Asset Purchase Agreement (2006)Full Document 

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ASSET PURCHASE AGREEMENT

 

DATED AS OF FEBRUARY 17, 2006

 

BY AND AMONG

 

TRANS WORLD ENTERTAINMENT CORPORATION

 

AND

 

MUSICLAND HOLDING CORP.

 

 



 

 

TABLE OF CONTENTS

 

 

ARTICLE 1 DEFINITIONS

1

 

 

ARTICLE 2 PURCHASE AND SALE; CLOSING

9

 

2.1

Purchase and Sale.

9

 

2.2

Cash Purchase Price.

11

 

2.3

Purchase Price Adjustment.

12

 

2.4

Assumption of Liabilities.

12

 

2.5

Excluded Liabilities.

13

 

2.6

Further Assurances.

14

 

2.7

The Closing.

15

 

2.8

Employee Matters.

16

 

2.9

Allocation of Purchase Price.

16

 

 

 

 

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

16

 

3.1

Organization and Good Standing.

16

 

3.2

Authority; Validity; Consents.

16

 

3.3

No Conflict.

17

 

3.4

Financial Statements.

17

 

3.5

Real Property.

17

 

3.6

Title to Assets.

18

 

3.7

Equipment.

18

 

3.8

Environmental, Health and Safety Matters.

18

 

3.9

Compliance with Legal Requirements; Permits.

19

 

3.10

Legal Proceedings.

19

 

3.11

Labor Relations.

19

 

3.12

Intangible Property.

19

 

3.13

Employee Benefits Compliance.

20

 

3.14

Taxes.

20

 

3.15

Brokers or Finders.

21

 

 

 

 

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER

21

 

4.1

Organization and Good Standing.

21

 

4.2

Authority; Validity; Consents.

21

 

4.3

No Conflict.

21

 

4.4

Brokers or Finders.

21

 

4.5

Legal Proceedings.

22

 

4.6

Sufficiency of Funds.

22

 

4.7

Acquired Assets “AS IS”; Buyer’s Acknowledgment Regarding Same.

22

 

 

 

 

ARTICLE 5 PRE-CLOSING COVENANTS OF THE COMPANY

23

 

5.1

Access and Investigation.

23

 

5.2

Operation of the Business.

23

 

5.3

Negative Covenants.

24

 

5.4

Required Approvals.

24

 

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5.5

Commercially Reasonable Efforts.

25

 

5.6

Confidentiality.

25

 

5.7

Notice of Developments.

25

 

5.8

Bankruptcy Court Approval.

25

 

5.9

Bankruptcy Filings.

26

 

5.10

Expense Reimbursement and Break-Up Fee.

26

 

5.11

Disclosure Schedules and Exhibits.

26

 

 

 

 

ARTICLE 6 PRE-CLOSING COVENANTS OF BUYER

27

 

6.1

Required Approvals.

27

 

6.2

Non-Disclosure Obligations.

27

 

6.3

Commercially Reasonable Efforts.

27

 

6.4

Identification of the TWEC Stores.

27

 

6.5

Notice of Developments.

27

 

 

 

 

ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER TO CLOSE

28

 

7.1

Accuracy of Representations.

28

 

7.2

Company’s Performance.

28

 

7.3

No Order.

28

 

7.4

Governmental Authorizations.

28

 

7.5

Required Consents.

28

 

7.6

Other Agreements.

28

 

7.7

Sale Order in Effect.

28

 

7.8

Inventory.

29

 

7.9

Agency Agreement.

29

 

7.10

Authorization for GOB Sales.

29

 

7.11

Employee Information.

29

 

7.12

Disclosure Schedules and Exhibits.

29

 

7.13

Executory Contracts.

29

 

 

 

 

ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO CLOSE

29

 

8.1

Accuracy of Representations.

29

 

8.2

Sale Order in Effect.

30

 

8.3

Buyer’s Performance.

30

 

8.4

No Order.

30

 

8.5

Governmental Authorizations.

30

 

8.6

Agreements.

30

 

8.7

Agency Agreement.

30

 

8.8

Disclosure Schedules and Exhibits.

30

 

8.9

Authorization for GOB Sales.

30

 

 

 

 

ARTICLE 9 POST-CLOSING COVENANTS

30

 

9.1

General.

31

 

9.2

Litigation Support.

31

 

9.3

Cooperation on Tax Matters.

31

 

9.4

Inventory Taking.

31

 

9.5

TWEC Designation Period.

32

 

9.6

TWEC Store Carrying Costs.

35

 

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9.7

Central Office Support.

35

 

9.8

Relocation of Inventory.

36

 

9.9

Access to Books, Records, Etc.

36

 

 

 

 

ARTICLE 10 TERMINATION

36

 

10.1

Termination Events.

36

 

10.2

Effect of Termination.

37

 

 

 

 

ARTICLE 11 GENERAL PROVISIONS

38

 

11.1

Non-Survival of Representations and Warranties

38

 

11.2

Confidential Information.

38

 

11.3

Public Announcements.

39

 

11.4

Notices.

39

 

11.5

Waiver.

40

 

11.6

Entire Agreement; Amendment.

40

 

11.7

Assignments.

41

 

11.8

Severability.

41

 

11.9

Section Headings, Construction.

41

 

11.10

Governing Law; Consent to Jurisdiction and Venue; Jury Trial Waiver.

41

 

11.11

Buyer Transaction Expenses.

42

 

11.12

Company Transaction Expenses.

42

 

11.13

Counterparts.

42

 

11.14

Time of Essence.

42

 

11.15

No Third Party Beneficiaries.

42

 

11.16

No Strict Construction.

42

 

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ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (“Agreement”) is made as of February 17, 2006 (the “Effective Date”) by and among TRANS WORLD ENTERTAINMENT CORPORATION, a New York corporation (“Buyer”), and MUSICLAND HOLDING CORP., a Delaware corporation, and its debtor affiliates and their respective chapter 11 estates (jointly and severally, the “Company”).

 

RECITALS

 

WHEREAS, the Company is a leading national specialty retailer of music, movies, games and other entertainment-related goods (the “Business”);

 

WHEREAS, on January 12, 2006 (the “Petition Date”), the Company, along with certain of its affiliates, filed voluntary petitions for relief commencing cases under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York;

 

WHEREAS, the Company desires to sell to Buyer certain of the assets of the Company and Buyer desires to purchase from the Company certain of the assets of the Company and assume certain specified liabilities of the Company, upon the terms and conditions hereinafter set forth;

 

WHEREAS, the Parties intend to effectuate the transactions contemplated by this Agreement through a sale of substantially all of the Company’s assets pursuant to Section 363 of the Bankruptcy Code; and

 

WHEREAS, the execution and delivery of this Agreement and the Company’s ability to consummate the transactions set forth in this Agreement are subject, among other things, to the entry of an Order of the Bankruptcy Court under, inter alia, sections 363 and 365 of the Bankruptcy Code.

 

NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, the Parties agree as follows.

 

ARTICLE 1
DEFINITIONS

 

For purposes of this Agreement, the following terms have the meanings specified or referenced below.

 

Acquired Assets” has the meaning set forth in Section 2.1(a).

 

Adjustment Amount” has the meaning set forth in Section 2.3.

 

Adjustment Payment” has the meaning set forth in Section 2.2(c).

 

Affiliate” has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934.

 

Agency Agreement” has the meaning set forth in Section 7.9.

 

Agent” means Hilco Merchant Resources and Gordon Brothers Retail Partners LLC.

 



 

Agreement” has the meaning set forth in the introductory paragraph.

 

Annual Audited Financial Statements” has the meaning set forth in Section 3.4.

 

Approval Motion” has the meaning set forth in Section 9.5(d).

 

Approval Order” has the meaning set forth in Section 9.5(d).

 

Assigned TWEC Store Lease” has the meaning set forth in Section 9.5(b).

 

Assignment Closing” has the meaning set forth in Section 9.5(f).

 

Assignment Closing Date” has the meaning set forth in Section 9.5(f).

 

Assumed Liabilities” has the meaning set forth in Section 2.4.

 

Assumption Agreement” has the meaning set forth in Section 2.7(c)(vi).

 

Auction” has the meaning set forth in Section 5.8(a).

 

Bankruptcy Case” means the cases commenced by the Company and its affiliated debtors under chapter 11 of the Bankruptcy Code, styled In re Musicland Holding Corp., et al., Case No. 06-10064 (SMB) and pending before the Bankruptcy Court.

 

Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of New York.

 

Bankruptcy Code” means Title 11 of the United States Code, Sections 101 et. seq.

 

Benefit Plan” has the meaning set forth in Section 3.13(a).

 

Bidding Procedures” has the meaning set forth in the definition of “Bidding Procedures Order,” below.

 

Bidding Procedures Motionmeans the motion, in form and substance reasonably acceptable to the Company and the Buyer, filed by the Company pursuant to, inter alia, sections 363 and 365 of the Bankruptcy Code, to obtain the the Bidding Procedures Order.

 

Bidding Procedures Order” means an Order of the Bankruptcy Court containing overbid procedures, protections and findings, in accordance with the Bidding Procedures (the “Bidding Procedures”), in form and substance reasonably satisfactory to the Company and Buyer, and that (among other things) (a) approves the provisions of Sections 5.10, 10.1 and 10.2 hereof, (b) approves the Bidding Procedures, (c) grants Buyer relief from the automatic stay to enable Buyer to exercise rights and receive benefits under this Agreement, including the ability to terminate this Agreement in accordance with Article 10 hereof, (d) authorizes and directs the Company to observe and perform its obligations under the Bidding Procedures (e) approves the Break-Up Fee and the Expense Reimbursement, (f) provides that Buyer’s claim to the Break-Up Fee and the Expense Reimbursement shall be entitled to super priority administrative claim treatment in the Bankruptcy Case, (g) establishes a date by which initial Qualified Bids must be submitted, (h) establishes the procedures for the Auction at which only Qualified Bidders who have previously submitted a Qualified Bid may bid, (j) schedules the Auction to be held not later than March 22, 2006, (k) schedules the Sale Hearing to be held not later than March 24, 2006, and

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