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)
March 5, 1997
J. BAKER, INC.
(Exact name of Registrant as Specified in Charter)
Massachusetts 0-14681 04-2866591
------------- ------- -----------
(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification number)
555 Turnpike Street, Canton, Massachusetts 02021
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (617) 828-9300
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On March 5, 1997, the Company sold substantially all of the assets of
its Shoe Corporation of America ("SCOA") division to an entity formed by CHB
Capital Partners of Denver, Colorado and Dennis B. Tishkoff, President of SCOA
and certain members of SCOA management (collectively "CHB"), for net cash
proceeds of approximately $40,000,000. The transaction involved the transfer to
CHB of the SCOA division's inventory, fixed assets, intellectual property and
license agreements for the various department and specialty store chains
serviced by SCOA and the assumption by CHB of certain liabilities of the SCOA
division.
On March 11, 1997, the Company completed the sale of its Parade of
Shoes division to Payless ShoeSource, Inc. of Topeka, Kansas ("Payless") for net
cash proceeds of approximately $20,000,000. The transaction involved the
transfer of the Parade of Shoes store leases, inventory, fixed assets and
intellectual property to Payless and the assumption by Payless of certain
liabilities of the Parade of Shoes division.
The net cash proceeds received by the Company from both the SCOA and
Parade of Shoes transactions, after funding of escrow indemnity accounts and
payment of related expenses and payables, were approximately $60 million and
were used to pay down the Company's bank debt pursuant to the Revolving Credit
and Loan Agreement between J. Baker, Inc., JBI, Inc. and Fleet National Bank, as
agent (the "Credit Agreement"). Upon consummation of the aforementioned
transactions, the Company's aggregate commitment amount under the Credit
Agreement was reduced from $205 million to $145 million.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits:
(a) Not applicable.
(b) Pro Forma Financial Information: The Forma Financial Information
required by Article 11 of Regulation S-X will be filed by amendment
within the time period set forth in Item 7 of Form 8-K.
(c) Exhibits:
(2.1) Asset Purchase Agreement, dated as of March 5, 1997 by and
between Shoe Corporation of America, Inc. and JBI, Inc.
Schedules to the Asset Purchase Agreement have been omitted.
The Company agrees to furnish supplementally a copy of any
Schedule to the Commission upon request.
(2.2) Asset Purchase Agreement dated as of January 13, 1997 between
Payless ShoeSource, Inc. and JBI, Inc. and J. Baker, Inc..
Schedules to the Asset Purchase Agreement have been omitted.
The Company agrees to furnish supplementally a copy of any
Schedule to the Commission upon request.
<PAGE>
SIGNATURES
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.
J. BAKER, INC.
By:/s/ Alan I. Weinstein
-----------------------------
Alan I. Weinstein
President and Chief Executive Officer
Date: Canton, Massachusetts
March 20, 1997
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------------------------------
EXHIBITS
Filed with
Current Report on Form 8-K
of
J. BAKER, INC.
555 Turnpike Street
Canton, MA 02021
Dated March 20, 1997
<PAGE>
INDEX TO EXHIBITS
Exhibit
Numbers
(2.1) Asset Purchase Agreement, dated as of March 5, 1997 by *
and between Shoe Corporation of America, Inc. and JBI, Inc.
Schedules to the Asset Purchase Agreement have been omitted.
The Company agrees to furnish supplementally a copy of
any Schedule to the Commission upon request.
(2.2) Asset Purchase Agreement dated as of January 13, 1997 *
between Payless ShoeSource, Inc. and JBI, Inc. and J.
Baker, Inc.. Schedules to the Asset Purchase Agreement
have been omitted. The Company agrees to furnish
supplementally a copy of any Schedule to the Commission
upon request.
* Enclosed herein
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
dated March 5, 1997
between
Shoe Corporation of America, Inc.
and
JBI, Inc.
<PAGE>
Page
Table of Contents
<TABLE>
<S> <C>
Page
1. Certain Definitions......................................................................................1
2. Purchase and Sale........................................................................................7
2.1 Covenant of Purchase and Sale..........................................................7
2.2 Excluded Assets........................................................................7
2.3 Assumed Liabilities....................................................................7
2.4 Consideration for Assets...............................................................7
2.5 Payment of Cash Purchase Price.........................................................8
2.6 Determination of Cash Purchase Price...................................................9
2.7 Allocation of Purchase Price..........................................................11
2.8 Reimbursement for Letters of Credit and Banker Acceptances............................11
2.9 Winkelmans............................................................................11
2.10 Post-Effective Time Transactions......................................................12
2.11 Lender Deposits.......................................................................12
3. Buyer's Representations and Warranties..................................................................12
3.1 Organization of Buyer.................................................................12
3.2 Authority.............................................................................13
3.3 No Conflict; Required Consents........................................................13
3.4 Acknowledgment Regarding Access to Certain Information................................13
3.5 HSR Act...............................................................................13
4. Seller's Representations and Warranties.................................................................13
4.1 Organization and Qualification of Seller..............................................13
4.2 Authority.............................................................................14
4.3 No Conflict; Required Consents........................................................14
4.4 Assets; Title, Condition, and Sufficiency.............................................14
4.5 Real Property.........................................................................15
4.6 Acquired Contracts....................................................................15
4.7 Employment Matters....................................................................16
4.8 Employee Benefits.....................................................................16
4.9 Litigation............................................................................17
4.10 Financial Statements..................................................................17
4.11 Absence of Certain Changes or Events..................................................18
4.12 Tax Returns; Other Reports............................................................18
4.13 Compliance with Legal Requirements; Business Permits..................................19
4.14 Intellectual Property.................................................................19
4.15 Environmental.........................................................................19
4.16 Books and Records.....................................................................20
4.17 Accounts Receivable...................................................................20
4.18 Inventory.............................................................................21
4.19 Warranties and Returns................................................................21
4.20 Customers and Suppliers...............................................................21
4.21 Product Liability Claims..............................................................21
4.22 Insurance.............................................................................21
5. Covenants...............................................................................................22
5.1 Effect of Investigations..............................................................22
5.2 Confidentiality.......................................................................22
5.3 Title Insurance Policy and Survey.....................................................23
5.4 Employee Matters......................................................................23
5.5 Bulk Sales............................................................................24
5.6 Transfer Taxes........................................................................24
5.7 Underground Storage Tanks.............................................................24
6. Closing.................................................................................................25
6.1 Closing; Time and Place...............................................................25
6.2 Seller's Obligations..................................................................26
6.3 Buyer's Obligations...................................................................27
6.4 Further Assurances....................................................................28
7. Indemnification.........................................................................................28
7.1 Indemnification by Seller.............................................................28
7.2 Indemnification by Buyer..............................................................28
7.3 Procedure for Indemnified Third Party Claim...........................................29
7.4 Determination of Indemnification Amounts and Related Matters..........................29
7.5 Survival; Time and Manner of Certain Claims...........................................30
7.6 Disbursement of Indemnity Escrow Deposit..............................................31
7.7 Other Indemnification.................................................................31
8. Miscellaneous Provisions................................................................................31
8.1 Expenses..............................................................................31
8.2 Brokerage.............................................................................31
8.3 Waivers...............................................................................31
8.4 Notices...............................................................................32
8.5 Entire Agreement; Amendments..........................................................33
8.6 Binding Effect; Benefits..............................................................33
8.7 Headings, Schedules, and Exhibits.....................................................33
8.8 Counterparts..........................................................................34
8.9 Governing Law.........................................................................34
8.10 Third Parties; Joint Ventures.........................................................34
8.11 Construction..........................................................................34
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made and entered into as
of March 5, 1997, by and between Shoe Corporation of America, Inc., a Delaware
corporation ("Buyer"), and JBI, Inc., a Massachusetts corporation ("Seller").
Recitals
Seller owns and operates its divisional business known as Shoe
Corporation of America (the "Business"). Buyer desires to purchase and Seller
desires to sell substantially all of the assets of Seller used solely by Seller
in the Business.
Agreements
In consideration of the mutual covenants and promises stated in this
Agreement, Buyer and Seller agree as follows:
Certain Definitions.
As used in this Agreement, the following terms, whether in singular or
plural forms, shall have the following meanings:
"Acquired Contracts" means all Contracts, other than Business Permits,
pertaining solely to the ownership, operation and maintenance of the Assets or
the Business, but excluding any Excluded Assets.
"Adjustment Escrow Agreement" has the meaning given in Section 2.5.
"Adjustment Escrow Deposit" has the meaning given in Section 2.5.
"Adjustment Liabilities" means the liabilities of Seller as of the
Effective Time, relating solely to the Business, for or in respect of (i) trade
accounts payable, (ii) expenses accrued as of the Effective Time in the Ordinary
Course (but excluding expenses under Business Benefit Arrangements or otherwise
relating to obligations to Business Employees), and (iii) liabilities of Seller
to Business Employees that are hired by Buyer upon Closing, for earned but
unused vacation time as of the Effective Time.
"Affiliate" means with respect to any Person, any other Person
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
"Assets" means all properties, privileges, rights, interests and
claims, real and personal, tangible and intangible, of every type and
description that are owned, leased or held by Seller (which pertain solely to or
are used by Seller solely in connection with the Business), including but not
limited to Acquired Contracts, Business Permits, Personal Property, Intangibles,
Real Property and Inventory, but excluding any Excluded Assets.
"Assumed Liabilities" means only (i) Adjustment Liabilities, (ii) those
obligations and liabilities accruing after the Effective Time under the Acquired
Contracts that are described on Schedules to this Agreement, (iii) obligations
and liabilities under Acquired Contracts that are purchase orders and that are
described on Schedules to this Agreement or otherwise are assumed in writing by
Buyer, and (iv) liabilities and obligations arising out of the operation of the
Business after the Effective Time.
"Business" has the meaning given in the Recitals.
"Business Benefit Arrangement" has the meaning given in Section 4.8.
"Business Day" means any day other than Saturday, Sunday or a day on
which banking institutions in Denver, Colorado or Boston, Massachusetts are
required or authorized to be closed.
"Business Employees" has the meaning given in Section 4.7.
"Business Permits" has the meaning given in Section 4.13.
"Cash Purchase Price" has the meaning given in Section 2.4.
"Closing" has the meaning given in Section 6.1.
"Closing Date" means the date on which Closing occurs.
"Closing Payment" has the meaning given in Section 2.5.
"Contingent Amount Note" has the meaning given in Section 2.4.
"Contract" means any written contract, purchase order, mortgage, deed
of trust, bond, indenture, lease, license, note, franchise, certificate, option,
warrant, right, or other instrument, document, obligation, or agreement, and any
oral obligation, right, or agreement.
"Division Retail Value" means the amount stated as such in Seller's
price file which has been used to value the Inventory of the Business for book
purposes, and which has been maintained on a consistent basis over time.
"Effective Time" means 11:59 p.m., March 1, 1997, at the applicable
location.
"Encumbrance" means any security agreement, financing statement filed
with any Governmental Authority, conditional sale or other title retention
agreement, any lease, consignment or bailment given for purposes of security,
any lien, mortgage, indenture, pledge, option, encumbrance, adverse interest,
constructive trust or other trust, claim, attachment, exception to or defect in
title or other ownership interest (including but not limited to reservations,
rights of entry, possibilities of reverter, encroachments, easement,
rights-of-way, restrictive covenants, leases and licenses) of any kind, which
otherwise constitutes an interest in or claim against property, whether arising
pursuant to any Legal Requirement, Contract, or otherwise.
"Environmental Law" means any Legal Requirement relating to pollution
or protection of public health, safety or welfare or the environment, including
those relating to emissions, discharges, releases or threatened releases of
Hazardous Substances into the environment (including ambient air, surface water,
ground water or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and rules and regulations promulgated thereunder and published
interpretations with respect thereto.
"Escrow Agent" means National Bank of Columbus.
"Excluded Assets" means (i) Seller's rights under any Contract
governing or evidencing an obligation of Seller for borrowed money; (ii)
inventory, fixtures and other assets used by Seller solely in the operation of
its Mega Store; (iii) any inventory, fixtures and other assets used by Seller
solely in the operation of Seller's Casual Male business; (iv) any leasehold
improvements relating to stores that have been closed or with respect to which
the Business no longer is providing services; (v) any In-Store Inventory that is
not Good and Saleable; (vi) any accounts receivable that are more than thirty
days past due; (vii) all claims of Seller with respect to the Business that
arise out of or with respect to events (or periods or portions thereof)
occurring before the Effective Time (including but not limited to claims for
refunds of Taxes); (viii) all Business Permits that are not transferable; (ix)
any cash, cash equivalents, marketable securities, bank deposits and bank
accounts; (x) any Contracts that are buying agency agreements or employment
contracts (other than those described on Schedule 4.6) or Contracts that are the
subject of Buyer's reimbursement obligations under Section 2.8(b); and (xi) any
properties, privileges, rights, interests and claims that are owned, leased or
held by Seller but which do not pertain solely to, and are not used by Seller
solely in connection with, the Business.
"Financial Statements" has the meaning given in Section 4.10.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Good and Saleable" means, in respect of any Inventory, that such
Inventory has not been worn outside a store, and is not defective, damaged or
mismated.
"Governmental Authority" means the United States of America, any state,
commonwealth, territory, or possession thereof and any political subdivision or
quasi-governmental authority of any of the same, including but not limited to
courts, tribunals, departments, commissions, boards, bureaus, agencies,
counties, municipalities, provinces, parishes, and other instrumentalities.
"Hazardous Substance" means any pollutants, contaminants, chemicals,
toxic or hazardous substances, noxious substances or wastes which are defined or
listed in, or otherwise classified pursuant to, any Environmental Law, or
regulated by any Governmental Authority, including but not limited to: (a) oil,
petroleum or petroleum compounds (refined or crude); (b) flammable, explosive or
radioactive materials or substances; (c) asbestos in any form that is or could
become friable; and (d) polychlorinated biphenyls or any electrical equipment
which contains any oil or dielectic fluid containing polychlorinated biphenyls.
"Indemnity Escrow Agreement" has the meaning given in Section 2.5.
"Indemnity Escrow Deposit" has the meaning given in Section 2.5.
"In-Store Inventory" means Inventory that is located in any one of the
stores in which Seller operates the Business or in the Business' distribution
center, or is in-transit between any of those locations.
"Intellectual Property" means (i) trademarks, service marks, logos,
trade names, and (to the extent of Seller's interest therein) the rights to the
name "Shoe Corporation of America" and any derivatives thereof, together with
all goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, (ii) trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals), and (iii)
computer software (including data and related documentation).
"In-Transit Inventory" means Inventory for the Business that has been
shipped by any of the Business' suppliers but has not been received by Seller.
"Intangibles" means intangible assets, including but not limited to
accounts receivable, Intellectual Property, warranties and goodwill, if any.
"Inventory" means all tangible goods that would constitute inventory
under GAAP, including supplies located in the Business' distribution center.
"Judgment" means any judgment, writ, order, injunction, award, or
decree of any court, judge, justice, or magistrate, including any bankruptcy
court or judge, and any order of or by any Governmental Authority.
"Knowledge" of Seller means the actual knowledge of Alan I. Weinstein,
Philip G. Rosenberg, Mark T. Beaudouin, Dennis B. Tishkoff, Stuart Tishkoff,
Terry Moore, Joe O'Riordan, Mike Dervos and Allyn Jones.
"Landed Cost" means the amount stated on purchase orders in the "on
order" file maintained by Seller with respect to the Business on a consistent
basis during and since the end of the Business' 1997 fiscal year, comprised
generally of the first cost of Inventory, plus commissions, duties, freight,
royalties and miscellaneous costs such as (but not limited to) costs for
insurance and brokers.
"Legal Requirements" means any statute, ordinance, code or other law,
rule, regulation, order, requirement, or procedure enacted, adopted,
promulgated, applied, or followed by any Governmental Authority.
"Lender Deposits" has the meaning given in Section 2.4.
"Litigation" means any claim, action, suit, proceeding, arbitration,
investigation or hearing that could result in a Judgment.
"Losses" means any claims, losses, liabilities, damages, penalties,
costs, and expenses, including but not limited to interest which may be imposed
in connection therewith, and reasonable fees and disbursements of counsel and
other experts incurred in connection with any of the foregoing, or in connection
with enforcing any rights to indemnification under this Agreement with respect
to any of the foregoing.
"Material Adverse Effect" means (i) any Loss, or series of related
Losses, in the amount of $500,000 or more, (ii) any material adverse effect on
the ability of Seller or Buyer (as the context requires) to perform its
obligations under the Agreement, or (iii) any other material and adverse effect
on the operations, financial condition or prospects of the Business.
"Ordinary Course" means the ordinary course of the Business, consistent
with past practice.
"Permitted Encumbrances" means the following Encumbrances: (a) liens
for Taxes not yet due and payable; (b) zoning laws and ordinances and similar
Legal Requirements; (c) rights reserved to any Governmental Authority to
regulate the affected property; (d) as to Real Property, any easements,
rights-of-way, servitudes, permits, restrictions and minor imperfections or
irregularities in (or non-monetary Encumbrances upon) title which do not
individually or in the aggregate interfere in any material respect with the
right or ability to own, use or operate the Real Property or interfere with the
right or ability to convey good, marketable and indefeasible title to such Real
Property; (e) as to Acquired Contracts and Business Permits, restrictions in the
terms thereof; and (f) as to Assets leased by Seller, the interests therein of
the respective lessors (and any Person claiming by or through them); provided,
however; that Permitted Encumbrances do not include any item which reasonably
could be expected materially and adversely to affect the conduct of the Business
as currently conducted.
"Person" means any natural person, Governmental Authority, corporation,
general or limited partnership, joint venture, limited liability company, trust,
association, or unincorporated entity of any kind.
"Personal Property" means tangible personal property in whatever form
other than Inventory, including but not limited to fixtures, furniture, computer
hardware (but not computer software), equipment, motor vehicles, trailers, tools
and office supplies.
"Prime Rate" means the rate announced from time to time by American
National Bank and Trust Company of Chicago, as its prime rate for loans to
commercial customers.
"Real Property" has the meaning given in Section 4.5.
"Schedule" means a portion of the letter from Seller to Buyer dated as
of the date of this Agreement, each of which portions discloses exceptions to
representations and warranties of Seller stated in this Agreement and is
designated with a number corresponding to the number of the Section in which
such representations and warranties are stated.
"Taxes" means all levies and assessments of any kind or nature imposed
by any Governmental Authority, including but not limited to all income, sales,
use, ad valorem, value added, franchise, severance, net or gross proceeds,
withholding, payroll, employment, excise, or property taxes, together with any
interest thereon and any penalties, additions to tax, or additional amounts
applicable thereto.
"Title Policy" has the meaning given in Section 5.3.
"Transaction Documents" means all instruments and documents executed
and delivered by Buyer or Seller or any officer, director, or Affiliate of
either of them in connection with this Agreement or the transactions
contemplated hereby.
"Transition Services Agreement" has the meaning given in Section 6.2.
.. Purchase and Sale
Covenant of Purchase and Sale. Subject to the terms and conditions set
forth in this Agreement, at Closing Seller shall convey, assign, and transfer to
Buyer, and Buyer shall acquire from Seller, for the Purchase Price, free and
clear of all Encumbrances except Permitted Encumbrances, all of Seller's rights,
titles and interests in the Assets.
. Notwithstanding the provisions of Section 2.1, the Assets shall not
include any of the Excluded Assets, all rights, titles and interests in which
shall be retained, or not transferred, by Seller.
. At Closing Buyer shall assume, and from and after Closing shall pay,
discharge and perform when due the Assumed Liabilities. Except only for Assumed
Liabilities, Buyer shall not assume, and (subject to Section 2.10) shall not
have any responsibility for, any liabilities or obligations of Seller, including
but not limited to liabilities or obligations associated with Excluded Assets.
. In consideration of the sale of the Assets to Buyer by Seller, Buyer
shall (i) execute and deliver to Seller a promissory note in the form of Exhibit
2.4 (the "Contingent Amount Note") and (ii) pay to Seller an amount (the "Cash
Purchase Price") equal to the sum of the following amounts (calculated without
duplication of any Asset or item in more than one of the following paragraphs
(a) through (l)):
100 percent of the book value of those Assets that constitute Personal
Property other than fixed assets as of the Effective Time, determined in
accordance with GAAP;
(1) plus fifty percent of the Division Retail Value of all
Assets that constitute Good and Saleable In-Store Inventory as of the Effective
Time (determined on the basis of the physical inventory of In-Store Inventory
conducted by Seller commencing December 26, 1996, adjusted to reflect operations
of the Business from completion thereof to Closing);
(2) plus 100 percent of all deposits and other payments made
(whether by wire transfers, letters of credit which have been drawn upon,
bankers' acceptances or otherwise) with respect to In-Transit Inventory, as of
the Effective Time, if and to the extent such amounts would be included in the
Landed Cost thereof, plus 100% of the interest on such bankers' acceptances;
(3) plus seventy-eight percent of the book value of all Assets
that are fixed assets (including but not limited to the Real Property) as of the
Effective Time, determined in accordance with GAAP;
(4) plus 100 percent of the face amount as of the
Effective Time of all accounts receivable included in the Assets;
(5) plus 100 percent of all prepaid expenses of the Business
as of the Effective Time, as determined in accordance with GAAP, including but
not limited to those described on Exhibit 2.4, if and to the extent Buyer will
have the benefit thereof after the Effective Time;
(6) plus 100 percent of the amount of the Businesses' security
deposits under any leases of real or personal property included in Acquired
Contracts, if and to the extent Buyer will have the benefit of such security
deposits after the Effective Time;
(7) plus 100 percent of any amounts actually paid by Seller
pursuant to paragraph 5 of Part II of the letter of intent dated November 13,
1996, among Seller, CHB Capital Partners and Dennis B. Tishkoff, consisting of
(A) $50,000 paid to Fleet Bank, (B) $50,000 paid to American National Bank and
Trust Company of Chicago, (C) $10,000 paid to Bank One, and (D) $15,000 paid to
Rice Sangalis Toole & Wilson (collectively, the "Lender Deposits").
(8) less 100 percent of the Adjustment Liabilities,
determined in accordance with GAAP (to the extent GAAP is applicable);
(9) less forty-one percent of the original prices paid by the
Business' retail customers with respect to all of the Business' merchandise that
(A) is sold prior to the Effective Time but is returned during the fifteen days
immediately following the Closing Date, and (B) promptly thereafter is delivered
to Seller in Canton, Massachusetts;
(10) less the aggregate amount of Seller's liability as of the
Effective Time in respect of bankers' acceptances relating to In-Store and
In-Transit Inventory, determined in accordance with GAAP; and
(11) less $4,000,000.
Payment of Cash Purchse Price. At Closing, Buyer shall pay the Cash
Purchase Price as estimated in accordance with paragraph 2.6 (the "Estimated
Cash Purchase Price"), as follows:
(12) Buyer shall pay to Seller, by wire transfer of immediately
available funds to an account designated by Seller, an amount (the
"Closing Payment") equal to ninety-two percent of the Estimated Cash Purchase
Price;
(12) Buyer shall deliver to the Escrow Agent, by wire transfer
of immediately available funds to an account designated by Escrow Agent, to be
held by Escrow Agent pursuant to the Indemnity Escrow Agreement in the form
attached to this Agreement as Exhibit 2.5(b), among Seller, Buyer and Escrow
Agent (the "Indemnity Escrow Agreement"), to be disbursed as provided in
Sections 7.6 or 2.8(b) or as otherwise provided in the Indemnity Escrow
Agreement, an amount equal to three percent of the Estimated Cash Purchase Price
(including all earnings thereon, the "Indemnity Escrow Deposit"); and
(13) Buyer shall deliver to the Escrow Agent, by wire transfer
of immediately available funds to an account designated by Escrow Agent, to be
held by Escrow Agent pursuant to the Adjustment Escrow Agreement in the form
attached to this Agreement as Exhibit 2.5(c), among Seller, Buyer and Escrow
Agent (the "Adjustment Escrow Agreement"), to be disbursed as provided in
Sections 2.6 or 2.8(b) or as otherwise provided in the Adjustment Escrow
Agreement, an amount equal to five percent of the Estimated Cash Purchase Price
(including all earnings thereon, the "Adjustment Escrow Deposit").
7.5 Determination of Cash Purchase Price. The amount of the Cash Purchase
Price shall be determined as follows:
Seller and Buyer acknowledge that they have agreed upon a
report (the "Preliminary Cash Purchase Price Report") showing Seller's
estimated calculation of the Cash Purchase Price, which shall be the Estimated
Purchase Price to be paid at Closing in accordance with Section 2.5.
(14) Seller shall, as soon as reasonably practicable (but in
no event later than sixty days) after Closing, deliver to Buyer a report (the
"Final Cash Purchase Price Report"), stating in detail Seller's final
calculation of the Cash Purchase Price together with detailed documents
substantiating the calculation thereof. Buyer shall provide Seller with
reasonable access to all records which Buyer has in its possession and which are
necessary for Seller to prepare the Final Cash Purchase Price Report. Upon the
request of Buyer, Seller shall provide Buyer and its accountants with reasonable
access to, and copies of, all books and records on the basis of which Seller
prepared the Final Cash Purchase Price Report.
(15) Within forty-five days after Buyer's receipt of the Final
Cash Purchase Price Report (the "Review Period"), Buyer shall give Seller
written notice of Buyer's objections, if any, to the calculation of the Cash
Purchase Price stated therein and, with respect to such objection, shall state
the maximum amount by which it believes Seller's calculation of the Cash
Purchase Price should be reduced on account of such objection. If Buyer fails to
make any such objections within the Review Period, the Cash Purchase Price shall
be as stated in the Final Cash Purchase Price Report, except with respect to
items that should have been included in the calculation of the Cash Purchase
Price in the Final Cash Purchase Price Report but for any reason were not, and
which are described in a written notice given by Seller to Buyer, or by Buyer to
Seller, within 120 days after the Closing Date. If Buyer makes any such
objection within the Review Period, Seller and Buyer shall in good faith
endeavor to resolve all such objections as expeditiously as possible. If Buyer
and Seller are unable to resolve all such objections within sixty days after
Buyer's receipt of the Final Cash Purchase Price Report, Seller and Buyer
jointly shall, within seventy-five days after Buyer's receipt thereof, select a
"big six" accounting firm independent of and reasonably acceptable to both of
them and retain and direct such firm to resolve any remaining unresolved
objections within thirty days after the date on which it is retained. The
determination of such firm shall be conclusive and binding upon Seller and Buyer
with respect to the matters presented to such firm. Seller and Buyer shall bear
equally the fees and expenses payable to such firm in connection with such
determination.
(16) On or before (i) the date that is fifty days after
Buyer's receipt of the Final Cash Purchase Price Report, if Buyer does not
timely make any objections thereto pursuant to paragraph 2.6(c), or (ii) that
date that is five Business Days after the date on which all objections timely
made by Buyer pursuant to Section 2.6(c) have been resolved in accordance with
that paragraph, Seller and Buyer shall take the following actions:
(x)if the amount of the Cash Purchase Price as finally determined is equal to or
greater than the sum of the Closing Payment and the Indemnity Escrow Deposit
(the amount of such excess, together with interest thereon at the rate of eight
percent per annum from the Closing Date through the date of disbursement as
provided below in this paragraph, being "Seller's Additional Amount"), (i)
Seller and Buyer jointly shall instruct the Escrow Agent in writing to (A)
disburse to Seller, out of the Adjustment Escrow Deposit an amount equal to
Seller's Additional Amount or the entire Adjustment Escrow Deposit, whichever is
less, and (B) disburse the balance, if any, of the Adjustment Escrow Deposit to
Buyer, and (ii) if the Adjustment Escrow Deposit is less than Seller's
Additional Amount, on the date of such disbursement by the Escrow Agent Buyer
shall pay the difference to Seller, by wire transfer of immediately available
funds to an account designated by Seller; or
(y) if the amount of the Cash Purchase Price as finally determined
is less than the sum of the Closing Payment and the Indemnity Escrow Deposit
(the amount of such difference, together with interest thereon at the rate of
eight percent per annum from the Closing Date through the date of disbursement
as provided below in this paragraph, being "Buyer's Refund Amount"),(A) Seller
and Buyer jointly shall instruct the Escrow Agent to disburse the entire
Adjustment Escrow Deposit to Buyer, and (B) on the date of disbursement by the
Escrow Agent, Seller shall pay to Buyer, by wire transfer of immediately
available funds to an account designated by Buyer, an amount equal to Buyer's
Refund Amount.
(17) Notwithstanding the above, if at any time the difference
(the "Difference") between (A) the Cash Purchase Price as set forth in the Final
Cash Purchase Price Report less the sum of any reductions made thereto as a
result of resolved objections of Buyer in accordance with Section 2.6(c) and the
amount of all remaining unresolved objections which were timely made by Buyer
pursuant to Section 2.6(c) exceeds (B) the sum of the Closing Payment and the
Indemnity Escrow Deposit, then Seller and Buyer promptly shall instruct the
Escrow Agent to disburse the Difference to Seller.
8.6 Allocation of Purchase Price
. The Cash Purchase Price shall be allocated among the Assets in
accordance with a schedule to be prepared by Buyer on the basis of an appraisal
of the Assets conducted by Buyer as soon as is practicable after final
determination of the Purchase Price in accordance with Section 2.6(c), and
reasonably agreed to by Seller. Seller and Buyer shall be bound by such
allocations, shall not take any position inconsistent with such allocations, and
shall file all returns and reports with respect to the transactions contemplated
by this Agreement (including all federal, state and local tax returns) on the
basis of such allocations.
9.7 Reimbursement for Letters of Credit and Banker Acceptances.
At Closing, Buyer shall establish and deliver to Seller a standby
letter of credit in favor of Seller in the amount of $1,395,000 with a term of
forty-five days, in form and substance satisfactory to Seller (the "Standby
LC"). If Seller is or becomes obligated to reimburse any amounts advanced or
disbursed pursuant to letters of credit for the purchase or shipment of any
In-Store or In-Transit Inventory, Seller shall be entitled immediately to
draw on the Standby LC in such amounts.
(18) If and to the extent there are outstanding at the
Effective Time any bankers' acceptances relating to the purchase of In-Store
Inventory or In-Transit Inventory, Seller shall pay all obligations with respect
thereto as they become due (without prepayment) and Buyer shall reimburse Seller
for the amount of such payments on the dates stated on Exhibit 2.8(b) (but shall
not be required to make any such reimbursement prior to the date of Seller's
actual payment). If Buyer at any time fails to pay any such amount on or before
the applicable date stated on Exhibit 2.8(b), Seller may, but is not obligated
to, obtain part or all of such unpaid amount by filing a claim therefor against
the Adjustment Escrow Deposit, in accordance with the Adjustment Escrow
Agreement, and/or against the Indemnity Escrow Deposit in accordance with the
Indemnity Escrow Agreement. After disbursement of any such amount by Escrow
Agent (in each case a "BA Funding Amount"), Buyer nevertheless shall remain
obligated to reimburse Seller for such BA Funding Amount plus interest thereon
from the applicable date for reimbursement stated on Exhibit 2.8(b) at the rate
of fourteen percent per annum, unless Buyer replenishes the Adjustment Escrow
Deposit and/or Indemnity Escrow Deposit, as applicable, with cash in an amount
of the BA Funding Amount, within fifteen days after the date of Escrow Agent's
disbursement thereof.
10.8 Winkelmans. If (i) within ninety days after the Closing Date Winkelman
Stores, Incorporated, ("Winkelman's") elects to liquidate its inventory in any
of its stores and within such ninety day period receives approval of the United
States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court") for such liquidation, and if (ii) the Bankruptcy Court has not approved
the Amendment to License Agreement dated as of February 28, 1997 between
Winkelman's and Seller, then either:
Seller shall pay to Buyer the amount (the
"Winkelman's Liquidation Shortfall Amount"), if any, by which (A) the aggregate
amount (the "Winkelman's Liquidation Amount") received by Buyer upon liquidation
of the Inventory held by the Business for sale in such stores of Winkelman's
(the "Winkelman's Liquidation Inventory"), net of the reasonable costs to Buyer
of conducting the liquidation, is less than (B) fifty percent of the aggregate
Division Retail Value thereof, provided that Buyer conducts such liquidation in
a commercially reasonable manner, or
(1) Buyer shall pay to Seller the amount (the "Winkelman's Liquidation
Excess Amount"), if any, by which (A) the Winkelman's Liquidation Amount
for such stores exceeds (B) fifty percent of the aggregate Division Retail
Value of the Winkelman's Liquidation Inventory for such stores.
Seller shall pay each Winkelman's Liquidation Shortfall Amount to Buyer, or
Buyer shall pay each Winkelman's Liquidation Excess Amount to Seller, as may be
the case, within fifteen days after completion of liquidation and (in the case
of a Winkelman's Liquidation Shortfall Amount) receipt by Seller of an invoice
therefor from Buyer with reasonably detailed supporting documentation.
11.9 Post-Effective Time Transactions. The operation of the Business
from immediately after the Effective Time to Closing (the "Interim Period")
shall be for the account of Buyer. Without limiting the generality of the
foregoing, Buyer shall be entitled to all receipts of the Business during
the Interim Period, and Buyer shall pay and discharge when due, or, at
Seller's option, promptly reimburse Seller for, all liabilities and
obligations of the Business which are attributable to the Interim Period,
including but not limited to all expenses for compensation and fringe benefits
payable to Business Employees with respect to the Interim Period. If there
shall occur during the Interim Period any event or occurrence as a result of
which Buyer incurs any casualty loss or other Loss for which Seller is insured,
Seller promptly shall pay to Buyer all proceeds of insurance paid to Seller
with respect thereto, up to the amount of the Losses incurred by Buyer.
Seller and Buyer acknowledge that, to the extent the foregoing requires
Buyer to pay any amounts that are not Assumed Liabilities, it
constitutes a financial accommodation between Seller and Buyer and not an
assumption by Buyer of any liabilities or obligations to third parties
other than or in addition to the Assumed Liabilities. Without limiting
the generality of the foregoing, none of the Business Employees shall be or
become employees of Buyer unless and until they are retained by Buyer upon or
following Closing.
12.10 Lender Deposits.If and to the extent Seller receives any refunds or
reimbursement of any Lender Deposits (or any portion thereof), such refunds or
reimbursements shall be for the account of Buyer and Seller promptly shall remit
such amounts to Buyer.
. Buyer represents and warrants to Seller as follows:
14. Organization of Buyer. Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware, and has
all requisite power and authority to own and lease the properties and assets it
currently owns and leases and to conduct its activities as such activities are
currently conducted. Buyer is duly qualified to do business as a foreign
corporation and is in good standing in all jurisdictions in which the ownership
or leasing of the properties and assets owned or leased by it or the nature of
its activities makes such qualification necessary, except where the failure to
be so qualified could not have a Material Adverse Effect.
15.11 Authority. Buyer has all requisite power and authority to execute,
deliver, and perform this Agreement and consummate the transactions contemplated
hereby. The execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated hereby by Buyer have been duly and
validly authorized by all necessary action on the part of Buyer. This Agreement
has been duly and validly executed and delivered by Buyer, and is the valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms.
16.12 No Conflict; Required Consents.. The execution, delivery, and
performance by Buyer of this Agreement do not and will not: (i) conflict with or
violate any provision of the certificate of incorporation or bylaws of Buyer;
(ii) violate any provision of any Legal Requirements; or (iii) require any
consent, approval, or authorization of, or filing of any certificate, notice,
application, report, or other document with, any Governmental Authority or other
Person that has not been duly made or obtained.
17.13 Acknowledgement Regarding Access to Certain Information. Buyer
acknowledges that Seller has directed Dennis B. Tishkoff to answer all questions
of Buyer with respect to the Business, and to make available to Buyer all
documents relating to the Business requested by Buyer.
18.14 HSR Act.The Acquiring Person (as that term is used in the regulations
promulgated pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended) in the transactions contemplated by this Agreement does not
have at least $10,000,000 in assets or annual sales (as determined in accordance
with such regulations).
19. Seller's Representations and Warranties. Seller represents and warrants
to Buyer as follows, subject to exceptions stated in the Schedules:
20. Organization and Qualification of Seller. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Massachusetts, and has all requisite power and authority to own and lease the
properties and assets it currently owns and leases and to conduct its activities
as such activities are currently conducted. Seller is duly qualified to do
business as a foreign corporation and is in good standing in all jurisdictions
in which the ownership or leasing of the properties and assets owned or leased
by it or the nature of its activities makes such qualification necessary.
21.15 Authority. Seller has all requisite power and authority to execute,
deliver, and perform this Agreement and consummate the transactions contemplated
by this Agreement. The execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated by this Agreement on the
part of Seller have been duly and validly authorized by all necessary action on
the part of Seller. This Agreement has been duly and validly executed and
delivered by Seller, and is the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms.
22.16 No Conflict; Required Consents. The execution, delivery, and
performance by Seller of this Agreement, and the consummation by Seller of the
transactions contemplated by this Agreement, do not and will not: (i) conflict
with or violate any provision of the charter or bylaws of Seller; (ii) violate
any provision of any Legal Requirements; (iii) conflict with, violate, result in
a breach of, constitute a default under (without regard to requirements of
notice, lapse of time, or elections of other Persons, or any combination
thereof), accelerate, or permit the acceleration of the performance required by,
any Contract or Encumbrance to which Seller is a party, or by which Seller or
the Assets are bound or affected immediately prior to Closing, which in any case
could have a Material Adverse Effect; (iv) result in the creation or imposition
of any Encumbrance against or upon any of the Assets other than a Permitted
Encumbrance; or (v) require any consent, approval or authorization of, or filing
of any certificate, notice, application, report, or other document with, any
Governmental Authority or other Person, the failure to obtain or make which
reasonably could be expected to have a Material Adverse Effect and that has not
been duly made or obtained.
23.17 Assets; Title, Condition, and Sufficiency
Seller (i) has exclusive, good and marketable title to those Assets
consisting of tangible personal property (other than tangible personal
property which is leased by Seller); (ii) has valid leasehold interests
in those Assets consisting of tangible personal property that are leased
by Seller; and (iii) validly holds its rights, titles and interests in all
Assets consisting of intangible properties, privileges, rights, interests
and claims, in the case of each of clauses (i), (ii) or (iii) of this Section
free and clear of all Encumbrances of any kind or nature, except Permitted
Encumbrances. Upon execution and delivery thereof by Seller as
provided in Section 6.2, the instruments described in that Section will be
adequate to transfer such rights, titles and interests in the Assets to Buyer,
free and clear of all Encumbrances other than Permitted Encumbrances.
(19) Except as set forth on Schedule 4.6, none of the Personal
Property included in the Assets is leased by Seller from any other Person. All
of the fixtures included in the Assets are in good operating condition and
repair, ordinary wear and tear excepted.
24.18 Real Property
All the Assets consisting of
fee interests in real property are described on Schedule 4.5 (including all
improvements thereon, the "Real Property"). Seller holds no leasehold interests
in any real property relating to, or used by Seller in its operation of, the
Business. Except as otherwise disclosed on Schedule 4.5, Seller holds good,
marketable and indefeasible fee simple title to the Real Property and the valid
and enforceable right to use and possess the Real Property, subject only to
Permitted Encumbrances.
(20) There are no leases or other Contracts, oral or written,
granting to any Person other than Seller the right to occupy or use any of the
Real Property, except as described on Schedule 4.5. All easements, rights-of-way
and other rights appurtenant to, or which are necessary for Seller's current use
of, any of the Real Property are valid and in full force and effect, and Seller
has not received any notice with respect to the termination or breach of any of
those rights. The Real Property, the improvements constructed thereon, and their
current use conform to (i) all applicable material Legal Requirements, including
zoning requirements and the Americans With Disabilities Act that are applicable
to Seller or the Real Property, and (ii) all restrictive covenants, if any, or
other Encumbrances affecting all or part of such parcel, except to the extent
that any nonconformity therewith constitutes a Permitted Encumbrance.
25.19 Acquired Contracts
Except for the Contracts listed
or described on Schedule 4.6 or other Schedules to this Agreement (the "Material
Acquired Contracts") and Contracts included in the Excluded Assets, Seller is
not bound or affected by any of the following that relate solely to the
Business: (i) leases or subleases of real or personal property (whether as
lessor or lessee); (ii) license Contracts for operation of shoe departments;
(iii) Contracts with suppliers or distributors, including but not limited to
purchase orders; (iv) bankers' acceptances, letters of credit or other
facilities for the purchase, shipment and or storage of Inventory; (v) Contracts
granting any Person an Encumbrance (other than a Permitted Encumbrance) on or
against any of the Assets; (vi) Contracts of employment, or Contracts with
consultants or independent contractors; (vii) Contracts pertaining to the use by
Seller of any Intellectual Property or proprietary information of any other
Person; (viii) Contracts restricting the ability of Seller, with respect to the
Business, to engage in any lawful activity or disclose any information; (ix)
Contracts other than those described in any other clause of this paragraph which
are material to the operation of the Business; or (x) any other Contracts
involving expenditures by or payments to Seller relating to the Business, that
will or are reasonably likely to exceed $12,000 in any twelve month period
(unless terminable without liability upon sixty days' or less notice).
(21) Seller has delivered to Buyer true and complete copies of
each of the Material Acquired Contracts, including any amendments thereto (or,
in the case of oral Acquired Contracts, true and complete written summaries
thereof), and true and complete copies of all standard form Contracts used by
Seller in its operation of the Business. Except as described in Exhibit 4.6: (i)
each of the Material Acquired Contracts is valid, in full force and effect, and
enforceable in accordance with its terms against the parties thereto other than
Seller, and Seller has fulfilled when due, or has taken all action necessary to
enable it to fulfill when due, all of its obligations thereunder without
material breach; (ii) there has not occurred any material breach (without regard
to lapse of time, the giving of notice, the election of any Person other than
Seller, or any combination thereof) by Seller that has not been cured or waived,
nor, to the knowledge of Seller, has there occurred any material breach (without
regard to lapse of time, the giving of notice, the election of Seller, or any
combination thereof) by any Person other than Seller under any of the Material
Acquired Contracts; and (iii) neither Seller nor, to the knowledge of Seller,
any other Person is in arrears in the performance or satisfaction of its
obligations under any of the Material Acquired Contracts if being in arrears
could constitute a material breach thereunder.
26.20 Employment Matters
Schedule 4.7 includes a complete and correct list of
names and positions of all employees of Seller engaged exclusively in the
Business and their current hourly wages or salaries and other compensation.
As relates to the Business and individuals exclusively employed by Seller in
connection with the Business ("Business Employees"), Seller has complied
and is in compliance in all material respects with all Legal Requirements
relating to the employment of labor, including those relating to wages, hours,
collective bargaining, unemployment compensation, worker's
compensation, equal employment opportunity, age and disability discrimination,
immigration control and the payment and withholding of Taxes.
(22) Seller is not a party to any collective bargaining
agreement or other Contract with any labor organization, and Seller has not
recognized or agreed to recognize and is not required to recognize any union or
other collective bargaining unit, applicable to any of the Business Employees.
No union or other collective bargaining unit been certified as representing any
Business Employees, nor has Seller received any requests from any Person for
recognition as a representative of any Business Employees for collective
bargaining purposes. To Seller's knowledge, none of Business Employees are
engaged in organizing activity with respect to any labor organization.
27.21 Employee Benefits
Schedule 4.8 includes a true and complete description
of all arrangements (each a "Business Benefit Arrangement") under
or with respect to which Seller provides employee or executive
compensation or benefits to any current Business Employee (including
any Business Employee on an approved leave of absence), including but not
limited to arrangements for or with respect to life or health insurance,
hospitalization, savings, bonus, profit sharing, retirement, pension, stock
bonus or option, deferred compensation, incentive compensation, holiday,
vacation, severance or sick pay, sick leave, disability, tuition refund or
reimbursement, service awards, use of vehicles, scholarships, relocation, patent
awards, fringe benefits, and individual employment, consulting or severance
Contracts, other than any of the foregoing that involve less than $10,000 in any
twelve month period and apply to fewer than ten Business Employees.
(23) Seller has paid or performed all of its obligations that
have become due under each Business Benefit Arrangement prior to the Effective
Time, and no Business Benefit Arrangement has been reduced or modified or
rendered not due by reason of any extension, whether at the request of Seller or
otherwise. Each Business Benefit Arrangement has been maintained in compliance
with all applicable Legal Requirements. Seller has provided complete copies of
each Business Benefit Arrangement or, in the case of each Business Benefit
Arrangement not existing in written form, a complete and accurate description
thereof (including any related trust instruments and insurance Contracts) and
all amendments thereto.
(24) Except as is not reasonably likely to result in a
Material Adverse Effect, (i) no reportable event, within the meaning of Title IV
of ERISA, has occurred and is continuing with respect to any Business Benefit
Arrangement constituting an "employee benefit plan" or "multiemployer plan" (as
those terms are defined in ERISA) maintained by Seller or any Affiliate of
Seller, and (ii) no "prohibited transaction," within the meaning of Title I of
ERISA, has occurred with respect to any such employee benefit plan or
multiemployer plan, and no material accumulated funding deficiency (as defined
in Title I of ERISA) or withdrawal liability (as defined in Title IV of ERISA)
exists with respect to any such employee benefit plan or multiemployer plan.
Seller does not contribute and has no obligation to contribute, and has not
contributed or had any obligation to contribute, to any "multiemployer plan" in
which any former, retired or current Business Employees have or have had any
right to participate.
28.22 Litigation. Except as described on Schedule 4.9, there is no Litigation
to which Seller is a party pending or, to Seller's knowledge, threatened,
nor any Judgment outstanding by which Seller is bound or to which it is
subject, in either case involving or affecting all or any part of the
Business or the Assets.
29.23 Financial Statements
Seller has delivered to Buyer correct and complete copies
of the unaudited balance sheets of the Business as of January 28, 1995,
February 3, 1996 and January 4, 1997, and the related unaudited statements
of income and cash flows for the Business' fiscal years or periods then
ended (collectively, the "Financial Statements"). Except as
described on Schedule 4.10, the Financial Statements were prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered thereby
and fairly present the Business' financial position, results of operations and
changes in financial position (other than with respect to interest, overhead and
income taxes) as of the dates and for the periods indicated, subject only to
normal year-end adjustments (none of which will be material in amount) and the
omission of footnotes. Except as disclosed by, or reserved against in, the
Business' most recent balance sheet included in the Financial Statements, Seller
does not have any liability or obligation, whether accrued, absolute, fixed or
contingent (including liabilities for taxes or unusual forward or long-term
commitments) relating to the Business (before the allocation of interest,
overhead and income taxes), which was or would be material to the business,
results of operations or financial condition of the Business, nor to Seller's
knowledge does any aspect of the Business form a basis for any claim by a third
party which, if asserted, could result in a liability required to be disclosed
by or reserved against in a balance sheet prepared in accordance with GAAP.
(25) In connection with its acquisition of the Business,
Seller allocated the consideration given by it for the Business among the Assets
of the Business in accordance with GAAP.
30.24 Absence of Certain Changes or Events. Except as described on
Schedule 4.11, since November 2, 1996, there has not occurred any of the
following:
any operation of the Business outside the Ordinary Course;
(26) any sale or disposition of any assets relating to
the Business other than in the Ordinary Course;
(27) any material adverse change in, or the occurrence of any
event which is likely, individually or in the aggregate, to result in any
material adverse change in, the business, operations, assets, prospects or
condition (financial or otherwise) of the Business, other than matters of a
general economic nature;
(28) any damage, destruction or loss to or of any of the
material assets or properties of Seller used in the conduct of the Business,
whether or not covered by insurance;
(29) any waiver, release, discharge, transfer or
cancellation by Seller of any rights or claims of any material value relating
to the Business;
(30) (A) any payment of any bonus, profit sharing, pension or
similar arrangement or special compensation to any Business Employee, except in
the ordinary course of administration of the Business Benefit Arrangements, or
(B) any increase in the compensation payable or to become payable to any
Business Employee, except in the Ordinary Course; or
(31) the entry by Seller into any Contract to do any of
the foregoing.
31.25 Tax Returns; Other Reports.
. Seller has filed in proper form all federal, state, local, and
foreign tax returns and other reports required to be filed, and has timely paid
all Taxes which have become due and payable, whether or not so shown on any such
return or report. Seller has received no notice of, nor does Seller have any
knowledge of, any notice of deficiency or assessment of proposed deficiency or
assessment from any taxing Governmental Authority with respect to the Business
or the Assets. Except as described on Schedule 4.12, there are no audits pending
with respect to Seller and there are no outstanding agreements or waivers by or
with respect to Seller that extend the statutory period of limitations
applicable to any federal, state, local, or foreign tax returns or Taxes for any
period. There are no determined deficiencies or proposed assessments of Taxes
against Seller or the Business.
32.26 Compliance with Legal Requirements; Business Permits
Except as is not reasonably
likely to result in a Material Adverse Effect, the ownership, leasing and use of
the Assets as they are currently owned, leased and used by Seller, and the
conduct of the Business as it is currently conducted, do not violate any Legal
Requirements. Seller has received no written notice claiming a violation by
Seller or the Business of any Legal Requirement applicable to the Business as it
is currently conducted (which violation is reasonably likely to result in a
Material Adverse Effect and has not been cured), and to Seller's knowledge there
is no basis for any claim that such a violation exists.
(32) Seller holds all permits, authorizations, licenses,
permissions and consents of any Governmental Authority or other Person that are
required to own, maintain and operate the Assets and conduct the Business as
currently conducted (the "Business Permits"), each of which that is material to
the conduct of the Business is described on Schedule 4.13, and all of the
Business Permits are in full force and effect. Except as described on Schedule
4.13 or as could not result in a Material Adverse Effect, (i) Seller is not in
violation of or default under any of the Business Permits (without regard to
requirements of notice, lapse of time, elections of other Persons, or any
combination thereof), (ii) Seller has received no notice of any threatened
cancellation, modification or non-renewal of any Business Permits, and (iii) to
Seller's knowledge, no basis for any such cancellation, modification, or renewal
exists. Seller has delivered to Buyer true and correct copies of each of the
Business Permits.
33.27 Intellectual Property. Seller fully owns, or is licensed
or otherwise has the right to use, all Intellectual Property that is
used solely in the operation of the Business (the "Business Intellectual
Property"), all material items of which are described on Schedule 4.14.
Except as described on Schedule 4.14, Seller has not granted any outstanding
license or other rights under any Business Intellectual Property. Except
as described on Schedule 4.14, (i) to Seller's knowledge there is no
violation, breach, misappropriation or infringement by any third
party of any Business Intellectual Property, (ii) there is no pending
or, to Seller's knowledge, threatened opposition, interference,
reexamination, arbitration, invalidity, declaratory judgment, revocation,
nullity or similar actions in respect of any Business Intellectual
Property, and (iii) there is no infringement by the Business of the rights of
any Person with respect to any Intellectual Property held by that Person, nor
has it received notice of any such claim.
34.28 Environmental
Except as described in Schedule
4.15 or as could not result in a Material Adverse Effect, Seller is in
compliance and has complied with all Environmental Laws applicable to the Assets
or the Business, and no claims, notices of violation or administrative, civil or
criminal proceedings have been threatened, filed or otherwise commenced against
Seller, or any other Person with respect to the Assets or the Business, alleging
any failure to so comply or alleging liability associated with Hazardous
Substances, materials or contamination originating from the Assets or the
Business.
(33) Except as disclosed in Schedule 4.15, Seller has not
generated, treated, disposed, released or discharged any Hazardous Substance at,
on, under, in or about, or in any other manner affecting the Real Property or
any other property, and, to Seller's knowledge, no other present or previous
owner, tenant, occupant or user of the Real Property or any other Person has
committed or suffered any of the foregoing. To Seller's knowledge, no release of
Hazardous Substances outside the Real Property has entered or threatens to enter
the Real Property, nor is there any pending or threatened claim based on
Environmental Laws which arises from any condition of the land surrounding the
Real Property.
(34) Except as described in Schedule 4.15: (i) no underground
storage tanks are currently or, to Seller's knowledge, have been, located on the
Real Property; (ii) to Seller's knowledge, no Real Property has been used at any
time as a gasoline station or any other facility which stores, pumps, dispenses
or produces gasoline or any other petroleum products, including recycled
products, or wastes; and (iii) to Seller's knowledge, no building or other
structure on the Real Property contains asbestos in any form that is or could
become friable. To Seller's knowledge, there are no incinerators, septic tanks,
leach fields or cesspools on the Real Property, and all waste is discharged into
a public sanitary sewer system.
(35) Seller has provided Buyer with complete and correct
copies of: (i) all studies, reports, surveys, correspondence or other documents
in Seller's possession or to which Seller has access, which relate to the
presence or alleged presence of Hazardous Substances, at, on or affecting the
Real Property; (ii) all notices or other documents or information in Seller's
possession, or in the possession of a third party who is or has been under
contract with Seller, that were received from any Governmental Authority having
the authority to administer or enforce any Environmental Law relating to any of
the requirements or liabilities associated with any Environmental Law; and (iii)
all information and documents in Seller's possession, or to which Seller has
access, relating to any claim, allegation or action by any third party against
the Seller, or any other Person who is or has been associated with the Real
Property, under any Environmental Law or alleging liability associated with
Hazardous Substances originating from the Assets or the Business.
35.29 Books and Records
All of the books, records, and accounts of the Business are in all
material respects accurate, are maintained in accordance with good business
practice and all applicable Legal Requirements, accurately present and reflect
in all material respects all of the transactions therein described, and are
reflected accurately in the Financial Statements.
36.30 Accounts Receivable.
Seller is the true and lawful owner of its accounts receivable
generated in the Business and has good and clear title to each such account,
free and clear of all Encumbrances, with the absolute right to transfer any
interest therein. Each such account receivable is (i) a valid obligation of the
account debtor enforceable in accordance with its terms, free and clear of all
encumbrances, set-offs, adverse claims, assessments, defaults, prepayments,
defenses, and conditions precedent (but subject to the effects of bankruptcy,
insolvency and laws affecting creditors' rights generally), and (ii) a true and
correct statement of the account for merchandise actually sold and delivered to,
or for actual services performed for and accepted by, such account debtor.
37.31 Inventory.
Inventory of the Business has been valued in the
Financial Statements in accordance with the retail inventory method, and
markdowns of Inventory have been taken in the ordinary course consistent with
past practice. Except pursuant to return policies described on Schedule 4.18 or
pursuant to warranties described on Schedule 4.19, the Business is not subject
to any material liability with respect to the return of Inventory in the
possession of wholesalers, distributors, retailers or other customers.
38.32 Warranties and Returns
Except that the Business honors the return
policies of the stores in which it operates, the Business does not give and has
not given any express product warranties. Except as set forth on Schedule 4.19,
there is not presently, nor since February 3, 1996 has there been, any failure
of a product sold by the Business such as to require a general recall or
replacement campaign with respect to such product or a reformulation or change
of such product.
39.33 Customers and Suppliers
Seller is not aware of any loss or threatened
loss of any customer, distributor, supplier or account of the Business that, in
the case of any customer, distributor or account, accounted for gross sales
during the fiscal year ended February 1, 1997 in excess of $500,000 or, in the
case of any supplier, the loss of which could have a Material Adverse Effect.
40.34 Product Liability Claims
No product liability claim is pending or, to
the knowledge of Seller, threatened against Seller, or against any other party
with respect to products sold in the course of the Business. To the knowledge of
Seller, there have been no product liability claims asserted which have resulted
in damages (including by way of settlement of claims) in excess of $10,000 as to
any one claim with respect to products sold by the Business.
41.35 Insurance
There are no pending or, to Seller's knowledge, threatened
termination or material premium increases with respect to any insurance policies
in effect with respect to the Business or the Assets, which relate or are
attributable primarily or exclusively to the Business. There are no material
outstanding requirements or recommendations by or made on behalf of any
insurance company that issued any policy with respect to any of the Assets
requiring or recommending any equipment or facilities be installed on or in
connection with any of the Assets.
42. Covenants
43. Effect of Investigations.
No investigation by Buyer or its representatives, nor any disclosure
to Buyer by Dennis B. Tishkoff or any other representative of Seller, shall
affect or limit the scope of any of the representations and warranties of Seller
in the Agreement or in any Transaction Document, limit the liability of Seller
for any breach of such representations and warranties, or limit any of Seller's
other obligations under Article 7 of this Agreement;
44.36 Confidentiality
Any non-public information that
Buyer may obtain from Seller in connection with this Agreement with respect to
Seller (exclusive of information relating to the Business) shall be deemed
confidential, and Buyer shall not disclose any such information to any third
party (other than its Affiliates, and their respective, directors, officers and
employees, and representatives of their advisors and lenders whose knowledge
thereof is necessary in order to facilitate the consummation of the transactions
contemplated hereby and who agree to keep such information confidential) or use
such information to the detriment of Seller; provided that (i) Buyer may use and
disclose any such information once it has been publicly disclosed (other than by
Buyer in breach of its obligations under this Section or any other Person
referred to in the immediately preceding parenthetical phrase) or which
rightfully has come into the possession of Buyer (other than from Seller of from
any such other Person), and (ii) to the extent that Buyer is compelled by Legal
Requirements to disclose any of such information, Buyer may disclose such
information if it shall have used all reasonable efforts, and shall have
afforded Seller the opportunity, to obtain an appropriate protective order, or
other satisfactory assurance of confidential treatment, for the information
compelled to be disclosed. In the event of termination of this Agreement, Buyer
shall use all reasonable efforts to cause to be delivered to Seller, and retain
no copies of, any documents, work papers and other materials obtained by Buyer
or on its behalf from Seller, whether so obtained before or after the execution
hereof.
(36) Any non-public information that Seller shall obtain from
Buyer in connection with this Agreement with respect to Buyer or any of its
Affiliates shall be deemed confidential, and Seller shall not disclose such
information to any third party (other than its Affiliates, and their respective
directors, officers and employees, and representatives of their advisors and
lenders whose knowledge thereof is necessary in order to facilitate the
consummation of the transactions contemplated thereby and who agree to keep such
information confidential) or use such information to the detriment of Buyer;
provided, that (i) Seller may use and disclose any such information once it has
been publicly disclosed (other than by Seller in breach of its obligations under
this Section or by any other person referred to in the preceding parenthetical
phrase) or which rightfully has come into the possession of Seller (other than
from Buyer or from any other such Person), and (ii) to the extent that Seller is
compelled by Legal Requirements to disclose any of such information, Seller may
disclose such information if it shall have used all reasonable efforts, and
shall have afforded Buyer the opportunity, to obtain an appropriate protective
order, or other satisfactory assurance of confidential treatment, for the
information compelled to be disclosed. In the event of termination of this
Agreement, Seller shall use all reasonable efforts to cause to be delivered to
Buyer, and retain no copies of, any documents, work papers, and other materials
obtained by Seller or on its behalf from Buyer, whether so obtained before or
after the execution hereof.
(37) Except as required by applicable Legal Requirements or
the requirements of the Nasdaq National Market, neither Seller nor Buyer shall
make any press release or public announcement or statement without the prior
written consent and approval of the other. Seller and Buyer shall consult with
and cooperate with the other with respect to the content and timing of all press
releases and other public announcements or statements, and any oral or written
statements to the Business Employees concerning this Agreement and the
transactions contemplated hereby.
45.37 Title Insurance Policy and Survey.
At Closing, Seller shall provide to Buyer, at Seller's cost, (i) an
owner's policy of title insurance (the "Title Policy") issued by a nationally
recognized title insurance company (the "Title Company"), insuring title to the
Real Property in Buyer in the amount of $5,500,000, and (ii) a boundary and
improvement survey of the Real Property acceptable to Buyer, certified to Buyer
and the Title Company.
46.38 Employee Matters
Seller shall be solely
responsible for and shall pay to the Business Employees all compensation,
including salaries, commissions, bonuses, deferred compensation, severance,
insurance, pensions profit sharing, sick pay and other compensation or benefits
to which they are entitled for periods prior to Closing, subject to Buyer's
obligations under Section 2.10; provided, however, that Seller shall have no
obligation to pay Business Employees hired by Buyer upon Closing for vacation
time accrued but unused as of Closing. Buyer may, but will have no obligation
to, offer employment to any of the current Business Employees as Buyer may
desire.
(38) Buyer assumes neither any liability for accrued benefits
nor any fiduciary or administrative responsibility to account for or dispose of
any benefits under any Business Benefit Arrangements consisting of employee
benefits plans (as defined in ERISA).
(39) Except for claims or obligations for vacation time
accrued consistent with Seller's regular vacation policies for Business
Employees hired by Buyer upon Closing, and subject to Buyer's obligations under
Section 2.10, (i) all claims and obligations under, pursuant to or in connection
with any Business Benefit Arrangements or arising under any Legal Requirement
affecting Business Employees incurred before Closing or resulting or arising
from events or occurrences (or portions thereof) prior to Closing, shall remain
the responsibility of Seller, whether or not such Business Employees are hired
by Buyer at or after Closing, and (ii) Buyer shall have and assumes no
obligation or liability under or in connection with any Business Benefit
Arrangement. Buyer shall not be obligated to Seller to assume any preexisting
physical condition of any Business Employee who is hired as an employee of
Buyer.
(40) From time to time as requested in writing by Seller
during the five year period following the Closing Date, Buyer shall advise
Seller which of the Business Employees hired by Buyer has ceased to be employed
by Buyer, and the effective date on which that occurred. Buyer shall have no
liability to Seller for any breach of its obligations under this paragraph.
(41) As soon as reasonably practicable following the Closing
Date, Buyer shall establish a defined contribution 401(k) profit sharing plan
(the "Buyer's Plan") to provide benefits to the Business Employees who were, as
of the Closing Date, entitled to coverage under the J. Baker, Inc. 401(k)
Savings Plan ("Seller's Plan") and who become employees of Buyer prior to March
6, 1997. In consideration of the transfer of assets described below, the Buyer's
Plan shall assume and discharge all obligations and liabilities of Seller's Plan
for all benefits held under the Seller's Plan for such Business Employees. As
soon as practicable after establishment of the Buyer's Plan, (i) Seller shall
cause the trustee or other funding medium of Seller's Plan to transfer to the
trustee or other fiduciary of the Buyer's Plan the portion of the Seller's Plan
assets allocated to the accounts of such Business Employees, together with the
earnings accrued under the Seller's Plan for the period from the Closing Date to
the date of actual transfer of assets and (ii) Seller shall provide Buyer with
such pertinent data or information as the Buyer may reasonably require to
determine such Business Employees' service and account balances under the
Seller's Plan as of the Closing Date. Seller and Buyer shall take such actions
as may be required by Section 414(l) of the Internal Revenue Code of 1986, as
amended, in connection with the spinoff and transfer of assets from Seller's
Plan to the Buyer's Plan.
47.39 Bulk Sales.
Buyer and Seller each waives compliance by the other with Legal
Requirements, if any, relating to bulk sales applicable to the transactions
contemplated hereby.
48.40 Transfer Taxes
Seller and Buyer each shall bear one-half the amount of all sales,
use, transfer, and similar Taxes arising from or payable by reason of the
transactions contemplated by this Agreement.
49.41 Underground Storage Tanks.
Seller shall reimburse Buyer
(within ten days after the date of each invoice therefor) for all fines,
penalties and other amounts paid by Buyer pursuant to Legal Requirements or
levy, assessment, order or other requirement of any Governmental Authority with
respect to, or as a result of, the noncompliance of Seller (or previous owners
and operators of the Real Property) with Legal Requirements respecting
underground storage tanks on the Real Property, including but not limited to any
failure to register or upgrade such tanks.
(42) If such underground storage tanks have been removed from
the ground by Buyer within one year after the Closing Date (and provided that
Buyer has not added any fuel or other products to such tanks prior to removal),
Seller shall reimburse Buyer (within ten days after the date of each invoice
therefor) for (i) the reasonable costs of removal and disposal of any soil
contaminated by such tanks or their contents prior to such removal and the
performance of any other remediation action required by applicable Legal
Requirements, any Judgment or any Governmental Authority in connection with such
removal, if such removal and/or disposal is performed by ERM or another firm
approved in writing by Seller (which approval shall not unreasonably be withheld
or delayed), and (ii) out-of-pocket costs and expenses reasonably incurred by
Buyer pursuant to any Legal Requirements, any Judgment or any order of a
Governmental Authority in connection with such removal, including but not
limited to continuing monitoring and reporting obligations, if any.
Notwithstanding any other provision of this Agreement, Buyer in any event shall
pay the costs of removing such tanks themselves and their contents, if any.
(43) With respect to any matter for which payment by Seller to
Buyer will or may be required under this Section 5.7, (i) Buyer shall allow
Seller or its advisors a reasonable period of time to review any filing or
correspondence made by Buyer or its advisors to any Governmental Authority prior
to transmittal to such Governmental Authority, and will consider and discuss
with Seller its comments with respect thereto (if any), (ii) Buyer will allow
Seller or its advisors to appear with Buyer or its advisors at any meeting with
representatives of a Governmental Authority, and Buyer shall allow Seller or its
advisors to participate in any telephone conference with representatives of a
Governmental Authority, and, to the extent reasonably practicable, shall give
reasonable advance notice to Seller of any such meeting or telephone conference,
and (iii) prior to committing to pay, or paying, any amount to a third party
(including any Governmental Authority and any environmental engineering or
clean-up firm), Buyer shall notify Seller of such proposed commitment or payment
and shall give Seller an opportunity to review the proposed commitment or
payment and associated documentation and discuss the same with such third party,
and shall not make such commitment or payment if Seller reasonably objects
thereto unless (x) Buyer reasonably doubts that Seller has the ability to
perform or pay (or cause to be performed or paid) such commitment or payment
when due, or (y) Buyer reasonably believes that, if Buyer fails promptly to make
or pay (or to cause to be performed or paid) such commitment or payment, Buyer
is reasonably likely to be subject to action of a Governmental Authority or to a
Judgment that reasonably could be expected to impair its operations.
50. Closing
51. The closing of the transactions contemplated by this Agreement
("Closing") shall take place at 10:00 a.m. on the date of this Agreement, at the
offices of Parcel, Mauro, Hultin & Spaanstra, P.C., Denver, Colorado.
52.42 At Closing, Seller shall deliver or cause to be delivered to Buyer,
the following:
Bill of Sale. Bill of Sale in the form of Exhibit 6.2(a),
executed by Seller.
(44) Assignment and Assumption. An Assignment of Contracts and
General Assumption Agreement in the form of Exhibit 6.2(b) (the "Assignment and
Assumption") executed by Seller.
(45) Vehicle Lease Assignments. Assignment instruments
relating to leases of motor vehicles used solely in the Business, in form and
substance acceptable to Buyer and Seller (the "Vehicle Lease Assignments").
(46) Vehicle Titles. Title certificates to all vehicles owned
by Seller and included among the Assets, if any, endorsed by Seller for transfer
of title to Buyer, and separate bills of sale therefor, if required by the laws
of the States in which such vehicles are titled.
(47) FIRPTA Affidavit. An affidavit in the form attached
as Exhibit 6.2(e), executed by Seller.
(48) Guaranty. A Guaranty in the form attached as Exhibit
6.2(f), executed by J. Baker,
(49) Evidence of Corporate Actions. Certified corporate
resolutions, or other evidence reasonably satisfactory to Buyer, that Seller has
taken all action necessary to authorize the execution of this Agreement and the
consummation of the transactions contemplated by this Agreement.
(50) Deed. A limited warranty deed conveying the Real Property
to Buyer, in the form of Exhibit 6.2(h), subject only to the exceptions
reflected on the Title Policy.
(51) Transition Services Agreement. A Transition Services
Agreement in the form attached as Exhibit 6.2(i) (the "Transition Services
Agreement"), executed by Seller.
(52) Escrow Agreements. The Indemnity Escrow Agreement
and the Adjustment Escrow Agreement, executed by Seller.
(53) Data. All historical data in the possession of Seller or
J. Baker, Inc. that relates solely to the Business and consists of sales and
inventory data, purchase order data, replenishment models, price
change/advertising data, sku master file (including chain pricing), and store
table file, on 3480 cartridges (6250 bpi in EBCDIC fixed length format),
together with a log of such cartridges cross-referencing the files being
provided, including the filename, the layout, and the period of time for the
data (provided that Seller at its option may, instead of delivering such data at
the Closing, make it available to Buyer at Seller's offices in Canton,
Massachusetts after Closing, at a mutually convenient time).
(54) Opinions. The opinions of Mark T. Beaudouin and
Goodwin, Procter & Hoar LLP, counsel to Seller, in forms acceptable to Buyer.
(55) Fleet Lease Agreements. Instruments among Seller, Buyer
and/or Fleet Capital Corporation ("Fleet"), in form and content acceptable to
Buyer and Seller, effecting a sublease to Buyer of the conveyor and sortation
system located on the Real Property (the "Fleet Sublease Documents"), in form
and content acceptable to Buyer and Seller, executed by Seller and Fleet.
53.43 Buyer's Obligations.
At Closing, Buyer shall deliver or cause to be delivered to Seller
(except as otherwise provided below) the following:
Closing Payment and Contingent Amount Note. The Closing
Payment and the Contingent Amount Note, executed by Buyer.
(56) Escrow Deposits. To the Escrow Agent, the Indemnity
and Adjustment Escrow Deposits.
(57) Evidence of Corporate Actions. Certified corporate
resolutions, or other evidence reasonably satisfactory to Seller, that Buyer has
taken all action necessary to authorize the execution of this Agreement and the
consummation of the transactions contemplated by this Agreement.
(58) Transition Services Agreement. The Transition
Services Agreement, executed by Buyer.
(59) Escrow Agreements. The Indemnity Escrow Agreement
and the Adjustment Escrow Agreement, executed by Buyer.
(60) Opinion. The opinion of Parcel, Mauro, Hultin &
Spaanstra, P.C., acceptable to Seller.
(61) Fleet Sublease Documents. The Fleet Sublease
Documents, executed by Buyer.
(62) Vehicle Lease Assignments. The Vehicle Lease
Assignments, executed by Buyer.
(63) Assignment and Assumption. The Assignment and
Assumption, executed by Buyer.
(64) Guaranty. The Guaranty, executed by Buyer.
(65) Standby LC. The Standby LC.
54.44 Further Assurances.
In addition to the actions described in Sections
6.2 and 6.3, Seller and Buyer shall execute and deliver such further documents
and instruments as are necessary at or following Closing to evidence or give
effect to the sale of the Assets and the assumption of the Assumed Liabilities
contemplated by this Agreement.
55. Indemnification
56 Indemnification by Seller. From and after Closing, Seller shall
indemnify and hold harmless Buyer and its Affiliates, and their respective
officers and directors, employees, agents, and representatives, as the case may
be, from and against any and all Losses (but, in each such case, only to the
extent that insurance proceeds have not been received and are not receivable in
respect thereof) arising out of or resulting from:
any representations and warranties made by Seller in this
Agreement not being true and accurate as of the Closing Date.
(66) any failure by Seller to perform any of its covenants,
agreements, or obligations in this Agreement;
(67) the operation of the Business prior to the Effective
Time (other than Assumed Liabilities); and
(68) all liabilities and obligations of Seller that are not
Assumed Liabilities (including but not limited to any such liabilities or
obligations that arise under the bulk sales laws of any jurisdiction), or any
failure of Seller to pay or discharge when due any such liabilities or
obligations.
57.45 Indemnification by Buyer.
From and after Closing, Buyer shall indemnify
and hold harmless Seller and its Affiliates, and their respective officers and
directors, employees, agents, and representatives, as the case may be, from and
against any and all Losses (but, in each such case, only to the extent that
insurance proceeds have not been received and are not receivable in respect
thereof) arising out of or resulting from:
any representations and warranties made by Buyer in this
Agreement not being true and accurate as of the Closing Date;
(69) any failure by Buyer to perform any of its covenants,
agreements, or obligations in this Agreement; and
(70) the Assumed Liabilities, or any failure of Buyer to
pay or discharge when due any of the Assumed Liabilities.
58.46 Procedure for Indemnified Third Party Claim
Promptly after receipt by
a party entitled to indemnification hereunder (the "Indemnitee") of written
notice of the assertion or the commencement of any Litigation with respect to
any matter referred to in Sections 7.1 or 7.2, the Indemnitee shall give written
notice thereof to the party from whom indemnification is sought pursuant hereto
(the "Indemnitor") and thereafter shall keep the Indemnitor reasonably informed
with respect thereto; provided, however, that failure of the Indemnitee to give
the Indemnitor notice as provided herein shall not relieve the Indemnitor of its
obligations hereunder unless and to the extent the Indemnitor is adversely
affected by such failure. In case any Litigation shall be brought against any
Indemnitee, the Indemnitor shall be entitled to participate in such Litigation
and, at the Indemnitor's option, may assume the defense thereof with counsel
satisfactory to the Indemnitee, at the Indemnitor's sole expense. Any
participation in any Litigation by the Indemnitee once defense thereof has been
assumed by the Indemnitor shall be at the expense of the Indemnitee, unless the
interests of the Indemnitor and the Indemnitee are sufficiently divergent that
the counsel selected by the Indemnitor cannot effectively represent the
Indemnitee. If the Indemnitor shall assume the defense of any Litigation, it
shall not settle the Litigation without the Indemnitee's consent unless the
settlement shall include as an unconditional term thereof the giving by the
claimant or the plaintiff of a release of the Indemnitee, satisfactory to the
Indemnitee, from all liability with respect to such Litigation, and shall not in
any way restrict the activities of the Indemnitee.
59.47 Determination of Indemnification Amounts and Related Matters
Except as stated in Section
7.4(b), (i) Seller and Buyer shall have no liability under Sections 7.1 and 7.2,
respectively, unless and until the aggregate amount of Losses otherwise subject
to its indemnification obligations thereunder exceeds $250,000, and then only to
the extent of such excess, and (ii) in no event shall the aggregate liability of
Seller or Buyer under Sections 7.1 and 7.2, respectively, exceed $5,000,000.
(71) Seller's obligations under Section 7.1, and Buyer's
obligations under Section 7.2, with respect to Losses arising or resulting from
a breach of any of their respective covenants stated in Sections 2.2, 2.3, 2.4,
2.5, 2.6, 2.7, 2.8, 2.9, 2.10, 2.11, 5.2, 5.4, 5.6, 5.7, 6.4, 8.2 and 8.6
(collectively, the "Exception Covenants") shall not be subject to the
limitations stated in Section 7.4(a), nor shall such Losses be considered with
Losses subject to such limitation for purposes of determining whether Losses
exceed the limitation stated in clause (ii) of that paragraph. However, if and
to the extent any Losses arising or resulting from a breach of Exception
Covenants (other than those in Section 5.7) also arise or result from any
occurrence or set of facts or circumstances that also constitute a breach of
Seller's representations and warranties in this Agreement, the limitation stated
in clause (ii) of Section 7.4(a) shall apply notwithstanding the first sentence
of this paragraph. Seller's obligations under Sections 7.1(c) or (d), with
respect to Losses arising with respect to events (or periods or portions
thereof) occurring before the Effective Time pursuant to claims of parties to
the License Agreement dated as of May 28, 1991 between Seller (as successor
licensee to the Felsway Corporation) and Steinbach, Inc., as amended, shall not
be subject to the limitations stated in Section 7.4(a).
(72) Notwithstanding any other provision of this Agreement,
for purposes of determining whether any representation or warranty of Seller in
this Agreement is untrue or inaccurate for purposes of this Article 7, and
determining the amount of any Losses arising or resulting from any such
untruthfulness or inaccuracy, such representations and warranties shall be as
they are stated except that all references to or qualifications by materiality
therein (including but not limited to the word "material" and phrase "Material
Adverse Effect") shall be deemed to be deleted therefrom and to be of no effect.
(73) Amounts payable by the Indemnitor to the Indemnitee in
respect of any Losses under Sections 7.1 or 7.2 shall be payable by the
Indemnitor as incurred or paid, as the case may be, by the Indemnitee, and shall
bear interest at the Prime Rate from the date the Losses for which
indemnification is sought were incurred or paid, as the case may be, by the
Indemnitee until the date of payment of indemnification by the Indemnitor.
60.48 Survival; Time and Manner of Certain Claims
The representations, warranties and agreements of Buyer and
Seller in this Agreement shall survive Closing; provided, however, that neither
Seller nor Buyer shall have any liability under:
Sections 7.1(a) or 7.2(a), respectively, except for
claims for Losses thereunder asserted by the party seeking such indemnification
by written notice to the party from whom such indemnification is sought (A)
within the statutory periods of limitations applicable to claims that could give
rise to such Losses, in the case of the representations and warranties stated in
Section 4.12, (B) within three years after the Effective Time, in the case of
the representations and warranties stated in Section 4.15, and (C) on or before
May 31, 1998, in all other cases; and
(2) Sections 7.1(b), (c) or (d) or 7.2(b) or (c), respectively,
except for claims for Losses thereunder asserted by the party seeking such
indemnification by written notice to the party from whom such indemnification
is sought within three years after the Effective Time.
(74) After Closing the sole remedy of Buyer and Seller with
respect to this Agreement and the transactions contemplated hereby for matters
referred to in Sections 7.1 and 7.2 shall be (i) to make claims, to the extent
permitted by such Sections, pursuant to the provisions of this Article 7, and
(ii) to seek specific enforcement of, or mandatory or injunctive relief with
respect to, Sections 2.5, 2.6 and 5.2.
61.49 Disbursement of Indemnity Escrow Deposit
The Indemnity Escrow Deposit
shall be held by the Escrow Agent until the first anniversary of the Closing
Date (the "Indemnity Escrow Period"). If and to the extent that Buyer suffers or
incurs any Losses for which it is entitled to indemnification under Section 7.1,
it shall be entitled (but shall have no obligation) to obtain such
indemnification from the Indemnity Escrow Deposit, by submitting to the Escrow
Agent a claim for a disbursement therefrom in the amount of such Losses (or, if
less, the amount of the Indemnity Escrow Deposit). Upon expiration of the
Indemnity Escrow Period, Seller and Buyer shall direct the Escrow Agent to
disburse to Seller the Indemnity Escrow Deposit, less (i) any amounts previously
disbursed to Buyer in payment of indemnified Losses or to Buyer pursuant to
Section 2.8(b) and (ii) any amounts with respect to which Buyer has made a claim
for disbursement and Seller has disputed such claim in the manner provided in
the Indemnity Escrow Agreement, which amounts shall continue to be subject to
the Indemnity Escrow Agreement in accordance with its terms.
62.50 Other Indemnification.
The provisions of Sections 7.3 and 7.4 shall be
applicable to any claim for indemnification made under any other provision of
this Agreement, and all references in Sections 7.3 and 7.4 to Sections 7.1 and
7.2 shall be deemed to be references to such other provisions of this Agreement.
63. Miscellaneous Provisions
64. Each of the parties shall pay its own expenses and the fees and
expenses of its counsel, accountants, and other experts in connection with this
Agreement.
65.51 Brokerage. Seller shall indemnify and hold Buyer harmless from and
against any and all Losses arising from any employment by it of, or services
rendered to it by, any finder, broker, agency, or other intermediary,
in connection with the transactions contemplated hereby, or any allegation
of any such employment or services, it being acknowledged that Webster
Consultants, LLC, did not in any event act in any such capacity or
provide any such service. Buyer shall indemnify and hold Seller harmless
from and against any and all Losses arising from any employment by it of,
or services rendered to it by, any finder, broker, agency, or other
intermediary, in connection with the transactions contemplated hereby, or
any allegation of any such employment or services, including but not
limited to any employment of, services rendered by, or claims made by Webster
Consultants, LLC.
66.52 Wavers. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party hereto, shall be deemed to constitute
a waiver by the party taking the action of compliance with any representation,
warranty, covenant or agreement contained herein or in any Transaction Document.
The waiver by any party hereto of any condition or of a breach of another
provision of this Agreement or any Transaction Document shall not operate or be
construed as a waiver of any other condition or subsequent breach. The waiver by
any party of any of the conditions precedent to its obligations under this
Agreement shall not preclude it from seeking redress for breach of this
Agreement other than with respect to the condition so waived.
67.53 Notices
All notices, requests, demands, applications, services of process,
and other communications which are required to be or may be given under this
Agreement or any Transaction Document shall be in writing and shall be deemed to
have been duly given if sent by telecopy or facsimile transmission, delivered by
recognized overnight courier, or mailed, certified first class mail, postage
prepaid, return receipt requested, to the parties hereto at the following
addresses:
To Seller:
JBI, Inc.
555 Turnpike Street
Canton, MA 02021
Attention: President
Telecopy: (617) 821-4867
Copies:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attention: Stephen W. Carr, P.C.
Telecopy: (617) 570-1231
To Buyer:
CHB Capital Partners
511 16th Street, Suite 600
Denver, CO 80202
Attention: Thomas L. Kelly II
Telecopy: (303) 571-0114
Copies:
Shoe Corporation of America, Inc.
2035 Innis Road
Columbus, Ohio 43224
Attention: Mr. Dennis B. Tishkoff
Telecopy: (614) 784-0104
Parcel, Mauro, Hultin & Spaanstra, P.C.
1801 California Street
Suite 3600
Denver, Colorado 80202-2636
Attention: Bruce D. Stocks
Telecopy: (303) 298-8465
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section. Such notice shall be effective,
(i) if delivered in person, by courier or by facsimile transmission, upon actual
receipt by the addressee, or (ii) if mailed, upon the earlier of five days after
deposit in the mail and the date of delivery as shown by the return receipt
therefor.
68.54. Entire Agreement;Amendments.
This Agreement embodies 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 thereto, including
but not limited to the Letter of Intent dated November 13, 1996, between Buyer
and J. Baker, Inc. This Agreement may not be modified orally, but only by an
agreement in writing signed by the party or parties against whom any waiver,
change, amendment, modification, or discharge may be sought to be enforced.
69.55. Binding Effect;Benefits.
This Agreement shall inure to the benefit of and will be binding upon
the parties hereto and their respective heirs, legal representatives,
successors, and permitted assigns. Neither Buyer nor Seller shall assign this
Agreement or delegate any of its duties hereunder to any other Person without
the prior written consent of the other. Notwithstanding the foregoing, Seller
and Buyer each shall be entitled to assign this Agreement, in whole or in part,
to any of their respective Affiliates without the consent of the other and Buyer
may assign the Agreement to American National Bank and Trust Company of Chicago
as agent for itself and other lenders; provided, however, that no such
assignment shall relieve Buyer or Seller of any of its respective obligations
under this Agreement, and provided, further, that any permitted assignee
(whether or not it so states in writing) shall be deemed to have taken any
interest in this Agreement and any rights thereunder subject to all rights
(including rights of offset), defenses and claims of Seller against Buyer.
70.56. Hearings, Schedues and Exhibits.
The section and other headings in this Agreement are for reference
purposes only and will not affect the meaning of interpretation of this
Agreement. Reference to Schedules or Exhibits shall, unless otherwise indicated,
refer to the Exhibits and Schedules attached to this Agreement, which shall be
incorporated in and constitute a part of this Agreement by such reference. Any
item that could be deemed to be properly disclosable on more than one Schedule
to this Agreement shall be deemed to be properly disclosed on all such Schedules
if it is disclosed in reasonable detail on any Schedule to the Agreement.
71.57. Counterparts
This Agreement may be executed in any number of counterparts, each of
which, when executed, shall be deemed to be an original and all of which
together will be deemed to be one and the same instrument.
72.58. Governing Law.
The validity, performance, and enforcement of this agreement and all
transaction documents, unless expressly provided to the contrary, shall be
governed by the laws of the Commonwealth of Massachusetts, without giving effect
to the principles of conflicts of law of such state.
73.59 Third Parties;Joint Ventures.
This Agreement constitutes an agreement solely among the parties
hereto, and is not intended to and will not confer any rights, remedies,
obligations, or liabilities, legal or equitable, including any right of
employment, on any Person (including but not limited to any employee or former
employee of Seller) other than the parties hereto and their respective
successors, or assigns, or otherwise constitute any Person a third party
beneficiary under or by reason of this Agreement. Nothing in this Agreement,
expressed or implied, is intended to or shall constitute the parties hereto
partners or participants in a joint venture.
74.60. Construction.
This Agreement has been negotiated by Buyer and Seller and their
respective legal counsel, and legal or equitable principles that might require
the construction of this Agreement or any provision of this Agreement against
the party drafting this Agreement shall not apply in any construction or
interpretation of this Agreement.
[Balance of this page intentionally blank]
<PAGE>
Buyer and Seller have executed this Asset Purchase Agreement as of the
date first written above.
SELLER
JBI, Inc.
By: /s/ Alan I. Weinstein
------------------------
Name: Alan I. Weinstein
Title: President
BUYER
Shoe Corporation of America, Inc.
By: /s/ Dennis B. Tishkoff
--------------------------
Name: Dennis B. Tishkoff
Title: President
EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
between
PAYLESS SHOESOURCE, INC.
and
JBI, INC. AND J. BAKER, INC.
Dated as of January 13, 1997
<PAGE>
<TABLE>
<S> <C>
I. DEFINITIONS...................................................................................................1
II. PURCHASE OF THE LEASES.......................................................................................7
2.1 Purchase and Sale of Leases.....................................................................7
2.2 Purchase Price for Leases.......................................................................7
2.3 Mechanics of Lease Assignments..................................................................7
2.4 Seller's Representations and Warranties Specific to Stores......................................8
(a) Condition..............................................................................8
(b) Obtaining Consents.....................................................................8
(c) Omitted................................................................................8
(d) Notice of Violations...................................................................8
(e) Restrictions on Use....................................................................8
(f) No Default.............................................................................9
(g) Copies of Leases.......................................................................9
(h) No Mechanics Liens.....................................................................9
(i) Environmental Conditions...............................................................9
(j) Title to Leases........................................................................9
(k) Exclusive Possession...................................................................9
2.5 Documentation..................................................................................10
2.6 Utilities and Licenses.........................................................................10
2.7 Notices........................................................................................10
III. PURCHASE OF INVENTORY......................................................................................11
3.1 Purchase and Sale of Inventory.................................................................11
3.2 Inventory Purchase Price.......................................................................11
3.3 Inventory Warranties and Indemnities...........................................................11
3.4 Delivery of Inventory From Warehouse...........................................................12
3.5 Layaways, Gift Certificates, Coupons, Frequent Shopper Program and
Vouchers....................................................................................12
3.6 Inventory and Pricing Documentation............................................................12
3.7 Inventory Audit................................................................................13
(a) Estimated Inventory...................................................................13
(b) Excluded Merchandise..................................................................14
(c) Procedures............................................................................14
(d) Auditor's Report......................................................................15
(e) Auditor's Fee.........................................................................15
(f) Parties' Expenses.....................................................................15
(g) Reconciliation........................................................................15
3.8 Return Procedures..............................................................................16
IV. PURCHASE ORDERS...........................................................................................16
4.1 Purchase and Sale of Purchase Orders...........................................................16
4.2 Purchase Price for Purchase Orders.............................................................16
4.3 Mechanics of Purchase Order Assignments........................................................16
4.4 Liabilities with Respect to Purchase Orders....................................................16
4.5 Reports regarding Purchase Orders and Inventory on Order.......................................16
4.6 Delivery of Inventory on Order.................................................................16
4.7 Paid Purchase Orders and Agency Commissions....................................................17
4.8 Letters of Credit..............................................................................17
V. PURCHASE OF OTHER TANGIBLE ASSETS............................................................................17
5.1 Purchase and Sale of Other Tangible Assets.....................................................17
5.2 Purchase Price for Other Tangible Assets.......................................................18
5.3 FF&E Audit.....................................................................................18
5.4 Purchase of FF&E and Store Supplies in the Warehouse...........................................18
VI. PURCHASE OF CONTRACTS AND PREPAIDS..........................................................................19
6.1 Purchase and Sale of Contracts and Prepaids....................................................19
6.2 Assumption of Contracts........................................................................19
6.3 Mechanics for Assignment of Contracts..........................................................19
6.4 Seller's Representations and Warranties Specific to the Contracts and ...........................
Prepaids....................................................................................19
(a) Contracts.............................................................................19
(b) Prepaids..............................................................................20
VII. INTELLECTUAL PROPERTY......................................................................................20
7.1 Purchase and Sale of Intellectual Property.....................................................20
7.2 Noninfringement by Inventory and Inventory On Order............................................20
7.3 Seller's Warranties and Representations Specific to the Intellectual
Property.......................................................................................20
(a) Title.................................................................................20
(b) Infringement..........................................................................21
(c) Exclusive Use.........................................................................21
(d) Validity..............................................................................21
(e) Adverse Claims........................................................................21
(f) Disputes..............................................................................21
(g) Trade Secrets.........................................................................21
VIII. REPRESENTATIONS AND WARRANTIES OF SELLER................................................................22
8.1 Corporate Power and Authority..................................................................22
8.2 Due Authorization..............................................................................22
8.3 Litigation.....................................................................................22
8.4 No Conflict....................................................................................22
8.5 Governmental Authorities.......................................................................23
8.6 Binding Obligation.............................................................................23
8.7 [Omitted]......................................................................................23
8.8 Division Financial Statements..................................................................23
8.9 Undisclosed Liabilities........................................................................23
8.10 No Adverse Change..............................................................................24
8.11 Title to and Condition of Properties...........................................................24
8.12 Taxes..........................................................................................24
8.13 [Omitted]......................................................................................25
8.14 [Omitted]......................................................................................25
8.15 Contracts and Commitments......................................................................25
8.16 Compliance with Laws...........................................................................26
8.17 Employee Benefit Plans.........................................................................27
8.18 [Omitted]......................................................................................27
8.19 Restrictions...................................................................................27
8.20 [Omitted]......................................................................................27
8.21 Completeness of Disclosure.....................................................................27
8.22 [Omitted]......................................................................................27
8.23 Accuracy of Documents..........................................................................28
8.24 Preparation of Other Financial Data............................................................28
8.25 Labor..........................................................................................28
8.26 Related Party Transactions.....................................................................28
8.27 Child and Forced Labor.........................................................................28
8.28 No Foreign Person..............................................................................28
8.29 No Affiliates..................................................................................28
IX. BUYER'S REPRESENTATIONS AND WARRANTIES......................................................................29
9.1 Corporate Power and Authority..................................................................29
9.2 Due Authorization..............................................................................29
9.3 Litigation.....................................................................................29
9.4 No Conflict....................................................................................29
9.5 Binding Obligation.............................................................................29
9.6 Governmental Authorities.......................................................................29
X. OPERATIONS PRIOR TO CLOSING..................................................................................30
10.1 Ordering of Merchandise........................................................................30
10.2 Inventory Levels...............................................................................30
10.3 Undelivered Inventory..........................................................................30
10.4 Inventory Processing...........................................................................30
10.5 Granting of Encumbrances.......................................................................30
10.6 Operation in the Ordinary Course...............................................................30
10.7 Material Decisions.............................................................................31
10.8 Leases.........................................................................................31
10.9 Access.........................................................................................31
10.10 Insurance......................................................................................31
10.11 Premises Work..................................................................................31
10.12 [Omitted]......................................................................................32
10.13 POS Devices, Etc...............................................................................32
10.14 Litigation Files..............................................................................32
XI. EMPLOYEES...................................................................................................32
11.1 Termination of Employees by Seller.............................................................32
11.2 Benefits for Active and Former Employees.......................................................33
11.3 Termination Benefits...........................................................................33
11.4 Hiring of Employees by Buyer...................................................................33
11.5 Indemnification for Employee Claims............................................................33
11.6 Employee Information...........................................................................34
XII. PURCHASE PRICE.............................................................................................34
12.1 Purchase Price for the Assets..................................................................34
(a) Inventory.............................................................................34
(b) Other Tangible Assets.................................................................34
(c) Leases................................................................................34
(d) Contracts and Prepaids................................................................34
(e) Intellectual Property.................................................................34
(f) FF&E and Store Supplies in Warehouse..................................................34
12.2 Payment of the Purchase Price for the Assets at the Closing....................................35
(a) Inventory.............................................................................35
(b) Other Tangible Assets.................................................................35
(c) Intellectual Property.................................................................35
12.3 Escrow.........................................................................................35
12.4 [Omitted]......................................................................................36
12.5 Tax Allocation of Purchase Price...............................................................36
12.6 Payment of Other Amounts.......................................................................36
XIII. ASSUMPTION OF SPECIFIED LIABILITIES.......................................................................36
13.1 Assumption of Specified Liabilities............................................................36
13.2 Excluded Liabilities...........................................................................37
13.3 Indemnification for Excluded Liabilities.......................................................38
XIV. CONDITIONS OF BUYER'S OBLIGATION TO CLOSE..................................................................38
14.1 Omitted........................................................................................38
14.2 Representations True as of the Closing Date....................................................38
14.3 Compliance with Agreements and Covenants.......................................................39
14.4 Opinion of Counsel.............................................................................39
14.5 Expiration of HSR Waiting Period...............................................................39
14.6 Other Agreements...............................................................................39
14.7 Actions or Proceedings.........................................................................39
14.8 Termination of Employees.......................................................................40
14.9 Qualitative and Quantitative Delivered Store Minimum...........................................40
XV. CONDITIONS TO SELLERS' OBLIGATION TO CLOSE..................................................................40
15.1 Consents and Approvals.........................................................................40
15.2 Representations True as of Closing Date........................................................40
15.3 Compliance with Agreements and Covenants.......................................................40
15.4 Opinion of Counsel.............................................................................41
15.5 Expiration of HSR Waiting Period...............................................................41
15.6 Other Agreements...............................................................................41
15.7 Actions or Proceedings.........................................................................41
15.8 Qualitative and Quantitative Delivered Store Minimum...........................................41
15.9 Issuance of Buyer's Backup L/C's...............................................................42
XVI. CLOSING....................................................................................................42
16.1 Closing........................................................................................42
16.2 Deliveries by Seller...........................................................................42
(a) Satisfactory Assignments..............................................................42
(b) Documents of Transfer.................................................................42
(c) Closing Certificate...................................................................42
(d) Opinion of Counsel....................................................................42
(e) The Records and Miscellaneous Assets..................................................43
(f) Possession of Delivered Stores........................................................43
16.3 Deliveries by Buyer............................................................................43
(a) Closing Payment.......................................................................43
(b) Closing Certificate...................................................................43
(c) Opinion of Counsel....................................................................43
XVII. TERMINATION...............................................................................................43
17.1 Termination....................................................................................43
(a) Mutual Consent........................................................................43
(b) By Buyer or Seller....................................................................43
17.2 Effect of Termination..........................................................................43
XVIII. NOTICES..................................................................................................44
XIX. INDEMNIFICATION............................................................................................44
19.1 Seller's Indemnification of Buyer..............................................................44
19.2 Buyer's Indemnification of Seller..............................................................45
19.3 Procedure for Indemnified Third Party Claim....................................................45
19.4 Limitation and Liability.......................................................................46
19.5 Survival; Time and Manner of Claims............................................................46
19.6 Guarantee by Seller's Affiliate................................................................46
XX. BULK SALES..................................................................................................46
XXI. BROKERAGE..................................................................................................46
XXII. PRORATIONS................................................................................................47
22.1 Prorations Generally...........................................................................47
22.2 Percentage Rent................................................................................47
22.3 Payment of Prorations..........................................................................47
22.4 Transfer Taxes.................................................................................47
XXIII. EXCLUSIVITY..............................................................................................47
XXIV. NONCOMPETITION AND CESSATION OF BUSINESS..................................................................47
24.1 Covenant not to Compete........................................................................47
24.2 Cessation of Business..........................................................................47
XXV. MISCELLANEOUS..............................................................................................48
25.1 Entire Agreement...............................................................................48
25.2 Assignability..................................................................................48
25.3 Access to Premises, Books and Records..........................................................48
25.4 Choice of Law..................................................................................48
25.5 Severability...................................................................................48
25.6 Further Assurances.............................................................................49
25.7 Counterparts...................................................................................49
25.8 Headings.......................................................................................49
25.9 No Third Party Beneficiaries...................................................................49
25.10 Expenses.......................................................................................49
25.11 Remedies Cumulative............................................................................49
25.12 Expenses of Litigation.........................................................................49
25.13 Locative Adverbs...............................................................................50
25.14 Exhibits.......................................................................................50
25.15 Waiver of Default..............................................................................50
25.16 Press Releases and Confidentiality.............................................................50
25.17 References to Articles and Sections............................................................50
25.18 Joint Preparation..............................................................................51
25.19 [Omitted]......................................................................................51
25.20 Increased Promotional Efforts..................................................................51
25.21 Former Information.............................................................................51
XXVI. LIST OF EXHIBITS AND SCHEDULES............................................................................53
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of the 13th day of January,
1997, by and between PAYLESS SHOESOURCE, INC., a Missouri corporation ("Buyer"),
and JBI, Inc., a Massachusetts corporation ("Subsidiary"), and , J. Baker, Inc.
a Massachusetts corporation ("Parent"), (Parent and Subsidiary are, both
collectively and singularly, referred to as "Seller").
Recitals
WHEREAS, Seller owns and operates a women's shoes merchandising
business through approximately 186 self-service retail stores located in the
Eastern and Midwestern United States under the trade name of Parade of Shoes as
a division of Subsidiary (the "Division"); and
WHEREAS, Seller desires to sell, and Buyer desires to purchase, certain
inventory, leases and other real property interests, leasehold improvements,
furniture, fixtures and equipment, and other assets used in the business,
pursuant to the terms and subject to the conditions set forth in this Agreement;
Agreements
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto mutually
covenant and agree as follows:
I. DEFINITIONS
In addition to other terms defined elsewhere in this Agreement, the
following terms have the meanings set forth below for purposes of this Agreement
and all schedules and exhibits attached hereto and incorporated by reference
into this Agreement:
"Affiliate" means any Person (as defined below) that directly
or indirectly controls, is controlled by or is under common control with another
Person.
"Asset(s)" means any one or more of the Leases, the Inventory,
the Purchase Orders, the Other Tangible Assets, the Contracts, the Prepaids, the
Intellectual Property and the Assignable Permits.
"Assignable Permits" means those Permits which (i) are freely
assignable by their terms, or (ii) pursuant to applicable law are freely
assignable in accordance with this transaction.
"Auditor" means Retail Grocer's Inventory Service (RGIS) or
Washington Inventory Service (WIS), as selected by Buyer, who shall conduct the
Inventory Audit and who shall be independent from both Buyer and Seller.
"Book Value" means the net book value of the applicable
Assets, which shall be such Assets' book value net of accumulated depreciation,
determined in accordance with Seller's books and records prepared in accordance
with Seller's ordinary course of business consistent with past practice as of
the Closing Date, but excluding capitalized interest and other internal loads.
"Business Day" means any weekday other than a weekday on which
banks are authorized to be closed under Kansas or Massachusetts law.
"Claims" means any and all claims (in the case of those
brought by third parties, whether meritorious or not), losses, liabilities,
demands, actions, judgments, damages, costs, fees, fines, penalties or expenses
of any kind or nature, including without limitation, reasonable attorneys' fees.
"Closing" means the consummation of the transactions
contemplated by this Agreement related to the sale or transfer of the Assets to
Buyer.
"Closing Date" means the date on which the Closing occurs, but
which in any event shall be a date no later than March 31, 1997.
"Contracts" means those contracts listed on Schedule 6.4(a)
hereto.
"Cost Complement" means 46.5%.
"Delivered Store" means each of the Stores for which a
Satisfactory Assignment is delivered to Buyer and which is in a condition on the
Closing Date which (without taking into account the possible application of the
Americans With Disabilities Act) allows Buyer to operate such Store in the
ordinary course of business. On the Closing Date, Schedule B shall be attached
to this Agreement listing the Delivered Stores.
"Division Lines" means those brands and trade names of
merchandise set forth on Schedule A.
"Encumbrances" means liens, mortgages, security interests,
financing statements, liabilities, restrictions, rights of possession, leases,
charges, judgments, sale agreements, options, unpaid duties or governmental
charges, claims and contracts of any kind or nature whatsoever, but shall not,
in any case, include Permitted Encumbrances.
"Excluded Merchandise" means (i) any merchandise inventory
that is damaged, dirty or shopworn in any manner or to any degree, as well as
mismates, near mates and singles as determined by Buyer and Seller or their
respective representatives in their reasonable discretion by mutual agreement at
the time of the Inventory Audit, (ii) any merchandise inventory being held for
return to vendors, (iii) any merchandise inventory delivered to Stores or any
warehouse for delivery to the Stores after the date hereof and prior to the
Closing Date that would not normally be received in the Division's ordinary
course of business consistent with past practices, (iv) any merchandise
inventory not from Division Lines, except for "floor buys" that, unless
otherwise approved by Buyer in writing, (A) were made in the ordinary course of
the Division's business consistent with past practices within the last twelve
months, (B) represent less than 3,000 pairs of shoes in the aggregate, and (C)
were not purchased or transferred from a retail affiliate of Seller and (v) any
merchandise in an Undelivered Store for which Seller is not in a position to
provide access to the Inventory in such Undelivered Store to conduct the
Inventory Audit and load the Inventory onto a trailer after such Inventory
Audit, within five (5) days after the Closing Date.
"FF&E" means all furniture, trade fixtures and equipment owned
by Seller as of the date of this Agreement, located in any of the Stores,
including without limitation signs, fire extinguishers, POS Devices, electronic
article surveillance tags and machines, and extra or spare signs and fixtures. A
list of the minimum amount of FF&E by Store and owned by Seller is set forth on
Schedule 5.1(b-iii) hereto.
"GAAP" means generally accepted accounting principles
consistently applied.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnify" means, as to the matter which is the subject of
indemnification, that the indemnifying party shall indemnify, defend, protect
and hold the indemnified party and its officers, directors, agents, employees,
insurers, bonders, Affiliates, successors and assigns harmless from and against
all Claims.
"Intellectual Property" means any and all of the following
that are owned or used, other than incidentally (for which purpose
manufacturer's and vendor trademarks and similar rights associated with items of
Inventory (e.g., "Keds" and "Gloria Vanderbilt") and systems and software used
in the administration of the Division shall be considered to be used only
incidentally), by Seller in the operation of the Division, including without
limitation those listed on Schedule 7.1 hereto: (i) all trademarks, trade names,
service marks, copyrights, trade dress, trade secrets, inventions, processes and
designs and patents, (ii) all intellectual property licenses, (iii) all other
sources of business identifiers and all goodwill associated therewith, (iv) all
registrations and recordings of any of the foregoing, (v) all applications for
registration of any of the foregoing, and (vi) all renewals of any of the
foregoing. A true, accurate and complete list of all trademarks and service
marks used other than incidentally in the Division and all other Intellectual
Property of a material nature is set forth on Schedule 7.1 hereto.
"Inventory" means all inventory with respect to the Stores and
in the Warehouse on the Closing Date which is (i) owned by Seller, (ii) held for
resale to customers in the ordinary course of the Division's business, (iii)
reflected on the books and records of the Division as inventory, subject to
verification by the Inventory Audit and (iv) located either in the Stores or in
the Warehouse or in transit from the Warehouse to any Store on the Closing Date;
provided, however, that no Excluded Merchandise shall be included as Inventory.
"Inventory Audit" means a physical count of the Inventory
located at the Delivered Stores, the Undelivered Stores and the Warehouse,
performed by the Auditor in accordance with Section 3.7.
"Inventory Cost" means the cost of each unit of merchandise in
the Inventory determined by multiplying the Cost Complement by the Retail Price.
"Inventory on Order" means merchandise that is the subject
of a Purchase Order.
"Inventory Purchase Price" means the purchase price for the
Inventory as set forth in Section 3.2 hereof.
"Lease" means all leasehold and occupancy rights and related
real property interests necessary for the use and enjoyment of a Store and all
of the lease documents pursuant to which Seller has leasehold and occupancy
rights in a Store or which affect such rights or both, including without
limitation any lease document, the term under which has not commenced. A true,
accurate and complete list of the Leases is set forth on Schedule 2.4(g)I-and
2.4(g)II hereto.
"Lease Assignment" means, with respect to each Lease, an
Assignment of Lease from Seller to Buyer in the form and substance of Exhibit A
and, where applicable, shall also include the consent and approval of the
landlord under such lease in the form and substance of Exhibit A-1.
"Leasehold Improvements" means all (i) building improvements
and additions that are included within the Stores and (ii) facilities serving
the Stores, including without limitation all air conditioners, furnaces, alarm
systems, ceilings, floor coverings, ventilating systems, lighting fixtures,
water heaters, wash basins, toilet fixtures, utility connections and utility
distribution systems. Notwithstanding any other representation, warranty,
covenant or agreement herein or in any document or instrument delivered
herewith, Buyer acknowledges and agrees that Seller does not have the title to
the Leasehold Improvements and that Seller's sole interest therein is to use the
Leasehold Improvements as lessee under the applicable Lease. Any representations
or warranties herein with respect to title or encumbrance on title shall be
deemed to refer, in the case of the Leasehold Improvements, to Seller's rights
as lessee therein.
"Loss" means damage to, destruction of or notice of the
proposed taking by eminent domain of, a Store or any of the Assets.
"Other Tangible Assets" has the meaning set forth in
Section 5.1.
"Person" means an individual, a firm, corporation, syndicate,
trust, partnership or any other business or juridical entity.
"POS Devices" means the computerized equipment and related
firmware, software, manuals, specifications and other related items used by
Seller as of the date of this Agreement in any of the Delivered Stores, or held
in inventory for use in the Stores as of the date of this Agreement and as of
the Closing Date for purposes of recording sales information from the Stores,
and shall include any spare or extra parts for such devices.
"Prepaids" means, with respect to a Delivered Store, prepaid
expenses determined in accordance with GAAP and that are included in the
categories of prepaid expenses listed on Schedule 6.4(b).
"Permitted Encumbrances" means the following which do not
interfere in a material respect with the right or ability to use or operate the
Stores in the manner currently operated: (i) liens for taxes not yet due and
payable; (ii) zoning laws and ordinances and similar legal requirements in the
manner currently applicable; (iii) rights reserved to any governmental authority
to regulate property on which the Stores are located; and, (iv) as to any real
property, easements, rights-of-way, securities, permits, restrictions and minor
imperfections or irregularities in title.
"Purchase Order(s)" means (i) one or more of those valid and
binding purchase orders listed on Schedule 4.1, which were placed on or before
the date of this Agreement, in the Division's ordinary course of business
consistent with past practices, for merchandise inventory to be delivered to the
Stores or to the Warehouse to the extent delivery for such purchase orders
occurs after the Closing Date and, after the date hereof, shall also mean (ii)
those valid and binding purchase orders placed on or after the date of this
Agreement in accordance with Section 10.1.
"Records" mean, all written data, correspondence, computer
files, financial statements, sales and inventory history, lot master file
listing each lot and a description therefor, purchase orders, legal files,
promotional plans, historical cost complement calculations, employee
information, sales plans and other records, written policies, handbooks and
instructions, or copies of any of the foregoing that Seller may have or use in
the internal operation of the Division, but does not in any such case include
any such item which Seller is prohibited by law or regulation from disclosing
(including without limitation, employee records).
"Retail Price" means, with respect to each unit of Inventory,
the price therefor shown on the Seller's 12/14 Official Price List adjusted (i)
for promotions effective on 12/14/96 and (ii) by reducing the price to $10.00
for all SKU's priced at $15.00 per unit that are offered for sale, or sold, at
two (2) units for $20.00.
"Satisfactory Assignment" means, with respect to a Store, the
assignment of the applicable Lease which is delivered to Buyer on the Closing
Date and shall:
(i) be in the substance and form of the Lease
Assignment, set forth on Exhibit A as to those Leases identified on
Schedule 2.4(g)-I and, as to those Leases identified on Schedule
2.4(g)-II a Lease Assignment in the substance and form set forth on
Exhibit A-1;
(ii) be in a form which maintains all Lease terms,
including rent, percentage rent, other charges, and options as
currently applicable to Seller as of the date hereof, as set forth in
the Lease for such Store except as otherwise amended by the Lease
Assignment; and
(iii) be without any (A) radius restrictions
applicable to Buyer's existing Payless ShoeSource or Payless Kids
stores or Buyer's subsequently existing Payless ShoeSource or Payless
Kids stores operated in the format historically associated with such
trade names or (B) operating covenants which would prevent Buyer's
operation of the Store in substantially its current format.
"Seller's Best Knowledge" means, with respect to Seller, the
informed knowledge after due and reasonable inquiry of Seller or any of its
officers, directors, management executives, or any one or more of the above. For
the purpose of this definition, the terms officers, directors, or management
executives, shall include any person who served or serves in such capacity at
any time.
"SKU" means the set of merchandise inventory to which a single
stock number is assigned and utilized for tracking quantities of Units (as
defined below).
"Specified Liabilities" has the meaning set forth in
Section 13.1.
"Store" means any one or more of the retail shoe stores of the
Division listed on Schedule C currently operated by Seller and which shall be
operating on the Closing Date, and shall not include any store of Seller not
operated as part of the Division as of the date of this Agreement, nor shall it
include any retail shoe store, leased or licensed shoe department, manufacturing
facility, clearance center, display facility, warehouse or other facility
operated by Seller other than those Stores listed on Schedule C.
"Store Supplies" means the supplies (such as bags, merchandise
receipts, etc.) which Seller has in each Store and, as specifically designated
for use in the Division, in the Seller's Warehouse, or which is otherwise
designated for a Store, in the Division's ordinary course of business.
"Undelivered Stores" means Stores that do not become Delivered
Stores pursuant to this Agreement, including, without limitation, any Stores
closed by Seller between the date hereof and the Closing Date, any Stores for
which the Lease has expired or been terminated on or before the Closing Date and
any Stores that, prior to the Closing, became subject to any eminent domain
proceedings or order.
"Unit" means, with respect to merchandise inventory in a
Store, a pair of footwear, an item of apparel or an accessory sold in the Stores
in the ordinary course of business.
"Warehouse" means the Seller's warehouse located in Canton,
Massachusetts and the warehouse in which Seller's dyeable merchandise is stored
in Auburn, Maine.
II. PURCHASE OF THE LEASES
II.1 Purchase and Sale of Leases. Subject
to the terms and conditions of this Agreement, on and as of the Closing Date,
Buyer shall purchase from Seller and Seller shall sell to Buyer the Leases for
the Delivered Stores.
II.2 Purchase Price for Leases At the
Closing Buyer shall assume, and thereafter shall pay, perform and discharge in
full when due, Seller's obligations under the Leases for the Delivered Stores
from and after the Closing Date. Except for such assumption, and except for
payments made in respect of the prorations made in accordance with Article XXII,
no payment shall be due from Buyer to Seller therefor. Notwithstanding anything
in this Agreement or the Lease Assignment to the contrary, Buyer shall not
assume (i) any liability arising out of or related to Leases for Undelivered
Stores or (ii) any liability, obligation or payment related to or arising out of
the performance or non-performance by Seller under any Lease for Delivered
Stores for any period prior to the Closing Date or for any event occurring prior
to the Closing Date.
II.3 Mechanics of Lease Assignments.
Upon execution of this Agreement, Seller and Buyer shall cooperate in obtaining
Satisfactory Assignments. Seller shall prepare (i) a Lease Assignment in the
form shown on Exhibit A-1 for each of the Leases listed on Schedule 2.4(g)-II
and (ii) a Lease Assignment in the form of Exhibit A for the remaining Leases.
Seller and Buyer shall execute a Lease Assignment for each Lease within seven
(7) days after the date hereof. Seller shall send the Lease Assignments for the
Leases listed on Schedule 2.4(g)-II to the Landlords respecting such Leases for
execution within three days after the execution by Buyer and Seller of such
Lease Assignments. Fully executed Lease Assignments shall become effective upon
the Closing but their effectiveness shall be contingent on the occurrence of the
Closing. Seller shall diligently proceed at its expense to obtain the Landlord's
execution of the Lease Assignments for the Leases listed on Schedule 2.4(g)-II
and Buyer shall reasonably cooperate in such efforts.
II.4 Seller's Representations and Warranties Specific to Stores
Except as set forth on the
Seller's Disclosure Schedule attached as Schedule 2.4 , each Seller, jointly and
severally, represents, warrants, covenants to and agrees with Buyer with respect
to each of the Stores that:
(a) Condition. Each Store is in good condition and
repair, ordinary wear and tear excepted, and is operating in accordance with the
Division's ordinary course of business, with its FF&E and Store Supplies intact
and with all Leasehold Improvements in good order and repair, ordinary wear and
tear excepted, properly functioning and meeting or exceeding all requirements in
the applicable Lease.
(b) Obtaining Consents. Seller shall use
commercially reasonable efforts, at its cost, to obtain and deliver to Buyer at
the Closing a Satisfactory Assignment with respect to each Lease.
(c) Omitted
(d) Notice of Violations. Seller has
not received notice, nor is Seller aware, of any facts or circumstances which
would give rise to the issuance of a notice, whether written or oral, since
January 1, 1994 with respect to any Store from:
(i) any governmental authority regarding any
actual or alleged violations of any statute, law, rule, order,
regulation, code or ordinance;
(ii) any insurance carrier providing coverage with
respect to any portion of the Stores regarding conditions which require
correction under the terms of existing insurance policies; or
(iii) any taxing authority or other governmental
agency regarding any proposed or actual assessments for public
improvements or proposed or pending eminent domain proceedings.
(e) Restrictions on Use. None of the Stores
are governed by or subject to: (i) any contractual agreements (other than the
Leases) among or between Seller and any third party(ies); (ii) any agreements
among or between any other parties; or (iii) any zoning, building, land use or
similar legal requirements, limitations or restrictions, which in any of the
foregoing in any way limit or prohibit the use of the Stores as retail shoe
stores.
(f) No Default. There is no existing default
by Seller or, to Seller's Best Knowledge, by any of Sellers' landlords under the
Leases, and no facts exist which, with notice or the passage of time or both,
would constitute a default, and Seller has performed, kept and observed all of
Seller's obligations under each Lease for each Store.
(g) Copies of Leases. A true, accurate and
complete list of the Leases is set forth on Schedule 2.4(g)-I and 2.4(g)-II)
hereto. Seller has delivered, or will deliver to Buyer, upon Buyer's request
copies of each of the Leases. The Leases so delivered are and shall be true,
complete and correct copies of each Lease and accurately reflect and constitute
all of the agreements and understandings between Seller and the landlords
thereunder with respect to the applicable Store.
(h) No Mechanics Liens. . All work which has
been performed in the Stores by or for Seller or for which Seller is liable or
may incur liability has been paid for in full (or if payment is not now due,
will be paid in full by Seller when due or by the Closing Date, whichever is
earlier), there are no disputes concerning the performance of or payment for
such work and there has been no such work performed for which mechanic's,
materialmen's or other liens may be claimed.
(i) Environmental Conditions. None of
the Stores has contained or currently contains (i) any substance, material,
chemical or waste which possesses toxic or hazardous characteristics or
properties (except for those toxic or hazardous substances, materials, chemicals
or wastes necessary or customary to the operation of a retail shoe store in
quantities which comply with law and consistent with such use), or (ii) any
asbestos which currently requires removal or abatement under existing
environmental laws. There are no other environmental conditions currently or at
the Closing Date at the Stores, or to Seller's Best Knowledge at any neighboring
property, which are reasonably likely to interfere with the operation of a
retail shoe store.
(j) Title to Leases. Seller owns each Lease and the
Leasehold Improvements free and clear of any Encumbrances.
(k) Exclusive Possession. Except in each
case for Permitted Encumbrances, there are no subleases, licenses or other
possessory interests or occupancy rights by, through or under the Leases, and no
third party(ies) or other operations of Seller possess or shall possess any such
possessory interests or occupancy rights by, through or under any agreement for
the Stores, except as may be arranged by Seller with respect to an Undelivered
Store after such time as it has been determined that it will not be a Delivered
Store.
If any notice pursuant to 2.4(d)(i), (d)(ii) or (f) above is received
by Seller with respect to any Store after the date hereof and prior to the
Closing Date, Seller shall promptly deliver a copy of such notice to Buyer and
shall cure or correct any default, violation or condition alleged in such notice
before the Closing Date for such Store unless the parties mutually agree that
such Store will be an Undelivered Store. If Seller should fail to cure or
correct any default, violation or condition alleged in such notice before the
Closing Date, then Buyer may, at its option, (i) take any or all necessary and
appropriate action to cure or correct such default, violation or condition at
Seller's sole cost and expense or (ii) exclude such Lease from the Leases
assigned hereunder (and the Store covered by such Lease shall be an Undelivered
Store).
II.5 Documentation Upon execution of this Agreement,
Seller shall provide Buyer with true, accurate and complete copies of all
construction plans, specifications and as-built drawings relating to the Stores
in Seller's possession and such supplemental information in connection with all
such as-built drawings and documents as are in Seller's possession, in each case
to the extent Buyer shall reasonably make a request in connection therewith.
II.6 Utilities and Licenses Seller shall fully
cooperate with and assist Buyer in obtaining all utility permits and services
(including without limitation electric, telephone, water and sewer service),
licenses and any other permits and services representing a continuation of such
permits or services as necessary for Buyer's use of each Store after the Closing
Date. Without limiting the generality of the foregoing, Seller shall fully
cooperate with and assist Buyer in ensuring the uninterrupted continuity of all
existing services, permit Buyer to use any utility services in Seller's name for
a reasonable period of time, execute any application for or form documenting the
issuance of any application or permit for service, provide any information or
records necessary or desirable to facilitate transition of service from Seller
to Buyer and use reasonable efforts to take all other actions reasonably
requested by Buyer in connection therewith within three (3) Business days of
Buyer's request. Buyer shall reimburse Seller for any utility service charges
incurred by Seller to the extent such charge relates to the period of time after
the Closing Date with respect to the applicable Delivered Store and for any
utility service deposits paid by Seller and transferred to Buyer's account
pursuant to the applicable utility company's transfer of the service from Seller
to Buyer. Seller irrevocably designates Buyer its attorney in fact for the
purposes of granting any permission or executing any permits, licenses,
applications or other documents necessary or desirable to permit Buyer to
maintain the uninterrupted continuity of utility and other services if Seller
fails to grant such permissions or execute such permits, applications or
documents within the period set forth in this Section.
II.7 Notices Until and through the Closing Date, Seller shall
send copies of all notices, consents, requests, approvals, instructions and
other communications (excluding Seller's transmittal of routine rent payments)
which any Lease provides for or permits to be sent to or by the tenant under the
Lease, to Buyer, and addressed to the attention of Buyer's General Counsel.
III. PURCHASE OF INVENTORY
III.1 Purchase and Sale of InventoryPurchase and Sale of Inventory.
Subject to the terms and conditions of this Agreement, on and as of the Closing
Date Seller shall sell, assign and transfer to Buyer and Buyer shall purchase
and accept all of the Inventory free and clear of all Encumbrances. Seller
shall, at Buyer's request, promptly execute with respect to any Inventory, a
Bill of Sale in the form of Exhibit B.
III.2 Inventory Purchase Price. The purchase price for the
Inventory (the "Inventory Purchase Price") shall be as follows:
(a) For all Inventory with a Seller designated Spring
1997 season code, 100% of the Inventory Cost for such Inventory.
(b) For all Inventory with a Seller designated Fall
1996 season code, 70% of the Inventory Cost for such Inventory.
(c) For all Inventory with a Seller designated Spring
1996 season code, 60% of all the Inventory Cost for such Inventory.
(d) For all Inventory with a Seller designated season
code earlier than Spring 1996, 40% of the Inventory Cost for such Inventory.
Notwithstanding the foregoing, the Inventory Purchase Price for all
Inventory located in the Undelivered Stores shall be further reduced by (i) 10%,
in the event there are ten (10) or less Undelivered Stores, or by (ii) 20%, in
the event there are more then ten (10) Undelivered Stores. To the extent that a
Lease for the Undelivered Store has expired or been terminated on or before the
Closing Date, Seller shall store the Inventory for such Store in a trailer or in
a location in the Seller's Warehouse designated for such Undelivered Store's
Inventory. In no event shall Buyer be obligated to purchase Inventory unless the
Inventory is counted and examined in the Inventory Audit (except when based on
Warehouse shipping records or Store sales records in accordance with Section
3.7(c)).
III.3 Inventory Warranties and Indemnities.
Effective as of the Closing, Seller shall assign to Buyer all of
Seller's rights, but not obligations, under any purchase orders (not including
Purchase Orders) or related documents under which items of the Inventory were
originally purchased, including without limitation, the benefits of any
warranties or indemnities contained therein. To the extent that any such items
may not be assignable, Seller agrees that upon request from Buyer it shall
enforce such rights in its own name for the benefit of Buyer and at Buyer's
expense.
III.4 Delivery of Inventory From Warehouse.
After effecting the Inventory Audit for the Inventory in the
Warehouse as provided herein, Seller, at the direction of Buyer and at Buyer's
expense, shall arrange for the delivery of such Inventory, as well as any Store
Supplies and FF&E held in inventory in the Seller's Warehouse which are
purchased by Buyer under Section 5.4, to any location in the continental United
States designated by Buyer. Seller shall pay all costs and expenses incurred in
the loading of such Inventory, FF&E and Store Supplies on trailers at Seller's
Warehouse. Seller and Buyer agree that Buyer is acquiring all of the Inventory
in the Seller's Warehouse, regardless of whether attributable to a Delivered
Store or an Undelivered Store.
III.5 Layaways, Gift Certificates, Coupons, Frequent Shopper Program
and Vouchers.
(a) Each Seller, jointly and severally, represents, warrants
and covenants to Buyer that there are no lay-away contracts with respect to the
Inventory sold by the Division as of the date hereof.
(b) Buyer shall honor Seller's gift certificates, vouchers and
similar customer credits outstanding as of the Closing Date; provided, Seller
shall reimburse Buyer promptly upon request (accompanied by delivery of such
certificates, vouchers or credits, or copies thereof) for any of such gift
certificates, vouchers and similar customer credits redeemed by Buyer after the
Closing.
(c) Each Seller, jointly and severally, represents and
covenants that there are no Division coupon, frequent purchaser discount or any
other similar programs outstanding.
III.6 Inventory and Pricing Documentation
Prior to or contemporaneously with the execution of this
Agreement, Seller has provided Buyer with copies, which Seller represents are
true, accurate and complete, of the following reports for all reporting periods
of the Division's current and preceding fiscal year which reports were prepared
in the ordinary course of business or in response to Buyer's request therefor:
(a) Financial reports which reflect calculations of cost
complements, all components of Inventory Cost, profit and loss, disposition of
merchandise inventory and supporting documentation (including without limitation
the Division's merchandise inventory flow statements);
(b) The Division's monthly Store merchandise inventory
reports, showing (i) quantities of merchandise inventory (and indicating whether
such quantities were derived by actual physical counts or by estimates), (ii)
merchandise inventory "shrink," (iii) merchandise inventory "turn," (iv)
quantities of damaged merchandise inventory and (v) merchandise inventory
deliveries and transfers (and with respect to each of the above showing all
quantities in Units per SKU);
(c) The Division's monthly Store sales reports for each and
all of the Stores (or more frequently if prepared more frequently in the
Division's ordinary course of business or at any time when requested by Buyer)
showing total sales and supplemented at Buyer's request by additional reports
showing for each Store (i) total merchandise inventory levels, (ii) merchandise
inventory deliveries and (iii) transfers or returns of merchandise inventory
(and with respect to each of the above showing all quantities at both cost and
at retail, in Units per SKU);
(d) The Division's summaries of each Store's occupancy
costs, along with all supporting documentation;
(e) Weekly retail price files showing retail price by
lot or item number for Seller's current fiscal year's fourth quarter; and
(f) The Division's monthly merchandise sales plans for
fiscal years ending in 1997 and 1998.
From and after the date of this Agreement and promptly following their
preparation by Seller in the Division's ordinary course of business, Seller
shall provide Buyer with true, accurate and complete copies of monthly (or more
frequently if prepared more frequently in such ordinary course) updates of all
materials required to be provided to Buyer under this Section 3.6. Seller
represents and warrants that all financial reports, sales reports, additional
reports and supporting documentation required under this Article III were
prepared in the ordinary course of Seller's business consistent with past
practices, or were prepared in good faith in response to a request by Buyer
therefor.
III.7 Inventory Audit.
(a) Estimated Inventory. Prior to the
Closing, Seller shall provide to Buyer its estimate of the Inventory by quantity
for each SKU to be delivered to Buyer in the "to be" Delivered Stores (by
Delivered Store), the Undelivered Stores (by Undelivered Store) and the
Warehouse (collectively, the "Estimated Inventory"). Such estimate shall be
derived from Seller's merchandise inventory system as operated by Seller in the
ordinary course of the Division's business in accordance with past practices. If
Buyer disputes in good faith the Estimated Inventory, Buyer shall provide its
own estimate of the Inventory together with Buyer's explanation for the variance
between its estimate and Seller's estimate to Seller, and if the parties cannot
agree on a mutually acceptable estimate, the average of the Seller's Estimate
and the Buyer's Estimate of Inventory shall be the Estimated Inventory.
(b) Excluded Merchandise. Prior to the
Inventory Audit with respect to a Store or the Warehouse, as the case may be,
Seller shall segregate within such Store or the Warehouse all of the Excluded
Merchandise which may be in such Store or Warehouse, and Seller shall clearly
and prominently mark or designate each item of Excluded Merchandise in such
manner as to ensure that no Excluded Merchandise shall be counted in the
Inventory Audit. Any Excluded Merchandise may be stored at the applicable Store
or the Warehouse until the Inventory Audit, but only to the extent that such
Excluded Merchandise is properly marked and segregated as provided herein. Any
Excluded Merchandise may be removed at Seller's sole cost and expense from the
applicable Store or if in the Warehouse, moved by Seller to a portion of the
Warehouse designated for non-Division Merchandise inventory. In such case,
Seller shall remove the Excluded Merchandise from the applicable Store or to
space not used to store the Division's Inventory in the Warehouse prior to the
Closing Date. Any Excluded Merchandise remaining on the premises of a Delivered
Store shall be deemed abandoned one (1) business day after the date on which the
Inventory Audit is completed (the "Inventory Audit Date") and may be disposed of
by Buyer after such date. Buyer shall not be responsible, and Seller shall bear
all risk of loss, for any Excluded Merchandise left in the applicable Store or
the Warehouse following the Inventory Audit Date. Within sixty (60) days after
Closing Seller shall be obligated to destroy or dispose of outside of the United
States the Excluded Merchandise located in the Seller's Warehouse or that was in
the Stores. The provisions of this Section 3.7(b) shall not apply to Excluded
Merchandise not owned by Seller which is located in the Warehouse in Auburn,
Maine.
(c) Procedures Seller shall permit the
Buyer, its representatives and the Auditor access at 6:00 a.m. local time to the
Warehouse and to the Stores on the Closing Date and for as much time as is
necessary thereafter to conduct the Inventory Audit. Buyer and Seller shall
cooperate to complete the Inventory Audit as soon as reasonably possible
following the Closing. The Auditor shall conduct a complete and accurate
physical count of the Inventory which shall include number of pairs by SKU and
size therefor (the "Physical Count"), in accordance with the procedures for
taking the Physical Count that are set forth in Schedule 3.7. To the extent that
the Inventory Audit is not commenced in all Stores on the same day, the
Inventory Audit shall take place first in the Delivered Stores and then in the
Undelivered Stores, unless the landlord for an Undelivered Store threatens to
seize immediate possession of such Undelivered Store in which case Buyer and
Seller shall cooperate to conduct the Inventory Audit in such Undelivered Store
as soon as reasonably possible. The Physical Count shall be completed
expeditiously, within a reasonable time after the Closing Date. In the event
that the Inventory Audit reveals the presence of Excluded Merchandise in the
affected Store or Seller's Warehouse, such Excluded Merchandise shall be
segregated from, and not be counted as, Inventory, and Seller may cause the
removal of such Excluded Merchandise from the Store aremises as set forth in (b)
above. Seller shall not make shipments of Inventory to the Stores from the
Warehouse on the Closing Date or thereafter except as directed by Buyer. Any
shipments from the Warehouse not yet received and accounted for at a Store by
the date of its Inventory Audit will be added to the Physical Count, based on
the Warehouse shipping records. Buyer shall not remove any Inventory from any
Delivered Store other than through sales in the ordinary course of business
prior to the completion of the Inventory Audit for such Delivered Store. In
addition to the Physical Count, the Auditor shall review the sales records for
the Delivered Store being audited for the period commencing upon the Closing
Date and ending on the day of the Inventory Audit for such Delivered Store and
conduct a count thereof by SKU and size of the Inventory sold during such period
(the "Sales Count"). The Sales Count total shall be added to the total of the
Inventory determined by the Physical Count to arrive at a total count of the
Inventory for the Delivered Stores. The Inventory Audit of the Inventory at
Seller's Warehouse may be done, at Buyer's option, while loading such Inventory
for shipment to another location designated by Buyer as permitted herein.
(d) Auditor's Report. The results of the
Inventory Audit shall be reported by the Auditor to Buyer and Seller, along with
supporting documentation (collectively, the "Auditor's Report"), no later than
thirty (30) days after the date on which the Physical Count of the Inventory is
concluded. As part of each Auditor's Report, Auditor shall provide Buyer and
Seller with all electronic media and files of the results of the Physical Count
of the Inventory.
(e) Auditor's Fee. The costs, fees and expenses of the Auditor
shall be borne equally by Buyer and Seller.
(f) Parties' Expenses. Buyer and Seller shall
each bear their own costs and expenses related to the Inventory Audit, including
without limitation the cost of certified public accountants or employees of
Buyer or Seller present at any Store or Warehouse during the Physical Count of
the Inventory, the wages of their own employees and any "extras" who assist in
the performance or evaluation of the Inventory Audit.
(g) Reconciliation. After completing the
Physical Count in each of the Stores and the Warehouse, both Buyer and Seller
shall agree upon and then sign (or cause to be signed) all inventory sheets and
other documents or forms used in the Physical Count and Sales Count pursuant to
this Section 3.7. Copies of all such materials shall be retained by both Buyer
and Seller for extension and totaling of the Physical Counts and Sales Counts
and the calculations of the Inventory for each Store and the Warehouse. No later
than five (5) days after receiving the Auditor's Report (the "Initial
Reconciliation Date"), each party shall review the Auditor's Report and
calculate the Inventory Cost and the Inventory Purchase Price for the Inventory
subject to the Auditor's Report. In the event there is no dispute pertaining to
the determination of the Inventory with respect to the Stores or the Warehouse,
Buyer and Seller shall exchange letters on the applicable Initial Reconciliation
Date to such effect. If Buyer's and Seller's determinations of the Inventory
Purchase Price are different, then Buyer and Seller shall negotiate in good
faith and use their good faith, diligent efforts to resolve such dispute. If
Buyer and Seller are unable to reach agreement within twenty (20) Business Days
after the applicable Initial Reconciliation Date, then such dispute shall be
submitted for resolution to a Big Six accounting firm agreed upon by Buyer and
Seller.
III.8 Return Procedures. Buyer shall deduct
from the Inventory Purchase Price the cost and expense to Buyer for accepting
all customer returned merchandise purchased from Stores prior to the Closing
Date, which is not saleable by Buyer in accordance with its normal policies and
which is returned within one hundred twenty (120) days following the Closing
Date.
IV. PURCHASE ORDERS
IV.1 Purchase and Sale of Purchase Orders.
Subject to the terms and conditions of this Agreement, at the
Closing, Buyer shall purchase from Seller and Seller shall sell to Buyer all of
Seller's right, title and interest in, to and under the Purchase Orders.
IV.2 Purchase Price for Purchase Orders.
At the Closing Buyer shall assume, and thereafter shall pay, perform and
discharge in full when and if due, Seller's obligations under the Purchase
Orders. No other payment shall be due from Buyer to Seller therefor.
IV.3 Mechanics of Purchase Order Assignments.
At Closing Seller shall assign to Buyer all of Seller's
rights under the Purchase Orders, including without limitation the benefits of
any warranties or indemnities contained therein. To the extent that any such
rights may not be assignable, Seller agrees that, upon request from Buyer,
Seller shall enforce such rights in Seller's own name and at Seller's expense
(other than as to the purchase price payable under such Purchase Order) and
Seller shall indemnify Buyer respecting any claims which may be brought against
Buyer or Seller respecting the assumption of the Purchase Order. Seller shall,
at Closing, execute and deliver documents evidencing such assignment in the form
of the Assignment and Assumption of Contracts and Purchase Orders attached as
Exhibit C.
IV.4 Liabilities with Respect to Purchase Orders.
Notwithstanding anything in this Agreement, Buyer
shall in no event be deemed to have assumed any liability arising out of or
related to a purchase order of Seller that is not listed on Schedule 4.1 or
placed in accordance with Section 10.1.
IV.5 Reports regarding Purchase Orders and Inventory on Order.
Seller shall provide to Buyer
on a weekly basis from the date of execution of this Agreement through the
Closing Date, reports on (i) the status of any Purchase Order and any Inventory
on Order, (ii) the receipt of any such inventory at the Seller's Warehouse prior
to the Closing Date, and (iii) the status of payment of the purchase price,
duties and agent commissions applicable to each Purchase Order.
IV.6 Delivery of Inventory on Order
Seller shall use commercially reasonable efforts to assure that Inventory on
Order to be delivered after the Closing Date will be delivered at such location
as may be designated by Buyer. After the Closing, Seller will cooperate and
assist Buyer in communicating with the other party to any Purchase Order
regarding Buyer's assumption thereof.
IV.7 Paid Purchase Orders and Agency Commissions
If, pursuant to the Purchase Order terms, Seller
has made payment to the vendor thereunder, then at Closing Buyer, upon
satisfactory proof of such payment, shall reimburse Seller therefor, as well as
for any accurately assessed duty or freight actually paid in connection
therewith. If, pursuant to the terms of any agency agreement, Seller has made
payment to an agent related to inventory covered by the Purchase Orders, then
Buyer, upon satisfactory proof of such payment and that such payment was in
accordance with the terms of the applicable agency agreement, shall reimburse
Seller therefor on the Closing Date provided that with respect to agency
commissions charged by Seller's Foreign Buying Office, the commission shall not
exceed two percent (2%) of the first cost of the merchandise purchased.
IV.8 Letters of Credit. After the date
hereof, Seller shall use reasonable efforts to obtain shipment of goods under
Purchase Orders without opening letters of credit in support of its obligations
with respect to such shipment. Subject to the provisions of Section 10.1, if,
despite such reasonable efforts, a supplier demands that a letter of credit be
opened by Seller to effect payment of the Purchase Order price, then Seller
shall notify Buyer of such fact and permit Buyer a reasonable opportunity to
discuss the matter with the supplier. If Buyer is unsuccessful in its attempt to
convince the supplier to eliminate its demand that payment be made by a letter
of credit, then, subject to the provisions of Section 10.1, Seller may obtain
shipment under such Purchase Order obligating payment through means of a letter
of credit. With respect to any letter of credit that is opened to effect payment
of a Purchase Order on or prior to the date hereof or, in accordance with the
preceding sentence, that is opened after the date hereof, and that is in any
such case still open and undrawn on the Closing Date (an "Open L/C"), Buyer
shall, effective as of the Closing, open a "back-to-back" letter of credit or a
"standby" letter of credit in favor of Seller or its designee and in an amount
that fully covers Seller's exposure under such Open L/C (a "Buyer's Backup
L/C").
V. PURCHASE OF OTHER TANGIBLE ASSETS
V.1 Purchase and Sale of Other Tangible Assets.
Subject to the terms and conditions of this Agreement, as
of the Closing Date, Buyer shall purchase and accept delivery of, and Seller
shall transfer, sell and assign to Buyer, free and clear of all Encumbrances,
all of Seller's right, title and interest in the following Assets, including all
warranties and indemnities related thereto (the "Other Tangible Assets"):
(a) the Leasehold Improvements for each Delivered Store;
(b) the FF&E in each Delivered Store;
(c) the Store Supplies at each Delivered Store on the
Closing Date;
(d) the Records;
(e) FF&E or Store Supplies in the Seller's Warehouse as
listed by item and quantity on Schedule 5.1(b-iii) to the extent designated
by Buyer; and
(f) all other tangible assets (other than Inventory and cash)
that are in the Delivered Stores on the Closing Date ("the Miscellaneous
Assets").
V.2 Purchase Price for Other Tangible Assets.
The aggregate purchase price for the Other Tangible
Assets (with the exception of the FF&E and Store Supplies described in 5.1(e))
shall be Seven Million Seven Hundred Eleven Thousand Four Hundred Dollars and No
Cents ($7,711,400); provided, that such amount shall be reduced by the following
amounts, as applicable:
(a) the net present value, using a discount rate of 7%, of any
rent or percentage rent increases or other fees, costs and charges required by
parties other than Seller or Buyer, which have been agreed to by Buyer and
Seller in their reasonable discretion, as a condition to such other party's
consent to the assignment of any Lease or any Contract by Seller to Buyer, it
being understood that any rent or percentage rent increases or other fees, costs
and charges which are provided for in the Lease or Contract prior to such
consent (rather than being imposed by such third party as a condition to such
consent) are not subject to this Section 5.2(a);
(b) 53.2% of the Book Value of the FF&E and Leasehold
Improvements as set forth in Schedule 5.1(b-i) for any Undelivered Stores; and
(c) the replacement cost for all FF&E shown on Schedule
5.1(b-ii) and not in the Delivered Stores on the Closing Date, as determined by
the FF&E Audit.
V.3 FF&E Audit. In conjunction with the Inventory Audit of
each Delivered Store and the Seller's Warehouse, the Auditor shall take a
complete physical count of the FF&E shown on Schedule 5.1(b-ii) in each
Delivered Store and in the Seller's Warehouse.
V.4 Purchase of FF&E and Store Supplies in the Warehouse.
To the extent desired by Buyer, Buyer
may purchase the FF&E and Store Supplies in the Seller's Warehouse at the prices
to be mutually agreed upon by the parties prior to Closing.
VI. PURCHASE OF CONTRACTS AND PREPAIDS
VI.1 Purchase and Sale of Contracts and Prepaids.
Subject to the terms and conditions of this
Agreement, on and as of the Closing Date, Buyer shall purchase, assume and
accept delivery of, and Seller shall transfer, sell and assign to Buyer, all of
Seller's right, title and interest in the Contracts and Prepaids associated with
the Delivered Stores. Seller shall, at the Closing execute and deliver an
assignment and assumption agreement with respect to the Purchase Orders and
Contracts transferred hereunder in the form and substance attached as Exhibit C
(the "Assignment and Assumption of Contracts and Purchase Orders") and a Bill of
Sale with respect to the Prepaids in form and substance attached as Exhibit B.
No payment shall be due from Buyer to Seller for the Contracts or the Prepaids.
VI.2 Assumption of Contracts. At the
Closing, Buyer shall assume, and shall thereafter pay, perform and discharge in
full when and if due, Seller's obligations under the Contracts arising from and
after the Closing Date. Buyer shall at the Closing execute and deliver the
Assignment and Assumption of Contracts and Purchase Orders. Notwithstanding
anything in this Agreement to the contrary, Buyer shall not assume (i) any
liability, obligation or payment related to, attributable to or arising out of
any contracts of the Seller other than the Contracts or (ii) any liability,
obligation or payment related to, attributable to, arising out of the
performance or non-performance of any contract for any period prior to the
Closing Date or any event occurring prior to the Closing Date.
VI.3 Mechanics for Assignment of Contracts.
At least ten (10) Business Days prior to Closing, the parties
shall attach Schedule 6.4(a) to this Agreement, Schedule 6.4(a) shall list, and
contain copies of, all of the Contracts, to the extent applicable listed by
Delivered Store, which Buyer agrees that Seller shall assign to, and be assumed
by, Buyer. Seller shall assign the Contracts listed on Schedule 6.4(a) to Buyer
at the Closing Date.
VI.4 Seller's Representations and Warranties Specific to the Contracts
and Prepaids.
In addition to Seller's representations, warranties and covenants
elsewhere in this Agreement, each Seller, jointly and severally, represents,
warrants and covenants to Buyer at Closing as follows:
(a) Contracts. The Contracts shall be in effect and
assignable as of the Closing Date. At or before the time Schedule 6.4(a) is
completed the Seller shall have provided to Buyer true and correct copies of the
Contracts. Seller further represents, warrants and covenants to Buyer that (i)
Seller is not now, nor shall Seller be as of the Closing Date, in default under
any of the Contracts and (ii) no facts exist that, with notice or the passage of
time or both, would constitute a default.
(b) Prepaids. Seller shall have provided
Buyer, on the Closing Date, as Schedule 6.4(b) a true, accurate and complete
list of all types of the Prepaids other than those which fall into the category
of Lease payments, real estate taxes, common area maintenance changes and
utilities.
VII. INTELLECTUAL PROPERTY
VII.1 Purchase and Sale of Intellectual Property.
Subject to the terms and conditions of this Agreement, on
and as of the Closing Date, Seller shall sell, transfer, assign and deliver and
Buyer shall purchase and accept the Intellectual Property. Seller shall at the
Closing execute and deliver documents evidencing such sale, assignment and
transfer of the Intellectual Property in form and substance reasonably
satisfactory to both parties.
VII.2 Noninfringement by Inventory and Inventory On Order.
In the event of any
Claim by a third party alleging infringement by any items included in the
Inventory or the Inventory On Order of any patent, trademark, service mark or
other intellectual property right of any third party, Seller shall indemnify and
defend Buyer with respect to such Claim in accordance with the provisions of
Section 19.3. If Buyer's distribution and sales of such items is temporarily or
permanently enjoined (for a period of more than ten (10) business days), in
addition to its other obligations under this Agreement, Seller shall purchase
the infringing items from Buyer at the price paid by Buyer for such items
hereunder or under the applicable Purchase Order, if permitted by the court in
such case, and dispose of such items outside of the United States or destroy
them, as permitted by the court in such case. If the court in such case does not
permit Buyer to sell such items to Seller, Seller, in addition to its other
obligations under this Agreement, shall reimburse to Buyer the price paid by
Buyer for such items hereunder or under the applicable Purchase Order plus all
costs incurred by Buyer to destroy the items. Without limiting Seller's
obligations under this Agreement, Seller may, at its option, purchase any
Inventory or Inventory On Order, subject to a Claim as described above, from
Buyer which has not yet been sold to customers at the price paid by Buyer for
such items hereunder or under the applicable Purchase Order . Within 14 days
after such purchase, at Seller's expense, Seller shall remove or reimburse Buyer
for its reasonable expense incurred in removing the items so purchased from
Buyer's premises. The obligations of this Section 7.2 shall not apply to any
items other than the specific items (i.e., the actual physical items) of
Inventory and Inventory On Order purchased under this Agreement or under
Purchase Orders assigned hereunder, whether or not of the same design or types
as such items.
VII.3 Seller's Warranties and Representations Specific to the
Intellectual Property.
Each Seller, jointly and severally, hereby
represents, warrants and covenants to Buyer as follows:
(a) Title. The Seller is the owner of all right,
title and interest in and to each item of the rights and property included
within the Intellectual Property, including, without limitation, the "PARADE OF
SHOES" service mark, free and clear of all liens, security interest, charges,
encumbrances, equities and other adverse claims and other Encumbrances;
(b) Infringement. The Seller has the right
and authority to use each item of the federally registered trademarks and
service marks included in the Intellectual Property (the "Registered Marks")
including the "PARADE OF SHOES" service mark, in the United States and Puerto
Rico in connection with the conduct of the Division and its business; such use
of the Registered Marks do not conflict with, infringe upon or violate any,
trademark, copyright or other proprietary right of any other Person; and Seller
has no knowledge that any of the Registered Marks are used in countries other
than the United States. The Seller has the right and authority under applicable
copyright law to use each item of the Division's box designs, sign designs and
in-store advertising designs (the "Designs") in the United States and Puerto
Rico in connection with the conduct of the Division and its business; and such
use of the Designs does not infringe upon any copyright of any other Person.
Seller has not received any third party claim, notice or demand alleging
infringement of any intellectual property rights of any third party due to
Seller's use of the Intellectual Property;
(c) Exclusive Use. No other Person has any right to
utilize any of the Registered Marks in the conduct or operation of a retail
shoe store or shoe department of a retail store;
(d) Validity. All patents and all state,
federal and foreign registrations and applications for all registration of all
copyrights, trademarks and other rights and property interest included within
the Intellectual Property are valid and in full force and effect and are not
subject to any Encumbrances, taxes, maintenance fees or pending legal or
administrative actions to which a response falls due within 90 days after the
date hereof;
(e) Adverse Claims. There are no claims,
actions or other adversary proceedings involving the Seller which concerns any
item of the rights or property included in the Intellectual Property; and to
knowledge of Seller there is no basis for any such claim, action or proceeding
nor is any such claim, action or proceeding threatened;
(f) Disputes. There are no outstanding or, to the best
knowledge of Seller, no threatened disputes or disagreements with respect to
any licenses or similar agreements or arrangements identified in Schedule 7.1;
and
(g) Trade Secrets. With respect to each trade
secret, referenced in Schedule 7.1, a true and correct copy of such trade
secret's documentation has been delivered by Seller to Buyer and is current,
accurate and sufficient in detail and content to identify and explain the trade
secret, and to allow its full and proper use without reliance on any special
knowledge or memory of others, and the Seller has taken all reasonable security
measures to protect the secrecy, confidentiality and value of such trade
secrets.
VIII. REPRESENTATIONS AND WARRANTIES OF SELLER
Each Seller, jointly and severally, hereby represents, warrants and
covenants to Buyer as of the date hereof and also as of the Closing Date as
follows, except as disclosed in Schedule 8 attached hereto:
VIII.1 Corporate Power and Authority.
Seller and Guarantor are corporations duly organized, validly existing and in
good standing under the laws of Massachusetts. Seller is duly qualified to do
business and in good standing in each jurisdiction in which it is required to be
so qualified. Each of Seller and Guarantor has full right, power and lawful
authority to own and operate its business, (including as to Seller, without
limitation the Division and the Assets) and to consummate the transactions
contemplated herein and in the Lease Assignment, the Noncompetition Agreement,
the Escrow Agreement and each Bill of Sale, Assignment and Assumption of
Contracts and Purchase Orders and other document of transfer and assignment
described in this Agreement, and with respect to Guarantor, the Guaranty
(collectively, the "Transaction Documents"). Seller has filed and maintained
fictitious name registrations or similar protective filings or registrations
respecting the name "Parade of Shoes" in the states and at the dates set forth
on Schedule 8.1 attached hereto.
VIII.2 Due Authorization. All necessary corporate
action to authorize this Agreement and the Transaction Documents and the
performance by Seller and Guarantor of all of their respective obligations
hereunder and under the Transaction Documents has been taken, and no additional
corporate action with respect to any of the above is or shall be required for
consummation of the transactions contemplated by this Agreement or by any of the
Transaction Documents.
VIII.3 Litigation. No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or to Seller's
Best Knowledge threatened against Seller or Guarantor which relates to the
Assets or the transactions contemplated by this Agreement or by any of the
Transaction Documents, nor does Seller know of any reasonably likely basis for
any such litigation, arbitration, investigation or proceeding, the result of
which could adversely affect the Buyer, the Assets or the transactions
contemplated hereby or by any of the Transaction Documents.
VIII.4 No Conflict. Seller's and Guarantor's performance of
and compliance with the terms and provisions of this Agreement and of the
Transaction Documents and the consummation of the transactions contemplated
herein and therein do not conflict with or result in any violation of any
charter, bylaw, mortgage, indenture, contract, agreement, instrument, franchise,
permit, judgment, decree, order, statute, rule or regulation applicable to
Seller, the Guarantor (to the extent of its obligations under the Guaranty) the
Division or the Assets; nor (except as may be necessary to permit a Satisfactory
Assignment or except for those agreements and related consents referenced on
Schedule 15.1) is any consent or any other action by any other Person required
under any such instrument that has not, or will not have been, obtained prior to
the Closing.
VIII.5 Governmental Authorities. Seller shall
prepare and file a notification and report form pursuant to the HSR Act (and
shall request early termination in such report and respond with reasonable
diligence and dispatch to any request for additional information made in
response to such filing) as soon as reasonably practicable after the date
hereof, but in no event later than January 24, 1997. Except for such filing and
except for any disclosure requirements under the Securities Exchange Act of
1934, as amended, which Seller shall timely make, all filings with or notices to
all governmental authorities required under any act, law, ordinance, regulation,
order or decree have been properly made by Seller and all licenses, policies,
permits, authorizations and approvals of governmental authorities are and have
been in full force and effect as required by applicable law, including but not
limited to workers' compensation insurance, meal period reduction
authorizations, unemployment and disability insurance and chauffeurs' social
security.
VIII.6 Binding Obligation. This Agreement and each of
the Transaction Documents constitutes a legal, valid and binding obligation of
Seller and with respect to the Guaranty, of the Guarantor and enforceable in
accordance with its terms, subject to all applicable bankruptcy, insolvency and
related laws and the application of equitable principles.
VIII.7 [Omitted].
VIII.8 Division Financial Statements.
Attached hereto as Schedule 8.8-1 are "consolidating balance sheets"
and "consolidating profit and loss statements" for J. Baker, Inc., which include
as a part thereof financial results for the Division and for Casual Male, Inc.
("Casual Male") for, and as of the end of, J. Baker, Inc.'s fiscal year ending
in 1996 and for, and as of the end of, the third quarter of the J. Baker, Inc.
fiscal year ending in 1997 (collectively the "Consolidating Financial
Statements"). The Consolidating Financial Statements each present fairly in all
material respects the financial position of the Seller and Casual Male,
respectively, and the results of the operations of each of the Division and
Casual Male with respect to the respective dates thereof and the periods covered
thereby before the allocation of interest, overhead and income taxes, in
conformity with GAAP (except as to footnote requirements which do not materially
affect the accuracy of the Consolidating Financial Statements).
VIII.9 Undisclosed Liabilities. Seller
has no liabilities, debts, claims or obligations, whether accrued, absolute,
contingent or otherwise, whether due or to become due, known or unknown, which
could materially and adversely affect the Assets or the business, assets or
operations of the Division, except:
(a) as expressly set forth in the Seller's balance sheet
as of November 2, 1996 and not heretofore paid or discharged;
(b) liabilities and obligations arising in the Division's
ordinary course of business consistent with past practices under any agreement,
contract, commitment, lease or plan specifically disclosed in this Agreement;
(c) those liabilities and obligations incurred, consistent
with the Division's past business practice, in or as a result of the Division's
ordinary course of business since November 2, 1996; and
(d) those fixed liabilities and obligations the monetary
effect of which would be less than $10,000 per occurrence and less than $50,000
in the aggregate.
VIII.10 No Adverse Change. Since November 2,
1996, the Division's business has been conducted only in the Division's ordinary
course of business and consistent with the Division's past practices and there
has not been (i) any material adverse change in the financial condition,
business, properties, assets, or results of operations of the Division; (ii) any
event or condition of any character that has materially and adversely affected
the Division or the operation of its business; (iii) any material changes in the
accounting systems, policies or practices of the Division; (iv) any waiver by or
on behalf of the Division of any material rights; or (v) shipments of inventory
or merchandise to the Stores or the Seller's Warehouse other than in the
Division's ordinary course of business and consistent with past practices.
VIII.11 Title to and Condition of Properties.
Seller has good and indefeasible title to and is the
lawful owner of the Assets, free and clear of all Encumbrances except for
Permitted Encumbrances; and at the Closing, Seller shall be the sole and lawful
owner of, and have good and indefeasible title to, all the Assets, free and
clear of all Encumbrances except for liens for property tax assessments not yet
due and payable. All of the premises, structures, facilities, FF&E, Leasehold
Improvements and other material items of tangible property and assets which
would be included in the Assets if the Closing took place on the date hereof are
in good working condition and repair, subject to normal wear and tear and
maintenance, are usable in the ordinary course of business, and conform to all
applicable laws, ordinances, codes, rules, and regulations relating to their
construction, use and operation, but excluding the Americans with Disabilities
Act. No Person other than Seller owns any property or assets located in the
Stores or necessary to the operation of the Division's business, except for
leased items under the Contracts.
VIII.12 Taxes. All tax returns of Seller required by
law to be filed as of the Closing Date will have been duly filed or valid
extensions will have been obtained, and all taxes imposed upon Seller or the
Division or any of their properties, assets or income, or with respect to their
employees, which are due and payable or claimed by any taxing authority to be
due and payable have been paid or reserved for in the filings with the
Securities and Exchange Commission or in the Consolidating Financial Statements
as of the Closing Date, other than taxes being contested in good faith by Seller
or the Division concerning an amount which, in the aggregate, does not exceed
$25,000. There are no claims for taxes pending against or which could adversely
affect the Assets and no threatened claim for tax deficiencies or any basis for
such claims.
VIII.13 [Omitted]
VIII.14 [Omitted]
VIII.15 Contracts and Commitments.
Except as disclosed on Schedule 8.15, Seller is not a party to any written or
oral:
(a) agreement, contract or commitment with any present or
former employee or consultant or for the employment of any Person, including any
consultant, who is significantly engaged in the conduct of the Division's
business;
(b) agreement, contract or commitment for the future purchase
of, or payment for, supplies or products, or for the performance of services by
a third party, which supplies, products or services are used in the conduct of
the Division's business involving in any one case $10,000 or more;
(c) agreement, contract or commitment relating to the
Division's business not otherwise listed on Schedule 8.15 and which by its terms
must continue over a period of more than six months from the date hereof or
exceeding $10,000 in value;
(d) distribution, dealer, representative or sales agency
agreement, contract or commitment relating to the Division's business;
(e) agreements, contracts or commitments with any
Affiliates which relate to or affect in any manner the Division's business;
(f) lease under which Seller is either lessor or lessee
relating to the Assets or any location at which the Assets are located, other
than the Leases and the Contracts;
(g) note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of money relating to the Division's business or agreement
or arrangement for a line of credit or guarantee, pledge or undertaking of the
indebtedness of any other Person relating to or affecting the Division's
business;
(h) agreement, contract or commitment for any charitable
or political contribution relating to the Division's business that is to occur
after, or extend beyond, the Closing;
(i) any commitment or agreement for any capital
expenditure or leasehold improvement in excess of $3,000 individually and
$100,000 in the aggregate relating to the Division's business;
(j) agreement, contract or commitment limiting or restraining
Seller, the Division's business or any successor thereto from engaging or
competing in any manner or in any business, nor, to Seller's Best Knowledge, is
any employee of Seller engaged in the conduct of the Division's business subject
to any such agreement, contract or commitment; and
(k) agreement, contract or commitment relating to the
Division's business.
Within seven (7) Business Days after the date of this Agreement, Seller
shall complete the list of agreements, contracts, commitments, leases, plans and
other instruments, documents and undertakings to be listed on Schedule 8.15 and
shall provide Buyer with such list, as well as copies of all such items listed
on Schedule 8.15. Each of the agreements, contracts, commitments, leases, plans
and other instruments, documents and undertakings listed on Schedule 8.15, or
not required to be listed therein because of the amount thereof, is valid and
enforceable, subject to bankruptcy and equitable principles in accordance with
its terms; Seller is, and to Seller's Best Knowledge all other parties thereto
are, in compliance with the provisions thereof; Seller is not, and to Seller's
Best Knowledge no other party thereto is, in default in the performance,
observance or fulfillment of any obligation, covenant or condition contained
therein; and no event has occurred which, with or without the giving of notice
or lapse of time, or both, would constitute a default thereunder. Furthermore,
no such agreement, contract, commitment, lease, plan or other instrument,
document or undertaking, in the reasonable opinion of Seller, contains any
contractual requirement with which there is a reasonable likelihood Seller (or
Buyer after the Closing, to the Seller's Best Knowledge) or any other party
thereto will be unable to comply.
VIII.16 Compliance with Laws. Subsidiary
has complied with each, and is not in violation of any, law, ordinance or
governmental rule or regulation, whether federal, state, local or foreign, to
which the Division's business, Assets or the Division is subject (collectively,
the "Laws") including all applicable environmental laws, but excluding the
Americans with Disabilities Act. Seller owns, holds, possesses or lawfully uses
in the operation of the Division's business all franchises, licenses, permits,
easements, rights, applications, filings, registrations and other authorizations
that are necessary to conduct the Division's business (collectively, the
"Permits"), free and clear of all Encumbrances and in accordance with the Laws,
and Seller is not in default with respect to any of such Permits. Seller shall
assign all Assignable Permits to Buyer at Closing. All Assignable Permits are
renewable by their terms or in the ordinary course of business without the need
to comply with any special qualification procedures or pay any amounts other
than routine filing fees. None of the Assignable Permits will be adversely
affected by the transactions contemplated hereby. Seller has not received notice
of revocation or non-renewal of any Permit which is required for the operation
of any Store.
VIII.17 Employee Benefit Plans. Schedule
8.17 to this Agreement is a complete and correct list of all employee benefit
plans (the "Employee Plans"), as that term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 as amended ("ERISA"), including
all collectively bargained plans, together with all stock options, stock
appreciation rights, bonus, deferred compensation and other formal or informal,
written or unwritten, plans and individual arrangements in which one or more
employees or former employees of the Division participate, to which Seller
contributes or pursuant to which Seller has any obligation in connection with
the Division's business. Each of the Employee Plans have been administered in
accordance with their terms and with all applicable provisions of ERISA, the
Internal Revenue Code of 1986 as amended (the "Code") and other applicable
federal and state laws. Complete and correct copies of all Employee Plans and
other arrangements listed on Schedule 8.17, including amendments and summary
plan descriptions, have been furnished to Buyer. Buyer is not adopting or
assuming, and Seller retains sole responsibility for, such Employee Plans and
any and all other plans and arrangements.
VIII.18 [Omitted]
VIII.19 Restrictions. Other than those
subleases listed on Schedule 8.15, the Leases & the Purchase Orders, Seller is
not a party to any indenture, agreement, contract, commitment, lease, plan,
license, permit, authorization or other instrument, document or understanding,
oral or written, or subject to any charter or other corporate restriction or any
judgment, order, writ, injunction, decree or award which materially adversely
affects or materially restricts or, so far as Seller can now reasonably foresee,
could reasonably be expected in the future to materially adversely affect or
materially restrict, the business, operations, assets, properties, prospects or
condition (financial or otherwise) of the Division's business after consummation
of the transactions contemplated hereby.
VIII.20 [Omitted]
VIII.21 Completeness of Disclosure.
No representation or warranty by Seller in this Agreement or in any certificate,
schedule, statement, document or instrument furnished or to be furnished to
Buyer pursuant hereto contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact required to be
stated herein or therein necessary to make any statement herein or therein not
misleading.
VIII.22 [Omitted]
VIII.23 Accuracy of Documents. All
documents and instruments, when considered together with all other documents and
instruments delivered to Buyer which amend or supplements such documents and
instruments delivered to Buyer in connection with this Agreement are materially
true, accurate and complete.
VIII.24 Preparation of Other Financial Data.
Seller's calculations of financial data (including without
limitation computations of profit and loss and cost complements) and all
business records (including without limitation annual and monthly financial,
inventory and sales reports, records of store occupancy costs and any other
documentation provided pursuant to Article III) provided to Buyer pursuant to
this Agreement were prepared in the Division's ordinary course of business
consistent with past practices or in a good faith response to Buyer's request
therefor, except as disclosed on Schedule 8.24.
VIII.25 Labor. No employees who are employed by Seller are (or
have been within the past three years) represented by any labor organization or
covered by any collective bargaining agreement pertaining to such employment,
nor is there any organizing activity pending or threatened by any labor
organization or group of employees who are employed by Seller in the Stores.
There are no unfair labor practice charges pending or, to Seller's Best
Knowledge, threatened against Seller with respect to the Stores or the employees
thereof as of the date hereof and, although Seller is presently unaware of any
facts which might give rise to such charges, Seller shall immediately give Buyer
notice of any such charges brought against Seller after the date of this
Agreement by or on behalf of any Persons employed or previously employed in any
Store.
VIII.26 Related Party Transactions. The
transactions between the Seller's Foreign Buying Office and the Division are the
only material intercompany or intracompany transactions which would affect the
book value of the Assets.
VIII.27 Child and Forced Labor. To
Seller's Best Knowledge, the Inventory was not produced by or obtained from
suppliers, manufacturers and sources which utilize child or forced labor.
VIII.28 No Foreign Person. Seller is not a foreign
person within the meaning of Section 1445 of the Internal Revenue Code ("the
Code") and is not subject to Section 897 of the Code. Seller shall deliver to
Buyer on the Applicable Closing Date a duly executed affidavit complying with
Section 1445 of the Code.
VIII.29 No Affiliates. Except as shown on Schedule 8.29, neither
Subsidiary nor Parent is an Affiliate of any Person.
IX. BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represent and warrants to Seller that:
IX.1 Corporate Power and Authority.
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of Missouri, with full right, power and lawful authority to enter
into this Agreement and the Transaction Documents to which it is a party and to
consummate the transactions contemplated herein and therein.
IX.2 Due Authorization. All necessary corporate action
to authorize the execution and delivery by Buyer of this Agreement and the
Transaction Documents to which it is a party and the performance by Buyer of its
obligations hereunder and under the Transaction Documents to which it is a party
has been taken, and no additional corporate action with respect to any of the
above is or shall be required for consummation of the transactions contemplated
by this Agreement and by the Transaction Documents to which Buyer is a party.
IX.3 Litigation. No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or to Buyer's
Best Knowledge threatened against Buyer which relates to the transactions
contemplated by this Agreement or by the Transaction Documents to which Buyer is
a party, nor does Buyer know of any reasonably likely basis for any such
litigation, arbitration, investigation or proceeding, the result of which could
adversely affect the transactions contemplated hereby or by the Transaction
Documents to which Buyer is a party. Buyer shall immediately give Seller notice
of any such matters within the scope of the foregoing representation brought
against Buyer after the date of this Agreement.
IX.4 No Conflict. Buyer's performance of and compliance with
the terms and provisions of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated herein and therein do not and
shall not at any time conflict with or result in any violation of any charter,
bylaw, mortgage, indenture, contract, agreement, instrument, franchise, permit,
judgment, decree, order, statute, rule or regulation applicable to Buyer; nor is
any consent or any other action by any other Person required under any such
instrument that has not or will not have been obtained prior to any Closing.
IX.5 Binding Obligation. This Agreement and each of
the Transaction Documents to which Buyer is a party constitutes a legal, valid
and binding obligation of Buyer enforceable in accordance with its terms,
subject to all applicable bankruptcy, insolvency and related laws and the
application of equitable principles.
IX.6 Governmental Authorities. Buyer shall
prepare and file a notification and report form pursuant to the HSR Act (and
shall request early termination in such report and respond with reasonable
diligence and dispatch to any request for additional information made in
response to such filing) as soon as reasonably practicable after the date hereof
but in no event later than January 24, 1997. Except for such filing and except
for any disclosure requirements under the Securities Exchange Act of 1934, as
amended, which Buyer shall timely make, all filings with or notices to all
governmental authorities required under any act, law, ordinance, regulation,
order or decree have been properly made by Buyer.
X. OPERATIONS PRIOR TO CLOSING
Each Seller represents, warrants and covenants to Buyer that:
X.1 Ordering of Merchandise. From the date
hereof to the day before the Closing Date, Seller may place Purchase Orders for
merchandise, but only to the aggregate extent of Seller's "Open To Buy" total
for the month in which the Purchase Order is placed. Buyer shall have the right
to review and approve in advance of placement all Purchase Orders to be placed
by Seller. Buyer may reject such Purchase Orders in an amount not to exceed 20%
of the Seller's "Open To Buy" for such month provided such Purchase Orders were
submitted in the ordinary course of business, consistent with past practices.
Seller shall submit all Purchase Orders in writing to the President of Buyer and
Buyer shall respond to Seller within seven (7) days of Buyer's receipt of such
Purchase Order.
X.2 Inventory Levels. Seller shall maintain the
merchandise inventory level prior to the Closing Date in the ordinary course of
business in any Store consistent with past practice and Section 10.1 and subject
to Section 25.20.
X.3 Undelivered Inventory. Seller shall not ship
or cause to be shipped any merchandise inventory into any Store or other
location for subsequent delivery to any Store other than in the Division's
ordinary course of business and consistent with past practices.
X.4 Inventory Processing. Seller shall
process all merchandise inventory in the Division's ordinary course of business
through the Division's customary merchandise inventory control process, subject
to the provisions of this Agreement.
X.5 Granting of Encumbrances. Other than in the
Division's ordinary course of business and consistent with past practices,
Seller shall not grant, assign, mortgage, pledge, sublet, hypothecate or
otherwise encumber any of the Assets, or sell, transfer or assign any of the
Assets.
X.6 Operation in the Ordinary Course.
Seller shall not, subject to Section 25.20, operate the Division other than in
the Division's ordinary course of business consistent with past practices
(including payment of vendors and suppliers, promotional markdowns, permanent
markdowns and sales of merchandise inventory) and shall use its commercially
reasonable efforts to maintain the relations and good will of the Division with
the suppliers, customers, employees and others having business relations with
the Division.
X.7 Material Decisions. Seller and Buyer
shall consult on an on-going basis regarding any material decisions affecting
the Division's business.
X.8 Leases. Seller shall not terminate, exercise any option,
otherwise extend the term of or amend any Lease without consulting with Buyer in
advance and securing Buyer's approval; or fail to exercise any option or
otherwise extend the term of any Lease or allow any option to lapse without
Buyer's consent, except that this sentence shall not apply to any Store which
both parties agree will be an Undelivered Store. In Seller's communication to
Buyer regarding such issues, Seller shall inform Buyer whether Seller would
exercise such option or extend the term of such Lease in the absence of this
Agreement. Seller shall also deliver to Buyer, on or before the Closing, the
original of each Lease for the Delivered Stores. Seller shall notify Buyer
promptly of any default by Seller or, to Seller's best knowledge, of any of
Seller's landlords under the Leases or any facts that, with notice or the
passage of time or both, would constitute a default under a Lease.
X.9 Access. Seller shall grant Buyer and its representatives
(including without limitation its lawyers, engineers and accountants) access, at
reasonable times and upon reasonable notice, to Seller's books, Records (subject
to the limitations stated in Sections 10.14 and 11.4), financial statements,
lease files, plans, as-built drawings and specifications and other documents and
records of Seller for the purposes of evaluating and investigating (i) the
Division's Assets and properties, the merchandise inventory, the Specified
Liabilities and the representations and warranties contained in this Agreement,
(ii) the Division's merchandise inventory control procedures, valuation methods
and accounting practices, and (iii) such other purposes as Buyer reasonably
deems necessary in connection with this Agreement. Such right of access shall
also include the right to prepare and retain subject to Section 25.16(b), copies
of all such materials. Seller shall also not fail to grant Buyer and its
representatives (including without limitation its engineers and consultants)
access to the Stores for the purposes of preparing drawings, revising any
as-built drawings or investigating for the presence of asbestos or any other
substance, material, chemical or waste which possesses or may possess toxic or
hazardous characteristics or properties or to the Stores to enable Buyer to
observe Seller's use of the Assets.
X.10 Insurance. Seller shall not fail to maintain liability
and fire and extended coverage insurance with respect to each Store and its
Assets as is consistent with prudent business practices and the requirements of
the applicable Lease, or allow any breach of such insurance policies or
agreements by Seller to occur or exist.
X.11 Premises Work. Seller shall not fail to pay when due
in full the cost of all work performed in a Store promptly after such work is
completed and in any event prior to the Closing Date; or contract for any such
work (except for necessary emergency work) to be performed in a Store which is
not scheduled or is not reasonably expected to be completed prior to the Closing
Date for such Store or fail to pay promptly for such contracted work or such
emergency work irrespective of the date of its completion.
X.12 [Omitted]
X.13 POS Devices, Etc. Seller shall permit
Buyer to install, at Buyer's expense at any time prior to the Closing Date, such
point-of-sale cash registers, inventory and sales reporting equipment,
computers, "U-Change" locks and back room desks at any Store as Buyer may deem
necessary, so long as such installation is not materially disruptive to Seller's
operation of such Store prior to the Closing Date. If Buyer installs "U-Change"
locks prior to the Closing Date, Buyer will provide keys to Seller upon change
of the locks.
X.14 Litigation Files. Promptly after the date hereof,
Seller shall permit Buyer's attorneys full access to all files available to
Seller, subject to confidentiality obligations to third parties and
attorney-client privilege issues, relating to (i) currently pending litigation
or claims, or (ii) litigation or claims which are no longer current but were
active in any manner within the five year period preceding the date of this
Agreement, relating to the Division, the assets, or the Division's operations so
that such files can be reviewed and analyzed. Such files, to the extent
reasonably available to Seller, shall include both the internal files maintained
by Seller or its in-house counsel and the files maintained by any outside legal
counsel involved in any such matter.
XI. EMPLOYEES
XI.1 Termination of Employees by Seller.
Seller and Buyer acknowledge and agree that Buyer does not intend to
acquire nor is it acquiring an ongoing business from Seller for any purpose and
does not intend to be a successor employer for any purpose. Seller shall provide
prior to and effective before the Closing Date written notice of termination of
employment satisfying all applicable legal requirements and shall terminate the
employment of all Division employees prior to the Closing Date, except in each
case for employees not in any Delivered Store who may be retained for other
operations. Seller shall pay all salaries, wages, bonuses, commissions, any
other employee compensation and any and all payments in lieu of Notice which may
be required by applicable laws, any severance payments, all accrued vacation pay
and all benefit plan contributions, all other benefits owed to or negotiated
with all employees and all benefit payments due as a result of or in connection
with the termination of any employees of Seller. Seller shall perform such
dismissals and make all payments required under this Agreement in accordance
with applicable law. Seller shall also comply with the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"), and all applicable
provisions of state law, including without limitation those portions with
respect to continuation of employee benefits. All of the foregoing obligations
shall be fulfilled at Seller's sole cost and expense.
XI.2 Benefits for Active and Former Employees.
Seller shall be solely responsible for all wages, medical,
dental and hospitalization benefits, Medicare premium reimbursement, health care
continuation requirements under COBRA and state law, sick pay, sickness and
accident benefits, short and long term disability benefits, workers
compensation, life insurance (and any other benefits) and any and all other
individual and group benefits under all Employee Plans and other arrangements
listed on Schedule 8.17 in effect or covering one or more employees or one or
more retired, disabled or terminated employees of Seller (including their
dependents and beneficiaries) including all covered claims, expenses, rights to
reimbursement and benefit claims. Seller acknowledges and agrees that Buyer
shall have no obligation for any such wages, benefits, reimbursement,
obligations or claims, and each Seller shall Indemnify and hold harmless Buyer
and its affiliates from and against any and all such claims in accordance with
Section 19.3.
XI.3 Termination Benefits. Seller shall be
solely responsible for, and shall pay or cause to be paid, all of its severance
payments and other separation or termination benefits, if any, whether absolute
or contingent, to Seller's employees, including those on leave, disability or
layoff at the time of closing, and to all former employees of Seller. Seller
shall have sole responsibility for compliance with and any liability arising
under the Worker Adjustment and Retraining Notification Act (29 U.S.C. ss. 2101,
"WARN") and state and local statutes and regulations of similar effect, and each
Seller shall Indemnify Buyer and its affiliates from and against any and all
Claims in any way related thereto or to any termination, separation or severance
arrangement. To the extent permitted by applicable law, Buyer shall provide to
Seller at Seller's request such pertinent data or information concerning the
employment status of those former employees of the Division which were hired by
Buyer, as reasonably necessary for Seller to determine such employees'
entitlement to benefits under Seller's employee benefit plans.
XI.4 Hiring of Employees by Buyer.
Buyer shall have the right, but not the obligation, to interview and hire all
corporate office employees of the Division and all management (e.g., district
managers, regional managers and store managers) and full-time and part-time
employees within the Store organization. Seller shall permit Buyer to interview
any of such employees and review and copy personnel files, payroll records, and
any and all documents related to such employees, except as otherwise prohibited
by law, upon reasonable notice after the date of this Agreement; provided, that
Buyer shall conduct such activities in a manner and at such time(s) so as not to
unreasonably interfere with the Division's ongoing business. Buyer shall comply
in all material respects with all applicable federal, state and local acts,
laws, ordinances and regulations with respect to the interviewing and hiring of
such employees.
XI.5 Indemnification for Employee Claims.
Each Seller, jointly and severally, shall Indemnify and hold harmless
Buyer in accordance with Section 19.3 with respect to any Claims arising out of
or related in any way to Seller's employment or termination of any employees,
Seller's compliance or failure to comply with acts, laws, ordinances or
regulations relating to employment or termination of employment and any person's
employment by Seller or the termination of such employment by Seller, including
without limitation (i) Claims arising out of any employment agreement,
collective bargaining agreement, WARN or any other plant closing act, law,
ordinance or regulation, (ii) Claims of discrimination and (iii) Claims relating
to the improper administration of COBRA or similar state law, and all other
federal, state and local laws, ordinances or regulations relating in any way to
Seller's employment of any employee, including without limitation, the
termination of employment.
XI.6 Employee Information. Upon the execution
of this Agreement, Seller shall deliver to Buyer a true, correct and complete
list of all the Division's employees with home addresses.
XII. PURCHASE PRICE
XII.1 Purchase Price for the Assets.
The purchase price for the Assets shall be as set forth in, or determined in
accordance with, this Agreement (the "Purchase Price"), payable as set forth in
this Section 12.1. The Purchase Price shall be determined as follows:
(a) Inventory. The Inventory Purchase Price
shall be determined in accordance with Sections 3.2 and 3.7 subject to all
deductions therefrom as provided in this Agreement.
(b) Other Tangible Assets. The
purchase price for the Other Tangible Assets shall be Seven Million Seven
Hundred Eleven Thousand Four Hundred Dollars and No Cents ($7,711,400) subject
to all deductions therefrom as provided in this Agreement.
(c) Leases. No payment shall be made from Buyer to Seller
for the assignment and transfer of the Leases to Buyer.
(d) Contracts and Prepaids. No payment shall be made
from Buyer to Seller for transfer of the Contracts and Prepaids to Buyer.
(e) Intellectual Property. The purchase price for the
Intellectual Property shall be One Hundred Dollars ($100) payable on the
Closing Date.
(f) FF&E and Store Supplies in Warehouse.
The purchase price for the FF&E and Store Supplies in
Seller's Warehouse which Buyer elects to purchase as set forth in Section 5.4 is
the price to be mutually agreed upon by the parties prior to Closing.
XII.2 Payment of the Purchase Price for the Assets at the Closing.
(a) Inventory.
(i) Estimated Inventory. On the Closing Date, Buyer
shall wire transfer to Seller immediately available funds in an amount
equal to ninety percent (90%) of the estimated Inventory Purchase Price
for the Inventory using the process in Article III (with the exception
of the provision for the Inventory Audit) for determining Inventory
Purchase Price.
(ii) On the first business day following the
determination of the Inventory Purchase Price of the Inventory pursuant
to Section 3.7, if the Inventory Purchase Price is not equal to the
estimated Inventory Purchase Price, Buyer shall wire transfer funds to
the Seller and/or the Escrow Agent, or Seller and/or the Escrow Agent
shall wire transfer funds to the Buyer and/or the Escrow Agent, each to
the extent required, such that following Buyer's payment under Section
12.2 (a) (i), Seller shall hold ninety percent (90%) of the Inventory
Purchase Price and the Escrow Agent shall hold ten percent (10%) of the
Inventory Purchase Price after such payment and Buyer shall have paid
to Seller and Escrow Agent the one hundred percent (100%) of the
Inventory Purchase Price under this Section 12.2(a).
(b) Other Tangible Assets. Buyer
shall wire transfer to Seller immediately available funds in an amount equal to
ninety percent (90%) of the Purchase Price for the Other Tangible Assets on the
Closing Date, and shall wire transfer to the Escrow Agent funds in an amount
equal to ten percent (10%) of the Purchase Price for the Other Tangible Assets
on the Closing Date.
(c) Intellectual Property. Buyer shall wire transfer to
Seller immediately available funds in an amount equal to $100 on the Closing
Date.
XII.3 Escrow.
(a) Buyer and Seller shall establish at the Closing an escrow
account (the "Escrow Account") with Boatmen's National Bank (subject to
agreement on a reasonable fee for such services) or such person or entity
mutually approved by Buyer and Seller as the escrowee, (the "Escrowee"). The
Escrow Account shall be funded with the ten percent (10%) balance of the
Purchase Price for the Assets, as described in Sections 12.2 (said funds are
referred to herein as the "Escrow Fund").
(b) The Escrow Fund shall be made available under the terms of
an escrow agreement in the form of Exhibit 12.3 (the "Escrow Agreement") among
the Escrowee, Buyer and Seller for the purpose of satisfying claims of Buyer
against Seller. The parties agree that the Escrow Fund shall not be the sole
remedy or source of payment for Buyer.
(c) The Escrowee shall act with respect to investment
and disbursement of the Escrow Fund as directed in the Escrow Agreement.
XII.4 [Omitted].
XII.5 Tax Allocation of Purchase Price.
The Purchase Price shall be allocated among the respective portions of
the assets, in accordance with an allocation schedule to be prepared by Buyer.
Such allocation schedule shall be prepared in accordance with section 1060 of
the Code. In connection with the determination of the foregoing allocation
schedules, Seller shall cooperate with Buyer and provide such information as
Buyer shall reasonably request. Seller and Buyer will each report the federal,
state, local and other tax consequences of the purchase and sale contemplated
hereby (including the filing of Internal Revenue Service Form 8594) in a manner
consistent with such allocation schedule.
XII.6 Payment of Other Amounts.
At Closing, Buyer shall pay to Seller, in the same manner as the payment of
the Purchase Price, the following amounts:
(a) the amount, if any, which Buyer is obligated to pay
to Seller pursuant to Section 4.7, and;
(b) the amount, if any, which Buyer is obligated to pay to
Seller for FF&E and Store Supplies in Seller's Warehouse which Buyer has elected
to purchase pursuant to Article V.
XIII. ASSUMPTION OF SPECIFIED LIABILITIES
XIII.1 Assumption of Specified Liabilities.
Buyer shall assume, as of the Closing Date, and
thereafter shall pay, perform, and discharge the Specified Liabilities, which
shall include only the following:
(a) Seller's obligations under the Leases for the Delivered
Stores and under the Contracts from and after the Closing Date; but only to the
extent described in Section 2.2 and Section 6.2, respectively; and
(b) As of the Closing Date, Seller's obligations under the
Purchase Orders but only to the extent described in Section 4.2 hereof.
Notwithstanding anything in this Agreement to the contrary, Buyer shall
not assume any liability, obligation or payment related to, attributable to or
arising out of the performance or non-performance of any Lease, Contract or
Purchase Order for any period prior to the Closing Date or for any event
occurring prior to the Closing Date.
XIII.2 Excluded Liabilities. Buyer and Seller
acknowledge that Buyer does not intend to acquire nor is it acquiring an ongoing
business from Seller for any purpose, and does not intend to be nor shall it be
a successor Person for any purpose. Notwithstanding anything in this Agreement
to the contrary, Buyer is not assuming and shall not be deemed to have assumed
any liabilities, debts or obligations of Seller other than the Specified
Liabilities. For purposes of clarity, the Specified Liabilities shall not, and
shall in no event be deemed to, include any of the following liabilities, debts
and obligations of Seller:
(a) any obligation under any financing or other
encumbrance on, affecting or related to any of the Stores, the Assets or other
assets of Seller;
(b) any obligations for any Federal, state, Commonwealth or
local income, sales, use, property, municipal license tax or other taxes or
assessments or any penalties or interest relating to any such taxes or
assessments or any combination of the above relating to (i) the Stores or Assets
on or prior to their transfer to Buyer (ii) Seller's other assets, (iii) their
transfer to Buyer or (iv) Seller's operations;
(c) any employment-related Claims, including but not limited
to Claims arising from or in any way related to policies, authorizations,
licenses and accounts required by the applicable laws or any obligations for
taxes, accrued salaries, wages, commissions, bonuses, pensions, workers and
unemployment compensation, sick pay, vacation pay, severance pay, other
compensation, benefit plan contributions or other employee benefits for any of
Seller's employees or any amounts for which Seller may become liable to any
Person or governmental entity under the provisions of ERISA or the regulations
promulgated thereunder;
(d) any obligations which may arise under (i) the
Multi-Employer Pension Plan Act, (ii) the Worker Adjustment and Retraining
Notification Act of 1988 or (iii) any similar plant closing act, law, ordinance
or regulation resulting from termination by Seller of the employment of any of
Seller's employees;
(e) any obligations or liabilities with respect to any
litigation commenced or Claims made at any time before, on or after the Closing
Date;
(f) any Claims relating to payment for merchandise inventory
or amounts, other than Purchase Orders assumed by Buyer hereunder, owed by
Seller or indebtedness of Seller to any bank, credit card company, lending
institution, vendor or supplier or any indebtedness of Seller under any notes or
commercial paper issued by Seller;
(g) all obligations under any agreement (including without
limitation any Lease), the benefits of Seller in, to or under which are excluded
from the Delivered Stores or Assets actually acquired by Buyer hereunder;
(h) any liability under any collective bargaining or
labor union agreement whereby personnel are or were employed by Seller;
(i) any obligations for returned checks or credit card
chargebacks arising from sales from a Store prior to the Closing Date (which
documentation for returned checks or chargebacks shall be promptly forwarded by
Buyer to Seller);
(j) any obligation to pay for returned merchandise
inventory which was purchased from a Store prior to the Closing Date except
as otherwise provided herein;
(k) any obligation under any civil rights, wage and hour
or equal employment opportunity acts, laws, ordinances or regulations;
(l) any obligation with respect to any lay-away contracts
entered into by Seller or customer Claims with respect to Inventory or Seller's
operation of the Stores;
(m) any consideration, fee or payment due or payable to
any Landlord under any Lease as a result of the assignment of any Lease from
Seller to Buyer; and
(n) any claim made by any Landlord under any Lease with
respect to any consideration paid by Buyer to Seller as contemplated by this
Agreement.
XIII.3 Indemnification for Excluded Liabilities.
Each Seller, jointly and severally, shall Indemnify Buyer
in accordance with Section 19.3 with respect to Claims arising out of or related
in any way to any liabilities, debts or obligations of Seller which are not
Specified Liabilities.
XIV. CONDITIONS OF BUYER'S OBLIGATION TO CLOSE
The obligations of Buyer to Close under this Agreement are, at the
option of Buyer, subject to satisfaction of the following conditions precedent
on or before the Closing Date:
XIV.1 Omitted
XIV.2 Representations True as of the Closing Date.
The representations and warranties of Seller
contained herein shall be true in all respects, (except as would not have a
material adverse effect on the Division's business or Assets and for such
changes as are contemplated by the terms of this Agreement), on and as of the
Closing Date with the same force and effect as though made by each Seller on and
as of the Closing Date.
XIV.3 Compliance with Agreements and Covenants.
Seller shall, in all material respects, have performed
all of Seller's obligations and agreements and complied with all of Seller's
covenants contained in this Agreement to be performed and complied with by
Seller on or prior to the Closing Date. In addition, Seller shall have delivered
to Buyer a certificate dated as of the Closing Date, in form and substance
satisfactory to Buyer, signed by an executive officer of Seller, certifying as
to compliance with Section 14.2 and this Section 14.3. Notwithstanding anything
in this Agreement to the contrary, the parties acknowledge and agree that for
the purposes of this Agreement other than with respect to the conditions to
closing as set forth above in Section 14.2 and the preceding paragraph of this
Section 14.3, but subject to all other provisions of this Agreement, Seller's
representations, warranties and covenants as set forth herein in Article VIII
and elsewhere as of the date of the execution of this Agreement shall be deemed
to be the representations, warranties and covenants in effect on the Closing
Date and shall be deemed to be true and correct in all respects as of the
Closing Date. Accordingly, if as of the Closing Date a breach of any warranty,
representation or covenant has occurred but is not material for the purposes of
Section 14.2 or 14.3, Buyer shall be obligated (subject to fulfillment or waiver
by Buyer of the other conditions described in this Article XIV) to close but
shall be entitled, subject to all other provisions of this Agreement including
without limitation Section 19.4, to Indemnification to the extent provided in
this Agreement for any Claims caused by such breach regardless of the fact that
such breach may not be material in the sense contemplated by the language
regarding Buyer's closing condition as set forth above in Section 14.2 and this
Section 14.3. All such Claims for Indemnification shall be subject in all
respects to the provisions and limitations of Article XIX hereof.
XIV.4 Opinion of Counsel. Buyer shall have
received opinions, dated the Closing Date, from both Goodwin, Procter & Hoar
LLP, Boston, Massachusetts, counsel for Seller, and the general counsel of
Seller in the form attached as Exhibit E.
XIV.5 Expiration of HSR Waiting Period.
Any applicable waiting period under the HSR Act shall have expired or
been earlier terminated without action to prevent consummation of this
Agreement, or to require the disposition of some of Buyer's assets or business
or some of the Division's Assets or the Division's business.
XIV.6 Other Agreements. All the other
agreements, certificates and instruments to be delivered to Buyer in connection
with the Closing shall have been delivered to Buyer, including, without
limitation, the Noncompetition and Nonsolicitation Agreement described in
Article XXIV hereof and the Guaranty.
XIV.7 Actions or Proceedings. No action or
proceeding by any governmental authority or any other Person shall have been
instituted or threatened which would enjoin, restrain or prohibit, or might
result in substantial damages in respect of, this Agreement or the consummation
of the transactions contemplated by this Agreement.
XIV.8 Termination of Employees. Seller
shall have provided Buyer with satisfactory evidence of Seller's compliance with
its obligations pursuant to the second sentence of Section 11.1.
XIV.9 Qualitative and Quantitative Delivered Store Minimum.
As of ten (10) days prior to the
Closing and as of Closing, Seller shall have obtained and delivered to Buyer
Satisfactory Assignments with respect to, and Seller being in a position to
transfer to Buyer hereunder, at least 140 Stores, of which 70 must be in the top
50% of the Stores, and 35 of the 70 must be in the top 25% of the Stores, such
ranking to be on the basis of contribution to overhead as ranked and shown on
the attached Schedule 14.9.
In its sole discretion, Buyer may elect to waive any of the foregoing
conditions in whole or in part with respect to the Closing; provided, however,
that if the Closing occurs despite nonfulfillment of a condition or conditions
thereto, such condition or conditions shall be waived, solely as conditions with
respect to the Closing, to the extent not fulfilled, but all other provisions
(including without limitation all of Seller's representations, warranties and
covenants) of this Agreement with respect thereto shall remain unaffected
thereby and shall not be deemed waived, contravened or modified in any way.
XV. CONDITIONS TO SELLERS' OBLIGATION TO CLOSE
The obligations of Seller to Close under this Agreement are, at the
option of Seller, subject to satisfaction of the following conditions precedent
on or before the Closing Date:
XV.1 Consents and Approvals. All consents and
approvals in writing reasonably satisfactory to Seller shall have been received
by Seller from any lenders, lessors, governmental authorities or other Persons
whose consent or approval is required for this transaction as determined by
Seller as set forth on Schedule 15.1.
XV.2 Representations True as of Closing Date.
The representations and warranties of Buyer contained herein
shall be true in all material respects (except for such changes as are
contemplated by the terms of this Agreement) on and as of the Closing Date with
the same force and effect as though made by Buyer on and as of the Closing Date.
XV.3 Compliance with Agreements and Covenants.
Buyer shall, in all material respects, have performed
all Buyer's obligations and agreements and complied with all Buyer's covenants
contained in this Agreement to be performed and complied with by Buyer on or
prior to the Closing Date. In addition, Buyer shall have delivered to Seller a
certificate dated as of the Closing Date, signed by an executive officer of
Buyer, certifying as to compliance with Section 15.2 and this Section 15.3.
Notwithstanding anything in this Agreement to the contrary,
the parties acknowledge and agree that for the purposes of this Agreement other
than with respect to the conditions to closing as set forth above in Section
15.2 and the preceding paragraph of this Section 15.3, but subject to all other
provisions of this Agreement, Buyer's representations, warranties and covenants
as set forth herein in Article IX and elsewhere as of the date of the execution
of this Agreement shall be deemed to be the representations, warranties and
covenants in effect on the Closing Date and shall be deemed to be true and
correct in all respects as of the Closing Date. Accordingly, if as of the
Closing Date a breach of any warranty, representation or covenant has occurred
but is not material for the purposes of Section 15.2 or 15.3, Seller shall
(subject to fulfillment or waiver by Seller of the other conditions described in
this Article XV) be obligated to close but shall be entitled, subject to all
other provisions of this Agreement including, without limitation, Section 19.4,
to Indemnification to the extent provided in this Agreement for any Claims
caused by such breach regardless of the fact that such breach may not be
material in the sense contemplated by the language regarding Seller's closing
condition as set forth above in Section 15.2 and this Section 15.3. All such
Claims for Indemnification shall be subject in all respects to the provisions
and limitations of Article XIX hereof.
XV.4 Opinion of Counsel. Seller shall have
received opinions, dated the Closing Date, from both Lathrop & Gage L.C.,
counsel for Buyer, and the general counsel of Buyer in the form attached as
Exhibit F.
XV.5 Expiration of HSR Waiting Period.
Any applicable waiting period under the HSR Act shall have expired or
been earlier terminated without action to prevent consummation of this
Agreement, or to require the disposition of some of Seller's assets or business.
XV.6 Other Agreements. All the other
agreements, certificates and instruments to be delivered to Seller in connection
with the Closing shall have been delivered by Buyer.
XV.7 Actions or Proceedings. No action or
proceeding by any governmental authority or any other Person shall have been
instituted or threatened which would enjoin, restrain or prohibit, or might
result in substantial damages in respect of, this Agreement or the consummation
of the transactions contemplated by this Agreement.
XV.8 Qualitative and Quantitative Delivered Store Minimum
As of ten (10) days prior
to the Closing and as of Closing, Seller shall have obtained and delivered to
Buyer Satisfactory Assignments with respect to, and Seller shall be in a
position to transfer to Buyer hereunder, at least 140 Stores, of which 70 must
be in the top 50% of the Stores, and 35 of the 70 must be in the top 25% of the
Stores, such ranking to be on the basis of contribution to overhead as ranked
and shown on the attached Schedule 14.9.
XV.9 Issuance of Buyer's Backup L/C's.
Buyer shall have procured a Buyer's Backup L/C in respect of each Open
L/C, if any.
In its sole discretion, Seller may elect to waive any of the foregoing
conditions in whole or in part with respect to the Closing; provided, however,
that if the Closing occurs despite nonfulfillment of a condition or conditions
thereto, such condition or conditions shall be waived solely as conditions with
respect to the Closing, to the extent not fulfilled, but all other provisions
(including without limitation all of Buyer's representations, warranties and
covenants) of this Agreement with respect thereto shall remain unaffected
thereby and shall not be deemed waived, contravened or modified in any way.
XVI. CLOSING
XVI.1 Closing. Subject to the satisfaction or waiver
of the conditions expressly stated herein, the Closing shall take place at the
offices of Payless ShoeSource, Inc., Topeka, Kansas, at 9:00 a.m. local time, on
March 31, 1997, or on such earlier date following satisfaction or waiver of all
of Buyer's and Seller's conditions as may be agreed by Buyer and Seller. Both
parties agree to notify each other when all of their respective conditions have
been either satisfied or waived. Seller shall immediately notify Buyer when the
condition set forth in Section 14.9 is satisfied.
XVI.2 Deliveries by Seller. At the Closing,
Seller shall deliver to Buyer the following:
(a) Satisfactory Assignments(a) Satisfactory Assignments
at least for the minimum number of Stores set forth in Section 14.9 (except to
the extent previously delivered pursuant to Section 14.9).
(b) Documents of Transfer. Bills of sale,
assignments and other documents reasonably satisfactory to Buyer and Seller
evidencing the sale, assignment and transfer of the Assets to Buyer in form and
substance reasonably satisfactory to both parties. At the Closing, Seller shall
execute and deliver to Buyer all assignments and other documents in form and
substance reasonably satisfactory to Buyer and Seller, necessary to then convey
to Buyer all of the Intellectual Property, and all of the Records.
(c) Closing Certificate. The certificate referred to in
Section 14.3, duly executed by an executive officer of Seller.
(d) Opinion of Counsel. The opinions of Seller's counsel
and general counsel referred to in Section 14.4.
(e) The Records and Miscellaneous AssetsThe Records and
Miscellaneous Assets. The Records and the Miscellaneous Assets.
(f) Possession of Delivered Stores. The possession
of the Delivered Stores, including all keys thereto.
XVI.3 Deliveries by Buyer. At the Closing,
Buyer shall deliver to Seller the following:
(a) Closing Payment. The portion of the
Purchase Price payable at the time of Closing as provided in Section 12.2 (plus
the other amounts due to Seller hereunder at Closing, including without
limitation under Section 12.6) to an account designated by Seller.
(b) Closing Certificate. The certificate referred to in
Section 15.3, duly executed by an executive officer of Buyer.
(c) Opinion of Counsel. The opinions of Buyer's counsel
and general counsel referred to in Section 15.4.
XVII. TERMINATION
XVII.1 Termination. This Agreement may be terminated
at any time at or prior to the Closing:
(a) Mutual Consent. At any time, with the mutual consent
of the Seller and Buyer; or
(b) By Buyer or Seller(b) By Buyer or Seller. By Buyer or
Seller at any time after March 31, 1997, if the Closing shall not have occurred
on or before March 31, 1997, provided that the failure to complete the Closing
on or before March 31, 1997 does not result from a material breach of any
covenant, agreement, representation or warranty made by the terminating party in
this Agreement.
XVII.2 Effect of Termination. Termination
of this Agreement pursuant to Section 17.1 hereof shall not in any way
terminate, limit or restrict the rights and remedies of any party hereto,
subject to the provisions of this Agreement, against any other party that has
violated or breached any of the representations, warranties, covenants,
agreements or other provisions of this Agreement prior to termination hereof.
The provisions of Section 25.16(b) shall survive any termination of this
Agreement.
XVIII. NOTICES
All notices, consents, requests, approvals, instructions, elections and
other communications (collectively "Notice") provided for or permitted hereunder
shall be in writing and shall be given, made, or communicated either by personal
delivery, by facsimile or telecopy transmission, by reliable overnight courier,
or by registered or certified mail, postage prepaid, and addressed as follows:
(a) if to Seller, to the attention of the President, at
J. Baker, Inc., Alan I. Weinstein, 555 Turnpike Street, Canton, Massachusetts,
02021, telecopier (617)821-4867, with a copy thereof to General Counsel, J.
Baker, Inc., 555 Turnpike Street, Canton, Massachusetts, 02021, telecopier
(617)-821-4867);
(b) if to Buyer, to the attention of the Chairman, at 3231
East Sixth Street, P.0. Box 1189, Topeka, KS 66601, telecopier (913) 295-6804;
with a copy thereof to General Counsel, at 3231 East Sixth Street, P.0. Box
1189, Topeka, KS 66601, telecopier (913) 368-7524;
or to such other address as the party who is to receive such Notices shall
notify the other party of in accordance with the foregoing. Any Notice shall be
deemed to have been given, made, received or communicated, as the case may be,
on the date personal delivery was effected if personally served, on the date
shown on the sender's receipt of its facsimile or telex transmission if by
facsimile or telex, on the date shown as the date of delivery on the overnight
courier's cartage copy if by overnight courier, or on the date of delivery (or
attempted delivery) as shown on the return receipt if delivered by registered or
certified mail.
XIX. INDEMNIFICATION
XIX.1 Seller's Indemnification of Buyer.
In addition to other indemnities of Seller provided for herein, each
Seller, jointly and severally, shall Indemnify Buyer against any Claim arising
from or related to (i) any misrepresentation by Seller contained herein, (ii)
any breach of representation or warranty by Seller contained herein, (iii) any
non-fulfillment of any covenant or agreement by Seller contained herein, and
(iv) any claim by a mortgagee or lender of any landlord under any Lease for a
Delivered Store or any other Person having a security interest or other interest
in a Delivered Store arising out of a failure of such Landlord to obtain any
required consent of such Mortgagee, Person or Lender in connection with the
assignment of such Lease hereunder, provided, however, that such Mortgagee,
Person or Lender, or its predecessor in interest, was the Mortgagee, Person or
Lender at or prior to the time of the Closing. Seller shall further Indemnify
Buyer with respect to product liability, forced labor or other Claims arising
out of or with respect to the Inventory and Inventory on Order acquired
hereunder and with respect to Seller's operations of the Stores, prior to the
Closing Date, including without limitation with respect to Claims under
warranties or guarantees given to invitees of Seller and with respect to Claims
of any invitees seeking redress for personal injury or damage to or loss of
property.
XIX.2 Buyer's Indemnification of Seller.
In addition to the other indemnities of Buyer provided for herein, Buyer
shall Indemnify Seller with respect to any misrepresentation by Buyer contained
herein, breach of warranty by Buyer contained herein, or any non-fulfillment of
any warranty or representation or any non-fulfillment of any covenant or
agreement by Buyer contained herein. Buyer shall further Indemnify Seller with
respect to Claims not caused by Seller arising out of events occurring after the
Closing related to Buyer's operations of the Stores, including without
limitation Claims under warranties or guarantees given to invitees of Buyer and
Claims of any invitees of Buyer seeking redress for personal injury or damage to
or loss of property.
XIX.3 Procedure for Indemnified Third Party Claim.
Promptly after receipt by a party entitled to
indemnification hereunder (the "Indemnitee") of written notice of the assertion
of any Claim or the assertion or the commencement of any litigation with respect
to any matter referred to in Sections 19.1 or 19.2 or otherwise subject to
indemnification under any provision of this Agreement, the Indemnitee shall give
written notice thereof to the party from whom indemnification is sought pursuant
hereto (the "Indemnitor") and thereafter shall keep the Indemnitor reasonably
informed with respect thereto; provided, however, that failure of the Indemnitee
to give the Indemnitor notice as provided herein shall not relieve the
Indemnitor of its obligations hereunder unless and to the extent the Indemnitor
is adversely affected by such failure. In case any litigation shall be brought
against any Indemnitee, the Indemnitor shall be entitled to participate in such
litigation and, at the Indemnitor's option, may assume the defense and
settlement thereof with counsel reasonably satisfactory to the Indemnitee, at
the Indemnitor's sole expense. If the Indemnitor so assumes the defense and
settlement, the Indemnitee may participate in such defense with counsel of its
choice, but any participation in any litigation or threatened litigation by the
Indemnitee once defense thereof has been assumed by the Indemnitor shall be at
the expense of the Indemnitee. Notwithstanding the foregoing, if the Indemnitor
(a) fails to assume the defense of such matter or provides an inadequate
defense, or (b) is subject to a conflict of interest which impairs its ability
to conduct such defense, the Indemnitee may assume and control the defense and
settlement of such matter at the Indemnitor's expense, provided, that the
Indemnitor shall not be liable for the fees and expenses of more than one law
firm in any one proceeding. If the Indemnitor shall assume the defense and
settlement of any litigation, it shall not settle the litigation without the
Indemnitee's consent (which shall not be unreasonably withheld) unless (i) the
Indemnitor pays the cost of any settlement in full, (ii) the settlement includes
as an unconditional term thereof the giving by the claimant or the plaintiff of
a release of the Indemnitee, reasonably satisfactory to the Indemnitee, from all
liability with respect to such litigation, and (iii) the settlement does not in
any way restrict the activities of the Indemnitee. The Indemnitee shall in no
event settle any Claim without the Indemnitor's consent, which shall not be
unreasonably withheld.
XIX.4 Limitation and Liability. Seller
(i.e., J. Baker, Inc. and JBI collectively) and Buyer shall have no liability
under , or in any way related to, this Agreement for any Claim made by the other
until the aggregate amount of liability for all such Claims exceeds $50,000, and
then only to the extent of such excess. In addition, in no event shall the total
liability of Seller (i.e., J. Baker, Inc. and JBI collectively) or Buyer under,
or in any way related to, this Agreement (other than obligations to make the
payments referred to in Section 12.2 when and as due) exceed $7,500,000 in
aggregate amount, except that (i) Seller's obligations to indemnify Buyer for
liabilities arising under WARN from the termination of Seller's employees in
connection with the sale of the Division contemplated hereby and (ii) Seller's
obligation to indemnify Buyer under Section 7.2 (Claims of the type described in
these clauses (i) and (ii), "Special Claims") shall not be subject to such
$7,500,000 maximum, nor shall payments by Seller to Buyer in connection with
such Special Claims be included in such $7,500,000 maximum.
XIX.5 Survival; Time and Manner of Claims.
The representations and warranties of Buyer and Seller herein,
and the covenants of Buyer and Seller herein to be performed prior to Closing,
shall survive Closing until that date which is two years after the Closing Date.
No action or Claim arising under or in any way related to this Agreement may be
brought or made unless such action or Claim has been specified in reasonable
detail in a written notice from Buyer to Seller or from Seller to Buyer, as the
case may be, on or before that date which is two years after the Closing Date.
XIX.6 Guarantee by Seller's Affiliate.
Casual Male, an Affiliate of Seller, (the "Guarantor") as an
inducement to Buyer to enter into this Agreement, hereby guarantees the prompt
payment or performance of all obligations of Seller under this Agreement,
including without limitation, Seller's obligations to Indemnify Buyer contained
herein, all pursuant to the form of Guaranty attached hereto as Exhibit G.
XX. BULK SALES
Buyer hereby waives compliance with all bulk sales or similar laws with
respect to the transactions contemplated by this Agreement. In the event of any
Claim relating to or arising out of any bulk sales or similar laws or Seller's
failure to comply therewith, Seller shall Indemnify Buyer with respect thereto
in accordance with Section 19.3.
XXI. BROKERAGE
Buyer represents and warrants to Seller that no Person acted on its
behalf in the capacity of broker or otherwise in connection with the matters
contemplated by this Agreement. Buyer shall Indemnify Seller with respect to any
Claims by anyone claiming a brokerage commission or other compensation through
or from Buyer. Seller represents and warrants to Buyer that no Person acted on
their behalf in the capacity of broker or otherwise in connection with the
matters contemplated by this Agreement. Seller shall Indemnify Buyer with
respect to any Claims by or on behalf of anyone claiming a brokerage commission
or other compensation through or from Seller.
XXII. PRORATIONS
XXII.1 Prorations Generally. All Lease
payments or other payments, fees, charges or assessments relating to the period
culminating on the Closing Date with respect to the Assets to be acquired by
Buyer (other than rent which is based upon a percentage of sales) including, but
not limited to, real estate taxes (but excluding personal property taxes),
common area maintenance charges (both exterior and interior), utilities, and
(only to the extent provided under a Contract) equipment maintenance shall be
prorated between Seller and Buyer as of the Closing Date on the basis of the
number of days before and after such date, Seller to have the last day.
XXII.2 Percentage Rent. Any percentage rent
based on a percentage of sales due under a Lease for a Delivered Store for the
lease year (as defined in the applicable Lease) in which the Closing Date falls
shall be prorated in accordance with the formula set forth on Schedule 22.2.
XXII.3 Payment of Prorations. Payments arising
with respect to any adjustments to reflect prorations shall be made as soon as
practicable after such proration calculation is completed. The debtor party
shall pay to the creditor party, from time to time, the amount of such
prorations within ten (10) days of the debtor party's receipt of a bill
therefor, together with supporting documentation.
XXII.4 Transfer Taxes. The parties shall each
pay fifty percent (50%) of any and all sales, use or other transfer tax arising
out of the transactions contemplated herein.
XXIII. EXCLUSIVITY
Seller shall not negotiate with, or enter into a letter of intent or a
binding agreement with, any party other than Buyer with respect to the sale,
transfer or assignment of any of the Assets.
XXIV. NONCOMPETITION AND CESSATION OF BUSINESS.
XXIV.1 Covenant not to Compete.
At Closing, Seller shall enter into the Noncompetition and
Nonsolicitation Agreement attached hereto as Exhibit H.
XXIV.2 Cessation of Business.
On the Closing Date, Seller shall cease operation of the Undelivered Stores
and shall cease to use the Intellectual Property in connection with any store
or business of Seller or otherwise. To the extent permitted under the related
Lease or by the related Landlord Seller shall place such signs as Buyer may
request on the Undelivered Stores.
XXV. MISCELLANEOUS
XXV.1 Entire Agreement. This Agreement contains the
entire agreement and understanding, both written and oral, between Seller and
Buyer with respect to the transactions contemplated hereby and supersedes all
other agreements and understandings, both written and oral, among the parties.
This Agreement shall not be modified, changed or terminated orally, but only by
an agreement in writing signed by the Person against whom enforcement of any
waiver, change, modification or discharge is sought. Except as may be otherwise
provided herein, the representations, warranties, covenants, indemnities and
terms of this Agreement shall survive the Closing and shall not merge in any
assignment.
XXV.2 Assignability. This Agreement shall not be
assignable by Seller without the prior consent of Buyer. Buyer may freely assign
its rights under this Agreement, in whole or in part to a wholly-owned
Subsidiary of Buyer, or an Affiliate of Buyer; provided, however, that no such
assignment or succession of assignments shall relieve Buyer of its obligations
hereunder. Buyer may designate any Subsidiary or Affiliate of Buyer to acquire
any of the Assets to be transferred hereunder. Subject to the foregoing
provisions, this Agreement shall be binding upon Seller and Buyer and their
respective successors, assigns, successors in interest, administrators, legal
representatives and executors.
XXV.3 Access to Premises, Books and Records.
Notwithstanding any specific obligations set forth in certain other
provisions of this Agreement pertaining to the provision of documents or records
or access thereto, from and after the date hereof, Seller shall afford to Buyer
and its duly authorized officers and other representatives, including Buyer's
lawyers, engineers, accountants and consultants, full access at all times during
reasonable business hours, to Seller's premises, and to such of Seller's books,
records, materials, other data and information of or pertaining to the Assets as
Buyer may reasonably deem necessary or desirable, and such right of access shall
include the right to copy any or all of the foregoing and shall continue after
the Closing Date for such reasonable time, not to exceed two (2) years, as Buyer
shall require under the circumstances. Seller shall not destroy any of the
foregoing until following the expiration of the two (2) year period contemplated
by this Section 25.3.
XXV.4 Choice of Law. This Agreement shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, Kansas law, without regard to conflicts of law principles
thereof.
XXV.5 Severability. If any provision of this Agreement
shall to any extent be held void or unenforceable, said provision shall be
deemed modified so as to constitute a provision conforming as nearly as possible
to the original provision while still remaining valid and enforceable. In such
event, the remainder of this Agreement (or the application of said provision to
persons or circumstances other than those in respect of which it is deemed void
or unenforceable) shall not be affected thereby. Each other provision of this
Agreement, unless specifically conditioned upon the voided aspect of said
provision, shall remain valid and enforceable to the fullest extent permitted by
law; any other provision of this Agreement which is specifically conditioned on
the voided aspect of said invalid provision shall also be deemed modified so as
to constitute a provision conforming as nearly as possible to the original
provision while still remaining valid and enforceable to the fullest extent
permitted by law.
XXV.6 Further Assurances. Seller covenants and agrees
that Seller shall from time to time, upon the request of Buyer, whether before
or after the Closing Date, perform all reasonable acts and execute all such
transfers, conveyances, assignments, assumptions, assurances and other
documents, as Buyer may from time to time reasonably request be done or executed
provided Seller is not required to incur any cost or expense not otherwise
required by this Agreement, to consummate the transaction contemplated herein.
XXV.7 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
XXV.8 Headings. The headings of the various
subdivisions of this Agreement are for convenience and reference only and shall
not affect the interpretation of any of the provisions of this Agreement.
XXV.9 No Third Party Beneficiaries.
The provisions of this Agreement are for the exclusive benefit of Buyer and
Seller and not for the benefit of any third Person, except for successors,
assigns and designees specifically permitted under this Agreement. This
Agreement shall not be deemed to have conferred any rights upon any third
Person, except for successors, assigns and designees specifically permitted
under this Agreement.
XXV.10 Expenses. Buyer and Seller shall each bear
their own expenses and costs, including attorneys' fees and expenses, in
connection with the negotiation, preparation and consummation of this Agreement,
except as set forth in this Agreement; provided, that Buyer shall pay the filing
fee under the HSR Act.
XXV.11 Remedies Cumulative. No remedy
referred to in this Agreement is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to herein or otherwise
available at law or in equity.
XXV.12 Expenses of Litigation. In the event any
party shall institute any action or proceeding against the other relating to the
provisions of this Agreement, or any default hereunder, then the unsuccessful
litigant in such action or proceeding shall reimburse the successful litigant
therein for the reasonable expenses of attorneys' fees (including the reasonable
cost of outside counsel and costs reasonably allocable to in-house counsel) and
disbursements reasonably incurred therein by the successful litigant.
XXV.13 Locative Adverbs. The terms "hereof," "hereby,"
"hereunder," "this Agreement" and similar expressions refer to this Agreement as
a whole and not to any particular article, paragraph or other portion hereof,
unless the context clearly requires otherwise; words importing the singular
number only include the plural and vice versa; and words importing the masculine
gender include the feminine and neuter genders and vice versa, where the context
so requires. Any Table of Contents or Index appearing herein is also for
convenience of reference and shall not affect the interpretation of this
agreement.
XXV.14 Exhibits. All exhibits and schedules referred
to in this Agreement and attached hereto are and shall be incorporated in this
Agreement and made a part hereof.
XXV.15 Waiver of Default. A waiver of default by a
party must be in writing and no such waiver shall be implied from any omission
by a party to take, any action in respect of such default. No express written
waiver of any default shall affect any default and period of time other than the
default and period of time specified in such express waiver. One or more written
waivers of default in the performance of any provision of this Agreement shall
not be deemed to be a waiver of any subsequent default in the performance of the
same provision or any other term or provision contained herein. A party's
consent to or approval of any act or request by another party requiring consent
or approval shall not be deemed to waive or render unnecessary the consent to or
approval of any subsequent similar acts or requests.
XXV.16 Press Releases and Confidentiality.
(a) From and after the date of execution of this Agreement
until the Closing Date, Buyer and Seller shall each provide to the other, in
advance, copies of press releases and public announcements relating to the
matters contemplated in this Agreement and shall not issue such press releases
or announcements without the prior written consent of the other, which consent
shall not be unreasonably withheld; provided, however, that such press releases
and public announcements may be made by either party without the consent of the
other party but only if (i) the party wishing to issue the press release or make
the announcement has been advised by legal counsel that such release or
announcement is advisable from a legal standpoint and (ii) a copy of the release
or announcement is furnished, in advance, to the other party.
(b) Until the Closing Date, the parties will continue to abide
by and be subject to that certain letter agreement dated November 8, 1996
concerning confidentiality.
XXV.17 References to Articles and Sections.
All references in this Agreement to a given Article or a given Section
(without further identification) refer to the applicable Article or Section of
this Agreement.
XXV.18 Joint Preparation. This Agreement shall be
deemed to have been prepared jointly by Buyer and Seller. No ambiguity, if any,
contained in this Agreement shall be interpreted against either Buyer or Seller,
but according to the application of rules for the interpretation of contracts.
XXV.19 [Omitted].
XXV.20 Increased Promotional Efforts.
Buyer acknowledges that prior to execution of this Agreement the
Division began increased promotional and markdown efforts with a view to selling
the Division's merchandise inventory with a Fall 1996 season code or earlier
("Aged Inventory") prior to the Closing Date at a rate that is greater than
would occur if the Division had maintained selling efforts in the ordinary
course of business and consistent with past business practices. Seller
anticipates that such increased selling efforts with respect to Aged Inventory
will continue through the Closing. The representations, warranties and covenants
made in this Agreement, including without limitation in Sections 8.10, 10.2 and
10.6, are qualified to the extent such representations, warranties and covenants
are inconsistent with the increased selling efforts with respect to Aged
Inventory described herein and such increased selling efforts with respect to
Aged Inventory and the consequences thereof shall not be deemed to have caused a
breach of any of the foregoing.
XXV.21 Former Information. After the Closing
Buyer shall reasonably cooperate, as and to the extent reasonably requested by
Seller, in connection with Seller's request to review any books and records or
other materials which may have been transferred to Buyer hereunder for the
purpose of enabling Seller to comply with any governmental reporting or address
any other reasonable matter, including but not limited to, the preparation of
tax returns or regulatory reports and any audit or litigation proceedings.
[Remainder of this page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed his Agreement on
the day and year set forth in the Preamble.
PAYLESS SHOESOURCE, INC.
By: /S/ STEVEN J. DOUGLASS
----------------------------
Name: Steven J. Douglass
Title: Chairman and Chief Executive Officer
JBI, INC.
By: /s/ Alan I. Weinstein
-----------------------------
Name: Alan I. Weinstein
Title: President and Acting CEO
J. BAKER, INC.
By: /s/ Alan I. Weinstein
-----------------------------
Name: Alan I. Weinstein
Title: President and Acting CEO
