Exhibit 2.4
This STOCK PURCHASE AGREEMENT (this "Agreement") dated as of
February 11, 2005, is entered into by and among HANOVER DIRECT, INC., a Delaware
corporation ("HDI"), The Company Store Group, LLC, a Delaware limited liability
company and a wholly-owned subsidiary of HDI (the "Seller"), and GUMP'S
HOLDINGS, LLC (formerly known as 4Q HOLDINGS LLC), a Nevada limited liability
company (the "Purchaser").
W I T N E S S E T H:
WHEREAS, Gump's Corp., a California corporation and a
wholly-owned subsidiary of the Seller ("Gump's Corp."), and Gump's by Mail,
Inc., a Delaware corporation and a wholly-owned subsidiary of the Seller
("Gump's by Mail"; each of Gump's Corp. and Gump's by Mail are referred to as a
"Company"; collectively, they are referred to as the "Companies"), are engaged
in a line of business in which they sell merchandise to the general public under
the "Gump's" or "Gump's by Mail" brand through a retail store, mail-order
catalogs, telephone sales and the Internet (the "Business"); provided, however,
that the Business does not include the provision of back-end services related to
order taking, order and payment processing, warehousing and fulfillment, and
return processing to third parties (including Affiliates (as defined in Section
6.11) of the Companies) by Keystone Internet Services, LLC ("Keystone"); and
WHEREAS, subject to the terms and conditions of this
Agreement, the Seller desires to sell to the Purchaser, and the Purchaser
desires to purchase from the Seller, all of the issued and outstanding capital
stock of each Company.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement and of the representations, warranties, conditions,
agreements and promises contained herein and other good and valuable
consideration, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF CAPITAL STOCK
1.1. Purchase and Sale. On the Closing Date (as hereinafter
defined), the Seller shall sell, convey, transfer, assign and deliver to the
Purchaser, and the Purchaser shall purchase, acquire and accept from the Seller,
the Acquired Assets and all of the issued and outstanding shares of capital
stock of the Companies, which, in the case of Gump's Corp., consists of 1,000
shares of common stock, no par value per share, and, in the case of Gump's by
Mail, consists of 1,000 shares of common stock, par value $0.01 per share
(collectively, the "Shares").
1.2. Purchase Price.
(a) Purchase Price. The purchase price (the "Purchase Price")
for the Shares and the web domain names used in the Business and to be acquired
by the Purchaser from
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Affiliates of the Seller pursuant to the Domain Name Purchase Agreement (as
hereinafter defined) (such web domain names being referred to as the "Acquired
Assets") shall be cash in the amount of:
(i) $8.5 million, plus the reimbursement of all
security deposits paid by HDI, the Seller or the Companies under any lease for
real property that is being assumed by the Purchaser, which security deposits
and related leases are listed on Schedule 1.2(a)(iii), plus
(ii) the reimbursement of all vendor deposits paid by
HDI, the Seller or the Companies in respect of the Companies or the Business
under any agreements, which vendor deposits and agreements are listed on
Schedule 1.2(a)(iv), plus
(iii) the reimbursement of the Purchaser's pro rata
share of rent for the facilities listed on Schedule 2.1(g)(ii) paid by HDI and
payroll for the employees of the Companies paid by HDI for any future services,
each up through the date of Closing, less
(iv) the amount of the Earnest Money Deposit (as
defined in Section 1.8) which Earnest Money Deposit has been previously paid by
the Purchaser to HDI, less
(v) $10.00, plus or minus
(vi) the Cash Shortfall Adjustment and the Working
Capital Adjustment provided for in Sections 1.3 and 1.7, respectively.
(b) Payment. The Purchaser shall pay the Purchase Price at
Closing by wire transfer of immediately available funds to an account designated
in writing by the Seller to the Purchaser, such designation of account to be
made no later than two (2) business days prior to the Closing Date.
(c) Allocation of Purchase Price. The allocation of the
Purchase Price among the Shares, the Acquired Assets and the non-compete and
non-solicitation covenant set forth in Section 3.8 shall be as set forth on
Schedule 1.2(c). The Purchaser, the Seller and their Affiliates shall follow
such allocation in determining and reporting their liabilities for federal,
state, local and foreign tax returns filed by them subsequent to the Closing
Date.
1.3. Closing. The closing (the "Closing") for the consummation
of the transactions contemplated by this Agreement shall take place at the
offices of Brown Raysman Millstein Felder & Steiner, 900 Third Avenue, New York,
New York 10022, or such other place as the Seller and the Purchaser shall agree,
at 5:00 p.m., local time, on the earlier of (i) the second business day after
the date on which the parties receive the consents referred to in Section
4.1(d)(iii) and (ii) the second business days after the date the 15-day second
notice period pursuant to Section 13.2 of the Lease Agreements referred to in
Section 4.1(d)(iii) expires, or such other date and time agreed to by the Seller
and the Purchaser (such date of the Closing being hereinafter called the
"Closing Date"). The Purchase Price shall be adjusted by the cash short-fall of
the Business from January 24, 2005 through the Closing Date. Such cash
short-fall shall be validated in the post-closing adjustment period and reflect
the infusion by HDI of loan capital to the Companies, as measured by the
increase in the credit lines of the Companies in HDI's Revolving Credit Facility
with Wachovia Bank, National Association (successor by
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merger to Congress Financial Corporation) (the "Cash Shortfall Adjustment"), to
cover the cash short-fall of the Business between January 24, 2005 and the
Closing Date and shall be paid together with the Working Capital Adjustment
referred to in Section 1.7. The Purchaser shall not be liable for any delay in
the Closing or for the consequences of any delay in fulfilling any of its
obligations under this Agreement if such delay is due to a Force Majeure Event
or the failure of the Seller to obtain the consent of either of its lenders and
the related release of their liens on the stock and assets of the Companies
before the Closing Date. A "Force Majeure Event" shall mean a cause beyond the
reasonable control of the Party including, but not limited to: acts of God,
earthquake, fire, flood, extreme weather or other natural calamity, national
emergencies, insurrections, riots, acts of terrorism or wars, provided that such
cause does not arise from, or in connection with, a failure by the Party
asserting that the Force Majeure Event affected its performance under this
Agreement. The Closing shall be deemed to be effective as of the close of
business on the Closing Date notwithstanding that the Purchaser shall be
responsible for the Cash Shortfall Adjustment from January 24, 2005 through the
Closing Date as described above.
1.4. Instruments of Conveyance and Transfer. At the Closing
the Seller shall deliver to the Purchaser share certificates representing all of
the Shares, duly endorsed for transfer or accompanied by duly executed stock
power(s) conveying the Shares to the Purchaser.
1.5. Post-Closing Assurances. HDI and the Seller shall, and
shall cause their Affiliates to, at any time and from time to time after the
Closing Date, upon the reasonable request of the Purchaser, do, execute,
acknowledge, deliver and file, or cause to be done, executed, acknowledged,
delivered or filed, all such further acts, deeds, transfers, conveyances,
assignments or assurances as may be reasonably required for the better
transferring, conveying, assigning and assuring to the Purchaser, or for the
aiding and assisting in the reducing to possession by the Purchaser of, the
Shares and the Acquired Assets.
1.6. Assignment of Contracts. Notwithstanding anything to the
contrary contained in this Agreement, this Agreement shall not constitute an
agreement or attempt to transfer, sublease or assign any contract, license,
lease, sales order, purchase order or other agreement or any claim or right of
any benefit arising thereunder or resulting therefrom or any governmental
permit, license, franchise, approval, registration or certificate of occupancy
(collectively, the "Rights") to the extent that an attempted sale, transfer,
sublease or assignment thereof, without the consent of any other party thereto,
would constitute a breach thereof or in any way adversely affect the Purchaser's
rights to receive the benefits thereunder.
In order, however, that the full value of any Rights may be
realized for the benefit of the Purchaser, HDI and the Seller shall cause their
Affiliates to, and at the reasonable request and under the direction of the
Purchaser, in the name of the Purchaser, take all such action and do or cause to
be done all such things that are necessary and advisable in order that the
rights and obligations of such Affiliate in connection with such Rights may be
performed in such manner that the value of such Rights shall be preserved and
shall inure to the exclusive benefit of the Purchaser (or to the benefit of the
Purchaser to the same extent as such Affiliate enjoyed prior to the date hereof
if such Affiliate was not entitled to the exclusive benefit thereof). Any
expenses incurred by HDI, the Seller or their Affiliates pursuant to this
Section 1.6 shall be borne 50-50 by HDI and the Purchaser.
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1.7. Post-Closing Adjustment.
(a) General. There shall be a post-closing adjustment to the
Purchase Price based on the amount by which the working capital of Gump's by
Mail as of January 22, 2005 is more or less than the working capital of Gump's
by Mail as of the date hereof by more than 3% (the "Applicable Percentage")
(excluding from such calculation the Cash Shortfall Adjustment for Gump's by
Mail).
(b) Determination of the Working Capital Adjustment.
(i) Schedule 1.7(b) contains a projected balance
sheet for Gump's by Mail as of January 22, 2005. As soon as practicable
following the execution of this Agreement (and in no event later than 30 days
following the date hereof), the Seller will prepare a balance sheet for Gump's
by Mail as of the date hereof and a certificate (the "Signing Date Working
Capital Certificate") setting forth its calculation of the working capital of
Gump's by Mail as of the date hereof and an itemization of the components of
such working capital (excluding debt to third parties and intercompany
indebtedness).
(ii) The Seller will permit the Purchaser and its
agents and representatives complete access to all pertinent books and records
during the period that the Signing Date Working Capital Certificate is being
prepared and during the pendency of any disputes under this Section 1.7.
(iii) Following receipt of the Signing Date Working
Capital Certificate, the Purchaser will be afforded a period of 30 days to
review the Signing Date Working Capital Certificate. To assist in any such
review, the Seller will make available to the Purchaser any work papers prepared
in connection with the Signing Date Working Capital Certificate and the
personnel involved in preparing the same. At or before the end of the 30 day
review period, the Purchaser will either (A) accept the Signing Date Working
Capital Certificate in its entirety or (B) deliver to the Seller a written
notice setting forth a detailed explanation of those items in the Signing Date
Working Capital Certificate that the Purchaser disputes (a "Notice of Dispute").
The Notice of Dispute shall also set forth the Purchaser's calculation of the
working capital of Gump's by Mail as of the date hereof and an itemization of
the components of such working capital. If the Purchaser does not deliver a
Notice of Dispute to the Seller within the 30-day review period, the Purchaser
will be deemed to have accepted the Signing Date Working Capital Certificate in
its entirety. If the Purchaser delivers a Notice of Dispute in which it disputes
some, but not all, of the items in the Signing Date Working Capital Certificate,
the Purchaser will be deemed to have accepted all of the items not disputed
other than those not directly disputed but which are affected by the items
disputed.
(iv) For a period of 14 days after the delivery of a
Notice of Dispute, the parties will attempt to resolve in good faith any
disputed items.
(v) At such time as the amount of the working capital
of Gump's by Mail as of the date hereof is accepted by the Purchaser or adjusted
to reflect the resolution of any dispute, then, in the event that (1) the amount
of the working capital of Gump's by Mail as of the date hereof is less than the
amount of the working capital of Gump's by Mail as of January 22,
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2005 by more than the Applicable Percentage, the amount of such difference shall
be promptly paid by the Seller to the Purchaser; (2) the amount of the working
capital of Gump's by Mail as of the date hereof is more than the amount of the
working capital of the Companies as of January 22, 2005 by more than the
Applicable Percentage, the amount of such difference shall be promptly paid by
the Purchaser to the Seller, and (3) the amount of the working capital of Gump's
by Mail as of the date hereof is neither more nor less than the amount of the
working capital of Gump's by Mail as of January 22, 2005 by more than the
Applicable Percentage, no adjustments to the Purchase Price or additional
payments shall be made. In the event of any such payment, the Purchaser and the
Seller shall adjust the allocation of the Purchase Price set forth on Schedule
1.2(c) as appropriate.
1.8. Earnest Money Deposit.
(a) Prior to the execution of this Agreement, the Purchaser
has delivered to HDI the amount of $50,000 (the "Initial Earnest Money
Deposit").
(b) Upon the execution of this Agreement, the Purchaser shall
deliver to U.S. Bank N.A., as escrow agent, the amount of $950,000 (the
"Additional Earnest Money Deposit"), which shall be held pursuant to the Escrow
Agreement, dated as of the date hereof, among the Escrow Agent, HDI, the Seller
and the Purchaser substantially in the form of Exhibit A attached hereto (the
"Escrow Agreement"). The Initial Earnest Money Deposit and the Additional
Earnest Money Deposit are referred to collectively as the "Earnest Money
Deposit."
(c) As contemplated by Section 1.2(a) hereof, the Earnest
Money Deposit shall constitute a part of the Purchase Price.
(d) In the event that this Agreement is terminated pursuant to
Section 6.2(a)(ii) or Section 6.2(a)(v), then HDI shall be entitled to keep the
Earnest Money Deposit, plus any interest earned in respect thereof. In the event
that this Agreement is terminated pursuant to Section 6.2(a)(i), Section
6.2(a)(iii) or Section 6.2(a)(iv), HDI and the Escrow Agent shall promptly
return the Earnest Money Deposit, without interest, to the Purchaser in
accordance with the terms of the Escrow Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties by HDI and the Seller. HDI
and the Seller jointly and severally represent and warrant to the Purchaser as
follows:
(a) Organization, Standing and Power. Each Company (i) is a
corporation duly incorporated, validly existing and in good standing under the
laws of the state of its incorporation and (ii) has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each Company is duly qualified to do business
and is in good standing in each jurisdiction in which such qualification is
necessary because of the property owned, leased or operated by it or because of
the nature of its business as now being conducted. Schedule 2.1(a) sets forth a
true and complete list of all such jurisdictions. True and complete copies of
the certificate of incorporation and bylaws of each
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Company, including all amendments thereto through and including the date hereof,
have been delivered to the Purchaser, and such documents have not been amended,
modified or rescinded in any respect and are in full force and effect.
(b) Authority; Binding Agreements. The execution, delivery and
performance of this Agreement and all other agreements, documents and
instruments contemplated by this Agreement to which HDI, the Seller or either
Company is a party and the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action of such entity. Each of HDI, the Seller and each Company has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and all other agreements, documents and
instruments contemplated by this Agreement and to consummate the transactions
contemplated hereby and thereby and each of such entities has duly executed and
delivered this Agreement. This Agreement is, and upon execution and delivery,
the other agreements, documents and instruments contemplated by this Agreement
as are executed and delivered by HDI, the Seller and the Companies will be, the
legal, valid and binding obligations of such entities, enforceable in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(c) The Shares; Subsidiaries of the Companies.
(i) The authorized capital stock of Gump's Corp.
consists of 1,000 shares of common stock, no par value per share, of which 1,000
shares are issued and outstanding. The authorized capital stock of Gump's by
Mail consists of 1,000 shares of common stock, par value $.01 per share, of
which 1,000 shares are issued and outstanding.
(ii) The Shares represent all of the issued and
outstanding shares of capital stock of the Companies. The Seller owns of record
and beneficially all of the Shares. Upon the consummation of the transactions
contemplated hereby, the Purchaser will be the record and beneficial owner of
the Shares, free and clear of any lien, claim, charge, security interest or
other encumbrance (collectively, "Liens"). All of the Shares have been duly
authorized and are fully paid and non-assessable. There are no outstanding
rights, options or warrants to acquire shares of the Companies. There are no
agreements to which HDI, Seller or any of their Affiliates are a party that
relate to the issuance or transfer of any Shares.
(iii) Neither Company has any subsidiaries or owns or
holds any equity or other securities in any other entity.
(d) Conflicts; Consents. The execution and delivery of this
Agreement and any of the other agreements, documents and instruments
contemplated by this Agreement, the consummation of the transactions
contemplated hereby or thereby, and the compliance by HDI, the Seller or their
Affiliates with any of the provisions hereof or thereof, will not (i) conflict
with or result in a breach of the certificate of incorporation or by-laws of
either Company, (ii) conflict with or result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of the provisions
of any material note, bond, lease, hypothecation, mortgage,
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indenture, license, franchise, permit, agreement or other material instrument or
obligation to which HDI, the Seller or any of their Affiliates is a party, or by
which any such party's properties or assets may be bound or affected, except for
such conflict, breach or default as to which requisite waivers or consents shall
be obtained before the Closing (which waivers or consents are set forth in
Schedule 2.1(d)), (iii) violate any law, statute, rule or regulation or order,
writ, injunction or decree applicable to HDI, the Seller or any of their
Affiliates or any such party's properties or assets or (iv) to the knowledge of
HDI or the Seller, result in the creation or imposition of any Lien against any
of the Shares or any of any of the Acquired Assets. Except as set forth in
Schedule 2.1(d), no consent or approval by, or any notification of or filing
with, any person, firm, corporation, partnership, limited liability company,
trust, joint venture, association or entity (governmental or private) (each, a
"Person" and collectively, "Persons") is required in connection with the
execution, delivery and performance by HDI, the Seller or any of their
Affiliates of this Agreement or any of the other agreements, documents and
instruments contemplated by this Agreement or the consummation of the
transactions contemplated hereby or thereby.
(e) Financial Information; Liabilities.
(i) Financial Statements. The following consolidated
financial statements of the Companies are attached hereto as Schedule
2.1(e)(i)(A) (the "Financial Statements"): the balance sheets as of December 27,
2003, December 28, 2002 and December 29, 2001, as restated, and the statements
of income for the fiscal years ended December 27, 2003, December 28, 2002 and
December 29, 2001, as restated. Except as indicated below or on Schedule
2.1(e)(i)(B), the Financial Statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a basis consistent
with prior periods and are true, accurate and complete. The balance sheets of
the Companies included in the Financial Statements present fairly in all
material respects the financial position of such entities as of the respective
dates thereof, and the related statement of income of such entities for each of
the periods specified above present fairly in all material respects the results
of operations of such entities for each of such periods. The Financial
Statements are unaudited and contain no footnotes or Schedules. The Financial
Statements are identical to the financial statements used internally by HDI in
the preparation of its consolidated financial statements, which consolidated
financial statements are included in the periodic reports it files with the
Securities and Exchange Commission. The preliminary consolidated balance sheet
of the Companies as of December 25, 2004 and the preliminary statements of
income for the fiscal year ended December 25, 2004 are attached hereto as
Schedule 2.1(e)(i)(A) (the "December Financial Statements"). Except as indicated
on Schedule 2.1(e)(i)(B), the December Financial Statements have been prepared
in conformity with GAAP applied on a basis consistent with prior periods and are
true, accurate and complete. The balance sheet of the Companies included in the
December Financial Statements presents fairly in all material respects the
financial position of such entities as of the date thereof, and the related
statement of income of such entities for such period presents fairly in all
material respects the results of operations of such entities for such period.
The December Financial Statements are unaudited and contain no footnotes or
Schedules.
(ii) Liabilities. Neither Company has any liabilities
or obligations of any nature (whether absolute, accrued, contingent or
otherwise, and whether due or to become due) other than (A) as reflected or
reserved against on the most recent balance sheet furnished
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pursuant to Section 2.1(e)(i), (B) as described on Schedule 2.1(e)(ii), (C)
liabilities and obligations incurred in the ordinary course of business
consistent with past practice, or (D) liabilities for Taxes (as hereinafter
defined) arising in connection with the operations of such entities and not yet
due and payable. All reserves reflected on the balance sheets of the Companies
included in the Financial Statements and the December Financial Statements are
adequate, and there are no loss contingencies that are required to be accrued in
accordance with GAAP that are not provided for on such balance sheets.
(f) Absence of Changes. Except as set forth in Schedule
2.1(f), since December 25, 2004, the date of the preliminary year end financial
statements, to the knowledge of HDI or the Seller, the business of the Companies
has been operated in the ordinary course consistent with past practice and there
has not been:
(i) any Material Adverse Change (as hereinafter
defined);
(ii) any material obligation or liability (whether
absolute, accrued, contingent or otherwise, and whether due or to become due)
incurred by either Company, other than obligations under customer contracts,
current obligations and liabilities incurred in the ordinary course of business
and consistent with past practice;
(iii) any material payment, discharge or satisfaction
of any claim or obligation by either Company, except in the ordinary course of
business and consistent with past practice;
(iv) except for sales of inventory in the ordinary
course of business consistent with past practice or as contemplated by this
Agreement, any material sale, assignment, pledge, encumbrance, hypothecation,
transfer or other disposition of any tangible asset used by either Company, or
any material sale, assignment, transfer or other disposition of any patents,
trademarks, trade secrets, service marks, trade names, copyrights, licenses,
franchises, know-how or any other intellectual property or proprietary
information or intangible assets used by either Company;
(v) any material write-down of the value of any asset
or inventory used or held by either Company or any write-off as uncollectible of
any accounts or notes receivable held by either Company;
(vi) any material cancellation of any debts by either
Company;
(vii) any material capital expenditure or commitment
or addition to property, plant or equipment by either Company;
(viii) any material increase in the compensation of
employees of either Company (including any increase pursuant to any bonus,
pension, change of control, stock option, profit-sharing or other benefit or
compensation plan, policy or arrangement or commitment);
(ix) any material damage, destruction or loss
(whether or not covered by insurance) affecting any asset or property held by
either Company;
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(x) any material change in the accounting methods or
accounting practices followed by either Company;
(xi) any failure to pay when due any material
liabilities of either Company;
(xii) any change in the level of inventory maintained
by either Company in any material respect from the levels customarily maintained
by them;
(xiii) any agreement, whether in writing or
otherwise, by either Company to take any of the actions specified in this
Section 2.1(f); and
(xiv) any change to either Company's charter or
by-laws.
As used herein, the term "Material Adverse Change" means any change in, or
effect on, the assets, liabilities, properties, condition (financial or
otherwise), affairs, earnings, business, operations, management personnel or
customer arrangements of the Companies that is materially adverse to the
Business, taken as a whole, except for any such changes or effects (x) resulting
from this Agreement or the transactions contemplated hereby or the announcement
thereof, (y) affecting the U.S. economy or (z) effecting the retailing and
direct marketing industries in general.
(g) Assets and Properties; Real Property.
(i) Except as set forth on Schedule 2(g)(i)(A), the
Companies own all of the properties and assets owned by them free and clear of
any of Liens. To the knowledge of HDI and the Seller, the tangible property
owned by the Companies is in good operating condition and repair, subject to
ordinary wear and tear. Attached as Schedule 2.1(g)(i)(B) is a list of tangible
property owned by the Companies.
(ii) Schedule 2(g)(ii) sets forth a true and complete
list of all properties or assets (other than real property) used in the Business
that are leased or licensed by the Companies. Neither Company is in material
breach of or default under any lease or license agreement relating to such
properties or assets and, to the knowledge of HDI and the Seller, no other party
to any such lease or license is in breach thereof or default thereunder.
(iii) Except as set forth in Schedule 2.1(g)(iii),
the properties and assets owned or leased by the Companies constitute all of the
properties and assets used in the Business. Merchandise held for sale under
consignment agreements, while not a legal asset of the Companies, shall be
treated for purposes of this Agreement as properties and assets used in the
Business whether or not such consignment merchandise appears as net inventory or
is listed on the Companies' balance sheet. Similarly, any materials, decor or
tenant or trade fixtures of the Companies located at 135 Post Street are, for
purposes of this Agreement, construed as properties and assets of the Companies
used in the Business whether or not listed on the Companies' balance sheet;
provided that the ownership of fixtures is controlled by the terms of the leases
for the 135 Post Street premises.
(iv) Neither Company owns any real property. The only
real property
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used in the operation of the Business is (A) the building at 135 Post Street,
San Francisco, California and (B) 2,400 square feet in the lower basement of a
building at 55 Stockton Street, San Francisco, California used for the storage
of merchandise and business-related items (collectively, the "Real Property").
The Real Property is leased by the Companies pursuant to the leases listed on
Schedule 2.1(g)(iv)(A). To the knowledge of HDI and the Seller, the Real
Property and all improvements thereon, conform in all material respects to
applicable federal, state, local and foreign laws and regulations, including
Environmental Laws (as hereinafter defined) and no notices of violation,
contravention or breach of any such legal requirements have been issued by any
governmental authority with respect to the Real Property, including all
building, fire, health, zoning, setback, and subdivision laws, regulations or
ordinances and all Environmental Laws and the Real Property is used in
compliance with all legal requirements. No condemnation proceeding is pending
or, to the knowledge of HDI or the Seller, threatened which would preclude or
impair the use of the Real Property by the Purchaser for the uses for which it
is intended.
(h) Patents, Trademarks and Similar Rights.
(i) Schedule 2.1(h)(i) sets forth a true and complete
list of any and all patents, trademarks (registered or unregistered), trade
names, service marks, copyrights, domain names and applications therefor owned,
used, filed by or licensed to either Company. With respect to registered
trademarks, Schedule 2.1(h)(i) sets forth a list of all jurisdictions in which
such trademarks (if any) are registered or applied for and all registration and
application numbers. With respect to patents, Schedule 2.1(h)(i) sets forth a
list of all jurisdictions in which such patents have been granted or applied for
and all registration and application numbers. Except as set forth on Schedule
2.1(h), the Companies own or validly license all patents, trademarks, service
marks, trade names, domain names and copyrights, in each case registered or
unregistered, inventions, technology, industrial design, software, know-how,
trade secrets, Personally-Identifiable Data (as defined below) and other
intellectual property rights used in the Business as presently conducted
(collectively, the "Intellectual Property"), to the knowledge of HDI and the
Seller, with no infringement of or conflict with any rights of others; provided,
however, that the Intellectual Property does not include any technology,
industrial design, software, know-how or trade secrets used principally or
exclusively by Keystone to perform its obligations under the Services Agreement
(as defined below) or that is provided or made available to the Purchaser solely
under the Services Agreement. Except as set forth in Schedule 2.1(h)(i), the
Companies or its Affiliates are, and on the Closing Date the Purchaser will be,
subject to the execution of the Domain Name Purchase Agreement, the sole and
exclusive owner of or valid licensee of all rights to the Intellectual Property,
free and clear of all Liens. Each of the aforesaid elements of the Intellectual
Property is valid, subsisting and enforceable. Except as set forth on Schedule
2.1(h)(i), neither Company nor any of their Affiliates has granted to any third
party any license or other right to any of the Intellectual Property. Except as
set forth on Schedule 2.1(h)(i), there is no claim pending or, to the knowledge
of HDI or the Seller, threatened that relates to any of the Intellectual
Property. Except as set forth on Schedule 2.1(h)(i), neither Company nor any of
their Affiliates has received any notice that the operations of the business of
the Companies or the practice of any of the Intellectual Property infringes upon
or conflicts with any patent, trademark, trade name, copyright or other
proprietary right of a third party.
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(ii) The Personally-Identifiable Data contains, in
all material respects, a true, correct, and complete list of every individual
contained in the Gump's customer database or housed by HDI within its data
warehouse, as of the Closing Date, including (1) all persons who have purchased
merchandise or gift certificates from Gump's either through catalogs, over the
Internet, by telephone, or, if such purchases were made with a payment vehicle
for which Gump's retained information on the individual, at the Gump's store in
San Francisco; (2) all persons who have requested receipt of the catalog; (3)
all persons who have received a merchandise shipment directly from Gump's or
gift certificate by mail from customers who have purchased from Gump's; (4) any
other individuals whose name and address reside on the Gump's customer file as
of the Closing Date, regardless of the date the names and addresses were
obtained or received. The Personally-Identifiable Data is the property of the
Companies and, except to the extent that such data is coincidentally contained
within the customer database or data warehouse of HDI, Seller or their
Affiliates, may not be sold or otherwise transferred by HDI, the Seller or their
Affiliates to any third party. HDI, the Seller and their Affiliates may not make
any use whatsoever of any of the Personally-Identifiable Data without express
written permission from the Purchaser, or as contemplated by the Direct
Marketing Services Agreement.
(iii) For the purposes of this Agreement,
"Personally-Identifiable Data" means the names, addresses, e-mail addresses,
telephone numbers, fax numbers, credit card type, and credit card numbers of any
natural persons, or any other data likely to substantially identify any
particular natural persons, together with any other information about a natural
person which is combined with, associated with, or linked to any of the
foregoing information, including, but not limited to, customer lists, mailing
lists, telemarketing lists, e-mail telemarketing lists, customer or prospective
customer databases, credit reports, promotion history and all data that exists
within the database or HDI data warehouse regarding customer purchases for the
Companies.
(i) Insurance. Schedule 2.1(i) contains a true and complete
list of all policies of casualty, liability, theft, fidelity, life and other
forms of insurance maintained by HDI, the Seller, the Companies or any of their
Affiliates with respect to the Business. All insurance policies are in the name
of HDI and are in full force and effect, all premiums with respect to such
policies are currently paid, and such policies will not by their terms be
affected by, or terminated or lapse by reason of, the transactions contemplated
by this Agreement except as to the Companies. None of HDI, the Seller, the
Companies or any of their Affiliates has received notice of cancellation or
termination of any such policy, nor has it been denied or had revoked or
rescinded any policy of insurance, nor borrowed against any such policies.
Except as set forth on Schedule 2.1(i), to the knowledge of HDI or the Seller,
no claim under any such policy relating to either Company or the Business is
pending. The Purchaser shall be responsible for the replacement of these
insurance policies for the Companies prior to the Closing.
(j) Agreements, Etc.
(i) Schedule 2.1(j)(i)(A) contains a true and
complete list (and with respect to oral contracts or agreements, a description)
of all written or oral contracts, agreements and other instruments to which any
HDI, the Seller, the Companies or any of their Affiliates is a party in
connection with the Business (A) relating to indebtedness for money borrowed or
capital leases, (B) of duration of three months or more from the date hereof and
not cancelable without
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penalty on 30 days or less notice, (C) relating to commitments in excess of
$25,000, (D) relating to the employment, compensation or termination of any
employee, consultant or other agent of either Company, (E) relating to the sale
or other disposition of any assets, properties or rights, (F) relating to the
lease or similar arrangement of any machinery, equipment, motor vehicles,
furniture, fixtures or similar property, (G) that restricts the operation of any
part of the Business anywhere in the world, (H) between either Company and the
top ten suppliers to the Business and (I) that is otherwise material to the
Business or entered into other than in the ordinary course of business. None of
HDI, the Seller, the Companies or any of their Affiliates is in default under
any such agreement or instrument where such default could, singly or in the
aggregate with defaults under other agreements or instruments, have a material
adverse effect on the assets, liabilities, properties, condition (financial or
otherwise), affairs, earnings, business, operations, management personnel or
customer arrangements of the Business (a "Material Adverse Effect"), and, to the
knowledge of HDI and the Seller, no other party to any such agreement or
instrument is in breach thereof or default thereunder. To the knowledge of HDI
and the Seller, all such agreements or instruments are in full force and effect
and are enforceable against the other parties thereto. Except as set forth in
Schedule 2.1(j)(i)(B), the Seller has made available to or furnished to the
Purchaser true and complete copies of all documents described in Schedule
2.1(j)(i)(A) . Except as set out in the contracts and agreements listed in
Schedule 2.1(j)(i)(A), there are no directors, officers, employees, consultants
or other agents of either Company who are entitled to a specified notice of
termination or fixed term of employment or who cannot be dismissed upon such
notice as is required by law. Except as specifically identified and set forth on
Schedule 2.1(m)(iii), no contract, agreement or instrument listed thereon
contains any provision providing for the cancellation or termination of such
contract, agreement or instrument, or any modification to or acceleration of the
terms thereof, as a result of the change of control of the Companies or the
consummation of the transactions contemplated by this Agreement.
(ii) The Seller has not made available to or
furnished to the Purchaser true and complete copies of the agreements described
in Schedule 2.1(j)(i)(B) (the "Other Agreements"). The Other Agreements (other
than purchase orders) are not, individually or in the aggregate, material to the
Business. The Other Agreements were entered into in the ordinary course of
business, consistent with past practice.
(k) Litigation, Etc. Except as set forth in Schedule 2.1(k),
there are not any suits, actions, claims, complaints, litigation, investigations
or legal or administrative or arbitration proceedings in respect of either
Company pending or, to the knowledge of HDI and the Seller, threatened, whether
at law or in equity, or before or by any federal, foreign, state, local or other
governmental department, commission, board, bureau, agency or instrumentality.
There are not any judgments, decrees, injunctions, rulings, awards or orders of
any court, governmental department, commission, agency, instrumentality or
arbitrator against either Company or any of their respective assets or
properties except as set forth in Schedule 2.1(k).
(l) Environmental Matters; Permits.
(i) Except as set forth on Schedule 2.1(l)(i):
(A) neither the Companies, their operations nor
the Real Property are subject to any outstanding written order, consent decree
or settlement agreement
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with any Person relating to (1) any Environmental Laws (as defined in Section
2(l)(iii)), (2) any Environmental Claim (as defined in Section 2(l)(iii)), or
(3) any Hazardous Materials Activity (as defined in Section 2(l)(iii)) that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect;
(B) the Companies have not received any letter
or request for information under Section 104 of the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. Section 9604) or any
comparable state law;
(C) to the knowledge of HDI and the Seller,
there are, and have been no conditions, occurrences, or Hazardous Materials
Activity that could reasonably be expected to form the basis of an Environmental
Claim against the Companies that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect;
(D) neither the Companies nor, to the knowledge
of HDI and the Seller, any predecessor of the Companies, have filed at any time
any notice under any Environmental Law indicating past or present treatment of
Hazardous Materials (as defined in Section 2(l)(iii)) at the Real Property, and
none of the Companies' operations involves the generation, transportation,
treatment, storage, or disposal of hazardous waste, as defined under 40 C.F.R.
Parts 260-270 or any state equivalent; and
(E) compliance with all current applicable
Environmental Laws could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(ii) Notwithstanding anything in this Section 2.1(l)
to the contrary, no event or condition has occurred or is occurring with respect
to the Companies relating to any Environmental Law, any Release (as defined in
Section 2(l)(iii)) of Hazardous Materials, or any Hazardous Material Activity,
including any matter disclosed on Schedule 2.1(l), that individually or in the
aggregate has had or could reasonably be expected to have a Material Adverse
Effect.
(iii) The following terms used in this Section 2.1
(l) shall have the following meanings:
(A) "Environmental Laws" shall mean any and all
current or future statutes, ordinances, orders, rules, regulations, guidance
documents, judgments, governmental authorizations, or any other requirements of
governmental authorities relating to (1) environmental matters, including those
relating to any Hazardous Materials Activity, (2) the generation, use, storage,
transportation or disposal of Hazardous Materials, or (3) occupational safety
and health, industrial hygiene, land use or the protection of human, plant, or
animal health or welfare, in any manner applicable to the Companies or the Real
Property, including the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601
et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C.
Section 136 et seq.), the Occupational
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Safety and Health Act (29 U.S.C. Section 651 et seq.), the Oil Pollution Act (33
U.S.C. Section 2701 et seq.) and the Emergency Planning and Community
Right-to-Know Act (42 U.S.C. Section 11001 et seq.), each as amended or
supplemented, any analogous state or local statutes or laws, and any regulations
promulgated pursuant to any of the foregoing.
(B) "Environmental Claim" shall mean any
investigation, notice, notice of violation, claim, action, suit, proceeding,
demand, abatement order or other order or directive (conditional or otherwise),
by any governmental authority or any other person, arising (1) pursuant to or in
connection with any actual or alleged violation of any Environmental Law, (2) in
connection with any Hazardous Materials or any actual or alleged Hazardous
Materials Activity, or (3) in connection with any actual or alleged damage,
injury, threat or harm to heath, safety, natural resources or the environment.
(C) "Hazardous Materials" shall mean (1) any
chemical, material or substance at any time defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous waste", "acutely hazardous waste", "radioactive waste",
"biohazardous waste", "pollutant", "toxic pollutant", "contaminant", "restricted
hazardous waste", "infectious waste", "toxic substances", or any other term or
expression intended to define, list or classify substances by reason of
properties harmful to health, safety or the indoor or outdoor environment
(including harmful properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar import under any applicable Environmental Laws),
(2) any oil, petroleum, petroleum fraction or petroleum derived substance, (3)
any drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources, (4) any flammable substances or explosives, (5) any radioactive
materials, (6) any asbestos-containing materials, (7) urea formaldehyde foam
insulation, (8) electrical equipment that contains oil or dielectric fluid
containing polychlorinated biphenyls, (9) pesticides, and (10) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by governmental authority or that may or could pose a hazard to the
health and safety of the owners, occupants or any other persons in the vicinity
of the Real Property or to the indoor or outdoor environment.
(D) "Hazardous Materials Activity" shall mean
any past, current, proposed or threatened activity, event or occurrence
involving any Hazardous Materials, including the use, manufacture, possession,
storage, holding, presence, existence, location, Release, threatened Release,
discharge, placement, generation, transportation, processing, construction,
treatment, abatement, removal, remediation, disposal, disposition or handling of
any Hazardous Materials, and any corrective action or response action with
respect to any of the foregoing.
(E) "Release" shall mean any release, spill,
emission, leaking, pumping, pouring, injection, escaping, deposit, disposal,
discharge, dispersal, dumping, leaching or migration of Hazardous Materials into
the indoor or outdoor environment (including the abandonment or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Materials), including the movement of any Hazardous Materials through the air,
soil, surface water or ground water.
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(iv) Each Company has all federal, state, local and
foreign governmental licenses, permits authorizations, certificates, approvals
(the "Permits") necessary to conduct their business as presently being
conducted, which Permits are listed in Schedule 2.1(l)(iv). Such Permits are in
full force and effect, no violations are or have been recorded in respect of any
thereof (other than such violations that have been fully cured or remedied), and
no proceeding is pending or, to the knowledge of HDI and the Seller, threatened
to seeking the revocation or limitation thereof.
(m) Employees and Compensation.
(i) No employee of either Company (collectively, the
"Gump's Employees") is represented by any union and, to the knowledge of HDI and
the Seller, there is no labor strike, slowdown, stoppage or organizational
effort pending or threatened against either Company.
(ii) Schedule 2.1(m)(ii) sets forth (A) a true and
correct list of the name, location and current annual salary, hourly pay rate
and commission structure, if any, of each Gump's Employee and (B) any other form
of material compensation (other than salary or customary employee benefits) paid
or payable to each Gump's Employee for the current fiscal year.
(iii) Except as set forth in Schedule 2.1(m)(iii),
the consummation of the transactions contemplated by this Agreement alone will
not (A) entitle any Gump's Employee to severance pay, change of control payment,
termination benefits or any other payment for which the Purchaser could
reasonably be expected to become liable, or (B) accelerate the time of payment
or vesting, or increase the amount of compensation due to any Gump's Employee
for which the Purchaser could reasonably be expected to become liable, in either
case pursuant to the terms of any plan, agreement or arrangement to which any of
HDI, the Companies and/or the Seller is a party as of the date of this
Agreement.
(n) Benefit Plans.
(i) Schedule 2.1(n) sets forth each material plan,
program, or arrangement maintained by either Company or under which either of
them has or may have any obligation to contribute, with respect to any Gump's
Employee, whether such plan, program or arrangement is formal or informal,
written or unwritten, and whether or not such plan, program, or arrangement is
an "employee benefit plan" subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") (collectively, "Gump's Benefit Plans").
(ii) The Seller has made available to or provided to
the Purchaser true and complete copies of: (A) each Gump's Benefit Plan that is
an "employee welfare benefit plan" under Section 3(1) of ERISA; (B) each Gump's
Benefit Plan that is an "employee pension benefit plan" under Section 3(2) of
ERISA; (C) the most recent annual report required to be filed, including Form
5500, for each Gump's Benefit Plan described under (A) or (B); (D) the current
summary plan description for each Gump's Benefit Plan and any material
modifications thereto; and (E) the most recent determination letter received
from the Internal Revenue Service (the "Service" or the "IRS") with respect to a
Gump's Benefit Plan described under (B) that is
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intended to be tax-qualified under Section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), or the application therefor, if such letter
has not been issued by the Service.
(iii) All of the Gump's Benefit Plans are in
compliance in all material respects with all applicable provisions of ERISA, the
Code and the regulations issued thereunder, as well as with all other applicable
federal, state and local statutes, ordinances and regulations. No Gump's Benefit
Plan is currently under audit by the IRS or the Department of Labor. All accrued
contribution obligations of HDI, the Seller, the Companies and any of their
respective Affiliates with respect to any Gump's Benefit Plan have been
substantially fulfilled on a timely basis.
(iv) Each Gump's Benefit Plan that is intended to
qualify under Section 401(a) of the Code (a "Qualified Gump's Benefit Plan") has
been determined by the IRS to be so qualified (including current changes in the
law applicable to Qualified Plans with respect to which the IRS is providing
such determinations as of the date of this Agreement). Except as set forth in
Schedule 2.1(n)(iv), during the five years immediately preceding the date of
this Agreement, there have been no terminations, partial terminations or
discontinuances of contributions to any Qualified Gump's Benefit Plan without
notice to and approval by the IRS (if such notice and approval were then
required by applicable law) and payment of all obligations and liabilities
attributable to such Qualified Plan. No officer, director or employee of the
Seller, the Companies or any of their respective Affiliates has committed a
material breach of any obligations imposed upon fiduciaries by Title I of ERISA
with respect to any Gump's Qualified Benefit Plan.
(v) Schedule 2.1(n)(v) contains a list of all former
employees (and the family members of such former employees) of the Companies
who, as of January 22, 2005, have (i) elected coverage pursuant to Section 4980B
of the Code and Sections 601 - 608 of ERISA ("COBRA"), which coverage is in
effect as of the date hereof or (ii) a right to elect coverage pursuant to
COBRA, which right is still outstanding as of the date hereof.
(vi) Other than routine claims for benefits and IRS
determination letter filings reviews, there are no actions, suits, claims or
investigations pending or, to the knowledge of HDI and the Seller, threatened
against or with respect to any of Gump's Benefit Plans or their respective
assets.
(vii) Except as set forth on Schedule 2.1(n)(vii),
there are no Gump's Benefit Plans with "change in control" or similar provisions
and the consummation of this Agreement and the transactions contemplated hereby
alone will not (i) result in any payments (whether of separation or severance
pay, unemployment pay or otherwise) becoming due from the Companies to any
Gump's Employee or (ii) result in the vesting, acceleration of payment or
increase in the amount of any benefit payable to or in respect of a Gump's
Employee that would constitute a "parachute payment" as defined in Section 280G
of the Code or that would require the payment of an excise tax under Section
4999 of the Code.
(ix) Section 162(m) of the Code has not, for any of
the three taxable years ending immediately before the date hereof, limited the
deduction for employee
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remuneration for the Companies.
(o) Business Relations. Except as set forth on Schedule
2.1(f), since December 25, 2004, there has not been any Material Adverse Change
in the business relationship of either Company and any of their respective
creditors, employees, suppliers or other Persons having a material business
relationship with them. No creditor, supplier or other Person having a material
business relationship with either Company has informed either such entity that
such Person intends to change or request a change in such relationship
(including any change in product pricing) because of the consummation of the
transactions contemplated hereby or for any other reason.
(p) Related Party Transactions. No current or former director,
officer or shareholder of HDI, the Seller, the Companies or any of their
Affiliates or, to the knowledge of HDI and the Seller, any relative with a
relationship no more remote than first cousin of any of the foregoing, is
presently, or during the 12-month period ending on the date hereof has been, (i)
a party to any transaction with either Company, other than the purchase of goods
from them the ordinary course of business, or (ii) to the knowledge of HDI and
the Seller, the direct or indirect owner of an interest in any corporation,
firm, association or business organization which is a present (or potential)
competitor or supplier of either Company.
(q) Taxes.
(i) (A) Except as set forth in Schedule 2.1(q)(v),
all Tax Returns (as defined below) required to be filed on or before the Closing
Date by the Companies and any consolidated, combined or unitary group of which
they are or have been a member (a "Seller Group") with respect to any Taxes (as
defined below) have been or will be filed when due (including extensions) in
accordance with all applicable laws; (B) all material Taxes shown as due on such
Tax Returns have been or will be timely paid; (C) such Tax Returns are true,
correct and complete in all material respects (including the amount of Taxes due
and payable); (D) there are no outstanding waivers or agreements extending the
application of any statute of limitations of any jurisdiction for any period
with respect to any member of the Seller Group regarding the assessment or
collection of any Tax; and (E) except for Taxes not yet due and payable and
except as set forth in Schedule 2.1(q)(v), none of the Seller Group's assets is
subject to any Lien arising in connection with any failure or alleged failure to
pay any Tax.
(ii) For purposes of this Agreement, (A) "Tax" means
any and all federal, state, local, foreign and other taxes, levies, fees,
imposts, duties, governmental fees and charges of whatever kind (including any
interest, penalties or additions to the tax imposed in connection therewith or
with respect thereto), including taxes imposed on, or measured by, income,
franchise, profits, gross income or gross receipts, and also ad valorem, value
added, sales, use, service, real or personal property, capital stock, stock
transfer, license, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, production, excise,
stamp, occupation, premium, windfall profits, environmental, transfer and gains
taxes and customs duties; and (B) "Tax Return" means returns, reports,
information statements and other documentation (including any additional or
supporting materials) filed or maintained, or required to be filed or
maintained, in connection with the calculation, determination, assessment or
collection of any Tax and shall include an amended
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returns required as a result of examination adjustments made by the Service or
other Tax authority.
(iii) All transfer, documentary, sales, use, stamp,
registration and other such taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including, if any, any
corporate-level gains tax triggered solely by this sale of the Shares and
personal property transfer taxes and any similar tax imposed in states or
subdivisions having jurisdiction over the Companies or in which the Companies
have has assets or are otherwise doing business), shall be paid by the Seller
when due, and the Seller will, at its own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable law, the Purchaser will, and will cause the Companies to, join in the
execution of any such Tax Returns and other documentation.
(iv) HDI and the Seller have previously provided the
Purchaser with true and complete copies of all Federal and State income, sales
and payroll Tax Returns filed within the past three (3) years for the Companies;
(v) Except as set forth on Schedule 2.1(q)(v), the
Companies are not a party to any pending or threatened action or proceeding by
any governmental authority for the assessment or collection of Taxes;
(vi) There are no unresolved written claims by a
governmental authority in any jurisdiction where the Companies do not file Tax
Returns that the Companies are or may be subject to taxation by such
jurisdiction;
(vii) Except as set forth on Schedule 2.1(q)(vii),
there have been no audits or other examinations with respect to the Taxes of the
Companies by a governmental authority with respect to any year since the
commencement of calendar year 2000;
(viii) The Companies have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, the Seller or other third
party;
(ix) The due but unpaid Taxes of the Companies did
not, as of the date of the Financial Statements, exceed the reserve for Tax
liability set forth on the face of the Financial Statements (not including any
notes thereto);
(x) The Companies have not filed a consent under
Section 341(f) concerning collapsible corporations. The Company has disclosed on
its federal income Tax Returns all positions taken therein that could be
reasonably expected to give rise to a substantial understatement of federal
income Tax within the meaning of Code Section 6662;
(xi) The Companies have not made any payments, are
not obligated to make any payments, and are not parties to any agreement that
under certain circumstances could obligate it to make any payments, that will
not be deductible under Code Section 280G;
(xii) The Companies have adopted the accrual method
of accounting for
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income tax purposes, and have not adopted or consented to any change in methods
of accounting requiring post-closing adjustments under Code Section 481 (or any
comparable provisions of state and local income tax laws) except as set forth in
Schedule 2.1(q)(xii).
(r) Brokers. No Person acting on behalf of HDI, the Seller or
any of their Affiliates or under the authority of any of HDI, the Seller or any
of their Affiliates is or will be entitled to any broker's or finder's fee or
any other commission or similar fee directly or indirectly from any of the
parties hereto in connection with any of the transactions contemplated hereby.
(s) Inventory.
(i) The inventory included in the Financial
Statements and the December Financial Statements (other than consignment
merchandise) is the only inventory used or held for use or intended to be used
or held for use in the Business and is valued for financial statement purposes
using the retail method of accounting, in the case of Gump's Corp., and using
the first-in, first-out basis of accounting, in the case of Gump's by Mail, Inc.
Such inventory is useable and salable in the ordinary course of business as
currently conducted at customary gross margins.
(ii) The inventory of the Companies includes all of
the following items used by the Companies in the operation of the Business:
packaging and packing materials (provided, however, that packaging and packing
materials (other than gift boxes) used by Gump's by Mail, Inc. are not part of
the inventory of the Companies), and shop jewelry inventory (unfinished pieces
of jewelry stones, clasps and other related jewelry items) and furniture,
decorative or other items currently on display in the store or the offices or
utilized by the Companies in the store or the offices but not otherwise part of
the inventory of the Companies.
(t) Customs. With respect to all goods imported into the
United States or any other country by either Company (the "Imported Goods") (i)
such Imported Goods have been properly valued and classified, provisionally, in
accordance with applicable tariff laws, rules and regulations, pending
investigations and rulings (including the Antidumping Duty Investigation on
Import of Wooden Bedroom Furniture from the People's Republic of China announced
by the U.S. Department of Commerce), (ii) all proper estimated duties, tariffs
or excise taxes have been paid with respect to the Imported Goods, (iii) no
penalties have been assessed or claimed with respect to any Imported Goods, and
(iv) except as set forth on Schedule 2.1(t), no written inquires relating to
such Imported Goods have been received by either Company.
(u) Accounts Receivable. Schedule 2.1(u) contains a true and
complete list of the accounts receivable of the Companies as of December 25,
2004, and the aging with respect thereto. All of the accounts receivable of the
Companies reflected on Schedule 2.1(u) are good and collectible in the ordinary
course of business at the aggregate recorded amounts thereof, less the amount of
the reserve for bad accounts reflected therein, and are not subject to any right
of offset or counterclaim.
(v) Accounts Payable. Schedule 2.1(v) contains a true and
complete list of the
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accounts payable of the Companies as of December 25, 2004. All of the accounts
payable of the Companies reflected on Schedule 2.1(v) are consistent with the
terms and conditions customary for the counterparty or vendor as the case may
be.
(w) Bank Accounts; Credit Card Processors; Gift Certificates.
Schedule 2.1(w) contains a true and complete list of the bank accounts of the
Companies as of December 25, 2004. Schedule 2.1(w) also contains a true and
complete list of the credit card processors used by the Companies as of December
25, 2004. The Purchaser shall be responsible for the establishment of
appropriate banking arrangements for the Companies and the replacement of those
credit card processing agreements where assignment or assumption by the
Companies or the Purchaser is not permitted prior to the Closing. Schedule
2.1(w) also contains a true and complete list of the gift certificate
liabilities of the Companies for the period from December 24, 2003 to December
25, 2004.
(x) Disclosure. No representation or warranty of HDI or the
Seller contained in this Agreement or any other agreement, document or
instrument delivered or entered into by HDI, the Seller or any of their
Affiliates on the Closing Date in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statement contained herein or therein not misleading.
2.2. Representations and Warranties by the Purchaser. The
Purchaser represents and warrants to HDI and the Seller as follows:
(a) Organization and Standing. The Purchaser is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Nevada.
(b) Authority; Binding Agreements. The execution, delivery and
performance of this Agreement and all other agreements, documents and
instruments contemplated by this Agreement to which the Purchaser is a party and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary action of the Purchaser. The
Purchaser has all requisite power and authority to execute, deliver and perform
this Agreement and all other agreements, documents and instruments contemplated
by this Agreement to which the Purchaser is a party and to consummate the
transactions contemplated hereby and thereby and the Purchaser has duly executed
and delivered this Agreement. This Agreement is, and upon execution and
delivery, all other agreements, documents and instruments contemplated by this
Agreement to which the Purchaser is a party will be, the legal, valid and
binding obligation of the Purchaser, enforceable in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(c) Conflicts; Consents. None of the execution of this
Agreement or any other agreement, document or instrument contemplated by this
Agreement to which the Purchaser is a party, the consummation of the
transactions contemplated hereby or thereby or compliance by the Purchaser with
any of the provisions hereof or thereof will (i) conflict with or result in a
breach of the constitutive documents of the Purchaser, (ii) conflict with or
result in a
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default (or give rise to any right of termination, cancellation or acceleration)
under any of the provisions of any note, bond, lease, mortgage, indenture,
license, franchise, permit, agreement or other instrument or obligation to which
the Purchaser is a party, or by which its properties or assets may be bound or
affected, except for such conflicts, breaches or defaults as to which requisite
waivers or consents shall be obtained before the Closing, or (iii) violate any
law, statute, rule or regulation or order, writ, injunction or decree applicable
to the Purchaser or its properties assets. No material consent or approval by or
notification of or filing with any Person (governmental or private) is required
in connection with the execution, delivery and performance by the Purchaser of
this Agreement or any agreement, document or instrument contemplated by this
Agreement to which the Purchaser is a party or the consummation of the
transactions contemplated hereby or thereby, other than those that have been
obtained or will prior to the Closing Date be obtained and are, or will be, in
full force and effect.
(d) Financing. The Purchaser has sufficient funds to pay the
Purchase Price and will not require any debt, equity or other financing in order
to consummate the transactions contemplated hereby; provided it has at least 30
days to marshal its funds after a Force Majeure Event.
(e) Brokers. Except for Perseus Advisors, no Person acting on
behalf of the Purchaser of any of its Affiliates or under the authority of the
Purchaser of any of its Affiliates is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly or indirectly from
any of the parties hereto in connection with any of the transactions
contemplated hereby. The Purchaser shall be responsible for the payment of all
fees and expenses of Perseus Advisors.
ARTICLE III
ADDITIONAL AGREEMENTS
3.1. Expenses. Each party hereto shall pay its respective
legal and accounting fees and expenses incurred in connection with the
preparation, execution and delivery of this Agreement and all other agreements,
documents and instruments executed pursuant hereto and any other costs and
expenses incurred by such party, except as otherwise expressly set forth herein,
whether or not Closing occurs.
3.2. Conduct of Business. From the date hereof until the
Closing Date, except as expressly contemplated by this Agreement or as otherwise
consented to by the Purchaser in writing, the Seller cause each Company to
operate their business only in the ordinary course consistent with past practice
in substantially the same manner as presently conducted and shall make all
reasonable efforts consistent with past practices to preserve their
relationships with customers, suppliers and other business relations; provided,
however, that the parties acknowledge and agree that Jed Pogran shall have sole
authority to run the business of the Companies from and after the date hereof
until the Closing Date in the ordinary course of business and consistent with
past practices and no decisions that can impact the balance sheet of either
Company shall be made or instituted without the express approval of Jed Pogran.
The Seller shall cause each of its Affiliates to not take any action that would,
or that could reasonably be expected to, result in any of the conditions set
forth in Section 4.1 not being satisfied.
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Without limiting the generality of the foregoing, the Seller, under the sole
direction of Jed Pogran in the ordinary course of business and consistent with
past practices, shall cause each Company to, except as otherwise agreed in
writing by the Purchaser: (i) carry on their businesses in the ordinary course
in substantially the same manner as heretofore conducted; (ii) maintain and keep
their assets in as good repair, working order and condition as at present,
except for depreciation due to ordinary wear and tear; (iii) keep in full force
and effect insurance comparable in amount and scope of coverage to that now
maintained; (iv) perform in all material respects all obligations under all
contracts, agreements, documents and instruments to which they are a party; (v)
comply in all material respects with all applicable requirements of law, rules,
regulations, orders, ordinances and directives, whether federal, state, local,
foreign or otherwise; (vi) not enter into or amend, modify, terminate or waive
compliance with any provision of any contract or commitment other than in the
ordinary course of business or as specifically contemplated by this Agreement;
(vii) not take, or fail to take, any action which would result in a breach in
any material respect of any of the warranties or an inaccuracy in any material
respect in any of the representations contained in Section 2.1; (viii) not
institute, settle or agree to settle any litigation, action or proceeding before
any court or tribunal or government authority and not waive or surrender any
rights related to the Business; (ix) not enter into any agreement or make any
commitment to take any of the type of action prohibited in the foregoing
clauses.
3.3. Further Assurances. Each party hereto agrees to use, and
HDI and the Seller agree to cause each of the Companies and each of their
Affiliates to use, its reasonable best efforts to take, or cause to be taken,
all action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations, to consummate and make
effective the transactions contemplated by this Agreement as expeditiously as
practicable and to ensure that the conditions set forth in Article IV are
satisfied, insofar as such matters are within the control of such party. In case
at any time after the Closing Date any further action is necessary or desirable
to carry out the purposes of this Agreement, each of the parties to this
Agreement shall, and HDI and the Seller shall cause each of the Companies and
each of their Affiliates to, take or cause to be taken all such necessary
action, including the execution and delivery of such further instruments and
documents, as may be reasonably requested by any party for such purposes or
otherwise to complete or perfect the transactions contemplated hereby.
3.4. Access and Information. From the date hereof until the
first to occur of the Closing Date or the termination of this Agreement, HDI and
the Seller shall, and shall cause the Companies and their Affiliates to, permit
the Purchaser and its representatives to make such investigation of the
business, operations and properties of each Company and the Acquired Assets as
such Persons deem necessary or desirable in connection with the transactions
contemplated hereby. HDI and the Seller shall, and shall cause the Companies and
their Affiliates to, furnish the Purchaser and its representatives with such
financial, operating and other data and information, and copies of documents,
with respect to each Company and the Acquired Assets, as the Purchaser shall
from time to time request. Such access and investigation shall be made upon
reasonable notice and at reasonable places and times. Such access and
information shall not affect or diminish any of the representations or
warranties hereunder.
3.5. Public Announcements. Except as otherwise required by
law, order or applicable stock exchange rules, no party hereto may issue any
press release or other public
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disclosure concerning transactions contemplated hereby without the prior written
consent of the other parties hereto.
3.6. Confidentiality. For the period commencing with the date
hereof and ending three (3) years after the Closing Date, the Purchaser agrees
that all financial or other information about HDI, the Seller and their
Affiliates, or other information of a confidential or proprietary nature,
disclosed to the Purchaser at any time in connection with the transactions
contemplated by this Agreement (other than information relating to the
Companies, the Business and the Acquired Assets) shall be kept confidential by
the Purchaser and its Affiliates and shall not be disclosed to any Person or
used by the Purchaser or any of its Affiliates except: (a) with the prior
written consent of HDI; (ii) as may be required by applicable law or court
process; or (iii) such information which is or becomes generally available to
the public other than as a result of a violation of this Section.
3.7. Non-Competition; Non-Solicitation.
(a) General. In consideration of the payments made pursuant to
Section 1.2 and the transactions contemplated by this Agreement, neither HDI nor
the Seller shall, nor shall they permit any of their Affiliates to, at any time
during the three-year period immediately following the Closing Date:
(i) directly or indirectly engage, or have any
ownership interest in, any Competing Business (as defined below) in the United
States or any foreign country in which the Companies now or have in the past 12
months conducted business; provided, however, that the foregoing shall not be
violated by any of HDI, the Seller or any of their Affiliates owning, directly
or indirectly, securities of any corporation or other entity if such entities do
not, directly or indirectly, beneficially own five percent (5%) or more of any
class of securities of such corporation or other entity; or
(ii) directly or indirectly, either as principal,
agent, employer, advisor, shareholder, partner or in any other capacity
whatsoever, either (i) hire, attempt to hire, contact or solicit with respect to
hiring any employee of the Companies or any of their Affiliates engaged in the
conduct of the Business, (ii) induce or otherwise counsel, advise or encourage
any employee of the Companies or any of their Affiliates engaged in the conduct
of the Business to leave the employment of the Companies or their Affiliates or
(iii) induce any representative or agent of the Companies or any of their
Affiliates engaged in the conduct of the Business to terminate or modify its
relationship with the Companies or any of their Affiliates.
(b) For purposes of this Section 3.7, "Competing Business"
shall mean any individual, business, firm, company, partnership, joint venture,
organization or other entity engaged in whole or in part in any business that
directly or indirectly competes with the Business in the United States or any
foreign country in which the Companies now or have in the past 12 months
conducted business; provided, however, that the following shall not constitute a
Competing Business:
(A) the sale by HDI, the Seller and their
Affiliates of goods through catalogs, over the Internet or through any other
method of mass marketing through
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catalogs or web sites currently in existence and operating as of this date by
HDI or by catalogs or web sites that may be purchased in the future by HDI so
long as such purchased catalogs or web sites are not principally engaged in the
Business;
(B) the provision by Keystone of back-end
services relating to order taking, order and payment processing, warehousing and
fulfillment, and return processing to third parties; and
C) the provision by HDI, the Seller and their
affiliates of good and services that are substantially similar to those provided
by such entities as of the date of this Agreement.
(c) Injunctive Relief. The parties acknowledge that each
party's damages at law would be an inadequate remedy for the breach by either
HDI or the Seller of any provision of this Section 3.7 and agree that, in the
event of such breach, the Purchaser may obtain temporary and permanent
injunctive relief restraining such party from such breach, and, to the extent
permissible under applicable statutes and rules of procedure, a temporary
injunction may be granted immediately upon the commencement of any such suit.
Nothing contained in this Agreement shall be construed as prohibiting the
Purchaser from pursuing other remedies available at law or in equity for such
breach or threatened breach of this Section 3.7.
3.8. Marketing Agreements. The Companies and a number of their
Affiliates are parties to marketing agreements ("Marketing Agreements") with
third parties, such as Amazon.com Inc. Each party hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable to have the
counterparties to such Marketing Agreements (a) give consideration to having the
Companies removed as parties to the Marketing Agreements in such a manner as to
not affect the rights of the other parties thereto and (b) enter into
replacement Marketing Agreements with the Companies, it being understood and
agreed that the final determination as to such matters rests with such
counterparties. HDI and the Seller shall, at the request of the Purchaser, use
their reasonable best efforts, and cause their Affiliates to use their
reasonable best efforts, to cooperate with the Companies in order that the
Companies may enter into replacement Marketing Agreements with such third
parties. It is understood and agreed by the parties that the actions
contemplated by this Section 3.8 may be taken prior to or after the Closing
Date.
3.9. Cooperation on Tax Matters.
(a) The Purchaser, HDI, the Seller and their Affiliates shall
cooperate, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns relating to the Companies and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. The Purchaser, HDI, the Seller agree, for
themselves and on behalf of their Affiliates, (1) to retain all books and
records with respect to Tax matters pertinent to the Companies relating to any
taxable period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the
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extent notified by the Purchaser, HDI or the Seller, any extensions thereof) of
the respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (2) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the Purchaser so requests, HDI, the Seller of the
Companies, as the case may be, shall allow the Purchaser to take possession of
such books and records.
(b) The Purchaser, HDI, the Seller and their Affiliates shall,
upon request, use their reasonable best efforts to obtain any certificate or
other document from any governmental authority or any other person or entity as
may be necessary to mitigate, reduce or eliminate any Tax that could be imposed
with respect to the transactions contemplated hereby.
3.10. Accounts Receivable. HDI and the Sellers agree that the
accounts receivable of the Companies added after the date hereof will be good
and collectible in the ordinary course of business at the aggregate amounts
recorded on the books of account of the Companies, less the amount of the
reserve for bad accounts reflected therein (which reserve will have been
established on a basis consistent with prior practice and in accordance with
GAAP), and will not be subject to any right of offset or counterclaim.
3.11. Power of Attorney.
(a) From and after the Closing Date, the Purchaser, on behalf
of the Companies, constitutes and appoints Steven Lipner or such other person as
designated by HDI who may assume the duties of Vice President, Taxation of HDI
after the date hereof, the true and lawful attorney-in-fact of the Companies,
with full power of substitution, and in the name, place and stead of the
Companies, to represent the Companies in connection with:
(i) any federal or state audit of the year 2000
payroll taxes of the Companies; and
(ii) any other Tax controversies that may arise after
the Closing Date and for which the Purchaser seeks indemnification pursuant to
the terms of this Agreement.
(b) The Purchaser authorizes such attorney-in-fact to take any
further action which the attorney-in-fact shall consider necessary or advisable
in connection with any of the foregoing matters, hereby giving such
attorney-in-fact full power and authority to do and perform each and every act
or thing whatsoever requisite or advisable to be done in connection with the
foregoing as fully as the Purchaser or the Companies might or could do
personally, and hereby ratifying and confirming all that any such
attorney-in-fact shall lawfully do or cause to be done by virtue thereof and
hereof; provided, however, that the attorney-in-fact may not settle any claim
without the consent of the Purchaser, which consent will not be unreasonably
withheld.
(c) The power of attorney granted pursuant to the Section is a
special power of attorney coupled with an interest and may not be revoked
without the prior written consent of HDI.
3.12. Post Street Lease and Guarantee. With regard to the
Leases for the building at 135 Post Street, San Francisco, California with
Seaker & Sons (the "Landlord")
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described on Schedule 2(g)(ii), HDI and the Seller shall obtain a consent or
consents to the assignment of such Leases from the Landlord on or before the
Closing Date and HDI agrees to remain a guarantor of the Lease for Floors B
through 4 of the Post Street premises until the Purchaser can obtain the release
of HDI as such guarantor. The Purchaser agrees to use its commercially
reasonable efforts to obtain the release of HDI as the guarantor of the lease
for Floors B through 4 of the Post Street premises after the Closing Date and
before the first anniversary of the Closing Date, which commercially reasonable
efforts will include requesting such release and providing reasonable
information requested by the Landlord, but shall not require making any
additional payments to the Landlord or any third party. If the Purchaser cannot
obtain the complete release of HDI as such guarantor on or before the first
anniversary of the Closing Date, as liquidated damages, Sands Springs Holdings
LLC shall either (i) transfer such percentage interest in its business so that
HDI will have an indirect interest in 5% of the common stock of the Purchaser,
or (ii) provide to HDI a stand-by letter of credit or promissory note or other
form of compensation acceptable to HDI in the amount of $2.5 million which shall
permit HDI, as guarantor of the obligations of Gump's Corp. under the Lease for
Floors B through 4 to be reimbursed for any and all liabilities, judgments,
claims, settlements, losses, damages, fees, penalties, obligations and expenses
(including reasonable fees and disbursements of counsel) incurred or suffered by
it arising from, by reason of or in connection with any obligations or defaults
by Gump's Corp. under such Lease Agreement or by Gump's by Mail under a related
Lease Agreement for Floors 5 and 6 of the Post Street premises until (x) the
release by the Landlord of HDI, as a guarantor of the Gump's Corp. lease, or (y)
the date of the termination of said leases pursuant to their terms. The remedies
set forth in clauses (i) and (ii) above shall be HDI's sole recourse for failure
to be released as a guarantor but shall not limit the Purchaser's
indemnification obligations set forth in Section 5.1(b).
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
4.1. Conditions of Obligations of the Purchaser. The
obligations of the Purchaser to purchase the Shares and to consummate the
transactions contemplated by this Agreement are subject to the satisfaction on
or prior to the Closing of the following conditions unless waived in writing by
the Purchaser:
(a) Representations, Warranties and Covenants; No Material
Adverse Change. Each of the representations and warranties of HDI and the Seller
contained herein shall be true and correct in all material respects as of the
date hereof and as of the Closing Date as if made on and as of the Closing Date
(except for such exceptions as shall occur between the date hereof and the
Closing Date as a result of Jed Pogran's running of the business of the
Companies from and after the date hereof until the Closing Date as described in
Section 3.2 and as described to the Purchaser), and HDI and the Seller shall
have performed and complied with all covenants and agreements required to be
performed or complied with on or prior to the Closing Date. Since the date of
this Agreement, there shall have been no Material Adverse Change in the assets,
liabilities, properties, condition (financial or otherwise), affairs, earnings,
business, operations, management personnel, or customer arrangements of the
Business.
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(b) Consents, Amendments and Terminations. The Purchaser shall
have received duly executed and delivered copies of all waivers, consents,
terminations, releases and approvals contemplated by Section 2.1(d) and Schedule
2.1(d), and the release and termination of any encumbrance, lien or pledge set
forth on Schedule 2.1(g)(i), all in form and substance reasonably satisfactory
to the Purchaser.
(c) Share Certificates. The Seller shall have delivered to the
Purchaser share certificates representing the Shares, duly endorsed for transfer
or accompanied by blank stock powers.
(d) Other Documents. HDI and the Seller shall have delivered
to the Purchaser, or caused their Affiliates to deliver, executed copies of such
other agreements, documents and instruments as are reasonably requested by the
Purchaser, each in form and substance reasonably satisfactory to the Purchaser,
including the following:
(i) a Direct Marketing Services Agreement (the
"Services Agreement") among HDI, Keystone, the Companies and the Purchaser,
substantially in the form of Exhibit B attached hereto;
(ii) a Domain Name Purchase Agreement and Bill of
Sale (the "Domain Name Purchase Agreement") between HDI, the Seller and Michael
D. Contino and the Purchaser transferring all of the registrants' right,
interest and title in the domain names currently used by the Companies,
substantially in the form of Exhibit C attached hereto;
(iii) a Consent of the landlord to the Assignment of
each of the Leases for the building at 135 Post Street, San Francisco,
California, as contemplated by Section 3.13 of this Agreement, either actual or
deemed pursuant to Section 13. 2 of such Leases; and
(iv) an Assignment and Assumption of that certain
agreement between Gump's by Mail and RR Donnelley dated February 23, 2004, and
the consent of RR Donnelley to the Assignment of such agreement.
(e) Consolidated Adjusted EBITDA. The December Financial
Statements shall indicate that the Companies have a consolidated adjusted EBITDA
for the twelve months ended December 25, 2004 of not less than $3 million. For
purposes of this Agreement, "consolidated adjusted EBITDA" shall mean earnings
before interest, taxes, depreciation and amortization, as adjusted to include
the full annualized cash lease expense paid by the Companies for the Real
Property, without giving effect to any reversals, adjustments or previous
accounting reserves that HDI may have made or currently applies in the ordinary
course of financial reporting.
(f) Inventory. The Purchaser shall have confirmed to its
reasonable satisfaction that the book value of the inventories of the Companies,
net of the obsolescence reserve and net of inventory held for sale under
consignment agreements, as of December 25, 2004 is at least $6 million.
(g) Certificates. The Purchaser shall have received a
certificate of the chief executive officer and the chief financial officer of
HDI and the Seller, in form and substance
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reasonably satisfactory to the Purchaser, confirming the matters set forth in
Section 4.1(a) and a certificate of the Secretary of HDI and the Seller, in form
and substance reasonably satisfactory to the Purchaser, affirming the
authenticity of the resolutions attached thereto that authorize the transactions
contemplated by this Agreement.
(h) Release of Liens and Guarantees. The Purchaser shall have
received evidence, in form and substance reasonable satisfactory to it, of the
unconditional release of the Companies of their obligations under the agreements
set forth or referred to in Schedule 2.1(g)(i), including the liens on the stock
of, property of, and guarantees of, the Companies pursuant to HDI's facilities
with Wachovia Bank, National Association (successor by merger to Congress
Financial Corporation) and Chelsey Finance, LLC.
(i) Termination of Certain Agreements. The Purchaser shall
have received evidence, in form and substance reasonably satisfactory to it, of
the commencement of the termination of the obligations of the Companies under
the agreements set forth or referred to in Schedule 2.1(j)(i)(A) that are
specified by the Purchaser to the Seller in writing at least 5 days prior to the
Closing Date. The Purchaser shall have received evidence of the termination of
such obligations no later than 45 days after the Closing Date.
(j) Governmental Consents; No Legal Bar; Permits. HDI and the
Seller shall have obtained all necessary authorizations, approvals, and
qualifications, or secured exemptions therefrom, required by, and made all
necessary filings and registrations with, any governmental authority in
connection with the consummation of the transactions contemplated by this
Agreement. No action or proceeding by or before any governmental authority shall
be pending or threatened challenging or seeking to restrain or prohibit the
transactions contemplated by this Agreement. No law, rule, regulation, order,
injunction or decree of any governmental authority preventing the transactions
contemplated by this Agreement shall be in effect. The Purchaser shall have
received all Permits necessary to conduct the Business as presently being
conducted, including those Permits listed in Schedule 2.1(l)(iv).
(k) Minute Books. The Purchaser shall have received the minute
books, stock certificate books and stock record books of each Company.
(l) Personally-Identifiable Data. The Seller shall have
provided to the Purchaser a true and correct copy of the Personally-Identifiable
Data; provided, however, that, at Seller's option, the Seller may provide to the
Purchaser a true and correct copy of the Personally-Identifiable Data after the
Closing; and, provided further, that such Data must be delivered to the
Purchaser no more than 30 days after the Closing.
(m) No Legal Proceedings. No court or governmental action or
proceeding shall have been instituted or threatened to restrain or prohibit the
transactions contemplated hereby, and on the Closing Date there will be no court
or governmental actions or proceedings pending or threatened against or
affecting the Company that involve a demand for any judgment or liability,
whether or not covered by insurance, that could reasonably be expected to result
in a Material Adverse Effect on the Company.
(n) Good Standing Certificates. The Purchaser shall have
received certificates
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from each jurisdiction set forth on Schedule 2.1(a), each dated no more than
thirty (30) days prior to the Closing Date, to the effect that the applicable
Company is in good standing in such jurisdiction.
(o) Certificate of Non-Foreign Status. The Seller shall have
provided the Purchaser with a certificate of non-foreign status in which the
Seller certifies that it is no a non-resident alien and not subject to
withholding under Code Section 1445.
(p) Resignations. Wayne P. Garten and Charles E. Blue shall
have resigned as officers and directors of the Companies.
(q) Other. The Purchaser shall have received such other
documents, instruments or certificates as it shall reasonably request.
4.2. Conditions of Obligations of the Seller. The obligations
of the Seller to sell the Shares and to consummate the transactions contemplated
by this Agreement are subject to the satisfaction on or prior to the Closing of
the following conditions unless waived in writing by the Seller:
(a) Representations, Warranties and Covenants. Each of the
representations and warranties of the Purchaser contained herein shall be true
and correct in all material respects as of the date hereof and as of the Closing
Date as if made on and as of the Closing Date, and the Purchaser shall have
performed and complied with all covenants and agreements required to be
performed or complied with on or prior to the Closing Date.
(b) Payment of Purchase Price. The Purchaser shall have paid
the Purchase Price to the Seller. Such payment shall be made by wire transfer of
immediately available funds to an account designated in writing by the Seller to
the Purchaser, such designation of account to be made no later than two (2)
business days prior to the Closing Date.
(c) Certificates. The Seller shall have received a certificate
of a duly authorized officer of the Purchaser confirming the matters set forth
in Section 4.2(a) in form and substance reasonably satisfactory to the Seller
and a certificate of the Secretary of the Purchaser affirming the authenticity
of the resolutions attached thereto that authorize the transactions contemplated
by this Agreement.
(d) Governmental Consents; No Legal Bar. HDI and the Seller
shall have obtained all necessary authorizations, approvals, and qualifications,
or secured exemptions therefrom, required by, and made all necessary filings and
registrations with, any governmental authority in connection with the
consummation of the transactions contemplated by this Agreement. No action or
proceeding by or before any governmental authority shall be pending or
threatened challenging or seeking to restrain or prohibit the transactions
contemplated by this Agreement. No law, rule, regulation, order, injunction or
decree of any governmental authority preventing the transactions contemplated by
this Agreement shall be in effect.
(e) Marketing Agreements. The Companies shall have been
removed as parties to the Marketing Agreements in such a manner as to not affect
the rights of the other parties thereto or such process shall have commenced and
shall conclude within 90 days
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following the Closing Date.
(f) Other Documents. The Purchaser shall have delivered to HDI
and the Seller executed copies of such other agreements, documents and
instruments as are reasonably requested by HDI or the Seller, each in form and
substance reasonably satisfactory to such party, including the following:
(i) the Services Agreement;
(ii) the Domain Name Purchase Agreement; and
(iii) a transition services agreement.
(g) No Legal Proceedings. No court or governmental action or
proceeding shall have been instituted or threatened to restrain or prohibit the
consummation of the transactions contemplated by this Agreement.
(h) Bank Accounts, etc. The Purchaser shall have established,
prior to the Closing Date, bank accounts in its own name with sufficient funds
to meet payroll and other operational obligations of the Companies after the
Closing Date. Additionally, the Purchaser shall have obtained, prior to the
Closing Date, policies of casualty, liability, theft, fidelity, life and other
forms of insurance it deems appropriate in its own name with respect to the
Business and entered into credit card processing agreements for the Business.
(i) Other. HDI and the Seller shall have received such other
documents, instruments or certificates as it shall reasonably request including,
without limitation, the Consent of the landlord to the Assignment of each of the
Leases for the building at 135 Post Street, San Francisco, California, as
contemplated by Section 3.13 of this Agreement, either actual or deemed pursuant
to Section 13.2 of such Leases.
ARTICLE V
INDEMNIFICATION
5.1. Indemnification.
(a) Indemnification by HDI and the Seller. HDI and the Seller
jointly and severally indemnify and hold harmless the Purchaser and its
Affiliates, and their shareholders, partners, directors, officers, employees and
other agents and representatives, from and against any and all liabilities,
judgments, claims, settlements, losses, damages, fees, Liens, Taxes, penalties,
obligations and expenses (including reasonable fees and disbursements of
counsel) (collectively, "Losses") incurred or suffered by any such Person
arising from, by reason of or in connection with:
(i) any breach of any representation, warranty,
covenant or agreement of HDI or the Seller contained in this Agreement or any
other agreement, document or instrument delivered or entered into by HDI or the
Seller on the Closing Date;
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(ii) regardless of any disclosure, any and all
federal, state, local and foreign income, profits, franchise, sales, use,
occupation, property, excise, employment and other Taxes (including interest,
penalties and withholdings of Tax) of any kind of the Companies for any and all
periods ending on or prior to the Closing Date. With regard to any claim
pertaining to ERISA, Taxes or title to the Shares, this indemnification shall
survive until the expiration of any applicable statute of limitations;
(iii) the conduct of the Business or other operations
of the Business on or prior to the Closing Date;
(iv) any and all actions, suits, proceedings,
demands, orders, rulings, decrees, judgments, costs and legal and other expenses
incident to any of the matters referred to in clauses (i) through (iii) of this
Section 5.1(a); and
(v) any liability of the Companies for gift
certificates issued by either of the Companies prior to December 24, 2003;
provided, however, that (x) HDI's and the Seller's obligation and liability for
any and all such Losses under this Section 5.1(a) shall not exceed in the
aggregate the amount of the Purchase Price, and (y) HDI and the Seller shall
have no obligation to indemnify or hold harmless the Purchaser or the other
indemnitees for any Losses under this Section 5.1(a) until the aggregate Losses
incurred by the Purchaser Parties exceeds $100,000 (the "Threshold") and then
only to the extent that the Losses exceed the Threshold; provided further, that
with respect to the matters set forth in Section 5.1(a)(ii) there shall be no
Threshold (and indemnification by HDI or the Seller for the matters set forth in
Section 5.1(a)(ii) shall not be counted towards determining whether the
Threshold has been reached).
(b) Indemnification by the Purchaser. The Purchaser shall
indemnify and hold harmless HDI, the Seller and their Affiliates, and their
shareholders, partners, directors, officers, employees and other agents and
representatives, from and against any and all Losses incurred or suffered by any
such Person arising from, by reason of or in connection with:
(i) any misrepresentation or breach of any
representation, warranty, covenant or agreement of the Purchaser contained in
this Agreement or any other agreement, document or instrument delivered or
entered into by the Purchaser on the Closing Date;
(ii) the compliance by HDI, the Seller or any of
their Affiliates with Section 1.6;
(iii) any and all federal, state, local and foreign
income, profits, franchise, sales, use, occupation, property, excise, employment
and other Taxes (including interest, penalties and withholdings of Tax) of any
kind related to the Business for any and all periods beginning after the Closing
Date;
(iv) the conduct of the Business or other operations
of the Business after the Closing Date;
(v) any obligations or defaults by Gump's Corp. or
Gump's by Mail
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under the Post Street leases referred to in Section 3.13;
(vi) any obligations for any of the five change in
control payments in the aggregate amount of approximately $715,739 listed in
Schedule 2.1(m)(iii);
(vii) any obligations arising from the promotion
described in Schedule 2.1(e)(ii); and
(viii) any and all actions, suits, proceedings,
demands, orders, rulings, decrees, judgments, costs and legal and other expenses
incident to any of the matters referred to in clauses (i) through (vii) of this
Section 5.1(b);
provided, however, that the Purchaser's obligation and liability for any and all
such Losses under this Section 5.1(b) shall not exceed in the aggregate the
Purchase Price.
5.2. Certain Limitations. Except for the guarantee and pledge
referred to in Section 3.13, the remedies provided in this Article V shall be
the exclusive remedies of the Purchaser for any Losses that are subject to
indemnification pursuant to Section 5.1 (a).
5.3. Procedures Relating to Third Party Claims.
(A) In order for an indemnified party to be
entitled to any indemnification provided for under this Article V arising from,
by reason of, or otherwise in connection with an asserted or unasserted claim or
demand made or which might be made by any Person against the indemnified party
(a "Third Party Claim"), the indemnified party must send reasonably prompt
notice to the indemnifying parties in writing of the Third Party Claim,
including the nature and basis of such claim to the extent known by the
indemnified party (the "Indemnification Notice"); provided, however, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the indemnifying parties have been materially and
actually prejudiced as a result of such failure. If a Third Party Claim is made
against the indemnified party, the indemnifying parties shall be entitled to
participate in the defense thereof and, if they so choose and acknowledge in
writing their respective obligation to indemnify the indemnified party therefor,
to assume the defense thereof with counsel selected by the indemnifying parties
acting together, provided that such counsel is reasonably acceptable to the
indemnified party. Should the indemnifying parties so elect to assume the
defense of a Third Party Claim, the indemnifying parties shall not be liable to
the indemnified party for legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof. If the indemnifying
parties assume such defense, the indemnified party shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the indemnifying parties, it being
understood that the indemnifying parties shall control such defense. The
indemnifying parties shall be liable for the fees and expenses of counsel
employed by the indemnified party for any period during which the indemnifying
parties have failed to assume the defense thereof (as well as during the period
prior to the time the indemnified party shall have given notice of the Third
Party Claim as provided above). Regardless of which party shall assume the
defense of such claim, each party shall provide to the other parties, upon such
other parties' written request, reasonable access during normal business hours
to the books, records and personnel in their possession or under their control
which are
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reasonable necessary to verify such
claim.
(B) Prior to the indemnifying parties notifying
the indemnified party of their intention to defend the claim, the indemnified
party will defend against such claim as the indemnified party deems appropriate.
If the indemnifying parties so elect to assume the defense of any Third Party
Claim, the indemnified party shall cooperate with the indemnifying parties in
the defense or prosecution thereof. Whether or not the indemnifying parties
shall have assumed the defense of a Third Party Claim, the indemnified party
shall not admit any liability with respect to, or settle, compromise or
discharge, such Third Party Claim without the prior written consent of the
indemnifying parties (which consent shall not be unreasonably withheld). If the
indemnifying parties shall have assumed the defense of a Third Party Claim, the
indemnified party shall agree to any settlement, compromise or discharge of a
Third Party Claim which the indemnifying parties may recommend and which by its
terms obligates the indemnifying parties to pay the full amount of the liability
in connection with such Third Party Claim, which releases the indemnified party
completely in connection with such Third Party Claim and which would not
otherwise adversely affect the indemnified party.
(C) Notwithstanding the foregoing, the
indemnifying parties shall not be entitled to assume the defense of any Third
Party Claim (and shall be liable for the reasonable fees and expenses of counsel
incurred by the indemnifying parties in defending such Third Party Claim) if the
Third Party Claim seeks an order, injunction or other equitable relief or relief
for other than money damages against the indemnified party which the indemnified
party determines, after conferring with its outside counsel, cannot be separated
from any related claim for money damages without any potential adverse effect to
the indemnified party. If such equitable relief or other relief portion of the
Third Party Claim can be so separated from that for money damages, the
indemnifying parties shall be entitled to assume the defense of the portion
relating to money damages.
5.4. Procedures Related to Claims other than Third Party
Claims. In the event any indemnified party should have a claim for
indemnification against the indemnifying parties under this Article V that does
not involve a Third Party Claim being asserted against or sought to be collected
from such indemnified party, the indemnified party shall deliver notice of such
claim with reasonable promptness to the indemnifying parties. The failure by any
indemnified party so to notify the indemnifying parties shall not affect the
indemnification provided hereunder except to the extent the indemnifying parties
have been materially and actually prejudiced as a result of such failure.
ARTICLE VI
MISCELLANEOUS
6.1. Entire Agreement. This Agreement and the other
agreements, documents and instruments contemplated by this Agreement and the
Schedules and exhibits hereto and thereto contain the entire agreement among the
parties with respect to the transactions contemplated hereby and thereby and
supersede all prior agreements or understandings among the parties, including
the letters, dated July 30, 2004 and September 3, 2004, between Sand
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Springs Holdings, LLC, a member of the Purchaser, and HDI relating to the
transactions contemplated by this Agreement.
6.2. Termination.
(A) This Agreement shall terminate on the
earlier to occur of any of the following events:
(i) the mutual written agreement of HDI and the
Purchaser;
(ii) by written notice of HDI to the Purchaser if the
Closing shall not have occurred prior to 11:59 p.m. (New York time) on the
second business day after the date on which all conditions set forth in Article
IV shall have been satisfied or waived other than as a result of a Force Majeure
Event;
(iii) by written notice of the Purchaser to HDI if
the Closing shall not have occurred prior to 11:59 p.m. (New York time) on the
second business day after the date the 15-day second notice period pursuant to
Section 13.2 of the Lease Agreements referred to in Section 4.1(d)(iii) expires
as a result of the failure of all conditions set forth in Article IV to have
been satisfied by the Seller or as a result of a Force Majeure Event;
(iv) by written notice of the Purchaser to HDI, if
HDI or the Seller shall have materially breached any of its representations,
warranties or agreements contained herein, provided that any such breach or
breaches is not cured within 15 business days after the Purchaser gives HDI
written notice identifying such breach or breaches; or
(v) by written notice of HDI to the Purchaser, if the
Purchaser shall have materially breached any of its representations, warranties
or agreements contained herein, provided that any such breach or breaches is not
cured within 15 business days after HDI gives the Purchaser written notice
identifying such breach or breaches;
provided, however, that the party seeking termination pursuant to clause (iv) or
(v) is not in breach in any material respect of any of its representations,
warranties, covenants or agreements contained in this Agreement.
(B) Nothing in this Section 6.2 shall relieve
any party of any liability for a breach of this Agreement prior to the
termination hereof. Except as aforesaid, upon the termination of this Agreement
in accordance with its terms, all rights and obligations of the parties under
this Agreement shall terminate, except their obligations under Sections 3.1 and
3.6.
6.3. Descriptive Headings; Certain Interpretations.
(A) Descriptive headings are for convenience
only and shall not control or affect the meaning or construction of any
provision of this Agreement.
(B) Whenever a representation or warranty in
this Agreement is qualified by the phrase "to the knowledge of HDI and the
Seller" or words of like import, such phrase or words of like import shall mean
to the
-34-
actual knowledge, after due inquiry, of the following individuals: Charles Blue,
Michael Contino, Wayne Garten, Lisa Green, Steven Lipner, Rich Mercer, Jed
Pogran and Nina Quarequio.
(C) Except as otherwise expressly provided in
this Agreement, the following rules of interpretation apply to this Agreement:
(i) the singular includes the plural and the plural includes the singular; (ii)
"or" and "any" are not exclusive and "include" and "including" are not limiting;
(iii) a reference to any agreement or other contract includes amendments
thereto; (iv) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder; (v) a reference to a
Person includes its permitted successors and assigns; (vi) "$" and "dollars"
refer to lawful money of the United States of America; and (vii) a reference in
this Agreement to an Article, Section, Exhibit or Schedule is to the appropriate
Article, Section, Exhibit or Schedule of this Agreement.
(D) Disclosure of information in any Schedule
attached hereto shall constitute disclosure under any other Section or Schedule
of this Agreement if it is apparent from such Schedule that the information
disclosed thereon should qualify or limit the representations and warranties of
such other Section.
6.4. Notices. All notices, requests and other communications
to any party hereunder shall be in writing and sufficient if delivered
personally or sent by facsimile (with confirmation of receipt) or by registered
or certified mail, postage prepaid, return receipt requested, addressed as
follows:
If to the Purchaser, to:
Gump's Holdings, LLC
211 Central Park West, Apt. 5-F
New York, New York 10024
Facsimile: (212) 632-6054
Attention: John G. Chachas
with copies to:
Wenthur & Chachas, LLP
4180 La Jolla Village Drive, Suite 500
La Jolla, California 92037
Facsimile: (858) 457-3691
Attention: George G. Chachas, Esq.
If to HDI or the Seller, to:
Hanover Direct, Inc.
1500 Harbor Boulevard
Weehawken, NJ 07086
Facsimile: (201) 272-3498
Attention: Legal Department
and
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Facsimile: (201) 272-3465
Attention: Wayne P. Garten
with a copy to:
Brown Raysman Millstein Felder & Steiner LLP
900 Third Avenue
New York, New York 10022
Facsimile: (212) 895-2900
Attention : Sarah Hewitt, Esq.
or to such other address or facsimile number as the party to whom notice is to
be given may have furnished to the other party in writing in accordance
herewith. Each such notice, request or communication shall be effective when
received or, if given by mail, when delivered at the address specified in this
Section or on the fifth business day following the date on which such
communication is posted, whichever occurs first.
6.5. No Third Party Beneficiaries. Other than as set forth in
Article V, this Agreement does not confer upon any Person other than the parties
hereto any rights or remedies.
6.6. Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement. The signatures to this Agreement may be delivered by facsimile and
any such facsimile signature shall be as admissible in any judicial or other
proceeding as the originals thereof.
6.7. Survival. All representations and warranties contained in
this Agreement or in any document, certificate or instruments delivered pursuant
hereto or in connection herewith (unless otherwise expressly provided herein or
therein) shall survive the execution and delivery of this Agreement and the
Closing and shall remain in full force and effect until the second (2nd)
anniversary of the date of this Agreement; provided, however, that no party's
indemnification obligations under Section 5.1 shall terminate with respect to
any item as to which the Person to be indemnified or the related party thereto
shall have, before the expiration of the applicable period, previously made a
claim by delivering a notice of such claim to the indemnifying party. Any
representation and warranty contained in this Agreement pertaining to ERISA,
Taxes or title to the Shares, shall survive the execution and delivery of this
Agreement and the Closing and shall remain in full force and effect until the
expiration of any applicable statute of limitations.
6.8. Amendments and Waivers. No modification, amendment or
waiver, of any provision of, or consent required by, this Agreement, nor any
consent to any departure herefrom, shall be effective unless it is in writing
and signed by the parties hereto. Such modification, amendment, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
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6.9. Assignment. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by any party hereto without
the prior written consent of the other parties hereto. Any purported assignment
not permitted by this Section shall be void.
6.10. Enforceability. It is the desire and intent of the
parties hereto that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
6.11. "Affiliate" Defined. As used in this Agreement, an
"Affiliate" of a specified Person is a Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control of such specified Person. As used in this definition, "control"
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
6.12. Governing Law; Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California, without regard to the choice of law provisions thereof. Each party
hereto agrees to the exclusive jurisdiction of any state or Federal court within
the Southern District of California , with respect to any claim or cause of
action arising under or relating to this Agreement, and waives personal service
of any and all process upon it, and consents that all services of process be
made by registered or certified mail, return receipt requested, directed to it
at its address in accordance with Section 6.4, and service so made shall be
deemed to be completed when received. Each party hereto waives any objection
based on forum non conveniens and waives any objection to venue of any action
instituted hereunder. Nothing in the paragraph shall affect the right of a party
hereto to serve legal process in any other manner permitted by law.
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
HANOVER DIRECT, INC.
By: /s/ Wayne P. Garten
----------------------------------------------
Name: Wayne P. Garten
Title: President and Chief Executive Officer
THE COMPANY STORE GROUP, LLC
By: /s/ Charles E. Blue
----------------------------------------------
Name: Charles E. Blue
Title: President
GUMP'S HOLDINGS, LLC
By: /s/ John G. Chachas
----------------------------------------------
Name: John G. Chachas
Title: Managing Member
With respect to the undertakings in Section 3.12
only:
SAND SPRINGS HOLDINGS LLC
By: /s/ John G. Chachas
----------------------------------------------
Name: John G. Chachas
Title: Managing Member
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================================================================================
STOCK PURCHASE AGREEMENT
BY AND AMONG
HANOVER DIRECT, INC.,
THE COMPANY STORE GROUP, LLC
AND
GUMP'S HOLDINGS, LLC
(FORMERLY KNOWN AS 4Q HOLDINGS LLC)
DATED: FEBRUARY 11, 2005
================================================================================
Table of Contents
Page
----
ARTICLE I
PURCHASE AND SALE OF CAPITAL STOCK................................................................................1
1.1. Purchase and Sale...............................................................................1
1.2. Purchase Price..................................................................................1
1.3. Closing.........................................................................................2
1.4. Instruments of Conveyance and Transfer..........................................................3
1.5. Post-Closing Assurances.........................................................................3
1.6. Assignment of Contracts.........................................................................3
1.7. Post-Closing Adjustment.........................................................................4
1.8. Earnest Money Deposit...........................................................................5
ARTICLE II
REPRESENTATIONS AND WARRANTIES....................................................................................5
2.1. Representations and Warranties by HDI and the Seller............................................5
2.2. Representations and Warranties by the Purchaser................................................20
ARTICLE III
ADDITIONAL AGREEMENTS............................................................................................21
3.1. Expenses.......................................................................................21
3.2. Conduct of Business............................................................................21
3.3. Further Assurances.............................................................................22
3.4. Access and Information.........................................................................22
3.5. Public Announcements...........................................................................22
3.6. Confidentiality................................................................................23
3.7. Non-Competition; Non-Solicitation..............................................................23
3.8. Marketing Agreements...........................................................................24
3.9. Cooperation on Tax Matters.....................................................................24
3.10. Accounts Receivable............................................................................25
3.11. Power of Attorney..............................................................................25
3.12. Post Street Lease and Guarantee................................................................25
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING..................................................................................26
4.1. Conditions of Obligations of the Purchaser.....................................................26
4.2. Conditions of Obligations of the Seller........................................................29
ARTICLE V
INDEMNIFICATION..................................................................................................30
i
Table of Contents
(continued
Page
----
5.1. Indemnification................................................................................30
5.2. Certain Limitations............................................................................32
5.3. Procedures Relating to Third Party Claims......................................................32
5.4. Procedures Related to Claims other than Third Party Claims.....................................33
ARTICLE VI
MISCELLANEOUS....................................................................................................33
6.1. Entire Agreement...............................................................................33
6.2. Termination....................................................................................34
6.3. Descriptive Headings; Certain Interpretations..................................................34
6.4. Notices........................................................................................35
6.5. No Third Party Beneficiaries...................................................................36
6.6. Counterparts...................................................................................36
6.7. Survival.......................................................................................36
6.8. Amendments and Waivers.........................................................................36
6.9. Assignment.....................................................................................37
6.10. Enforceability.................................................................................37
6.11. "Affiliate" Defined............................................................................37
6.12. Governing Law; Jurisdiction....................................................................37
ii