ASSET PURCHASE AGREEMENT BETWEEN SAKS INCORPORATED

Exhibit 99.1

 

ASSET PURCHASE AGREEMENT

 

BETWEEN

 

SAKS INCORPORATED

 

AND

 

BELK, INC.

 

Dated as of April 28, 2005

 

TABLE OF CONTENTS

 

 

i

 

ii

 

iii

Exhibits

 

 

iv

Schedules

 

 

v

ASSET PURCHASE AGREEMENT

 

ASSET PURCHASE AGREEMENT, dated as of April 28, 2005 (this “ Agreement ”), by and between Saks Incorporated, a Tennessee corporation (“ Seller ”), and Belk, Inc., a Delaware corporation (“ Buyer ”).

 

PRELIMINARY STATEMENT:

 

WHEREAS, Seller is engaged in the business of owning and operating retail department stores under the nameplates McRae’s and Proffitt’s; and

 

WHEREAS, Seller and the Companies (as hereinafter defined) own, among other things, the assets used in the operation of the Business (as hereinafter defined); and

 

WHEREAS, Seller desires to sell to Buyer, and to cause the Companies to sell to Buyer, and Buyer desires to purchase from Seller and the Companies, substantially all of the assets solely related to the Business, all on the terms and subject to the conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, it is hereby agreed between Seller and Buyer as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1 Definitions . In this Agreement, the following terms have the meanings specified or referred to in this Section 1.1 .

 

“ 2005 Seller Capital Budget ” has the meaning specified in Section 5.5(b) .

 

“ Account Information ” means the “Cardholder List,” the “Charge Transaction Data” and all other “Cardholder Information” and “Account Documentation” related to “Accounts” (as each such term is defined in the Program Agreement) as of the Effective Time, in each case to the extent solely related to the Business and excluding Excluded Account Information.

 

“ Adjusted Purchase Price ” has the meaning specified in Section 3.2(f) .

 

“ Adjustment Amount ” has the meaning specified in Section 3.2(e) .

 

“ Affiliate ” means, with respect to any Person, any other Person who directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such Person. As used herein, “control” means the power to direct the management or affairs of a Person, and “ownership” means the beneficial ownership of more than 50% of the equity securities of the Person.

 

“ Agreement ” has the meaning specified in the first paragraph of this Agreement.

 

“ Allocation Schedule ” has the meaning specified in Section 3.3(a) .

 

“ Arbitrator ” has the meaning specified in Section 3.2(c) .

 

“ Asset Acquisition Proposal ” means any proposal or offer with respect to any purchase, directly or indirectly, of all or any significant portion of the Assets, whether by merger, consolidation, acquisition or otherwise (other than any transaction with Buyer or its Affiliates); provided , however , that, for the avoidance of doubt, any Seller Acquisition Proposal and any proposal or offer relating exclusively to assets and properties of Seller and/or its Affiliates not being sold pursuant to this Agreement shall in no event be deemed to be an Asset Acquisition Proposal; provided , further , that any proposal or offer with respect to the capital stock of the Companies shall be deemed to be an Asset Acquisition Proposal only if such offer or proposal contemplates that any of the Assets would not be conveyed to Buyer or its Affiliates.

 

“ Assets ” has the meaning specified in Section 2.1(a) .

 

“ Assignment and Assumption Agreement (Real Estate) ” means the Assignment and Assumption Agreement (Real Estate) in substantially the form of Exhibit A , with such modifications thereto as may be necessary to conform to the requirements of the applicable Leasehold Interest or Real Estate Agreement (but which in any event shall expressly disclaim any representation or warranty by Seller or its Affiliates (other than representations and warranties made in this Agreement) as provided in Exhibit A ), with separate instruments for each parcel of Real Estate (each of which shall expressly disclaim any representation or warranty by Seller or its Affiliates (other than representations and warranties made in this Agreement)).

 

“ Assumed Liabilities ” has the meaning specified in Section 2.3(a) .

 

“ Bill of Sale, Assignment and Assumption Agreement ” means the Bill of Sale, Assignment and Assumption Agreement in the form of Exhibit B .

 

“ Books and Records ” has the meaning specified in Section 2.1(a)(xiii) .

 

“ Business ” means the business of owning and operating the retail department stores located on the Real Estate, excluding any Club Libby Lu operations.

 

“ Business Agreements ” has the meaning specified in Section 5.14 .

 

“ Business Employees ” has the meaning specified in Section 5.17(a) .

 

“ Business Plan ” means any Pension Plan or Welfare Plan that is sponsored by Seller or any Company in which any employees of the Business are participating or under which any current or former employees of the Business have accrued any benefits while employed by Seller or any Company to which they remain entitled or with respect to which Seller or any Company has any liability.

 

“ Business Severance Practices ” has the meaning specified in Section 8.3(d)(i) .

 

“ Buyer ” has the meaning specified in the first paragraph of this Agreement.

 

“ Buyer Ancillary Agreements ” means all agreements, instruments and documents being or to be executed and delivered by Buyer under this Agreement or in connection herewith.

 

“ Buyer Group Member ” means (a) Buyer and its Affiliates, (b) directors, officers and employees of Buyer and its Affiliates and (c) the successors and assigns of the foregoing.

 

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“ Buyer’s DC Plan ” has the meaning specified in Section 8.3(i)(ii) .

 

“ Buyer’s Plans ” has the meaning specified in Section 8.3(c)(i) .

 

“ Change In Law ” means the adoption, promulgation, modification or reinterpretation of any law, rule, regulation, ordinance or order or any other Requirement of Law of any Governmental Body that occurs subsequent to the date of this Agreement.

 

“ Claim Notice ” has the meaning specified in Section 11.3 .

 

“ Closing ” means the closing of the transfer of the Assets from Seller and the Companies to Buyer.

 

“ Closing Date ” has the meaning specified in Section 4.1 .

 

“Closing Date Interest” has the meaning specified in Section 3.1 .

 

“Club Libby Lu Licensed Departments Agreement” has the meaning specified in Section 7.8(b) .

 

“ COBRA ” has the meaning specified in Section 8.3(h) .

 

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

 

“ Companies ” means Carson Pirie Holdings, Inc., a Delaware corporation, Jackson Leasing, LLC, a Mississippi limited liability company, McRae’s, Inc., a Mississippi corporation, McRae’s of Alabama, Inc., an Alabama corporation, McRae’s Stores Partnership, a Mississippi general partnership, and Parisian, Inc., an Alabama corporation.

 

“ Company Ancillary Agreements ” means all agreements, instruments and documents being or to be executed and delivered by any of the Companies under this Agreement or in connection herewith.

 

“ Company Intellectual Property ” means any Intellectual Property that is owned by Seller or any of the Companies and used solely in connection with the Business, including the Company Software.

 

“ Company Registered Intellectual Property ” means all of the Registered Intellectual Property owned by or filed in the name of Seller or any of the Companies and used solely in connection with the Business.

 

“ Company Software ” means all Software owned by Seller or any of the Companies and used solely in connection with the Business.

 

“ Confidentiality Agreement ” means that certain letter agreement dated February 16, 2005 between Seller and Buyer.

 

“ Contracts ” has the meaning specified in Section 2.1(a)(vii) .

 

“ Court Order ” means any judgment, order, award or decree of any foreign, federal, state, local or other court, agency, tribunal or Governmental Body and any award in any arbitration proceeding.

 

“ Credit Agreement ” means the Amended and Restated Credit Agreement dated as of November 26, 2003 among Seller, as borrower, Fleet Retail Group, Inc., as agent, and the other financial institutions party thereto, as lenders.

 

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“ Current Business Employees ” has the meaning specified in Section 5.17(a) .

 

“ Customer Information ” has the meaning specified in Section 2.1(a)(xii) .

 

“ Cut-Off Date ” has the meaning specified in Section 4.1 .

 

“ Cut-Off Date AP Schedule ” has the meaning specified in Section 2.5 .

 

“ Cut-Off Date Working Capital Statement ” has the meaning specified in Section 3.2(a) .

 

“ DOJ ” has the meaning specified in Section 7.5 .

 

“ Effective Time ” has the meaning specified in Section 4.1 .

 

“ Employment Agreement ” means any employment contract, termination or severance agreement, change of control agreement or any other agreement respecting the terms and conditions of employment or payment of compensation in respect to any current or former officer or employee of the Business.

 

“ Encumbrance ” means any lien, charge, claim, restriction, security interest, encumbrance, mortgage, pledge, easement, conditional sale or other title retention agreement, title exception, defect in title or other restriction of a similar kind.

 

“ Environmental Law ” means all Requirements of Law relating to protection of surface or ground water, drinking water supply, soil, surface or subsurface strata or medium, ambient air, pollution control, Hazardous Materials, health, chemical use, safety or sanitation.

 

“ Environmental Permits ” means all permits, licenses or authorizations required pursuant to any Environmental Law.

 

“ Equipment ” has the meaning specified in Section 2.1(a)(iii) .

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

“ Excluded Account Information ” means (a) any credit bureau report obtained by or on behalf of Household Bank pertaining to a “Cardholder” (as defined in the Program Agreement) and any credit scoring and decision information, analyses of credit quality and credit risk, analyses prepared for the purpose of fraud or suspicious activity monitoring or other similar analyses prepared by or on behalf of Household Bank and maintained in Household Bank’s credit file pertaining to a Cardholder; (b) any information collected by or on behalf of Household Bank from a Cardholder in response to the following items in a “Credit Card Application” (as defined in the Program Agreement): date of birth, previous address, time spent at any address, employment information, document identification information (including passport number and drivers license number) and information regarding other credit cards held by the Cardholder; and (c) any other information collected by or on behalf of Household Bank, whether from a Cardholder or from any other Person, to the extent that Household Bank and Seller have agreed in good faith after the date of the Program Agreement but prior to the date of this Agreement that the collection, use and distribution of such information by Seller and its Affiliates would be inconsistent with the intent of the parties to the Program Agreement that neither Household Bank nor Seller be deemed to be a “consumer reporting agency” within the meaning of Section 603 of

 

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the Fair Credit Reporting Act (15 U.S.C. § 1681a(d)), as amended, and (d) any nonpublic personal information about a Cardholder that the Cardholder has directed not be disclosed to a nonaffiliated third party pursuant to the provisions of the Gramm-Leach-Bliley Act, 15 U.S.C. § 6801 et seq., and any regulations issued pursuant thereto.

 

“ Excluded Assets ” has the meaning specified in Section 2.1(b) .

 

“ Excluded Employees ” means the employees whose names are listed on Schedule 1.1(a) .

 

“ Excluded Liabilities ” has the meaning specified in Section 2.3(b) .

 

“ Expenses ” means any and all reasonable out-of-pocket expenses incurred in connection with defending or asserting any claim, action, suit or proceeding hereunder (including court filing fees, court costs, arbitration fees or costs, costs of investigation, witness fees and reasonable fees and disbursements of legal counsel, expert witnesses, accountants and other professionals).

 

“ Final Working Capital ” has the meaning specified in Section 3.2(a) .

 

“ Financial Statements ” has the meaning specified in Section 5.4 .

 

“ Financial Statements Date ” means January 29, 2005.

 

“ FLSA ” means the United States Fair Labor Standards Act, as amended, and the rules and regulations promulgated thereunder.

 

“ FTC ” has the meaning specified in Section 7.5 .

 

“ GAAP ” means United States generally accepted accounting principles, consistently applied by Seller, in effect at the date of the financial statement to which it refers.

 

“ Governmental Body ” means any foreign, federal, state, local or other governmental authority or any court, administrative or regulatory agency, department, instrumentality, body or commission.

 

“ Governmental Permits ” has the meaning specified in Section 5.7 .

 

“ Grant Deeds ” means the quitclaim deeds in the forms attached to Exhibit Q .

 

“ Hazardous Materials ” means any waste, pollutant, contaminant, hazardous substance, toxic, ignitable, reactive or corrosive substance, hazardous waste, hazardous chemicals, petroleum or petroleum-derived substance or waste or any constituent of any such substance or waste, the use, handling or disposal of which by Seller or any of the Companies is in any way governed by or subject to any applicable Requirement of Law.

 

“ HIPAA ” has the meaning specified in Section 8.8 .

 

“ Household Bank ” has the meaning specified in Section 7.9 .

 

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

“ Identified Guaranties ” has the meaning specified in Section 7.7 .

 

“ Incremental Property Taxes ” means, with respect to property Taxes imposed on the Assets with respect to any Straddle Period, the excess, if any, of (a) the portion of such

 

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property Taxes for the portion of such Straddle Period ending on the Cut-Off Date allocated pro rata on a daily basis using the assessed value and Tax rate imposed as a result of the transactions contemplated by this Agreement over (b) the portion of such property Taxes for the portion of such Straddle Period ending on the Cut-Off Date allocated pro rata on a daily basis, using the assessed value and Tax rate that would have applied had such transactions not occurred.

 

“ Indemnified Party ” has the meaning specified in Section 11.3 .

 

“ Indemnitor ” has the meaning specified in Section 11.3 .

 

“ Intellectual Property ” means any or all of the following and all rights, arising out of or associated therewith: (i) all United States, international and foreign patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof; (ii) all inventions (whether patentable or not), improvements, technical data, Trade Secrets, and all documentation relating to any of the foregoing throughout the world; (iii) all copyrights, copyright registrations and applications therefor, and all other rights corresponding thereto throughout the world; (iv) all industrial designs and any registrations and applications therefor throughout the world; (v) all internet uniform resource locators, domain names, trade names, logos, slogans, designs, common law trademarks and service marks, trademark and service mark registrations and applications therefor throughout the world; (vi) all databases and data collections and all rights therein throughout the world; and (vii) any similar or equivalent rights to any of the foregoing anywhere in the world.

 

“ Inventory ” has the meaning specified in Section 2.1(a)(v) .

 

“ Inventory Firm ” has the meaning specified in Section 3.2(h) .

 

“ Inventory Schedule ” has the meaning specified in Section 3.2(h) .

 

“ Key Employees ” means all employees of the Business whose annual base salaries exceed $150,000.

 

“ Knowledge of Buyer ” means, as to a particular matter, the current actual knowledge of the executive officers of Buyer (as the term “executive officer” is defined in Rule 3b-7 under the Exchange Act).

 

“ Knowledge of Seller ” means, as to a particular matter, the current actual knowledge of the executive officers of Seller (as the term “executive officer” is defined in Rule 3b-7 under the Exchange Act), the President and Chief Executive Officer of Proffitt’s and McRae’s and Seller’s Senior Vice President—Real Estate with responsibility for the Business.

 

“ Labor Laws ” means all Requirements of Law concerning labor relations, unions and collective bargaining, conditions of employment, employment discrimination and harassment, wages, hours or occupational safety and health, including ERISA, the United States Immigration Reform and Control Act of 1986, the United States National Labor Relations Act, the United States Civil Rights Acts of 1866 and 1964, the United States Equal Pay Act, the United States Age Discrimination in Employment Act, the United States Americans with Disabilities Act, the United States Family Medical Leave Act, the United States Worker Adjustment and Retraining Notification Act, the United States Occupational Safety and Health Act, the United States Davis Bacon Act, the United States Walsh-Healy Act, the United States Service Contract Act, United States Executive Order 11246, the United States Fair Labor

 

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Standards Act and the United States Rehabilitation Act of 1973, as each such act is amended, and all rules and regulations promulgated under such acts.

 

“ Lease Agreements ” has the meaning specified in Section 5.8(c) .

 

“Leased Real Estate” has the meaning specified in Section 2.1(a)(ii) .

 

“Leasehold Interests” has the meaning specified in Section 2.1(a)(ii) .

 

“ Losses ” means any and all liabilities, obligations, losses, costs, settlement payments, awards, judgments, fines, penalties, damages, expenses, deficiencies or other charges.

 

“ Material Adverse Effect ” means any change or effect that, when taken together with all other changes or effects, has or is reasonably likely to have a material adverse effect on the assets, results of operations or financial condition of the Business taken as a whole, other than any change or effect resulting from or relating to (a) economic conditions, (b) global financial or capital markets, (c) the retail department store industry, (d) the public disclosure of the transactions contemplated by this Agreement, (e) the consummation of the transactions contemplated by this Agreement or compliance with the terms of this Agreement, (f) any Excluded Asset, Excluded Liability or other asset or property of Seller or its Affiliates that is not being transferred pursuant to this Agreement, (g) any Change In Law or (h) acts of terrorism or war (whether or not declared).

 

“ Non-Prevailing Party ” has the meaning specified in Section 3.2(d) .

 

“Notice of Disagreement” has the meaning specified in Section 3.2(b) .

 

“ Other Guaranties ” has the meaning specified in Section 7.7 .

 

“ Owned Real Estate ” has the meaning specified in Section 2.1(a)(i) .

 

“ Pension Plan ” means any pension plan, as defined in Section 3(2) of ERISA, applied without regard to the exceptions from coverage contained in Sections 4(b)(4) or 4(b)(5) thereof.

 

“ Permitted Encumbrances ” means (a) liens for Taxes and other governmental charges and assessments that are not yet due and payable or that are being contested in good faith in accordance with applicable Requirements of Law; (b) liens of landlords and liens of carriers, warehousemen, mechanics and materialmen and other like liens arising in the ordinary course of business for sums not yet due and payable; (c) Encumbrances identified in Schedule 1.1(b) ; (d) source code escrow agreements for Software owned by Seller or any of the Companies listed in Schedule 5.13 ; (e) Encumbrances evidenced by any security agreement, financing statement, purchase money agreement, conditional sales contract, capital lease or operating lease, or by any license, coexistence agreement, undertaking, declaration, limitation of use or consent to use, in each case that is described in Schedule 5.13 or the non-disclosure of which therein does not constitute a misrepresentation under Section 5.13; and (f) other Encumbrances or imperfections on property that are not material in amount or do not materially adversely affect the value, title, possession or existing use of the property affected by such Encumbrance or imperfection.

 

“ Permitted Real Property Exceptions ” means, collectively, (a) liens, charges, encumbrances and exceptions for Taxes and other governmental charges and assessments (including special assessments) that are not yet due and payable; (b) all Real Estate Agreements; (c) all matters and exceptions set forth in the title insurance policies or commitments set forth in

 

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Schedule 1.1(c) ; (d) liens, charges, encumbrances or title exceptions or imperfections with respect to the Owned Real Estate created by or resulting from the acts or omissions of Buyer or any of its Affiliates, employees, officers, directors, agents, representatives, contractors, invitees or licensees; (e) liens, charges, encumbrances and/or title exceptions or imperfections created by any of the documents to be executed in connection with the Closing or this Agreement (including any reservations, easements, restrictions, covenants and other matters set forth in the Grant Deeds) whether prior to, at or after the Closing; (f) all matters that may be shown by a current, accurate survey or physical inspection of the Owned Real Estate; (g) Requirements of Law, including building and zoning laws, ordinances and regulations now or hereafter in effect relating to the Owned Real Estate; (h) any and all service contracts and agreements affecting the Owned Real Estate as of the date hereof, and any and all service contracts and agreements entered into after the date of this Agreement in accordance with the provisions of this Agreement, in each case, to the extent in effect as of the Closing; (i) violations of laws, regulations, ordinances, orders or requirements, if any, arising out of any Change in Law; (j) any Permitted Encumbrance to the extent applicable or relating to, or otherwise affecting, the Real Estate; and (k) easements, rights of way, restrictions, covenants or other similar matters that are not material in amount or do not materially adversely affect the value, title or existing use of the Real Estate affected by such easement, right of way, restriction, covenant or other matter.

 

“ Person ” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a Governmental Body, or any department, agency or political subdivision thereof.

 

“ Private Brand Merchandise ” has the meaning specified in Section 7.4(b)(xvii) .

 

“ Private Brands Agreement ” has the meaning specified in Section 7.8(c) .

 

“ Program Agreement ” means that certain Program Agreement dated as of April 15, 2003 and as amended as of April 15, 2003 and June 15, 2004 by and among Seller, McRae’s, Inc. and Household Bank.

 

“ Purchase Orders ” has the meaning specified in Section 2.1(a)(vi) .

 

“ Purchase Price ” has the meaning specified in Section 3.1 .

 

“ PWC ” has the meaning specified in Section 8.10(a) .

 

“ Real Estate ” has the meaning specified in Section 2.1(a)(ii) .

 

“ Real Estate Agreements ” has the meaning specified in Section 2.1(a)(ix) .

 

“ Reference Working Capital ” has the meaning specified in Section 3.2(e) .

 

“ Reference Working Capital Statement ” means the working capital statement set forth in Schedule 1.1(d) , together with supporting documentation.

 

“ Register and Store Safe Cash ” means (a) the “register cash” necessary to open the stores of the Business on the day after the Cut-Off Date and (b) any cash that is in the safes or vaults of the stores of the Business, in the aggregate amounts for (a) and (b) as set forth in Exhibit C .

 

“ Registered Intellectual Property ” means all United States, international and foreign: (i) patents and patent applications (including provisional applications); (ii) registered

 

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trademarks and service marks, applications to register trademarks and service marks, intent-to-use applications or other registrations or applications related to trademarks and service marks; (iii) registered copyrights and applications for copyright registration; (iv) domain name registrations; and (v) any other Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued, filed with or recorded with any federal, state, local or foreign Governmental Body or other public body.

 

“ Required Consents ” has the meaning specified in Section 8.5 .

 

“ Requirements of Law ” means any foreign, federal, state and local laws, statutes, regulations, rules, codes, orders, decrees, directives, decisions, judgments, injunctions, writs or ordinances enacted, adopted, issued or promulgated by any Governmental Body.

 

“ Retained Names and Marks ” has the meaning specified in Section 8.1(a) .

 

“ SEC ” means the United States Securities and Exchange Commission.

 

“ SEC Financials ” has the meaning specified in Section 8.10(a) .

 

“ Seller ” has the meaning specified in the first paragraph of this Agreement.

 

“ Seller Acquisition Proposal ” means any proposal or offer with respect to a merger, acquisition, consolidation or similar transaction involving any purchase of all or any significant portion of the capital stock of Seller.

 

“ Seller Ancillary Agreements ” means all agreements, instruments and documents being or to be executed and delivered by Seller under this Agreement or in connection herewith.

 

“ Seller Gift Programs ” has the meaning specified in Section 2.3(a)(vii) .

 

“ Seller Group Member ” means (a) Seller and its Affiliates, (b) directors, officers and employees of Seller and its Affiliates and (c) the successors and assigns of the foregoing.

 

“ Seller Return Policies ” has the meaning specified in Section 2.3(a)(viii) .

 

“ Seller’s DC Plan ” has the meaning specified in Section 8.3(i)(i) .

 

“ Severance Pay Plan ” has the meaning specified in Section 5.15(f) .

 

“ Software ” means computer software programs and related documentation and materials, whether in source code, object code or human readable form; provided , however , that Software does not include software that is available generally through retail stores, distribution networks or is otherwise subject to “shrink-wrap” license or “click-through” agreements including any software installed in the ordinary course of business as a standard part of hardware, equipment or fixtures purchased by Seller or any of the Companies.

 

“ Straddle Period ” means any taxable year or period beginning before and ending after the Cut-Off Date.

 

“ Tax ” (and, with correlative meaning, “ Taxes ” ) means any federal, state, local or foreign income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem, value added, transfer or excise

 

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tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, imposed by any Governmental Body.

 

“ Tax Return ” means any return, report or similar statement required to be filed with respect to any Tax (including any attached schedules), including any information return, claim for refund, amended return or declaration of estimated Tax.

 

“ Trade Secrets ” means confidential ideas, trade secrets, know-how, concepts, methods, processes, formulae, reports, data, customer lists, mailing lists, business plans and other proprietary information that provides the owner with a competitive advantage.

 

“ Transferred Employees ” has the meaning specified in Section 8.3(a) .

 

“ Transfer Taxes ” has the meaning specified in Section 8.2(a)(iv) .

 

“ Transition Services Agreement ” has the meaning specified in Section 7.8(a) .

 

“ Unassigned Contract ” has the meaning specified in Section 2.2(a) .

 

“ Warranties ” has the meaning specified in Section 2.1(a)(iv) .

 

“ Welfare Plan ” means any welfare plan, as defined in Section 3(1) of ERISA, applied without regard to the exceptions from coverage contained in Sections 4(b)(4) or 4(b)(5) thereof.

 

“ Working Capital ” has the meaning specified in Section 3.2(g) .

 

“ Year-End Seller Balance Sheet ” has the meaning specified in Section 5.4 .

 

Section 1.2 Interpretation . In this Agreement (including the exhibits and schedules to this Agreement):

 

(a) words denoting the singular include the plural and vice versa, and words denoting any gender include all genders;

 

(b) “including” means “including without limitation;”

 

(c) “business day” means any day other than a Saturday, a Sunday or a day that is a statutory holiday under the laws of the United States or the State of Tennessee;

 

(d) when calculating the period of time within which or following which any act is to be done or step taken, the date that is the reference day in calculating such period shall be excluded and, if the last day of such period is not a business day, the period shall end on the next day that is a business day;

 

(e) all dollar amounts are expressed in United States dollars, and all amounts payable hereunder shall be paid in United States dollars;

 

(f) money shall be tendered by wire transfer of immediately available federal funds to the account designated in writing by the party that is to receive such money;

 

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(g) references herein to articles, sections, exhibits and schedules mean the articles and sections of, and the exhibits and schedules attached to, this Agreement; and

 

(h) the words “hereof,” “hereby,” “herein,” “hereunder” and similar terms in this Agreement refer to this Agreement as a whole and not only to a particular section in which such words appear.

 

ARTICLE II

PURCHASE AND SALE

 

Section 2.1 Purchase and Sale of Assets .

 

(a) Generally . On the terms and subject to the conditions of this Agreement, Seller agrees to, and to cause the Companies to, assign, sell, transfer, convey and deliver to Buyer, and Buyer agrees to purchase from Seller and the Companies, all of Seller’s and the Companies’ right, title and interest as of the Effective Time in the following property and assets (collectively, the “ Assets ”):

 

(i) the real property listed on Exhibit E , together with all interests of Seller and the Companies in the buildings, structures, installations, fixtures, trade fixtures and other improvements situated thereon and all easements, rights of way and other rights, interests and appurtenances of Seller and the Companies therein or thereunto pertaining (collectively, “ Owned Real Estate ”);

 

(ii) the leasehold and subleasehold interests of Seller and the Companies in all real property listed on Exhibit F (collectively, “ Leased Real Estate ” and, together with the Owned Real Estate, the “ Real Estate ”), together with all interests of Seller and the Companies in the leases, subleases, licenses, occupancy agreements, and other documents or agreements related thereto and any and all interests of Seller and the Companies in the buildings, structures, installations, fixtures, trade fixtures and other improvements situated thereon and all easements, rights of way and other rights, interests and appurtenances of Seller and the Companies therein or thereunto pertaining (collectively with the Leased Real Estate, the “ Leasehold Interests ”);

 

(iii) the machinery, equipment, furniture, tools, computer hardware and network infrastructure and spare parts located on the Real Estate as of the Effective Time (exclusive of Inventory (which is defined in, and subject to, Section 2.1(a)(v) ) (collectively, “ Equipment ”) and all motor vehicles exclusively for use by Business Employees (excluding, for the avoidance of doubt, trucks, tractor-trailers and similar motor vehicles);

 

(iv) all warranties or guarantees by any manufacturer, supplier or other vendor to the extent solely related to any of the Assets (“ Warranties ”);

 

(v) the inventory, packaging materials and supplies, in each case to the extent solely related to the Business and wherever located as of the Effective Time, and inventory, packaging materials and supplies on order or in transit as of the Effective

 

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Time, in each case to the extent solely related to the Business (collectively, the “ Inventory ”);

 

(vi) all purchase orders issued by Seller or any Companies in the ordinary course to the extent they relate to the operation of the Business (“ Purchase Orders ”);

 

(vii) all contracts, guarantees, leases, licenses (including those relating to concessions or licensed departments), Software licenses, commitments and other agreements, in each case solely related to the Business (exclusive of Leasehold Interests and Real Estate Agreements, which are subject to Section 2.1(a)(ii) and Section 2.1(a)(ix) , respectively) (“ Contracts ”);

 

(viii) all equipment lease agreements to the extent assumed by Buyer pursuant to Section 2.4(b) ;

 

(ix) all reciprocal easement and operating agreements, agreements supplemental thereto, easements, Seller’s and each Company’s interests as landlord under any leases or subleases, purchase and lease-termination options, rights of first refusal or first offer, subordination, non-disturbance and attornment agreements, and other agreements that run with the land and in each case are appurtenant to the Real Estate and other agreements (other than Leasehold Interests) that relate to the occupancy or operation of the Real Estate (collectively, “ Real Estate Agreements ”);

 

(x) the Intellectual Property owned by or licensed to Seller or any Company that is solely related to the Business, including the Intellectual Property identified on Exhibit G , but excluding the Intellectual Property specifically identified on Exhibit H ;

 

(xi) the Governmental Permits solely related to the Business;

 

(xii) the information regarding customers and bridal registries of the Business described on Exhibit I (“ Customer Information ”); provided , that if Buyer requests that Seller provide any Customer Information in any format that differs from the format in which Seller maintains such Customer Information, at the Closing, Buyer shall pay Seller for any reasonable out-of-pocket costs of Seller or any Affiliate of Seller associated with producing such Customer Information in such format. Buyer understands and agrees that neither Seller nor the Companies will produce any information that would violate any contractual obligation, violate any Requirement of Law or cause Seller or any of the Companies to become a “consumer reporting agency” as defined in the Federal Fair Credit Reporting Act. Seller agrees to, and to cause the Companies to, retain information regarding customers of the Business in accordance with its existing retention policies and procedures;

 

(xiii) all material sales records, accounting records, purchase records, supplier lists, advertising and promotional records, material real estate and engineering data, blueprints and other property records primarily related to the Business; personnel, benefits, payroll, medical and other records of all Transferred Employees, to the extent permitted by Requirements of Law; and all other material books and records primarily

 

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related to the Business, exclusive of Account Information and Excluded Account Information (collectively, “ Books and Records ”); provided that Seller and its Affiliates shall have the right to keep and use a copy of all Books and Records where necessary to comply with any Requirements of Law or necessary for use in connection with the business of Seller or any of its Affiliates, including the preparation of Tax Returns, the administration of Business Plans, the preparation of the financial statements of Seller or any of its Affiliates, the fulfillment of obligations under the Transition Services Agreement or in connection with investigations or litigation. If any Books and Records relate primarily, but not solely, to the Business, Seller may, before delivering such Books and Records to Buyer, redact all information and data therefrom that relate to businesses of Seller or any of its Affiliates other than the Business;

 

(xiv) Register and Store Safe Cash;

 

(xv) all rights of Seller or any Company under any refunds, deposits (other than customer deposits), claims, causes of action, rights of set off and rights of recoupment, in each case to the extent solely related to the Business (except to the extent that any claims, causes of action or rights of set off are specifically related to any Excluded Liability);

 

(xvi) the Company Software (including intellectual property rights related thereto) and all databases and compilations, including any and all data and collections of data, whether machine readable or otherwise listed on Exhibit J , and all telephone numbers, domain names and URL addresses, in each case solely related to the Business or the Assets, including those listed on Exhibit J ;

 

(xvii) the Account Information to the extent that a transfer of such information does not violate any contractual obligation, violate any Requirement of Law or cause Seller or any of the Companies to become a “consumer reporting agency” as defined in the Federal Fair Credit Reporting Act; provided , however , that no Account Information shall be conveyed to Buyer or any of its Affiliates pursuant hereto in the event that Buyer has not fully complied with Section 7.9 at or prior to Closing;

 

(xviii) all prepaid expenses (including prepaid advertising expenses) and goodwill, in each case, to the extent solely related to the Business; and

 

(xix) all other assets (other than Excluded Assets) of the nature of the assets reflected on the Year-End Seller Balance Sheet that are exclusively used in the Business.

 

(b) Excluded Assets . Seller and its Affiliates are not selling, and Buyer is not purchasing, any property or assets not described in Section 2.1(a) (the “ Excluded Assets ”). Without limiting the generality of the foregoing, the following property and assets of Seller and its Affiliates constitute Excluded Assets, notwithstanding anything to the contrary provided in Section 2.1(a) :

 

(i) cash (except as provided in Section 2.1(a)(xiv) ), and receivables from third-party credit card or debit card sales transactions on or before the Cut-Off Date (regardless of when posted); proceeds from checks and bank drafts accepted on or before

 

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the Cut-Off Date (regardless of when cleared); payments (including by check or bank draft, regardless of when cleared) on “Accounts” and “Account Receivables” (as each such term is defined the Program Agreement) received by Seller or any of the Companies on or before the Cut-Off Date; amounts in bank accounts and certificates of deposit, together with all other cash equivalents, securities (whether or not marketable) and investments;

 

(ii) all Employment Agreements other than those listed in Schedule 8.3(b) ;

 

(iii) all unpaid accounts, notes and other miscellaneous receivables in favor of Seller or any of the Companies with respect to the Business, together with all collateral security therefor;

 

(iv) all rights of Seller or any Company under any letters of credit, guaranties, performance or surety bonds or cash collateral posted by Seller or any of the Companies and to any refunds (or credits) of Taxes to which Seller is entitled under Section 8.2 or otherwise with respect to Excluded Assets;

 

(v) Seller’s or any Company’s rights under the contracts, guarantees, licenses, personal property leases, commitments and other agreements, warranties and purchase orders listed on Exhibit K ; Seller’s or any Company’s rights under the contracts, guarantees, licenses, personal property leases, commitments and other agreements, warranties and purchase orders that relate both to the Business and any other business of Seller, any Company or any Affiliate of Seller or any Company; and, except for Real Estate Agreements and the Leasehold Interests, each other contract, guarantee, license, personal property lease, commitment and other agreement, warranty or purchase order that is not assignable without the consent, approval or waiver of a third party and with respect to which one or more necessary third-party consents, approvals or waivers shall not have been received;

 

(vi) Seller’s or any Company’s rights under any policies of insurance purchased by Seller or any of the Companies, or any benefits, proceeds or premium refunds payable or paid thereunder or with respect thereto (except as provided in Section 8.4 );

 

(vii) the corporate charter, qualifications to conduct business as a foreign corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, Tax Returns and other Tax records, seals, minute books, stock transfer books and similar documents of Seller or any Company;

 

(viii) the rights of Seller or any Company under this Agreement or any other agreement between Seller or any Company and Buyer entered into on or after the date of this Agreement in accordance with the terms hereof;

 

(ix) all websites, website content and web images and all computer software related thereto (including intellectual property rights related thereto), except computer software listed on Exhibit J , and all books and records related thereto;

 

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(x) the Governmental Permits that are not transferable without the consent of a Governmental Body and with respect to which the required consent is not obtained;

 

(xi) the real estate listed on Exhibit L ;

 

(xii) any trademark or service mark that uses in whole or in part any of the items set forth on Exhibit H or any derivative or diminutive form of expansion thereof, whether or not stylized, and any trade dress that is used by Seller, any Company or any Affiliate of Seller or any Company in any business other than the Business;

 

(xiii) all assets related to any accounting, computer hardware (not located on the Real Estate), legal, human resource, payroll, treasury, insurance, transportation, tax or other general and administrative services supplied by Seller or any Company unless such services are supplied on the Real Estate and relate solely to the Business;

 

(xiv) the personal property and other assets listed on Exhibit M ;

 

(xv) all information regarding customers of the Business that is not Account Information and that is not required to be provided to Buyer pursuant to Section 2.1(a)(xii) ;

 

(xvi) all intercompany accounts among Seller and its Affiliates relating to the Business, which accounts are subject to Section 7.6 ;

 

(xvii) all equity interests of any subsidiaries of Seller;

 

(xviii) all assets relating primarily to the operation of Club Libby Lu stores or departments; and

 

(xix) the Excluded Account Information.

 

Section 2.2 Unassignable Contracts . (a) Notwithstanding anything to the contrary stated in this Agreement, if (i) any Contract, Warranty or Purchase Order is not capable of being sold, assigned, transferred or conveyed in the absence of the approval, consent or waiver of any other Person without conflicting with, violating, constituting a default under or breaching such Contract, Warranty or Purchase Order, and (ii) all necessary approvals, consents and waivers of all parties to such Contract, Warranty or Purchase Order have not been obtained at or prior to the Closing, then Buyer shall assume the obligations and liabilities of Seller and the Companies under such Contract, Warranty or Purchase Order (each, an “ Unassigned Contract ”) (but not such Unassigned Contract itself), and the claims, rights and benefits of Seller or any of the Companies arising under such Unassigned Contract or resulting therefrom after the Cut-Off Date (but not such Unassigned Contract itself) shall (to the maximum extent permitted by Requirements of Law or any applicable agreement) be included in the Assets transferred to Buyer hereunder (and any such payments or other benefits received by Seller or any of the Companies therefrom after the Cut-Off Date shall immediately be transferred by Seller or any such Company to Buyer), and at the request of Buyer, Seller and the Companies shall, following the Closing, use all commercially reasonable efforts to obtain, and to assist Buyer in attempting

 

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to obtain, the necessary approvals, consents and waivers (provided that Seller and its Affiliates shall not be required to make any payments or offer or grant any accommodation (financial or otherwise) to any third party to obtain any approval, consent or waiver except to the extent Buyer agrees to reimburse Seller for any such payment made by Seller at the request of Buyer), and shall promptly execute all documents necessary to complete the transfer of such Unassigned Contract to Buyer if such approvals, consents and waivers are obtained.

 

(b) Following the Effective Time, (i) Seller and the Companies shall use commercially reasonable efforts, at the request of Buyer and at the expense and for the account of Buyer, to take actions that are necessary to allow Buyer to exercise any right of Seller or any of the Companies arising from any Unassigned Contract (including the right to elect to terminate such Unassigned Contract in accordance with the terms thereof) and (ii) neither Seller nor any of the Companies shall take any action under any Unassigned Contract that would reasonably be expected to limit, restrict or terminate in any material respect the benefits to Buyer of such Unassigned Contract unless, in good faith and after consultation with and prior written notice to Buyer, Seller or any of the Companies is (A) ordered orally or in writing to do so by a Governmental Body of competent jurisdiction or (B) otherwise required to do so by Requirements of Law; provided , however , that if any such order is appealable, Seller or the Companies shall, at Buyer’s cost and expense, take such actions as are reasonably requested by Buyer to file and pursue such appeal and to obtain a stay of such order; provided further that Seller and its Affiliates shall not be required to make any payments or offer or grant any accommodation (financial or otherwise) to any third party with respect to clause (i) or (ii) of this Section 2.2(b) except to the extent Buyer agrees to reimburse Seller for any such payment made by Seller at the request of Buyer.

 

Section 2.3 Assumption of Liabilities .

 

(a) Generally . On the terms and subject to the conditions of this Agreement, at the Closing, Buyer shall assume, and hereby agrees to pay, perform and observe fully and timely, effective as of the Effective Time, all liabilities and obligations, known or unknown, asserted or unasserted, absolute or contingent, of Seller and the Companies to the extent solely relating to or solely arising out of the Business or the Assets, whether arising before, on or after the Cut-Off Date other than liabilities or obligations constituting Excluded Liabilities (collectively, the liabilities and obligations so assumed being referred to as the “ Assumed Liabilities ”). To the extent that Seller or any of its Affiliates pays any Assumed Liability following the Cut-Off Date in the ordinary course of business, Buyer shall reimburse Seller for any amount so paid immediately upon demand; provided that if any such payment is not made in the ordinary course, Buyer shall reimburse Seller for such amount when such payment would have been made if such payment had been made in the ordinary course. To the extent that Buyer pays any Excluded Liability from and after the Cut-Off Date in the ordinary course of business, Seller shall reimburse Buyer for any amount so paid immediately upon demand; provided that if any such payment is not made in the ordinary course, Seller shall reimburse Buyer for such amount when such payment would have been made if such payment had been made in the ordinary course. Without limiting the generality of the foregoing, the following liabilities constitute Assumed Liabilities:

 

(i) all liabilities and obligations of Seller or any of the Companies under or in respect of the Real Estate, Real Estate Agreements, Leasehold Interests, Equipment, Inventory, Contracts, Warranties and Purchase Orders;

 

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(ii) all accrued expenses of Seller or any of the Companies to the extent solely related to the Business;

 

(iii) [intentionally omitted];

 

(iv) all liabilities and obligations with respect to Transferred Employees, Business Plans or other employee benefit policies and practices of Seller listed in Schedule 5.15(e) , in each case, to the extent that such liabilities and obligations are assumed by Buyer pursuant to Section 8.3 ;

 

(v) all payment obligations relating to compensation and commissions that have been earned but have not been paid as of the Effective Time to Transferred Employees;

 

(vi) all liabilities and obligations arising from litigation, arbitration, administrative or other proceedings, pending or threatened against Seller or any Company to the extent solely related to the Business or the Assets (other than workers’ compensation liabilities and obligations, which shall be governed by Section 8.3(k) , liabilities and obligations described in Section 2.3(b)(v) or 2.3(b)(x) and any matters listed on Schedule 2.3(b)(xi) ), and all performance obligations under any product recall or any non-financial settlement obligation to the extent solely related to the Business;

 

(vii) all liabilities and obligations arising from all gift certificate, gift card, merchandise voucher, coupon, refund or other loyalty, frequent shopper or similar program (collectively, the “ Seller Gift Programs ”) reward redemptions submitted by customers of the Business for gift certificates, gift cards, merchandise vouchers, coupons, refunds or other loyalty, frequent shopper or similar program rewards purchased, issued or earned in connection with the Business on or prior to the Cut-Off Date;

 

(viii) all liabilities and obligations arising from all return policies for merchandise purchased in connection with the Business (the “ Seller Return Policies ”) to the extent assumed by Buyer pursuant to Section 8.7 ;

 

(ix) any claims (including product-liability and infringement claims) relating to goods sold or services provided by the Business before, on or after the Cut-Off Date (other than claims described in Section 2.3(b)(x) and 2.3(b)(xi) );

 

(x) any claims (other than claims under Business Plans, which shall be governed by Section 8.3 , and workers’ compensation claims, which shall be governed by Section 8.3(k) ) asserted by Business Employees or by dependents of such Business Employees, for acts or omissions occurring on or before the Cut-Off Date;

 

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(xi) all liabilities and obligations relating to the ownership or condition of the tangible Assets (including environmental conditions) before, on or after the Cut-Off Date;

 

(xii) all liabilities and obligations of Seller or its Affiliates (including the Companies) to pay or perform any obligation or liability (A) pursuant to any guaranty or obligation or lien, security interest or other encumbrance on, or in respect of, any collateral of Seller or any Company (other than the Assets) to ensure performance given or made by Seller or any such Company to the extent solely related to the Business (including pursuant to a letter of credit or surety bond), or (B) that otherwise arises as a matter of law or contract to the extent solely related to the Business, but in no event shall the provisions of this subsection include any obligation to repay any borrowed money; and

 

(xiii) all liabilities and obligations with respect to Taxes for which Buyer is liable under Section 8.2 .

 

(b) Excluded Liabilities . Notwithstanding anything to the contrary provided in Section 2.3(a) , Assumed Liabilities shall not include, and in no event will Buyer assume, agree to pay, discharge or satisfy any liability or obligation under this Agreement or otherwise, or have any responsibility for, the following liabilities and obligations of Seller or the Companies (the “ Excluded Liabilities ”):

 

(i) any liability or obligation for money borrowed (it being understood that the liabilities and obligations under any capital lease set forth in Schedule 5.13 is an Assumed Liability);

 

(ii) any liability or obligation with respect to Taxes for which Seller is liable under Section 8.2 ;

 

(iii) any liability or obligation for costs and expenses (other than Transfer Taxes and as set forth in Section 8.6 or as otherwise expressly set forth in this Agreement) in connection with the negotiation and execution of this Agreement or the consummation of the transactions contemplated hereby;

 

(iv) any liability or obligation of Seller under this Agreement or under any other agreement between Seller or any of its Affiliates, on the one hand, and Buyer or any of its Affiliates, on the other hand, entered into on or after the date of this Agreement in accordance with the terms hereof;

 

(v) any liability or obligation relating to any Business Plan, Employment Agreement or other employee benefit policies and practices of Seller listed in Schedule 5.15(e) , in each case, to the extent such liabilities and obligations are not expressly assumed by Buyer pursuant to Section 8.3 ;

 

(vi) all payment obligations relating to bonuses of employees of the Business that have been earned but have not been paid as of the Effective Time;

 

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(vii) all intercompany accounts among Sellers and its Affiliates relating to the Business, which accounts are subject to Section 7.6 ;

 

(viii) any liability or obligation to the extent related to the Excluded Assets (except as provided in Section 2.2 or 2.4 ) or any other assets not transferred to and not purchased by Buyer relating to the Business (other than such liabilities and obligations assumed by Buyer pursuant to Section 2.3(a)(iii) ), provided that this clause shall not affect any obligation of Buyer under the Transition Services Agreement, Club Libby Lu Licensed Departments Agreement or Private Brands Agreement;

 

(ix) any liability or obligation relating to, resulting from or arising out of any former operations or properties of Seller or any of the Companies that have been discontinued or disposed of prior to the Cut-Off Date;

 

(x) any liability or obligation with respect to any claim arising out of an occurrence on or prior to the Cut-Off Date for which Seller or any of the Companies is insured under the commercial general liability policy covering the Business or the Assets (without regard to any deductible or self-insured amount), as in effect as of the date of this Agreement (whether or not Seller actually recovers any insurance proceeds with respect to such claim);

 

(xi) any liability or obligation relating to the matters set forth on Schedule 2.3(b)(xi) (subject to any limitations set forth in such schedule), including Seller’s costs associated with defending and managing such matters (including attorneys’ fees and costs of investigation); and

 

(xii) all unpaid accounts payable of Seller or any of the Companies, subject to Section 2.5 .

 

Seller shall, or shall cause the Companies to, pay, perform and fully observe all Excluded Liabilities.

 

Section 2.4 Leased Department Agreements and Equipment Lease Agreements . (a) Exhibit R sets forth each leased department agreement relating both to the Business and to other businesses of Seller and its Affiliates. The parties agree to use commercially reasonable efforts to enter into new leased department agreements with the parties identified in Exhibit R that relate exclusively to each party’s own stores. If such new leased department agreements are not in effect as of the Effective Time, the parties agree that, to the maximum extent permitted by Requirements of Law or any applicable leased department agreement, each party shall be solely responsible for all obligations and liabilities, and shall receive all claims, benefits and rights, under each such leased department agreement to the extent related to stores operated by such party. Each party agrees to use commercially reasonable efforts to effect the foregoing.

 

(b) Exhibit S sets forth equipment lease agreements relating both to the Business and to other businesses of Seller and its Affiliates. The parties agree to use commercially reasonable efforts to obtain the necessary approvals, consents and waivers to

 

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assign to Buyer that portion of the equipment lease agreements (and any applicable schedules thereto) that relate exclusively to the stores included in the Assets; provided , however , that Seller and its Affiliates shall not be required to make any payments or offer or grant any accommodation (financial or otherwise) to any third party to obtain any approval, consent or waiver except to the extent Buyer agrees to reimburse Seller for any such payment made by Seller at the request of Buyer. If, prior to the Closing, all necessary approvals, consents and waivers are not obtained with respect to any equipment lease agreement, then (to the maximum extent permitted by Requirements of Law or any applicable equipment lease agreement) to the extent related to the stores included in the Assets, Buyer shall assume the obligations and liabilities of Seller and the Companies under such equipment lease agreement after the Cut-Off Date (but not such equipment lease agreement itself), and Buyer shall receive the claims, rights and benefits of Seller or any of the Companies arising under such equipment lease agreement or resulting therefrom after the Cut-Off Date (but not such equipment lease agreement itself).

 

Section 2.5 Accounts Payable . Promptly following the Closing, Seller shall deliver to Buyer a schedule (the “ Cut-Off Date AP Schedule ”) that sets forth Seller’s good faith estimate of the allocated accounts payable of the Business as of the close of business on the Cut-Off Date, calculated using the same methods used to prepare such line items in the Reference Working Capital Statement. Buyer shall pay Seller the amounts set forth in the Cut-Off Date AP Schedule in accordance with Exhibit 2.5 . The Cut-Off Date Working Capital Statement and Final Working Capital shall include and reflect the allocated accounts payable of the Business set forth in the Cut-Off Date AP Schedule.

 

ARTICLE III

PURCHASE PRICE

 

Section 3.1 Purchase Price . The purchase price for the Assets shall be equal to $622,000,000 (six hundred twenty-two million dollars) (the “ Purchase Price ”), subject to adjustment in accordance with Section 3.2 . The Purchase Price shall be paid by Buyer pursuant to Section 4.2 . To compensate Seller for the Closing occurring after the Cut-Off Date, Buyer shall pay Seller at Closing an additional amount (the “Closing Date Interest”) equal to interest on the Purchase Price, calculated on the basis of the number of days (excluding the Closing Date) by which the Closing follows the Cut-Off Date at an annual rate equal to the three-month LIBOR rate in effect as of the Closing Date.

 

Section 3.2 Adjustment of Purchase Price .

 

(a) Within 45 days after the Closing Date, Seller shall prepare and deliver to Buyer a statement (the “ Cut-Off Date Working Capital Statement ”) setting forth Working Capital as of the close of business on the Cut-Off Date (the determination of Working Capital, as it may be adjusted under this Section 3.2 in the event of a Notice of Disagreement, is referred to as “ Final Working Capital ”). Buyer shall reasonably assist Seller and its representatives in the preparation of the Cut-Off Date Working Capital Statement and shall provide Seller and its representatives reasonable access at all reasonable times to the personnel, properties, books and records of Buyer and its Affiliates for such purpose.

 

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(b) The Cut-Off Date Working Capital Statement shall become final and binding upon the parties on the 30th day following receipt thereof by Buyer unless Buyer gives written notice of its disagreement (“ Notice of Disagreement ”) to Seller before such date. A Notice of Disagreement pursuant to this Section 3.2(b) may be submitted only if, assuming all of Buyer’s assertions therein were sustained, an adjustment to the Purchase Price would be required under Section 3.2(f) , and the Notice of Disagreement must set forth Buyer’s determination of Final Working Capital and specify in reasonable detail the nature of any disagreement with Seller’s determination. The only disagreements that may be set forth in the Notice of Disagreement pursuant to this Section 3.2(b) are those that relate to (x) any claimed inconsistencies between the principles used in the preparation of the Cut-Off Date Working Capital Statement and the principles used in the preparation of the Reference Working Capital Statement, (y) disputes regarding the results of the inventory tabulation performed, or the Inventory Schedule prepared, pursuant to Section 3.2(h) or (z) errors in mathematical computation. Notwithstanding anything to the contrary in this Section 3.2 , no disagreement set forth in the Notice of Disagreement may relate to the principles used in the preparation of the Cut-Off Date Working Capital Statement, so long as those principles are consistently applied with the Reference Working Capital Statement. If a valid Notice of Disagreement is received by Seller in a timely manner, then the Cut-Off Date Working Capital Statement and the Final Working Capital (as finally determined in accordance with clause (i) or (ii) below) shall become final and binding upon the parties on the earlier of (i) the date the parties resolve in writing any differences they have with respect to all matters specified in the Notice of Disagreement and (ii) the date any disputed matters are finally resolved in writing by the Arbitrator.

 

(c) During the 30-day period following the delivery of a Notice of Disagreement, Seller and Buyer shall seek in good faith to resolve in writing any differences that they may have with respect to any matter specified in the Notice of Disagreement. If, at the end of such 30-day period, Seller and Buyer have not reached agreement on all such matters, then the matters that remain in dispute shall be promptly submitted to an arbitrator (the “ Arbitrator ”) for review and resolution. The Arbitrator shall be a nationally recognized independent public accounting firm as shall be agreed upon by the parties in writing, provided that the Arbitrator will not be an accounting firm used by either Seller or Buyer for audit or valuation purposes. The procedures for the arbitration shall be determined by the Arbitrator. The Arbitrator shall render a decision resolving the matters in dispute within 30 days following completion of the submissions to the Arbitrator. Any item not specifically referred to in the Notice of Disagreement shall be deemed final and binding on Buyer and Seller in the manner set forth in the Cut-Off Date Working Capital Statement. The Arbitrator shall determine Final Working Capital based solely on presentations made by Seller and Buyer (and not by independent review).

 

(d) The Non-Prevailing Party in any arbitration before the Arbitrator shall pay its own expenses incurred with respect to the arbitration and shall pay a percentage of (i) the fees and expenses of the Arbitrator plus (ii) the reasonable out-of-pocket expenses (including reasonable attorneys’ fees) of the other party incurred with respect to the arbitration, which percentage shall be calculated by dividing (A) an amount equal to the difference between the Non-Prevailing Party’s determination of Final Working Capital, as submitted to the Arbitrator, and the Arbitrator’s determination of Final Working Capital by (B) an amount equal to the difference between the parties’ respective determinations of Final Working Capital, as submitted

 

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to the Arbitrator. The other party shall pay the remainder of the fees and expenses of the Arbitrator and its own expenses not required to be paid by the Non-Prevailing Party hereunder. A party is the “ Non-Prevailing Party ” if the Arbitrator’s determination of Final Working Capital is closer to the other party’s determination of Final Working Capital, as submitted to the Arbitrator, than it is to that party’s determination of Final Working Capital, as submitted to the Arbitrator. In resolving any matter specified in the Notice of Disagreement, the Arbitrator shall not assign a value to any item greater than the greatest value for such item claimed by either party or less than the smallest value for such item claimed by either party.

 

(e) For purposes of this Agreement, “ Reference Working Capital ” means $125,274,416, and “ Adjustment Amount ” means $8,800,000.

 

(f) If Final Working Capital exceeds the Reference Working Capital, the Purchase Price shall be increased by the sum of (i) the amount by which Final Working Capital exceeds the Reference Working Capital and (ii) the Adjustment Amount. If the Reference Working Capital exceeds Final Working Capital by less than the Adjustment Amount, the Purchase Price shall be increased by the difference between (A) the Adjustment Amount and (B) the amount by which the Reference Working Capital exceeds Final Working Capital. If the Reference Working Capital exceeds Final Working Capital by more than the Adjustment Amount, the Purchase Price shall be reduced by the difference between (x) the amount by which the Reference Working Capital exceeds Final Working Capital and (y) the Adjustment Amount. The Purchase Price, as increased or decreased by the adjustment provided for in this Section 3.2(f) , is referred to as the “ Adjusted Purchase Price .” If the Purchase Price is less than the Adjusted Purchase Price, Buyer shall, and if the Purchase Price is more than the Adjusted Purchase Price, Seller shall, within five business days after the Cut-Off Date Working Capital Statement becomes final and binding on the parties, make payment to the other party of the amount of such difference, together with interest thereon at an annual rate equal to the three-month LIBOR rate in effect as of the Closing Date, calculated on the basis of the number of days elapsed from the Cut-Off Date through but excluding the payment date.

 

(g) The term “ Working Capital ” means (i) the sum of Inventory (as determined pursuant to Section 3.2(h) ) (less any markdown reserve) and prepaid assets of the Business, less (ii) allocated accounts payable set forth in the Cut-Off Date AP Schedule and actual accrued expenses of the Business, calculated on the same basis as reflected in the relevant line items on the Reference Working Capital Statement. Without limiting the generality of the foregoing, the computation of Working Capital will be done in a manner consistent with methods used in the preparation of the Reference Working Capital Statement, and the governing principle will be that the adjustment contemplated by this Section 3.2 can be appropriately measured only when the Reference Working Capital and the Final Working Capital are computed on the same basis, using the same principles and methodologies. Working Capital shall not include any Excluded Assets or Excluded Liabilities (including any liability or obligation with respect to Taxes).

 

(h) As soon as reasonably practicable after the date hereof, Seller will engage Regis or such other third party service provider that shall be mutually agreed upon by Buyer and Seller (the “ Inventory Firm ”) to perform a scanned physical inventory between June 23 and June 29, 2005, or on such other dates as may be mutually agreed upon by Buyer and Seller, to

 

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determine the quantity of Inventory located on the Real Estate. Such inventory shall be taken in accordance with Seller’s typical inventory procedures. The cost of taking the inventory shall be shared equally between Buyer and Seller, and such cost shall include only the fees and expenses incurred by the Inventory Firm in connection with the taking of the inventory and the cost of supplies utilized in the inventory. At its sole expense, each party may have a reasonable number of representatives present to observe the taking of such inventory and may verify the inventory tabulation as conducted. Immediately upon completion of the inventory tabulation, Seller shall furnish Buyer with a copy of the physical inventory data. Promptly following the completion of the inventory tabulation, Seller shall prepare a schedule (the “ Inventory Schedule ”) that contains a roll forward of the physical inventory data to the Cut-Off Date, using Seller’s standard procedures for rolling forward physical inventory data, and promptly following the completion of the Inventory Schedule, Seller shall deliver to Buyer a copy of the Inventory Schedule. In the event that there is any dispute regarding the Inventory Schedule prepared pursuant to this Section 3.2(h) , such dispute shall be resolved in connection with the determination of Final Working Capital, as set forth in Sections 3.2(b) - 3.2(d) .

 

Section 3.3 Allocation of Purchase Price; Transfer Tax Valuation . (a) Within 60 days following the Closing Date, Seller and Buyer shall negotiate and draft a schedule (the “ Allocation Schedule ”) allocating the Purchase Price (increased to take into account the Assumed Liabilities) among the Assets. The Allocation Schedule shall be reasonable and shall be prepared in accordance with Section 1060 of the Code and the regulations thereunder. Seller and Buyer each agrees that promptly upon receiving such Allocation Schedule it shall return an executed copy thereof to the other party. Seller and Buyer each agrees to file Internal Revenue Service Form 8594, and all federal, state, local and foreign Tax Returns, in accordance with the Allocation Schedule. Seller and Buyer each agrees to provide the other promptly with any other information required to complete Form 8594.

 

(b) Prior to the Closing Date, Seller and Buyer shall jointly agree on the valuation of the Real Estate, Real Estate Agreements and other Assets to the extent that valuations are needed for purposes of determining the amount of Transfer Taxes. If a party disagrees with respect to a proposed valuation, the parties shall negotiate in good faith to resolve the issue. If they cannot resolve the issue prior to the Closing Date, it shall be resolved by an accounting or appraisal firm chosen by and mutually acceptable to both parties after Closing. If payment of a Transfer Tax is due prior to any such resolution, payment shall be made in accordance with Section 8.2(a)(iv) based on Buyer’s reasonable valuation and, upon resolution, the party responsible for filing the Tax Return with respect to such Tax shall make such corrective filings with the appropriate Governmental Body and Buyer and Seller each shall pay 50% of any additional, and each shall be entitled to 50% of any refund of any, Transfer Tax resulting from such corrective filings.

 

Section 3.4 Certain Assets . (a) Prior to the Closing, the parties shall use commercially reasonable efforts to obtain the necessary landlord consent to assign to Buyer the Lease Agreement listed in Exhibit T ; provided , however , that (i) Seller and its Affiliates shall not be required to make any payments or offer or grant any accommodation (financial or otherwise) to any third party to obtain such landlord consent except to the extent Buyer agrees to reimburse Seller for any such payment made by Seller or any of its Affiliates at the request of Buyer, (ii) neither Seller nor any of its Affiliates shall be required to make any proposal or request to assign

 

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such Lease Agreement and (iii) no proposal or request to assign such Lease Agreement shall be made without the prior written consent of Seller. If, prior to the Closing, the necessary landlord consent with respect to such Lease Agreement has not been obtained, then (x) all assets of Seller or any of the Companies solely related to the store leased by Seller or any of the Companies pursuant to such Lease Agreement shall constitute Excluded Assets, (y) all assets and liabilities solely related to such store shall be excluded from the calculations of Reference Working Capital and Final Working Capital and (z) the Adjusted Purchase Price shall be reduced in the amount set forth on Exhibit T .

 

(b) In the event that the necessary landlord consent with respect to the Lease Agreement listed on Exhibit T has not been obtained prior to the Closing but Seller obtains such landlord consent within 90 days following the Closing Date, Seller shall notify Buyer in writing. As promptly as practicable following the delivery of such notice, Buyer shall pay to Seller by wire transfer of immediately available funds an amount equal to the agreed value of the store with respect to which such notice relates, and Seller will, or will cause the Companies to, convey to Buyer such store and all assets of Seller or any of the Companies solely related to such store.

 

Section 3.5 Certain Rights of First Refusal . If Buyer shall not have secured to its satisfaction the unconditional release and waiver of the rights of first refusal on the sale of the stores listed in Exhibit U from the respective holders of such rights on or before Closing, then, at Buyer’s request, Seller, the Companies and Buyer shall promptly cooperate to comply with the applicable provisions of the applicable right of first refusal (including entering into separate purchase and sale agreements for the Real Estate for each such store that is the subject of such right of first refusal and excluding such Real Estate (but only to the extent the same is subject to the right of first refusal in question and without effect on the other Assets) from the terms of this Agreement), including providing the holder of such right or option with such other sufficient information and documentation to exercise such right. The separate purchase price for the stores listed in Exhibit U for such purposes shall be as set forth in Exhibit U . The Purchase Price under this Agreement shall not be reduced by such amounts and shall be payable in full as otherwise provided in this Agreement whether or not any such holder exercises any such right or the closing on or conveyance of any of such stores occurs. However, if the Closing under this Agreement occurs, Buyer shall be entitled to receive all proceeds payable under each such separate agreement, whether the closing thereunder occurs prior to, concurrent with or subsequent to the Closing under this Agreement, whether payable by the holder of such right or by Buyer if such holder does not exercise such right, provided that the proceeds shall not be payable prior to Closing. If any such right is not exercised, then the store that was the subject of such right shall be conveyed to Buyer pursuant to this Agreement or the applicable separate agreement, as the case may be.

 

ARTICLE IV

CLOSING

 

Section 4.1 Closing Date . The Closing shall be held at the offices of Sidley Austin Brown & Wood LLP, 10 South Dearborn Street, Chicago, Illinois 60603, at 10:00 a.m. Chicago time on July 5, 2005 (or, if the conditions set forth in Articles IX and X have not been satisfied or waived, other than those conditions that are intended to be satisfied at the Closing, by the appropriate party by such date, subject to the provisions of Article XII , at 10:00 a.m. Chicago

 

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time on the first Monday that is a business day to occur following the date on which all of the conditions to Closing set forth in Articles IX and X shall have been so satisfied or waived, other than those conditions that are intended to be satisfied at the Closing), or at such other place, time and day as shall be agreed upon by Buyer and Seller. The date on which the Closing is actually held is referred to herein as the “ Closing Date ,” although the transfer of Assets and the assumption of the Assumed Liabilities shall be effective as of 11:59 p.m. Chicago time (the “ Effective Time ”) on the Saturday immediately preceding the Closing Date (the “ Cut-Off Date ”).

 

Section 4.2 Payment on the Closing Date . Subject to fulfillment or waiver (where permissible) of the conditions set forth in Articles IX and X , at the Closing Buyer shall pay Seller an amount equal to the Purchase Price by wire transfer of immediately available funds to the bank account or accounts specified by Seller at least three business days prior to Closing.

 

Section 4.3 Buyer’s Additional Closing Date Deliveries . Subject to fulfillment or waiver (where permissible) of the conditions set forth in Articles IX and X , at the Closing Buyer shall deliver to Seller all of the following:

 

(a) certificate of the secretary or an assistant secretary of Buyer, dated the Closing Date, in form and substance reasonably satisfactory to Seller, as to (i) no amendments to the certificate of incorporation of Buyer since a specified date; (ii) the bylaws of Buyer; (iii) the resolutions of the Board of Directors of Buyer authorizing the execution and performance of this Agreement, the Buyer Ancillary Agreements and the transactions contemplated hereby and thereby; and (iv) incumbency and signatures of the officers of Buyer executing this Agreement or any Buyer Ancillary Agreement;

 

(b) the certificate contemplated by Section 9.5 , duly executed by a duly authorized officer of Buyer;

 

(c) the Club Libby Lu Licensed Departments Agreement, the Private Brands Agreement and the Transition Services Agreement, in each case duly executed on behalf of Buyer;

 

(d) the Bill of Sale, Assignment and Assumption Agreement and the Assignment and Assumption Agreement (Real Estate) (which shall be modified to conform to the particular requirements of the jurisdictions in which the Real Estate is located), in each case duly executed on behalf of Buyer; and

 

(e) any real estate transfer Tax declarations required to be executed or filed in connection with the transfer of the Real Estate.

 

Section 4.4 Seller’s Closing Date Deliveries . Subject to fulfillment or waiver (where permissible) of the conditions set forth in Articles IX and X , at the Closing Seller shall deliver to Buyer all of the following:

 

(a) certificate of the secretary or an assistant secretary of Seller, dated the Closing Date, in form and substance reasonably satisfactory to Buyer, as to (i) no amendments to

 

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the amended and restated charter of Seller since a specified date; (ii) the amended and restated bylaws of Seller; (iii) the resolutions of the Board of Directors of Seller authorizing the execution and performance of this Agreement, the Seller Ancillary Agreements and the transactions contemplated hereby and thereby; and (iv) incumbency and signatures of the officers of Seller executing this Agreement or any Seller Ancillary Agreement;

 

(b) certificates of the secretary or an assistant secretary of each Company, dated the Closing Date, in form and substance reasonably satisfactory to Buyer, as to (i) no amendments to the amended and restated charter of such Company since a specified date; (ii) the amended and restated bylaws of such Company; (iii) the resolutions of the Board of Directors of such Company authorizing the execution and performance of the Company Ancillary Agreements to which such Company is a party and the transactions contemplated thereby; and (iv) incumbency and signatures of the officers of such Company executing any Company Ancillary Agreement to which such Company is a party;

 

(c) the certificate contemplated by Section 10.5 , duly executed by a duly authorized officer of Seller;

 

(d) the Club Libby Lu Licensed Departments Agreement, the Private Brands Agreement and the Transition Services Agreement, in each case duly executed on behalf of Seller;

 

(e) the Bill of Sale, Assignment and Assumption Agreement, Grant Deeds (with respect to the Owned Real Estate and which shall be modified to conform to the particular requirements of the jurisdictions in which the Owned Real Estate is located) and the Assignment and Assumption Agreement (Real Estate) (which shall be modified to conform to the particular requirements of the jurisdictions in which the Real Estate is located), in each case duly executed on behalf of Seller or one or more of the Companies;

 

(f) any other assignments and endorsements, without recourse or representation (other than as set forth herein), that may be reasonably necessary to transfer the Assets to Buyer in proper form and suitable for filing with the appropriate Governmental Body;

 

(g) any real estate transfer Tax declarations required to be executed or filed in connection with the transfer of the Real Estate; and

 

(h) an affidavit, substantially in the form of Exhibit V made under penalties of perjury and duly executed by Seller and each of the Companies that provides Seller’s and each Company’s United States taxpayer identification number and states that Seller is not a foreign person for purposes of Section 1445 of the Code.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SELLER

 

As an inducement to Buyer to enter into this Agreement and to consummate the transactions contemplated hereby, Seller represents and warrants to Buyer as follows (it being

 

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understood that, except with respect to Section 5.23 , Seller makes no representation or warranty with respect to any Excluded Assets):

 

Section 5.1 Organization of Seller; Power and Authority of Seller; Ownership of the Companies . Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Tennessee. All of the issued and outstanding equity interests of each Company are held of record and beneficially owned directly or indirectly by Seller. Seller is duly qualified to transact business and is in good standing in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities, in each case in respect of the Business, makes such qualifications necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Seller has the corporate power and authority to own or lease and operate its assets with respect to the Business and to carry on the Business in the manner that it was conducted immediately prior to the date of this Agreement.

 

Section 5.2 Organization of the Companies; Power and Authority of the Companies. Each of the Companies is a corporation or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation. Each of the Companies is duly qualified to transact business and is in good standing in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities, in each case in respect of the Business, makes such qualifications necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each of the Companies has the corporate or other organizational power and authority to own or lease and operate its assets and to carry on the Business in the manner that it was conducted immediately prior to the date of this Agreement.

 

Section 5.3 Authority of Seller; Conflicts . (a) Seller has all requisite corporate power to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Seller and the consummation by Seller of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Seller (no stockholder approval being required), and each of the Seller Ancillary Agreements has been duly authorized by Seller. This Agreement has been duly executed and delivered by Seller and (assuming the valid authorization, execution and delivery of this Agreement by Buyer and the validity and binding effect of this Agreement on Buyer) constitutes the valid and binding obligation of Seller enforceable against Seller in accordance with its terms, and each of the Seller Ancillary Agreements, upon execution and delivery by Seller will be (assuming the valid authorization, execution and delivery by Buyer, where Buyer is a party, and any other party or parties thereto) a legal, valid and binding obligation of Seller enforceable in accordance with its terms, subject, in the case of this Agreement and each of the Seller Ancillary Agreements, to bankruptcy, insolvency, reorganization, moratorium and similar laws of general application relating to or affecting creditors’ rights and to general equity principles.

 

(b) Subject to Section 5.8(d) and except as set forth in Schedule 5.3 , the execution and delivery of this Agreement or any of the Seller Ancillary Agreements by Seller, the consummation of any of the transactions contemplated hereby or thereby by Seller or

 

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compliance with or fulfillment of the terms, conditions and provisions hereof or thereof by Seller will not:

 

(i) assuming the receipt of all necessary consents and approvals and the filing of all necessary documents as described in Section 5.3(b)(ii) , result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or result in the creation or imposition of any Encumbrance upon any of the Assets, under (1) the charter, bylaws or similar organizational documents of Seller or the Companies, (2) any Business Agreement, (3) any Court Order to which Seller or the Companies is a party or by which Seller or any of the Companies is bound or (4) any Requirements of Law affecting Seller or the Companies, other than, in the case of clauses (2), (3) and (4) above, any such breaches, defaults, rights, loss of rights or Encumbrances that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or would not prevent the consummation of any of the transactions contemplated hereby, or

 

(ii) require the approval, consent, authorization or act of, or the making by Seller or the Companies of any declaration, filing or registration with, any Governmental Body, except (1) in connection, or in compliance, with the provisions of the HSR Act, (2) the filing with the SEC of such reports under the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby, (3) applicable requirements, if any, of the New York Stock Exchange, (4) such consents, approvals, filings and notices as may be required under any Requirements of Law with respect to environmental matters pertaining to any notification, disclosure or required approval triggered by the transactions contemplated by this Agreement, (5) such filings as may be required in connection with the Taxes described in Section 8.2(a)(iv) , and (6) such approvals, consents, authorizations, declarations, filings or registrations the failure of which to be obtained or made would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or would not prevent the consummation of any of the transactions contemplated hereby.

 

No representation or warranty is made as to whether any new governmental approvals, consents, licenses, permits, orders, authorizations, declarations, filings or registrations will be required as a result of the sale of the Assets to Buyer in order for Buyer to continue to conduct the Business and operate the Assets following the Cut-Off Date in the manner in which the