New York
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0-14818
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14-1541629
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(State or Other Jurisdiction of Incorporation)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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☐ |
Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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☒ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐ |
Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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☐ |
Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which
registered
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Common shares, $0.01 par value per share
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TWMC
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NASDAQ Stock Market (Common Shares)
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ITEM 8.01. |
OTHER EVENTS
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ITEM 9.01.
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FINANCIAL STATEMENTS AND EXHIBITS
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Exhibit
No.
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Description
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Asset Purchase Agreement dated as of January 23, 2020, by and among Record Town, Inc., Record Town USA LLC,
Record Town Utah LLC, Trans World FL LLC, Trans World New York, LLC, Trans World Entertainment Corporation, 2428392 Inc., and 2428391 Ontario Inc, o/a Sunrise
Records.*
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||
Trans World Entertainment Corporation Press Release dated as of January 23, 2020.
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* |
Schedules, annexes and exhibits attached to the Asset Purchase Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Trans World Entertainment
Corporation will furnish the omitted items to the Securities and Exchange Commission upon request by the Commission.
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|
• |
the risk that the Transaction may not be completed in a timely manner or at all, which may adversely affect the Company’s business and the price of the
Company’s common stock;
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|
• |
the failure to satisfy any of the conditions to the consummation of the Transaction, including the adoption of the purchase agreement by the Company’s
stockholders and the receipt of third party consents;
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|
• |
the occurrence of any event, change or other circumstance or condition that could give rise to the termination of the Asset Purchase Agreement;
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• |
the effect of the announcement or pendency of the Transaction on the Company’s business relationships, operating results and business generally;
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• |
risks that the Transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the Transaction;
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• |
risks related to diverting management’s attention from the Company’s ongoing business operations;
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• |
the outcome of any legal proceedings that may be instituted against the Company related to the Transaction;
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• |
unexpected costs, charges, expenses, liabilities or delays in the consummation of the Transaction;
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• |
the Company’s ability to operate as a going-concern following the closing of the Transaction; and
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• |
other risks described in the Company’s filings with the SEC, such as its Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.
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/s/ Edwin Sapienza
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||
Date: January 23, 2020
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||
Edwin Sapienza
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||
Chief Financial Officer
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Exhibit
No.
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Description
|
|
2.1
|
Asset Purchase Agreement dated as of January 23, 2020, by and among Record Town, Inc., Record Town USA LLC, Record
Town Utah LLC, Trans World FL LLC, Trans World New York, LLC, Trans World Entertainment Corporation, 2428392 Inc., and 2428391 Ontario Inc, o/a Sunrise Records.*
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99.1
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Trans World Entertainment Corporation Press Release dated as of January 23, 2020.
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Page
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ARTICLE 1
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||
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DEFINITIONS
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1
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Section 1.1
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Definitions
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1
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ARTICLE 2
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||
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PURCHASE AND SALE
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9
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Section 2.1
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Purchase and Sale of Assets.
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9
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Section 2.2
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Excluded Assets.
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10
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Section 2.3
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Assumed Liabilities.
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11
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Section 2.4
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Excluded Liabilities.
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12
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Section 2.5
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Purchase Price.
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13
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Section 2.6
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Purchase Price Adjustment
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13
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Section 2.7
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Allocation of Purchase Price.
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16
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Section 2.8
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Certain Tax Matters.
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17
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Section 2.9
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Non-Assignable Assets.
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17
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Section 2.10
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Right Pockets.
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18
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ARTICLE 3
|
||
CLOSING
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||
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|
19
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Section 3.1
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Closing.
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19
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Section 3.2
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Vendor’s Closing Deliverables.
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19
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Section 3.3
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Purchaser’s Closing Deliverables.
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20
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ARTICLE 4
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||
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REPRESENTATIONS AND WARRANTIES OF VENDOR
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20
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Section 4.1
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Corporate Status of Vendor.
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20
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Section 4.2
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Authority of Vendor.
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21
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Section 4.3
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No Conflicts; Consents.
|
21
|
Section 4.4
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Financial Statements.
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22
|
Section 4.5
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Absence of Certain Changes, Events and Conditions.
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22
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Section 4.6
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Material Contracts.
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23
|
Section 4.7
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Title to Purchased Assets.
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24
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Section 4.8
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Condition and Sufficiency of Assets.
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24
|
Section 4.9
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Real Property.
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24
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Section 4.10
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Intellectual Property.
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25
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Section 4.11
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Inventory.
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26
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Section 4.12
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Legal Proceedings.
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26
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Section 4.13
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Compliance with Laws; Permits.
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26
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Section 4.14
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Environmental Matters
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27
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Section 4.15
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Benefit Plans
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27
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Section 4.16
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Employment Matters
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27
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Section 4.17
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Taxes
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28
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Section 4.18
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Insurance.
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28
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Section 4.19
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Product Warranties.
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29
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Section 4.20
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Product Liabilities.
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29
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Page
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||
Section 4.21
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Privacy/Data Protection.
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29
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Section 4.22
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Suppliers.
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30
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Section 4.23
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Brokers.
|
30
|
Section 4.24
|
No Other Representations and Warranties.
|
30
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ARTICLE 5
|
||
|
REPRESENTATIONS AND WARRANTIES OF PURCHASER
|
30
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Section 5.1
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Corporate Status of Purchaser.
|
30
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Section 5.2
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Authority of Purchaser.
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30
|
Section 5.3
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No Conflicts; Consents.
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31
|
Section 5.4
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Brokers.
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31
|
Section 5.5
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Sufficiency of Funds.
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31
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Section 5.6
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Legal Proceedings.
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31
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Section 5.7
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Independent Investigation.
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31
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ARTICLE 6
|
||
|
COVENANTS
|
32
|
Section 6.1
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Conduct of Business Before Closing.
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32
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Section 6.2
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Access to Information.
|
32
|
Section 6.3
|
No Solicitation of Other Bids.
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33
|
Section 6.4
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Notice of Certain Events.
|
34
|
Section 6.5
|
Employees and Employee Benefits.
|
35
|
Section 6.6
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Inventory Audit.
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36
|
Section 6.7
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Change of Name.
|
36
|
Section 6.8
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Governmental Approvals and Consents
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36
|
Section 6.9
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Books and Records
|
37
|
Section 6.10
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Confidentiality.
|
37
|
Section 6.11
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Closing Conditions.
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37
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Section 6.12
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Public Announcements.
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37
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Section 6.13
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Non-Competition; Non-Solicitation.
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38
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Section 6.14
|
Required Vote.
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38
|
Section 6.15
|
Further Assurances.
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39
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ARTICLE 7
|
||
|
CONDITIONS TO CLOSING
|
39
|
Section 7.1
|
Conditions to Obligations of Purchaser.
|
39
|
Section 7.2
|
Conditions to Obligations of Vendor.
|
40
|
Section 7.3
|
Conditions to Obligations of Each Party.
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41
|
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ARTICLE 8
|
||
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INDEMNIFICATION
|
41
|
Section 8.1
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Survival.
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41
|
Section 8.2
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Indemnification by Vendor.
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41
|
Section 8.3
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Indemnification by Purchaser.
|
42
|
Section 8.4
|
Certain Limitations.
|
43
|
Section 8.5
|
Indemnification Procedures
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44
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Section 8.6
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Escrow Amount.
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45
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Section 8.7
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Tax Treatment of Indemnification Payments.
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45
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Page
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Section 8.8
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Exclusive Remedy.
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45
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ARTICLE 9
|
||
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TERMINATION
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45
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Section 9.1
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Termination.
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45
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Section 9.2
|
Effect of Termination.
|
47
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ARTICLE 10
|
||
|
MISCELLANEOUS
|
48
|
Section 10.1
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Expenses.
|
48
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Section 10.2
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Notices.
|
48
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Section 10.3
|
Interpretation.
|
49
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Section 10.4
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Headings.
|
49
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Section 10.5
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Severability.
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50
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Section 10.6
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Entire Agreement.
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50
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Section 10.7
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Successors and Assigns.
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50
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Section 10.8
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No Third-Party Beneficiaries.
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50
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Section 10.9
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Remedies Cumulative; Specific Performance.
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50
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Section 10.10
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Amendment and Modification; Waiver.
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50
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Section 10.11
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Governing Law; Forum Selection.
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51
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Section 10.12
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Counterparts.
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51
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Section 10.13
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Parent Guaranty.
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51
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Section 10.14
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Sunrise Guaranty
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53
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Section 10.15
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Bulk Sales.
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54
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Section 10.16
|
Disclosure Schedules.
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54
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Section 1.1
|
Definitions
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Section 2.1
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Purchase and Sale of Assets.
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(a)
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all accounts or notes receivable of the Business;
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(b)
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all inventory, finished goods, raw materials, work in progress, packaging, supplies, parts and other inventories of the Business wherever located and whether held by Vendor or third parties (collectively,
the “Inventory”);
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(c)
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all Contracts, the Real Property Leases set forth in Section 4.9(a) of the Disclosure Schedules and the IP Licenses set forth in Schedule 4.10(a) to this Agreement (collectively, the “Assigned Contracts”);
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(d)
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all Intellectual Property owned by Vendor and used primarily in connection with the Business, including without limitation the IP Registrations set forth in Schedule 4.10(a) to this Agreement (collectively,
the “IP Assets”);
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(e)
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all furniture, fixtures, equipment, supplies and other tangible personal property of the Business (collectively, the “Tangible Personal Property”);
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(f)
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all Permits but only to the extent such Permits may be transferred under applicable Law;
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(g)
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all of Vendor’s rights under warranties, indemnities and all similar rights against third parties to the extent related to any Purchased Assets;
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(h)
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originals, or where not available, copies, of all books and records, including books of account, ledgers and general, financial and accounting records, machinery and equipment maintenance files, customer
lists, customer purchasing histories, price lists, distribution lists, supplier lists, production data, quality control records and procedures, customer complaints and inquiry files, research and development files, records and data
(including all correspondence with any Governmental Authority), sales material and records, strategic plans, internal financial statements and marketing and promotional surveys, material and research, that primarily relate to the Business
or the Purchased Assets, other than books and records set forth in Section 2.2(g) (collectively, the “Books and Records”);
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(i)
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any refunds in respect of Non-Income Taxes attributable to the Business with respect to the Interim Tax Period;
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(j)
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all cash, cash equivalents, proceeds and other monies derived from the operation of the Business from the Closing Time to the Closing Date; and
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(k)
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all goodwill associated with any of the assets described in the foregoing clauses.
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Section 2.2
|
Excluded Assets.
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(a)
|
all assets primarily relating to any business of Parent other than the Business (including the Etailz Business);
|
(b)
|
all cash and cash equivalents, bank accounts and securities of Vendor prior to the Closing Time;
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(c)
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all intercompany receivables and payables between Parent, on the one hand, and Vendor or subsidiaries of Vendor on the other hand;
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(d)
|
all third-party receivables created prior to the Closing Time (including, but not limited to, those set forth in Schedule 2.2(d) to this Agreement);
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(e)
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all Contracts that are not Assigned Contracts (including, but not limited to, those set forth in Schedule 2.2(e) to this Agreement);
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(f)
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all Intellectual Property other than the IP Assets;
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(g)
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the corporate seals, organizational documents, minute books, securities registers, Tax Returns, books of account or other records having to do with the corporate organization of Vendor, all employee-related
or employee benefit-related files or records, other than personnel files of Transferred Employees, and any other books and records that Vendor is prohibited from disclosing or transferring to Purchaser under applicable Law and is required
by applicable Law to retain;
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(h)
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all insurance policies of Vendor and all rights to applicable claims and proceeds thereunder;
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(i)
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all Vendor Benefit Plans and trusts or other assets attributable thereto;
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(j)
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all Tax assets and Tax attributes (including duty and Tax refunds and prepayments) of Vendor, other than any Non-Income Tax refunds described in Section 2.1(i);
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(k)
|
all rights to any action, proceeding or claim of any nature available to or being pursued by Vendor, whether arising by way of counterclaim or otherwise;
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(l)
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the assets, properties and rights specifically set forth in Schedule 2.2(l) to this Agreement;
|
(m)
|
all prepaid expenses, credits, advance payments, security, deposits, charges, sums and fees specifically as set forth in Schedule 2.2(m) to this Agreement (the “Prepaid
Amounts”); provided, that all Prepaid Amounts for a period which includes (but does not end on) the Closing Time shall be apportioned between Purchaser and Vendor based on the number of days included in such period through the
Closing Time and the number of days included in such period after and including the Closing Time (the “Apportioned Prepaid Amounts”); and
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(n)
|
the rights that accrue or will accrue to Vendor under the Transaction Documents.
|
Section 2.3
|
Assumed Liabilities.
|
(a)
|
all liabilities of Vendor with respect to (i) gift cards or gift certificates outstanding as of and following the Closing Time (the “Gift Card Obligations”) in an
aggregate amount not to exceed the Gift Card Aggregate Amount and (ii) customer loyalty discount cards relating to the Business as of and following the Closing Time;
|
(b)
|
all liabilities and obligations arising under or relating to the Assigned Contracts and IP Assets, as of and following the Closing Time, including without limitation liabilities as a holdover tenant under
the Short Term Real Property Leases and those set forth in Schedule 2.3(b) to this Agreement with respect to the period prior to the Closing Time;
|
(c)
|
all Inventory-related payables and Inventory-related liabilities existing as of the Closing Time or incurred following the Closing Time;
|
(d)
|
(i) from the Closing Time to the Closing Date, the aggregate amount of Vendor’s obligations with respect to compensation payable and benefits provided by Vendor to each Employee who becomes a Transferred
Employee (the “Apportioned Employee Expenses”) and (ii) all liabilities and obligations with respect to any Transferred Employee arising as a result of the employment, or termination of employment,
of the Transferred Employee by Purchaser or an Affiliate of Purchaser after the Closing;
|
(e)
|
all liabilities and obligations for (i) Transfer Taxes or Apportioned Taxes for which Purchaser is responsible pursuant to Section 2.8(a) or Section 2.8(c), respectively and (ii) Non-Income Taxes
attributable to the Business with respect to the Interim Tax Period; and
|
(f)
|
all other liabilities and obligations arising out of or relating to the ownership or operation of the Business and the Purchased Assets on or after the Closing Time.
|
Section 2.4
|
Excluded Liabilities.
|
(a)
|
any liabilities or obligations arising out of or relating to Vendor’s ownership or operation of the Business and the Purchased Assets before the Closing Time, including without limitation, any liabilities
or obligations with respect to freight, utilities, common area maintenance and expenses, outstanding rent payments, insurance and related operating expenses of the Business and the Purchased Assets;
|
(b)
|
any liabilities or obligations relating to or arising out of the Excluded Assets;
|
(c)
|
with the exception of (1) any Transfer Taxes or Apportioned Taxes for which Purchaser is responsible pursuant to Section 2.8(a) or Section 2.8(c), respectively, and (2) any Non-Income Taxes attributable to
the Business with respect to the Interim Tax Period, (i) all Taxes of the Vendor with respect to any Pre-Closing Period, (ii) all Taxes of any Person other than the Vendor for which the Vendor is liable pursuant to Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or non-U.S. law) as a result of the Vendor and such Person being members of the same consolidated, combined, unitary or similar Tax group prior to Closing, or (iii) any Taxes,
with respect to any Pre-Closing Period, of any Person other than the Vendor for which the Vendor is liable (A) as a transferee or successor or otherwise by operation of law as a result of a merger or other transaction occurring prior to
Closing or (B) as a result of a Contract entered into by the Vendor prior to Closing, but excluding, in each case, any Purchaser Closing Date Taxes;
|
(d)
|
any liabilities or obligations, other than Apportioned Employee Expenses, relating to or arising out of (i) the Vendor Benefit Plans or all other compensation or benefit plans, programs or agreements that
are sponsored, maintained or contributed to by Vendor or any Affiliate of Vendor, or with respect to which Vendor or any Affiliate of Vendor has any liability, (ii) the employment, or termination of employment, of (A) any Transferred
Employee before the Closing Time (B) any Employee of Vendor or an Affiliate of Vendor who does not become a Transferred Employee or (C) any other former employee, current or former independent contractor or consultant of Vendor or an
Affiliate of Vendor who does not become a Transferred Employee, (iii) workplace safety insurance or workers’ compensation claims of any Transferred Employee that relate to events occurring before the Closing Date, or (iv) the WARN Act and
the NY WARN Act in respect of any Employee of Vendor who does not become a Transferred Employee;
|
(e)
|
any liabilities or obligations of Vendor arising or incurred in connection with the negotiation, preparation, investigation and performance of this Agreement, the other Transaction Documents and the
transactions contemplated hereby and thereby, including fees and expenses of counsel, accountants, consultants, advisers and others; and
|
(f)
|
any liabilities and obligations of Vendor set forth in Section 2.4(f) of the Disclosure Schedules.
|
Section 2.5
|
Purchase Price.
|
(a)
|
the Base Purchase Price less the Escrow Amount, shall be paid by Purchaser by wire transfer of immediately available funds to an account designated in writing by Vendor to Purchaser on the Closing Date;
|
(b)
|
(i) the Apportioned Payments, plus (ii) the In-Transit Check Payment Amount, plus (iii) any other amounts paid by Vendor at or following the Closing Time in respect of the Purchased Assets or Assumed
Liabilities, which such amounts are submitted to Purchaser in writing no later than two Business Days prior to the Closing Date, plus (iv) the amount, if any, by which the Closing Date Purchase Price exceeds the Base Purchase Price, minus
(v) the amount, if any, by which the Closing Date Purchase Price is less than the Base Purchase Price, shall be paid by Purchaser on the earliest to occur of (A) within seven Business Days of the Closing Date if the Purchaser has secured
lender financing of at least $10,000,000, (B) within seven Business Days of the Purchaser having secured lender financing of at least $10,000,000, if such financing is secured after the Closing Date or (C) March 15, 2020, if the Purchaser
has not secured lender financing of at least $10,000,000, by wire transfer of immediately available funds to an account designated in writing by Vendor to Purchaser; provided, that if the calculation pursuant to this Section 2.5(b)
results in a negative number, such amount shall be paid within seven Business Days of the Closing Date by wire transfer of immediately available funds to Purchaser, first from the Escrow Amount in an amount not to exceed $500,000 to an
account designated in writing by Purchaser, and then by Vendor directly to an account designated in writing by Purchaser; and
|
(c)
|
the Escrow Amount shall be deposited by Purchaser by wire transfer of immediately available funds into an account designated by the Escrow Agent and shall be held and distributed in accordance with the
terms of the Escrow Agreement to satisfy (i) any adjustments to the Closing Date Purchase Price in favor of Purchaser under Section 2.6(b), (ii) amounts payable under Section 6.5(c) and (iii) any and all claims made by Purchaser or any
other Purchaser Indemnified Party against Vendor under Article 8.
|
Section 2.6
|
Purchase Price Adjustment
|
(a)
|
Closing Date Purchase Price Adjustment. The Base Purchase Price is based on Vendor
delivering to Purchaser at the Closing Time $40,000,000 of Net Inventory (“Target Net Inventory”). The Base Purchase Price shall be adjusted at Closing as follows: (A)
for every $1.00 by which Net Inventory at the Closing Time exceeds Target Net Inventory, up to $42,000,000, the Base Purchase Price will be increased by $0.50, (B) for every $1.00 by which Net
Inventory at the Closing Time exceeds $42,000,000, the Base Purchase Price will be increased by $0.25, (C) for every $1.00 by which Net Inventory at the Closing Time is less than Target Net
Inventory, down to $37,000,000, the Base Purchase Price will be decreased by $0.50, (iv) for every $1.00 by which Net Inventory at the Closing Time is less than $37,000,000, the Base
Purchase Price will be decreased by $0.75.
|
(b)
|
Post-Closing Adjustment.
|
(i)
|
No later than 30 days after the Closing Date, Purchaser shall prepare and deliver to Vendor a statement setting forth its good faith calculation of the value of the Net Inventory as of the Closing Time
together with any revision to the Closing Date Purchase Price adjusted pursuant to the methodology set out in Section 2.6(a) (the “Closing Net Inventory Statement”), prepared using the same
accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and methodologies that were used in the determining Net Inventory at the Closing.
|
(ii)
|
If the Closing Date Purchase Price as determined pursuant to Section 2.6(b)(i) and Section 2.6(c) is (x) greater than the Closing Date Purchase Price paid in accordance with Section 2.5(b), then Purchaser
shall pay Vendor the amount of such difference or (y) less than the Closing Date Purchase Price paid in accordance with Section 2.5(b), then Vendor shall pay Purchaser the amount of such difference, which such amounts, if any, shall be
paid in accordance with Section 2.6(c)(vi) (the amount payable pursuant to clause (x) or (y), the “Post-Closing Adjustment”).
|
(c)
|
Examination and Review.
|
(i)
|
Examination. After receipt of the Closing Net Inventory Statement, Vendor shall have 20 days (the “Review Period”) to review the Closing Net Inventory
Statement. During the Review Period, Vendor and Vendor’s accountants shall have full access to the relevant books and records of Purchaser, the personnel of, and work papers prepared by, Purchaser or Purchaser’s accountants to the extent
that they relate to the Closing Net Inventory Statement and to such historical financial information (to the extent in Purchaser’s or its Representatives’ possession) relating to the Closing Net Inventory Statement as Vendor may
reasonably request for the purpose of reviewing the Closing Net Inventory Statement and to prepare a Statement of Objections, provided that such access shall be in a manner that does not interfere with the normal business operations of
Purchaser.
|
(ii)
|
Objection. On or before the last day of the Review Period, Vendor may object to the Closing Net Inventory Statement by delivering to Purchaser a written statement setting forth Vendor’s objections in
reasonable detail, indicating each disputed item or amount and the basis for Vendor’s disagreement therewith (the “Statement of Objections”). If Vendor fails to deliver the Statement of Objections
before the expiration of the Review Period, the Closing Net Inventory Statement and the Post-Closing Adjustment, as the case may be, reflected in the Closing Net Inventory Statement shall be deemed to have been irrevocably accepted by
Vendor. If Vendor delivers the Statement of Objections before the expiration of the Review Period, Purchaser and Vendor shall negotiate in good faith to resolve such objections within 30 days after the delivery of the Statement of
Objections (the “Resolution Period”), and, if the same are so resolved within the Resolution Period, the Post-Closing Adjustment and the Closing Net Inventory Statement with such changes as may have
been previously agreed in writing by Purchaser and Vendor, shall be final and binding.
|
(iii)
|
Resolution of Disputes. If Vendor and Purchaser fail to reach an agreement with respect to all of the matters set forth in the Statement of Objections before expiration of the Resolution Period, then
any amounts remaining in dispute (“Disputed Amounts”) shall be submitted for resolution to the office of RSM US LLP or, if RSM US LLP is unwilling or unable
to serve, to the office of an independent accountant of national standing as mutually agreed between Vendor and Purchaser, who, acting as an expert and not an arbitrator (the “Independent Auditor”),
shall resolve the Disputed Amounts only and make any adjustments to the Post-Closing Adjustment, as the case may be, and the Closing Net Inventory Statement. The parties agree that all adjustments shall be made without regard to
materiality. The Independent Auditor shall only decide the specific items under dispute by the parties and its decision for each Disputed Amount must be within the range of values assigned to each such item in the Closing Net Inventory
Statement and the Statement of Objections, respectively.
|
(A)
|
The Purchaser and Vendor shall each prepare a written submission within thirty (30) Business Days of the formal appointment of the Independent Auditor on the matters in dispute which, together with the
relevant supporting documents, shall be submitted to the Independent Auditor for determination, with copies of such submissions submitted at the same time to the other party.
|
(B)
|
Following delivery of their respective submissions, each of Purchaser and Vendor shall have the opportunity to comment once only on the other’s submissions by written comment delivered to the Independent
Auditor not later than twenty (20) Business Days after receipt of the other’s submissions by Vendor or Purchaser (as the case may be), with copies of such comments submitted at the same time to the other party.
|
(C)
|
The Independent Auditor may request further information or clarification on any matter which it in its sole discretion decides is relevant from either of Vendor or Purchaser. Any response to such a request
which Vendor or Purchaser (as the case may be) may wish to make shall be delivered to the Independent Auditor not later than fifteen (15) Business Days after receipt of such request by Vendor or Purchaser (as the case may be), with copies
of such response submitted at the same time to the other party.
|
(D)
|
Unless otherwise directed by the Independent Auditor, following delivery of such a response, Vendor and Purchaser (as the case may be) shall have the opportunity to comment once only on the response by
written comment delivered to the Independent Auditor not later than fifteen (15) Business Days after receipt of the response by Vendor or Purchaser (as the case may be), with copies of such comment submitted at the same time to the other
party.
|
(E)
|
Thereafter, neither Vendor nor Purchaser (nor any other person or persons acting on behalf of any of them) shall be entitled to make further submissions except insofar as the Independent Auditor so requests
in accordance with Section 2.6(c)(iii).
|
(F)
|
The Independent Auditor shall determine (using its own legal advice as appropriate) any question of the legal construction of this Agreement but only insofar as it is relevant to the determination of the
Closing Net Inventory Statement, the calculation of the Post-Closing Adjustment and/or the Schedule of Adjustments.
|
(iv)
|
Fees of the Independent Auditor. The fees and expenses of the Independent Auditor shall be paid by Vendor and Purchaser based upon the percentage that the amount actually contested but not awarded to
Vendor or Purchaser, respectively, bears to the aggregate amount actually contested by Vendor and Purchaser. As an illustration of the allocation of fees and expenses of the Independent Auditor, if the amount set out in Vendor’s
Statement of Objections is $1,000,000, but the parties resolve a portion of the disputed items and refer to the Independent Auditor for resolution disputes in the aggregate amount of $500,000 and the Independent Auditor determines that
$400,000 of such contested objections are valid and that the Net Inventory at the Closing Time should be increased by that amount (in favor of Vendor) and if the amount of the Independent Auditor’s fees and expenses were $100,000, then
Purchaser would pay $80,000 {$400,000 (in favor of Vendor) / $500,000 (aggregate contested amount submitted to the Independent Auditor) x $100,000 (Independent Auditor’s fees and expenses)} and Vendor would pay the remaining $20,000.
Notwithstanding the foregoing, each party shall at all times be responsible for its own costs of presenting its case to the Independent Auditor.
|
(v)
|
Determination by Independent Auditor. The Independent Auditor shall make a determination as soon as practicable and in any event within 30 days (or such other time as the parties hereto shall agree
in writing) after its engagement, and its resolution of the Disputed Amounts and their adjustments to the Closing Net Inventory Statement and the Post-Closing Adjustment shall, in the absence of manifest error, be final, conclusive and
binding upon the parties hereto. The Independent Auditor shall act as an expert and, without prejudice to any other rights which they may respectively have under this Agreement, the parties expressly waive, to the extent permitted by
law, any rights of recourse to the courts they may otherwise have to challenge the Independent Auditor’s determination, except as it pertains to manifest error.
|
(vi)
|
Payment of Post-Closing Adjustment. Except as otherwise provided herein, any payment of the Post-Closing Adjustment, together with interest calculated as set forth below, shall (A) be due (x) within
five Business Days of acceptance of the applicable Closing Net Inventory Statement or (y) if there are Disputed Amounts, then within five Business Days of the Independent Auditor resolution described in (v); and (B) be paid by wire
transfer of immediately available funds to such account as is directed by Purchaser or Vendor, as the case may be. Any payment of the Post-Closing Adjustment owed by Vendor to Purchaser shall be paid first by the Escrow Agent from the
Escrow Amount, up to $500,000, in accordance with the terms of the Escrow Agreement; and, if the Post-Closing Adjustment exceeds $500,000 (less any amounts deducted from the Escrow Amount pursuant to Section 2.5(b)) in favor of Purchaser,
any remaining amount over $500,000 shall be paid directly by Vendor to Purchaser. Upon the later of (x) a final determination of the Final Purchase Price, and, if applicable, payment by the Escrow Agent to Purchaser from the Escrow
Amount in connection with the Post-Closing Adjustment and (y) payment by the Escrow Agent to Purchaser (or a designee of Purchaser approved by Vendor) from the Escrow Amount in connection with the amounts payable under Section 6.5(c), any
remaining amount of the Escrow Amount shall be released to Vendor pursuant to the terms of the Escrow Agreement.
|
(d)
|
Treatment of Adjustments for Tax Purposes. Any payments made under this Section 2.6 shall be treated as an adjustment to the Purchase Price by the parties and their Affiliates for U.S. federal and
all applicable state or local income Tax purposes, unless otherwise required by Law.
|
Section 2.7
|
Allocation of Purchase Price.
|
Section 2.8
|
Certain Tax Matters.
|
(a)
|
Notwithstanding any Law to the contrary, any Transfer Taxes shall be paid 50% by Vendor and 50% by Purchaser when due, and Purchaser shall, at its own expense, file all necessary tax returns and other
documentation with respect to all such Transfer Taxes; provided, that, if required by any Law, Vendor will join in the execution of any such tax returns and other documentation.
|
(b)
|
[Reserved].
|
(c)
|
For all purposes of this Agreement, (i) all real, personal and intangible ad valorem property Taxes levied with respect to any Purchased Asset for a taxable period which includes (but does not end on) the
Closing Time (“Apportioned Taxes”) shall be apportioned between Purchaser and Vendor based on the number of days included in such period prior to the Closing Time and the number of days included in
such period from and after the Closing Time and (ii) Non-Income Taxes attributable to the Business with respect to the Interim Tax Period shall be determined by daily proration (in the case of real, personal or intangible ad valorem
property Taxes) or based on an interim closing of the books (in the case of any Non-Income Taxes other than real, personal or intangible ad valorem property Taxes).
|
(d)
|
The parties shall waive compliance with the provisions of any bulk sales, bulk transfer or similar Laws related to Taxes of any jurisdiction that may otherwise be applicable with respect to the sale of any
of the Purchased Assets to the Purchaser.
|
(e)
|
Purchaser shall be entitled to deduct and withhold from any amounts payable pursuant to this Agreement such amounts required to be deducted or withheld under the Code or any provision of state or local Law
relating to any Tax; provided that if Purchaser intends to withhold any such amounts, Purchaser shall provide written notice to Vendor at least three Business Days prior to the Closing Date of the Taxes for which withholding will be
required. To the extent such amounts are so deducted or withheld and duly paid to the applicable Governmental Authority, such amounts shall be treated for all purposes under this Agreement as having been paid to Vendor.
|
Section 2.9
|
Non-Assignable Assets.
|
(a)
|
Notwithstanding anything to the contrary in this Agreement, and subject to the provisions of this Section 2.9, to the extent that the sale, assignment, transfer, conveyance or delivery, or attempted sale,
assignment, transfer, conveyance or delivery, to Purchaser of any Purchased Asset would result in a violation of applicable Law, or would require the consent, authorization, approval or waiver of a Person who is not a party to this
Agreement or an Affiliate of a party to this Agreement (including any Governmental Authority), and such consent, authorization, approval or waiver shall not have been obtained before the Closing, this Agreement shall not constitute a
sale, assignment, transfer, conveyance or delivery, or an attempted sale, assignment, transfer, conveyance or delivery, thereof; provided that, subject to the satisfaction or waiver of the
conditions contained in Article 7, Vendor shall hold such Purchased Asset in trust for the Purchaser and the Closing shall occur notwithstanding the foregoing without any adjustment to the Purchase Price on account thereof. Following the
Closing and until June 30, 2020, Vendor and Purchaser shall use commercially reasonable best efforts, and shall cooperate with each other, to obtain any such required consent, authorization, approval or waiver, or any release,
substitution or amendment required to novate all obligations under any and all Assigned Contracts or other liabilities that constitute Assumed Liabilities or to obtain in writing the unconditional release of all parties to such
arrangements, so that, in any case, Purchaser shall be solely responsible for such liabilities and obligations from and after the Closing Time; provided that neither Vendor nor Purchaser shall be
required to pay any consideration therefor. Once such consent, authorization, approval, waiver, release, substitution or amendment is obtained, Vendor shall absolutely assign, transfer, convey and deliver to Purchaser the relevant
Purchased Asset to which such consent, authorization, approval, waiver, release, substitution or amendment relates for no additional consideration. Applicable Transfer Taxes imposed in respect of such sale, assignment, transfer,
conveyance or licence shall be paid in accordance with Section 2.8(a).
|
(b)
|
To the extent that any Purchased Asset or Assumed Liability, or both, cannot be transferred to Purchaser under this Section 2.9, Purchaser and Vendor shall use commercially reasonable best efforts to enter
into such arrangements (such as subleasing, sub-licensing or subcontracting) to provide to the parties the economic and, to the extent permitted under applicable Law, operational equivalent of the transfer of such Purchased Asset or
Assumed Liability to Purchaser as of the Closing and the performance by Purchaser of its obligations with respect thereto; provided, that Vendor’s obligations shall cease on June 30, 2020. Purchaser shall, as agent or subcontractor for
Vendor pay, perform and discharge fully the liabilities and obligations of Vendor thereunder from and after the Closing Time (including without limitation liabilities as a holdover tenant under the Short Term Real Property Leases). To the
extent permitted under applicable Law, Vendor shall, at Purchaser’s expense, until June 30, 2020, hold in trust for and pay to Purchaser promptly upon receipt thereof, such Purchased Asset and all income, proceeds and other monies
received by Vendor to the extent related to such Purchased Asset in connection with the arrangements under this Section 2.9. Vendor shall be permitted to set off against such amounts all direct costs associated with the retention and
maintenance of such Purchased Assets. Notwithstanding anything herein to the contrary, the provisions of this Section 2.9 shall not apply to any consent or approval required under any antitrust or trade regulation Law, which consent or
approval shall be governed by Section 6.8.
|
|
(c) |
Notwithstanding the foregoing, Purchaser acknowledges and agrees that effective February 1, 2020, Vendor will remain a tenant, and in some cases a holdover tenant, under the Short Term Real Property Leases. As a result, Vendor may
be unable to, and shall have no obligation to, obtain any such required consent, authorization, approval or waiver, or release, substitution, amendment or novation with respect to such Short Term Real Property Leases. Purchaser
acknowledges and agrees it may be required to assume such Short Term Real Property Leases and the associated assumed liabilities as a holdover tenant.
|
Section 2.10
|
Right Pockets.
|
|
(a) |
After the Closing Date, if any asset or liability that should be a Purchased Asset or Assumed Liability nevertheless is identified as being owned by Vendor, Vendor and Purchaser shall cooperate and take or cause to be taken such
actions as are necessary to cause the transfer, assignment, conveyance or delivery to Purchaser of all right, title, interest and obligation in and to such asset or liability.
|
|
(b) |
After the Closing Date, if any asset or liability that should be an Excluded Asset or Excluded Liability nevertheless is identified as being owned by the Purchaser, Purchaser and Vendor shall cooperate and take or cause to be taken
such actions as are necessary to cause the transfer, assignment, conveyance or delivery to Vendor of all right, title, interest and obligation in and to such asset or liability.
|
Section 3.1
|
Closing.
|
Section 3.2
|
Vendor’s Closing Deliverables.
|
(a)
|
the Escrow Agreement duly executed by Vendor;
|
(b)
|
(i) a bill of sale and general conveyance assignment and assumption agreement and (ii) an assumption agreement of Real Property Leases, substantially in the forms attached hereto as Exhibit 3.2(b)(i)
(the “Bill of Sale and Assignment and Assumption Agreement”) and Exhibit 3.2(b)(ii) (the “Real Property Lease Assignment and Assumption Agreement”)
solely in respect of the Real Property Leases set forth on Section 3.2(b) of the Disclosure Schedules1, duly executed by Vendor;
|
(c)
|
an intellectual property assignment agreement substantially in the form attached hereto as Exhibit 3.2(c) (the “Intellectual Property Assignment Agreement”) to the
extent necessary to properly record the assignment to Purchaser of all of Vendor’s right, title and interest in and to the IP Assets;
|
(d)
|
evidence satisfactory to Purchaser of the Required Vote and Vendor Required Vote in respect of the sale of the Purchased Assets to the Purchaser pursuant to the terms of this Agreement, in accordance with
Section 6.14;
|
(e)
|
the officer’s certificate of Vendor required by Section 7.1(e) and Section 7.1(f);
|
(f)
|
Payoff and release letters from creditors of Parent or Vendor, as applicable, together with UCC termination statements, with respect to any financing statements filed against any of the Purchased Assets,
terminating all encumbrances (other than any Permitted Encumbrances) on any of the Purchased Assets;
|
(g)
|
a completed and signed IRS Form W-9 from Record Town; and
|
(h)
|
such other customary instruments of transfer, assumptions, filings or documents, in form and substance reasonably satisfactory to Purchaser, as may be required to give effect to this Agreement.
|
Section 3.3
|
Purchaser’s Closing Deliverables.
|
(a)
|
the Escrow Agreement duly executed by Purchaser;
|
(b)
|
the Closing Date Purchase Price, less the Escrow Amount, by wire transfer of immediately available funds;
|
(c)
|
the Bill of Sale and Assignment and Assumption Agreement duly executed by Purchaser;
|
(d)
|
the Real Property Lease Assignment and Assumption Agreement solely in respect of the Real Property Leases set forth on Section 3.2(b) of the Disclosure Schedules duly executed by Purchaser;
|
(e)
|
the Purchaser Closing Certificate;
|
(f)
|
a certificate that any Inventory being sold to Purchaser will be exempt from applicable sales tax as a sale for resale; and
|
(g)
|
the certificates of the Secretary of Purchaser required by Section 7.2(e) and Section 7.2(f).
|
Section 4.1
|
Corporate Status of Vendor.
|
(a)
|
Record Town is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. Record Town is duly qualified or licensed as a foreign corporation to conduct business and is in good standing in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
|
(b)
|
Trans World NY is a company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. Trans World NY is duly qualified or licensed as a foreign company to conduct business and is in good standing in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.
|
|
(c) |
Record Town USA LLC is a company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. Record Town USA LLC is duly qualified or licensed as a foreign company to conduct business and is in good standing in each jurisdiction where the character of the properties owned, leased
or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed would not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.
|
|
(d) |
Record Town Utah LLC is a company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite power and authority to
own, lease and operate its properties and to carry on its business as now being conducted. Record Town Utah LLC is duly qualified or licensed as a foreign company to conduct business and is in
good standing in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or
licensed would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
|
|
(e) |
Trans World FL LLC is a company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. Trans World FL LLC is duly qualified or licensed as a foreign company to conduct business and is in good standing in each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed would not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.
|
Section 4.2
|
Authority of Vendor.
|
Section 4.3
|
No Conflicts; Consents.
|
(i)
|
conflict with or violate Vendor’s Certificate of Incorporation or bylaws or equivalent organizational documents,
|
(ii)
|
(A) conflict with or violate any Law applicable to Vendor or by which any property or asset of Vendor is bound or affected or (B) result in any breach of or constitute a default under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in the creation of any Encumbrance (other than a Permitted Encumbrance) on any property or asset of Vendor, except, in the case of (A) and (B), as would not,
individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, or
|
(iii)
|
require Vendor to obtain any consent of, or make or deliver any filing or notice to, a Governmental Authority (other than the filing of the Parent Proxy Statement as set forth in Section 6.14).
|
Section 4.4
|
Financial Statements.
|
(a)
|
Vendor has delivered to Purchaser the Financial Statements and Interim Financial Statements.
|
(b)
|
All of the Financial Statements and Interim Financial Statements:
|
(i)
|
are based on the Books and Records of Parent;
|
(ii)
|
present fairly and accurately, in all material respects, the financial condition of the Business as of the respective dates thereof and the results of operations of the Business for the periods covered
thereby; and
|
(iii)
|
have been prepared in accordance with GAAP, applied on a consistent basis throughout the periods covered; provided, that the Interim Financial Statements are subject to year-end adjustments consistent with
past practice and does not contain all of the footnotes required by GAAP.
|
(c)
|
Vendor (taken as a whole) is not now insolvent, nor will it be rendered insolvent by the Transactions. Immediately after giving effect to the consummation of the Transaction, Vendor (taken as a whole) will
have assets (calculated at fair market value and on a going-concern basis) that exceed its known and probable liabilities.
|
Section 4.5
|
Absence of Certain Changes, Events and Conditions.
|
(a)
|
event, occurrence or development that has had a Material Adverse Effect;
|
(b)
|
incurrence of any indebtedness for borrowed money in connection with the Business in an aggregate amount exceeding $100,000, except unsecured current obligations and liabilities incurred in the Ordinary
Course;
|
(c)
|
sale or other disposition of any of the Purchased Assets shown or reflected in the Interim Financial Statements, except for the sale of Inventory in the Ordinary Course and except for any Purchased Assets
having an aggregate value of less than $100,000;
|
(d)
|
cancellation of any debts or claims or amendment, termination or waiver of any rights constituting Purchased Assets, except in the Ordinary Course of business;
|
(e)
|
capital expenditures in an aggregate amount exceeding $200,000 that would constitute an Assumed Liability;
|
(f)
|
imposition of any Encumbrance (other than a Permitted Encumbrance) upon any of the Purchased Assets;
|
(g)
|
increase in the compensation of any Employees, other than as provided for in any written agreements or in the Ordinary Course;
|
(h)
|
adoption, termination, amendment or modification of any Vendor Benefit Plan, the effect of which in the aggregate would increase the obligations of Vendor by more than 10% of its existing annual obligations
to such plans;
|
(i)
|
adoption of any amalgamation, arrangement, reorganization, liquidation or dissolution or filing of an assignment or notice of intention to file a proposal in bankruptcy under any provisions of the United
States Bankruptcy Code or the making of any bankruptcy order against it under such act or any similar Law;
|
(j)
|
purchase or other acquisition of any property or asset that constitutes a Purchased Asset for an amount in excess of $100,000, except for purchases of Inventory or supplies in the Ordinary Course; or
|
(k)
|
any agreement to do any of the foregoing, or any action or omission that would result in any of the foregoing.
|
Section 4.6
|
Material Contracts.
|
(a)
|
Section 4.6(a) of the Disclosure Schedules lists Contracts (x) by which any of the Purchased Assets are bound or affected or (y) to which Vendor is bound in connection with the Business or the Purchased
Assets (together with all Real Property Leases listed in Section 4.9(a) of the Disclosure Schedules and all Intellectual Property Licenses listed in Section 4.10(a) of the Disclosure Schedules, collectively, the “Material Contracts”):
|
(i)
|
all Contracts involving aggregate consideration in excess of $100,000 or requiring performance by any party more than one year from the date hereof, which, in each case,
cannot be cancelled without penalty or without more than 180 days’ notice;
|
(ii)
|
all Contracts that relate to the sale of any of the Purchased Assets, other than in the Ordinary Course, for consideration in excess of $100,000;
|
(iii)
|
all Contracts that relate to the acquisition of any business, a material portion of shares or amount of assets of any other Person or any real property (whether by amalgamation, arrangement,
sale of shares, sale of assets or otherwise), in each case involving amounts in excess of $100,000;
|
(iv)
|
except for agreements relating to trade receivables, all Contracts relating to indebtedness (including guarantees), in each case having an outstanding principal amount in excess of $100,000;
and
|
(v)
|
all Contracts between or among Vendor and any Affiliate of Vendor related to the ongoing operation of the Business after Closing that will not be terminated on or prior to the Closing;
|
(vi)
|
all collective agreements or Contracts with any labour organization, union or association.
|
(b)
|
Except with respect to the Short Term Real Property Leases and as set forth in Section 4.6(b) of the Disclosure Schedules, to Vendor’s Knowledge, Vendor is not in breach of, or default under, any Material
Contract, except for such breaches or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
|
Section 4.7
|
Title to Purchased Assets.
|
(a)
|
Except with respect to the Short Term Real Property Leases and as set forth in Section 4.7 of the Disclosure Schedules, (i) Vendor has good and valid title to, or a valid leasehold interest in, all of the
Purchased Assets free and clear of any Encumbrances (other than Permitted Encumbrances), (ii) Vendor has full right and power to sell, convey, absolutely assign, transfer and deliver to Purchaser good and valid title to, or a valid
leasehold interest in, all of the Purchased Assets, free and clear of any and all Encumbrances (other than Permitted Encumbrances) and (iii) the Purchased Assets are not subject to any preemptive right, right of first refusal or other
right or restriction.
|
(b)
|
Except with respect to the Short Term Real Property Leases and as set forth in Section 4.7 of the Disclosure Schedules, the sale, transfer and assignment of the Purchased Assets as contemplated by this
Agreement will give Purchaser possession of, and the right to use, all the assets required for conducting the Business in the Ordinary Course. Except with respect to the Short Term Real Property Leases and as set forth in Section 4.7 of
the Disclosure Schedules, upon Closing, Purchaser will be entitled to the continued possession and use of all Purchased Assets, subject to Permitted Encumbrances and Section 2.9 hereof. Except for the Purchased Assets, there are no other
assets, properties or rights, including intellectual property rights, that are required by Vendor, or that will be required by Purchaser after the Closing, to conduct the Business in a manner substantially consistent in all material
respects with the manner in which Vendor currently conducts the Business.
|
|
(c) |
The foregoing representations under (a) and (b) shall not include Intellectual Property, which shall be subject solely to Section 4.10.
|
Section 4.8
|
Condition and Sufficiency of Assets.
|
Section 4.9
|
Real Property.
|
(a)
|
Section 4.9(a) of the Disclosure Schedule sets forth an accurate and complete list of all real property leased by Vendor as lessee and all leases, subleases, licenses and other Contracts and all amendments
and modifications thereto and guarantees thereof (each such Contract, a “Real Property Lease” and the real properties specified in such Contracts being referred to herein individually as a “Vendor Property” and collectively as the “Vendor
Properties”), pursuant to which Vendor holds an interest in real property to be assigned to Purchaser pursuant to Section 2.1, subject to Section 2.9. Vendor does not own any real property. Vendor Properties constitute all interests in
real property currently used or currently held for use in connection with the Business by Vendor and which are necessary for the continued operation of the Business by Vendor as the Business is currently conducted in the Ordinary Course.
All of Vendor Properties, buildings, fixtures and improvements thereon leased by Vendor are in good operating condition and repair (subject to ordinary wear and tear). Vendor has provided to Purchaser true, correct and complete copies of
the Real Property Leases, together with all amendments, modifications or supplements thereto.
|
(b)
|
Vendor possesses all material certificates of occupancy and Permits of any Governmental Authority necessary or useful for the current use and operation of each Vendor Property, and Vendor has fully complied
with all material conditions of the Permits applicable to them. No default or violation, or event that with the lapse of time or giving of notice or both would become a default or violation, has occurred in the due observance of any
Permit.
|
(c)
|
There does not exist any actual or, to the Vendor’s Knowledge, threatened or contemplated condemnation or eminent domain proceedings that affect any Vendor Property or any part thereof, and Vendor has not
received any notice, oral or written, of the intention of any Governmental Authority or other Person to take or use all or any part thereof.
|
(d)
|
Vendor has not received any notice from any insurance company that has issued a policy with respect to any Vendor Property requiring performance of any structural or other repairs or alterations to such
Vendor Property.
|
Section 4.10
|
Intellectual Property.
|
(a)
|
Section 4.10(a) of the Disclosure Schedules lists all IP Registrations included in the IP Assets that are material to the operation of the Business. All required filings and fees related to such IP
Registrations have been timely filed with and paid to the relevant Governmental Authorities and authorized registrars, and all IP Registrations are, to the Vendor’s Knowledge, otherwise in good standing.
|
(b)
|
Vendor is the sole and exclusive legal and beneficial, and with respect to the IP Registrations, registered, owner of all right, title and interest in and to the IP Assets, and has the valid right to use
all other Intellectual Property used in or necessary for the conduct of the Business as currently conducted, in each case, free and clear of Encumbrances other than Permitted Encumbrances. Without limiting the generality of the foregoing,
Vendor has provided Purchaser with true and complete copies of each binding, written agreement with current and former employees of Vendor, and with current and former independent contractors, pursuant to which such employees and
independent contractors (i) waive any moral rights and assign to Vendor any ownership interest and right they may have in the IP Assets; and (ii) acknowledge Vendor’s exclusive ownership of all IP Assets.
|
(c)
|
The consummation of the transactions contemplated in this Agreement will not result in the loss or impairment of, or payment of any additional amounts with respect to, nor require the consent of any other
Person in respect of, Purchaser’s right to own, use or hold for use any IP Assets as owned, used or held for use in the conduct of the Business as currently conducted.
|
(d)
|
Except as set forth in Section 4.10(d) of the Disclosure Schedules, Vendor’s rights in the IP Assets are, to the Vendor’s Knowledge, valid, subsisting and enforceable. Except as set forth in Section 4.10(d)
of the Disclosure Schedules, Vendor has taken all commercially reasonable steps to maintain the IP Assets and to protect and preserve the confidentiality of all trade secrets included in the IP Assets.
|
(e)
|
Except as set forth in Section 4.10(e) of the Disclosure Schedules, to the Vendor’s Knowledge, the conduct of the Business as currently conducted, does not infringe, misappropriate, dilute or otherwise
violate the Intellectual Property rights of any Person in any material respect. Except as set forth in Section 4.10(e) of the Disclosure Schedules, to the Vendor’s Knowledge, no Person is currently infringing, misappropriating, diluting
or otherwise violating, any IP Assets in any material respect.
|
(f)
|
Except as set forth in Section 4.10(f) of the Disclosure Schedules, there are no active or otherwise unresolved Actions (including any oppositions, interferences or re-examinations) settled, pending or
threatened (including in the form of offers to obtain a licence): (i) alleging any infringement, misappropriation, dilution or violation of the Intellectual Property of any Person by Vendor in connection with the Business; (ii)
challenging the validity, enforceability, registrability or ownership of any IP Assets or Vendor’s rights with respect to any IP Assets; or (iii) by Vendor alleging any infringement, misappropriation, dilution or violation by any Person
of any IP Assets. Vendor is not subject to any outstanding or prospective Governmental Order (including any application or petition therefor) that does or would restrict or impair the use of any IP Assets in any material respect.
|
Section 4.11
|
Inventory.
|
Section 4.12
|
Legal Proceedings.
|
Section 4.13
|
Compliance with Laws; Permits.
|
(a)
|
Vendor is in compliance with all Laws applicable to the conduct of the Business as currently conducted in the Ordinary Course or the ownership and use of the Purchased Assets, except where the failure to be
in compliance would not have a Material Adverse Effect.
|
(b)
|
All Permits required for Vendor to conduct the Business as currently conducted or for the ownership and use of the Purchased Assets have been obtained by Vendor and are valid and in full force and effect,
except where the failure to obtain such Permits would not have a Material Adverse Effect.
|
(c)
|
None of the representations and warranties in Section 4.13 shall be deemed to relate to environmental matters (which are governed by Section 4.14), employee benefits matters (which are governed by Section
4.15), employment matters (which are governed by Section 4.16) or tax matters (which are governed by Section 4.17).
|
Section 4.14
|
Environmental Matters
|
Section 4.15
|
Benefit Plans
|
Section 4.16
|
Employment Matters
|
(a)
|
With respect to each Employee and each individual independent contractor and consultant that is engaged to provide services with respect to the Business, Section 4.16 of the Disclosure Schedules sets forth
an accurate and complete list of (i) the names, titles, annual salaries, most recent annual bonus and other compensation of such employee and the wage rates for any such employees who are non-salaried employees (by classification) and
(ii) the names of all such independent contractors or consultants and their current compensation. Vendor has not entered into an employment agreement with any Person set forth on Section 4.16 of the Disclosure Schedule other than an
agreement for employment “at will.”
|
(b)
|
Vendor is not and has never been a party to any labor or collective bargaining agreement and there are no labor or collective bargaining agreements which pertain to Vendor’s employment of any Employees.
|
(c)
|
No labor organization or group of Employees has made a pending demand for recognition, and there are no representation proceedings or petitions seeking a representation proceeding presently pending or, to
the Vendor’s Knowledge, threatened to be brought or filed, with the National Labor Relations Board or other labor relations tribunal, in each case with respect to Vendor’s employment of any Employees. There is no organizing activity
involving Vendor, nor, to the Vendor’s Knowledge, is any threatened by any labor organization or group of Employees.
|
(d)
|
There are no (i) strikes, work stoppages, slowdowns, lockouts or arbitrations or (ii) material grievances, unfair labor practice charges or other labor disputes pending or, to the Vendor’s Knowledge,
threatened against or involving Vendor by or with respect to any Employees.
|
(e)
|
There are no material complaints, charges, grievances or claims against Vendor pending or, to Vendor’s Knowledge, threatened that could be brought or filed, with any Governmental Authority or based on,
arising out of, in connection with or otherwise relating to the employment or termination of employment or failure to employ by Vendor of any Employee.
|
(h)
|
Vendor is and has been in compliance in all material respects with its obligations under the WARN Act and the NY WARN Act to promptly and correctly furnish all notices required to be given thereunder in
connection with any “plant closing” or “mass layoff” to “affected employees,” “representatives” and any state dislocated worker unit and local government officials. No reduction in the notification
period under the WARN Act or the NY WARN Act is being relied upon by Vendor. Vendor has no plans to undertake any action that would trigger the WARN Act or the NY WARN Act. Section 4.16 of the Disclosure Schedule sets forth an accurate,
correct and complete list of all employees of the Business terminated (except with cause, by voluntarily departure or by normal retirement), laid off or subjected to a reduction of more than 50% in hours or work during the two full
calendar months and the partial month preceding the date of this Agreement, other than seasonal and/or part-time employees.
|
Section 4.17
|
Taxes
|
(a)
|
(i) Vendor has timely filed all Tax Returns relating to the Business required to have been filed by it, and such Tax Returns are true, correct and complete in all material respects, and (ii) Vendor has paid
all Taxes (including withholding Taxes) required to have been paid by it, whether or not shown to be payable on such Tax Returns. Vendor has withheld and paid all Taxes relating to the Business required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.
|
(b)
|
There are no liens for Taxes on the Purchased Assets, other than Permitted Encumbrances.
|
(c)
|
To the Vendor’s Knowledge, no audit of any Tax Return relating to the Business is currently pending or threatened. Since December 31, 2016, no claim has been made by any Governmental Authority in a
jurisdiction where Vendor does not file Tax Returns relating to the Business that it is or may be subject to taxation by that jurisdiction.
|
(d)
|
Record Town has treated itself as owner of each of the Purchased Assets for U.S. federal and applicable state or local Tax purposes. None of the Purchased Assets is the subject of a “safe-harbor lease”
within the provisions of former Section 168(f)(8) of the Code, as in effect prior to amendment by the Tax Equity and Fiscal Responsibility Act of 1982. None of the Purchased Assets directly or indirectly secures any debt the interest on
which is tax exempt under Section 103(a) of the Code. None of the Purchased Assets is “tax-exempt use property” within the meaning of Section 168(h) of the Code.
|
(e)
|
Record Town is a “United States person” within the meaning of Section 7701(a)(30) of the Code.
|
Section 4.18
|
Insurance.
|
Section 4.19
|
Product Warranties.
|
Section 4.20
|
Product Liabilities.
|
Section 4.21
|
Privacy/Data Protection.
|
(a)
|
Vendor has made all disclosures to, and obtained all necessary consents from users, customers and workers (i.e., employees, independent contractors and temporary employees) of Vendor required by current
applicable law relating to privacy and data security and has filed registrations as required with the applicable data protection authority. Vendor also has ensured that it has complied with any cross-border limitation relating to the
transfer of Personal Information. Vendor has currently posted a privacy policy governing its use of data and disclaimers of liability on Vendor web sites, and has complied at all times in all material respects with such privacy policy,
any public statements made by Vendor regarding its current privacy practices and all other rules, policies and procedures established from time to time by Vendor with respect to Personal Information. The current posted privacy policy
covers all of the activities in which Vendor is engaged including the placement of cookies, the tracking of user activity on a website and the creation of profiles of users, required to be posted under applicable law. Moreover, Vendor
complies with all requests from users, customers and workers to opt-out of the collection, use or disclosure of Personal Information as required by applicable law.
|
(b)
|
There is no action or claim pending, asserted or, to the Vendor’s Knowledge, threatened or anticipated against Vendor alleging a violation of privacy, data protection, data security or confidentiality
obligations under any applicable Laws, rules, policies or procedures, which if determined adversely to Vendor would result in a Material Adverse Effect, and, to the Vendor’s Knowledge, no valid basis exists for any such action or claim.
The negotiation, execution and consummation of the transactions contemplated by the Transaction, and any disclosure and/or transfer of information, including Personal Information, in connection therewith, will not breach or otherwise
cause any violation of any such rules, policies or procedures or any applicable Laws relating to privacy, data protection, data security or the collection, use or maintenance of Personal Information relating to users, customers or
workers, in all cases, in any material respect. With respect to all Personal Information gathered or accessed in the course of Vendor’s operations, Vendor has at all times taken all reasonable measures consistent with industry best
practices to ensure that such data is protected against loss and unauthorized access, use, modification, disclosure or other misuse, and there has been no unauthorized access to or other misuse, either suspected or actual, of such data.
|
Section 4.22
|
Suppliers.
|
(a)
|
Section 4.22(a) of the Disclosure Schedules sets forth with respect to the Business (i) each supplier to whom Vendor has paid consideration for goods or services rendered in an amount greater than or equal
to $10,000 for each of the two most recent financial years (collectively, the “Material Suppliers”); and (ii) the amount of purchases from each Material Supplier during these periods. Vendor has not
received any notice, and to Vendor’s Knowledge there is no reason to believe, that any of the Material Suppliers has ceased, or intends to cease, to supply goods or services to the Business or to otherwise terminate or materially reduce
its relationship with the Business.
|
Section 4.23
|
Brokers.
|
Section 4.24
|
No Other Representations and Warranties.
|
Section 5.1
|
Corporate Status of Purchaser.
|
Section 5.2
|
Authority of Purchaser.
|
Section 5.3
|
No Conflicts; Consents.
|
(i)
|
conflict with or violate Purchaser’s Certificate of Incorporation or bylaws or equivalent organizational documents,
|
(ii)
|
conflict with or violate any Law applicable to Purchaser or by which any property or asset of Purchaser is bound or affected,
|
(iii)
|
violate or conflict with any other material restriction of any kind or character to which Purchaser is subject, except where the existence of violation or conflict would not, individually or in the
aggregate, have a Purchaser Material Adverse Effect, or
|
(iv)
|
require Purchaser to obtain any Consent of, or make or deliver any filing or notice to, a Governmental Authority.
|
Section 5.4
|
Brokers.
|
Section 5.5
|
Sufficiency of Funds.
|
Section 5.6
|
Legal Proceedings.
|
Section 5.7
|
Independent Investigation.
|
Section 6.1
|
Conduct of Business Before Closing.
|
(a)
|
preserve and maintain all Permits required for the conduct of the Business as currently conducted or the ownership and use of the Purchased Assets;
|
(b)
|
pay the debts, Taxes and other obligations of the Business when due;
|
(c)
|
maintain the properties and assets included in the Purchased Assets in the same condition as they were on the date of this Agreement, subject to ordinary wear and tear and other than the disposition or use
of Inventory or Tangible Personal Property in the Ordinary Course;
|
(d)
|
continue in full force and effect without modification all Insurance Policies, except as required by applicable Law;
|
(e)
|
defend and protect the properties and assets included in the Purchased Assets from infringement or usurpation;
|
(f)
|
perform all of its obligations under all Assigned Contracts;
|
(g)
|
maintain the Books and Records in accordance with past practice;
|
(h)
|
comply in all material respects with all Laws applicable to the conduct of the Business or the ownership and use of the Purchased Assets;
|
(i)
|
except in connection with actions permitted by Section 6.3 hereof, not take or permit any action that would cause any of the changes, events or conditions described in Section 4.5 to occur; and
|
(j)
|
use its reasonable best efforts to obtain all landlord consents in connection with the assignment and assumption of the Long Term Real Property Leases.
|
Section 6.2
|
Access to Information.
|
Section 6.3
|
No Solicitation of Other Bids.
|
(a)
|
Parent and Vendor shall not, and shall not authorize or permit any of their respective Affiliates or any of their respective Representatives to, directly or indirectly, (i) encourage, solicit, initiate,
facilitate or continue inquiries regarding an Acquisition Proposal (as defined below); (ii) enter into discussions or negotiations with, or provide any information to, any Person concerning a possible Acquisition Proposal; or (iii) enter
into any agreements or other instruments (whether or not binding) regarding an Acquisition Proposal. Parent and Vendor shall immediately cease and cause to be terminated, and shall cause their respective Affiliates and all of their
respective Representatives to immediately cease and cause to be terminated, all existing discussions or negotiations with any Persons conducted heretofore with respect to, or that could lead to, an Acquisition Proposal. For purposes
hereof, “Acquisition Proposal” means any inquiry, proposal or offer from any Person (other than Purchaser or any of its Affiliates) relating to the direct or indirect disposition, whether by sale,
merger or otherwise, of all or any portion of the Business or the Purchased Assets, other than the disposition or use of Inventory or Tangible Personal Property in the Ordinary Course.
|
(b)
|
Notwithstanding Section 6.3(a), prior to receipt of the Required Vote, Parent and Vendor’s respective board of directors (collectively, the “Board”), directly or
indirectly through any Representative, may, subject to Section 6.3(c): (i) participate in negotiations or discussions with any third party that has made (and not withdrawn) a bona fide, unsolicited Acquisition Proposal in writing that
the Board believes in good faith constitutes or would reasonably be expected to result in a Superior Proposal; (ii) thereafter furnish to such third party non-public information relating to Vendor, the Business or the Purchased Assets
pursuant to an executed confidentiality agreement (which shall not be prohibited by this Agreement); provided, such non-public information provided under this clause (ii) has previously been provided to Purchaser or is provided to
Purchaser substantially concurrently with the time it is provided to such Person; (iii) following receipt of and on account of a Superior Proposal, make, withdraw, amend, modify, or materially qualify the Board’s recommendation to its
shareholders with respect to the Transaction or approve, endorse or recommend, or declare advisable or publicly propose to approve, endorse, recommend or declare advisable a Superior Proposal (an “Adverse Recommendation Change”); (iv) enter into definitive agreements with respect to a Superior Proposal subject to the requirements of Section 6.3(c) and/or (v) take any action
that any court of competent jurisdiction orders Parent or Vendor to take (which order remains unstayed), but in each case referred to in the foregoing clauses (i) through (v), only if the Board determines in good faith that the failure to
take such action would reasonably be expected to cause the Board to be in breach of its fiduciary duties under applicable Law. Nothing contained herein shall prevent the Board from disclosing to
Parent’s stockholders a position contemplated by Rule 14d-9 and Rule 14e-2(a) promulgated under the Exchange Act with regard to an Acquisition Proposal, if Parent determines, in good-faith, that failure to disclose such position would
constitute a violation of applicable Law.
|
(c)
|
Prior to effecting an Adverse Recommendation Change or entering into a definitive agreement in respect of a Superior Proposal, Parent and Vendor shall have first provided at least two Business Days’ prior
written notice to Purchaser that Parent or Vendor is prepared to make an Adverse Recommendation Change or enter into a definitive agreement with respect to a Superior Proposal, which notice shall include, if applicable, a copy of the
written definitive agreements (including all exhibits and schedules), and during such two Business Day period, Parent and Vendor shall negotiate with Purchaser in good faith (if requested by Purchaser) to enable Purchaser to propose in
writing such adjustments in the terms and conditions of this Agreement so that such Superior Proposal ceases to constitute a Superior Proposal. Following the end of two Business Day period (it being understood and agreed that any
material change to the financial or other terms and conditions such Superior Proposal shall require an additional notice to Purchaser and a new two Business Day period), and after considering such negotiations and any adjustments in the
terms and conditions of this Agreement that have been agreed to in writing by Purchaser, the Board determines, in good faith, that such Superior Proposal continues to constitute a Superior Proposal, Parent and Vendor shall be permitted to
terminate this Agreement pursuant to Section 9.1(c)(iii).
|
(d)
|
Parent and Vendor agree that the rights and remedies for non-compliance with this Section 6.3 shall include having such provision specifically enforced by any court of competent equitable jurisdiction.
|
Section 6.4
|
Notice of Certain Events.
|
(a)
|
During the Interim Period, Vendor shall promptly notify Purchaser in writing of:
|
(i)
|
any fact, circumstance, event or action the existence, occurrence or taking of which (A) has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (B)
has resulted in, or could reasonably be expected to result in, any representation or warranty made by Vendor hereunder not being true and correct (except where the failure of such representations and
warranties to be true and correct would not have a Material Adverse Effect), or (C) has resulted in, or could reasonably be expected to result in, the failure of any of the conditions set forth in Section 7.1 or Section 7.3 to be
satisfied;
|
(ii)
|
any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;
|
(iii)
|
any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement; and
|
(iv)
|
any Actions commenced or, to Vendor’s Knowledge, threatened against, relating to or involving or otherwise affecting the Business, the Purchased Assets or the Assumed Liabilities that, if pending on the
date of this Agreement, would have been required to have been disclosed under Section 4.12 or that relate to the consummation of the transactions contemplated by this Agreement.
|
(b)
|
Purchaser’s receipt of information under this Section 6.4 shall not operate as a waiver or otherwise affect any representation, warranty or agreement given or made by Vendor in this Agreement and shall not
be deemed to amend or supplement the Disclosure Schedules.
|
Section 6.5
|
Employees and Employee Benefits.
|
(a)
|
Effective on the Closing Date, Purchaser or one of its Affiliates shall offer employment on an at-will basis to retail store Employees and all such other Employees identified by the Purchaser at least ten
Business Days prior to the Closing (the “Offered Employees”), in each case, on such terms and conditions as Purchaser may determine. Any Employees that are not Offered Employees or who fail to
accept an offer of employment by Purchaser or one of its Affiliates by the Purchaser or one of its Affiliates shall remain an employee of Parent, Vendor or one of their respective Affiliates and all obligations and liabilities with
respect to such employees shall remain the obligations and liabilities of Parent, Vendor or one of their respective Affiliates, as applicable; provided that Purchaser shall (i) be responsible for all Apportioned Employee Expenses and (ii)
in good faith offer employment to all full-time Employees at each of Vendor’s headquarters and distribution center located in Albany, New York save and except for up to 79 full-time Employees at such location.
|
(b)
|
Vendor shall be responsible for all notice, payments in lieu of notice and other obligations, and shall retain all liabilities and obligations of Vendor, arising before or on the Closing under the WARN Act,
the NY WARN Act, or similar state Law, resulting from employment losses arising out of or related to this Agreement or Transaction, in respect of any Employees who do not become Transferred Employees, including those Offered Employees who
fail to accept an offer of employment from Purchaser or one of Purchaser’s Affiliates, other than Apportioned Employee Expenses. Purchaser shall be responsible for all notice, payments in lieu of notice and other obligations, and shall
assume all liabilities and obligations of Vendor, arising after the Closing under the WARN Act, the NY WARN Act,, or similar state Law, but only in respect of any Transferred Employees.
|
(c)
|
No later than May 6, 2020 (the “Payment Date”), Purchaser will pay to each Transferred Employee participating in any Vendor Benefit Plans that are cash bonus plans
(each, an “Annual Bonus Plan”) or who is a party to a retention bonus or similar agreement with Vendor or its Affiliates (a “Retention Agreement”):
|
(i)
|
if the Transferred Employee is employed by Purchaser or its Affiliates on the Payment Date, a bonus equal to such Transferred Employee’s bonus entitlement under all such Annual Bonus Plans for Vendor’s 2019
fiscal year, based on actual performance for the 2019 fiscal year, with such level of achievement determined by the Vendor, and
|
(ii)
|
if the Transferred Employee is employed by Purchaser or its Affiliates on (and has not given notice of termination on or prior to) May 1, 2020, or such employment is terminated without “Cause” or due to
death or “Permanent Disability” (as provided in the Transferred Employee’s Retention Agreement, as the case may be), an amount equal to the retention bonus payable pursuant to such Transferred Employee’s Retention Agreement, if any,
|
(d)
|
Vendor hereby waives, for the benefit of Purchaser, its Affiliates and their respective successors and assigns, with effect from and after the Closing, any and all restrictions in any Contract with any of
the Transferred Employees relating to (a) non-competition with Vendor or non-solicitation subsequent to termination of employment, or (b) the maintenance of confidentiality of any information for the benefit of Vendor, to the extent such
non-competition or non-solicitation restriction or confidential information relates to the Purchased Assets, the Assumed Liabilities, the Transferred Employees, the Business or Purchaser’s unrestricted enjoyment of the benefits of the
Purchased Assets.
|
(e)
|
The provisions of this Section 6.5 are solely for the benefit of the respective parties to this Agreement and nothing in this Section 6.5, express or implied, shall confer upon any employee (or any
dependent or beneficiary thereof), any rights or remedies, including any right to continuance of employment or any other service relationship with Purchaser or any of its Affiliates, or any right to compensation or benefits of any nature
or kind whatsoever. Nothing in this Section 6.5, express or implied, shall: (i) interfere with the right of Purchaser or its Affiliates to terminate the employment or other service relationship of any Transferred Employee at any time, or
(ii) obligate Purchaser or its Affiliates to adopt, enter into or maintain any compensation or benefit plan, program or agreement at any time.
|
Section 6.6
|
Inventory Audit.
|
Section 6.7
|
Change of Name.
|
Section 6.8
|
Governmental Approvals and Consents
|
(a)
|
Each party hereto shall, as promptly as possible, use its reasonable best efforts to obtain, or cause to be obtained, all consents, authorizations, orders and approvals from all Governmental Authorities
that may be or become necessary for its execution and delivery of this Agreement and the performance of its obligations under this Agreement and the other Transaction Documents. Each party shall cooperate fully with the other party and
its Affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals. The parties hereto shall not wilfully take any action that will have the effect of delaying, impairing or impeding the receipt of any
required consents, authorizations, orders and approvals.
|
(b)
|
All analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments and proposals made by or on behalf of either party before any Governmental Authority or the staff or
regulators of any Governmental Authority, in connection with the transactions contemplated hereunder (but, for the avoidance of doubt, not including any interactions between Vendor with Governmental Authorities in the Ordinary Course, any
disclosure that is not permitted by Law or any disclosure containing confidential information) shall be disclosed to the other party hereunder in advance of any filing, submission or attendance, it being the intent that the parties will
consult and cooperate with one another, and consider in good faith the views of one another, in connection with any such analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments and proposals.
Each party shall give notice to the other party with respect to any meeting, discussion, appearance or contact with any Governmental Authority or the staff of any Governmental Authority, with such notice being sufficient to provide the
other party with the opportunity to attend and participate in such meeting, discussion, appearance or contact.
|
Section 6.9
|
Books and Records
|
(a)
|
To facilitate the resolution of any claims made against or incurred by Vendor before the Closing, or for any other reasonable purpose, for a period of two (2) years after the Closing, Purchaser shall:
|
(i)
|
retain the Books and Records (including personnel files) relating to periods before the Closing; and
|
(ii)
|
upon reasonable notice, afford Vendor’s Representatives reasonable access (including the right to make, at Vendor’s expense, photocopies), during normal business hours, to such Books and Records.
|
(b)
|
To facilitate the resolution of any claims made by or against or incurred by Purchaser after the Closing, or for any other reasonable purpose, for a period of two (2) years after the Closing, Vendor shall:
|
(i)
|
retain the Books and Records of Vendor relating to the Business and its operations for periods before the Closing; and
|
(ii)
|
upon reasonable notice, afford the Purchaser’s Representatives reasonable access (including the right to make, at Purchaser’s expense, photocopies), during normal business hours, to such books and records.
|
(c)
|
Neither Purchaser nor Vendor shall be obligated to provide the other party with access to any books or records (including personnel files) under this Section 6.9.
|
Section 6.10
|
Confidentiality.
|
Section 6.11
|
Closing Conditions.
|
Section 6.12
|
Public Announcements.
|
Section 6.13
|
Non-Competition; Non-Solicitation.
|
(a)
|
For a period of two (2) years commencing on the Closing Date (the “Restricted Period”), Parent and Vendor shall not, and shall not permit any of their respective
Affiliates to, directly or indirectly, (i) engage in or assist others in engaging in the Business in the United States or (ii) have an interest in any Person that engages directly or indirectly in the Business in the United States in any
capacity, including as a partner, shareholder, employee, principal, agent, trustee or consultant; provided that the Etailz Business shall not be deemed to be in competition with the Business.
Notwithstanding the foregoing, Parent and/or Vendor may own, directly or indirectly, solely as an investment, securities of any Person traded on any recognized stock exchange if Parent or Vendor, as applicable, is not a controlling Person
of, or a member of a group which controls, such Person and does not, directly or indirectly, own 5% or more of any class of securities of such Person.
|
(b)
|
During the Restricted Period, Parent and Vendor shall not, and shall not permit any of its Affiliates to, directly or indirectly, hire or solicit any Person who is offered employment by Purchaser under
Section 6.5 or is or was employed in the Business during the Restricted Period, or encourage any such employee to leave such employment or hire any such employee who has left such employment, except pursuant to a general solicitation that
is not directed specifically to any such employees; provided that nothing in this Section 6.13(b) shall prevent Parent or Vendor or any of its Affiliates from soliciting or hiring, or both, (i) any employee whose employment has been
terminated by Purchaser or (ii) after 180 days from the date of termination of employment, any employee whose employment has been terminated by the employee.
|
(c)
|
During the Restricted Period, neither Parent nor Vendor (nor their respective Representatives) shall, and shall not permit any of its Affiliates to, directly or indirectly, make any written or oral comments
to the suppliers or customers of the Business or potential suppliers or customers of the Business that is intended to impugn, disparage, or otherwise damage the reputation of Purchaser or the Business.
|
(d)
|
Parent and Vendor acknowledges that a breach or threatened breach of this Section 6.13 may give rise to irreparable harm to Purchaser, for which monetary damages would not be an adequate remedy, and hereby
agrees that, in the event of a breach or a threatened breach by Parent and/or Vendor of any such obligations, Purchaser shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be
entitled to seek equitable relief, including a temporary restraining order, an interim or permanent injunction, specific performance and any other relief that may be available from a court of competent equitable jurisdiction (without any
requirement to post bond or other security).
|
(e)
|
Each of Parent and Vendor acknowledges that the restrictions contained in this Section 6.13 are reasonable and necessary to protect the legitimate interests of Purchaser and constitute a material inducement
to Purchaser to enter into this Agreement and consummate the transactions contemplated by this Agreement. The covenants contained in this Section 6.13 and each provision hereof are severable and distinct covenants and provisions. The
invalidity or unenforceability of any such covenant or provision as written shall not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such covenant or provision in any other jurisdiction.
|
Section 6.14
|
Required Vote.
|
|
(a) |
Subject to Section 6.3 hereof, Parent shall take all action necessary to duly call, give notice of, convene, and hold a meeting of the Parent’s common stockholders (the “Parent Stockholders Meeting”)
no later than 15 days following the filing with the SEC of the definitive letter to the stockholders, notice of meeting, proxy statement and forms of proxy in connection with the transactions contemplated by this Agreement
(collectively, the “Proxy Statement”) and, in connection therewith, Parent shall mail the Proxy Statement to the holders of Parent’s common stock in advance of such meeting. Subject to Section 6.3
hereof, Parent shall use reasonable best efforts to: (i) solicit from the holders of Parent’s common stock proxies in favor of the adoption of this Agreement; and (ii) take all other actions necessary or advisable to secure the Required
Vote. Once the Parent Stockholders Meeting has been called and noticed, Parent shall not postpone or adjourn the Parent Stockholders Meeting without the prior written consent of Purchaser (other than: (A) in order to obtain a quorum of
its stockholders; (B) to allow reasonable additional time after the filing and mailing of any supplemental or amended disclosures to the Proxy Statement or (C) subject to Section 6.3(c), upon an Adverse Recommendation Change).
|
|
(b) |
In connection with the Parent Stockholders Meeting, as soon as reasonably practicable and, in any event, within three Business Days following the date of this Agreement Parent shall prepare and file a preliminary letter to the
stockholders, notice of meeting, proxy statement and forms of proxy in connection with the transactions contemplated by this Agreement (collectively, the “Preliminary Proxy Statement”) with the
SEC. Purchaser will, to the extent necessary, cooperate with Parent in the preparation and review of the Preliminary Proxy Statement and Proxy Statement, and Purchaser agrees to correct any information provided by it for use in the
Preliminary Proxy Statement or Proxy Statement which shall have become false or misleading and Parent shall promptly prepare and mail to its stockholders an amendment or supplement setting forth such correction.
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Section 6.15
|
Further Assurances.
|
Section 7.1
|
Conditions to Obligations of Purchaser.
|
(a)
|
The representations and warranties of Vendor set out in Article 4 shall be true and correct in all respects as of the Closing Time with the same effect as though made at and as of such date (except those
representations and warranties that address matters only as of a specified date, which shall be true and correct in all respects as of that specified date), except where the failure of such representations and warranties to be true and
correct would not have a Material Adverse Effect.
|
(b)
|
Vendor shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the other Transaction Documents to be performed or
complied with by it on or before the Closing Date.
|
(c)
|
Vendor shall have delivered to Purchaser duly executed counterparts to the Transaction Documents (other than this Agreement) and such other documents and deliveries set forth in Section 3.2.
|
(d)
|
Purchaser shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of Vendor, that each of the conditions set forth in Section 7.1(a) and Section 7.1(b) have been
satisfied (the “Vendor Closing Certificate”).
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(e)
|
Purchaser shall have received a certificate of the Secretary (or equivalent officer) of Vendor certifying that attached thereto are true and complete copies of all resolutions adopted by the board of
directors of Vendor authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in
full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby.
|
(f)
|
Purchaser shall have received a certificate of the Secretary (or equivalent officer) of Vendor certifying the names and signatures of the officers of Vendor authorized to sign this Agreement, the
Transaction Documents and the other documents to be delivered hereunder and thereunder.
|
(g)
|
Vendor shall have completed and delivered to the Purchaser the results of the Inventory Audit and Inventory Audit Supplement.
|
Section 7.2
|
Conditions to Obligations of Vendor.
|
(a)
|
The representations and warranties of Purchaser set out in Article 5 shall be true and correct in all respects as of the Closing Date with the same effect as though made at and as of such date (except those
representations and warranties that address matters only as of a specified date, which shall be true and correct in all respects as of that specified date), except where the failure of such representations and warranties to be true and
correct would not have a Purchaser Material Adverse Effect.
|
(b)
|
Purchaser shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the other Transaction Documents to be performed
or complied with by it on or before the Closing Date.
|
(c)
|
Purchaser shall have delivered to (i) Vendor, the amount due under Section 2.5(a), (ii) Vendor, the duly executed counterparts to the Transaction Documents (other than this Agreement), (iii) the Escrow
Agent, the Escrow Amount and (iv) to Vendor, such other documents and deliveries set forth in Section 3.2.
|
(d)
|
Vendor shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of Purchaser, that each of the conditions set forth in Section 7.2(a) and Section 7.2(b) have been
satisfied (the “Purchaser Closing Certificate”).
|
(e)
|
Vendor shall have received a certificate of the Secretary (or equivalent officer) of Purchaser certifying that attached thereto are true and complete copies of all resolutions adopted by the board of
directors of Purchaser authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are
in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby.
|
(f)
|
Vendor shall have received a certificate of the Secretary (or equivalent officer) of Purchaser certifying the names and signatures of the officers of Purchaser authorized to sign this Agreement, the
Transaction Documents and the other documents to be delivered hereunder and thereunder.
|
Section 7.3
|
Conditions to Obligations of Each Party.
|
(a)
|
this Agreement will have been duly adopted by the Required Vote;
|
(b)
|
there shall not be any Law that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited; or
|
(c)
|
any Governmental Authority shall not have issued a Governmental Order restraining or enjoining the transactions contemplated by this Agreement, and such Governmental Order shall have become final and
non-appealable.
|
Section 8.1
|
Survival.
|
Section 8.2
|
Indemnification by Vendor.
|
(a)
|
any inaccuracy in or breach of any representation or warranty made by Vendor in this Agreement as of the date of this Agreement (without giving effect to: (A) any update of or modification to the
Disclosure Schedule made or purported to have been made on or after the date of this Agreement; or (B), solely with respect to the calculation of any Losses attributable to any such inaccuracy or breach, any materiality, Material Adverse
Effect or similar qualifications limiting the scope of such representation or warranty);
|
(b)
|
any inaccuracy in or breach of any representation or warranty made by Vendor: (A) in this Agreement as if such representation or warranty was made at and as of the Closing Time; or (B) in the Vendor
Closing Certificate (in each case, without giving effect to: (1) any update of or modification to the Disclosure Schedule made or purported to have been made on or after the date of this Agreement; or (2), solely with respect to the
calculation of any Losses attributable to any such inaccuracy or breach, any materiality, Material Adverse Effect or similar qualifications limiting the scope of such representation or warranty);
|
(c)
|
any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Vendor under this Agreement and in the other Transaction Documents;
|
(d)
|
subject to Section 2.8(a) and Section 2.8(c) and except for Non-Income Taxes attributable to the Business with respect to the Interim Tax Period, (i) all Taxes of the Vendor with respect to any Pre-Closing
Period, (ii) all Taxes of any Person other than the Vendor for which the Vendor is liable pursuant to Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or non-U.S. law) as a result of the Vendor and such
Person being members of the same consolidated, combined, unitary or similar Tax group prior to Closing, or (iii) any Taxes, with respect to any Pre-Closing Period, of any Person other than the Vendor for which the Vendor is liable (A) as
a transferee or successor or otherwise by operation of law as a result of a merger or other transaction occurring prior to Closing or (B) as a result of a Contract entered into by the Vendor prior to Closing, but excluding, in each case,
any Purchaser Closing Date Taxes;
|
(e)
|
except as set forth in Section 2.3(d), all obligations and liabilities with respect to any Transferred Employee prior to the Closing; or
|
(f)
|
regardless of the disclosure of any matter set forth in the Disclosure Schedule, any Excluded Liability.
|
Section 8.3
|
Indemnification by Purchaser.
|
(a)
|
any inaccuracy in or breach of any representation or warranty made by Purchaser in this Agreement as of the date of this Agreement (without giving effect to, solely with respect to the calculation of any
Losses attributable to any such inaccuracy or breach, any materiality, Purchaser Material Adverse Effect or similar qualifications limiting the scope of such representation or warranty);
|
(b)
|
any inaccuracy in or breach of any representation or warranty made by Purchaser: (A) in this Agreement as if such representation or warranty was made at and as of the Closing; or (B) in the Purchaser
Closing Certificate (in each case, without giving effect to, solely with respect to the calculation of any Losses attributable to any such inaccuracy or breach, any materiality, Purchaser Material Adverse Effect or similar qualifications
limiting the scope of such representation or warranty);
|
(c)
|
any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Purchaser under this Agreement and in the other Transaction Documents;
|
(d)
|
subject to Section 2.8(a) and Section 2.8(c), (i) all Taxes of the Purchaser with respect to any Post-Closing Period, (ii) all Taxes of any Person other than the Purchaser for which the Purchaser is liable
pursuant to Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or non-U.S. law) as a result of the Purchaser and such Person being members of the same consolidated, combined, unitary or similar Tax group after
Closing, (iii) any Taxes, with respect to any Post-Closing Period, of any Person other then the Purchaser for which the Purchaser is liable (A) as a transferee or successor or otherwise by operation of law as a result of a merger or other
transaction occurring after the Closing or (B) as a result of a Contract entered into by the Purchaser after Closing, or (iv) any Purchaser Closing Date Taxes and (v) any Non-Income Taxes attributable to the Business with respect to the
Interim Tax Period; or
|
(e)
|
any Assumed Liability.
|
Section 8.4
|
Certain Limitations.
|
(a)
|
The Indemnifying Party shall not be liable to the Indemnified Party for indemnification under Section 8.2(a) and Section 8.2(b) or Section 8.3(a) and Section 8.3(b), as the case may be, until the aggregate
amount of all Losses in respect of indemnification under Section 8.2(a) and Section 8.2(b) or Section 8.3(a) and Section 8.3(b), as the case may be, exceeds $100,000. Once Losses in respect of such indemnification matters exceed $100,000,
the applicable Indemnified Party shall be entitled to recover the amount of Losses back to the first dollar. Notwithstanding anything to the contrary contained in Section this Section 8.4(a), the limitations set forth in Section 8.4(a)
shall not apply in the event of any intentionally misrepresentation or fraud.
|
(b)
|
The aggregate amount of all Losses for which an Indemnifying Party shall be liable under Sections 8.2(a) through 8.2(c) or Sections 8.3(a) through 8.3(c), as the case may be, shall not exceed ten percent
(10%) of the Final Purchase Price; and, the aggregate amount of all Losses for which an Indemnifying Party shall be liable under Sections 8.2(d) through 8.2(f) or Sections 8.3(d) through 8.3(e), as the case may be, shall not exceed the
Final Purchase Price
|
(c)
|
Payments by an Indemnifying Party under Section 8.2(a), Section 8.2(b), Section 8.3(a) or Section 8.3(b) in respect of any Loss shall be limited to the amount of any liability or damage that remains after
deducting therefrom, net of any premium increases and/or expenses, any insurance proceeds and any indemnity, contribution or other similar payment received or reasonably expected to be received by the Indemnified Party in respect of any
such claim. The Indemnified Party shall use its reasonable best efforts to recover under insurance policies or indemnity, contribution or other similar agreements for any Losses before seeking indemnification under this Agreement.
|
(d)
|
Other than with respect to a breach of Section 6.10 herein, in no event shall any Indemnifying Party be liable to any Indemnified Party for any punitive, exemplary, incidental, consequential, special or
indirect damages, including loss of future revenue or income, loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement, or diminution of value or any damages based on any type of multiple,
whether or not the possibility of such damages has been disclosed to any Person in advance or could have been reasonably foreseen by such Person.
|
(e)
|
Each Indemnified Party shall take, and cause its Affiliates to take, all reasonable steps to mitigate any Loss upon becoming aware of any event or circumstance that would be reasonably expected to, or does,
give rise thereto, including incurring costs only to the minimum extent necessary to remedy the breach that gives rise to such Loss.
|
(f)
|
Vendor shall not be liable under this Article 8 for any Losses based upon or arising out of any inaccuracy in or breach of any of the representations or warranties of Vendor set out in this Agreement if
Purchaser had knowledge of such inaccuracy or breach before the Closing.
|
Section 8.5
|
Indemnification Procedures
|
(a)
|
Third-Party Claims. If any Indemnified Party receives notice of the assertion or commencement of any action, lawsuit, claim or other legal proceeding made or brought by any Person who is not a party
to this Agreement or an Affiliate of a party to this Agreement or a Representative of the foregoing (each, a “Third-Party Claim”) against such Indemnified Party with respect to which the
Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnified Party shall give the Indemnifying Party prompt written notice thereof. The failure to give such prompt written notice shall not, however,
relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses or is otherwise materially prejudiced by reason of such failure. Such notice by the
Indemnified Party shall (i) describe the Third-Party Claim in reasonable detail, (ii) include copies of all material written evidence thereof, and (iii) indicate the estimated amount, if reasonably practicable, of the Loss that has been,
or may be, sustained by the Indemnified Party. The Indemnifying Party shall have the right to participate in or, by giving written notice to the Indemnified Party, to assume the defense of any Third-Party Claim at the Indemnifying Party’s
expense and by the Indemnifying Party’s own counsel, and the Indemnified Party shall cooperate in good faith in such defense. If the Indemnifying Party assumes the defense of any Third-Party Claim, subject to Section 8.5(b), it shall have
the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counter-claims pertaining to any such Third-Party Claim in the name and on behalf of the Indemnified Party. The Indemnified Party shall have the
right, at its own cost and expense, to participate in the defense of any Third-Party Claim with counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. If the Indemnifying Party elects not to
compromise or defend such Third-Party Claim or fails to promptly notify the Indemnified Party in writing of its election to defend as provided in this Agreement, the Indemnified Party may, subject to Section 8.5(b) below, pay, compromise,
defend such Third-Party Claim and seek indemnification for any, and all, Losses based upon, arising from or relating to such Third-Party Claim. Vendor and Purchaser shall cooperate with each other in all reasonable respects in connection
with the defense of any Third-Party Claim, including making available (subject to the provisions of Section 6.9) records relating to such Third-Party Claim and furnishing, without expense (other than reimbursement of actual out-of-pocket
expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third-Party Claim.
|
(b)
|
Settlement of Third-Party Claims. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not enter into settlement of any Third-Party Claim without the prior written
consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed), except as provided in this Section 8.5(b). If a firm offer is made to settle a Third-Party Claim without leading to liability or the creation
of a financial or other obligation on the part of the Indemnified Party and provides, in customary form, for the unconditional release of each Indemnified Party from all liabilities and obligations in connection with such Third-Party
Claim and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to that effect to the Indemnified Party. If the Indemnified Party fails to consent to such firm offer within 10
days after its receipt of such notice, the Indemnified Party may continue to contest or defend such Third-Party Claim and, in such event, the maximum liability of the Indemnifying Party as to such Third-Party Claim shall not exceed the
amount of such settlement offer. If the Indemnified Party fails to (i) consent to such firm offer and (ii) assume the defense of such Third-Party Claim, the Indemnifying Party may settle the Third-Party Claim upon the terms set forth in
such firm offer to settle such Third-party Claim. If the Indemnified Party has assumed the defense under Section 8.5(a) above, it shall not agree to any settlement without the written consent of the Indemnifying Party (which consent shall
not be unreasonably withheld or delayed).
|
(c)
|
Direct Claims. Any claim by an Indemnified Party on account of a Loss which does not result from a Third-Party Claim (each, a “Direct Claim”) shall be asserted
by the Indemnified Party giving the Indemnifying Party prompt written notice thereof. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to
the extent that the Indemnifying Party forfeits rights or defenses or is otherwise materially prejudiced by reason of such failure. Such notice by the Indemnified Party shall (i) describe the Direct Claim in reasonable detail, (ii)
include copies of all material written evidence thereof, and (iii) indicate the estimated amount, if reasonably practicable, of the Loss that has been, or may be, sustained by the Indemnified Party. The Indemnifying Party shall have 30
days after its receipt of such notice to respond in writing to such Direct Claim. During such 30-day period, the Indemnified Party shall allow the Indemnifying Party and its professional advisors to investigate the matter or circumstance
alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect of the Direct Claim, and the Indemnified Party shall assist the Indemnifying Party’s investigation by giving such information and
assistance (including access to the Indemnified Party’s premises and personnel and the right to examine and copy any accounts, documents or records) as the Indemnifying Party or any of its professional advisors may reasonably request. If
the Indemnifying Party does not so respond within such 30-day period, the Indemnifying Party shall be deemed to have rejected such claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the
Indemnified Party on the terms and subject to the provisions of this Agreement.
|
Section 8.6
|
Escrow Amount.
|
Section 8.7
|
Tax Treatment of Indemnification Payments.
|
Section 8.8
|
Exclusive Remedy.
|
Section 9.1
|
Termination.
|
(a)
|
by the mutual written consent of Vendor and Purchaser;
|
(b)
|
by Purchaser via written notice to Vendor if:
|
(i)
|
Purchaser is not then in material breach of any provision of this Agreement and there has been a material breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made
by Vendor or Parent under this Agreement that would give rise to the failure of any of the conditions specified in Article 7, and such breach, inaccuracy or failure has not been waived and (A) if capable of being cured, has not been cured
within ten (10) Business Days after written notice thereof, or (B) cannot be cured by Vendor by March 31, 2020 (the “Outside Date”); or
|
(ii)
|
any of the conditions set forth in Section 7.1 shall not have been fulfilled by the Outside Date, unless such failure shall be due to the failure of Purchaser to perform or comply with any of the covenants,
agreements or conditions hereof to be performed or complied with by it before the Closing;
|
(iii)
|
if the value of the Net Inventory as of the Closing Time is less than $30,000,000 as determined by the Inventory Audit and Inventory Audit Supplement.
|
(c)
|
by Vendor by written notice to Purchaser if:
|
(i)
|
Vendor or Parent is not then in material breach of any provision of this Agreement and there has been a material breach, inaccuracy in or failure to perform any representation, warranty, covenant or
agreement made by Purchaser under this Agreement that would give rise to the failure of any of the conditions specified in Article 7, and such breach, inaccuracy or failure has not been waived and (i) if capable of being cured, has not
been cured within ten (10) Business Days after written notice thereof or (ii) cannot be cured by Purchaser by the Outside Date; or
|
(ii)
|
any of the conditions set forth in Section 7.2 shall not have been fulfilled by the Outside Date, unless such failure shall be due to the failure of Vendor to perform or comply with any of the covenants,
agreements or conditions hereof to be performed or complied with by it before the Closing; or
|
(iii)
|
if prior to the receipt of the Required Vote, the Board authorizes Parent or Vendor, to the extent permitted by and subject to full compliance with the applicable terms and conditions of this Agreement,
including Section 6.3 hereof, to enter into a definitive agreement (other than a confidentiality agreement) in respect of a Superior Proposal; or
|
(d)
|
by Purchaser or Vendor by written notice to the other party if:
|
(i)
|
any of the conditions set forth in Section 7.3(b) or Section 7.3(c) fail to be satisfied; or
|
(ii)
|
if this Agreement has been submitted to the stockholders of Parent for adoption at a duly convened Parent Stockholders Meeting and the Requisite Vote shall not have been obtained at such meeting (unless
such Parent Stockholders Meeting has been adjourned or postponed, in which case at the final adjournment or postponement thereof).
|
Section 9.2
|
Effect of Termination.
|
(a)
|
as set forth in Section 6.10, this Article 9 and Article 10 hereof;
|
(b)
|
that nothing herein shall relieve any party hereto from liability for any intentional or willful breach of any provision hereof;
|
(c)
|
no termination of this Agreement shall affect the obligations of the parties to the Confidentiality Agreement, all of which obligations shall survive the termination of this Agreement;
|
(d)
|
if this Agreement is terminated by Vendor pursuant to Section 9.1(c)(iii) then Vendor must, promptly following such termination (and in any event no later than three (3) Business Days following the
execution of a definitive agreement (other than a confidentiality agreement) with respect to a Superior Proposal) pay, or cause to be paid, to Purchaser an amount equal to Three Million, Five Hundred Thousand Dollars ($3,500,000) (which
such amount shall be deemed to include all of Purchaser’s costs and expenses incurred with respect to the Transaction) (the “Termination Fee”) by wire transfer of immediately available funds to an
account or accounts designated in writing by Purchaser.
|
Section 10.1
|
Expenses.
|
Section 10.2
|
Notices.
|
If to Vendor:
|
Record Town, Inc./Trans World NY, LLC/Record Town USA LLC/Record Town Utah LLC/Trans World FL LLC
c/o Trans World Entertainment Corporation 38 Corporate Circle Albany, New York 12203 Facsimile: 518-862-9747 Email: esapienza@twec.com Attention: Ed Sapienza |
with a copy to (which shall not constitute notice):
|
Cahill Gordon & Reindel llp
80 Pine Street New York, New York 10005-1702 Facsimile: 212.378.2545 Email: kpetillo-decossard@cahill.com Attention: Kimberly C. Petillo-Décossard |
If to Parent:
|
Trans World Entertainment Corporation
38 Corporate Circle Albany, New York 12203 Facsimile: 518-862-9747 Email: esapienza@twec.com Attention: Ed Sapienza |
with a copy to (which shall not constitute notice):
|
Cahill Gordon & Reindel llp
80 Pine Street New York, New York 10005-1702 Facsimile: 212.378.2545 Email: kpetillo-decossard@cahill.com Attention: Kimberly C. Petillo-Décossard |
If to Purchaser and/or Sunrise:
|
c/o Sunrise Records
1430 Cormorant Road Ancaster, Ontario L9G 4V5 Email: jesse@sunriserecords.com Attention: Jesse Gardner |
with a copy to (which shall not constitute notice):
|
Aird & Berlis LLP
Brookfield Place, 181 Bay Street, Suite 1800 Toronto, Ontario, Canada M5J J29 Facsimile: 416.863.1515 Email: tgioia@airdberlis.com Attention: Tony Gioia |
Section 10.3
|
Interpretation.
|
Section 10.4
|
Headings.
|
Section 10.5
|
Severability.
|
Section 10.6
|
Entire Agreement.
|
Section 10.7
|
Successors and Assigns.
|
Section 10.8
|
No Third-Party Beneficiaries.
|
Section 10.9
|
Remedies Cumulative; Specific Performance.
|
Section 10.10
|
Amendment and Modification; Waiver.
|
Section 10.11
|
Governing Law; Forum Selection.
|
(a)
|
This Agreement shall be construed in accordance with, and governed in all respects by, the internal laws of the State of Delaware (without giving effect to principles of conflicts of laws).
|
(b)
|
Any Proceeding relating to this Agreement or the enforcement of any provision of this Agreement may be brought or otherwise commenced in any state or federal court located in the State of Delaware. Each
party to this Agreement:
|
(i)
|
expressly and irrevocably consents and submits to the exclusive jurisdiction of each state and federal court located in the State of Delaware (and each appellate court located in the State of Delaware) in
connection with any such Proceeding;
|
(ii)
|
agrees that each state and federal court located in the State of Delaware shall be deemed to be a convenient forum;
|
(iii)
|
agrees not to assert (by way of motion, as a defense or otherwise), in any such Proceeding commenced in any state or federal court located in the State of Delaware, any claim that such party is not subject
personally to the jurisdiction of such court, that such Proceeding has been brought in an inconvenient forum, that the venue of such proceeding is improper or that this Agreement or the subject matter of this Agreement may not be enforced
in or by such court; and
|
(iv)
|
waives any right to trial by jury in any proceeding regarding this Agreement, the Transaction Documents or any provision hereof or thereof.
|
(c)
|
Vendor agrees that if any Proceeding is commenced against the Purchaser by any Person in or before any court or other tribunal anywhere in the world, then the Purchaser may proceed against Vendor in or
before such court or other tribunal with respect to any indemnification claim or other claim arising from or relating to such Proceeding or any of the matters alleged therein or any of the circumstances giving rise thereto.
|
Section 10.12
|
Counterparts.
|
Section 10.13
|
Parent Guaranty.
|
(a)
|
To induce Purchaser to enter into this Agreement, Parent (in such capacity, the “Guarantor”) hereby absolutely, irrevocably and unconditionally guarantees to
Purchaser the due and punctual performance and discharge of Vendor’s obligations under this Agreement, to the same extent and on the same terms and conditions and subject to the same defenses as apply to such obligations by Vendor (which
includes, without limitation, Vendor’s obligation to pay the Termination Fee, if and when applicable) (the “Guaranteed Obligations”).
|
(b)
|
Guarantor hereby represents and warrants that:
|
(i)
|
The execution, delivery and performance of this Agreement by the Guarantor and the consummation of the transactions contemplated hereby have been duly and validly authorized and no other proceedings on its
part are necessary to authorize the execution, delivery or performance of this Agreement;
|
(ii)
|
This Agreement has been duly executed and delivered by Guarantor and, assuming the due authorization, execution and delivery by the other parties, constitutes a legal, valid and binding obligation of
Guarantor, enforceable in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting the enforcement of creditors’ rights
generally and by general principles of equity, regardless of whether such enforceability is considered in an Action at Law or equity; and
|
(iii)
|
Guarantor is not subject to or obligated under any Law, or any agreement, instrument, license, franchise or permit, or any order, writ, injunction or decree, which would be breached or violated by
Guarantor’s execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby, except any such breach or violation that would not impair Guarantor’s ability to comply with its obligations
hereunder.
|
Section 10.14
|
Sunrise Guaranty
|
(a)
|
To induce Vendor to enter into this Agreement, Sunrise (in such capacity, the “Purchaser Guarantor”) hereby absolutely, irrevocably and unconditionally guarantees to
Vendor the due and punctual performance and discharge of Purchaser’s obligations under this Agreement from the date hereof until the later of (x) the date payment of the amounts, if any, required to be paid by Purchaser pursuant to
Section 2.5(b) are paid to Vendor and (y) the date payment of the amounts, if any, required to be paid by Purchaser pursuant to Section 2.6 are paid to Vendor, to the same extent and on the same terms and conditions and subject to the
same defenses as apply to such obligations by Purchaser (the “Guaranteed Purchaser Obligations”).
|
(b)
|
Purchaser Guarantor hereby represents and warrants that:
|
(i)
|
The execution, delivery and performance of this Agreement by the Purchaser Guarantor and the consummation of the transactions contemplated hereby have been duly and validly authorized and no other
proceedings on its part are necessary to authorize the execution, delivery or performance of this Agreement;
|
(ii)
|
This Agreement has been duly executed and delivered by Purchaser Guarantor and, assuming the due authorization, execution and delivery by the other parties, constitutes a legal, valid and binding obligation
of Purchaser Guarantor, enforceable in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting the enforcement of
creditors’ rights generally and by general principles of equity, regardless of whether such enforceability is considered in an Action at Law or equity; and
|
(iii)
|
Purchaser Guarantor is not subject to or obligated under any Law, or any agreement, instrument, license, franchise or permit, or any order, writ, injunction or decree, which would be breached or violated by
Purchaser Guarantor’s execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby, except any such breach or violation that would not impair Purchaser Guarantor’s ability to comply with
its obligations hereunder.
|
Section 10.15
|
Bulk Sales.
|
Section 10.16
|
Disclosure Schedules.
|
RECORD TOWN, INC.
|
|||
Per:
|
/s/ Michael Feurer
|
||
|
Name:
|
Michael Feurer
|
|
|
Title:
|
CEO
|
TRANS WORLD NEW YORK LLC
|
|||
Per:
|
/s/ Michael Feurer
|
||
|
Name:
|
Michael Feurer
|
|
|
Title:
|
CEO
|
RECORD TOWN USA LLC
|
|||
Per:
|
/s/ Michael Feurer
|
||
|
Name:
|
Michael Feurer
|
|
|
Title:
|
CEO
|
RECORD TOWN UTAH LLC
|
|||
Per:
|
/s/ Michael Feurer
|
||
|
Name:
|
Michael Feurer
|
|
|
Title:
|
CEO
|
TRANS WORLD FL LLC
|
|||
Per:
|
/s/ Michael Feurer
|
||
|
Name:
|
Michael Feurer
|
|
|
Title:
|
CEO
|
TRANS WORLD ENTERTAINMENT CORPORATION
(Solely with respect to Sections 6.3, 6.13, 6.14 and 10.13) |
|||
Per:
|
/s/ Michael Feurer
|
||
|
Name:
|
Michael Feurer
|
|
|
Title:
|
CEO
|
2428392 INC.
|
||
Per:
|
/s/ Doug Putnam
|
|
|
Name: Doug Putnam
|
|
|
Title: President
|
2428391 ONTARIO INC. o/a SUNRISE RECORDS
(Solely with respect to Section 10.14) |
||
Per:
|
/s/ Doug Putnam
|
|
|
Name: Doug Putnam
|
|
|
Title: President
|
Press Release
|
Exhibit 99.1
|
|
• |
the risk that the Transaction may not be completed in a timely manner or at all, which may adversely affect the Company’s business and the price of the Company’s common stock;
|
|
• |
the failure to satisfy any of the conditions to the consummation of the Transaction, including the adoption of the purchase agreement by the Company’s stockholders and the
receipt of third party consents;
|
|
• |
the occurrence of any event, change or other circumstance or condition that could give rise to the termination of the Asset Purchase Agreement;
|
|
• |
the effect of the announcement or pendency of the Transaction on the Company’s business relationships, operating results and business generally;
|
|
• |
risks that the Transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the Transaction;
|
|
• |
risks related to diverting management’s attention from the Company’s ongoing business operations;
|
|
• |
unexpected costs, charges, expenses, liabilities or delays in the consummation of the Transaction;
|
|
• |
the Company’s ability to operate as a going-concern following the closing of the Transaction; and
|
|
• |
other risks described in the Company’s filings with the SEC, such as its Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.
|