UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 11, 1997
Venture Stores, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 1-10590 43-0914490
(State or Other (Commission (I.R.S.Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
2001 East Terra Lane, O'Fallon, Missouri 63366-0110
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (314) 281-5500
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition or Disposition of Assets
On July 11, 1997 (the "Closing Date"), Venture Stores, Inc. (the
"Company") sold 20 stores to Kmart Corporation ("Kmart") for a
negotiated price of $38 million cash, before closing adjustments
and prepaid rent for the post closing inventory liquidation
period. Kmart also assumed as of the Closing Date certain
specified liabilities of the Company, including obligations under
the leases relating to 17 of the stores. The assets purchased by
Kmart include three stores that were owned by the Company and the
transfer of leases for 17 stores that were held under leases. In
addition, the sale included substantially all personal property,
other than inventory, located in the stores. The stores being
sold include five in the Dallas-Ft. Worth area, ten in Houston,
two in Indianapolis, and one each in Des Moines, Iowa, Waterloo,
Iowa, and Tulsa, Oklahoma. Kmart will assume occupancy of the
stores by September 15, 1997. In connection with the sale, the
Company will take a nonrecurring pre-tax charge of approximately
$64 million in the second quarter of 1997 for costs associated
with selling and closing the stores and liquidating the
inventory.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information
The following unaudited pro forma condensed consolidated
financial statements are filed with this report:
Pro Forma Condensed Balance Sheet as of April 26, 1997
Pro Forma Condensed Statement of Earnings:
Year Ended January 25, 1997
13 Weeks Ended April 26, 1997
The Pro Forma Condensed Balance Sheet of the Company as of April
26, 1997 reflects the financial position of the Company after
giving effect to the disposition of the assets discussed in Item
2 and assumes the disposition took place on April 26, 1997. The
Pro Forma Condensed Statement of Earnings for the fiscal year
ended January 25, 1997 and the 13 weeks ended April 26, 1997
assume the disposition occurred on January 28, 1996, and are
based on the pro forma operations of the Company for the year
ended January 25, 1997 and 13 weeks ended April 26, 1997.
The unaudited pro forma condensed financial statements have been
prepared by the Company based upon assumptions deemed
appropriate. The unaudited pro forma condensed financial
statements presented herein are shown for illustrative purposes
only and are not necessarily indicative of the future financial
position or future results of operations of the Company, or of
the financial position or results of operations that would have
actually occurred had the transaction been in effect as of the
date or for the periods presented. In addition, it should be
noted that the Company's financial statements will reflect the
disposition only from July 11, 1997, the Closing Date.
The Company will incur a nonrecurring charge of approximately
$64 million in the second quarter of 1997 for costs associated
with selling and closing the stores and liquidating the
inventory. The unaudited Pro Forma Condensed Statement of
Earnings for the fiscal year ended January 25, 1997 and the 13
weeks ended April 26, 1997 do not reflect the effect of this
charge.
The unaudited pro forma condensed financial statements should be
read in conjunction with the historical financial statements and
related notes of the Company.
(c) Exhibits
2 Asset Purchase Agreement ("Asset Purchase Agreement")
between Kmart Corporation and Venture Stores, Inc.
dated as of July 2, 1997
Exhibits and schedules contained in the Asset Purchase
Agreement are not filed herewith. Such exhibits and
schedules are listed and described in the table of
contents of the Asset Purchase Agreement. The Company
undertakes to furnish supplementally a copy of any
omitted exhibit or schedule to the Commission upon
request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized.
VENTURE STORES, INC.
(Registrant)
By: /s/ Russell E. Solt
Name: Russell E. Solt
Title: Executive Vice President -
Administration and
Chief Financial Officer
Date: July 25, 1997
Pro Forma Financial Information
Venture Stores, Inc.
Pro Forma Condensed Balance Sheet as of April 26, 1997
(Unaudited)
(thousands)
Pro Forma
Historical Adjustments(a) Pro Forma
ASSETS
Current assets:
Cash and cash equivalents $ 14,487 $ $ 14,487
Accounts receivable, net 12,937 12,937
Merchandise inventories 320,065 (47,772)(b) 272,293
Income taxes receivable 946 946
Other current assets 8,113 2,000 (c) 10,113
Total current assets 356,548 (45,772) 310,776
Property and equipment, net 357,379 (102,139)(d) 255,240
Deferred income taxes 6,992 (2,030)(e) 4,962
Other assets 10,269 10,269
TOTAL ASSETS $ 731,188 $ (149,941) $ 581,247
LIABILITIES AND SHAREHOLDERS'
INVESTMENT
Current liabilities:
Short-term debt $ 167,903 $ (51,983)(f) $ 115,920
Current maturities of long-
term debt 4,341 4,341
Deferred income taxes 4,962 4,962
Accounts payable 129,623 129,623
Accrued expenses 59,882 (3,964)(b) 55,918
Total current liabilities 366,711 (55,947) 310,764
Long-term debt 178,031 (28,064)(g) 149,967
Other liabilities 3,770 3,770
Deferred gain on sale/leaseback 18,710 18,710
Shareholders' investment 163,966 (65,930)(h) 98,036
TOTAL LIABILITIES AND SHAREHOLDERS'
INVESTMENT $ 731,188 $ (149,941) $ 581,247
(a) In the above pro forma adjustments, all closing costs and associated
liabilities paid, resulting from the transaction, were assumed to
reduce the net proceeds received from the sale.
(b) Reflects the liquidation of inventory and payment of certain
liabilities as a result of the sale.
(c) Reflects occupancy costs for the post-closing liquidation period which
were prepaid at closing.
(d) Represents the net book value of property and equipment sold in the
transaction.
(e) Reflects the establishment of a valuation allowance to reduce deferred
tax assets to the amount expected to be realized due to the loss
incurred related to this transaction.
(f) Reflects the net cash proceeds received from the sale plus the cash
received from the liquidation of inventories.
(g) Reflects the prepayment of $5,754 of mortgage notes from the proceeds
of the sale and a reduction in the financing obligation from
sale/leaseback transactions as a result of Kmart assuming certain of
these obligations.
(h) Reflects the nonrecurring charge for costs associated with this
transaction.
Pro Forma Financial Information
Venture Stores, Inc.
Pro Forma Condensed Statement of Earnings
For the Year Ended January 25, 1997
(Unaudited)
(thousands, except per share data)
Pro Forma
Historical Adjustments Pro Forma
Net Sales $1,485,759 $ (227,802)(a) $1,257,957
Costs and expenses:
Cost of merchandise sold 1,165,325 (179,601)(a) 985,724
Selling, general,
administrative and
other expenses 387,173 (60,234)(a) 326,939
Net interest expense 27,576 (4,760)(b) 22,816
Earnings (loss) before income
taxes (94,315) 16,793 (77,522)
Income tax provision (benefit) (35,837) 15,509 (c) (20,328)
NET EARNINGS (LOSS) $ (58,478) $ 1,284 $ (57,194)
Dividends on preferred stock 2,500 2,500
NET EARNINGS (LOSS) AVAILABLE
TO COMMON SHAREOWNERS $ (60,978) $ 1,284 $ (59,694)
EARNINGS (LOSS) PER
COMMON SHARE $ (3.38) $ (3.31)
AVERAGE COMMON SHARES
OUTSTANDING 18,025 18,025
(a) To eliminate the store operating results of the 20 stores sold for the
entire period presented.
(b) To adjust interest expense to reflect decreases in short-term debt and
long-term debt utilizing the average interest rates in effect during
the period.
(c) To adjust income taxes for the limit on the benefit that could be
realized based on the valuation allowance that would have been
recorded against the deferred tax asset if the transaction had
occurred on January 28, 1996.
Pro Forma Financial Information
Venture Stores, Inc.
Pro Forma Condensed Statement of Earnings
For the 13 Weeks Ended April 26, 1997
(Unaudited)
(thousands, except per share data)
Pro Forma
Historical Adjustments Pro Forma
Net Sales $ 314,438 $ (51,238)(a) $ 263,200
Costs and expenses:
Cost of merchandise sold 242,416 (39,574)(a) 202,842
Selling, general,
administrative and
other expenses 89,059 (14,097)(a) 74,962
Net interest expense 7,781 (1,239)(b) 6,542
Earnings (loss) before income
taxes and extraordinary item (24,818) 3,672 (21,146)
Income tax provision (benefit) (9,312) 9,513 (c) 201
NET EARNINGS (LOSS) BEFORE
EXTRAORDINARY ITEM (15,506) (5,841) (21,347)
Dividends on preferred stock 625 625
NET EARNINGS (LOSS) AVAILABLE
TO COMMON SHAREOWNERS
BEFORE EXTRAORDINARY ITEM $ (16,131) $ (5,841) $ (21,972)
EARNINGS (LOSS) PER COMMON
SHARE BEFORE EXTRAORDINARY
ITEM $ (0.88) $ (1.20)
AVERAGE COMMON SHARES
OUTSTANDING 18,266 18,266
(a) To eliminate the store operating results of the 20 stores sold for the
entire period presented.
(b) To adjust interest expense to reflect decreases in short-term debt and
long-term debt utilizing the average interest rates in effect during
the period.
(c) To adjust income taxes for the limit on the benefit that could be
realized based on the valuation allowance that would have been
recorded against the deferred tax asset if the transaction had
occurred on January 28, 1996. The remaining income tax provision is
for certain state taxes.
EXHIBIT 2
ASSET PURCHASE AGREEMENT
BETWEEN
Kmart Corporation
AND
Venture Stores, Inc.
Dated as of
July 2, 1997
TABLE OF CONTENTS
Page
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
2. Basic Transaction. . . . . . . . . . . . . . . . . . . . . 5
(a) Purchase and Sale of Assets. . . . . . . . . . . . . 5
(b) Assumption of Liabilities. . . . . . . . . . . . . . 5
(c) Purchase Price . . . . . . . . . . . . . . . . . . . 6
(d) The Closing. . . . . . . . . . . . . . . . . . . . . 6
(e) Deliveries at the Closing. . . . . . . . . . . . . . 6
(f) Prorations . . . . . . . . . . . . . . . . . . . . . 6
(g) Closing Costs. . . . . . . . . . . . . . . . . . . . 8
(h) Further Assurances . . . . . . . . . . . . . . . . . 8
3. Representations and Warranties of Seller . . . . . . . . . 8
(a) Organization of Seller . . . . . . . . . . . . . . . 9
(b) Authorization of Transaction . . . . . . . . . . . . 9
(c) Noncontravention . . . . . . . . . . . . . . . . . . 9
(d) Brokers' Fees. . . . . . . . . . . . . . . . . . . . 9
(e) Title to Assets. . . . . . . . . . . . . . . . . . . 10
(f) Percentage Rent. . . . . . . . . . . . . . . . . . . 10
(g) Intentionally Deleted . . . . . . . . . . . . . . . 10
(h) Undisclosed Liabilities. . . . . . . . . . . . . . . 10
(i) Legal Compliance . . . . . . . . . . . . . . . . . . 10
(j) Real Property. . . . . . . . . . . . . . . . . . . . 10
(k) Tangible Assets. . . . . . . . . . . . . . . . . . . 13
(l) Litigation . . . . . . . . . . . . . . . . . . . . . 13
(m) Environment, Health, and Safety. . . . . . . . . . . 13
(n) Disclosure . . . . . . . . . . . . . . . . . . . . . 14
4. Representations and Warranties of Buyer. . . . . . . . . . 14
(a) Organization of Buyer. . . . . . . . . . . . . . . . 14
(b) Authorization of Transaction . . . . . . . . . . . . 14
(c) Noncontravention . . . . . . . . . . . . . . . . . . 15
(d) Brokers' Fees. . . . . . . . . . . . . . . . . . . . 15
(e) Disclosure . . . . . . . . . . . . . . . . . . . . . 15
5. Pre-Closing Covenants. . . . . . . . . . . . . . . . . . . 15
(a) General. . . . . . . . . . . . . . . . . . . . . . . 15
(b) Landlord Consents. . . . . . . . . . . . . . . . . . 15
(c) Other Notices and Consents . . . . . . . . . . . . . 15
(d) Full Access. . . . . . . . . . . . . . . . . . . . . 15
(e) Notice of Developments . . . . . . . . . . . . . . . 17
(f) Exclusivity. . . . . . . . . . . . . . . . . . . . . 17
(g) Title Insurance. . . . . . . . . . . . . . . . . . . 17
(h) Surveys. . . . . . . . . . . . . . . . . . . . . . . 18
(i) Cooperation. . . . . . . . . . . . . . . . . . . . . 18
6. Conditions to Obligation to Close
(a) Conditions to Obligation of Buyer. . . . . . . . . . 18
(b) Conditions to Obligation of Seller . . . . . . . . . 20
7. Termination. . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Termination of Agreement . . . . . . . . . . . . . . 22
(b) Effect of Termination. . . . . . . . . . . . . . . . 23
(c) Partial Termination . . . . . . . . . . . . . . . . 23
8. Post-Closing Covenants and Matters . . . . . . . . . . . . 24
(a) Intentionally deleted. . . . . . . . . . . . . . . . 24
(b) Indemnification Provisions for Benefit of Buyer. . . 24
(c) Indemnification Provisions for Benefit of Seller . . 25
(d) Matters Involving Third Parties. . . . . . . . . . . 25
(e) Condemnation . . . . . . . . . . . . . . . . . . . . 27
(f) Casualty . . . . . . . . . . . . . . . . . . . . . . 27
(g) Employees. . . . . . . . . . . . . . . . . . . . . . 27
(h) Sale of Owned Machinery, Owned Equipment
and Owned Furniture. . . . . . . . . . . . . . . . 28
9. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . 28
(a) Survival of Representations and Warranties . . . . . 28
(b) Press Releases and Public Announcements. . . . . . . 28
(c) No Third-Party Beneficiaries . . . . . . . . . . . . 28
(d) Entire Agreement . . . . . . . . . . . . . . . . . . 28
(e) Succession and Assignment. . . . . . . . . . . . . . 28
(f) Counterparts . . . . . . . . . . . . . . . . . . . . 29
(g) Headings . . . . . . . . . . . . . . . . . . . . . . 29
(h) Notices. . . . . . . . . . . . . . . . . . . . . . . 29
(i) Governing Law. . . . . . . . . . . . . . . . . . . . 30
(j) Amendments and Waivers . . . . . . . . . . . . . . . 30
(k) Severability . . . . . . . . . . . . . . . . . . . . 30
(l) Expenses . . . . . . . . . . . . . . . . . . . . . . 30
(m) Construction . . . . . . . . . . . . . . . . . . . . 31
(n) Incorporation of Exhibits and Schedules. . . . . . . 31
(o) Specific Performance . . . . . . . . . . . . . . . . 31
(p) Submission to Jurisdiction . . . . . . . . . . . . . 31
Exhibits
A Stores (Texas/Interstate)
B Assumed Liabilities
C Form of Assignment and Assumption Agreement
D License
E Form of Unitary Lease
F Form of Unitary Lease
Schedules
3(e)-1 Title Exceptions
3(e)-2 Exceptions Seller Must Clear from Title
3(f) Percentage Rent Obligations of Seller under the
Leases
3(h) Liabilities of Seller relating to the stores
3(j)(I) Owned Property
3(j)(I)(E) Subleases and Security Deposits
3(j)(ii) Leases
3(j)(ii)(B) Leases Requiring Landlord Consent for Assignment
3(j)(ii)(E) Notices of Encroachments and Other Violations
3(j)(ii)(F) Other Agreements
3(j)(ii)(G) Assignments, Oral or Written, By Parties to the
Lease or Sublease
3(k) Leased Equipment and Other Tangible Assets Located
at the Stores
3(l) Litigation to Which Seller is a Party Relating to
the Acquired Assets
3(m) Environmental Reports
5(c)-1 Estoppel Certificates and Other Requested Third
Party Items -- Conditions to Closing
5(c)-2 Requested Third-Party Items -- Cooperation of the
Parties
5(g) Title Insurance Amounts Per Owned Property or
Leased Property
6(a)(v) Subleases Not Terminated or Cancelled
6(a)(xiv) Stores Requiring Additional Environmental Review
7(a)(ii) Purchase Price Reduction Formula
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement"), dated as
of July 2, 1997, by and between Kmart Corporation, a Michigan
corporation ("Buyer"), and Venture Stores, Inc., a Delaware
corporation ("Seller"). Buyer and Seller are each a "Party" and
are referred to collectively herein as the "Parties."
WHEREAS, Buyer and Seller have reached agreement with
respect to the sale by Seller and the purchase by Buyer of
certain assets of Seller, together with the assumption by Buyer
of certain liabilities of Seller related thereto.
NOW, THEREFORE, in consideration of the mutual agree-
ments, herein contained, intending to be legally bound hereto,
the Parties agree as follows:
1. Definitions.
"Acquired Assets" means all right, title, and interest
in and to all of the stores of Seller listed on Exhibit A hereto
(the "Stores") and the assets contained in and relating to the
Stores, including all fee, leasehold and ground leasehold inter-
est in the land, all buildings, structures, improvements, fix-
tures, and fittings, and all easements, rights-of-way, and other
appurtenants thereto (such as appurtenant rights in and to public
streets); all owned machinery, owned furniture and owned equip-
ment that are necessary to the operation of a discount retail
store, including, but not limited to, energy monitoring system
equipment, security and surveillance equipment, hand-held scan-
ners, label printers, shopping carts, movable merchandise han-
dling equipment, autopoles, sign hangers, and clothes hangers;,
all Subleases and all security deposits paid thereunder; trans-
ferable business licenses; and architectural, site, landscaping
or other permits, applications, approvals, authorizations and
other entitlements, transferable guarantees and warranties,
reports, test results, environmental assessments and as-built
plans to the extent that these items are in Seller's possession
or are readily attainable by Seller and the pylons and monuments
that support Seller's signs; provided, however, that Acquired
Assets shall not include Excluded Assets.
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees, rul-
ings, damages, dues, penalties, fines, costs, amounts paid in
settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and attorneys' fees and
expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of
the regulations promulgated under the Securities Exchange Act.
"Assumed Liabilities" means the Liabilities set forth
on Exhibit B hereto.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transac-
tion that forms or could form the basis for any specified conse-
quence.
"Closing" has the meaning set forth in Section 2(d)
below.
"Closing Date" has the meaning set forth in
Section 2(d) below.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Deferred Intercompany Transaction" has the meaning set
forth in Treas. Reg. Section 1.1502-13.
"Delinquent Rents" has the meaning set forth in Section
2(f) below.
"Disclosure Schedule or Schedules" has the meaning set
forth in Section 3 below.
"Environmental, Health, and Safety Laws" means the Com-
prehensive Environmental Response, Compensation and Liability Act
of 1980, the Resource Conservation and Recovery Act of 1976, and
the Occupational Safety and Health Act of 1970, each as amended,
together with all other laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety, or
employee health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, pro-
cessing, distribution, use, treatment, storage, disposal, trans-
port, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
"Excluded Assets" means the inventories of retail goods
contained in the Stores, which shall be disposed of by Seller
pursuant to the License; any property located in the Stores which
is leased to Seller as set forth on Schedule 3(k) or furnished by
Seller's merchandise vendors; personal computers; bags; credit
card applications; employment applications; receipts and similar
supplies used in the business; policy and procedures manuals;
training materials and equipment; personnel files and other
confidential or proprietary materials; Seller's books, records,
trademarks and signs; and any owned equipment that is located
primarily in Seller's distribution centers and from time to time
in the Stores and that is used exclusively for distribution of
Seller's inventory.
"Ground Leased Property" has the meaning set forth in
Section 5(h) below.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in
Section 8(d) below.
"Indemnifying Party" has the meaning set forth in
Section 8(d) below.
"Interim Period" means, with respect to each Store, the
period during which the License is in effect commencing on the
Closing Date and ending on the date on which Seller delivers
possession of the Store to Buyer pursuant to the terms of the
License.
"Interstate Stores" means those ten stores located in
Texas, Oklahoma, Iowa and Indiana listed on Exhibit A hereto.
"Joint Press Release" has the meaning set forth in
Section 9(b) below.
"Knowledge" means that the Party has or is deemed to
have actual knowledge after reasonable investigation.
"Landlord Consents" has the meaning set forth in
Section 5(b) below.
"Leased Property" means those certain parcels of land
leased to Seller pursuant to the Leases (as hereinafter defined).
"Leases" means those certain leases, subleases and
ground leases of Seller, as tenant, as amended to date, listed on
Schedule 3(j)(ii).
"Liability" means any liability (whether known or
unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any
Liability for Taxes.
"License" has the meaning set forth in Section 2(e)
below.
"License Fee" has the meaning set forth in Section 2(e)
below.
"Ordinary Course of Business" means the ordinary course
of business consistent with past custom and practice (including
with respect to quantity and frequency).
"Owned Property" means those certain fee owned proper-
ties of Seller listed on Schedule 3(j)(I).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corpora-
tion, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity
(or any department, agency, or political subdivision thereof).
"Purchase Price" has the meaning set forth in
Section 2(c) below.
"Restructuring Laws" has the meaning set forth in
Section 6(a)(xv) below.
"Reports" has the meaning set forth in Section 3(m)
below.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a)
mechanic's, materialmen's, and similar liens, (b) liens for Taxes
not yet due and payable, (c) purchase money liens and liens
securing rental payments under capital lease arrangements, and
(d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Seller" has the meaning set forth in the preface
above.
"Stores" means those stores listed on Exhibit A hereto.
"Subleases" means all tenant leases, subleases, licens-
es and concessions, all as amended to date, of Seller, as land-
lord, sublessor and licensor with respect to the Stores as
disclosed on Schedule 3(j)(I)(E) of the Disclosure Schedule.
"Sublessees" means all tenants, subtenants and licens-
ees under the Subleases.
"Survey" has the meaning set forth in Section 5(h)
below.
"Taxes" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environ-
mental (including taxes under Code Sec. 59A), customs duties,
capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any
kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"Texas Stores" shall mean those ten Stores located in
the Houston, Texas market listed on Exhibit A hereto.
"Third Party Claim" has the meaning set forth in
Section 8(d) below.
"WARN Act" means the United States Worker Adjustment
and Retraining Notification Act.
2. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject
to the terms and conditions of this Agreement, Buyer agrees to
purchase from Seller, and Seller agrees to sell, transfer,
convey, and deliver to Buyer, all of the Acquired Assets at the
Closing for the consideration specified below in this Section 2.
(b) Assumption of Liabilities. On and subject to
the terms and conditions of this Agreement, Buyer agrees to
assume and become responsible for the Assumed Liabilities as of
the Closing Date. Buyer will not assume or have any responsi-
bility, however, with respect to any other obligations or Liabil-
ity of Seller not included within the definition of Assumed
Liabilities, including, but not limited to, (i) any Liability of
Seller for income, transfer, sales, use, and other Taxes (exclud-
ing real estate and personal property taxes which shall be
apportioned as set forth in Section 2 (f)) arising in connection
with the consummation of the transactions contemplated hereby
(including any income Taxes arising because Seller is transfer-
ring the Acquired Assets or because Seller has deferred gain on
any Deferred Intercompany Transaction), (ii) any Liability of
Seller for the unpaid Taxes of any Person (other than any of
Seller, its subsidiaries and landlords under the Leases for which
such Liability is prorated) under Treas. Reg. Section 1.1502-6
(or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise, (iii) any
Liability arising in the Ordinary Course of Business or otherwise
in connection with the operation or condition of the Stores prior
to the end of the Interim Period including, but not limited to,
Liabilities to employees with respect to salaries and employee
benefits plans, (iv) any Liability arising pursuant to the
activities of Seller under the License, (v) any Liability of
Seller relating to the WARN Act, (vi) any Liability of Seller for
costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby, or (vii) any Liability or
obligation of Seller under this Agreement (or under any side
agreement between Seller on the one hand and Buyer on the other
hand entered into on or after the date of this Agreement).
(c) Purchase Price. Buyer agrees to pay to Seller
at the Closing Thirty-eight Million and No/100 Dollars
($38,000,000.00 ) (the "Purchase Price") by delivery of cash
payable by wire transfer of immediately available funds.
(d) The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place
at the offices of Skadden, Arps, Slate, Meagher & Flom (Illinois)
in Chicago, Illinois, commencing at 9:00 a.m. on July 11, 1997 or
such other date as the Parties may mutually determine (the
"Closing Date").
(e) Deliveries at the Closing. At the Closing,
(i) Seller will deliver to Buyer the certificates, instruments,
and documents referred to in Section 6(a) below; (ii) Buyer will
deliver to Seller the certificates, instruments, and documents
referred to in Section 6(b) below; (iii) Seller will execute, ac-
knowledge (if appropriate), and deliver to Buyer (A) a special
warranty deed for each parcel of Owned Property; (B) an assign-
ment of lease for each Lease, other than the Unitary Leases (as
hereinafter defined), substantially in the form of Exhibit C
attached hereto; (C) a bill of sale; and (D) such other instru-
ments of sale, transfer, conveyance, and assignment as Buyer and
its counsel may reasonably request (each of A-D shall be
reasonably satisfactory in form and substance to Buyer and its
counsel); (iv) Buyer will execute, acknowledge (if appropriate),
and deliver to Seller an instrument of assumption substantially
in the form of Exhibit C attached hereto and such other
assumption documents reasonably requested by Seller in form and
substance reasonably satisfactory to Buyer and its counsel; and
(v) Buyer will deliver to Seller the consideration specified in
Section 2(c) above. The Parties shall enter into a license
agreement (the "License") substantially in the form of Exhibit D
attached hereto to allow Seller access to the Stores after
Closing during the Interim Period only so that Seller may prepare
for and liquidate the inventory at the Stores. Seller, as
consideration for the License, shall pay to Buyer at Closing, a
fee in the amount of Two Million Dollars ($2,000,000)(the "Li-
cense Fee").
(f) Prorations. Rents, revenues, and other in-
come, if any, from the Stores (but excluding customer sales and
licensed department revenues), assessments, improvement bonds,
service or other contract fees, utility costs, real property
taxes, and other expenses affecting the Stores shall be prorated
between Buyer and Seller as of the Closing Date. For purposes of
calculating prorations, Buyer shall be deemed to have title to or
a valid leasehold interest in the Acquired Assets, and therefore
entitled to the income and responsible for the expenses, after
12:01 a.m. on the Closing Date. Delinquent rents owed to Seller
as of the Closing Date (the "Delinquent Rents") shall not be
prorated and Seller (subject to the provisions of the next
succeeding sentence) hereby irrevocably assigns, as of the
Closing Date, its entire right, title, and interest in and to
such Delinquent Rents (including the right to collect same) to
Buyer. If Buyer collects any Delinquent Rents subsequent to the
Closing Date, such Delinquent Rents, net of any collection costs,
shall first be applied to the Sublessee's current rent obliga-
tions and other payment obligations under the Sublease and any
excess Delinquent Rents shall be refunded to Seller. At Closing,
Buyer shall be fully credited for (i) security deposits which
were paid by Sublessees to Seller, (ii) reimbursement expenses
and other sums owed by Seller to Sublessees under the Subleases
for work which occurred prior to the Closing Date or for work to
be performed or allowances to be granted to any Sublessees upon
or after the Closing Date pursuant to any Subleases or other
agreements in existence as of the Closing Date, (iii) any commis-
sions or brokerage fees payable upon or after the Closing Date in
connection with any Subleases in existence as of the Closing
Date, (iv) rentals already received by Seller attributable to
periods after the Closing Date, (v) unpaid real property taxes
with an assessment date prior to the current calendar year and
Seller's prorated share of any unpaid real property taxes with an
assessment date during 1997 and (vi) any unpaid personal property
taxes with an assessment date prior to the Closing Date. At
Closing, Seller shall be fully credited for security deposits and
prepaid rent and other prepaid sums paid to landlords by Seller
under the Leases. All real property taxes with respect to the
Acquired Assets shall be prorated as of the Closing Date. The
proration shall be based on the assessment for the current
calendar year and the most recent ascertainable components of the
tax formula and shall be re-prorated upon receipt of the actual
tax bills. If there is any additional money due and owing to
Buyer as a result of the re-prorations, such amounts shall be
deducted from the License Fee, or, if no money remains from the
License Fee, Seller shall reimburse Buyer for the additional tax
expense within five (5) business days of receipt of written
demand with appropriate back-up. If there is any additional
money due and owing Seller as a result of the re-prorations,
Buyer shall reimburse Seller for such amount within fifteen (15)
business days of receipt of the actual tax bill. If supplemental
taxes are assessed after the Closing Date for any period prior to
the Closing Date, Seller shall immediately reimburse Buyer for
the cost of such supplemental taxes. All personal property taxes
assessed prior to the Closing Date shall be the responsibility of
Seller. All personal property taxes assessed after the Closing
Date shall be the responsibility of Buyer. At Closing, Buyer
shall be fully credited for all personal property taxes on
personal property owned by Seller as of the personal property tax
assessment date and not yet paid and Seller shall assume the
liability for such payment. Seller shall provide Buyer with
copies of all unpaid personal property tax bills. If Seller
receives any additional personal property tax bills after Clos-
ing, for personal property assessed prior to Closing, Seller
shall pay such additional bills in a timely manner, but, in no
event shall Seller allow such taxes to become delinquent. If
Buyer receives any additional personal property tax bills or
subsequent audit adjustments after Closing for personal property
assessed prior to Closing, Buyer shall pay such taxes and deduct
such taxes from the License Fee, or if no money remains from the
License Fee, Seller shall immediately reimburse Buyer for the
additional tax expense. Notwithstanding the foregoing, Buyer
acknowledges that Seller is contesting the assessed valuation of
certain of the Acquired Assets. If as a result thereof, Buyer
receives a refund or a credit against real estate taxes pertain-
ing to any tax year ending prior to the Closing Date, Buyer shall
promptly pay to Seller the amount of the refund or the amount of
the credit.
(g) Closing Costs. Each party shall pay its own
costs and expenses arising in connection with the Closing (in-
cluding, without limitation, its own attorney and advisor fees).
Seller shall pay for any and all transfer, conveyance or similar
taxes in connection with the Closing.
(h) Further Assurances. After the Closing, the
Parties shall from time to time at each other's request and
without further cost or expense to each other, execute and
deliver such other instruments of conveyance, transfer and
assumption and take such other actions as may reasonably be
requested to more effectively consummate the transactions contem-
plated hereby and to vest in Buyer good, valid and marketable
title to or valid leasehold interest in the Acquired Assets, or
to cause Buyer to assume the Assumed Liabilities, as the case may
be.
3. Representations and Warranties of Seller. Seller
represents and warrants to Buyer that the statements contained in
this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this
Section 3), except as set forth on the disclosure schedule accom-
panying this Agreement and initialed by the Parties (the "Disclo-
sure Schedule" or "Schedules") or as supplemented as hereinafter
provided. In the event, on or before July 7, 1997, Seller learns
of any event that may affect the accuracy of the following
representations or warranties or discovers any inaccuracies
therein, Seller shall notify Buyer of such event or inaccuracy
and the Parties shall negotiate in good faith the appropriate
remedy therefor. If no such remedy is agreed upon, to the extent
such inaccuracy, in the sole judgment of Buyer, materially
affects or casts doubt on the value of the Acquired Assets and
the benefits of the transaction contemplated herein to Buyer as a
whole, Buyer shall have the right to terminate this Agreement in
accordance with Section 7 below. To the extent the inaccuracy
goes to an individual Store, Buyer shall have the remedies set
forth in Section 7(a)(ii). The Disclosure Schedule will be ar-
ranged in paragraphs corresponding to the lettered and numbered
paragraphs contained herein.
(a) Organization of Seller. Seller is a corpora-
tion duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation.
(b) Authorization of Transaction. Seller has full
power and authority (including full corporate power and author-
ity) to execute and deliver this Agreement and to perform its
obligations hereunder subject to Seller's receipt, which is
required hereunder, of the Landlord Consents and other required
third party consents described in Section 5(b) and Section 5(c)
below. Without limiting the generality of the foregoing, the
board of directors of Seller has duly authorized the execution,
delivery, and performance of this Agreement by Seller. This
Agreement constitutes the valid and legally binding obligation of
Seller, enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and
the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby (including the assignments and
assumptions referred to in Section 2 above), will (i) violate any
constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Seller is
subject or any provision of the charter or bylaws of Seller or
(ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument,
or other arrangement to which Seller is a party or by which it is
bound or to which any of the Acquired Assets is subject (or
result in the imposition of any Security Interest upon any of the
Acquired Assets), subject to Seller's receipt, which is required
hereunder, of the Landlord Consents and other required third
party consents described in Section 5(b) and Section 5(c) below.
Except as it relates to the Hart-Scott-Rodino Act and any
applicable state statutes relating to the Store going-out-of-
business sales, Seller does not need to give any notice to, make
any filing with, or obtain any authorization, consent, or approv-
al of any government or governmental agency in order for the Par-
ties to consummate the transactions contemplated by this Agree-
ment (including the assignments and assumptions referred to in
Section 2 above).
(d) Brokers' Fees. Seller has no Liability or
obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this
Agreement for which Buyer could become liable or obligated.
(e) Title to Assets. Seller has good, valid and
marketable title to, or a valid leasehold interest in, the Ac-
quired Assets, free and clear of any Security Interest or re-
striction on transfer except those exceptions set forth on
Schedule 3(e)-1 and 3(e)-2.
(f) Percentage Rent. Seller is not obligated for
the payment of percentage rent under the Leases except as set
forth on Schedule 3(f).
(g) Intentionally deleted.
(h) Undisclosed Liabilities. Seller has received
no notice nor does Seller have any Knowledge, of any Liability
relating to the Stores (and Seller has received no notice of, and
has no Knowledge of, any Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any Liabili-
ty), except for Liabilities set forth on Schedule 3(h) or Liabil-
ities that are adequately covered by insurance policies that will
remain in effect until all such Liabilities are resolved or
Liabilities that are self-insured if each such Liability is less
than Ten Thousand dollars ($10,000) individually and less than
Fifty Thousand Dollars ($50,000) in the aggregate.
(i) Legal Compliance. With respect to the opera-
tion of the Stores, Seller has materially complied with all
applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments
(and all agencies thereof), and has received no notice of, and
has no Knowledge that any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has
been filed or commenced against it alleging any failure so to
comply.
(j) Real Property.
(i) Schedule 3(j)(I) lists and
describes briefly all of the Owned Property that is
part of the Acquired Assets. With respect to each such
parcel of Owned Property:
(A) Seller has received no
notice, nor does Seller have Knowledge, of any threat-
ened condemnation proceedings, lawsuits, or administra-
tive actions relating to the Owned Property and Seller
has received no notice of, nor does Seller have Knowl-
edge of, any other matters materially adversely affect-
ing the current use or occupancy;
(B) the Owned Property is not
located within any flood plain or subject to any simi-
lar type restriction for which any permits or licenses
necessary to the use thereof have not been obtained;
(C) Seller has received no
notice, nor does Seller have any Knowledge, of any
failure to obtain approvals of governmental authorities
(including licenses and permits) required in connection
with the ownership or operation of the Stores and to
Seller's Knowledge the Stores have been operated and
maintained in accordance with applicable laws, rules,
and regulations;
(D) Seller has received no
notice from any landlord, any governmental authority or
agency or any other party, nor does Seller have any
Knowledge, of any violation or potential violation of
annexation, zoning, land use or building code require-
ments, subdivision map requirements, air and water
quality control permits or state, county or city ordi-
nances with regard to any parcel of Owned Property;
(E) there are no Subleases or
other agreements, written or oral, granting to any
party or parties the right of use or occupancy of any
portion of the parcel of Owned Property and no security
deposits have been paid to Seller thereunder other than
as disclosed on Schedule 3(j)(I)(E);
(F) Seller has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in any Owned Property, includ-
ing any outstanding options or rights of first refusal
to purchase any Owned Property, or any portion thereof
or interest therein except as set forth in
Section 3(e)-2;
(G) there are no parties
(other than Seller) in possession of the Owned Proper-
ty, other than Sublessees under any Subleases disclosed
on Schedule 3(j)(I)(E) who are in possession of space
to which they are entitled; and
(H) all Stores located on the
Owned Property are supplied with utilities and other
services necessary for the operation of such facilities
as they are currently operated.
(ii) Seller has delivered to Buyer cor-
rect and complete copies of all of the Leases and
Subleases. With respect to each Lease and Sublease, as
applicable:
(A) the Lease and Sublease are
legal, valid, binding, enforceable, and in full force
and effect;
(B) the Lease and Sublease set
forth on Schedule 6(a)(v) can be assigned without Land-
lord Consent except as set forth on Schedule
3(j)(ii)(B);
(C) the property subject to
the Lease is not located within any flood plain or
subject to any similar type restriction for which any
permits or licenses necessary to the use thereof have
not been obtained;
(D) Seller has not sent or
received a notice of default, nor does Seller have any
Knowledge, that any Party to a Lease or Sublease is in
breach or default, and has no Knowledge that any event
has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination,
modification, or acceleration under any Lease or Sub-
lease;
(E) Seller has received no
notice from any landlord, any governmental authority or
agency or any other party, nor does Seller have any
Knowledge, of any violation or potential violation of
annexation, zoning, land use or building code require-
ments, subdivision map requirements, air and water
quality control permits or state, county or city ordi-
nances with regard to the Store under the Lease except
as set forth in Schedule 3(j)(ii)(E);
(F) there are no other agree-
ments between the parties to the Lease or Sublease,
oral or written, except as set forth in the Lease or
Sublease or on Schedule 3(j)(ii)(F);
(G) Seller has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the Lease or Sublease except
as set forth on Schedule 3(j)(ii)(G);
(H) Seller has received no
notice, nor does Seller have any Knowledge, of any
failure to obtain approvals of governmental authorities
(including licenses and permits) required in connection
with the operation of the Store subject to the Lease
and has operated and maintained the Store in accordance
with applicable laws, rules, and regulations;
(I) there are no pending or,
to the Knowledge of Seller, threatened condemnation
proceedings, lawsuits, or administrative actions relat-
ing to the Leased Property and Seller has received no
notice, nor does Seller have Knowledge, of any other
matters materially adversely affecting the current use
or occupancy thereof;
(J) Seller has no Knowledge of
any material casualty or other casualty not adequately
covered by insurance affecting the Store subject to the
Lease;
(K) the Store subject to the
Lease is supplied with utilities and other services
necessary for the operation of said Store as it is
currently operated; and
(L) the Store subject to the
Lease abuts on and has direct vehicular access to a
public road or has access to a public road via a perma-
nent, irrevocable, appurtenant easement benefitting the
properties on which the Store is located.
(k) Tangible Assets. Seller owns all machinery,
equipment and furniture and other tangible assets located at each
Store which are necessary for the operation of the Store and
which are part of the Acquired Assets except for those categories
of equipment listed on Schedule 3(k) that are leased to Seller.
Each such tangible asset is in good operating condition and
repair (subject to normal wear and tear) and is suitable for the
purposes for which it presently is used. Seller has not removed
any owned machinery, owned equipment or owned furniture of the
type that is included in the Acquired Assets from any Store since
June 15, 1997 other than in the Ordinary Course of Business.
(l) Litigation. Schedule 3(l) sets forth each
instance in which Seller is a party or, to Seller's Knowledge, is
threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator relating
to the Acquired Assets other than litigation in the nature of
personal injury suits that are adequately covered by insurance
and which the insurance company is currently handling.
(m) Environment, Health, and Safety.
(i) As it relates to the Acquired
Assets, except as disclosed in the reports set forth on
Schedule 3(m) ("Reports"), Seller, to its Knowledge,
has complied with all Environmental, Health, and Safety
Laws, and no action, suit, proceeding, hearing, inves-
tigation, charge, complaint, claim, demand, or notice
has been filed or commenced against Seller alleging any
failure so to comply. Without limiting the generality
of the preceding sentence, as it relates to the Ac-
quired Assets, except as disclosed in the Reports,
Seller, to its Knowledge, has obtained and been in
material compliance with all of the terms and condi-
tions of all permits, licenses, and other authoriza-
tions which are required under, and has complied with
all other limitations, restrictions, conditions, stan-
dards, prohibitions, requirements, obligations, sched-
ules, and timetables which are contained in, all Envi-
ronmental, Health, and Safety Laws.
(ii) As it relates to the Acquired
Assets, except as disclosed in the Reports, Seller, to
its Knowledge, has not handled or disposed of any sub-
stance, arranged for the disposal of any substance,
exposed any employee or other individual to any sub-
stance or condition, or owned or operated any property
or facility in any manner that could form the Basis for
any present or future action, suit, proceeding, hear-
ing, investigation, charge, complaint, claim, or demand
against Seller giving rise to any Liability) for damage
to any site, location, or body of water (surface or
subsurface), for any illness of or personal injury to
any employee or other individual, or for any reason
under any Environmental, Health, and Safety Law.
(n) Disclosure. The representations and warran-
ties contained in this Section 3 do not contain any untrue state-
ment of a material fact or omit to state any material fact
necessary in order to make the statements and information
contained in this Section 3 not misleading.
4. Representations and Warranties of Buyer. Buyer
represents and warrants to Seller that the statements contained
in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substi-
tuted for the date of this Agreement throughout this Section 4),
except as set forth in the Disclosure Schedule.
(a) Organization of Buyer. Buyer is a corporation
duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation.
(b) Authorization of Transaction. Buyer has full
power and authority (including full corporate power and authori-
ty) to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of Buyer, enforceable in accordance
with its terms and conditions.
(c) Noncontravention. Neither the execution and
the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby (including the assignments and
assumptions referred to in Section 2 above), will (i) violate any
provision of Buyer's charter or bylaws or (ii) violate any
material order, arbitration award, judgment, decree, law, ordi-
nance, or regulation to which Buyer is a party. Except as it
relates to the Hart-Scott-Rodino Act, Buyer does not need to give
any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated
by this Agreement (including the assignments and assumptions
referred to in Section 2 above).
(d) Brokers' Fees. Buyer has no Liability or
obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this
Agreement for which Seller could become liable or obligated.
(e) Disclosure. The representations and warran-
ties contained in this Section 4 do not contain any untrue state-
ment of a material fact or omit to state any material fact
necessary in order to make the statements and information
contained in this Section 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as fol-
lows with respect to the period between the execution of this
Agreement and the Closing.
(a) General. Each of the Parties will use commer-
cially reasonable efforts to take all action and to do all things
necessary, proper, or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (inclu-
ding satisfaction, but not waiver, of the closing conditions set
forth in Section 6 below).
(b) Landlord Consents to Assignment. Seller shall
use commercially reasonable efforts to obtain all required
consents of the landlords to the assignment of the Leases to
Buyer as set forth on Schedule 3(j)(ii)(B) (the "Landlord Con-
sents"). The Parties shall cooperate to facilitate the acquisi-
tion of the Landlord Consents, subject to the cost limitations
set forth in this Section 5(b). The Parties shall share equally
any fees or payments (including any increase in rent under any
Lease) imposed by landlords in connection with the transfer of
any Lease; provided, however, neither Party shall be required to
pay more than $200,000 in the aggregate pursuant to this
Section 5(b). If Seller is unable to obtain a required Landlord
Consent, the Parties shall enter into a sublease, provided that
such sublease is permissible under the terms of the applicable
Lease, that such sublease shall contain substantially the same
terms and conditions as contained in such Lease, which are
reasonably satisfactory to Buyer, so that Buyer is essentially in
the same position as Buyer would have been had the Lease been as-
signed, and provided, further, that Buyer shall receive a non-
disturbance and attornment agreement reasonably satisfactory to
Buyer from Seller's landlord. If Seller is unable to fulfill the
requirements of this Section 5(b), Buyer shall have the remedies
set forth in Section 7 (a)(ii) hereof.
(c) Other Notices and Consents. Seller shall be
required to deliver any notices to third parties, and Seller
shall use commercially reasonable efforts to obtain any third
party consents that are required to transfer or assign any of the
Acquired Assets or do any of the things contemplated in this
Agreement, as well as any estoppel certificates, in the form
required by each particular Lease, if any, or a form reasonably
agreed upon by Seller and Buyer, and other similar items from
ground lessors, landlords and Sublessees as more specifically set
forth on Schedules 5(c)-1 and 5(c)-2. Obtaining the consents set
forth in Schedule 5(c)-1 shall be a condition to the obligations
of Buyer hereunder and, if Seller is unable to obtain the items
set forth in Schedule 5(c)-1, Buyer shall have the remedies set
forth in Section 7 (a)(ii) hereof. Obtaining the consents or
waivers set forth in Schedule 5(c)-2 shall not be deemed a condi-
tion to Closing, but Seller shall cooperate with Buyer in an
attempt to obtain same at no expense to Seller.
Each of the Parties will give any notices to, make any
filings with, and use commercially reasonable efforts to obtain
any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to
above. Without limiting the generality of the foregoing, each of
the Parties will file any Notification and Report Forms and
related material that it may be required to file with the Federal
Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use
commercially reasonable efforts to obtain an early termination of
the applicable waiting period, and will make any further filings
pursuant thereto that may be necessary, proper, or advisable in
connection therewith.
(d) Full Access. After issuance of the Joint
Press Release pursuant to Section 9(b) hereof, Seller will permit
representatives of Buyer to have full access to all premises,
properties, personnel, books, records, contracts, and documents
of or pertaining to the Stores and the Acquired Assets. Buyer
agrees that until Closing, except as otherwise provided herein or
required by law and except for the exercise by Buyer of any
remedy hereunder, Buyer shall keep the information and the
documents supplied by Seller to Buyer confidential and will
disclose such information only to Buyer's agents, employees,
consultants, attorneys, lenders, and other Persons with a need to
know the information including title company personnel and
surveyors. Disclosure of information by Buyer shall not be
prohibited if that disclosure is of information that is or
becomes a matter of public record or public knowledge from
sources other than Buyer.
(e) Notice of Developments. Each Party will give
prompt written notice to the other Party of any material adverse
development causing a breach of any of its own representations
and warranties in Section 3 and Section 4 above. No disclosure
by either Party pursuant to this Section 5(e), however, shall be
deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
(f) Exclusivity. Seller will not (i) solicit,
initiate, or encourage the submission of any proposal or offer
from any Person relating to the acquisition of the Acquired
Assets or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. Seller
will notify Buyer immediately if any Person makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.
(g) Title Insurance. Seller will provide to Buyer
at Closing, with respect to each Owned Property and each Leased
Property, an ALTA Owner's or Leasehold Policy of Title Insurance
Form B-1992 (or equivalent policy acceptable to Buyer if the
Owned Property or Leased Property is located in a state in which
an ALTA Owner's or Leasehold Policy of Title Insurance Form
B-1992 is not available) issued by a title insurer satisfactory
to Buyer, in the amounts listed on Schedule 5(g), insuring fee or
leasehold title to such Owned Property or Leased Property respec-
tively to be in Buyer as of the Closing (subject only to the
title exceptions described in Schedule 3(e)-1). Each title
insurance policy delivered under this Section 5(g) shall insure
title to the Owned Property or Leased Property and all recorded
easements benefitting same with extended coverage insuring over
the general exceptions customarily contained in such policies, if
available in the applicable state, and shall include those title
endorsements reasonably requested by Buyer and available in the
state where the Owned Property or Leased Property is located.
Seller shall not be required to bring any action or proceeding or
incur any expense (other than liquidated amounts not in excess of
Five Hundred Thousand Dollars ($500,000) in the aggregate) in
order to deliver clean title as provided hereunder. If Seller is
unable to deliver acceptable title to an Owned Property or Leased
Property in accordance with this Agreement, Buyer shall have the
remedies set forth in Section 7(a)(ii) hereof.
(h) Surveys. With respect to each parcel of
Owned Property, each Store that is subject to a ground lease
("Ground Leased Property") and each Leased Property (to the
extent available), Seller will provide, prior to the Closing
Date, an as-built survey certified to Buyer and such other
parties as Buyer may request, prepared by a licensed surveyor,
disclosing the location of all improvements, easements, party
walls, sidewalks, roadways, utility lines, and other matters
shown customarily on such surveys, and showing access affirma-
tively to public streets and roads (the "Survey"). The Survey
shall not disclose any survey defect or encroachment from or onto
the Owned Property, Ground Leased Property, or Leased Property
which in Buyer's reasonable judgment materially impairs the use
or operation of the Store unless same has been cured or insured
over prior to the Closing. Obtaining the Surveys shall not be
deemed a condition to Closing, but Seller shall use commercially
reasonable efforts to deliver the Surveys prior to Closing and
shall be required to deliver the Surveys no later than August 15,
1997.
(i) Cooperation. Seller shall cooperate with
Buyer in discussions with the landlords under the Leases regard-
ing the amendment of such Leases, where required, to permit Buyer
to self-insure certain of the insurance coverage required there-
under. The Parties acknowledge that Seller shall not be required
to incur any out of pocket cost or expense in connection with the
cooperation required by this Section 5(i) and that obtaining any
amendments contemplated by this Section 5(i) shall not be a
condition to the obligation of either Party to consummate the
Closing hereunder.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of Buyer. The obli-
gation of Buyer to consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of
the following conditions:
(i) the representations and warranties
of Seller set forth in Section 3 above shall be true
and correct in all material respects at and as of the
Closing Date;
(ii) Seller shall have performed and
complied with all of its covenants hereunder in all
material respects at and as of the Closing Date;
(iii) Kimven Corporation shall enter
into two unitary net leases (the "Unitary Leases") with
Buyer in substantially the same forms of Exhibits E and
F hereto with regard to the Stores listed thereon;
(iv) Seller shall have procured all of
the Landlord Consents, or a corresponding sublease and
non-disturbance and attornment agreement, as specified
in Section 5(b) above;
(v) Seller shall have cancelled, or
given notice of such cancellation, at Seller's sole
cost and expense, all of the third party contracts and
agreements to which Seller is a party relating to the
Acquired Assets except for the Subleases set forth on
Schedule 6(a)(v) which cannot be terminated;
(vi) Seller shall give evidence to
Buyer that Seller has procured and will maintain the
insurance required pursuant to the License;
(vii) Seller shall have procured all of
the third party consents and estoppels specified on
Schedule 5(c)-1 above, all of the title insurance poli-
cies and endorsements specified in Section 5(g) above;
(viii) no action, suit, or proceeding
shall be pending or threatened before any court or
quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judg-
ment, order, decree, ruling, or charge would (A) pre-
vent consummation of any of the transactions contem-
plated by this Agreement, (B) cause any of the transac-
tions contemplated by this Agreement to be rescinded
following consummation, or (C) affect materially and
adversely the right of Buyer to own the Acquired As-
sets;
(ix) Seller shall have delivered to
Buyer a certificate to the effect that each of the
conditions specified in Section 6(a)(i),(ii),(iv),(v)
and (viii) above is satisfied in all respects;
(x) all applicable waiting periods (and
any extensions thereof) under the Hart-Scott- Rodino
Act shall have expired or otherwise been terminated and
Seller and Buyer shall have received all other authori-
zations, consents, and approvals of governments and
governmental agencies, if any, referred to in
Section 3(c) and Section 4(c) above;
(xi) Neither of the Parties shall have
terminated this Agreement pursuant to Section 7 below;
(xii) Buyer shall have completed its
inspection of the roofs of the Stores located in Texas
with results satisfactory to Buyer on or before July 7,
1997;
(xiii) Seller shall have provided Buyer
with environmental reports satisfactory to Buyer for
the Store located in Waterloo, Iowa;
(xiv) Buyer shall have completed such
additional environmental reports, studies, tests or
diligence as Buyer deems necessary on the Stores listed
on Schedule 6 (a)(xiv) with results satisfactory to
Buyer in its sole discretion;
(xv) Seller shall have corrected the
violations set forth on Schedule 3(j)(ii)(E) in a
manner that is satisfactory to Buyer;
(xvi) Seller shall not have sought
relief pursuant to the provisions of the United States
Bankruptcy Code or any other similar state or federal
law or process (collectively "Restructuring Laws") nor
be the subject of an involuntary proceeding pursuant to
any Restructuring Laws; provided, however, in the event
a proceeding is filed by or against Seller pursuant to
a Restructuring Law prior to the earlier of Closing or
August 15, 1997, Seller may satisfy this condition to
Closing by obtaining entry of a final order, within
fifteen (15) days after commencement of such proceed-
ing, authorizing and approving the assumption pursuant
to section 365(b) of the United States Bankruptcy Code
or such other applicable Restructuring Law of this
Agreement and of any and all other agreements contem-
plated hereby, each without qualification or modifica-
tion; and
(xvii) all actions to be taken by
Seller in connection with consummation of the transac-
tions contemplated hereby and all certificates, in-
struments, and other documents required to effect the
transactions contemplated hereby will be reasonably
satisfactory in form and substance to Buyer.
Buyer may waive any condition specified in this
Section 6(a) if it executes a writing so stating at or prior to
the Closing.
(b) Conditions to Obligation of Seller. The
obligation of Seller to consummate the transactions to be per-
formed by it in connection with the Closing is subject to satis-
faction of the following conditions:
(i) the representations and warranties
of Buyer set forth in Section 4 above shall be true and
correct in all material respects at and as of the
Closing Date;
(ii) Buyer shall have performed and
complied with all of its covenants hereunder in all
material respects at and as of the Closing Date;
(iii) no action, suit, or proceeding
shall be pending or threatened before any court or
quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by
this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded follow-
ing consummation (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
(iv) Buyer shall have delivered to
Seller a certificate to the effect that each of the
conditions specified above in Section 6(b)(i)-(iii)
above is satisfied in all respects;
(v) all Landlord Consents have been
obtained and all applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act
shall have expired or otherwise been terminated and
Seller and Buyer shall have received all other authori-
zations, consents, and approvals of governments and
governmental agencies, if any, referred to in
Section 3(c) and Section 4(c) above;
(vi) Neither of the Parties shall have
terminated this Agreement pursuant to Section 7 below;
(vii) Seller shall have received all
permits and licenses necessary to undertake the liqui-
dation of inventory pursuant to the License; provided,
however, that if Seller is unable to obtain the licens-
es and permits contemplated by this Section 6(b)(vii)
with regard to any of the Stores, Buyer shall have the
remedies set forth in Section 7 (a)(ii) hereof;
(viii) Kimven Corporation and Kimven II
Corporation shall amend the two Leases listed in Sched-
ule 3(j)(ii) with respect to Store numbers 29 and 32
(and others) so that such Leases cover only those
Stores currently covered by such Leases that are not
being sold to Buyer hereunder with a prorata reduction
in the rental thereunder; and
(ix) all actions to be taken by Buyer
in connection with consummation of the transactions
contemplated hereby and all certificates, instruments,
and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in
form and substance to Seller.
Seller may waive any condition specified in this
Section 6(b) if it executes a writing so stating at or prior to
the Closing.
(c) Buyer shall notify Seller on or before July 7,
1997 with respect to the condition set forth in Section 6(a)
(xii) above, or prior to Closing with respect to the conditions
set forth in Section 6(a)(xiii) or (xiv) above, if Buyer has not
completed such due diligence in a satisfactory manner in Buyer's
sole judgment and the Parties shall negotiate in good faith the
appropriate remedy therefor. If no such remedy is agreed upon,
the provisions of Section 7(a)(ii) shall apply with respect to
the applicable Stores in question.
7. Termination.
(a) Termination of Agreement. The Parties may
terminate this Agreement as provided below:
(i) Buyer and Seller may terminate this
Agreement by mutual written consent at any time prior
to the Closing;
(ii) Buyer may terminate this Agreement
prior to Closing, upon written notice to Seller, if (1)
on Buyer's Termination Date, Seller is able to deliver
less than eight of the Interstate Stores and less than
eight of the Texas Stores and (2) Buyer is unwilling to
close on less than eight of the Interstate Stores and
less than eight of the Texas Stores, in accordance with
the provisions of this Agreement, including, but not
limited to, Sections 5(b), 5(c), 5(g), 5(h), 6(a)(xii),
6(a)(xiii), 6(a)(xiv), 8(f) and 8(g) hereof. If, on
Buyer's Termination Date, Seller is only able to deliv-
er less than eight of the Interstate Stores and less
than eight of the Texas Stores, Buyer may elect to pur-
chase all of the Interstate Stores that Seller can
deliver and/or all of the Texas Stores that Seller can
deliver with an applicable reduction of the Purchase
Price as set forth in Schedule 7(a)(ii).
Notwithstanding the foregoing, if Buyer is
unwilling to purchase one or more of the Interstate
Stores or the Texas Stores in accordance with the terms
of this Agreement, but is obligated or elects to pur-
chase the remainder of that group of Stores in accor-
dance with the terms of this Agreement, the Purchase
Price shall be reduced as set forth in Schedule
7(a)(ii).
(iii) Buyer may terminate this Agree-
ment by giving written notice to Seller at any time
prior to the Closing in the event Seller has breached
any material representation, warranty, or covenant con-
tained in this Agreement in any material respect, Buyer
has notified Seller of the breach, and the breach has
continued without cure for a period of 10 days after
the notice of breach; provided, however, that such cure
period shall not effect Buyer's right to terminate
under Section 7(a)(vi);
(iv) Seller may terminate this Agree-
ment by giving written notice to Buyer at any time
prior to the Closing in the event Buyer has breached
any material representation, warranty, or covenant con-
tained in this Agreement in any material respect,
Seller has notified Buyer of the breach, and the breach
has continued without cure for a period of 10 days
after the notice of breach; provided, however, that
such cure period shall not effect Seller's right to
terminate under Section 7(a)(v);
(v) Seller may terminate this Agreement
at any time after July 15, 1997 ("Seller's Termination
Date") (i) in total, if the Closing does not occur with
respect to any Stores on or before Seller's Termination
Date, or (ii) with respect to all Stores not Closed as
of Seller's Termination Date if a Closing has occurred
as of such date with respect to some Stores (a "Partial
Closing"), provided, however, that if a Partial Closing
has occurred, Seller may not terminate this Agreement
with respect to Store 131 and Store 139 unless the
conditions to the Closing of these Stores have not been
met on or before July 29, 1997; and
(vi) Buyer may terminate this Agreement
if the Closing does not occur on or before August 15,
1997 ("Buyer's Termination Date").
(b) Effect of Termination. If any Party termi-
nates this Agreement pursuant to Section 7(a) above, all rights
and obligations of the Parties hereunder shall terminate without
any Liability of any Party to any other Party (other than with
respect to any Liability for broker's fees).
(c) Partial Termination. Notwithstanding anything
to the contrary contained herein, (i) if Seller is not able to
deliver all of the Stores in accordance with the terms of this
Agreement but is able to deliver eight or more of the Texas
Stores and eight or more of the Interstate Stores in accordance
with the terms of this Agreement, then Buyer shall be obligated
to close on the Texas Stores and the Interstate Stores that
Seller can deliver in accordance with the terms of this Agreement
with an applicable reduction in the Purchase Price as set forth
in Schedule 7(a)(ii), (ii) if Seller is able to deliver eight or
more of the Texas Stores in accordance with the terms of this
Agreement but less than eight of the Interstate Stores, then
Buyer shall be obligated to close on the Texas Stores that Seller
can deliver in accordance with the terms of this Agreement with
an applicable reduction in the Purchase Price as set forth in
Schedule 7(a)(ii), and (iii) if Seller is able to deliver eight
or more of the Interstate Stores in accordance with the terms of
this Agreement but less than eight of the Texas Stores, then
Buyer shall be obligated to close on the Interstate Stores that
Seller can deliver in accordance with the terms of this Agreement
with an applicable reduction in the Purchase Price as set forth
in Schedule 7(a)(ii). In the case of (ii) above, Buyer may elect
to purchase those Interstate Stores that Seller can deliver with
an applicable reduction of the Purchase Price as set forth in
Schedule 7(a)(ii). In the case of (iii) above, Buyer may elect
to purchase those Texas Stores that Seller can deliver with an
applicable reduction of the Purchase Price as set forth in
Schedule 7(a)(ii). Upon a Partial Closing of the Interstate
Stores and/or the Texas Stores, as the case may be, from and
after Seller's Termination Date, Seller shall have no further
obligation to close on the remaining Interstate Stores or the re-
maining Texas Stores, except that Seller shall continue to use
reasonable efforts to satisfy the necessary conditions to Closing
for Store 131 and Store 139 until July 29, 1997. In no event,
however, shall Seller be obligated to close on Store 131 and/or
Store 139 at any time after July 29, 1997.
8. Post-Closing Covenants and Matters.
(a) Intentionally deleted.
(b) Indemnification Provisions for Benefit of
Buyer.
(i) In the event Seller breaches any of
its representations, warranties, and covenants con-
tained in this Agreement, and, if there is an applica-
ble survival period pursuant to Section 9(a) below,
Seller agrees to indemnify Buyer from and against any
Adverse Consequences Buyer may suffer through and after
the date of the claim for indemnification (including
any Adverse Consequences Buyer may suffer after the end
of any applicable survival period) resulting from,
arising out of, relating to, in the nature of, or
caused by the breach (or the alleged breach) provided
Buyer gives notice to Seller of such claim before the
end of the applicable survival period, if any.
(ii) Seller agrees to indemnify Buyer
from and against the entirety of any Adverse Conse-
quences Buyer may suffer resulting from, arising out
of, relating to, in the nature of, or caused by any
Liability of Seller which is not an Assumed Liability
(including any Liability of Seller that becomes a
Liability of Buyer under any bulk transfer law of any
jurisdiction, under any common law doctrine of de facto
merger or successor liability, or otherwise by opera-
tion of law during any time period prior to and includ-
ing the Interim Period and for all Liability, including
severance payments to and any claims of Seller's em-
ployees), including Liability under any contracts and
agreements referenced in Section 6(a)(v) and including
any Liability arising in connection with the operation
and condition of the Stores during the Interim Period.
(c) Indemnification Provisions for Benefit of
Seller.
(i) In the event Buyer breaches any of
its representations, warranties, and covenants con-
tained in this Agreement, and, if there is an applica-
ble survival period pursuant to Section 9(a) below,
then Buyer agrees to indemnify Seller from and against
any Adverse Consequences Seller may suffer through and
after the date of the claim for indemnification (in-
cluding any Adverse Consequences Seller may suffer
after the end of any applicable survival period) re-
sulting from, arising out of, relating to, in the
nature of, or caused by the breach (or the alleged
breach) provided Seller gives notice to Buyer of such
claim before the end of the applicable survival period,
if any.
(ii) Buyer agrees to indemnify Seller
from and against any Adverse Consequences Seller may
suffer resulting from, arising out of, relating to, or
caused by any Assumed Liability arising during any time
period from and after the end of the Interim Period.
(d) Matters Involving Third Parties.
(i) If any third party shall notify
either Party (the "Indemnified Party") with respect to
any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against the other Party
(the "Indemnifying Party") under this Section 8, then
the Indemnified Party shall promptly notify the
Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified
Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.
(ii) An Indemnifying Party will have
the right to defend the Indemnified Party against the
Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party
in writing within 15 days after the Indemnified Party
has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Adverse Conse-
quences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim, (B) the Indemnifying
Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to
defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (C) the Third
Party Claim involves only money damages and does not
seek an injunction, criminal penalties or other equita-
ble relief, (D) settlement of, or an adverse judgment
with respect to, the Third Party Claim is not, in the
good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice adverse to
the continuing business interests of the Indemnified
Party, and (E) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligent-
ly.
(iii) So long as the Indemnifying Party
is conducting the defense of the Third Party Claim in
accordance with Section 8(d)(ii) above, (A) the In-
demnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of
the Third Party Claim, (B) the Indemnified Party will
not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying
Party (not to be withheld unreasonably), and (C) the
Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to
the Third Party Claim without the Prior written consent
of the Indemnified Party (not to be withheld unreason-
ably).
(iv) In the event any of the conditions
in 8(d)(ii) above is or becomes unsatisfied, however,
upon prior notice and reasonable opportunity to cure to
the Indemnifying Party (A) the Indemnified Party may
defend against, and consent to the entry of any judg-
ment or enter into any settlement with respect to, the
Third Party Claim in any manner it may deem appropriate
(and the Indemnified Party need not consult with, or
obtain any consent from, any Indemnifying Party in
connection therewith), (B) the Indemnifying Parties
will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the
Third Party Claim (including attorneys' fees and ex-
penses), and (C) the Indemnifying Parties will remain
responsible for any Adverse Consequences the Indemni-
fied Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third
Party Claim to the fullest extent provided in this
Section 8.
(e) Condemnation. If, prior to Closing, all or
any portion of a Store is taken by condemnation or eminent domain
(or is the subject of a pending or contemplated taking which has
not been consummated), Seller shall immediately notify Buyer of
such fact. In such event, Buyer shall have the option to either
consummate the purchase of the Stores subject to an assignment by
Seller to Buyer of any condemnation award or to exercise the
remedies set forth in Section 7(a)(ii) above with respect to the
condemned Store.
(f) Casualty. Prior to Closing and notwithstand-
ing the pendency of this Agreement, the entire risk of loss or
damage by earthquake, flood, landslide, fire, hurricane, tornado
or other casualty shall be borne by Seller. If, prior to Clos-
ing, any of the Stores is materially damaged or destroyed by
earthquake, flood, landslide, fire, hurricane, tornado, or other
casualty, Seller shall immediately notify Buyer of such fact. If
the damage is material, in Buyer's reasonable judgment, Buyer
shall have the option to either consummate the purchase of the
Stores subject to an assignment by Seller to Buyer of the insur-
ance proceeds or to exercise the remedies set forth in Section
7(a)(ii) above with respect to the damaged Store. If the damage
is immaterial, in Buyer's reasonable judgment, Buyer shall be re-
quired to close on such Store with, at Buyer's option, either the
assignment of insurance proceeds from Seller or an adjustment to
the Purchase Price as reasonably determined by the Parties.
(g) Employees. From and after the Joint Press
Release, Seller shall permit Buyer reasonable access to interview
employees of Seller assigned to the Stores for the purpose of
making appropriate arrangements for employing any and all such
employees as desired by Buyer, provided that Seller shall retain
the right to make a competing offer of continued employment to
any such employee. Seller shall retain responsibility for sever-
ance obligations, giving any notice to employees required by law
or contract, including any WARN Act notices and any other obliga-
tions which may arise in connection with its employees and their
termination of employment.
(h) Sale of Owned Machinery, Owned Equipment and
Owned Furniture. If on or before the end of the second quarter
of Buyer's 1998 fiscal year, Buyer decides, in its sole discre-
tion, not to use some or all of the machinery, equipment, furni-
ture or fixtures included in the Acquired Assets, Buyer shall
return such items to Seller at no charge, provided that Seller
pays the cost of packing and transportation for any of such
items. If Seller chooses not to reclaim such Acquired Assets,
Buyer may resell such items, and shall share the net proceeds
resulting from such sale or sales after deduction of all costs
incurred in connection with such sale(s), including taxes paid on
the proceeds thereof, equally with Seller.
9. Miscellaneous.
(a) Survival of Representations and Warranties.
All of the representations and warranties of the Parties con-
tained in this Agreement shall survive the Closing hereunder for
a period of one (1) year.
(b) Press Releases and Public Announcements. The
Parties shall issue a joint press release (the "Joint Press
Release") announcing the transaction within two (2) business days
after the execution of this Agreement. Notwithstanding the
foregoing, neither Party shall issue any press release or make
any public announcement relating to the subject matter of this
Agreement without the prior written approval of the other Party;
provided, however, that either Party may make any public disclo-
sure it believes in good faith is required by applicable law or
any listing or trading agreement concerning its publicly-traded
securities (in which case the disclosing Party will use its
commercially reasonable efforts to consult with the other Party
prior to making the disclosure).
(c) No Third-Party Beneficiaries. This Agreement
shall not confer any rights or remedies upon any Person other
than the Parties and their respective successors and permitted
assigns.
(d) Entire Agreement. This Agreement (including
the documents referred to herein) constitutes the entire agree-
ment between the Parties and supersedes any prior understandings,
agreements, or representations by or between the Parties, written
or oral, to the extent they related in any way to the subject
matter hereof.
(e) Succession and Assignment. This Agreement
shall be binding upon and inure to the benefit of the Parties
named herein and their respective successors and permitted
assigns. Neither Party may assign either this Agreement or any
of its rights, interests, or obligations hereunder without the
prior written approval of the other Party; provided, however,
that Buyer may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate one
or more of its Affiliates to perform its obligations hereunder
(in any or all of which cases Buyer nonetheless shall remain
responsible for the performance of all of its obligations hereun-
der).
(f) Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and the
same instrument.
(g) Headings. The section headings contained in
this Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this Agree-
ment.
(h) Notices. All notices, requests, demands,
claims, and other communications hereunder will be in writing.
Any notice, request, demand, claim, or other communication
hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to Seller:
Venture Stores, Inc.
2001 East Terra Lane
O'Fallon, MO 63366-0110
Attn: EVP-Administration
Facsimile No. (314) 281-7233
With a copy to:
Kronish Lieb Weiner & Hellman
1114 Avenue of Americas
45th Floor
New York, New York 10036
Attn: Mark Lipschutz
Facsimile No. (212) 479-6275
If to Buyer:
Kmart Corporation
3100 West Big Beaver Road
Troy, MI 48084-3163
Attn: General Counsel
Facsimile No. (248) 643-1054
With a copy to:
Skadden, Arps, Slate, Meagher & Flom (Il-
linois)
333 West Wacker Drive
Suite 2100
Chicago, Illinois 60606
Attn: Marian P. Wexler
Facsimile No. (312) 407-0411
Either Party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at the
address set forth above using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex,
ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the
intended recipient. Either Party may change the address to which
notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
(i) Governing Law. This Agreement shall be
governed by and construed in accordance with the domestic laws of
the State of Illinois without giving effect to any choice or con-
flict of law provision or rule (whether of the State of Illinois
or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois.
(j) Amendments and Waivers. No amendment of any
provision of this Agreement shall be valid unless the same shall
be in writing and signed by authorized representatives of Buyer
and Seller. Seller may consent to any such amendment at any time
prior to the Closing with the prior authorization of its board of
directors. No waiver by either Party of any default, misrepre-
sentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this
Agreement that is invalid or unenforceable in any situation in
any jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of Buyer and Seller will bear
its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions
contemplated hereby. Seller shall pay all transfer, conveyance
or similar Taxes.
(m) Construction. The Parties have participated
jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated there-
under, unless the context requires otherwise. The word "includ-
ing" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein
shall have independent significance. If either Party has
breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another repre-
sentation, warranty, or covenant relating to the same subject
matter (regardless of the relative levels of specificity) which
the Party has not breached shall not detract from or mitigate the
fact that the Party is in breach of the first representation,
warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The
Exhibits and Schedules identified in this Agreement are incor-
porated herein by reference and made a part hereof.
(o) Specific Performance. Each of the Parties
acknowledges and agrees that the other Party would be damaged
irreparably in the event any of the provisions of this Agreement
are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees
that the other Party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agree-
ment and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the
Parties and the matter (subject to the provisions set forth in
Section 9(p) below), in addition to any other remedy to which it
may be entitled, at law or in equity.
(p) Submission to Jurisdiction. Each of the Par-
ties submits to the jurisdiction of any state or federal court
sitting in Chicago, Illinois in any action or proceeding arising
out of or relating to this Agreement and agrees that all claims
in respect of the action or proceeding may be heard and deter-
mined in any such court. Each Party also agrees not to bring any
action or proceeding arising out of or relating to this Agreement
in any other court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding
so brought and waives any bond, surety, or other security that
might be required of the other Party with respect thereto.
Either Party may make service on the other Party by sending or
delivering a copy of the process (i) to the Party to be served at
the address and in the manner provided for the giving of notices
in Section 9(h) above or (ii) to the Party to be served in care
of the Process Agent at the address and in the manner provided
for the giving of notices in Section 9(h) above. Nothing in this
Section 9(p), however, shall affect the right of either Party to
bring any action or proceeding arising out of or relating to this
Agreement in any other court or to serve legal process in any
other manner permitted by law or in equity. Each Party agrees
that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment
or in any other manner provided by law or in equity.
IN WITNESS WHEREOF, the Parties hereto have executed
this Agreement as of the date first above written.
Kmart Corporation
By: /s/ Michael J. Viola
Title: Vice President and Treasurer
Venture Stores, Inc.
By: /s/Robert Wildrick
Title: C.E.O.
