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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 11, 1994
(October 2, 1994)
BROWN GROUP, INC.
(Exact name of registrant as specified in its charter)
New York
(State or other jurisdiction of incorporation or organization)
1-2191 43-0197190
(Commission File Number) (IRS Employer Identification Number)
8300 Maryland Avenue
St. Louis, Missouri 63105
(Address of principal executive offices) (Zip Code)
(314) 854-4000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
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Item 2. Acquisition or Disposition of Assets
------------------------------------
On October 2, 1994, Brown Group, Inc. completed a
transaction to sell substantially all of the assets,
net of certain liabilities to be assumed, of its
Cloth World chain of fabric stores to Fabri-Centers
of America, Inc., for $62 million in cash, subject to
final balance sheet adjustments. The price was
determined through arms-length negotiations. Cloth
World operates 343 stores selling fabrics and sewing
accessories.
Cloth World had sales of $224.1 million in fiscal
1993 and $103.5 million in the first six months of
fiscal 1994. Cloth World had operating profit of
$3.9 million in fiscal 1993 and $1.1 million in the
first six months of fiscal 1994.
Item 7. Financial Statements and Exhibits
---------------------------------
(b) (1) Pro forma financial information related to the sale
of Cloth World on pages 10 through 13 of Brown Group,
Inc.'s Form 10-Q for the quarter ended July 30, 1994,
is incorporated herein by reference.
(c) Exhibits
(2) Asset Purchase Agreement among Fabri-Centers of
America, Inc.; FCA of Ohio, Inc.; Brown Group,
Inc.; and Cloth World, Inc. dated as of
August 24, 1994
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned hereunto duly
authorized.
BROWN GROUP, INC.
(Registrant)
H. E. Rich
----------------------------
Executive Vice President and
Chief Financial Officer
Date: October 11, 1994
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ASSET PURCHASE AGREEMENT
among
FABRI-CENTERS OF AMERICA, INC.
FCA OF OHIO, INC.,
BROWN GROUP, INC.
and
CLOTH WORLD, INC.
Dated as of August 24, 1994
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TABLE OF CONTENTS
1. SALE AND PURCHASE OF ACQUIRED ASSETS. . . . . . . . . . . . . . 1
1.1 Acquired Assets. . . . . . . . . . . . . . . . . . . . . . 1
1.3 Retained Assets. . . . . . . . . . . . . . . . . . . . . . 4
2. ASSUMED AND RETAINED LIABILITIES. . . . . . . . . . . . . . . . 5
2.1 Assumption of Liabilities. . . . . . . . . . . . . . . . . 5
2.2 Retained Liabilities . . . . . . . . . . . . . . . . . . . 6
3. CONSIDERATION FOR THE ACQUIRED ASSETS . . . . . . . . . . . . . 8
3.1 Consideration. . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Closing Date Statement . . . . . . . . . . . . . . . . . . 8
3.3 Inventory Count; Valuation and Obsolescence
Reserve . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Prorated Charges . . . . . . . . . . . . . . . . . . . . . 9
3.5 Review of Closing Date Statement; Resolution of
any Dispute . . . . . . . . . . . . . . . . . . . . 10
3.6 Purchase Price Adjustment. . . . . . . . . . . . . . . . . 10
4. REPRESENTATIONS AND WARRANTIES OF BROWN GROUP AND CLOTH
WORLD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Organization of Brown Group and Cloth World. . . . . . . . 11
4.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 Authority. . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 Financial Statements; Accounting Controls. . . . . . . . . 12
4.6 No Material Adverse Change . . . . . . . . . . . . . . . . 12
4.8 Actions Since January 29, 1994 . . . . . . . . . . . . . . 13
4.9 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . 14
4.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 14
4.11 Real Property, including Store Leases . . . . . . . . . . 15
4.12 Personal Property . . . . . . . . . . . . . . . . . . . . 17
4.13 Proprietary Rights. . . . . . . . . . . . . . . . . . . . 17
4.14 Contracts and Commitments; Arrangements regarding
Patterns. . . . . . . . . . . . . . . . . . . . . . 18
4.15 Completeness of Assets. . . . . . . . . . . . . . . . . . 19
4.16 Employee Benefit Plans. . . . . . . . . . . . . . . . . . 19
4.17 Labor Matters . . . . . . . . . . . . . . . . . . . . . . 21
4.18 Litigation. . . . . . . . . . . . . . . . . . . . . . . . 21
4.19 Workers' Compensation Claims. . . . . . . . . . . . . . . 22
4.20 Permits, Licenses, and Authorizations . . . . . . . . . . 22
4.21 Compliance with Laws. . . . . . . . . . . . . . . . . . . 22
4.22 Environmental Matters . . . . . . . . . . . . . . . . . . 23
4.23 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 24
4.24 Suppliers . . . . . . . . . . . . . . . . . . . . . . . . 24
4.25 Finders . . . . . . . . . . . . . . . . . . . . . . . . . 24
5. REPRESENTATIONS AND WARRANTIES OF FABRI-CENTERS AND FCA
OHIO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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5.1 Organization of Fabri-Centers and FCA Ohio . . . . . . . . 24
5.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . 25
5.3 No Violation . . . . . . . . . . . . . . . . . . . . . . . 25
5.4 Finders. . . . . . . . . . . . . . . . . . . . . . . . . . 25
6. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1 Operation of the Business Prior to the Time of
Closing . . . . . . . . . . . . . . . . . . . . . . 25
6.2 Access to Premises and Records . . . . . . . . . . . . . . 26
6.3 Training of Personnel. . . . . . . . . . . . . . . . . . . 27
6.4 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Efforts to Satisfy Conditions to Closing . . . . . . . . . 27
6.6 Store Lease Consents . . . . . . . . . . . . . . . . . . . 28
6.7 Divestiture of any Stores Required to Obtain
Governmental Approvals. . . . . . . . . . . . . . . 29
6.8 Severance Obligations. . . . . . . . . . . . . . . . . . . 31
6.9 Overall Limitation on Sellers' Obligations for
Capped Liabilities. . . . . . . . . . . . . . . . . 31
6.10 Environmental Audits. . . . . . . . . . . . . . . . . . . 32
6.11 Transition Services . . . . . . . . . . . . . . . . . . . 32
7. CONDITIONS PRECEDENT TO OBLIGATION OF FABRI-CENTERS AND
FCA OHIO. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.1 Performance of Agreements. . . . . . . . . . . . . . . . . 33
7.2 Representations and Warranties . . . . . . . . . . . . . . 33
7.3 No Material Adverse Change . . . . . . . . . . . . . . . . 33
7.4 Due Diligence Condition. . . . . . . . . . . . . . . . . . 33
7.5 Financing. . . . . . . . . . . . . . . . . . . . . . . . . 33
7.6 No Injunction. . . . . . . . . . . . . . . . . . . . . . . 34
7.7 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.8 Other Third-Party Consents and Governmental
Approvals . . . . . . . . . . . . . . . . . . . . . 34
7.9 Documents Delivered. . . . . . . . . . . . . . . . . . . . 34
8. CONDITIONS TO OBLIGATION OF BROWN GROUP AND CLOTH
WORLD . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.1 Performance of Agreements. . . . . . . . . . . . . . . . . 34
8.2 Representations and Warranties . . . . . . . . . . . . . . 34
8.3 No Injunction. . . . . . . . . . . . . . . . . . . . . . . 35
8.4 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.5 Governmental Approvals . . . . . . . . . . . . . . . . . . 35
8.6 Documents Delivered. . . . . . . . . . . . . . . . . . . . 35
9. THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.1 Time and Location. . . . . . . . . . . . . . . . . . . . . 35
9.2 Deliveries by Brown Group and Cloth World. . . . . . . . . 35
9.3 Deliveries by Fabri-Centers. . . . . . . . . . . . . . . . 36
9.4 Further Assurances . . . . . . . . . . . . . . . . . . . . 37
10. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 38
11.1 Survival of Covenants, Representations,
Warranties and Indemnification. . . . . . . . . . . 38
11.2 Indemnification by Brown Group and Cloth World. . . . . . 39
11.3 Indemnification By Fabri-Centers and FCA Ohio . . . . . . 39
11.4 Notice and Defense of Claims. . . . . . . . . . . . . . . 39
11.5 Deductible. . . . . . . . . . . . . . . . . . . . . . . . 40
12. COVENANT NOT TO COMPETE . . . . . . . . . . . . . . . . . . . . 40
13. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . 41
13.1 Waiver of Compliance with Bulk Sales Laws . . . . . . . . 41
13.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 41
13.3 Waiver and Amendment. . . . . . . . . . . . . . . . . . . 41
13.4 Entire Agreement; No Rights or Remedies to Other
Persons . . . . . . . . . . . . . . . . . . . . . . 41
13.5 Assignment. . . . . . . . . . . . . . . . . . . . . . . . 41
13.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . 42
13.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 42
13.8 Headings. . . . . . . . . . . . . . . . . . . . . . . . . 43
13.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 43
13.10 Severability . . . . . . . . . . . . . . . . . . . . . . 43
13.11 Publicity. . . . . . . . . . . . . . . . . . . . . . . . 43
14. GENERAL PROVISIONS OF GLOBAL APPLICATION. . . . . . . . . . . . 43
15. PARENT GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . 45
INDEX OF DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . 46
LIST OF SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
LIST OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT, dated as of August 24, 1994, is among
FABRI-CENTERS OF AMERICA, INC., an Ohio corporation ("Fabri-
Centers"), FCA OF OHIO, INC., an Ohio corporation [("FCA Ohio")
and, together with Fabri-Centers, sometimes referred to herein
individually and collectively as the "Buyers")], BROWN GROUP,
INC., a New York corporation ("Brown Group"), and CLOTH WORLD,
INC., a Missouri corporation [("Cloth World") and, together with
Brown Group, sometimes referred to herein individually and
collectively as the "Sellers"].
Cloth World and the Subsidiaries (as defined in Section
4.1) operate a chain of retail fabric stores (the "Stores") that
sell craft, home decorating, and sewing fabrics and notions,
along with patterns and sewing machines (the "Business"). Brown
Group owns all of the outstanding capital stock of Cloth World,
and Fabri-Centers owns all of the outstanding capital stock of
FCA Ohio. Brown Group and Cloth World desire to sell, and Fabri-
Centers and FCA Ohio desire to purchase, substantially all of the
assets and rights of Cloth World and the Subsidiaries upon the
terms and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the payments
provided for and the covenants contained in this Agreement, the
parties agree as follows:
1. SALE AND PURCHASE OF ACQUIRED ASSETS
1.1 Acquired Assets. Subject to the conditions set
forth in this Agreement, at the Time of Closing (as defined in
Section 9.1), Brown Group will cause Cloth World and the
Subsidiaries to sell and transfer to FCA Ohio, and Fabri-Centers
will cause FCA Ohio to purchase from Cloth World and the
Subsidiaries, and timely to pay Cloth World the full
consideration (as hereinafter defined) therefor, all right,
title, and interest of Cloth World and the Subsidiaries at the
Time of Closing in and to the following assets and rights
(collectively, the "Acquired Assets"):
(a) Furniture, Fixtures, Equipment, and Tangible
Personal Property. All of the tangible personal
property located at the Warehouse (as defined in
Section 1.1(b)), including fixtures, machinery,
equipment, furniture, and supplies, and all of the
fixtures, supplies, and other tangible personal
property (other than Inventory, as defined in Section
1.1(b)) relating to the Stores or the Business,
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including but not limited to all such tangible personal
property (i) located at the Stores or (ii) identified on the
Tangible Personal Property List attached to this Agreement
as Schedule 1.1(a).
(b) Inventory. All merchandise inventory, except
consignment merchandise, (i) located at the Stores,
(ii) located at the Cloth World's warehouse at
Amarillo, Texas (the "Warehouse") and held for delivery
to and use or sale at the Stores, or (iii) in transit
from the Warehouse to the Stores (the "Inventory").
(c) Real Property; Store Leases. All rights and
interest (i) in and to the real property owned in fee
by Cloth World or any of the Subsidiaries, used in the
Business, and identified on the Owned Real Property
List attached to this Agreement as Schedule 1.1(c)(i)
(the "Owned Real Property") and (ii) subject to Section
6.6 and to the extent assignable, all rights and
interests under leases for the Stores and other
agreements with respect to the use of the Stores or
other real property identified on the Store Lease List
attached to this Agreement as Schedule 1.1(c)(ii) (the
"Store Leases").
(d) Personal Property Leases and Executory
Contracts. To the extent assignable, all rights and
interests under (i) the leases of personal property
identified on the Personal Property Lease List attached
to this Agreement as Schedule 1.1(d)(i) (the "Personal
Property Leases"), (ii) the executory contracts
identified on the Executory Contract List attached to
this Agreement as Schedule 1.1(d)(ii) (the "Executory
Contracts"), and (iii) all open purchase orders for
merchandise inventory to be used or sold at the Stores
that are entered into in the ordinary course of the
Business.
(e) Security and Other Deposits. All security,
vendor, utility, and other deposits and prepaid items
or expenses relating to the Stores or the Business,
including but not limited to the items identified on
the Security and Other Deposits List attached to this
Agreement as Schedule 1.1(e).
(f) Permits. To the extent assignable, all
permits, licenses, and other authorizations issued by
any government or governmental agency or instru-
mentality, whether federal, state, or local
("Governmental Entity") that are held by Brown Group,
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Cloth World, or any of the Subsidiaries and used in the
Stores or the Business, and all applications therefor,
including but not limited to the items identified on the
Permit List attached to this Agreement as Schedule 1.1(f)
(the "Permits") (the foregoing notwithstanding, Schedule
1.1(f) may be supplemented at any time prior to the Time of
Closing in order to identify such permits).
(g) Trade Name, Trademarks, Copyrights, and other
Proprietary Rights. All trade names, trademarks,
copyrights, logos, customer lists, and other
proprietary rights, together with associated goodwill,
and all applications therefor that are held by Brown
Group, Cloth World, or any of the Subsidiaries and used
in the Stores or the Business, including the items
identified on the Proprietary Rights List attached to
this Agreement as Schedule 1.1(g) (the "Proprietary
Rights"). As soon as practicable after the Time of
Closing, Cloth World will change its name to another
name that does not contain the words "Cloth" or
"World."
(h) Notes, Vendor Accounts, and other Accounts
Receivable. All notes, vendor accounts, and other
accounts receivable (although no representation or
warranty is made in this Agreement as to the
collectability of accounts receivable) relating to the
Stores or the Business (excluding any intercompany
accounts receivable owned by Cloth World or any of the
Subsidiaries), but only to the extent reflected in the
Closing Date Statement and supported by a list showing
the amount due from each debtor.
(i) Cash in Registers. $500 in cash per Store,
which will be left in the cash registers or store safes
in each Store at the Time of Closing (the "Cash in
Registers").
(j) Books and Records. A true and correct copy
of all books and records relating to the Stores and the
Business; Brown Group and Cloth World may retain the
originals of any such books and records needed for the
preparation of financial reports or tax returns.
(k) Other Assets. All other assets the book
value of which is included in the Closing Date
Statement (as defined in Section 3.2).
1.2 No Warranties. THE ACQUIRED ASSETS ARE BEING SOLD
"AS IS" AND "WHERE IS," AND THERE ARE NO WARRANTIES OF
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MERCHANTABILITY, FITNESS, OR OF ANY OTHER KIND WHATSOEVER,
WHETHER EXPRESS OR IMPLIED, BEING MADE OR GIVEN IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED HEREBY, OTHER THAN AS
EXPRESSLY SET FORTH IN THIS AGREEMENT.
1.3 Retained Assets. Notwithstanding the foregoing,
the following assets (the "Retained Assets") will be retained by
Brown Group and Cloth World and not included in the transferred
assets:
(a) Cash and Cash Equivalents. Except for
the Cash in Registers, all cash-on-hand, deposits in
bank accounts, and other cash equivalents of Brown
Group and Cloth World.
(b) Warehouse and Executive Offices; Assets
Relating to Warehouse and Executive Offices. The
Warehouse and executive offices of Brown Group and
Cloth World and all assets located at the Warehouse,
other than tangible personal property referred to in
Section 1.1(a) and Inventory held there for delivery to
and use or sale at the Stores.
(c) Intercompany Receivables. All accounts
receivable, if any, owed by Brown Group or any
affiliates of Brown Group to Cloth World or any of the
Subsidiaries.
(d) Remediation Property. Any Remediation
Property that FCA Ohio elects to exclude from the
Acquired Assets pursuant to Section 6.10.
(e) Assets and Rights of Brown Group related
to Other Operations. All assets and rights of Brown
Group that are related to operations other than the
Business and are not used in the Business; and all
programs, data, and other software that are used in the
operations of Brown Group, irrespective of whether
heretofore used in the Business. Brown Group will, to
the extent it may lawfully do so, provide Fabri-Centers
with copies of all such programs, data, and other
software used in the Business, together with copies of
related source code and documentation; Brown Group will
also reasonably assist Fabri-Centers in obtaining any
third-party consent required for the use of such
programs, data, or other software by Fabri-Centers.
(f) Specified Items. The items specifically
identified on the Retained Assets List attached to this
Agreement as Schedule 1.3(f).
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2. ASSUMED AND RETAINED LIABILITIES
2.1 Assumption of Liabilities. From and after
the Time of Closing, Fabri-Centers will cause FCA Ohio to assume
and agree to pay and discharge, to satisfy in full without any
recourse to Sellers, and to hold Sellers harmless and indemnify
Sellers from and against, all the following liabilities and
obligations (the "Assumed Liabilities"):
(a) Store Leases. All liabilities and
obligations of Brown Group and Cloth World arising
after the Time of Closing under the Store Leases
assigned to FCA Ohio pursuant to Section 1.1(c).
(b) Personal Property Leases and Executory
Contracts. Subject to Section 2.2(a), any and all liabili-
ties and obligations of Brown Group and Cloth World arising
after the Time of Closing under the Personal Property Leases
and the Executory Contracts.
(c) Accounts Payable and Other Current
Liabilities Reflected in Closing Date Statement. All
accounts payable, expenses, and other current
liabilities (other than intercompany accounts payable)
arising out of the normal operation of the Stores, but
only to the extent reflected in the Closing Date
Statement and supported by a list showing the amount
owed to each creditor.
(d) Liability for Product Returns. All
liability for product returns attributable to products
sold by Cloth World or the Subsidiaries before the Time
of Closing, but only to the extent of the return
allowance reflected in the Closing Date Statement.
(e) Certain Liabilities as Employer. All
liabilities to employees of Sellers or any of the
Subsidiaries who are hired by Fabri-Centers or FCA Ohio
within six months after the Time of Closing ("Hired
Employees"), including without limitation liability to
provide wages, salary, bonuses, or vacation or holiday
pay, but only to the extent reflected in the Closing
Date Statement and supported by a list showing the
amount owed to or accrued for each employee.
(f) Accruing after Time of Closing. All
liabilities incurred by Fabri-Centers or FCA Ohio in
connection with their operation of the Business or
ownership of the Acquired Assets after the Time of
Closing or as a proximate result of a negligent or
wrongful act or omission of Buyers. Without limiting
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the generality of the foregoing, such assumed liabilities
will include all liabilities of Cloth World or any of the
Subsidiaries, or of Buyers, under any Store Leases, Personal
Property Leases, or Executory Contracts included in the
Assumed Liabilities that (i) arise and become payable after
the Time of Closing or (ii) result from a breach or other
negligent or wrongful acts or omissions by Buyers after the
Time of Closing.
(g) Liabilities Included on the Closing Date
Statement. All liabilities included in the Closing
Date Statement that are supported by lists or
schedules.
2.2 Retained Liabilities. Notwithstanding the
foregoing, neither Fabri-Centers nor FCA Ohio will assume or
otherwise be responsible to third parties for any of the
following liabilities and obligations (the "Retained
Liabilities") and none of the Retained Liabilities will be
included on the Closing Date Statement:
(a) Certain Liabilities under Leases,
Contracts, Permits, or Licenses. All liabilities of
Cloth World or any of the Subsidiaries under any lease,
contract, permit, or license to which it is a party or
by which it is bound, including but not limited to the
Store Leases, Personal Property Leases, or Executory
Contracts, that (i) arise and become payable before the
Time of Closing or (ii) result from a breach or other
negligent or wrongful acts or omissions by Brown Group,
Cloth World, or any of the Subsidiaries before the Time
of Closing.
(b) Tax Liabilities. All federal, state,
and local tax liabilities, including income, payroll
and withholding, sales, use, ad valorem, transfer,
franchise, license, excise, property, environmental, or
windfall profit tax, custom, duty, or other
governmental fee, assessment, or charge (collectively,
"Taxes") of Brown Group, Cloth World, or any of the
Subsidiaries attributable to periods prior to the Time
of Closing or, with respect to personal property Taxes,
as to which the lien date has occurred prior to the
Time of Closing. For purposes of this Agreement, the
term "Taxes" includes all Tax liabilities that might be
imposed on Cloth World or any of the Subsidiaries by
reason of their membership in an affiliated,
consolidated, combined, or unitary group.
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(c) Obligations to Donald Richey and Warehouse
Employees. Any and all obligations and liabilities arising
prior to the Time of Closing that Sellers may have to Mr.
Donald Richey and to employees of Sellers at the Warehouse
(other than the manager of the Warehouse), including any
obligation to provide severance pay or other benefits
following termination of employment or the sale of the
Business.
(d) Certain Obligations and Liabilities as
Employer. All liabilities, arising or attributable to
events occurring prior to the Time of Closing, to
current or former employees of Cloth World or any of
the Subsidiaries, including Hired Employees (i) to
provide sick pay, disability benefits, profit sharing,
pension, health insurance, or other benefits not
specifically referred to in Section 2.1 with respect to
the employment of any person by Brown Group, Cloth
World, or any of the Subsidiaries, including but not
limited to benefits arising under any Employee Plans
(as defined in Section 4.16(a)), or (ii) for workers'
compensation claims, premiums, or retroactive premium
adjustments attributable to events occurring or
conditions existing prior to the Time of Closing. All
obligations to current or former employees of Cloth
World or any of the Subsidiaries (other than Hired
Employees), their spouses, former spouses, dependents,
and former dependents to provide continuation coverage
required by Part 6 of Subtitle B of Title I of the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4980B of the Internal
Revenue Code of 1986, as amended (the "Code"; these
provisions are collectively referred to as "COBRA").
(e) Violation of Law. All liabilities of
Cloth World or any of the Subsidiaries for a violation
of law occurring prior to the Time of Closing,
including but not limited to any violation of laws
relating to employment practices, terms and conditions
of employment, wages and hours, nondiscrimination in
employment, and sexual harassment.
(f) Litigation and Claims. All liabilities
with respect to litigation and claims against Cloth
World or any of the Subsidiaries attributable to events
occurring or conditions existing prior to the Time of
Closing.
(g) Intercompany Accounts Payable. All
liabilities with respect to accounts payable, if any,
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owed by Cloth World or any of the Subsidiaries to Brown
Group or any affiliates of Brown Group.
(h) Liabilities Not Related to Business.
All liabilities or obligations that are not related to
the operation of the Stores or the Business.
(i) Liabilities Not Included in Closing Date
Statement. Any liabilities not included in the Closing
Date Statement.
3. CONSIDERATION FOR THE ACQUIRED ASSETS
3.1 Consideration. As consideration for the
Acquired Assets and the covenant not to compete in Section 12,
Fabri-Centers will cause FCA Ohio to assume and agree to pay and
discharge, to satisfy in full without any recourse to Sellers,
and to hold Sellers harmless and indemnify Sellers from and
against, the Assumed Liabilities and pay Cloth World cash in an
amount equal to the Net LIFO Book Value of Cloth World and the
Subsidiaries as of the Time of Closing (as defined in Section
3.6). To this end, at the Time of Closing, Fabri-Centers will
cause FCA Ohio to assume the Assumed Liabilities and to:
(a) Pay to Cloth World $61,000,000 by
delivery of a bank check drawn on a bank in St. Louis,
Missouri; and
(b) Deposit $1,000,000 with a bank in St.
Louis, Missouri that is reasonably satisfactory to both
parties, as Escrow Agent (the "Escrow Agent"), pursuant
to an Escrow Agreement substantially in the form
attached to this Agreement as Exhibit 3.1(b).
The amount payable under clause (a) will be reconciled with the
Net LIFO Book Value as of the Time of Closing in accordance with
Sections 3.2 through 3.6. The consideration, as adjusted, will
be allocated among the Acquired Assets and the covenant not to
compete on the basis set forth in the Allocation Schedule
attached to this Agreement as Schedule 3.1.
3.2 Closing Date Statement. As soon as
practicable following the Time of Closing (and in no event later
that 60 days following the Time of Closing), Brown Group will
cause to be prepared and deliver to Fabri-Centers an audited
consolidated balance sheet of Cloth World and the Subsidiaries as
of the Time of Closing (the "Closing Date Statement"), as well as
audited consolidated statements of earnings and cash flows of
Cloth World and the Subsidiaries for the period from January 29,
1994 to the Time of Closing. These financial statements will be
audited by Ernst & Young, a nationally recognized firm of
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certified public accountants; Ernst & Young will not, however, be
required to sign its audit report until after the resolution of
any dispute pursuant to Section 3.5. Fabri-Centers'
representatives will be consulted with respect to the planning
and scope of the audit. The Closing Date Statement will be based
upon the books and records of Brown Group and Cloth World and
prepared in accordance with generally accepted accounting
principles applied on a basis consistent with the audited
consolidated balance sheet of Cloth World and the Subsidiaries as
of January 29, 1994 (the "January 1994 Balance Sheet"), except
that (a) the value of Inventory will be determined on a LIFO
basis in accordance with Section 3.3, (b) the amount of accruals
for prorated charges will be determined in accordance with
Section 3.4, and (c) Retained Assets and Retained Liabilities
will be excluded. Brown Group will provide Fabri-Centers with
sufficient detail to enable Fabri-Centers to reconcile the
Schedules used in delineating the Acquired Assets, Retained
Assets, Assumed Liabilities, and Retained Liabilities (e.g., the
Tangible Personal Property List, Owned Real Property List,
Personal Property Lease List, Security and Other Deposits List,
Proprietary Rights List, and Retained Assets List) with the
Closing Date Statement.
3.3 Inventory Count; Valuation and Obsolescence
Reserve. Brown Group will take a physical count of the Inventory
in all stores and the Warehouse (except for stores already
counted subsequent to May 20, 1994) in accordance with the
Inventory Instructions attached to this Agreement as Schedule
3.3(a). Fabri-Center's representatives will be permitted to
observe and perform reasonable testing of the count. The count
of the Inventory will occur during the period from the date of
this Agreement through October 1, 1994. The method for valuing
the Inventory (using the LIFO method of accounting) and
determining the amount of the obsolescence reserve will be in
accordance with the past practices and procedures of Cloth World
as illustrated in the Inventory Materials attached to this
Agreement as Schedule 3.3(b).
3.4 Prorated Charges. All rent (including
percentage rent), common area charges, utility charges, fuel
charges, and other obligations under the Store Leases, Personal
Property Leases, and Executory Contracts will be prorated as of
the Time of Closing (the "Prorated Charges") and reflected in the
Closing Date Statement and supported by a list showing the amount
owed under each of the Store Leases, Personal Property Leases,
and Executory Contracts. The accrual for the percentage rent, if
any, due under each Store Lease will be determined by multiplying
(a) a fraction, the numerator of which is the gross sales for the
Store from the first day of the current lease year to the Time of
Closing and the denominator of which is the projected annual
gross sales at that Store for the current lease year, by (b) the
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total projected percentage rent for the current lease year under
the Store Lease. The projected annual gross sales and the
projected percentage rent for the current lease year under each
Store Lease will be delivered to Buyers at the Time of Closing.
3.5 Review of Closing Date Statement; Resolution
of any Dispute. Following receipt of the Closing Date Statement,
Fabri-Centers will be afforded a period of 30 days to review the
Closing Date Statement and to complete a review of any work
papers prepared in connection with the preparation or audit of
the Closing Date Statement. At or before the end of the 30-day
review period, Fabri-Centers will either (a) accept the Closing
Date Statement in its entirety or (b) deliver to Brown Group
written notice identifying the items in the Closing Date
Statement that Fabri-Centers disputes. If Fabri-Centers does not
deliver any such written notice within the 30-day review period,
Fabri-Centers will be deemed to have accepted the Closing Date
Statement. Within a period of 14 days from the end of the 30-day
review period, the parties will attempt in good faith to resolve
any disputed items. If they are unable to do so, the remaining
disputed items will be referred to the St. Louis, Missouri
offices of Price Waterhouse, a nationally recognized firm of
certified public accountants, for resolution. The parties will
share equally the cost of the certified public accountants. The
book value of the disputed items, as determined by the certified
public accountants, will be binding on the parties.
3.6 Purchase Price Adjustment. If the
consolidated net book value of Cloth World and the Subsidiaries
shown in the Closing Date Statement, after the resolution of any
dispute pursuant to Section 3.5, (the "Net LIFO Book Value") is
less than $62,000,000, FCA Ohio will have the right to recover,
from funds on deposit with the Escrow Agent, the amount by which
$62,000,000 exceeds the Net LIFO Book Value, together with
interest. To the extent that the funds on deposit with the
Escrow Agent are not sufficient to pay the full amount due to FCA
Ohio, Cloth World will pay the balance due to FCA Ohio, together
with interest. If the Net LIFO Book Value is more than
$62,000,000, FCA Ohio will pay to Cloth World the amount by which
the Net LIFO Book Value exceeds $62,000,000, together with
interest, and all funds on deposit with the Escrow Agent will be
remitted to Cloth World. Interest will accrue, from the Time of
Closing to the date of payment, at a rate equal to the average
monthly LIBOR plus 75 basis points. Any such payment will be
payable by check delivered within 5 business days after (a) the
acceptance by Fabri-Centers of the Closing Date Statement or (b)
the resolution of any dispute pursuant to Section 3.5, as the
case may be.
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4. REPRESENTATIONS AND WARRANTIES OF BROWN GROUP AND CLOTH
WORLD
Brown Group and Cloth World represent and warrant
to Fabri-Centers and FCA Ohio as follows:
4.1 Organization of Brown Group and Cloth World.
Brown Group and Cloth World are corporations duly organized,
validly existing, and in good standing under the laws of the
States of New York and Missouri, respectively. Cloth World is
qualified to do business as a foreign corporation in each
jurisdiction where it is required to be qualified.
4.2 Subsidiaries. Brown Group does not own,
directly or indirectly, equity securities of any corporation,
partnership, or other organization engaged in the Business other
than those identified on Section 4.2 of the Disclosure Schedule
attached to this Agreement as Schedule 4 (the "Subsidiaries").
Each of the Subsidiaries is a corporation or partnership duly
organized, validly existing, and in good standing under the laws
of the state in which it is organized. Each of the Subsidiaries
is qualified to do business as a foreign corporation or
partnership in each jurisdiction where it is required to be
qualified.
4.3 Authority. Brown Group and Cloth World have
sufficient corporate power to enter into and perform their
obligations under this Agreement. The execution, delivery, and
performance of this Agreement by Brown Group and Cloth World have
been duly authorized by all necessary corporate action on their
part. Assuming the due authorization, execution, and delivery of
this Agreement by Fabri-Centers and FCA Ohio, this Agreement is a
valid and binding obligation of Brown Group and Cloth World
enforceable against them in accordance with its terms.
4.4 No Violation. The execution and delivery of
this Agreement by Brown Group and Cloth World do not, and the
performance by Brown Group and Cloth World of their obligations
under this Agreement will not, result in any violation of or
default under, or give rise to a right of modification,
termination, or acceleration of any obligation under, any
provision of the charter or bylaws of Brown Group, Cloth World,
or any of the Subsidiaries; of any loan or credit agreement,
note, bond, mortgage, indenture, lease, or other agreement or
instrument to which Brown Group, Cloth World, or any of the
Subsidiaries is a party (including but not limited to any Store
Lease, Personal Property Lease, or Executory Contract); of any
permit, license, judgment, order, or decree by which Brown Group,
Cloth World, or any of the Subsidiaries is bound; or of any
applicable statute, ordinance, rule, or regulation which relates
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to the Business; except, in each case, for matters set forth in
Section 4.4 of the Disclosure Schedule. No authorization,
consent, or approval of, or filing with, any Governmental Entity
is necessary for the performance by Brown Group of its
obligations under this Agreement, except (a) as set forth in
Section 4.4 of the Disclosure Schedule and (b) for compliance
with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act").
4.5 Financial Statements; Accounting Controls.
(a) The consolidated balance sheets of Cloth
World and the Subsidiaries as of July 30, 1994, January 29, 1994
and January 30, 1993, the consolidated statements of earnings and
cash flows of Cloth World and the Subsidiaries for the 6-month
periods ended July 30, 1994 and July 31, 1993 and for the 12-
month periods ended January 29, 1994, January 30, 1993, and
February 1, 1992, all of which are included in Section 4.5 of the
Disclosure Schedule, have been prepared in accordance with
generally accepted accounting principles, except for the omission
of footnotes, applied on a basis consistent with prior periods
and fairly present the consolidated financial position and
consolidated results of operations of Cloth World and the
Subsidiaries at the dates and for the periods indicated, subject
in the case of the interim financial statements to normal
year-end audit adjustments. As soon as practicable after the
Time of Closing (and in no event later than 60 days after the
Time of Closing), Brown Group will provide Fabri-Centers with
audited consolidated financial statements of Cloth World and the
Subsidiaries that meet the requirements of Item 7(a) of Form 8-K
under the Securities Exchange Act of 1934, as amended.
(b) Brown Group, Cloth World, and the
Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that, with respect to
Cloth World and the Subsidiaries, (i) transactions are executed
in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization,
and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
4.6 No Material Adverse Change. There has been
no material adverse change in the consolidated financial
condition, the consolidated results of operations, or the
Business of Cloth World and the Subsidiaries since January 29,
1994.
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4.7 No Undisclosed Liabilities. Neither Cloth
World nor any of the Subsidiaries has any liabilities, fixed or
contingent, other than:
(a) Insured liabilities;
(b) Liabilities fully shown or reserved against
in the January 1994 Balance Sheet;
(c) Current liabilities, not unusual in
nature or amount, incurred in the ordinary course of
business by Cloth World or the Subsidiaries since
January 29, 1994; and
(d) Contingent liabilities (other than those
required to be accrued by a charge to income or
disclosed in footnotes to financial statements under
generally accepted accounting principles) based on
unasserted claims presently unknown to the Buyers, but
with respect to which Buyers would have meritorious
defenses.
4.8 Actions Since January 29, 1994. Except as
disclosed in Section 4.8 of the Disclosure Schedule, since
January 29, 1994 neither Cloth World nor any of the Subsidiaries
has:
(a) Incurred any material obligations or
liabilities, other than obligations or liabilities
incurred in the ordinary course of business and not
unusual in nature or amount.
(b) Sold or transferred any of material
assets, other than the sale of Inventory in the
ordinary course of business, or waived any rights of
material value.
(c) Opened or closed any Stores.
(d) Entered into or modified any material
contracts or arrangements with suppliers, including but
not limited to suppliers of patterns, not in the
ordinary course of business.
(e) Mortgaged, pledged, or subjected to lien
or other encumbrance any Real Property (as defined in
Section 4.12) or material personal property.
(f) Acquired, merged with or into, or
consolidated with any other business.
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(g) Made capital expenditures in excess of
$50,000 for any one project (the foregoing
notwithstanding, Section 4.8 of the Disclosure Schedule
may be supplemented at any time prior to the Time of
Closing in order to identify any such capital
expenditures).
(h) Entered into any other material
transaction other than in the ordinary course of
business.
(i) Entered into an agreement or other
commitment to do any of the foregoing.
4.9 Inventory. The Inventory reflected in the
January 1994 Balance Sheet has been counted and valued in a
manner consistent with the Inventory Instructions and the past
practices and procedures of Cloth World as illustrated in the
Inventory Materials attached to this Agreement as Schedule
3.3(b).
4.10 Tax Matters.
(a) Section 4.10 of the Disclosure Schedule sets
forth a list of the states and other jurisdictions in which
returns or reports (including informational returns and reports)
are required to be filed with any governmental authority
responsible for the imposition of any Taxes (a "Taxing
Authority") by or on behalf of Cloth World or any of the
Subsidiaries ("Returns").
(b) Except as set forth in Section 4.10 of the
Disclosure Schedule, (i) there are not now and will not be at the
Time of Closing any grounds for the assertion or assessment of
any Taxes against Fabri-Centers or FCA Ohio as successors to the
Business, and neither Fabri-Centers nor FCA Ohio will incur any
liability for such Taxes, except to the extent of any reserve
therefor in the Closing Date Statement, (ii) there are not now
and will not be at the Time of Closing any grounds for the
imposition of any lien on the Acquired Assets, except for liens
in respect of Taxes reserved against in the Closing Date
Statement, (iii) the Acquired Assets are not now and will not be
at the Time of Closing encumbered by any lien arising out of
unpaid Taxes, other than liens for Taxes for which payment is not
yet required, and (iv) there is no action or proceeding or
unresolved claim for assessment or collection pending or
threatened by, or present or expected dispute with, any
governmental authority for the assessment or collection from
Brown Group, Cloth World, or any of the Subsidiaries of any Taxes
that could result in the assertion or assessment of Taxes against
Fabri-Centers or FCA Ohio as successors to the Business or in the
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imposition of any lien on the Acquired Assets, and (iv) there is
no extension or waiver of the period for the assertion or
collection of any Taxes against Brown Group, Cloth World, or any
of the Subsidiaries that could result in the assertion or
assessment of Taxes against Fabri-Centers or FCA Ohio as
successors to the Business or in the imposition of any lien on
the Acquired Assets.
4.11 Real Property, including Store Leases.
(a) Except as set forth in Section 4.11 of the
Disclosure Schedule, Cloth World and the Subsidiaries do not own
or lease any real property other than the Owned Real Property and
the Store Leases. Cloth World and the Subsidiaries are in
possession of the Owned Real Property and the Store Leases
(collectively, the "Real Property") and have (i) good and
marketable title to the Owned Real Property and (ii) have good,
valid, and subsisting leaseholds as to the Store Leases, in each
case free and clear of all mortgages, security interests, title
defects, pledges, liens, charges, encumbrances, easements, and
rights-of-way other than (A) as noted in such Store Leases, (B)
taxes and assessments, both general and special, that are a lien
but not yet due and payable, (C) the specific exceptions
identified in Section 4.11 of the Disclosure Schedule, and (D)
such other and additional liens, defects, charges, restrictions,
impairments, and the like which do not, individually or in the
aggregate, materially impair the value of the Real Property or
use of the Real Property in the Business as presently and
ordinarily conducted.
(b) Section 4.11 of the Disclosure Schedule
contains a table or schedule specifying the rent (including
percentage rent), term, and renewal term or terms of each of the
Store Leases. Section 4.11 of the Disclosure Schedule also
identifies each of the Store Leases that (i) requires the consent
of the landlord or any other party for the completion of the
transactions contemplated by this Agreement, including but not
limited to consent for an assignment of the Store Lease or a
change in control ("Store Lease Consents"), or (ii) contains a
"radius clause" or similar restriction that, following the
completion of the transactions contemplated by the Agreement,
could be violated by, or result in an increase in rents or
termination of the Store Lease due to, the existence of stores
operated by Fabri-Centers or any of it affiliates ("Radius
Clauses").
(c) Brown Group has heretofore delivered to
Fabri-Centers a complete, correct, and current copy of each of
the Store Leases, including any modifications and supplements.
Except as set forth in Section 4.11 of the Disclosure Schedule,
(i) all of the Store Leases are in full force and effect in
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accordance with their respective terms, (ii) Cloth World, the
Subsidiaries, and, to the best knowledge of Brown Group and Cloth
World, all other parties to the Store Leases have duly and timely
performed their obligations under the Store Leases, (iii) no
default on the part of Cloth World, any of the Subsidiaries, or,
to the best knowledge of Brown Group and Cloth World, any other
party has occurred and is subsisting under any of the Store
Leases, (iv) neither Cloth World nor any of the Subsidiaries has
given or received any notice of default under any of the Store
Leases, (v) no event has occurred or condition exists that, with
the giving of notice, the passage of time, or both, would
constitute a default by Cloth World, any of the Subsidiaries, or,
to the best knowledge of Brown Group and Cloth World, any other
party under any of the Store Leases, and (vi) none of Cloth
World, any of the Subsidiaries, or, to the best knowledge of
Brown Group and Cloth World, any other party has waived, or
extended the time for the performance of, any obligations under
the Store Leases. To the best knowledge of Brown Group and Cloth
World, none of the landlords under the Store Leases has expressed
an intention to cancel any of the Store Leases outside normal
expiration dates or other terms of the particular lease.
(d) Except as set forth in Section 4.11 of the
Disclosure Schedule or as provided in the Store Leases: (i) no
third parties have any rights to use or occupy any of the Real
Property, whether as tenants, subtenants, holders of easements or
licenses, or otherwise and (ii) to the best knowledge of Brown
Group and Cloth World, there are no easements, conditions,
reservations, covenants, restrictions, or any other matters
presently of record that would materially and adversely affect
the use of the Real Property in the Business as presently and
ordinarily conducted.
(e) Section 4.11 of the Disclosure Schedule
identifies all material service and maintenance contracts
relating to the Real Property.
(f) Except as set forth in Section 4.11 of the
Disclosure Schedule or as provided in the Store Leases, public
utilities are available to serve all of the Real Property,
including gas, water, electricity, telephone, and sanitary and
storm sewers. If any of these public utilities enter the
property through adjoining private land, to the best knowledge of
Brown Group and Cloth World, they do so in accordance with valid
public easements, licenses, or other rights. To the best
knowledge of Brown Group and Cloth World, there is no proposed
curtailment of utility service to any of the Real Property listed
on the Real Property Description.
(g) To the best knowledge of Brown Group and
Cloth World, all heating, air conditioning, water, plumbing, and
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electrical systems and equipment serving the Real Property are in
reasonably good working condition, normal wear and tear excepted,
and there are no material latent defects in any of the structures
located on the Real Property, and the roof of each building
included in the Real Property is watertight in all material
respects.
(h) To the best knowledge of Brown Group and
Cloth World, the use of the Real Property by Cloth World and the
Subsidiaries in the Business as presently and ordinarily
conducted conforms with all applicable zoning laws, regulations,
and permits. To the best knowledge of Brown Group and Cloth
World, except as set forth in Section 4.11 of the Disclosure
Schedule, (a) no zoning changes are pending or threatened that
would prohibit or make nonconforming the use of any of the Real
Property in the Business, (b) no condemnation or eminent domain
proceedings are pending or threatened with respect to any of the
Real Property, and (c) no landlord or public authority is
installing, or planning to install, any improvements the cost of
which might, in full or in part, be assessed against Cloth World
or any of the Subsidiaries.
4.12 Personal Property. Except as set forth in
Section 4.12 of the Disclosure Schedule, Cloth World and the
Subsidiaries have good and marketable title to all of the
personal property reflected in the January 1994 Balance Sheet
(other than personal property sold since January 29, 1994 in the
ordinary course of business) and, at the Time of Closing, will
have good and marketable title to all of the personal property
included in the Acquired Assets, in each case free and clear of
all mortgages, security interests, title defects, pledges, liens,
charges, and encumbrances, including any conditional sale or
other title retention agreements.
4.13 Proprietary Rights. Except as set forth in
Section 4.13 of the Disclosure Schedule: (i) Brown Group, Cloth
World, or one of the Subsidiaries, as the case may be, has the
right to use each of the Proprietary Rights in the locations and
in the manner as currently being used; (ii) neither Cloth World
nor any of the Subsidiaries uses any material trade names,
trademarks, copyrights, or logos other than the Proprietary
Rights; (iii) none of the Proprietary Rights are subject to any
pending or threatened challenge of which Brown Group, Cloth
World, or any of the Subsidiaries has received notice; (iv) to
the best knowledge of Brown Group and Cloth World, the use of the
Proprietary Rights in the Business as presently and ordinarily
conducted does not infringe upon the proprietary rights of
others; (v) none of Brown Group, Cloth World, or any of the
Subsidiaries has received any notice of any such infringement;
and (vi) to the best knowledge of Cloth World and Brown Group, no
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other party is infringing upon Sellers' rights in the Proprietary
Rights.
4.14 Contracts and Commitments; Arrangements
regarding Patterns. Except as set forth in Section 4.14 of the
Disclosure Schedule or in Schedule 1.1(c)(ii), Schedule
1.1(d)(i), or Schedule 1.1(d)(ii) to this Agreement, neither
Cloth World nor any of the Subsidiaries is a party to or bound by
any oral or written contracts which cannot be terminated by Cloth
World or one of the Subsidiaries on notice of 30 days or less and
which:
(a) provides for the purchase of supplies or
services that (i) entails the expenditure in any fiscal
year of more than $50,000 in the case of supplies other
than merchandise or $250,000 in the case of
merchandise, (ii) purports to be exclusive as pertains
to any product, type of product, or region, or (iii)
has a term of more than one year.
(b) limits the right of Cloth World or any
of the Subsidiaries to compete, to open a Store in any
territory, or to use any trade names, trademarks,
copyrights, logos, or other proprietary rights.
(c) provides for payments to anyone based on
the operating results of Cloth World, any of the
Subsidiaries, or any one or more of the Stores.
(d) affects the prices charged by Cloth
World or any of the Subsidiaries, including any
commitment to match prices charged by others.
(e) warrants goods or services by Cloth
World or any of the Subsidiaries in a manner that
differs materially from the warranty provided by the
manufacturer of the goods or the provider of the
services.
(f) commits for capital expenditures in
excess of $50,000 for any one project or $250,000 for
any group of projects.
(g) pursuant to which anyone holds a
mortgage, security interest, pledge, lien, charge, or
encumbrance in any of the Acquired Assets.
(h) is otherwise material to the Business.
To the extent requested by Fabri-Centers, Brown
Group has delivered or prior to the Time of Closing will deliver
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to Fabri-Centers copies of all written contracts and commitments
listed in the Disclosure Schedule, all Personal Property Leases,
all Executory Contracts, summaries of all oral contracts and
commitments listed in the Disclosure Schedule, and all
modifications and supplements thereto (collectively, the
"Contracts"). Except as revealed in Section 4.14 of the
Disclosure Schedule or in the Contract itself and to the extent
material to the Business or the Acquired Assets (i) each of the
Contracts is in full force and effect in accordance with its
terms, (ii) Cloth World, each of the Subsidiaries, and, to the
best knowledge of Brown Group and Cloth World, all other parties
to the Contracts have duly and timely performed their material
obligations under the Contracts, (iii) no default on the part of
Cloth World, any of the Subsidiaries, or, to the best knowledge
of Brown Group and Cloth World, any other party has occurred and
is subsisting under any of the Contracts, (iv) neither Cloth
World nor any of the Subsidiaries has given or received any
notice of default under any of the Contracts, (v) no event has
occurred or condition exists that, with the giving of notice, the
passage of time, or both, would constitute a default by Cloth
World, any of the Subsidiaries, or, to the best knowledge of
Brown Group and Cloth World, any other party under any of the
Contracts, and (v) none of Cloth World, any of the Subsidiaries,
or, to the best knowledge of Brown Group and Cloth World, any
other party has waived, or extended the time for the performance
of, any obligations under the Contracts. To the best knowledge
of Brown Group and Cloth World, none of the Contracts is subject
to any impending cancellation.
4.15 Completeness of Assets. The Acquired Assets
comprise all of the material assets and rights used in the
Business as presently and ordinarily conducted. Except as
described in Section 4.11 or 4.12 of the Disclosure Schedule, no
affiliate of Brown Group, other than Cloth World and the
Subsidiaries, has an interest in any of the Acquired Assets or in
any other assets or rights used in the Business as presently and
ordinarily conducted.
4.16 Employee Benefit Plans.
(a) Identification. Section 4.16 of the
Disclosure Schedule lists all employee benefit plans (excluding
arrangements with Donald Richey) as defined in Section 3(3) of
ERISA and all other material pension, retirement, profit sharing,
fringe benefit, bonus, incentive, deferred compensation,
supplemental retirement, vacation, hospitalization, medical, life
insurance, disability, severance, stock option, stock purchase,
and benefit plans, programs, or arrangements, written or
otherwise, that are maintained, sponsored, administered, or
contributed to by Brown Group, Cloth World, or any of the
Subsidiaries in which current or former employees of Cloth World
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or any of the Subsidiaries participate and all employment,
executive compensation, severance, consulting, noncompetition, or
indemnification agreements with current or former employees of
Cloth World or any of the Subsidiaries (together, the "Employee
Plans").
(b) List of Certain Current Employees. Section
4.16 of the Disclosure Schedule identifies all current employees
of Cloth World or any of the Subsidiaries and discloses the
position and base salary of each such employee.
(c) Absence of Certain Benefits; Compliance;
Contributions. Except as provided in Section 4.16 of the
Disclosure Schedule and to the extent materially adverse to the
Business or the Acquired Assets: (i) neither Brown Group, Cloth
World, nor any of the Subsidiaries has taken any action with
respect to any Employee Plan that will cause, and the completion
of the transactions contemplated by this Agreement will not
cause, an acceleration of or increase in the vesting,
exercisability, or benefits provided by the Employee Plan that
could result in a liability of Fabri-Centers or FCA Ohio, as
successors to the Business or otherwise, or a lien on the
Acquired Assets; (ii) none of Brown Group, Cloth World, or any of
the Subsidiaries has any obligation to contribute to, or has any
liability under ERISA for any complete or partial withdrawal
from, any "multiemployer pension plan" (within the meaning of
Section 4001 of ERISA) in which any current or former employees
of Cloth World or any of the Subsidiaries participate or have
participated that could result in a liability of Fabri-Centers or
FCA Ohio, as successors to the Business or otherwise, or a lien
on the Acquired Assets; and (iii) no liability under Title IV of
ERISA has been incurred by Cloth World, any of the Subsidiaries,
or any of trades or businesses that would be aggregated with
Cloth World or any of the Subsidiaries for purposes of imposing
liability under Title IV of ERISA (an "ERISA Affiliate") that has
not been satisfied in full, and no condition exists that
presents, and the completion of the transactions contemplated by
this Agreement do not present, a material risk that Cloth World,
any of the Subsidiaries, or an ERISA Affiliate will incur a
liability under Title IV of ERISA other than liability for
premiums due the Pension Benefit Guaranty Corporation.
(d) COBRA. Brown Group or Cloth World has timely
provided or will timely provide all notices and any continuation
of health benefit coverage (including but not limited to medical
and dental coverage) required to be provided to any present or
former employees of Cloth World and the Subsidiaries (other than
Hired Employees), their spouses, former spouses, dependents, and
former dependents, under COBRA and under applicable state law to
the extent such notices are required to be provided by any party
under COBRA or under state law by reason of the events occurring
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prior to, on, or after the Closing Date or by reason of the
transactions contemplated by this Agreement.
(e) Severance. Section 4.16 of the Disclosure
Schedule identifies the severance benefits that employees of
Cloth World and the Subsidiaries are entitled to receive upon
termination of employment, sets forth an estimate of the total
liability for severance benefits resulting from the completion of
the transactions contemplated by this Agreement, and describes
the assumptions used in calculating that estimate.
4.17 Labor Matters. Except as set forth in
Section 4.17 of the Disclosure Schedule, neither Cloth World nor
any of the Subsidiaries is a party to any collective bargaining
agreement. To the best knowledge of Brown Group and Cloth World,
no effort is underway to organize any employees of Cloth World or
any of the Subsidiaries. To the best knowledge of Brown Group
and Cloth World, Cloth World and each of the Subsidiaries are in
substantial compliance with all federal and state laws respecting
employment and employment practices, terms and conditions of
employment, wages and hours, nondiscrimination in employment, and
sexual harassment and are not engaged in any unfair labor
practices. Section 4.17 of the Disclosure Schedule describes all
pending labor grievances and arbitration cases of which Brown
Group, Cloth World, or any of the Subsidiaries has received
notice, and all civil rights, equal employment opportunity, and
sexual harassment charges against Cloth World or any of the
Subsidiaries of which Brown Group, Cloth World, or any of the
Subsidiaries has received notice, as well as all settlements,
consent orders, and prior decrees of any court or Governmental
Entity requiring any continued observance by Cloth World or any
of the Subsidiaries. Except as set forth in Section 4.17 of the
Disclosure Schedule, (i) no complaint of which Brown Group, Cloth
World, or any of the Subsidiaries has received notice alleging
any unfair labor practices has been filed with the National
Mediation Board or the National Labor Relations Board with
respect to Cloth World or any of the Subsidiaries since February
2, 1991, (ii) there have not been any work stoppages, strikes, or
other significant labor troubles at any of the locations owned or
leased by Cloth World or any of the Subsidiaries, including the
Stores, since February 2, 1991, (iii) neither Cloth World nor any
of the Subsidiaries has had any arbitration cases brought against
them since February 2, 1991 of which Brown Group, Cloth World, or
any of the Subsidiaries has received notice, and (iv) no
arbitration cases of which Brown Group, Cloth World, or any of
the Subsidiaries have received notice are pending or threatened
against either Cloth World or any of the Subsidiaries.
4.18 Litigation. Except for matters set forth in
Section 4.18 of the Disclosure Schedule, there is no action,
suit, proceeding, order, or investigation of which Brown Group,
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Cloth World, or any of the Subsidiaries have received notice
before any federal, state, municipal, or other court or
Governmental Entity pending or threatened (i) against Cloth World
or any of the Subsidiaries or (ii) against Brown Group or any of
its other affiliates that in any material respect specifically
involves Cloth World, any of the Subsidiaries, any of Cloth
World's or a Subsidiary's current or former employees, the
Business, or any of Acquired Assets. Except as set forth in
Section 4.18 of the Disclosure Schedule, to the best knowledge of
Brown Group and Cloth World, no event has occurred or condition
exists that can reasonably be expected to result in any such
action, suit, proceeding, order, or investigation.
4.19 Workers' Compensation Claims. Section 4.19
of the Disclosure Schedule sets forth a complete and accurate
schedule of the workers' compensation liability of Cloth World
for claims made and remaining open.
4.20 Permits, Licenses, and Authorizations. The
Permit List, as supplemented following the date of this Agreement
and prior to the Time of Closing, does or will identify all
permits, licenses, and other authorizations material to the
Business or the Acquired Assets issued by a Governmental Entity
that are held by Brown Group, Cloth World, or any of the
Subsidiaries and are used in the Stores or the Business, and no
other permits, licenses, or authorizations are required for the
operation of the Stores or the Business substantially as
presently and ordinarily conducted. Except as disclosed in
Section 4.20 of the Disclosure Schedule, to the best knowledge of
Brown Group and Cloth World, each of Cloth World, and the
Subsidiaries is in material compliance with the terms of each of
the items identified on the Permit List, as supplemented, that
are applicable to it.
4.21 Compliance with Laws.
(a) Except with respect to the Americans with
Disabilities Act of 1990 and all regulations and guidelines
thereunder (the "ADA") and further except with respect to the
laws of states and instrumentalities of states concerning the
same general subject as that covered by the ADA, to the best
knowledge of Brown Group and Cloth World, the operation of the
Business as presently and ordinarily conducted complies in all
material respects with all applicable laws, rules, and
regulations, and to the best knowledge of Brown Group and Cloth
World, neither Cloth World nor any of the Subsidiaries has any
material liability for any past or present violation of any such
law, rule, or regulation.
(b) To the best knowledge of Brown Group and
Cloth World, all Stores remodeled or opened after the enactment
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of the ADA comply in all material respects with the requirements
of the ADA and with the requirements of the laws of states and
instrumentalities of states concerning the same general subject
as that covered by the ADA (assuming for this purpose that the
requirements of such laws are not substantially more burdensome
than the requirements of the ADA).
4.22 Environmental Matters. Except as set forth
in Section 4.22 of the Disclosure Schedule, none of Cloth World
or any of the Subsidiaries has released hazardous, toxic, or
polluting substances, including but not limited to PCBs, asbestos
or asbestos containing materials, petroleum, or petroleum
containing products ("Hazardous Substances") at, on, or from any
real property now or formerly owned, leased, or operated by Cloth
World or any of the Subsidiaries (including the Real Property).
To the best knowledge of Brown Group and Cloth World, and except
as set forth in Section 4.22 of the Disclosure Schedule:
(a) The past and present conduct of the Business
by Cloth World and the Subsidiaries, and the use of any real
property now or formerly owned, leased, or operated by Cloth
World or any of the Subsidiaries (including the Real Property),
have been and are in compliance with applicable environmental
permits, laws, rules, regulations, and orders of Governmental
Entities. No Governmental Entity has made, issued, filed in any
court, or threatened to make, issue, or file in any court, any
notice of liability, notice of violation, demand, claim, request
for information, lien, citation, summons, complaint, or order
regarding an alleged violation of any such permits, laws, rules,
regulations, or orders.
(b) No person has to any material degree released
Hazardous Substances at, on, or from any real property now or
formerly owned, leased, or operated by Cloth World or any of the
Subsidiaries (including the Real Property).
(c) Brown Group has delivered to FCA Ohio
complete and accurate copies of all written reports of
environmental audits, inspections, or investigations in its
possession, if any, relating to the Business or any real property
now or formerly owned, leased, or operated by Cloth World or any
of the Subsidiaries (including the Real Property). None of these
reports, if any, suggests that Cloth World or any of the
Subsidiaries has any material liability for noncompliance or
remediation.
(d) No active or inactive underground or above
ground storage tanks in violation of law are located at any real
property now or formerly owned, leased, or operated by Cloth
World or any of the Subsidiaries (including the Real Property).
No Hazardous Substances required by law to be cleaned up are
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located at or contaminate any real property now or formerly
owned, leased, or operated by Cloth World or any of the
Subsidiaries (including the Real Property).
4.23 Insurance. Section 4.23 of the Disclosure
Schedule lists all insurance policies and bonds obtained by
Sellers and in force with respect to the Acquired Assets or the
Business and, for each such policy, identifies the insurer, type
of coverage, policy limits and deductibles, and expiration date.
All such policies are in full force and effect in accordance with
their respective terms, will remain in such full force and effect
to the Time of Closing, and are believed to be sufficient in all
material respects for compliance by Cloth World and the
Subsidiaries with all applicable requirements of law and of all
agreements to which any of them is a party.
4.24 Suppliers. Section 4.24 of the Disclosure
Schedule identifies each supplier from which Cloth World and the
Subsidiaries have purchased, either during the fiscal year ended
January 29, 1994 or during the period from January 29, 1994 to
the date of this Agreement, more than $50,000 of goods (other
than merchandise) or services or more than $250,000 of
merchandise. Section 4.24 of the Disclosure Schedule describes
any agreements or arrangements with any of these suppliers
regarding prices, payment terms, delivery times, service, or
other material terms of sale. Brown Group is not aware of any
anticipated changes in any of these agreements or arrangements,
of any material adverse change in the financial condition of any
of these suppliers, or of any other reason why any of these
suppliers cannot continue to do business with Cloth World and the
Subsidiaries on the same basis as heretofore.
4.25 Finders. No finder or broker has acted on
behalf of Brown Group, Cloth World, or any of the Subsidiaries in
connection with the transactions contemplated by this Agreement
other than Smith Barney, Inc., whose fee will be paid solely by
Brown Group.
5. REPRESENTATIONS AND WARRANTIES OF FABRI-CENTERS AND FCA OHIO
Fabri-Centers and FCA Ohio represent and warrant
to Brown Group and Cloth World as follows:
5.1 Organization of Fabri-Centers and FCA Ohio.
Fabri-Centers and FCA Ohio are corporations duly organized,
validly existing, and in good standing under the laws of the
State of Ohio. FCA Ohio is a wholly owned subsidiary of Fabri-
Centers.
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5.2 Authority. Fabri-Centers and FCA Ohio have
sufficient corporate power to enter into and perform their
obligations under this Agreement. The execution, delivery, and
performance of this Agreement by Fabri-Centers and FCA Ohio have
been duly authorized by all necessary corporate action on their
part. Assuming the due authorization, execution, and delivery of
this Agreement by Brown Group and Cloth World, this Agreement is
a valid and binding obligation of Fabri-Centers and FCA Ohio
enforceable against them in accordance with its terms.
5.3 No Violation. The execution and delivery of
this Agreement by Fabri-Centers and FCA Ohio do not, and the
performance by Fabri-Centers and FCA Ohio of their obligations
under this Agreement will not, result in any violation of or
default under, or give rise to a right of modification,
termination, or acceleration of any obligation under, any
provision of the Articles of Incorporation or Regulations of
Fabri-Centers or FCA Ohio; of any loan or credit agreement, note,
bond, mortgage, indenture, lease, or other agreement or
instrument to which Fabri-Centers or FCA Ohio is a party; of any
permit, license, judgment, order, or decree by which Fabri-
Centers or FCA Ohio is bound; or of any statute, ordinance, rule,
or regulation by which Fabri-Centers or FCA Ohio is bound or
which relates to their business. No authorization, consent, or
approval of, or filing with, any Governmental Entity is necessary
for the performance by Fabri-Centers or FCA Ohio of their
obligations under this Agreement, except for compliance with the
HSR Act.
5.4 Finders. No finder or broker has acted on
behalf of Fabri-Centers or FCA Ohio in connection with the
transactions contemplated by this Agreement other than Salomon
Brothers Inc, whose fee will be paid solely by Fabri-Centers or
FCA Ohio.
6. COVENANTS
6.1 Operation of the Business Prior to the Time
of Closing. From the date of this Agreement until the Time of
Closing, Brown Group will cause Cloth World and the Subsidiaries
to operate the Business in all material respects in accordance
with the following procedures:
(a) Ordinary Course. Cloth World and the
Subsidiaries will continue to operate the Business as
presently and ordinarily conducted and will use all
reasonable efforts to preserve their existing
relationships with suppliers, customers, employees, and
others having business relations with the them.
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(b) Not Engage in Transactions Referred to
in Section 4.8. Neither Cloth World nor any of the
Subsidiaries will engage in any of the transactions
referred to in Section 4.8 without the prior written
consent of Fabri-Centers.
(c) Business Policies. Neither Cloth World
nor any of the Subsidiaries will change in any material
respect any of their business policies, including but
not limited to advertising, pricing, promotional,
purchasing, inventory, and personnel policies, without
the prior written consent of Fabri-Centers. Without
limiting the foregoing, neither Cloth World nor any of
the Subsidiaries will mark-down retail prices except in
accordance with existing pricing policies applied on a
basis consistent with past practices. Cloth World will
from time to time upon its reasonable request advise
Fabri-Centers of, and consult with Fabri-Centers
regarding, the types, mix, and quantities of inventory
that it intends to maintain in the Stores through the
end of the current fiscal year.
(d) Store Leases, Personal Property Leases,
and Executory Contracts. Cloth World and the
Subsidiaries will perform in all material respects the
terms and conditions of the Store Leases, Personal
Property Leases, and Executory Contracts.
(e) Maintain Properties. Cloth World and
the Subsidiaries will maintain all of the Acquired
Assets in customary condition and repair, except for
reasonable wear and tear and damage due to unforeseen
casualty.
(f) Maintain Books of Account. Cloth World
and the Subsidiaries will maintain their books of
account and records in the usual and ordinary manner
and in accordance with generally accepted accounting
principles.
(g) Comply with Law. Cloth World and the
Subsidiaries will comply in all material respects with
all laws applicable to them or contest in good faith,
upon the advice of counsel, any alleged failure so to
comply with any such laws.
6.2 Access to Premises and Records. From the
date of this Agreement until the Time of Closing, Brown Group
will (a) permit Fabri-Centers and its representatives to review
the books and records relating to Cloth World, the Subsidiaries,
and the Business and furnish such additional financial and
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operating information relating thereto as Fabri-Centers may
reasonably request and (b) cause Cloth World and the Subsidiaries
to permit authorized representatives of Fabri-Centers, at
mutually agreeable times, to inspect the Stores and to interview
key officers and employees of Cloth World and the Subsidiaries.
All of Fabri-Center's investigations will be conducted in a
manner that does not unreasonably interfere with Brown Group's
normal business activities. Fabri-Centers agrees to treat all
proprietary information received from Brown Group, Cloth World,
and the Subsidiaries as confidential.
6.3 Training of Personnel. Prior to the Time of
Closing, Brown Group will cause Cloth World and the Subsidiaries
to permit Fabri-Centers and its representatives to enter the
Stores and to train employees of Cloth World and the Subsidiaries
in the operation of Fabri-Center's point-of-sale cash registers
and in other procedures practiced by employees of Fabri-Centers.
All of Fabri-Center's training will be conducted in a manner that
does not unreasonably interfere with Brown Group's normal
business activities.
6.4 HSR Act. Fabri-Centers and Brown Group will
submit to the United States Department of Justice and the United
States Federal Trade Commission all of the forms and information
applicable to this transaction required under the HSR Act and
will use all reasonable efforts to respond promptly to any
request by them for additional information.
6.5 Efforts to Satisfy Conditions to Closing;
Waiver or Modification of Radius Clauses. Brown Group, Cloth
World, Fabri-Centers, and FCA Ohio will use all reasonable
efforts to satisfy the conditions to closing in Sections 7 and 8,
including all reasonable efforts to obtain the consents and
approvals by third parties and Governmental Entities required for
the completion of the transactions contemplated by this
Agreement. To the extent requested by Fabri-Centers, Brown Group
and Cloth World will use all reasonable efforts to assist in
obtaining a waiver or modification of all Radius Clauses to the
extent that they would result in an increase in rentals due to
the proximity of Stores owned or operated by Fabri-Centers or any
of its affiliates. Fabri-Centers will control the discussions
with landlords regarding any such waiver or modification; neither
Brown Group, Cloth World, nor any of the Subsidiaries will,
without the prior written consent of Fabri-Centers, agree to an
increase in the rents, to any other material change in the terms
of any Store Lease, or to any payment to landlords in connection
with any such waiver or modification.
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6.6 Store Lease Consents.
(a) In connection with the sale and transfer
of the Store Leases in accordance with Section 1.1(c),
Brown Group, Cloth World, and Fabri-Centers will use
all reasonable efforts to obtain all Store Lease
Consents prior to the Time of Closing. Notwithstanding
any such sale and transfer of the Store Leases
hereunder, neither Brown Group nor Cloth World will
transfer any Store Lease hereunder unless the related
Store Lease Consent is obtained. If and to the extent
necessary to obtain any such Store Lease Consent,
Fabri-Centers will provide the landlord with all
financial and business information about Fabri-Centers
reasonably requested by such landlord or of a type
previously furnished by Fabri-Centers to its own
landlords. Fabri-Centers will control the discussions
with landlords regarding the Store Lease Consents and,
if necessary, regarding the cost of terminating any
Store Lease that cannot be transferred to FCA Ohio;
neither Brown Group, Cloth World, nor any of the
Subsidiaries will, without the prior written consent of
Fabri-Centers, agree to an increase in the rents, to
any other material change in the terms of any Store
Lease, or to any payment to landlords in connection
with the termination of any Store Leases that cannot be
transferred.
(b) In the event that Fabri-Centers, in
order to secure a Store Lease Consent agrees to an
increase in rents or makes a lump sum or other payment
to the landlord, in either case for the remaining
current lease term only, Fabri-Centers and Brown Group
will each pay one half (1/2) of the cost, subject to
the overall limitations upon Sellers' obligations for
Capped Liabilities set forth in Section 6.9. For this
purpose, the cost of any increase in rents will be
expressed as a present value, calculated using a
discount rate equal to 175 basis points in excess of
the yield to maturity on the average US Treasury
security having a duration equal to the lease duration,
and settled in cash as soon as the amount is
calculated.
(c) In the event of the failure to obtain
one or more Store Lease Consents prior to the Time of
Closing, Brown Group and Cloth World will continue for
a period of eighteen (18) months thereafter to use all
reasonable efforts to obtain the Store Lease Consents
as soon as practicable. Until these Store Lease
Consents are obtained or upon the expiration of such
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period, whichever is earlier, Brown Group and Cloth World
will (i) to the extent they are legally able to do so,
consider FCA Ohio a sublessee under any such Store Leases
and make available to FCA Ohio any benefits Brown Group or
Cloth World receives, will receive, or are available to
Brown Group or Cloth World under such Store Leases, or
(ii) cooperate reasonably in devising another lawful
arrangement for transferring to FCA Ohio such benefits of
the related Store Leases, including, in the case of Store
Leases transferred into or held by Subsidiaries, the
transfer to FCA Ohio of the capital stock of the
Subsidiaries. If, notwithstanding these efforts, one or
more Store Lease Consents are not obtained and the parties
are unable to devise another arrangement for transferring to
FCA Ohio the benefits of the related Store Leases, Brown
Group will remain (as between itself and the landlord or
landlords in question) as primary obligor under the Store
Leases and, subject to the overall limitations upon Sellers'
obligations for Capped Liabilities set forth in Section 6.9,
pay future rents, the costs of terminating the Store Leases,
the costs of any associated litigation, and all other
amounts due under the Store Leases ("Store Lease
Liabilities").
(d) Sellers' obligations with respect to the
Store Leases will be limited to the foregoing
undertakings. There will be no adjustment in the
purchase price as a result of any failure or failures
on the part of Buyers to have received a Store Lease
Consent or any right of occupancy or use of any
property under a Store Lease.
(e) Any other term or provision in this Agreement
to the contrary notwithstanding, at such time as Sellers
have paid the Aggregate Cap (as defined in Section 6.9) for
the Capped Liabilities (as defined in Section 6.9), Buyers
will pay, discharge, satisfy in full without any recourse to
Sellers, and indemnify and hold Sellers harmless from and
against, any and all remaining liabilities with repect to
the Store Leases, including without limitation the Store
Lease Liabilities, although Buyers will not be deemed
thereby to have assumed any Store Leases for which the
requisite Store Lease Consents have not been obtained.
6.7 Divestiture of any Stores Required to Obtain
Governmental Approvals. In the event that the divestiture of one
or more of the Stores is required in order to obtain any
governmental approval required for the completion of the
transactions contemplated by this Agreement, including but not
limited to approval by the Federal Trade Commission or the
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Justice Department of the United States ("Required
Divestitures"), Fabri-Centers will carry out the divestiture in a
manner that it, in its judgment, considers to be reasonable and
appropriate under the circumstances; Fabri-Centers will not,
however, be required to take, or cause to be taken, any action
that would result in divestitures or other conditions or
requirements that Fabri-Centers, in its reasonable judgment,
deems to be materially burdensome. At the time each such Store
is divested, Brown Group will, subject to the overall limitations
upon Sellers' ogligations for Capped Liabilities set forth in
Section 6.9, pay to FCA Ohio one half (1/2) of the amount
determined with respect to that Store using the following
formula:
[A times (B / C)] plus D minus E minus F
Where:
A = $62,000,000, adjusted in accordance with Section 3.6.
B = Gross sales at that Store for the fiscal year ended
January 29, 1994 (or, if the Store was not open for the
full fiscal year, gross sales at the Store for that
fiscal year on an annualized basis).
C = Gross sales at all of the Stores for the fiscal year
ended January 29, 1994.
D = The costs incurred by Fabri-Centers or FCA Ohio in
connection with the divestiture, including any amounts
paid in connection with the transfer of the related
Store Lease, associated attorneys' fees, and other out-
of-pocket expenses.
E = The proceeds, if any, realized upon the transfer of the
related Store Lease.
F = The book value of the Inventory at the Store, net of
obsolescence reserve, as of the Time of Closing, as
reflected in the Closing Date Statement.
Any other term or provision in this Agreement to
the contrary notwithstanding, Sellers' liability under this
Section 6.7 will be subject to the overall limitations upon
Sellers' obligations for Capped Liabilities set forth in Section
6.9. That is to say, at such time as Sellers have paid the
Aggregate Cap for the Capped Liabilities, Buyers will pay,
discharge, satisfy in full without any recourse to Sellers, and
indemnify and hold Sellers harmless from and against, any and all
remaining liabilities with repect to the Required Divestitures.
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6.8 Severance Obligations.
(a) To Donald Richey and Warehouse Employees.
Sellers will retain all obligations and liabilities arising
prior to the Time of Closing that they may have to Mr.
Donald Richey and to employees of Sellers at the Warehouse
(other than the manager of the Warehouse), including any
obligation to provide severance pay or other benefits
following termination of employment or the sale of the
Business. These obligations and liabilities will not be
subject to the Aggregate Cap.
(b) To All Other Employees. Subject to the
provisions of this Section 6.8(b) which follow, Brown Group
and Cloth World will also retain all obligations and
liabilities to provide severance pay to employees of Cloth
World and its Subsidiaries other than Hired Employees,
Donald Richey, and the Warehouse employees referred to in
Section 6.8(a), and will reimburse Fabri-Centers and FCA
Ohio for any severance pay that they are required to pay to
Hired Employees whose employment is terminated for any
reason within six months after the Time of Closing ("Capped
Severance Obligations"), subject in each case to the overall
limitations upon Sellers' obligations for Capped Liabilities
set forth in Section 6.9. Although Sellers will administer
the payment of all such Capped Severance Obligations, any
other term or provision in this Agreement to the contrary
notwithstanding, Sellers' liability under this Section 6.8
will be subject to the overall limitations upon Sellers'
obligations for Capped Liabilities set forth in Section 6.9.
That is to say, at such time as Sellers have paid the
Aggregate Cap for the Capped Liabilities, Buyers will pay,
discharge, satisfy in full without any recourse to Sellers,
and indemnify and hold Sellers harmless from and against,
any and all remaining liabilities with repect to the
Severance Obligations.
(c) Sellers will be responsible for and
discharge any and all obligations to Warehouse
employees (other than the manager of the Warehouse)
under the Worker Adjustment and Retraining Notification
Act ("WARN"), and Buyers will be responsible for and
discharge any and all obligations under WARN with
respect to all other employees of Cloth World and the
Subsidiaries, although Sellers will provide any notices
called for under WARN as directed by Buyers.
6.9 Overall Limitation on Sellers' Obligations
for Capped Liabilities. Any other term or provision in this
Agreement to the contrary notwithstanding, Sellers' aggregate
payment obligations with respect to Store Lease Liabilities,
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Required Divestitures, and Capped Severance Obligations ("Capped
Liabilities") will be limited to an overall cap of $1,900,000
(the "Aggregate Cap"). It will be at Buyers' reasonable
discretion which category or categories of expenses are paid by
Sellers in reaching the Aggregate Cap. Once the Aggregate Cap is
reached, Sellers will have no further obligations whatsoever,
Buyers will pay and discharge all liabilities with respect to
Store Leases, Required Divestitures, or Capped Severance
Obligations, and Sellers will have no further obligations
whatsoever with respect thereto. Sellers will receive full
credit against the Aggregate Cap for any and all payments they
make directly to third parties in connection with Capped
Liabilities.
6.10 Environmental Audits. As soon as
practicable after the date of this Agreement, FCA Ohio may, at
its expense, obtain an environmental audit by a firm of
nationally recognized experts in the field who are reasonably
acceptable to Sellers of any Real Property that it elects to have
audited. If such environmental audit discloses, with respect to
any portion of the Real Property, the presence of Hazardous
Substances or other conditions that violate applicable
environmental permits, laws, rules, regulations, or orders of
Governmental Entities, FCA Ohio may elect to exclude from the
Acquired Assets any portion of the Real Property requiring
remediation ("Remediation Property"), in which case the
Remediation Property will be excluded from the Closing Date
Statement. In such event, Sellers may elect not to proceed with
the sale of any Acquired Assets hereunder and to terminate all
their obligations under this Agreement.
6.11 Transition Services. Effective as of the
Time of Closing, Brown Group and Fabri-Centers will enter into a
transition services agreements providing for warehouse services,
computer services, and other transition services for a reasonable
period of time after the closing, but in no event for longer than
six months (the "Transition Services Agreements"). Fabri-Centers
will reimburse Brown Group for the direct costs of all employees
who work full time to provide these services, for an agreed upon
percentage of the direct costs of all employees who work part
time to provide these services, and for all reasonable and
documented out-of-pocket expenses, indirect and overhead expenses
(to the extent that such expenses represent a reasonable
allocation of the actual cost of the related services), and
incentive expenses approved by Fabri-Centers that are incurred by
Brown Group in providing these services, including amounts due
under the lease of the Warehouse attributable to the period in
which the warehouse services are provided.
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7. CONDITIONS PRECEDENT TO OBLIGATION OF FABRI-CENTERS AND FCA
OHIO
The obligation of Fabri-Centers and FCA Ohio to
complete the transactions contemplated by this Agreement is
subject to the satisfaction, in all material respects, at or
before the Time of Closing of the following conditions:
7.1 Performance of Agreements. Brown Group and
Cloth World have performed in all material respects all
obligations to be performed by them under this Agreement at or
before the Time of Closing.
7.2 Representations and Warranties. The
representations and warranties made by Brown Group and Cloth
World in this Agreement are true in all material respects at and
as of the Time of Closing as though the representations and
warranties had been made at and as of the Time of Closing.
7.3 No Material Adverse Change. Between the date
of this Agreement and the Time of Closing, there has been no
material adverse change in the consolidated financial condition,
the consolidated results of operations, or the Business of Cloth
World and the Subsidiaries, it being understood, however, that
any material adverse change proximately resulting from either a
negligent or wrongful act or omission of Buyers or from the
disclosure of this Agreement and the transactions contemplated by
it will not permit the Buyers to refuse to complete the
transactions contemplated by this Agreement.
7.4 Due Diligence Condition. In the course of
completing its due diligence investigation, nothing has come to
the attention of Fabri-Centers that causes it reasonably to
believe, and it does in fact so believe (all as evidenced with
specificity in resolutions of Buyers' Boards of Directors
promptly delivered to Sellers), that (i) the financial and other
information disclosed to Fabri-Centers before the date of this
Agreement does not represent, in all material respects, the value
and financial performance of Cloth World and the Subsidiaries,
taken as a whole, or (ii) the value of Cloth World and the
Subsidiaries, taken as a whole, premised on information available
to Fabri-Centers after the date of this Agreement is materially
less than the value of Cloth World and the Subsidiaries premised
on information disclosed to Fabri-Centers before the date of this
Agreement.
7.5 Financing. Fabri-Centers has obtained
financing, on terms reasonably satisfactory to it, for the cash
portion of the consideration for the Acquired Assets. If this
Agreement is terminated due to the failure by Fabri-Centers to
obtain financing, Fabri-Centers will promptly (and in no event
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later than 30 days after receipt of an invoice from Sellers)
reimburse Brown Group and Cloth World for all of their document
out-of-pocket expenses (including, without limitation, the fees
and disbursements of their counsel) reasonably incurred by them
in connection with the negotiation, execution, and performance of
this Agreement or of any other Closing Document or in connection
with the due diligence conducted by Fabri-Centers.
7.6 No Injunction. No temporary restraining
order or preliminary or final injunction prohibiting the
completion of the transactions contemplated by this Agreement has
been issued (other than at the instance of Buyers) and is in
effect. No action, suit, proceeding, order, or investigation
(other than at the instance of Buyers) is pending or threatened
before any federal, state, municipal, or other court or
Governmental Entity that, if adversely determined, could have a
material adverse effect on the consolidated financial condition,
the consolidated results of operations, or the Business of Cloth
World and the Subsidiaries or could materially impair the ability
of Fabri-Centers or FCA Ohio to operate the Business from and
after the Time of Closing as presently and ordinarily conducted.
7.7 HSR Act. All applicable pre-merger
notification and waiting period requirements under the HSR Act
have been satisfied.
7.8 Other Third-Party Consents and Governmental
Approvals. All third-party consents and governmental approvals
required for the completion of the transactions contemplated by
this Agreement, other than the Store Lease Consents, have been
obtained in writing and delivered to FCA Ohio.
7.9 Documents Delivered. Brown Group has
delivered to Fabri-Centers all of the documents required under
Section 9.2.
8. CONDITIONS TO OBLIGATION OF BROWN GROUP AND CLOTH WORLD
The obligation of Brown Group and Cloth World to
complete the transactions contemplated by this Agreement is
subject to the satisfaction, in all material respects, at or
before the Time of Closing of the following conditions:
8.1 Performance of Agreements. Fabri-Centers and
FCA Ohio have performed in all material respects all obligations
to be performed by them under this Agreement at or before the
Time of Closing.
8.2 Representations and Warranties. The
representations and warranties made by Fabri-Centers and FCA Ohio
in this Agreement are true in all material respects at and as of
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the Time of Closing as though the representations and warranties
had been made at and as of the Time of Closing.
8.3 No Injunction. No temporary restraining
order or preliminary or final injunction prohibiting the
completion of the transactions contemplated by this Agreement has
been issued (other than at the instance of Sellers) and is in
effect.
8.4 HSR Act. All applicable pre-merger
notification and waiting period requirements under the HSR Act
have been satisfied.
8.5 Governmental Approvals. All governmental
approvals required for the completion of the transactions
contemplated by this Agreement have been obtained in writing and
delivered to Brown Group.
8.6 Documents Delivered. Fabri-Centers has
delivered to Brown Group all of the documents required under Sec-
tion 9.3.
9. THE CLOSING
9.1 Time and Location. The closing will take
place at Brown Group, Inc., 8300 Maryland Avenue, St. Louis,
Missouri, 63105, on October 2, 1994, or at such other place and
date as the parties may agree (the "Time of Closing").
9.2 Deliveries by Brown Group and Cloth World.
At the closing, and as conditions concurrent to the obligations
of Fabri-Centers and FCA of Ohio specified in Section 9.3 below,
Brown Group and Cloth World will deliver or cause to be delivered
to Fabri-Centers the following:
(a) Certificates, dated not more than 30
days prior to the Time of Closing, from the appropriate
authorities in the States of New York and Missouri
attesting to the existence and good standing of Brown
Group and Cloth World.
(b) Certified copies of resolutions adopted
by the Boards of Directors of Brown Group and Cloth
World approving the execution, delivery, and
performance of this Agreement by them.
(c) An officers' certificate, signed by the
Chief Executive Officer or the Chief Financial Officer
of Brown Group, certifying that the conditions in
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Sections 7.1, 7.2, 7.3, 7.6, 7.7, and 7.8 have been
satisfied.
(d) An Opinion of Brown Group's Counsel
substantially in the form of Exhibit 9.2(d).
(e) An Assignment and Assumption of Store
Lease for each of the Store Leases substantially in the
form of Exhibit 9.2(f), duly executed by Cloth World or
the Subsidiary that is a party to the Store Lease,
together with the forms of Store Lease Consents
(executed by the landlord to the extent the same has
been accomplished) referred to in Section 7.8.
(f) A General Assignment and Assumption
Agreement substantially in the form of Exhibit 9.2(g),
duly executed by Cloth World and the Subsidiaries.
(g) A General Assignment and Bill of Sale
substantially in the form of Exhibit 9.2(h), duly
executed by Cloth World and the Subsidiaries.
(h) The Escrow Agreement, duly executed by
Brown Group and Cloth World.
(i) The Transition Services Agreements, duly
executed by Brown Group.
(j) A deed for the Owned Real Property (this
deed will be the same type of deed as was given to
Cloth world when it acquired the Owned Real Property;
for example, if Cloth World was given a general
warranty deed, it will deliver a general warranty deed
to FCA Ohio).
9.3 Deliveries by Fabri-Centers. At the closing,
and as conditions concurrent to the obligations of Brown Group
and Cloth World specified in Section 9.2 above, Fabri-Centers and
FCA of Ohio will deliver or cause to be delivered to Brown Group
and Cloth World the following:
(a) Certificate, dated not more than 30 days
prior to the Time of Closing, from the appropriate
authority in the State of Ohio attesting to the
existence and good standing of Fabri-Centers and FCA
Ohio.
(b) Certified copies of resolutions adopted
by the Boards of Directors of Fabri-Centers and FCA
Ohio approving the execution, delivery, and performance
of this Agreement by them.
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(c) An officer's certificate, signed by the
Chief Executive Officer or the Chief Financial Officer
of Fabri-Centers, certifying that the conditions in
Sections 8.1 through 8.5 have been satisfied.
(d) An Opinion of Fabri-Center's Counsel
substantially in the form of Exhibit 9.3(d).
(e) The General Assignment and Assumption
Agreement, duly executed by FCA Ohio.
(f) The Escrow Agreement, duly executed by
Fabri-Centers and FCA Ohio.
(g) The Transition Services Agreements, duly
executed by Fabri-Centers.
(h) $61,000,000 by delivery of a bank check
drawn on a bank in St. Louis, Missouri, as provided in
Section 3.1(a).
Also as a condition concurrent to the obligations of Brown Group
and Cloth World specified in Section 9.2 above, FCA Ohio will at
the closing deposit $1,000,000 with the Escrow Agent, as provided
in Section 3.1(c).
9.4 Further Assurances. Each of the parties
agrees that it will, from time to time after the date of this
Agreement, execute and deliver such other documents and
instruments and take such other actions as may be reasonably
requested by the other party to carry out the transactions
contemplated by this Agreement.
10. TERMINATION
This Agreement may be terminated on or before the
Time of Closing:
(a) by the mutual written consent of Brown
Group and Fabri-Centers;
(b) by Fabri-Centers, if there has been a
material violation or breach by Brown Group or Cloth
World of any of the representations, warranties, or
covenants made by them in this Agreement that has not
been waived in writing by Fabri-Centers and has not
been or cannot be cured by Brown Group or Cloth World
at or before the Time of Closing;
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(c) by Brown Group, if there has been a
material violation or breach by Fabri-Centers or FCA
Ohio of any of the representations, warranties, or
covenants made by them in this Agreement that has not
been waived in writing by Brown Group and has not or
cannot be cured by Fabri-Centers or FCA Ohio at or
before the Time of Closing;
(d) by either party in the event the Closing
has not occurred by October 31, 1994; provided that, if
the Closing has not occurred due to a violation or
breach of the representations, warranties, or covenants
made by either of the parties in this Agreement, that
party may not terminate this Agreement under this
clause (d); or
(e) otherwise as expressly provided for
herein.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.1 Survival of Covenants, Representations,
Warranties and Indemnification. The covenants made by Brown
Group, Cloth World, Fabri-Centers, and FCA Ohio in this Agreement
will survive the Time of Closing and any investigation or inquiry
made by any of them without limitation as to time except as
otherwise provided in this Agreement. The representations and
warranties made by Brown Group, Cloth World, Fabri-Centers, and
FCA Ohio in this Agreement will also survive the Time of Closing
and any investigation or inquiry, although any claim for the
incorrectness or breach of these representations or warranties
must be brought by written Notice of Indemnification Claim in the
form attached as Exhibit 11.1 delivered to the party from whom
indemnification is sought within the following periods:
(a) With respect to the representations and
warranties in Sections 4.1, 4.2, 4.3, 5.1, and 5.2,
within a period of 3 years following the Time of
Closing.
(b) With respect to the representations and
warranties in Section 4.10, prior to the lapse of time
specified in the applicable statutes of limitation.
(c) With respect to all representations and
warranties not referred to in clauses (a) and (b) of
this Section 11.1, within a period of 18 months
following the Time of Closing.
All claims not brought by means of such written
notice delivered within such applicable period of limitations
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specified above will thereupon expire and will be forever
barred.
Indemnification undertakings will expire
concurrently with expiration of the respective covenants,
representations, or warranties on which they are based.
11.2 Indemnification by Brown Group and Cloth
World. Subject to Sections 11.1 and 11.5, Brown Group and Cloth
World will, jointly and severally, indemnify Fabri-Centers and
FCA Ohio for any claim, loss, cost, liability, or expense
(including attorneys' fees and costs of litigation) that may be
asserted against or incurred by them as a proximate result of (a)
the incorrectness of any of the representations or warranties
made by Brown Group or Cloth World in this Agreement, (b) the
breach of any of the covenants made by Brown Group or Cloth World
in this Agreement, or (c) the assertion against Fabri-Centers or
FCA Ohio of any of the Retained Liabilities.
11.3 Indemnification By Fabri-Centers and FCA
Ohio. Subject to Sections 11.1 and 11.5, Fabri-Centers and FCA
Ohio will, jointly and severally, indemnify Brown Group, Cloth
World, and the Subsidiaries for any claim, loss, cost, liability,
or expense (including attorneys' fees and costs of litigation)
that may be asserted against or incurred by Brown Group or Cloth
World as a proximate result of (a) the incorrectness of any of
the representations or warranties made by Fabri-Centers or FCA
Ohio in this Agreement, (b) the breach of any of the covenants
made by Fabri-Centers or FCA Ohio in this Agreement, (c) the
assertion against Brown Group, Cloth World, or the Subsidiaries
of any of the Assumed Liabilities or, after Sellers have paid the
Aggregate Cap for the Capped Liabilities, the assertion against
Brown Group, Cloth World, or the Subsidiaries of any of the
Capped Liabilities, (d) any damage or injury proximately
resulting from an act or omission of Buyers or their agents or
employees while on Sellers' premises in connection with any due
diligence investigation or training activity prior to the Time of
Closing.
11.4 Notice and Defense of Claims. A party (the
"Asserting Party") claiming indemnification under this Agreement,
including indemnification under Section 2.1, 3.1, 6.9, or 11 of
this Agreement, will promptly notify in writing the party from
whom indemnification is being sought (the "Indemnifying Party")
of the nature and basis of the claim for indemnification; the
failure to give any such notice will not, however, relieve the
Indemnifying Party from its obligation to provide indemnification
under this Section 11. If the claim relates to a claim or other
action by a third party against the Asserting Party or any fixed
or contingent liability to a third party (a "Third Party Claim"),
the Indemnifying Party may elect to assume the defense of the
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Third Party Claim at its own expense with counsel selected by it.
The Indemnifying Party may not, however, assume the defense if
the named partes to the Third Party Claim (including any
impleaded parties) include both the Indemnifying Party and the
Asserting Party and the representation of both parties by the
same counsel would be inappropriate due to actual or potential
differing interests between them; in any such case, the Asserting
Party will have the right to employ, at the expense of the
Indemnifying Party, counsel approved by the Indemnifying Party.
If the Indemnifying Party assumes the defense of the Third Party
Claim, the Indemnifying Party will not be liable for any fees or
expenses of counsel for the Asserting Party incurred in
connection with the Third Party Claim (except in the case of
potential differing interests, as provided in the preceding
sentence). If the Indemnifying Party does not assume the defense
of the Third Party Claim, the Asserting Party will have the right
to settle the Third Party Claim at the Indemnifying Party's
expense. The Asserting Party and the Indemnifying Party will
cooperate in the defense of any claim, action, or proceeding
covered by this Section 12. The Asserting Party will make
available to the Indemnifying Party or its representatives all
records and other materials reasonably required by the
Indemnifying Party for use in contesting any Third Party Claim.
11.5 Deductible. No action may be brought
against any party hereto on account of or in any way related to
any representation or warranty in any Closing Document (as
hereinafter defined), or for any indemnity for breach of any such
representation or warranty, unless and until the person or entity
claiming to have been injured thereby has sustained actual
damages in excess of $300,000 (the "Deductible") as a proximate
result of such party's misrepresentations or breaches of
warranty. Such action will be limited to recovery of only those
damages which exceed the Deductible. The limitation in this
Section 11.5 does not apply to any indemnification under Sections
11.2(b), 11.2(c), 11.3(b), 11.3(c) or 11.3(d).
12. COVENANT NOT TO COMPETE
For a period of five years after the Time of
Closing, Brown Group and Cloth World will not, and will cause
their affiliates not to, own or operate any retail store that
sells sewing fabrics, apparel fabric, home furnishings, notions,
patterns, craft fabric, crafts, seasonal goods, or flowers of a
type sold on the date of this Agreement at the Stores, or at
Fabri-Centers' Jo-Ann Fabrics stores, at any place within the
continental United States; except that, this Section 12 will not
prohibit Brown Group, Cloth World or any of their affiliates
from owning not more than five percent in the aggregate of the
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outstanding shares of any corporation whose shares are traded on
a national securities exchange or in the over-the-counter market.
13. MISCELLANEOUS PROVISIONS
13.1 Waiver of Compliance with Bulk Sales Laws.
The parties waive compliance with any bulk sales laws applicable
to the transactions contemplated by this Agreement.
13.2 Expenses. Except as otherwise expressly
provided in this Agreement, Brown Group will pay all fees and
expenses incurred by Brown Group, Cloth World, or any of the
subsidiaries, whether before or after the Time of Closing, in
connection with the transactions contemplated by this Agreement,
and Fabri-Centers and FCA Ohio will pay all fees and expenses
incurred by Fabri-Centers or FCA Ohio, whether before or after
the Time of Closing, in connection with the transactions
contemplated by this Agreement. Sellers will pay all sales and
use taxes and transfer fees arising out of the transfer of the
Acquired Assets to FCA Ohio, and Buyers will pay all recording
fees resulting from the recording of assignments of the Store
Leases.
13.3 Waiver and Amendment. Any provision of this
Agreement may be waived in writing by the party that is entitled
to the benefit of that provision. This Agreement may be amended
or supplemented at any time, although no such amendment or
supplement will be effective unless it is in writing and signed
by both Brown Group and Fabri-Centers.
13.4 Entire Agreement; No Rights or Remedies to
Other Persons. This Agreement, including the Schedules and
Exhibits to this Agreement, (a) constitutes the entire agreement
among the parties on its subject matter and supersedes all prior
agreements, both written and oral, and (b) is not intended to
confer any rights or remedies upon any individual or organization
other than the parties. The Confidentiality Agreement, however,
between Brown Group and Fabri-Centers dated as of May 10, 1993
(including the Addendum thereto dated August 9,1994) is hereby
confirmed, will survive execution of this Agreement and will
remain in full force and effect until the purchase price has been
paid to Sellers in full.
13.5 Assignment. Without the prior written
consent of the other parties, none of the parties may assign its
rights or delegate its obligations under this Agreement, except
that FCA Ohio may assign all of its rights under this Agreement
to another wholly owned subsidiary of Fabri-Centers.
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13.6 Governing Law. The interpretation,
validity, and enforcement of this Agreement will be governed by
the laws of the State of Missouri.
13.7 Notices. All notices and other com-
munications under this Agreement must be in writing and will be
deemed to be given (a) when delivered in person, (b) when sent by
facsimile with confirmation of receipt, (c) one day after being
sent by overnight courier, or (d) five business days after being
sent by registered or certified mail (return receipt requested),
addressed in each case as follows:
If to Fabri-Centers or FCA Ohio:
Fabri-Centers of America, Inc.
5555 Darrow Road
Hudson, Ohio 44238
Facsimile Number: (216) 656-3057
Attention: Robert Norton,
Vice Chairman of the Board
If to Brown Group or Cloth World:
Brown Group, Inc.
8300 Maryland Avenue
St. Louis, Missouri 63105
Facsimile Number: (314) 854-4205
Attention: Harry E. Rich
Executive Vice President
with copies to:
Robert D. Pickle, Esq.
Vice President, Secretary and General Counsel
Brown Group, Inc.
8300 Maryland Avenue
St. Louis, Missouri 63105
and
Edwin S. Fryer, Esq.
Bryan Cave
211 North Broadway, Ste. 3600
St. Louis, Missouri 63102-2186
Any party may change the address or facsimile
number to which notices or other communications are to be given
by furnishing the other parties with written notice of the
change.
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13.8 Headings. The headings contained in this
Agreement are for reference purposes only and are not intended to
affect the meaning or interpretation of this Agreement.
13.9 Counterparts. This Agreement may be
executed in two or more counterparts, all of which will be
considered one and the same agreement, and will become effective
when one counterpart has been signed by each of the parties and
delivered to the other parties.
13.10 Severability. The invalidity of any
provision or provisions of this Agreement will not affect the
validity of any other provisions of this Agreement, which will
remain in full force and effect.
13.11 Publicity. No press releases or other
public disclosure, either written or oral, of the transactions
contemplated by this Agreement will be made by any party without
the consent of the other parties, except as may be required by
law. If disclosure is required by law, the party seeking to make
the disclosure will consult with the other party regarding the
content and timing of the disclosure.
14. GENERAL PROVISIONS OF GLOBAL APPLICATION
THE FOLLOWING PROVISIONS ARE OF GENERAL
APPLICATION TO THE AGREEMENT AND TO THE CLOSING DOCUMENTS (AS
HEREINAFTER DEFINED) AND THEY WILL APPLY AND GOVERN ANY OTHER
TERM OR PROVISION HEREIN OR IN ANY OTHER CLOSING DOCUMENT TO THE
CONTRARY NOTWITHSTANDING:
14.1 Any and all disclosures made anywhere in
this Agreement or any other Closing Document will be considered
also to have been made in every exhibit and schedule hereto and
thereto. No schedule, exhibit or other document will be deemed
to be part of this Agreement unless the same has been
specifically referred to herein, marked as such and physically
attached hereto. There are no representations or warranties of
any kind whatsoever made herein by any party hereto except those
which are expressly set forth herein or in another Closing
Document.
14.2 Any party obligated hereunder or under any
other Closing Document to use "reasonable efforts" will be deemed
to have satisfied such obligation in full by the use of all
reasonable business efforts.
14.3 Any provision in this Agreement or in any
Closing Document that any document, act, forbearance, or
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undertaking be "satisfactory" to a party will be interpreted to
mean "reasonably satisfactory" to such party.
14.4 Each representation and/or warranty, whether
made herein or in another Closing Document, stated to have been
made "to the best knowledge" of the party making same, or words
of similar import, will be limited to mean only the actual
knowledge of the officers of Brown Group who have direct
involvement with Cloth World, Brown Group's General Counsel and
lawyers in the office of the General Counsel, officers of Cloth
World, Cloth World's store planning group, Cloth World's lease
administrators, and Jim Hankins and buyers reporting to him,
without any further inquiry or diligence on the part of such
person.
14.5 Unless the context clearly requires
otherwise, all references to this Agreement and to the Closing
Documents will include all exhibits and schedules hereto and
thereto respectively.
14.6 No representation or warranty of any party
will be deemed to have been breached because it is or may be
untrue or inaccurate on the date this Agreement is executed if,
as a result of corrective action initiated at or prior to the
Time of Closing by or on behalf of the party making such
representation or warranty, it becomes or is made true or
accurate on or before the time of Closing.
14.7 Whenever a representation or warranty
contains the word "may", "might", "could" or "would" in respect
to the future effect of an act, omission or occurrence, the same
will be deemed to mean "can reasonably be expected to".
14.8 The term "Closing Document" or "Closing
Documents" will mean and be limited to this Agreement and the
documents referred to in Sections 9.2 and 9.3.
14.9 If the subject of a representation or
warranty which is limited to a specific subject matter is also
covered by a representation or warranty of more general
application, the limitations and qualifications upon the
representation or warranty which appear in the more specific
section will also apply to the more general provision to the
extent that the more general provision covers the subject of the
specific provision.
14.10 Whenever a Closing Document provides for
the consent or approval of any party hereto, such consent or
approval will not be unreasonably withheld or delayed.
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14.11 The phrase "full force and effect" when
used in a Closing Document in relation to an agreement, lease or
other instrument or undertaking will mean and be limited to "full
force and effect in accordance with its terms."
14.12 Buyers will cooperate reasonably with
Sellers (such as, without limitation, giving Sellers'
representatives reasonable access to Buyers' premises and
employees) in respect of Sellers' obligations to minimize,
resolve and discharge the Retained Liabilities.
15. PARENT GUARANTEES
Each of Fabri-Centers and Brown Group hereby
unconditionally and irrevocably guarantees the full and timely
performance of all the obligations and responsibilities of FCA
Ohio (in the case of Fabri-Centers) and Cloth World (in the case
of Brown Group) under this Agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
BROWN GROUP, INC.
By: Harry E. Rich
Title:________________________
CLOTH WORLD, INC.
By: Harry E. Rich
Title:_________________________
FABRI-CENTERS OF AMERICA, INC.
By: R. L. North
Title:_________________________
FCA OF OHIO, INC.
By: R. L. North
Title:________________________
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INDEX OF DEFINED TERMS
Acquired Assets . . . . . . . . . . . . . . . . . . . .1
ADA . . . . . . . . . . . . . . . . . . . . . . . . . 22
Aggregate Cap . . . . . . . . . . . . . . . . . . . . 32
Asserting Party . . . . . . . . . . . . . . . . . . . 39
Assumed Liabilities . . . . . . . . . . . . . . . . . .5
Brown Group . . . . . . . . . . . . . . . . . . . . . .1
Business. . . . . . . . . . . . . . . . . . . . . . . .1
Buyers. . . . . . . . . . . . . . . . . . . . . . . . .1
Capped Liabilities. . . . . . . . . . . . . . . . . . 32
Capped Severance Obligations. . . . . . . . . . . . . 31
Cash in Registers . . . . . . . . . . . . . . . . . . .3
Closing Date Statement. . . . . . . . . . . . . . . . .8
Cloth World . . . . . . . . . . . . . . . . . . . . . .1
COBRA . . . . . . . . . . . . . . . . . . . . . . . . .7
Code. . . . . . . . . . . . . . . . . . . . . . . . . .7
Contracts . . . . . . . . . . . . . . . . . . . . . . 19
Employee Plans. . . . . . . . . . . . . . . . . . . . 20
ERISA . . . . . . . . . . . . . . . . . . . . . . . . .7
ERISA Affiliate . . . . . . . . . . . . . . . . . . . 20
Escrow Agent. . . . . . . . . . . . . . . . . . . . . .8
Executory Contracts . . . . . . . . . . . . . . . . . .2
Fabri-Centers . . . . . . . . . . . . . . . . . . . . .1
FCA Ohio. . . . . . . . . . . . . . . . . . . . . . . .1
Governmental Entity . . . . . . . . . . . . . . . . . .2
Hazardous Substances. . . . . . . . . . . . . . . . . 23
Hired Employees . . . . . . . . . . . . . . . . . . . .5
HSR Act . . . . . . . . . . . . . . . . . . . . . . . 12
Indemnifying Party. . . . . . . . . . . . . . . . . . 39
Inventory . . . . . . . . . . . . . . . . . . . . . . .2
January 1994 Balance Sheet. . . . . . . . . . . . . . .9
Net LIFO Book Value . . . . . . . . . . . . . . . . . 10
Owned Real Property . . . . . . . . . . . . . . . . . .2
Permits . . . . . . . . . . . . . . . . . . . . . . . .3
Personal Property Leases. . . . . . . . . . . . . . . .2
Proprietary Rights. . . . . . . . . . . . . . . . . . .3
Prorated Charges. . . . . . . . . . . . . . . . . . . .9
Radius Clauses. . . . . . . . . . . . . . . . . . . . 15
Real Property . . . . . . . . . . . . . . . . . . . . 15
Remediation Property. . . . . . . . . . . . . . . . . 32
Required Divestitures . . . . . . . . . . . . . . . . 30
Retained Assets . . . . . . . . . . . . . . . . . . . .4
Retained Liabilities. . . . . . . . . . . . . . . . . .6
Returns . . . . . . . . . . . . . . . . . . . . . . . 14
Sellers . . . . . . . . . . . . . . . . . . . . . . . .1
Store Lease Consents. . . . . . . . . . . . . . . . . 15
Store Lease Liabilities . . . . . . . . . . . . . . . 29
Store Leases. . . . . . . . . . . . . . . . . . . . . .2
Stores. . . . . . . . . . . . . . . . . . . . . . . . .1
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Subsidiaries. . . . . . . . . . . . . . . . . . . . . 11
Taxes . . . . . . . . . . . . . . . . . . . . . . . . .6
Taxing Authority. . . . . . . . . . . . . . . . . . . 14
Third Party Claim . . . . . . . . . . . . . . . . . . 39
Time of Closing . . . . . . . . . . . . . . . . . . . 35
Transition Services Agreements. . . . . . . . . . . . 32
Warehouse . . . . . . . . . . . . . . . . . . . . . . .2
WARN. . . . . . . . . . . . . . . . . . . . . . . . . 31
47
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LIST OF SCHEDULES & EXHIBITS
Section Description
------- -----------
1.1(a) Tangible Personal Property List
1.1(c)(i) Owned Real Property List
1.1(c)(ii) Store Lease List
1.1(d)(i) Personal Property Lease List
1.1(d)(ii) Executory Contract List
1.1(e) Security and Other Deposits List
1.1(f) Permit List
1.1(g) Proprietary Rights List
1.3(f) Retained Assets List
3.1 Allocation Schedules
3.1(b) Escrow Agreement
3.3(a) Inventory Instructions
3.3(b) Inventory Materials
4 Disclosure Schedule
9.2(d) Opinion of Brown Group's Counsel
9.2(f) Assignment and Assumption of Store Leases
9.2(g) General Assignment and Assumption Agreement
9.2(h) General Assignment and Bill of Sale
9.3(d) Opinion of Fabri-Center's Counsel
11.1 Notice of Indemnification Claim
The schedules and exhibits listed above will be
made available to the SEC Staff upon request.
48
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