<PAGE>
ASSET PURCHASE AGREEMENT
BETWEEN
SAKS INCORPORATED
AND
BELK, INC.
DATED AS OF APRIL 28, 2005
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S>
<C>
ARTICLE I
DEFINITIONS...........................................................................................
1
Section 1.1
Definitions....................................................................................
1
Section 1.2
Interpretation.................................................................................
10
ARTICLE II PURCHASE AND
SALE....................................................................................
11
Section 2.1
Purchase and Sale of
Assets....................................................................
11
Section 2.2
Unassignable
Contracts.........................................................................
15
Section 2.3
Assumption of
Liabilities......................................................................
16
Section 2.4
Leased Department
Agreements and Equipment Lease
Agreements.................................... 19
Section 2.5
Accounts
Payable...............................................................................
20
ARTICLE III PURCHASE
PRICE......................................................................................
20
Section 3.1
Purchase
Price.................................................................................
20
Section 3.2
Adjustment of Purchase
Price...................................................................
20
Section 3.3
Allocation of Purchase
Price; Transfer Tax
Valuation........................................... 23
Section 3.4
Certain
Assets.................................................................................
23
Section 3.5
Certain Rights of
First
Refusal................................................................
24
ARTICLE IV
CLOSING..............................................................................................
24
Section 4.1
Closing
Date...................................................................................
24
Section 4.2
Payment on the Closing
Date....................................................................
25
Section 4.3
Buyer's Additional
Closing Date
Deliveries.....................................................
25
Section 4.4
Seller's Closing Date
Deliveries...............................................................
25
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
SELLER..............................................................
26
Section 5.1
Organization of
Seller; Power and Authority of Seller; Ownership of the
Companies.............. 27
Section 5.2
Organization of the
Companies; Power and Authority of the
Companies............................ 27
Section 5.3
Authority of Seller;
Conflicts.................................................................
27
Section 5.4
Financial
Statements...........................................................................
28
Section 5.5
Operations Since
Financial Statements
Date.....................................................
29
Section 5.6
Taxes..........................................................................................
30
Section 5.7
Governmental
Permits...........................................................................
30
Section 5.8
Real
Property..................................................................................
30
Section 5.9
Personal Property
Leases.......................................................................
31
Section 5.10
Intellectual
Property.........................................................................
32
Section 5.11
Title to
Property.............................................................................
32
Section 5.12
No Violation,
Litigation or Regulatory
Action.................................................
32
Section 5.13
Contracts.....................................................................................
33
Section 5.14
Status of
Contracts...........................................................................
34
Section 5.15
ERISA.........................................................................................
35
Section 5.16
Environmental
Compliance......................................................................
36
Section 5.17
Employee Relations and
Agreements.............................................................
36
</TABLE>
i
<PAGE>
<TABLE>
<S>
<C>
Section 5.18
No
Brokers....................................................................................
37
Section 5.19
Condition of
Assets...........................................................................
38
Section 5.20
No Undisclosed
Liabilities....................................................................
38
Section 5.21
Insurance.....................................................................................
38
Section 5.22
Customer
Information..........................................................................
38
Section 5.23
Sufficiency of
Assets.........................................................................
38
Section 5.24
Seller Gift
Programs..........................................................................
39
Section 5.25
Seller Return
Policies........................................................................
39
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF
BUYER..............................................................
39
Section 6.1
Organization of
Buyer..........................................................................
39
Section 6.2
Authority of Buyer;
Conflicts..................................................................
39
Section 6.3
No Violation,
Litigation or Regulatory
Action..................................................
40
Section 6.4
Financing......................................................................................
40
Section 6.5
No
Brokers.....................................................................................
40
ARTICLE VII ACTION PRIOR TO THE CLOSING
DATE....................................................................
41
Section 7.1
Access to
Information..........................................................................
41
Section 7.2
Notifications..................................................................................
41
Section 7.3
Consents of Third
Parties; Governmental
Approvals..............................................
42
Section 7.4
Operations Prior to
the Closing
Date...........................................................
43
Section 7.5
Antitrust Law
Compliance.......................................................................
45
Section 7.6
Termination of Certain
Intercompany
Accounts...................................................
45
Section 7.7
Indebtedness; Release
of
Guaranties............................................................
45
Section 7.8
Ancillary
Agreements...........................................................................
46
Section 7.9
Household
Bank.................................................................................
46
Section 7.10
Remittance of Cash
Receipts...................................................................
47
Section 7.11
Software
Issues...............................................................................
47
Section 7.12
No
Solicitation...............................................................................
47
Section 7.13
Interim
Financials............................................................................
48
Section 7.14
Private
Brands................................................................................
48
Section 7.15
Certain
Agreement.............................................................................
48
ARTICLE VIII ADDITIONAL
AGREEMENTS..............................................................................
49
Section 8.1
Use of
Names...................................................................................
49
Section 8.2
Tax
Matters....................................................................................
50
Section 8.3
Employees and Employee
Benefits................................................................
52
Section 8.4
Insurance; Risk of
Loss........................................................................
56
Section 8.5
Consents.......................................................................................
57
Section 8.6
Fees and
Expenses..............................................................................
57
Section 8.7
Gift Cards, Etc;
Return
Policies...............................................................
58
Section 8.8
HIPAA
Confidentiality..........................................................................
58
Section 8.9
Non-Solicitation of
Employees..................................................................
58
Section 8.10
SEC
Financials................................................................................
58
Section 8.11
Mortgages and Other
Encumbrances..............................................................
59
Section 8.12
Certain
Litigation............................................................................
59
</TABLE>
ii
<PAGE>
<TABLE>
<S>
<C>
ARTICLE IX CONDITIONS PRECEDENT TO
OBLIGATIONS OF
BUYER.........................................................
59
Section 9.1
HSR
Act........................................................................................
60
Section 9.2
No
Order.......................................................................................
60
Section 9.3
Representations and
Warranties.................................................................
60
Section 9.4
Performance of
Obligations.....................................................................
60
Section 9.5
Closing
Certificate............................................................................
60
Section 9.6
Release of
Encumbrances........................................................................
60
ARTICLE X CONDITIONS PRECEDENT TO
OBLIGATIONS OF
SELLER.........................................................
60
Section 10.1
HSR
Act.......................................................................................
60
Section 10.2
No
Order......................................................................................
60
Section 10.3
Representations and
Warranties................................................................
61
Section 10.4
Performance of
Obligations....................................................................
61
Section 10.5
Closing
Certificate...........................................................................
61
ARTICLE XI
INDEMNIFICATION......................................................................................
61
Section 11.1
Indemnification by
Seller.....................................................................
61
Section 11.2
Indemnification by
Buyer......................................................................
62
Section 11.3
Notice of
Claims..............................................................................
63
Section 11.4
Determination of
Amount.......................................................................
64
Section 11.5
Third Person
Claims...........................................................................
64
Section 11.6
Limitations...................................................................................
65
Section 11.7
Mitigation....................................................................................
66
ARTICLE XII
TERMINATION.........................................................................................
66
Section 12.1
Termination...................................................................................
66
Section 12.2
Notice of
Termination.........................................................................
67
Section 12.3
Effect of
Termination.........................................................................
67
ARTICLE XIII
MISCELLANEOUS......................................................................................
67
Section 13.1
Survival of
Representations and
Warranties....................................................
67
Section 13.2
Governing
Law.................................................................................
67
Section 13.3
No Public
Announcement........................................................................
67
Section 13.4
Notices.......................................................................................
68
Section 13.5
Successors and
Assigns........................................................................
68
Section 13.6
Access to Records
after
Closing...............................................................
69
Section 13.7
Entire Agreement;
Amendments..................................................................
69
Section 13.8
Interpretation................................................................................
69
Section 13.9
Waivers.......................................................................................
70
Section 13.10
Partial
Invalidity...........................................................................
70
Section 13.11
Execution in
Counterparts....................................................................
70
Section 13.12
Further
Assurances...........................................................................
70
Section 13.13
Disclaimer of
Warranties.....................................................................
70
Section 13.14
Specific
Performance.........................................................................
71
Section 13.15
Waiver of Jury
Trial.........................................................................
71
</TABLE>
iii
<PAGE>
EXHIBITS
2.5 Accounts Payable
A Assignment and
Assumption Agreement (Real Estate)
B Bill of Sale,
Assignment and Assumption Agreement
C Register and
Store Safe Cash by Store
D [Reserved]
E Owned Real
Estate
F Leased Real
Estate
G Intellectual
Property Assets
H Excluded
Intellectual Property
I Customer
Information
J Software
K Excluded
Contracts
L Excluded Real
Estate
M Excluded
Personal Property
N Transition
Services Agreement
O Club Libby Lu
Licensed Departments Agreement
P Private Brands
Agreement
Q Forms of Grant
Deeds
R Leased
Department Agreements
S Equipment
Agreements
T Lease
Agreement
U Rights of First
Refusal with Respect to Certain Properties
V Form of Section
1445 Affidavit
iv
<PAGE>
SCHEDULES
1.1(a) Excluded
Employees
1.1(b) Permitted
Encumbrances
1.1(c) Title
Policies and Commitments
1.1(d) Reference
Working Capital Statement
2.3(b)(xi) Excluded Litigation
5.3
No Conflicts
5.4
Financial Statements
5.5
Operations Since Financial Statements Date
5.6
Taxes
5.7
Governmental Permits
5.8(a) Leased
Real Estate and Owned Real Estate
5.8(b) Zoning and
Condemnation
5.8(c) Real
Estate Defaults
5.9
Personal Property Leases
5.10(a) Company
Registered Intellectual Property and Company Software
5.10(b) Right, Title and
Interest in Company Intellectual Property
5.10(c) Patents and
Registrations of Company Registered Intellectual
Property
5.10(d) Infringement of
Intellectual Property
5.10(e) Challenge to
Company Registered Intellectual Property
5.12
Violation, Litigation or Regulatory Action of the Companies
5.13
Contracts
5.14
Status of Contracts
5.15(a) Welfare Plans
and Pension Plans
5.15(b) Compliance of
Welfare Plans and Pension Plans
5.15(c) Determination
Letters for Qualified Plans
5.15(e) Other Employee
Benefits
5.15(f) Severance Pay
Plan
5.16
Environmental Compliance
5.17(a) Business
Employees
5.17(b) Compensation of
Employees
5.17(c) Employee
Relations and Agreements
5.20
Certain Liabilities
5.23
Excluded Assets
5.24
Seller Gift Programs
5.25
Seller Return Policies
7.1
Access Contacts
7.4
Operations Prior to Closing Date
7.7
Letters of Credit
7.11
Software Issues
8.3(a) Offers of
Employment
8.3(b) Individual
Employment Agreements
v
<PAGE>
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).
<PAGE>
"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.
2
<PAGE>
"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.
3
<PAGE>
"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
4
<PAGE>
the Fair Credit Reporting Act (15 U.S.C.
Section 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. Section 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
5
<PAGE>
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
6
<PAGE>
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
8
<PAGE>
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
8
<PAGE>
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
9
<PAGE>
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;
10
<PAGE>
(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
11
<PAGE>
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
12
<PAGE>
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
13
<PAGE>
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;
14
<PAGE>
(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
15
<PAGE>
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:
16
<PAGE>
(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;
(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;
17
<PAGE>
(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;
18
<PAGE>
(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
19
<PAGE>
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.
20
<PAGE>
(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 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
21
<PAGE>
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
22
<PAGE>
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
23
<PAGE>
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
24
<PAGE>
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
25
<PAGE>
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
26
<PAGE>
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
