FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: December 15, 1997
(Date of earliest event reported)
LEVITZ FURNITURE INCORPORATED LEVITZ FURNITURE CORPORATION
(Exact name of registrant as specified (Exact name of registrant
in its charter) as specified in its charter)
DELAWARE 33-47377-01 23-2351830
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
FLORIDA 33-47377 23-1657490
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
6111 BROKEN SOUND PARKWAY, N.W.
BOCA RATON, FLORIDA 33487-2799
(561) 994-6006
(Address including zip code, and telephone number including area code of
registrants' principal executive offices)
Item 5. Other Events.
Levitz Furniture Corporation, a Florida corporation ("LFC"),
and its wholly owned subsidiary, John M. Smyth Company, an Illinois
corporation ("JMS"), entered into an Asset Purchase Agreement (the
"Purchase Agreement"), dated as of December 15, 1997, with Heilig-Meyers
Company, a Virginia corporation ("Heilig"), pursuant to which Heilig will
purchase substantially all of the assets of JMS. LFC is a wholly owned
subsidiary of Levitz Furniture Incorporated, a Delaware corporation
("LFI"). The purchase price to be paid to JMS by Heilig will include
$23,680,000 in consideration for the transfer of certain real property and
improvements as well as additional amounts for the equipment, inventory,
accounts receivable, deposits and prepaid expenses, cash on hand and
certain customer accounts of JMS (collectively, the "JMS Assets"). Pursuant
to the Purchase Agreement, the aggregate purchase price to be paid to JMS
by Heilig, which will not be determinable until the consummation of the
transaction, is currently expected to be approximately $35 million to $40
million.
Pursuant to an order of the United States District Court for
the District of Delaware dated December 15, 1997 (the "Procedures Order"),
a copy of which is attached hereto, competing bids for the purchase of the
JMS Assets will be accepted until December 30, 1997. If qualified bids are
received, an auction of the JMS Assets will be held on January 5, 1998. A
hearing on the sale of the JMS Assets to Heilig or the successful bidder at
any auction is scheduled for January 7, 1998. Subject to (i) the approval
of the Court, (ii) the absence of a superior offer from a third party
bidder and (iii) the satisfaction or waiver of certain standard conditions
to the consummation of the transaction, including, without limitation, the
expiration or termination of the applicable waiting period under the Hart
Scott Rodino Antitrust Improvements Act of 1976, as amended, LFC and JMS
anticipate consummating the transaction during January of 1998.
The foregoing is a summary only and is qualified in its
entirety by reference to the Purchase Agreement and the Procedures Order,
copies of which are attached hereto as Exhibits to this Current Report on
Form 8-K.
Item 7. Financial Statements and Exhibits.
(a) Not Applicable
(b) Not Applicable
(c) Exhibits:
99.1 Asset Purchase Agreement, dated as of December 15, 1997, among
Heilig-Meyers Company, John M. Smyth Company and Levitz
Furniture Corporation.
99.2 Order of the United States District Court for the District
of Delaware, dated December 15, 1997, under 11
U.S.C.ss.ss.105 and 363 (i) approving bidding procedures and
termination fee in connection with the proposed sale of
substantially all of the assets of John M. Smyth Company and
John M. Smyth Realty Company and related assumption and
assignment of certain executory contracts and unexpired
leases, (ii) scheduling a hearing date on the sale of such
assets, and (iii) approving form and manner of notice
thereof.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
LEVITZ FURNITURE INCORPORATED
By: /s/ Edward P. Zimmer
_________________________
Edward P. Zimmer
Vice President
Date: December 19, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
LEVITZ FURNITURE CORPORATION
By: /s/ Edward P. Zimmer
________________________
Edward P. Zimmer
Vice President
Date: December 19, 1997
INDEX TO EXHIBITS
Exhibit
Number Exhibit
99.1 Asset Purchase Agreement, dated as of December 15, 1997, among
Heilig-Meyers Company, John M. Smyth Company and Levitz
Furniture Corporation.
99.2 Order of the United States District Court for the District of
Delaware, dated December 15, 1997, under 11 U.S.C.ss.ss.105
and 363 (i) approving bidding procedures and termination fee
in connection with the proposed sale of substantially all of
the assets of John M. Smyth Company and John M. Smyth Realty
Company and related assumption and assignment of certain
executory contracts and unexpired leases, (ii) scheduling a
hearing date on the sale of such assets, and (iii) approving
form and manner of notice thereof.
EXHIBIT 99.1
ASSET PURCHASE AGREEMENT
Among
HEILIG-MEYERS COMPANY,
JOHN M. SMYTH COMPANY
and
LEVITZ FURNITURE CORPORATION
Dated as of December 15, 1997
TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS..........................2
ARTICLE II
SALE AND PURCHASE OF ASSETS....................15
Section 2.1 Transfer of Assets........................................15
Section 2.2 Assumed Liabilities.......................................17
Section 2.3 Purchase Price............................................18
Section 2.4 Closing...................................................24
Section 2.5 Post-Closing Adjustments..................................27
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SELLER AND THE PARENT.................31
Section 3.1 Organization and Authority................................31
Section 3.2 Authority Relative
to this Agreement................................31
Section 3.3 Consents and Approvals;
No Violations....................................32
Section 3.4 No Default................................................34
Section 3.5 Compliance with Applicable Law............................34
Section 3.6 Labor Relations...........................................34
Section 3.7 Employee Benefit Plans; ERISA.............................35
Section 3.8 Material Contracts........................................36
Section 3.9 Environmental Matters.....................................37
Section 3.10 Title to Assets...........................................39
Section 3.11 Inventory.................................................39
Section 3.12 Brokers or Finders........................................40
Section 3.13 Litigation................................................40
Section 3.14 Tax Matters...............................................41
Section 3.15 No Undisclosed Liabilities................................42
Section 3.16 Financial Statements......................................42
Section 3.17 LIMITED WARRANTIES........................................43
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER........43
Section 4.1 Organization..............................................44
Section 4.2 Authority Relative to
this Agreement...................................44
Section 4.3 Consents and Approvals;
No Violations....................................45
Section 4.4 Brokers or Finders........................................46
Section 4.5 Financing.................................................46
Section 4.6 No Litigation.............................................46
Section 4.7 LIMITED WARRANTIES........................................46
ARTICLE V
COVENANTS AND OTHER AGREEMENTS...............47
Section 5.1 Conduct of the Business...................................47
Section 5.2 Access to Information;
Confidentiality..................................49
Section 5.3 Reasonable Efforts........................................50
Section 5.4 Certain Payroll Withholding
Matters..........................................52
Section 5.5 Employees.................................................53
Section 5.6 Fees and Expenses.........................................55
Section 5.7 Publicity.................................................55
Section 5.8 Submission for Court Approval.............................55
Section 5.9 Qualified Overbids........................................56
Section 5.10 Business Records..........................................56
Section 5.11 Transfer Taxes............................................57
Section 5.12 Trademarks................................................57
Section 5.13 Liquidation Agent.........................................58
Section 5.14 Adequate Assurances.......................................61
Section 5.15 Risk of Loss..............................................61
Section 5.16 Returns of Merchandise....................................62
ARTICLE VI
CONDITIONS.........................63
Section 6.1 Conditions to Each Party's
Obligations......................................63
Section 6.2 Conditions to Obligations of
the Buyer........................................65
Section 6.3 Conditions to Obligations of
the Seller and the Parent........................66
ARTICLE VII
TERMINATION AND AMENDMENT.................68
Section 7.1 Termination...............................................68
Section 7.2 Effect of Termination.....................................70
Section 7.3 Amendment.................................................71
Section 7.4 Extension; Waiver.........................................71
ARTICLE VIII
INDEMNIFICATION......................71
Section 8.1 Survival of Representations
and Warranties...................................71
Section 8.2 Seller's Indemnity........................................72
Section 8.3 Seller's and Parent's Limitation
of Liability.....................................72
Section 8.4 Buyer's Indemnity.........................................73
Section 8.5 Buyer's Limitation of Liability...........................74
Section 8.6 Procedure.................................................75
Section 8.7 Exclusive Remedy..........................................76
ARTICLE IX
MISCELLANEOUS.......................76
Section 9.1 Notices...................................................76
Section 9.2 Descriptive Headings......................................77
Section 9.3 Counterparts..............................................78
Section 9.4 Entire Agreement..........................................78
Section 9.5 Governing Law.............................................78
Section 9.6 Specific Performance......................................78
Section 9.7 Assignment................................................78
Section 9.8 Parties in Interest.......................................79
Section 9.9 Severability..............................................79
Section 9.10 Exclusive Jurisdiction....................................79
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is
entered into as of the 15th day of December, 1997, by and among
Heilig-Meyers Company, a Virginia corporation (the "Buyer"), John M.
Smyth Company, an Illinois corporation (the "Seller"), and Levitz
Furniture Corporation, a Florida corporation (the "Parent").
W I T N E S S E T H
WHEREAS, on September 5, 1997 (the "Petition Date"), each
of the Seller and the Parent filed a voluntary petition (the "Petition")
for reorganization relief pursuant to Chapter 11 of title 11 of the
United States Code, 11 U.S.C. ss. 101 et seq., as amended (the
"Bankruptcy Code"), in the United States Bankruptcy Court for the
District of Delaware, and has operated its business as a
debtor-in-possession (as defined in Bankruptcy Code Section 1101) as
authorized by Bankruptcy Code Sections 1107 and 1108 since the Petition
Date;
WHEREAS, the Chapter 11 cases of the Seller and the Parent
are being jointly administered (the "Chapter 11 Cases") and remain
pending before the United States District Court for the District of
Delaware (the "Court");
WHEREAS, the Buyer has agreed to acquire from
the Seller, and the Seller has agreed to sell to the
Buyer, the Purchased Assets (as defined below), on the
terms and subject to the conditions set forth herein;
WHEREAS, the Buyer has agreed to assume from the Seller,
and the Seller has agreed to assign to the Buyer, certain of the Seller's
liabilities, including the Seller's rights and obligations under certain
contracts, on the terms and subject to the conditions set forth herein;
and
WHEREAS, the Parent has agreed to execute this Agreement
with the Seller in order to comply with any obligations assumed herein by
the Seller where its participation is required to consummate the
transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises,
covenants, representations and warranties contained herein, and other
good and valuable consideration, the adequacy and receipt of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"Accounts Receivable" shall mean all receivables related
to merchandise sold at the Stores other than receivables subject to the
GECC Receivables Agreement.
"Accounts Receivable Consideration" shall have the meaning
ascribed to it in Section 2.3(a)(iv).
"Adjustment Amount" shall have the meaning ascribed to it in
Section 2.5(d).
"Affiliate" shall mean, with respect to any Person, any
Person which, directly or indirectly, controls, is controlled by, or is
under common control with, the specified Person and any Person that would
be deemed to be an "affiliate" or an "associate" of such Person, as those
terms are defined in Rule 12b-2 of the General Rules and Regulations of
the Securities Exchange Act of 1934, as amended; and shall also have the
meaning ascribed to the term "affiliate" by Section 101(2) of the
Bankruptcy Code.
"Aggrieved" shall have the meaning ascribed to it in Section
8.6.
"Allocation Statement" shall have the meaning ascribed to it
in Section 2.3(e)(i).
"Assumed Contracts" shall have the meaning ascribed to it in
Section 2.1(b).
"Assumed Liabilities" shall have the meaning ascribed to it
in Section 2.2(a).
"Auction" shall have the meaning ascribed to it in Section
5.9.
"Bankruptcy Code" shall have the meaning ascribed to it in
the Recitals.
"Bankruptcy Rules" shall mean the Federal Rules of
Bankruptcy Procedure.
"Benefit Plan" shall mean each compensation, stock option,
employment, severance, insurance, pension or retirement plan, program or
agreement, whether or not subject to ERISA, and whether covering one
person or more than one person, that is sponsored, maintained or
contributed to by the Seller or the Parent for the benefit of any
employee or former employee of the Seller employed in connection with the
Business.
"Business" shall mean the retail sale of furniture and
other items at the Stores as currently conducted.
"Buyer" shall have the meaning ascribed to it in the
Preamble.
"Buyer Claims" shall have the meaning ascribed to it in
Section 8.2(c).
"Buyer's Indemnities" shall have the meaning ascribed to it
in Section 8.2.
"Buyer's Liabilities" shall have the meaning ascribed to it
in Section 2.2(b).
"Buyer's Officer's Certificates" shall have the meaning
ascribed to it in Section 6.3(c).
"Cancellations Statement" shall have the meaning ascribed to
it in Section 2.3(d).
"Cash-On-Hand Consideration" shall have the meaning ascribed
to it in Section 2.3(a)(vi).
"Chapter 11 Cases" shall have the meaning ascribed to it in
the Recitals.
"Claim" shall have the meaning ascribed to it in Section
8.6.
"Closing" shall have the meaning ascribed to it in Section
2.4(a).
"Closing Date" shall have the meaning ascribed to it in
Section 2.4(a).
"COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Continuing Employee" shall have the meaning ascribed to it
in Section 5.5(a).
"Court" shall have the meaning ascribed to it in the
Recitals.
"Cutoff Time" shall mean 12:01 a.m. on the Closing Date.
"Deposit Consideration" shall have the meaning ascribed to
it in Section 2.3(a)(v).
"Earnest Money Deposit" shall have the meaning ascribed to
it in Section 2.3(b).
"Eligible Inventory" shall mean all Inventory which
consists of a quality and quantity useable and saleable in the ordinary
course of business consistent with the Seller's past practices but
excluding parts and unidentifiable, unsaleable, previously owned or
damaged Inventory.
"Environmental Claim" shall mean any claim, action or
written notice by any Governmental Entity or third party alleging
liability of the Seller arising out of, based on or resulting from (a)
the presence, or release or threatened release into the environment, of
any Hazardous Material at any of the Owned Real Property or (b)
circumstances forming the basis of any violation of any Environmental Law
at any Owned Real Property.
"Environmental Law" shall mean all applicable federal, state
and local statutes, regulations and orders relating to pollution,
protection of the environment, public health and safety or employee health
and safety, including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, 42 U.S.C. ss.ss. 9601 et
seq., Food Security Act of 1985, as amended by the Agriculture Conservation
and Trade Act of 1990, 7 U.S.C. ss. 1 and the Occupational Safety and
Health Act, 29 U.S.C. ss.ss. 654 et seq.
"Equipment" shall have the meaning ascribed to it in Section
2.1(a)(ii).
"Equipment Consideration" shall have the meaning ascribed to
it in Section 2.3(a)(ii).
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"Estimated Inventory Consideration" shall have the meaning
ascribed to it in Section 2.4(b).
"Excluded Assets" shall have the meaning ascribed to it in
Section 2.1(c).
"Excluded Liabilities" shall have the meaning ascribed to it
in Section 2.2(a).
"Final Order" shall mean the order of the Court pursuant
to Title 11 of the United States Code approving the assignment to the
Buyer of the Assumed Contracts, and the sale, assignment and transfer to
the Buyer of the Purchased Assets free and clear of all Liens except
Permitted Liens, pursuant to Sections 363 and 365 and other provisions of
the Bankruptcy Code.
"GAAP" shall mean United States generally accepted
accounting principles, consistently applied.
"GECC" shall mean General Electric Capital Corporation.
"GECC Receivable" shall mean any and all consideration to
be received from GECC by the Seller after the Closing Date pursuant to
the GECC Receivables Agreement upon the purchase by GECC from the Seller
of customer accounts which relate to sales of merchandise in the Stores
commenced prior to the Closing Date but completed, which primarily
consists of delivery to the customer after the Closing Date by the Buyer
on the behalf of the Seller.
"GECC Receivables Agreement" shall mean that certain
Second Amended and Restated Account Purchase and Credit Card Program
Agreement, dated as of September 5, 1997, by and among the Parent, the
Seller, certain subsidiaries of the Parent and GECC.
"GECC Receivable Consideration" shall have the meaning
ascribed to it in Section 2.3(a).
"Governmental Entity" shall mean any federal, state,
municipal or local court, legislature, governmental agency, commission or
regulatory authority or instrumentality.
"Gross Margin" shall mean the retail selling price of
merchandise plus delivery charges, if applicable, less Landed Cost.
"Hazardous Materials" shall mean any chemical, hazardous
or toxic substance or waste, pollutant, contaminant, petroleum product or
by-product, asbestos-containing material or polychlorinated
biphenyl-containing fluid regulated under any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indemnitor" shall have the meaning ascribed to it in
Section 8.6.
"Instruments of Assignment and Assumption" shall have the
meaning ascribed to it in Section 2.4(c).
"Inventory" shall mean all inventory on the Closing Date
located at the Stores (other than merchandise that is sold and not
delivered), at the Seller's Warehouses or in transit to the Stores from
the vendors or Seller's Warehouses and all prepaid inventory items with
scheduled delivery following the Closing Date.
"Inventory Dispute Statement" shall have the meaning
ascribed to it in Section 2.5(c).
"Inventory Period" shall have the meaning ascribed to it
in Section 2.5(a).
"Inventory Representatives" shall have the meaning
ascribed to in Section 2.5(a).
"Landed Cost" shall mean invoice cost plus freight and
excise; provided, however, that Landed Cost shall not include any amounts
for overbilling.
"Leases" shall have the meaning ascribed to it in Section
5.13(b).
"Lien" shall have the meaning ascribed to it in 11 U.S.C.
ss. 101(37), together with any security interest, mortgage, lien, charge,
claim, right, interest, violation, hypothecation, pledge, equity,
encumbrance or restriction of any kind against Seller (other than those
created by Buyer or as a result of any act of Buyer), including, but not
limited to, any restriction on the use, transfer, receipt of income or
other exercise of any attribute of ownership and any claims or liens with
respect to Taxes (including Transfer Taxes, other than Transfer Taxes in
respect of the transactions contemplated hereby).
"Liquidation Period" shall have the meaning ascribed to it
in Section 5.13(a).
"Liquidation Stores" shall have the meaning ascribed to it
in Section 5.13(a).
"Losses" shall have the meaning ascribed to it in Section
8.2.
"Marks" shall have the meaning ascribed to it in Section
5.12.
"Material Adverse Effect" shall mean any change, event or
effect (or series of related changes, events or effects) which, when
taken individually or together, has a material adverse effect on the
business, operations, assets or liabilities of the Business.
"Net Book Value" of any item shall mean the original cost
of such item less accumulated depreciation.
"Non-Eligible Inventory" shall mean all Inventory other
than Eligible Inventory.
"Owned Real Property" shall have the meaning ascribed to
it in Section 2.1(a)(i).
"Parent" shall have the meaning ascribed to it in the
Preamble.
"Permits" shall have the meaning ascribed to it in Section
3.5.
"Permitted Liens" shall mean:
(a) Liens for taxes and assessments which are not yet due
and payable;
(b) Liens to be released prior to or at the Closing; and
(c) Liens, encumbrances, defects, exceptions, easements,
rights of way, encroachments, restrictions, covenants, claims or other
similar charges set forth on Schedule A attached hereto.
"Person" shall mean any individual, group, corporation,
partnership or other organization or entity (including without limitation
any Governmental Entity).
"Petition" shall have the meaning ascribed to it in the
Recitals.
"Petition Date" shall have the meaning ascribed to it in
the Recitals.
"Procedures Order" shall mean the order of the Court
approving, among other things, certain sale and auction procedures to
apply to the Seller's sale of the Purchased Assets and assignment of the
Assumed Contracts on substantially the terms set forth in the motion,
dated December 2, 1997, seeking entry of such an order.
"Purchase Price" shall have the meaning ascribed to it in
Section 2.3(a).
"Purchased Assets" shall have the meaning ascribed to it
in Section 2.1(a).
"Qualified Overbid" shall have the meaning ascribed to it
in the Procedures Order.
"Real Property Deeds" shall have the meaning ascribed to
it in Section 2.4(c).
"Rental Payment" shall have the meaning ascribed to it in
Section 5.13(b).
"Retail Employees" shall mean all retail store employees,
but not including regional staff, customer service, warehouse and shop
personnel, employed on the Closing Date in any one of the Stores located
on the Owned Real Property.
"Retained Employees" shall mean all employees of the
Seller other than Continuing Employees.
"Reviewing Accountants" shall mean an accounting firm
selected by mutual agreement of the Buyer and the Seller for purposes of
resolving any dispute pursuant to Section 2.5(c); provided, however, that
if the Buyer and the Seller are unable to mutually agree on the Reviewing
Accountants, a "big-six" accounting firm will be selected as the
Reviewing Accountants by mutual agreement of the respective accounting
firms of the Buyer and the Seller.
"Sale" shall have the meaning ascribed to it in Section
5.13(b).
"Sale Termination Date" shall have the meaning ascribed to
it in Section 5.13(d).
"Seller" shall have the meaning ascribed to it in the
Preamble.
"Seller Claims" shall have the meaning ascribed to it in
Section 8.4(c).
"Seller Indemnities" shall have the meaning ascribed to it
in Section 8.4.
"Seller's Officer's Certificate" shall have the meaning
ascribed to it in Section 6.2(c).
"Seller's Warehouses" shall mean those certain warehouses
of the Seller located on the Owned Real Property.
"Store Operating Statements" shall have the meaning
ascribed to it in Section 3.16(a).
"Stores" shall mean the retail furniture stores listed on
Schedule 1.1 hereto.
"Successful Bidder" shall have the meaning ascribed to it
in the Procedures Order.
"Tax" or "Taxes" shall mean any and all taxes, levies or
other like assessments (including interest and penalties), including
income, transfer, gross receipts, excise, property, sales, use, payroll
and employment taxes, imposed by the United States, or any state or local
government, subdivision or agency thereof.
"Tax Return" shall mean any report or return filed with
any federal, state or local taxing authority with respect to Taxes
imposed upon or attributable to the Purchased Assets or the operations of
the Business.
"Tax Reviewing Accountants" shall have the meaning
ascribed to it in Section 2.3(e)(i).
"Termination Fee" shall have the meaning ascribed to it in
Section 7.2(b).
"Trademark License Agreement" shall have the meaning
ascribed to it in Section 5.12.
"Transfer Taxes" shall have the meaning ascribed to it in
Section 2.3(c)(v).
"WARN Act" shall mean the federal Worker Adjustment and
Retraining Notification Act.
ARTICLE II
SALE AND PURCHASE OF ASSETS
Section 2.1 Transfer of Assets.
(a) On the terms and subject to the conditions of this
Agreement, on the Closing Date, the Seller shall sell and assign to the
Buyer, and the Buyer shall purchase and accept from the Seller, all of
the Seller's right, title and interest in and to those certain assets set
forth below (collectively, the "Purchased Assets"):
(i) the fee interests in real property listed in
Schedule 2.1(a)(i) hereto and all improvements thereon and all
appurtenances thereto (the "Owned Real Property");
(ii) all fixtures, furniture (other than Inventory) and
vehicles located on the Closing Date in the Stores or at the Seller's
Warehouses (the "Equipment");
(iii) all Inventory;
(iv) all merchandise located at the Stores that is sold
and not delivered at the time of the Closing other than such merchandise
that relates to a customer account to be sold to GECC pursuant to the
GECC Receivables Agreement;
(v) all bills of lading, trust, receipts, warehouse
receipts and other documents of title of whatever kind and description
relating to the Inventory;
(vi) all Accounts Receivable;
(vii) to the extent transferable, all Permits set forth
on Schedule 2.1(a)(vii) hereto;
(viii) all purchase contracts and orders for Inventory;
(ix) the deposits and prepaid expenses of the Seller
relating to the utilities and other services set forth on Schedule
2.1(a)(ix) hereto;
(x) all cash on hand in the Stores on the Closing Date;
and
(xi) the GECC Receivable.
(b) On the terms and subject to the conditions
of this Agreement, and pursuant to Section 365 of the Bankruptcy Code,
the Seller shall assume and assign to the Buyer, and the Buyer shall
accept the assignment of and assume, all of the Seller's right, title,
interest in and obligations under the contracts set forth on Schedule
2.1(b) hereto (the "Assumed Contracts").
(c) The Buyer is not acquiring, and the Seller
shall retain, all right, title and interest in and to any
property, assets or rights not expressly identified as Purchased Assets
in Section 2.1(a) or Assumed Contracts in Section 2.1(b), including,
without limitation, (i) all of the Seller's cash (other than cash on hand
in the Stores on the Closing Date), bank deposits, accounts, investments
and funds, (ii) all of the Seller's claims, demands and causes of action
against third parties, (iii) all leases and contracts not included in
Assumed Contracts and (iv) all insurance policies of the Seller
(collectively, the "Excluded Assets").
Section 2.2 Assumed Liabilities.
(a) The Buyer shall assume (i) all obligations
and liabilities arising under the Assumed Contracts, (ii) all obligations
and liabilities arising from customer deposits and open purchase orders
and (iii) such other obligations as set forth on Schedule 2.2(a)
(collectively, the "Assumed Liabilities"). The Buyer shall not assume,
and shall be deemed not to have assumed, any liabilities or obligations
of the Seller, except for the Assumed Liabilities (the "Excluded
Liabilities").
(b) The Seller shall not assume or remain liable for any
liabilities or obligations to third parties of the Buyer arising from or
relating to the ownership of or operation of the Purchased Assets or the
businesses of the Buyer from and after the Closing (the
"Buyer's Liabilities").
Section 2.3 Purchase Price.
(a) In consideration for the sale and transfer of the
Purchased Assets, the Buyer shall assume the Assumed Liabilities, and the
Buyer shall pay the Seller the following amounts, as adjusted pursuant to
Sections 2.3(b) and 2.5 hereof (the "Purchase Price"):
(i) $23,680,000;
(ii) an amount in cash equal to the Net Book Value of
all Equipment (the "Equipment Consideration");
(iii) an amount in cash equal to the Estimated
Inventory Consideration;
(iv) an amount in cash equal to the face value of the
Accounts Receivable less customer deposits on merchandise (the "Accounts
Receivable Consideration");
(v) an amount in cash equal to the amount of the
deposits (including, without limitation, any deposits made by the Seller
under telephone or telex contracts or contracts for the supply of heat,
steam, electric power, gas, lighting or any other utility service for the
Owned Real Property) and prepaid expenses of the Seller relating to the
utilities and other services set forth on Schedule 2.1(a)(ix) hereto (the
"Deposit Consideration");
(vi) an amount in cash equal to the amount of cash on
hand in the Stores on the Closing Date (the "Cash-On-Hand
Consideration"); and
(vii) an amount in cash equal to the face value of the
customer accounts to be purchased by GECC pursuant to the GECC
Receivables Agreement (the "GECC Receivable Consideration").
(b) Two million dollars ($2,000,000) (the "Earnest Money
Deposit") shall be paid by the Buyer to the Seller as a deposit toward
the purchase price by a transfer of immediately available funds
contemporaneously with the execution and delivery of this Agreement by
the Buyer.
(c) The Purchase Price shall be adjusted as follows:
(i) The following matters and items pertaining to the
Purchased Assets shall be apportioned between the Seller and the Buyer
or, where applicable, credited in total to a particular party, as of the
Cutoff Time. To the extent known at the Closing, net credits in favor of
the Buyer shall be deducted from the balance of the Purchase Price at the
Closing and net credits in favor of the Seller shall be paid in cash at
the Closing. Unless otherwise indicated below, the Buyer shall receive a
credit for any of the following items to the extent the same are accrued
but unpaid as of the Cutoff Time (whether or not due, owing or delinquent
as of the Cutoff Time), and the Seller shall receive a credit to the
extent any of the following items shall have been paid prior to the
Closing Date to the extent the payment thereof relates to any period of
time after the Cutoff Time.
(ii) All ad valorem taxes, special or general
assessments, real property taxes, personal property taxes, water or sewer
rents, rates and charges, vault charges, utility charges (including
charges for fuel, gas and telephone) and any governmental permit fees
with respect to permits transferable to the Buyer shall be prorated
between the Buyer and the Seller. The Seller shall be responsible for the
portion of such amounts that is attributable to periods before the
Closing Date, and the Buyer shall be responsible for the portion of such
amounts that is attributable to periods on or after the Closing Date.
With respect to real estate taxes for 1997, the credit therefor shall be
based on the 1996 tax bill and adjusted and reprorated between the
parties when the 1997 tax bill is known. With respect to the applicable
portion of the real estate taxes for 1998, the credit therefor shall be
equal to the pro rata portion of the 1996 tax bill plus five percent
(5%).
(iii) The Seller shall be responsible for the payment
of all sales taxes or other similar taxes, if any, payable or accrued
until the Cutoff Time and the Buyer shall be responsible for the payment
of all sales taxes or other similar taxes payable or accrued after the
Cutoff Time. The Seller shall be entitled to receive any rebates or
refunds with respect to any such taxes paid by the Seller.
(iv) The Buyer shall be responsible for the payment of
any and all amounts which accrue after the Closing Date under the
Seller's telephone and telex contracts and contracts for the supply of
heat, steam, electric power, gas, lighting and any other utility service.
(v) All excise, sales, use, transfer (including real
property transfer or gains), stamp, documentary, filing, recordation and
other similar taxes together with any interest in respect of such
additions or penalties ("Transfer Taxes") resulting from the transactions
effected pursuant to this Agreement, if any, shall be borne in equal part
by the Buyer and the Seller. The Seller shall pay the costs of clearing
title to the Owned Real Property so that it is conveyed in the condition
required by this Agreement. The Buyer shall pay the premium for any title
policy relating to the Owned Real Property and cost of any survey
relating to the Owned Real Property. Except as noted above with respect
to clearing title, the Buyer shall pay all recording fees incurred in
connection with the recordation of the transfer of the Owned Real
Property.
(d) The Seller shall reimburse the Buyer for the Gross
Margins from all cancellations of merchandise that is sold but not
delivered at the time of the Closing of which the Buyer verifies and
notifies the Seller in writing within 45 days after the Closing (the
"Cancellations Statement"). The Buyer and the Seller agree to negotiate
in good faith to resolve any dispute relating to the Cancellations
Statement. If any such dispute is not resolved by the parties and their
respective independent accountants within ten (10) business days after
delivery of the Cancellations Statement, such dispute will be resolved by
the Reviewing Accountants as promptly as practicable, and such resolution
will be conclusive and binding on the parties in the manner and to the
same effect as a binding arbitration award. The expenses of the Reviewing
Accountants shall be paid one-half by each of the Seller and the Buyer.
(e) The Purchase Price and the Assumed Liabilities (plus
other relevant items) shall be allocated as follows:
(i) The Seller and the Buyer agree that the Purchase
Price and the Assumed Liabilities (plus other relevant items) will be
allocated to the Purchased Assets for Tax purposes based on the fair
market value of all such assets. As soon as practicable, the Seller and
the Buyer shall use reasonable efforts to agree upon an allocation
statement (the "Allocation Statement") setting forth the allocation of
the Purchase Price (plus other relevant items) to the Purchased Assets.
If the Seller and the Buyer do not reach a final resolution of the
Allocation Statement within sixty (60) days after the Closing, any
remaining disputes shall be resolved by an accounting firm of national
reputation selected by the Seller and the Buyer (the "Tax Reviewing
Accountants"), who shall be instructed to resolve any matters in dispute
as promptly as practicable. The determination of the Tax Reviewing
Accountants shall be final and binding. Upon the final determination of
the Allocation Statement, the parties hereto shall sign such Allocation
Statement. The Seller and the Buyer shall each pay one-half of the fees
and expenses of the Tax Reviewing Accountants.
(ii) The Allocation Statement shall be revised from
time to time jointly by the parties hereto to reflect any adjustment of
the Purchase Price pursuant to this Agreement or for Tax purposes.
(iii) The Seller and the Buyer shall treat the
acquisition of the Purchased Assets as a single "applicable asset
acquisition" under Section 1060 of the Code. The Buyer shall prepare, as
appropriate, one or more Form or Forms 8594 under Section 1060 of the
Code relating to the transactions contemplated by this Agreement based on
the Allocation Statement. The Seller and the Buyer shall file, or cause
the filing of, such Form or Forms with each relevant taxing authority.
(iv) The Seller and the Buyer shall file and cause to
be filed all Tax Returns, and execute such other documents as may be
required by any Tax authority, in a manner consistent with the Allocation
Statement as revised from time to time and shall refrain from taking any
position inconsistent with the Allocation Statement, as revised from time
to time with any taxing authority.
Section 2.4 Closing.
(a) Upon the terms and subject to the conditions of this
Agreement, the consummation of the transactions contemplated by this
Agreement (the "Closing") will take place on the second business day
following satisfaction (or waiver, if permissible) of the conditions set
forth in Article VI hereof, at 10:00 a.m., at the offices of Skadden,
Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York, or
at such other time and place as shall be mutually agreed upon by the
parties. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date."
(b) One day prior to the Closing Date, (i) the Seller
shall deliver to the Buyer a statement, certified by the Chief Accounting
Officer of the Seller, setting forth the amount of the Equipment
Consideration, the Accounts Receivable Consideration, the Deposit
Consideration, the Cash-On-Hand Consideration, the GECC Receivable
Consideration and the Rental Payment, and (ii) the Seller and the Buyer
shall agree on a good faith estimate of the amount of Inventory, valued
at (A) for Eligible Inventory, the Landed Cost of such Inventory, and (B)
for Non-Eligible Inventory, one-half of the Landed Cost of such Inventory
((A) and (B) together, the "Estimated Inventory Consideration").
(c) At the Closing, the Seller shall deliver to the Buyer
or its assignee(s) or designee(s) the following: (i) a duly executed
limited or special warranty deed (which deed shall include a covenant
against grantor's acts) conveying good and marketable fee simple title
for each tract or parcel of the Owned Real Property, together with all
improvements thereon and all appurtenances thereto, subject only to
Permitted Liens, in substantially the form of Exhibit A hereto (the "Real
Property Deeds"); (ii) duly executed instruments of assignment and
assumption of the Assumed Contracts substantially in the form of Exhibit
B hereto ("Instruments of Assignment and Assumption"); (iii) duly
executed bills of sale and assignment to the Buyer in substantially the
form of Exhibit C hereto for the Purchased Assets; (iv) the Seller's
Officer's Certificate; (v) all books, records and other data of the
Seller related to the Purchased Assets and the Seller's operation thereof
as contemplated by Section 5.11 hereof; (vi) the Trademark License
Agreement; and (vii) such other instruments and documents as are required
by any other provision in this Agreement or are necessary or appropriate
to convey title to any of the Purchased Assets or as may be reasonably
required by Buyer's title company.
(d) At the Closing, the Buyer shall deliver to the Seller
the following: (i) in immediately available funds by wire transfer to an
account or accounts at a United States bank or banks as specified in
writing by the Seller at least one business day prior to the Closing,
$23,680,000 plus (A) the sum of (1) the Equipment Consideration, (2) the
Accounts Receivable Consideration, (3) the Estimated Inventory
Consideration, (4) the Deposit Consideration, (5) the GECC Receivable
Consideration and (6) the Cash-On-Hand Consideration, plus (B) the amount
of the Rental Payment, minus (C) the Earnest Money Deposit; (ii) duly
executed Instruments of Assignment and Assumption; (iii) the Buyer's
Officer's Certificate; (iv) the Trademark License Agreement; and (v) such
other documents and instruments as reasonably are required to evidence
the assumption of the Assumed Liabilities.
Section 2.5 Post-Closing Adjustments.
(a) During the period commencing on the first business day
following the Auction and ending not later than the Closing Date (the
"Inventory Period"), the Seller and the Buyer shall cause a physical
count of the Inventory to be conducted. During the Inventory Period, to
the extent reasonably necessary to expedite the completion of the count,
the Stores shall be closed to the public and shall not transact business.
The count shall be conducted by representatives of the Buyer and the
Seller (the "Inventory Representatives") and shall be conducted in
accordance with the Seller's normal inventory procedures. The Buyer and
the Seller shall share equally the costs incurred in connection with such
count of the Inventory.
(b) Upon completing the physical count of the Inventory,
and subject to the resolution of disputes as hereinafter provided, the
count by the Inventory Representatives shall be final and binding on the
parties for all purposes of this Agreement. Any disputes as to the
condition or exclusion of Inventory as Eligible Inventory shall be
resolved as follows: The Inventory Representatives shall use their
reasonable best efforts to immediately agree on whether an item is
Eligible Inventory. If the parties are still unable to reach such
agreement, such items shall be included in Eligible Inventory for
purposes of calculating the payments required to be made by the Buyer at
the Closing pursuant to Section 2.4(d); provided, however, that the
payment made with respect to any such disputed items of Inventory shall
remain subject to adjustment as provided in Section 2.5(c).
(c) On the Closing Date, the Buyer shall deliver to the
Seller a written statement (the "Inventory Dispute Statement") describing
all items, if any, that it contends should not included as Eligible
Inventory. The parties agree to review such items and to use their
reasonable best efforts to negotiate in good faith an agreement as to the
status of such items as Eligible Inventory. To the extent that the
parties cannot reach agreement as to the status of an item of Inventory
as Eligible Inventory or Non-Eligible Inventory, such disputes shall be
decided by negotiations among senior management of the Buyer and the
Seller. If the parties are unable to agree on the status of one or more
such items of Inventory within ten (10) days after the Closing Date, the
parties shall submit their dispute for final resolution to a panel of
three (3) arbitrators to be selected as follows: each of the Seller and
the Buyer shall select one (1) American Arbitration Association approved
arbitrator and the Seller's designee and the Buyer's designee together
shall select a third American Arbitration Association approved arbitrator
mutually agreeable to such designees.
(d) Within ten (10) days after the final determination of
the disputes set forth on the Inventory Dispute Statement, whether by
mutual agreement or upon notice of determination by the Court, the Seller
shall pay the Buyer the Adjustment Amount (as defined below) as a
post-petition administrative expense due and payable as an ordinary
course expense of the Seller. The "Adjustment Amount" shall mean the
difference of the Inventory Value less the Estimated Inventory
Consideration.
(e) With respect to any sale of merchandise financed by
GECC, upon delivery to the customer of any such merchandise, the Buyer
shall promptly forward to the Seller satisfactory documentation of
delivery and the Seller shall promptly forward such documentation to
GECC. Within fifteen (15) days of receipt by the Seller of payment from
GECC for any customer account related to such sales, the Seller shall
remit to the Buyer the amount of any payment so received as a
post-petition administrative expense due and payable by the Seller as an
ordinary course expense of the Seller.
(f) In the event that GECC refuses to consummate the
purchase of any customer account of the Seller which is subject to the
GECC Receivables Agreement, the Seller shall, within fifteen (15)
business days of notice from GECC of such refusal, (i) reimburse the
Buyer for the portion of the GECC Receivable to which such customer
account relates less the Landed Cost of the Inventory in cases where the
Buyer is in possession of the merchandise related to such customer
account, and (ii) reimburse the Buyer for the portion of the GECC
Receivable to which such customer account relates in cases where the
Buyer has not received possession of the merchandise related to such
customer account.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SELLER AND THE PARENT
The Seller and the Parent represent and warrant to the
Buyer as follows:
Section 3.1 Organization and Authority. Each of the Seller
and the Parent is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation. Each
of the Seller and the Parent has heretofore made available to the Buyer
complete and correct copies of its articles of incorporation and by-laws,
as currently in effect. Each of the Seller and the Parent, as a
debtor-in-possession under Chapter 11 of the Bankruptcy Code, has all
requisite power and authority to carry on and conduct its business as it
is now being conducted and to own or lease its properties and assets, and
is duly qualified to do business and is in good standing as a foreign
corporation in all of the jurisdictions in which such qualification is
necessary, except where the failure to be so qualified or be in good
standing would not have a Material Adverse Effect.
Section 3.2 Authority Relative to this Agreement. Subject
to the entry of the Procedures Order and the Final Order by the Court,
each of the Seller and the Parent has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. Subject to the entry of the Procedures Order and the
Final Order, the execution and delivery of this Agreement by each of the
Seller and the Parent and the consummation by each of the Seller and the
Parent of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of each of the Seller and the
Parent, and no other corporate proceedings on the part of any member of
either the Seller or the Parent, or their respective Boards, are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed
and delivered by each of the Seller and the Parent and, subject to the
entry of the Final Order, constitutes a valid and binding obligation of
each of the Seller and the Parent, enforceable against each of the Seller
and the Parent in accordance with its terms, except that such
enforceability is subject to and limited by the effect of bankruptcy,
insolvency, reorganization, arrangement and moratorium laws, laws
relating to fraudulent transfers or conveyances and general principles of
equity (whether asserted in an action at law or in equity).
Section 3.3 Consents and Approvals; No Violations. Except
for the applicable requirements, if any, of the HSR Act and the WARN Act,
and subject to the entry of the Procedures Order and the Final Order by
the Court, no filing with, and no permit, authorization, consent or
approval of any Governmental Entity, is necessary for the consummation by
the Seller of the transactions contemplated by this Agreement. Subject to
the entry of the Procedures Order and the Final Order by the Court, and
the receipt by the Seller of the consent of the lenders under the
Seller's $260,000,000 Postpetition Credit Agreement, dated as of
September 5, 1997, neither the execution and delivery of this Agreement
by each of the Seller and the Parent nor the consummation by each of the
Seller and the Parent of the transactions contemplated by this Agreement
will (i) conflict with or result in any breach of any provision of the
respective articles of incorporation or by-laws of each of the Seller and
the Parent, (ii) result in a violation or breach of, or constitute (with
or without due notice or lapse of time, or both) a default (or give rise
to any right of termination, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, contract, Permit, lease
or other agreement to which the Purchased Assets may be subject or (iii)
violate any order, statute or regulation applicable to the Seller, the
Parent or the Purchased Assets, except in the case of clause (ii) or
(iii) for violations, breaches or defaults which could not reasonably be
expected to have a Material Adverse Effect.
Section 3.4 No Default. To the knowledge of the Seller and
the Parent, as of the Closing the Seller will not be, in any material
respects, in default (except for defaults of the type referred to in
Section 365(b)(2) of the Bankruptcy Code) or violation (and no event will
have occurred which with notice or lapse of time would constitute a
default or violation) of any term, condition or provision of (i) any
Assumed Contract or which would give rise to a right to terminate any
such Assumed Contract, or (ii) any order, injunction or decree applicable
to the Business or the Purchased Assets.
Section 3.5 Compliance with Applicable Law. The Seller
holds all material permits, licenses, approvals and authorizations of all
applicable Governmental Entities necessary for the lawful conduct of the
Business (the "Permits"). The Business is being conducted in all material
respects in compliance with all Permits, orders, injunctions, decrees and
applicable laws, rules and regulations of any Governmental Entity having
jurisdiction over the Purchased Assets.
Section 3.6 Labor Relations. Except as set forth in
Schedule 3.6 hereto, (i) there is no unfair labor practice charge or
complaint, grievance or arbitration under any collective bargaining
agreement, discrimination or equal employment opportunity charge or
complaint, or other complaint or lawsuit or administrative proceeding
pending, or, to the knowledge of the Seller and the Parent, threatened in
writing by or on behalf of any employee of the Business, (ii) since
January 1, 1996, there has been no labor strike, lockout, slowdown or
stoppage, nor, to the knowledge of the Seller and the Parent, is any such
action presently threatened in writing against or affecting the Business,
and (iii) within the last three years there are no citations,
investigations, administrative proceedings or formal complaints of
violations of local, state or federal occupational safety and health laws
pending before the Occupational Safety and Health Review Commission or
any federal, state or local agency or court against the Business of which
the Seller or Parent has received notice.
Section 3.7 Employee Benefit Plans; ERISA.
(a) Schedule 3.7 hereto sets forth a list of all Benefit
Plans. Except as set forth on Schedule 3.7 hereto, each such Benefit Plan
complies, in all material respects, in form and in operation with the
applicable requirements of ERISA, the Code and other applicable laws.
Neither the Seller nor the Parent has incurred any liability to the
Pension Benefit Guaranty Corporation under applicable provisions of ERISA
with respect to any of the Benefit Plans, or any withdrawal liability
under Title IV of ERISA with respect to any of the Benefit Plans that are
multi-employer plans, except as set forth on Schedule 3.7 hereto. Except
as set forth on Schedule 3.7 hereto, the consummation of the transactions
contemplated by this Agreement will not entitle any current or former
employee or officer of the Business to severance pay, unemployment
compensation or any other payment from the Buyer, except as expressly
provided in this Agreement and except to the extent that unemployment or
similar compensation may become payable under applicable law to a
Continuing Employee who is terminated following the Closing Date.
Section 3.8 Material Contracts.
(a) Schedule 3.8(a) hereto sets forth a complete list of:
(i) each collective bargaining or union contract applicable to any
Continuing Employee; (ii) each employment or severance contract
applicable to any Continuing Employee; (iii) agreements relating to the
Business or the Purchased Assets involving $50,000 or more in payments or
revenues within the 12-month period commencing on the Closing Date, other
than purchase orders made in the ordinary course of business; and (iv)
other contracts that are material to the Business or the Purchased
Assets.
(b) The Seller has made available to the Buyer true and
complete copies of each agreement set forth in Schedule 3.8(a) hereto. At
the Closing, all Assumed Contracts will be in full force and effect. At
the Closing, there will not exist under any Assumed Contract any event of
default (except for breaches and defaults of the type referred to in
Section 365(b)(2) of the Bankruptcy Code) or event (other than the
transactions contemplated by this Agreement) or condition that, after
notice or lapse of time or both, would constitute a violation, breach or
event of default thereunder on the part of the Seller and except for such
events or conditions that, individually or in the aggregate, (i) would
not reasonably be expected to affect the conduct of the Business in any
material respect and (ii) will not materially impair the ability of the
Seller to perform its obligations hereunder.
Section 3.9 Environmental Matters. All references to the
Seller in this Section 3.9 refer only to the Seller's ownership and
operation of the Business on or at the Owned Real Property, including any
off-site waste disposal related to the Owned Real Property, and not to
the Seller's activities unrelated to the Business or conducted other than
on or at the Owned Real Property.
(a) The Seller is, in all material respects, in compliance
with applicable Environmental Laws, including the possession by the
Seller of all Permits required under applicable Environmental Laws. All
material Permits currently held by the Seller pursuant to Environmental
Laws are identified in Schedule 3.9(a) hereto.
(b) There is no Environmental Claim pending or, to the
knowledge of the Seller and the Parent, threatened against the Seller
with respect to ownership or operation of the Business at the Owned Real
Property, including any off-site waste disposal related to the Owned Real
Property.
(c) There are no judgments, orders or decrees of
Governmental Entities that relate to violations of Environmental Law with
respect to the Business or the Owned Real Property.
(d) To the knowledge of the Seller and the Parent, there
are no underground storage tanks located on the Owned Real Property.
(e) To the knowledge of the Seller and the Parent, no
Hazardous Material has been released at, on, about or under any Owned
Real Property by the Seller, or by any third party or predecessor to the
Seller, which would have a Material Adverse Effect.
(f) No properties or facilities owned or leased by the
Seller contain, to the knowledge of the Seller and the Parent, (i) any
friable structural asbestos which is damaged and, in its present
condition, is reasonably likely to pose an unreasonable risk of harm to
employees or the general public and (ii) any PCB or PCB-contaminated
electrical equipment.
(g) Except as heretofore made available to the Buyer,
since January 1, 1996, there have been no environmental inspections,
investigations, audits or tests conducted in relation to any of the Owned
Real Property or Purchased Assets, the reports of which are in the
possession or control of the Seller.
Section 3.10 Title to Assets. At the Closing the Seller
shall have, and shall deliver to the Buyer, good title to all of the
Purchased Assets constituting personal property, free and clear of all
Liens, and good, marketable fee simple title to the Owned Real Property,
free and clear of all Liens, other than Permitted Liens.
Section 3.11 Inventory. Except as set forth on Schedule
3.11 hereto: (i) all of the Eligible Inventory consists of a quality and
quantity useable and saleable in the ordinary course of business
consistent with past practice; (ii) all Eligible Inventory has been
priced at the lower of landed FIFO cost or market; and (iii) the
quantities of each type of Eligible Inventory are reasonable and
warranted in the present and anticipated circumstances of the Seller
based on the Seller's past practices and status as a debtor-in-possession
under Chapter 11 of the Bankruptcy Code.
Section 3.12 Brokers or Finders. None of the Seller, the
Parent or any of their Affiliates has retained any agent, broker,
investment banker, financial advisor or other firm or person that is or
will be entitled to any broker's or finder's fee or any other commission
or similar fee in connection with any of the transactions contemplated by
this Agreement.
Section 3.13 Litigation. Except for the Chapter 11 Cases
and those matters set forth on Schedule 3.13 hereto, as of the date
hereof, there are no actions, suits, proceedings or, to the knowledge of
the Seller and the Parent, investigations relating to the Business or the
Purchased Assets pending, or, to the knowledge of the Seller or the
Parent, threatened by or before any Governmental Entity and there are not
any orders, injunctions, judgments or decrees outstanding against the
Business or any of the Purchased Assets except in all cases where such
action, suit, proceeding, investigation, order, injunction, judgment or
decree would not have a Material Adverse Effect.
Section 3.14 Tax Matters.
(a) All Tax Returns that the Seller was required to file
with respect to the Business for periods ending prior to the date hereof
have been filed. All such Tax Returns were correct and complete in all
material respects. Taxes shown as owed by the Seller on any material Tax
Return have been paid. The Seller is not the beneficiary of any extension
of time within which to file any material Tax Return. There are no Liens
on any of the Purchased Assets of the Seller that arose in connection
with any failure (or alleged failure) to pay any Tax.
(b) Except as set forth on Schedule 3.14(b) hereto, there
is no dispute or claim concerning any liability for Taxes of the Seller
either (A) claimed or raised by any authority in writing or (B) as to
which any of the stockholders, directors and officers (and employees
responsible for Tax matters) of the Seller has knowledge based upon
personal contact with any agent of such authority.
(c) The Seller has not waived any statute of limitations
in respect of material Taxes or agreed to any extension of time with
respect to an assessment or deficiency with respect to material Taxes.
Section 3.15 No Undisclosed Liabilities. Upon the Closing,
there shall be no material liabilities or obligations of any kind of the
Seller affecting the Purchased Assets or the Business, except for the
Assumed Liabilities or obligations (a) disclosed by the Seller herein,
(b) covered by insurance, indemnification, contribution or comparable
arrangements, (c) reflected in the Store Operating Statements, or (d)
that were incurred in the ordinary course of business after the date of
the Store Operating Statements.
Section 3.16 Financial Statements.
(a) The Seller has furnished the Buyer with the unaudited
operating statements for each of the Stores for the period April 1, 1997
through November 30, 1997 (the "Store Operating Statements"), and the
Store Operating Statements present fairly in all material respects the
results of the operations of each Owned Store as of the dates indicated
thereon and have been prepared on a basis consistent with the Seller's
historical internal monthly operating reports for its retail furniture
stores.
(b) Since the date of the Store Operating Statements, the
Seller has operated its Business and the Purchased Assets only in the
ordinary course of business, consistent with the Seller's status as a
debtor-in-possession since the Petition Date.
Section 3.17 LIMITED WARRANTIES. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE III OR
THE REAL PROPERTY DEEDS WITH RESPECT TO THE OWNED REAL PROPERTY, THE
SELLER AND THE PARENT HAVE NOT MADE AND DO NOT HEREBY MAKE ANY EXPRESS OR
IMPLIED REPRESENTATIONS AND WARRANTIES, STATUTORY OR OTHERWISE, OF ANY
NATURE, INCLUDING WITH RESPECT TO ANY EXPRESS OR IMPLIED REPRESENTATION
OR WARRANTY AS TO THE MERCHANTABILITY, QUALITY, QUANTITY, SUITABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE OF THE PURCHASED ASSETS. EXCEPT FOR
THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE
III OR THE REAL PROPERTY DEEDS WITH RESPECT TO THE OWNED REAL PROPERTY,
ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, OF ANY
NATURE, INCLUDING WITH RESPECT TO THE MERCHANTABILITY, QUALITY, QUANTITY,
SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF THE PURCHASED ASSETS
ARE HEREBY DISCLAIMED BY THE SELLER AND PARENT.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller and the
Parent as follows:
Section 4.1 Organization. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Virginia. The Buyer has heretofore made available to the Seller
and the Parent complete and correct copies of its articles of
incorporation and by-laws, as currently in effect.
Section 4.2 Authority Relative to this Agreement. Subject
to the entry of the Procedures Order and the Final Order, the Buyer has
full corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Buyer and the consummation by the Buyer
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of the Buyer and no other corporate
proceeding on the part of the Buyer is necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Buyer
and constitutes a valid and binding obligation of the Buyer, enforceable
against the Buyer in accordance with its terms, except that such
enforceability is subject to and limited by the effect of bankruptcy,
insolvency, reorganization, arrangement and moratorium laws, laws
relating to fraudulent transfers or conveyances and general principles of
equity (whether asserted in an action at law or in equity).
Section 4.3 Consents and Approvals; No Violations. Except
for the applicable requirements, if any, of the HSR Act and the WARN Act,
no filing with, and no permit, authorization, consent or approval of any
Governmental Entity is necessary for the consummation by the Buyer of the
transactions contemplated by this Agreement. Neither the execution and
delivery of this Agreement by the Buyer nor the consummation by it of the
transactions contemplated by this Agreement will (i) conflict with or
result in any breach of any provision of the Articles of Incorporation or
By-laws of the Buyer, (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any
note, contract, Permit, lease or other agreement to which the Buyer is a
party or by which the Buyer or any of its properties or assets may be
bound or (iii) violate any order, statute or regulation applicable to the
Buyer, except in the case of clause (ii) or (iii) for violations,
breaches or defaults which would not, in the aggregate, prevent or delay
the consummation of the transactions contemplated by this Agreement.
Section 4.4 Brokers or Finders. Neither the Buyer nor any
of its Affiliates has retained any agent, broker, investment banker,
financial advisor or other firm or person that is or will be entitled to
any broker's or finder's fee or any other commission or similar fee in
connection with any of the transactions contemplated by this Agreement.
Section 4.5 Financing. The Buyer has sufficient
unrestricted funds on hand or committed lines of credit to consummate the
transactions contemplated by this Agreement.
Section 4.6 No Litigation. As of the date hereof, there
are no actions, suits, proceedings or, to the knowledge of Buyer,
investigations relating to the Buyer pending or, to the knowledge of the
Buyer, threatened by or before any Governmental Entity and there are not
any orders, injunctions, judgments or decrees that (i) call into question
the authority or right of the Buyer to enter into this Agreement and
consummate the transactions contemplated hereby, or (ii) would otherwise
prevent or delay the transactions contemplated by this Agreement.
Section 4.7 LIMITED WARRANTIES. EXCEPT AS EXPRESSLY
PROVIDED IN THIS ARTICLE IV, THE BUYER HAS NOT MADE AND DOES NOT HEREBY
MAKE ANY EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES OF ANY NATURE.
ARTICLE V
COVENANTS AND OTHER AGREEMENTS
Section 5.1 Conduct of the Business. From and after the
date hereof until the Closing Date, and unless the Buyer shall otherwise
consent or agree in writing, the Seller and the Parent covenant that:
(a) Except as contemplated by this Agreement or required
by the Bankruptcy Code or order of the Court, the Seller shall not make
any material change in the physical condition of any Store located on
Owned Real Property, except as set forth on Schedule 5.1(a), with regard
to any ongoing renovation and remodeling efforts at the Stores located on
Owned Real Property and normal maintenance and repairs of the Stores
located on Owned Real Property, including, without limitation, the
installation of elevators at such Stores, and the Seller shall conduct
the Business and maintain the Purchased Assets in the ordinary course
consistent with the Seller's status and practices as a
debtor-in-possession under Chapter 11 of the Bankruptcy Code.
(b) Without limiting the generality of the foregoing,
except as contemplated by this Agreement, the Seller shall: (i) conduct
the Business in accordance with the Seller's recent retail practices with
respect to the receipt of goods, the distribution, pricing, sale and
promotion of goods and the taking of permanent and temporary markdowns to
insure proper aging and other customary inventory management practices;
(ii) use commercially reasonable efforts to preserve and maintain in all
material respects the Purchased Assets and existing relationships with
suppliers, customers and others doing business with the Seller; and (iii)
promptly notify the Buyer in writing of any material damage to the
Purchased Assets of which the Seller or the Parent has knowledge, or any
fact, circumstance or occurrence which the Seller reasonably believes to
have a Material Adverse Effect or would render any of the Seller's
representations or warranties inaccurate in any material respect.
(c) Except as otherwise contemplated by this Agreement or
required by order of the Court, the Seller and the Parent shall not: (i)
mortgage, pledge or subject the Purchased Assets to any Lien other than
Permitted Liens; (ii) enter into, adopt or amend (except as required by
law or by any agreement listed in Schedule 3.10 hereto) any Benefit Plan
or increase the amount or accelerate the payment or vesting of any
benefit payable thereunder; (iii) cancel, terminate, assign or amend any
Assumed Contract; (iv) close any Stores to be purchased by the Buyer; (v)
purchase inventory or supplies for the Stores other than in accordance
with the Seller's past practices following the Petition Date; or (vi)
transfer or sell any Equipment from the Stores.
(d) Except as otherwise permitted by the terms of this
Agreement, the Seller shall not permit or take any action that would be
expected to and does result in any of the representations and warranties
in Article III becoming untrue or incorrect in any material respect.
Section 5.2 Access to Information; Confidentiality.
(a) The Seller shall permit the Buyer and its respective
representatives and agents to have reasonable access during normal
business hours to the Seller's books and records relating to the
Purchased Assets and the Business and, with the Seller's consent (which
consent will not be unreasonably withheld), reasonable access to the
Purchased Assets. The Buyer shall conduct its review and otherwise use
its reasonable efforts to minimize disruption to the Business in
connection with the access granted hereunder. Without the prior written
consent of the Seller (which consent shall not be unreasonably withheld),
the Buyer shall not conduct any environmental testing on any of the Real
Property or contact any employees of the Business.
(b) The Buyer shall, and shall cause its respective
representatives and agents to, treat as confidential all of the
information provided by the Seller pursuant to Section 5.2(a) hereof or
otherwise in connection with the consummation of the transactions
contemplated by this Agreement and not use such information except in
connection with the transactions contemplated hereby or disclose such
information to third parties other than the Buyer's representatives and
agents, without the prior written consent of the Seller; provided,
however, that following the Closing this Section 5.2(b) shall not
prohibit the Buyer from using and providing to third parties such
information concerning the Purchased Assets or the Business as it may
deem appropriate. If the transactions contemplated by this Agreement are
not consummated, upon the request of the Seller, the Buyer shall promptly
return to the Seller all information received from the Seller and destroy
all evaluation materials prepared by the Buyer or its representatives
based on such information.
Section 5.3 Reasonable Efforts.
(a) Upon the terms and subject to the
conditions of this Agreement and the terms of the Procedures Order and
the Final Order as they are entered by the Court, each of the parties
hereto agrees to use its reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement as promptly as
practicable, including: (i) promptly making any requested submissions or
responses to any formal or informal requests for additional information
under the HSR Act with respect to the transactions contemplated by this
Agreement, and cooperating with each other with respect to the foregoing;
(ii) the making of appropriate filings and such other actions reasonably
necessary in connection with application(s) for entry of the Procedures
Order and the Final Order; and (iii) preparing and filing all other
forms, registrations, consents and notices required to be filed to
consummate the transactions contemplated by this Agreement.
(b) Each party hereto shall promptly inform the other of
any communication from any Governmental Entity regarding any of the
transactions contemplated by this Agreement, including any inquiries made
of such party by the Federal Trade Commission or the Department of
Justice in connection with any HSR Act filing. Each party shall promptly
consult with the other with respect to, provide any necessary information
with respect to and provide the other copies of all filings made by such
party with any Governmental Entity or any other information supplied by
such party to a Governmental Entity in connection with this Agreement or
the transactions contemplated by this Agreement. If any party or
Affiliate thereof receives a request for additional information or
documentary material from any such Governmental Entity with respect to
the transactions contemplated by this Agreement, then such party will use
its reasonable efforts to make, or cause to be made, as soon as
reasonably practicable and after consultation with the other party, an
appropriate response in compliance with such request.
Section 5.4 Certain Payroll Withholding Matters. The
Seller agrees to transfer to the Buyer any records relating to
withholding and payment of income and unemployment taxes (federal, state
and local) and FICA taxes with respect to wages paid to Continuing
Employees by the Seller during the calendar year in which the Closing
occurs. The Buyer agrees to provide the Continuing Employees with Forms
W-2, Wage and Tax Statement, for the calendar year in which the Closing
occurs setting forth the wages paid and taxes withheld with respect to
the Continuing Employees for such calendar year by the Seller and the
Buyer as predecessor and successor employers, respectively, as provided
by Section 5 of Revenue Procedure 84-77.
Section 5.5 Employees.
(a) The Buyer agrees to offer employment to all Retail
Employees who meet the Buyer's standard employment criteria effective
immediately upon the Closing. The Buyer shall comply with any applicable
federal, state or local law or rule in connection with its hiring
process. The Buyer shall indemnify, defend and hold harmless the Seller
from, and shall reimburse the Seller for, any judgments, awards, losses,
obligations, damages, liabilities, deficiencies, penalties, fines, claims
and expenses (including reasonable attorneys' fees and expenses) (i)
arising from or in connection with the Buyer's offer of employment to any
employees of the Business and (ii) any severance liability relating to
any Continuing Employee. The employees who accept such employment shall
be referred to herein as the "Continuing Employees." The Buyer shall
notify the Seller within seven (7) days following the Closing of all
Retail Employees who accept employment with the Buyer.
(b) The Buyer shall provide the Continuing Employees with
benefits that are generally comparable in the aggregate to those provided
by Buyer to similarly situated employees of the Buyer. The Buyer agrees
that solely for purposes of determining any Continuing Employee's
eligibility to participate in the Buyer's employee benefit plans, such
Continuing Employee shall receive full credit for all prior continuous
service with the Seller and its predecessors to the extent credit for
such service is permitted under the Buyer's employee benefit plans and
the Buyer's past practices.
(c) As of the Closing Date, Continuing Employees shall
cease to participate in the employee welfare benefit plans (within the
meaning of Section 3(1) of ERISA) maintained or sponsored by the Seller
or its Affiliates and shall begin to participate in employee welfare
benefit plans of the Buyer or its Affiliates, in accordance with the
terms of such plans and the Buyer's past practices.
(d) The Seller shall remain liable for and shall hold the
Buyer harmless from, and indemnify the Buyer against, any and all
liability arising from or relating to (i) the Retained Employees; (ii)
the failure by the Seller to comply with the continuation health care
coverage of COBRA under Sections 601 through 608 of ERISA and Section
4980B of the Code; (iii) any complete or partial withdrawal from any
Benefit Plan that is a multi-employer plan, which withdrawal results from
the consummation of this Agreement; and (iv) the failure by the Seller to
give sufficient notice to any employee of any Store pursuant to the WARN
Act or other similar applicable law.
Section 5.6 Fees and Expenses. Except as otherwise
provided in this Agreement, whether or not the transactions contemplated
by this Agreement are consummated, each of the Seller and the Parent, on
the one hand, and the Buyer, on the other hand, shall bear its own fees
and expenses incurred in connection with the transactions contemplated by
this Agreement.
Section 5.7 Publicity. Except in connection with the
Chapter 11 Cases and the Seller's status as a debtor-in-possession, as
required by the Bankruptcy Code or orders of the Court, or as otherwise
required by law or, in the case of Buyer, the New York Stock Exchange,
Inc. prior to the Closing neither the Buyer nor the Seller shall, and
each of them shall cause their respective affiliates, representatives and
agents not to, issue or cause the publication of any press release or
similar public announcement with respect to the transactions contemplated
by this Agreement without the prior consent of the other parties.
Section 5.8 Submission for Court Approval. The Seller
shall file with the Court (a) this Agreement and (b) to the extent not
previously filed, one or more applications and motions seeking entry of
the Procedures Order and the Final Order as promptly as practicable after
the date hereof. The Buyer shall cooperate with the Seller in obtaining
Court approvals of this Agreement and entry of the Procedures Order and
the Final Order, and the Seller shall use its reasonable efforts to
obtain such approvals and orders, and shall deliver to the Buyer copies
of all pleadings, motions, notices, statements, schedules, applications,
reports and other papers to be filed with the Court relating to such
approvals and orders reasonably in advance of filing the same in order to
permit the Buyer to provide comments thereto.
Section 5.9 Qualified Overbids. The Seller shall notify
the Buyer if any Qualified Overbids are received by the Seller and shall
deliver to the Buyer a copy of any written Qualified Overbids. Upon
delivery by the Seller to the Buyer of a Qualified Overbid, the Buyer
shall have the right to participate in any subsequent auction as provided
for in the Procedures Order (the "Auction"), pursuant to the terms and
conditions set forth in the Procedures Order for the Auction.
Section 5.10 Business Records. The Buyer shall have the
right to retain the business records of the Seller located at, and
primarily related to, the Stores, including, without limitation, such
customer lists as may exist for the Stores, provided that upon the
Seller's request the Buyer shall promptly make copies thereof available
to the Seller. In addition, the Seller shall provide to the Buyer, upon
its request, copies of any business records relating to the Stores but
located at the Parent's offices in Pottstown, Pennsylvania.
Section 5.11 Transfer Taxes. All Transfer Taxes resulting
from the transactions effected pursuant to this Agreement, if any, shall
be borne in equal part by the Buyer and the Seller. Any Tax Returns that
must be filed in connection with such Transfer Taxes shall be prepared
and filed when due by the party primarily or customarily responsible
under the applicable local law for filing such Tax Returns. The party or
parties responsible for filing such Tax Returns shall be reimbursed
within ten (10) business days of submitting a request therefor to the
non-filing party or parties.
Section 5.12 Trademarks. The Seller agrees to grant to the
Buyer the exclusive, irrevocable non-transferable license to use in the
Chicago metropolitan area the names "Homemakers", "John M. Smyth" and
"John M. Smyth Homemakers" and the trademarks listed on Schedule 5.12
(collectively, the "Marks"). Such license shall be in accordance with the
terms and restrictions set forth in the Trademark License Agreement
attached hereto as Exhibit D (the "Trademark License Agreement").
Section 5.13 Liquidation Agent.
(a) The Seller hereby appoints the Buyer, and the Buyer
hereby agrees to serve, as the Seller's exclusive agent for the limited
purpose of selling the Inventory in the Stores located in Morton Grove,
Illinois and Ford City, Illinois (the "Liquidation Stores")for the period
commencing on the Closing Date and ending 90 days thereafter(the
"Liquidation Period").
(b) At the Closing, the Buyer shall pay to the Seller a
cash payment equal to the pro rata portion of $73,217 (the rent and
common area expenses payable under the real property leases relating to
the Liquidation Stores (the "Leases")) for the period commencing on the
Closing Date through January 31, 1998 (the "Rental Payment"). The Buyer
shall, on each of January 23, 1998 and February 20, 1998, pay to the
Seller cash payments equal to $73,217. On March 25, 1998, the Buyer shall
pay to the Seller the pro rata portion of $73,217 (the rent and common
area expenses payable under the Leases for the period commencing on March
1, 1998 and ending on the last day of the Liquidation Period). The Buyer
shall provide the Seller with all retail sales information required under
the Leases. On or before December 31, 1997, the Seller shall provide the
Buyer with a written list of all operational, administrative and other
expenses incurred with respect to the Liquidation Stores during the
period of October 15, 1997 through December 15, 1997. Not later than
seven (7) days prior to the Closing Date, the Buyer shall inform the
Seller of which services relating to such expenses, if any, it desires to
be cancelled as of the Closing Date; provided, however, that the Seller
shall not be required to cancel any services or products required
pursuant to the Leases. The Buyer also shall be responsible for and shall
pay directly or shall promptly reimburse the Seller or the Parent, as
applicable, for all expenses associated with services not requested by
Buyer to be cancelled and for all other expenses incurred at the request
of the Buyer in conducting the sale of the Inventory in the Liquidation
Stores (the "Sale"). The Buyer shall reimburse the Seller for any such
expenses paid by the Seller or the Parent, as the case may be, within
thirty (30) days of receipt of an invoice from the Seller stating, in
reasonable detail, the amount and type of any Expenses so paid.
(c) Buyer may conduct the Sale in any manner permissible
under applicable law, including, without limitation, as a "store closing
sale" or an "inventory liquidation sale". The Buyer shall conduct the
Sale in a commercially reasonable manner and in compliance with the terms
of this Agreement and any orders of any court of competent jurisdiction.
The Seller shall not be obligated in any way to assist Buyer in the
conduct of the Sale; provided, however, that Seller shall preserve intact
the equipment, fixtures, furniture and other physical aspects of the
Liquidation Stores to the extent necessary for Buyer to conduct the Sale.
(d) The Sale shall commence on the Closing Date and shall
terminate ninety (90) days thereafter (the "Sale Termination Date")
unless a later date shall be agreed to in writing by the Buyer and the
Seller. On the Sale Termination Date, Buyer shall vacate the Liquidation
Stores and shall surrender and deliver the Liquidation Store premises and
the Liquidation Store keys to the Seller. Buyer agrees to leave the
Liquidation Stores in substantially the same condition as delivered to
the Buyer, ordinary wear and tear excepted. The Buyer shall be
responsible for the removal of all refuse, Inventory and other items from
the Liquidation Stores on or prior to the Sale Termination Date. All
assets of the Seller not used by the Buyer in the conduct of the Sale
(e.g., supplies, furniture, trade fixtures, improvements to real
property, etc.) shall be returned to the Seller as soon as practicable
after the Sale Termination Date.
Section 5.14 Adequate Assurances. The Buyer covenants and
agrees to provide adequate assurances of future performance as required
under Section 365(f)(2)(B) of the Bankruptcy Code in respect of any and
all contracts and leases assumed by the Buyer and assigned by the Seller
under this Agreement. Such adequate assurances shall be provided by the
Buyer at the time that the Seller assumes and assigns the contracts and
the leases under applicable bankruptcy law, or at such earlier or later
time designated by Final Order of the Court. The Seller shall comply with
Section 365(a) of the Bankruptcy Code in respect of any Assumed Contracts
and covenants and agrees to make any payments required by Sections
365(b)(1)(A) and (B) of the Bankruptcy Code on or before the Closing Date
or such other time as the Court may direct.
Section 5.15 Risk of Loss. All risk of loss to the
Purchased Assets shall be borne by Seller until Closing. All risk of loss
to the Purchased Assets shall be borne by Buyer from and after the
Closing. If any material item or portion of the Purchased Assets is
materially damaged, destroyed or taken by condemnation or other eminent
domain proceeding prior to Closing, Buyer shall have the right, at its
option, to refuse to purchase such damaged, destroyed, condemned or taken
item or portion and the Purchase Price for the Purchased Assets shall be
reduced as mutually agreed by the parties hereto or require Seller to pay
to it the amount of any proceeds of insurance or other award or payment
payable to Seller on account of such damage, destruction, condemnation or
other taking.
Section 5.16 Returns of Merchandise. The Buyer shall
receive and hold as a bailee on behalf of the Seller all merchandise
returned by any customer who financed such merchandise through GECC
("Returned Merchandise") until notification of Seller's repurchase of the
customer account related to such returned merchandise. The Buyer is
hereby notified of the security interest of GECC in Returned Merchandise
until such time as the Seller repurchases the customer account from GECC
related to such Returned Merchandise from GECC. Within fifteen (15) days
of the receipt of Returned Merchandise, the Buyer shall forward to the
Seller satisfactory documentation of such Returned Merchandise. Within
ten (10) business days of receipt of such documentation, the Seller shall
notify the Buyer of the repurchase by the Seller of the customer account
related to such Returned Merchandise pursuant to the terms of the GECC
Receivables Agreement. Within ten (10) days of receipt of such
notification, the Buyer shall reimburse the Seller for the Landed Cost of
the Returned Merchandise.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligations. The
respective obligations of each party to effect the transactions
contemplated by this Agreement shall be subject to the satisfaction at or
prior to the Closing of the following conditions:
(a) The waiting period applicable to the consummation of
the transactions contemplated by this Agreement required pursuant to the
HSR Act shall have expired or been terminated.
(b) All material authorizations, consents, orders or
approvals of Governmental Entities set forth on Schedule 6.1(b) shall
have occurred, been filed or been obtained and not rescinded.
(c) There shall not be in effect any statute, regulation,
order, decree or judgment of any Governmental Entity which makes illegal
or enjoins or prevents the consummation of the transactions contemplated
by this Agreement.
(d) The Court shall have entered the Final Order which
shall have authorized the Seller to convey to the Buyer all of its right,
title and interest in and to the Purchased Assets free and clear of all
Liens other than Permitted Liens with respect to the Owned Real Property,
and the Court shall have approved the assignment and assumption of the
Assumed Contracts as contemplated hereby. The Final Order, which must be
reasonably satisfactory in form and substance to the Buyer, shall
authorize the Seller and the Parent to enter into and consummate this
Agreement and the transactions contemplated hereby, and further provide,
among other things, that (i) the transfers of the Purchased Assets by the
Seller to the Buyer pursuant to this Agreement (a) are or will be legal,
valid and effective transfers of the Purchased Assets; (b) vest or will
vest Buyer with good title to the Purchased Assets (including good and
marketable title to the Real Property), free and clear of all Liens
except Permitted Liens; (c) constitute the best offer or value received
by Seller for the Purchased Assets; and (d) do not and will not subject
Buyer to any liability as a successor of Seller; (ii) the Court retains
jurisdiction to enforce the provisions of this Agreement in all respects;
(iii) the provisions of the Final Order are nonseverable and mutually
dependent; (iv) the transactions contemplated by this Agreement are
undertaken by the Buyer in good faith, as that term is used in Section
363(m) of the Bankruptcy Code; (v) pursuant to Section 363(n) of the
Bankruptcy Code, the consideration paid under this Agreement was not
controlled by an agreement among potential bidders at the hearing; (vi)
the Seller and the Parent have fully satisfied the requirements of
Sections 365(b)(1)(A) and (B) of the Bankruptcy Code with regard to the
Assumed Contracts and there are no defaults or amounts due and owing on
the Assumed Contracts; (vii) the terms and provisions of the Final Order
and this Agreement shall remain in full force and effect upon the
dismissal or conversion of the Chapter 11 Cases to another chapter under
the Bankruptcy Code and (viii) the terms and provisions of the Final
Order and this Agreement shall be binding on all creditors and parties in
interest. The Seller and the Parent shall seek and use their respective
reasonable efforts to include in the Final Order that the transfers and
assignments to the Buyer contemplated by this Agreement (including,
without limitation, the transfer and assignment of the Real Property)
shall, pursuant to Section 1146(c) of the Bankruptcy Code, not be subject
to the imposition or payment of any transfer taxes of any nature.
Section 6.2 Conditions to Obligations of the Buyer. The
obligation of the Buyer to effect the transactions contemplated by this
Agreement shall be further subject to the satisfaction at or prior to the
Closing of the following conditions:
(a) The representations and warranties of the Seller and
the Parent set forth in Article III shall be true and correct in all
material respects as of the Closing Date with the same effect as though
such representations and warranties had been made at and as of the
Closing Date, other than representations and warranties that expressly
speak as of a specific date (which need only be true and correct as of
such date).
(b) Each of the Seller and the Parent shall have performed
in all material respects all obligations required to be performed by it
under this Agreement at or prior to the Closing.
(c) The Buyer shall have received from the Seller a
certificate executed by an officer of the Seller, dated the Closing Date,
to the effect of (a) and (b) above (the "Seller's Officer's
Certificate").
(d) The Final Order shall have become nonappealable in
accordance with Rule 8002 of the Bankruptcy Rules.
Section 6.3 Conditions to Obligations of the Seller and
the Parent. The obligation of the Seller and the Parent to effect the
transactions contemplated by this Agreement shall be further subject to
the satisfaction at or prior to the Closing of the following conditions:
(a) The representations and warranties of the Buyer set
forth in Article IV shall be true and correct in all material respects as
of the Closing Date with the same effect as though such representations
and warranties had been made at and as of the Closing Date, other than
representations and warranties that speak as of a specific date (which
need only be true and correct in all material respects as of such date).
(b) The Buyer shall have performed in all material
respects all obligations required to be performed by it under this
Agreement at or prior to the Closing.
(c) The Seller shall have received from the Buyer
certificates executed by officers of the Buyer, dated the Closing Date,
to the effect of (a) and (b) above (the "Buyer's Officer's Certificate").
(d) The Seller shall have received the consent of the
lenders under the $260,000,000 Postpetition Credit Agreement, dated as of
September 5, 1997, to the extent that any such consent is required to
transfer any or all of the Purchased Assets to the Buyer free and clear
of any Lien held by the lenders.
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.1 Termination. This Agreement may be terminated
at any time prior to the Closing by:
(a) Mutual consent of the Seller and the Buyer.
(b) Either the Seller or the Buyer if the Closing shall
not have occurred on or before January 31, 1998 (unless the failure to
consummate the Closing by such date shall be due to the failure of the
party seeking to terminate this Agreement to have fulfilled any of its
obligations under this Agreement).
(c) Either the Seller or the Buyer if any court of
competent jurisdiction or other competent Governmental Entity shall have
issued a statute, decree or injunction permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement
and such statute, decree or injunction shall have become final and
nonappealable.
(d) Either the Seller or the Buyer, if the Buyer chooses
not to respond to an initial Qualified Overbid within the time provided
under the Procedures Order or if, after the Seller has received a
Qualified Overbid, the Buyer notifies the Seller that it will not
participate in the Auction.
(e) Either the Seller or the Buyer, if the Buyer is not
the Successful Bidder at any Auction.
(f) Either the Seller or the Buyer, if the Court has not
entered the Procedures Order within thirty (30) days following the date
of the filing with the Court of the motion seeking entry of the
Procedures Order.
(g) By the Buyer, if the Seller has materially breached
any of the Seller's representations, warranties, covenants or other terms
of this Agreement.
(h) By the Buyer, if on or before December 30, 1997, the
Buyer has informed the Seller of one or more matters with respect to the
Owned Real Property discovered in connection with the due diligence
review of the Owned Real Property to which Buyer, in its sole discretion,
objects.
(i) By the Seller, if the Buyer has materially breached
any of the Buyer's representations, warranties, covenants or other terms
of this Agreement.
(j) By the Buyer, if on or before December 30, 1997 the
Seller shall not have received the consent of the lenders under the
$260,000,000 Postpetition Credit Agreement, dated as of September 5,
1997, to the extent that any such consent is necessary to transfer any or
all of the Purchased Assets to the Buyer free and clear of any Lien held
by the lenders.
Section 7.2 Effect of Termination.
(a) In the event of the termination and abandonment of
this Agreement pursuant to Section 7.1 hereof (except for Section
7.1(d)and 7.1(e)), this Agreement shall terminate without any liability
on the part of any party hereto or its affiliates, directors, officers or
stockholders, other than the provisions of Sections 5.2(b), 5.7 and 7.2
hereof. Nothing contained in this Section 7.2 shall relieve any party
from liability for any breach of this Agreement.
(b) If this Agreement is terminated by any party pursuant
to Section 7.1(d) or Section 7.1(e), then the Seller shall pay to the
Buyer the sum of $350,000 (the "Termination Fee") at the closing of the
transaction arising from the Court-approved transaction out of the
proceeds of that transaction; provided, however, that Seller shall in no
event be required to pay to the Buyer the Termination Fee unless the
Seller shall have consummated a sale of (x) all of the Purchased Assets
or (y) a portion of the Purchased Assets having an aggregate value in
excess of $1 million, in each case, to a Purchaser other than the Buyer
or its Affiliates.
(c) If this Agreement is terminated by any party, then,
within five (5) business days of such termination, the Seller shall
return to the Buyer by wire transfer in immediately available funds the
Earnest Money Deposit.
Section 7.3 Amendment. This Agreement may be amended at
any time by the Seller, the Parent and the Buyer, but only by an
instrument in writing signed on behalf of each of the Seller, the Parent
and the Buyer.
Section 7.4 Extension; Waiver. At any time prior to the
Closing, each of the Seller, on the one hand, and the Buyer, on the other
hand, may (i) extend the time for the performance of any of the
obligations or acts of the other, (ii) waive any inaccuracies in the
representations and warranties of the other contained herein or in any
document delivered pursuant hereto; (iii) waive compliance with any of
the agreements of the other contained herein; or (iv) waive any condition
to its obligations hereunder. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Survival of Representations and Warranties.
The representations and warranties in this Agreement and in any other
document delivered in connection herewith shall survive the Closing
solely for the purposes of Article VIII of this Agreement and terminate
one year from the Closing Date.
Section 8.2 Seller's Indemnity. The Seller and the Parent,
jointly and severally, covenant and agree to defend, indemnify and hold
harmless the Buyer, its officers, directors, employees (except Continuing
Employees), agents, advisors, representatives and Affiliates
(collectively, the "Buyer's Indemnities") from and against, and pay or
reimburse the Buyer's Indemnities for, any and all claims, liabilities,
losses, costs or damages (collectively, "Losses") resulting from or
arising out of:
(a) any breach of any representation or warranty made by
the Seller herein;
(b) any failure of the Seller to perform any covenant or
agreement or fulfill any other obligation in respect hereof; and
(c) any Excluded Liabilities or Excluded Assets
(collectively, "Buyer Claims").
Section 8.3 Seller's and Parent's Limitation of Liability.
Anything in this Agreement to the contrary notwithstanding, the liability
of the Seller and the Parent to indemnify the Buyer pursuant to Section
8.2 hereof against any Losses sustained by reason of any Buyer Claim
shall be limited to Buyer Claims as to which the Buyer has given the
Seller written notice thereof on or prior to one year after the Closing
Date, whether or not any Losses have then actually been sustained. The
provisions for indemnity contained in Section 8.2 hereof shall be
effective only after the aggregate amount of all Buyer Claims for which
the Seller is liable exceeds $50,000, and then only to the extent of such
excess, but in no event in excess of $1 million; provided, however, that
the Seller's and the Parent's liability for Buyer Claims under Section
8.2(c) shall not be so limited; provided further, however, that the
Seller's and the Parent's liability with respect to their respective
obligations under Section 2.5(e) and 2.5 (f) shall not be so limited. The
Seller and the Parent hereby agree to secure their respective obligations
to the Buyer under this Section 8.3 for a period of one (1) year by
providing a standby letter of credit in the amount of $1 million with
such letter of credit to embody the terms set forth in Exhibit E attached
hereto.
Section 8.4 Buyer's Indemnity. The Buyer covenants and
agrees to defend, indemnify and hold harmless the Seller and the Parent
and their respective officers, directors, employees, agents, advisors,
representatives and Affiliates (collectively, the "Seller Indemnities")
from and against any and all Losses resulting from or arising out of:
(a) any breach of any representation or warranty made by
the Buyer herein;
(b) any failure by the Buyer to perform any covenant or
agreement or fulfill any other obligation in respect hereof;
(c) the Assumed Liabilities, the Buyer's Liabilities and
the operation of the Business by the Buyer or the Buyer's ownership,
operation or use of the Purchased Assets following the Closing Date
(collectively, "Seller Claims"); and
(d) the agency relationship between the Seller and the
Buyer contemplated by Section 5.13 hereof, including, without limitation,
the Sale and the Buyer's use of the Liquidation Stores in connection
therewith.
Section 8.5 Buyer's Limitation of Liability. Anything in
this Agreement to the contrary notwithstanding, the liability of the
Buyer to indemnify the Seller pursuant to Section 8.4 hereof against any
Losses sustained by reason of any Seller Claim shall be limited to Seller
Claims as to which the Seller has given the Buyer written notice thereof
at or prior to one year after the Closing Date, whether or not any Losses
have then actually been sustained. The provisions for indemnity contained
in Section 8.4 hereof shall be effective only after the aggregate amount
of all Seller Claims for which the Buyer is liable under the indemnity
exceeds $50,000, and then only to the extent of such excess.
Section 8.6 Procedure. In the event that any party (the
"Aggrieved") desires to make a claim for indemnification hereunder
against any other party (the "Indemnitor") in connection with any action,
suit, proceeding or demand at any time instituted against or made upon
the Aggrieved for which the Aggrieved seeks indemnification hereunder (a
"Claim"), the Aggrieved shall notify the Indemnitor of such Claim and the
amount and circumstances surrounding it, and of the Aggrieved's claim of
indemnification with respect thereto, provided that failure of the
Aggrieved to give such notice shall only relieve the Indemnitor of its
obligations under this Article VIII to the extent, if any, that the
Indemnitor shall have been prejudiced thereby. Upon receipt of such
notice from the Aggrieved, the Indemnitor shall be entitled, at the
Indemnitor's election, to assume or participate in the defense of such
Claim. In any case in which the Indemnitor assumes the defense of the
Claim, (i) the Aggrieved shall have the right, at its expense, to engage
counsel to participate in such defense, and (ii) the Indemnitor shall
give the Aggrieved two (2) business days' notice prior to executing any
settlement agreement and the Aggrieved shall have the right, in its
reasonable discretion, to approve or reject the settlement; provided,
however, that upon rejection of any settlement, the Aggrieved shall
assume control of the defense of such Claim and the liability of the
Indemnitor with respect to such Claim shall be limited to the amount or
the monetary equivalent of the rejected settlement and related expenses.
Section 8.7 Exclusive Remedy. Subject to the following
sentence, each of the Seller, the Parent and the Buyer acknowledge that
their sole post-Closing remedy contained in this Agreement shall be as
set forth in this Article 8. Nothing contained herein, however, shall
limit the rights of any party hereto to pursue any claim of fraud or to
seek and obtain any and all equitable remedies, including injunctive
relief, to specifically enforce another party's obligations hereunder.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given upon receipt if
delivered personally, or when sent if mailed by registered or certified
mail (return receipt requested) or transmitted by facsimile (with
confirmation of transmittal) to the parties at the following addresses
(or at such other address for a party as shall be specified by like
notice):
(a) if to the Parent or the Seller, to:
Levitz Furniture Corporation
6111 Broken Sound Parkway, N.W.
Boca Raton, Florida 33487
Facsimile: (561) 998-5615
Attention: Edward P. Zimmer
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Facsimile: (212) 735-2000
Attention: J. Gregory Milmoe
(b) if to the Buyer, to:
Heilig-Meyers Company
12560 West Creek Parkway
Richmond, Virginia 23238
Facsimile: (804) 784-7910
Attention: Joseph R. Jenkins, Jr.
with a copy to:
McGuire Woods Battle & Boothe LLP
1 James Centre
Richmond, Virginia 23219
Facsimile: (804) 698-2152
Attention: David W. Robertson, Esq.
Section 9.2 Descriptive Headings. The descriptive headings
herein are inserted for convenience only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
Section 9.3 Counterparts. This Agreement may be executed
in two or more counterparts, all of which shall be considered one and the
same agreement.
Section 9.4 Entire Agreement. This Agreement, together
with the exhibits and schedules hereto, constitutes the entire agreement,
and supersede all prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
Section 9.5 Governing Law. This Agreement shall be
governed and construed in accordance with the laws of the State of
Delaware, without regard to any applicable principles of conflicts of
law.
Section 9.6 Specific Performance. The parties hereto agree
that if any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached,
irreparable damage would occur, no adequate remedy at law would exist and
damages would be difficult to determine, and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
Section 9.7 Assignment. This Agreement may not be assigned
by any party hereto without the written consent of the other parties,
except that Buyer may assign this Agreement to a corporation controlled
by or under common control with the Buyer without such prior written
consent; provided, however, no such assignment shall release Buyer from
primary liability hereunder. Notwithstanding the foregoing, Buyer may by
written notice to Seller specify a designee or nominee to which title to
the Owned Real Property will be conveyed.
Section 9.8 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto, their
successors and permitted assigns, and nothing in this Agreement, express
or implied, is intended to or shall confer upon any other person or
persons any rights, benefits or remedies of any nature whatsoever under
or by reason of this Agreement.
Section 9.9 Severability. This Agreement shall be deemed
severable; the invalidity or unenforceability of any term or provision of
this Agreement shall not affect the validity or enforceability of this
Agreement or of any other term hereof, which shall remain in full force
and effect.
Section 9.10 Exclusive Jurisdiction. The parties hereby
agree that, without limitation of any party's right to appeal any order
of the Court, (a) the Court shall retain exclusive jurisdiction to
enforce the terms of this Agreement and to decide any claims or disputes
which may arise or result from, or be connected with, this Agreement, any
breach or default hereunder or the transactions contemplated herein, and
(b) any and all claims, actions, causes of action, suits and proceedings
relating to the foregoing shall be filed and maintained only in the
Court, and the parties hereby consent and submit to the jurisdiction of
the Court and shall receive notices at such locations as indicated in
Section 9.1 hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
JOHN M. SMYTH COMPANY
By: /s/ Edward P. Zimmer
__________________________
Edward P. Zimmer
Vice President
LEVITZ FURNITURE CORPORATION
By: /s/ Edward P. Zimmer
_____________________________
Edward P. Zimmer
Vice President
HEILIG-MEYERS COMPANY
By: /s/ William E. Helms
_____________________________
William E. Helms
Senior Vice President
Corporate Expansion
EXHIBIT 99.2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- - - - - - - - - - - - - - - x
In Re :
Chapter 11
Levitz Furniture :
Incorporated, et al., Case No. 97-1842 (JJF)
:
Jointly Administered
Debtors. :
- - - - - - - - - - - - - - - x
ORDER UNDER 11 U.S.C. SECTIONS 105 AND 363 (I) APPROVING
BIDDING PROCEDURES AND TERMINATION FEE IN CONNECTION
WITH THE PROPOSED SALE OF SUBSTANTIALLY ALL OF THE
ASSETS OF JOHN M. SMYTH COMPANY AND JOHN M. SMYTH
REALTY COMPANY AND RELATED ASSUMPTION AND ASSIGNMENT
OF CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES,(II)
SCHEDULING A HEARING DATE ON THE SALE OF SUCH ASSETS, AND
(III) APPROVING FORM AND MANNER OF NOTICE THEREOF
Upon the motion dated December 2, 1997 (the
"Procedures Motion"), of the above-captioned debtors and
debtors-in-possession (the "Debtors"), seeking entry of
an order (i) authorizing the Debtors to implement certain
bidding procedures and to pay a termination fee in
connection with the sale of substantially all of the
assets of John M. Smyth Company and John M. Smyth Realty
Company (the "Smyth Sale"), (ii) scheduling a hearing on
the Smyth Sale and (iii) approving the form and manner of
notice thereof; and upon the record in these cases; and
after due deliberation thereon; and good and sufficient
cause appearing therefor; it is hereby
FOUND THAT:
1. The Court has jurisdiction over this
matter pursuant to 28 U.S.C. SECTION 1334;
2. This is a core proceeding pursuant to 28
U.S.C. SECTION 157(b)(2)(A),(N) and (O);
3. Good and sufficient notice of the
Procedures Motion has been given;
4. The Debtors proposed notice of the Smyth
Sale(1) and the Auction Procedures is appropriate and
reasonably calculated to provide all interested parties
with timely and proper notice of the Smyth Sale and the
Auction Procedures to be employed in connection
therewith.
5. The Debtors have demonstrated a sound
business justification for authorizing them to pay
Heilig-Meyers the $350,000 Termination Fee under the
circumstances set forth in the Procedures Motion.
6. The $350,000 Termination Fee is fair and
reasonable, and was negotiated by the parties in good
faith.
7. The entry of this Order is in the best
interests of the Debtors and their estates, creditors and
interest holders; and it is therefore
ORDERED, ADJUDGED AND DECREED THAT:
1. The Procedures Motion is granted.
2. The following Auction Procedures shall
apply with respect to the sale of the Smyth Assets:
(a) Any person, other than Heilig-Meyers, who
wishes to participate in the bidding
process for the Smyth Assets (a "Potential
Bidder") must, if they have not already
done so, deliver to the Debtors by
December 30, 1997 at 2:00 p.m. (i) current
audited financial statements or such other
form of financial information disclosure
acceptable to the Debtors that
demonstrates the financial capability of
the Potential Bidder to consummate a
competing transaction with the Debtors
with respect to the Smyth Assets (the
"Alternative Transaction"); and (ii)
___________________
1 Unless otherwise defined, capitalized terms used
herein shall have the meaning ascribed to them in
the Procedures Motion.
$2,000,000 in the form of a cashier's
check or by wire transfer (at the
Potential Bidder's expense), to be held in
escrow by Debtors' counsel pending the
outcome of the auction or an irrevocable
letter of credit in the amount of
$2,000,000 to the Debtors. Any Potential
Bidder that makes a deposit pursuant to
clause (ii) (a "Financial Capability
Deposit") above but is not selected as the
Successful Bidder (as defined below) at
the Auction shall receive a return of the
Financial Capability Deposit within five
(5) business days after the selection of
the Successful Bidder (and the interest,
if any, earned thereon).
(b) A Potential Bidder that satisfies the
foregoing requirements and that the
Debtors have determined is reasonably
likely (based on availability of
financing, experience and other
considerations) to be able to consummate
an Alternative Transaction if selected as
the Successful Bidder, shall be considered
a qualified bidder ("Qualified Bidder").
(c) Any Qualified Bidder that desires to make
a bid shall deliver a copy of its bid in
writing to the undersigned counsel for the
Debtors not later than 2:00 p.m. (Eastern
time) on December 30, 1997 (the "Bidding
Deadline"). Within twenty four (24) hours
after the Bidding Deadline, the Debtors
shall notify Heilig-Meyers and any
Qualified Bidder that has submitted a
Qualified Overbid (as defined below) that
an auction will be held.
(d) To be a "Qualified Overbid", a bid must
either: (i) contain a purchase price in an
amount equal to at least $24,480,000,
which amount represents the purchase price
for the Smyth Fee Property ($23,680,000)
in the Asset Purchase Agreement plus
$800,000 (the "Initial Minimum Bidding
Increment") and otherwise the same or
substantially the same terms as those set
forth in the Asset Purchase Agreement,
including the purchase of inventory,
furniture, fixtures and vehicles, accounts
receivable and the dollar for dollar cash
purchase of the additional Smyth Assets
such as cash, deposits and prepaid
expenses; or (ii) offer to purchase some
or all of the Smyth Assets, which offer
provides for consideration (including the
value of the Smyth Assets to be retained
by the Debtors) having a value the Debtors
believe to exceed the purchase price
offered by Heilig-Meyers by at least
$800,000. A Qualified Overbid must also:
(w) include a mark-up of the Asset
Purchase Agreement attached to the Sale
Motion or a proposed asset purchase
agreement; (x) include a statement that
such bid shall be irrevocable until 11
business days following the Sale Hearing
or any continuation thereof; (y) provide
written evidence of a commitment for
financing or other evidence of ability to
consummate the transaction; and (z) not be
conditioned on the outcome of unperformed
due diligence with respect to the Smyth
Assets, but may be subject to the accuracy
in material respects at the closing of
that transaction of specified
representations and warranties or the
satisfaction in material respects at the
closing of that transaction of specified
conditions that, in either case, the
Debtors find are acceptable.
(e) Heilig-Meyers and any Qualified Bidder who
has submitted a Qualified Overbid shall be
eligible to participate in an auction
commencing at 10:00 a.m. at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP,
919 Third Avenue, New York, New York
10022, on January 5, 1998 (the "Auction").
Prior to the commencement of bidding, the
Debtors will announce their valuation of
the Qualified Overbids and Heilig-Meyers
bid and which of those bids they deem
preliminarily to be the highest and best
bid of the Qualified Overbids. Bidding
shall then commence and continue in
increments of not less than $100,000 in
cash (the "Auction Minimum Bidding
Increment"), until such time as Heilig-
Meyers and the Qualified Bidders have
announced that each has made its final
cash bid.
(f) The Successful Bidder shall be the bidder
submitting the last cash bid at the
Auction. The Debtors shall not be deemed
to have accepted a bid submitted at the
Auction unless and until such bid and the
Debtors' acceptance thereof have been
approved by order of the Court. The
Debtors will have no obligation to accept
formally any bid submitted at the Auction.
(g) A deposit of twenty-five percent (25%) of
the purchase price (which may include the
Financial Capability Deposit, collectively
the "Good Faith Deposit") shall be paid by
the Successful Bidder (unless the
Successful Bidder is Heilig-Meyers in
which case the terms of the Asset Purchase
Agreement shall control as to any deposit
requirement) to Skadden, Arps, Slate,
Meagher & Flom LLP, counsel to the
Debtors, no later than 11:00 a.m. (Eastern
Time) on the next business day following
the Announcement. The Good Faith Deposit
shall be in the form of a cashier's check
or wire transfer and held by Skadden,
Arps, Slate, Meagher & Flom LLP in an
escrow account until approval of the sale
transaction by the Court and the closing
of the sale transaction.
(h) Unless otherwise agreed by the parties and
approved by the Court, the Good Faith
Deposit (and the interest, if any, earned
thereon) shall be returned to the
Successful Bidder (unless the Successful
Bidder is Heilig-Meyers in which case the
terms of the Asset Purchase Agreement
shall control as to any deposit
requirement) only if: (i) the Successful
Bidder is not in breach of any material
obligation of the asset purchase agreement
to which the Successful Bidder is a party;
(ii) either (x) the Debtors are in breach
of any material provision of the asset
purchase agreement to which the Successful
Bidder is a party, and such breach would
entitle the Successful Bidder to terminate
such contract, (y) a court of competent
jurisdiction has stayed the Successful
Bidder and/or the Debtors from closing the
sale; provided, however, that such stay
was not requested, supported or obtained
by the Successful Bidder, or (z) the
Debtors are not in breach of any material
provision of the asset purchase agreement
to which the Successful Bidder is a party,
but the Successful Bidder nonetheless has
the right to terminate such agreement (or
termination thereof is self-operative);
and (iii) the asset purchase agreement to
which the Successful Bidder is a party has
been terminated. In all other
circumstances the Good Faith Deposit shall
be released to the Debtors, either upon
closing of the sale to the Successful
Bidder, in which event the Good Faith
Deposit (and any interest earned thereon)
shall be applied toward the Successful
Bidder's payment of the purchase price for
the Smyth Assets, or upon termination of
the asset purchase agreement to which the
Successful Bidder is a party, in which
event the Successful Bidder shall forfeit
all of its rights, claims and entitlement
with respect to the Good Faith Deposit
and, unless the Successful Bidder is
Heilig-Meyers, in which case all rights
upon termination or breach shall be
governed by the Asset Purchase Agreement.
Unless otherwise provided by order of the
Court, in the event the Debtors are unable
for any reason to consummate the sale to
the Successful Bidder or to execute and
deliver any and all closing documents,
unless the Successful Bidder is Heilig-
Meyers, in which case all rights upon
termination or breach shall be governed by
the Asset Purchase Agreement, the Debtors'
sole liability to the Successful Bidder
shall be limited to the return of the Good
Faith Deposit (and the interest, if any,
earned thereon).
3. The Debtors are hereby authorized to pay
Heilig-Meyers the $350,000 Termination Fee, if the sale
of the Smyth Assets to Heilig-Meyers is not consummated
and the Debtors consummate a sale of all or a portion of
the Smyth Assets in excess of $1 million to a person or
entity other than Heilig-Meyers, said Termination Fee to
be payable to Heilig-Meyers from the proceeds of the sale
to the third party purchaser.
4. A hearing with respect to the Sale Motion
(the "Sale Hearing") shall be held before the Honorable
Joseph J. Farnan, Jr., Chief United States District
Judge, in Courtroom 6A, J. Caleb Boggs Federal Building,
844 King Street, Wilmington, Delaware, 19801 on
January 7, 1998 at 12:00 noon.
5. Objections to the relief requested in the
Sale Motion, if any, must (a) be in writing, (b) conform
to the requirements of the Bankruptcy Code, the
Bankruptcy Rules and the Local Rules of the United States
Bankruptcy Court for the District of Delaware, (c) set
forth the name of the objector and the nature and amount
of any claim or interest held by and against the Debtors'
estates or property, (d) state the legal and factual
basis for the objection and the specific grounds
therefore and (e) must be filed with the Court and served
upon Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third
Avenue, New York, New York 10022, Attention: Sally
McDonald Henry and Skadden, Arps, Slate, Meagher & Flom
LLP, One Rodney Square, Wilmington, DE 19801, Attention:
Gregg M. Galardi, so as to be actually received by no
later than 4:00 p.m. prevailing Eastern time on December
30, 1997. Only timely filed and served responses,
objections or other pleadings will be considered by the
Court at the Sale Hearing.
6. The Bidding Deadline shall be December 30,
1997 at 2:00 p.m.
7. The Auction, if any, shall be conducted at
the offices of Skadden, Arps, Slate, Meagher & Flom LLP,
919 Third Avenue, New York, New York 10022 and commence
at 10:00 a.m. prevailing Eastern time on January 5, 1998.
8. Notice of the Sale Hearing and the relief
requested in the Sale Motion is hereby deemed to be good
and sufficient notice thereof, and any requirements for
other notice be, and hereby are, waived and dispensed
with pursuant to Bankruptcy Rules 2002, 6004, 6006 and
9007 and Section 102 of the Bankruptcy Code and pursuant
to this Court's powers under Section 105 of the
Bankruptcy Code if:
(a) on or before December 16, 1997, the
Debtors shall have caused to be served copies of this
Procedures Order and the Sale Motion upon the following
persons in the manner indicated (i) counsel to BT
Commercial Corporation, as agent for the lenders under
the DIP Facility (by FedEx), (ii) the United States
Trustee for the District of Delaware (by FedEx); (iii)
counsel to the Official Committee of Unsecured Creditors
of Levitz Furniture Incorporated and its affiliates (by
FedEx); (iv) all parties that expressed a bona fide
interest in acquiring the Smyth Assets to the Debtors'
financial advisors (by FedEx), (v) counsel to Heilig-
Meyers Company (by FedEx), (vi) all parties to executory
contracts or unexpired leases proposed to be assumed and
assigned to Heilig-Meyers pursuant to the Sale Motion,
(vii) each taxing authority and known Lien holder in the
Smyth Assets (by FedEx), and (viii) all parties that have
filed requests for notices in these cases pursuant to
Bankruptcy Rule 2002 (by first class mail); and
(b) on or before December 19, 1997, the
Debtors shall cause a notice, substantially in the form
annexed as Exhibit "A" hereto, to be published in the
national edition of The New York Times.
9. The Sale Hearing may be adjourned, from
time to time, without further notice to creditors or
parties in interest other than by announcement of said
adjournment in Court or on the Court's calendar on the
date scheduled for said hearing.
10. The Debtors shall have the right to amend
the Sale Motion and the relief requested therein at any
time prior to this Court's determination of the merits of
the Smyth Sale.
11. The Debtors are hereby authorized and
empowered to take such steps, expend such sums of money
and do such other things as may be necessary to implement
and effect the terms and requirements established by this
Procedures Order.
12. This Court shall retain jurisdiction over
any matters related to or arising from the implementation
of this Procedures Order, including, but not limited to
the right to amend this Procedures Order.
Date: Wilmington, Delaware
December 15, 1997
/s/ Joseph J. Farnan, Jr.
___________________________________
The Honorable Joseph J. Farnan, Jr.
Chief United States District Judge
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- - - - - - - - - - - - - - - - - - - - - - -x
In re :
Chapter 11
Levitz Furniture :
Incorporated, et al., Case No. 97-1842 (JJF)
:
Jointly Administered
Debtors. :
- - - - - - - - - - - - - - - - - - - - - - -x
NOTICE OF HEARING ON THE SALE OF SUBSTANTIALLY
ALL OF THE ASSETS OF JOHN M. SMYTH COMPANY AND
JOHN M. SMYTH REALTY COMPANY TO HEILIG-MEYERS AND
SOLICITATION OF COMPETING OFFERS IN CONNECTION THEREWITH
PLEASE TAKE NOTICE that, pursuant to an order of the United States
District Court for the District of Delaware (the "District Court") dated
December __, 1997 (the "Procedures Order"), a hearing (the "Sale Hearing")
shall be held at 12:00 noon on January 7, 1998 before the Honorable Joseph
J. Farnan, Jr., Chief United States District Judge, in Courtroom 6A, J.
Caleb Boggs Federal Building, 844 King Street, Wilmington, Delaware, on the
motion of the above-captioned debtors and debtors-in-possession (the
"Debtors"), dated December __, 1997 (the "Sale Motion"), for entry of an
order pursuant to 11 U.S.C. ss.ss. 105, 363, 365 and 1146(c) authorizing
and approving, among other things, (i) the sale of substantially all of the
assets of John M. Smyth Company and John M. Smyth Realty Company (the
"Smyth Assets") free and clear of liens, claims, encumbrances and
interests, and (ii) the assumption and assignment of certain executory
contracts and unexpired leases in connection therewith to Heilig-Meyers
Company or such other party submitting the highest and best bid for the
Smyth Assets. The Smyth Assets include certain real property and the stores
located thereon in Schaumburg, Downers Grove and Orland Park, Illinois, the
Debtors' inventory at such stores and their stores in Morton Grove and Ford
City, Illinois (collectively, the "Stores"), the furniture, fixtures and
vehicles at the Stores, certain accounts receivable, and other assets such
as cash, deposits and prepaid expenses. The Debtors value the consideration
to be paid for the Smyth Assets is $35 million.
PLEASE TAKE FURTHER NOTICE that pursuant to the Procedures Order,
the Debtors are hereby soliciting competing bids for the Smyth Assets.
Competing bids must be submitted to the undersigned counsel for the Debtors
by 2:00 p.m. on December 30, 1997 and otherwise comply with the
requirements set forth in the Procedures Order. In the event that the
Debtors receive a Qualified Overbid (as defined in the Procedures Order),
an auction sale of the Smyth Assets will be conducted at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New
York 10022, commencing at 10:00 a.m. on January 5, 1998.
PLEASE TAKE FURTHER NOTICE that copies of the Sale Motion, the
Procedures Order and any other related documents are on file with the Clerk
of the Bankruptcy Court for the District of Delaware, 824 Market Street,
Marine Midland Plaza, Wilmington, Delaware 19801, and may be reviewed
during regular business hours. Such documents are also available upon
written request submitted to the undersigned counsel for the Debtors.
PLEASE TAKE FURTHER NOTICE that objections to the Sale Motion, if
any, must (a) be in writing, (b) conform to the requirements of the
Bankruptcy Code, the Bankruptcy Rules and the Local Bankruptcy Rules, (c)
set forth the name of the objector and the nature and amount of any claim
or interest held by and against any Debtors' estate or property, (d) state
the legal and factual basis for the objection and the specific grounds
therefore and (e) be filed with the Clerk of the Bankruptcy Court and
served upon the undersigned counsel for the Debtors so as to be actually
received by 4:00 p.m. (Eastern time) on December 30, 1997. Only timely
filed and served responses or objections will be considered by the District
Court at the Sale Hearing.
Dated: Wilmington, Delaware By Order of the District Court
December [ ], 1997 Joseph J. Farnan, Jr.,
Chief District Court Judge
SKADDEN, ARPS, SLATE, MEAGHER SKADDEN, ARPS, SLATE, MEAGHER
& FLOM LLP & FLOM LLP
919 Third Avenue One Rodney Square
New York, New York 10022-3897 Wilmington, Delaware 19801
(212) 735-3000 (302) 651-3000
Attn: Sally McDonald Henry Attn: Gregg M. Galardi
Attorneys for Levitz Furniture Incorporated, et al.
Debtors and Debtors-in-Possession
