Exhibit 99.1
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ASSET SALE AGREEMENT
BY AND AMONG
THE GRAND UNION COMPANY,
C&S WHOLESALE GROCERS, INC.
AND
GU MARKETS LLC
DATED AS OF NOVEMBER 12, 2000
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions.....................................................2
Section 1.2 Interpretation.................................................13
ARTICLE II
PURCHASE AND SALE OF ASSETS
Section 2.1 Sale and Transfer of Assets....................................15
Section 2.2 Retained Assets................................................20
Section 2.3 Assumption of Liabilities......................................21
Section 2.4 Retained Liabilities...........................................22
Section 2.5 The Purchase Price.............................................22
Section 2.6 Escrows........................................................23
ARTICLE III
THE CLOSING
Section 3.1 The Closing....................................................24
Section 3.2 Deliveries by Seller...........................................24
Section 3.3 Deliveries by Purchaser........................................26
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF SELLER
Section 4.1 Authorization..................................................28
Section 4.2 Binding Agreement..............................................28
Section 4.3 Organization; Qualification of Seller..........................29
Section 4.4 Subsidiaries and Affiliates....................................29
Section 4.5 Consents and Approvals; No Violations..........................29
Section 4.6 Financial Statements...........................................30
Section 4.7 Books and Records..............................................30
Section 4.8 Material Contracts.............................................30
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Section 4.9 Absence of Certain Changes.....................................32
Section 4.10 Title to Assets; Encumbrances..................................33
Section 4.11 Real Property..................................................34
Section 4.12 Environmental Matters..........................................36
Section 4.13 Insurance......................................................37
Section 4.14 Casualties.....................................................37
Section 4.15 Compliance with Laws; Permits and Licenses.....................37
Section 4.16 Taxes..........................................................38
Section 4.17 Intellectual Property..........................................39
Section 4.18 Labor Relations and Employment.................................40
Section 4.19 Brokers or Finders.............................................41
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND C&S
Section 5.1 Organization...................................................42
Section 5.2 Authorization..................................................42
Section 5.3 Binding Agreement..............................................42
Section 5.4 Consents and Approvals; No Violations..........................42
Section 5.5 Availability of Funds..........................................43
Section 5.6 Brokers or Finders.............................................43
ARTICLE VI
COVENANTS
Section 6.1 Interim Operations of the Business.............................43
Section 6.2 Access; Confidentiality........................................46
Section 6.3 Efforts and Actions to Cause Closing to Occur..................48
Section 6.4 Notification of Certain Matters................................50
Section 6.5 Deliveries by Purchaser; Certain Adjustments...................50
Section 6.6 Submission for Court Approval..................................52
Section 6.7 Bidding Procedures.............................................53
Section 6.8 Employee Matters...............................................57
Section 6.9 Prompt Payment of Cure Amounts; Expenses Relating to the
Assets......................................................57
Section 6.10 Inventory Matters; Purchase Price Adjustment...................59
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Section 6.11 Subsequent Actions.............................................61
Section 6.12 Publicity......................................................61
Section 6.13 Completion of Non-assignable Assigned Contracts................62
Section 6.14 Estoppel Certificates..........................................62
Section 6.15 Tax Matters....................................................62
Section 6.16 General Cooperation............................................65
Section 6.17 Use of Seller's Name and Logo..................................65
Section 6.18 Removal of Equipment...........................................65
Section 6.19 Disclosure Supplements.........................................66
Section 6.20 Further Assurances.............................................66
Section 6.21 Third Party Purchasers.........................................66
Section 6.22 Interim Supply Agreement.......................................68
Section 6.23 Escrow Expiration..............................................68
Section 6.24 Adequate Assurances............................................69
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation to Effect the Closing....69
Section 7.2 Conditions to Obligations of Purchaser to Effect the Closing...70
Section 7.3 Conditions to Obligations of Seller to Effect the Closing.....73
ARTICLE VIII
TERMINATION
Section 8.1 Termination....................................................74
Section 8.2 Effect of Termination..........................................76
Section 8.3 Extension; Waiver..............................................77
ARTICLE IX
INDEMNIFICATION
Section 9.1 Indemnification; Remedies......................................77
Section 9.2 Notice of Claim; Defense.......................................78
Section 9.3 Survival of Indemnification Claims.............................79
Section 9.4 Tax Effect of Indemnification Payments.........................79
Section 9.5 Effect of Investigation........................................79
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Section 9.6 Survival of Covenants, Representations and Warranties..........79
ARTICLE X
MISCELLANEOUS
Section 10.1 Fees and Expenses..............................................80
Section 10.2 Bulk Sales. ...................................................80
Section 10.3 Condition of Assets............................................80
Section 10.4 Amendment and Modification.....................................81
Section 10.5 Notices........................................................81
Section 10.6 Counterparts...................................................83
Section 10.7 Entire Agreement; No Third Party Beneficiaries.................83
Section 10.8 Severability...................................................84
Section 10.9 Governing Law..................................................84
Section 10.10 Exclusive Jurisdiction.........................................84
Section 10.11 Election of Remedies...........................................84
Section 10.12 Assignment.....................................................84
Section 10.13 Headings.......................................................85
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ASSET SALE AGREEMENT
Asset Sale Agreement, dated as of November 12, 2000, by and
among The Grand Union Company, a Delaware corporation ("Seller"), C&S Wholesale
Grocers, Inc., a Vermont corporation ("C&S"), and GU Markets LLC, a Delaware
limited liability company ("Purchaser").
WHEREAS, Seller is engaged in the retail grocery business and
operates grocery stores (the "Business"); and
WHEREAS, Seller and its Subsidiaries, as debtors in possession
pursuant to voluntary petitions, filed on October 3, 2000 (the "Petition") for
reorganization relief pursuant to chapter 11 of title 11 of the United States
Code, 11 U.S.C. ss.ss. 101-1330 (as amended, the "Bankruptcy Code"), pending in
the United States Bankruptcy Court for the District of New Jersey (the
"Bankruptcy Court") as Case Nos. 00-39613 through 00- 39616 (collectively, the
"Bankruptcy Case"); and
WHEREAS, Purchaser desires to purchase and acquire from Seller
certain assets and rights, and Seller desires to sell, convey, assign and
transfer all of such assets and rights to Purchaser, in the manner and subject
to the terms and conditions set forth herein and as authorized under Sections
105, 363 and 365 of the Bankruptcy Code; and
WHEREAS, Seller desires to assign to Purchaser and Purchaser
desires to assume from Seller, certain liabilities in the manner and subject to
the terms and conditions set forth herein and as authorized under Sections 105,
363 and 365 of the Bankruptcy Code;
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties, covenants and agreements contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
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ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context clearly requires
otherwise:
"Accounts Receivable" means any and all trade accounts, notes
and other receivables of Seller and its Subsidiaries and all claims relating
thereto or arising therefrom.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
Exchange Act.
"Agreement" or "this Agreement" shall mean this Asset Sale
Agreement, together with the Exhibits and Appendices hereto and the Disclosure
Schedule.
"Allocation Schedule" has the meaning set forth in Section
6.15(e).
"Alternative Transaction" has the meaning set forth in Section
6.7(a).
"Ancillary Agreements" shall mean the Bill of Sale, the Escrow
Agreement, the Interim Operating Agreement and the Lease Assignment Documents.
"Applicable Law" shall mean any law, regulation, rule, order,
judgment or decree to which the Business, the Assets, Seller or any of its
Subsidiaries is subject.
"Asset Adjustment Amount" has the meaning set forth in Section
6.5(c).
"Assets" shall mean the Permanent Assets and the Contingent
Assets.
"Assigned Contracts" means those contracts listed in Sections
2.1(a)(ii) and 2.1(b)(i) (other than those subsequently withdrawn pursuant to
Sections 6.5(a) or (b)) and all Real Property Leases.
"Associate" has the meaning set forth in Rule 12b-2 of the
Exchange Act.
"Assumed Liabilities" has the meaning set forth in Section
2.3(a).
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"Auction" shall have the meaning ascribed to such term in the
Bidding Procedures Order.
"Auction Deposit Escrow" has the meaning set forth in Section
2.6(a).
"Balance Sheet" shall mean the most recent unaudited balance
sheet of Seller and its Subsidiaries as at July 2, 2000, included in the
Financial Statements.
"Balance Sheet Date" shall mean the date of the Balance Sheet.
"Bankruptcy Case" has the meaning set forth in the recitals
hereof.
"Bankruptcy Code" has the meaning set forth in the recitals
hereof.
"Bankruptcy Court" has the meaning set forth in the recitals
hereof.
"Base Inventory Amount" has the meaning set forth in Section
6.10(a).
"Base Inventory Analysis" has the meaning set forth in Section
6.10 (a).
"Bid" shall have the meaning ascribed to such term in the
Bidding Procedures Order.
"Bidding Procedures" shall mean those procedures in respect of
an Auction set forth in the Bidding Procedures Order.
"Bidding Procedures Order" shall mean the order of the
Bankruptcy Court, dated October 30, 2000.
"Break-Up Fee" has the meaning set forth in Section 6.7(a).
"Business" has the meaning set forth in the recitals hereof.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banks in New York City are authorized or obligated by
Applicable Law or executive order to close or are otherwise generally closed.
"C&S" has the meaning set forth in the recitals hereof.
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"Closing" shall mean the closing referred to in Section 3.1.
"Closing Date" shall mean the date on which the Closing
occurs.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commitment Letter" has the meaning set forth in Section 5.5.
"Confidentiality Agreement" shall mean the letter agreement
dated July 27, 2000 between Seller and C&S.
"Contingent Assets" has the meaning set forth in Section
2.1(b) (other than those subsequently withdrawn pursuant to Sections 6.5(a) or
(b)).
"Definitive Sale Documentation" shall mean this Agreement, as
executed, together with all Exhibits and Schedules hereto.
"Deposit" shall have the meaning set forth in Section 6.7(a).
"Disclosure Schedule" shall mean the disclosure schedule of
even date herewith prepared and signed by Seller and delivered to Purchaser
simultaneously with the execution hereof.
"DOJ" shall mean the Antitrust Division of the United States
Department of Justice.
"Encumbrance" shall mean any mortgage, pledge, lien (statutory
or otherwise), security interest, easement, right of way, covenant, claim,
restriction, right, option, conditional sale or other title retention agreement,
charge or encumbrance of any kind or nature, including actions in rem and lis
pendens in respect of any Assets.
"Environmental Claim" shall mean any claim, action, cause of
action, investigation or written notice by any Person alleging noncompliance
with or actual or potential liability under Environmental Law.
"Environmental Claim Adjustment" has the meaning set forth in
Section 6.5(d).
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"Environmental Law" shall mean each applicable federal, state,
local and foreign law and regulation relating to the protection of the
environment, including ambient air, surface water, ground water, land surface or
subsurface strata, and natural resources.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Claim" shall mean a claim for indemnification or
defense arising out of Section 9.1(b)(ii), including reasonable attorneys' fees
and expenses and reasonable accountants' fees and expenses incurred in the
investigation or defense of any of the same or in asserting, preserving or
enforcing any of the rights of Purchaser arising under Section 9.1(b)(ii).
"Escrow Account" has the meaning set forth in Section 2.6(b).
"Escrow Agent" has the meaning set forth in Section 2.6(b).
"Escrow Agreement" has the meaning set forth in Section
2.6(b).
"Escrow Termination Date" has the meaning set forth in Section
2.6(b).
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Expense Reimbursement" has the meaning set forth in Section
6.7(a).
"Expenses" has the meaning set forth in Section 6.7(a).
"Final Closing Inventory Analysis" has the meaning set forth
in Section 6.10(c).
"Final Order" shall mean an order or judgment of the
Bankruptcy Court as to which the time to appeal, petition for certiorari, or
move for reargument or rehearing has expired and as to which no appeal, petition
for certiorari, or other proceedings for reargument or rehearing shall then be
pending or in the event that an appeal, writ of certiorari, reargument, or
rehearing thereof has been sought, such order of the Bankruptcy Court shall have
been determined by the highest court to which such order was appealed, or
certiorari, reargument or rehearing shall have been denied and
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the time to take any further appeal, petition for certiorari, or move for
reargument or rehearing shall have expired.
"Financial Statements" shall mean (a) the consolidated balance
sheet of Seller as at April 1, 2000, together with consolidated statements of
income, sharehold ers' equity and cash flows for the year then ended, together
with the notes thereto, all certified by PricewaterhouseCoopers LLP, independent
certified public accountants, whose report thereon is included therein, and (b)
an unaudited consolidated balance sheet of the Seller as at July 2, 2000, and
unaudited consolidated statements of income, shareholders' equity and cash flows
for the period then ended.
"Financing Condition" shall have the meaning set forth in
Section 7.2(k).
"FTC" shall mean the United States Federal Trade Commission.
"GAAP" shall mean United States generally accepted accounting
principles.
"Governmental Entity" shall mean a court, arbitral tribunal,
administra tive agency or commission or other governmental or other regulatory
authority or agency.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indebtedness" shall mean, at any time and with respect to any
Person, (a) all indebtedness of such Person for borrowed money, (b) all
indebtedness of such Person for the deferred purchase price of property or
services (other than property, including Inventory, and services purchased, and
trade payables, other expense accruals and deferred compensation items arising
in the ordinary course of business, consistent with past practice), (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments (other than performance, surety and appeal bonds arising in
the ordinary course of business in respect of which such Person's liability
remains contingent), (d) all indebtedness of such Person created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all obligations of such Person under
leases which have been or should be, in accordance with GAAP, recorded as
capital leases, to the extent required to be so
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recorded, (f) all reimbursement, payment or similar obligations of such Person,
contingent or otherwise, under acceptance, letter of credit or similar
facilities, (g) all Indebtedness of others referred to in clauses (a) through
(f) above guaranteed directly or indirectly by such Person, or in effect
guaranteed directly or indirectly by such Person through an agreement (i) to pay
or purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Indebtedness, (iii) to supply funds
to or in any other manner invest in the debtor (including any agreement to pay
for property or services irrespective of whether such property is received or
such services are rendered) or (iv) otherwise to assure a creditor against loss
in respect of such Indebtedness, and (h) all Indebtedness referred to in clauses
(a) through (g) above secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any
Encumbrance upon or in property (including, accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness.
"Intellectual Property" shall mean all Trademarks, United
States and foreign patents and patent applications and improvements thereon,
assumed names, logos, copyrights, copyright registrations and applications
therefor, including derivatives and renewals thereof, trade secrets, formulae,
inventions, technical information, know- how, processes, other confidential
information and all other intellectual property throughout the world owned by,
licensed to or used by Seller in connection with or applicable to the Business.
"Interim Operating Agreement" shall mean a short-term
agreement pursuant to which Seller would agree to provide operating services
during a transition period of up to 90 days following the Closing for some or
all of the grocery stores and warehouses acquired by Purchaser hereunder, having
the principal terms listed on Exhibit A.
"Interim Supply Agreement" shall mean the supply agreement,
dated as of October 3, 2000, by and between Seller and C&S and as approved by
order of the Bankruptcy Court dated October 3, 2000, as may be amended by
written agreement of the parties thereto.
"Inventory" has the meaning set forth in Section 2.1(a)(vi).
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"Inventory Adjustment Amount" has the meaning set forth in
Section 6.10(b).
"Involuntary Redesignated Stores" has the meaning set forth in
Section 6.5(b).
"Knowledge of Seller" concerning a particular subject, area or
aspect of the Business or affairs shall mean the actual knowledge of any of the
senior officers and directors of Seller.
"Lease Assignment Documents" has the meaning set forth in
Section 3.2(c).
"Leased Real Property" shall mean the leasehold interests held
by Seller or any of its Subsidiaries under the Real Property Leases.
"Liabilities" shall mean the debts, liabilities, claims,
security interests, Encumbrances (other than Permitted Encumbrances), demands,
expenses, commitments and obligations (whether accrued or not, known or unknown,
disclosed or undisclosed, fixed or contingent, asserted or unasserted,
liquidated or unliquidated, arising prior to, at or after the Closing) of Seller
or its Subsidiaries.
"Lenders" has the meaning set forth in Section 5.5.
"License Agreements" has the meaning set forth in Section
4.17(c).
"Material Adverse Effect" means a material adverse effect on
the financial condition, results of operations or business of the Business, the
Assets or the Liabilities of the Business.
"Material Contracts" has the meaning set forth in Section
4.8(b).
"Materials of Environmental Concern" shall mean all substances
defined as Hazardous Substances, Oils, Pollutants or Contaminants in the
National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. ss.
300.5, or defined as such by, or regulated as such under, any Environmental Law.
"Owned Real Property" shall mean the owned real property
described in Sections 2.1(a)(viii) and 2.1(b)(v), including all improvements and
structures thereon
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and appurtenances belonging thereto (other than that subsequently withdrawn
pursuant to Sections 6.5(a) or (b)).
"Permanent Assets" has the meaning set forth in Section
2.1(a).
"Permits" means permits, certificates, licenses, filings,
approvals and other authorizations of any Governmental Entity.
"Permitted Encumbrances" shall mean (i) liens for current
Taxes that are not yet due or delinquent or are being contested in good faith by
appropriate proceed ings; (ii) statutory liens or landlords', carriers',
warehousemen's, mechanics', suppliers', materialmen's, repairmen's liens or
other like Encumbrances arising in the ordinary course of business with respect
to amounts not yet overdue (provided that such amounts arising or accruing prior
to the Closing remain Retained Liabilities); (iii) with respect to the Real
Property, minor title defects or irregularities that do not, individually or in
the aggregate, materially impair the value or use of such property; and (iv) as
to any Real Property Lease, any Encumbrance affecting solely the interest of the
landlord thereunder and not the interest of the tenant thereunder, which do not
materially impair the value or use of such Real Property Lease.
"Person" shall mean a natural person, partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, Governmental Entity or other
entity or organization.
"Petition" has the meaning set forth in the recitals hereof.
"Plans" shall mean each deferred compensation and each bonus
or other incentive compensation, stock purchase, stock option and other equity
compensation plan, program, agreement or arrangement; each severance or
termination pay, medical, surgical, hospitalization, life insurance and other
"welfare" plan, fund or program (within the meaning of Section 3(1) of ERISA);
each profit-sharing, stock bonus or other "pension" plan, fund or program
(within the meaning of Section 3(2) of ERISA); each employment, termination or
severance agreement; and each other employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to by Seller or an ERISA Affiliate,
that together with Seller would be deemed a "single employer" within the meaning
of Section 4001(b) of ERISA, or to which Seller or an ERISA Affiliate is party,
whether written or oral, for the benefit of any employee or former employee of
Seller or any Subsidiary of Seller.
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"Potential Bidder" shall mean a Person that participates in
the bidding process.
"Post-Signing Matter" has the meaning set forth in Section
6.19.
"Potential Third Party Purchasers" has the meaning set forth
in Section 6.7(d).
"Preliminary Closing Inventory Analysis" as the meaning set
forth in Section 6.10(b).
"Previous Supply Agreement" shall mean the Amended and
Restated Term Sheet: Supply Agreement, dated as of September 24, 1999, by and
between Seller and C&S, dated October 15, 1999.
"Purchase Price" has the meaning set forth in Section 2.5.
"Purchaser" has the meaning set forth in the recitals hereof.
"Purchaser Indemnified Persons" shall mean Purchaser and its
Affiliates.
"Purchaser Losses" shall mean any and all actual losses,
liabilities, damages, judgments, settlements and expenses (including interest
and penalties recovered by a Third Party with respect thereto and reasonable
attorneys' fees and expenses and reasonable accountants' fees and expenses
incurred in the investigation or defense of any of the same or in asserting,
preserving or enforcing any of the rights of Purchaser arising under Article IX)
incurred by any Purchaser Indemnified Persons that arise out of (i) any breach
by Seller of any of its covenants, agreements and obligations in this Agreement
that survive the Closing or (ii) any breach by Seller prior to the Closing of
any of its covenants, agreements and obligations contained in this Agreement.
"Purchaser Representation Losses" shall mean any and all
actual losses, liabilities, damages, judgments, settlements and expenses
(including interest and penalties recovered by a Third Party with respect
thereto and reasonable attorneys' fees and expenses and reasonable accountants'
fees and expenses incurred in the investigation or defense of any of the same or
in asserting, preserving or enforcing any of the rights of Purchaser arising
under Article IX) incurred by any Purchaser Indemnified Persons that arise out
of any breach by Seller of any of its representations and warranties
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contained in or made by or pursuant to this Agreement. All statements contained
in any schedule or other writing delivered by Seller pursuant hereto shall be
deemed representations and warranties.
"Real Property" shall mean the Leased Real Property together
with the Owned Real Property.
"Real Property Leases" shall mean the real property leases to
which Seller and/or a Subsidiary of Seller is a party described in Sections
2.1(a)(iii) and 2.1(b)(ii) of the Disclosure Schedule (other than those
subsequently withdrawn pursuant to Sections 6.5(a) or (b)).
"Release" shall mean any release, spill, emission, discharge,
leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration
into the environment (including, ambient air, surface water, groundwater and
surface or subsurface strata).
"Retained Assets" has the meaning set forth in Section 2.2.
"Retained Liabilities" has the meaning set forth in Section
2.4.
"Retained Properties" shall mean the real property, and
buildings and fixtures thereon, owned, leased or operated by Seller or any of
its Subsidiaries, the control of which will not be transferred, directly or
indirectly, to Purchaser at Closing pursuant to this Agreement, including those
assets listed in Section 2.2(a) or 2.2(c) of the Disclosure Schedule.
"Sale Motion" has the meaning set forth in Section 6.6(a).
"Sale Order" shall mean an order of the Bankruptcy Court, in
form reasonably satisfactory to Seller, C&S and Purchaser, approving the
consummation of the Transactions, under Sections 105, 363 and 365 of the
Bankruptcy Code.
"Seller" has the meaning set forth in the recitals hereof.
"Seller-unique items" shall mean all items provided to Seller
which are not carried by any other chain of grocery stores supplied by C&S.
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"Seller's Trademarks and Logos" has the meaning set forth in
Section 6.17.
"Software" shall mean any and all (a) computer programs,
including any and all software implementation of algorithms, models and
methodologies, whether in source code or object code, (b) databases and
compilations, including any and all data and collections of data, and (c) all
documentation, including user manuals and training materials, relating to any of
the foregoing.
"Subsequent Individual Bid" has the meaning set forth in
Section 6.7(a).
"Subsequent Third Party Purchasers" has the meaning set forth
in Section 6.7(g).
"Subsidiary" shall mean, with respect to any Person, any
corporation or other organization, whether incorporated or unincorporated, of
which (a) at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries or (b) such Person or any other Subsidiary of such Person is a
general partner (excluding any such partnership where such Person or any
Subsidiary of such party does not have a majority of the voting interest in such
partnership).
"Supply Agreements" shall mean the Previous Supply Agreement
and the Interim Supply Agreement.
"Tax" or "Taxes" shall mean all taxes, duties, levies,
penalties or other assessments imposed by any federal, state, local or foreign
governmental authority, including income, gross receipts, excise, personal and
real property (including leaseholds and interests in leaseholds), sales, gain,
use, license, custom duty, unemployment, capital stock, transfer, franchise,
payroll, withholding, social security, minimum estimated, profit, gift,
severance, value added, disability, premium, recapture, credit, occupation,
service, leasing, employment, stamp and other taxes, and shall include interest,
penalties or additions attributable thereto or attributable to any failure to
comply with any requirement regarding Tax Returns.
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"Tax Return" shall mean any return (including estimated
returns), report, information return, statement, declaration or other document
(including any related or supporting information) filed or required to be filed
with any United States federal, state, local or foreign Governmental Entity in
connection with any determination, assessment or collection of any Tax or other
administration of any laws, regulations or administra tive requirements
(collectively "returns") and any amended returns.
"Third Party" shall mean any Person other than Seller,
Purchaser, C&S or any of their respective Affiliates.
"Third Party Purchaser" has the meaning set forth in Section
6.21.
"Title IV Plans"shall mean any Plan subject to Title IV of
ERISA.
"Trademarks" shall mean all United States and foreign
trademarks, tradenames, service marks and registrations and applications for
registration therefor.
"Trade Secrets" shall mean technology, trade secrets and other
confidential information, know-how, proprietary processes, formulae, algorithms,
models and methodologies.
"Transactions" shall mean all the transactions provided for or
contem plated by this Agreement and/or the Ancillary Agreements.
"Transfer Taxes" has the meaning set forth in Section 6.15(a).
Section 1.2 Interpretation.
(a) When a reference is made in this Agreement to a section,
article, paragraph, exhibit or schedule, such reference shall be to a section,
article, paragraph, exhibit or schedule of this Agreement unless clearly
indicated to the contrary.
(b) Whenever the words "include", "includes" or "including"
are used in this Agreement they shall be deemed to be followed by the words
"without limitation."
(c) The words "hereof", "herein" and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any particular provision of this Agreement.
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(d) The meaning assigned to each term defined herein shall be
equally applicable to both the singular and the plural forms of such term, and
words denoting any gender shall include all genders. Where a word or phrase is
defined herein, each of its other grammatical forms shall have a corresponding
meaning.
(e) A reference to any party to this Agreement or any other
agreement or document shall include such party's predecessors, successors and
permitted assigns.
(f) A reference to any legislation or to any provision of any
legislation shall include any amendment to, and any modification or re-enactment
thereof, any legislative provision substituted therefor and all regulations and
statutory instruments issued thereunder or pursuant thereto.
(g) References to $ are to United States Dollars.
(h) As used in this Agreement, any reference to any event,
change or effect being material or having a material adverse effect on or with
respect to any entity (or group of entities taken as a whole) means such event,
change or effect is materially adverse to (i) the prospects, consolidated
financial condition, businesses or results of operations of such entity as a
whole (or, if used with respect thereto, of such group of entities taken as a
whole) or (ii) the ability of such entity (or group) to consummate the
Transactions.
(i) The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement.
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ARTICLE II
PURCHASE AND SALE OF ASSETS
Section 2.1 Sale and Transfer of Assets. On the terms and
subject to the conditions set forth in this Agreement, at the Closing, Seller
shall sell, convey, assign, transfer and deliver, and shall cause its applicable
Subsidiaries to sell, convey, assign, transfer and deliver, to Purchaser and/or
one or more of its Affiliates or Subsidiaries and/or Third Party Purchasers, as
applicable, and Purchaser and/or one or more of its Affiliates or Subsidiaries
and/or Third Party Purchasers, as applicable, shall purchase, acquire and accept
from Seller and its applicable Subsidiaries, free and clear of any Encumbrances
as and to the extent provided for in the Sale Order (other than Permitted
Encumbrances, unless otherwise provided in the Sale Order), all of Seller's and
its Subsidiaries' right, title and interest in and to the assets, properties,
rights, claims, contracts and businesses of every kind, character and
description, whether tangible or intangible, whether real, personal or mixed,
whether accrued, contingent or otherwise, and wherever located which are used in
or are related to the Business, other than the Retained Assets, including:
(a) the Permanent Assets:
(i) all Intellectual Property;
(ii) except as otherwise provided in this
Agreement or listed in Section 2.1(b)(i) of the Disclosure Schedule,
all rights of Seller in and to all supply agreements, license
agreements, advisory agreements, promotional agreements,
confidentiality agree ments (under which Seller has provided
information to a Third Party) to the extent related to the Assets, all
purchase orders for the sale or purchase of goods and services, or
both, and all other contracts and other agreements of whatever nature
to which Seller is a party, to the extent set forth in Section
2.1(a)(ii) of the Disclosure Schedule;
(iii) except as otherwise provided in this
Agreement or listed in Section 2.1(b)(ii) of the Disclosure Schedule,
all rights of Seller in and to the Real Property Leases, to the extent
set forth in Section 2.1(a)(iii) of the Disclosure Schedule;
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(iv) all books, files, data, customer and
supplier lists, cost and pricing information, business plans, quality
control records and manuals, blueprints, research and development
files, personnel records and all other records of Seller other than the
minute books, stock record books, stock ledgers, Tax Returns, tax books
and records and similar financial and other records of Seller which,
(x) relate to income taxes, gross receipts Taxes and any Taxes imposed
in lieu of such Taxes; provided, however, that Purchaser shall have
access during regular business hours to such records, including for
purposes of making summaries and copies thereof (at Purchaser's
expense), as they pertain to the Business and Assets upon reasonable
notice to Seller; and provided further, however, that in the event that
Seller desires to destroy or dispose of any such records, Seller shall
first offer to deliver, at Purchaser's expense, any or all of such Tax
Returns, tax books and records and similar financial or other records
relating to income taxes payable with respect to the Business as
Purchaser may request; and (y) in the case of all other Tax Returns and
tax books and records, do not pertain primarily to the Business;
provided, however, that Purchaser shall have access during regular
business hours to such records, including for purposes of making
summaries and copies thereof (at Purchaser's expense), as they pertain
to the Business and Assets upon reasonable notice to Seller;
(v) all personal computers, computer hardware
and Software of Seller, other than those personal computers and
computer hardware at the locations on Section 2.2(a) of the Disclosure
Schedule and other than those set forth in Section 2.1(b)(iii) of the
Disclosure Schedule;
(vi) all inventory, supplies,
goods-in-transit, packaging materials and other consumables of Seller
(the "Inventory"), including Inventory (A) in transit from suppliers of
the Business or (B) held by suppliers of the Business, other than
inventory at locations disclosed in Section 2.2(a) of the Disclosure
Schedule;
(vii) all Permits of Seller and its
Subsidiaries, but only to the extent assignable pursuant to the
Bankruptcy Code related to the Permanent Assets;
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(viii) all real property owned by Seller,
together with (A) all buildings, other facilities and other structures
and improve ments thereon, (B) all rights, privileges, hereditaments
and appurte nances appertaining thereto or to any of such buildings or
other facilities or other structures or improvements and (C) to the
extent constituting real property under Applicable Laws, all fixtures
and installations and other property attached thereto or located
thereon, other than those set forth in Section 2.1(b)(v) or 2.2(a) of
the Disclosure Schedule;
(ix) all machinery, vehicles, tools,
equipment, furnishings, fixtures, furniture and spare parts owned or
leased by Seller on the Closing Date, excluding all automobiles (other
than those used as of the Closing Date by employees to be hired by
Purchaser or a Third Party Purchaser), whether owned or leased other
than that machinery, vehicles, tools, equipment, furnishing, fixtures,
furniture and spare parts located at locations on Section 2.2(a) of the
Disclosure Schedule, and those items referred to in Section 2.1(a)(ii)
and those set forth in Section 2.1(b)(vi) of the Disclosure Schedule;
(x) all advertising or promotional materials
of Seller;
(xi) all manufacturer's warranties to the
extent related to the Assets and all claims under such warranties;
(xii) all rights to the telephone numbers
(and related directory listings) to the extent assignable without
payment of pre-petition telephone bills, Internet domain names, and
internet sites used by Seller, other than those set forth in Section
2.1(b)(vii) of the Disclosure Schedule;
(xiii) all prepaid expenses of Seller and
deposits other than deposits with trade vendors;
(xiv) all security deposits, earnest
deposits and all other forms of security placed with Seller or its
Subsidiaries for the performance of a contract or agreement which
otherwise constitute a portion of the Assets, other than those set
forth in Section 2.2(a) of the Disclosure Schedule;
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(xv) all operating cash at the store level;
(xvi) all accounts receivable due from, or
claims against, C&S or any of its Affiliates, except as provided in
Section 2.5;
(xvii) the goodwill in or arising from the
Assets and the Business;
(xviii) all other assets and properties
related to or used in connection with the Business, excluding those
listed in Section 2.1(b) and the leases and related assets referred to
in Section 2.1(a)(ii) and 2.1(a)(iii); and
(xix) all rights, privileges, claims,
demands, choses in action, prepayments, deposits, refunds,
indemnification agreements with, and indemnification rights against,
Third Parties, warranty claims (to the extent transferable), offsets
and other claims of Seller and its Subsidiaries in respect of the
above-listed Permanent Assets and any rights, demands, claims, actions,
and causes of action constituting avoidance actions or other claims of
Seller's estate under chapter 5 of the Bankruptcy Code with respect to
C&S and its Affiliates; provided, however that Purchaser is not
purchasing Seller's right to object to the amount of C&S' claim under
the Previous Supply Agreement and provided, further that Seller shall
not be entitled to interpose any counterclaim or offset relating to a
claim, action, cause of action, right or demand under chapter 5 of the
Bankruptcy Code, those claims having been transferred to Purchaser;
(b) the Contingent Assets:
(i) except as otherwise provided in this
Agreement, all rights of Seller in and to the supply agreements,
license agreements, advisory agreements, promotional agreements, all
purchase orders for the sale or purchase of goods and services, or
both, and all other contracts and other agreements of whatever nature
to which Seller or any its Subsidiaries is a party, listed in Section
2.1(b)(i) of the Disclosure Schedule;
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(ii) except as otherwise provided in this
Agreement, all rights of Seller in and to the Real Property Leases,
listed in Section 2.1(b)(ii) of the Disclosure Schedule;
(iii) the personal computers, computer
hardware and Software of Seller set forth in Section 2.1(b)(iii) of the
Disclosure Schedule;
(iv) the Permits of Seller and its
Subsidiaries, but only to the extent assignable pursuant to the
Bankruptcy Code, set forth in Section 2.1(b)(iv) of the Disclosure
Schedule;
(v) the real property owned by Seller,
together with (A) all buildings, other facilities and other structures
and improve ments thereon, (B) all rights, privileges, hereditaments
and appurtenances appertaining thereto or to any of such buildings or
other facilities or other structures or improvements and (C) to the
extent constituting real property under Applicable Laws, all fixtures
and installations and other property attached thereto or located
thereon set forth in Section 2.1(b)(v) of the Disclosure Schedule;
(vi) the machinery, vehicles, tools,
equipment, furnishings, fixtures, furniture and spare parts owned or
leased by Seller on the Closing Date set forth in Section 2.1(b)(vi) of
the Disclosure Schedule;
(vii) the rights to the telephone numbers
(and related directory listings) to the extent assignable without
payment of pre- petition telephone bills, Internet domain names, and
internet sites created or maintained by or on behalf of Seller set
forth in Section 2.1(b)(vii) of the Disclosure Schedule; and
(viii) all rights, privileges, claims,
demands, choses in action, prepayments, deposits, refunds,
indemnification agreements with, and indemnification rights against,
Third Parties, warranty claims (to the extent transferable), offsets
and other claims of Seller and its Subsidiaries in respect of the
above-listed Contingent Assets.
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(c) Pursuant to the terms of Section 6.5(a),
Purchaser may elect to exclude any of the Contingent Assets listed above from
the Assets to be transferred and sold at the Closing; provided, however, that
there shall be no adjustment to the Purchase Price therefor.
Section 2.2 Retained Assets. Notwithstanding Section 2.1, all
of Seller's and its Subsidiaries' right, title and interest in and to the
following properties, assets and rights shall be excluded from the Assets
(collectively, the "Retained Assets"):
(a) all assets listed in Section 2.2(a) of the
Disclosure Schedule;
(b) any assets and associated claims arising out of
the Retained Liabilities;
(c) all leases listed in Section 2.2(c) of the
Disclosure Schedule, and, if required by the terms of any of such leases, all
fixtures, installations, machinery and furnishings to be turned over to the
lessor under any such lease at the end of such lease's term;
(d) all Permanent Assets subsequently designated
Retained Assets pursuant to the provisions of Section 6.5(b);
(e) all Contingent Assets subsequently designated
Retained Assets pursuant to the provisions of Section 6.5;
(f) all Tax refunds and recoveries and similar
benefits of Seller and its Subsidiaries;
(g) any cash (other than operating cash at the store
level), cash equivalents, securities, stock of subsidiaries or other investments
held by Seller;
(h) any claims, counterclaims, offsets, defenses or
causes of action arising prior to the Closing Date, other than to the extent
relating to, or arising from, the Assets or Assumed Liabilities;
(i) the assets, properties or contracts listed in
Section 2.2(i) of the Disclosure Schedule;
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(j) the owned or leased real property listed in
Section 2.2(j) of the Disclosure Schedule;
(k) any rights, demands, claims, actions, and causes
of action constituting avoidance actions or other claims of Seller's estate
under chapter 5 of the Bankruptcy Code, other than in respect of C&S and its
Affiliates; and
(l) all right, title and interest in and to all
properties, assets and rights of Seller and its Subsidiaries that are not being
transferred pursuant to Section 2.1 (including the Plans).
Section 2.3 Assumption of Liabilities. (a) At the Closing,
Purchaser and/or one or more of its Affiliates or Subsidiaries and/or Third
Party Purchasers, as applicable, shall assume, and shall be solely and
exclusively liable for, the following Liabilities of Seller: all obligations of
Seller under the Assigned Contracts that arise, and relate to a period, on or
after the Closing Date or that arise prior to the Closing Date and require
performance, in whole or in part, after the Closing, including, (i) all
unperformed and unfulfilled obligations incurred on or after the Closing Date in
respect of services rendered or goods sold to Seller on or after the Closing
Date which are required to be performed and fulfilled under the contracts,
agreements, leases, licenses, permits, applications, unfilled sales and purchase
orders, invoices and other commitments assigned to Purchaser pursuant to
Sections 2.1(a)(ii), 2.1(a)(iii), 2.1(b)(i) and 2.1(b)(ii); (ii) all obligations
with respect to returns, credits, discounts and allowances relating to products
sold to store customers prior to the Closing Date and incurred by Seller in the
ordinary course of business to the extent relating to the Assets; (iii) all
obligations incurred on or after the Closing Date of Seller with respect to
security and maintenance contracts and agreements relating to the Assets and set
forth on Schedule 2.3(a)(iii) hereto; and (iv) all liabilities that are the
responsibility of Purchaser under Sections 6.15(a) and 6.15(d) hereof
(collectively, the "Assumed Liabilities").
(b) Nothing contained in this Agreement shall require
Purchaser or any of its Affiliates to pay, perform or discharge any Assumed
Liability so long as it shall in good faith contest or cause to be contested the
amount or validity thereof and shall have indemnified and have held harmless
Seller and its Affiliates with respect thereto pursuant to the terms of this
Agreement.
(c) Nothing contained in this Section 2.3 or in any
instrument of assumption executed by Purchaser at the Closing shall release or
relieve Seller from its representations, warranties, covenants and agreements
contained in this Agreement
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or any certificate, schedule, instrument, agreement or document executed
pursuant hereto or in connection herewith, including, the obligations of Seller
to indemnify Purchaser in accordance with the provisions of Article IX hereto.
(d) Notwithstanding the foregoing, Purchaser and its
Affiliates shall not, and nothing in this Agreement shall require Purchaser
and/or its Affiliates to, assume or be liable or otherwise be responsible for
any Liabilities of Seller or its Subsidiaries with respect to any Plan
(including, but not limited to, any Title IV Plan), except as may be required by
law or pursuant to any Assigned Contracts.
Section 2.4 Retained Liabilities. Notwithstanding anything in
this Agreement to the contrary, Purchaser shall not assume, and shall be deemed
not to have assumed, any Liabilities of Seller, any of its Subsidiaries or the
Business except as provided in Section 2.3(a), including (i) any and all
liabilities incurred or assumed prior to the Closing Date (e.g. pension and
benefit plan Liabilities, severance and bonus pay obligations, accrued vacation
time of employees, payment obligations for goods and/or services received, Plan
Liabilities, including Multiemployer Plan and ERISA Plan withdrawal Liabilities;
liabilities arising out of failure to comply with law); (ii) any and all
liabilities or potential liabilities in respect of pending or threatened
litigation brought or to be brought in respect of events, circumstances or facts
occurring prior to the Closing; and (iii) except for Taxes referred to in
Sections 6.15(a) and 6.15(f), Taxes attributable to the Assets or the operations
or the income of the Seller and its Subsidiaries for any taxable period
beginning on or before the Closing Date, and as between Seller and Purchaser, it
is understood that Seller shall be solely and exclusively liable with respect to
all Liabilities of Seller, its Subsidiaries and the Business, whether disclosed
or undisclosed, whether known or unknown, whether fixed or contingent (including
all Liabilities retained pursuant to Section 6.8), other than the Assumed
Liabilities (collectively, the "Retained Liabilities").
Section 2.5 The Purchase Price. Subject to the terms and
conditions of this Agreement, the aggregate purchase price for the sale and
transfer of the Assets to, and the assumption of the Assumed Liabilities by,
Purchaser (the "Purchase Price"), is THREE HUNDRED AND ONE MILLION EIGHT HUNDRED
THOUSAND DOLLARS ($301,800,000), (a) less the sum of (i) the Asset Adjustment
Amount (ii) the Environmental Claim Adjustment and (iii) such amounts due and
payable to C&S under the Interim Supply Agreement in respect of which Purchaser
elects to offset against the Purchase Price (b) plus amounts owed by C&S to
Seller pursuant to the Interim Supply Agreement and (c) which amount will be
subject to increase or decrease, as applicable, by the Inventory Adjustment
Amount. Each of (a) and (c) above, as applicable, may be
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offset against the Purchase Price, but for all purposes of bankruptcy law shall
be considered a reduction to the Purchase Price. Further, the Purchase Price
will either be increased or decreased by the Inventory Adjustment Amount, as
provided in Section 6.10. FIFTEEN MILLION DOLLARS ($15,000,000) of the Purchase
Price will be payable pursuant to Section 2.6(b), and the remainder of the
Purchase Price will be payable at Closing by wire transfer in immediately
available funds to an account specified in writing by Seller. If the parties
disagree as to the actual amount due and payable to C&S under the Interim Supply
Agreement, (i) subject to Seller's rights under Section 7.3(e) with respect to
differences in valuation exceeding $1,000,000, and (ii) subject to the
limitations set forth in Section 6.7(a) in respect of claims of unsecured
creditors in Seller's Bankruptcy Case, the greater of the values assigned shall
be the amount due and payable to C&S under the Interim Supply Agreement for
purposes hereof; provided, however, that if Seller receives the Purchase Price
less such greater amount and a court of competent jurisdiction subsequently
finds that the aggregate dollar amount of such reduction is less than the amount
by which the Purchase Price was reduced therefor, Purchaser shall promptly remit
to Seller the amount by which the amount the Purchase Price was reduced exceeds
such judicially determined amount.
Section 2.6 Escrows. (a) C&S shall make a deposit in the
amount of $15,090,000 which shall be deemed to be in full satisfaction of the 5%
bidding deposit required by the Bidding Procedures Order into an escrow account
(the "Auction Deposit Escrow") at the earlier of (i) two Business Days hereof
and (ii) such time as a bid deposit would be due pursuant to the Bidding
Procedures Order. If at the conclusion of the Auction, Purchaser is the
prevailing bidder, C&S shall make a deposit into the Auction Deposit Escrow in
such amount as to bring the balance therein to 10% of the greater of (A) the
unadjusted Purchase Price and (B) the amount of Purchaser's prevailing bid at
the Auction. Funds deposited in such Auction Deposit Escrow will be (i) paid to
Seller at the Closing, or (ii) remitted to C&S promptly upon termination of this
Agreement. All earnings on amounts in the Auction Deposit Escrow accruing on or
after the date of the Auction shall be distributed on a monthly basis to C&S.
(b) At the Closing, Seller, Purchaser, C&S and a bank
in the United States to be mutually agreed upon by the parties within ten days
of the date of this Agreement (the "Escrow Agent"), will enter into an escrow
agreement, having a maximum term of one year and otherwise in form and substance
customary in similar transactions (the "Escrow Agreement"), and Purchaser will
deposit FIFTEEN MILLION DOLLARS ($15,000,000) with the Escrow Agent to be held
and disposed of by the Escrow Agent pursuant to the terms and conditions of the
Escrow Agreement (the "Escrow Account"). Delivery of funds by the Escrow Agent
to the applicable parties
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shall be made pursuant to the terms of the Escrow Agreement and all earnings
thereon shall be distributed on a monthly basis to Seller. Once the final
adjustment shall have been made to the Inventory Adjustment Amount pursuant to
Section 6.10(d), subject to the provision of Section 6.23, funds in the Escrow
Account in excess of $1.5 million shall be promptly paid to Seller. Provided
that Seller shall have given the notice required by Section 6.23, the balance of
the Escrow Account would be released to Seller on the earlier of (a) the first
anniversary of the Closing and (b) the later of (i) six months after the Closing
and (ii) the final distribution by Seller to its creditors under a confirmed
chapter 11 plan in its Bankruptcy Case, subject, in each case, to any claims
being made against the Escrow Account (such earlier date referred to herein as
the "Escrow Termination Date").
ARTICLE III
THE CLOSING
Section 3.1 The Closing. Upon the terms and subject to the
conditions of this Agreement, the consummation of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Skadden,
Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New York 10036, at
10:00 a.m., New York time, five (5) Business Days following the satisfaction
and/or waiver of all conditions to close set forth in Article VII (other than
conditions which can be satisfied only by the delivery of certificates, opinions
or other documents at the Closing), unless (a) such date falls prior to January
12, 2001, in which case the Closing will be delayed until January 12, 2001 or
(b) another date and/or place is agreed in writing by each of the parties
hereto. The Closing Date shall occur prior to the confirmation of Seller's plan
of liquidation or reorganization in its Bankruptcy Case.
Section 3.2 Deliveries by Seller. At the Closing, Seller shall
deliver or cause to be delivered to Purchaser or Third Party Purchasers, as
applicable (unless previously delivered), the following:
(a) a duly executed Bill of Sale in form and
substance customary in similar transactions;
(b) duly executed bargain and sale deeds in
recordable form for all Owned Real Property, without covenants against grantor's
acts;
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(c) duly executed counterparts of one or more
instruments of assignment and assumption, substantially in form and substance
customary in similar transactions, with respect to all Leased Real Property (the
"Lease Assignment Documents");
(d) each estoppel certificate, if any, received from
the landlord under any Real Property Lease certifying that such Real Property
Lease is in full force and effect, that there are no defaults thereunder or any
conditions that with the passage of time or the giving of notice, or both, would
constitute a default thereunder (including, that all current rent and additional
rent thereunder has been paid), or an estoppel certificate in the form so
provided for under such Real Property Lease, it being understood that receipt of
such estoppel certificates shall not be a condition to Closing;
(e) copies of all leases or subleases to Third
Parties with respect to all or any portion of any of the Real Property as well
as each estoppel certificate, if any, received from each tenant under the
foregoing leases or subleases certifying that such lease or sublease, as the
case may be, is in full force and effect, that there are no defaults thereunder
or any conditions that with the passage of time or giving of notice, or both,
would constitute a default thereunder and that all rent thereunder has been paid
through the date of such estoppel, it being understood that receipt of such
estoppel certificates shall not be a condition to Closing;
(f) all documents of title and instruments of
conveyance reasonably necessary to transfer record and/or beneficial ownership
to Purchaser (or Third Party Purchasers, as applicable) of all automobiles,
trucks, trailers (and any other property owned by Seller or any of its
Subsidiaries which require execution, endorsement and/or delivery of a document
in order to vest record or beneficial ownership thereof in Purchaser (or Third
Party Purchasers, as applicable)) which constitute Assets pursuant to this
Agreement;
(g) duly executed Transfer Tax Returns to be filed in
each jurisdiction in which any parcel of Real Property is located (unless
rendered inapplicable by the Sale Order);
(h) a duly executed counterpart of the Escrow
Agreement;
(i) executed copies of the consents referred to in
Section 4.5;
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(j) all documents containing or relating to
"know-how" to be acquired by Purchaser (or Third Party Purchasers, as
applicable) pursuant hereto;
(k) the certificates of counsel referred to in
Section 7.2(b);
(l) the Officers' Certificate referred to in Section
7.2(c);
(m) a certification of non-foreign status for Seller
and any Subsidiary of Seller that is selling Assets pursuant to this Agreement
in the form and manner which complies with the requirements of Section 1445 of
the Code and the regulations promulgated thereunder;
(n) all such other documents of title, deeds,
endorsements, assignments and other instruments of sale, conveyance or transfer
as, in the opinion of Purchaser's (or Third Party Purchasers', as applicable)
counsel, are reasonably necessary to vest in Purchaser (or Third Party
Purchasers, as applicable) good and marketable title to the Assets;
(o) a duly executed counterpart of the Interim
Operating Agreement; and
(p) all other previously undelivered documents
required to be delivered by Seller to Purchaser (or Third Party Purchasers, as
applicable) at or prior to the Closing in connection with the Transactions.
Section 3.3 Deliveries by Purchaser.
(a) At the Closing, C&S shall or shall cause
Purchaser to deliver to Seller (unless previously delivered), the following:
(i) a certified check (or, at Seller's
option, wire transfer) payable to Seller in the amount of the Purchase
Price less the sum of the amounts to be paid pursuant to Sections
3.3(b) and 3.3(c) and the amount released to Seller pursuant to Section
2.6(a);
(ii) a duly executed Instrument of
Assumption in form and substance customary in similar transactions;
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(iii) a duly executed counterpart of the
Escrow Agreement;
(iv) a duly executed counterpart of each
Lease Assignment Document applicable to Purchaser;
(v) a duly executed counterpart of the
Interim Operating Agreement; and
(vi) such other documents as are required to
be delivered by Purchaser to Seller pursuant to this Agreement.
(b) At the Closing, Purchaser shall deliver or cause
to be delivered to the Escrow Agent (unless previously delivered), the
following:
(i) a duly executed counterpart of the
Escrow Agreement; and
(ii) a wire transfer made payable to an
escrow account established with the Escrow Agent pursuant to the terms
of the Escrow Agreement in the amount of FIFTEEN MILLION DOLLARS
($15,000,000).
(c) At the Closing, Third Party Purchasers, if any,
shall deliver or cause to be delivered to Seller (unless previously delivered),
the following:
(i) certified checks (or, at Seller's
option, wire transfer) payable to Seller in such amounts as shall
theretofore have been negotiated between such Third Party Purchasers
and Purchaser;
(ii) a duly executed counterpart of each
Lease Assignment Document applicable to the Third Party Purchasers; and
(iii) such other documents as are required
to be delivered by Third Party Purchasers to Seller pursuant to this
Agreement.
(d) At the Closing, the Auction Deposit Escrow shall
be delivered to Seller (other than income amounts thereon, which amounts shall
be promptly remitted to Purchaser).
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ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF SELLER
Except as specifically set forth in the Disclosure Schedule
prepared and signed by Seller and delivered to Purchaser simultaneously with the
execution hereof, Seller represents and warrants to Purchaser that all of the
statements contained in this Article IV are true and complete as of the date of
this Agreement (or, if made as of a specified date, as of such date). Each
exception set forth in the Disclosure Schedule and each other response to this
Agreement set forth in the Disclosure Schedule is identified by reference to, or
has been grouped under a heading referring to, a specific individual Section of
this Agreement and, except as otherwise specifically stated with respect to such
exception, relates only to such Section. In the event of any inconsistency
between statements in the body of this Agreement and statements in the
Disclosure Schedule (excluding exceptions expressly set forth in the Disclosure
Schedule with respect to a specifically identified representation or warranty),
the statements in the body of this Agreement shall control.
Section 4.1 Authorization. Subject to the entry of the Sale
Order, Seller has full corporate power and authority to execute and deliver this
Agreement and the Ancillary Agreements and to consummate the Transactions.
Subject to the entry of the Sale Order, (a) the execution, delivery and
performance by Seller of this Agreement and the Ancillary Agreements and (b) the
consummation by it of the Transactions have been duly authorized by Seller's
Board of Directors, and no other corporate action on the part of Seller is
necessary to authorize the execution and delivery by Seller of this Agreement or
the Ancillary Agreements or the consummation by it of the Transactions. The
Board of Directors of Seller has resolved to recommend that the Bankruptcy Court
approve this Agreement, the Ancillary Agreements and the Transactions; provided
that such recommendation may be withdrawn, modified or amended only in
accordance with the provisions of Section 6.7.
Section 4.2 Binding Agreement. This Agreement has been duly
executed and delivered by Seller and, subject to the entry of the Sale Order and
assuming due and valid authorization, execution and delivery hereof and thereof,
as the case may be, by Purchaser and C&S, each of this Agreement and upon their
execution and delivery by Seller, each Ancillary Agreement is, or will be when
executed, a valid and binding
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obligation of Seller, enforceable against Seller in accordance with its terms,
except the availability of the remedy of specific performance or injunctive or
other forms of equitable relief may be subject to equitable defenses and would
be subject to the discretion of the court before which any proceeding therefor
may be brought.
Section 4.3 Organization; Qualification of Seller. Except as a
result of the commencement of Seller's Bankruptcy Case, Seller (i) is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorpora tion; (ii) has full corporate power and authority to
carry on the Business as it is now being conducted and to own the Business; and
(iii) is duly qualified or licensed to do business as a foreign corporation in
good standing in every jurisdiction in which the conduct of the Business
requires such qualification or, if Seller or any Subsidiary of Seller is not so
qualified in any such jurisdiction, it can become so qualified in such
jurisdiction without any material adverse effect (including assessment of state
taxes for prior years) upon its business and properties. Seller has heretofore
made available to Purchaser complete and correct copies of the certificates of
incorporation and by-laws or similar organizational documents of Seller and its
Subsidiaries as presently in effect.
Section 4.4 Subsidiaries and Affiliates. Section 4.4 of the
Disclosure Schedule sets forth the name, jurisdiction of incorporation and
authorized and outstanding capital of each Subsidiary of Seller and the
jurisdictions in which each Subsidiary of Seller is qualified to do business. No
Subsidiary of Seller owns, holds or has rights in any assets of the Business
(other than certain Permits held by Grand Union Stores, Inc. of Vermont); no
Subsidiary of Seller operates any assets of the Business, and, except in respect
of those Permits held by Grand Union Stores, Inc. of Vermont, no Subsidiary of
Seller has entered into any agreement or incurred any obligations in the name of
Seller and/or its Subsidiaries or in respect of any assets of the Business.
Section 4.5 Consents and Approvals; No Violations. Except as
set forth in Section 4.5 of the Disclosure Schedule or for the filings, Permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the HSR Act and subject to obtaining the approval of
the Bankruptcy Court pursuant to the entry of the Sale Order, none of the
execution, delivery or performance of this Agreement or the Ancillary Agreements
by Seller, the consummation by Seller of the Transactions or compliance by
Seller with any of the provisions hereof or thereof will (i) conflict with or
result in any breach of any provision of the certificate of incorporation, the
by-laws or similar organizational documents of Seller or any Subsidiary of
Seller, (ii) require any filing with, or Permit, authorization, consent or
approval of, any Governmen tal Entity or other Person (including, consents from
parties to loans, contracts, leases and
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other agreements to which Seller or any Subsidiary of Seller is a party), (iii)
require any consent, approval or notice under, or result in a violation or
breach of, or constitute (with or without due notice or the passage of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any contract, agreement, arrangement or understanding to which Seller or any
Subsidiary of Seller is a party (which is an Assigned Contract or by which any
of the Assets are bound), or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Business, any of the Assets,
Seller, any Subsidiary of Seller or any of their properties or assets (except to
the extent any of the foregoing is rendered inapplicable by order of the
Bankruptcy Court).
Section 4.6 Financial Statements. True and complete copies of
the Financial Statements, together with the related auditors report (if
applicable), are included in Section 4.6 of the Disclosure Schedule. The
Financial Statements present fairly in all material respects the consolidated
financial position, results of operations and cash flows of Seller as of the
respective dates thereof and for the periods covered thereby in accordance with
generally accepted accounting principles applied on a consistent basis, subject,
in the case of the interim statements, to normal year-end adjustments and the
absence of footnotes.
Section 4.7 Books and Records. The books of account and other
records of the stores and warehouses constituting part of the Assets are
complete and correct in all material respects and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls.
Section 4.8 Material Contracts.
(a) Section 4.8(a) of the Disclosure Schedule sets
forth all written contracts, agreements, commitments and personal property
leases which relate to the Business and any oral agreements or arrangements
which to the Knowledge of Seller are legally binding and covered by the
following:
(i) that materially or adversely affects or
materially restricts the freedom of Seller to compete in its lines of
business or with any Person or in any geographical area, for any length
of time, or otherwise to conduct the Business as presently conducted or
materially and adversely affect or materially restrict, the business,
operations, assets, properties or condition (financial or other) of the
Business as currently conducted;
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(ii) all maintenance contracts and for the
receipt of all consulting or other services, except those consulting
and similar contracts or agreements terminable without penalty on
ninety (90) or fewer days' notice or those involving the receipt or
payment of less than $25,000 per year;
(iii) involving future expenditures or
receipts or other performance with respect to goods or services having
a total value in excess of $50,000, other than purchase and sales
orders issued in the ordinary course of business; and
(iv) involving a lease, sublease,
installment purchase or similar arrangement for the use of personal
property which involves a total consideration in excess of $50,000.
(b) Seller has made available to Purchaser the best
available copies of all agreements set forth in Section 4.8(a) of the Disclosure
Schedule (the "Material Contracts").
(c) Except as set forth in Section 4.8(c) of the
Disclosure Schedule, each Material Contract to be assumed by Purchaser pursuant
to Sections 2.1(a)(ii), 2.1(a)(iii), 2.1(b)(i) and 2.1(b)(ii) is in full force
and effect, has not been modified or amended and constitutes the legal, valid
and binding obligation of Seller or a Subsidiary of Seller, as the case may be,
in accordance with the terms of such agreement (or would be but for the
commencement of the Bankruptcy Case). To the Knowledge of Seller, each Material
Contract is (or would be but for the commencement of the Bankruptcy Case) a
legal, valid and binding obligation of the other party or parties to such
Material Contract. In the past twelve months (except for breaches and defaults
of the type referred to in Section 365(b)(2) of the Bankruptcy Code), neither
Seller nor any Subsidiary of Seller has given or received a notice of breach or
default under (whether written or, to the Knowledge of Seller, oral) or had any
dispute with respect to any Material Contract which is pending and would be
reasonably likely to result in a Material Adverse Effect. At the Closing, the
assumption and assignment of each such Material Contract to be assumed by
Purchaser pursuant to Sections 2.1(a)(ii), 2.1(a)(iii), 2.1(b)(i) and
2.1(b)(ii), will be valid and enforceable subject to the approval of the
Bankruptcy Court to the entry of the Sale Order.
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Section 4.9 Absence of Certain Changes. Since the Balance
Sheet Date, the Business has been conducted only in the ordinary and usual
course consistent with Seller's past practice, and neither Seller, nor the
Business has or could reasonably be expected to have:
(a) except as set forth in Section 4.9(a) of the
Disclosure Schedule, suffered any Material Adverse Effect;
(b) permitted or allowed any of its Assets (real,
personal or mixed, tangible or intangible) to be subjected to any Encumbrance,
except for liens for current taxes not yet due and other Permitted Encumbrances;
(c) sold, transferred or otherwise disposed of any of
the Assets (real, personal or mixed, tangible or intangible), except in the
ordinary course of business and consistent with Seller's past practice;
(d) disposed of or permitted to lapse any rights to
the use of any Intellectual Property, or disposed of or disclosed to any Person
other than representatives of Purchaser any trade secret, formula, process,
know-how or other Intellectual Property not theretofore a matter of public
knowledge except pursuant to one or more confidentiality agreements;
(e) except as set forth in Section 4.9(e) of the
Disclosure Schedule, with respect to the Business, effected any change in
accounting methods, principles or practices or suffered (i) any damage,
destruction, or casualty loss, whether or not covered by insurance, to any
material Asset or (ii) any condemnation proceeding commencing with respect to
any Asset (or received notice as to the proposed commence ment of any such
proceeding); or
(f) experienced or suffered to exist a material
reduction in value, or amount, of Inventory.
For purposes of this Section 4.9, the filing with the
Bankruptcy Court of a Petition on October 3, 2000 and the events occurring prior
to such filing which led to the need for such filing, shall not constitute a
Material Adverse Effect; provided, however, that effects of the filing of such
Petition may constitute Material Adverse Effects.
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Section 4.10 Title to Assets; Encumbrances.
(a) Personal Property. Seller is the owner of the
Assets other than the Leased Real Property and leased personal property, and, by
the execution and delivery at the Closing of the instruments of transfer
provided for herein and such other documents as may reasonably be requested by
Purchaser or its counsel, Purchaser will be vested with good, valid and
marketable title to each of the Assets other than the Leased Real Property and
leased personal property (subject to their respective leases), free and clear of
all Encumbrances, other than Permitted Encumbrances.
(b) Leased Real Property. Section 4.10(b) of the
Disclosure Schedule contains a list of all real property leased by Seller and
used in connection with the operation of the Business and included in the
Assets. Subject to the approval of the Bankruptcy Court pursuant to the Sale
Order and the assumption and assignment of the Leases pursuant thereto, each of
the leases relating to Leased Real Property is a valid and subsisting leasehold
interest of Seller free of subtenancies and other occupancy rights and
Encumbrances (other than Permitted Encumbrances), except as set forth in Section
4.10(b) of the Disclosure Schedule, and, except as limited by the Bankruptcy
Code, is a binding obligation of Seller, enforceable against Seller in
accordance with its terms, and is in full force and effect. To the Knowledge of
Seller, following the assumption and upon the assignment of such leases by
Seller to Purchaser in accordance with the provisions of Section 365 of the
Bankruptcy Code and the requisite order of the Bankruptcy Court, there will be
no monetary defaults thereunder and no circumstances or events which, with
notice or the passage of time or both, would constitute defaults under such
leases except, in either instance, for defaults which, individually or in the
aggregate, do not or would not reasonably be expected to have a material impact
on the use of such property or are unenforceable due to operation of Section
365(b)(2) of the Bankruptcy Code or shall be cured by Seller pursuant to Section
365 (b)(1) of the Bankruptcy Code.
(c) Leased Personal Property. Section 4.10(c) of the
Disclosure Schedule contains a list of all personal property leased by Seller
and used in connection with the operation of the Business and included in the
Assets where the lease in respect of such personalty is not cancellable (without
penalty) on less than ninety (90) days' notice or involves annual expenditures
exceeding $25,000. Subject to the approval of the Bankruptcy Court pursuant to
the Sale Order and the assumption and assignment of the leases pursuant thereto,
each of the leases relating to leased personal property is a valid and
subsisting leasehold interest of Seller free of Encumbrances (other than
Permitted Encumbrances), except as set forth in Section 4.10(c) of the
Disclosure
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Schedule, and, except as limited by the Bankruptcy Code, is a binding obligation
of Seller, enforceable against Seller in accordance with its terms, and is in
full force and effect. To the Knowledge of Seller, following the assumption and
upon the assignment of such leases by Seller to Purchaser in accordance with the
provisions of Section 365 of the Bankruptcy Code and the requisite order of the
Bankruptcy Court, there will be no monetary defaults thereunder and no
circumstances or events which, with notice or the passage of time or both, would
constitute defaults under such leases except, in either instance, for defaults
which, individually or in the aggregate, do not or would not reasonably be
expected to have a material impact on the use of such property or are
unenforceable due to operation of Section 365(b)(2) of the Bankruptcy Code or
shall be cured by Seller pursuant to Section 365(b)(1) of the Bankruptcy Code.
(d) Owned Real Property. As of the Closing Date,
Seller shall have good, valid and marketable fee simple title to the Owned Real
Property, free and clear of any Encumbrances, except Permitted Encumbrances.
Section 4.11 Real Property.
(a) To the Knowledge of Seller, there are no defects
in the plants, stores, buildings, improvements and structures, fixtures or
equipment located on or at the Real Property which would substantially impair
the conduct of the Business by Purchaser immediately following the Closing
relative to the conduct of the Business on the date hereof.
(b) Seller has not granted to any Person (other than
pursuant to this Agreement) any right to occupy or possess or otherwise encumber
any portion of the Real Property other than as set forth in Section 4.11(b) of
the Disclosure Schedule. Seller's interests with respect to the Real Property
Leases have not been assigned or pledged and are not subject to any Encumbrances
other than Permitted Encumbrances. Seller has not vacated or abandoned any
portion of the Real Property or given notice to any Third Party of their intent
to do the same.
(c) Seller is not a party to or obligated under any
option, right of first refusal or other contractual right to sell, dispose of or
lease any of the Real Property or any portion thereof or interest therein to any
Person other than Purchaser.
(d) There is no contract or agreement to which Seller
is a party, other than the Assigned Contracts, affecting any of the Real
Property for which Purchaser will be responsible or liable after Closing, except
those which (i) are terminable on not
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more than sixty (60) days' notice without premium or penalty or (ii) require
payment of less than $2,000 per month per location but will expire or be
terminated within one year of the Closing.
(e) Seller has not received any written notice of any
pending, threatened or contemplated condemnation proceeding affecting any of the
Real Property or any part thereof or of any sale or other disposition of any of
the Real Property or any part thereof in lieu of condemnation.
(f) Neither Seller nor any of its Subsidiaries has
received any written notices from any Governmental Authority stating or alleging
that any improve ments located on the Real Property have not been constructed in
compliance with Applicable Law or are being operated in violation of Applicable
Law.
(g) Neither Seller nor any of its Subsidiaries has
received any written notices from any Governmental Authority requiring or
advising as to the need for any material repair, alteration, restoration or
improvement in connection with the Real Property.
(h) To the Knowledge of Seller, the Real Property is
in all material respects in good condition and repair and adequate in all
material respects for the continued conduct of the business to which it relates.
(i) With respect to the Leased Real Property:
(i) the Real Property Leases are in full
force and effect; neither Seller nor any of its Subsidiaries has
received any written notice or, to the Knowledge of Seller, oral
notice, that any material default, or condition which with the passage
of time would constitute a default, exists under the Real Property
Leases, except such notices as to which the alleged defaults have been
cured or otherwise resolved;
(ii) true, correct and complete copies of
the Real Property Leases have been delivered to Purchaser prior to the
date hereof and such Real Property Leases have not been amended or
modified since that date;
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(iii) to the extent that any property
subject to a Real Property Lease is the subject of a security interest
of a third party lender and such Real Property Lease is subordinate to
such lender's rights to the property subject to such Real Property
Lease, Seller has a non- disturbance agreement with the landlord's
lender with respect to each Real Property Lease;
(iv) none of the Leased Real Property has
been pledged by Seller or any of its Subsidiaries or is subject to any
Encum brance (other than pursuant to this Agreement; Permitted
Encumbrances and Encumbrances in favor of Seller's lenders);
(v) neither Seller nor any of its
Subsidiaries has given any notice to any landlord under any of the Real
Property Leases indicating that it will not be exercising any extension
or renewal options under the Real Property Leases. All security
deposits required under the Real Property Leases have been paid to and,
to the Knowledge of Seller, are being held by the applicable landlord
under the Real Property Leases; and
(vi) Section 4.11(i)(vi) of the Disclosure
Schedule sets forth a summary of all construction allowances payable
under the Real Property Leases and the amounts thereof which, as of the
date hereof, have been drawn by Seller or any of its Subsidiaries.
(j) Section 4.11(j) of the Disclosure Schedule sets
forth all construction and material alteration projects currently ongoing at the
Real Property.
Section 4.12 Environmental Matters. Except as set forth in
Section 4.12 of the Disclosure Schedule and except for conditions that,
individually or in the aggregate, would not reasonably be expected to result in
Environmental Claims which would be reasonably likely to result in Purchaser
Representation Losses exceeding five million dollars ($5,000,000) in the
aggregate:
(a) Each of Seller and its Subsidiaries are in
material compliance with all Environmental Laws which compliance includes, but
is not limited to, the possession by Seller and its Subsidiaries of all Permits
required under all applicable Environmental Laws, and compliance with the terms
and conditions thereof.
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(b) Neither Seller nor any Subsidiary of Seller has
received any written communication, whether from a Governmental Entity or
Person, that alleges that Seller or any of its Subsidiaries is not in compliance
with any Environmental Laws, which has not been resolved, and to the Knowledge
of Seller, there are no conditions existing at the Assets that could reasonably
be expected to prevent or interfere with such full compliance in the future.
(c) To the Knowledge of Seller, there are no past or
present facts, circumstances or conditions, including the Release of any
Materials of Environ mental Concern, that could reasonably be expected to result
in an Environmental Claim against Seller or any Subsidiary of Seller.
(d) Seller has made available to Purchaser prior to
the execution of this Agreement all environmental audits, assessments and
documentation regarding environmental matters pertaining to, or the
environmental condition of, the Assets or the compliance (or non-compliance) by
Seller or any of its Subsidiaries with any Environmental Laws.
Section 4.13 Insurance. Section 4.13 of the Disclosure
Schedule sets forth (a) a true and complete list and description of all
insurance policies, other insurance arrangements and other contracts or
arrangements for the transfer or sharing of insurance risks by Seller, any of
its Subsidiaries or the Business, other than any insurance policy, contract or
other arrangement that constitutes or otherwise relates to a Plan, in force on
the date hereof with respect to the business or assets of the Business and (b) a
description of such risks which Seller has designated as being self-insured.
Section 4.14 Casualties. Since the Balance Sheet Date neither
Seller nor any Subsidiary of Seller has been affected in any way as a result of
flood, fire, explosion or other casualty which would reasonably be expected to
result in a Material Adverse Effect.
Section 4.15 Compliance with Laws; Permits and Licenses. (a)
Seller and its Subsidiaries are in compliance, and will continue to comply, with
in a timely manner and in all respects with all laws, rules and regulations,
ordinances, judgments, decrees, orders, writs and injunctions of all United
States federal, state, local and foreign governments and agencies thereof that
affect the business, properties or assets of the Business or any of the Assets,
except for such noncompliance as would not reasonably be expected to result in a
Material Adverse Effect.
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(b) Seller and its Subsidiaries have in effect, have
obtained and will continue to obtain and renew, all Permits necessary to conduct
the Business as it is presently being conducted in accordance with the
ordinances, rules, requirements and regulations of any Governmental Entity
having jurisdiction over its properties or activities, and there has occurred no
default under any such Permit, except for such Permits that, if not obtained,
would not reasonably be expected to result in a Material Adverse Effect.
(c) Without limiting the foregoing, (i) the
operations of the Business do not violate or fail to comply in any material
respect with applicable health, fire, safety, zoning or building codes, laws or
ordinances, rules or regulations; (ii) neither Seller nor any of its
Subsidiaries has received any notice not heretofore complied with or in the
process of being complied with, from any Governmental Entity having jurisdiction
over its properties or activities, or any insurance or inspection body, that its
operations or any of its properties, facilities, equipment or business
procedures or practices fail to comply in all material respects with any
Applicable Law, ordinance, regulation, building or zoning law, or requirement of
any public authority or body; and (iii) there are no pending or, to the
Knowledge of Seller, threatened actions or proceedings by any Governmental
Entity alleging violations in any material respect of such codes, laws or
ordinances except, in each case, where such violation would not reasonably be
expected to result in a Material Adverse Effect.
Section 4.16 Taxes.
(a) All income and other material Tax Returns
required to be filed by or with respect to the Assets or the operations or the
income of Seller and its Subsidiaries have, within the time and in the manner
prescribed by law, been duly filed with the appropriate taxing authorities.
(b) To the Knowledge of Seller, there are no
Encumbrances for Taxes upon any of the Assets, except for statutory Encumbrances
for Taxes not yet due.
(c) None of the Assets is property which is required
to be treated as being owned by any other person pursuant to the so-called "safe
harbor lease" provisions of former Section 168(f)(8) of the Code.
(d) None of the Assets directly or indirectly secures
any Indebtedness the interest on which is tax exempt under Section 103(a) of the
Code.
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(e) None of the Assets is "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
Section 4.17 Intellectual Property.
(a) Section 4.17(a) of the Disclosure Schedule sets
forth, for the Intellectual Property owned by Seller or any Subsidiary of
Seller, a complete and accurate list of all U.S. and foreign (i) patents and
patent applications; (ii) Trademark registrations (including Internet domain
registrations), Trademark applications, and material unregistered Trademarks
(including, the issue and expiration dates of all of the Trademark registrations
and applications of Seller relating to the Business) and (iii) copyright
registrations, copyright applications and material unregistered copyrights. Such
list includes, for each of the foregoing, the applicable record owner,
jurisdiction and registration and/or application number, and date issued (or
filed).
(b) Section 4.17(b) of the Disclosure Schedule lists
all Software (other than off-the-shelf software applications programs having an
acquisition price of less than $5,000) which are owned, licensed, leased or
otherwise used by Seller in the conduct of the Business, and identifies which
Software is owned, licensed, leased or otherwise used, as the case may be.
(c) Section 4.17(c) of the Disclosure Schedule sets
forth a complete and accurate list of all agreements granting or obtaining any
right to use or practice any rights under any Intellectual Property, to which
Seller or any Subsidiary of Seller is a party or otherwise bound, including
license agreements, settlement agreements and covenants not to sue
(collectively, the "License Agreements"). Such list includes for each agreement,
the title, the parties, the date executed and the Intellectual Property covered
thereby. The License Agreements are valid and binding obligations of all parties
thereto, enforceable in accordance with their terms, and there exists no event
or condition which will result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default by any party under any
such License Agreement except for (i) breaches and defaults of the type referred
to in Section 365(b)(2) or which shall be cured by Seller pursuant to Section
365(b)(1) of the Bankruptcy Code and (ii) where such breaches or defaults would
not reasonably be expected to result in a Material Adverse Effect. No royalties,
honoraria or other fees in excess of $2,500 per year are payable to any Third
Parties for the use of or right to use any Intellectual Property except pursuant
to the License Agreements.
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(d) Except as set forth on Section 4.17(d) of the
Disclosure Schedule, the Intellectual Property material to Business owned by
Seller or any Subsidiary of Seller and, to the Knowledge of Seller, any
Intellectual Property used by Seller or any of its Subsidiaries, is valid and
subsisting, in full force and effect, and has not been canceled, expired or
abandoned. To the Knowledge of Seller, there is no pending threatened
opposition, interference or cancellation proceeding before any court or
registration authority in any jurisdiction against the Intellectual Property
owned by Seller or its Subsidiaries, or against any Intellectual Property
licensed to Seller or any of its Subsidiaries, except where such opposition,
interference or cancellation would not reasonably be expected to result in a
Material Adverse Effect.
(e) Seller will transfer to Purchaser on the Closing
Date good and marketable title to all of the Intellectual Property owned by
Seller, free and clear of all Encumbrances. Except as set forth in Section
4.17(e) of the Disclosure Schedule, (i) Seller has the sole and exclusive right
to use the registered Trademarks in the United States in connection with the
goods listed and (ii) Seller is the owner of all right, title and interest in
and to the registered Trademarks.
(f) The conduct of the Business as currently
conducted or planned to be conducted does not infringe upon (either directly or
indirectly such as through contributory infringement or inducement to infringe)
any intellectual property rights owned or controlled by any Third Party except
where such infringement would not reasonably be expected to result in a Material
Adverse Effect.
(g) To the Knowledge of Seller, no Third Party is
misappropri ating, infringing, diluting or violating any Intellectual Property
owned by Seller or any Subsidiary of Seller except where such misappropriation,
infringement, dilution or violation would not reasonably be expected to result
in a Material Adverse Effect. Except as set forth on Section 4.17(g) of the
Disclosure Schedule, to the Knowledge of Seller, no such claims have been
brought against any Third Party by Seller which are still pending.
Section 4.18 Labor Relations and Employment.
(a) Section 4.18(a) of the Disclosure Schedule lists
all collective bargaining agreements applicable on the date hereof to employees
of the Business, copies of which have been provided to Purchaser.
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(b) Except to the extent set forth in Section 4.18(b)
of the Disclosure Schedule, (i) there is no labor strike, dispute, slowdown,
stoppage or lockout actually pending, or to the Knowledge of Seller, threatened
against or affecting the Business; (ii) to the Knowledge of Seller, no union
claims to represent the employees of the Business; (iii) Seller and all
Subsidiaries of Seller are in material compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment, wages, hours of work and occupational safety and health, and are not
engaged in any material unfair labor practices as defined in the National Labor
Relations Act or other Applicable Law, ordinance or regulation; (iv) there is no
material unfair labor practice charge or complaint against Seller or any
Subsidiary of Seller pending or, to the Knowledge of Seller, threatened before
the National Labor Relations Board or any similar state or foreign agency; (v)
to the Knowledge of Seller, no charges with respect to or relating to Seller or
any Subsidiary of Seller are pending before the Equal Employment Opportunity
Commission or any other agency responsible for the prevention of unlawful
employment practices; (vi) to the Knowledge of Seller, Seller has not received
notice of the intent of any federal, state, local or foreign agency responsible
for the enforcement of labor or employment laws to conduct an investigation with
respect to or relating to Seller or any Subsidiary of Seller and no such
investigation is in progress; and (vii) to the Knowledge of Seller, there are no
complaints, lawsuits or other proceedings pending or threatened in any forum by
or on behalf of any present or former employee of Seller or any Subsidiary of
Seller, any applicant for employment or classes of the foregoing alleging breach
of any contract or employment, any law or regulation governing employment or the
termination thereof or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship.
Section 4.19 Brokers or Finders. No agent, broker, investment
banker, financial advisor or other firm or Person is or will be entitled to any
broker's or finder's fee from Seller or any other commission or similar fee from
Seller in connection with any of the Transactions except for Merrill Lynch,
Pierce, Fenner & Smith, Inc.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND C&S
C&S and Purchaser jointly and severally represent and warrant
to Seller that:
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Section 5.1 Organization. Purchaser is a limited liability
company and C&S is a corporation, duly organized, validly existing and in good
standing under the laws of its state of organization or incorporation.
Section 5.2 Authorization. Each of C&S and Purchaser has full
power and authority to execute and deliver this Agreement and the Ancillary
Agreements and to consummate the Transactions. The execution, delivery and
performance by C&S and Purchaser of this Agreement and the Ancillary Agreements
and the consummation by each of them of the Transactions have been duly
authorized by their Managing Member or Board of Directors, as applicable, and no
other corporate or limited liability company action on its part is necessary to
authorize the execution and delivery by it of this Agreement or the Ancillary
Agreements or the consummation by it of the Transactions. No vote of, or consent
by, the holders of any class or series of equity is necessary to authorize the
execution and delivery by Purchaser or C&S of this Agreement or the Ancillary
Agreements or the consummation by it of the Transactions.
Section 5.3 Binding Agreement. Each of this Agreement and each
Ancillary Agreement has been duly executed and delivered by C&S and Purchaser
and assuming due and valid authorization, execution and delivery hereof or
thereof, as the case may be, by Seller, each of this Agreement and each
Ancillary Agreement is a valid and binding obligation of C&S and Purchaser,
enforceable against C&S and Purchaser in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws of general application affecting
enforcement of creditors' rights generally and (ii) the availability of the
remedy of specific performance or injunctive or other forms of equitable relief
may be subject to equitable defenses and would be subject to the discretion of
the court before which any proceeding therefor may be brought.
Section 5.4 Consents and Approvals; No Violations. Except as
set forth in Section 5.4 of the Disclosure Schedule and except for the filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the HSR Act, none of the execution, delivery
or performance of this Agreement or the Ancillary Agreements by C&S or
Purchaser, the consummation by C&S or Purchaser of the Transactions or
compliance by C&S or Purchaser with any of the provisions hereof or thereof will
(i) conflict with or result in any breach of any provision of the certificate of
formation or operating agreement of Purchaser or Certificate of Incorporation or
By-Laws of C&S, (ii) require any filing with, or permit, authorization, consent
or approval of, any Governmental Entity, (iii) require any consent, approval or
notice under, or result in a violation or breach of, or constitute (with or
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without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any contract, agreement, arrangement or
understanding to which Purchaser or C&S is a party, as applicable, or by which
Purchaser or any of its properties or assets may be bound, or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Purchaser, or any of its Subsidiaries or any of their respective properties or
assets, excluding from the foregoing clauses (ii), (iii) and (iv) such
violations, breaches or defaults which would not, individually or in the
aggregate, have a material adverse effect on the ability of Purchaser to
consummate the Transactions.
Section 5.5 Availability of Funds. Purchaser has delivered to
Seller, prior to the date hereof, a true, correct and complete copy of a
commitment letter and related term sheet (together, the "Commitment Letter")
providing commitments by the financial institutions issuing such letter (the
"Lenders") to lend to C&S or an Affiliate of C&S immediately available funds in
an amount, together with other cash available to Purchaser and C&S, sufficient
to consummate the Transactions and pay all related fees and expenses. Such
Commitment Letter is in full force and effect on the date hereof.
Section 5.6 Brokers or Finders. None of Purchaser, C&S or any
of their Subsidiaries or Affiliates has entered into any agreement or
arrangement entitling any agent, broker, investment banker, financial advisor or
other firm or Person to any broker's or finder's fee or any other commission or
similar fee in connection with any of the Transactions, except Wasserstein
Perella & Co., Inc., whose fees and expenses will be paid by Purchaser in
accordance with Purchaser's agreement with such firm.
ARTICLE VI
COVENANTS
Section 6.1 Interim Operations of the Business. Subject to any
obligations as a debtor or debtor-in-possession under the Bankruptcy Code, or
order of the Bankruptcy Court, Seller shall, in the context of its pending case
before the Bankruptcy Court, use commercially reasonable efforts to ensure that,
and Seller covenants and agrees that, after the date hereof and prior to the
Closing Date, except (i) as expressly provided in this Agreement, (ii) as set
forth in the Disclosure Schedule or (iii) as may be agreed in writing by
Purchaser:
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(a) (i) the Business shall be conducted in the same
manner as heretofore conducted and only in the ordinary course; (ii) each
category of Inventory at each of the stores shall be maintained at adequate
levels to assure the ordinary course of operations of the Business (provided,
however, that Seller may reduce private label and Seller-unique items, inventory
that is damaged, unusable or unsaleable (absent discount), inventory with less
than a 30-day shelf life and inventory in excess of four weeks of such item's
average weekly turn movement, provided that such reduction shall not excuse
Seller from failure to maintain Inventories at any location at adequate levels);
(iii) each of Seller and any Subsidiary of Seller shall use commercially
reasonable efforts to: preserve the business organization of the Business intact
(at the store, district and corporate levels); keep available the services of
the current officers and employees of the Business; and maintain the existing
relations with franchisees, customers, suppliers, creditors, business partners,
employees and others having business dealings with the Business, to the end that
the goodwill and ongoing business of the Business shall be unimpaired at the
Closing Date; (iv) the Business shall not institute any new methods of
manufacture, purchase, sale, lease, management, accounting or operation or
engage in any transaction or activity other than minor changes in the ordinary
course of business and consistent with Seller's past practice; (v) Seller shall
use commercially reasonable efforts to maintain its corporate operations in
Wayne, New Jersey at least in the same manner and effectiveness as previously
conducted but with such changes as may be reasonably necessary to enable Seller
as of the Closing Date to adequately comply with its obligations under the
Interim Operating Agreement after the Closing; and (vi) retail margins shall not
be increased or decreased other than consistent with Seller's past practice;
(b) Seller shall take all action reasonably required
to (i) preserve and protect the Intellectual Property; (ii) maintain the books,
records and accounts of the Business in the usual, regular and ordinary course
of business on a basis consistent with Seller's past practice and in accordance
with GAAP; and (iii) maintain, preserve and protect all of the Assets in the
condition in which they exist on the date hereof, except for ordinary wear and
tear; provided that Seller shall not be required to make any capital
expenditures or major repairs in connection with any of the Real Property unless
(A) such expenditures or repairs are fully covered by Seller's insurance or (B)
the failure to do so would interfere in the operation of any store or warehouse
in any material respect;
(c) Seller shall not modify, amend or terminate any
of its leases or material contracts unless any such modification or amendment
shall be to the benefit of Seller or waive, release or assign any material
rights or claims to the extent
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included in the Assets, except in the ordinary course of business and consistent
with Seller's past practice;
(d) none of Seller or any of its Subsidiaries with
respect to any of the stores constituting part of the Assets shall enter into
any material commitment or transaction (including, any capital expenditure)
other than in the ordinary course of Business;
(e) neither Seller nor any Subsidiary of Seller shall
lease, license, mortgage, pledge or encumber any Assets other than in the
ordinary and usual course of business, consistent with Seller's past practice or
transfer, sell or dispose of any Assets other than in the ordinary and usual
course of business, consistent with Seller's past practice or dispose of or
permit to lapse any rights to any Intellectual Property;
(f) Seller shall not permit any insurance policy
naming it as a beneficiary or a loss payable payee to be canceled or terminated
without notice to Purchaser;
(g) neither Seller nor any Subsidiary of Seller shall
adopt any plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization that is
inconsistent with the Transactions or the terms of this Agreement;
(h) neither Seller nor any Subsidiary of Seller shall
take, or agree to or commit to take, any action that would or is reasonably
likely to result in any of the conditions to the Closing set forth in Article
VII not being satisfied, or would make any representation or warranty of Seller
contained herein inaccurate in any material respect at, or as of any time prior
to, the Closing Date, or that would materially impair the ability of Seller or
Purchaser to consummate the Transactions contemplated by this Agreement in
accordance with the terms hereof or materially delay such consummation;
(i) neither Seller nor any Subsidiary of Seller shall
take any action which would have or reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect;
(j) other than pursuant to the Auction, neither
Seller nor any Subsidiary of Seller shall enter into any agreement, contract,
commitment or arrangement to do any of the foregoing, or authorize, recommend,
propose or announce an intention to do, any of the foregoing; and
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(k) At the Closing, Seller shall have cash at store
locations sufficient for the ordinary operation of the Business, and in amounts
consistent with past practice for such day of the week and time of the year.
Section 6.2 Access; Confidentiality.
(a) Between the date of this Agreement and the
Closing, Seller shall (i) afford Purchaser and its authorized representatives
reasonable access to all offices and other facilities, all books and records and
all employees and personnel of Seller and its Subsidiaries; (ii) permit
Purchaser and its authorized representatives to make such inspections and to
make copies of such books and records as they may reasonably require; and (iii)
furnish Purchaser and its authorized representatives with such financial and
operating data and other information concerning the Business as they may from
time to time reasonably request. Each party will direct its employees to render
any assistance which the other party may reasonably request in examining or
utilizing records referred to in this Section 6.2.
(b) On and after the Closing Date, during normal
business hours, Seller will permit Purchaser and its authorized representatives
to have access to and examine and make copies of all books and records of Seller
and its Subsidiaries relating to the Business which are not delivered to
Purchaser pursuant hereto (including correspondence, memoranda, books of
account, Tax records and the like) and relating to transactions or events
occurring prior to the Closing Date.
(c) Purchaser shall cooperate with Seller, at
Seller's expense, and make available to Seller such documents, books, records or
information transferred to Purchaser and relating to activities of the Business,
Seller or any of its Subsidiaries prior to the Closing as Seller may reasonably
require for a period of six (6) years from the Closing Date upon reasonable
notice to Purchaser and during normal business hours.
(d) Each party agrees not to destroy any files or
records which are subject to this Section 6.2 without giving reasonable notice
to the other parties, and within 15 days of receipt of such notice, such other
party may cause to be delivered to it the records intended to be destroyed, at
such other party's expense.
(e) Between the date of this Agreement and the
Closing, the Purchaser and its environmental consultant, which consultant shall
be acceptable to Seller, which acceptance shall not be unreasonably withheld or
denied, may upon
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reasonable notice and at reasonable times enter into and upon all or any portion
of the properties of Seller included in the Assets (including all Real Property)
in order to assess the environmental condition of such properties or the
business conducted thereat. Notwithstanding the foregoing, no soil and surface
or ground water sampling, monitoring, borings or testing and any other invasive
tests, or investigations relating to environmental conditions or Materials of
Environmental Concern at such properties shall be conducted without Seller's
consent, which consent shall not be unreasonably withheld, and permitting Seller
the opportunity to participate therein. Purchaser and C&S hereby agree to repair
and restore any portion of the Assets damaged as a result of any inspection or
assessment of the Assets by Purchaser and/or C&S and, in addition, hereby
indemnify and hold harmless Seller from and against any and all damage suffered
by Seller in connection with any entry onto, or inspection of, the Assets by
Purchaser, C&S or Purchaser's and/or C&S' agents, employees, representatives or
contractors in connection therewith, which indemnity shall survive the sale of
the Assets for a period of one year pursuant to the terms of this Agreement or,
if such sale is not consummated, the termination of this Agreement. Seller shall
cooperate with Purchaser, C&S and their authorized representatives in conducting
such assessment, and shall allow Purchaser, C&S and their authorized
representatives reasonable access to their properties and businesses.
(f) Any information regarding the Business or Assets
heretofore or hereafter obtained from Seller by Purchaser or its representatives
shall be subject to the terms of the Confidentiality Agreement, and such
information shall be held by Purchaser and its representatives in accordance
with the terms of the Confidentiality Agreement; provided, however, that
following the Closing, this Section 6.2 and the Confidentiality Agreement shall
not prohibit Purchaser from using and providing to Third Parties such
information concerning the Assets or the Business as it may deem appropriate.
The foregoing shall not preclude Purchaser from (i) the use or disclosure of
such information which currently is known generally to the public or which
subsequently has come into the public domain, other than by way of disclosure in
violation of this Agreement, (ii) the use or disclosure of such information that
becomes available to Purchaser on a non-confidential basis from a source other
than Seller or Seller's representatives, provided that such source is not known
by Purchaser to have a legal obligation prohibiting the disclosure of such
information, or (iii) the disclosure of such information required by law or
court order, provided that, to the extent practicable, prior to such disclosure
required by law or court order Purchaser will give Seller prior written notice
of the nature of the law or order requiring disclosure and the disclosure to be
made in accordance therewith.
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Section 6.3 Efforts and Actions to Cause Closing to Occur.
(a) Prior to the Closing, upon the terms and subject
to the conditions of this Agreement, each of Purchaser, C&S and Seller shall use
their respective commercially reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done and cooperate with each other in
order to do, all things necessary, proper or advisable (subject to any
Applicable Laws) to consummate the Closing and the other Transactions as
promptly as practicable including, but not limited to (i) the preparation and
filing of all forms, registrations and notices required to be filed to
consummate the Closing and the other Transactions and the taking of such actions
as are reasonably necessary to obtain any requisite approvals, authorizations,
consents, orders, licenses, Permits, qualifications, exemptions or waivers by
any Third Party or Governmental Entity, and (ii) the preparation of any
documents reasonably requested by Purchaser in order to facilitate financing of
any of the Transactions. In addition, no party hereto shall take any action
after the date hereof that could reasonably be expected to materially delay the
obtaining of, or result in not obtaining, any permission, approval or consent
from any Governmental Entity or other Person required to be obtained prior to
Closing.
(b) Prior to the Closing, each party shall promptly
consult with the other parties hereto with respect to, provide any necessary
information with respect to, and provide the other parties (or their respective
counsel) with copies of, all filings made by such party with any Governmental
Entity or any other information supplied by such party to a Governmental Entity
in connection with this Agreement and the Transactions. Each party hereto shall
promptly provide the other parties with copies of any written communication
received by such party from any Governmental Entity regarding any of the
Transactions. If any party hereto or Affiliate thereof receives a request for
additional information or documentary material from any such Governmental Entity
with respect to any of the Transactions, then such party shall endeavor in good
faith to make, or cause to be made, as soon as reasonably practicable and after
consultation with the other parties, an appropriate response in compliance with
such request. To the extent that transfers, amendments or modifications of
Permits (including environmental Permits) are required as a result of the
execution of this Agreement or consummation of any of the Transactions, Seller
shall use commercially reasonable efforts to effect such transfers, amendments
or modifications.
(c) Seller shall at the request of Purchaser, prior
to the Closing, request the unconditional release of each Person holding a
mortgage or lien on any Real Property; provided, that Purchaser shall pay or
reimburse Seller for all expenses charged
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to Seller by such lenders to effect such releases and related filings. All such
releases shall be in writing and, if obtained, executed counterparts thereof
shall be delivered to Purchaser at or prior to the Closing.
(d) In addition to and without limiting the
agreements of the parties contained above, Seller, Purchaser and C&S shall:
(i) take promptly all actions necessary to
make the filings required of them or any of their Affiliates under the
HSR Act;
(ii) comply at the earliest practicable date
with any request for additional information or documentary material
received by Seller or Purchaser or any of their Affiliates from the FTC
or the DOJ pursuant to the HSR Act or from any other Governmental
Entity in connection with antitrust matters;
(iii) cooperate with each other in
connection with any filing under the HSR Act and in connection with
resolving any investigation or other inquiry concerning the
Transactions commenced by the FTC, DOJ, or any other Governmental
Entity;
(iv) use commercially reasonable efforts to
resolve such objections, if any, as may be asserted with respect to the
Transactions under any antitrust law; and
(v) advise the other parties promptly of any
material communication received by such party from the FTC, DOJ, or any
other Governmental Entity regarding any of the Transactions, and of any
understandings, undertakings or agreements (oral or written) such party
proposes to make or enter into with the FTC, DOJ, or any other
Governmental Entity in connection with the Transactions.
Concurrently with the filing of notifications under the HSR Act or as soon
thereafter as practicable, Seller and Purchaser shall each request early
termination of the HSR Act waiting period.
(e) Notwithstanding the foregoing or any other
covenant herein contained, nothing in this Agreement shall be deemed to require
Purchaser, C&S
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or Seller (i) to commence any litigation against any Person in order to
facilitate the consummation of any of the Transactions, (ii) to take or agree to
take any other action or agree to any limitation that could reasonably be
expected to have a Material Adverse Effect on the business, assets, condition
(financial or otherwise), results of operations or prospects of Purchaser on the
one hand, or the Business, on the other hand, or (iii) to defend against any
litigation brought by any Governmental Entity seeking to prevent the
consummation of, or impose limitations on, any of the Transactions.
Section 6.4 Notification of Certain Matters.
(a) Seller shall give prompt notice to Purchaser, and
Purchaser and C&S shall give prompt notice to Seller, of (i) any notice or other
communication from any Person alleging that the consent of such Person is or may
be required in connection with the Transactions and (ii) any written objection,
litigation or administra tive proceeding that challenges the Transactions or the
entry of the Sale Order.
(b) Seller shall give notice to Purchaser promptly
after becoming aware of (i) the occurrence or non-occurrence of any event
occurrence or non- occurrence of which would be likely to cause either (A) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Closing Date or (B) any condition set forth in Article VII to be unsatisfied in
any material respect at any time from the date hereof to the Closing Date and
(ii) any failure of Seller or any of its Subsidiaries, to comply in any material
respect with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that (x) the delivery of any
notice pursuant to this Section 6.4 shall not limit or otherwise affect the
remedies available hereunder to Purchaser or C&S and (y) giving such notice
shall not be required from and after the time Purchaser or C&S has actual
knowledge of the information required to be included in such notice.
Section 6.5 Deliveries by Purchaser; Certain Adjustments.
(a) Within 30 days after the earlier of (a) a
definitive list of non-real estate executory contracts to which Seller or any of
its Subsidiaries is a party being delivered to Purchaser and (b) the completion
of the auction in Seller's Bankruptcy Case, Purchaser shall deliver to Seller a
list of those executory contracts and other Contingent Assets which Purchaser
does not wish to acquire. Such assets shall become Retained Assets and the
schedules of Contingent Assets will be revised to remove such assets and such
assets will not constitute Assets at Closing. No adjustment shall be made
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to the Purchase Price in connection with the redesignation of Contingent Assets
pursuant to this Section 6.5(a).
(b) Prior to the Closing, Purchaser and Seller shall
jointly develop a list of Permanent and Contingent Assets which Seller and/or
its Subsidiaries, as applicable, despite their respective best efforts and
unless due primarily to the fault of Purchaser, C&S or Third Party Purchaser, as
applicable, have been unable to assign or transfer to Purchaser or one or more
Third Party Purchasers, as applicable, or as to which, in the case of Real
Property, all or substantially all of the property is damaged by fire of other
casualty and the parties shall agree to a Purchase Price adjustment in
accordance with Section 6.5(c). Subject to the rights of Purchaser under Section
7.2, such assets shall become Retained Assets and the schedules of Permanent and
Contingent Assets will be revised to remove such assets and such assets will not
constitute Assets at Closing. Without limitation as to what constitutes "fault",
the Purchase Price shall not be adjusted in connection with the redesignation of
such Assets as Retained Assets if such redesignation is due primarily to
Purchaser's, C&S' or Third Party Purchaser's, as applicable, inability to
satisfy the requirement of showing adequate assurance of future performance
under section 365(b) of the Bankruptcy Code; provided, however, Purchaser shall
be entitled to receive from Seller and retain one-half of the aggregate proceeds
(net of all costs of sale or liquidation and assignment, excluding cure costs
and without regard to any liens on such property or proceeds in favor of any of
Seller's lenders) from the Seller's subsequent disposition of no more than ten
(10) stores of such redesignated assets and, provided, further, that the
foregoing provision shall only apply to no more than ten, and shall only apply
if there are at least two, store leases so redesignated and the furniture,
fixtures and equipment located therein ("Involuntary Redesignated Stores");
provided, further, that Seller shall be entitled to offset from the amounts due
to Purchaser under the first proviso of this sentence any distributions made on
account of the rejection of any lease relating to an Involuntary Redesignated
Store and the costs and expenses of effecting such rejections. If there shall
exist more than ten Involuntary Redesignated Stores, Purchaser shall have the
right to designate the Involuntary Redesignated Stores to be included in such
calculation.
(c) Purchaser and Seller shall use their best
efforts, in respect of those Assets for which a Purchase Price adjustment is
contemplated pursuant to Section 6.5(b), to jointly assign a value to the Assets
to be excluded pursuant to Section 6.5(b), such value to be the Asset Adjustment
Amount; provided, however, if the difference in values assigned by Purchaser and
Seller to such assets is less than $500,000, the average of the values assigned
shall be the Asset Adjustment Amount. If the difference in values assigned by
Purchaser and Seller to such assets exceeds $500,000,
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Purchaser and Seller shall submit their calculations in respect of such assets
to a mutually selected Third Party appraisal firm, whose valuation shall be the
Asset Adjustment Amount, and subject to the rights of the parties under Article
VII, shall be binding on the parties. Purchaser and Seller shall each bear 50%
of the fees and expenses of such Third Party appraisal firm.
(d) Prior to the Closing, Purchaser and Seller shall
jointly develop a list of items, if any, of the Assets which could reasonably be
expected to result in an Environmental Claim, which would reasonably be expected
to result in Purchaser Representation Losses and which are not disclosed in
Section 4.12 of the Disclosure Schedule on the date hereof. Purchaser and Seller
shall use their best efforts, taking into account the commercial use of the
property and the reasonable efforts of remediation, in respect of such matters
to jointly assign a value to such Environmental Claims. To the extent that the
aggregate value assigned to such Environmental Claims exceeds two million
dollars ($2,000,000), such amount in excess of two million dollars ($2,000,000)
shall be the Environmental Claims Adjustment; provided, however, the amount of
any Environmental Claims Adjustment shall not exceed three million dollars
($3,000,000). If the parties cannot reach an agreement as to the amount of
Purchaser Representation Losses in respect of such Environmental Claims, the
parties shall retain a mutually acceptable environmental consulting firm, the
expenses of which shall be borne equally by Purchaser and Seller, to resolve
such dispute.
Section 6.6 Submission for Court Approval.
(a) As promptly as practicable, but in no event later
than five Business Days, after the date hereof, Seller shall file this Agreement
with the Bankruptcy Court in connection with Seller's pending sale motion dated
October, 16, 2000 (the "Sale Motion"). The parties agree that for purposes of
the Interim Supply Agreement, the "Aggregate Consideration Paid" shall be deemed
to be Three Hundred One Million Eight Hundred Thousand Dollars ($301,800,000) if
the Transactions close.
(b) Seller shall provide Purchaser with copies of any
and all motions, applications, pleadings, schedules, statements, reports and
other papers (including exhibits and supporting documentation) filed by or on
behalf of Seller or any Subsidiary of Seller in its chapter 11 case and related
to the Assets or this Agreement.
(c) Seller shall provide timely notice of the
Supplement (as defined in the Sale Motion) to any additional party designated by
Purchaser; provided,
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however, if Seller does not have in its files the address of such additional
party, Purchaser shall provide an address or waive such request.
(d) At all times Seller shall use commercially
reasonable efforts to obtain the timely approval of the Sale Order by the
Bankruptcy Court.
Section 6.7 Bidding Procedures. Seller and Purchaser
acknowledge that this Agreement is the culmination of an extensive process
undertaken by Seller to identify and negotiate a transaction with a bidder who
was prepared to pay the highest or best purchase price for the assets of Seller
while assuming or otherwise satisfying certain liabilities in order to maximize
value for Seller's constituents. This Agreement shall be subject to the
consideration of higher or better offers submitted at the Auction to be held
pursuant to the Bidding Procedures Order and the Auction Procedures (as defined
in such order) approved by the Bankruptcy Court pursuant to the Bidding
Procedures Order.
(a) Break-Up Fee and Expense Reimbursement. In the
event that (i) any or all of the Assets are acquired by a Person (other than
C&S, Purchaser or their Affiliates, if any of them is the prevailing bidder at
the Auction of all of the Assets) who was the prevailing bidder at the Auction
or (ii) Seller sells, transfers, leases or otherwise disposes (including through
a liquidation) of store locations accounting for more than 50% of sales for the
prior twelve months in a transaction or series of transactions to a party or
parties (other than C&S, Purchaser or their Affiliates, if any of them is the
prevailing bidder at the Auction for all of the Assets) within four months from
the date that the agreement with the prevailing bidder (or second highest bidder
(as such term is used in the Bidding Procedures Order) who becomes a prevailing
bidder as the case may be) at the Auction terminates, or if there is no
agreement with the prevailing bidder (or second highest bidder who becomes a
prevailing bidder, as the case may be) from the date of the Auction (either of
clause (i) or clause (ii) being an "Alternative Transaction"), Purchaser shall
be entitled to payment of the Break-Up Fee approved by Final Order of the
Bankruptcy Court in the Bidding Procedures Order; provided that, for purposes of
this Agreement and consistent with the Bidding Procedures Order, the Break- Up
Fee is $8,450,400. The Break-Up Fee shall be paid in cash within two Business
Days following the earlier to occur of (A) the closing of any Alternative
Transaction and (B) the effective date of a settlement or Final Order, or
agreement authorizing or allowing Seller to retain some or all of the Earnest
Money Down Payment (as defined in the Bidding Procedures Order) (the "Deposit")
submitted by the prevailing bidder (or, if applicable, second highest bidder, as
the case may be) at the Auction (or by any other Person entering into an
Alternative Transaction with Seller). In the event that Purchaser
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is not the prevailing bidder for all of the Assets at the Auction, Seller shall
pay (the "Expense Reimbursement") to C&S and Purchaser, in an amount not to
exceed $1,750,000, as reimbursement for all of their actual and reasonable fees
and expenses (including, expenses of counsel and other consultants and
out-of-pocket expenses related in any way to this Agreement or transactions
contemplated hereby) (the "Expenses"); provided, however, that C&S and Purchaser
shall promptly file an application with the Bankruptcy Court for approval of the
actual and reasonable nature of the requested Expenses; provided, further, that
Seller shall pay such Expenses in cash within two Business Days of the later of
(X) a Final Order reflecting Bankruptcy Court approval therefor and (Y) the
earlier to occur of (A) the closing of any Alternative Transaction (provided
that there shall be no four-month time restriction in clause (ii) of the
definition of Alternative Transaction) and (B) the effective date of a
settlement or Final Order, or agreement authorizing or allowing Seller to retain
some or all of the Deposit submitted by the prevailing bidder (or second highest
bidder who becomes a prevailing bidder, as the case may be) at the Auction (or
by any other Person entering into an Alternative Transaction with Seller). The
Expense Reimbursement and the Break-up Fee shall be paid as, and constitute an
administrative expense, of Seller under section 503(b)(1) of the Bankruptcy Code
and be paid solely from the proceeds of an Alternative Transaction or Deposits
and solely to the extent that such funds are sufficient and there shall be no
general claim against the estate for payment of the Break-up Fee and Expense
Reimbursement and which in any event shall be paid without regard to the
security interest of the Seller's pre-petition or post-petition lenders.
Purchaser shall be entitled to the Break-Up Fee notwithstanding the termination
of this Agreement in accordance with Section 6.7(c) or subsequent individual
bids submitted by Third Party Purchasers or the Purchaser (whether or not such
bids are accepted by Seller). C&S and Purchaser represent and warrant that no
Third Party Purchaser shall be entitled to, or shall receive, any portion of the
Break-Up Fee, which shall be retained by C&S or Purchaser. If Purchaser declines
to continue bidding at the Auction with respect to all of the Assets and then
C&S, Purchaser or an Affiliate thereof succeeds on an individual bid (the
"Subsequent Individual Bid ") to purchase some of the Assets, the Break-Up Fee
shall be reduced by an amount equal to the product of $8,450,400 multiplied by a
fraction, the numerator of which is the unadjusted purchase price of the
Subsequent Individual Bid and the denominator of which is the unadjusted
Purchase Price under this Agreement. In the event that Purchaser is not the
prevailing bidder, the sale order relating to the prevailing bidder shall ratify
the payments of the Break-Up Fee made prior to the date of such sale order, if
any, and further authorize the payment of the Break-Up Fee and the Expense
Reimbursement in accordance with the terms of this provision and without regard
to the security interest of the Seller's pre-petition or post-petition lenders.
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(b) Initial Overbids. In accordance with the Bidding
Procedures Order, Seller agrees that any initial overbid at the Auction with
respect to the Assets shall have an unadjusted purchase price equaling or
exceeding $322,926,000. With respect to initial and subsequent Bids at the
Auction, Seller shall value Bids based on the consideration to be received by
Seller.
(c) Rights of Third Party Purchasers to Bid at
Auction. Seller agrees that (A) this Agreement shall constitute a Stalking Horse
Agreement and, subject to compliance with this Agreement and submission of
Adequate Assurance Packages, a qualified Bid for purposes of the Bidding
Procedures Order and (B) Purchaser and, to the extent designated at or prior to
the execution of this Agreement, Third Party Purchasers shall be deemed to be
Qualified Bidders upon submission of Adequate Assurance Packages. Purchaser
shall identify, for purposes of the Bidding Procedures, the Third Party
Purchasers to Seller on or before the Bid Deadline (as defined in the Bidding
Procedures Order) which list of Third Party Purchasers may be supplemented at or
before the Auction. In the event that Purchaser declines to continue bidding at
any point during the Auction, Seller and Purchaser agree that, notwithstanding
anything to the contrary in the Bidding Procedures Order (i) this Agreement
shall be deemed terminated by Seller to allow any of the Third Party Purchasers
or Purchaser to bid on some or all of the Assets at the Auction, (ii) any Third
Party Purchaser or Purchaser may use this Agreement as a contract form (as
modified in a manner acceptable to Seller) on which to bid at the Auction for
some or all of the Assets, (iii) the Third Party Purchaser's and Purchaser's
participation in the bid and Deposit submitted by Purchaser shall satisfy any
deposit requirement under the Bidding Procedures Order that might be needed to
support an individual bid; provided, however, that in the event any Third Party
Purchaser or Purchaser prevails on a bid to individually purchase Assets, such
party shall provide to Seller a deposit equal to 10% of such prevailing bid at
the conclusion of the Auction; and (iv) Purchaser's Deposit shall be immediately
released from the Auction Deposit Escrow to Purchaser upon the conclusion of the
Auction or within one Business Day thereof except to the extent that a Third
Party Purchaser has prevailed at Auction on a bid to purchase some Assets and
has not submitted a ten percent (10%) Deposit to Seller , in which case the
Seller shall retain only that portion of Purchaser's Deposit equal to the
Deposit required for such Third Party Purchaser's independent bid until such
time as Seller receives the required Deposit from such Third Party Purchaser;
provided, however, that Purchaser shall provide a 10% Deposit in respect of any
Assets it, nonetheless, acquires at the Auction.
(d) Non-Interference with Third Party Purchasers.
Simulta neously with the execution of this Agreement, Purchaser shall provide
Seller with a list
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of Third Party Purchasers with whom Purchaser in good faith believes that
Purchaser and such Third Party believe they have an agreement, arrangement or
understanding to purchase any of the Assets ("Potential Third Party
Purchasers"). Notwithstanding anything to the contrary in the Bidding Procedures
Order, Seller agrees that it shall not initiate contact or have any
communication with any Potential Third Party Purchaser (or any agent, employee,
or representative of such entity) without the prior written consent of
Purchaser; provided, however, that Seller shall be entitled to respond to
requests or communications that are initiated by a Potential Third Party
Purchaser (or any agent, employee, or representative of such entity).
(e) No Right to Force Purchaser to Accept Less than
All Assets. Notwithstanding anything to the contrary in the Bidding Procedures
Order, Seller agrees that it shall not seek to force Purchaser to accept a
transaction that provides for the transfer and assignment of less than all of
the Assets, except as provided by Section 6.5.
(f) Dissemination of this Agreement. Upon the earlier
of two Business Days after execution of the Agreement or at the Auction, Seller
shall mail or otherwise effectively deliver a copy of this Agreement to each
Qualified Bidder for some or all of the Assets together with a statement that
this Agreement constitutes a Stalking Horse Agreement for purposes of the Bid
Procedures Order.
(g) Designation of Subsequent Third Party Purchasers
and Assignment of Assets and Contracts. Seller agrees that at Closing it shall
seek to transfer the Assets, in accordance with the terms and conditions of this
Agreement, to the Purchaser and those Third Party Purchasers designated by
Purchaser prior to the supplemental mailing to creditors on November 20, 2000.
Thereafter and subject to Bankruptcy Court approval, Purchaser and Seller agree
that Purchaser shall be entitled to designate additional Third Party Purchasers
at any time prior to Closing (the "Subsequent Third Party Purchasers") and, in
such event, Seller shall provide notice to affected landlords and other
interested parties of such requested assignment and, if approved, transfer and
assign such Assets directly to such Subsequent Third Party Purchaser. If such
party does not object within five days, such assignment or transfer shall be
deemed binding on such landlord or interested party and any objection to such
assignment or transfer shall be deemed forever waived. In the event of a timely
objection being received, the Bankruptcy Court shall resolve such objection.
Resolution of such objection shall not be a condition to Closing.
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Section 6.8 Employee Matters.
(a) As of the Closing, Purchaser may, in its
discretion, offer to employ any hourly or salaried employee of Seller or any of
its Subsidiaries under such terms and conditions as Purchaser may determine.
(b) Seller shall retain, and Purchaser shall not
assume any Plans (including, Title IV Plans) or any other arrangement or
agreements (including with respect to any retention or sale bonus arrangements
of Seller) relating to the employees of Seller or any of its Subsidiaries. All
Liabilities to, or relating to, the Plans (including, all multiemployer Plans),
and all Liabilities to, or relating to, any employee of Seller or any of its
Subsidiaries shall be Retained Liabilities, and Purchaser shall have no
obligation or liability with respect to such Plans, arrangements or agreements.
Purchaser and Seller shall take all actions necessary to cause the retention by
Seller of all such Plans.
(c) Seller shall comply with the requirements of the
Worker Adjustment and Retraining Notification Act of 1988 ("WARN Act") as though
the Closing hereunder constituted a "plant closing" or "mass layoff," as those
terms are defined in the WARN Act or any state law applicable to or affecting
any site of employment, facility, operating unit, or employee of the Business.
Section 6.9 Prompt Payment of Cure Amounts; Expenses
Relating to the Assets.
(a) With respect to each Assigned Contract, Seller
shall pay, as soon as practicable following the Closing, all amounts that are
required to be paid under section 365(b)(1)(A) or (b)(1)(B) of the Bankruptcy
Code; provided, however, that cure amounts that are the subject of a bona fide
dispute shall be paid within five Business Days of the effectiveness of a
settlement or Final Order of the Bankruptcy Court resolving such disputes, as
the case may be.
(b) Seller shall be responsible for all expenses,
fees, charges, and other obligations in respect of the Assets through 11:59:59
p.m. on the day prior to the Closing Date. Purchaser shall assume responsibility
for all such expenses, fees, charges, and other obligations in respect of the
Assets as of 12:00:01 a.m. on the Closing Date.
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(c) On the Closing Date, Purchaser shall reimburse
Seller for all amounts, in each case existing on the Closing Date and as set
forth in a certificate of the chief financial officer of Seller, and apportioned
between Seller and Purchaser as of 12:00:01 a.m. on the Closing Date, (i) that
are the obligation of Seller under Sections 2.4 and 6.15(d) as of the Closing
Date; and (ii) in respect of (A) prepaid Taxes related to the Owned Real
Property; (B) prepaid rents and all other prepaid expenses and deposits under
the Real Property Leases being transferred to Purchaser in accordance with
Sections 2.1(a)(iii) and 2.1(b)(ii); (B) water charges, sewer rents and vault
charges, if any; (C) value of fuel stored on the Real Property constituting part
of the Assets (purchased and paid for by Seller prior to the Closing) at
Seller's cost, including any taxes; (D) any prepaid items, including, fees for
licenses which are transferred to Purchaser at the Closing and annual permit and
inspection fees; (E) utilities, including, telephone, steam, electricity and
gas, on the basis of the most recently issued bills therefor, subject to
adjustment after the Closing when the next bills are available, or if current
meter readings are available, on the basis of such readings; (F) deposits with
telephone and other utility companies, and any other persons or entities who
supply goods or services in connection with the Real Property being transferred
to Purchaser in accordance with Sections 2.1(a)(viii) and 2.1(b)(v) if same are
assigned to Purchaser at the Closing, which shall be credited in their entirety
to Seller; and (G) such other items as are customarily apportioned in connection
with the sale of similar properties. On the date which is 30 days after the
Closing Date, Purchaser shall reimburse Seller for all amounts, paid to Third
Parties by Seller and as set forth in a certificate of the chief financial
officer of Seller (and not reported in the certificate called for by the first
sentence of this Section 6.9(c)) delivered to Purchaser after the Closing Date,
and apportioned between Seller and Purchaser as of 11:59:59 p.m. on the day
prior to the Closing Date, that are the obligation of Purchaser on or after the
Closing Date including each of the items listed in (i) and (ii), above.
(d) On the date which is 90 days after the Closing
Date, Seller shall reimburse Purchaser for all amounts, paid to Third Parties by
Purchaser and as set forth in a certificate of the chief financial officer of
Purchaser delivered to Seller not more than 60 days after the Closing Date, and
apportioned between Seller and Purchaser as of 12:00:01 a.m. on the Closing
Date, that are the obligation of Seller prior to the Closing Date including: (i)
Taxes related to the Owned Real Property paid in arrears, rents paid in arrears
and all other expenses paid in arrears under the Real Property Leases
transferred to Purchaser in accordance with Sections 2.1(a)(iii) and 2.1(b)(ii);
(ii) water charges, sewer rents and vault charges, if any, paid in arrears;
(iii) value of fuel billed to Purchaser at Purchaser's cost, including any
taxes, delivered to, and stored, the Real Property prior to the Closing Date,
but not transferred with the Assets; (iv) any items,
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including, fees for licenses which are transferred to Purchaser at the Closing
and annual permit and inspection fees paid in arrears; (v) utilities, including,
telephone, steam, electricity and gas, to the extent paid in arrears on the
basis of the most recently issued bills therefor, subject to adjustment after
the Closing when the next bills are available, or if current meter readings are
available, on the basis of such readings; and (vi) such other items paid in
arrears as are customarily apportioned in connection with the sale of similar
properties. All such amounts shall constitute administrative claims with
priority over all other administrative claims (except for such claim as may be
generated pursuant to Section 6.10 with which it shall have equal priority) in
Seller's Bankruptcy Case. On the date which is 120 days after the Closing Date,
Seller shall reimburse Purchaser for all amounts paid, and all Taxes not yet
paid but payable, since the last date reflected on the certificate called for by
the preceding sentence to Third Parties by Purchaser and as set forth in a
certificate of the chief financial officer of Purchaser (with reasonable
supporting documentation) delivered to Seller not more than 90 days after the
Closing Date, and apportioned between Seller and Purchaser as of 12:00:01 a.m.
on the Closing Date, that are the obligation of Seller prior to the Closing Date
including each of the items listed in (i) through (vi), above.
Section 6.10 Inventory Matters; Purchase Price Adjustment.
(a) Exhibit B sets forth the "Base Inventory
Analysis" which Base Inventory Analysis has been derived from the balance sheet
dated October 14, 2000, accompanied by a certificate of Seller's chief financial
officer and independent auditor confirming the amounts and adjustments indicated
therein. The Base Inventory Analysis includes the net value (the "Base Inventory
Amount") and composition of usable and saleable inventory on a
location-by-location basis for agreed categories of Inventory.
(b) Two days prior to the Closing, Seller shall
deliver a "Preliminary Closing Inventory Analysis" which will estimate the
aggregate net Inventory value as of the Closing Date (the "Preliminary Inventory
Amount"), accompanied by a certificate of Seller's chief financial officer
confirming the amounts and adjustments indicated therein, prepared consistently
with the Base Inventory Analysis. For purposes of determining the Purchase Price
as contemplated by Section 2.5, the initial "Inventory Adjustment Amount" shall
mean if the Preliminary Inventory Amount is:
(i) less than the Base Inventory Amount, the
amount of the shortfall below the Base Inventory Amount;
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(ii) between 120% of the Base Inventory
Amount and the Base Inventory Amount, the excess over the Base
Inventory Amount; or
(iii) in excess of 120% of the Base
Inventory amount, 20% of the Base Inventory Amount, and no more;
provided, however, that if the Preliminary Inventory Amount is less than 80% of
the Base Inventory Amount, a Material Adverse Effect shall be deemed to have
occurred and Purchaser shall not be required to effect the Transactions. In the
case of clause (i) of this Section 6.10(b), such Inventory Adjustment Amount
shall be deducted from the Purchase Price. In the cases of clauses (ii) or (iii)
of this Section 6.10(b), the Purchase Price shall be increased by such Inventory
Adjustment Amount.
(c) Not later than three weeks following the Closing,
Seller shall deliver a "Final Closing Inventory Analysis" which will set forth
the aggregate net value of the Inventory as of the Closing prepared in
accordance with the methodology utilized in Exhibit B and on a basis consistent
with the Preliminary Closing Inventory Analysis. For purposes of preparing the
Final Inventory Analysis, the inventory balance as of the Closing Date shall be
calculated by RGIS or such other inventory counting firm mutually agreed upon by
Purchaser and Seller, with Purchaser and Seller each being entitled to designate
representatives to participate in the calculation of such inventory balance. The
fees and expenses of the inventory counting firm would be borne equally by
Purchaser and Seller. Any decrease in the Final Inventory Amount as compared to
the Preliminary Inventory Amount will be remitted to Purchaser from the Escrow
Account in accordance with the formula set forth in Section 6.10(b); provided
that if the funds in the Escrow Account (in excess of $1.5 million) shall be
insufficient to cover the amount of the decrease in the Final Inventory Amount
from the Preliminary Inventory Amount, the amount of such decrease shall be
promptly remitted by Seller to Purchaser (provided that $1.5 million shall be
retained in the Escrow Account for the satisfaction of indemnification claims,
as provided by Article IX) and any unsatisfied amount of such decrease shall
constitute an administrative claim with priority over all other administra tive
claims in Seller's Bankruptcy Case. Any increase in the Final Inventory Amount
as compared to the Preliminary Inventory Amount will be remitted to Seller by
Purchaser, in accordance with the formula set forth in Section 6.10(b), subject
to the limitation in Section 6.10(b)(iii).
(d) The Inventory Adjustment Amount shall be revised
to reflect the effect of the adjustments pursuant to Section 6.10(c). Following
the final
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calculation, and payments necessary to give effect to the revisions to the
Inventory Adjustment Amount, all amounts in excess of $1.5 million in the Escrow
Account shall be remitted to Seller.
(e) Prior to the Closing, Seller will use
commercially reasonable efforts to minimize the amount of private label and
Seller-unique items, inventory that is damaged, unusable or unsaleable (absent
discount), inventory with less than a 30-day shelf life and inventory in excess
of four weeks of such item's average weekly turn movement, provided that such
reduction does not cause the Inventories at any location from falling below
adequate levels. C&S agrees to handle damaged Inventory pursuant to the reclaim
terms of the Interim Supply Agreement.
Section 6.11 Subsequent Actions.
(a) If at any time after the Closing, Purchaser will
consider or be advised that any deeds, bills of sale, instruments of conveyance,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm ownership (of record or otherwise) in
Purchaser, its right, title or interest in, to or under any or all of the Assets
or otherwise to carry out this Agreement, Seller shall, or cause the appropriate
Subsidiary of Seller to, execute and deliver all deeds, bills of sale,
instruments of conveyance, assignments and assurances and take and do all such
other actions and things as may be reasonably requested by Purchaser in order to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in Purchaser or otherwise to carry out this
Agreement; provided that Purchaser or C&S shall promptly reimburse Seller for
all reasonable out-of-pocket expenses incurred in respect thereof.
(b) In case at any time after the Closing Date any
further action is necessary, proper or advisable to carry out the purposes of
this Agreement, as soon as reasonably practicable, each party hereto shall take,
or cause its proper officers or directors to take, all such necessary, proper or
advisable actions.
Section 6.12 Publicity. The initial press release with respect
to the execution of this Agreement shall be a joint press release reasonably
acceptable to Purchaser and Seller. Thereafter, until the Closing, or the date
the Transactions are terminated or abandoned pursuant to Article VIII, neither
Seller nor Purchaser, nor any of their respective Affiliates, shall issue or
cause the publication of any press release or other public announcement with
respect to this Agreement or the other Transactions
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without prior consultation with the other parties, except as may be required by
law or by any listing agreement with a national securities exchange or trading
market.
Section 6.13 Completion of Non-assignable Assigned Contracts.
To the extent that the rights of Seller or any of its Subsidiaries under any
Assigned Contract, or under any other Asset to be assigned under the Bankruptcy
Code to Purchaser hereunder, may not be assigned without the consent of a Third
Party which has not been obtained prior to the Closing, this Agreement shall not
constitute an agreement to assign the same if an attempted assignment would be
unlawful. If any such consent has not been obtained or if any attempted
assignment would be ineffective or would impair Purchaser's rights under the
instrument in question so that Purchaser would not acquire the benefit of all
such rights, then Seller or a Subsidiary of Seller, as applicable, to the
maximum extent permitted by Applicable Law and the instrument, shall act as
Purchaser's agent in order to obtain for Purchaser the benefits thereunder and
shall cooperate, to the maximum extent permitted by Applicable Law and the
instrument, with Purchaser in any other reasonable arrangement designed to
provide such benefits to Purchaser (including, by entering into an equivalent
arrangement).
Section 6.14 Estoppel Certificates. During the period from the
date hereof through the Closing Date, Seller shall request an estoppel
certificate from the landlord under each Real Property Lease certifying that
each such Real Property Lease is in full force and effect, that there are no
defaults thereunder or any conditions that with the passage of time or the
giving of notice, or both, would constitute a default thereunder (including,
that all current rent and additional rent thereunder has been paid), or an
estoppel certificate in the form so provided for under any such Real Property
Lease.
Section 6.15 Tax Matters.
(a) If prior to Closing Seller shall have obtained an
order of Bankruptcy Court exempting the Transactions from all sales, use,
transfer, stamp, duty, value added, and other similar taxes and fees, including,
all bulk sales taxes, in each case including interest, penalties or additions
attributable thereto (collectively, "Transfer Taxes"), to the extent any such
Transfer Taxes arise out of the transfer of the Assets and any Transfer Taxes
required to effect any recording or filing with respect thereto such Transfer
Taxes shall be borne by Purchaser. The Transfer Taxes shall be calculated
assuming that no exemption from Transfer Taxes is available, unless otherwise
indicated in the Sale Order or at Closing, Purchaser shall provide an
appropriate resale exemption certificate or other evidence, reasonably
acceptable to Seller, of exemption from such Transfer Taxes.
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(b) If prior to the Closing, Seller shall not have
obtained an order of the Bankruptcy Court exempting the Transactions from all
Transfer Taxes, any Transfer Taxes required to effect any recording or filing
with respect thereto shall be borne by Seller. The Transfer Taxes shall be
calculated assuming that no exemption from Transfer Taxes is available, unless
at Closing, Purchaser shall provide an appropriate resale exemption certificate
or other evidence, reasonably acceptable to Seller, of exemption from such
Transfer Taxes.
(c) Seller and Purchaser shall cooperate to timely
prepare and file any returns or other filings relating to such Transfer Taxes,
including any claim for exemption or exclusion from the application or
imposition of any Transfer Taxes. With respect to any such returns or filings
required to be filed by either party, the other party shall pay to the filing
party, not later than five (5) Business Days before the due date for payment of
such Transfer Taxes, an amount equal to that portion of Transfer Taxes shown on
such return or other filing for which the non-filing party is liable under
Sections 6.15(a) or 6.15(b), and the filing party shall, following the filing
thereof, furnish a copy of such return or other filing and a copy of a receipt
showing payment of any such Transfer Tax to non-filing party. Purchaser and
Seller and its Subsidiaries shall cooperate in providing each other with any
appropriate resale exemption certifications and other similar documentation.
(d) Purchaser and Seller agree to furnish or cause
their Affiliates to furnish, to each other, upon request, as promptly as
practicable, such information and assistance relating to the Assets or the
Business (including, access to books and records) as is reasonably necessary for
the filing of all Tax Returns and other Tax filings, the making of any election
related to Taxes, the preparation for any audit by any taxing authority, and the
prosecution or defense of any claim, suit or proceeding relating to any Tax
Return. Purchaser and Seller shall cooperate, or cause their Affiliates to
cooperate, with each other in the conduct of any audit or other proceeding
related to Taxes and each shall execute and deliver such other documents as are
necessary to carry out the intent of this Section 6.15(d). Purchaser and Seller
shall provide, or cause their Affiliates to provide, timely notice to each other
in writing of any pending or threatened Tax Audits, assessments or litigation
with respect to the Assets or the Business for any taxable period for which the
other party may have liability under this Agreement. Purchaser and Seller shall
furnish, or cause their respective Affiliates to furnish, to each other copies
of all correspondence received from any taxing authority in connection with any
Tax Audit or information request with respect to any taxable period for which
the other or its Affiliates may have liability under this Agreement.
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(e) Seller and its Subsidiaries shall prepare all Tax
Returns of Sellers and its Subsidiaries for periods ending on or prior to the
Closing Date. As between Seller and Purchaser, it is understood that Seller
shall be solely and exclusively liable with respect to any Taxes relating to
such Tax Returns.
(f) Proration of Taxes. Except as provided in
Sections 6.15(a) and 6.15(b), all real property Taxes, personal property Taxes
or similar ad valorem obligations levied with respect to the Assets for any
taxable period that includes the day before the Closing Date and ends after the
Closing Date, whether imposed or assessed before or after the Closing Date,
shall be prorated between Seller and Purchaser as of 12:00:01 a.m. on the
Closing Date. If any Taxes subject to proration are paid by Purchaser, on the
one hand, or Seller, on the other hand, the proportionate amount of such Taxes
paid (or in the event a refund of any portion of such Taxes previously paid is
received, such refund net of any Taxes payable with respect to the receipt of
any interest included in such refund) shall be paid promptly by (or to) the
other after the payment of such Taxes (or promptly following the receipt of any
such refund); provided, however, that (other than in the case of refunds) any
such payment of Taxes, whether or not relating to Owed Real Property, shall be
certified and reimbursed in the same manner as set forth in Sections 6.9(c) and
(d).
(g) Allocation of Purchase Price. Purchaser shall,
within 150 days after the Closing Date, prepare and deliver to Seller a schedule
(the "Allocation Schedule") allocating the Purchase Price (i) plus the amounts,
if any, described in Section 2.5(a)(iii) and less the amounts, if any, described
in Section 2.5(b) and (ii) the liabilities assumed by Purchaser and/or Third
Party Purchasers, if any, pursuant to this Agreement among the Assets in
accordance with Treas. Reg. 1.1060-1T (or any comparable provisions of state or
local tax law) or any successor provision. Seller will have the right to make
reasonable objections to the Allocation Schedule within ten (10) days after its
receipt thereof, in which event Purchaser and Seller will negotiate in good
faith to resolve such objections. If Purchaser and Seller cannot mutually
resolve Seller's reasonable objections to the Allocation Schedule within 10 days
after Purchaser's receipt of such objections, such dispute with respect to the
Allocation Schedule shall be presented to a "big five" accounting firm to be
mutually selected by Purchaser and Seller, on the next day for a decision that
shall be rendered by such accounting firm within thirty (30) calendar days
thereafter and shall be final and binding upon each of the parties. The fees,
costs and expenses incurred in connection therewith shall be shared in equal
amounts by Purchaser and Seller. Purchaser and Seller each shall report and file
all Tax Returns (including amended Tax Returns and claims for refund) consistent
with the
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Allocation Schedule, and shall take no position contrary thereto or inconsistent
therewith (including, in any audits or examinations by any taxing authority or
any other proceedings). Purchaser and Seller shall cooperate in the filing of
any forms (including Form 8594) with respect to such allocation, including any
amendments to such forms required with respect to any adjustment to the Purchase
Price, pursuant to this Agreement. Notwithstanding any other provisions of this
Agreement, the foregoing agreement shall survive the Closing Date without
limitation.
Section 6.16 General Cooperation. From the date hereof through
the Closing, Seller will use its good faith efforts to operate the Business in
such a manner as to achieve a smooth transition consistent with the mutual
business interests of Seller and Purchaser. In this regard, Seller and Purchaser
agree that they will enter into good faith discussions concerning the Business,
including, but not limited to, personnel policies and procedures, and other
operational matters relating to the Business.
Section 6.17 Use of Seller's Name and Logo. It is expressly
agreed that Purchaser is purchasing, acquiring or otherwise obtaining all right,
title or interest in and to the Intellectual Property, including, but not
limited to, the name "Grand Union" or any trade names, Trademarks, identifying
logos or service marks related thereto or employing the words "Grand Union" or
any part or variation of any of the foregoing or any confusingly similar trade
names, Trademarks or logos (collectively, the "Seller's Trademarks and Logos").
Seller agrees that immediately on the Closing Date, Seller shall cease and
desist, and cause all of its Affiliates, Subsidiaries or licensees to cease and
desist from all further use of Seller's Trademarks and Logos being transferred
herein, and will adopt new trade names, Trademarks, identifying logos and
service marks related thereto which are not confusingly similar to Seller's
Trademarks and Logos being transferred herein. Seller shall have the continuing
right to use the name "Grand Union" for purposes of the Bankruptcy Case and the
corporate name of Seller and its Subsidiar ies, but promptly following the
consummation of a plan of reorganization, Seller shall amend the charter
documents of Seller and its Subsidiaries to delete the name "Grand Union".
Section 6.18 Removal of Equipment. Purchaser shall use its
reasonable commercial efforts to remove all of the Assets which are located at
the Retained Properties on the Closing Date within 30 days of the Closing, at
its sole expense.
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Section 6.19 Disclosure Supplements. From time to time
(provided that Seller shall not be required to furnish such supplements or
amendments more frequently than once every thirty days) prior to the Closing,
Seller shall promptly supplement or amend the Disclosure Schedule with respect
to any matter, condition or occurrence hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in the Disclosure Schedule (a "Post-Signing Matter"). No
supplement or amendment shall be deemed to cure any breach of any representation
or warranty made in this Agreement or have any effect for the purpose of
determining satisfaction of the conditions set forth in Article VII hereof or
the compliance by Seller with any covenant set forth herein or the
indemnification provided for in Article IX hereof; provided, however, that if
Purchaser elects to close the Transactions contemplated hereby after receiving
notice of a Post-Signing Matter, Purchaser shall not be entitled to
indemnification as provided for by Article IX in respect of breach of
representations and warranties relating to such Post-Signing Matter. No revision
to Section 4.12 of the Disclosure Schedule shall in any way affect the amount of
the Environmental Claim Adjustment.
Section 6.20 Further Assurances. Each party shall cooperate
with the other parties, and execute and deliver, or use its commercially
reasonable efforts to cause to be executed and delivered, all such other
instruments, including instruments of conveyance, assignment and transfer, and
to make all filings with and to obtain all consents, approvals or authorizations
of any Governmental Entity or other regulatory authority or any other Person
under any Permit, agreement, indenture or other instrument, and take all such
other actions as such party may reasonably be requested to take by another party
hereto from time to time, consistent with the terms of this Agreement, in order
to effectuate the provisions and purposes of this Agreement and the transactions
contemplated hereby.
Section 6.21 Third Party Purchasers. (a) Once Purchaser
identifies to Seller a Person as a potential purchaser of any of the Assets at
or prior to the Closing (a "Third Party Purchaser"), and Seller and such Third
Party Purchaser have entered into a confidentiality agreement containing
standard and appropriate terms and provisions, Seller agrees that:
(i) Between the date hereof and the Closing,
Seller shall (A) afford such Third Party Purchaser and its authorized
representatives reasonable access to all offices and other facilities,
all books and records and all employees and personnel of Seller and its
Subsidiaries, (B) permit such Third Party Purchaser and its authorized
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representatives to make such inspections and to make copies of such
books and records as they may reasonably require and (C) furnish such
Third Party Purchaser and its authorized representatives with such
financial and operating data and other information and other
information concerning the Business as they may from time to time
reasonably request. Seller will direct its employees to render any
assistance which such Third Party Purchaser may reasonably request in
examining or utilizing records referred to in this Section 6.21(a).
(ii) Such Third Party Purchaser and its
authorized representatives (including its designated engineers or
consultants) may at any time enter into and upon all or any portion of
the Real Property of Seller included in the Assets in order to assess
the environmental condition of such properties or the business
conducted thereat. Notwithstanding the foregoing, no soil and surface
or ground water sampling, monitoring, borings or testing and any other
invasive tests or investigations relating to environmental conditions
or Materials of Environmental Concern at such properties shall be
conducted (i) without Sellers' consent, which consent shall not be
unreasonably withheld; (ii) without permitting Seller the opportunity
to participate therein; and (iii) unless such Third Party Purchaser and
C&S agree to repair and restore any portion of the Assets damaged as a
result of any inspection or assessment of the Assets by any Third Party
Purchaser and indemnify and agree to hold harmless Seller from and
against any and all damage suffered by Seller in connection with any
entry onto, or inspec tion of, the Assets by any Third Party Purchaser
or such Third Party Purchaser's agents, employees, representatives or
contractors in connec tion therewith, which indemnity shall survive the
sale of the Assets for a period of one year or, if such sale is not
consummated, the termination of this Agreement. Seller shall cooperate
with such Third Party Purchaser and its authorized representatives in
conducting such assessment, and shall allow such Third Party Purchaser
and its authorized representatives reasonable access to their
properties and businesses.
(iii) Once Seller and such Third Party
Purchaser have entered into a confidentiality agreement under which
Seller agrees to provide information pertaining to any of the Assets to
such Third Party Purchaser, the sharing by Purchaser with such Third
Party Purchaser, or the sharing by such Third Party Purchaser with
Purchaser, of any
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information concerning the Business or any of its assets or properties
will not be deemed to be a violation of the terms of the
Confidentiality Agreement or Section 6.2(f), or any confidentiality
agreement between Seller and such Third Party Purchaser.
(iv) In order to facilitate the acquisition
of Assets by one or more Third Party Purchasers, Seller shall, if
requested by Purchaser, execute one or more amendments to this
Agreement making such Third Party Purchasers parties hereto in respect
of a portion of the Assets, and to permit such Third Party Purchasers
to assume all rights, obligations and interests of Purchaser under this
Agreement in respect of such Assets, all subject to any further
required order of the Bankruptcy Court.
(b) Purchaser agrees, that the inclusion of one or
more Third Party Purchasers in this Agreement pursuant to Section 6.21(a) shall
not relieve Purchaser or C&S of its obligation (i) to effect the Closing upon
the satisfaction in respect of Purchaser of all conditions to Closing set forth
in Sections 7.1 and 7.2, whether or not, in respect of the acquisition of Assets
by any Third Party Purchaser, the applicable waiting period under the HSR Act
shall have expired or been terminated; (ii) to the extent not provided by any
such Third Party Purchaser, to provide adequate assurances of performance of
Assumed Contracts, in accordance with Section 6.7(g), or (iii) to provide
deposits as required by Section 2.6(a).
Section 6.22 Interim Supply Agreement. Provided that Seller is
in compliance with its obligations under the Interim Supply Agreement, C&S would
continue to ship products to Seller in accordance with the terms of the Interim
Supply Agreement through the Closing Date. Seller and Purchaser hereby agree
that if the Transactions are consummated, the "Aggregate Consideration Paid" for
all purposes of the Interim Supply Agreement shall be $301,800,000.
Section 6.23 Escrow Expiration. Seller shall, no less than
five (5) Business Days prior to the anticipated Escrow Termination Date, give
Purchaser, C&S and the Escrow Agent, notice of such anticipated termination.
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Section 6.24 Adequate Assurances. Promptly upon the conclusion
of the Auction, Purchaser, C&S, or Third Party Purchasers, as applicable, shall
(i) identify which Assigned Contracts constituting unexpired leases of
non-residential real property shall be assumed and assigned to Purchaser, C&S or
Third Party Purchasers, as applicable, and (ii) to the extent necessary or
desirable, supplement or modify the Adequate Assurance Package for Purchaser,
C&S or Third Party Purchasers, as the case may be, with respect to Section 365
of the Bankruptcy Code. C&S, Purchaser and each applicable Third Party
Purchaser, as the case may be, shall fully cooperate with Seller and shall use
commercially reasonable efforts to satisfy the requirements of "adequate
assurance of future performance" under section 365 of the Bankruptcy Code. The
foregoing covenants regarding adequate assurance of future performance herein of
Purchaser, C&S and any applicable Third Party Purchaser shall likewise apply to
any other Assigned Contracts which Purchaser or any applicable Third Party
Purchaser request to have assumed and assigned pursuant to this Agreement.
Nothing in this Section 6.24 shall abridge or modify the rights of Purchaser to
assign or transfer directly certain Assets to be designated, assigned or
transferred directly to Subsequent Third Party Purchasers, subject to compliance
with Section 365 of the Bankruptcy Code and pursuant to Section 6.7(g) of this
Agreement.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation to Effect
the Closing. The respective obligation of each party to effect the Closing shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions:
(a) Statutes; Court Orders. No statute, rule or
regulation shall have been enacted by any Governmental Entity which prohibits
the consummation of the Closing; and there shall be no order or injunction of a
court of competent jurisdiction or Governmental Entity in effect precluding
consummation of the Closing;
(b) HSR Approval. The applicable waiting period under
the HSR Act shall have expired or been terminated; and
(c) Escrow Agreement. The Escrow Agent shall have
delivered to the parties a duly executed counterpart of the Escrow Agreement.
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Section 7.2 Conditions to Obligations of Purchaser to Effect
the Closing. The obligations of Purchaser to consummate the Closing shall be
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions:
(a) Government Action. There shall not be, threatened
in a bona fide manner, or pending any suit, action or proceeding by any
Governmental Entity:
(i) seeking to prohibit or impose any
material limitations on Purchaser's ownership or operation (or that of
any of its Subsidiaries or Affiliates) of all or a material portion of
its businesses or assets or the Assets, or to compel Purchaser or any
of its Subsidiaries or Affiliates to dispose of or hold separate any
material portion of the Assets or the business or assets of Purchaser
or any of its Subsidiaries or Affiliates;
(ii) seeking to restrain or prohibit the
consum mation of the Closing or the performance of any of the other
Transac tions, or seeking to obtain from Purchaser or any of its
Subsidiaries any damages that are material;
(iii) seeking to impose material limitations
on the ability of Purchaser, or rendering Purchaser unable, to accept
for payment or pay for or purchase any material Asset or otherwise to
consummate the Closing;
(iv) seeking to impose material limitations
on the ability of Purchaser effectively to exercise full rights of
ownership of the Assets;
(v) which otherwise is reasonably likely to
have a Material Adverse Effect; or
any other action shall be taken by any Governmental Entity, other than the
application to the Transactions of applicable waiting periods under the HSR Act,
that is reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (v) above.
(b) Certificates of Seller's Counsel. Seller shall
have delivered to Purchaser at the Closing certificates of Seller's counsel,
dated as of the Closing Date,
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in form and substance satisfactory to the Purchaser, to the effect that to the
actual knowledge of any of Jeffrey Tanenbaum, Adam Rogoff, Howard Greenberg or
Morris Bauer, no motion or pleading seeking relief under Bankruptcy Rules Rule
9024 or Fed. R. Civ. P. 60 has been filed with respect to the Sale Order.
(c) Permits Obtained. All Permits necessary for the
operation of the Business either have been transferred to Purchaser or have been
obtained by Purchaser.
(d) Material Adverse Effect. Since the date hereof,
there shall not have occurred any Material Adverse Effect.
(e) Representations and Warranties. All of the
representations and warranties of Seller set forth in this Agreement that are
qualified as to materiality shall be true and complete and any such
representations and warranties that are not so qualified shall be true and
complete in all material respects, in each case as of the date of this Agreement
and as of the Closing Date, other than representations and warranties that speak
as of a specific date or time (which need only be so true and correct as of such
date or time).
(f) Seller's Performance of Covenants. Seller shall
not have failed to perform in any material respect any obligation or to comply
in any material respect with any agreement or covenant of Seller to be performed
or complied with by it under this Agreement. Purchaser, in its reasonable good
faith judgment, shall be satisfied that, since the date of this Agreement,
Seller shall have maintained its organization substantially intact (including at
store, district and corporate levels such that there would be no material
adverse effect upon the operations of the Business or upon Purchaser's ability
to operate the Business), and Seller's business has been operated in the
ordinary course, including maintaining adequate Inventory levels.
(g) Sufficient Inventory. The Preliminary Inventory
Amount is at least 80% of the Base Inventory Amount; provided that if the
Closing should occur after January 15, 2001 such percentage shall be adjusted as
set forth in Exhibit C.
(h) Certificate of Seller's Officers. Purchaser shall
have received from Seller a certificate, dated the Closing Date, duly executed
by the Chief Executive Officer or the Chief Financial Officer of Seller,
reasonably satisfactory in form to Purchaser, to the effect of paragraphs (d),
(e), (f) and (g) above.
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(i) Tax Certifications. Purchaser shall have received
a certification of non-foreign status for Seller and any Subsidiary of Seller
that is selling Assets pursuant to this Agreement in the form and manner which
complies with the requirements of Section 1445 of the Code and the regulations
promulgated thereunder.
(j) Sale Order. The Bankruptcy Court shall have
entered the Sale Order, which shall be a Final Order. Nothing in this Section
7.2(j), or any other Section of this Agreement, shall preclude Seller or
Purchaser from consummating the Transactions if Purchaser, in its sole
discretion, waives the requirement that the Sale Order or any other orders be
Final Orders. No notice of such waiver of this or any other condition to Closing
need be given except to Seller or Purchaser, as explicitly required in this
Agreement, it being the intention of the parties hereto that Purchaser shall be
entitled to, and is not waiving, the protection of Section 363(m) of the
Bankruptcy Code, the mootness doctrine and any similar statute or body of law if
the Closing occurs in the absence of a Final Order.
(k) Receipt of Commitment Funds. C&S or Purchaser
shall have received the funds contemplated by the Commitment Letter (the
"Financing Condition").
(l) Title Commitments. Purchaser shall have received
commitments from a nationally recognized title insurance company with respect to
each parcel of Owned Real Property insuring title thereto vested in Purchaser
subject only to Permitted Encumbrances.
(m) Interim Operating Agreement. The Interim
Operating Agreement shall have been delivered by Seller.
(n) Transfer of All Assets. Substantially all Assets
(other than Contingent Assets and Assets that cannot be transferred pursuant to
Section 6.5) shall be transferred to Purchaser, it being understood that
Purchaser shall have no obligation to effect the Closing unless substantially
all Assets (other than as referred to above) shall be transferred to Purchaser
or, pursuant to the terms hereof, one or more Third Party Purchasers; provided,
however, that Purchaser shall not be required to close, if any of the Assets
listed on Schedule 7.2(n) of the Disclosure Schedule cannot be transferred and
assigned to Purchaser.
(o) Supply Agreement. Seller shall have rejected the
Previous Supply Agreement as set forth in Section 6.6(a).
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The foregoing conditions are for the sole benefit of Purchaser and may be waived
by Purchaser, in whole or in part, at any time and from time to time in its sole
discretion.
Section 7.3 Conditions to Obligations of Seller to
Effect the Closing.
The obligations of Seller to consummate the Closing shall be subject
to the satisfaction on or prior to the Closing Date of each of the following
conditions:
(a) Representations and Warranties. All of the
representations and warranties of C&S and Purchaser set forth in this Agreement
that are qualified as to materiality shall be true and complete and any such
representations and warranties that are not so qualified shall be true and
complete in all material respects, in each case as of the date of this Agreement
and as of the Closing Date, other than representations and warranties that speak
as of a specific date or time (which need only be so true and correct as of such
date or time).
(b) Purchaser's Performance of Covenants. C&S and
Purchaser shall not have failed to perform in any material respect any material
obligation or to comply in any material respect with any agreement or covenant
of C&S or Purchaser to be performed or complied with by it under this Agreement.
(c) Certificate of Purchaser's Officers. Seller shall
have received from Purchaser a certificate, dated the Closing Date, duly
executed by the managing member of Purchaser, satisfactory in form to Seller, to
the effect of paragraphs (a) and (b) above.
(d) Sale Order. The Bankruptcy Court shall have
entered the Sale Order, which shall be a Final Order, unless Seller waives the
requirement that such order be a Final Order.
(e) Supply Agreement Amount Discrepancy. If the
difference in values assigned by Purchaser and Seller to the amount due to C&S
under the Interim Supply Agreement exceeds One Million Dollars ($1,000,000), the
Bankruptcy Court shall have approved the amount due thereunder.
(f) Funding. Subject to the offsets and adjustments
provided for hereunder, at the Closing, Purchaser and/or one or more Third Party
Purchasers shall have paid the Purchase Price (including in such amount, funds
deposited into escrows pursuant to Section 2.6).
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The foregoing conditions are for the sole benefit of Seller and may be waived by
Seller, in whole or in part, at any time and from time to time in its sole
discretion.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be
terminated or abandoned at any time prior to the Closing Date:
(a) By the mutual written consent of Purchaser and
Seller;
(b) By either Purchaser or Seller if any Governmental
Entity shall have issued an order, decree or ruling or taken any other action
(which order, decree, ruling or other action the parties hereto shall use their
reasonable efforts to lift), which permanently restrains, enjoins or otherwise
prohibits the consummation of the Transac tions and such order, decree, ruling
or other action shall have become final and non- appealable;
(c) By either Purchaser or Seller (provided that the
failure of the Closing to occur on or before either date set forth below is not
the result of a breach of any covenant, agreement, representation or warranty
hereunder by the party seeking such termination), upon written notice given to
the other parties in the event that the Closing shall not have taken place on or
before January 15, 2001; provided, however, that if the applicable waiting
period under the HSR Act shall not have expired or been terminated, such date
shall automatically be extended to March 15, 2001; provided, further, that if
the Financing Condition shall not have been satisfied by January 15, 2001, such
date shall automatically be extended to February 15, 2001.
(d) By Seller if Purchaser or C&S shall have breached
in any material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement, which breach cannot be or has not
been cured within three Business Days after the giving of written notice by
Seller to Purchaser specifying such breach;
(e) By Purchaser:
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(i) if Seller shall have breached in any
material respect any of its representations, warranties, covenants or
other agree ments contained in this Agreement, which breach cannot be
or has not been cured within three Business Days after the giving of
written notice by Purchaser to Seller specifying such breach;
(ii) if there shall have occurred any
Material Adverse Effect since the date hereof;
(iii) if Purchaser, in its reasonable
discretion, shall have determined that an amount of Assets material to
the Transac tions may not be assigned pursuant to the operation of
Section 6.5(b) by Seller and/or its Subsidiaries, as applicable, to
Purchaser, and/or Third Party Purchasers, if any, whether or not any
Governmental Entity shall have issued an order, decree or ruling or
taken any other action (which order, decree, ruling or other action the
parties hereto shall use their reasonable efforts to lift), which
permanently restrains, enjoins or otherwise prohibits acquisition by
Purchaser of such Assets;
(iv) if Seller shall have breached any
provision of the Interim Supply Agreement or such agreement has been
terminated;
(v) if the Bankruptcy Court has not entered
the Sale Order by February 1, 2001;
(vi) if Seller or the board of directors of
Seller shall have decided not to proceed with this Agreement or to
transfer or dispose of the Assets to any party other than Purchaser;
(vii) if Seller has filed or supported a
plan of liquidation relating to Seller that seeks to transfer or
dispose of the Assets;
(viii) if Seller's Bankruptcy Case is
converted from a case under chapter 11 of the Bankruptcy Code to a case
under chapter 7 of the Bankruptcy Code; or
(ix) if Purchaser declines to continue
bidding at any point during the Auction and is not the prevailing
bidder at such time.
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(f) By Seller at any time after February 15, 2001 if
(i) all the conditions set forth in Sections 7.1 and 7.2 (other than the
Financing Condition) shall have been satisfied or waived at such time and (ii)
C&S or Purchaser shall have failed to receive the funds contemplated by the
Commitment Letter or obtained other funds which are sufficient to consummate the
Transactions.
Section 8.2 Effect of Termination.
(a) In the event of the termination or abandonment of
this Agreement by any party hereto pursuant to the terms of this Agreement,
written notice thereof shall forthwith be given to the other party or parties
specifying the provision hereof pursuant to which such termination or
abandonment of this Agreement is made, and there shall be no liability or
obligation thereafter on the part of Purchaser, C&S or Seller except (A) for
fraud, (B) for breach of this Agreement prior to such termination or abandonment
of the Transactions, (C) as set forth in Section 8.2(b) and (D) as set forth in
Section 10.1.
(b) Without limiting the provisions of Section 6.7,
if Purchaser terminates this Agreement after the entry of the Sale Order
pursuant to Section 8.1(e)(i), 8.1(e)(vi) or 8.1(e)(vii), Seller shall pay, or
cause to be paid, to Purchaser, an amount of Expenses determined by the
Bankruptcy Court in accordance with Section 6.7(a) within two Business Days of
such determination. Any payments required to be made pursuant to this Section
8.2(b) shall be made by wire transfer of same day funds to an account designated
by Purchaser.
(c) If Seller terminates this Agreement pursuant to
Section 8.1(f) and the failure to obtain the financing for the Transactions is
not the result of there being a material disruption of the banking and capital
markets after the date of the Commitment Letter which in the lender's reasonable
opinion adversely impacts in any material respect availability of credit or the
lender's ability to syndicate the credit facility, C&S or Purchaser shall pay
Seller, as liquidated damages, within two Business Days of such termination, an
amount equal to fifteen million dollars ($15,000,000), it being understood that
Seller's actual damages in such event shall be difficult to predict at this time
and incapable of precise estimation and that Seller's sole and exclusive remedy
upon such termination shall be payment of such amount, which may be withheld by
Seller from the Auction Deposit Escrow.
(d) Any deposit into escrow made by Purchaser
pursuant to Section 2.6(a) shall be remitted to Purchaser within one Business
Day of the termination
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of this Agreement, unless terminated by Seller pursuant to Section 8.1(d) in
which case Seller shall retain the deposit, subject to Section 8.2(c).
Section 8.3 Extension; Waiver. At any time prior to the
Closing, each of the parties hereto may (i) extend the time for the performance
of any of the obligations or acts of any other party hereto, (ii) waive any
inaccuracies in the representations and warranties of any other party contained
herein or in any document delivered pursuant hereto, (iii) waive compliance with
any of the agreements of the other party contained herein, or (iv) waive any
condition to its obligations hereunder. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Indemnification; Remedies.
(a) Seller shall indemnify, defend and hold harmless
Purchaser Indemnified Persons from and against and in respect of (i) all
Purchaser Losses and (ii) all Retained Liabilities.
(b) Seller's indemnification obligations under
Section 9.1(a) and (c) shall be from the first dollar of any claim.
(c) Seller shall indemnify, defend and hold harmless
Purchaser Indemnified Persons from and against and in respect of any breach or
inaccuracy in any representation contained in Article IV including, in respect
of Purchaser Representation Losses.
(d) Notwithstanding anything to the contrary herein,
the indemnification pursuant to Section 9.1(a) and Section 9.1(c) shall (i)
survive only through the Escrow Termination Date; (ii) be limited in amount to
$1.5 million and (iii) be payable solely from the Escrow Account.
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Section 9.2 Notice of Claim; Defense. Purchaser shall give
Seller prompt notice of any Third Party claim that may give rise to any
indemnification obligation under this Article IX, together with the estimated
amount of such claim, and Seller shall have the right to assume the defense (at
Seller's expense) of any such claim through counsel of Seller' own choosing by
so notifying Purchaser within 30 days of the first receipt by Seller of such
notice from Purchaser; provided, however, that any such counsel shall be
reasonably satisfactory to Purchaser. Failure to give such notice shall not
affect the indemnification obligations hereunder in the absence of actual and
material prejudice. If Seller assumes the defense of such claim or action, it
shall have the right to settle such claim or action; provided, however, that it
shall not settle such claim or action without the prior written consent of
Purchaser (which consent shall not be unreasonably withheld). If, under
applicable standards of professional conduct, a conflict with respect to any
significant issue between any Purchaser Indemnified Person and Seller exists in
respect of such Third Party claim, Seller shall pay the reasonable fees and
expenses of such additional counsel as may be required to be retained in order
to eliminate such conflict. Seller shall be liable for the fees and expenses of
counsel employed by Purchaser for any period during which Seller has not assumed
the defense of any such Third Party claim (other than during any period in which
Purchaser will have failed to give notice of the Third Party claim as provided
above). If Purchaser assumes the defense of such claim or action, it shall not
settle such claim or action without the prior written consent of Seller (which
consent shall not be unreasonably withheld). If Seller assumes such defense,
Purchaser shall have the right to participate in the defense thereof and to
employ counsel, at its own expense, separate from the counsel employed by
Seller, it being understood that Seller shall control such defense. If Seller
chooses to defend or prosecute a Third Party claim, Purchaser shall cooperate in
the defense or prosecution thereof, which cooperation shall include, to the
extent reasonably requested by Seller, the retention, and the provision to
Seller, of records and information reasonably relevant to such Third Party
claim, and making employees of the Business available on a mutually convenient
basis to provide additional information and explanation of any materials
provided hereunder. If Seller chooses to defend or prosecute any Third Party
claim, Purchaser shall agree to any settlement, compromise or discharge of such
Third Party claim that Seller may recommend and that, by its terms, discharges
Purchaser and any of its Affiliates from the full amount of liability in
connection with such Third Party claim; provided, however, that, Seller shall
not consent to, and Purchaser shall not be required to agree to, the entry of
any judgment or enter into any settlement that (i) provides for injunctive or
other non- monetary relief affecting Purchaser or any of its Affiliates or (ii)
does not include as an unconditional term thereof the giving of a release from
all liability with respect to such claim by each claimant or plaintiff to each
Purchaser Indemnified Person that is the subject of such Third Party claim.
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Section 9.3 Survival of Indemnification Claims. The
indemnification obligations set forth in this Article IX shall survive the
Closing in accordance with the provisions of this Article IX.
Section 9.4 Tax Effect of Indemnification Payments. All
indemnity payments made by Seller to Purchaser Indemnified Persons, or by
Purchaser Indemnified Persons to Seller, pursuant to this Agreement shall be
treated for all Tax purposes as adjustments to the Purchase Price.
Section 9.5 Effect of Investigation. The right to
indemnification, payment of Purchaser Losses or for other remedies based on any
representation, warranty, covenant or obligation of Seller contained in or made
pursuant to this Agreement shall not be affected by any investigation conducted
with respect to, or any knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this Agreement or
the date the Closing occurs, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant or obligation. The
waiver of any condition to the obligation of Purchaser to consummate the
Transactions, where such condition is based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, shall not affect the right to indemnification, payment
of Purchaser Losses, or other remedy based on such representation, warranty,
covenant or obligation.
Section 9.6 Survival of Covenants, Representations and
Warranties. The representations and warranties set forth in Article IV shall not
survive following the Escrow Termination Date and, except as set forth below
covenants shall survive through the Closing; provided that (a) expiration of a
representation, warranty, covenant or agreement shall not affect the obligations
of a party with respect to claims for indemnifi cation for which notice has been
given to the indemnifying party in accordance with this Article IX prior to such
expiration and (b) all covenants, agreements and indemnification matters that
contemplate or may involve actions to be taken or obligations in effect after
the Closing shall survive the Closing Date.
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ARTICLE X
MISCELLANEOUS
Section 10.1 Fees and Expenses. (a) All costs and expenses
incurred in connection with this Agreement and the consummation of the
Transactions (other than filing fees in respect of filings under the HSR Act,
which shall be borne by Purchaser) shall be paid by the party incurring such
expenses, except as specifically provided to the contrary in this Agreement and
except as provided in Section 8.2(b).
(b) To the extent provided in the Sale Order, in accordance
with Section 1146(c) of the Bankruptcy Code, the instruments transferring the
Assets to Purchaser shall contain the following endorsement:
"Because this [instrument] has been authorized pursuant to
Order of the United States Bankruptcy Court for the District
of New Jersey relating to a chapter 11 plan of the Grantor, it
is exempt from transfer taxes, stamp taxes or similar taxes
pursuant to 11 U.S.C. ss.1146(c)."
In addition, Seller shall seek an order that provides that any transaction,
consummated within six months from the Closing Date, whereby C&S transfers or
assigns any of the Assets to a Third Party, shall be exempt from Transfer Taxes,
stamp Taxes or similar Taxes pursuant to 11 U.S.C. section 1146(c).
Section 10.2 Bulk Sales. Each of the parties hereto waives
compliance with any applicable provisions of the Uniform Commercial Code Article
6 (Bulk Sales or Bulk Transfers) or analogous provisions of law, as adopted in
the states in which the Business is conducted as such provisions may apply to
the transactions contemplated by this Agreement.
Section 10.3 Condition of Assets. PURCHASER AGREES THAT THE
REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN ARE IN LIEU OF ALL OTHER
WARRANTIES WHETHER EXPRESS OR IMPLIED, INCLUDING, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, SUCH OTHER WARRANTIES
BEING SPECIFICALLY DISCLAIMED BY SELLER. Purchaser further agrees that the
Assets being sold hereunder are being sold without any warranty or
representation whatsoever, except as specifically stated herein.
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Section 10.4 Amendment and Modification. This Agreement may be
amended, modified and supplemented in any and all respects, but only by a
written instrument signed by all of the parties hereto expressly stating that
such instrument is intended to amend, modify or supplement this Agreement.
Section 10.5 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given when mailed, delivered
personally, telecopied (which is confirmed) or sent by an overnight courier
service, such as Federal Express, to the parties at the following addresses (or
at such other address for a party as shall be specified by such party by like
notice):
if to Purchaser or C&S, to:
C&S Wholesale Grocers, Inc.
Old Ferry Road
Brattleboro, VT 05301
Attention: Richard B. Cohen
President and Chief Executive Officer
Telephone: (802) 257-6700
Facsimile: (802) 257-6620
with a copy under separate cover to:
C&S Wholesale Grocers, Inc.
Old Ferry Road
Brattleboro, VT 05301
Attention: Mark Gross, Esq.
Senior Vice President and General Counsel
Telephone: (802) 257-6025
Facsimile: (802) 257-6857
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and with copies (which shall not constitute notice)
to :
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attention: Richard J. Grossman, Esq.
Telephone: (212) 735-3000
Telecopy: (212) 735-2000
and
Milbank, Tweed, Hadley & McCloy LLP
One Chase Manhattan Plaza
New York, New York 10005
Attention: Dennis F. Dunne, Esq.
Telephone: (212) 530-5770
Telecopy: (212) 822-5770
if to Seller, to:
The Grand Union Company
201 Willowbrook Blvd.
Wayne, New Jersey 07470
Attention: Jeffrey P. Freimark
Telephone: (973) 890-6340
Telecopy: (973) 890-6551
and
Attention: General Counsel
Telephone: (973) 890-6084
Telecopy: (973) 890-6873
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with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Ted S. Waksman, Esq.
Telephone: (212) 310-8362
Telecopy: (212) 310-8007
or to such other address as a party may from time to time designate in writing
in accordance with this Section. Each notice or other communication given to any
party hereto in accordance with the provisions of this Agreement shall be deemed
to have been received (a) on the Business Day it is sent, if sent by personal
delivery, or (b) on the first Business Day after sending, if sent by overnight
delivery, properly addressed and prepaid or (c) upon receipt, if sent by mail
(regular, certified or registered); provided, however, that notice of change of
address shall be effective only upon receipt. The parties agree that delivery of
process or other papers in connection with any such action or proceeding in the
manner provided in this Section 10.5, or in such other manner as may be
permitted by law, shall be valid and sufficient service thereof.
Section 10.6 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties.
Section 10.7 Entire Agreement; No Third Party Beneficiaries.
This Agreement, the Disclosure Schedule and other schedules, annexes, and
exhibits hereto, the Confidentiality Agreement, the Bidding Procedures Order and
the Sale Order (a) constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and thereof and supersede and cancel all
prior agreements, negotiations, correspondence, undertakings, understandings and
communications of the parties, oral and written, with respect to the subject
matter hereof, and (b) except for Section 6.21, are not intended to confer upon
any Person other than the parties hereto and thereto any rights or remedies
hereunder.
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Section 10.8 Severability. Any term or provision of this
Agreement that is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction or other authority declares that any term or
provision hereof is invalid, void or unenforceable, the parties agree that the
court making such determination shall have the power to reduce the scope,
duration, area or applicability of the term or provision, to delete specific
words or phrases, or to replace any invalid, void or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision.
Section 10.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO THE PRINCI PLES OF CONFLICTS OF LAW THEREOF.
Section 10.10 Exclusive Jurisdiction. The parties hereby agree
that, without limitation of any party's right to appeal any order of the
Bankruptcy Court, (a) the Bankruptcy Court shall retain exclusive jurisdiction
to enforce the terms of this Agreement and to decide any claims or disputes
which may arise or result from, or be connected with this Agreement, any breach
or default hereunder, or the transactions contemplated herein, and (b) any and
all claims, actions, causes of action, suits and proceedings relating to the
foregoing shall be filed and maintained only in the Bankruptcy Court, and the
parties hereby consent and submit to the jurisdiction of the Bankruptcy Court.
Section 10.11 Election of Remedies. Neither the exercise of
nor the failure to exercise a right of set-off or to give notice of a claim
under this Agreement will constitute an election of remedies or limit Purchaser
or any Purchaser Indemnified Persons in any manner in the enforcement of any
other remedies that may be available to any of them, whether at law or in
equity.
Section 10.12 Assignment. Neither this Agreement not any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written content of the other parties, except that (a) Purchaser may assign, in
its sole discretion, any or all of its rights, obligations and interests
hereunder to any Affiliate or Subsidiary of Purchaser, (b)
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Purchaser may assign any or all of its rights, obligations and interests under
this Agreement to any Person or Persons, or any assignee of such Person or
Persons, providing to Purchaser or any of its Affiliates or Subsidiaries
financing for the Transactions, or to any Person providing to Purchaser or any
of its Affiliates or Subsidiaries financing related to the Business or to any of
the businesses of Purchaser and its Affiliates or Subsidiaries, and (c) subject
to the limitations in respect of Purchaser's obligations set forth in Section
6.21(b), Purchaser may assign any or all of its rights, obligations and
interests under this Agreement to a Third Party that is a purchaser of any or
all of the Assets as contemplated by Section 6.21(a)(v). In order to effect the
provisions of the preceding sentence, Seller shall, if requested by Purchaser,
execute one or more amendments to this Agreement making Third Party Purchasers
parties hereto. Subject to the first sentence of this Section 10.12, this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
Section 10.13 Headings. The article, section, paragraph and
other headings contained in this Agreement are inserted for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
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IN WITNESS WHEREOF, Purchaser, C&S and Seller have executed
this Agreement or caused this Agreement to be executed by their respective
officers thereunto duly authorized as of the date first written above.
THE GRAND UNION COMPANY
By: /s/ Gary Philbin
-------------------------------------
Name: Gary Philbin
Title: President and CEO
GU MARKETS LLC
By:/s/ Mark Gross
--------------------------------------
Name: Mark Gross
Title: Secretary
C&S WHOLESALE GROCERS, INC.
By :/s/ Mark Gross
-------------------------------------
Name: Mark Gross
Title: Senior Vice President
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Exhibit A
---------
Interim Operating Agreement
---------------------------
1. Purchaser and C&S agree to pay all expenses and to assume all
liabilities (except "Retained Liabilities") relating to the operation
of Seller for a period of up to 90 days following Closing, except for:
a. employee costs and expenses relating to wind-down,
b. professional costs and expenses relating to
wind-down, and
c. Severance or other termination costs.
2. Purchaser and Seller shall agree upon the services to be provided to
Purchaser and Third Party Purchasers under the Interim Operating
Agreement
3. Purchaser shall have the right to terminate the Interim Operating
Agreement, on a service-by-service or location-by-location basis, at
any time upon at least two weeks notice, at which point the applicable
obligations of Seller shall cease and all applicable costs and expenses
through the applicable termination date and resulting from such
termination of the Interim Operating Agreement shall be due and payable
by Purchaser and C&S.
4. Seller shall use its best efforts to provide adequate levels of
employees for purposes of the Interim Operating Agreement. However, it
is not a breach if Seller cannot provide such staffing to fulfill
Purchaser's needs under the Interim Operating Agreement It is
understood that in order to retain the service of administrative and
field (non-store) employees under the Interim Operating Agreement,
Seller will likely be required to incentivize such employees to remain
as employees of Seller, subject to Purchaser's approval. Such
incentives will have the result of increasing costs to Purchaser.
5. It is understood that C&S will be required to provide advance funding
of an amount equal to the estimated cost of Seller under the Interim
Operating Agreement for the subsequent two-week period at the time of
Closing in order to properly fund the Interim Operating Agreement and
that C&S shall provide additional advance funding to Seller as may be
required to maintain minimum undrawn advanced funding of such amount.
365216.14-New York S1A
