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ASSET PURCHASE AGREEMENT
AMONG
JOAN AND DAVID HELPERN INCORPORATED
and
JOAN HELPERN DESIGNS, INC.
AS SELLERS
AND
MAXWELL SHOE COMPANY INC.
AS PURCHASER
Dated as of October 12, 2000
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of October
12, 2000, among joan and david helpern incorporated, a Massachusetts
corporation, a debtor and debtor-in-possession, with offices located at 4 West
58th Street, New York, New York 10019 ("J&D") and JOAN HELPERN DESIGNS, INC., a
Delaware corporation ("JHD") (J&D and JHD being collectively called the
"Sellers"), and MAXWELL SHOE COMPANY INC., a Delaware corporation, with offices
located at 101 Sprague Street, Boston, MA 02137 ("Purchaser").
PRELIMINARY STATEMENT
WHEREAS, on March 9, 2000 (the "Petition Date"), J&D filed a voluntary
petition pursuant to Chapter 11 of Title 11, United States Bankruptcy Code (the
"Bankruptcy Code") with the United States Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court"); and
WHEREAS, pursuant to sections 1107 and 1108 of the Bankruptcy Code,
J&D continues to operate its Business (as hereinafter defined) and manage its
property as debtor-in-possession; and
WHEREAS, J&D has determined that the sale of substantially all of its
assets pursuant to the Bankruptcy Code is in the best interests of its estate
and creditors; and
WHEREAS, JHD has determined that the sale of substantially all of its
assets related to the Business (other than accounts receivable and unpaid
royalties) is in its best interests and in the best interests of its
stockholders; and
WHEREAS, Sellers desire to sell the Purchased Assets (as hereafter
defined) to Purchaser, and Purchaser desires to purchase the Purchased Assets
from Sellers, pursuant to Bankruptcy Code sections 105(a), 363 and 365, upon the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
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ARTICLE I.
DEFINITIONS
Section 1.1. Definitions Unless otherwise defined herein, the terms
defined in the preamble and the Recitals to this Agreement shall have the
respective meanings specified therein, and the following terms shall have the
meanings specified below:
"Affiliate" means "Affiliate" as defined in Rule 405 promulgated
under the Securities Act of 1933, as amended.
"Agency and License Agreement" means the agreement among J&D,
Purchaser and The Ozer Group LLC (the "Agent") to be executed on or before the
Closing Date in the form attached hereto as Exhibit A.
"Agreement" has the meaning set forth in the preamble and shall
include all Schedules and Exhibits hereto.
"Allocation Statement" has the meaning set forth in Section 2.5.
"Ancillary Documents" means the Agency and License Agreement, the
Assignment and Assumption Agreements, the J&D Escrow Agreement, the JHD Escrow
Agreement, the Purchaser Escrow Agreement, and each agreement, document,
instrument or certificate contemplated by this Agreement or to be executed by
Purchaser or any Seller in connection with the consummation of the transactions
contemplated by this Agreement, in each case only as applicable to the relevant
party or parties to such Ancillary Document, as indicated by the context in
which such term is used.
"Apportionment Date" has the meaning set forth in Section 2.7.
"Assignment and Assumption Agreements" means the Assignment and
Assumption Agreements to be executed at Closing by Purchaser and the Sellers in
substantially the forms attached hereto as Exhibit B-1 and B-2, and any other
document or instrument of transfer (including without limitation bills of sale
and trademark assignments) executed at the Closing in order to transfer any
Purchased Assets to the Purchaser or to evidence Purchaser's assumption of any
Assumed Liabilities.
"Assigned Contracts" means the Other Contracts that are designated by
Purchaser for assumption by Seller and assignment to Purchaser in accordance
with Section 2.1(b)(ii) hereof.
"Assigned Leases" means the Leases that are designated by Purchaser
for assumption by Seller and assignment to Purchaser in accordance with Section
2.1(b)(i) hereof.
"Assumed Liabilities" has the meaning set forth in Section 2.3.
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"Auction" means the Auction held on October 12, 2000 in accordance
with the order of the Bankruptcy Court dated October 6, 2000.
"Auditing Party" has the meaning set forth in Section 10.3(b).
"Billing Period" has the meaning set forth in Section 2.7.
"Business" means (i) as to J&D, J&D's operations as a retailer and
wholesaler of upscale footwear, apparel and accessories, primarily under the
trademark Joan & David and certain related trademarks listed on Schedule 3.2.a.,
and (ii) as to JHD, JHD's business and operations as a trademark licensor,
including, but not limited to, with respect to the Trademarks.
"Business Day" means a day, other than a Saturday or a Sunday, on
which the New York Stock Exchange is open for business in The City of New York.
"Case" means J&D's Chapter 11 case, No. 00 B 10961 (SMB), pending
in the Bankruptcy Court.
"Claims" has the meaning set forth in Section 2.7.
"Closing" has the meaning set forth in Section 9.1.
"Closing Adjustment Amount" has the meaning set forth in Section
2.4(a).
"Closing Cash Payment" has the meaning set forth in Section 2.2.
"Closing Date" has the meaning set forth in Section 9.1.
"Closing Year" has the meaning set forth in Section 10.2.
"Code" means the Internal Revenue Code of 1986, as heretofore or
hereafter amended.
"Contaminant" means any substance regulated under any Environmental
Law as a pollutant, hazardous substances, hazardous or toxic wastes, hazardous
materials, or "toxic substances" under any Environmental Law.
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Sellers, are treated as a single employer
under Section 414 of the Code.
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"Corporate Office" means all of the 12th and 13th floors of Sellers'
corporate offices located at 4 West 58th Street, New York, New York 10019.
"Corporate Office Lease" shall mean the leases for the Corporate
Office.
"Cost Value" shall mean first cost as invoiced from the factory plus
inbound freight and storage costs and customs duties in an aggregate amount
equal to 15 percent of such first cost.
"Cure Costs" means (a) the amount necessary for J&D to pay to a
landlord in order to assume a Lease under Section 365 of the Bankruptcy Code,
including any credit received from such landlord for any security deposit such
landlord is holding, as such amount is determined by the Sale Order or other
order of the Bankruptcy Court, provided that in any case where Purchaser is
obligated under the Agreement to pay any Cure Costs, Purchaser shall not receive
such credit for any security deposits, and (b) the amount necessary for J&D to
pay to the other parties to any of the Other Contracts in order to be able to
assume such Other Contract under Section 365 of the Bankruptcy Code, as such
amount is determined by the Sale Order or other order of the Bankruptcy Court.
"Damaged" means damaged or defective because goods are dented, worn,
scratched, broken, faded, torn, mismatched, mismated, near mated or affected
with defects rendering them not first quality.
"Damages" means losses, amounts paid in settlement, Taxes, claims,
damages, Liabilities, obligations, judgments, settlements and reasonable out-of-
pocket costs (including costs of investigation or enforcement) and reasonable
expenses and attorneys fees; provided, however, that Damages shall not include
(i) any incidental or consequential damages or (ii) any special or punitive
damages.
"Department Store Licenses" means the license or concession agreements
for J&D's licensed departments or concession stands located in department
stores, in each case more particularly described on Schedule 3.1(f).
"Department Store Locations" means the department store locations
covered by the Department Store Licenses.
"Deposit" shall have the meaning ascribed thereto in Section 2.2
hereof.
"Environmental Law" means any Regulation which is related to or
otherwise imposes liability or standards of conduct concerning discharges,
releases or threatened releases of Contaminants into ambient air, water or land,
or otherwise relating to the manufacture, processing, generation, distribution,
use, treatment, storage, disposal, cleanup, transport or handling of
Contaminants.
"Environmental Liabilities and Costs" means all Losses from any claim,
by any Person, whether based on contract, tort, or arising under or pursuant to
any Environmental Law or a
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Release of a Contaminant into the environment, including any Remedial Action,
any Lien in favor of any authority pursuant to any Environmental Law or any
Order or agreement with any authority.
"Equipment" shall have the meaning ascribed thereto in the definition
of "J&D Assets" below.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder.
"Escrow Agent" shall mean Hahn & Hessen LLP.
"Excluded Assets" means all assets of any of the Sellers other than
the Purchased Assets, including without limitation: (a) all causes of action,
choses in action and rights of recovery and counterclaims (i) relating to the
conduct of the Business before the Closing Date except to the extent the same
affect any of the Purchased Assets, and (ii) against creditors of any Seller,
including, without limitation, avoidance actions of J&D under 11 U.S.C. (S) 547-
553 (except warranty contract claims associated with the J&D Assets); (b) any
pension plan, profit sharing plan, or other plan or program providing benefits
to current or former employees of the Sellers; (c) cash, cash equivalents and
marketable securities, including without limitation any amounts due from credit
card companies with respect to retail sales prior to the Closing Date; (d)
prepaid security deposits, including without limitation all rent security
deposits held by the lessors under the Leases which are listed on Schedule 3.1.f
hereto; (e) retainers; (f) insurance premium refunds and tax refunds, whether or
not applied for; (g) life insurance policies; (h) setoff or recoupment rights
not arising from or related to the Purchased Assets; (i) residual proceeds
generated by inventory clearance sales or other post-bankruptcy petition sales
of assets to which J&D or any Affiliate is entitled to a portion of the
proceeds; (k) all other property or assets not described in the definition of
"Purchased Assets" below; (l) all original lists, records and other information
(including computer files), relating to the conduct of the Business prior to the
Closing; (m) all leases (other than the Corporate Office Lease) to which J&D or
any Affiliate is a party that are not listed in Schedule 3.1(f) hereto,
including without limitation the lease pertaining to the Warehouse, or which, if
so listed, are not designated as Assigned Leases in accordance with Section
2.1(b)(i) hereof, and the fixtures and Equipment at the premises covered thereby
(the "Excluded Leases"); (n) accounts receivable and unpaid royalties due to
JHD; (o) Excluded Inventory (as defined below); (p) goods which belong to
sublessees, licensees or concessionaires of J&D or any Affiliate; (q) shares of
capital stock of Joan and David (U.K.) Limited ("J&DUK") and Bensi, S.A. and all
of the assets of such subsidiaries; (r) causes of action existing as of or after
the Closing Date that relate to any of the foregoing Excluded Assets and claims
and causes of action, to the extent they exist, that any Seller may have against
any of its officers, directors, employees and/or agents; (s) Receivables; (t)
any J&D Asset or JHD Asset designated for exclusion from Purchased Assets in
accordance with the terms and within the time(s) stated herein; (u) any and all
claims by J&D against Garcel, Inc. d/b/a Great American Group, in its capacity
as agent of J&D in connection with its conduct of Bankruptcy Court approved
store closing sales; and (v) any claims against Purchaser and/or Agent arising
under or in connection with this Agreement or any Ancillary Document.
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"Excluded Inventory" means (a) the inventory of J&D which is being
sold in an inventory clearance sale by J&D or its agent or agents, pursuant, in
the case of J&D, to an order of the Bankruptcy Court dated July 24, 2000, (b)
all inventory of Bensi, S.A., (c) all inventory of J&DUK, and (d) any goods that
would have constituted On-Order Merchandise but that are not purchased by
Purchaser because such goods do not satisfy the conditions set forth in Section
2.1(b)(iii).
"Excluded Liabilities" has the meaning set forth in Section 2.3(b).
"Final Inventory" has the meaning set forth in Section 2.4.
"FL Warehouse" means the facilities of Fashion Logistics located at 40
Enterprise Avenue, Secaucus, New Jersey.
"GAAP" means United States generally accepted accounting principles,
as in effect on the Closing Date.
"Governmental Agency" means (a) any international, foreign, federal,
state, county, local or municipal governmental or administrative agency or
political subdivision thereof, (b) any governmental authority, board, bureau,
commission, department or instrumentality, (c) any court or administrative
tribunal, (d) any non-governmental agency, tribunal or entity that is vested by
a governmental agency with applicable jurisdiction or (e) any arbitration
tribunal or other non-governmental authority with applicable jurisdiction.
"Gross Rings" has the meaning set forth in Section 2.4.
"HSR Act" means the Hart Scott Rodino Antitrust Improvements Act of
1976, as amended.
"Intellectual Property" means all intellectual property as it relates
to the Business, excluding licenses relating to off the shelf software, and only
pertaining to those goods or services as registered or applied for in those
jurisdictions identified on Schedule 3.3a, owned or used under license by
Sellers, licenses and sublicenses granted and obtained with respect thereto,
rights to protection of interests therein, trade names, service marks or
trademarks and all goodwill associated therewith (including, but not limited to,
any and all interests of any Seller in and to the Trademarks), and, to the
extent any of the following exist, logos, patterns, designs, lasts, drawings,
software, Internet Uniform Resource Locators ("URLs"), formulae, copyrights,
patents, inventions, whether or not patentable, whether or not reduced to
practice or whether or not yet made the subject of a pending patent application,
ideas and conceptions of potentially patentable subject matter, including,
without limitation, any patent disclosures, whether or not reduced to practice
and whether or not yet made the subject of a pending patent application or
applications, copyrights (registered or otherwise) and registrations and
applications for registration thereof, including, without limitation, source
code, object code, operating systems and specifications, data, databases, files,
documentation and other materials related thereto, trade secrets and
confidential, technical or business information (including ideas, formulas,
compositions, inventions, and conceptions of inventions whether patentable or
unpatentable and whether or not reduced
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to practice), patterns, designs, lasts, drawings, Internet domain names, whether
or not confidential, technology (including know-how), research and development
information, plans, proposals, technical data, copyrightable works, financial,
marketing and business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information, copies and
tangible embodiments of all the foregoing, in whatever form or medium, all
rights currently held or enjoyed by any Seller to obtain and rights to apply for
patents, and to register trademarks and copyrights, and all rights currently
held and enjoyed by any Seller to sue and recover and retain damages and costs
and attorneys fees for present and past infringement of any of the rights herein
above set out (provided, that in the case of any affirmative damage assessment
in favor of Purchaser and/or any Seller(s) relating to a pre-Closing
infringement claim that continues post-Closing, Purchaser and the relevant
Seller(s) shall mutually agree upon an appropriate allocation of any such damage
award as between Purchaser and any such Seller(s), and if they are unable to
agree on such allocation within 30 days after such damage assessment, such
allocation will be resolved by the Bankruptcy Court or binding arbitration as
provided in Section 2.2(b)(iii) hereof; provided, further, that Purchaser may
initiate and maintain, for its own account, any action against any third party
seeking to enjoin any alleged infringement of any Intellectual Property, and/or
the Trademarks).
"Inventory" has the meaning set forth in Section 2.4.
"Inventory Count" has the meaning set forth in Section 2.4.
"Inventory Date" has the meaning set forth in Section 2.4.
"Inventory Locations" shall have the meaning ascribed thereto in
Section 2.4(b).
"Inventory Service" has the meaning set forth in Section 2.4.
"IRS" means the Internal Revenue Service of the United States
Department of the Treasury.
"Item Values" has the meaning set forth in Section 2.4.
"J&D Assets" means such of the following assets and property of
J&D as do not constitute Excluded Assets:
(a) the Assigned Leases and the Corporate Office Lease, and all trade
fixtures and other improvements owned or leased by J&D and located at the Stores
subject to the Assigned Leases, and all easements, licenses, rights-of-way,
permits and all appurtenances to such Stores owned by J&D, and in the case of
each such Store solely to the extent they are designated for assignment by
Purchaser and become Assigned Leases in accordance with Section 2.1(b)(i)
hereof;
(b) all machinery, equipment (including all office equipment), trade
fixtures, tools, dies and furniture (the "Equipment"), owned or leased by J&D
located on or at the Corporate Office or at the Stores subject to Assigned
Leases, including, but not limited to any such item owned by
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J&D that is subject to a title retention arrangement which is intended as
security; provided, that any such item subject to any equipment or other lease
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agreement shall be included in the Purchased Assets only to the extent such
lease agreement is assignable by J&D and assumed by Purchaser, and in each case
solely to the extent designated for assignment by Purchaser in accordance with
Section 2.1(b)(ii) hereof;
(c) all inventory which is not Excluded Inventory owned by J&D,
including inventory located at the Stores (subject, in the case of the
Department Store Locations, to Section 2.1(b)(i)(c)), the Corporate Office, the
FL Warehouse or the Warehouse, and all promotional materials, replacement and
spare parts and, packaging materials imprinted with any of the Trademarks,
operating supplies imprinted with any of the Trademarks, and returned or
repossessed goods;
(d) all On-Order Merchandise that satisfies the conditions set
forth in Section 2.1(b)(iii) hereof;
(e) the J&D Intellectual Property;
(f) all assignable rights (including, but not limited to, any
purchase options) existing under the Assigned Leases and Assigned Contracts, in
each case solely to the extent designated for assignment by Purchaser in
accordance with Section 2.1(b)(ii) hereof;
(g) all office supplies, production supplies, spare parts and other
miscellaneous supplies (in each case only if imprinted with any of the
Trademarks), which if located at the Warehouse shall be removed by Purchaser
from the Warehouse no later than the conclusion of Purchaser's occupancy of the
Warehouse under the Warehouse License; and other tangible property of any kind
owned or leased (in the case of any such leased items, solely to the extent
designated for assignment by Purchaser in accordance with Section 2.1(b)(ii)
hereof) by J&D and located at the Stores that are subject to Assigned Leases,
(to the extent the same do not constitute fixtures) and provided that certain
items that are not included as Purchased Assets may be utilized by Purchaser and
the Agent pursuant to the terms of the Agency and License Agreement;
(h) originals or copies, at J&D's expense, of all lists, records and
other information pertaining to accounts, personnel and referral sources, copies
of all lists and records pertaining to suppliers and customers (both retail and
wholesale), and copies of all books and records of every kind (including,
without limitation, those evidenced by computer) relating to the Purchased
Assets or the prior operations of the Business, except any books and records
specifically set forth in or related to the Excluded Assets (all such books and
records (including access to computer files), which J&D shall provide to
Purchaser, at Purchaser's expense, after the Closing Date upon reasonable
request); and
(i) to the extent relating to other Purchased Assets, all assignable
permits, licenses, certifications and approvals from all permitting, licensing,
accrediting and certifying agencies, and the rights to all data and records held
by such permitting, licensing and certifying agencies.
"J&D Escrow Agreement" shall have the meaning ascribed thereto in
Section 2.2(b)(iii) hereof.
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"J&D Intellectual Property" means all Intellectual Property owned
or used by J&D.
"JHD Assets" means (a) the name "Joan & David" and all other
Trademarks owned by JHD that are listed on Schedule 3.3.a. hereto, as they
relate to the Business and only in those jurisdictions identified in Schedule
3.3a, including all goodwill associated therewith and the right to use such name
and marks in the future; and (b) subject to any license, franchise, concession,
commission or other similar agreement or arrangement of the "Joan & David" brand
or related brands as set forth in Schedule 3.3.a hereto (the "JHD Contracts"),
all Intellectual Property owned by JHD related to the Purchased Assets and the
Business.
"JHD Escrow Agreement" shall have the meaning ascribed thereto in
Section 2.2(b)(iii) hereof.
"Knowledge" as applied to any party shall mean the actual knowledge of
each executive officer of J&D and JHD, including, but not limited to, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer (or Interim
Chief Operating Officer or Interim Chief Financial Officer in the case of J&D),
General Counsel, Executive Vice President, as listed on Schedule 3.1.a hereto.
"Leases" means the real property leases for certain of the Stores as
set forth on Schedule 3.1.f. and does not include the Corporate Office Lease.
"Liability" means any liability or obligation (whether known or
unknown, asserted or unasserted, fixed or contingent, accrued or unaccrued,
liquidated or unliquidated, and whether due or to become due), including any
liability for Taxes.
"Lien" means any mortgage, pledge, security interest, claim, charge or
other encumbrance.
"Losses" has the meaning set forth in Section 11.1.
"Material Adverse Change" means a material adverse change or changes
with respect to the Purchased Assets, taken as a whole, since the date of this
Agreement which results or result in a material and demonstrable diminution in
the value of the Purchased Assets.
"Merchandise" has the meaning set forth in Section 2.4.
"On-Order Merchandise" means Fall 2000 and Resort/Holiday 2000 goods
which have been (a) received by J&D's freight forwarder in Europe or (b) ordered
in the ordinary course of the Business and are subject to purchase orders issued
by J&D that are listed on Schedule 2.1(b)(iii) hereto, but which in any such
case have not been received at any Inventory Location as of the Inventory Date,
and which otherwise satisfy the conditions set forth in Section 2.1(b)(iii)
hereof.
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"Other Contracts" means all agreements (other than the Leases and the
Corporate Office Lease), including the Department Store Licenses, which are
listed on Schedule 3.1(f) and all extensions, amendments, modifications,
enhancements, replacements, substitutions and supplements thereto or thereof.
"Other Contracts" does not include the JHD Contracts.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permit" means any permit, consent, certification, approval,
authorization, license, variance or permission required by a Governmental Agency
under any applicable law or otherwise relating to the Purchased Assets.
"Person" means any individual, partnership, corporation, trust,
association, limited liability company, Governmental Agency or other entity.
"Petty Cash" means the aggregate balances in the cash registers at the
Stores and petty cash funds as of 11:59 p.m. on the day immediately preceding
the Closing Date, for which an adjustment shall be made pursuant to the Agency
and License Agreement.
"Plan" or "Plans" means all "employee benefit plans" as defined in
Section 3(3) of ERISA, all "employee pension benefit plans" as defined in
Section 3(2) of ERISA, and all other material employee benefit arrangements,
payroll practices, employment agreements, incentive plans, or other similar
compensatory arrangements, whether or not subject to ERISA, including, without
limitation, any such arrangements providing severance pay, sick leave, vacation
pay, salary continuation for disability, retirement benefits, deferred
compensation, bonus pay, incentive pay, stock options, hospitalization
insurance, medical insurance, retiree health benefits, life insurance,
scholarships or tuition reimbursements, maintained, sponsored, or contributed to
by any Sellers or any member of the Controlled Group, for the benefit of current
or former employees of any Sellers or any member of the Controlled Group, and
includes employee pension benefit plans, maintained, sponsored, or contributed
to by any Sellers or any member of the Controlled Group within the last six
years.
"Pre-Closing Tax Period" means (i) any Tax Period ending on or before
the date preceding the Closing Date and (ii) with respect to a Tax Period that
commences before but ends after the Closing Date, the portion of such period up
to and including the Closing Date.
"Purchase Price" has the meaning set forth in Section 2.2.
"Purchased Assets" means the JHD Assets and the J&D Assets, as same
shall be designated by Purchaser (to the extent such designation is permitted by
Section 2.1 hereof) at or before the Closing Date.
"Purchaser" has the meaning set forth in the preamble.
"Purchaser Breach Losses" has the meaning set forth in Section 11.1.
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"Purchaser Escrow Agreement" shall have the meaning ascribed thereto
in Section 2.2(b)(iii) hereof.
"Purchaser Indemnified Parties" has the meaning set forth in Section
11.2.
"Purchaser's Portion" has the meaning set forth in Section 2.7.
"Receivables" means all J&D trade and other accounts receivable
and rights to payment of money.
"Regulation" means any law, statute, regulation, ruling, rule or order
of, administered or enforced by or on behalf of any governmental authority.
"Release" means any release, spill, emission, leaking, pumping,
disposal, discharge, dispersal or migration into the indoor or outdoor
environment or into or out of any property or assets (including the Purchased
Assets) owned or leased by Sellers as at the Closing Date, including the
movement of Contaminants through or in the air, soil, surface water, groundwater
or property.
"Sale Order" has the meaning set forth in Section 7.5.
"Schedules" means the various Schedules referred to in this Agreement
delivered separately to Purchaser on or before the date of execution and
delivery of this Agreement by the parties hereto.
"Sellers" has the meaning set forth in the preamble.
"Sellers' Breach Losses" has the meaning set forth in Section
11.2.
"Sellers' Indemnified Parties" has the meaning set forth in
Section 11.1.
"Sellers' Portion" has the meaning set forth in Section 2.7.
"Stores" means the premises described in the Leases listed on
Schedule 3.1(f) and the Department Store Locations.
"Store Closing Sale" shall have the meaning set forth in Section
8.7 hereof.
"Survival Period" has the meaning set forth in Section 3.6.
"Tax Return" means any report, return, information return or other
information required to be supplied to a taxing authority in connection with
Taxes.
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"Tax" or "Taxes" means (i) all federal, state, local and foreign
taxes, including income, gross receipts, excise, employment, sales, use,
transfer, license, payroll, franchise, severance, stamp, withholding, Social
Security, unemployment, disability, real property, personal property,
registration, environmental, custom duties, value added, alternative or add-on
minimum, estimated or other tax, including any interest, penalties or additions
thereto, whether disputed or not, or (ii) liability for the payment of any
amounts of the type described in (i) as a result of being party to any agreement
or any express or implied obligation to indemnify any other Person, or (iii) in
the case of the Sellers, liability for the payment of any amount of the type
described in clause (i) as a result of being or having been before the Closing
Date a member of an affiliated, consolidated, combined or unitary group, or a
party to any agreement or arrangement, as a result of which liability of the
Sellers is determined or taken into account with reference to the liability of
any other Person.
"Termination Event" shall have the meaning ascribed thereto in
Section 9.4 hereof.
"Third Party Claim" has the meaning set forth in Section 11.3(a).
"Trademarks" means any and all trademarks, service marks, trade dress,
logos, trade names, and corporate names, whether or not registered, including
all common law rights, and registrations and applications for registration
thereof, including, but not limited to, all marks registered in the United
States Patent and Trademark Office, the trademark offices of the States and
Territories of the United States of America, and the trademark offices of other
nations throughout the world as the same relates to the Business and only in
those jurisdictions identified on Schedule 3.3a, including any goodwill
associated therewith.
"Transaction Taxes" has the meaning set forth in Section 10.1.
"Warehouse" means the warehouse and offices leased to J&D located at
1935 Revere Beach Parkway, Everett, Massachusetts.
"Warehouse License" means that certain license pursuant to which J&D
shall grant Purchaser (and any agent of Purchaser) the right to occupy and use
the Warehouse during the conduct of the Store Closing Sales under the Agency and
License Agreement.
"Warehouse License Period" shall have the meaning ascribed thereto
in Section 2.9 hereof.
ARTICLE II
SALE AND PURCHASE OF PURCHASED ASSETS
Section 2.1. Purchase and Sale of Purchased Assets. On the terms and
subject to the conditions set forth in this Agreement, at the Closing Date
(unless a different date is specified herein) Purchaser shall purchase from each
Seller, and each Seller shall sell, transfer, assign,
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convey and deliver to Purchaser, all of such Seller's right, title and interest
in and to the Purchased Assets.
Section 2.1(a). Assignment of Leases, Licenses, Contracts, Purchase
Orders and Certain Claims. Subject to the terms and conditions set forth in
this Agreement, including, but not limited to Section 2.1(b) hereof, Sellers
will assign and transfer to Purchaser, effective as of the Closing Date (except
with respect to On-Order Merchandise), all of Sellers' right, title and interest
in and to, and Purchaser will take assignment of, the Corporate Office Lease,
the Assigned Leases, and the Assigned Contracts; provided, however, any such
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assignment of any Lease or Other Contract shall only be, and become effective
following the designation thereof as a "Purchased Asset" hereunder in accordance
with Sections 2.1(b)(i) and 2.1(b)(ii) hereof, at which time and in accordance
with the procedures provided for herein it shall become an "Assigned Lease" or
"Assigned Contract", as the case may be.
Section 2.1(b). Lease/Other Contract Election.
Section 2.1(b)(i). Lease Election.
(a) Purchaser has declared at the Auction and hereby confirms that it
elects not to designate any of the Leases and Department Store Licenses for J&D
to assume and thereupon assign to Purchaser. Accordingly, each of the Leases
and Department Store Licenses shall be deemed an Excluded Asset under this
Agreement effective as of the Closing Date, and any liabilities arising
thereunder shall constitute Excluded Liabilities hereunder.
(b) Purchaser shall purchase all inventory located at the Department
Store Locations. Purchaser shall bear the cost of moving all inventory
purchased pursuant to this Section 2.1(b)(i)(b) from the Department Store
Locations to Purchaser's designated destination.
Section 2.1(b)(ii). Other Contract Election. Purchaser has
declared at the Auction and Purchaser hereby confirms that it elects not to
designate any of the Other Contracts for J&D to assume and thereupon assign to
Purchaser. Accordingly, all of the Other Contracts shall be deemed Excluded
Assets under this Agreement effective as of the Closing Date, and any
liabilities arising thereunder shall constitute Excluded Liabilities hereunder.
Section 2.1(b)(iii). On-Order Merchandise. Purchaser shall purchase
from J&D and shall pay J&D an amount equal to the aggregate Cost Value of any
On-Order Merchandise; provided, however, that such On-Order Merchandise, to be
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included as a Purchased Asset hereunder, must (a) constitute goods that are
first quality merchandise saleable in the ordinary course of business (it being
recognized that such goods may be sold in Store Closing Sales) and not Damaged,
(b) subject to the last sentence of this Section 2.1(b)(iii), in the case of
goods that do not fall within clause (a) of the definition of On-Order
Merchandise in Section 1.1. hereof conform (except as to quantity) in all
material respects to the terms and provisions of the applicable underlying
Seller Purchase Order(s) (it being understood that the description of such goods
as is contained in Schedule 2.1(b)(iii) hereto is sufficient for purposes of
this Section) and any outstanding letter(s) of credit relating thereto, it being
agreed that
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acceptance of such goods by J&D's freight forwarder in Europe and payment to the
manufacturer under any letters of credit relating thereto or J&D has otherwise
paid for such goods shall be prima facie evidence of such conformity and that,
subject to clause (d) below, no failure of the manufacturer to ship such goods
by the shipping date specified in the applicable purchase order or letter of
credit and no variation from the shipping destination specified in the
applicable purchase order or letter of credit shall be deemed to make such goods
nonconforming; (c) following Sellers' clearance of such goods through customs,
be delivered to Purchaser in the United States of America, at a single
destination to be designated by Purchaser, and (d) be delivered to Purchaser, as
specified in clause (c) above, no later than October 30, 2000 ("On-Order
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Merchandise Delivery Deadline"). Goods that do not constitute On-Order
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Merchandise because they do not satisfy the requirements set forth in this
Section 2.1(b)(iii) shall constitute Excluded Assets hereunder effective as the
Closing Date; provided, however, Purchaser agrees to accept the conforming
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portion of the On-Order Merchandise which arrives on or prior to the On-Order
Merchandise Delivery Deadline in any case where a portion, but not all, of the
On-Order Merchandise in question is non-conforming under the terms of this
Section 2.1(b)(iii); provided further, that any non-conforming portion of such
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On-Order Merchandise shall constitute Excluded Inventory hereunder.
Section 2.2. Purchase Price.
(a) The base purchase price for the Purchased Assets is sixteen
million eight hundred thousand dollars ($16,800,000) which includes (i)
$7,200,000 for (A) the Cost Value of inventory as of the Closing Date (except as
set forth in Clause (C)), (B) the Cost Value of the On-Order Merchandise, and
(C) the Cost Value of all Merchandise sold in the Stores subject to the Agency
and License Agreement (the "Agency Stores") between 12:01 A.M. Eastern Standard
Time on October 14, 2000 and the Closing Date (the "Pre-Closing Merchandise"),
plus (ii) $9,350,000 for the value of the J&D Intellectual Property, the JHD
Assets and the other Purchased Assets (other than the Corporate Office Lease),
plus (iii) $250,000 attributable to the Corporate Office Lease, which base price
will be subject to adjustment at the Closing as provided in Section 2.4(a)
below and subject to further adjustment after the Closing as provided in Section
2.4(g) and (h) below (the "Purchase Price").
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(b) Payment of Purchase Price; Deposit; Escrow.
(i) As security for Purchaser's obligation to close the transaction
contemplated hereby, Purchaser has delivered to counsel for J&D a refundable
good faith deposit in the aggregate amount of $500,000 (the "Deposit"). The
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Deposit may be retained by Sellers to the extent of their damages in the event
of Purchaser's breach of this Agreement without limiting Sellers' right to
specific performance, other equitable remedies, and additional damages as a
consequence of Purchaser's breach. At the Closing, the Deposit (together with
any interest earned thereon) shall be applied as set forth in Section 2.2(b)(ii)
hereof. In the event of the occurrence of a Termination Event under Section 9.4
hereof, other than as a result of Purchaser's breach hereunder, the Deposit,
together with any interest earned thereon, shall be returned to Purchaser not
later than two (2) Business Days after the occurrence of such
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Termination Event. Pending the occurrence of the Closing hereunder, the Deposit
shall be held in an interest bearing escrow account to be maintained by counsel
to J&D.
(ii) At Closing, Purchaser shall pay Sellers by wire transfer of
immediately available funds, to an account(s) designated by Sellers, an amount
in respect of the Purchase Price equal to $16,800,000 (the "Closing Cash
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Payment"), subject to adjustment pursuant to Sections 2.4(a), 2.7 and 10.2
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hereof. In addition, Purchaser hereby authorizes the release of the Deposit at
the Closing to the Escrow Agent (together with any interest earned thereon),
which amount shall be held under the Purchaser Escrow Agreement and shall
constitute the Purchaser Escrow Amount. In addition to the Purchase Price
payable at Closing, Purchaser shall pay J&D for On-Order Merchandise by wire
transfer of immediately available funds to an account designated by J&D, upon
the completion of counting and acceptance at the times and in accordance with
Exhibit 2.4(b) hereof.
(iii)(x) J&D and Purchaser agree that on the Closing Date, $500,000
of the Purchase Price shall be deposited into escrow with the Escrow Agent under
the terms of the J&D Escrow Agreement (the "J&D Escrow Amount"). The J&D Escrow
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Agreement shall provide, among other things, that the J&D Escrow Amount shall be
made available to satisfy such claims as may be asserted by Purchaser as
provided for herein and in the J&D Escrow Agreement with regard to (a) any
adjustment(s) to the Purchase Price to the extent same relates to, concerns, or
arises from any J&D Asset, to the extent same constitutes a Purchased Asset
hereunder, in accordance with the terms of this Agreement and (b) any final and
binding judgments against Purchaser post-Closing for any matter or claim for
which Purchaser is entitled to indemnification under Article XI hereof to the
extent such indemnification claim relates to, concerns, or arises from any J&D
Asset, to the extent same constitutes a Purchased Asset hereunder. Purchaser
and J&D agree that the escrow arrangement created by the J&D Escrow Agreement
shall have a term of eight (8) months from the Closing Date, unless a shorter
time is hereafter agreed upon in writing by J&D and Purchaser; provided,
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however, the J&D Escrow Agreement shall further provide that the Escrow Agent
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shall disburse some or all of the J&D Escrow Amount to J&D and/or Purchaser, as
their interests therein may appear, and as may be agreed by them, after the
Purchase Price adjustment for the reconciliation of the aggregate Cost Value of
the Final Inventory has been made and agreed upon, such that the amount of the
J&D Escrow Amount then remaining on deposit with the Escrow Agent shall be fixed
at the amount of $175,000 (with any excess being paid to J&D and any shortage
being paid by J&D). The J&D Escrow Agreement shall further provide that in the
event there is any claim(s) threatened or asserted (with proof thereof
reasonably satisfactory to J&D having been delivered to J&D) by any person
against Purchaser at the expiration of the term of the J&D Escrow Agreement,
which claim(s) has not yet matured into a final binding judgment against
Purchaser at such time, the escrow created by the J&D Escrow Agreement and this
Agreement shall be extended for a period of time and in such amount as shall be
agreed by J&D and Purchaser; provided, however, in the event Purchaser and J&D
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are unable to agree on either the amount or duration of the extension of the
escrow created hereby and the J&D Escrow Agreement, such dispute shall be
resolved by the Bankruptcy Court (or if said court is without jurisdiction,
through binding arbitration in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, which arbitration shall be conducted in
New York, New York, unless an alternate venue is mutually agreed upon by
Purchaser and J&D).
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(iii)(y) JHD and Purchaser agree that on the Closing Date, $500,000
of the Purchase Price shall be deposited into escrow with the Escrow Agent under
the terms of the JHD Escrow Agreement (the "JHD Escrow Amount"). The JHD Escrow
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Agreement shall provide, among other things, that the JHD Escrow Amount shall be
made available to satisfy such claims as may be asserted by Purchaser as
provided for herein and in the JHD Escrow Agreement with regard to any final and
binding judgments against Purchaser post-Closing for any matter or claim for
which Purchaser is entitled to indemnification under Article XI hereof to the
extent such indemnification claim relates to, concerns, or arises from any JHD
Asset, to the extent same constitutes a Purchased Asset hereunder. Purchaser and
JHD agree that the escrow arrangement created by the JHD Escrow Agreement shall
have a term of six (6) months from the Closing Date, unless a shorter time is
hereafter agreed upon in writing by JHD and Purchaser. The JHD Escrow Agreement
shall further provide that in the event there is any claim(s) threatened or
asserted (with proof thereof reasonably satisfactory to JHD and J&D having been
delivered to JHD) by any person against Purchaser at the expiration of the term
of the JHD Escrow Agreement, which claim(s) has not yet matured into a final
binding judgment against Purchaser at such time, the escrow created by the JHD
Escrow Agreement and this Agreement shall be extended for a period of time and
in such amount as shall be agreed by JHD, J&D and Purchaser; provided, however,
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in the event Purchaser, JHD and J&D are unable to agree on either the amount or
duration of the extension of the escrow created hereby and the JHD Escrow
Agreement, such dispute shall be resolved by the Bankruptcy Court (or if said
court is without jurisdiction, through binding arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association, which
arbitration shall be conducted in New York, NY, unless an alternate venue is
mutually agreed upon by Purchaser, J&D and JHD).
(iii)(z) J&D and Purchaser agree that on the Closing Date, $500,000
shall be deposited by Purchaser into escrow with the Escrow Agent under the
terms of the Purchaser Escrow Agreement (the "Purchaser Escrow Amount"). The
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Purchaser Escrow Agreement shall provide, among other things, that the Purchaser
Escrow Amount shall be made available to satisfy such claims as may be asserted
by J&D as provided for herein and in the Purchaser Escrow Agreement with regard
to (a) any adjustment(s) to the Purchase Price to the extent same relates to,
concerns, or arises from any J&D Asset, to the extent same constitutes a
Purchased Asset hereunder, in accordance with the terms of this Agreement
including without limitation Purchaser's obligations with respect to On-Order
Merchandise, (b) Purchaser's obligations under the Agency and License
Agreement, and (c) any final and binding judgments against J&D post-Closing for
any matter or claim for which J&D is entitled to indemnification under Article
XI hereof to the extent such indemnification claim relates to, concerns, or
arises from any Assumed Liability. Purchaser and J&D agree that the escrow
arrangement created by the Purchaser Escrow Agreement shall have a term of eight
(8) months from the Closing Date, unless a shorter time is hereafter agreed upon
in writing by J&D and Purchaser; provided, however, the Purchaser Escrow
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Agreement shall further provide that the Escrow Agent shall disburse some or all
of the Purchaser Escrow Amount to J&D and/or Purchaser, as their interests
therein may appear, and as may be agreed by them, after (A) the Purchase Price
adjustment for the reconciliation of the aggregate Cost Value of the Inventory
has been made and agreed upon, (B) all On-Order Merchandise has been paid for by
Purchaser, and (C) Purchaser has made all payments required to be made under the
Agency and License Agreement, such that the amount of the Purchaser Escrow
Amount then remaining on deposit with the Escrow Agent shall be fixed at the
amount of $175,000 (with any excess being paid to J&D and any
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shortage being paid into escrow by Purchaser). The Purchaser Escrow Agreement
shall further provide that in the event there is any claim(s) threatened or
asserted (with proof thereof reasonably satisfactory to Purchaser having been
delivered to Purchaser) by any person against J&D at the expiration of the term
of the Purchaser Escrow Agreement, which claim(s) has not yet matured into a
final binding judgment against J&D at such time, the escrow created by the
Purchaser Escrow Agreement and this Agreement shall be extended for a period of
time and in such amount as shall be agreed by J&D and Purchaser; provided,
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however, in the event Purchaser and J&D are unable to agree on either the amount
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or duration of the extension of the escrow created hereby and the Purchaser
Escrow Agreement, such dispute shall be resolved by the Bankruptcy Court (or if
said court is without jurisdiction, through binding arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association,
which arbitration shall be conducted in New York, New York, unless an alternate
venue is mutually agreed upon by Purchaser and J&D).
Section 2.3. Assumption of Liabilities.
(a) On the terms and subject to the conditions set forth in this
Agreement, from and after the Closing Date, Purchaser will assume and pay,
perform, discharge and be responsible solely for the following liabilities of
the Sellers (the "Assumed Liabilities"):
(i) all liabilities and obligations that accrue and arise after the
Closing Date in respect of (A) the Assigned Contracts and Assigned Leases,
including without limitation any obligations to provide or replace a cash
security deposit(s) under such Leases, (B) any obligations with respect to the
JHD Contracts and (C) the Corporate Office Lease;
(ii) customer returns that occur within 10 days after the Closing
(Purchaser shall receive a credit as set forth in Section 2.4 for wholesale and
retail customer returns of goods sold before the Closing Date that occur within
10 days after the Closing Date, net of the Item Values of the returned
Merchandise);
(iii) gift certificates and customer credits issued by J&D that are
outstanding on the Closing Date, and redeemed within 10 days after the Closing
Date (provided, however, that Purchaser will receive a credit as set forth in
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Section 2.4 for the face amount of any such gift certificates that are redeemed
by customers within 10 days after the Closing Date); and
(iv) the Cure Costs for the Assigned Leases.
(b) Sellers acknowledge and agree that pursuant to the terms and
provisions of this Agreement and under any Lease or Other Contract, Purchaser
will not assume any obligation of Sellers, other than the Assumed Liabilities.
In furtherance and not in limitation of the foregoing, neither Purchaser nor any
of its Affiliates shall assume, and shall not be deemed to have assumed, other
than as specifically set forth in Article II hereof, any debt, claim, obligation
or other liability of Sellers or any of its/their Affiliates whatsoever,
including, but not limited to, (i) any Environmental Costs and Liabilities for
any act, omission, condition or event caused by or attributable to Sellers to
the extent occurring or existing prior to the Closing Date, including without
limitation all Environmental Costs and Liabilities
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relating in any manner to Sellers' direct or indirect handling, transportation
or disposal of any Contaminants, (ii) any of Sellers' liabilities in respect of
Taxes, except as expressly provided herein, (iii) any investment banking,
financial advisory, brokers' or finders' fees arising by reason of Sellers'
dealings with brokers or other third parties, or other liability of Sellers for
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement, (iv) any indebtedness of any Seller, except for the Assumed
Liabilities, (v) any obligations or liabilities for Sellers' employees,
including severance, termination pay, pension, profit sharing or any other
employee benefit plans, compensation or retiree medical and other benefits and
obligations, or any obligation, claim or amount under the Workers Adjustment and
Retraining Notification Act ("WARN Act"), OSHA, FLSA, ERISA, and other federal,
state and local laws, unfair labor practices, employee claims, discrimination
claims, errors and omissions, litigation, violations of law and tort claims or
actions, whether disclosed or undisclosed, which have accrued or arise out of
any Sellers' omissions or conduct of its business on or prior to the Closing,
(vi) any obligation or liability arising as a result of or whose existence is a
breach of Sellers' representations, warranties, agreements or covenants
contained in this Agreement or otherwise, (vii) any Excluded Assets, (viii) any
Affiliate obligations, (ix) any liability subject to compromise, except to the
extent same constitutes an Assumed Liability, (x) rebates, allowances,
deductions and/or price discrepancies relating in any manner to products sold in
pursuit of the Business prior to the Closing Date, except to the extent the same
constitute Assumed Liabilities, and (xi) any U.S. customs duties, except to the
extent included in the Cost Value of Inventory and On-Order Merchandise
purchased by Purchaser pursuant to this Agreement (collectively, "Excluded
Liabilities"). Disclosure of any obligation or liability on any schedule to this
Agreement shall not create an Assumed Obligation or other liability of
Purchaser, except where such disclosed obligation has been expressly assumed by
Purchaser as an Assumed Liability in accordance with the provisions of Article
II hereof.
Section 2.4. Adjustment of Purchase Price
(a) On the Business Day preceding the Closing, J&D shall deliver a
calculation of the amount, if any, by which the Purchase Price shall be adjusted
at the Closing in accordance with this Section 2.4 (the "Closing Adjustment").
Such adjustment of the Purchase Price (the "Preliminary Purchase Price") shall
be based on (i) the Cost Value of the inventory reflected on J&D's books and
records as of the close of business on September 30, 2000, carried forward to
the most recent practicable date preceding the Closing Date, plus (ii) any
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prepaid deposits and/or security deposits and prepaid expenses (in each case
solely to the extent Purchaser thereby becomes entitled to receive the benefit
thereof post-Closing) minus (iii) the Cost Value of that portion of the On-Order
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Merchandise that is described in clause (a) of the definition of On-Order
Merchandise in Section 1.1 hereof and that is included in the Inventory
reflected on J&D's books and records.
(b) Commencing on October 14, 2000, J&D and Purchaser shall cause to
be taken a "financial" and "SKU" inventory (defined as a listing which
summarizes the inventory on a detailed basis providing SKU number, quantity on
hand, inventory at Cost Value and inventory at current "Retail Price" [as
defined in the Agency and License Agreement]) (the "Inventory Count") of the
Merchandise in the Stores, the Warehouse, the FL Warehouse, and the Corporate
Office (collectively, the "Inventory Locations"), which Inventory Count Sellers
and Purchaser shall jointly schedule; provided, however, Sellers and Purchaser
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agree that the Inventory Count shall continue at as many Inventory Locations as
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possible on the day after the Closing Date and shall be completed in each of the
Inventory Locations no later than five (5) days after the Closing Date; provided
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further, that notwithstanding anything herein to the contrary, the Inventory
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Count in any Department Store Location shall be conducted at such times as shall
be agreed upon by Purchaser and J&D, and in each case as may be permissible
under the respective Department Store Licenses; provided further, that any On-
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Order Merchandise shall be counted by representatives of Purchaser and J&D upon
the delivery of same to Purchaser, at a single location to be designated by
Purchaser to J&D in writing. The date that the Inventory Count is taken in any
of the foregoing locations shall be referred to as to such location as the
"Inventory Date". The Inventory Count (other than for On-Order Merchandise)
shall be taken by RGIS Inventory Specialists (or such other independent
inventory service as shall be mutually acceptable to Purchaser and Seller)
("Inventory Service"), and Purchaser and J&D shall each have the right to review
and verify the listing and tabulation of the Inventory Count by Inventory
Service. Each Store shall be closed during the Inventory Count at such Store
(which shall be taken after or before regular business hours when at all
possible), and J&D and Purchaser shall each have a representative present during
such period. Instructions to be delivered to Inventory Service prior to the
Inventory Count are annexed hereto as Exhibit C hereof. Prior to the Closing
Date, Purchaser and J&D shall mutually agree, in writing, to the procedures to
be followed in boxing and shipping Inventory at any Store not subject to an
Assigned Lease or Assigned Contract and the procedures for counting and
acceptance of On-Order Merchandise. To facilitate the orderly and accurate
conduct of the Inventory Count at the Inventory Locations, (i)J&D hereby agrees
that effective five days before the Closing Date and continuing through and
including the occurrence of the Closing hereunder J&D shall cease any inter-
Inventory Location transfers of Merchandise, and (ii) Purchaser hereby agrees
that effective from 12:00 A.M. on the Closing Date and continuing through and
including the completion of the Inventory Count at all the Inventory Locations,
Purchaser shall not make any inter-Inventory Location transfers of Merchandise.
(c) J&D shall submit a report, including work papers and other back-
up data, to Purchaser prepared by Inventory Service at the conclusion of the
Inventory Count. The Inventory Count by Inventory Service shall be final and
binding upon the parties unless objected to within five (5) Business Days after
receipt by Purchaser or J&D; any such objection shall set forth each
objection(s) in detail. All such objections shall be limited to matters
involving the integrity of the physical count and the tabulation thereof. The
Purchaser and J&D shall each bear their own costs in connection with the
Inventory Count, provided, however, Purchaser and J&D shall share equally all
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costs and expenses of Inventory Service in connection with its performing the
Inventory Count.
(d) To the extent that the Inventory Date of any Store precedes the
Closing Date, J&D shall keep a strict count of (i) gross register receipts and
SKU records less applicable Sales Tax ("Net Receipts") attributable to the sale
of all items of Merchandise and (ii) cash reports of sales by selling price and
SKU Number within each Inventory Location from such Inventory Date through 11:59
P.M. Eastern Standard Time on the date preceding the Closing Date. To the
extent that the Inventory Date of any Store occurs on or after the Closing Date,
then Purchaser shall keep a similar strict count of Net Receipts and cash
reports of sales within each Inventory Location from the Closing Date through
such Inventory Date. "Gross Rings" means the aggregate amount of Net Receipts
attributable to the sale of all items of Merchandise for all such periods.
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(e) The term "Inventory" shall mean the aggregate of the Item Values
(as hereafter defined) of all of the Merchandise as calculated for all Inventory
Locations in the Inventory Count as of their respective Inventory Dates. The
term "Final Inventory" shall mean (a) the Inventory, plus (b) (i) the aggregate
of the Item Values of the Merchandise sold after 12:01 A.M. Eastern Standard
Time on October 14, 2000 at Agency Stores giving rise to Gross Rings and (ii)
the aggregate of the Item Values of the Merchandise sold on or after the Closing
Date at Stores other than Agency Stores giving rise to Gross Rings plus (c) an
amount equal to 2% of the Gross Rings from 11:59 P.M. Eastern Standard Time on
the date preceding the Closing Date through the applicable Inventory Dates. The
"Item Value" for Merchandise and Merchandise sold giving rise to Gross Rings
pursuant to this Section 2.4 shall mean the Cost Value of such Merchandise minus
(d) to the extent the Inventory Date of a Store occurs prior to the Closing
Date, an amount equal to 2% of the Gross Rings from such Store from 12:01 A.M.
Eastern Standard Time on the Inventory Date of such Store through the Closing
Date. "Merchandise" shall mean all goods owned by J&D or J&DUK and located at
the Inventory Locations, except (a) goods which are Damaged or, in the case of
Inventory Locations other than an outlet Store, not in an original Joan & David
O carton or box (it being agreed that a display shoe will be deemed to be in
such a carton or box if such carton or box exists at the Inventory Location of
such display shoe) ("Defective Merchandise"), and (b) goods which belong to
sublessees, licensees or concessionaires of J&D or have been placed in the
Stores on consignment. The Item Value for Defective Merchandise shall be $5.00
per item (with an "item" constituting a pair of shoes or any other item of
apparel for purposes of determining the Item Value of any item constituting
Defective Merchandise).
(f) J&D shall submit a report to Purchaser within thirty (30) days of
the Closing Date stating J&D's calculation of the Closing Adjustment, based on
the actual values as of the Closing Date (except as otherwise provided herein)
of the categories of Purchased Assets set forth in Section 2.4(a) above,
including a detailed valuation of the Final Inventory (by style, color and
size). J&D's valuation of the Final Inventory shall be subject to review by
Purchaser and any agent, representative or designee thereof. Purchaser shall
have twenty (20) days after receipt of J&D's report to advise J&D that Purchaser
disputes such calculation, with the basis of any such dispute being limited to
compliance with this Section 2.4 and manifest clerical and accounting errors by
J&D in calculating Item Values. If Purchaser fails to provide such notice, then
the Closing Adjustment as calculated in J&D's report shall be the Closing
Adjustment. If Purchaser provides notice that it disputes J&D's calculation
within such twenty (20) day period, Purchaser and J&D shall each use best
efforts to resolve such dispute through negotiation. If such dispute cannot be
resolved through negotiation within ten (10) Business Days after the receipt by
J&D of Purchaser's notice of dispute, then the dispute shall be resolved by the
Bankruptcy Court after notice and hearing, which shall have sole and absolute
discretion with respect to the resolution of such dispute. The calculation of
the Closing Adjustment, as modified by the Bankruptcy Court shall be final and
binding upon the parties, and shall constitute the Closing Adjustment. The
Closing Adjustment shall also state the amounts of the other adjustments to the
Purchase Price and credits to Purchaser set forth in this Agreement (including,
without limitation, those set forth in Section 2.3(a)(ii) and (iii) hereof), and
any disputes regarding the calculation of such amounts shall be resolved in the
manner set forth in this Section 2.4 (f).
(g) (i) The sum of (x) Purchase Price as finally determined pursuant
to Section 2.4(f) hereof and (y) the amounts paid by Purchaser to J&D pursuant
to 2.4(h) is referred to hereafter
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as the "Final Purchase Price".
(ii) If the amount of the Final Purchase Price (including, for
purposes of this Section 2.4(g), the amount of the adjustments to be made under
Sections 2.7 and 10.2) that is attributable to any components other than the
Final Inventory and the On Order Merchandise (the "Non-Inventory Components")
exceeds the amount of the Preliminary Purchase Price (including, for purposes of
this Section 2.4(g), the amount of the adjustments to be made under Sections 2.7
and 10.2) that is attributable to the Non-Inventory Components, Purchaser shall
pay 100% of the amount of such increase in cash to J&D within three (3) Business
Days after the final determination of the Closing Adjustment under Section
2.4(f) above. If the amount of the Final Purchase Price (including, for purposes
of this Section 2.4(g), the amount of the adjustments to be made under Sections
2.7 and 10.2) that is attributable to the Non-Inventory Components is less than
the amount of the Preliminary Purchase Price (including, for purposes of this
Section 2.4(g), the amount of the adjustments to be made under Sections 2.7 and
10.2) that is attributable to the Non-Inventory Components, J&D shall pay 100%
of the amount of such increase in cash to Purchaser within three (3) Business
Days after the final determination of the Closing Adjustment under Section
2.4(f) above.
(iii) The portion of the Purchase Price to be paid for inventory and
On Order Merchandise pursuant to this Agreement shall be $7,200,000, adjusted
upward or downward based on the Final Inventory and the Cost Value of the On
Order Merchandise, with upward or downward adjustments to be based on 70% of
Cost Value. The Closing Adjustment for the inventory and On Order Merchandise
shall reconcile the amounts actually paid to J&D pursuant to this Agreement for
inventory and On Order Merchandise with the amount that should have been paid as
set forth in the preceding sentence. Adjustments made pursuant to this Section
2.4(g) (iii) shall be paid in cash by J&D, if it was paid more than it should
have been paid for inventory and On Order Merchandise, or Purchaser, if it paid
less than it should have paid for inventory and On Order Merchandise, within
three (3) Business Days after the final determination of the Closing Adjustment
under Section 2.4(f) above. Schedule 2.4 (g) sets forth, by way of illustration
only, examples of the manner in which the foregoing adjustment shall be
implemented
(h) Purchaser shall pay J&D in accordance with Section 2.1(b)(iii)
hereof an amount equal to the Cost Value of all On-Order Merchandise which
satisfies the conditions set forth in Section 2.1(b)(iii) hereof at the time(s)
such conditions are satisfied.
(i) The Purchase Price shall not be reduced because certain assets
become Excluded Assets pursuant to Section 2.1(b).
Section 2.5. Allocation of Purchase Price.
(a) As soon as practicable after the Closing Date, Purchaser will
deliver to Sellers a statement setting forth an allocation of the Purchase Price
in accordance with applicable law (the "Allocation Statement").
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(b) Not later than 30 days prior to the filing of their respective
Forms 8594 relating to this transaction, each party shall deliver to the other
party a copy of its Form 8594.
Section 2.6. Sale at Closing Date. The sale, transfer, assignment and
delivery by the Sellers of the Purchased Assets to Purchaser, and the assumption
by Purchaser of the Assumed Liabilities, as herein provided, shall be effected
on the Closing Date (except with respect to On-Order Merchandise) by the
execution and delivery by the Sellers and Purchaser of the Assignment and
Assumption Agreement(s) and such other Ancillary Documents as shall be necessary
or appropriate to consummate the transactions contemplated hereby.
Section 2.7. Apportionments. The following are to be apportioned as
of 11:59 PM Eastern Daylight Time on the date immediately preceding the Closing
Date (or such other date as may be applicable with respect to any Assigned Lease
or Assigned Contract, if the effective date of such assignment is different than
the Closing Date) (the "Apportionment Date") to the extent such are valid post-
petition claims or are subject to non-avoidable liens: rent (including
percentage rent and additional rent, which to the extent based on revenues will
be apportioned in proportion to revenues before and after the Apportionment
Date) under any of the Assigned Leases (solely to the extent same are designated
for assignment in accordance with the terms hereof) and Department Store
Licenses (solely to the extent same are designated for assignment in accordance
with the terms hereof), water, sewer and utility charges and real estate taxes,
to the extent payable under the Assigned Leases and Department Store Licenses
(solely to the extent same are designated for assignment in accordance with the
terms hereof) and such other Apportionments and adjustments in connection with
the Stores, Assigned Leases and Department Store Licenses (solely to the extent
same are designated for assignment in accordance with the terms hereof) as are
customarily apportioned in transactions of this nature, including without
limitation, insurance premiums payable to department store licensors, merchant
association dues, and amounts payable under Assigned Contracts (collectively,
the "Claims"). Any obligations of JHD with respect to the JHD Contracts shall
also be apportioned as of the Apportionment Date. The amount of any such Claim,
for the applicable billing period which includes the date immediately preceding
the Closing Date (with respect to any Claim, the "Billing Period") shall be
deemed to be (i) for a Claim the amount of which is certain on or before the
Apportionment Date, the amount of such Claim for the entire Billing Period and
(ii) for a Claim the amount of which is not certain on or before the
Apportionment Date but for which apportionment is made on the Apportionment Date
(rather than post-Closing) , the amount of such Claim for the comparable billing
period preceding the Billing Period. In determining the apportionment, (x) the
portion of any Claim payable by the Sellers (with respect to such Claim, the
"Sellers' Portion") shall be deemed to be such Claim multiplied by a fraction,
the numerator of which is the number of days from the beginning of the Billing
Period containing the Apportionment Date through and including the Apportionment
Date and the denominator of which is the number of days in such Billing Period,
and (y) the portion of any Claim payable by Purchaser (with respect to such
claim, the "Purchaser's Portion") shall be deemed to be the amount of such Claim
less the Sellers' Portion. The Purchase Price shall be adjusted by netting the
aggregate amount of Sellers' Portion and Purchaser's Portion of all Claims with
such net adjustment, if any, being paid in cash to the party entitled to it.
Except as otherwise provided herein, all apportionments shall be made on the
basis of actual bills available on or prior to the Closing, to the extent
available after commercially reasonable efforts by Sellers to obtain the same.
Any apportionments that are not made on the Closing Date shall be made after the
Closing
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Date and paid at the same time as the final Closing Adjustment. Any
apportionments for which Sellers seek payment at the Closing shall be identified
by Sellers in writing at least two Business Days prior to the Closing Date.
Section 2.8. Casualty and Condemnation. To the extent applicable and
not otherwise adjusted for pursuant to Section 2.4 hereof, in the event of any
damage or destruction by reason of any casualty to any of the Purchased Assets
after the date hereof and prior to the Closing Date, or if prior to the Closing
Date there shall be any taking by condemnation or eminent domain of any of the
Purchased Assets, the Sellers shall (i) in the case of damage or destruction,
pay over to Purchaser at Closing any insurance proceeds received by the Sellers
prior to the Closing Date and assign to Purchaser at Closing all of the Sellers'
right, title and interest in and to any additional proceeds related to such
damage or destruction and (ii) in the case of condemnation or eminent domain,
pay over to Purchaser at the Closing all awards received by the Sellers on
account of such condemnation or eminent domain prior to the Closing Date and
assign to Purchaser all of the Sellers' right to receive any additional awards
related to such condemnation or eminent domain; provided, that if all such
casualties and takings by condemnation or eminent domain constitute,
collectively, a Material Adverse Change, Purchaser shall have the right to
terminate this Agreement prior to the Closing Date.
Section 2.9. Warehouse; Warehouse Assets. Purchaser has notified J&D
that it has elected to have J&D grant Purchaser a license ("Warehouse License")
pursuant to which Purchaser shall have the right to use and occupy the Warehouse
for a period from the Closing Date through the completion of the Store Closing
Sales (the "Warehouse License Period"). No landlord-tenant relationship shall
be created by or under the Warehouse License. Any expenses arising with
respect to Purchaser's (or any agent or designee thereof) entry into, occupancy
and use of the Warehouse during the Warehouse License Period, including, but not
limited to, the following: rent, additional rent, real estate taxes, utilities,
telephone, alarms and alarm service, premiums for insurance costs required under
the lease for the Warehouse, and all costs related to any and all contracts and
arrangements for utilities and other services at the Warehouse, shall be paid by
Purchaser. Purchaser may terminate the Warehouse License Period at any time
after the Closing Date upon seven (7) days' written notice to J&D. While
occupying the Warehouse, Purchaser shall comply with all terms and conditions of
the lease therefor and shall not take or omit to take any action that would
constitute a default or event of default under such lease. Purchaser shall
maintain appropriate property liability and casualty insurance with respect to
its use and occupancy of the Warehouse during the Warehouse License Period. The
policies for such insurance shall list J&D as an additional insured. At the
conclusion of the Warehouse License Period, Purchaser shall deliver the
Warehouse in vacant and broom clean condition; provided, however, that nothing
-------- -------
herein contained shall require Purchaser to cure building violations, remove
fixtures or installations which are attached to the premises, remove carpeting,
or remove Excluded Assets.
Section 2.10. Corporate Office, License. (a) Purchaser hereby
authorizes J&D, for a period of thirty (30) days from and after the Closing Date
(the "Corporate Office License Period"), to enter into and use the Corporate
Office, together with Purchaser, in a manner consistent with the terms and
conditions of the Corporate Office Lease, for the purpose of performing J&D's
post-Closing obligations hereunder and under the Agency and License Agreement,
taking such
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actions and having access to such records as are necessary for the Case or to
pursue rights and claims against third parties, filing of tax returns, insurance
claims and any other necessary filings, and marketing or selling any Excluded
Assets hereunder. No landlord-tenant relationship shall be created by this
authorization. While occupying the Corporate Office, J&D shall comply with all
terms and conditions of the lease therefor and shall not take or omit to take
any action which would constitute a default or event of default under such
lease. J&D shall maintain appropriate property liability and casualty insurance
with respect to its use and occupancy of the Corporate Office during the
Corporate Office License Period. The policies for such insurance shall list
Purchaser as an additional insured.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Section 3.1. Representations and Warranties of Each Seller.
Each of the Sellers represents and warrants to the Purchaser as to
itself and its portion of the Purchased Assets as follows:
Section 3.1.a. Authority of Sellers. Such Seller is a corporation
validly existing and in good standing under the laws of its jurisdiction of
organization. Such Seller has full corporate power and authority to execute and
deliver this Agreement and each of the Ancillary Documents to be executed and
delivered on its behalf at the Closing, and the execution and delivery by such
Seller of this Agreement and the Ancillary Documents to which it is a party and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action on the part of
such Seller, and this Agreement constitutes, and each of the Ancillary Documents
to which it is a party upon its execution will constitute, the legal, valid and
binding obligation of such Seller enforceable in accordance with its terms,
subject in the case of J&D to entry by the Bankruptcy Court of the Sale Order
and the receipt of the consents, waivers and approvals specified on Schedule
3.1(c) and except, in the case of JHD, as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium, or similar laws from time to time
in effect which affect creditors' rights generally, and by legal and equitable
limitations on the enforceability of specific remedies. Subject to any
necessary authorization from the Bankruptcy Court in the case of J&D, such
Seller has full corporate power and authority to own its properties and to carry
on the business presently being conducted by it. Schedule 3.1.a. lists each
current executive officer of such Seller.
Section 3.1.b. No Conflict or Violation.
(a) The execution, delivery and performance by such Seller of this
Agreement and the Ancillary Documents to which such Seller is a party do not and
will not violate or conflict with any provision of the Certificate of
Incorporation or By-laws (or equivalent documents) of such Seller and, assuming
that the consents, waivers, authorizations, approvals, declarations, filings and
registrations referred to in Section 3.1(c) are obtained or made, do not and
will not (i) violate, in any material respect, any provision of law, or any
order, judgment or decree of any court or other Governmental Agency applicable
to such Seller, or (ii) violate or result in a material breach of or constitute
(with due notice or lapse of time or both) a material default under any Assigned
Contract, loan agreement, mortgage, security
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agreement, indenture or other instrument to which such Seller is a party or by
which it is bound or to which any of the Purchased Assets having sold by such
Seller is subject.
(b) As of the date of this Agreement, such Seller has not entered into
any other agreement to sell the Purchased Assets that has not been terminated
prior to the execution and delivery of this Agreement.
Section 3.1.c. Consents and Approvals. Schedule 3.1(c) sets forth a
true and complete list of each material consent, waiver, authorization or
approval of (i) any Governmental Agency and each declaration to or filing or
registration with any such Governmental Agency, or (ii) of any other Person in
connection with any Assigned Contract involving the payment by such Seller of
more than $50,000 in any calendar year, that is required for the execution and
delivery of this Agreement by such Seller or the performance by such Seller of
its obligations hereunder; provided that Schedule 3.1.c does not identify any
consent, waiver, authorization or approval that would have been required to be
set forth on such Schedule absent the application of sections 363 or 365 of the
Bankruptcy Code.
Section 3.1.d. Compliance with Law. Except as set forth on Schedule
3.1.d., such Seller (i) has complied in all material respects with all laws,
regulations, orders and other legal requirements applicable to the Business or
the Purchased Assets, (ii) to such Seller's Knowledge, has not received written
notice of any violation of any law, regulation, order or other legal requirement
which violation would have a material adverse effect on the Purchased Assets,
and (iii) to such Seller's Knowledge, is not in default in any material respect
under any order, writ, judgment, award, injunction or decree of any Governmental
Agency, applicable to the Business or the Purchased Assets.
Section 3.1.e. Sufficiency and Title to the Purchased Assets. Such
Seller at the Closing Date will have, to the best of its Knowledge, good and
valid title to each of the Purchased Assets being sold by it. The entry by the
Bankruptcy Court of the Sale Order and the delivery to the Purchaser of the
instruments of transfer of ownership contemplated by this Agreement will vest
good and valid title to the Purchased Assets in the Purchaser, free and clear of
all interests in the Purchased Assets including all Liens thereon, other than
Assumed Liabilities or as set forth in any of the schedules hereto.
Section 3.1.f. Assigned Contracts and Leases. The Other Contracts
and Leases are listed on Schedule 3.1.f. hereto. True and complete copies of
the Other Contracts and Leases have been made available by the Sellers to
Purchaser. At the Closing, the Sellers shall have cured any and all defaults
or, in the case of J&D, shall have provided adequate assurance that it will cure
any and all defaults with respect to any Assigned Contract(s) as provided in
section 365 of the Bankruptcy Code and as required by the Bankruptcy Court so
that at the Closing (or such other date as shall apply hereunder with respect to
the assumption and assignment of any Other Contract) such Seller shall be able
to assume and assign same to Purchaser, it being understood that Purchaser will
pay the Cure Costs for any Assigned Leases. Other than as set forth on Schedule
3.1.f., and except for the Cure Costs, which shall be paid by Sellers or
Purchaser as provided herein, neither the Seller assigning such other Contracts
or Leases nor, to the best of the such Seller's Knowledge, any other party under
any of the Other Contracts and Assigned Leases has commenced any action against
the other or given or received any written notice of any material default or
violation under any Other Contract or Assigned Lease which
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was not withdrawn or dismissed, except only for those defaults which will be
cured prior to the Closing in accordance with the Sale Order (or which need not
be cured under the Bankruptcy Code to permit the assumption and assignment of
Assigned Contracts and Assigned Leases), and each of the Other Contracts and
Assigned Leases is or will be at the Closing valid, binding and in full force
and effect as against such Seller.
Section 3.1.g. Litigation. Other than in connection with the Case
and except as set forth on Schedule 3.1.g, there are no material actions, causes
of action, claims, suits or proceedings pending against such Seller with respect
to the Business or affecting the operation of the Business or the use of the
Purchased Assets, at law or in equity, or before or by any Governmental Agency,
or which seek to restrain or enjoin the consummation of or would materially and
adversely affect, the transactions contemplated hereby, with the exception of
those matters set forth in Schedule 3.1.g.
Section 3.1.h. Tax Matters. To such Seller's Knowledge, there is no
Lien affecting any of the Purchased Assets that arose in connection with any
failure or alleged failure to pay any Tax.
Section 3.1.i. Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried on by such Seller
without the intervention of any other Person acting on such Seller's behalf in
such manner as to give rise to any valid claim by any such Person against the
Purchaser for a finder's fee, brokerage commission or other similar payment
based on an arrangement with such Seller. The parties acknowledge that Newmark
Retail Financial Advisors LLC is the sole financial advisor to J&D, and its
fees are the sole responsibility of J&D, except to the extent JHD may agree to
bear a portion of such fee.
Section 3.1.j. Material Contracts. Except for (i) the Assigned
Contracts and Leases, (ii) as disclosed on Schedule 3.2.a. or Schedule 3.3a.
with respect to the Intellectual Property, and (iii) the Other Contracts listed
on Schedule G to the Schedules and Statement of Financial Affairs filed by J&D
with the Bankruptcy Court on June 9, 2000, copies of which have previously been
furnished to Purchaser (the "Non-Assigned Contracts"), such Seller is not a
party to or bound by any material contract relating to the Business.
Section 3.1.k. Permits. Schedule 3.1.k correctly describes each
Permit, the non-existence of which Permit to such Seller's Knowledge would have
a Material Adverse Effect, together with the name of the government agency or
entity issuing such Permit. Upon consummation of the transactions contemplated
by this Agreement, the Purchaser will, assuming the consents in Schedule 3.1.c
have been obtained prior to the Closing Date, have all of such the Seller's
right, title and interest in all the Permits to the extent transferable.
Section 3.1.l. Labor Matters and Employees.
(a) Schedule 3.1.l lists each Plan and each Multi-employer Plan.
Upon entry of the Sale Order by the Bankruptcy Court and Closing, the liability,
if any, of any Sellers under any Plan or Multi-employer Plan will not become a
liability of Purchaser.
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(b) There is no labor dispute relating to the Business, other than
routine individual grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of the Business, or any
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to employees of the Business. There are no labor unions or other
organizations representing or attempting to represent any employees of Sellers
and no agreements, plans, programs, documents or letters of understanding
currently in effect between any Sellers and any union or other employee
organization affecting wages, hours or other terms and conditions of employment.
(c) The transactions contemplated by this Agreement do not require
the consent of the PBGC; provided that the PBGC may exercise its right to be
heard at the Bankruptcy Court hearing regarding the sale of the Purchased Assets
on the terms and conditions contemplated by this Agreement. No employee of any
Sellers will become entitled to any retirement, severance or similar benefit or
enhanced benefit under any Plan or Multi-employer Plan solely as a result of the
transactions contemplated hereby which will become a liability of Purchaser.
Section 3.1.m. Environmental Liabilities. To such Seller's
Knowledge, no Contaminant has been deposited, leaked, released, or disposed of
at, on or under any real property now or previously owned, leased or operated by
Sellers which may reasonably be expected to result in a Material Adverse Effect.
No property (a) now or previously owned, leased or operated by such Seller, (b)
to which any Contaminant located on or resulting from the use of any Purchased
Assets have been transported, or (c) to which such Seller has, directly or
indirectly, transported such substances, is listed or, to the Knowledge of
Sellers, proposed for listing on any federal, state, local or foreign list of
sites requiring material investigation or cleanup. There has been no material
environmental investigation, study, audit, test, review or other analysis
conducted in relation to any Purchased Assets or any other property or facility
now or previously owned or leased by any Sellers.
Section 3.1.n. Leases. Each Seller has valid leasehold interests in
each of the Assigned Leases listed on Schedule 3.1.f listed next to its name.
Section 3.2. Representations and Warranties of J&D.
Section 3.2.a. Intellectual Property.
(a) Schedule 3.2.a. sets forth a true and complete list of all
trademarks or service marks (including any registrations or applications for
registration of any of the foregoing) that J&D owns and/or uses in connection
with the Business. Except as set forth on Schedule 3.2.a., J&D either owns or
has the right to use by license, sublicense, agreement or other permission all
of the J&D Intellectual Property listed on Schedule 3.2.a.(except that the
foregoing representation is to the best of J&D's Knowledge with respect to those
jurisdictions identified on Schedule 3.2a, other than the United States of
America, Canada and the United Kingdom), free and clear of all Liens, with the
exception of those security interests existing in favor of Fleet Retail Finance
Inc. and Paragon Capital LLC against the trademark registrations in the United
States of America, the United Kingdom and elsewhere set forth in Schedule 3.2.a.
Except as noted on Schedule 3.2.a., no actions or claims have been brought,
made,
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asserted, or to J&D's Knowledge threatened against J&D in any of the
jurisdictions identified on Schedule 3.2a, either (A) based upon or challenging
or seeking to deny or restrict the use by J&D of any of the J&D Intellectual
Property, or (B) alleging that any trademarks, service marks, logos, trade
names, trade secrets, works, products, or services that are or have been used,
made or sold by J&D infringe any patents, trademarks, copyrights or any other
intellectual property rights or other rights of any person. To the best of
J&D's Knowledge, in any of the jurisdictions identified in Schedule 3.2a, except
as noted on Schedule 3.2.a hereto, no product or service related to the Business
violates any license or infringes upon any intellectual property rights of any
person, and no person is using any trademarks, service marks, trade names,
logos, trade secrets, patents, copyrights or other intellectual property that
are confusingly similar to any J&D Intellectual Property or that infringe upon
the J&D Intellectual Property or upon the rights of J&D therein, with the
exception of those matters set forth in Schedule 3.2.a. Except as disclosed in
Schedule 3.2.a., J&D has not granted any license or other right to any other
person with respect to the J&D Intellectual Property. The consummation of the
transactions contemplated by this Agreement will not result in the termination
or impairment of any of J&D's rights in or to the J&D Intellectual Property
other than the assignment thereof to Purchaser. With respect to the J&D
Intellectual Property in foreign jurisdictions other than Canada and the United
Kingdom, the representations and warranties in this Section 3.2.a are limited to
those jurisdictions in which granted or pending Intellectual Property rights
exist and sufficient commercial use of the Merchandise bearing the Intellectual
Property has been made.
(b) Except as is set forth in Schedule 3.2.a., no royalties or other
amounts are payable by J&D to any other person by reason of the ownership or use
of the J&D Intellectual Property.
(c) Except as set forth in Schedule 3.2.a hereto J&D is not a party
to, or subject to, any contract which currently requires, or upon the passage of
time or occurrence of an event or contingency (whether or default or otherwise)
will require, the conveyance or disclosure to any person of the J&D Intellectual
Property, or of any rights thereto.
(d) As a result of the transactions contemplated hereby, upon the
Closing, Purchaser shall own and possess, or own and possess adequate and
enforceable licenses, sublicenses or other rights to use, in perpetuity and
without payment of any fee, all of the assignable J&D Intellectual Property.
Section 3.3. Representations and Warranties of JHD.
Section 3.3.a. Intellectual Property.
(a) Schedule 3.3.a. sets forth a true and complete list of all
trademarks or service marks, including any registrations or applications for
registration of any of the foregoing that JHD owns and uses in connection with
the Business. Except as set forth on Schedule 3.3.a., JHD either owns or has
the right to use by license, sublicense, agreement or other permission all of
the Intellectual Property listed on Schedule 3.3.a., (except that the foregoing
representation is to the best of JHD's Knowledge with respect to those
jurisdictions identified on Schedule 3.3a, other than the United States of
America, Canada and the United Kingdom), free and clear of all Liens, with the
exception of those security
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interests existing in favor of Fleet Retail Finance Inc. and Paragon Capital LLC
against the trademark registrations in the United States of America set forth in
Schedule 3.3.a. Except as noted on Schedule 3.3.a., no actions or claims have
been brought, made, asserted, or to its Knowledge, threatened against JHD , in
any of the jurisdictions identified on Schedule 3.3a either (A) based upon or
challenging or seeking to deny or restrict the use by JHD of any of the
Trademarks, or (B) alleging that any trademarks, service marks, logos, trade
names, trade secrets, works, products, or services that are or have been used,
made or sold by JHD infringe any patents, trademarks, copyrights or any other
intellectual property rights or other rights of any person. To the best of JHD's
Knowledge, in any of the jurisdictions identified on Schedule 3.3a, except as
described on Schedule 3.3.a. hereto, no product or service related to JHD's
business violates any license or infringes upon any intellectual property rights
of any person, and no person is using any trademarks, service marks, trade
names, logos, trade secrets, patents, copyrights or other intellectual property
that are confusingly similar to the Trademarks or that infringe upon the
Trademarks or upon the rights of JHD therein with the exception of the matter
set forth in Schedule 3.3.a. Except as disclosed in Schedule 3.3.a. hereof, JHD
has not granted any license or other right to any other person with respect to
the Trademarks. The consummation of the transactions contemplated by this
Agreement will not result in the termination or impairment of any rights of JHD
in or to the Trademarks other than the assignment thereof to Purchaser. With
respect to the JHD's Intellectual Property in foreign jurisdictions other than
the United Kingdom and Canada, the representations and warranties in this
Section 3.3.a are limited to those jurisdictions in which granted or pending
Intellectual Property rights exist and sufficient commercial use of the
Merchandise bearing the Intellectual Property has been made.
(b) Except as described on Schedule 3.3.a. hereto, no royalties or
other amounts are payable by JHD to any other person by reason of the ownership
or use of the Trademarks;
(c) Except as described on Schedule 3.3.a. hereto, JHD is not a party
to, or subject to, any contract which currently requires, or upon the passage of
time or occurrence of an event or contingency (whether or default or otherwise)
will require, the conveyance or disclosure to any person of the Trademarks, or
of any rights thereto.
(d) As a result of the transactions contemplated hereby, upon the
Closing, Purchaser shall own and possess, or own and possess adequate and
enforceable licenses, sublicenses or other rights to use, in perpetuity and
without payment of any fee, all the JHD Assets.
Section 3.4 Representations and Warranties of Joan Helpern, David
Helpern, Sr. and David Helpern, Jr. Joan Helpern, David Helpern, Sr., and David
Helpern, Jr., (each a "Representor"), severally and not jointly, acknowledging
that Purchaser is relying on these representations and warranties in entering
into this Agreement and the transaction(s) contemplated herein, and in the
absence of such representations would not enter into said transactions,
represents and warrants as to herself or himself as follows:
(a) Such Representor has not sold, transferred, licensed or conveyed
any of the Sellers' rights, title or interest in and to any of the Sellers'
Trademarks, except to the extent noted on Schedule 3.2.a. or 3.3.a. hereto.
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(b) To the actual knowledge of such Representor, none of the Sellers
has sold, transferred, licensed or conveyed any of its rights, title or interest
in and to any of such Seller's Trademarks, except to the extent noted on
Schedule 3.2.a or 3.3.a. hereto.
Section 3.5 Further Assurances. J&D, JHD and each Representor each
agrees and covenants that at any time and from time to time, at the request of
Purchaser and without further consideration, it, he or she will promptly execute
and deliver to Purchaser such further instruments and documents and take all
other steps in each case as Purchaser may reasonably require in order to carry
out the full intent and purpose of this Agreement, including without limitation,
to put Purchaser, or its permitted successors or assigns, in actual possession
and physical control of the J&D Intellectual Property and the JHD Assets and to
effectuate or record the transfer and assignment to Purchaser of the J&D
Intellectual Property and the JHD Assets. Sellers, the Representors, and
Purchaser understand that the official transfer of the Trademarks in the
jurisdictions set forth on Schedule 3.3a requires execution of additional
agreements and other assurances, and the parties hereby agree to execute
specific confirmatory assignment and other supplementary documents (as may be
required) in favor of the Purchaser, at Purchaser's expense, for each of the
countries in which there are Trademarks recited in Schedule 3.3a in order to
effectuate recordal of the assignment of the aforesaid Trademarks on the
registers in those jurisdictions.
Section 3.6. Survival. Each of the representations and warranties of
the Sellers and the Representors shall survive the Closing until the expiration
of eighteen (18) months after the Closing Date (the "Survival Period"). No
claim may be asserted by Purchaser against any Seller or Representor arising out
of a breach of any such representation or warranty unless written notice setting
forth the basis of such claim in reasonable detail has been furnished to such
Seller or Representor before the expiration of the Survival Period.
Section 3.7. Disclaimer of Additional Representations and
Warranties; Schedules.
(a) Except as expressly set forth in this Agreement, the Schedules
and Exhibits hereto, the Ancillary Documents, and any certificate or instrument
delivered pursuant to the terms hereof or thereof, the Sellers make no
representations or warranties with respect to any or all of the Excluded Assets,
the Business, or its operations, assets (including, without limitation, the
Purchased Assets), liabilities (including, without limitation, the Assumed
Liabilities) or condition, including, with respect to the Purchased Assets, any
representation or warranty of merchantability, suitability or fitness for a
particular purpose, or quality as to the Purchased Assets, or any part thereof,
or as to the condition or workmanship thereof, or the absence of any defects
therein, whether latent or patent. Except as provided in this Agreement, the
Schedules and Exhibits hereto, the Ancillary Documents, and any other
certificate or instrument delivered pursuant to the terms hereof or thereof, the
Purchased Assets are to be conveyed hereunder "AS IS" on the date hereof and in
their present condition, subject to reasonable use, wear and tear between the
date hereof and the Closing Date, and Purchaser shall rely upon its own
examination thereof.
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(b) Notwithstanding anything to the contrary contained in this
Agreement, no matter primarily relating to any of the Excluded Assets or
Excluded Liabilities is required to be disclosed on any Schedule. In addition,
any item disclosed on any one Schedule shall be deemed to be disclosed on each
Schedule, where relevant. Disclosure of an item in any Schedule shall not be
deemed to be an admission that such item is material.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Sellers as follows:
Section 4.1. Authority of Purchaser. Purchaser is a corporation
validly existing, and in good standing under the laws of the State of Delaware.
Purchaser has full corporate power and authority to execute and deliver this
Agreement, and each of the Ancillary Documents to which it is a party, and the
execution and delivery by Purchaser of this Agreement and such Ancillary
Documents, and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on the part of Purchaser, and this Agreement constitutes, and each of such
Ancillary Documents upon its execution will constitute, the legal, valid and
binding obligation of Purchaser enforceable in accordance with its terms, except
as such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium, or similar laws from time to time in effect which affect creditors'
rights generally, and by legal and equitable limitations on the enforceability
of specific remedies. Purchaser has full corporate power and authority to own
its properties and to carry on the business presently being conducted by it.
Section 4.2. No Conflict or Violation. The execution, delivery and
performance by Purchaser of this Agreement and the Ancillary Documents to which
it is a party do not and will not violate or conflict with any provision of the
Certificate of Formation or Operating Agreement of Purchaser, and, assuming that
the consents, waivers, authorizations, approvals, declarations, filings and
registrations referred to in Section 3.3 and 4.3(i) are obtained or made, do not
and will not violate any provision of law, or any order, judgment or decree of
any court or other Governmental Agency applicable to Purchaser, or violate, or
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any loan agreement, mortgage, security agreement, indenture or
other instrument to which Purchaser is a party or by which it is bound.
Section 4.3. Consents and Approvals. The execution, delivery and
performance by Purchaser of this Agreement do not require the consent or
approval of, or filing with, any government, governmental body or agency or
other entity or Person except: (i) as may be required to effect the transfer of
any Permits; or (ii) such consents, approvals and filings, the failure to obtain
or make which would not, individually or in the aggregate, have a material
adverse effect on its ability to consummate the transactions contemplated
hereby. Purchaser is not required to make a prenotification filing with respect
to the transactions contemplated by this Agreement under the HSR Act and the
rules thereunder.
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Section 4.4. Availability of Funds, etc. Purchaser will at Closing
have available funds sufficient to allow it to pay its obligations pursuant to
Sections 2.2 and 2.4 at the times and in the manner set forth in this Agreement.
In furtherance and not in limitation of the foregoing, Purchaser hereby
represents, covenants and agrees that as of the date hereof and through the
Closing Date: (i) it has and will maintain cash and cash equivalents of at least
$25 million (free and clear of any liens or restrictions) and such funds or the
applicable portion thereof will be available (free and clear of any liens or
restrictions) to pay the Purchase Price on the Closing Date and (ii) its net
worth (i.e., the fair value of all Purchaser's assets minus all its liabilities)
---
is and will be at least $35 million. Purchaser acknowledges and agrees that
Sellers are relying on the foregoing representation and covenant in connection
with their execution of this Agreement.
Section 4.5. Litigation. There are no actions, causes of action,
claims, suits, proceedings, orders, writs, injunctions, or decrees pending or,
to the Knowledge of Purchaser, threatened against Purchaser at law or in equity
or before or by any Governmental Agency, which seeks to restrain or enjoin the
consummation of the transactions contemplated hereby or that shall otherwise
materially adversely affect the ability of Purchaser to perform its obligations
hereunder.
Section 4.6. Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried on by Purchaser without
the intervention of any other Person acting on its behalf in such manner as to
give rise to any valid claim by any such Person against the Sellers or their
Affiliates for a finder's fee, brokerage commission or other similar payment
based on an arrangement with Purchaser.
Section 4.7. Adequate Assurances Regarding Executory Contracts. As
of the Bankruptcy Court hearing on approval of entry of the Sale Order,
Purchaser will be capable of satisfying the conditions contained in sections
365(b)(1)(c) and (f) of the Bankruptcy Code with respect to J&D's Assigned
Contracts and Leases and the Corporate Office Lease.
Section 4.8. Survival. Each of the representations and warranties
of Purchaser shall survive the Closing until the expiration of the Survival
Period. No claim may be asserted by any Seller against Purchaser arising out of
a breach of any such representation or warranty unless written notice setting
forth the basis of such claim in reasonable detail has been furnished by such
Seller to the Purchaser before the expiration of the Survival Period.
ARTICLE V.
CERTAIN COVENANTS OF THE SELLERS
Each Seller covenants with Purchaser as follows:
Section 5.1. Conduct of Business Before the Closing Date.
(a) Without the prior written consent of Purchaser or unless
otherwise ordered by the Bankruptcy Court sue sponte or on motion by a third
party, notice of which order or motion shall be promptly delivered by J&D to
Purchaser, and except for planned store closings and liquidation of
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inventory previously disclosed to Purchaser as set forth in Schedule 5.1,
between the date hereof and the Closing Date, none of the Sellers shall, except
as required or expressly permitted pursuant to the terms hereof, make any
material adverse change in (i) the assets, properties, rights and claims which
would on the Closing Date constitute Purchased Assets or (ii) the Business as it
relates to the assets, properties, rights and claims to be sold by such Seller
which would on the Closing Date constitute Purchased Assets, or enter into any
transaction respecting the Purchased Assets, other than in any such case in the
ordinary course of the Business consistent with the Sellers' past practices, and
shall continue to operate the Stores and the Business as it relates to the
Purchased Assets in the ordinary course of the Business. Without limiting the
generality of, but subject to, the foregoing, unless otherwise consented to in
writing by Purchaser, each Seller shall, consistent with its past practices,
where applicable:
(i) Perform all of its material post-petition obligations under the
Leases and Other Contracts in accordance with their terms, except for
obligations which are not required to be performed under the
Bankruptcy Code or which are being disputed by such Seller in good
faith;
(ii) Comply in all material respects with all statutes, laws,
ordinances, rules and regulations applicable to the Purchased Assets
except where compliance is being disputed by such Seller in good faith
or excused by the Bankruptcy Code or other applicable law;
(iii) Not remove, agree to remove, sell or agree to sell or otherwise
transfer or permit any Person or entity to remove any equipment,
machinery and fixtures of material value from the Stores, except for
replacements and refurbishments in the ordinary course of business;
(iv)(A) Not amend or modify, in any material respect, or terminate or
dispose of any of the Leases, Department Store Licenses or Other
Contracts or agree or consent to any material amendments or
modifications or terminations thereof and (B) promptly notify
Purchaser of any amendment or modification to any Lease, Department
Store License or Other Contract;
(v) Not change, in any material respect, any of its methods or
procedures relating to accounting for the Cost Value of inventory in
the Business;
(vi) Promptly notify Purchaser if such Seller receives any notices
from any lessor, Governmental Agency, insurance company or any other
entity indicating any material default or the need for any material
repairs, alterations or improvements or any other matter that could
reasonably be expected to result in a Material Adverse Change, or that
any of the Stores are or may be in violation of any law, and cause
compliance at such Seller's cost, except where compliance is being
disputed by such Seller in good faith or excused by the Bankruptcy
Code or other applicable law;
(vii) Promptly notify Purchaser if such Seller receives any notices
of or otherwise becomes aware of any condemnation proceedings
affecting the Stores;
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(viii) Not enter into any material agreements that would be binding
on the Purchaser or affect any of the Purchased Assets other than in
the ordinary course of business and, not enter into any leases for new
stores or any new Department Store License;
(ix) Not issue new purchase orders for Merchandise;
(x) Promptly notify Purchaser of any order of the Bankruptcy Court
entered in the Case that materially affects or will materially affect
the operation of the Business or the Purchased Assets and promptly
deliver a copy of any such order to Purchaser; and
(xi) Maintain all occurrence-based forms of insurance with respect to
the Purchased Assets as in effect on the date hereof.
(xii) From the date hereof until the Closing Date, JHD shall take all
necessary steps, at its expense, to maintain and protect the
Intellectual Property, including without limitation, prosecuting
pending applications for registration of Intellectual Property and
maintaining, to the extent permitted by law, each registration of
Intellectual Property owned by JHD, including, without limitation,
responding to office actions from the Patent and Trademark Office or
similar, foreign registration offices, filing applications for
renewal, affidavits of use and affidavits of incontestability where
necessary. Following the Closing Date, Sellers shall have no further
obligation or expense with respect to the maintenance of the
Intellectual Property except to assist the Purchaser as set forth in
Section 3.5 hereof.
(b) Notwithstanding the foregoing, J&D may, prior to Closing, file a
request with the Bankruptcy Court that J&D be permitted to conduct inventory
clearance or going out of business sales in the event that the Closing does not
occur by the date set forth in Section 9.1 as a result of a breach or default by
the Purchaser.
Section 5.2. Consents and Approvals.
(a) J&D shall use commercially reasonable efforts to obtain (i) entry
of the Sale Order by the Bankruptcy Court, (ii) approval of the obligation set
forth in Section 9.5(b), and (iii) all consents and approvals of third parties
necessary to duly transfer to the Purchaser all of J&D's rights, title and
interest in and to all of the J&D Intellectual Property, and (b) JHD shall use
commercially reasonable efforts to obtain all consents and approvals of third
parties necessary to duly transfer to the Purchaser all of JHD's rights, title
and interest in and to all of the JHD Assets; provided, that Sellers shall not
be required to make any payment to any third parties other than any payments
(including Cure Costs in the case of J&D, except as otherwise provided herein)
required to be made under the Corporate Office Lease, any Assigned Lease,
Assigned Contract or JHD Contract in order to duly transfer such Purchased
Asset.
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Section 5.3. Further Assurances.
(a) Upon the request of the Purchaser at any time after the Closing
Date, each Seller shall forthwith execute and deliver such documents and take
such actions as Purchaser or its counsel may reasonably request to effectuate
the purposes of this Agreement.
(b) Each Seller agrees that for a period of not less than two (2)
years following the Closing Date (i) it shall not destroy or dispose of any of
the books and records included in the Excluded Assets without first offering to
turn over possession thereof (or, if the books and records relate exclusively
to, and are being sold to, a purchaser of related Excluded Assets, possession of
copies thereof) to Purchaser by written notice at least ten (10) days prior to
such destruction or disposition and (ii) that it shall make available to
Purchaser and its representatives and agents, during normal business hours and
upon reasonable notice, all such books and records and permit Purchaser and its
respective representatives and agents to examine and, at their expense, copy
such books and records at any time during normal business hours and upon
reasonable notice.
(c) Unless otherwise agreed to by Purchaser, Sellers shall not sell
or grant access to, and shall preserve the confidentiality of, all customer
lists retained by Sellers as part of the Excluded Assets, except as otherwise
required by applicable law, legal process or the Bankruptcy Court.
(d) Notwithstanding anything to the contrary herein, to the extent
available under Canadian Provincial or other applicable Canadian law, Purchaser
reserves the right to file any application for any duty draw back or other
refund attributable to the inventory; provided, that in the event Purchaser
determines to make any such application, Sellers shall furnish Purchaser with
such cooperation and with access to such books and records of Sellers than in
their possession that may be reasonably requested by Purchaser in order to make
such application.
Section 5.4. Reasonable Efforts. Subject to the proviso at the end
of Section 5.2, upon the terms and subject to the conditions of this Agreement,
the Sellers will use commercially reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary or
proper consistent with applicable law to consummate and make effective in the
most expeditious manner practicable the transactions contemplated hereby.
Without limiting the foregoing, and provided such steps do not require Sellers
to incur any material out-of pocket expenses the Sellers will take or cause to
be taken by others all reasonable actions required to obtain or satisfy all
consents and to continue such efforts as may be required after the Closing Date
to facilitate the full and expeditious transfer of legal title, the assignment,
or the sublease or sublicense as the case may be, of the Purchased Assets.
Section 5.5. Assignment of Contracts. At the Closing and effective as
of the Closing Date (unless another date(s) is provided herein), the Sellers
shall sell, assign and transfer to Purchaser or its designee all their rights
under the Corporate Office Lease, the Assigned Contracts and Assigned Leases.
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Section 5.6. Name Change Filings. Within 10 days after the Closing
Date, each Seller shall file with (a) the Secretary of State or similar office
in the jurisdiction of its incorporation, an amendment to its certificate of
incorporation to change its name to a name which does not contain any of the
Trademarks or any confusingly similar name, and (b) a motion with the Bankruptcy
Court seeking authorization and approval of the name change required in (a)
hereof, and changing the caption of the case to reflect such name change, and
shall promptly provide Purchaser with evidence of such filings. In addition, J&D
shall, within 15 days after the Closing Date, take such actions and file such
documents as are necessary to reflect such name changes in all states in which
J&D is qualified to do business as a foreign corporation and will deliver to
Purchaser copies of such documents evidencing such name change filings. J&D and
JHD shall not use the trade names listed on Schedule 3.2.a. or 3.3.a. after the
Closing, except (i) as required for the Case or to pursue rights and claims
against third parties, and (ii) for a period, not to exceed 180 days after the
Closing Date, by Sellers, J&DUK, Bensi S.A. or their agents in connection with
the marketing and sale of any Excluded Inventory of J&D, J&DUK, or Bensi S.A.
not sold to Purchaser hereunder; (iii) filing of tax returns, insurance claims
and any other necessary filings; and (iv) publishing any notices required by the
Bankruptcy Court. Purchaser hereby grants to Sellers, J&DUK, Bensi S.A., and
their liquidation agents for a period of 180 days after the Closing Date, a
limited license and right to use the trade names, logos and customer lists
relating to and used in connection with the operation of the Stores, solely for
the purposes of selling the Excluded Assets, including without limitation
advertising and conducting inventory liquidation and going out of business sales
with respect to Excluded Inventory and other Excluded Assets, and for the
purposes and for the time period set forth in the preceding sentence.
Section 5.7. Referral of Business Opportunities. From and after the
Closing Date (and in the case of J&D, through and including the date of entry of
an order granting a final decree in the Case), J&D shall use reasonable efforts
to refer to Purchaser all incoming customer orders received by it including,
without limitation, all customer orders received by J&D via computer or other
automated inventory control systems. To the extent customer orders are
delivered to third party electronic data interchange providers, such providers
will be instructed to transmit such orders to Purchaser or Purchaser's
providers. Electronic delivery, if used, shall be by such method as shall be
mutually agreed.
ARTICLE VI.
CERTAIN COVENANTS OF PURCHASER
Section 6.1. Reasonable Efforts. Upon the terms and subject to the
conditions of this Agreement, Purchaser will use commercially reasonable efforts
to take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary or proper consistent with applicable law to consummate and make
effective in the most expeditious manner practicable the transactions
contemplated hereby.
Section 6.2. Consents and Approvals. Purchaser shall use commercially
reasonable efforts to provide, at the Sellers' request, assistance in obtaining
the Sale Order.
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Section 6.3. Certain Employees. Purchaser will have the right, but
not the obligation, to offer employment to any former or present employees or
consultants of J&D. Sellers understand that the Purchaser may be offering
employment to certain of J&D's employees, and will cooperate with Purchaser in
allowing Purchaser access to those employees prior to Closing for purposes of
interviewing and selection. Any employment offers accepted shall be subject to
Purchaser's policies and procedures. Purchaser shall not assume any Liabilities
relating to current or former employees of J&D, including, without limitation,
wage and salary obligations, bonus obligations, reimbursement obligations for
employee business expenses, vacation pay and holiday pay, jury duty pay,
personal leave and sick day pay, obligations under or in connection with
medical, dental and prescription drug coverage or other insurance plans or
programs, other general welfare benefits, obligations under employment contracts
and severance obligations, or under any Plan.
Section 6.4. Information and Access. Following consummation of the
Closing, so long as such access does not unreasonably interfere with Purchaser's
business operations, Purchaser shall permit Sellers' counsel and other
professionals or representatives employed by them or by J&D's Creditors
Committee or otherwise retained by any of them reasonable access to the
financial and other books and records relating to the Purchased Assets or the
Business (whether in documentary or data form) for the purposes of facilitating
the continuing administration of the J&D chapter 11 case, preparing Tax Returns
or responding to Tax related inquiries, and other such administrative
activities, which access shall include the right of such professionals to copy,
at the Sellers' expense, such documents and records as they may request in
furtherance of the purposes described above. If Purchaser moves any such
documents or records from their present location, Sellers have the right to
require Purchaser to copy and deliver to Sellers or their professionals such
documents and records as they may request, but only to the extent Sellers or any
such professional (i) furnish Purchaser with reasonably detailed written
descriptions of the materials to be so copied and (ii) Sellers reimburse
Purchaser for the costs and expenses thereof. The parties acknowledge that
Sellers shall have the right to retain any documents and records provided to
them by Purchaser, subject in all respects to the provisions of Section 5.7
hereof. Following the Closing, Purchaser shall provide Sellers and such of
Sellers' professionals as Sellers shall have from time-to-time designated, with
reasonable access to former management of the Business during regular business
hours to assist Sellers as set forth in this Section 6.4, provided again that
such access does not unreasonably interfere with Purchaser's business
operations. Purchaser shall not dispose of any such documents and records
except as shall be consistent with applicable law; provided, further, Purchaser
-------- -------
shall provide Sellers with reasonable advance notice prior to the disposal of
any such documents or records, together with the opportunity for Sellers to
preserve such documents or records at Sellers' cost.
Section 6.5. Further Assurances.
(a) Upon the request of any Seller at any time after the Closing
Date, the Purchaser shall forthwith execute and deliver such documents as such
Seller or its counsel may reasonably request to effectuate the purposes of this
Agreement.
(b) Purchaser agrees that for a period of not less than two (2) years
following the Closing Date, it shall not destroy or dispose of any of the books
and records of a Seller included in the
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Purchased Assets without first offering to turn over possession thereof to such
Seller by written notice at least ten (10) days prior to such destruction or
disposition.
(c) Purchaser agrees to furnish Sellers for a period of six (6)
months after the Closing with reasonable access to the Warehouse if applicable
and to all books, records, contracts and documents pertaining to the Business
and the Purchased Assets, including all computer equipment and files, for the
purposes of preparing and resolving the Closing Adjustments and resolving tax
and accounting issues and claims adjustments.
Section 6.6. Future Inventory Production Requirements. From and after
the Closing Date, Purchaser may, in its discretion, give favorable consideration
to utilizing Sellers' existing suppliers of Inventory for some or all its future
inventory production needs. Purchaser has the present intention, which
intention is subject to change, in Purchaser's discretion, to procure some or
all of its future inventory requirements from Sellers' existing inventory
suppliers upon terms and conditions satisfactory to Purchaser, in its
discretion.
ARTICLE VII.
CONDITIONS TO THE SELLERS' OBLIGATIONS
The obligations of the Sellers to consummate the transactions
contemplated by this Agreement are subject to the satisfaction (unless waived in
writing by the Sellers in their sole discretion) of each of the following
conditions on or prior to the Closing Date:
Section 7.1. Representations and Warranties. The representations and
warranties of Purchaser contained in this Agreement shall be true and correct on
and as of the Closing Date in all material respects as though such
representations and warranties were made on and as of the Closing Date.
Purchaser shall have delivered to the Sellers a certificate signed by an officer
of Purchaser, dated the Closing Date, to the foregoing effect.
Section 7.2. Compliance with Agreement. Purchaser shall have
performed and complied in all material respects with all covenants and
conditions to be performed or complied with by it on or prior to the Closing
Date. Purchaser shall have delivered to the Sellers a certificate signed by an
officer of Purchaser, dated the Closing Date, to the foregoing effect.
Section 7.3. Consents. Other than the Bankruptcy Court's entry of the
Sale Order (which is addressed in Section 7.5), all consents, waivers,
authorizations and approvals of any Governmental Agency shall have been duly
obtained and shall be in full force and effect on the Closing Date.
Section 7.4. Corporate Documents. The Sellers shall have received
from Purchaser certified copies of the resolutions duly adopted by the board of
directors of Purchaser approving the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, and such
resolutions shall be in full force and effect as of the Closing Date.
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Section 7.5. Bankruptcy Court Order(s).
(i) The Bankruptcy Court shall have entered the Sale Order
substantially in the form annexed hereto as Exhibit 7.5(i) (the "Sale Order")
within three (3) business days following the Sale Hearing, with such Sale Order
to contain, at a minimum, the relief and findings provided for in Section 8.7
hereof; and
(ii) Purchaser shall have provided adequate assurance of future
performance required under 11 U.S.C. (S) 365(f)(2) with respect to the
performance of its obligations under the Corporate Office Lease.
Section 7.6. Execution of Agreements. The Purchaser shall have duly
authorized and executed and delivered to Sellers this Agreement, each Ancillary
Document to which it is a party, and a consulting agreement with any person
deemed necessary or appropriate by Purchaser, in its discretion, with such
consulting agreement(s) being in form acceptable to Purchaser, in its
discretion.
Section 7.7. Opinion of Counsel. The Sellers shall have received
from Purchaser an opinion from Purchaser's Counsel, in form and substance
reasonably satisfactory to Sellers, as to the matters referred to in Section 4.1
and (as to the knowledge of such counsel) 4.2 hereof.
Section 7.8. No Adverse Proceeding. As of the Closing Date, there
shall not have been instituted or be pending any suit, action or other
proceeding by any Governmental Agency in which it is sought to restrain or
prohibit the transactions contemplated by this Agreement.
Section 7.9. No Appeal or Stay. The Sale Order shall not have been
appealed or be subject to any appeal as of the Closing Date and no stay shall be
in effect as of the Closing Date.
ARTICLE VIII.
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligation of Purchaser to consummate the transactions
contemplated by this Agreement is subject to the satisfaction (unless waived in
writing by Purchaser in its sole discretion) of each of the following conditions
on or prior to the Closing Date:
Section 8.1. Representations and Warranties. The representations and
warranties of the Sellers contained in this Agreement shall be true and correct
on and as of the Closing Date in all material respects as though such
representations and warranties were made on and as of the Closing Date. Each of
the Sellers shall have delivered to Purchaser a certificate signed by an
Executive Officer of each Seller, dated the Closing Date, to the foregoing
effect.
Section 8.2. Compliance with Agreement. The Sellers shall have
performed and complied in all material respects with all covenants and
conditions to be performed or complied with
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by them on or prior to the Closing Date. The Sellers shall have delivered to
Purchaser a certificate signed by an executive officer of each of the Sellers,
dated the Closing Date, to the foregoing effect.
Section 8.3. No Adverse Proceeding. As of the Closing Date, there
shall not have been instituted or be pending any suit, action or other
proceeding by any Governmental Agency in which it is sought to restrain or
prohibit the transactions contemplated by this Agreement.
Section 8.4. Consents; Lien Releases. Other than obtaining the Sale
Order (which is addressed in Section 8.7), there shall have been duly obtained
and in full force and effect on the Closing Date: (i) all consents, waivers,
authorizations and approvals of any Governmental Agency required in connection
with the execution, delivery and performance of this Agreement, (ii) any
consents required in order to assign any Assigned Contract, in each case as set
forth on Schedule 3.1(f) hereof, and (iii) all consents, waivers, authorizations
and approvals of Paragon Capital, LLC ("Paragon") and Fleet Retail Finance Inc.
(f/k/a Bank Boston Retail Finance Inc.) ("FRFI") to the extent required in
connection with the execution, delivery and performance of this Agreement,
including, but not limited to, the sale, transfer and conveyance of the J&D
Intellectual Property, and JHD Assets (including, but not limited to, the
Trademarks) to Purchaser, together with such lien releases and/or waivers as may
be necessary, appropriate, or reasonably requested by Purchaser, to evidence the
waiver and release thereof by Paragon and FRFI effective as of the Closing
hereunder.
Section 8.6. Corporate Documents. Purchaser shall have received from
Sellers certified copies of the resolutions duly adopted by the boards of
directors and stockholders of Sellers approving the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby, and
such resolutions shall be in full force and effect as of the Closing Date.
Section 8.7. Bankruptcy Court Order(s). The Bankruptcy Court shall
have entered the Sale Order within three (3) business days following the Sale
Hearing, which includes, among other things (i) a finding that the Purchased
Assets shall be sold to Purchaser free and clear of all liens, claims and
encumbrances pursuant to section 363(f) of the Bankruptcy Code, (ii) provision
that the Purchaser is a good faith purchaser entitled to the protection of
section 363(m) of the Bankruptcy Code and a waiver of the stays set forth in
Bankruptcy Rules 6004(g) and 6006(d), (iii) authorization for Sellers'
assumption and assignment to Purchaser of the Corporate Office Lease, (iv)
subject to Section 10.1 hereof, the exemption of the transactions contemplated
herein from certain taxes under section 1146(c) of the Bankruptcy Code, (v) the
retention of jurisdiction by the Bankruptcy Court to resolve any and all
disputes that may arise under this Agreement as between Sellers and Purchaser,
and further to hear and determine any and all disputes between Sellers and/or
Purchaser, as the case may be, and any non-Seller party to, among other things,
the Corporate Office Lease, any Assigned Contract or Assigned Lease, as
applicable, concerning, inter alia, J&D's assumption and assignment thereof to
Purchaser under this Agreement, and (vi) authorizing and approving the Agency
and License Agreement (including, but not limited to, the Sellers' grant to
Purchaser (individually and together with any agent(s) as may be selected by
Purchaser, in its sole discretion) of a license (the "Store Closing License") to
---------------------
use certain of Sellers' Stores for the purpose of conducting "store closing,"
"total liquidation" or similar theme inventory liquidation sales ("Store Closing
-------------
Sales") in the Sellers' Stores as shall be designated by Purchaser prior to the
-----
expiration of the Lease Election Period hereunder (collectively, the "Closing
-------
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<PAGE>
Locations"), with such Store Closing Sales to be (a) for the sole account and
---------
benefit of the Purchaser, (b) completed by Purchaser no later than January 10,
2001, and (c) conducted in accordance with procedures reasonably satisfactory to
Purchaser, and further consistent with such procedures as have previously been
approved by the Bankruptcy Court in the Case. The Sale Order shall contain
provisions included in Exhibit 7.5 (i) that grant Purchaser the Store Closing
License to use the Closing Locations for the duration of the Store Closing Sales
thereat.
Section 8.8. No Material Adverse Change. No Material Adverse Change
shall have occurred since the date of this Agreement other than those, if any,
principally caused by, or directly arising out of, conduct of Purchaser.
Section 8.9. Execution of Agreements. Each of the Sellers shall have
duly authorized and executed and delivered to Purchaser this Agreement, and each
Ancillary Document to be executed by it.
Section 8.10. Warehouse License. Purchaser shall have secured the
right to use and occupy the Warehouse for the Warehouse License Period in
accordance with the terms and provisions of the Warehouse License.
Section 8.11. Opinions of Counsel. Purchaser shall have received
from JHD an opinion of counsel relating to the Trademarks from Ladas & Parry, in
the form attached as Schedule 8.11 hereto and (b) an opinion from J&D`s and
JHD's special counsel, in form and substance reasonably satisfactory to
Purchaser, as to the matters represented in Section 3.1.a and (to the knowledge
of such counsel) Section 3.1.b hereof.
Section 8.11. No Appeal or Stay. The Sale Order shall not have been
appealed or be subject to any appeal as of the Closing Date and no stay shall be
in effect as of the Closing Date.
ARTICLE IX.
THE CLOSING; TERMINATION
Section 9.1. The Closing. The Closing of the purchase and sale of the
Purchased Assets (the "Closing") shall be held no later than the first Business
Day after entry of the Sale Order, provided that each of the conditions
precedent set forth in Articles VII and VIII have been satisfied or waived (the
"Closing Date"), and shall be deemed to have occurred at 12:00 A.M, Eastern
Standard Time, at the beginning of the Closing Date. The Closing shall be held
at the offices of Hahn & Hessen LLP, 350 Fifth Avenue, New York, New York 10018.
At the Closing, all of the transactions provided for in Article II hereof shall
be consummated on a substantially concurrent basis, except as otherwise
contemplated by Article II. Sellers and Purchaser shall use their reasonable
best efforts to ensure that the Closing Date occurs on or before October 16,
2000, time being of the essence.
Section 9.2. Deliveries by Sellers. At the Closing, Sellers will
deliver, in addition to the other documents contemplated by this Agreement, the
following: all of the Ancillary
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Documents to be executed and delivered by it and such other and additional
documents of transfer that may be reasonably requested by Purchaser (and/or any
Permitted Designee thereof).
Section 9.3 Deliveries by Purchaser. At the Closing, Purchaser will
deliver the following: (a) the Purchase Price payable pursuant to and in
accordance with Section 2.2, and (b) duly executed originals of any and all
Ancillary Documents to be executed by Purchaser.
Section 9.4. Termination. Anything in this Agreement to the contrary
notwithstanding, this Agreement and the transactions contemplated hereby may be
terminated in any of the following ways at any time before the Closing and in no
other manner:
(a) By mutual written consent of Purchaser and the Sellers;
(b) By Purchaser or the Sellers, if the Closing has not occurred on
or before October 21, 2000 (if such terminating party is not then in default of
any material obligation hereunder, which default is the cause of the Closing not
occurring on or before such date); and
(c) By the Sellers or Purchaser (if such terminating party is not
then in default of any material obligation hereunder) if the other party (i) is
in breach in any material respect of any of its material representations or
warranties made in this Agreement, or (ii) is in material violation or default
of any of its covenants or agreements in this Agreement and such breach,
violation or default is not cured within five days written notice of such
violation or default.
Section 9.5. Effects of Termination.
(a) In the event this Agreement is terminated pursuant to Section
9.4, except as provided in this Section 9.5 all further obligations of the
parties hereunder shall terminate. If this Agreement is terminated as permitted
by Section 9.4, termination shall be without liability of any party (or any
stockholder, director, officer, employee, agent, consultant or representative or
such party) to any other party to this Agreement; subject to Section 9.5(d)
below. The provisions of this Section 9.5 shall survive any termination hereof
pursuant to Section 9.4.
(b) In the event that this Agreement is terminated by the Sellers
pursuant to an order of the Bankruptcy Court as a result of a higher or better
offer being made at the Sale Hearing and the Purchased Assets are sold to a
third party pursuant to such order, the Sellers shall pay to the Purchaser a fee
of $400,000, which shall be inclusive of Purchaser's costs and expenses
(including, without limitation, the fees and expenses of its attorneys,
consultants and accountants and the financing costs related to the proposed
transaction), provided, that Purchaser shall not be entitled to such fee if it
--------
is in default of any material obligation hereunder.
(c) Except as specifically provided in Section 9.5 (d) below, if this
Agreement is terminated, the Sellers shall immediately return the Deposit to
Purchaser.
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(d) The parties agree that if Sellers terminate this Agreement
pursuant to Section 9.4 (c), or by reason of Purchaser's failure to comply with
Section 7.1, 7.2, 7.4, 7.6 or 9.4, or Purchaser's failure to consummate the
Closing on the Closing Date notwithstanding the satisfaction of Purchaser's
closing conditions in Article VIII, Sellers shall be entitled to retain the
Deposit to the extent of their damages subject to the procedures set forth in
the Escrow Agreement, without precluding Sellers from asserting claims for
additional monetary damages to which Sellers might otherwise be entitled, or
from seeking specific performance of this Agreement.
Section 9.6. Bankruptcy Court Approval. Sellers' performance under
this Agreement is subject to the Bankruptcy Court's prior entry of the Sale
Order.
ARTICLE X.
CERTAIN TAXES; FEES; RECORDS
The parties hereto hereby covenant and agree as follows:
Section 10.1. Certain Taxes and Fees Related to Purchase of Assets.
The parties recognize and acknowledge that, because the sale, transfer,
assignment and delivery of the Purchased Assets is being made in contemplation
with J&D's plan of reorganization or plan of liquidation, J&D may be exempt
under section 1146(c) of the Bankruptcy Code and the Sale Order from all state
and local transfer, recording, stamp or other similar transfer taxes
(collectively, "Transaction Taxes") that may be imposed by reason of the sale,
transfer, assignment and delivery of J&D's portion of the Purchased Assets;
provided, however, that if Transaction Taxes are assessed for any reason, then
the applicable Seller shall bear the cost of such Transaction Taxes. Purchaser
shall pay any recording and filing fees applicable to the Trademark. Purchaser
and the Sellers agree to cooperate to determine the amount of Transaction Taxes
payable in connection with the transactions contemplated under this Agreement.
Transaction Taxes shall not include any Taxes for which the Sellers are
responsible under Section 10.2. Sellers shall bear the cost of any use or sales
tax that may be imposed as a result of the transactions contemplated hereby or,
together with Purchaser, jointly seek to establish a basis for an exemption
therefrom. Purchaser and the Sellers agree to cooperate in the preparation and
filing of any and all required returns for or with respect to such Transaction
Taxes and/or use or sales taxes with any and all appropriate taxing authorities.
Section 10.2. Proration of Personal Property Taxes. All personal
property taxes and similar ad valorem obligations levied with respect to the
----------
Purchased Assets for a taxable period which includes (but does not end on) the
date preceding the Closing Date (collectively, the "Apportioned Obligations"),
shall be apportioned between Sellers and Purchaser based on the number of days
of such taxable period included in the Pre-Closing Tax Period and the number of
days of such taxable period after the Closing Date (with respect to any such
taxable period, the "Post-Closing Tax Period"). Sellers shall be liable for the
proportionate amount of such taxes that is attributable to the Pre-Closing Tax
Period, and Purchaser shall be liable for the proportionate amount of such taxes
that is attributable to the Post-Closing Tax Period. The aggregate amount of
Apportioned Obligations shall be calculated by Sellers and presented to
Purchaser prior to or on the Closing Date. Sellers shall calculate such amount
(i) for
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Apportioned Obligations for which the tax liens for the Year which includes the
Closing Date (the "Closing Year") have attached before the Closing Date, based
on such liens, (ii) for Apportioned Obligations for which the tax liens for the
Closing Year have not attached before the Closing Date, based on tax liens for
the year immediately preceding the Closing Year.
Section 10.3. Cooperation on Tax and Other Matters.
(a) Purchaser and the Sellers agree to furnish or cause to be
furnished to each other, as promptly as practicable, such information and
assistance relating to the Business (including access to books and records) as
is reasonably necessary for the preparation and filing of any Tax Return, claim
for refund or other required or optional filings relating to tax matters, for
the preparation for and proof of facts during any tax audit, for the preparation
for any tax protest, for the prosecution or defense of any suit or other
proceeding relating to tax matters and for the answer of any governmental or
regulatory inquiry relating to tax matters.
(b) Except as set forth below, Purchaser and Sellers shall retain all
books and records with respect to Taxes pertaining to the Purchased Assets for a
period of at least six years following the Closing Date. Each party shall
provide the other with at least ten days prior written notice before destroying
any such books and records, during which period the party receiving such notice
can elect to take possession, at its own expense, of such books and records.
Purchaser and Sellers agree that they will provide access to each other and each
other's attorneys, accountants and other representatives ("Auditing Party")
(after reasonable notice and during normal business hours) to personnel and to
such files and records as Auditing Party may reasonably deem necessary to (i)
properly prepare for, file, prove, answer, prosecute and/or defend any such
return, filing, audit, protest, claim, suit, inquiry or other proceeding or (ii)
resolve any claim against the Auditing Party. Auditing Party shall reimburse
the opposite party for any reasonable out-of-pocket costs incurred by it (but
not for overhead or cost of salaries or benefits of the opposite party's
personnel) in providing such access.
Section 10.4. Receivables. All cash, checks and other instruments
-----------
tendered to Purchaser by any Person with respect to the Receivables, including
payments tendered under billing procedures reflecting payment under account
numbers of Sellers on or prior to the Closing Date, shall not constitute
property of Purchaser, shall be held in trust by Purchaser for the benefit of
J&D and shall be remitted by the Purchaser to J&D on a monthly basis for the one
year period after the Closing Date and quarterly thereafter. Nothing in this
Section 10.4 shall be deemed to limit in any respect any of J&D's rights to
collect Receivables from any Person.
ARTICLE XI.
INDEMNIFICATION
Section 11.1. Indemnification by the Purchaser. From and after the
Closing Date, the Purchaser will indemnify, defend and hold harmless the
Sellers, their Affiliates and their respective officers, directors, employees
and agents (the "Sellers' Indemnified Parties") from and against
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any and all claims, actions, suits, demands, assessments, judgments, losses,
liabilities, damages, penalties, costs and expenses (including, without
limitation, reasonable attorneys' fees, accounting fees and investigation costs)
(collectively, "Losses") that may be incurred by any such indemnified party and
result from, relate to or are incurred in connection with (a) any breach of any
representation or warranty or any covenant, obligation or agreement of the
Purchaser contained in this Agreement, (b) the conduct of the Business by
Purchaser, its Permitted Designee (if any) or any Affiliate or agent thereof on
and after the Closing Date, except to the extent that any such Loss is caused by
a breach by the Sellers of any of their representations, warranties, covenants
or obligations under this Agreement, and/or (c) the occupancy or use of the
Warehouse by Purchaser after the Closing; provided that, the indemnification
rights of the Sellers Indemnified Parties with respect to Losses related to any
breach of the Purchaser's representations and warranties contained in this
Agreement ("Purchaser Breach Losses") shall survive only for the Survival
Period.
Section 11.2. Indemnification by the Sellers. From and after the
Closing Date, each Seller will defend and hold harmless the Purchaser, its
Affiliates and their respective officers, directors, employees and agents (the
"Purchaser Indemnified Parties") from and against any and all Losses that may be
incurred by any such indemnified party and result from, relate to or are
incurred in connection with (i) the Excluded Liabilities of such Seller (other
than any Liabilities expressly assumed by Purchaser pursuant to Section 2.3),
except to the extent that any such Loss is caused by a breach by the Purchaser
of any of its representations, warranties, covenants or obligations under this
Agreement, (ii) the Excluded Assets of such Seller, ), except to the extent
that any such Loss is caused by a breach by the Purchaser of any of its
representations, warranties, covenants or obligations under this Agreement,
(iii) any breach of any representation or warranty or any covenant, obligation
or agreement of such Seller contained in this Agreement or (iv) the occupancy or
use of the Warehouse by such Seller after the Closing; provided, that the
indemnification rights of the Purchaser Indemnified Parties with respect to
Losses related to any breach of any of the Sellers' representations and
warranties contained in this Agreement (the "Sellers' Breach Losses") shall
survive only for the Survival Period.
Section 11.3. Notice of Claim; Right to Participate in and Defend
Third Party Claim.
(a) In the event that any indemnified party (which term includes all
Persons entitled to indemnification under this Section 11 and their successors
and assigns) receives notice of the assertion of any claim, the commencement of
any suit, action or proceeding or the imposition of any penalty or assessment by
a third party in respect of which indemnity may be sought under this Agreement
("Third Party Claim") and the indemnified party intends to seek indemnity under
this Agreement, then the indemnified party will promptly provide the
indemnifying party with notice of the Third Party Claim. The failure by an
indemnified party to notify an indemnifying party of a Third Party Claim does
not relieve the indemnifying party of any indemnification responsibility under
this Section 11 unless and only to the extent that such failure adversely
prejudices the ability of the indemnifying party to defend such Third Party
Claim.
(b) The indemnifying party has the right to control the defense,
compromise or settlement of the Third Party Claim with counsel of its choosing
if the indemnifying party delivers written
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notice to the indemnified party within seven calendar days following the
indemnifying party's receipt of notice of the Third Party Claim from the
indemnified party acknowledging its obligations to indemnify the indemnified
party with respect to such Third Party Claim in accordance with this Section 11
and establishes security, or otherwise demonstrates its ability, in a manner
reasonably satisfactory to the indemnified party to secure or provide for the
indemnifying party's obligations under this Section 11 with respect to such
Third Party Claim. In its defense, compromise or settlement of any Third Party
Claim, the indemnifying party will provide the indemnified party, in a timely
manner, with such information with respect to such defense, compromise or
settlement as the indemnified party requests and will not assume any position or
take any action that would impose an obligation of any kind or restrict the
actions of the indemnified party. The indemnified party will be entitled (at the
indemnified party's expense) to participate in the defense by the indemnifying
party of any Third Party Claim with its own counsel. Notwithstanding the
foregoing, if the indemnifying party fails, in the reasonable opinion of the
indemnified party, to take reasonable steps necessary to defend a Third Party
Claim within ten calendar days after receiving notice from the indemnified party
that the indemnified party believes the indemnifying party has failed to take
such steps, the indemnified party may assume its own defense, and the
indemnifying party will be responsible for any reasonable expenses therefor.
Without the prior written consent of the indemnified party, the indemnifying
party will not enter into any settlement or compromise of any Third Party Claim
which could lead to liability or create any financial or other obligation on the
part of the indemnified party for which the indemnified party is not entitled to
reimbursement under this Agreement.
(c) In the event that the indemnifying party does not undertake the
defense, compromise or settlement of a Third Party Claim, the indemnified party
has the right to control the defense or settlement of such Third Party Claim
with counsel of its choosing at the cost of the indemnifying party; provided,
--------
however, that the indemnified party will not settle or compromise any Third
Party Claim without the indemnifying party's prior written consent, unless (i)
the terms of such settlement or compromise release the indemnified party and the
indemnifying party from any and all liability with respect to the Third Party
Claim or (ii) the indemnifying party has not (x) acknowledged its obligations to
indemnify the indemnified party with respect to such Third Party Claim in
accordance with this Section 11 and (y) established security, or otherwise
demonstrated its ability, in a manner reasonably satisfactory to the indemnified
party to secure or provide for the indemnifying party's obligations under this
Section 11 with respect to such Third Party Claim.
(d) Any indemnifiable claim under this Agreement that is not a Third
Party Claim will be asserted by the indemnified party by promptly delivering
notice thereof to the indemnifying party. If the indemnifying party does not
respond to such notice within 15 calendar days after its receipt, it shall have
no further right to contest the validity of such claim. Any such contest, if
not resolved by the parties, shall be subject to final resolution by the
Bankruptcy Court after notice and hearing.
ARTICLE XII.
MISCELLANEOUS PROVISIONS
Section 12.1. Representations and Warranties. The representations
and warranties of the parties to this Agreement made in this Agreement, subject
to the exceptions thereto,
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will not be affected by any information furnished to, or any investigation
conducted by, any of them or their representatives in connection with the
subject matter of this Agreement.
Section 12.2. Notices. All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given (a) when delivered
personally to the recipient, (b) when sent to the recipient by telecopy (receipt
electronically confirmed by sender's telecopy machine) if during normal business
hours of the recipient, otherwise on the next Business Day, (c) one (1) Business
Day after the date when sent to the recipient by reputable overnight courier
service or (d) five (5) Business Days after the date when mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid. Such notices, demands and other communications will be sent to the
Sellers and to Purchaser at the addresses indicated below:
To J&D: Chief Operating Officer
c/o joan and david helpern incorporated
4 W. 58th Street
New York, NY 10019
With a copy to: Frank Oswald, Esq.
Togut, Segal & Segal, LLP
One Penn Plaza
New York, New York 10119
and
Leonard B. Pack, Esq.
1500 Broadway, Suite 2100
New York, New York 10036
To JHD: Mrs. Joan Helpern
c/o joan and david helpern incorporated
4 West 58th Street
New York, New York 10019
With a copy to: Kenneth H. Heitner, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
and
Jerome L. Coben, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
300 S. Grand, Suite 3400
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Los Angeles, CA 90071
To the Purchaser: MAXWELL SHOE COMPANY, INC.
101 Sprague Street
Boston, MA 02137
Attn: James J. Tinagero
With a copy to: Traub, Bonacquist & Fox LLP
655 Third Avenue
New York, NY 10017
Att.: Paul Traub, Esq.
and
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, CA 90071
Attn.: Jonathan Layne, Esq.
To J&D's Creditors
Committee: Hahn & Hessen LLP
Committee of J&D
350 Fifth Avenue
New York, New York 10118
Att.: William Fabrizio, Esq.
or to such other address as any party hereto may, from time to time, designate
in writing delivered pursuant to the terms of this Section.
Section 12.3. Amendments. The terms, provisions and conditions of
this Agreement may not be changed, modified or amended in any manner except by
an instrument in writing duly executed by each of the parties hereto.
Section 12.4. Assignment This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights, interest or
obligations hereunder shall be assigned by any of the parties hereto without
prior written consent of the other parties; except, that (i) without relieving
Purchaser of any of its duties, obligations or liabilities hereunder, Purchaser
may assign any of its rights hereunder to any Affiliate or wholly-owned
subsidiary (a "Permitted Designee") (and upon such designation as a Permitted
------------------
Designee hereunder, such Permitted Designee shall become obligated to perform
any and all obligations arising hereunder in respect of that portion of the
Purchased Assets and Assumed Liabilities allocable thereto, including, but not
limited to, as concerns any obligations in respect of any portion of
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the On-Order Merchandise), (ii) Purchaser may grant a security interest(s) in
its rights and interests hereunder to its third-party lender(s) and (iii) the
execution by J&D, Purchaser and the Agent, of the Agency and License Agreement
does not violate the foregoing. Nothing contained herein, express or implied, is
intended to confer on any Person other than the parties hereto or their
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
Section 12.5. Announcements. Except with respect to the notice of
the sale required in connection with the obtaining of Bankruptcy Court approval
of the transaction contemplated hereunder and the entry of the Sale Order
related thereto, all press releases, notices to customers and suppliers and
other announcements prior to the Closing Date with respect to this Agreement and
the transactions contemplated by this Agreement shall be approved by Purchaser
and Sellers prior to the issuance thereof; provided that any party may make any
public disclosure it believes in good faith is required by law or regulation (in
which case the disclosing party shall advise the other party (which shall be J&D
in the case of disclosure proposed to be made by Purchaser and Purchaser in the
case of disclosure proposed to be made by any of the Sellers) prior to making
such disclosure and provide such other party an opportunity to review and
comment on the proposed disclosure).
Section 12.6. Expenses. Except as otherwise set forth in this
Agreement and the Agency and License Agreement, each party to this Agreement
shall bear all of its legal, accounting, investment banking and other expenses
incurred by it or on its behalf in connection with the transactions contemplated
by this Agreement, whether or not such transactions are consummated.
Section 12.7. Entire Agreement. This Agreement and the Ancillary
Documents constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede and are in full substitution
for any and all prior agreements and understandings between them relating to
such subject matter. The Exhibits and Schedules to this Agreement are hereby
incorporated and made a part hereof and are an integral part of this Agreement.
Section 12.8. Descriptive Headings. The descriptive headings of the
several sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
Section 12.9. Counterparts. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by any one or more
parties hereto, and each such executed counterpart shall be, and shall be deemed
to be, an original, but all of which shall constitute, and shall be deemed to
constitute, in the aggregate but one and the same instrument.
Section 12.10. Governing Law; Jurisdiction. This Agreement shall be
construed, performed and enforced in accordance with, and governed by, the laws
of the State of New York, without giving effect to the principles of conflicts
of laws thereof. For so long as J&D is subject to the jurisdiction of the
Bankruptcy Court, the parties hereto irrevocably elect as the sole judicial
forum for the adjudication of any matters arising under or in connection with
this Agreement, and consent to the jurisdiction of, the Bankruptcy Court. After
J&D is no longer subject to the jurisdiction of the Bankruptcy Court, the
parties hereto irrevocablyelect as the sole judicial forum for the adjucation of
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any matters arising under or in connection with this Agreement, and consent to
the jurisdiction of, the jurisdiction of, the courts
of the County of New York, State of New York or of the United States of America
for the Southern District of New York.
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Section 12.11. Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction will be applied against any party.
Any references to any federal, state, local or foreign statute or law will also
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Unless the context otherwise requires: (a) a term has the
meaning assigned to it by this Agreement; (b) an accounting term not otherwise
defined has the meaning assigned to it by GAAP; (c) the word "or" is not
exclusive; (d) the words "include", "includes" and "including" shall be deemed
to be followed by the words "without limitation"; (e) words in the singular
include the plural and in the plural include the singular; and (f) "$" means the
currency of the United States of America.
Section 12.12. Severability. In the event that any one or more of
the provisions contained in this Agreement or in any other instrument referred
to herein shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument. Furthermore, in lieu of any such invalid
or unenforceable term or provision, the parties hereto intend that there shall
be added as a part of this Agreement a provision as similar in terms to such
invalid or unenforceable provision as may be possible and be valid and
enforceable.
IN WITNESS WHEREOF, the Sellers and Purchaser have executed and
delivered this Agreement as of the day and year first written above.
MAXWELL SHOE COMPANY INC.
By: /s/ James J. Tinagero
--------------------------
James J. Tinagero
Executive Vice President
joan and david helpern incorporated
By: /s/ David Helpern
---------------------------
Name:
Title: Chairman
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JOAN HELPERN DESIGNS, INC.
By: Its /s/ Joan Helpern
---------------------------
Name:
Title: President
JOAN HELPERN
(Solely as to Sections 3.4 and 3.5 hereof)
/s/ Joan Helpern
---------------------------
DAVID HELPERN, SR.
(Solely as to Sections 3.4 and 3.5 hereof)
/s/ David M. Helpern
---------------------------
DAVID HELPERN, JR.
(Solely as to Sections 3.4 and 3.5 hereof)
/s/ David Helpern, Jr
----------------------------
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Summary of Schedules to the Asset Purchase Agreement
[The Registrant agrees to furnish supplemental copies to the Securities and
Exchange Commission of any of the following omitted schedules upon request of
the Commission]
Schedule 2.1(b)(iii) Schedule identifying purchase orders for all Fall 2000
and Resort/Holiday 2000 goods which were issued in the
ordinary course of the Business, but which in any such
case have not been received at any Inventory Location as
of the Inventory Date, and which otherwise satisfy the
conditions set forth in Section 2.1(b)(iii) of the Asset
Purchase Agreement.
Schedule 2.4(g)(iii) Illustration of Closing Adjustment for the Inventory
and On Order Merchandise shall be implemented.
Schedule 3.1.a. Schedule identifying each of the Sellers executive
officers (namely, the Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer (or Interim
Chief Operating Officer or Interim Chief Financial
Officer in the case of J&D), General Counsel, Executive
Vice President) to whom Knowledge may be ascribed), and
the receipt of the consents, waivers and approvals
obtained by Sellers.
Schedule 3.1c. Schedule setting forth a true and complete list of each
material consent, waiver, authorization or approval of
(i) any Governmental Agency and each declaration to or
filing or registration with any such Governmental
Agency, or (ii) of any other Person in connection with
any Assigned Contract involving the payment by such
Seller of more than $50,000 in any calendar year, that
is required for the execution and delivery of this
Agreement by such Seller or the performance by such
Seller of its obligations hereunder; provided that
Schedule 3.1.c does not identify any consent, waiver,
authorization or approval that would have been required
to be set forth on such Schedule absent the application
of sections 363 or 365 of the Bankruptcy Code.
Schedule 3.1.d. Schedule identifying exclusions from Sellers'
representations that such Seller (i) has complied in all
material respects with all laws, regulations, orders and
other legal requirements applicable to the Business or
the Purchased Assets, (ii) to such Seller's Knowledge,
has not received written notice of any violation of any
law, regulation, order or other legal requirement which
violation would have a material adverse effect on the
Purchased Assets, and (iii) to such Seller's Knowledge,
is not in default in any material respect under any
order, writ, judgment, award, injunction or decree of
any
<PAGE>
Governmental Agency, applicable to the Business or the
Purchased Assets.
Schedule 3.1.f Schedule of Other Contracts, means all agreements (other
than the Leases and the Corporate Office Lease),
including the Department Store Licenses and all
extensions, amendments, modifications, enhancements,
replacements, substitutions and supplements thereto or
thereof. "Other Contracts" does not include the JHD
Contracts.
Schedule 3.1.g. Schedule identifying exceptions to Sellers'
representation that, other than in connection with the
J&D Chapter 11 Case, there are no material actions,
causes of action, claims, suits or proceedings pending
against such Seller with respect to the Business or
affecting the operation of the Business or the use of
the Purchased Assets, at law or in equity, or before or
by any Governmental Agency, or which seek to restrain or
enjoin the consummation of or would materially and
adversely affect, the transactions contemplated hereby.
Schedule 3.1.k. Schedule describing each Permit, the non-existence of
which Permit to such Seller's Knowledge would have a
Material Adverse Effect, together with the name of the
government agency or entity issuing such Permit.
Schedule 3.1.l. Scheduling listing each Plan and each Multi-employer
Plan. Upon entry of the Sale Order by the Bankruptcy
Court and Closing, the liability, if any, of any Sellers
under any Plan or Multi-employer Plan will not become a
liability of Purchaser.
Schedule 3.2.a. Schedule setting forth a true and complete list of all
trademarks or service marks (including any registrations
or applications for registration of any of the
foregoing) that J&D owns and/or uses in connection with
the Business.
Schedule 3.3.a. Schedule setting forth a true and complete list of all
trademarks or service marks, including any registrations
or applications for registration of any of the foregoing
that JHD owns and uses in connection with the Business.
Schedule 5.1. Schedule identifying planned store closings and
liquidation of inventory previously disclosed to
Purchaser.
Schedule 8.11. Form Opinion Of Counsel from JHD's counsel relating to
the Trademarks from Ladas & Parry.
