ASSET PURCHASE AGREEMENT

Exhibit 2.1

ASSET PURCHASE AGREEMENT

dated as of December 20, 2006

among

Lexington-Rowe Furniture Holding Corp.

and

The Rowe Companies

and

THE OTHER SELLERS NAMED HEREIN

TABLE OF CONTENTS

 

 

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT is made and entered into as of this 20 ^th day of December, 2006, by and between (i) Lexington-Rowe Furniture Holding Corp., a Delaware corporation (“ Purchaser ”), and (ii) The Rowe Companies, a Nevada corporation (“ ParentCo ”), and each of its subsidiaries listed on the signature pages of this Agreement (ParentCo and each of its subsidiaries listed on the signature pages to this Agreement, each a “ Seller ” and collectively, “ Sellers ”).

In consideration of the mutual covenants, agreements and warranties herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION

1.1 Definitions . Unless otherwise defined herein, terms used herein shall have the meanings set forth below:

“ Acquired Assets ” shall have the meaning set forth in Section 2.1(a) hereof.

“ Acquisition Proposal ” means a proposal (other than by Purchaser or its Affiliates) relating to any merger, consolidation, business combination, sale or other disposition of 10% or more of the Acquired Assets pursuant to one or more transactions, the sale of 10% or more of the outstanding shares of capital stock or equity interests of any Seller (including, without limitation, by way of a tender offer, foreclosure or plan of reorganization (including a plan of reorganization proposed or advanced by Sellers), merger or liquidation) or a similar transaction or business combination involving one or more Third Parties and any Seller.

“ Affiliate ” of any particular Person means any other Person controlling, controlled by or under common control with such particular Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities or otherwise.

“ Affiliated Group ” means an affiliated group as defined in Section 1504 of the Code (or any analogous combined, consolidated or unitary group defined under state, local or foreign income Tax law) of which any Seller is or has been a member.

“ Agreement ” means this Asset Purchase Agreement, including all of the Exhibits and the Schedules hereto, as the same may be amended from time to time in accordance with its terms.

“ Allocation ” shall have the meaning set forth in Section 12.10 hereof.

“ Applicable Rate ” means the prime rate of interest reported from time to time in The Wall Street Journal.

“ Assignment and Assumption ” shall have the meaning set forth in Section 10.2(c) hereof.

“ Assignment Motion ” shall have the meaning set forth in Section 6.6(c) hereof.

“ Assumed Contracts ” means all Contracts identified in Schedule 2.1(a)(v) attached hereto under the heading “ Assumed Contracts ,” other than those excluded by Purchaser from the Acquired Assets pursuant to Section 2.3(c) hereof .

“ Assumed Equipment Leases ” means all equipment leases identified in Schedule 2.1(a)(v) attached hereto under the heading “ Assumed Equipment Leases ,” other than those excluded by Purchaser from the Acquired Assets pursuant to Section 2.3(c) hereof.

“ Assumed Executory Contracts ” means the Assumed Contracts and the Assumed Leases.

“ Assumed Facility Leases” means all of the Facility Leases identified in Schedule 2.1(a)(v) attached hereto, other than those excluded by Purchaser from the Acquired Assets pursuant to Section 2.3(c) hereof.

“ Assumed Leased Facilities ” means the Leased Facilities identified in the Assumed Facility Leases.

“ Assumed Leases ” means the Assumed Equipment Leases and the Assumed Facility Leases.

“ Assumed Obligations ” shall have the meaning set forth in Section 2.2(a) hereof.

“ Assumed Owned Real Property ” means the Owned Real Property identified in Schedule 2.1(a)(vii) attached hereto, other than those excluded by Purchaser from the Acquired Assets pursuant to Section 2.3(c) .

“ Assumed Plans ” shall mean only the Employee Benefit Plans identified in Schedule 2.1(a)(xxiii) attached hereto; provided , however , that notwithstanding any other provision of this Agreement or the Disclosure Schedules, no Assumed Plan shall include any plan that (1) constitutes a pension plan subject to Title IV of ERISA or Section 412 of the Code, (2) provides retiree medical or other retiree welfare benefits, or (3) constitutes an employee stock ownership plan within the meaning of Section 407(d)(6) of ERISA or Section 4975(e)(7) of the Code; provided , further , notwithstanding anything in this Agreement or any Schedule attached hereto to the contrary, no deferred compensation plan shall be included in the definition of Assumed Plan or otherwise deemed assumed by Purchaser, it being agreed and acknowledged that to the extent any deferred compensation obligations are to be paid by Purchaser pursuant to the Assumed Obligations (set forth in Section 2.2(a)(iv) herein) Purchaser shall establish its own deferred compensation plan(s) to assume the obligations under Sellers deferred compensations plans.

“ Auction ” shall mean the auction conducted by Sellers pursuant to the Bidding Procedures Order and Section 8.2(c) hereof for substantially all of the Acquired Assets.

 

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“ Bankruptcy Code ” means title 11 of the United States Code.

“ Bankruptcy Court ” means the United States Bankruptcy Court for the Eastern District of Virginia.

“ Baseline Net Current Assets ” means $19,500,000, which for purposes of this Agreement is deemed to have been calculated as Net Current Assets was calculated as of December 15, 2006 on Schedule 1 and using the principles, methodologies and practices used historically by GECC under the DIP Credit Agreement to determine eligibility.

“ Benefit Plan ” means any “employee benefit plan” (including, without limitations, “plans” as defined in ERISA §3(3)), profit sharing, deferred compensation, bonus, stock option, stock purchase, vacation pay, holiday pay, pension, retirement plans, medical and any other form of compensation or benefit plan, program or arrangement of any kind regardless of whether any such plan is written or oral or provided under an employment, collective bargaining or other similar arrangement.

“ Bid ” or “ Bids ” means the bids to be solicited by Sellers, or that may otherwise arise, for the sale of all or substantially all of the Acquired Assets, on terms and conditions substantially the same in all respects to this Agreement and in accordance with the procedures set forth on the Bidding Procedures Order.

“ Bidders ” means the other prospective purchasers from whom Sellers will solicit Bids in accordance with the procedures set forth on the Bidding Procedures Order, or that may otherwise arise.

“ Bidding Procedures Order ” means the order of the Bankruptcy Court in the form and substance including in Sellers’ filings with the Bankruptcy Court on or about October 30, 2006 attached hereto and, among other things, (i) setting a deadline for the filing of objections to the entry of the Sale Order, (ii) providing that the Auction shall be held on or one day prior to the Sale Hearing, (iii) scheduling the Sale Hearing, (iv) providing for competitive bidding procedures pursuant to which Acquisition Proposals may be solicited, made and accepted and containing the terms specified in Sections 8.2(c) and 11.2 hereof and (v) approving and implementing the provisions of Sections 6.7 , 6.8 ,  8.2(c) and 11.2 hereof.

“ Books and Records ” means all records and lists of Sellers including without limitation, (i) all merchandise, analysis reports, marketing reports and creative material pertaining to the Acquired Assets, the Facilities or the Business, (ii) all records relating to customers, suppliers or personnel of Sellers (including, without limitation, customer lists, mailing lists, e-mail address lists, recipient lists, sales records, correspondence with customers, customer files and account histories, supply lists and records of purchases from and correspondence with suppliers), (iii) all records relating to all product, business and marketing plans of any Seller, and (iv) all books, ledgers, files, reports, plans, drawings and operating records of every kind of Sellers; provided , however , “ Books and Records ” shall not include the originals of any Seller’s minute books, stock books and Tax Returns.

“ Breakup Fee ” shall have the meaning set forth in Section 8.2(c)(i) hereof.

 

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“ Business ” means the activities carried on by Sellers consisting principally of the manufacturing of frames for their own use, the manufacture, sale, purchase and distribution of upholstered furniture products, and the wood kiln drying business.

“ Cash ” shall have the meaning set forth in Section 2.3(d) hereof.

“ Cash Portion ” shall have the meaning as set forth in Section 3.1(a) hereof.

“ Carve Out Amount ” shall mean the aggregate of all amounts covered by the definition “Carve-Out Amount” as defined in the DIP Credit Agreement as in effect on the date hereof but not to exceed $1,250,000.

“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. §9601 et seq .) and any Regulations promulgated thereunder.

“ Chapter 11 Cases ” means the cases commenced by Sellers under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court under Case Nos. 06-11142 and 06-11143.

“ Claim ” shall have the meaning set forth in section 101(5) of the Bankruptcy Code.

“ Closing Statement ” shall have the meaning set forth in Section 3.1(c) hereof.

“ Closing Date ” shall have the meaning set forth in Section 10.1 hereof.

“ Closing Net Current Assets ” shall have the meaning set forth in Section 3.1(b) hereof.

“ Closing ” shall have the meaning set forth in Section 10.1 hereof.

“ COBRA ” shall have the meaning set forth in Section 4.7(e) hereof.

“ Code ” means the United States Internal Revenue Code of 1986, as amended.

“ Company Intellectual Property ” shall have the meaning set forth in Section 4.21(b) hereof.

“ Contract ” means any agreement, contract, non-governmental license, commitment or other binding arrangement or understanding, whether written or oral, to which any Seller is a party and which any Seller is permitted under the Bankruptcy Code to assume and assign.

“ DIP Credit Agreement ” means the agreement described in the definition of GECC below.

“ Disclosure Schedule ” shall have the meaning set forth in Section 4.1 hereof.

 

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“ Dollars ” or “ $ ” means dollars of the United States of America.

“ Employee Benefit Plan ” shall have the meaning set forth in Section 4.7 hereof.

“ Environmental Laws ” means all federal, state, provincial, local and foreign statutes, Regulations, ordinances, directives and other provisions having the force or effect of law, all judicial and administrative orders and determinations, all contractual obligations and all common law, in each case concerning public health and safety, worker health and safety, pollution or protection of the environment, including without limitation all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, Release, threatened Release, control, or cleanup of any Hazardous Substances (including without limitation CERCLA and analogous state laws), each as amended or in effect prior to, on or after Closing.

“ Environmental Permits ” shall have the meaning set forth in Section 4.17 hereof.

“ ERISA Affiliate ” means each entity which is treated as a single employer with any Seller or its Subsidiaries for purposes of Code §414.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and all Regulations issued thereunder.

“Escrow Actual Closing Amount” means the amount of the Escrow Funds immediately following the Closing after any distribution of the Escrow Funds in connection with the Closing, which amount shall equal the Escrow Closing Amount less any reduction to the Escrow Closing Amount pursuant to Section 3.4 .

“ Escrow Agent ” means Wells Fargo Bank, National Association or its successors.

“ Escrow Agreement ” means the escrow agreement in form and substance reasonably satisfactory to Purchaser, ParentCo, and GECC.

“ Escrow Closing Amount ” means $1,500,000.

“ Escrow Deposit Amount ” means $3,000,000.

“ Escrow Funds ” means the amount of cash held from time to time by the Escrow Agent pursuant to the Escrow Agreement.

“ Estimated Purchase Price ” shall have the meaning set forth in Section 3.1(b) hereof.

“ Evidences of Ownership ” means stock certificates, partnership ownership certificates, and any other certificate, instrument, book entry or notation or other indicia of ownership interests in any Person.

“ Excluded Assets ” shall have the meaning set forth in Section 2.3 hereof.

 

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“ Excluded Contracts ” shall have the meaning set forth in Section 2.3(b) hereof.

“ Excluded Environmental Liabilities ” means any Liability or investigatory, corrective or remedial obligation, whenever arising or occurring, arising under Environmental Laws with respect to Sellers or any of their predecessors or Affiliates, the Business, the Acquired Assets or the Facilities (including without limitation any arising from the on-site or off-site Release, threatened Release, treatment, storage, disposal, or arrangement for disposal of Hazardous Substances) whether or not constituting a breach of any representation or warranty herein and whether or not set forth on any disclosure schedule attached hereto.

“ Excluded Leases ” shall have the meaning set forth in Section 2.3(b) hereof.

“ Executive Officer ” of a Person means its chairman, chief executive officer, chief financial officer, president, any vice president, secretary, controller, treasurer or general counsel.

“ Exhibits ” means the exhibits hereto.

“ Expense Reimbursement ” shall have the meaning set forth in Section 8.2(c)(i) hereof.

“ Facilities ” means collectively the premises at which each Seller operates.

“ Facility Leases ” means all of Sellers’ right, title and interest in all leases, subleases, licenses, concessions and other agreements (written or oral) and all amendments, extensions, renewals, guaranties and other agreements with respect thereto, pursuant to which Sellers hold a leasehold or subleasehold estate in, or are granted the right to use or occupy a Leased Facility.

“ Final Determination ” shall have the meaning set forth in Section 3.1(c) hereof.

“ Final Order ” means an Order as to which the time to file an appeal, a motion for rehearing or reconsideration or a petition for writ of certiorari has expired and no such appeal, motion or petition is pending.

“ Final Purchase Price ” shall have the meaning set forth in Section 3.1(d) hereof.

“ Financial Statements ” shall have the meaning set forth in Section 4.5 hereof.

“ GAAP ” means, at a given time, United States generally accepted accounting principles, consistently applied.

“ GECC ” means General Electric Capital Corporation, a Delaware corporation, in its capacity as agent for the lenders under that certain Senior Secured, Super-Priority Debtor-In-Possession Credit Agreement, dated as of September 21, 2006, by and among the Sellers, Storehouse, Inc., the other parties signatory thereto, the lenders signatory thereto from time to time, and General Electric Capital Corporation, as lender and agent for the lenders.

 

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“ Governmental Authority ” means any United States federal, state or local or any foreign government, governmental regulatory or administrative authority, agency or commission or any court, tribunal or judicial or arbitral body.

“ Hazardous Substances ” means any pollutants, contaminants or chemicals, and any industrial, toxic or otherwise hazardous materials, substances or wastes with respect to which liability or standards of conduct are imposed under any Environmental Laws, including, without limitation, petroleum and petroleum-related substances, products, by-products and wastes, asbestos, urea formaldehyde, lead-based paint, noise and odors.

“ Indebtedness ” means, as applied to any Person, (a) all indebtedness of such Person, including for borrowed money, whether current or funded, secured or unsecured; (b) any indebtedness of such Person evidenced by any note, bond, debenture or other debt security; (c) any obligation incurred for all or any part of the purchase price of property or other assets or for the cost of property or other assets constructed or of improvements thereto, other than accounts payable included in current liabilities and incurred in respect of property purchased in the Ordinary Course of Business; (d) any commitment by which such Person assures a creditor against loss (including contingent reimbursement obligations with respect to letters of credit and bankers’ acceptances); (e) all indebtedness or liabilities of such Person secured by a purchase money mortgage or other Lien (other than certain permitted liens arising by operation of law) on the Acquired Assets; (f) all obligations under leases which shall have been or must be, in accordance with GAAP, recorded as capital leases in respect of which such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or with respect to which obligations such Person assures a creditor against loss; (g) all accrued interest, fees and other expenses owed with respect to the indebtedness referred to herein, including but not limited to, prepayment penalties, letters of credit and bankers’ acceptances, consent fees, and fees and expenses due under the DIP Credit Agreement); (h) all obligations (determined on the basis of actual, not notional, obligations) in respect of interest rate protection agreements, interest rate swap agreements, foreign currency exchange agreements or other interest or exchange rate hedging agreements or arrangements; and (i) all indebtedness of third Persons of the type referred to herein which is directly or indirectly guaranteed by such Person or which such Person has agreed (contingently or otherwise) to purchase, assume or otherwise acquire or in respect of which it has otherwise assured a creditor against loss.

“ Insider ” means, any Executive Officer, director, governing body member, stockholder, partner or Affiliate, as applicable, of any Seller or any predecessor or Affiliate of any Seller or any individual related by marriage or adoption to any such individual or any entity in which any such Person owns any beneficial interest.

“ Intellectual Property ” means all of the following in any jurisdiction throughout the world: (i) patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof, (ii) trademarks, service marks, trade dress, logos, slogans, trade names, internet domain names and corporate names, together with all goodwill associated therewith, and applications, registrations and renewals in connection therewith, (iii) copyrights, mask works and copyrightable works, and applications, registrations and renewals in connection therewith, (iv) trade secrets and confidential business information (including ideas, research and development, know-how,

 

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inventions, formulas, compositions, manufacturing and production processes and techniques, designs, drawings and specifications), (v) proprietary computer software (including but not limited to source code, executable code data, databases and documentation); (vi) copies and tangible embodiments of any of the foregoing in whatever form or medium; and (vii) all other intellectual property.

“ Inventory ” means all inventory of any kind or nature, whether or not prepaid, and wherever located, held or owned by any Seller including, without limitation, all raw materials, work in process, semi-finished and finished products, replacement and spare parts, packaging materials, operating supplies, and fuels and other and similar items.

“ Knowledge of Sellers ” shall mean the knowledge of any director, governing body member or Executive Officer of any of Sellers. Notwithstanding anything contained herein to the contrary, all representations and warranties related to the Rowan Street Property and any fixed assets which are both not currently used and not currently intended to be used in the operation of the Business are subject to the Knowledge of the Sellers.

“ Latest Balance Sheet ” shall have the meaning set forth in Section 4.5 hereof.

“ Leased Facilities ” means any land, buildings, structures, improvements, fixtures or other interest in real property which is used or intended to be used by Sellers or used or intended to be used in, or otherwise related to, the Business other than the Owned Real Property.

“ Liability ” means any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due and regardless of when asserted), including, without limitation, any liability for Taxes.

“ Lien ” or “ Liens ” means any lien (statutory or otherwise), hypothecation, encumbrance, Claim, Liability, security interest, interest, mortgage, pledge, restriction, charge, instrument, license, preference, priority, security agreement, easement, covenant, encroachment, option, right of recovery, Tax (including foreign, federal, state and local Tax), Order of any Governmental Authority, of any kind or nature (including (i) any conditional sale or other title retention agreement and any lease having substantially the same effect as any of the foregoing, (ii) any assignment or deposit arrangement in the nature of a security device, (iii) any claim based on any theory that Purchaser is a successor, transferee or continuation of Sellers or the Business, and (iv) any leasehold interest, license or other right, in favor of a Third Party or a Seller, to use any portion of the Acquired Assets), whether secured or unsecured, choate or inchoate, filed or unfiled, scheduled or unscheduled, noticed or unnoticed, recorded or unrecorded, contingent or non-contingent, material or non-material, known or unknown.

“ Material Adverse Change ” or “ Material Adverse Effect ” means, any event, change, condition or matter that individually or in the aggregate results in or would reasonably be expected to result in a material adverse effect or change in the results of operations or condition (financial or otherwise) of the Business or the Acquired Assets in an amount equal to or greater than $750,000; provided , however , in determining whether a Material Adverse Change or Material Adverse Effect has occurred or would reasonably be expected to occur there shall be

 

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excluded any effect the cause of which is primarily (i) bankruptcy costs and expenses, (ii) transaction expenses related to the transaction contemplated by this Agreement, (iii) any changes in economic or market conditions affecting U.S. manufacturers of upholstered furniture generally provided it does not disproportionately affect the Business or the Acquired Assets, (iv) any changes in the market value of Owned Real Property.

“ Material Contract ” shall have the meaning set forth in Section 4.24(c) hereof.

“ Net Current Assets ” means the aggregate dollar value of eligible accounts receivable (as such term or similar term is defined in the DIP Credit Agreement) and eligible inventory (as such term or similar term is defined in the DIP Credit Agreement), in each case to the extent included in the Acquired Assets.

“No Fee Event ” means a termination of this Agreement pursuant to (i)  Section 11.1(a) , Section 11.1(b) , Section 11.1(d) (but only if such termination is solely on account of a failure to satisfy one or more of the closing conditions set forth in Sections 8.2(a) , 8.2(c) , 8.3 , 8.7 , or 8.10 ), or Section 11.1(g) , or (ii) by ParentCo under Section 11.1(c) or Section 11.1(i) (but only if such termination is solely on account of a failure to satisfy one or more of the closing conditions set forth in Sections 9.1 , 9.3 , 9.4 , 9.5 , or 9.6 ).

“ Notice of Disagreement ” shall have the meaning set forth in Section 3.1(c) hereof.

“ Notice ” means any summons, citation, directive, Order, claim, litigation, proceeding, judgment, letter or other communication, written or oral, actual or threatened, from the United States Environmental Protection Agency and any Governmental Authority, or any other entity or any individual and shall include the imposition of any Lien on property owned, leased, occupied or used by any Seller pursuant to any Environmental Law.

“ Order ” means any decree, order, injunction, rule, judgment, consent of or by any Governmental Authority.

“ Ordinary Course of Business ” means the operation of the Business by Sellers in the usual and ordinary course in a manner substantially similar to the manner in which Sellers operated since the commencement of the Chapter 11 Cases (including, without limitation, with respect to quantity and frequency).

“ Owned Real Property ” means all land and all buildings, structures, fixtures and other improvements located thereon, and all easements, rights of way, servitudes, tenements, hereditaments, appurtenances, privileges and other rights with respect thereto owned by Sellers.

“ Permits ” means licenses, permits, approvals, certificates of occupancy, authorizations, operating permits, registrations, plans and the like.

“ Permitted Liens ” means easements, covenants, conditions, restrictions and other similar matters of record on real property, leasehold estates or personalty (excluding any rights of appeal from the Sale Order), that do not in any material respect detract from the value thereof and do not individually or in the aggregate in any material respect interfere with the present use, ownership or operation of the property subject thereto, and Taxes on real property not yet due and payable that are Assumed Obligations.

 

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“ Person ” means any corporation, partnership, joint venture, limited liability company, organization, entity, authority or natural person.

“ Petty Cash ” shall have the meaning set forth in Section 2.1(a)(i) hereof.

“ Proceeding ” shall have the meaning set forth in Section 2.4(a)(ix) hereof.

“ Purchase Price ” shall have the meaning set forth in Section 3.1(a) hereof.

“ Purchase Price Calculation ” shall have the meaning set forth in Section 3.1(c) hereof.

“ Purchaser ” shall have the meaning set forth in the Preamble hereto.

“ Qualifying Bid ” shall have the meaning set forth in Section 8.2(c)(vii) hereof.

“ Regulation ” means any law, statute, regulation, ruling, rule or Order of, administered or enforced by or on behalf of, any Governmental Authority.

“ Rehired Employees ” means each employee of Sellers who is offered employment with Purchaser as set forth in Section 12.1 and who accepts such offer of employment and commences active employment with Purchaser.

“ Release ” shall have the meaning set forth in CERCLA.

“ Restructuring ” means the consolidation of the Missouri frame and upholstery manufacturing activities of Sellers into the Virginia frame and upholstery Facilities of Sellers.

“ Rowan Street Property ” means Owned Real Property located at 239 Rowan Street, Salem, Virginia.

“ Rule ” or “ Rules ” means the Federal Rules of Bankruptcy Procedure.

“ Sale Hearing ” means the hearing of the Bankruptcy Court to approve this Agreement and the transactions contemplated herein.

“ Sale Motion ” shall have the meaning set forth in Section 6.6(b) hereof.

“ Sale Order ” means the order of the Bankruptcy Court to be entered by the Bankruptcy Court pursuant to sections 363 and 365 of the Bankruptcy Code and (i) approving this Agreement and the transactions contemplated hereby; (ii) approving the sale of the Acquired Assets to Purchaser free and clear of all Liens (other than Permitted Liens) pursuant to section 363(f) of the Bankruptcy Code, (iii) approving the assumption and assignment to Purchaser of the Assumed Executory Contracts, pursuant to section 365(f)(2) of the Bankruptcy Code, except Purchaser’s promise to perform following the Closing obligations under the Assumed Executory Contracts; (iv) transferring and assigning the Assumed Executory Contracts

 

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such that the Assumed Executory Contracts will be in full force and effect from and after the Closing; (v) finding that Purchaser is a good-faith purchaser entitled to the protections of section 363(m) of the Bankruptcy Code; (vi) confirming that Purchaser is acquiring the Acquired Assets free and clear of the Unassumed Liabilities and providing for a full release of Purchaser with respect to the Unassumed Liabilities; (vii) providing that the provisions of Rules 6004(h) and 6006(d) of the Federal Rules of Bankruptcy Procedure are waived and there will be no stay of execution of the Sale Order under Rule 62(a) of the Federal Rules of Civil Procedure; (viii) retaining jurisdiction of the Bankruptcy Court to interpret and enforce the terms and provisions of this Agreement; (ix) authorizing and approving the results of the Auction, (x) providing for payment of the Cash Portion to GECC and GECC’s Liens attaching to the Cash Portion and otherwise being in form and substance satisfactory to GECC, and (xi) providing that, notwithstanding anything herein including in subsection (x) of this definition, to the extent Purchaser is owed funds from Sellers pursuant to hereof, Purchaser’s right to receive funds or reimbursements from the Escrow Funds shall be senior to all other liens or claims against Sellers or Seller’s assets.

“ Schedules ” means the schedules attached hereto (including, without limitation, the Disclosure Schedules).

“ Seller ” and “ Sellers ” shall have the meaning set forth in the Preamble hereto.

“ Seller Payables ” shall have the meaning set forth in Section 6.11(f) hereof

“ Subsidiary ” means, with respect to any Person, any corporation a majority of the total voting power of shares of stock of which is entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or any partnership, limited liability company, association or other business entity a majority of the partnership or other similar ownership interest of which is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this definition, a Person is deemed to have a majority ownership interest in a partnership, limited liability company, association or other business entity if such Person is allocated a majority of the gains or losses of such partnership, limited liability company, association or other business entity or is or controls the managing director or general partner of such partnership, limited liability company, association or other business entity.

“ Successful Bid ” shall have the meaning set forth in Section 8.2(c)(viii) hereof.

“ Systems ” means the computer systems, including software, hardware, networks and interfaces used by Sellers.

“ Tax ” and, with correlative meaning, “ Taxes ” mean with respect to any Person (i) all federal, state, local, county, foreign and other taxes, assessments or other government charges, including, without limitation, any income, alternative or add-on minimum tax, estimated gross income, gross receipts, sales, use, ad valorem , value added, transfer, capital stock franchise, profits, license, registration, recording, documentary, intangibles, conveyancing, gains,

 

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withholding, payroll, employment, social security (or similar), unemployment, disability, excise, severance, stamp, occupation, premium, property (real and personal), environmental or windfall profit tax, custom duty or other tax, governmental fee or other like assessment, charge, or tax of any kind whatsoever, together with any interest, penalty, addition to tax or additional amount imposed by any Governmental Authority responsible for the imposition of any such tax (domestic or foreign) whether such Tax is disputed or not, (ii) Liability for the payment of any amounts of the type described in clause (i) above relating to any other Person as a result of being party to any agreement to indemnify such other Person, being a successor or transferee of such other Person, or being a member of the same affiliated, consolidated, combined, unitary or other group with such other Person, or (iii) Liability for the payment of any amounts of the type described in clause (i) arising as a result of being (or ceasing to be) a member of any Affiliated Group (or being included (or required to be included) in any Tax Return relating thereto).

“ Tax Return ” means any report, return, declaration, claim for refund or other information or statement supplied or required to be supplied by any Seller relating to Taxes, including any schedules or attachments thereto and any amendments thereof.

“ Third Party ” means any Person other than Sellers, Purchaser or any of their respective Affiliates.

“ Transaction Documents ” means this Agreement, and all other agreements, instruments, certificates and other documents to be entered into or delivered by any party in connection with the transactions contemplated to be consummated pursuant to this Agreement.

“ Unassumed Liabilities ” shall have the meaning set forth in Section 2.4 hereof.

“ Valuation Firm ” shall have the meaning set forth in Section 3.1(c) hereof.

“ WARN Act ” shall have the meaning set forth in Section 4.8(g) hereof.

1.2 Rules of Construction . Unless the context otherwise clearly indicates, in this Agreement:

(a) the singular includes the plural;

(b) “includes” and “including” are not limiting;

(c) “may not” is prohibitive and not permissive; and

(d) “or” is not exclusive.

ARTICLE II

PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES

2.1 Purchase and Sale of Assets .

(a) Subject to the terms and conditions set forth in this Agreement, at the Closing, Sellers shall sell, contribute, convey, assign, transfer and deliver to Purchaser, free and

 

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clear of all Liens (except for the Assumed Obligations and Permitted Liens), and Purchaser shall purchase, acquire and take assignment and delivery of, for the consideration specified in Section 3.1 , all properties, assets, rights, titles and interests of every kind and nature, owned or leased by Sellers (including indirect and other forms of beneficial ownership) as of the Closing Date (including, without limitation, all assets of Sellers located on the premises of the Facilities), whether tangible or intangible, real or personal and wherever located and by whomever possessed, including, without limitation, all of the following assets but excluding Excluded Assets pursuant to Section 2.3 (all of the assets to be sold, assigned, transferred and delivered to Purchaser hereunder herein called the “ Acquired Assets ”):

(i) petty cash used in the operation of the Business (“ Petty Cash ”);

(ii) all accounts and notes receivable (whether current or noncurrent and including intercompany receivables (other than intercompany receivables related to Storehouse, Inc.) and all causes of action specifically pertaining to the collection of the foregoing, but including, however, only avoidance claims or causes of action arising under the Bankruptcy Code or applicable state law, including, without limitation, all rights and avoidance claims of Sellers arising under Chapter 5 of the Bankruptcy Code that relate to the Persons set forth on Schedule 2.1(a)(ii) ;

(iii) all promotional allowances and vendor rebates and similar items;

(iv) all Intellectual Property (including without limitation, all of the Intellectual Property set forth on Schedule 4.21 ), along with all income, royalties, damages and payments due or payable to Sellers as of the Closing or thereafter, including, without limitation, damages and payments for past, present or future infringements or misappropriations thereof, the right to sue and recover for past infringements or misappropriations thereof and any and all corresponding rights that, now or hereafter, may be secured throughout the world and all copies and tangible embodiments of any such Intellectual Property in Sellers’ possession or control;

(v) all of Sellers’ rights existing under the Assumed Executory Contracts, including, without limitation, all rights to security and other deposits held pursuant thereto;

(vi) all bank accounts, safety deposit boxes, lock boxes and the like;

(vii) all Assumed Owned Real Property;

(viii) [Intentionally Omitted];

(ix) all leasehold improvements and all machinery, equipment (including all transportation and office equipment), fixtures, trade fixtures, computer equipment, telephone systems and furniture owned by Sellers wherever located, including, without limitation, all such items which are located in any building, warehouse, office or other space leased, owned or occupied by Sellers or used in connection with the Business;

(x) all of the Inventory;

 

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(xi) all office supplies, production supplies, spare parts, other miscellaneous supplies, and other tangible property of any kind wherever located, including, without limitation, all property of any kind located in any building, office or other space leased, owned or occupied by Sellers or in any warehouse where any of Sellers’ properties and assets may be situated;

(xii) all deposits and advances and prepaid and other current assets;

(xiii) subject to Section 2.3 , all claims, deposits, prepayments, warranties, guarantees, refunds (other than any Tax refunds and insurance premium refunds related solely to Excluded Contracts and Excluded Leases, including without limitation, workmen’s compensation refunds payable pursuant solely to the Excluded Contracts and Excluded Leases), causes of action, rights of recovery, rights of set-off and rights of recoupment of every kind and nature (whether or not known or unknown or contingent or non-contingent) and all loans from Sellers to such Sellers’ employees, including the Rehired Employees;

(xiv) the right to receive and retain mail, accounts receivable payments and other communications;

(xv) the right to bill and receive payment for products shipped or delivered and services performed but unbilled or unpaid as of the Closing;

(xvi) all Books and Records;

(xvii) all advertising, marketing and promotional materials and all other printed or written materials;

(xviii) all transferable 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;

(xix) all goodwill as a going concern and all other intangible properties;

(xx) all telephone numbers;

(xxi) all indemnities;

(xxii) all rights to proceeds under insurance policies (including, without limitation, life insurance policies and all cash surrender value related thereto) and all investments of Sellers (other than investments with cash equivalents); and

(xxiii) all rights of Sellers under the Assumed Plans, if any.

(b) All of the Acquired Assets shall be sold, assigned, transferred, conveyed and delivered to Purchaser free and clear of all Liens (other than Permitted Liens), whether arising prior to or subsequent to the date of the filing of the Chapter 11 petitions of Sellers.

 

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(c) Notwithstanding anything in this Agreement to the contrary, Purchaser may revise the Disclosure Schedules, including the Disclosure Schedules setting forth the Acquired Assets and the Excluded Assets to add, or eliminate, any lease, Contract, Employee Benefit Plan or other asset at any time on or prior to the eleventh business day prior to the Sale Hearing and require Sellers to give notice to the parties to any such lease or Contract; provided that such change shall not affect the amount of the Purchase Price.

2.2 Assignment and Assumption of Liabilities .

(a) Subject to the terms and conditions set forth in this Agreement, Purchaser shall only assume from Sellers and thereafter be responsible for the payment, performance or discharge of the following liabilities and obligations of Sellers (all such liabilities and obligations herein called the “ Assumed Obligations ”):

(i) obligations under the Assumed Executory Contracts first arising on the Closing Date (but excluding liabilities for breaches of any such contracts or commitments occurring prior to the Closing Date);

(ii) up to an aggregate amount of $3,000,000 of the post-petition trade accounts payables, expressly set forth on Schedule 2.2(a) attached hereto;

(iii) any obligations associated with the Assumed Plans; provided that claims incurred but not reported under any self-insured medical plan that is an Assumed Plan shall not exceed $800,000;

(iv) up to an aggregate amount of $2,700,000 of obligations with respect to any unpaid base wages (including overtime), base salary and commissions (including associated employee withholding and employer Taxes) for any Rehired Employee attributable to services provided to Sellers during the most recent payroll schedule as of the Closing Date, deferred compensation under the deferred compensation plans listed on Schedule 2.2(a)(iv) attributable to any Person (other than Bruce Birnbach) who is a current or former employee of the Sellers, unused vacation, and unused sick leave attributable to any Rehired Employee, in each case earned and accrued in the ordinary course of business and set forth on Schedule 2.2(a)(iv) ; provided , however , that (i) the $2,700,000 set forth in this Section 2.2(a)(iv) shall first be used to pay such base salary and commissions (including associated employee withholding and employer Taxes) incurred or accrued, unused vacation, and unused sick leave attributable to any Rehired Employee and after such obligations are paid, the residual amount of such $2,700,000, if any, shall be used to provide deferred compensation (which value, for the avoidance of doubt, shall be the net present value of those deferred compensation liabilities as determined in accordance with GAAP) to any Person who is a current or former employee of the Sellers, (ii) instead of assuming the deferred compensation plans listed on Schedule 2.2(a)(iv) with respect to the deferred compensation obligation set forth above, Purchaser may, in its sole discretion, elect to establish a new deferred compensation plan as of or after the Closing, to provide substantially similar deferred compensation benefits (as determined by Purchaser) in aggregate amount not to exceed the amount determined in accordance with clause (i) above, to any applicable Person who is a current or former employee of the Sellers who is a participant under Sellers’ deferred compensation plan set forth in Schedule 2.2(a)(iv) , and (iii) any such

 

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Person who is a current or former employee of the Sellers who is a participant in Sellers’ deferred compensation plan who does not sign a release acceptable to Purchaser relinquishing Sellers from all liabilities under Sellers’ deferred compensation plans shall not be eligible to participate in or receive benefits under Purchase’s new deferred compensation plan;

(v) transfer, sales, conveyancing, recording and similar Taxes and charges, whether applicable to Sellers or Purchaser, relating to the sale of the Acquired Assets and the assumption of the Assumed Obligations, if any; and

(vi) to the extent set forth in Section 2.6 , any cure obligations (pursuant to section 365 of the Bankruptcy Code) with respect to any Assumed Executory Contract.

(b) Notwithstanding anything in this Agreement to the contrary, Sellers hereby acknowledge and agree that Purchaser is not assuming from Sellers, or is in any way responsible for, the Unassumed Liabilities and that to the extent any items set forth in the categories above exceed the dollar limitations in such categories, Sellers shall pay such items.

(c) Section 2.2(a) shall not limit any claims or defenses Purchaser may have against any party other than Sellers. The transactions contemplated by this Agreement shall in no way expand the rights or remedies of any Third Party against Purchaser or Sellers as compared to the rights and remedies which such Third Party would have had against Sellers absent the Chapter 11 Cases had Purchaser not assumed such Assumed Obligations.

2.3 Excluded Assets . Notwithstanding anything to the contrary in this Agreement, the following assets of Sellers shall be retained by Sellers and are not being sold or assigned to Purchaser hereunder (all of the following are referred to collectively as the “ Excluded Assets ”):

(a) any and all rights under this Agreement and, except as relate to the Persons set forth on Schedule 2.1(a)(ii) , avoidance claims or causes of action arising under the Bankruptcy Code or applicable state law, including, without limitation, all rights and avoidance claims of Sellers arising under Chapter 5 of the Bankruptcy Code;

(b) all leases of Sellers other than the Assumed Leases (the “ Excluded Leases ”) and all Contracts other than the Assumed Contracts (the “ Excluded Contracts ”);

(c) any asset or Contract set forth on Schedule 2.3(c) attached hereto; provided that Purchaser may amend the Disclosure Schedules, including the Disclosure Schedules setting forth the Acquired Assets and the Excluded Assets attached hereto at any time on or before one (1) day prior to the Closing Date in order to exclude from the definition of Acquired Asset, and include in the definition of Excluded Asset, any other asset, lease or Contract not otherwise excluded, as the case may be; provided further that such exclusion shall not serve to reduce or otherwise affect the amount of the Purchase Price;

(d) except for Petty Cash, all cash (including, without limitation, checking account balances, certificates of deposit and other time deposits and petty cash) net of overdrafts (“ Cash ”) and marketable and other securities;

(e) income Tax Returns of Sellers and related materials;

 

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(f) the equity securities or other ownership interest of any Seller;

(g) the equity securities or other ownership interest of any of Sellers’ Affiliates;

(h) any and all claims, demands or causes of action that may exist, if any, against the current or former officers, directors, employees or agents of Sellers or relating solely to the Excluded Assets or the Unassumed Liabilities;

(i) any Tax refunds and refunds under any insurance policies related solely to the Excluded Contracts and Excluded Leases;

(j) prepaid premiums for directors and officers liability insurance of Sellers;

(k) to the extent related to the Excluded Assets, Excluded Contracts or Excluded Leases, prepaids, deposits and advances related to Excluded Assets, Excluded Contracts or Excluded Leases;

(l) intercompany receivables related to Storehouse, Inc.; and

(m) the Intellectual Property exclusively related to Storehouse, Inc. set forth on Schedule 2.3(m) and currently owned by Rowe Diversified, Inc.

2.4 No Other Liabilities Assumed .

(a) Each Seller acknowledges and agrees that pursuant to the terms and provisions of this Agreement, Purchaser will not assume, or in any way be liable or responsible for, any liability or obligation of any Seller (including Liabilities relating to the pre-petition or post-petition operation of the Business, the Excluded Assets or to the Acquired Assets (and the use thereof)), whether relating to or arising out of the Business, the Excluded Assets or the Acquired Assets or otherwise, whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due, other than the Assumed Obligations. In furtherance and not in limitation of the foregoing, except as specifically set forth in Section 2.2 , neither Purchaser nor any of its Affiliates shall assume, and shall not be deemed to have assumed, any Indebtedness, Claim, Liability or other obligation of any Seller or any predecessor or Affiliate of any Seller whatsoever (other than the Assumed Obligations), including, but not limited to the following (collectively, the “ Unassumed Liabilities ”):

(i) all obligations, Claims, or Liabilities of Sellers or any predecessor or Affiliate of any Seller that relate to any of the Excluded Assets or Excluded Contracts;

(ii) except as set forth in Section 2.2(a) , any amounts due or which may become due or owing under the Assumed Executory Contracts with respect to the period prior to Closing (including, without limitation, any cure payments or obligations pursuant to section 365 of the Bankruptcy Code or otherwise);

 

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(iii) the Excluded Environmental Liabilities (regardless of whether such Liabilities are technically Liabilities of any Seller or Affiliate of any Seller);

(iv) except as set forth in Section 2.2(a) , all obligations, Claims, or Liabilities of Sellers or any predecessor or Affiliate of any Seller or for which Sellers or any predecessor or Affiliate of any Seller could be liable relating to Taxes accrued or due and payable at or prior to the Closing (including with respect to the Acquired Assets or otherwise) including, without limitation, any Taxes that will arise as a result of the sale of the Acquired Assets or the assumption of the Assumed Obligations pursuant to this Agreement and any deferred Taxes of any nature;

(v) all obligations, Claims, or Liabilities for any legal, accounting, investment banking, brokerage or similar fees or expenses incurred by any Seller or any predecessor or Affiliate of any Seller in connection with, resulting from or attributable to the transactions contemplated by this Agreement or otherwise;

(vi) all Indebtedness of any Seller or any predecessor or Affiliate of any Seller;

(vii) all obligations and Liabilities of Sellers related to the right to or issuance of any capital stock or other equity interest of any Seller or any predecessor or Affiliate of any Seller, including, without limitation, any stock options or warrants;

(viii) all obligations and Liabilities of Sellers or any predecessor or Affiliate of any Seller resulting from, caused by or arising out of, or which relate to, directly or indirectly, the conduct of Sellers or ownership or lease of any properties or assets or any properties or assets previously used by Sellers or any predecessor or Affiliate of any Seller, or other actions, omissions, including, without limitation, any amounts due or which may become due or owing under the Assumed Executory Contracts with respect to the period prior to the Closing, except for cure payments payable by Purchaser as set forth in Section 2.2(a) , whether known or unknown on the date hereof;

(ix) all obligations and Liabilities of Sellers or any predecessor or Affiliate of any Seller resulting from, caused by or arising out of, or which relate to, directly or indirectly, the conduct of Sellers or any predecessor or Affiliate of any Seller anywhere or ownership or lease of any properties or assets or any properties or assets previously used by Sellers or any predecessor or Affiliate of any Seller at any time, or other actions, omissions or events occurring prior to the Closing and which (i) constitute, may constitute or are alleged to constitute a tort, breach of contract or violation of any law, rule, Regulation, treaty or other similar authority or (ii) relate to any and all Claims, disputes, demands, actions, Liabilities, damages, suits in equity or at law, administrative, regulatory or quasi-judicial proceedings, accounts, costs, expenses, setoffs, contributions, attorneys’ fees and/or causes of action of whatever kind or character (“ Proceeding ”) against Sellers or any predecessor or Affiliate of any Seller, whether past, present, future, known or unknown, liquidated or unliquidated, accrued or unaccrued, pending or threatened;

 

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(x) any obligation or Liability arising out of any Proceeding commenced against Sellers or any predecessor or Affiliate of any Seller after the Closing and arising out of, or relating to, any occurrence or event happening prior to the Closing Date;

(xi) except as set forth in Section 2.2(a) , all obligations, Claims or Liabilities (whether known or unknown) with respect to the employees or former employees, or both (or their representatives) of Sellers or any predecessor or Affiliate of any Seller arising prior to the Closing Date, including, without limitation, payroll, vacation, sick leave, worker’s compensation, unemployment benefits, pension benefits, employee stock option or profit sharing plans, health care plans or benefits, or any other employee plans or benefits or other compensation of any kind to any employee, and obligations of any kind including, without limitation, any Liability pursuant to the WARN Act for any action or inaction prior to the Closing;

(xii) except as set forth in Section 2.2(a) , if any, any obligation or Liability arising under any Employee Benefit Plan or any other employee benefit plan, program or arrangement at any time maintained, sponsored or contributed to by Sellers or any predecessor or Affiliate of any Seller or any ERISA Affiliate, or with respect to which Sellers or any predecessor or Affiliate of any Seller or any ERISA Affiliate has any Liability;

(xiii) except as set forth in Section 2.2(a) , all accounts payable of Sellers or any predecessor or Affiliate of any Seller arising prior to the Closing;

(xiv) any obligation or Liability arising out of or relating to services and/or products of Sellers or any predecessor or Affiliate of any Seller to the extent provided, developed, designed, manufactured or marketed, sold and/or distributed prior to the Closing;

(xv) any obligation or Liability under any Assumed Executory Contract which arises after the Closing but which arises out of or relates to any breach that occurred prior to the Closing Date;

(xvi) any obligation or Liability under any contract, agreement, lease, mortgage, indenture or other instrument of Sellers or any predecessor or Affiliate of any Seller not assumed by Purchaser hereunder;

(xvii) any obligation or Liability under any employment, collective bargaining, severance, retention or termination agreement with any employee, labor organization, consultant or contractor (or their representatives) of Sellers or any predecessor or Affiliate of any Seller (including, without limitation, any obligations to pay bonuses, change of control payments or similar payment obligations, or other forms of compensation arising, vesting (whether fully or partially) or payable (whether or not at the Closing), to directors, officers, employees, consultants or agents of Sellers as a result of the consummation of the transactions contemplated by the Agreement);

(xviii) any obligation or Liability arising out of or relating to any grievance by current or former employees of Sellers or any predecessor or Affiliate of any Seller, whether or not the affected employees are hired by Purchaser;

 

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(xix) any obligation or Liability of Sellers or any predecessor or Affiliate of any Seller to any shareholder or Affiliate of any Seller;

(xx) any obligation or Liability to indemnify, reimburse or advance amounts to any officer, director, employee or agent of Sellers or any predecessor or Affiliate of any Seller;

(xxi) any obligation or Liability to distribute to any Seller’s shareholders or otherwise apply all or any part of the consideration received hereunder;

(xxii) any obligation or Liability arising out of or resulting from non-compliance with any law, ordinance, Regulation or treaty by Sellers or any predecessor or Affiliate of any Seller;

(xxiii) any obligation or Liability for infringement or misappropriation arising from the development, modification or use of any Intellectual Property on or before the Closing;

(xxiv) any obligation or Liability of Sellers under this Agreement or any other document executed in connection herewith; and

(xxv) any obligation or Liability of Sellers or any predecessor or Affiliate of any Seller based upon such Person’s acts or omissions occurring after the Closing.

(b) The parties acknowledge and agree that disclosure of any obligation or Liability on any Schedule to this Agreement shall not create an Assumed Obligation or other Liability of Purchaser, except where such disclosed obligation has been expressly assumed by Purchaser as an Assumed Obligation in accordance with the provisions of Section 2.2 hereof.

2.5 Deemed Consents and Cures . For all purposes of this Agreement (including all representations and warranties of Sellers contained herein), Sellers shall be deemed to have obtained all required consents in respect of the assignment of any Assumed Executory Contract if, and to the extent that, pursuant to the Sale Order or other Bankruptcy Court Order, Sellers are authorized to assume and assign Assumed Executory Contracts to Purchaser pursuant to section 365 of the Bankruptcy Code and any applicable cure cost has been satisfied by Purchasers and/or Sellers, as provided in this Agreement.

2.6 Obligations in Respect of Required Consents . To the extent that any Assumed Executory Contract is subject to a cure pursuant to section 365 of the Bankruptcy Code, promptly following the Closing, Purchaser shall directly pay or otherwise provide for such cure; provided , however , if the aggregate of all cure obligations (other than any cure obligation included in the Assumed Liabilities which is not past due) with respect to the Assumed Executory Contracts exceeds $500,000, Sellers shall pay all additional cure obligations in excess of $500,000 with respect to the Assumed Executory Contracts. To the extent Seller is responsible for a cure pursuant to the terms hereof, Purchaser may pay (on behalf of Sellers) any unpaid cure amounts and offset such amount(s) against any amount(s) Purchaser may owe Sellers (including by recovering such amount(s) from the Escrow Funds). Sellers hereby agree and acknowledge that the foregoing provision is in addition to, and not in derogation of, any statutory or other remedy that Purchaser may have against Sellers.

 

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2.7 Assignment of Contracts . With respect to any Contract which is not set forth on Schedule 2.1(a)(v) , Schedule 2.1(a)(vii) , or Schedule 2.1(a)(xxiii) attached hereto, and provided such Contract has not been rejected by Sellers pursuant to section 365 of the Bankruptcy Code, upon written notice(s) from Purchaser, Sellers shall use commercially reasonable efforts to assume and assign to Purchaser pursuant to section 365 of the Bankruptcy Code any Contract(s) set forth in Purchaser’s notice(s); provided that any applicable cure cost shall be satisfied (i) by Purchaser, or (ii) by Sellers but only if (i) if the aggregate of all cure obligations (other than any cure obligation included in the Assumed Liabilities which is not past due) with respect to the Assumed Executory Contracts exceeds $500,000 and (ii) the absence of such Contract from such Schedules was a result of Sellers’ breach of a representation and warranty set forth herein. The parties agree and acknowledge that (i) following the Closing, provided that they provide Purchaser with reasonable advance notice of any motion(s) to reject any Contract (and any motions to reject contracts will set forth specifically Contracts and parties thereto to be rejected), Sellers may immediately reject any of its Contracts and (ii) the covenant set forth in this Section 2.7 shall survive the Closing. Notwithstanding anything in this Agreement to the contrary, on the date any Contract is assumed and assigned to Purchaser pursuant to this Section 2.7 , such Contract shall be deemed an Assumed Executory Contract and deemed scheduled on Schedule 2.1(a)(v) , Schedule 2.1(a)(vii) , or Schedule 2.1(a)(xxiii) , as the case may be, under the appropriate heading for all purposes under this Agreement.

ARTICLE III

BASIC TRANSACTION

3.1 Payment of Purchase Price .

(a) The aggregate purchase price for the Acquired Assets (the “ Purchase Price ”) shall be $31,000,000, comprised of (i) $24,000,000 payable in cash (subject to the adjustments (if any) set forth below, in Section 6.11 and in Section 6.12), and (ii) the assumption of the Assumed Obligations.

(b) At the Closing, Purchaser shall be assigned the Acquired Assets and shall assume the Assumed Obligations and shall pay by wire transfer (i) to (or for the benefit of) Sellers as set forth herein an amount in cash equal to the (A) $24,000,000 minus (y) an amount by which the Net Current Assets of Sellers as of the Closing Date as shown on the Closing Statement (as defined in Section 3.1(c) below and as prepared in accordance with the provisions thereof) (the “ Closing Net Current Assets ”) is less than the Baseline Net Current Assets, plus (z) an amount by which the Closing Net Current Assets is greater than the Baseline Net Current Assets, as estimated (the “ Estimated Purchase Price ”) in good faith by Purchaser and ParentCo (including an estimate of Closing Net Current Assets) (the amount in subsection (A) above, the “ Cash Portion ”), such estimate to be agreed upon not less than one day prior to Closing, minus (B) the Escrow Actual Closing Amount. For avoidance of doubt a portion of the Cash Portion to be paid by Purchaser at the Closing shall come from the Escrow Funds that were deposited with the Escrow Agent pursuant to Section 3.3 , such amount shall equal the difference between the Escrow Deposit Amount less the Escrow Actual Closing Amount. The parties will instruct the Escrow Agent to deliver such amount to (or for the benefit of) Sellers as set forth herein.

 

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(c) Within 90 days following the Closing Date, Purchaser shall deliver to ParentCo a schedule (in its final and binding form, the “ Closing Statement ”), setting forth the Closing Net Current Assets and a certificate setting forth the resulting Cash Portion calculated with reference to such amounts (in its final and binding form, together with the Closing Statement, the “ Purchase Price Calculation ”). The Closing Statement shall be prepared in the same manner and using the same principles, methodologies, and practices used to calculate the Baseline Net Current Assets. Sellers shall cooperate as reasonably requested in connection with the preparation of the Purchase Price Calculation. During the 30-day period immediately following ParentCo‘s receipt of the Purchase Price Calculation, ParentCo shall be permitted to review Purchaser’s books and records related to the preparation of the Purchase Price Calculation and determination of the Purchase Price. The Purchase Price Calculation shall become final and binding upon the parties 30 days following ParentCo‘s receipt thereof unless ParentCo gives written notice of its disagreement (a “ Notice of Disagreement ”) to Purchaser prior to such date. Any Notice of Disagreement shall specify in reasonable detail the nature and dollar amount of any disagreement so asserted and shall be delivered only if (and to the extent that) ParentCo reasonably and in good faith determines that the Purchase Price Calculation and the resulting Cash Portion calculated with reference thereto delivered by Purchaser has not been determined in accordance with the guidelines and procedures set forth in this Agreement. If a timely Notice of Disagreement is received by Purchaser, then the Purchase Price Calculation (as revised in accordance with clause (x) or (y) below) shall become final and binding upon the parties on the earliest of (x) the date the parties resolve in writing any differences they have with respect to the matters specified in the Notice of Disagreement or (y) the date all matters in dispute are finally resolved in writing by the Valuation Firm (defined below). During the 30 days following delivery of a Notice of Disagreement, the parties shall seek in good faith to resolve in writing any differences which they have with respect to the matters specified in the Notice of Disagreement. Following delivery of a Notice of Disagreement, Purchaser and its agents and representatives shall be permitted to review ParentCo‘s and its representatives’ working papers relating to the Notice of Disagreement. At the end of the 30-day period referred to above, the parties shall submit to a mutually satisfactory valuation or consulting firm (the “ Valuation Firm ”) for review and resolution of all matters (but only such matters) that remain in dispute and that were properly included in the Notice of Disagreement. The parties shall instruct the Valuation Firm to make a final determination (the “ Final Determination ”) of the Closing Net Current Assets and the resulting Purchase Price calculated with reference to such amounts to the extent such amounts are in dispute, in accordance with the guidelines and procedures set forth in this Agreement. The parties will cooperate with the Valuation Firm during the term of its engagement. The parties shall instruct the Valuation Firm to not assign a value to any item in dispute greater than the greatest value for such item assigned by Purchaser, on the one hand, or ParentCo, on the other hand, or less than the smallest value for such item assigned by Purchaser, on the one hand, or ParentCo, on the other hand. The parties shall also instruct the Valuation Firm to make the Final Determination based solely on presentations by Purchaser and Sellers which are in accordance with the guidelines and procedures set forth in this Agreement ( i.e ., not on the basis of an independent review). The Purchase Price Calculation and the determination of the Closing Net Current Assets and the resulting Purchase Price calculated with reference thereto shall become final and binding on the parties on the date the Valuation Firm delivers the Final

 

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Determination in writing to the parties (which shall be requested by the parties to be delivered not more than 45 days following submission of such disputed matters). The fees and expenses of the Valuation Firm shall be allocated to the parties as determined (and set forth in the Final Determination) by the Valuation Firm based upon the relative success (in terms of percentages) of each party’s claim. For example, if the Final Determination reflects a 60-40 compromise of the parties’ claims, the Valuation Firm would allocate expenses 40% to the party whose claim was determined to be 60% successful and 60% to the party whose claim was determined to be 40% successful.

(d) Promptly after the Purchase Price Calculation and the determination of the Closing Net Current Assets, and the resulting Cash Portion calculated with reference to such amounts shall become final and binding on the parties under Section 3.1(c) above, the Estimated Purchase Price shall be recalculated by giving effect to the final and binding determination of the Closing Net Current Assets (as recalculated, the “ Final Purchase Price ”). If the Final Purchase Price is greater than the Estimated Purchase Price, Purchaser shall, within three business days after the Purchase Price Calculation becomes final and binding on the parties, make payment by wire transfer to Sellers in immediately available funds of the amount of such difference, together with interest thereon at a rate per annum equal to the Applicable Rate, calculated on the basis of the actual number of days elapsed over 360, from the Closing Date to the date of payment. If the Estimated Purchase Price is greater than the Final Purchase Price, Sellers shall cause the Escrow Agent to, within three business days after the Purchase Price Calculation becomes final and binding on the parties, make payment by wire transfer to Purchaser in immediately available funds of the amount of such difference, together with interest thereon at a rate per annum equal to the Applicable Rate, calculated on the basis of the actual number of days elapsed over 360, from the Closing Date to the date of payment. Any amounts remaining in the Escrow Account, if any, after Sellers have fully satisfied all payment obligations to Purchaser pursuant to this Section 3.1(d) , shall be paid to ParentCo (on behalf of Sellers) within the later of (i) three business days after the date on which Sellers satisfy all of their payment obligations to Purchaser pursuant to this Section 3.1(d) , if any, or (ii) three business days after the Purchase Price Calculation becomes final and binding on the parties pursuant to this Section 3.1 . Notwithstanding anything to the Agreement to the contrary, (i) the maximum amount owing by Sellers to Purchaser pursuant to this Section 3.1(d) is any amount equal to the Escrow Closing Amount, and (ii) the maximum amount owing by Purchaser to ParentCo pursuant to this Section 3.1(d) is an amount equal to the Escrow Closing Amount; provided further that no amount shall be owed pursuant to this Section 3.1(d) except to the extent such amount owing exceeds $125,000. Sellers further agree and acknowledge, on behalf of themselves and their lenders, that to the extent Purchaser is owed funds from Sellers pursuant to this Section 3.1 , Sellers’ obligations under this Section 3.1 shall be senior to all other claims against Sellers. For avoidance of doubt, any obligations of Sellers under this Section 3.1 shall be paid solely from the Escrow Funds.

(e) Payments made pursuant to this Section 3.1 shall be allocated among the assets purchased in accordance with Section 12.10 .

3.2 Further Assurances . From time to time after the Closing and without further consideration, (i) Sellers, upon the request of Purchaser, shall execute and deliver such documents and instruments of conveyance and transfer as Purchaser may reasonably request in

 

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order to consummate more effectively the purchase and sale of the Acquired Assets as contemplated hereby and to vest in Purchaser title to the Acquired Assets transferred hereunder, or to otherwise more fully consummate the transactions contemplated by this Agreement, and (ii) Purchaser, upon the request of Sellers, shall execute and deliver such documents and instruments of assumption as Sellers may reasonably request in order to confirm Purchaser’s Liability for the obligations specifically assumed hereunder or otherwise to more fully consummate the transactions contemplated by this Agreement.

3.3 Deposit . Not later than 5:00 p.m. (Eastern Time) on the second business day immediately following entry of the Bidding Procedures Order on the Bankruptcy Court’s docket, Purchaser shall deposit with the Escrow Agent an amount equal to the Escrow Deposit Amount. In the event this Agreement is terminated by Sellers pursuant to Section 11.1(c) , the receipt by Sellers of the Escrow Funds shall be Sellers’ sole and exclusive remedy as liquidated damages and the Escrow Agent shall immediately disburse the Escrow Funds to Sellers to be retained by Sellers for their own account. If this Agreement is terminated for any reason other than the termination of this Agreement by Sellers pursuant to Section 11.1(c) the Escrow Agent shall immediately upon such termination return to Purchaser the Escrow Funds and Purchaser shall have no further obligation or Liability of any kind to Sellers or any of their Affiliates. The fees and charges of the Escrow Agent shall be paid one-half by Sellers and one-half by Purchaser.

3.4 No Reduction; GECC Payment . The Cash Portion will be reduced pursuant to Section 6.11(f) so long as and to the extent that the Cash Portion (after taking into effect the adjustment pursuant to Section 6.11(f) ) is not less than an amount equal to the Indebtedness (other than the Carve Out Amount) owed to GECC under the DIP Credit Agreement as of the Closing Date minus $1,725,000; provided that the Closing Escrow Amount shall be decreased by the amount of Seller Payables which do not reduce the Cash Portion at the closing pursuant to this Section 3.4 with such amount being used to satisfy Sellers’ obligations hereunder such that Purchaser receives the benefit of the provisions in Section 6.11(f) .

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLERS

4.1 Sellers’ Representations and Warranties . Sellers jointly and severally represent and warrant to Purchaser that the statements contained in this Article IV are correct and complete as of the date of this Agreement, except as set forth in the disclosure schedule delivered by Sellers to Purchaser on the date hereof (the “ Disclosure Schedule ”). The Disclosure Schedules shall be arranged in sections corresponding to the numbered and lettered sections and subsections contained in this Article IV , and the disclosures in any section or subsection of the Disclosure Schedules shall qualify other sections and subsections in this Article IV to the extent that an appropriate cross reference is contained in such section or subsection or to the extent it is reasonably apparent on the face of the Disclosure Schedules that such disclosure is applicable to the representations or warranties by Sellers calling for disclosure of such information.

4.2 Validity of Agreement . Subject to any necessary authorization from the Bankruptcy Court, each Seller has full power and authority to execute and deliver the Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The board of directors (or similar governing body) of each Seller has duly

 

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approved the Transaction Documents to which such Person is a party and has duly authorized the execution and delivery of such Transaction Documents and the consummation of the transactions contemplated thereby. No other corporate or organizational proceedings on the part of any Seller are necessary to approve and authorize the execution and delivery of the Transaction Documents to which such Person is a party and the consummation of the transactions contemplated thereby. All Transaction Documents to which any Seller is a party have been duly executed and delivered by such Person, except such Transaction Documents that are required by the terms hereof to be executed and delivered by such Person after the date hereof, in which case such Transaction Documents will be duly executed and delivered by such Person at or prior to the Closing, and, subject to any necessary authorization from the Bankruptcy Court, all Transaction Documents constitute, or will constitute, as the case may be, the valid and binding agreements of Sellers, enforceable against Sellers in accordance with their terms.

4.3 Organization, Standing and Power . Each Seller is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and, except where the failure to obtain such qualification could not reasonably be expected to have a Material Adverse Effect , is qualified to do business in every jurisdiction in which it is required to be qualified. Each Seller has full power and authority and all material licenses, Permits and authorizations necessary to own and operate its properties and to carry on the Business as now conducted by it. Correct and complete copies of each Seller’s articles of incorporation and by-laws have been furnished to Purchaser, which documents reflect all amendments made thereto at any time prior to the date of this Agreement. Correct and complete copies of the minute books containing the records of meetings of the stockholders and board of directors, the stock certificate books and the stock record books of each Seller have been furnished to Purchaser. Subject to any necessary authorization from the Bankruptcy Court, each Seller has all requisite corporate power and authority to own, lease and operate its properties, to carry on the Business as now being conducted and to execute and deliver this Agreement and all agreements, instruments and other documents referred to herein, and, subject to the entry of the Sale Order, to perform its obligations hereunder and thereunder.

4.4 No Conflicts or Violations . Except as set forth on Schedule 4.4 attached hereto, and to the extent any of the foregoing is not enforceable due to operation of applicable bankruptcy law or the Sale Order, the execution, delivery and performance of the Transaction Documents and the consummation of the transactions contemplated thereby by Sellers do not and shall not (a) (i) conflict with or result in any breach of any of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in a violation of, (iv) to the Knowledge of the Sellers, give any Third Party the right to modify, terminate or accelerate any obligation under, or (v) require any authorization, consent, approval, exemption or other action by or notice or declaration to, or filing with, any court or administrative or other Governmental Authority, under the provisions of the articles of incorporation, by-laws or other constitutive documents of any Seller, or, to the Knowledge of the Sellers, any material Assumed Executory Contract, or any law, statute, rule or Regulation to which any Seller is subject or any Order to which any Seller is subject; or (b) result in the creation of any Lien upon the Acquired Assets.

4.5 Financial Statements and Related Matters . Set forth on Schedule 4.5 attached hereto are copies of Sellers’ (i) unaudited consolidated and consolidating balance sheet as of October 31, 2006 (the “ Latest Balance Sheet ”) and the related statements of income and cash

 

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flows for the eleven-month period then ended and (ii) audited consolidated and consolidating balance sheets and statements of income and cash flows for the fiscal years ended November 30, 2003, 2004 and 2005. Each of the foregoing financial statements (including in all cases the notes thereto, if any) (the “ Financial Statements ”) is accurate and complete in all material respects, is consistent with the Books and Records (which, in turn, are accurate and complete), presents fairly Sellers’ financial condition and results of operations as of the times and for the periods referred to therein, and has been prepared in accordance with GAAP, subject in the case of unaudited financial statements to changes resulting from normal year-end adjustments for recurring accruals (which shall not be material individually or in the aggregate) and to the absence of footnote disclosure. For purposes of clarity, the Financial Statements include Storehouse, Inc.’s numbers.

4.6 Title to Assets; Assets Necessary to Business .

(a) Except as set forth on Schedule 4.6(a) attached hereto, Sellers have good and marketable title to, or a valid license or leasehold interest in, the Acquired Assets. Since the date of the Latest Balance Sheet, no Seller has purchased any material amount of assets except in the Ordinary Course of Business, consistent with past practice.

(b) Except as described on Schedule 4.6(b) attached hereto, the Acquired Assets are in good operating condition and repair (ordinary wear and tear excepted) and are fit for use in the Ordinary Course of Business.

(c) Sellers own or lease all buildings, machinery, equipment, and other tangible assets necessary for the conduct of the Business as presently conducted. The Acquired Assets constitute all of the assets, agreements, licenses and properties owned by Sellers (other than the Excluded Assets) and are all assets, agreements, licenses and properties required for the conduct of the Business as presently conducted. No Affiliate or Subsidiary of Sellers owns, leases or licenses any assets used in the Business as presently conducted.

(d) Except for the Intellectual Property being conveyed to Purchaser pursuant to this Agreement, Schedule 4.6(d) sets forth an accurate and complete list of all of the assets, properties, rights, titles and interests (of any kind and nature including by contract or otherwise) owned, leased or licensed by Rowe Diversified, Inc. Except as set forth on Schedule 4.6(d) , Rowe Diversified, Inc. has no material obligation or liability (whether accrued, absolute, contingent, unliquidated or otherwise including any obligation or liability under any Contract).

(e) Except for the real property being conveyed to Purchaser pursuant to this Agreement, Schedule 4.6(e) sets forth an accurate and complete list of all of the material assets, properties, rights, titles and interests (of any kind and nature including by contract or otherwise) owned, leased or licensed by Rowe Properties, Inc. Except as set forth on Schedule 4.6(e) , Rowe Properties, Inc.