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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 8-K
___________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 20, 1998
CABLEVISION SYSTEMS CORPORATION
(Exact Name of Registrant as specified in its charter)
Delaware
(State of Incorporation)
1-9046 11-2776686
(Commission File Number) (IRS Employer
Identification Number)
One Media Crossways, Woodbury, New York 11797
(Address of principal executive offices)
Registrant's telephone number, including area code:
(516) 364-8450
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ITEM 5. OTHER EVENTS
Cablevision Systems Corporation (the "Registrant" or the "Company")
hereby supplements and, to the extent any prior disclosure in the Company's Form
10-K for the year ended December 31, 1996 (the "Form 10-K") or the Company's
Form 10-Qs for the quarters ended March 31, June 30 and September 30, 1997 (the
"Form 10-Qs") are inconsistent herewith, amends the Form 10-K and Form 10-Qs as
follows:
Agreement to Acquire Certain Assets
from the Wiz, Inc. and its Subsidiaries and Affiliates
As of January 29, 1998, Cablevision Electronics Investments, Inc.
("Cablevision Electronics"), a wholly-owned subsidiary of the Company,
entered into an agreement (the "Purchase Agreement") with The Wiz, Inc. and
certain of its subsidiaries and affiliates (collectively, the "Wiz") pursuant
to which Cablevision Electronics will acquire substantially all of the assets
associated with approximately 40 Nobody Beats The Wiz consumer electronics
store locations. The Wiz filed for bankruptcy protection on December 16,
1997. Prior to the bankruptcy filing, the Wiz operated approximately 53
retail locations.
The purchase price to be paid by Cablevision Electronics will be
equal to the sum of (i) 80% of total qualifying inventory and 10% of
nonqualifying inventory and (ii) $10.0 million which is expected to be used
for the payment of certain administrative expenses (a portion of which will
be assumed and paid by Cablevision Electronics (thereby reducing the $10.0
million payment by a corresponding amount)). Based on current estimates, the
purchase price to be paid by Cablevision Electronics is currently expected to
approximate $95 million. It is expected that approximately $50 million of the
purchase price will be furnished through third-party borrowings.
Cablevision Electronics has the right to make up to $3.0 million of
secured loans to the Wiz prior to closing for the purpose of purchasing new
inventory (the "Inventory Loans"). Any such advances shall be matched by
another secured lender to the Wiz on the basis of approximately $700,000 for
each $300,000 advanced by Cablevision Electronics.
The Purchase Agreement provides for certain secured loans from
Cablevision Electronics to the Wiz (the proceeds of which will be used by the
Wiz to meet operating costs pending closing). To date, the Company has made
$7 million of such secured loans. Additional secured loans in specified
amounts are required over the period from February 4, 1998 through the
closing date. Cablevision Electronics can elect at any time not to make
further secured loans but if it does so, the Wiz will have the right to
terminate the Purchase Agreement. Cablevision Electronics has the right to
terminate its obligations under the Purchase Agreement at any time. If it
terminates between February 10, 1998 and February 17, 1998, its secured loans
(other than the inventory loans) will be forgiven in certain circumstances.
If the transactions contemplated by the Purchase Agreement are consummated,
the secured loans will only be repaid to the extent that the purchase price
payable in respect of the purchased inventory exceeds the amounts payable to
certain secured creditors.
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Cablevision Electronics is, and following the acquisition will be,
an unrestricted subsidiary under the Company's debt instruments. The Company
has not guaranteed any of Cablevision Electronic's obligations under the
Purchase Agreement. The Company expects that the acquired business will incur
substantial operating losses for the first six months of 1998.
Proposed Acquisition of Connecticut Cable
Television Systems from TCI Communications, Inc.
On January 27, 1998, the Company, CSC Parent Corporation (which
will become the parent holding company of Cablevision Systems Corporation in
connection with the consummation of the Pending TCI NY/NJ Transactions
described below) and TCI Communications, Inc. ("TCIC") entered into a
non-binding letter of intent for the Company to acquire TCIC's cable
television systems (the "TCIC Connecticut Systems") in and around Hartford,
Vernon, Branford and Lakeville, Connecticut on the terms described below (the
"Proposed TCI CT Transactions"). In consideration for the TCIC Connecticut
Systems, which have been valued by the parties at $380 million, in the
Proposed TCI CT Transactions CSC Parent Corporation will (i) transfer to
TCIC its cable television systems serving Kalamazoo, Michigan (which served
approximately 48,000 subscribers as of December 31, 1997 and which have been
valued by the parties at $75 million), (ii) transfer to TCIC other cable
television systems to be identified by TCIC and purchased with approximately
$25 million of funds provided by CSC Parent Corporation, (iii) issue shares
of CSC Parent Corporation's Class A common stock (based on a $115.60 per
share valuation), and (iv) the assume certain indebtedness relating to the
TCIC Connecticut Systems, which on the date of the non-binding letter of
intent totalled $110 million.
Based upon information provided to the Company by TCIC, the TCIC
Connecticut Systems served approximately 249,000 subscribers as of September 30,
1997.
The closing of the Proposed TCI CT Transactions will be
conditioned, among other things, upon the expiration or termination of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and other regulatory and other customary
approvals. The Proposed TCI CT Transactions are currently expected to be
consummated during 1998. There can be no assurance that the HSR Act waiting
period will expire or be terminated in a timely fashion or that other
approvals will be obtained in a timely manner or at all or that governmental
agencies or others will not take legal action to prevent the consummation of
the Proposed TCI CT Transactions. Accordingly, there can be no assurance that
the Proposed TCI CT Transactions will be consummated in a timely fashion, or
at all.
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Stock Distribution
On January 20, 1998, the Company announced a two-for-one stock split
to be effected as a special stock distribution of one share of common stock for
each share of common stock outstanding. The stock distribution will be paid in
the form of additional shares of the stock of CSC Parent Corporation, which will
become the parent holding company of Cablevision Systems Corporation in
connection with the consummation of the transactions (the "Pending TCI NY/NJ
Transactions") contemplated by the Amended and Restated Contribution and Merger,
dated as of June 6, 1997, among TCIC, the Company, CSC Parent Corporation and
CSC Merger Corporation. In connection with the consummation of the Pending TCI
NY/NJ Transactions, CSC Parent Corporation will be renamed Cablevision Systems
Corporation. The record and payment dates for the stock distribution will be
established in connection with the closing of the Pending TCI NY/NJ
Transactions, which are expected to be consummated on February 27, 1998.
Shareholders of both the Company's Class A and Class B common stock will receive
the same class of stock that they will receive as a result of the consummation
of the Pending TCI NY/NJ Transactions.
Resignation of Chief Operating Officer
Also on January 20, 1998, Robert P. May resigned from his position as
the Company's Chief Operating Officer and as a Director of the Company.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA
FINANCIAL INFORMATION AND EXHIBITS
(c) The following exhibits are filed as a part of this report on Form 8-K:
99.1 Asset Purchase Agreement, dated as of January 29, 1998,
between The Wiz, Inc. and each of its subsidiaries and
affiliates listed on the signature pages thereto and
Cablevision Electronics Investments, Inc.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CABLEVISION SYSTEMS CORPORATION
By: /s/ BARRY J. O'LEARY
---------------------------
Name: Barry J. O'Leary
Title: Senior Vice President,
Finance and Treasurer
Dated: February 5, 1998
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Index to Exhibits
Exhibit No. Description
99.1 Asset Purchase Agreement, dated as of January 29, 1998, between
The Wiz, Inc. and each of its subsidiaries and affiliates listed
on the signature pages thereto and Cablevision Electronics
Investments, Inc.
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ASSET PURCHASE AGREEMENT
between
THE WIZ, INC.
AND ITS SUBSIDIARIES
and
CABLEVISION ELECTRONICS INVESTMENTS, INC.
Dated as of January 29 , 1998
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Specific Definitions . . . . . . . . . . . . . . . . . .2
Section 1.2 Other Terms. . . . . . . . . . . . . . . . . . . . . . .9
Section 1.3 Other Definitional Provisions. . . . . . . . . . . . . 10
ARTICLE II
PURCHASE AND SALE OF THE BUSINESS
Section 2.1 Purchase and Sale of Assets. . . . . . . . . . . . . . 10
Section 2.2 Deferred Transfers . . . . . . . . . . . . . . . . . . 11
Section 2.3 Excluded Assets. . . . . . . . . . . . . . . . . . . . 11
Section 2.4 Assumption of Liabilities. . . . . . . . . . . . . . . 13
Section 2.5 Excluded Liabilities . . . . . . . . . . . . . . . . . 14
Section 2.6 Calculation of the Purchase Price and
Secured Loans. . . . . . . . . . . . . . . . . . . . . 16
Section 2.7 Assigned Leases and Executory Contracts. . . . . . . . 19
Section 2.8 Financing Lease/Security Agreement . . . . . . . . . . 22
Section 2.9 Closing. . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.10 Deliveries by Purchaser. . . . . . . . . . . . . . . . 24
Section 2.11 Deliveries by Sellers. . . . . . . . . . . . . . . . . 25
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
ARTICLE V
COVENANTS
Section 5.1 Access . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.2 Conduct of Business. . . . . . . . . . . . . . . . . . 29
Section 5.3 Court Proceedings. . . . . . . . . . . . . . . . . . . 31
Section 5.4 Certain Bankruptcy Undertakings by Sellers . . . . . . 32
Section 5.5 Reasonable Best Efforts. . . . . . . . . . . . . . . . 33
Section 5.6 Tax Matters. . . . . . . . . . . . . . . . . . . . . . 33
Section 5.7 Compliance with WARN, etc. . . . . . . . . . . . . . . 33
Section 5.8 Further Assurances . . . . . . . . . . . . . . . . . . 34
Section 5.9 Conduct of Environmental Investigations. . . . . . . . 34
Section 5.10 Non-Solicitation . . . . . . . . . . . . . . . . . . . 34
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Page
Section 5.11 Store Closures; Use of Name. . . . . . . . . . . . . . 34
Section 5.12 Office Space . . . . . . . . . . . . . . . . . . . . . 35
Section 5.13 Covered Employees. . . . . . . . . . . . . . . . . . . 35
Section 5.14 Insurance. . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VI
CONDITIONS TO CLOSING; REMEDIES
Section 6.1 Conditions to the Obligations of Purchaser
and Seller . . . . . . . . . . . . . . . . . . . . . . 35
Section 6.2 Conditions to the Obligations of Purchaser . . . . . . 36
Section 6.3 Conditions to the Obligations of Sellers . . . . . . . 36
Section 6.4 Survival . . . . . . . . . . . . . . . . . . . . . . . 37
Section 6.5 Sole Remedy. . . . . . . . . . . . . . . . . . . . . . 37
Section 6.6 RAS. . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VII
TERMINATION
Section 7.1 Termination. . . . . . . . . . . . . . . . . . . . . . 38
Section 7.2 Effect of Termination. . . . . . . . . . . . . . . . . 39
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.2 Amendment; Waiver. . . . . . . . . . . . . . . . . . . 40
Section 8.3 No Assignment or Benefit to Third Parties. . . . . . . 41
Section 8.4 Entire Agreement . . . . . . . . . . . . . . . . . . . 41
Section 8.5 Fulfillment of Obligations . . . . . . . . . . . . . . 41
Section 8.6 Public Disclosure. . . . . . . . . . . . . . . . . . . 41
Section 8.7 Return of Information. . . . . . . . . . . . . . . . . 41
Section 8.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.9 Schedules. . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.10 Bulk Sales . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 8.11 GOVERNING LAW; SUBMISSION TO
JURISDICTION . . . . . . . . . . . . . . . . . . . . . 42
Section 8.12 Counterparts . . . . . . . . . . . . . . . . . . . . . 42
Section 8.13 Headings . . . . . . . . . . . . . . . . . . . . . . . 42
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ASSET PURCHASE AGREEMENT, dated as of January 29, 1998, between The
Wiz, Inc., a New York corporation ("The Wiz"), and each of The Wiz's
Subsidiaries and Affiliates listed on the signature pages hereto (collectively,
"Sellers") and Cablevision Electronics Investments, Inc., a Delaware corporation
("Purchaser").
W I T N E S S E T H:
WHEREAS, Sellers are engaged in the marketing, sales and distribution
of consumer electronic and music products through the 41 retail locations, four
of which have ancillary home office locations, and two warehouses primarily in
New York, New Jersey and Connecticut and listed on Schedule 1 (the "Business")
and 14 other retail locations that have been or will be closed;
WHEREAS, Sellers are debtors in possession in a case (the "Bankruptcy
Case") under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy
Code"), pending in the United States Bankruptcy Court for the Southern District
of New York (the "Court"), and assigned Case Nos. 97 B 48257 (CB) through 97 B
49346(CB) and 97 B 48540(CB) and 97 B 48541(CB);
WHEREAS, the parties hereto desire that Sellers sell, transfer and
assign to Purchaser and that Purchaser purchase and acquire from Sellers certain
assets and liabilities of the Business, all as more specifically provided
herein;
WHEREAS, subject to approval of the Court, as set forth herein,
Sellers shall be authorized by the Court to sell such assets to the Purchaser
free and clear of all liens and encumbrances;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and undertakings contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Specific Definitions. As used in this Agreement, the
following terms shall have the meanings set forth as referenced below:
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"Accounts Receivable" shall mean all accounts and notes receivable and finance
receivables of Sellers arising out of the sale or other disposition of
goods or services (including warranties, extended warranties and gift
certificates) of the Business.
"Affiliates" shall mean, with respect to any Person, any Persons directly or
indirectly controlling, controlled by, or under common control with, such
other Person at any time during the period for which the determination of
affiliation is being made. For purposes of this definition, the term
"control" (including the correlative meanings of the terms "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or
cause the direction of management policies of such Person, whether through
the ownership of voting securities or by contract or otherwise.
"Agreement" shall mean this Asset Purchase Agreement, as the same may be amended
or supplemented from time to time in accordance with the terms hereof.
"Amended DIP Financing Arrangements" shall mean the financing arrangements
authorized by the order of the Court captioned "ORDER PURSUANT TO SECTION
364(c) OF THE BANKRUPTCY CODE AND RULE 4001 OF THE FEDERAL RULES OF
BANKRUPTCY PROCEDURE AUTHORIZING DEBTORS (1) TO OBTAIN INTERIM
POST-PETITION FINANCING, (2) GRANTING SENIOR LIENS AND PRIORITY
ADMINISTRATIVE EXPENSE STATUS, (3) MODIFYING THE AUTOMATIC STAY, (4)
AUTHORIZING DEBTORS TO ENTER INTO AGREEMENTS WITH CONGRESS FINANCIAL
CORPORATION, (5) AUTHORIZING DEBTORS TO USE CASH COLLATERAL AND GRANTING
ADEQUATE PROTECTION IN FAVOR OF PARAGON CAPITAL, L.L.C. AND B III CAPITAL
PARTNERS, L.P. AND (6) AUTHORIZING DEBTORS TO OBTAIN POST-PETITION CREDIT
FROM TRADE VENDORS AND GRANTING JUNIOR LIENS" and entered on December 19,
1997, as amended prior to the date hereof and as further amended by the
Amended DIP Financing Order.
"Amended DIP Financing Order" shall mean an order of the Court extending its
order dated December 19, 1997, as previously extended, to permit the
secured loans contemplated by Sections 2.6(b) and 2.6(c) hereof on the
terms contemplated by such Sections.
"Antitrust Laws" shall mean and include the Sherman Act, as amended, the Clayton
Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended,
and all other federal and state statutes, rules, regulations, orders,
decrees, administrative and judicial doctrines, and
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other Laws that are designed or intended to prohibit, restrict or regulate
actions having the purpose or effect of monopolization or restraint of
trade.
"Approval Order" shall have the meaning set forth in Section 5.3(a).
"Assigned Leases" shall mean those leases listed on Schedule 2.1(d).
"Assumed Administrative Expenses" shall mean each of the expenses set forth on
Schedule 1.1(a) hereto.
"Assumed Liabilities" shall have the meaning set forth in Section 2.4.
"Assumption Date" shall have the meaning set forth in Section 2.7.
"Assumption Notice" shall have the meaning set forth in Section 2.7.
"Bankruptcy Case" shall have the meaning set forth in the Recitals.
"Bankruptcy Code" shall have the meanings set forth in the Recitals.
"Books and Records" shall mean all books, ledgers, files, reports, plans and
operating records of, or maintained for, the Business, excluding any such
items to the extent they are included in Excluded Assets.
"Business" shall have the meaning set forth in the Recitals.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day on
which banks in New York City are authorized or obligated by law or
executive order to close.
"Cablevision" shall mean Cablevision Systems Corporation, a Delaware
corporation.
"Closed Retail Locations" shall mean the retail locations listed on Schedule
1.1(b).
"Closing" shall mean the closing of the Transaction.
"Closing Date" shall have the meaning set forth in Section 2.9.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
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"Confidentiality Agreements" shall mean the agreement between Sellers and
Purchaser, dated January 5, 1998 and the Agreement between Sellers and
Madison Square Garden, L.P., dated as of November 5, 1997.
"Congress" shall mean Congress Financial Corporation, a California corporation.
"Congress Advances" shall mean all "Indebtedness" (as defined in the Amended DIP
Financing Arrangements) due Congress.
"Consideration Determination Motion" shall have the meaning set forth in Section
2.8.
"Contracts" shall mean all agreements, contracts, leases and subleases, purchase
orders, arrangements, commitments and licenses.
"Court" shall have the meaning set forth in the Recitals.
"Covered Employee" shall have the meaning set forth in Section 2.4(c).
"Cure Amount" shall have the meaning set forth in Section 2.7.
"Deposit" shall have the meaning set forth in Section 7.1(b).
"DIP Financing Arrangements" shall mean the financing arrangements authorized by
the order of the Court dated December 19, 1997 as extended to the date
hereof (and described in the definition of "Amended DIP Financing
Arrangements").
"Encumbrances" shall mean liens, charges, encumbrances, security interests,
options, adverse claims, or any other restrictions or third party rights.
"Excess Substandard Inventory Amount" shall have the meaning set forth in
Schedule 2.6(a).
"Excluded Assets" shall have the meaning set forth in Section 2.3.
"Excluded Liabilities" shall have the meaning set forth in Section 2.5.
"Executory Contract" shall have the meaning set forth in Section 2.7.
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"Executory Contract Assumption Procedures" shall have the meaning set forth in
Section 2.7.
"Executory Contract Option Period" shall have the meaning set forth in
Section 2.7.
"Financing Leases" shall have the meaning set forth in Section 2.8.
"Financing Lease Consideration Procedures" shall have the meaning set forth in
Section 2.8.
"Fixtures and Equipment" shall mean furniture, fixtures, furnishings, machinery,
vehicles, equipment and other tangible personal property.
"Genco/United Radio Inventory" shall mean the merchandise owned by Sellers and
located at refurbishers commonly known as Genco and United Radio.
"Governmental Authorizations" shall mean all licenses, permits, certificates and
other authorizations and approvals required to carry on the Business as
currently conducted under applicable Laws.
"Government Antitrust Entity" shall mean any federal, state or local court,
administrative body or other governmental entity with jurisdiction over the
enforcement of any Antitrust Law or other similar Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Hearing Date" shall mean the date on which the Court shall consider the
approval of the Transaction.
"Higher and Better Offer" shall mean a legally binding offer approved by the
Court to acquire the Business as a going concern, which includes the
payment to The Wiz of a non-refundable deposit in an amount at least equal
to the Deposit set forth in Section 7.1(b).
"Intellectual Property" shall mean patents, patent applications, licenses,
inventions, software, source codes, trade secrets, know-how, copyrights,
works of authorship, mask rights, trademarks, service marks, trade names,
trade dress and any similar proprietary rights.
"Inventory" shall mean all inventory Related to the Business, including without
limitation all goods held for sale, and wrapping, supply and packaging
items,
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in each case as of the Closing except to the extent included in Excluded
Assets.
"Inventory Amount" shall have the meaning set forth in Schedule 2.6(a).
"Inventory Loan" shall have the meaning set forth in Schedule 2.6(c).
"Laws" shall mean any federal, state, or local law, statute, ordinance, rule,
regulation, code, order, judgment, injunction or decree.
"Material Adverse Effect" shall mean an effect that is materially adverse to the
business, financial condition or results of operations of the Business
taken as a whole.
"Net Administrative Expense Payment" shall have the meaning set forth in Section
2.6(a).
"Nonexecutory Contract" shall mean any Contract identified in writing to Sellers
prior to Closing by Purchaser other than (i) an Executory Contract, (ii) an
Assigned Lease or (iii) any Excluded Asset or any Contract which represents
an Excluded Liability.
"One Hundred Percent Layaway" shall mean amounts received by the Sellers for
"layaway" purchases if one hundred percent of the purchase price was paid
by the customer on or thirty days prior to the Closing Date.
"Orders" shall mean the collectively the Approval Order, the Amended DIP
Financing Order, the Scheduling Order and any orders issued in connection
with an Assigned Lease.
"Paragon" shall collectively mean Paragon Capital L.L.C., a Massachusetts
limited liability Company and B III Capital Partners, L.P., a Delaware
Limited Partnership.
"Paragon Advances" shall mean all Obligations due and owing to Paragon pursuant
to the Paragon B III Agreements (as defined in the DIP Financing
Arrangements and the Amended DIP Financing Agreements) plus the Paragon B
III Fee due and owing to Paragon pursuant to said Amended DIP Financing
Arrangements.
"Partial Layaways" shall mean amounts received by the Sellers for "layaway"
purchases if less than one hundred percent of the purchase price was paid
by the customer on or thirty days prior to the Closing Date.
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"Permitted Encumbrances" shall mean with respect to real property, (A)
easements, quasi easements, licenses, covenants, Rights-of-Way or other
similar restrictions, including any other agreements, conditions or
restrictions that would be shown by a current title report or other similar
report or listing, (B) any conditions that may be shown by a current survey
or physical inspection and (C) zoning, building, subdivision or other
similar requirements or restrictions.
"Person" shall mean an individual, a corporation, a partnership, an association,
a trust or other entity or organization.
"Purchase Price" shall have the meaning set forth in Section 2.6(a).
"Purchaser" shall have the meaning set forth in the Preamble.
"RAS" shall have the meaning set forth in Section 6.6.
"RGIS Payment" shall mean the payment currently estimated to be $250,000 to
conduct a physical inventory as provided in Schedule 2.6(c).
"Reductions" shall have the meaning set forth in Section 2.6(a).
"Related to the Business" shall mean related to, or used in connection with, the
Business as conducted prior to the Closing.
"Sanwa" shall collectively mean Sanwa Business Credit Corporation, Bankers
Leasing Association, Inc. and Harris Bank Glencoe-Northbrook, N.A.
"Scheduling Order" shall have the meaning set forth in Section 5.3(a).
"Sellers" shall have the meaning set forth in the Preamble.
"Subsidiary" shall mean (a) any corporation in an unbroken chain of corporations
beginning with The Wiz if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain, (b) any partnership in which The Wiz or any
other Seller is a general partner, or (c) any partnership, corporation,
limited liability company or similar
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entity that The Wiz or any other Seller controls, through the ownership of
interests or otherwise.
"Substandard Inventory" shall have the meaning set forth in Schedule 2.6(a).
"Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income,
gross receipts, excise, stamp, sales, real or personal property, ad
valorem, withholding, estimated, social security, unemployment, occupation,
use, service, service use, license, net worth, payroll, franchise,
severance, transfer, recording or other taxes, assessments or charges
imposed by any governmental entity and any interest, penalties, or
additions to tax attributable thereto.
"Termination Date" shall have the meaning set forth in Section 7.1.
"Termination Fee" shall have the meaning set forth in Section 7.1(b).
"Termination Notice" shall have the meaning set forth in Section 2.7.
"The Wiz" shall have the meaning set forth in the Preamble.
"Trademark Assignment Agreement" shall have the meaning set forth in Section
2.11(e).
"Transaction" shall mean the purchase and sale of the Transferred Assets and the
assumption of the Assumed Liabilities pursuant to this Agreement.
"Transfer Taxes" shall have the meaning set forth in Section 5.6(a).
"Transferred Assets" shall have the meaning set forth in Section 2.1.
"Transferred Intellectual Property" shall mean the Intellectual Property Related
to the Business, except to the extent included in Excluded Assets.
"WARN" shall mean the Worker Adjustment and Retraining Notification Act.
"Wiz Bucks" shall mean certificates representing credit in U.S. dollars toward
the purchase of products sold by Sellers subject to the restrictions set
forth on the face of such certificates.
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Section 1.2 Other Terms. Other terms may be defined elsewhere in the
text of this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
Section 1.3 Other Definitional Provisions.
(a) The words "hereof", "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States dollars.
(d) References herein to a specific Section, Subsection or Schedule
shall refer, respectively, to Sections, Subsections or Schedules of this
Agreement, unless the express context otherwise requires.
(e) Wherever the word "include", "includes", or "including" is used
in this Agreement, it shall be deemed to be followed by the words "without
limitation".
ARTICLE II
PURCHASE AND SALE OF THE BUSINESS
Section 2.1 Purchase and Sale of Assets.
On the terms and subject to the conditions and termination rights set
forth herein, at the Closing, Sellers shall sell, convey, transfer, assign and
deliver to Purchaser, and Purchaser shall purchase from Sellers all of each
Seller's respective right, title and interest in and to the assets of such
Seller Related to the Business as of the Closing, whether tangible or
intangible, real or personal, except for the Excluded Assets (collectively, the
"Transferred Assets"), including all of such right, title and interest in and to
the following:
(a) All cash, cash equivalents and Accounts Receivable generated by
sales of inventory, warranties, extended warranties, gift certificates and
any other merchandise or products Related to the Business after the close
of business on Closing Date;
(b) All receivables in existence on or after the Closing Date and
other rights in respect of residuals
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payable (but not initiation fees) on sales of telephones, pagers and other
equipment regardless of when made;
(c) Inventory;
(d) Assigned Leases;
(e) Transferred Intellectual Property;
(f) Books and Records to the extent related to the Transferred Assets
or the Assumed Liabilities;
(g) Fixtures and Equipment relating to the Business (subject to
Section 2.8(a)(iii)).
(h) All claims, causes of action and choses in action, except (i) to
the extent related to any Excluded Asset or Excluded Liability and necessary for
Sellers to get the benefit of any Excluded Asset or (ii) to the extent available
as a defense, counterclaim, cross-claim, offset or third-party claim in
connection with an Excluded Liability;
(i) Any claims or causes of action of the estates of Sellers against
third parties arising under the provisions of Sections 509 or 541 through 553 of
the Bankruptcy Code, except to the extent related to any Excluded Asset or
Excluded Liability (unless also related to any transaction or transfer involving
a trade vendor/creditor to the Business) and necessary for Sellers to get the
benefit of any Excluded Asset or to the extent available as a defense,
counterclaim, cross-claim, offset or third-party claim in connection with an
Excluded Liability; all such claims or causes of action shall be released as
provided in the Approval Order and all defenses, counterclaims, cross-claims and
third party claims arising under applicable law in connection therewith except
to the extent related to any Excluded Asset or Excluded Liability (unless also
related to any transaction or transfer involving a trade vendor/creditor to the
Business) and necessary for Sellers to get the benefit of any Excluded Asset or
to the extent available as a defense, counterclaim, cross-claim, offset or
third-party claim in connection with an Excluded Liability; and
(j) All Nonexecutory Contracts.
Section 2.2 Deferred Transfers. Executory Contracts shall be sold,
conveyed, transferred, assigned and delivered to Purchaser on a deferred basis
as, when and to the extent provided in Section 2.7 and 2.8, respectively.
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Section 2.3 Excluded Assets. Notwithstanding anything herein to
the contrary, from and after the Closing, Sellers shall retain all of their
existing right, title and interest in and to, and there shall be excluded
from the sale, conveyance, assignment or transfer to Purchaser hereunder, and
the Transferred Assets shall not include, the following (collectively, the
"Excluded Assets"):
(a) All rights and obligations under any Contract other than under
the Nonexecutory Contracts, the Executory Contracts (until such rights and
obligations are required to be conveyed as provided in Section 2.7) and the
Assigned Leases;
(b) Intellectual Property not Related to the Business and
copyrights, rights of authorship, software and source codes related to the
Excluded Assets and Excluded Liabilities that are not necessary to conduct
the Business as currently conducted;
(c) All capital stock of each Subsidiary of The Wiz;
(d) All Books and Records not Related to the Business and Books and
Records related to the Excluded Assets and Excluded Liabilities that are not
necessary to conduct the Business as currently conducted;
(e) The Tax attributes of Sellers (including any Tax refund or net
operating losses);
(f) All claims, causes of action and choses in action (including
any claim under any insurance policy issued to any Seller under which any
Seller is named as a beneficiary or loss payee) to the extent related to any
Excluded Asset or Excluded Liability and necessary for Sellers to get the
benefit of any Excluded Asset or to the extent available as a defense,
counterclaim, cross-claim, offset or third-party claim in connection with an
Excluded Liability;
(g) all claims and causes of action of the estates of Sellers
against third parties arising under the provisions of Sections 509 or 541
through 553 of the Bankruptcy Code to the extent related to any Excluded
Asset or Excluded Liability (unless also related to any transaction or
transfer involving a trade vendor/creditor to the Business) and necessary for
Sellers to get the benefit of any Excluded Asset or to the extent available
as a defense, counterclaim, cross-claim, offset or third-party claim in
connection with an Excluded Asset;
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(h) Claims, reserves, refunds and other rights on or in respect of
insurance policies of Sellers; provided that Sellers shall comply with
Section 5.14;
(i) Inventory, Fixtures and Equipment and other assets located as
of the Closing Date in, and Fixtures and Equipment removed prior to the
Closing Date from (and not installed in any other retail location of
Sellers), a Closed Retail Location;
(j) All cash, cash equivalents, cash in transit, and Accounts
Receivable as of the Closing Date and cash collateralizing letters of credit
in amounts outstanding on the date of this Agreement, other than cash, cash
equivalents, and Accounts Receivable included in Section 2.1(a) and (b);
(k) The Segregated Account (as defined in the Amended DIP Financing
Order);
(l) Deposits and reserves paid by Sellers prior to the Closing Date
to Brinks Incorporated, Federal Express, UPS, utility providers and credit
card issuers or processors or otherwise held by any of the same as of the
Closing Date and other deposits specifically identified to Purchaser in
writing prior to execution of this Agreement;
(m) Bank accounts of Sellers except to the extent of any funds
therein that are covered by Section 2.1(a);
(n) Professional retainers paid by Sellers;
(o) Deposits paid by Sellers to Bunzl USA and its Affiliates;
(p) All receivables in respect of initiation fees on sales of
telephones, pagers and other equipment sold on or prior to the Closing; and
(q) All assets of Namron Construction Inc.
Section 2.4 Assumption of Liabilities. On the terms and subject
to the conditions set forth herein, at the Closing, Purchaser agrees to
assume and discharge or perform when due, the liabilities and obligations set
forth in (a) through (h) of this paragraph 2.4 (the "Assumed Liabilities")
and no others.
(a) All liabilities and obligations under each Executory Contract
and Non-executory Contract, that accrue and are required to be performed from
and after the date that Purchaser has assumed such Executory Contract or
Non-executory Contract;
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(b) All liabilities and obligations that accrue and are required to
be performed after the Closing Date pursuant to the Assigned Leases and the
Nonexecutory Contracts;
(c) Sellers' obligation to provide paid vacation, sick leave and
personal floating holidays or, in lieu thereof (at Purchaser's option), to
make payments to employees of Sellers listed on the Schedule to be provided
pursuant to Section 5.13 who are employed by Sellers on the Closing Date and
by Purchaser immediately following the Closing Date (each such employee, a
"Covered Employee"), in amounts up to but not exceeding the amounts as are
set forth for each such Covered Employee on such Schedule plus ordinary
course accruals for the period thereafter and prior to Closing for accrued
vacation, sick leave and personal floating holidays;
(d) All liabilities and obligations that accrue and are required to
be performed after the Closing Date to the extent related to or arising out
of the ownership or operation of the Transferred Assets by Purchaser after
the Closing Date;
(e) All Assumed Administrative Expenses;
(f) All liabilities of Sellers arising from the issuance or sale
by Sellers within 30 days prior to the Closing Date of gift certificates; or
(g) All return, rebate and layaway liabilities of Sellers arising
from sales of Inventory made within 30 days (33 days in the case of returns)
prior to the Closing Date.
(h) The Purchaser shall make the payments and satisfy the
obligations required to be made or satisfied by it under Section 2.7 and 2.8.
Section 2.5 Excluded Liabilities. Except as expressly provided by
Section 2.4 hereof, Purchaser shall not assume or be liable for any of the
liabilities or obligations of Sellers or any of their Affiliates, of any kind
or nature whether presently in existence or arising hereafter (the "Excluded
Liabilities"), including without limitation the following:
(a) all liabilities and obligations to the extent related to or
arising out of assets not included in the Transferred Assets;
(b) all liabilities incurred in connection with, arising out of or
related to the ownership or use of any of
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the Transferred Assets or the conduct of the Business prior to the Closing
Date;
(c) all liabilities and obligations arising out of or relating to
any Environmental Law that accrued or arose prior to the Closing Date to the
extent related to any real property owned, leased or operated by any Seller
or included in the Assigned Leases;
(d) all liabilities for Taxes, except, with regard to Taxes
attributable to the ownership of the Transferred Assets, to the extent they
are attributable to the period after the Closing Date (and except as provided
in Section 5.6);
(e) all liabilities for which any Seller has expressly assumed
responsibility in this Agreement;
(f) all liabilities and obligations relating to current or former
employees, agents, consultants or other independent contractors of Sellers,
whether or not such persons are employed by Purchaser after the Closing Date,
relating to services performed, benefits accrued or claims incurred prior to
the Closing Date, in each case, including, but not limited to, compensation,
bonus, incentives, deferred compensation, accrued salary, employee benefits,
severance, vacation, sick leave, personal days, worker's compensation, and
unemployment compensation or employee welfare and pension benefits;
(g) all liabilities for any claims and administrative expenses of
whatsoever kind or nature, arising prior or subsequent to the commencement of
the Bankruptcy Case, whether or not asserted, including, but not limited to,
liability in respect of the fees and expenses of professionals retained in or
related to the Bankruptcy Case and all liability under any pre- and
post-petition financing agreement including, without limitation, the
aggregate principal amount of, and accrued but unpaid interest on, any
outstanding borrowings thereunder, and any penalties, fees and expenses
(including attorneys' fees and expenses) other than Assumed Administrative
Expenses and the Cure Amount for an Assumed Agreement;
(h) all liabilities and obligations arising out of any lawsuit,
action, proceeding, inquiry, claim, order or investigation by or before any
court or governmental or other regulatory or administrative agency or
commission for events occurring on or before the Closing Date or not related
to the Transferred Assets or Assumed Liabilities.
(i) All liabilities of Sellers arising from the issuance or
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sale by Sellers of Wiz Bucks or the issuance or sale prior to more than 30
days before the Closing Date of gift certificates; and all return, rebate and
layaway liabilities of Sellers arising from sales of inventory made more than
30 days (33 days in the case of returns) before to the Closing Date.
All such Excluded Liabilities shall be retained by and remain
obligations and liabilities of Sellers or their Affiliates, as the case may
be. Sellers agree that the Sellers or their Affiliates, as the case may be,
incurring the liability will be responsible for (and Purchaser shall not be
responsible for) all Excluded Liabilities. It is expressly understood and
agreed that the parties intend that Purchaser shall not be considered to be a
successor to Sellers by reason of any theory of law or equity and that
Purchaser shall have no liability except as otherwise expressly provided in
this Agreement for any liability of Sellers or any of their Affiliates.
Section 2.6 Calculation of the Purchase Price and Secured Loans.
(a) Purchase Price. The purchase price ("Purchase Price") for the
Transferred Assets shall be equal to the sum of (i) $10 million less the
Assumed Administrative Expenses (the "Net Administrative Expense Payment"),
plus (ii) an amount equal to 80% of the Inventory Amount, plus (iii) an
amount equal to 10% of the Excess Substandard Inventory Amount. The Purchase
Price shall be reduced by an amount equal to (x) 80% of the face value of any
gift certificates issued by Sellers within 30 days prior to the Closing, (y)
the payments received by Sellers in respect of Partial Layaways and (z) 80%
of the payments received by Sellers in respect of the 100% Layaways (the
"Reductions"). The Inventory Amount and the Excess Substandard Inventory
Amount, including the portion payable at Closing, shall be determined in
accordance with Schedule 2.6(a). The Reductions shall be applied against the
amounts payable to Sellers under clauses (ii) and (iii) of the first sentence
of this Section 2.6(a). In the event that any portion of such Purchase Price
is to be paid into escrow pursuant to Section 2.9(b), the Reductions shall be
applied entirely against the portion paid immediately to Sellers rather than
to the escrowed amount.
(b) Secured Loans. Unless the Closing or the Termination Date
shall have earlier occurred, Purchaser shall make secured loans to The Wiz
Distributors, Ltd. in the amounts and on the dates set forth in Schedule
2.6(b)-A. Unless the Closing or the Termination Date shall have earlier
occurred, the advances scheduled for January 30, 1998 shall be conditioned on
and made immediately following the issuance of the Amended DIP Financing
Order and the
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advances scheduled for February 3, 1998 shall be conditioned on and made
immediately following the issuance of the Approval Order (as hereinafter
defined). Each subsequent secured advance shall be conditional upon the
previous receipt of the orders mentioned in the previous sentence. Each
secured loan provided by this Section 2.6(b) shall be made pursuant to the
Amended DIP Financing Arrangements and shall have the following additional
terms:
(i) Sellers' obligation to repay the loans will be evidenced by a
secured promissory note in the form attached hereto as Schedule 2.6(b)-B;
(ii) Sellers' obligation to repay the loans, and accrued interest
thereon, shall be secured by a post-petition lien and security interest
pursuant to Section 364(c)(3) of the Bankruptcy Code in all of the
"Collateral" (as defined in the DIP Financing Arrangements and any
additional collateral provided for in any amendment thereto) and all such
indebtedness of Sellers to Purchaser shall be granted an allowed
super-priority administrative expense claim in accordance with
Section 364(c)(1) of the Bankruptcy Code having priority in right of
payment over any and all administrative expenses or priority claims of the
kind specified in, or ordered pursuant to, Sections 330, 331, 503(b),
506(c) or 507(b) of the Bankruptcy Code as provided in the Amended DIP
Financing Order); provided, however, that Purchaser shall not, as a result
of the secured loan, have a lien on, or recourse to, any avoidance or other
actions of the Sellers' bankruptcy estates;
(iii) If this Agreement terminates for any reason except as provided
in Section 7.1(b) the liens granted by Sellers with respect to the loans
shall be subordinate to the payment in full of the Congress Advances, the
Paragon Advances and, to the extent such liens are valid and perfected, the
claims, not exceeding $1.5 million (plus interest and fees) asserted by
Sanwa.
(iv) The loans under this Section 2.6(b) will be forgiven in full at
the Closing except to the extent that the Purchase Price specified in
Section 2.6(a)(ii) and (iii) after giving effect to the Reductions exceeds
the sum of (w) the Congress Advances, (x) the Paragon Advances and (y), to
the extent such liens are valid and perfected, up to $1.5 million (plus
interest and fees) allegedly owing to Sanwa and (z) the Inventory Loans
plus (A) $1 million, if the Closing occurs on or prior to February 10, 1998
or (B) $2 million, if the Closing occurs after February 10, 1998.
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(c) Inventory Loans. At any time after the issuance of the Amended
DIP Financing Order, Purchaser shall have the right to make the secured loans to
The Wiz Distributors, Ltd. provided for in this Section 2.6(c) (the "Inventory
Loans"). Each Inventory Loan shall be made pursuant to the Amended DIP
Financing Arrangements and shall have the following additional terms:
(i) the Inventory Loans will be advanced in installments on such
dates as shall be determined by the Purchaser in its sole discretion;
(ii) Sellers' obligation to repay the Inventory Loans will be
evidenced by a secured promissory note in the form attached hereto as
Schedule 2.6(c);
(iii) Sellers' obligation to repay the Inventory Loans, and accrued
interest thereon, shall be secured by a post-petition lien and security
interest pursuant to Section 364(c)(3) of the Bankruptcy Code in all of the
"Collateral" (as defined in the DIP Financing Arrangements and any
additional collateral provided for in any amendment thereto) and all such
indebtedness of Sellers to Purchaser shall be granted an allowed
super-priority administrative expense claim in accordance with
Section 364(c)(1) of the Bankruptcy Code having priority in right of
payment over any and all administrative expenses or priority claims of the
kind specified in, or ordered pursuant to, Sections 330, 331, 503(b),
506(c) or 507(b) of the Bankruptcy Code as provided in the Amended DIP
Financing Order); provided, however, that Purchaser shall not, as a result
of the secured loan, have a lien on, or recourse to, any avoidance or other
actions of the Sellers' bankruptcy estates; the liens granted by Sellers
with respect to the Inventory Loans shall be subordinate to the payment in
full of the Congress Advances, the Paragon Advances and to the extent such
liens are valid and perfected, the claims, not exceeding $1.5 million (plus
interest and fees), asserted by Sanwa;
(iv) proceeds of the Inventory Loans shall be used by the Sellers
exclusively to purchase additional first quality inventory as directed by
the Purchaser (and reasonably acceptable to The Wiz, Inc. in amount, type
and price).
(v) If this Agreement terminates for any reason except as provided in
Section 7.1(b) the liens granted by Sellers with respect to the Inventory
Loans shall be subordinate to the payment in full of the Congress Advances,
the Paragon Advances and, to the extent such
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liens are valid and perfected, the claims, not exceeding $1.5 million (plus
interest and fees), asserted by Sanwa.
(vi) The Inventory Loans will be forgiven in full at the Closing
except to the extent that the Purchase Price specified in Section
2.6(a)(ii) and (iii) after giving effect to the Reductions exceeds the sum
of (x) the Congress Advances, (y) the Paragon Advances and (z) to the
extent such liens are valid and perfected, the claims, not exceeding $1.5
million (plus interest and fees), asserted by Sanwa.
(vii) If the Closing occurs, the Inventory Loans will be paid from the
Purchase Price specified in Section 2.6(a)(ii) and (iii), together with the
amounts referred to in clauses (x), (y) and (z) of Section 2.6(c)(vi)
above, in accord with existing priorities.
Section 2.7 Assigned Leases and Executory Contracts.
(a) On the Closing Date, Sellers shall assume and assign to Purchaser
all Assigned Leases in accordance with section 365 of the Bankruptcy Code.
Purchaser shall pay directly to the non-Seller parties to such Assigned Leases
all amounts required to be paid to cure pre- and post-petition defaults as
required by sections 365 and 365(f)(2) of the Bankruptcy Code (each, a "Cure
Amount"). On January 29, 1998, Purchaser requested Sellers not to reject the
leases on the Lake Grove, Manhasset, Holmdel or Sayville locations. The leases
for such locations shall be treated under the Executory Contract Assumption
Procedures but Purchaser shall be responsible for the actual carry costs of
keeping the location open (including payroll for employees who are retained and
fixture, equipment and other personal property payments required to be made at
such locations) from January 29, 1998 and not the Closing Date. In the event
that the Closing does not take place, Purchaser's obligation to be so
responsible for payments for such locations shall cease 15 days after Purchaser
provides written notice to Sellers.
(b) The Approval Order shall provide that Purchaser has up to ninety
days after the Closing Date (the "Executory Contract Option Period") to
determine whether it requires Sellers to assume any or all of Sellers' executory
contracts and unexpired leases other than Assigned Leases and assign such
executory contracts and unexpired leases (both real and personal) (collectively,
"Executory Contracts") to Purchaser under Section 365 of the Bankruptcy Code.
Purchaser's decision as to whether to require an assignment of any Executory
Contract, the maintenance of
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such contracts during the Executory Contract Option Period, and Sellers'
obligation to assume and assign any such contract shall be governed by the
following procedures (the "Executory Contract Assumption Procedures") which
shall be approved by the Approval Order:
(i) During the Executory Contract Option Period for each Executory
Contract, Purchaser shall (A) exercise and enjoy all rights and benefits of
Sellers under such Executory Contract and (B) pay directly to the
non-Seller party under such Executory Contract only the sums required to be
paid under such Executory Contract for use of or damage to the property
subject to such Executory Contract during the Executory Contract Option
Period. Purchaser shall not be deemed to have assumed or be liable for any
obligations under such contracts other than the payment of amounts pro
rated to cover only use of or damage to the property during the applicable
Executory Contract Option Period (or, if later, the date the relevant
property subject to the relevant Executory Contract is made available for
return, but solely to the extent ordered by the Court) during which
Purchaser has actual use of the property subject to such contract. In no
event shall Purchaser be responsible for the payment of any sums or the
performance of any obligations under an Executory Contract after
termination of the Executory Contract Period for such Executory Contract or
prior to such Executory Contract Option Period unless such Executory
Contract is assumed by Sellers and assigned to Purchaser.
(ii) Sellers shall be responsible to the non-Seller party to each
Executory Contract for all obligations of Sellers, including payment of all
rent and other charges, under each of the Executory Contracts for the
period commencing on the date Sellers filed their bankruptcy petitions up
to and including the Closing Date; provided that Sellers shall not be
obligated to Purchaser for amounts it fails to pay under this provision.
(iii) During the Executory Contract Option Period for each
Executory Contract, Seller shall not modify, amend or terminate any
Executory Contract or otherwise interfere with the exercise and enjoyment
by Purchaser of Sellers' rights under any Executory Contract; provided,
that Purchaser shall not exercise any such rights in a manner that could
increase any administrative claim against Seller if the Assumption Date (as
defined herein) relating to such Executory Contract does not take place.
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(iv) During the Executory Contract Option Period, Purchaser may
provide written notice to such Sellers and the non-Seller parties to
Executory Contracts (the "Assumption Notice") requiring Sellers to assume
and assign under section 365 of the Bankruptcy Code certain Executory
Contracts designated by Purchaser. The Assumption Notice shall advise the
non-Seller parties of Sellers' intent to assume and assign such contracts
to Purchaser and the Cure Amount determined by Purchaser to be required to
be paid to cure defaults as required by Sections 365(b) and 365(f)(2) of
the Bankruptcy Code. A copy of the Assumption Notice shall be filed with
the Court. Each such non-Seller party shall have five days to object to
the assumption and assignment and to the Cure Amount identified in the
Assumption Notice, and must specifically state the grounds for its
objection and the proper Cure Amount and provide sufficient documentation
in support thereof. If a non-Seller party to an Executory Contract timely
asserts or raises an objection to the assumption and assignment of such
party's Executory Contract or to the Cure Amount, then a hearing will be
scheduled before the Court at a date and time to be established. If no
timely objection is received by the Court, Sellers and Purchaser, the Cure
Amount will be the amount listed in the Assumption Notice, and the
Executory Contract will be automatically assumed and assigned to Purchaser
six days after the filing of the Assumption Notice without further order of
the Court (the "Assumption Date"), and Purchaser shall promptly pay the
related Cure Amount directly to the non-Seller party to such Executory
Contract. The application of the Executory Contract Assumption Procedures
and the assignment of each such Executory Contract to Purchaser will not
constitute a default under the Executory Contract or otherwise allow the
non-Seller party thereto to terminate or adversely affect Purchaser's
rights thereunder.
(v) The Executory Contract Option Period with respect to any
Executory Contract shall terminate upon the occurrence of any of the
following: (A) ten days after the date on which Purchaser notifies such
Sellers and the non-Seller party to an Executory Contract that it does not
require such Sellers to assume and assign such Executory Contract (the
"Termination Notice"); (B) the expiration of the ninetieth day after the
Closing Date if no Termination Notice is given; or (C) if an Assumption
Notice is given, the earlier of (x) the date an order is entered by the
Court rejecting the proposed assumption by Sellers and assignment to
Purchaser of the Executory Contract, (y) the date Purchaser withdraws the
Assumption Notice or (z) the Assumption
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Date or the date the Court approves the assumption and assignment. Upon
termination of the Executory Contract Option Period relating to an
Executory Contract pursuant to this paragraph (v), (1) the relevant
Executory Contract shall be deemed rejected by Sellers, and (2) Purchaser
and the non-Seller party to such Executory Contract shall develop a
mutually agreeable method for such non-Seller party to recover any property
subject to such Executory Contract.
(vi) During the Executory Contract Option Period, the non-Seller party
to such Executory Contract shall be enjoined by the Approval Order from
taking any action to recover the property subject to such Executory
Contract or to terminate such Executory Contract so long as Purchaser is
paying amounts to be paid by it pursuant to the Executory Contract
Assumption Procedures.
(vii) The Approval Order shall provide that Sellers' time to
assume or reject any Executory Contract that is a lease of non-residential
real property is extended to the conclusion of the Executory Contract
Option Period for such Executory Contract.
Section 2.8 Financing Lease/Security Agreement.
(a) The Approval Order shall provide that Transferred Assets covered
by equipment financing leases and security agreements ("Financing Leases")
constituting perfected liens upon certain Transferred Assets either (x) senior
to the liens of Congress, Paragon or Sanwa or (y) junior only to perfected liens
on the property covered by such Financing Lease which liens have been satisfied
in full as of the Closing Date shall be transferred to Purchaser free and clear
of the liens of such Financing Leases and the claims of the putative lessors of
such Financing Leases. In full satisfaction of any secured claims and liens of
such Financing Leases and the putative lessors thereof, the interests of the
putative lessors of such Financing Leases shall be determined and satisfied
under the following procedures (the "Financing Lease Consideration Procedures")
which shall be approved by the Approval Order:
(i) To determine the fair market value of Transferred Assets subject
to a Financing Lease and the value of the lien of such Financing Lease,
Purchaser may file a motion (the "Consideration Determination Motion") with
the Court and serve same upon the owner of the applicable Financing Lease.
The Consideration Determination Motion shall contain Purchaser's
determination of the fair market value of the
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applicable Transferred Assets and the value of the lien of the applicable
Financing Lease. The putative lessor of the applicable Financing Lease
shall be entitled to object to Purchaser's determination and, if an
objection is filed, the Court shall hold a hearing to determine the fair
market value of the property and the value of the lien. Upon the Court's
determination of the price to be paid for the Transferred Asset covered by
a Financing Lease, Purchaser shall pay to the putative lessor of the
applicable Financing Lease the amount determined by the Court, and the
putative lessor of the Financing Lease shall provide such release and lien
termination documentation as reasonably requested by Purchaser; provided,
that Purchaser may, at any time, determine that it does not wish to
complete the purchase of such Transferred Asset subject to a Financing
Lease, in which case the owner of such Financing Lease shall be entitled to
immediately recover such property but shall not receive additional
consideration from Purchaser except for use or damage charges related
solely to Purchaser's use of such property and expressly approved by order
of the Court; and provided further, that in no event shall Purchaser be
required to pay any amount to the putative lessor of a Financing Lease that
does not hold a properly perfected security interest in and lien on the
relevant Transferred Assets covered by such Financing Lease which lien is
either (x) senior to the liens of Congress, Paragon or Sanwa, or (y) junior
only to perfected liens on the property covered by such Financing Lease
which liens have been satisfied in full as of the Closing Date.
(ii) Purchaser shall have 90 days from the Closing Date to file the
Consideration Determination Motion with the Court. During such 90 day
period, Purchaser may pay the putative lessor under the applicable
Financing Lease monthly rental or interest payments required under such
Financing Lease commencing on the Closing Date and each owner of a covered
Financing Lease shall be enjoined from taking any action to recover
property subject to such leases or agreements so long as Purchaser is
paying such amounts. Purchaser shall continue to pay monthly rent or
interest payments as required by each such Financing Lease until the time
the Court determines the Consideration Determination Motion or seven days
after Purchaser advises the putative
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lessor of such Financing Lease and files with the Court notice that
Purchaser does not wish to complete the purchase of the personal property
covered by such Financing Lease. Upon receipt of such notice or failure of
Purchaser to pay monthly rent or interest which accrues after the Closing
Date, the putative lessor of a Financing Lease shall be entitled to
immediately recover the property subject to such Financing Lease, and
Purchaser and such putative lessor shall develop a mutually agreeable
method for such putative lessor to recover property covered by such
Financing Lease. If the Court reaches a decision on a Consideration
Determination Motion and the purchase is consummated, Purchaser may request
that the Court order reduce the consideration to be paid by Purchaser by
monthly rent or interest paid to the putative lessor of a Financing Lease
by Purchaser as provided hereby.
(iii) If the Court determines that Transferred Assets which
Purchaser believes to be covered by a Financing Lease are in fact covered
by a "true" lease, such lease may be assumed by Sellers and assigned to
Purchaser upon payment of all Cure Amounts and evidence of adequate
assurance of future performance under such lease by Purchaser.
Determination of Cure Amounts and assumption and assignment of such lease
shall be governed by the Executory Contract Assumption Procedures and the
filing of the Consideration Determination Motion shall be deemed to be a
timely Assumption Notice; provided, that Purchaser shall promptly advise
the non-Seller party to such Executory Contract of its proposed Cure
Amount.
Section 2.9 Closing.
The Closing shall take place at the offices of Sullivan & Cromwell,
125 Broad Street, New York, New York 10004 at 10:00 A.M. New York City time, on
the later of (i) February 6, 1998, and (ii) the second Business Day following
the date on which the conditions set forth in Section 6.1 have been satisfied or
waived, or at such other time and place as the parties hereto may mutually
agree; provided, however, that, subject to Sellers' right to terminate this
Agreement in the circumstances set forth in Section 7.1, if Buyer has timely
made the secured loans provided for in Section 2.6(b), it will have the right to
extend the Closing to the close of business on the next date on which a secured
loan would be required to be made; in each case notwithstanding that the Closing
could have occurred on an earlier date. The date on which the Closing occurs is
called the "Closing Date".
Section 2.10 Deliveries by Purchaser. At the Closing, Purchaser
shall deliver to The Wiz, on behalf of the Sellers, the following:
(a) the Purchase Price provided for in Section 2.6(a)(i) in
immediately available funds by wire transfer to
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an account or accounts designated by The Wiz not less than two Business Days
prior to the Closing;
(b) (x) if the physical inventory described in Schedule 2.6(a) has
been completed and there are no outstanding disputes pursuant to Schedule 2.6(a)
as to the inventory calculation, an amount equal to the full amount required to
be paid pursuant to Section 2.6(a)(ii) and (iii) (reduced by the Reductions); or
(y) if the physical inventory described in Schedule 2.6(a) has not been
completed, an amount equal to 80% of the amount described in (i) above (computed
without regard to the Reductions) (based upon a mutual good faith estimate made
on the basis of the Sellers' books and records), such 80% amount to be reduced
by the Reductions, with the balance being placed in a mutually satisfactory
escrow arrangement; or (z) if the inventory has been completed and there are
outstanding disputes pursuant to Schedule 2.6(a) as to the inventory
calculation, the 80% of the Inventory Amount and the 10% of the Excess
Substandard Inventory Amount computed with respect to the undisputed amounts
shall be paid to Sellers after deduction of the full amount of the Reductions
and the balance shall be placed in escrow pursuant to mutually satisfactory
escrow arrangements;
(c) such instruments of assumption and other instruments or
documents, in form and substance reasonably acceptable to The Wiz, as may be
necessary to effect Purchaser's assumption of the Assumed Liabilities;
(d) an opinion of Sullivan & Cromwell, special counsel to Purchaser,
or Robert S. Lemle, Executive Vice President and General Counsel of Cablevision,
or any combination thereof at Purchaser's election, dated the Closing Date, in
form and substance reasonably satisfactory to Sellers;
(e) the certificate and other documents to be delivered pursuant to
Section 6.3 hereof;
(f) such other instruments or documents, in form and substance
reasonably acceptable to Sellers, as may be necessary to effect and evidence the
Closing; and
(g) reasonable evidence of the satisfaction of the condition set
forth in Section 6.3(c).
Section 2.11 Deliveries by Sellers. At the Closing, Sellers shall
deliver, or cause to be delivered, to Purchaser the following:
(a) bills of sale or other appropriate documents of transfer, in form
and substance reasonably acceptable to
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Purchaser, transferring all of the Transferred Assets to Purchaser;
(b) the Approval Order, approving this Agreement and the consummation
of the transactions contemplated hereby and releasing all Encumbrances other
than Permitted Encumbrances in all or any portion of the Transferred Assets in
form and substance reasonably satisfactory to Purchaser;
(c) a certificate of the Secretary or Assistant Secretary of each
Seller, dated the Closing Date, as to (y) the incumbency of any officer of such
Seller executing this Agreement or any document related thereto and (z) as to
The Wiz, Nobody Beats the Wiz, Inc. and The Wiz Distributors, Ltd. true and
correct copies of the Certificate of Incorporation and By-laws of such Seller
and all amendments thereto;
(d) an opinion of Kramer, Levin, Naftalis & Frankel, special
bankruptcy counsel to Seller, dated the Closing Date, in form and substance
reasonably satisfactory to Purchaser;
(e) a trademark assignment agreement (the "Trademark Assignment
Agreement") duly executed by Sellers, providing for the assignment and transfer
to Purchaser of all of Sellers' right, title and interest in and to all
trademarks, service marks, service names, trade names and assumed names included
in the Transferred Intellectual Property, in form and substance reasonably
acceptable to Purchaser;
(f) possession of the premises subject to the Assigned Leases (free of
all tenants, licensees and occupants);
(g) certificates of good standing of each of The Wiz, Nobody Beats the
Wiz, Inc. and The Wiz Distributors, Ltd., dated a recent date from the
jurisdiction of organization of each such entity, together with certificates or
telegrams bringing down to date the information contained in each certificate
dated not earlier than five days prior to the Closing Date;
(h) the certificates and other documents to be delivered pursuant to
Section 6.2 hereof; and
(i) such other instruments or documents, in form and substance
reasonably acceptable to Purchaser, as may be necessary to effect and evidence
the Closing.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
None of the Sellers or any other Person makes any express or implied
representation or warranty on behalf of Sellers. ALL WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, ARE EXCLUDED FROM THE SALE AND TRANSFER OF THE TRANSFERRED ASSETS AND
THE ASSUMED LIABILITIES.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Neither Purchaser nor any other Person makes any express or implied
representation or warranty on behalf of Purchaser.
ARTICLE V
COVENANTS
Section 5.1 Access. (a) Prior to the Closing, Sellers shall permit
Purchaser and its representatives to have access, during regular business hours
and upon reasonable advance notice, to the Transferred Assets, subject to
reasonable rules and regulations of Sellers and any applicable Laws, including
any Antitrust Law or other similar Laws, and Sellers shall furnish, or cause to
be furnished, to Purchaser any financial and operating data and other
information that is available with respect to the Business as Purchaser shall
from time to time reasonably request. Sellers agree to retain for a period of
not less than four years following the Closing Date all Books and Records
included in the Excluded Assets unless Sellers have offered to deliver such
Books and Records to Purchaser upon Purchaser's request. Following the Closing,
Sellers shall provide Purchaser and its representatives, upon reasonable notice,
reasonable access to the Books and Records included in the Excluded Assets to
the extent such Books and Records were not delivered to Purchaser and to the
extent such access is reasonably related to the Transferred Assets or Assumed
Liabilities or otherwise necessary for Purchaser to comply with the terms of
this Agreement or any Laws.
(b) Not less than five days prior to the Closing, Sellers shall have
furnished to Purchaser a list on which it will use a reasonable good faith
effort to list the following contracts:
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(i) any lease (other than the Assigned Leases) providing for annual
rentals of $100,000 or more; (ii) any contract for the purchase of
materials, supplies, goods, services, equipment or other assets
providing for annual aggregate payments by Sellers of $100,000 or
more; (iii) any sales, distribution or other similar agreement
providing for the sale by Sellers of materials, supplies, goods,
services, equipment or other assets that provides for annual aggregate
payments to Sellers of $100,000 or more; (iv) any partnership, joint
venture or other similar contract or agreement or any material
power-of-attorney; (v) any contract relating to indebtedness for
borrowed money, any contract relating to a deferred purchase price of
property in excess of $10,000 (whether incurred, assumed, guaranteed
or secured by asset) or any contract relating to any indebtedness
secured by any assets of any Seller; (vi) any material license
agreement, franchise agreement or agreement in respect of similar
rights granted to or held by any Seller; (vii) any agency, dealer,
sales representative or other similar agreement providing for annual
aggregate payments by Sellers or by the other party thereto of
$100,000 or more; (viii) any contract, order or decree that
substantially limits the freedom of any Seller to compete in any line
of business or with any Person or in any area and which would so limit
the freedom of any Seller or Purchaser after the Closing Date; (ix)
any guarantee (other than guarantees in respect of any lease
transferred to a third party for which any Seller has been
indemnified), indemnity, keep-well or similar agreement or arrangement
pursuant to which the aggregate liability of Sellers is $100,000 or
more; (x) any other contract or commitment not made in the ordinary
course of business that is material to Sellers taken as a whole, and
(xi) any agreement relating to residuals of the type referred to in
Section 2.1(b);
(c) Purchaser agrees to retain for a period of not less than four
years (and not less than the period of the applicable statute of limitations for
Books and Records relating to Taxes) following the Closing Date all Books and
Records included in the Transferred Assets. Following the Closing, Purchaser
shall provide Sellers and their representatives, during normal business hours
and upon reasonable notice, reasonable access to the Books and Records included
in the Transferred Assets and other underlying data and documentation relating
to the Business
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and make personnel of Purchaser available to Sellers in Sellers' review thereof
to the extent such access is reasonably related to any Excluded Assets or
Excluded Liabilities, the administration of Sellers' bankruptcy proceedings, the
winding-up of Sellers' operations or otherwise necessary for Sellers to comply
with the terms of this Agreement or any Laws. Purchaser shall provide the
services of appropriate employees to assist in the closing of Sellers' books as
of the Closing Date.
Section 5.2 Conduct of Business. (a) During the period from the date
hereof to the Closing Date, except as otherwise contemplated by this Agreement
or as Purchaser shall otherwise agree in writing in advance with respect to the
Business, Sellers covenant and agree that Sellers shall conduct the Business in
the ordinary and usual course as conducted since the filing of the Bankruptcy
Case and use their reasonable efforts to preserve the Business intact, as
contemplated below. During the period from the date hereof to the Closing Date,
except as otherwise contemplated by this Agreement or as Purchaser shall
otherwise consent in writing, Sellers covenant and agree that with respect to
the Business they shall not:
(i) incur, create or assume any Encumbrance on any of its properties
(other than a Permitted Encumbrance) which would be an Encumbrance on the
Transferred Assets after purchase by Purchaser;
(ii) sell, lease, license, transfer or dispose of any assets other
than Excluded Assets and sales of Inventory, credit card accounts
receivable, and other goods and services sold in Sellers' retail operations
in the ordinary course of their Business;
(iii) enter into, voluntarily terminate, or materially extend or
modify any Contract involving payments in excess of $7,500 other than sales
of goods and services sold in Sellers' retail operations in the ordinary
course of business;
(iv) set aside or pay any dividend or distribution with respect to
the capital stock of The Wiz, repurchase, redeem or otherwise acquire any
shares of the capital stock or other equity interest of The Wiz, grant any
options to purchase shares of capital stock or any other equity interest of
any Seller or issue any shares of capital stock or any other equity
interest of any Seller;
(v) enter into any financing arrangement or incur any indebtedness
for borrowed money other than pursuant to the DIP Financing Arrangements
and the
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Amended DIP Financing Arrangements (or any extensions thereof) as in effect
on the date hereof;
(vi) make any change with respect to the compensation, benefits or
title of any of the employees employed in the Business;
(vii) other than in the ordinary course of business as conducted
since the filing of the Bankruptcy Case, enter into any warranty or
extended warranty arrangements;
(viii) issue any coupons, rebate slips, gift certificates or other
arrangements allowing customers to acquire goods in the future;
(ix) other than in the ordinary course of business as conducted since
the filing of the Bankruptcy Case, accept any customer deposits (including
layaway purchases) with respect to future sales;
(x) enter into any purchase orders for Inventory other than as
directed by Purchaser;
(xi) terminate or lay off any employee employed in the Business other
than for employee misconduct and other than reductions in weekly hours
worked by any employee;
(xii) exercise any option to extend any Assigned Lease;
(xiii) surrender any premises subject to an Assigned Lease or
terminate, cancel, modify or amend any Assigned Lease; or
(xiv) enter into any agreement or commitment with respect to any of
the foregoing.
(b) During the period from the date hereof to the Closing Date,
Sellers shall provide consultation rights to Purchaser with respect to all
significant decisions relating to the Business not otherwise subject to
Purchaser's approval under Section 5.2(a).
(c) From the date hereof until the Closing, the Business shall be
conducted in a manner entirely consistent with the Interim Budget initialed by
The Wiz and Purchaser on the date hereof. No amount in excess of 105% of each
budgeted line item amount in the Interim Budget will be expended (other than
changes from the budget that vary
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directly in accordance with revenues), without the express consent of Purchaser.
(d) Seller shall not consent to any amendment to the DIP Financing
Arrangements or the Amended DIP Financing Arrangements that adversely affects
the Purchaser in any respect without the prior written consent of the Purchaser.
Section 5.3 Court Proceedings.
(a) On or prior to January 27, 1998, Sellers filed with the Court a
motion and supporting papers in form and substance reasonably acceptable to
Purchaser seeking Court approval of the Termination Fee provided for in Section
7.1(b) and the bidding procedures, including an initial $2,500,000.00 overbid
requirement and subsequent overbid amounts equal to at least $500,000.00 for
each bid or partial bids in the aggregate, and scheduling the Hearing Date. The
order ("Scheduling Order") approving the Termination Fee and bidding procedures
and scheduling the Hearing Date shall be entered by the Court on or before
January 30, 1998 and shall be in form and substance reasonably acceptable to
Purchaser and its counsel. On or prior to January 27, 1998, Sellers filed with
the Court a motion and supporting papers seeking Court approval (the "Approval
Order") of this Agreement and Sellers' performance of their obligations under
this Agreement.
(b) On or prior to January 29, 1998, Sellers filed with the Court a
motion and supporting papers in form and substance reasonably satisfactory to
Purchaser and its counsel seeking the Amended DIP Financing Order. The Amended
DIP Financing Order was entered by the Court on or prior to January 30, 1998 and
is in form and substance reasonably acceptable to Purchaser.
(c) The Approval Order shall be in form and substance reasonably
acceptable to Purchaser and contain findings and rulings pursuant to, inter
alia, Sections 363(b),(f) and (m) and 365 of the Bankruptcy Code and such other
provisions as Purchaser may reasonably require relating to the transactions
contemplated by this Agreement including provisions relating to the sale,
assignment, transfer and delivery, or the assumption and assignment, of the
Transferred Assets and the Assigned Leases to Purchaser free and clear of all
Encumbrances (other than Permitted Encumbrances) and all liabilities of every
kind or nature except those expressly assumed in this Agreement. In addition to
such other provisions as Purchaser shall reasonably require, the Approval Order
shall (i) permanently enjoin after the Closing Date any Person from asserting
any claim or interest against Purchaser or any of its Affiliates which was or
could have been asserted in the Bankruptcy Case
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against any Seller other than claims directly related to the Assumed
Liabilities, and (ii) provide that all avoidance and similar actions (other than
those constituting Excluded Assets) shall be released, including all preference
and other claims (of any nature) against vendors and claims (of any nature)
against shareholders and shall include other releases (including releases of
Cablevision and its Affiliates) in form and substance reasonably acceptable to
Purchaser, Sellers, Congress, Paragon and the Committee of Unsecured Creditors.
(d) Sellers shall provide notice of any hearing on the Termination
Fee and bidding procedures and the Approval Order or any other matter before the
Court relating to this Agreement or the Transaction, in each case as required by
the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and the Local
Bankruptcy Rules of the Southern District of New York or as otherwise ordered by
the Bankruptcy Court.
(e) Sellers shall be permitted to engage in such actions or
proceedings as Sellers deem appropriate in the event that this Agreement is
terminated in accordance with the terms of Article VII hereof. Sellers may,
consistent with their fiduciary duties, solicit and encourage competing going
concern bids for substantially all of the assets of the Sellers but not for a
complete or partial liquidation.
Section 5.4 Certain Bankruptcy Undertakings by Sellers.
(a) Sellers shall use their reasonable efforts to effect the
transactions contemplated by this Agreement in accordance with the Scheduling
Order and the Approval Order.
(b) Except for actions contemplated by Section 5.3(e), from and after
the date hereof, Sellers shall not take any action, or fail to take any action,
which action or failure to act would reasonably be expected to (i) prevent or
impede the consummation of the transactions contemplated by this Agreement in
accordance with the terms of this Agreement; or (ii) result in (A) the reversal,
avoidance, revocation, vacating or modification (in any manner that would
reasonably be expected to materially and adversely affect Purchaser's rights
hereunder), or (B) the entry of a stay pending appeal, in each of cases (A) and
(B), of the Scheduling Order or the Approval Order or any separate order entered
pursuant to Section 105, 363, 365, or other section of the Bankruptcy Code
relating to the subject matter hereof.
(c) From and after the Closing Date, Sellers shall promptly provide
to Purchaser copies of all motions,
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orders, briefs, hearing transcripts, reports and other pleadings filed in the
Bankruptcy Court or in related court proceedings received or filed by Seller
after the date hereof, except to the extent such motions, orders, briefs,
hearing transcripts, reports and pleadings are publicly available via the
Internet.
Section 5.5 Reasonable Best Efforts. Sellers and Purchaser will
cooperate and use their respective reasonable best efforts to fulfill the
conditions precedent to the other party's obligations hereunder, including
securing as promptly as practicable all consents, approvals, waivers and
authorizations required in connection with the Transaction. Purchaser and
Sellers will promptly file documentary materials required by the U.S. Antitrust
Laws and any other Laws and promptly file any additional information requested
as soon as practicable after receipt of such request thereof.
Section 5.6 Tax Matters.
(a) Purchaser shall pay all use, conveyance, stamp duty, transfer,
gain, sales, registration, recording or other similar fees and taxes ("Transfer
Taxes"), if any, imposed and required to be paid as a result of the transactions
contemplated herein on or before the due date of such taxes, returns or filings.
Purchaser and Seller will cooperate and use all commercially reasonable efforts
to minimize such Transfer Taxes;
(b) Purchaser will retain a qualified appraiser for purposes of
allocating the Purchase Price among the Transferred Assets for purposes of
Section 1060 of the Code using the method set forth in Section 1060. The
determinations of such appraiser will be binding upon Purchaser and Sellers.
Any adjustment to the Purchase Price required by this Agreement shall be
allocated on a pro rata basis among the Transferred Assets;
(c) Purchaser and Sellers will cooperate in reporting the federal,
state, local and other Tax consequences of the transactions contemplated herein.
Sellers shall not take any Tax position contrary to that taken by Purchaser;
(d) The obligations set forth in this Section 5.6 shall be
unconditional and absolute and shall remain in effect until 30 days following
the expiration of the applicable statutes of limitation (including waivers and
extensions thereof) for the taxable year or period at issue.
Section 5.7 Compliance with WARN, etc. Sellers shall not prior to
the Closing Date effectuate a "plant
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closing" or "mass layoff", as those terms are defined in WARN, affecting any of
the Sellers' employees and requiring a notice to employees pursuant to WARN,
without notifying Purchaser in advance.
Section 5.8 Further Assurances. From time to time after the Closing
Date, Purchaser and Sellers each shall promptly execute, acknowledge and deliver
any other assurances or documents reasonably requested by the other party hereto
and necessary for the other party hereto to satisfy its obligations hereunder or
to obtain the benefits contemplated hereby.
Section 5.9 Conduct of Environmental Investigations. Purchaser shall
be permitted to conduct such investigation relating to the environmental
compliance of properties subject to Assigned Leases, unless the terms of any
such lease prohibit such an investigation, as it shall determine and Sellers
shall cooperate with Purchaser and its representatives in connection with such
investigation.
Section 5.10 Non-Solicitation. Sellers agree that they will not
directly or indirectly prior to the second anniversary of the Closing Date,
induce, encourage, or solicit any of their employees or former employees to whom
Purchaser offers employment with notice to Seller to reject Purchaser's offer of
employment or leave such employment, or to accept any other position or
employment.
Section 5.11 Store Closures; Use of Name. Sellers agree that all of
the Closed Retail Locations have been or will be closed prior to the Closing
Date and Sellers will reject or assume and assign all of the leases relating to
such locations. Any and all liability arising out of, in connection with, or
related to such rejection or sale shall be the sole responsibility of Sellers.
Sellers recognize and agree that they are transferring to Purchaser all right to
use and authorize the use of the name "Nobody Beats the Wiz" and all derivatives
thereof and Sellers agree that after the Closing Date they will not (i) make any
use of such name or a trade name or trade mark or otherwise in connection with
the sale of merchandise, (ii) reopen or operate any retail establishment for the
sale of any products of a type formerly sold as part of the Business following
the sale or liquidation of the Excluded Assets, or (iii) sell any products of a
type formerly sold as part of the Business in any manner by reference to the
fact that such merchandise may have once been owned by the Business. Sellers
will change their names promptly after the Closing to names not including the
name "Wiz" or any derivation thereof.
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Section 5.12 Office Space. Purchaser shall provide, until the
termination of all bankruptcy proceedings related to Sellers, office space at
Purchaser's primary office for the Business and reasonably adequate to
accommodate up to six individuals designated by Sellers from time to time.
Sellers shall not be obligated to pay any rent for such office space. Sellers
will make their own arrangements for telephone and utilities. If Sellers are
unable to do so, Purchaser will provide telephone and utilities but only if
Sellers provide cash deposits therefor, which Buyer, in its sole discretion,
deems adequate to cover any such charges and reimburses Purchaser within 10 days
of Purchaser delivering to Seller an invoice for such charges.
Section 5.13 Covered Employees. Sellers shall deliver to Purchaser
not later than February 2, 1998 a Schedule setting forth a listing of each
employee of the Company and each employee's accrued vacation, sick leave and
personal floating holidays all as of a recent date. Purchaser shall deliver to
Sellers, not later than three business days following the delivery by Sellers,
such list of the employees to whom Purchaser intends to offer employment as of
the Closing Date. Purchaser shall not be bound to offer employment to any such
person.
Section 5.14 Insurance. At or prior to the Closing, Sellers shall
cause Purchaser to be named as an additional named insured on all policies of
insurance maintained by Sellers, at no cost to Sellers (other than any policies
which Purchaser agrees in writing to except from this Section 5.14 and any
policies which have been or which are cancelled). Notwithstanding the foregoing
each Seller reserves the right to terminate any or all of such policies at any
time.
ARTICLE VI
CONDITIONS TO CLOSING; REMEDIES
Section 6.1 Conditions to the Obligations of Purchaser and Seller.
The obligations of the parties hereto to effect the Closing are subject to the
satisfaction (or waiver without further notice to parties in interest or
approval by the Court) prior to the Closing of the following conditions:
(a) HSR Act and Other Antitrust Laws. All filings under Antitrust
Laws and similar Laws shall have been made and any required waiting period under
such Laws applicable to the Transaction shall have expired or been earlier
terminated.
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(b) No Injunctions. No court or governmental authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, or non-appealable judgment, decree, injunction or
other order that is in effect on the Closing Date and prohibits the consummation
of the Closing or imposes material limitations on Purchaser's ownership or
operation of the Transferred Assets.
(c) Consents, etc. Each consent, approval, waiver or authorization
required to be obtained by any Seller or Purchaser for, or notice or filing
required to be given by any Seller or Purchaser to or made by any Seller or
Purchaser with, any federal, state or local governmental authority or other
Person in connection with, the execution, delivery and performance by any Seller
or Purchaser of this Agreement shall have been obtained except for any consent,
approval, waiver, authorization, notice or filing required for the transfer
hereunder of any asset other than Assigned Leases, the failure of which to
obtain will not result in a Material Adverse Effect.
Section 6.2 Conditions to the Obligations of Purchaser. The
obligation of Purchaser to effect the Closing is subject to the satisfaction (or
waiver without further notice to parties in interest or approval by the Court)
prior to the Closing of the following conditions:
(a) Covenants. The covenants and agreements of Sellers to be
performed on or prior to the Closing shall have been duly performed in all
material respects, and Purchaser shall have received certificates to such effect
dated the Closing Date and executed by a duly authorized officer of each of the
Sellers.
(b) Approval Order. The Court shall have issued the Approval Order
on or before February 3, 1998 and the Approval Order shall not be subject to any
stay and either (i) shall have become final and nonappealable or (ii) shall
contain a finding that Purchaser is a good faith purchaser for value within the
meaning of Section 363(m) of the Bankruptcy Code.
Section 6.3 Conditions to the Obligations of Sellers. The obligation
of Sellers to effect the Closing is subject to the satisfaction (or waiver
without further notice to parties in interest or approval by the Court) prior to
the Closing of the following conditions:
(a) Covenants. The covenants and agreements of Purchaser to be
performed on or prior to the Closing shall have been duly performed, in all
material respects, and Sellers shall have received a certificate to such effect
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dated the Closing Date and executed by a duly authorized officer of Purchaser.
(b) The Court shall have issued the Approval Order and the Approval
Order shall not be subject to any stay.
(c) Prior to or contemporaneous with the Closing, there shall have
been contributed to Purchaser as equity capital (excluding any funds comprising
the Purchase Price) an amount not less than $40,000,000.
Section 6.4 Survival. The covenants of Sellers and Purchaser in this
Agreement shall survive the Closing.
Section 6.5 Sole Remedy. Each party shall be answerable (at law or
in equity) in damages or for specific performance for any breach of any covenant
herein. The rights and remedies expressly provided in this Agreement shall
constitute the sole and exclusive basis for and means of recourse between the
parties with respect to the subject matter hereof and Purchaser and Sellers each
expressly waives any and all other rights or causes of action it may have
against the other party now or in the future under any Law. Sellers recognize
and agree that Purchaser is acting on its own behalf in entering into this
Agreement. No Affiliate of Purchaser (including without limitation Cablevision)
or of any Seller (other than any other Seller) shall have any liability
hereunder whether as a primary obligor, guarantor or otherwise and any claim in
respect thereof is hereby waived and released by Sellers and Purchaser,
respectively.
Section 6.6 RAS. Notwithstanding anything herein to the contrary,
neither RAS Management Advisors, Inc. ("RAS") nor any of its officers,
directors, shareholders, employees, agents, representatives or independent
contractors shall have any liability whatsoever to any party for any act,
omission or representations related to or arising from either the transactions
contained in or contemplated by this Agreement or the retention of RAS by
Sellers as Chief Restructuring Officer, pursuant to an order of the Bankruptcy
Court, dated December 16, 1997.
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ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by mutual agreement of Purchaser and Sellers;
(b) by Sellers on or prior to February 3, 1998 if a Higher and Better
Offer is received for the Transferred Assets. Sellers' right to terminate
pursuant to this Section 7.1(b) shall expressly be conditioned upon acceptance
and approval by the Court of such Higher and Better Offer. Sellers' right to
terminate pursuant to this Section 7.1(b) shall also expressly be conditioned
upon Sellers' payment to Purchaser at the time of approval of the Higher and
Better Offer of the sum of (i) all amounts paid, advanced or contributed to any
Seller by Purchaser (including the secured loans made by Purchaser pursuant to
Section 2.6(b) and the inventory loans made by Purchaser pursuant to
Section 2.6(c), respectively, and without regard to any priority or
subordination agreements governing such payments, advances or contributions),
(ii) $2,000,000 as a termination fee (the "Termination Fee") and (iii) one-half
of the RGIS Payment (the "Deposit");
(c) by Purchaser at any time up to and including the Closing Date;
provided, that the Secured Loans made by Purchaser pursuant to Section 2.6(b)
will be forgiven in full if Purchaser terminates this Agreement pursuant to this
Section 7.1(c) after February 10, 1998 (other than a termination as a result of
(i) failure to receive HSR Act clearance by February 17, 1998 or (ii) Sellers'
failure to comply with Article V hereof which prevents the consummation of the
Transaction or materially and adversely affects the value of the Transferred
Assets).
(d) by the Sellers if Purchaser fails to make any Secured Loans in
the amount and at the times provided in Section 2.6(b);
(e) by Sellers if the Closing Date shall not have occurred on or
prior to February 10, 1998 and HSR Act clearance has been obtained on or prior
to February 9, 1998 or (ii) on or prior to February 17, 1998; provided,
however, that the right to terminate under this Section 7.1 (e) shall not be
available to Sellers if the failure of the Closing Date to occur on or before
such date was caused by or resulted from (i) a breach by a Seller of the
provisions of Section 5.5, (ii) a failure by Sellers to deliver the Sellers'
deliveries under Section 2.11 or (iii) affirmative
38
<PAGE>
acts by a Seller constituting a breach of a covenant of Seller hereunder.
The date on which this Agreement is terminated is referred to as the
"Termination Date".
Section 7.2 Effect of Termination. In the event of the termination
of this Agreement in accordance with Section 7.1, this Agreement shall
thereafter become void and have no effect, and no party hereto shall have any
liability to the other party hereto or their respective Affiliates, directors,
officers or employees, except for the obligations of the parties hereto
contained in this Section 7.2 and in the third sentence of Section 2.7(a) and
Sections 7.1(b), 8.1, 8.2, 8.4, 8.6, 8.7, 8.8, 8.9 and 8.11 hereof (and any
related definitional provisions set forth in Article I)), and except that
nothing in this Section 7.2 shall relieve any party from liability for any
breach of this Agreement that arose prior to such termination.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices. All notices, consents or other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended, if delivered
by registered or certified mail, return receipt requested, or by a national
courier service, or if sent by telecopier, provided that the telecopy is
promptly confirmed by telephone confirmation thereof, to the person at the
address set forth below, or such other address as may be designated in writing
hereafter, in the same manner, by such person:
To Purchaser:
CABLEVISION ELECTRONICS
INVESTMENTS, INC.
One Media Crossways
Woodbury, New York 11797
Telephone: (516) 364-8450
Telecopy: (516) 396-8768
Attn: General Counsel
39
<PAGE>
With a copy to:
SULLIVAN & CROMWELL
125 Broad Street
New York, New York 10004
Telephone: (212) 558-4000
Telecopy: (212) 558-3588
Attn: John P. Mead
To Sellers:
NOBODY BEATS THE WIZ, INC.
1300 Federal Road
Carteret, NJ 07008
Telephone: (732) 602-1000
Telecopy: (732) 602-8971
Attn: Richard Sebastiao
With a copy to:
KRAMER, LEVIN, NAFTALIS & FRANKEL
919 Third Avenue
New York, NY 10022
Telephone: (212) 715-9100
Telecopy: (212) 715-8000
Attn: Kenneth H. Eckstein
Saul E. Burian
and
TRAUB, BONACQUIST & FOX LLP
489 Fifth Avenue
New York, New York 10017
Telephone: (212) 476-4770
Telecopy: (212) 476-4787
Attn: Paul Traub
Michael S. Fox
Section 8.2 Amendment; Waiver. Any provision of this Agreement may
be amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Purchaser and each of the Sellers, or in
the case of a waiver, by the party against whom the waiver is to be effective.
No failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
40
<PAGE>
Section 8.3 No Assignment or Benefit to Third Parties. No party to
this Agreement may assign any of its rights or delegate any of its obligations
under this Agreement, by operation of law or otherwise, without the prior
written consent of the other party hereto provided that the rights of Sellers
hereunder may be assigned to a successor or designee of Sellers after Closing.
Prior to the Closing, Purchaser may assign its rights and obligations to another
wholly-owned subsidiary of Cablevision . After the Closing, Purchaser may assign
all of its rights and obligations to any successor to all or substantially all
of its assets, whether by Merger or otherwise. Nothing in this Agreement,
express or implied, is intended to confer upon any Person other than Purchaser,
Sellers or their respective successors or permitted assigns, any rights or
remedies under or by reason of this Agreement.
Section 8.4 Entire Agreement. This Agreement (including all
Schedules and Exhibits hereto) contains the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written, with respect to such matters.
The Confidentiality Agreements shall be deemed to be terminated in all respects
as of the Closing.
Section 8.5 Fulfillment of Obligations. Any obligation of any party
to any other party under this Agreement, which obligation is performed,
satisfied or fulfilled by an Affiliate of such party, shall be deemed to have
been performed, satisfied or fulfilled by such party.
Section 8.6 Public Disclosure. Notwithstanding anything herein to
the contrary, each of the parties to this Agreement hereby agrees with the other
party hereto that, except as may be required to comply with the requirements of
any applicable Law, and the rules and regulations of each stock exchange upon
which the securities of one of the parties is listed, or as the Sellers'
reasonably believe is necessary or appropriate in connection with the Bankruptcy
Case no press release or similar public announcement or communication shall
ever, whether prior to or subsequent to the Closing, be made or caused to be
made concerning the execution or performance of this Agreement unless
specifically approved in advance by both parties hereto.
Section 8.7 Return of Information. If for any reason whatsoever the
transactions contemplated by this Agreement are not consummated, Purchaser shall
promptly return to Sellers all Books and Records furnished by Sellers, the
Business or any of their respective agents, employees, or representatives
(including all copies, if any, thereof), and shall not use or disclose the
information
41
<PAGE>
contained in such Books and Records for any purpose or make such information
available to any other entity or person.
Section 8.8 Expenses. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be borne by the party incurring
such expenses.
Section 8.9 Schedules. The disclosure of any matter in any schedule
to this Agreement shall be deemed to be a disclosure for all purposes of this
Agreement to which such matter could reasonably be expected to be pertinent, but
shall expressly not be deemed to constitute an admission by Sellers or Purchaser
or to otherwise imply, that any such matter is material for the purposes of this
Agreement.
Section 8.10 Bulk Sales. The parties agree to waive compliance with
Article 6 of the Uniform Commercial Code as adopted in each of the jurisdictions
in which any of the Transferred Assets are located to the extent, if any, that
such Article is applicable to the transactions contemplated hereby.
SECTION 8.11 GOVERNING LAW; SUBMISSION TO JURISDICTION. THE
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW. EACH PARTY HERETO AGREES THAT IT SHALL BRING
ANY ACTION OR PROCEEDING IN RESPECT OF ANY CLAIM ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY THIS
AGREEMENT, WHETHER IN TORT OR CONTRACT OR AT LAW OR IN EQUITY, EXCLUSIVELY IN
THE COURT AND, SOLELY IN CONNECTION WITH CLAIMS ARISING UNDER THIS AGREEMENT OR
THE TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY THIS AGREEMENT: (i)
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURT, (ii) WAIVES ANY
OBJECTION TO VENUE IN ANY SUCH ACTION OR PROCEEDING IN THE COURT, (iii) WAIVES
ANY OBJECTION THAT THE COURT IS AN INCONVENIENT FORUM OR DOES NOT HAVE
JURISDICTION OVER ANY PARTY HERETO AND (iv) AGREES THAT SERVICE OF PROCESS UPON
SUCH PARTY IN ANY SUCH ACTION OR PROCEEDING SHALL BE EFFECTIVE IF NOTICE IS
GIVEN IN ACCORDANCE WITH SECTION 8.1 OF THIS AGREEMENT.
Section 8.12 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and all of which
shall constitute one and the same Agreement.
Section 8.13 Headings. The heading references herein and the table
of contents hereto are for convenience purposes only, do not constitute a part
of this Agreement
42
<PAGE>
and shall not be deemed to limit or affect any of the provisions hereof.
43
<PAGE>
IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the date first written above.
THE WIZ, INC.
By: RAS Management Advisors,
Inc.
In its capacity as Chief
Restructuring Officer
By: /s/ Richard Sebastiao
------------------------
President
THE WIZ DISTRIBUTORS, LTD.
NOBODY BEATS THE WIZ, INC.
THE WIZ OF PATCHOGUE, INC.
THE WIZ OF NOHO, INC.
THE WIZ OF POUGHKEEPSIE, INC.
THE WIZ OF NORWALK, INC.
THE WIZ OF PRINCETON, INC.
THE WIZ OF NYACK, INC.
THE WIZ OF QUEENS BOULEVARD,
INC.
THE WIZ OF OLD BRIDGE, INC.
NBTW LEASING, INC.
THE WIZ OF RARITAN, INC.
THE WIZ DISTRIBUTORS OF 106TH
STREET, INC.
THE WIZ OF ROCKVILLE, INC.
THE WIZ DISTRIBUTORS OF JAMAICA,
INC.
THE WIZ OF ROXBURY, INC.
THE WIZ DISTRIBUTORS OF FLUSHING
INC.
THE WIZ OF SALEM, INC.
THE WIZ DISTRIBUTORS OF NEW
JERSEY, INC.
THE WIZ OF SAYVILLE, INC.
THE WIZ DISTRIBUTORS OF NEW
YORK, INC.
THE WIZ OF SAUGUS, INC.
THE WIZ OF 15TH STREET, INC.
THE WIZ OF SECAUCUS, INC.
THE WIZ OF 45TH STREET, INC.
THE WIZ OF SPRING VALLEY, INC.
THE WIZ OF 57TH STREET, INC.
THE WIZ OF SPRINGFIELD, INC.
THE WIZ OF 86TH STREET, INC.
<PAGE>
THE WIZ OF STATEN ISLAND, INC.
THE WIZ OF 125TH STREET, INC.
THE WIZ OF STEINWAY STREET,
INC.
THE WIZ OF ALBANY, INC.
THE WIZ OF SYRACUSE INC.
THE WIZ OF BAILEY'S
CROSSROADS, INC.
THE WIZ OF THIRD AVENUE, INC.
THE WIZ OF BAY PARKWAY, INC.
THE WIZ OF TOMS RIVER, INC.
THE WIZ OF BAY PLAZA, INC.
THE WIZ OF UNION SQUARE, INC.
THE WIZ OF BAY RIDGE, INC.
THE WIZ OF UTICA, INC.
THE WIZ OF BRICK, INC.
THE WIZ OF VALLEY STREAM, INC.
THE WIZ OF BROADWAY, INC.
THE WIZ OF WAYNE, INC.
THE WIZ OF CARLE PLACE, INC.
THE WIZ OF WILMINGTON, INC.
THE WIZ OF CARTERET, INC.
THE WIZ OF WONDER PLAZA, INC.
THE WIZ OF D.C., INC.
THE WIZ OF YORKTOWN, INC.
THE WIZ OF DANBURY, INC.
THE WIZ DIRECT, INC.
THE WIZ OF EAST BRUNSWICK,
INC.
THE WIZ OF EATONTOWN, INC.
THE WIZ OF EMPIRE STATE, INC.
THE WIZ OF FAIRFAX, INC.
THE WIZ OF FIFTH AVENUE, INC.
THE WIZ OF FLATBUSH, INC.
THE WIZ OF FLATLANDS, INC.
THE WIZ OF FORDHAM ROAD, INC.
THE WIZ OF FRAMINGHAM, INC.
THE WIZ OF FULTON STREET, INC.
THE WIZ OF GOTHAM, INC.
THE WIZ OF GREENWICH VILLAGE,
INC.
THE WIZ OF HAMILTON, INC.
THE WIZ OF HERALD SQUARE, INC.
THE WIZ OF HICKSVILLE, INC.
THE WIZ OF HOLMDEL, INC.
THE WIZ OF HOLYOKE, INC.
THE WIZ OF JERSEY CITY, INC.
THE WIZ OF KINGS PLAZA, INC.
THE WIZ OF LAKE GROVE, INC.
THE WIZ OF LIVINGSTON, INC.
THE WIZ OF MANHASSET, INC.
THE WIZ OF MARLBOROUGH, INC.
THE WIZ OF MARYLAND, INC.
<PAGE>
THE WIZ OF MENLO PARK, INC.
THE WIZ OF MERIDEN, INC.
THE WIZ OF MIDDLETOWN, INC.
THE WIZ OF MIDTOWN, INC.
THE WIZ OF MILFORD, INC.
THE WIZ OF MONMOUTH, INC.
THE WIZ OF NEWINGTON, INC.
THE WIZ OF PARAMUS, INC.
NAMRON CONSTRUCTION, INC.
By: RAS Management Advisors,
Inc.
In its capacity as Chief
Restructuring Officer
By: /s/ Richard Sebastiao
---------------------
President
<PAGE>
CABLEVISION ELECTRONICS
INVESTMENTS, INC.
By: /s/ Marc Lustgarten
---------------------
Name: Marc Lustgarten
Title: Vice Chairman
<PAGE>
In consideration of the parties
execution and delivery of this
Agreement, each of the undersigned
consent to the terms of this
Agreement and to support the
transaction contemplated hereby.
CONGRESS FINANCIAL CORPORATION
By: /s/ Andrew Robin
----------------------
Name: Andrew Robin
Title: Senior Vice
President
PARAGON CAPITAL L.L.C.
By: /s/ Stewart L. Cohen
----------------------
Name: Stewart L. Cohen
Title: Chief Executive
Officer
B-III CAPITAL PARTNERS, L.P.
By: /s/ Stewart L. Cohen
----------------------
Name: Stewart L. Cohen
Title: Agent
THE OFFICIAL COMMITTEE OF
UNSECURED CREDITORS OF THE
WIZ, INC.
By: /s/ Michael S. Fox
----------------------
Name: Michael S. Fox
Title: Counsel
