EXHIBIT 2.01
ASSET PURCHASE AGREEMENT
AMONG
G & G SHOPS, INC.,
THE SUBSIDIARIES OF G & G SHOPS, INC. NAMED HEREIN,
THE SUBSIDIARIES OF PETRIE RETAIL, INC. NAMED HEREIN,
PSL, INC.
AND
G+G RETAIL, INC.
Dated as of July 6, 1998
TABLE OF CONTENTS
Page No.
-------
ARTICLE I. DEFINITIONS .............................................. 1
Section 1.1. Definitions ...................................... 1
ARTICLE II. SALE AND PURCHASE OF PURCHASED ASSETS AND ASSUMPTION
OF ASSUMED LIABILITIES .................................. 10
Section 2.1. Purchase and Sale of Purchased Assets ......... 10
Section 2.2. Assumption of Liabilities ..................... 10
Section 2.3. Purchase Price ................................ 11
Section 2.4. Liability Escrow Account; Reimbursements ...... 11
Section 2.5. [INTENTIONALLY OMITTED] ....................... 11
Section 2.6. Allocation of Purchase Price .................. 11
Section 2.7. Sale at Closing Date .......................... 12
Section 2.8. [INTENTIONALLY OMITTED] ....................... 12
Section 2.9. Discharge of Liens ............................ 12
Section 2.10. Casualty and Condemnation ..................... 12
Section 2.11. Bond Cancellation ............................. 12
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLERS .......... 13
Section 3.1. Authority of Sellers .......................... 13
Section 3.2. No Conflict or Violation ...................... 13
Section 3.3. Consents and Approvals ........................ 14
Section 3.4. Compliance with Law ........................... 14
Section 3.5. [INTENTIONALLY OMITTED] ....................... 14
Section 3.6. Sufficiency and Title to the Purchased Assets . 14
Section 3.7. [INTENTIONALLY OMITTED] ....................... 15
Section 3.8. Assigned Contracts ............................ 15
Section 3.9. Intellectual Property ......................... 15
Section 3.10. Labor Relations ............................... 15
Section 3.11. Employee Benefits ............................. 16
Section 3.12. [INTENTIONALLY OMITTED] ....................... 17
Section 3.13. Litigation .................................... 17
Section 3.14. [INTENTIONALLY OMITTED]........................
Section 3.15. Tax Matters ................................... 18
Section 3.16. Interim Operations ............................ 18
Section 3.17. Brokers ....................................... 18
Section 3.18. Disclaimer of Additional Representations
and Warranties; Schedules ................... 18
Section 3.19. Limitation .................................... 19
Section 3.20. Survival ...................................... 19
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER ............. 19
Section 4.1. Authority of Purchaser ........................ 19
Section 4.2. No Conflict or Violation ...................... 20
Section 4.3. Consents and Approvals ........................ 20
Section 4.4. Availability of Funds ......................... 20
Section 4.5. Litigation .................................... 20
Section 4.6. Brokers ....................................... 21
i
Section 4.7. Adequate Assurances Regarding Executory Contracts .... 21
Section 4.8. Hart-Scott-Rodino .................................... 21
ARTICLE V. CERTAIN COVENANTS OF THE SELLERS ................................ 21
Section 5.1. Conduct of Business Before the Closing Date .......... 21
Section 5.2. Consents and Approvals ............................... 23
Section 5.3. Information and Access ............................... 23
Section 5.4. Further Assurances ................................... 24
Section 5.5. Reasonable Efforts ................................... 24
Section 5.6. Assignment of Contracts .............................. 24
Section 5.7. Cure of Defaults ..................................... 24
Section 5.8. [INTENTIONALLY OMITTED] .............................. 24
Section 5.9. Accounts Receivable .................................. 24
Section 5.10. Name Change Filings .................................. 24
Section 5.11. Rejection of Contracts ............................... 25
Section 5.12. Transition Arrangements .............................. 25
ARTICLE VI. CERTAIN COVENANTS OF PURCHASER ................................. 25
Section 6.1. [INTENTIONALLY OMITTED] .............................. 25
Section 6.2. Reasonable Efforts ................................... 25
Section 6.3. Consents and Approvals ............................... 25
Section 6.4. Adequate Assurances Regarding Executory
Contracts .......................................... 25
Section 6.5. Performance Under Assigned Contracts ................. 26
Section 6.6. Further Assurances ................................... 26
ARTICLE VII. CONDITIONS TO THE SELLERS' OBLIGATIONS ........................ 26
Section 7.1. Representations and Warranties ....................... 26
Section 7.2. Compliance with Agreement ............................ 26
Section 7.3. Financing ............................................ 26
Section 7.4. Consents ............................................. 27
Section 7.5. Corporate Documents .................................. 27
Section 7.6. Entry of the Order ................................... 27
Section 7.7. Galin Releases ....................................... 27
ARTICLE VIII. CONDITIONS TO PURCHASER'S OBLIGATIONS ........................ 27
Section 8.1. Representations and Warranties ....................... 27
Section 8.2. Compliance with Agreement ............................ 28
Section 8.3. Agreements with Galins ............................... 28
Section 8.4. Consents ............................................. 28
Section 8.5. Corporate Documents .................................. 28
Section 8.6. Entry of the Order ................................... 28
Section 8.7. Entry of the Bidding Protections Order ............... 28
Section 8.8. Financing ............................................ 28
Section 8.9. Material Adverse Effect .............................. 29
Section 8.10. Revolving Credit and Guaranty Agreement .............. 29
Section 8.11. Release of the Galins ................................ 29
ARTICLE IX. THE CLOSING; TERMINATION ....................................... 29
Section 9.1. The Closing .......................................... 29
ii
Section 9.2. Bidding Protections .................................. 29
Section 9.3. Termination .......................................... 32
Section 9.4. Effects of Termination ............................... 33
ARTICLE X. TAXES ........................................................... 34
Section 10.1. Taxes Related to Purchase of Assets .................. 34
Section 10.2. Cooperation on Tax Matters ........................... 34
ARTICLE XI. EMPLOYEES AND EMPLOYEE BENEFIT PLANS ........................... 35
Section 11.1. Employment ........................................... 35
Section 11.2. Collective Bargaining Agreements ..................... 36
Section 11.3. Employee Welfare Benefit Plans ....................... 36
Section 11.4. COBRA ................................................ 37
Section 11.5. G & G Profit Sharing Plan ............................ 38
Section 11.6. 401(k) Savings Plan .................................. 38
Section 11.7. Puerto Rico Savings Plan ............................. 39
Section 11.8. Vacation and Sick Leave .............................. 40
Section 11.9. Severance Benefits ................................... 41
ARTICLE XII. INDEMNIFICATION ............................................... 41
Section 12.1. Indemnification by the Purchaser ..................... 41
Section 12.2. Indemnification by the Sellers ....................... 42
Section 12.3. Notice of Claim; Right to Participate In
and Defend Third Party Claim........................ 43
Section 12.4. Right to Indemnification Not Affected by
Knowledge .......................................... 44
ARTICLE XIII. MISCELLANEOUS PROVISIONS ..................................... 44
Section 13.1. Representations and Warranties ....................... 44
Section 13.2. Notices .............................................. 45
Section 13.3. Amendments ........................................... 46
Section 13.4. Assignment ........................................... 46
Section 13.5. Announcements ........................................ 46
Section 13.6. Expenses ............................................. 47
Section 13.7. Entire Agreement ..................................... 47
Section 13.8. Descriptive Headings ................................. 47
Section 13.9. Counterparts ......................................... 47
Section 13.10. Governing Law; Jurisdiction .......................... 47
Section 13.11. Construction ......................................... 47
Section 13.12. Substantive Consolidation ............................ 49
Section 13.13. Severability ......................................... 49
iii
SCHEDULE
NUMBER SCHEDULE NAME
1.1 G&G Subsidiaries
1.2 PRI Subsidiaries
1.3 Leases
1.3(a) Petrie Seller Leases
1.4 Other Contracts
1.6 Seller Balance Sheet and Adjusted Balance Sheet
2.6 Allocation of Purchase Price
2.11 Bonds
3.3 Consents and Approvals
3.4 Compliance with Law
3.5 Financial Statements
3.8 Assigned Contracts
3.9 Intellectual Property
3.10 Collective Bargaining Agreements
3.11(a) Employee Benefit Plans
3.11(c) Exceptions to Section 401 Qualification
3.11(d) Exceptions to Compliance
3.11(e) Other Compensation Obligations
3.11(h) Plan Claims
3.13 Litigation
3.14 Hazardous Materials
3.16 Interim Operations
11.9 Change in Control Plan Employees
EXHIBIT EXHIBIT NAME
A Assignment and Assumption Agreement
B Bill of Sale and Assumption Agreement
C Order
D Bidding Protections Order
iv
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of July 6, 1998 among G & G Shops, Inc., a Delaware corporation ("G&G")
and a debtor and debtor-in-possession in a case pending under chapter 11 of the
Bankruptcy Code, each of the Subsidiaries of G&G specified on Schedule 1.1 (each
a "G&G Seller" and collectively the "G&G Sellers"), each of which is a debtor
and debtor-in-possession in a case pending under chapter 11 of the Bankruptcy
Code, each of the Subsidiaries of Petrie Retail, Inc., a Delaware corporation
("PRI"), specified on Schedule 1.2 (each a "Petrie Seller" and collectively the
"Petrie Sellers"), each of which is a debtor and debtor-in-possession in a case
pending under chapter 11 of the Bankruptcy Code, PSL, Inc., a Delaware
corporation and a debtor and debtor-in-possession in a case pending under
chapter 11 of the Bankruptcy Code ("PSL" and, together with the Petrie Sellers,
the "Other Sellers") (G&G, together with the G&G Sellers and the Other Sellers,
each a "Seller" and collectively the "Sellers"), and G+G Retail, Inc., a
Delaware corporation ("Purchaser").
PRELIMINARY STATEMENT
WHEREAS, the Sellers are engaged primarily in the retail sale of
junior women's apparel under the trade names "G&G" and "Rave" (the "Business");
WHEREAS, on October 12, 1995, the Sellers filed voluntary petitions
with the Bankruptcy Court initiating cases under chapter 11 of the Bankruptcy
Code and have continued in the possession of their assets and in the management
of their businesses pursuant to sections 1107 and 1108 of the Bankruptcy Code;
WHEREAS, Purchaser desires to purchase from the Sellers, and the
Sellers desire to sell to Purchaser, substantially all of the assets of the
Business, and Purchaser will assume certain liabilities, all on the terms and
subject to the conditions set forth herein; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Definitions. Unless otherwise defined herein, the terms
defined in the introductory paragraph and the Recitals to this Agreement shall
have the respective meanings specified therein, and the following terms shall
have the meanings specified below:
"Adjusted Balance Sheet" means the adjusted balance sheet of G&G as of the
Balance Sheet Date, as set forth under Column 3 of Schedule 1.6.
"Affiliate" means "affiliate" as defined in Rule 405 promulgated under the
Securities Act of 1933, as amended.
"Agreement" has the meaning set forth in the preamble and shall include
all Schedules and Exhibits hereto.
"Ancillary Agreements" means, collectively, the Assignment and Assumption
Agreement and the Bill of Sale and Assumption Agreement.
"Apportionment Date" has the meaning set forth in Section 2.9.
"Assignment and Assumption Agreement" means the Assignment and Assumption
Agreement to be executed at Closing by Purchaser and the Sellers in
substantially the form attached hereto as Exhibit A.
"Assigned Contracts" means the Leases and the Other Contracts.
"Assumed Liabilities" has the meaning set forth in Section 2.2.
"Balance Sheet Date" means April 4, 1998.
"Bankruptcy Code" means The Bankruptcy Reform Act of 1978, as heretofore
and hereafter amended, and codified as 11 U.S.C. Section 101, et seq.
"Bankruptcy Court" means the United States Bankruptcy Court for the
Southern District of New York, or any other court, having jurisdiction over the
Cases from time to time.
"Bill of Sale and Assumption Agreement" means the Bill of Sale and
Assumption Agreement to be executed at Closing by Purchasers and the Sellers in
substantially the form attached hereto as Exhibit B.
"Business" has the meaning set forth in the Recitals hereto.
"Business Day" means a day, other than a Saturday or a Sunday, on which
the New York Stock Exchange is open for business in The City of New York.
"Business Employees" means employees of the Sellers who, on the applicable
date, perform services primarily for the Business.
2
"Cases" means the Chapter 11 cases of each of the Sellers pending in the
Bankruptcy Court and being jointly administered for procedural purposes as In re
Petrie Retail, Inc., et al., Case No. 95 B 44528 (AJG).
"Closing" has the meaning set forth in Section 9.1.
"Closing Date" has the meaning set forth in Section 9.1.
"Code" means the Internal Revenue Code of 1986, as heretofore or hereafter
amended.
"Damages" means losses, amounts paid in settlement, Taxes, claims,
damages, Liabilities, obligations, judgments, settlements and reasonable
out-of-pocket costs (including costs of investigation or enforcement) and
reasonable expenses and attorneys' fees; provided, however, that Damages shall
not include (i) any incidental or consequential damages or (ii) any special or
punitive damages.
"DIP Lenders" means The Chase Manhattan Bank and the other financial
institutions from time to time party to the Revolving Credit and Guaranty
Agreement.
"Equipment and Fixtures" means, to the extent used in the Business, (i)
building operating systems and equipment, other systems and equipment
(including, all point of sale, ticketing, sensormatic, phone and security
systems and equipment), furniture, furnishings, fixtures, trade fixtures and
improvements and selling and other supplies, including items leased by the
Sellers (but only to the extent assignable), and (ii) to the extent assignable,
any rights of the Sellers to the warranties, licenses and other similar rights
with respect thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means (a) any cash or cash equivalents of the Sellers
(including for this purpose all (i) collected funds received in bank accounts of
the Sellers and (ii) amounts in the process of collection charged on credit
cards, through 11:59 p.m., Eastern Daylight Time, on the Closing Date) other
than cash held in the Stores in an aggregate amount not to exceed $136,300, plus
$200 per new store opened from the date of this Agreement through the Closing
Date, (b) all properties and assets of the Petrie Sellers other than the Leases
set forth on Schedule 1.3(a), (c) all properties and assets of PSL other than
the service marks and trademarks set forth on Schedule 3.9, (d) any capital
stock or equity interest held by any Seller in any other Seller or any other
Person, (e) corporate seals,
3
minute books, charter documents, corporate stock record books, original tax and
financial records and such other books and records as pertain to the
organization, existence or share capitalization of any of the Sellers, (f) any
rights of the Sellers or any of their Affiliates to any Tax refund or Tax
benefits or credits (including loss-carryforwards and credits) incurred or
accrued, (g) any assets of any Plan maintained by any Seller or any of its
Affiliates, unless such Plan is required to be assumed pursuant to Article XI or
to the extent that any assets relating to any Plan are transferred to any plan
maintained by Purchaser pursuant to Article XI, (h) any property, casualty,
workers' compensation or other insurance policy or related insurance services
contract relating to any Seller or any of its Affiliates or any of such Seller's
property and any rights of any Seller or any of its Affiliates under such
insurance policy or contract, other than rights under such insurance policies or
contracts with respect to any Assumed Liability or any casualty affecting any of
the Purchased Assets if and to the extent purchased, (i) any rights of the
Sellers under this Agreement or under any other agreement between any Seller and
Purchaser, (j) any assets, or other rights of any Seller which do not relate to
the Business, (k) intercompany claims of Sellers, (l) any business of Sellers
and/or their respective Affiliates other than the Business, (m) any asset of any
Seller that would constitute Purchased Assets (if owned by such Seller on the
Closing Date) that is conveyed or otherwise disposed of during the period from
the date hereof until the Closing Date (1) in the ordinary course of the
Business and not in violation of the terms of this Agreement or (2) as otherwise
expressly permitted by the terms of this Agreement, (n) the Non-Assignable
Leases, (o) any books, records and information related solely to any of the
Excluded Assets or Excluded Liabilities; provided, however, that the Sellers
shall deliver to the Purchaser and the Purchaser shall be entitled to retain
copies of such books, records and information to the extent they relate to the
Purchased Assets or Assumed Liabilities or are otherwise required in the
operation or administration of the Business and (p) without limiting any of the
foregoing, any of the following, to the extent that they relate solely to any
Excluded Assets or Excluded Liabilities: claims, refunds, causes of action,
rights of recovery, rights of setoff and rights of recoupment of the Sellers as
of the Closing Date.
"Excluded Liabilities" has the meaning set forth in Section 2.2.
"Executory Contracts" means all Assigned Contracts entered into by or
assigned to a Seller before October 12, 1995 and which are executory or
unexpired as of the Closing Date.
4
"GAAP" means United States generally accepted accounting principles, as in
effect from time to time.
"G&G Superior Proposal" has the meaning set forth in Section 9.2.
"Governmental Agency" means (a) any international, foreign, federal,
state, county, local or municipal governmental or administrative agency or
political subdivision thereof, (b) any governmental authority, board, bureau,
commission, department or instrumentality, (c) any court or administrative
tribunal, (d) any non-governmental agency, tribunal or entity that is vested by
a governmental agency with applicable jurisdiction or (e) any arbitration
tribunal or other non-governmental authority with applicable jurisdiction.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Incentive Agreement" means the Incentive Agreement approved by order of
the Bankruptcy Court by and among Jay and Scott Galin, PRI and G&G.
"Intellectual Property" means trademarks, service marks, brand names,
logos, trade names, trade dress, label designs, copyrights, customer lists, art
work, patents, developments, research data, test procedures, marketing plans,
processes, confidential information, inventions (whether or not patentable),
discoveries, business methods, trade secrets, registrations, goodwill and rights
in computer software, technology and know-how related to the Business; and all
rights granted or retained in licenses under any of the foregoing respecting the
Business; and all other intellectual and intangible property rights related to
the Business (including applications for, and extensions and reissuances of, any
of the foregoing and the rights therein) and all claims for past infringements.
"IRS" means the Internal Revenue Service of the United States Department
of the Treasury.
"Knowledge" as applied to any party shall mean the actual knowledge of
such party.
"Leased Property" means all of the Sellers' right, title and interest, as
tenant or sub-tenant, under the real property Leases set forth on Schedules 1.3
and 1.3(a).
"Leases" means those real property leases and equipment leases more
particularly described on Schedules 1.3, 1.3(a) and 1.4, except (x) those
designated by Purchaser pursuant to Section 2.1(b) or 5.11 and (y) the
Non-Assignable Leases.
5
"Liability" means any liability or obligation (whether known or unknown,
asserted or unasserted, fixed or contingent, accrued or unaccrued, liquidated or
unliquidated, and whether due or to become due), including any liability for
Taxes.
"Liability Escrow Account" means an account established and maintained
jointly by G&G and Purchaser, in a bank acceptable to such parties, and
administered in accordance with Section 2.4 hereof.
"Lien" means any mortgage, pledge, security interest, charge or other
encumbrance.
"Material Adverse Effect" means a material adverse effect with respect to
the results of operations, properties, operations or financial condition of the
Business, taken as a whole.
"Non-Assignable Leases" shall mean those real property leases more
particularly described on Schedules 1.3, 1.3(a) and 1.4, the assignment of which
(i) Purchaser reasonably determines requires the consent of the landlord
thereunder (provided, Purchaser so informs the Sellers within two Business Days
prior to the final sale hearing) or (ii) if the Sellers object to the
determination of Purchaser in the foregoing clause, the Bankruptcy Court
determines requires the consent of the landlord thereunder, which consent in
either event has not been obtained as of the Closing Date.
"Non-Management Seller Group" means Edwin Holman, Gerald Chaney and
Michael McLearn, provided that none of such individuals shall have any personal
liability arising out or resulting from any references herein to the
Non-Management Seller Group.
"Official Committee" has the meaning set forth in the preamble to Article
VII.
"Order" means an Order of the Bankruptcy Court, in the form attached
hereto as Exhibit C (other than immaterial changes made after the date hereof
and agreed to by the Sellers and Purchaser, which agreement (to such immaterial
changes) shall not be unreasonably withheld by either party), authorizing, among
other things, the sale of the Purchased Assets to the Purchaser and the
assignment of the Assigned Contracts to the Purchaser, in accordance with the
terms and conditions of this Agreement and pursuant to, among others, sections
363 and 365 of the Bankruptcy Code.
"Other Contracts" means all agreements which are listed on Schedule 1.4.
6
"Permit" means any permit, approval, authorization, license, variance or
permission required by a Governmental Agency under any applicable law.
"Permitted Liens" means, with respect to Leases, any Lien on the
underlying property which is not prohibited under the applicable Lease.
"Person" means any individual, partnership, corporation, trust,
association, limited liability company, Governmental Agency or other entity.
"Plan" or "Plans" has the meaning set forth in Section 3.11(a).
"Profit Sharing Plan" has the meaning set forth in Section 11.5.
"Purchase Price" has the meaning set forth in Section 2.3.
"Purchased Assets" means all of the Sellers' right, title and interest in
and to their business, properties, assets, goodwill, rights and claims of
whatever kind and nature, real or personal, tangible or intangible, known or
unknown, actual or contingent and wherever situated, including the Sellers'
rights under Leases (including, without limitation, Sellers' rights to the
Leased Property), as the same may exist on the Closing Date and are related to
the Business, including, without limitation, the following:
(a) all Leases, Leased Property and improvements and other
appurtenances thereto and rights in respect thereof;
(b) all inventories and other tangible personal property;
(c) all Equipment and Fixtures;
(d) all accounts receivable and notes receivable and other claims
for money or other obligations due to the Sellers including, without
limitation, construction allowances from landlords under the Leases,
vendor credits pursuant to the Assigned Contracts and, in each case, all
proceeds thereof;
(e) all of the Sellers' Intellectual Property, including the items
listed on Schedule 3.9, as well as all goodwill associated with the
Business;
(f) all right, title and interest in, to and under the Assigned
Contracts;
7
(g) all books and records relating primarily to the Business
(including such books and records as are contained in computerized storage
media), including books and records related to inventory, purchasing,
accounting, sales, maintenance, repairs, marketing, banking, Intellectual
Property, shipping records, personnel files for Transferred Employees and
all files, customer and supplier lists, records, literature and
correspondence related to the Business; provided, however, that the
Sellers shall be entitled to make and retain copies of such books and
records to the extent they relate to Excluded Assets or Excluded
Liabilities or are otherwise required in the administration of the estates
of the Sellers and their affiliates and the Cases;
(h) to the extent legally assignable, all Permits;
(i) to the extent that any of the following relate to any Assumed
Liability or any of the Purchased Assets: claims, deposits, prepayments,
prepaid assets, refunds (excluding Tax refunds), causes of action, rights
of recovery, rights of setoff and rights of recoupment of the Sellers as
of the Closing Date, including, to the extent assignable without
additional cost to the Sellers, any such rights of the Sellers under any
property, casualty, workers' compensation or other insurance policy or
related insurance services contract respecting the Business (other than
prepaid premiums and deposits); and
(j) all cash received by the Sellers on account of sales (including
credit card sales) or receivables from and after the Closing Date;
provided, however, that notwithstanding any of the foregoing provisions of this
definition, the Purchased Assets shall not include any Excluded Assets.
"Purchaser Puerto Rico Plan" has the meaning set forth in Section 11.7.
"Purchaser Savings Plan" has the meaning set forth in Section 11.6.
"Revolving Credit and Guaranty Agreement" means the Revolving Credit and
Guaranty Agreement, dated as of May 5, 1997, as the same has been and may be
amended, among PRI, PS Stores Acquisition Corp., the subsidiaries of PRI party
thereto and The Chase Manhattan Bank, for itself and as agent for the other
financial institutions named therein.
8
"Schedules" means the various Schedules referred to in this Agreement
delivered separately to Purchaser on or before the date of this Agreement.
"Seller Balance Sheet" means the balance sheet of the Business as of April
4, 1998, set forth under Column 1 of Schedule 1.6 attached hereto.
"Seller Puerto Rico Plan" has the meaning set forth in Section 11.7.
"Seller Savings Plans" has the meaning set forth in Section 11.6.
"Stores" means the premises described in the Leases and all fixtures or
leasehold improvements thereon, used or held for use by any of the Sellers in
the Business.
"Success Fee" means the Success Fee payable to Jay and Scott Galin
pursuant to the Incentive Agreement.
"Tax Return" means any report, return, information return or other
information required to be supplied to a taxing authority in connection with
Taxes.
"Taxes" means all federal, state, local and foreign taxes, including
income, gross receipts, excise, employment, sales, use, transfer, license,
payroll, franchise, severance, stamp, withholding, Social Security,
unemployment, disability, real property, personal property, registration,
alternative or add-on minimum, estimated or other tax, including any interest,
penalties or additions thereto, whether disputed or not.
"Transaction Taxes" has the meaning set forth in Section 10.1.
"Transferred Employees" has the meaning set forth in Section 11.1(b).
"Transferred Non-Union Employees" has the meaning set forth in Section
11.1(b).
"Transferred Union Employees" has the meaning set forth in Section
11.1(b).
"WARN" has the meaning set forth in Section 11.1(a).
"Welfare Type Plans" has the meaning set forth in Section 11.3.
9
ARTICLE II.
SALE AND PURCHASE OF
PURCHASED ASSETS AND
ASSUMPTION OF ASSUMED LIABILITIES
Section 2.1. Purchase and Sale of Purchased Assets. (a) On the terms
and subject to the conditions set forth in this Agreement, at the Closing
Purchaser shall purchase from the Sellers, and the Sellers shall sell, transfer,
assign, convey and deliver to Purchaser, all of the Sellers' right, title and
interest in and to the Purchased Assets.
(b) At any time not less than 10 Business Days prior to the final
sale hearing of the Bankruptcy Court, Purchaser, in its sole discretion may, by
written notice to the Sellers, elect to exclude up to four (4) Leases that are
Executory Contracts from the definitions of "Assigned Contracts" and "Purchased
Assets" and any such Executory Contract shall be deemed an "Excluded Asset" and
deleted from Schedules 1.3, 1.3(a) or 1.4, as applicable, and no adjustment to
the Purchase Price shall be made as a result of any such deletion; provided,
that the aggregate amount of allowable claims for damages arising from the
exclusion of Executory Contracts if the Sellers were to reject such Executory
Contracts shall not exceed $250,000.
Section 2.2. Assumption of Liabilities. On the terms and subject to
the conditions set forth in this Agreement, from and after the Closing,
Purchaser will assume and pay, perform, discharge and be responsible solely for
the following liabilities of the Sellers (the "Assumed Liabilities"):
(a) all liabilities of the Seller specifically shown or reflected in
the Adjusted Balance Sheet, as increased or decreased in the ordinary
course of the Business after the Balance Sheet Date, determined in
accordance with the principles utilized in the preparation of the Adjusted
Balance Sheet;
(b) all Liabilities of any of the Sellers accruing or arising from
and after the Closing Date under any and all Assigned Contracts;
(c) the Success Fee; and
(d) Notwithstanding the preceding clauses (a) and (b), Assumed
Liabilities shall not include (i) Liabilities with respect to Taxes
(unless otherwise specified on Schedule 1.6 hereof), (ii) Liabilities
arising under any multiemployer Plan, (iii) Liabilities of the Sellers
relating to any litigation or legal proceeding pending on the Closing Date
(other than litigation or legal proceedings with respect to Liabilities
shown or reflected on the Adjusted Balance Sheet, (iv) all cure
obligations pursuant to Section 5.7
10
hereof and all other obligations of the Sellers under the Assigned
Contracts arising prior to the Closing Date and required to be performed
thereunder prior to the Closing Date, other than those specifically
assumed by Purchaser and reflected on the Adjusted Balance Sheet and (v)
Liabilities with respect to Non-Assignable Leases and all such Liabilities
shall constitute Excluded Liabilities as defined below.
All the Liabilities and obligations of the Sellers of whatever kind or nature,
known or unknown, fixed or contingent, accrued or unaccrued, other than the
Assumed Liabilities, are hereinafter referred to as the "Excluded Liabilities".
Purchaser shall not assume or pay, perform, discharge or be responsible for any
of the Excluded Liabilities.
Section 2.3. Purchase Price. The total purchase price for the
Purchased Assets is approximately $160 million, comprised of a cash payment of
$132 million (such cash portion, the "Purchase Price") plus the amount of
Assumed Liabilities. The Purchase Price shall be paid to the Sellers, subject to
the conditions set forth in this Agreement, at the Closing, (i) by wire transfer
of immediately available funds to an account designated by PRI, an amount equal
to $125 million (the "Closing Cash Payment") (subject to adjustment pursuant to
Section 5.1(1) hereof); and (ii) by payment of $7 million (subject to adjustment
pursuant to Section 5.1(1) hereof) to be held in the Liability Escrow Account
and applied pursuant to the terms of Section 2.4.
Section 2.4. Liability Escrow Account; Reimbursements. G&G and the
Purchaser shall cause certain of the Excluded Liabilities, as described in
footnote (d) to Schedule 1.6 hereof, to be paid out of the Liability Escrow
Account. The Liability Escrow Account and the payment of amounts therefrom shall
be jointly administered by Gerald Chaney and Michael Kaplan, in good faith and
consistent with the principles set forth in the footnotes to Schedule 1.6
hereof, or by such other persons as shall be designated by the Sellers (in lieu
of Gerald Chaney) or by Purchaser (in lieu of Michael Kaplan). Amounts remaining
in the Liability Escrow Account, if any, twenty (20) days after the Closing Date
shall be paid to Sellers. All disputes relating to the Liability Escrow Account
shall be settled by a third-party accounting firm mutually agreed to by the
Sellers and Purchaser prior to the Closing Date, and if such an agreement cannot
be reached, such firm as selected by the Bankruptcy Court.
Section 2.5. [INTENTIONALLY OMITTED].
Section 2.6. Allocation of Purchase Price. The Sellers and Purchaser
hereby agree on the allocation of the Purchase Price among the Purchased Assets
as set forth on Schedule 2.6 hereto. Subsequent to the Closing, the Sellers will
cooperate with Purchaser in the preparation, execution and filing with the
United States Internal Revenue Service of all
11
information returns and supplements thereto required to be filed by the parties
under section 1060 of the Internal Revenue Code of 1986, as amended, relating to
the allocation of such consideration, and the Sellers and Purchaser agree to
file Form 8594 (or any substitute therefor) when and as required by applicable
law.
Section 2.7. Sale at Closing Date. The sale, transfer, assignment
and delivery by the Sellers of the Purchased Assets to Purchaser, and the
assumption by Purchaser of the Assumed Liabilities, as herein provided shall be
effected on the Closing Date by (a) the execution and delivery by the Sellers
and Purchaser of an assignment and assumption of the Assigned Contracts
substantially in the form of Exhibit A, subject only to Permitted Liens, and (b)
with respect to the other Purchased Assets and Assumed Liabilities, by the
execution and delivery by the Sellers and Purchaser of a bill of sale and
assumption agreement substantially in the form of Exhibit B.
Section 2.8. [INTENTIONALLY OMITTED].
Section 2.9. Discharge of Liens. Notwithstanding anything to the
contrary in this Agreement, if on the Closing Date there are any Liens that the
Sellers are obligated to pay and discharge under this Agreement, the Sellers may
use any portion of the Purchase Price to discharge the same, either by way of
payment, escrow or by bonding.
Section 2.10. Casualty and Condemnation. (a) In the event of any
damage or destruction by reason of any casualty to any of the Purchased Assets
after the date hereof, or if there shall be any taking by condemnation or
eminent domain of any of the Purchased Assets, the Sellers shall (i) in the case
of damage or destruction, pay over to Purchaser at Closing any insurance
proceeds received by the Sellers prior to the Closing Date (including the amount
of any applicable deductible or self-insurance retention) and assign to
Purchaser all of the Sellers' right, title and interest in and to any additional
proceeds related to such damage or destruction and (ii) in the case of
condemnation or eminent domain, pay over to Purchaser all awards received by the
Sellers on account of such condemnation or eminent domain prior to the Closing
Date and assign to Purchaser all of the Sellers' right to receive any additional
awards related to such condemnation or eminent domain; provided, that if all
such casualties and takings by condemnation or eminent domain have,
collectively, a Material Adverse Effect, Purchaser shall have the right to
terminate this Agreement prior to the Closing Date.
Section 2.11. Bond Cancellation. The parties hereto acknowledge and
agree that, on or prior to the Closing Date, the Sellers may terminate or
otherwise cancel the bonds set forth on Schedule 2.11 hereto.
12
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Subject to Sections 3.18 and 3.19, the representations and
warranties set forth in Sections 3.1 through 3.17 are made as follows:
(i) The Sellers hereby make to Purchaser the representations and
warranties set forth in Section 3.1, Section 3.2 (other than the representation
and warranty made in clause (ii) thereof), Section 3.3 (other than the
representation and warranty made in clause (ii) thereof), Section 3.6(a) (second
sentence only), Section 3.11, Section 3.15 (other than with respect to the
representations and warranties related to any state or local sales or use Tax,
ad valorem personal property Tax, payroll Tax arising after January 31, 1998 or,
with respect to the Leases, any real property Tax relating to the Leases) and
Section 3.17; and
(ii) With respect to clause (ii) of Section 3.2, clause (ii) of
Section 3.3, Section 3.4, Section 3.6 (other than the second sentence of Section
3.6(a), Section 3.8, Section 3.9, Section 3.10, Section 3.13 and Section 3.16,
the Sellers represent and warrant to Purchaser only that none of the
Non-Management Seller Group has Knowledge, as of the date hereof, that any of
the statements made in any of such Sections or clauses is not true and correct
as of the date hereof. The foregoing provisions of this paragraph (ii) shall be
applicable notwithstanding any reference in any of such Sections or clauses to
the Knowledge of any Seller.
Section 3.1. Authority of Sellers. Each Seller is a corporation
validly existing and in good standing under the laws of its state of
organization. Each Seller has full corporate power and authority to execute and
deliver this Agreement and each of the Ancillary Agreements to which it is a
party, and the execution and delivery by each Seller of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action on the part of each Seller, and this Agreement constitutes, and
each of the Ancillary Agreements upon its execution will constitute, the legal,
valid and binding obligation of each Seller enforceable in accordance with its
terms, subject to issuance of the Order and the receipt of the consents, waivers
and approvals specified on Schedule 3.3. Subject to any necessary authorization
from the Bankruptcy Court, each Seller has full corporate power and authority to
own its properties and to carry on the Business presently being conducted by it.
Section 3.2. No Conflict or Violation. The execution, delivery and
performance by each of the Sellers of this Agreement and the Ancillary
Agreements to which such Seller is a party do
13
not and will not violate or conflict with any provision of the Certificate or
Articles of Incorporation or By-laws (or equivalent documents) of such Seller
and, assuming that the consents, waivers, authorizations, approvals,
declarations, filings and registrations referred to in Section 3.3 are obtained
or made, do not and will not (i) violate any provision of law, or any order,
judgment or decree of any court or other Governmental Agency applicable to such
Seller, or (ii) violate or result in a material breach of or constitute (with
due notice or lapse of time or both) a material default under any Assigned
Contract, loan agreement, mortgage, security agreement, indenture or other
instrument to which such Seller is a party or by which it is bound or to which
any of the Purchased Assets is subject and, in each case, became so on or after
October 12, 1995.
Section 3.3. Consents and Approvals. Schedule 3.3 sets forth a true
and complete list of each material consent, waiver, authorization or approval of
(i) any Governmental Agency and each declaration to or filing or registration
with any such Governmental Agency, or (ii) of any other Person in connection
with any Assigned Contract involving the payment by any Seller of more than
$150,000 in any calendar year, that is required for the execution and delivery
of this Agreement by the Sellers or the performance by the Sellers of their
respective obligations hereunder; provided, that the representations and
warranties set forth in this Section 3.3 shall not apply to Leases.
Section 3.4. Compliance with Law. Except as set forth on Schedule
3.4, the Sellers (i) have complied in all material respects with all laws,
regulations, orders and other legal requirements applicable to the Business or
the Purchased Assets, (ii) have not received written notice of any violation of
any law, regulation, order or other legal requirement and (iii) are not in
default in any material respect under any order, writ, judgment, award,
injunction or decree of any Governmental Agency, applicable to the Business or
the Purchased Assets.
Section 3.5. [INTENTIONALLY OMITTED]
Section 3.6. Sufficiency and Title to the Purchased Assets.
(a) The Purchased Assets constitute all of the assets or property
used or held for use in the Business, except for the Excluded Assets, and,
except as set forth on Schedule 3.6, the Sellers have good and valid title to
each of the Purchased Assets. Neither PRI nor any other entity owned directly or
indirectly by PRI (other than the Sellers) holds title to or any ownership
interest in any of the assets or property used or held for use in the Business
(other than the Excluded Assets) other than through the capital stock of the
Sellers.
(b) The entry of the Order and the delivery to the Purchaser of the
instruments of transfer of ownership
14
contemplated by this Agreement will vest good and valid title to the Purchased
Assets in the Purchaser, free and clear of all interests in the Purchased Assets
including all Liens thereon, other than Permitted Liens or as set forth on any
of the schedules hereto.
Section 3.7. [INTENTIONALLY OMITTED].
Section 3.8. Assigned Contracts. True and complete copies of the
Assigned Contracts listed on Schedule 3.8 have been provided by the Sellers to
Purchaser. At the Closing, the Sellers shall have cured any and all defaults or
have provided adequate assurance that they will cure any and all defaults with
respect to Assigned Contracts as provided in Section 365 of the Bankruptcy Code
and as required by the Bankruptcy Court so that at the Closing, there shall be
no material defaults under any of the Assigned Contracts. Other than as set
forth on Schedule 3.8, neither the Sellers nor, to the best of the Sellers'
Knowledge, any other party under any of the Assigned Contracts has commenced any
action against the other or given or received any written notice of default or
violation under any Assigned Contract which was not withdrawn or dismissed,
except only for those defaults which will be cured prior to the Closing in
accordance with the Order (or which need not be cured under the Bankruptcy Code
to permit the assumption and assignment of Assigned Contracts). Each of the
Leases and other Assigned Contracts listed on Schedule 3.8 is or will be at the
Closing valid, binding and in full force and effect as against each Seller party
thereto.
Section 3.9. Intellectual Property. Schedule 3.9 sets forth a true
and complete list of all applications and registrations for material
Intellectual Property that Sellers own or use in the Business. Except as set
forth on Schedule 3.9, the Sellers either own or have the right to use by
license, sublicense, agreement or other permission all of the Intellectual
Property listed on Schedule 3.9. Except as noted on Schedule 3.9, none of the
Sellers has been charged with, nor to the Sellers' Knowledge is threatened to be
charged with, with respect to the trademarks, service marks and trade names
listed on Schedule 3.9, the infringement or other violation of the intellectual
property rights of any other Person having or that would reasonably be expected
to have a Material Adverse Effect.
Section 3.10. Labor Relations. To the Knowledge of the Sellers,
except as set forth on Schedule 3.10 hereto, there is currently no material
investigation being conducted or threatened by any Governmental Agency
concerning Sellers' compliance with wage and hours laws or regulations,
occupational safety or health laws or regulations, human rights or
anti-discrimination laws or regulations or any other laws or regulations
affecting Business Employees.
15
Section 3.11. Employee Benefits.
(a) Schedule 3.11(a) sets forth all "employee benefit plans", as
defined in Section 3(3) of ERISA, and all other material employee benefit
arrangements or payroll practices including, without limitation, any such
arrangements or payroll practices providing severance pay, sick leave,
vacation pay, salary continuation for disability, retirement benefits,
deferred compensation, bonus pay, incentive pay, stock options,
hospitalization insurance, medical insurance, life insurance, scholarships
or tuition reimbursements, maintained by the Seller or to which the Seller
is obligated to contribute thereunder for current or former Business
Employees (each a "Plan" and collectively, the "Plans"). True, correct and
complete copies of the following documents, with respect to each of the
Plans, to the extent applicable, have been delivered or made available to
Purchaser: (i) the Plan and its related trust document, including any
amendments thereto, (ii) the most recent IRS Form 5500 filed with the
Internal Revenue Service, and (iii) summary plan description.
(b) None of the Plans is a multiemployer plan, as defined in Section
3 (37) of ERISA, or a single-employer plan, as defined in Section 4001 (a)
(15) of ERISA, that is subject to Title IV of ERISA.
(c) Except as set forth on Schedule 3.11(c), each Plan that is
intended to qualify under Section 401 of the Code and the trust maintained
pursuant thereto has received a favorable determination letter from the
IRS regarding its qualification, and, to the Knowledge of the employees of
Sellers with responsibility for such matters, nothing has occurred with
respect to the operation of any such Plan that could reasonably result in
the loss of such qualification or exemption.
(d) Except as set forth on Schedule 3.11(d), the Plans have been
maintained, in all respects, in accordance with their terms and with all
provisions of ERISA and the Code and other applicable federal and state
laws and regulations, except for any failure to so comply as would not
have a Material Adverse Effect. There are no unpaid contributions due
prior to the date hereof with respect to any Plan that are required to
have been made under the terms of the Plan or any applicable law.
(e) Except as set forth on Schedule 3.11(e), the Sellers have no
obligation to provide any deferred compensation, pension or non-pension
benefits to retired or other former employees, except for health benefits
as specifically required by Part 6 of Title I of ERISA ("COBRA") or other
applicable law or pension benefits
16
payable from a Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code.
(f) All group health plans covering employees of the Sellers have
been operated in material compliance with the requirements of Section
4980B of the Code (and any predecessor provisions) and COBRA.
(g) Neither the Sellers nor to the Knowledge of the employees of
Sellers with responsibility for such matters any other "disqualified
person" or "party in interest," as defined in Section 4975 of the Code and
Section 3(14) of ERISA, respectively, has engaged in any "prohibited
transaction," as defined in Section 4975 of the Code or Section 406 of
ERISA, with respect to any Plan nor to the Knowledge of the employees of
Sellers with responsibility for such matters have there been any fiduciary
violations under ERISA which could subject any Seller (or any officer,
director or employee thereof) to any penalty or tax under Section 502(i)
of ERISA or Sections 4971 and 4975 of the Code.
(h) Except as set forth on Schedule 3.11(h), with respect to any
Plan: (i) no filing, application or other matter is pending with the IRS,
the PBGC, the United States Department of Labor or any other governmental
body; (ii) there is no action, suit or claim pending (nor, to the
Knowledge of the employees of Sellers with responsibility for such
matters, any basis for such a claim), other than routine claims for
benefits; and (iii) there are no outstanding liabilities for taxes or
penalties under ERISA, the Code or other applicable law.
Section 3.12. [INTENTIONALLY OMITTED]
Section 3.13. Litigation. Other than in connection with the Cases
and except as set forth on Schedule 3.13, there are no actions, causes of
action, claims, suits or proceedings pending or, to Sellers' Knowledge,
threatened against any of the Sellers with respect to the Business or affecting
the operation of the Business or the use of the Purchased Assets, at law or in
equity, or before or by any Governmental Agency, which (i) seeks to restrain or
enjoin the consummation of or would materially and adversely affect, the
transactions contemplated hereby or (ii) could reasonably be expected to have a
Material Adverse Effect.
Section 3.14. [INTENTIONALLY OMITTED]
17
Section 3.15. Tax Matters. There is no Lien affecting any of the
Purchased Assets that arose in connection with any failure or alleged failure to
pay any Tax which will attach to the Purchased Assets after the Closing.
Section 3.16. Interim Operations. Taking into account the Sellers'
status as debtors in possession under the Bankruptcy Code, since April 4, 1998,
the Business has been operated in the ordinary course, consistent with past
practices, except as set forth on Schedule 3.16. Except in the ordinary course
of business (including the execution and delivery of post-petition leases and/or
lease renewals) and except as approved by the Bankruptcy Court, since the
Balance Sheet Date, none of the Sellers has, with respect to the Business: (i)
incurred or become subject to, or agreed to incur or become subject to, any
material obligation or Liability that is an Assumed Liability, except as
contemplated by this Agreement; (ii) mortgaged or pledged any of the Purchased
Assets, except pursuant to the Revolving Credit and Guaranty Agreement; (iii)
sold or transferred or agreed to sell or transfer any of the Purchased Assets;
(iv) suffered any extraordinary losses or waived any material rights; (v)
terminated any material contract, agreement, license, or other instrument to
which it is a party with respect to the Purchased Assets.
Section 3.17. Brokers. Except for the services provided by CIBC
Oppenheimer in connection with the transactions contemplated by this Agreement,
all negotiations relative to this Agreement and the transactions contemplated
hereby have been carried on by the Sellers without the intervention of any other
Person acting on the Sellers' behalf in such manner as to give rise to any valid
claim by any such Person against the Purchaser for a finder's fee, brokerage
commission or other similar payment based on an arrangement with the Sellers.
Section 3.18. Disclaimer of Additional Representations and
Warranties; Schedules.
(a) Except as expressly set forth in this Agreement, the Schedules
and Exhibits hereto, the Ancillary Agreements, and any certificate or
instrument delivered pursuant to the terms hereof or thereof, the Sellers
make no representations or warranties with respect to the Business, or its
operations, assets (including, without limitation, the Purchased Assets),
liabilities (including, without limitation, the Assumed Liabilities) or
conditions, including, with respect to the Purchased Assets, any
representation or warranty of merchantability, suitability or fitness for
a particular purpose, or quality as to the Purchased Assets, or any part
thereof, or as to the condition or workmanship thereof, or the absence of
any defects therein, whether latent or patent. Except as provided in this
Agreement, the Schedules and Exhibits hereto, the Ancillary Agreements,
and any other certificate
18
or instrument delivered pursuant to the terms hereof or thereof, the
Purchased Assets are to be conveyed hereunder "AS IS" on the date hereof
and in their present condition, subject to reasonable use, wear and tear
between the date hereof and the Closing Date, and Purchaser shall rely
upon its own examination thereof.
(b) Notwithstanding anything to the contrary contained in this
Agreement, no matter primarily relating to any of the Excluded Assets or
Excluded Liabilities is required to be disclosed on any Schedule. In
addition, any item disclosed on any one Schedule shall be deemed to be
disclosed on each Schedule, where relevant. Disclosure of an item in any
Schedule shall not be deemed to be an admission that such item is
material.
Section 3.19. Limitation. Notwithstanding the foregoing provisions
of this Article III or any other provision of this Agreement, none of the
Sellers shall have any liability to Purchaser for or in respect of any
representation or warranty made in this Article III, and none of the Sellers
shall be deemed to have breached or violated any such representation or
warranty, as of the date hereof, any of Jay Galin, Scott Galin or Michael Kaplan
has Knowledge of the facts or circumstances causing such representation or
warranty to be not true and correct.
Section 3.20. Survival. Each of the representations and warranties
of Sellers described in clause (i) of the introduction to this Article III shall
survive the Closing until the earlier to occur of (x) the first anniversary of
the Closing Date or (y) the confirmation of the Sellers' plan of reorganization
by the Bankruptcy Court and each of the representations and warranties of
Sellers described in clause (ii) of the introduction to this Article III shall
survive the Closing until the earlier to occur of (x) the date which is six
months following the Closing Date or (y) the confirmation of the Sellers' plan
of reorganization by the Bankruptcy Court (the "Survival Period"). No claim may
be asserted by Purchaser against Sellers arising out of a breach of any such
representation or warranty unless written notice setting forth the basis of such
claim in reasonable detail has been furnished to the Sellers before the
expiration of the Survival Period.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Sellers as follows:
Section 4.1. Authority of Purchaser. Purchaser is a corporation,
validly existing, and in good standing under the laws of the State of Delaware.
Purchaser has full corporate power and authority to execute and deliver this
Agreement, and
19
the execution and delivery by Purchaser of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of Purchaser, and this Agreement
constitutes the legal, valid and binding obligation of Purchaser enforceable in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium, or similar laws from time to time
in effect which affect creditors' rights generally, and by legal and equitable
limitations on the enforceability of specific remedies. Purchaser has full
corporate power and authority to own its properties and to carry on the business
presently being conducted by it.
Section 4.2. No Conflict or Violation. The execution, delivery and
performance by Purchaser of this Agreement and the Ancillary Agreements do not
and will not violate or conflict with any provision of the Certificate or
Articles of Incorporation or By-laws of Purchaser and do not and will not
violate any provision of law, or any order, judgment or decree of any court or
other Governmental Agency applicable to Purchaser, or violate or result in a
material breach of or constitute (with due notice or lapse of time or both) a
default under any loan agreement, mortgage, security agreement, indenture or
other instrument to which Purchaser is a party or by which it is bound.
Section 4.3. Consents and Approvals. The execution, delivery and
performance by Purchaser of this Agreement do not require the consent or
approval of, or filing with, any government, governmental body or agency or
other entity or person except: (i) as may be required to effect the transfer of
any Permits; or (ii) such consents, approvals and filings, the failure to obtain
or make which would not, individually or in the aggregate, have a material
adverse effect on its ability to consummate the transactions contemplated
hereby.
Section 4.4. Availability of Funds. Purchaser shall seek to obtain,
within 10 Business Days after the date hereof, commitments for debt and/or
equity financing acceptable in all respects to Purchaser, in its sole
discretion, taking into account pricing, interest rates, covenants, financial
condition of the Business and all such other factors as Purchaser deems relevant
(the "Financing Commitments"). Assuming receipt of such Financing Commitments
(which the Sellers acknowledge is not assured), Purchaser will at Closing have
funds sufficient to allow it to pay the Purchase Price at the times and in the
manner set forth in this Agreement and to satisfy all its other obligations
under this Agreement.
Section 4.5. Litigation. Except in connection with the Cases, there
are no actions, causes of action, claims, suits, proceedings, orders, writs,
injunctions, or decrees pending or, to the Knowledge of Purchaser, threatened
against Purchaser at law or in equity or before or by any Governmental Agency,
which seeks to restrain or enjoin the consummation of the transactions
20
contemplated hereby or that shall otherwise materially adversely affect the
ability of Purchaser to perform its obligations hereunder.
Section 4.6. Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried on by Purchaser
without the intervention of any other person acting on its behalf in such manner
as to give rise to any valid claim by any such person against the Sellers or
their Affiliates for a finder's fee, brokerage commission or other similar
payment based on an arrangement with Purchaser.
Section 4.7. Adequate Assurances Regarding Executory Contracts.
Purchaser is and will be capable of satisfying the conditions contained in
sections 365(b)(1)(c) and (f) of the Bankruptcy Code with respect to the
Executory Contracts.
Section 4.8. Hart-Scott-Rodino. For purposes of the HSR Act, in
connection with the consummation of the transactions hereby (i) the Purchaser's
total assets are less than $10,000,000 and (ii) the Purchaser would be its own
"ultimate parent entity" as such term is defined under the HSR Act.
ARTICLE V.
CERTAIN COVENANTS OF THE SELLERS
Each Seller covenants with Purchaser that from and after the date hereof
through the Closing Date:
Section 5.1. Conduct of Business Before the Closing Date. Without
the prior written consent of Purchaser or unless otherwise ordered by the
Bankruptcy Court sua sponte or on motion by a third party, notice of which order
or motion shall be promptly delivered by the Sellers to Purchaser, between the
date hereof and the Closing Date, the Sellers shall not, except as required or
expressly permitted pursuant to the terms hereof, make any material change in
the Purchased Assets or the Business as it relates to the Purchased Assets, or
enter into any transaction respecting the Business, other than in any such case
in the ordinary course of the Business consistent with the Sellers' past
practices, and shall continue to operate the Stores and the Business as it
relates to the Purchased Assets in the ordinary course of the Business. Without
limiting the generality but subject to, the foregoing, unless otherwise
consented to in writing by Purchaser the Sellers shall, consistent with their
past practices:
(a) Perform all of their material post-petition obligations under
the Leases and Other Contracts in accordance with their terms, except for
obligations which are not required to be performed under the Bankruptcy
Code or which are being disputed by the Sellers in good faith;
21
(b) Comply in all material respects with all statutes, laws,
ordinances, rules and regulations applicable to the Purchased Assets and
Assumed Liabilities except where compliance is being disputed by the
Sellers in good faith or excused by the Bankruptcy Code or other
applicable law;
(c) Not remove, agree to remove, sell or agree to sell or otherwise
transfer or permit any person or entity to remove any Equipment, Machinery
and Fixtures from the Stores, except for replacements and refurbishments
in the ordinary course of business;
(d) Not amend or modify, in any material respect, or terminate any
of the Leases or Other Contracts or agree or consent to any material
amendments or modifications or terminations thereof;
(e) Not change, in any material respect, any of their methods or
procedures relating to accounting for accounts receivable or inventory in
the Business;
(f) Promptly notify Purchaser if the G&G Sellers receive any notices
from any lessor, Governmental Agency, insurance company or any other
entity indicating any material default or the need for any material
repairs, alterations or improvements or any other matter that could
reasonably be expected to materially and adversely affect the Purchased
Assets, or that any of the Leased Properties are or may be in violation of
any law, and cause compliance at the Sellers' cost, except where
compliance is being disputed by the Sellers in good faith;
(g) Promptly notify Purchaser if the Sellers receive any notices of
or otherwise become aware of any condemnation proceedings affecting the
Stores;
(h) Not grant any unusual or extraordinary wage, salary or benefit
increases to any of the Sellers' employees (eligible to become Transferred
Employees) prior to Closing;
(i) Not enter into any material agreements that would be binding on
the Purchaser or affect any of the Purchased Assets after the Closing
Date, other than in the ordinary course of business;
(j) Promptly notify Purchaser of any order of the Bankruptcy Court
entered in the Cases that affects or will affect the operation of the
Business or the Purchased Assets and promptly deliver a copy of any such
order to Purchaser;
(k) Maintain all occurrence-based forms of insurance with respect to
the Purchased Assets as in effect on the date hereof; and
22
(1) The Sellers shall, from and after the date hereof through the
Closing Date, make available to the Business an amount each week equal to
the lesser of (i) total weekly revenues of the Business for such week
minus $1 million, plus or minus 10% and (ii) $4.5 million, for operating
expenses of the Business (such amount paid by the Sellers, the "Operating
Expense Payment"). To the extent that the aggregate Operating Expense
Payments made from the date hereof through the Closing Date are less than
the Total Weekly Minimum, the parties agree that the Liability Escrow
Account shall be increased by the amount of such shortfall and the Closing
Cash Payment shall be decreased by the amount of such shortfall. As used
in this Section 5.1(1), "Total Weekly Minimum" shall mean the product of
(i) $4.5 million and (ii) the number of weeks (including any pro rata
portion of a partial week) between the date hereof and the Closing Date.
Section 5.2. Consents and Approvals. The Sellers shall use
commercially reasonable efforts to obtain (a) entry of the Order by the
Bankruptcy Court, and (b) the consent of The Chase Manhattan Bank, on behalf of
itself and as agent under the Revolving Credit and Guaranty Agreement, to this
Agreement and the transaction contemplated hereby.
Section 5.3. Information and Access. The Sellers will permit
representatives of Purchaser to have reasonable access during normal business
hours after reasonable notice from Purchaser to the Sellers, and in a manner so
as not to interfere with the normal operations, to all premises, properties,
personnel, accountants, books, records, contracts and documents of or pertaining
to the Business. Purchaser and each of its representatives will treat and hold
as confidential such information in accordance with the terms and provisions of
that certain Confidentiality Agreement, entered into on April 29, 1998, between
Pegasus Investors, L.P. and PRI, which Confidentiality Agreement remains in full
force and effect. Purchaser shall reimburse the Sellers for any reasonable
out-of-pocket costs incurred by the Sellers (but not for overhead or cost of
salaries or benefits of Purchaser's personnel) in providing such access.
Purchaser shall indemnify, defend and hold harmless the Sellers, the lessors
under the Leases and their respective Affiliates from and against any and all
claims, demands, causes of action, losses, damages, liabilities, cost and
expenses (including, without limitation, attorneys' fees and disbursements),
suffered or incurred by such Persons in connection with (i) Purchaser's and/or
Purchaser's representatives' entry upon the Leased Property, or (ii) any and all
other activities undertaken by Purchaser or Purchaser's representatives with
respect to the Leased Property pursuant to this Section 5.3. The parties hereto
agree and acknowledge that the provisions of this Section 5.3 shall in no way
affect the conditions set forth in Article VIII of this Agreement.
23
Section 5.4. Further Assurances. Upon the request of the Purchaser
at any time after the Closing Date, the Sellers shall forthwith execute and
deliver such documents and take such actions as Purchaser or its counsel may
reasonably request to effectuate the purposes of this Agreement.
Section 5.5. Reasonable Efforts. Upon the terms and subject to the
conditions of this Agreement, the Sellers will use commercially reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary or proper consistent with applicable law to
consummate and make effective in the most expeditious manner practicable the
transactions contemplated hereby. Without limiting the foregoing, the Sellers
will take or cause to be taken by others all reasonable actions required to
obtain or satisfy all consents and to continue such efforts as may be required
after the Closing Date to facilitate the full and expeditious transfer of legal
title, or the sublease or sublicense as the case may be, of the Purchased
Assets.
Section 5.6. Assignment of Contracts. At the Closing and effective
as of the Closing Date, the Sellers shall sell, assign and transfer to Purchaser
all their rights under the Assigned Contracts, free from all defaults by the
Sellers and all claims by third parties against Purchaser or the Purchased
Assets relating to any defaults by the Sellers thereunder.
Section 5.7. Cure of Defaults. The Sellers shall, on or prior to
the Closing, cure any and all defaults or provide adequate assurance that they
will cure any and all defaults with respect to Assigned Contracts as provided in
Section 365 of the Bankruptcy Code and as required by the Bankruptcy Court, so
that such Assigned Contracts may be assumed by the Sellers and assigned to the
Purchaser as applicable in accordance with the provisions of section 365 of the
Bankruptcy Code and so that Purchaser shall have no obligations for defaults
existing prior to the assignment.
Section 5.8. [INTENTIONALLY OMITTED].
Section 5.9. Accounts Receivable. Each Seller shall promptly remit
in kind to Purchaser any payments received by such Seller after the Closing in
respect of accounts receivable constituting a part of the Purchased Assets
hereunder.
Section 5.10. Name Change Filings. On the Closing Date, the Sellers
shall file with the Secretary of State of the state of incorporation of each
applicable Seller an amendment to each applicable Seller's certificate of
incorporation to change its name to a name which does not contain the words "G&G
Shops" or "G&G," and shall promptly provide Purchaser with evidence of such
filing. In addition, the Sellers shall, within 30 days after the Closing Date,
take such actions and file such documents as are necessary to reflect such name
changes in all states in
24
which any such Seller is qualified to do business as a foreign corporation and
will deliver to Purchaser copies of such documents evidencing such name change
filings.
Section 5.11. Rejection of Contracts. In the event that at any time
not less than 10 Business Days prior to the final sale hearing of the Bankruptcy
Court, Purchaser gives written notice to Sellers, directing Sellers to reject up
to four (4) Leases that are Executory Contracts, such agreements shall be
deleted from Schedule 1.3, 1.3(a) or 1.4, as applicable, and shall not be deemed
an "Assigned Contract" or a "Purchased Asset"; provided, that the aggregate
allowed claims for damages arising from the exclusion of Executory Contracts, if
the Sellers were to reject such Executory Contracts shall not exceed $250,000.
Section 5.12. Transition Arrangements. From and after the Closing
Date, Sellers shall maintain all checking accounts (with sufficient funds
therein) until all checks drawn on such accounts prior to the Closing Date have
cleared. In addition, Sellers shall cooperate with Purchaser in the
establishment of such other reasonable transition arrangements (including,
without limitation, with respect to insurance, medical, payroll and banking
matters) as Purchaser shall reasonably request, for a period of up to ninety
(90) days following the Closing Date. Purchaser shall compensate the Sellers for
their actual costs incurred in providing such services including, but not
limited to, direct costs and liabilities incurred in providing such transition
services, labor costs and related overhead costs.
ARTICLE VI.
CERTAIN COVENANTS OF PURCHASER
Section 6.1. [INTENTIONALLY OMITTED].
Section 6.2. Reasonable Efforts. Upon the terms and subject to the
conditions of this Agreement, Purchaser will use commercially reasonable efforts
to take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary or proper consistent with applicable law to consummate and make
effective in the most expeditious manner practicable the transactions
contemplated hereby.
Section 6.3. Consents and Approvals. Purchaser shall use
commercially reasonable efforts to provide, at the Sellers' request, assistance
in obtaining the Order in order to effect the transactions contemplated by this
Agreement.
Section 6.4. Adequate Assurances Regarding Executory Contracts.
With respect to each Executory Contract, Purchaser shall provide adequate
assurance as required under the Bankruptcy Code of the future performance of
such Executory Contract by Purchaser. Purchaser agrees that it will promptly
take all
25
actions as are reasonably required by the Sellers to assist in obtaining the
Bankruptcy Court's entry of the Order, such as furnishing affidavits,
non-confidential financial information or other documents or information for
filing with the Bankruptcy Court and making Purchaser's employees and
representatives available to testify before the Bankruptcy Court, with respect
to demonstrating adequate assurance of future performance by Purchaser under the
Executory Contracts.
Section 6.5. Performance Under Assigned Contracts. Purchaser agrees
that from and after the Closing Date it shall take all actions necessary to
satisfy its obligations under the terms and conditions of each of the Assigned
Contracts.
Section 6.6. Further Assurances. Upon the request of the Sellers at
any time after the Closing Date, the Purchaser shall forthwith execute and
deliver such documents as the Sellers or their counsel may reasonably request to
effectuate the purposes of this Agreement.
ARTICLE VII.
CONDITIONS TO THE SELLERS' OBLIGATIONS
The obligations of the Sellers to consummate the transactions
contemplated by this Agreement are subject to the satisfaction (unless waived in
writing by the Sellers) of each of the following conditions on or prior to the
Closing Date:
Section 7.1. Representations and Warranties. The representations and
warranties of Purchaser contained in this Agreement shall be true and correct on
and as of the Closing Date in all material respects as though such
representations and warranties were made on and as of the Closing Date.
Purchaser shall have delivered to the Sellers a certificate signed by an officer
of Purchaser, dated the Closing Date, to the foregoing effect. The Sellers shall
also have received a certificate dated the Closing Date and signed by each of
Jay Galin, Scott Galin and Michael Kaplan, stating that they have no knowledge
that any of the representations and warranties set forth in Article III hereof
are untrue; provided, that such individuals shall have no personal liability
arising out of or resulting from such certificate.
Section 7.2. Compliance with Agreement. Purchaser shall have
performed and complied in all material respects (and in all respects in the case
of Article II hereof) with all covenants and conditions to be performed or
complied with by it on or prior to the Closing Date. Purchaser shall have
delivered to the Sellers a certificate signed by an officer of Purchaser, dated
the Closing Date, to the foregoing effect.
Section 7.3. Financing. Purchaser shall have obtained Financing
Commitments which, together with Purchaser's available
26
cash on the Closing Date, are sufficient to enable Purchaser to pay the Purchase
Price, and all of the conditions set forth in such Financing Commitments shall
have been satisfied.
Section 7.4. Consents. Other than the Bankruptcy Court's entry of
the Order (which is addressed in Section 7.6), all consents, waivers,
authorizations and approvals of any Governmental Agency set forth on Schedule
3.3 and the consent of The Chase Manhattan Bank, on behalf of itself and as
agent under the Revolving Credit and Guaranty Agreement, shall have been duly
obtained and shall be in full force and effect on the Closing Date.
Section 7.5. Corporate Documents. The Sellers shall have received
from Purchaser certified copies of the resolutions duly adopted by the board of
directors of Purchaser approving the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, and such
resolutions shall be in full force and effect as of the Closing Date.
Section 7.6. Entry of the Order. (i) The Bankruptcy Court shall have
entered the Order; (ii) the Order shall not be stayed; (iii) the Order shall not
modify the terms and conditions of this Agreement or the transactions
contemplated hereby in any way that adversely affects the Sellers; and (iv) the
Order shall be final and no longer subject to appeal.
Section 7.7. Galin Releases. The Sellers shall have received a
release in form and substance reasonably satisfactory to them from each of Jay
Galin and Scott Galin releasing the Sellers, Warburg, Pincus Ventures, L.P. and
each of their affiliates from any and all claims arising under or related to
each of the Galins respective employment by the Sellers including, but not
limited to, the Incentive Agreement, except as to indemnification claims arising
out of the management of the Business in its ordinary course.
ARTICLE VIII.
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligation of Purchaser to consummate the transactions
contemplated by this Agreement is subject to the satisfaction (unless waived in
writing by Purchaser) of each of the following conditions on or prior to the
Closing Date:
Section 8.1. Representations and Warranties. The representations and
warranties of the Sellers contained in this Agreement shall be true and correct
on and as of the Closing Date in all material respects as though such
representations and warranties were made on and as of the Closing Date. The
Sellers shall have delivered to Purchaser a certificate signed by the Chief
Executive Officer or the Chief Operating Officer of the G&G Sellers, dated the
Closing Date, to the foregoing effect;
27
provided, that none of such individuals shall have any personal liability
arising out of or resulting from such certificate.
Section 8.2. Compliance with Agreement. The Sellers shall have
performed and complied in all material respects (and in all respects in the case
of Article II hereof) with all covenants and conditions to be performed or
complied with by them on or prior to the Closing Date. The Sellers shall have
delivered to Purchaser a certificate signed by an executive officer of each of
the Sellers, dated the Closing Date, to the foregoing effect.
Section 8.3. Agreements with Galins. On or prior to July 20, 1998,
Jay Galin, Scott Galin and the other shareholders of Purchaser shall have
entered into mutually acceptable shareholder, employment and other arrangements
(the "Purchaser Agreements") relating to the ownership, management and operation
of Purchaser and the Business after the Closing Date.
Section 8.4. Consents. Other than obtaining the Order (which is
addressed in Section 8.6), there shall have been duly obtained and in full force
and effect on the Closing Date: (i) all consents, waivers, authorizations and
approvals of any Governmental Agency required in connection with the execution,
delivery and performance of this Agreement, (ii) the consent of The Chase
Manhattan Bank, on behalf of itself and as agent under the Revolving Credit and
Guaranty Agreement and (iii) any consents required in connection with any
Assigned Contract (other than Leases) involving the payment by any Seller of
more than $150,000 in any calendar year, in each case as set forth on Schedule
3.3.
Section 8.5. Corporate Documents. Purchaser shall have received from
Sellers certified copies of the resolutions duly adopted by the boards of
directors of Sellers approving the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, and such resolutions
shall be in full force and effect as of the Closing Date.
Section 8.6. Entry of the Order. (i) The Bankruptcy Court shall have
entered the Order; (ii) the Order shall not be stayed; (iii) the Order as
entered by the Bankruptcy Court, shall not modify the terms and conditions of
this Agreement or the transactions contemplated hereby in any way that adversely
affects Purchaser; and (iv) the Order shall be final and no longer subject to
appeal.
Section 8.7. Entry of the Bidding Protections Order. The Bidding
Protections Order (as defined in Section 9.2 below), in the form annexed as
Exhibit D, shall have been entered by the Bankruptcy Court.
Section 8.8. Financing. Purchaser shall have obtained Financing
Commitments which, together with Purchaser's available
28
cash on the Closing Date, are sufficient to enable Purchaser to pay the Purchase
Price, and all of the conditions set forth in such Financing Commitments shall
have been satisfied.
Section 8.9. Material Adverse Effect. No Material Adverse Effect
shall have occurred since the date of this Agreement arising from causes outside
the control of Purchaser and which could not have been avoided by Purchaser's
exercise of reasonable care.
Section 8.10. Revolving Credit and Guaranty Agreement. The Revolving
Credit and Guaranty Agreement shall not have been terminated.
Section 8.11. Release of the Galins. Jay and Scott Galin shall have
received a release from the Sellers from any and all claims asserting a breach
of the Incentive Agreement or a breach of fiduciary duty arising out of the
Galins' participation as investors and employees in the sale of the Business to
G+G Retail, Inc., including the Galins' commitment to act exclusively with
"TGV/Pegasus" as provided in the bid letter, dated May 18, 1998.
ARTICLE IX.
THE CLOSING; TERMINATION
Section 9.1. The Closing. The Closing of the purchase and sale of
the Purchased Assets (the "Closing") shall be held within two (2) Business Days
after each of the conditions precedent set forth in Articles VII and VIII have
been satisfied or waived (the "Closing Date"). The Closing shall be held at the
offices of Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York
10019. At the Closing, all of the transactions provided for in Article II hereof
shall be consummated on a substantially concurrent basis.
Section 9.2. Bidding Protections.
(a) Other Proposals. Except as otherwise set forth in this Section
9.2(a), the Sellers and their agents shall not solicit any proposal from any
Person or Persons to acquire, directly or indirectly, all or substantially all
of the assets of the Business or more than 50% of the voting power of the equity
securities of G&G (an "Alternative Transaction") or any inquiry which may result
in such a proposal from any person (provided that in no event shall the filing
of, submission of documents to or the presentation of evidence, testimony or
information to the Bankruptcy Court constitute the solicitation of an
Alternative Transaction). Notwithstanding anything herein to the contrary,
negotiations and discussions by the Sellers with any party that previously
submitted a written expression of interest (including, but not limited to, a
markup of a form purchase agreement) in acquiring all or substantially all of
the Business shall not
29
constitute the solicitation of an Alternative Transaction; without limiting the
foregoing, such determination shall not affect whether or not the Sellers
entering into an agreement with such a party constitutes an Alternative
Transaction hereunder. Notwithstanding the foregoing or anything in this
Agreement to the contrary, if at any time prior to the Closing or termination of
this Agreement, any of the Sellers (or any representative of the Sellers)
receives any unsolicited proposal or inquiry that the Sellers determine in good
faith constitutes or may result in a G&G Superior Proposal (as defined below),
the Sellers may (and may authorize and/or permit any of their officers,
directors, employees, attorneys, agents or representatives to) (i) furnish
information with respect to the Sellers or the Business to any person or persons
making such proposal or inquiry (which may include a person or persons that made
inquiries or proposals prior to the date hereof), (ii) participate in
discussions and/or negotiations regarding such proposal or inquiry and (iii)
subject to approval by order of the Bankruptcy Court, enter into one or more
agreements with any such person or persons with respect to a G&G Superior
Proposal and, prior to or concurrently therewith, terminate this Agreement. "G&G
Superior Proposal" means any bona fide proposal made by any person or persons to
acquire, directly or indirectly, all or substantially all of the assets of the
Business or more than 50% of the voting power of the equity securities of G&G on
terms which the Boards of Directors of PRI and G&G determine in their good faith
judgment to be more favorable to the Sellers than the transaction provided for
in this Agreement (taking into account all factors relating to such proposed
transaction deemed relevant by such Boards of Directors, including, but not
limited to, the financing thereof, the proposed timing thereof and all other
conditions thereto), including a recapitalization transaction approved by the
appropriate Boards of Directors of the Sellers; provided, that no such proposal
may be deemed a G&G Superior Proposal unless such proposal includes
consideration which is in excess of the sum of (i) the Purchase Price, (ii) the
Topping Fee (as defined below), which for purposes of this Section 9.2(a) shall
be deemed to equal $2.64 million, and (iii) the Expense Reimbursement (as
defined below), which for purposes of this Section 9.2(a) shall be deemed to
equal $1,250,000.
(b) Topping Fee. If, after entry of the Bidding Protections Order
(as defined below), (i) this Agreement has not been terminated pursuant to
Sections 9.3(a), 9.3(b), 9.3(f), 9.3(g) or 9.3(h), (ii) Purchaser is not then in
default of any material obligation hereunder which would excuse performance
hereunder by the Sellers and (iii) the Sellers shall accept an offer and enter
into an agreement which provides for a G&G Superior Proposal, then Pegasus
Investors, L.P. shall, without further court order, be entitled to receive a fee
equal to 2% of Purchase Price (the "Topping Fee"); provided, however that if at
the hearing to sell all or substantially all of the Business a G&G Superior
Proposal is made and the Purchaser revises its offer to purchase the Purchased
Assets, Pegasus Investors, L.P. shall
30
be entitled to receive only the Expense Reimbursement as provided below.
The Topping Fee shall be payable within five (5) days of the consummation of a
G&G Superior Proposal.
(c) Expense Reimbursement. In the event that (i) an agreement
providing for a G&G Superior Proposal is entered into or (ii) this Agreement is
terminated for any reason other than as set forth in the last sentence of this
Section 9.2(c), Pegasus Investors, L.P. shall be entitled to receive
reimbursement of the reasonable, actual, fully-documented out-of-pocket costs
and expenses paid or incurred by Purchaser or Pegasus Investors, L.P.,
commencing as of May 1, 1998 and ending on the earlier of (i) the date Purchaser
is notified of the Sellers' execution of an agreement providing for an
Alternative Transaction or a G&G Superior Proposal and (ii) the date this
Agreement is terminated, directly incident to, under or in connection with this
Agreement and the transactions contemplated hereby (including fees and
disbursements of counsel, accountants, financial advisors and other third
parties and commitment fees paid to financing institutions) in an amount not to
exceed $1,250,000 in the aggregate (the "Expense Reimbursement"). The Expense
Reimbursement shall be payable within five (5) days of the consummation of an
agreement which provides for an Alternative Transaction or a G&G Superior
Proposal; provided, that Purchaser shall have presented to the Sellers fully
detailed invoices or other documentation supporting the Expense Reimbursement.
Purchaser's claim for such Expense Reimbursement shall be a super-priority
administrative claim in the Cases senior to all unsecured administrative claims
other than those arising under (a) the Revolving Credit and Guaranty Agreement
(and related documents), (b) the letter agreement, dated March 13, 1998, between
Century Business Credit Corporation and Warburg, Pincus Ventures L.P. and (c)
administrative claims of employees of the Sellers for wages, benefits and
severance entitlements. Notwithstanding anything contained in this Agreement to
the contrary, the Purchaser shall not be entitled to receive the Expense
Reimbursement if the Agreement is terminated pursuant to Section 9.3(e) (by
the Sellers solely as a result of any default or breach by Purchaser), 9.3(f),
9.3(g) or 9.3(h); provided, however, that if within 120 days of any such
termination by the Sellers pursuant to Section 9.3(g) as a result of the
Sellers' dissatisfaction with a Financing Commitment tendered by Purchaser which
Purchaser was willing to accept, the Sellers enter into an agreement which
provides for an Alternative Transaction or a G&G Superior Proposal (i) for total
consideration (including assumption of liabilities) which equals or exceeds the
consideration to be provided by Purchaser hereunder, the Sellers shall, promptly
upon consummation of such agreement, pay to Pegasus Investors, L.P. the Expense
Reimbursement and (ii) for total consideration (including assumption of
liabilities) which is less than the consideration to be provided by Purchaser
hereunder, the Sellers shall, promptly upon consummation of such
31
agreement, pay to Pegasus Investors, L.P. the Expense Reimbursement up to a
maximum of $625,000; and provided, further that if Purchaser shall fail to
tender a Financing Commitment to the Sellers hereunder, the Agreement is
terminated by the Sellers pursuant to Section 9.3(g) and the Sellers enter into
an agreement within 120 days of the date the Agreement is so terminated which
provides for an Alternative Transaction or a G&G Superior Proposal (other than a
going out of business sale, provided that a going out of business sale shall not
include a sale of all or substantially all of the Business to an entity or
entities which continues to operate the Business as a going concern under such
entity's or entities' trade names) and each of Jay Galin and Scott Galin
participate in such transaction, the Sellers shall, promptly upon consummation
of such agreement, pay to Pegasus Investors, L.P. the Expense Reimbursement up
to a maximum of $500,000.
(d) Bidding Protections Order. The Sellers shall use commercially
reasonable efforts to obtain an order in the form annexed as Exhibit D hereto
(the "Bidding Protections Order") of the Bankruptcy Court approving the
provisions of this Section 9.2, and the Purchaser shall cooperate with and take
such actions as reasonably requested by the Sellers in obtaining such order. The
Bidding Protections Order shall provide that the Topping Fee and the Expense
Reimbursement shall be payable by Sellers as set forth above.
Section 9.3. Termination. Anything in this Agreement to the contrary
notwithstanding, this Agreement and the transactions contemplated hereby may be
terminated in any of the following ways at any time before the Closing and in no
other manner:
(a) By mutual written consent of Purchaser and the Sellers (in the
case of the Sellers, upon consultation with, and with the consent of, the
Official Committee); or
(b) By Purchaser as provided in Section 2.10; or
(c) By the Sellers as provided in Section 9.2;
(d) By Purchaser or the Sellers (if such terminating party is not
then in default of any obligation hereunder), if the Closing has not
occurred on or before August 31, 1998;
(e) By the Sellers or Purchaser (if such terminating party is not
then in default of any obligation hereunder) if the other party is in
breach in any material respect of any of its representations made in this
Agreement, or is in violation or default of any of its covenants or
agreements in this Agreement;
32
(f) By Purchaser or the Sellers, within two Business Days following
July 15, 1998, if the Bidding Protections Order is not entered by July 15,
1998 or such Bidding Protections Order has not been consented to by the
DIP Lenders by July 15, 1998;
(g) By Purchaser or the Sellers, within two Business Days following
July 20, 1998, if Purchaser has not obtained the Financing Commitments on
or before July 20, 1998; or
(h) By Purchaser or the Sellers, within two Business Days following
July 20, 1998, if the Purchaser Agreements shall not have been entered
into and delivered to the Sellers on or before July 20, 1998.
Section 9.4. Effects of Termination. (a) In the event this Agreement
is terminated pursuant to Section 9.3, except as provided in this Section 9.4,
all further obligations of the parties hereunder shall terminate.
(b) Notwithstanding anything contained in this Agreement to the
contrary, the Sellers shall have no liability or obligation under this Article
IX unless and until the Bidding Protections Order shall have been entered by the
Bankruptcy Court and the DIP Lenders shall have consented to the Bidding
Protections Order. Thereafter, the Sellers' liability for any termination of
this Agreement solely shall be as follows:
(i) In the event this Agreement is terminated other than as
set forth below in Section 9.4(b)(ii), the Sellers
shall only be liable to Pegasus Investors, L.P. for the
Expense Reimbursement pursuant and subject to the terms
of Section 9.2(c).
(ii) In the event this Agreement is terminated due to the
Sellers' execution of an agreement providing for a G&G
Superior Proposal, the Sellers shall be liable to
Pegasus Investors, L.P. for (i) the Topping Fee
pursuant and subject to the terms of Section 9.2(b)
and (ii) the Expense Reimbursement pursuant and subject
to the terms of Section 9.2(c).
(c) In the event this Agreement is terminated pursuant to Section
9.3(e) (by the Sellers solely as a result of any default or breach by
Purchaser), Purchaser shall be liable for any and all Damages incurred or
suffered by any Seller as a result of such default or delay, up to a maximum of
$3 million. Each of Pegasus Partners, L.P. and Pegasus Related Partners, L.P.
acknowledges and agrees that it shall have joint and several liability with
Purchaser up to such maximum amount of Damages.
33
(d) The foregoing provisions of this Section 9.4 shall not limit
the rights of the parties hereto to seek specific performance of any obligation
hereunder of any other party.
ARTICLE X.
TAXES
The parties hereto hereby covenant and agree as follows:
Section 10.1. Taxes Related to Purchase of Assets. The parties
recognize and acknowledge that, because the sale, transfer, assignment and
delivery of the Purchased Assets is being made in connection with the Sellers'
plan of reorganization, they may be exempt under section 1146(c) of the
Bankruptcy Code and the Order from all state and local transfer, recording,
stamp or other similar transfer taxes (collectively, "Transaction Taxes") that
may be imposed by reason of the sale, transfer, assignment and delivery of the
Purchased Assets; provided, however, that if Transaction Taxes are assessed for
any reason, then the Sellers shall bear the cost of such Transaction Taxes along
with any recording and filing fees. Purchaser and the Sellers agree to cooperate
to determine the amount of Transaction Taxes payable in connection with the
transactions contemplated under this Agreement. Transaction Taxes shall not
include any Taxes for which the Sellers are responsible under Section 10.2.
Sellers shall bear the cost of any use or sales tax that may be imposed as a
result of the transactions contemplated hereby or, together with Purchaser,
jointly seek to establish a basis for an exemption therefrom. Purchaser and the
Sellers agree to cooperate in the preparation and filing of any and all required
returns for or with respect to such Transaction Taxes and/or use or sales taxes
with any and all appropriate taxing authorities.
Section 10.2. Cooperation on Tax Matters. Purchaser and the Sellers
agree to furnish or cause to be furnished to each other, as promptly as
practicable, such information and assistance relating to the Business as is
reasonably necessary for the preparation and filing of any Tax Return, claim for
refund or other required or optional filings relating to tax matters, for the
preparation for and proof of facts during any tax audit, for the preparation for
any tax protest, for the prosecution or defense of any suit or other proceeding
relating to tax matters and for the answer of any governmental or regulatory
inquiry relating to tax matters.
Purchaser agrees to retain possession of all files and records
delivered to Purchaser by the Sellers for a period of at least six years from
the Closing Date. In addition, from and after the Closing Date, Purchaser agrees
that it will provide access to the Sellers and their attorneys, accountants and
other representatives (after reasonable notice and during normal
34
business hours) to such files and records as the Sellers may reasonably deem
necessary to properly prepare for, file, prove, answer, prosecute and/or defend
any such return, filing, audit, protest, claim, suit, inquiry or other
proceeding. Sellers shall reimburse Purchaser for any reasonable out-of-pocket
costs incurred by Purchaser (but not for overhead or cost of salaries or
benefits of Purchaser's personnel) in providing such access.
ARTICLE XI.
EMPLOYEES AND EMPLOYEE BENEFIT PLANS
Section 11.1. Employment.
(a) Offer to Hire. Effective as of the Closing Date, Purchaser
shall (i) offer to hire, in a comparable position and at the same rate of
pay, each active Business Employee who is primarily involved in the
conduct of the Business on the day immediately prior to the Closing Date
and all those inactive Business Employees who are on approved leave on the
Closing Date because of jury duty, family or medical leave, sick leave,
vacation or military duty or (ii) pay and discharge all severance
obligations (including any WARN (as defined below) liability triggered as
a result of Purchaser's failure to offer employment to such Business
Employees) owed to the Business Employees set forth in the preceding
sentence to which Purchaser does not offer employment. Purchaser shall be
responsible for any obligations or Liabilities to the Business Employees
under the Worker Adjustment and Retraining Notification Act and any
similar state or local "plant closing" law ("WARN") to the extent WARN
thresholds are exceeded as a result of actions taken by the Purchaser on
or after the Closing Date with respect to the Business Employees. The
Sellers shall be responsible for any obligations or Liabilities to the
Business Employees under WARN as a result of actions taken by the Sellers
prior to the Closing Date.
(b) Transferred Employees. The Business Employees who accept and
commence employment with Purchaser and whose terms and conditions of
employment are covered by a collective bargaining agreement with any of
the Sellers immediately prior to the Closing Date shall be referred to
herein as "Transferred Union Employees." The Business Employees who accept
and commence employment with Purchaser and whose terms and conditions of
employment are not covered by a collective bargaining agreement with any
of the Sellers immediately prior to the Closing Date shall be referred to
herein as "Transferred Non-Union Employees." Collectively, the Transferred
Union Employees and the Transferred-Non Union Employees shall be referred
to herein as the "Transferred Employees." Purchaser's obligation with
respect to Transferred Employees shall commence as of the Closing Date.
Upon request of Purchaser, the Sellers shall
35
provide Purchaser reasonable access to and copies of data regarding ages,
dates of hire, compensation, job description and, subject to applicable
law, such other personnel records as Purchaser may reasonably request in
respect of the Business Employees.
(c) Terms of Employment. For the period ending one year after the
Closing Date, Purchaser will provide Transferred Non-Union Employees with
benefits under Purchaser's employee benefit plans which are substantially
equivalent to those provided to such employees pursuant to the Plans
specified in Schedule 3.11(a) and will provide Transferred Union Employees
with such benefits as shall be required under the terms of any applicable
collective bargaining agreement covering such employees from and after the
Closing Date. Except as provided otherwise in this Article XI or as
required by the terms of any collective bargaining agreement, the
Transferred Employees' employment with Purchaser shall be upon such terms
and conditions as Purchaser, in its sole discretion, shall determine, and
nothing herein expressed or implied by this Agreement shall confer upon
any Business Employee, or legal representative thereof, any rights or
remedies, including any right to employment, or for any specified period,
of any nature or kind whatsoever, under or by reason of this Agreement.
Section 11.2. Collective Bargaining Agreements. Effective as of the
Closing Date, Purchaser shall assume until their scheduled expiration dates the
collective bargaining agreements listed on Schedule 3.10 in respect of the
Transferred Union Employees and shall be solely responsible for discharging all
obligations (including the establishment of such employee benefit plans,
programs and arrangements as may be required by such collective bargaining
agreements) and Liabilities arising thereunder on and after the Closing Date.
Purchaser shall have no responsibility or Liability in respect of any collective
bargaining agreement covering any current or former employees of the Sellers
during the period of employment by the Sellers.
Section 11.3. Employee Welfare Benefit Plans. Except with respect to
any claim that is covered by an Assigned Contract or otherwise constitutes an
Assumed Liability, the Sellers shall retain responsibility for all hospital,
medical, life insurance, disability and other welfare plan expenses and
benefits, and for all workers' compensation, unemployment compensation and other
government mandated benefits (collectively referred to herein as "Welfare Type
Plans"), in respect of claims covered by Plans and which are incurred by
Transferred Employees and their dependents prior to the Closing Date. Purchaser
shall be responsible for all claims incurred on or after the Closing Date by
Transferred Employees and their dependents under all Welfare Type Plans that are
maintained by Purchaser for the Transferred Employees and their dependents. For
purposes of this Section 11.3, claims shall be deemed to have been incurred:
36
(a) with respect to all death or dismemberment claims, on the
actual date of death or dismemberment;
(b) with respect to all disability claims, other than short-term
disability or salary continuation benefits, on the date the claimant
became unable to (i) perform his or her regular duties of employment, in
the case of an employee claimant, or (ii) perform the normal day-to-day
responsibilities that would reasonably be expected of someone of similar
age and lifestyle, in the case of a dependent claimant;
(c) with respect to short-term disability or salary continuation
claims, on each day for which income benefits are payable to the claimant;
(d) with respect to all medical, drug or dental claims, on the date
the service was received or the supply was purchased by the claimant;
provided, however, that a medical claim relating to a claimant's
hospitalization shall be deemed to be incurred on the date the claimant
was first hospitalized; and
(e) with respect to workers' compensation claims, on the date the
incident occurred.
Transferred Employees shall participate as of the Closing Date under Welfare
Type Plans established or provided by Purchaser without, to the extent
practicable, any waiting periods, any evidence of insurability and any
preexisting physical or mental condition restrictions (except to the extent
applicable and unsatisfied under the Sellers' Welfare Type Plans), and Purchaser
shall provide credit, to the extent recognized by a similar Plan of the Sellers,
for claims incurred prior to the Closing Date for purposes of applying
deductibles, co-payments, out of pocket maximums and benefit maximums. Prior to
and following the Closing Date, the Sellers shall provide Purchaser with the
records and other data needed for Purchaser to comply with the provisions of
this Section. At Purchaser's request, the Sellers shall, to the extent
practicable, arrange to have coverage under their Welfare Type Plans extended
for the Transferred Employees through the end of the month in which the Closing
occurs.
Section 11.4. COBRA. Purchaser shall have sole responsibility for
"continuation coverage" benefits provided after the Closing Date under
Purchaser's group health plans to all Transferred Employees, and "qualified
beneficiaries" of Transferred Employees, for whom a "qualifying event" occurs
after the Closing Date. The Sellers shall be responsible for providing any
notices to the Transferred Employees required pursuant to the Consolidated
Omnibus Budget Reconciliation Act, and shall have sole responsibility for
"continuation coverage" benefits provided under the Sellers' group health plans
to all employees of the Sellers, and "qualified beneficiaries" of employees of
the
37
Sellers, for whom a "qualifying event" has occurred on or prior to the Closing
Date. The terms "continuation coverage," "qualified beneficiaries" and
"qualifying event" shall have the meanings ascribed to them under Section 4980B
of the Code and Sections 601-608 of ERISA.
Section 11.5. G & G Profit Sharing Plan. G&G currently sponsors and
maintains a qualified defined contribution profit sharing plan known as the G&G
Retirement Plan and Trust (the "Profit Sharing Plan") which provides certain
retirement benefits for certain eligible employees of the G&G Sellers, including
certain Transferred Employees. Effective as of the Closing Date, the Sellers and
Purchaser shall take all necessary and appropriate action to cause Purchaser to
assume the sponsorship of the Profit Sharing Plan. Purchaser and the Sellers
agree that the Purchaser shall be deemed the successor to and assignee of the
Sellers for all purposes under the Profit Sharing Plan, including for purposes
of determining the date on which a termination of employment, separation from
service or other similar event has occurred under the Profit Sharing Plan. As of
the Closing Date, the Sellers and their respective Affiliates shall have no
Liability for the payment of benefits to any participants accrued under the
Profit Sharing Plan before or after the Closing Date, and Purchaser shall
indemnify and hold the Sellers and their respective Affiliates harmless from and
against any Liability as a result of any claim against a Seller or its
Affiliates for the payment of benefits under the Profit Sharing Plan. Nothing
contained herein shall interfere with Purchaser's right to amend or terminate
the Profit Sharing Plan, in accordance with its terms and applicable law,
following its assumption.
Section 11.6. 401(k) Savings Plan. G&G is currently a Participating
employer in two 401(k) plans known as the Petrie Retail, Inc. 401(k) Savings
Plan and the Petrie Retail, Inc. 401(k) Plan for UAW Local 2326 Employees
(collectively the "Seller Savings Plans") which provide benefits for certain of
the Transferred Employees. Effective as of the Closing Date, Purchaser shall
adopt or provide a savings plan or plans with a cash or deferred arrangement
that is qualified under Section 401(a) of the Code on behalf of the Transferred
Employees who participated in the Seller Savings Plans (the "Purchaser Savings
Plan"), and that expressly provides that: (i) Transferred Employees who were
participants in the Seller Savings Plans immediately prior to the Closing Date
will continue their participation in the Purchaser Savings Plans as of the
Closing Date without interruption and (ii) all Transferred Employees will have
their months and years of service with the Sellers and their Affiliates which is
recognized under the Seller Savings Plans credited for eligibility, vesting and
other purposes for which service is taken into account under the Seller Savings
Plans. As soon as practicable after the Closing Date, the Sellers shall cause
the assets of the trust under the Seller Savings Plans in respect of the
aggregate benefits accrued (including unvested
38
benefits) under the Seller Savings Plans by the Transferred Employees to be
valued and transferred to the trust under the Purchaser Savings Plan; provided,
however, that Purchaser shall first have provided the Sellers with either a copy
of a favorable determination letter from the IRS or an opinion of counsel
reasonably satisfactory to the Sellers regarding the qualification, in form, of
the Purchaser Savings Plan under Section 401(a) of the Code. The assets to be
transferred from the trust under the Seller Savings Plans pursuant to this
Section 11.6 shall be in cash or, to the extent mutually agreed to by the
Sellers and Purchaser, a combination of cash, securities and other property;
provided, however, that any outstanding loans attributable to the accounts of
the Transferred Employees shall be transferred in kind. The actual amount
transferred from the trust under the Seller Savings Plans shall be adjusted to
reflect any normal and reasonable administrative expenses properly attributable
to the accounts of the Transferred Employees during the period following the
Closing Date. At the time the assets that are held in the trust with respect to
the Transferred Employees under the Seller Savings Plans are paid to the trust
under the Purchaser Savings Plans, the Purchaser Savings Plans shall assume all
liabilities of the Seller Savings Plans for the applicable benefits so
transferred, and such transfer shall be in full discharge of all obligations of
the Seller Savings Plans in respect thereof. During the period following the
Closing Date and preceding the transfer of assets and liabilities pursuant to
this Section 11.6, (i) the Sellers shall take such action as is necessary to
prevent a default by any Transferred Employee with an outstanding loan from the
Seller Savings Plans unless and until such Transferred Employee fails to make a
timely payment on such loan and (ii) Purchaser will cooperate with and assist
the Sellers or their designee in the continued administration of the Seller
Savings Plans, including, subject to the consent of the Transferred Employee,
collecting and remitting to the trustee of the Seller Savings Plans payroll
deductions relating to any outstanding loans. Notwithstanding the above, the
amount transferred to the trust under the Purchaser Savings Plans shall in no
event be less than the amount necessary to satisfy the requirements of Section
414(l) of the Code and ERISA.
Section 11.7. Puerto Rico Savings Plan. G&G is currently a
Participating employer in a plan known as the Petrie Retail, Inc. Savings Plan
for Puerto Rico Employees (the "Seller Puerto Rico Plan") which provides certain
deferred compensation benefits for certain eligible employees of the Sellers,
including certain of the Transferred Employees. Effective as of the Closing
Date, Purchaser shall adopt or provide a savings plan or plans with a cash or
deferred arrangement that is qualified under Section 1165(a) of the Puerto Rico
Internal Revenue Code of 1994 on behalf of the Transferred Employees (the
"Purchaser Puerto Rico Plan"), and that expressly provides that: (i) Transferred
Employees who were Participants in the Seller Puerto Rico Plan immediately prior
to the Closing Date will continue their participation in the Purchaser Puerto
Rico Plan as of the Closing
39
Date without interruption, and (ii) all Transferred Employees will have their
months and years of service with the Sellers and their Affiliates which is
recognized under the Seller Puerto Rico Plan credited for eligibility, vesting
and other purposes for which service is taken into account under the Seller
Puerto Rico Plan. As soon as practicable after the Closing Date, the Sellers
shall cause the assets of the trust under the Seller Puerto Rico Plan in respect
of the aggregate benefits accrued (including unvested benefits) under the Seller
Puerto Rico Plan by the Transferred Employees to be valued and transferred to
the trust under the Purchaser Puerto Rico Plan; provided, however, that
Purchaser shall first have provided the Sellers with either a copy of a
favorable determination letter from the Puerto Rico Department of Treasury or an
opinion of counsel reasonably satisfactory to the Sellers regarding the
qualification, in form, of the Purchaser Puerto Rico Plan under Section 1165 of
the Puerto Rico Internal Revenue Code of 1994. The assets to be transferred from
the trust under the Seller Puerto Rico Plan pursuant to this Section 11.7 shall
be in cash or, to the extent mutually agreed to by the Sellers and Purchaser, a
combination of cash, securities and other property; provided, however, any
outstanding loans attributable to the accounts of the Transferred Employees
shall be transferred in kind. The actual amount transferred from the trust under
the Seller Puerto Rico Plan shall be adjusted to reflect any normal and
reasonable administrative expenses properly attributable to the accounts of the
Transferred Employees during the period following the Closing Date. At the time
the assets that are held in the trust with respect to the Transferred Employees
under the Seller Puerto Rico Plan are paid to the trust under the Purchaser
Puerto Rico Plans, the Purchaser Puerto Rico Plans shall assume all liabilities
of the Seller Puerto Rico Plan for the applicable benefits so transferred, and
such transfer shall be in full discharge of all obligations of the Seller Puerto
Rico Plan in respect thereof. During the period following the Closing Date and
preceding the transfer of assets and liabilities pursuant to this Section 11.7,
(i) the Sellers shall take such action as is necessary to prevent a default by
any Transferred Employee with an outstanding loan from the Seller Puerto Rico
Plan unless and until such Transferred Employee fails to make a timely payment
on such loan and (ii) Purchaser will cooperate with and assist the Sellers or
their designee in the continued administration of the Seller Puerto Rico Plan,
including, subject to the consent of the Transferred Employee, collecting and
remitting to the trustee of the Seller Puerto Rico Plan payroll deductions
relating to any outstanding loans. Notwithstanding the above, the amount
transferred to the trust under the Purchaser Puerto Rico Plans shall in no event
be less than the amount necessary to satisfy the applicable requirements of the
Puerto Rico Internal Revenue Code of 1994.
Section 11.8. Vacation and Sick Leave. Each Transferred Employee
will be credited by Purchaser with any unused vacation and sick leave earned as
of the Closing Date
40
under the vacation and sick leave policy of the Sellers applicable to such
Transferred Employee, and the Sellers shall have no Liability therefor following
the Closing Date. Purchaser shall recognize service by each Transferred Employee
with the Sellers for purposes of determining entitlement to vacation and sick
leave following the Closing Date under the applicable vacation and sick leave
policy of the Sellers; provided, however, that this Section 11.8 shall not be
construed so as to entitle any Transferred Employee to be credited with any
benefits under Purchaser's vacation and sick leave policy with respect to any
period of employment prior to the Closing Date other than as provided in the
preceding sentence.
Section 11.9. Severance Benefits. Purchaser agrees that in the event
that any Business Employee does not accept employment with Purchaser, Purchaser
will provide such person with a severance benefit which is not less than one
week's salary for each year of such person's service with the Sellers and
Purchaser, but not less than two weeks or more than 12 weeks. Purchaser further
agrees that in the event that (i) any Business Employee whose terms and
conditions of employment are covered by a collective bargaining agreement with
any of the Sellers immediately prior to the Closing Date or (ii) any Transferred
Union Employee does not accept employment with Purchaser or is terminated by
Purchaser, other than for cause, during the one-year period immediately
following the Closing Date, Purchaser will make all payments required by the
terms of the collective bargaining agreements covering such persons.
Notwithstanding the foregoing, in the event the individuals set forth on
Schedule 11.9 are entitled to payment under the Change in Control Severance Plan
Covering Key Employees of Petrie Retail, Inc. and its Operating Subsidiaries
(the "Change in Control Plan"), Purchaser agrees to make all payments to such
individuals, on behalf of Sellers, required by the terms of the Change in
Control Plan, in lieu of the severance benefits required by the preceding
sentence. The parties agree that nothing contained in this Section 11.9 shall be
deemed to confer upon any Person other than the parties to this Agreement any
legal or equitable right, remedy or claim under or with respect to this
Agreement or any provision of this Agreement.
ARTICLE XII.
INDEMNIFICATION
Section 12.1. Indemnification by the Purchaser. From and after the
date of this Agreement, the Purchaser will indemnify, defend and hold the
Sellers, their Affiliates and their respective officers, directors, employees
and agents harmless from and against any and all claims, actions, suits,
demands, assessments, judgments, losses, liabilities, damages, penalties, costs
and expenses (including, without limitation, reasonable attorneys' fees to the
extent permitted by law and accounting fees and investigation costs)
(collectively, "Losses")
41
that may be incurred by any such indemnified party and, directly or indirectly,
resulting or arising from, related to or incurred in connection with (i) the use
or operation of the Purchased Assets or the conduct of the Business after the
Closing Date, (ii) the Assumed Liabilities, (iii) those liabilities and
obligations arising after the Closing Date under the Assigned Contracts included
in the Purchased Assets and acquired by the Purchaser hereunder; provided,
however, that this Section 12.1 does not apply to any such liabilities and
obligations arising from breaches of such Assigned Contracts or defaults under
Assigned Contracts by the Sellers, and (iv) any breach of any representation or
warranty or any covenant, obligation or agreement of the Purchaser contained in
this Agreement; provided, further, that Purchaser shall not be required to
indemnify the Sellers under this clause (iv) of this Article XII in respect of
any Losses related to any breach of any of the Purchaser's representations and
warranties ("Purchaser Breach Losses") until the aggregate amount of all
Purchaser Breach Losses exceeds $500,000, whereupon Purchaser shall be required
to indemnify the Sellers in respect of all Purchaser Breach Losses and not only
those in excess of $500,000.
Section 12.2. Indemnification by the Sellers. From and after the
date of this Agreement, each Seller will indemnify, defend and hold the
Purchaser, its Affiliates and their respective officers, directors, employees
and agents harmless from and against any and all Losses that may be incurred by
any such indemnified party, directly or indirectly resulting or arising from,
related to or incurred in connection with (i) the Excluded Liabilities, (ii) the
Excluded Assets (iii) liabilities in connection with the Non-Assignable Leases
and (iv) any breach of any representation or warranty or any covenant,
obligation or agreement of the Sellers contained in this Agreement; provided,
that, with respect to this clause (iv), the indemnification rights of Purchaser
with respect to Losses related to any breach of any of the Sellers'
representations and warranties set forth in (a) Section 3.1, Section 3.2 (other
than the representation and warranty made in clause (ii) thereof), Section 3.3
(other than the representation and warranty made in clause (ii) thereof),
Section 3.6(a) (second sentence only), Section 3.11, Section 3.15 (other than
with respect to the representations and warranties related to any state or local
sales or use Tax, ad valorem personal property Tax, payroll Tax arising after
January 31, 1998 or, with respect to the Leases, any real property Tax relating
to the Leases) and Section 3.17 ("Non-Business Seller Breach Losses") and (b)
clause (ii) of Section 3.2, clause (ii) of Section 3.3, Section 3.4, Section 3.6
(other than the second sentence of Section 3.6(a), Section 3.8, Section 3.9,
Section 3.10, Section 3.13 and Section 3.16 ("Business Seller Breach Losses"
and, together with the Business Seller Breach Losses, the "Seller Breach
Losses") shall survive only for the applicable Survival Periods; and provided,
further, that the Sellers shall not be required to indemnify Purchaser under
this clause (iv) of this Article XII in respect of any Seller Breach Loss until
the
42
aggregate amount of all Seller Breach Losses exceeds $500,000 (the "Aggregate
Basket Amount"), whereupon the Sellers shall be required to indemnify Purchaser
in respect of all Seller Breach Losses and not only those in excess of the
Aggregate Basket Amount; and provided, further, that the Sellers shall only be
liable under this clause (iv) of this Article XII for Business Seller Breach
Losses up to an aggregate amount of $4,500,000, it being understood that the
Sellers shall be liable under this Article XII for all Non-Business Seller
Breach Losses.
Section 12.3. Notice of Claim; Right to Participate In and Defend
Third Party Claim. (a) In the event that any indemnified party (which term
includes all Persons entitled to indemnification under Section 12 and their
successors and assigns) receives notice of the assertion of any claim, the
commencement of any suit, action or proceeding or the imposition of any penalty
or assessment by a third party in respect of which indemnity may be sought under
this Agreement ("Third Party Claim") and the indemnified party intends to seek
indemnity under this Agreement, then the indemnified party will promptly provide
the indemnifying party with notice of the Third Party Claim. The failure by an
indemnified party to notify an indemnifying party of a Third Party Claim does
not relieve the indemnifying party of any indemnification responsibility under
Section 12 unless and only to the extent that such failure adversely prejudices
the ability of the indemnifying party to defend such Third Party Claim.
(b) The indemnifying party has the right to control the defense,
compromise or settlement of the Third Party Claim with counsel of its choosing
if the indemnifying party delivers written notice to the indemnified party
within seven calendar days following the indemnifying party's receipt of notice
of the Third Party Claim from the indemnified party acknowledging its
obligations to indemnify the indemnified party with respect to such Third Party
Claim in accordance with this Section 12 and establishes security, or otherwise
demonstrates its ability, in a manner reasonably satisfactory to the indemnified
party to secure or provide for the indemnifying party's obligations under this
Section 12 with respect to such Third Party Claim. In its defense, compromise or
settlement of any Third Party Claim, the indemnifying party will provide the
indemnified party, in a timely manner, with such information with respect to
such defense, compromise or settlement as the indemnified party requests and
will not assume any position or take any action that would impose an obligation
of any kind or restrict the actions of the indemnified party. The indemnified
party will be entitled (at the indemnified party's expense) to participate in
the defense by the indemnifying party of any Third Party Claim with its own
counsel. Notwithstanding the foregoing, if the indemnifying party fails, in the
reasonable opinion of the indemnified party, to take reasonable steps necessary
to defend a Third Party Claim within ten calendar days after receiving notice
from the indemnified party that the indemnified party believes
43
the indemnifying party has failed to take such steps, the indemnified party may
assume its own defense, and the indemnifying party will be responsible for any
reasonable expenses therefor. Without the prior written consent of the
indemnified party, the indemnifying party will not enter into any settlement or
compromise of any Third Party Claim which could lead to liability or create any
financial or other obligation on the part of the indemnified party for which
the indemnified party is not entitled to reimbursement under this Agreement.
(c) In the event that the indemnifying party does not undertake the
defense, compromise or settlement of a Third Party Claim, the indemnified party
has the right to control the defense or settlement of such Third Party Claim
with counsel of its choosing at the cost of the indemnifying party; provided,
however, that the indemnified party will not settle or compromise any Third
Party Claim without the indemnifying party's prior written consent, unless (i)
the terms of such settlement or compromise release the indemnified party and the
indemnifying party from any and all liability with respect to the Third Party
Claim or (ii) the indemnifying party has not (x) acknowledged its obligations to
indemnify the indemnified party with respect to such Third Party Claim in
accordance with this Section 12 and (y) established security, or otherwise
demonstrated its ability, in a manner reasonably satisfactory to the indemnified
party to secure or provide for the indemnifying party's obligations under this
Section 12 with respect to such Third Party Claim.
(d) Any indemnifiable claim under this Agreement that is not a Third
Party Claim will be asserted by the indemnified party by promptly delivering
notice thereof to the indemnifying party. If the indemnifying party does not
respond to such notice within 15 calendar days after its receipt, it shall have
no further right to contest the validity of such claim.
Section 12.4. Right to Indemnification Not Affected by Knowledge.
Subject to Section 3.19, the right to indemnification, payment of Losses or
other remedy based on the representations, warranties, covenants and
obligations in this Agreement will not be affected by any investigation
conducted with respect to, or any knowledge acquired (or capable of being
acquired) at any time, whether before or after the execution and delivery of
this Agreement or the Closing Date, with respect to the accuracy or inaccuracy
of or compliance with, any such representation, warranty, covenant or
obligation.
ARTICLE XIII.
MISCELLANEOUS PROVISIONS
Section 13.1. Representations and Warranties. The representations
and warranties of the parties to this Agreement made in this Agreement, subject
to the exceptions thereto, will not be affected by any information furnished to,
or any
44
investigation conducted by, any of them or their representatives in connection
with the subject matter of this Agreement.
Section 13.2. Notices. All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given (a) when delivered
personally to the recipient, (b) when sent to the recipient by telecopy (receipt
electronically confirmed by sender's telecopy machine) if during normal business
hours of the recipient, otherwise on the next Business Day, (c) one (1) Business
Day after the date when sent to the recipient by reputable express courier
service (charges prepaid) or (d) seven (7) Business Days after the date when
mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid. Such notices, demands and other communications
will be sent to the Sellers and to Purchaser at the addresses indicated below:
If to Purchaser: G+G Retail, Inc.
520 Eighth Avenue
New York, New York 10018
Attention: Scott D. Galin
Facsimile No. (212) 695-4952
and
Pegasus Investors, L.P.
99 River Road
Cos Cob, Connecticut 06807
Attention: Jonathan Berger
Facsimile No. (203) 869-6940
With copies
(which shall not
constitute notice) to:
Kaye, Scholer, Fierman, Hays &
Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Mark S. Selinger, Esq.
Facsimile No. (212) 836-8689
and
Shack & Siegel, P.C.
530 Fifth Avenue
16th Floor
New York, New York 10036
Attention: Donald Shack, Esq.
Facsimile No. (212) 730-1964
45
If to the Sellers: Petrie Retail, Inc.
150 Meadowlands Parkway
Secaucus, New Jersey 07094
Attention: Michael B. McLearn
Facsimile No. (201) 392-0938
With a copy Willkie Farr & Gallagher
(which shall not 787 Seventh Avenue
constitute notice) to: New York, New York 10019
Attention: Cornelius T. Finnegan III
Facsimile No. (212) 728-8111
and
Hahn & Hessen, LLP
350 Fifth Avenue
Suite 3700
New York, New York 10118
Attention: Mark S. Indelicato
Facsimile No. (212) 594-7167
or to such other address as any party hereto may, from time to time, designate
in writing delivered pursuant to the terms of this Section.
Section 13.3. Amendments. The terms, provisions and conditions of
this Agreement may not be changed, modified or amended in any manner except by
an instrument in writing duly executed by each of the parties hereto.
Section 13.4. Assignment. This Agreement is binding upon and inures
to the benefit of the successors and assigns of each party to this Agreement
(including any trustee appointed in respect of the Sellers under the Bankruptcy
Code), but no rights, obligations or liabilities under this Agreement may be
assigned by any party without the prior written consent of the other parties
hereto, except that Purchaser shall have the right, on or prior to the Closing
Date, to assign all or any portion of its rights under this Agreement to one or
more wholly owned subsidiaries of Purchaser and/or to one or more entities under
common ownership with Purchaser; provided, however, that no such assignment
shall relieve Purchaser of its obligations hereunder.
Section 13.5. Announcements. All press releases, notices to
customers and suppliers and other announcements prior to the Closing Date with
respect to this Agreement and the transactions contemplated by this Agreement
shall be approved by both Purchaser and PRI prior to the issuance thereof;
provided that any party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing party shall
advise the other party (which shall be PRI in the case of disclosure proposed to
be made by Purchaser and Purchaser in the case of disclosure proposed to be made
by any of
46
the Sellers) prior to making such disclosure and provide such other party an
opportunity to review and comment on the proposed disclosure)
Section 13.6. Expenses. Except as otherwise set forth in this
Agreement, each party to this Agreement shall bear all of its legal, accounting,
investment banking and other expenses incurred by it or on its behalf in
connection with the transactions contemplated by this Agreement, whether or not
such transactions are consummated.
Section 13.7. Entire Agreement. This Agreement and the Ancillary
Agreements constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede and are in full substitution
for any and all prior agreements and understandings between them relating to
such subject matter. The Exhibits and Schedules to this Agreement are hereby
incorporated and made a part hereof and are an integral part of this Agreement.
Section 13.8. Descriptive Headings. The descriptive headings of the
several sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
Section 13.9. Counterparts. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by any one or more
parties hereto, and each such executed counterpart shall be, and shall be deemed
to be, an original, but all of which shall constitute, and shall be deemed to
constitute, in the aggregate but one and the same instrument.
Section 13.10. Governing Law; Jurisdiction. This Agreement shall be
construed, performed and enforced in accordance with, and governed by, the laws
of the State of New York, without giving effect to the principles of conflicts
of laws thereof. For so long as the Sellers are subject to the jurisdiction of
the Bankruptcy Court, the parties hereto irrevocably elect as the sole judicial
forum for the adjudication of any matters arising under or in connection with
this Agreement, and consent to the jurisdiction of, the Bankruptcy Court. After
the Sellers are no longer subject to the jurisdiction of the Bankruptcy Court,
the parties hereto irrevocably elect as the sole judicial forum for the
adjudication of any matters arising under or in connection with this Agreement,
and consent to the jurisdiction of, the courts of the County of New York, State
of New York or of the United States of America for the Southern District of New
York.
Section 13.11. Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction will be applied against any party.
Any references to any federal, state, local or foreign statute or law will also
47
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Unless the context otherwise requires: (a) a term has the
meaning assigned to it by this Agreement; (b) an accounting term not otherwise
defined has the meaning assigned to by GAAP; (c) the word "or" is not exclusive;
(d) the words "include", "includes" and "including" shall be deemed to be
followed by the words "without limitation"; (e) words in the singular include
the plural and in the plural include the singular; (f) provisions apply to
successive events and transactions; and (g) "$" means the currency of the United
States of America.
48
Section 13.12. Substantive Consolidation. Purchaser hereby
acknowledges that the Cases have been substantively consolidated and agrees that
the Sellers shall not be deemed to have breached any representations, warranties
or covenants hereunder solely as a result of such substantive consolidation.
Section 13.13. Severability. In the event that any one or more of
the provisions contained in this Agreement or in any other instrument referred
to herein shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument. Furthermore, in lieu of any such invalid
or unenforceable term or provision, the parties hereto intend that there shall
be added as a part of this Agreement a provision as similar in terms to such
invalid or unenforceable provision as may be possible and be valid and
enforceable.
IN WITNESS WHEREOF, the Sellers and Purchaser have executed and
delivered this Agreement as of the day and year first written above.
G & G SHOPS, INC.
By: /s/ Edwin J. Holman
---------------------------------
Name: Edwin J. Holman
Title: Chairman of the Board
PSL, INC.
By: /s/ Edwin J. Holman
---------------------------------
Name: Edwin J. Holman
Title: Chairman and Chief Executive
Officer
49
78 Nassau Street Corp.
458 Seventh Avenue Corporation
G & G Island Corporation
G & G Shops of Brooklyn, Inc.
G & G Shops of Maryland, Inc.
G & G Shops of Mid-Island Corp.
G & G Shops of Nanuet, Inc.
G & G Shops of New England, Inc.
G & G Shops of New York, Inc.
G & G Shops of North Carolina, Inc.
G & G Shops of Pennsylvania, Inc.
G & G Shops of Woodbridge, Inc.
Sco-Jef Mercantile Corp.
By: /s/ Edwin J. Holman
---------------------------------
Name: Edwin J. Holman
Title: Chairman of the Board
50
157 De Diego Corporation
61 Dr. Veve Corporation
Caribe Apparel Corporation
Christina El Senorial Corp.
Cumbres Apparel Corp.
Dayson's Cupey Corp.
Dayson's of Ponce, Inc.
El Canton Apparel Corp.
Franklin 198 Corp.
Franklin 203 Corp.
Franklin 203 Corp.
Franklin 221 Corp.
Franklin 253 Corp.
Marianne Estrella Corp.
Noya Carolina Corp.
N. Calimano MPA Corp.
Progresso-Corchado Corp.
Rave Apparel of Bayamon Corporation
Rave Apparel Corporation of Humacao
Whitney Stores, Inc.
By: /s/ Edwin J. Holman
---------------------------------
Name: Edwin J. Holman
Title: Chairman and Chief Executive
Officer
51
G+G RETAIL, INC.
By: /s/ Jonathan Berger
---------------------------------
Name: Jonathan Berger
Title: Vice President
PEGASUS PARTNERS, L.P.
By: /s/ Jonathan Berger
---------------------------------
Name: Jonathan Berger
Title: Vice President
As to Section 9.4 only.
PEGASUS RELATED PARTNERS, L.P.
By: /s/ Jonathan Berger
---------------------------------
Name: Jonathan Berger
Title: Vice President
As to Section 9.4 only.
EXHIBIT A
ASSIGNMENT AND ASSUMPTION AGREEMENT
KNOW ALL MEN BY THESE PRESENTS, that the Sellers (the "Assignors"
hereunder), pursuant to the terms of that certain Asset Purchase Agreement,
dated July 6, 1998, by and among the Sellers and Purchaser (the "Agreement"),
for and in consideration of Ten Dollars ($10.00) and other good and valuable
consideration from G+G Retail, Inc., a Delaware corporation ("Assignee"), the
receipt and sufficiency of which are hereby acknowledged by Assignors, do hereby
assign, transfer, sell and convey unto Assignee, its successors and assigns, all
of Assignors' right, title and interest in, to and under the Assigned Contracts
described on Exhibit A attached hereto and incorporated herein by reference,
together with all renewal options, if any, options to purchase and all other
rights privileges and benefits belonging to or held by Assignors under the
Assigned Contracts.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns
forever, subject, however, to all terms, conditions and provisions in the
Assigned Contracts.
In consideration for the foregoing assignment, Assignee hereby accepts the
foregoing assignment and agrees to assume, perform and be bound by all of the
duties, obligations and liabilities of Assignors under the Assigned Contracts
arising on and after the date hereof.
Assignors further agree to execute and deliver to Assignee such further
instruments of transfer and assignment as Assignee may from time to time
reasonably request in order to transfer and assign to and vest in Assignee all
of the rights, privileges and property hereby transferred and assigned or
intended so to be.
Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to such terms in the Agreement.
A-1
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed to be effective as of the ___ day of July, 1998.
G & G SHOPS, INC.
By:___________________________
Name:
Title:
PSL, INC.
By:___________________________
Name:
Title:
A-2
78 Nassau Street Corp.
458 Seventh Avenue Corporation
G & G Island Corporation
G & G Shops of Brooklyn, Inc.
G & G Shops of Maryland, Inc.
G & G Shops of Mid-Island Corp.
G & G Shops of Nanuet, Inc.
G & G Shops of New England, Inc.
G & G Shops of New York, Inc.
G & G Shops of North Carolina, Inc.
G & G Shops of Pennsylvania, Inc.
G & G Shops of Woodbridge, Inc.
Sco-Jef Mercantile Corp.
By:___________________________
Name:
Title:
A-3
157 De Diego Corporation
61 Dr. Veve Corporation
Caribe Apparel Corporation
Christina El Senorial Corp.
Cumbres Apparel Corp.
Dayson's Cupey Corp.
Dayson's of Ponce, Inc.
El Canton Apparel Corp.
Franklin 198 Corp.
Franklin 203 Corp.
Franklin 203 Corp.
Franklin 221 Corp.
Franklin 223 Corp.
Marianne Estrella Corp.
Noya Carolina Corp.
N. Calimano MDA Corp.
Progresso-Corchado Corp.
Rave Apparel Corp of Bayamon
Rave Apparel Corp of Humacao
Whitney Stores, Inc.
By:___________________________
Name:
Title:
A-4
G+G RETAIL, INC.
By:___________________________
Name:
Title:
A-5
EXHIBIT B
BILL OF SALE AND ASSUMPTION AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
That the Sellers, in consideration for their receipt of the Purchase Price and
for other good and valuable consideration paid to the Sellers by G+G RETAIL,
INC., a Delaware corporation (the "Purchaser"), receipt and sufficiency of
which is hereby accepted and acknowledged, have granted, bargained, sold,
transferred, assigned and delivered, and notwithstanding that the following
property may be conveyed by separate and specific transfer documents, by these
presents do hereby grant, bargain, sell, transfer, assign and deliver unto said
Purchaser all of their right, title and interest in the assets, property and
property rights collectively constituting the Purchased Assets owned by the
Sellers under that certain Asset Purchase Agreement, dated July 6, 1998, by and
among the Sellers and Purchaser (the "Agreement") (all capitalized terms used
herein and not otherwise defined shall have the meanings ascribed thereto in
the Agreement) and consisting of the following:
(a) all Leases, Leased Property and improvements and other
appurtenances thereto and rights in respect thereof;
(b) all inventories and other tangible personal property;
(c) all Equipment and Fixtures;
(d) all accounts receivable and notes receivable and other claims for
money or other obligations due to the Sellers including, without
limitation, construction allowances from landlords under the Leases,
vendor credits pursuant to the Assigned Contracts and, in each case,
all proceeds thereof;
(e) all of the Sellers' Intellectual Property, as well as all
goodwill associated with the Business;
(f) all right, title and interest in, to and under the Assigned
Contracts;
(g) all books and records relating primarily to the Business
(including such books and records as are contained in computerized
storage media), including books and records related to inventory,
purchasing, accounting, sales, maintenance, repairs, marketing,
banking, Intellectual Property, shipping records, personnel files for
Transferred Employees and all
B-1
files, customer and supplier lists, records, literature and
correspondence related to the Business; provided, however, that the
Sellers shall be entitled to make and retain copies of such books and
records to the extent they relate to Excluded Assets or Excluded
Liabilities or are otherwise required in the administration of the
estates of the Sellers and their affiliates and the Cases;
(h) to the extent legally assignable, all Permits;
(i) to the extent that any of the following relate to any Assumed
Liability or any of the Purchased Assets: claims, deposits,
prepayments, prepaid assets, refunds (excluding Tax refunds), causes
of action, rights of recovery, rights of setoff and rights of
recoupment of the Sellers as of the Closing Date, including, to the
extent assignable without additional cost to the Sellers, any such
rights of the Sellers under any property, casualty, workers'
compensation or other insurance policy or related insurance services
contract respecting the Business (other than prepaid premiums and
deposits); and
(j) all cash received by the Sellers on account of sales (including
credit card sales) or receivables from and after the Closing Date;
TO HAVE AND TO HOLD the same unto said Purchaser and its successors and assigns,
to and for its or their use, forever; and
The Sellers do hereby warrant that they are the lawful owners of the foregoing
Purchased Assets; that the foregoing Purchased Assets are free and clear of all
Liens (except as may otherwise be stated in the Agreement); and that the Sellers
have the right to sell the foregoing Purchased Assets; and
To the extent provided in the Agreement, the Sellers do hereby agree to warrant
and defend the sale of the foregoing Purchased Assets hereby made unto the
Purchaser and its successors and assigns against all persons whomsoever; and
The Sellers hereby constitute and appoint, effective as of the date hereof, the
Purchaser, its successors and assigns as the true and lawful attorney-in-fact of
the Sellers with full power of substitution in the name of such Purchaser or in
the name of the Sellers but for the benefit of the Purchaser (a) to collect for
the account of the Purchaser any item of the foregoing Purchased Assets and (b)
to institute and prosecute all proceedings which the Purchaser may in its
discretion deem proper in order to assert or enforce any right, title or
interest in or to the foregoing Purchased Assets and to defend or compromise any
and all actions, suits or proceedings in respect of any of the foregoing
Purchased Assets. The Purchaser shall be entitled to
B-2
retain for its own account any amounts collected pursuant to the foregoing
powers, including any amounts payable as interest in respect thereof. The
Purchaser shall indemnify and hold harmless each Seller for damages arising out
of the performance of its duties hereunder. THE SELLERS HEREBY DECLARE THAT THE
FOREGOING APPOINTMENT IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE AND
PERPETUAL AND SHALL NOT BE TERMINATED BY ANY ACT OF THE SELLERS OR THEIR
SUCCESSORS OR ASSIGNS, BY OPERATION OF LAW OR BY THE OCCURRENCE OF ANY OTHER
EVENT OR IN ANY OTHER MANNER.
B-3
IN WITNESS WHEREOF, the Sellers have caused this Bill of Sale and
Assumption Agreement to be executed by its proper corporate officers this ____
day of _____, 1998.
G & G SHOPS, INC.
BY: ____________________
Name:
Title:
PSL, INC.
BY: ____________________
Name:
Title:
B-4
78 Nassau Street Corp.
458 Seventh Avenue Corporation
G & G Island Corporation
G & G Shops of Brooklyn, Inc.
G & G Shops of Maryland, Inc.
G & G Shops of Mid-Island Corp.
G & G Shops of Nanuet, Inc.
G & G Shops of New England, Inc.
G & G Shops of New York, Inc.
G & G Shops of North Carolina, Inc.
G & G Shops of Pennsylvania, Inc.
G & G Shops of Woodbridge, Inc.
Sco-Jef Mercantile Corp.
By:_____________________________
Name:
Title:
B-5
157 De Diego Corporation
61 Dr. Veve Corporation
Caribe Apparel Corporation
Christina El Senorial Corp.
Cumbres Apparel Corp.
Dayson's Cupey Corp.
Dayson's of Ponce, Inc.
El Canton Apparel Corp.
Franklin 198 Corp.
Franklin 203 Corp.
Franklin 203 Corp.
Franklin 221 Corp.
Franklin 223 Corp.
Marianne Estrella Corp.
Noya Carolina Corp.
N. Calimano MDA Corp.
Progresso-Corchado Corp.
Rave Apparel Corp of Bayamon
Rave Apparel Corp of Humacao
Whitney Stores, Inc.
By:_________________________
Name:
Title:
B-6
UNITED STATES BANKRUPTCY COURT EXHIBIT C
SOUTHERN DISTRICT OF NEW YORK
- -------------------------------------X
In re : Chapter 11
PETRIE RETAIL, INC., et al. : Case No. 95 B 44528 (AJG)
: (Jointly Administered)
:
Debtors.
- -------------------------------------X
ORDER PURSUANT TO SECTIONS 105, 363, 365 AND 1146 OF THE
BANKRUPTCY CODE: (A) AUTHORIZING SUBJECT DEBTORS TO (i)
SELL SUBSTANTIALLY ALL OF THE ASSETS RELATING TO THE BUSINESS
OF G&G SHOPS, INC. AND CERTAIN OF ITS AFFILIATES, AND (ii)
ASSUME, ASSIGN AND/OR SELL CERTAIN UNEXPIRED LEASES AND
EXECUTORY CONTRACTS RELATING THERETO, FREE AND CLEAR OF ALL
LIENS, CLAIMS, INTERESTS AND ENCUMBRANCES; (B) APPROVING
ASSET PURCHASE AGREEMENT AND OTHER AGREEMENTS RELATED THERETO;
(C) AUTHORIZING SUBJECT DEBTORS TO CONSUMMATE ALL TRANSACTIONS
CONTEMPLATED BY SUCH AGREEMENTS; AND (D) GRANTING RELATED RELIEF
Upon the motion (the "Motion") dated July 6, 1998 of the
above-captioned debtors and debtors in possession (collectively, the "Debtors"),
for an order pursuant to sections 105, 363, 365 and 1146 of title 11 of the
United States Code (the "Bankruptcy Code"), as supplemented by Rules 2002, 4001,
6004, 6006, 9007, 9008 and 9019 of the Federal Rules of Bankruptcy Procedure
(the "Bankruptcy Rules"), inter alia, (a) approving that certain Asset Purchase
Agreement dated as of July __, 1998 (the "Purchase Agreement"),/1/ among G & G
Shops, Inc. ("G&G"), certain of the subsidiaries of G&G, PSL, Inc. ("PSL"),
____________________
/1/ Capitalized terms used herein and not otherwise defined have the meanings
ascribed to them in the Purchase Agreement or the Motion.
C-1
the other Debtors identified in the Purchase Agreement (together with G&G and
PSL, the "Subject Debtors") and G+G Retail, Inc. ("Purchaser"), a copy of
which was filed with the Court on July ___, 1998, and authorizing the Subject
Debtors to take all steps necessary or appropriate to consummate the Purchase
Agreement; (b) authorizing the sale of the Purchased Assets to Purchaser, free
and clear of all liens, claims, interests and encumbrances other than those to
which Purchaser has agreed to take subject, or to such other Successful Bidder;
(c) authorizing the Subject Debtors to assume and assign the Assigned Contracts
to Purchaser or to such other Successful Bidder; and (d) granting related
relief, all as more fully set forth in the Motion; and upon the affidavit of
Michael J. Kelly, Esq., submitted in support of the Motion pursuant to Local
Bankruptcy Rule 9077-1(a), the Order to Show Cause, dated July 6, 1998 (the
"Scheduling Order"), which scheduled (i) a hearing (the "Bidding Protections
Hearing") to consider approval of the Bidding Protections and other relief, and
(ii) a hearing (the "Sale Hearing," and together with the Bidding Protections
Hearing, the "Hearings") to consider the remainder of the relief sought by the
Motion; and the Scheduling Order having established a bar date of July 20, 1998
(the "Cure Objection Deadline"), by which landlords and other non-debtor parties
to the Assigned Contracts had to file objections setting forth, among other
things, all outstanding defaults and any purported conditions to assignment
under the Assigned Contracts, whether monetary or non-monetary, and claims of
every kind and character existing as of June 30, 1998, and any objections to
C-2
the Asset Purchase Agreement, or be forever barred from asserting other
defaults, pursuing any other claims which may have existed on said date under
the Assigned Contracts, and taking any action inconsistent with the Asset
Purchase Agreement; and the Bidding Protections Hearing having been held on July
15, 1998; and the Bidding Protections Order dated July ___, 1998 having been
entered; and the Sale Hearing having been held on July 27, 1998; and upon the
Motion and full record of the Hearings and upon all of the submissions filed
herein and all prior proceedings in these cases, and upon the affidavits of
service and Publication of the Notice reflecting compliance with the notice
requirements contained in the Scheduling Order; and after due deliberation and
sufficient cause appearing therefor; it is
HEREBY FOUND AND DETERMINED, that:
a. The Court has jurisdiction to hear and determine the Motion and all
related matters pursuant to 28 U.S.C. (S)(S) 1334 and 157 and the "Standing
Order of Referral of Cases to Bankruptcy Judges" of the United States District
Court for the Southern District of New York, dated December 10, 1984 (Ward,
Acting C.J.). Venue of this proceeding in this district is proper pursuant to 28
U.S.C. (S) 1409. The Motion and Hearings constitute core proceedings pursuant to
28 U.S.C. (S) 157(b)(2)(A), (B), (N) and (O). The statutory predicates for the
relief granted herein are sections 105, 363, 365 and 1146 of the Bankruptcy
Code, as
C-3
complemented by Bankruptcy Rules 2002, 4001, 6004, 6006, 9007, 9008 and 9019.
b. The Debtors have demonstrated sufficient cause to expedite the
Hearings on and determination of the Motion and the related relief requested in
connection therewith; delay will cause the Debtors and their estates irreparable
harm.
c. Proper, timely and sufficient notice of the Motion and the Hearings
was provided by direct mail and publication of the Notice and is sufficient
pursuant to Bankruptcy Rules 2002, 4001, 6004 and 6006 and the Scheduling Order.
No other or further notice of the Motion, the Hearings, or the entry of this
Order is necessary. A reasonable opportunity to object to or be heard regarding
the relief requested in the Motion has been afforded to all interested parties
including (i) each creditor listed on the Debtors' schedules as holding a claim
in an undisputed, liquidated amount greater than zero or that timely filed a
proof of claim in these cases; (ii) the United States Trustee; (iii) all persons
who are known by the Subject Debtors to have liens upon or other interests in
the Purchased Assets; (iv) all parties to the Assigned Contracts at the notice
addresses required in the Assigned Contracts; (v) the Securities and Exchange
Commission in Washington, D.C.; (vi) the Pension Benefit Guaranty Corporation;
(vii) the District Director of the Internal Revenue Service for the Southern
District of New York; (viii) the United States Attorney for the Southern
District of New York; (ix) the New York State Commissioner of Taxation and the
equivalent taxing
C-4
authorities for each of the states in which the Subject Debtors have operated
the business; and (x) all parties who have appeared and filed demands for copies
of all notices and other papers.
d. The Subject Debtors have advanced sound and sufficient business
justification, and it is a reasonable exercise of the Subject Debtors' business
judgment to (i) sell all their right, title and interest in and to the Purchased
Assets upon the terms and conditions set forth in the Purchase Agreement, (ii)
assume and assign to Purchaser the Assigned Contracts and (iii) consummate all
transactions contemplated by the Purchase Agreement.
e. The provisions of sections 363(b), 363(f) and 365 of the Bankruptcy
Code have been complied with and are applicable as to the Purchased Assets.
f. Consummation of the Purchase Agreement and the related agreements
(collectively, the "Transaction Documents") is in the best interests of the
Subject Debtors, the other Debtors herein and their estates, all creditors,
equity holders and other parties in interest.
g. All of the transactions contemplated by the Transaction Documents,
including the sale of the Purchased Assets, are properly authorized under
sections 105, 363, 365 and 1146 of the Bankruptcy Code.
h. The Purchase Agreement incorporates the highest or otherwise best
offer received for the Purchase Assets following
C-5
a period of active and thorough solicitation and the conduct of an open and
complete sale process managed by the Debtors and CIBC Oppenheimer reasonably
calculated to yield the highest or otherwise best offer for the Purchased
Assets.
i. The sale, conveyance and assignment of the Purchased Assets pursuant
to the Transaction Documents is free and clear of any and all liens, security
interests, pledges, hypothecations, encumbrances, claims (including but not
limited to any and all "claims" as defined in Section 101(5) of the Bankruptcy
Code and any and all rights and claims under any bulk transfer statutes and
similar laws) or other interests of whatever kind or nature in or with respect
to any of the Purchased Assets (including but not limited to any options or
rights to purchase such assets and any mechanic's or tax liens), whether arising
by agreement, by statute or otherwise and whether arising before, on or after
the date on which these chapter 11 cases were commenced (collectively, "Liens").
j. The Subject Debtors and the Purchaser are exempt from and excused from
complying with any jurisdiction's bulk transfer laws or any laws or regulations
requiring notice to any taxing authority of any jurisdiction prior to, or other
laws which might directly or indirectly affect, consummation of the transactions
contemplated by the Transaction Documents or the relief requested in the Motion
and the provisions of this Order.
k. The Transaction Documents: (i) were proposed, negotiated, and entered
into in good faith after arms-length
C-6
bargaining by the parties; and (ii) provide the Subject Debtors with the highest
or otherwise best offer received for the Purchased Assets. Purchaser is a good
faith purchaser pursuant to section 363(m) of the Bankruptcy Code and entitled
to the protections thereunder.
l. In connection with the assumption and assignment of the Assigned
Contracts, at or prior to the Closing, the Subject Debtors shall pay all cure
amounts to the non-debtor parties to the Assigned Contracts as required by the
Bankruptcy Code or the Court, provided that if the Debtors dispute the cure
amount of an Assigned Contract, the Debtors will establish an escrow fund and
deposit the full cure amount asserted by the non-Debtor party to the contract
(or such lesser amount as ordered by the Court) into the escrow fund, to be held
in escrow subject to further order of the Court or agreement of the parties.
m. The Purchaser has provided adequate assurance of its future
performance under the Assigned Contracts and the proposed assumption and
assignment of the Assigned Contracts satisfy the requirements of the Bankruptcy
Code including, inter alia, sections 365(b)(1) and (3) and 365(f) to the extent
applicable. Specifically, the record has established that: (i) Jay Galin has
been President of G&G since 1968 and Scott Galin has been Executive Vice
President of G&G since 1991, Jay and Scott Galin will have an equity interest in
the Purchaser and will continue to operate and manage the business for the
Purchaser; (ii) Jay and Scott Galin have substantial proven retailing experience
and
C-7
ability to efficiently and effectively operate the Business at the premises
covered by the Assigned Contracts in accordance with the terms of the Assigned
Contracts and Jay and Scott Galin have experience in operating stores having the
same or similar uses as permitted under the Assigned Contracts, in first-class
shopping centers sufficient to enable it to successfully operate the premises
for the permitted uses under the Assigned Contracts; (iii) Jay and Scott Galin
have reputation and experience and the Purchaser has a financial condition equal
to or better than each of the Debtors which is a party to any of the Assigned
Contracts; (iv) the assignment of the Assigned Contracts to Purchaser does not
materially adversely affect the quality or type of business operation conducted
at the Stores by the Debtors heretofore; (v) Purchaser will continue to operate
the business and the stores under the existing trade names and pursuant to the
other terms of the Assigned Contracts; and (vi) assuming the value of the
Purchased Assets minus the value of the Assumed Liabilities totals an amount
equal to the cash Purchase Price, the net worth of Purchaser is in excess of
$30,000,000.
n. The assignments of the Assigned Contracts shall be effective
notwithstanding any provisions precluding or impairing the rights of the Subject
Debtors to assign the Assigned Contracts or preventing or restricting Purchaser
from operating retail stores under its trade names.
C-8
o. The Assigned Contracts are valid and binding, in full force and
effect, and enforceable in accordance with their terms.
p. The sale of the Purchased Assets to the Purchaser and the assumption
by the Purchaser of the Assumed Liabilities will maximize the assets of the
estates of the Subject Debtors and is in contemplation of the formulation of a
plan of reorganization and necessary to the confirmation and consummation of any
plan of reorganization. Accordingly, the sale of the Purchased Assets shall be
deemed a sale "under a plan" within the meaning of section 1146(c) of the
Bankruptcy Code exempt from any and all stamp taxes, recording taxes and similar
taxes.
NOW, THEREFORE, IT IS HEREBY ADJUDGED, DECREED AND ORDERED that:
1. The findings of fact set forth above and conclusions of law stated
herein shall constitute the Court's findings of fact and conclusions of law
pursuant to Bankruptcy Rule 7052, made applicable to this proceeding pursuant to
Bankruptcy Rule 9014. To the extent any finding of fact later shall be
determined to be a conclusion of law, it shall be so deemed, and to the extent
any conclusion of law later shall be determined to be a finding of fact, it
shall be so deemed.
2. The Motion is granted; provided, however, that notwithstanding
anything contained herein or in the Transaction Documents to the contrary, the
Subject Debtors shall be deemed
C-9
to have assumed and assigned each Assigned Contract as of the date of, and only
upon the Closing, and absent such Closing, each Assigned Contract shall neither
be deemed assumed nor assigned and shall in all respects be subject to further
administration under the Bankruptcy Code.
3. The Transaction Documents are hereby approved. The Subject Debtors are
authorized to sell to Purchaser all of their right, title and interest in and to
the Purchased Assets pursuant to the terms of the Transaction Documents.
4. The Debtors are authorized and empowered to execute, deliver and
perform under the Transaction Documents and all agreements and documents
contemplated thereby and related thereto, and to take or perform such actions
and expend such funds as may be necessary to effectuate the terms of the
Transaction Documents, all transactions related thereto and this Order.
5. From and after the Closing Date, the Purchaser shall assume, satisfy
and discharge the Assumed Liabilities and shall defend, indemnify and hold the
Debtors harmless from and against any and all liabilities for any claim or
pecuniary loss arising out of or related to the Assumed Liabilities from and
after the Closing Date.
6. The Purchaser has not assumed or otherwise become obligated for any of
the Excluded Liabilities and has not purchased any of the Excluded Assets.
Consequently, all holders
C-10
of Excluded Liabilities are hereby enjoined from asserting or prosecuting any
claim or cause of action against the Purchaser or the Purchased Assets to
recover on account of any Excluded Liabilities. All persons having any interest
in the Excluded Assets are hereby enjoined from asserting or prosecuting any
claim or cause of action against the Purchaser for any liability associated with
the Excluded Assets.
7. As of the Closing Date, the Seller shall not be responsible for any
Assumed Liability and all holders of Assumed Liabilities are hereby enjoined
from asserting or prosecuting any claim or cause of action against the Debtors
or their estates to recover any claim that is an Assumed Liability. All persons
having any interest in the Assumed Liabilities are hereby enjoined from
asserting or prosecuting any claim or cause of action against the Debtors for
any liability associated with the Assumed Liabilities.
8. Pursuant to sections 105(a) and 363(f) of the Bankruptcy Code, the
Purchased Assets shall be sold free and clear of all Liens of any kind or
nature, except for the Permitted Liens. Nothing contained herein shall be deemed
to be an acknowledgment or consent by the Debtors as to the amount, priority or
allowance of any claim or validity, force and effect, or immunity from
avoidance, of any Lien.
9. Upon the Closing Date, each of the Debtors' creditors, except holders
of Permitted Liens with respect to such liens, is authorized and directed to
execute such documents and take all
C-11
other action as may be necessary to release its Liens upon or other interests in
the Purchased Assets.
10. The Subject Debtors are authorized to pay or to provide funds to the
Purchaser to pay all cure amounts with respect to the Assigned Contracts
pursuant to the Transaction Documents (or, if disputed, paying into escrow the
disputed cure amount or such lesser amount as ordered by the Court) so that all
such payments are made within ten (10) business days of the Closing.
11. All parties to the Assigned Contracts are forever barred and enjoined
from raising or asserting against the Debtors and the Purchaser any default or
breach under, or any claim or pecuniary loss, or condition to assignment,
arising under or related to, the Assigned Contracts existing as of the Closing
or arising by reason of the Closing unless such default, breach, claim,
pecuniary loss or condition was raised or asserted prior to the Cure Objection
Deadline in strict accordance with the provisions of the Scheduling Order.
12. The Assigned Contracts, upon assignment to the Purchaser, shall be
deemed valid and binding, in full force and effect and enforceable in accordance
with their terms, subject to the provisions of this Order, and, pursuant to
section 365(k) of the Bankruptcy Code, the Subject Debtors shall be relieved
from any further liability, except for any cure obligations as herein provided.
C-12
13. Despite any provision to the contrary that entitles any party to or
beneficiary of any Assigned Contract to any compensation, injunctive relief or
other right of any kind, by reason of the assignment of any Assigned Contract,
failure to comply with such provision in connection with the consummation of the
Transaction Documents shall not be a default or triggering event under any
Assigned Contract and such provision shall not be enforceable.
14. Pursuant to section 1146 of the Bankruptcy Code, all transfers and the
delivery of instruments of transfer under the Transaction Documents are exempt
from any and all stamp taxes, recording taxes and similar taxes imposed upon
such sale or transfer under any Federal, State or local law.
15. This Order shall be binding upon and inure to the benefit of any
successors and assigns of the Purchaser and the Subject Debtors, including
without limitation, any trustee appointed for the Subject Debtors in their
respective chapter 11 cases or subsequent chapter 7 cases.
16. Purchaser is hereby determined to be a good faith purchaser under
section 363(m) of the Bankruptcy Code, and is entitled to the protections
afforded to a good faith purchaser thereunder.
17. Pursuant to this Court's Order dated January 12, 1999: (A) Approving
And Authorizing Debtors to Enter into (i) Fourth Amendment To Revolving Credit
And Guaranty Agreement And (ii)
C-13
Third Amendment To Related Junior Participation Agreement; and (B) Granting
Other Related Relief (the "January 12 Order"), the net proceeds from the sale of
the Purchased Assets shall (a) first promptly be paid to The Chase Manhattan
Bank, as Agent for the Debtors' debtor-in-possession lenders under the
debtor-in-possession financing agreement (the "DIP Agreement"), and applied to
repay in full, if such proceeds are sufficient, all Obligations under and as
defined in the DIP Agreement (other than, prior to the Senior Loan Termination
Date (as defined in the DIP Agreement), fees owed to Warburg, Pincus Ventures,
L.P. pursuant to Section 2.19 of the DIP Agreement); and (b) thereafter, be
applied, distributed and utilized in accordance with the remaining provisions of
the January 12 Order.
18. The Debtors shall be authorized and empowered (but not directed) to
pay, or establish an escrow account for, all or any portion of any real estate
or personal property taxes (including any interest or penalties thereon) on the
Purchased Assets.
19. This Order shall be effective and enforceable immediately upon entry.
20. The failure specifically to include any particular provisions of the
Transaction Documents in this Order shall not diminish or impair the efficacy of
such provisions, it being the intent of the Court that the Transaction Documents
are approved in their entirety.
21. The Court shall retain sole and exclusive jurisdiction over all
matters arising from or related to the Purchased
C-14
Assets, the Motion, the Transaction Documents, the implementation thereof and
this Order.
Dated: New York, New York
July ____, 1998
______________________________
UNITED STATES BANKRUPTCY JUDGE
C-15
EXHIBIT D
UNITED STATES BANKRUPTCY COURT HEARING DATE: JULY __, 1998
SOUTHERN DISTRICT OF NEW YORK HEARING TIME: _____ _.M.
- --------------------------------------------------X
:
In re : Chapter 11
:
PETRIE RETAIL, INC., et al., : Case No. 95 B 44528 (AJG)
: (Jointly Administered)
Debtors. :
:
- --------------------------------------------------X
ORDER APPROVING TOPPING FEE AND EXPENSE REIMBURSEMENT
AND ESTABLISHING BIDDING PROCEDURES RELATED TO ASSET
PURCHASE AGREEMENT PROVIDING FOR THE SALE OF
SUBSTANTIALLY ALL OF THE ASSETS RELATING TO THE BUSINESS
OF G & G SHOPS, INC. AND CERTAIN OF ITS AFFILIATES AND
RELATED TRANSACTIONS
Upon the motion (the "Motion"), dated July 6, 1998, of G & G
Shops, Inc. ("G&G"), PSL, Inc. ("PSL") and certain subsidiaries and/or
affiliates of Petrie Retail, Inc. ("PRI") and G&G (collectively, the "Seller"),
certain of the above-captioned debtors and debtors in possession (collectively
with the Seller, the "Debtors"), for orders, (l) approving a topping fee and
expense reimbursement (respectively, the "Topping Fee" and "Expense
Reimbursement") and establishing bidding procedures for competing bids to
purchase the Purchased Assets (defined below), and establishing procedures for
determining Cure Obligations (as defined in the Motion), and (2) pursuant to
sections 105, 363, 365 and 1146 of title 11 of the United States Code (the
"Bankruptcy Code"), as supplemented by Rules 2002, 4001, 6004, 6006, 9007 and
9008 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"),
among other things: (a) authorizing
D-1
and approving an asset purchase agreement substantially in the form of that
certain Asset Purchase Agreement dated as of July 6, 1998 (the "Purchase
Agreement"), among the Seller and G & G Retail, Inc. ("Purchaser"), a copy of
which was filed with the Court on July __, 1998; (b) authorizing the sale of
substantially all of the assets relating to the business of G&G and certain of
its affiliates in accordance with the Purchase Agreement (as defined in the
Purchase Agreement, the "Purchased Assets"),/1/ to Purchaser under the Purchase
Agreement, free and clear of all liens, claims, interests and encumbrances
other than those to which Purchaser has agreed to take subject; (c) authorizing
the Seller to assume, assign and/or sell the Assigned Contracts; (d) authorizing
the Seller to take all steps necessary or appropriate to consummate the Purchase
Agreement and to consummate all transactions related thereto; and (e) granting
related relief, all as more fully set forth in the Motion; and this Court having
scheduled a hearing (the "Bidding Protections Hearing") to consider (i)
authorizing and approving the Topping Fee and Expense Reimbursement and (ii)
establishing bidding procedures for competing offers for the Purchased Assets,
by Order to Show Cause, dated July __, 1998 (the "Order to Show Cause"); and
notice of the Bidding Protections Hearing and that portion of the relief
requested by the Motion to be considered at the Bidding Protections Hearing
having been provided in the form and manner prescribed in the Order to Show
Cause; and such notice
_____________
1. All capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Motion.
D-2
constituting due and adequate notice of the Bidding Protections Hearing and no
other or further notice being necessary or required; and the Bidding Protections
Hearing having been held on July __, 1998; and it appearing, based upon the
Motion, the full record of these cases and the record of the Bidding Protections
Hearing, that the relief requested at such hearing is in the best interests of
the Debtors, their estates, creditors and other parties in interest; and after
due deliberation and sufficient cause appearing therefor, it is
ORDERED, that the Topping Fee and Expense Reimbursement provisions
contained in Section 9.2 of the Purchase Agreement are approved in all respects;
and it is further
ORDERED, that the Debtors are authorized and empowered to pay the Topping
Fee and Expense Reimbursement to Pegasus Investors, L.P., as required under and
pursuant to the Purchase Agreement, within five (5) business days after Pegasus
Investors, L.P. becomes entitled thereto without further order of the Court; and
it is further
ORDERED, that the Debtors are authorized and empowered to take or perform
such actions and expend such funds as may be necessary to effectuate the terms
of this Order; and it is further
ORDERED, that the Bidding Procedures set forth in paragraph seventy-six
(76) of the Motion are approved; and it is further
D-3
ORDERED, that any offer to purchase the Purchased Assets must conform
with the Bidding Procedures; and it is further
ORDERED, that parties desiring to submit a competing bid for the
Purchased Assets must file and serve in accordance with the Bidding Procedures
a written intention to bid on the Purchased Assets upon: (i) Willkie Farr &
Gallagher, Attorneys for the Debtors, 787 Seventh Avenue, New York, New York
10019-6099, Attention: Michael J. Kelly, Esq., (ii) the United States Trustee,
80 Broad Street, Third Floor, New York, New York 10004, Attention: Patricia
Schrage, Esq.; (iii) Zalkin, Rodin & Goodman LLP, Attorneys for Chase, 750 Third
Avenue, New York, New York 10017, Attention: Richard Toder, Esq.; (iv) Hahn &
Hessen, Attorneys for the Creditors' Committee, 350 Fifth Avenue, Suite 3700,
New York, New York 10118, Attention: William Fabrizio, Esq.; (v) Kaye, Scholer,
Fierman, Hays & Handler, LLP, Attorneys for the Purchaser, 425 Park Avenue, New
York, New York, Attention: Herbert S. Edelman, Esq. and Mark S. Selinger, Esq.,
and Shack & Siegel, P.C., Attorneys for Jay and Scott Galin, 530 Fifth Avenue,
16th Floor, New York, New York 10036, Attention: Donald Shack, Esq.; and (vi)
CIBC Oppenheimer Corp., 425 Lexington Avenue, 3rd Floor, New York, New York
10017, Attention: Brian Gerson, so as to be received not later than seventy-two
(72) hours prior to the Sale Hearing; and it is further
D-4
ORDERED, that this Court shall retain exclusive jurisdiction to
consider and resolve any matter, claim or dispute arising from or relating to
the Topping Fee and Expense Reimbursement or the implementation of this Order.
Dated: New York, New York
July __, 1998
______________________________
UNITED STATES BANKRUPTCY JUDGE
D-5