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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): May 8, 1998 Closing Date
VALUE CITY DEPARTMENT STORES, INC.
(Exact name of registrant as specified in its charter)
OHIO
(State or other jurisdiction of incorporation)
1-10767 NO. 31-1322832
(Commission File Number) (IRS Employer Identification No.)
3241 WESTERVILLE ROAD, COLUMBUS, OHIO 43224
(Address of principal executive offices) (Zip Code)
(614) 471-4722
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
At a closing on May 8, 1998, the Company purchased 99.9% of the common
stock of Shonac Corporation ("Shonac") from Nacht Management, Inc. and
Schottenstein Stores Corporation ("SSC"), pursuant to that certain Stock
Purchase Agreement, dated as of May 1, 1998, a copy of which is filed herewith
as a Exhibit 2.1. SSC owns approximately 62% of the Company's outstanding common
stock. Shonac has operated, as Licensee, the shoe departments in the Company's
department stores since Shonac's inception in 1969. Shonac also operates a chain
of free-standing retail shoe outlets located throughout the United States,
principally under the name DSW Shoe Warehouse. The negotiated purchase
price for Shonac was $99,900,000.
The Company also acquired the store operations of the Valley Fair
Corporation ("Valley Fair") from SSC for a negotiated purchase price of
$8,000,000. Valley Fair operates two department stores located in Irvington and
Little Ferry, New Jersey. The Company has operated, as Licensee, certain
departments in these two stores for 18 years.
Both acquisitions will be accounted for as purchases and were effective
as of May 3, 1998. The acquisitions were funded by cash provided by operations
and approximately $88,000,000 from the Company's new long-term revolving bank
credit facility among the Company as borrower, the lending institutions named
therein, as lenders, National City Bank, as Swing-line Lender, Administrative
Agent and as Syndication Agent, and Bank One, N.A., as Documentation Agent. The
aggregate amount available under the bank facility is $185,000,000.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements.
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Registrant to provide the financial statements
required by this Item 7(a). In accordance with Item 7(a)(4) of Form
8-K, such financial statements shall be filed by amendment to this
Form 8-K no later than 60 days after May 23, 1998.
(b) Pro Forma Financial Information.
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Registrant to provide the pro forma financial
information required by this Item 7(b). In accordance with Item 7(b) of
Form 8-K , such financial statements shall be filed by amendment to
this Form 8-K no later than 60 days after May 23, 1998.
(c) Exhibits.
2.1 Stock Purchase Agreement entered into as of May 1, 1998
between the Company and Schottenstein Stores Corporation
("SSC") and Nacht Management Inc.
2.2 Asset Purchase Agreement entered into as of May 1, 1998
between the Company and Valley Fair Corporation, an
affiliate of SSC.
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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 hereunto duly authorized.
VALUE CITY DEPARTMENT STORES, INC.
(Registrant)
By /s/ ROBERT M. WYSINSKI
-----------------------------------
Robert M. Wysinski, Senior Vice
President, Chief Financial Officer,
Treasurer And Secretary*
Date: May 22, 1998
- --------------------------------------------------------------------------------
* Mr. Wysinski is the principal financial officer and has been duly authorized
to sign on behalf of the registrant.
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made and
entered into as of May 1, 1998 by and among VALUE CITY DEPARTMENT STORES, INC.,
an Ohio corporation ("Buyer"), and SCHOTTENSTEIN STORES CORPORATION, a Delaware
corporation ("SSC"), NACHT MANAGEMENT INC., an Ohio corporation ("Nacht"). SSC
and Nacht are collectively referred to herein as "Sellers".
A. Nacht owns 205.2524 shares of the common stock, without par
value ("Company Common Stock"), of Shonac Corporation, an Ohio corporation (the
"Company"), representing 50% of the issued and outstanding shares of the Company
Common Stock. SSC owns 204.8418952 shares of Company Common Stock, representing
49.9% of the issued and outstanding shares of the Company Common Stock. The Ohio
State University owns 0.4105048 shares of Company Common Stock, representing
0.1% of the outstanding shares of the Company Common Stock.
B. The Company owns and operates, as licensee, the shoe
departments in the chain of off-price department stores owned by Buyer and the
shoe departments in two Valley Fair stores and, directly or through its
wholly-owned subsidiary, owns and operates two chains of retail footwear outlets
under the names DSW Shoe Warehouse and Crown Shoe ( all of the foregoing
collectively, the "Business").
C. Sellers desire to sell all of their 410.0942952 shares of
Company Common Stock, representing 99.9% of the issued and outstanding shares of
the Company Common Stock (the "Shares"), to Buyer and Buyer desires to purchase
the Shares from Sellers, all on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants hereinafter contained, the parties hereto agree as follows:
ARTICLE 1.
SALE AND PURCHASE OF SHARES
Section 1.1. Sale and Purchase of Shares. Upon the terms and
subject to the conditions hereinafter set forth, Sellers agree to sell,
transfer, assign and deliver the Shares to Buyer, and Buyer agrees to purchase
the Shares from Sellers, free and clear of all security interests, liens,
pledges, claims, charges, escrows, encumbrances, options, rights of first
refusal, mortgages, indentures, security agreements or other agreements,
arrangements, contracts, commitments, understandings or obligations, whether
written or oral and whether or not relating in any way to credit or the
borrowing of money.
Section 1.2. Delivery of Shares. At the Closing (as defined in
Section 3.1 hereof), Sellers shall deliver to Buyer all of the share
certificates representing the Shares duly endorsed in blank or otherwise in
transferable form satisfactory to Buyer.
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ARTICLE 2.
PURCHASE PRICE
Section 2.1. Purchase Price. The purchase price (the "Purchase
Price") for all 410.0942952 of the Shares shall be a total of Ninety-Nine
Million Nine Hundred Thousand Dollars ($99,900,000) in cash.
Section 2.2. Payment. The Purchase Price shall be paid by a wire
transfer from Buyer in the total amount of the Purchase Price to Sellers at the
Closing, with $50,000,000 of the Purchase Price being paid to Nacht and
$49,900,000 of the Purchase Price being paid to SSC, in each case with interest
on such amounts from the Effective Time through the date of payment at the rate
of eight and one-half percent (8.5%) per annum.
ARTICLE 3.
THE CLOSING
Section 3.1. The Closing. This transaction shall be closed (the
"Closing") at 10:00 a.m., local time, on Friday, May 8, 1998 (the "Closing
Date") at the offices of Porter, Wright, Morris & Arthur, Columbus, Ohio or at
such other time and place as the parties may agree upon in writing, and shall be
effective as of 12:01 a.m., Columbus, Ohio time, on May 3, 1998 (the "Effective
Time").
Section 3.2. Buyer's Obligations at the Closing. At the Closing,
Buyer shall deliver to Sellers:
(a) The payment of the Purchase Price, plus interest, as
provided in Section 2.2; and
(b) A certificate of the Chief Executive Officer of Buyer in
form reasonably satisfactory to Sellers stating that the
representations and warranties of Buyer set forth in Article
5 are true and correct as of the Closing Date.
Section 3.3. Sellers' Obligations at the Closing. At the Closing,
Sellers shall deliver to Buyer:
(a) The certificates representing the Shares duly executed
in blank as provided in Section 1.2 above; and
(b) A certificate of Sellers in form satisfactory to Buyer
stating that the representations and warranties of Sellers
set forth in Article 4 are true and correct as of the
Closing Date.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby represent and warrant to Buyer that, except as set
forth on the Disclosure Schedule delivered by Sellers to Buyer in connection
with this Agreement (the "Disclosure Schedule"), but, with respect to any
specific representation and warranty, only to the extent that it would be
reasonably apparent that a reference on the Disclosure Schedule relates to such
representation and warranty:
Section 4.1. Organization and Qualification; Subsidiaries. The
Company and each of its subsidiaries (as such subsidiaries are listed on the
Disclosure Schedule) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the requisite corporate power and authority and any necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power, authority and governmental
approval could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect (as defined below). The Company and each of its
subsidiaries is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing which could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
When used in connection with the Company or a subsidiary, the term "Material
Adverse Effect" means any change or effect that, either individually or in the
aggregate with all other changes or effects, is materially adverse to the
assets, business, condition (financial or otherwise), prospects or results of
operations of the Company and its subsidiaries taken as a whole.
Section 4.2. Articles of Incorporation and Code of Regulations.
The Company has heretofore furnished to Buyer a complete and correct copy of the
articles of incorporation and the code of regulations of the Company as
currently in effect. Such articles of incorporation and code of regulations are
in full force and effect and no other organizational documents are applicable to
or binding upon the Company. The Company is not in violation of any of the
provisions of its articles of incorporation or code of regulations. As used in
this Agreement, reference to the delivery of documents by Sellers to Buyer shall
include delivery of such documents by Sellers to counsel for Buyer.
Section 4.3. Capitalization. The authorized capital stock of the
Company consists of 500 shares of Company Common Stock. As of April 15, 1998,
410.5048 shares of Company Common Stock were issued and outstanding, fully paid
and nonassessable, all of which were validly issued to Sellers and The Ohio
State University and were issued free of preemptive (or similar) rights. The
Company has not issued or reserved for issuance: (a) any shares of capital stock
or other voting securities of the Company or any of its subsidiaries, other than
the Shares, (b) any options or other rights to acquire from the Company or any
of its subsidiaries, or any obligation of the Company or any its subsidiaries to
issue, any capital stock,
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voting securities or securities convertible into or exchangeable for capital
stock or voting securities of the Company or any of its subsidiaries, or (c) any
equity equivalents, interests in the ownership or earnings of the Company or any
of its subsidiaries or other similar rights (clauses (a), (b) and (c)
collectively, "Company Securities"). There are no outstanding obligations of the
Company or its subsidiaries to repurchase, redeem or otherwise acquire any
Company Securities or to provide funds to or make any investment (in the form of
a loan, capital contribution or otherwise) in any such subsidiary or any other
entity. There are no options, calls, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or its subsidiaries to which the Company or any of
its subsidiaries is a party. The Company has delivered to Buyer prior to the
date hereof a true and complete list of the subsidiaries and associated entities
of the Company which evidences, among other things, the amount of capital stock
or other equity interests owned by the Company, directly or indirectly, in such
subsidiaries or associated entities. Each of the outstanding shares of capital
stock of each of the Company's subsidiaries is duly authorized, validly issued,
fully paid and nonassessable and all such shares are owned by the Company or
another wholly owned subsidiary of the Company and are owned free and clear of
all security interests, liens, claims, pledges, agreements, limitations in
voting rights, charges or other encumbrances of any nature whatsoever. No entity
in which the Company owns, directly or indirectly, less than a 50% equity
interest is, individually or when taken together with all such other entities,
material to the business of the Company and its subsidiaries taken as a whole.
As of the date hereof, the only outstanding indebtedness for borrowed money of
the Company and its subsidiaries is set forth on Section 4.3 of the Disclosure
Schedule.
Section 4.4. Authority Relative to this Agreement; Title to the
Shares. Each Seller has the full legal right, capacity and power required to
enter into, execute and deliver this Agreement and to perform fully its
obligations hereunder. This Agreement has been duly executed and delivered by
Sellers and, assuming the due execution and delivery of this Agreement by Buyer,
this Agreement constitutes the valid and binding obligation of Sellers
enforceable against Sellers in accordance with its terms, has been duly
authorized by all necessary corporate action and no other corporate proceedings
on the part of any Seller is necessary to authorize this Agreement or to
consummate the transactions contemplated under this Agreement. At the Effective
Time, Sellers shall own and transfer the Shares to Buyer free and clear of all
security interests, liens, pledges, claims, charges, escrows, encumbrances,
options, rights of first refusal, mortgages, indentures, security agreements or
other agreements, arrangements, contracts, commitments, understandings or
obligations, whether written or oral and whether or not relating in any way to
credit or the borrowing of money.
Section 4.5. No Conflict; Required Filings and Consents.
(a) The execution, delivery and performance of this
Agreement by each of the Sellers does not and will not: (i) conflict with or
violate the articles of incorporation or code of regulations of the Company or
the equivalent organizational documents of any of its subsidiaries; (ii)
assuming that all consents, approvals and authorizations contemplated by clauses
(i) and (ii) of subsection (b) below have been obtained and all filings
described in such clauses have been made, conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to
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the Company or any of its subsidiaries or by which its or any of their
respective properties are bound or affected; or (iii) result in any breach or
violation of or constitute a default (or an event which with notice or lapse of
time or both could become a default) or result in the loss of a material benefit
under, or give rise to any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of the Company or any of its subsidiaries pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or its or any of their respective properties are bound or affected,
except (A) in the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect and (B) in the case of clause (iii), other than as set forth in
Section 4.5 of the Disclosure Schedule.
(b) The execution, delivery and performance of this
Agreement by the Sellers and the consummation of the stock purchase pursuant
hereto (the "Stock Purchase") do not and will not require any consent, approval,
authorization or permit of, action by, filing with or notification to, any
Federal, state or local government or any court, administrative agency or
commission or other governmental authority, official or agency, domestic or
foreign (a "Governmental Entity"), except for (i) the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and (ii) such
consents, approvals, authorizations, permits, actions, filings or notifications
the failure of which to make or obtain could not reasonably be expected to (x)
prevent or materially delay consummation of the Stock Purchase or (y) have a
Material Adverse Effect.
Section 4.6. Compliance. Neither the Company nor any of its
subsidiaries is in conflict with, or in default or violation of, (i) any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties are bound
or affected or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective properties are bound or
affected, except for any such conflicts, defaults or violations which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 4.7. Financial Statements.
(a) The Company has heretofore delivered or promptly will
deliver to Buyer, each of the audited consolidated financial statements of the
Company, including all related notes thereto, for each of the two fiscal years
ended January 3, 1998 and will deliver to Buyer, at least five business days
prior to the Closing, the unaudited financial statements of the Company
consisting of a balance sheet of the Company as of April 4, 1998 and a statement
of earnings of the Company for the three months then ended (the "Financial
Statements"). The Financial Statements have been, and will be as of the Closing
Date, prepared in accordance with generally
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accepted accounting principles applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto) and fairly
present, and will fairly present as of the Closing Date, the consolidated
financial position of the Company and its subsidiaries at the respective dates
thereof and the consolidated results of its operations and changes in cash flows
for the periods indicated.
(b) Except as and to the extent set forth on the
consolidated balance sheet of the Company and its subsidiaries at April 4, 1998,
neither the Company nor any of its subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise),
except for liabilities or obligations incurred in the ordinary course of
business since April 4, 1998 and for liabilities that could not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect.
Section 4.8. Absence of Certain Changes or Events. Since April 4,
1998, except as contemplated by this Agreement or disclosed in Section 4.8 of
the Disclosure Schedule, the Company and its subsidiaries have conducted their
businesses only in the ordinary course and, since such date, there has not been
(i) any condition, event or occurrence which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect, or (ii) any
condition, event or occurrence which could reasonably be expected to prevent,
hinder or materially delay the ability of the Sellers to consummate the
transactions contemplated by this Agreement.
Section 4.9. Absence of Litigation. Except as disclosed in Section
4.9 of the Disclosure Schedule, there are no suits, claims, actions, proceedings
or investigations pending or, to the best knowledge of the Company or the
Sellers, threatened against the Company or any of its subsidiaries, or any
properties or rights of the Company or any of its subsidiaries, before any
Governmental Entity, that (i) individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect or (ii) seek to delay or prevent
the consummation of the transactions contemplated hereby. As of the date hereof,
neither the Company nor any of its subsidiaries nor any of their respective
properties is or are subject to any order, writ, judgment, injunction, decree,
determination or award having, or which, insofar as can be reasonably foreseen,
in the future could reasonably be expected to have a Material Adverse Effect or
could prevent or materially delay the consummation of the transactions
contemplated hereby. As of the date hereof, no officer, director or shareholder
of the Company is a defendant in any litigation with respect to the performance
of duties as an officer, director or shareholder of the Company under any
federal or state law (including litigation under federal and state securities
laws).
Section 4.10. Properties.
(a) Section 4.10(a) of the Disclosure Schedule sets forth a
complete and accurate list and description of all real property and interests in
real property owned in fee by the Company (the "Owned Real Property"), such
description including, for each parcel of Owned Real Property, the legal
description and address thereof, the approximate acreage thereof, the use
thereof, and the nature and square footage of any improvements thereon. Section
4.10(a) of the Disclosure Schedule also sets forth a complete and accurate list
and description of all real
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property leased, subleased or otherwise occupied by the Company (the "Leased
Real Property"), such description including, for each Leased Real Property, an
identification of the lease or sublease agreement therefor and any and all
amendments, modifications, side letters pertaining to the lease terms
(collectively, the "Leases"), default notices and material estoppel letters
related thereto (true and complete copies of which have previously been
delivered by the Company to Buyer), the names of the lessor and lessee (or
sublessor or sublessee) thereunder (including whether the lessor thereunder is
an affiliate of the Company, the title and date thereof, the location and
approximate size of the premises leased thereunder, the rental and term
thereunder, including any extension options, and the use of such premises. The
Owned Real Property and the Leased Real Property shall be hereinafter
collectively referred to as the "Real Property."
(b) The Company holds good and marketable fee or leasehold
title (as the case may be) to the Owned Real Property and the Leased Real
Property, free and clear of any liens, mortgages, easements, rights-of-way,
licenses, use restrictions, claims, charges, options, title defects or
encumbrances of any nature whatsoever, except for the Permitted Encumbrances (as
defined below). The Permitted Encumbrances do not and will not impair or
adversely affect the current or contemplated (the term "contemplated," as used
in this Section 4.10, meaning as identified in Section 4.10(a) of the Disclosure
Schedule) use, occupancy or operation of any Real Property, or the business,
operations, condition (financial or otherwise) or prospects of the Company. All
aspects of the Real Property are in compliance with any and all restrictions and
other provisions included in the Permitted Encumbrances, and there are no
matters which create, or which with notice or the passage of time would create,
a default under any of the documents evidencing the Permitted Encumbrances. No
part of the Real Property is subject to any building or use restrictions that
would restrict or prevent the present or contemplated use and enjoyment of the
Real Property, and the Real Property is properly and duly zoned for its current
and contemplated use and is in all material respects a conforming use. As used
herein, the term "Permitted Encumbrances" means those (i) liens for taxes not
yet due and payable or which are being contested in good faith and by
appropriate proceedings, (ii) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like liens, or (iii) easements,
rights-of-way, encroachments, restrictions, conditions and other similar
encumbrances, which are described or listed in Section 4.10(b) of the Disclosure
Schedule.
(c) Section 4.10(c) of the Disclosure Schedule contains a
complete and accurate list and description of all existing surveys, title
insurance policies, title insurance, abstracts and other evidence of title in
the Company's or Sellers's possession (true and complete copies of which have
previously been delivered by the Company and Sellers to Buyer) covering the Real
Property and all Permitted Encumbrances arising with respect to the Real
Property since the issuance of such title insurance policies.
(d) All buildings, structures, improvements and fixtures
located on, under, over or within the Real Property, and all other aspects of
each parcel of Real Property, (i) are in good operating condition and repair and
are structurally sound and free of any material defects; (ii) are suitable,
sufficient and appropriate in all respects for their current and contemplated
uses; and (iii) consist of sufficient land, parking areas, sidewalks, driveways
and other improvements to permit the continued use of such facilities in the
manner and for the purposes to which they are
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presently devoted or to which they are contemplated to be devoted, except for
such violations of (i),(ii) or (iii) which, individually or in the aggregate
with any other violation, could not reasonably be expected to have a Material
Adverse Effect. There are no outstanding or threatened requirements by any
insurance company which has issued an insurance policy covering any Real
Property, or by any board of fire underwriters or other body exercising similar
functions, requiring any repairs or alterations to be done on any Real Property,
except for such requirements which, individually or in the aggregate with any
other requirement, could not reasonably be expected to have a Material Adverse
Effect.
(e) There is no pending or, to the best knowledge of the
Company or the Sellers, threatened action or proceeding by any Governmental
Entity for assessment or collection of taxes, impact fees or special assessments
affecting any part of any Real Property, and no condemnation or eminent domain
proceeding against any part of any Real Property is pending or, to the best
knowledge of the Company or the Sellers, threatened, except for such actions or
proceedings which, individually or in the aggregate with any other action or
proceeding, could not reasonably be expected to have a Material Adverse Effect.
(f) Except for such circumstances which, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect: (i) all of the Leases are valid, binding and in full force and effect
and no Lease is subject to any pledge, lien, sublease, assignment, license or
other agreement granting to any third party any interest in such Lease or any
right to the use or occupancy of any Leased Real Property; (ii) the lessee under
each Lease is now in possession of the applicable Leased Real Property and there
is no pending or, to the best knowledge of the Company or the Sellers,
threatened proceeding which might interfere with the quiet enjoyment of each
tenant; (iii) to the best knowledge of the Company or the Sellers, there are no
outstanding defaults or circumstances which, upon the giving of notice or
passage of time or both, would constitute a default or breach by either party
under any Lease; (iv) the consummation of the transactions contemplated hereby
does not require the consent of any lessor under any Lease and will not
constitute a breach or default under any Lease; (v) the Company has exercised
within the time prescribed in each Lease any option provided therein to extend
or renew the term thereof; and (vi) the Leased Real Property either (A) is not
subject to any mortgage, deed of trust or other lien which has priority over any
Lease held by the Company, or (B) the holder of any such lien has entered into a
valid, binding and enforceable nondisturbance agreement in favor of the Company
pursuant to which the lease cannot be extinguished or terminated by reason of
any foreclosure or other acquisition of title by such holder. As used herein,
the term "lease" shall also include subleases, the term "lessor" shall also
include any sublessor, and the term "lessee" shall also include any sublessee.
Section 4.11. Employee Benefit Plans.
(a) Section 4.11(a) of the Disclosure Schedule contains a
true and complete list of each "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including without limitation multiemployer plans within the meaning
of ERISA Section 3(37), stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, collective bargaining, bonus,
<PAGE> 9
incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject to
ERISA (including any funding mechanism therefor now in effect or required in the
future as a result of the transaction contemplated by this Agreement or
otherwise), under which any employee or former employee of the Company or any of
its subsidiaries has, or could reasonably be expected to have, any present or
future right to benefits or under which the Company or any subsidiary of the
Company has, or could reasonably be expected to have, any present or future
liability. All such plans, agreements, programs, policies and arrangements shall
be collectively referred to as the "Company Plans." Section 4.11 of the
Disclosure Schedule also contains a true and complete description of all
severance plans of the Company or any of its subsidiaries. No Company Plan is a
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA or is an
"employee pension plan" within the meaning of Section 3(2) of ERISA subject to
Title IV of ERISA.
(b) With respect to each Company Plan, the Company has
delivered or made available to Buyer a current, accurate and complete copy (or,
to the extent no such copy exists, an accurate description) thereof and, to the
extent applicable, (i) any related trust agreement, annuity contract or other
funding instrument; (ii) the most recent determination letter; (iii) any summary
plan description and other written communications (or description of any oral
communication) by the Company or any of its subsidiaries which modify in any
significant respect the benefits provided under the terms of any Company Plan in
a manner not reflected in any of the documents described in this subsection (b);
and (iv) for the three most recent years (A) the Form 5500 and attached
schedules; (B) audited financial statements; and (C) actuarial valuation
reports.
(c) With respect to all the Company Plans: (i) all Company
Plans are in compliance with all applicable laws, including the Internal Revenue
Code of 1986, as amended (the "Code") and ERISA, and including all filing and
reporting requirements; (ii) the aggregate accumulated benefit obligations of
each pension plan that is subject to Title IV of ERISA (as of the date of the
most recent actuarial valuation prepared for such Plan) do not exceed the fair
market value of the assets of such pension plan (as of the date of such
valuation), and no material adverse change has occurred with respect to the
financial condition of such plan since such last valuation; (iii) each pension
plan that is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service, and
the Company is not aware of any circumstances likely to result in revocation of
any such favorable determination letter; (iv) there is no pending or, to the
knowledge of Sellers, threatened litigation or administrative agency proceeding
relating to any Company Plan (other than benefit claims in the ordinary course);
(v) the Company has no obligations under any unfunded deferred compensation
plans; (vi) neither the Company, its subsidiaries nor any entity that is treated
as a single employer with the Company or its subsidiaries under Section 414(b),
(c), (m) or (o) of the Code (an "ERISA Affiliate") has incurred or reasonably
expects to incur any lien or liability to the Pension Benefit Guaranty
Corporation, any Pension Plan or otherwise under Title IV of ERISA (other than
the payment of contributions or premiums, none of which are overdue) or under
Section 412 of the Code; and (vii) all contributions required to be made to any
Company Plan by applicable law or regulation or by any plan document or other
contractual undertaking, and all premiums due or payable with respect to
insurance policies funding any Company Plan, for any period through the date
hereof have been timely made or paid in full or, to the extent not
<PAGE> 10
required to be made or paid on or before the date hereof, have been fully
reflected on the Financial Statements.
(d) Except as specifically contemplated by the agreements
listed in Section 4.11(d) of the Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement will not (x) entitle any Company
employee or director to severance pay, or (y) accelerate the time of payment or
vesting or trigger any payment of compensation or benefits under, increase the
amount payable or trigger any other material obligation pursuant to, any of the
Company Plans.
(e) Except as specifically contemplated by the agreements
listed in Section 4.11(d) of the Disclosure Schedule, none of the Company or any
of its subsidiaries has any liability for life, health, medical or other welfare
benefits to former employees or beneficiaries or dependents thereof, except for
health continuation coverage as required by Section 4980B of the Code or Part 6
of Title I of ERISA and at no expense to the Company or any of its subsidiaries.
(f) All Company Plans covering foreign employees of the
Company or any of its subsidiaries comply with applicable local law and are
fully funded and/or book reserved to the extent applicable.
(g) There are no pending or threatened claims (other than
claims for benefits in the ordinary course), lawsuits or arbitrations which have
been asserted or instituted against the Company Plans, any fiduciaries thereof
with respect to their duties to the Company Plans or the assets of any of the
trusts under any of the Plans which could reasonably be expected to result in
any material liability to the Company.
Section 4.12. Tax Matters. For purposes of this Section 4.12, any
reference to the Company or its subsidiaries shall include any corporation that
merged or was liquidated with and into the Company or any of its subsidiaries.
Except as disclosed in Section 4.12 of the Disclosure Schedule:
(a) All Tax Returns required to be filed by or with respect
to the Company and its subsidiaries have been timely filed. The Company and its
subsidiaries have (i) timely paid all Taxes that are due, or that have been
asserted in writing by any taxing authority to be due, from or with respect to
it for the periods ending prior to the date hereof or (ii) provided adequate
reserves in its financial statements for any Taxes that have not been paid,
whether or not shown as being due on any Tax Returns.
(b) No material claim for unpaid Taxes has become a lien
against the property of the Company or any of its subsidiaries or is being
asserted against the Company or any of its subsidiaries.
(c) Except as described in Section 4.12 of the Disclosure
Schedule, there are no outstanding agreements, waivers or arrangements extending
the statutory period of limitation applicable to any claim for, or the period
for the collection or assessment of, Taxes due from or
<PAGE> 11
with respect to the Company or any subsidiary of the Company for any taxable
period, and no power of attorney granted by or with respect to the Company or
any subsidiary of the Company relating to Taxes is currently in force.
(d) No audit or other proceeding by any Governmental Entity
has formally commenced and no specific notification has been given to the
Company or any subsidiary of the Company that such an audit or other proceeding
is pending or threatened with respect to any Taxes due from or with respect to
the Company or any subsidiary of the Company or any Tax Return filed by or with
respect to the Company or any subsidiary of the Company. No assessment of Tax
has been proposed in writing against the Company or any subsidiary of the
Company or any of their assets or properties.
(e) As of the Effective Time, neither the Company nor any of
the subsidiaries shall be a party to, be bound by or have any obligation under,
any Tax sharing agreement or similar contract or arrangement with any party
other than exclusively the Company and its subsidiaries.
(f) There is no contract or agreement, plan or arrangement
by the Company or any subsidiary of the Company covering any person that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible by the Company or its subsidiaries by reason of section
280G of the Code, as now in effect.
(g) As used herein, "Taxes" shall mean all taxes of any
kind, including, without limitation, those on or measured by or referred to as
income, gross receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
value added, property or windfall profits taxes, customs, duties or similar
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any
Governmental Entity. As used herein, "Tax Return" shall mean any return,
declaration, report, claim for refund or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
Section 4.13. Environmental Laws. Except to the extent that any
condition, individually or in the aggregate with any other condition, could not
reasonably be expected to have a Material Adverse Effect, (a) each of the
Company and each of its subsidiaries complies and has complied with all
Environmental Laws applicable to the properties, assets or businesses of the
Company and its subsidiaries, and possesses and complies with and has possessed
and complied with all Environmental Permits required under such laws except
where any noncompliance or failure to possess any Environmental Permit has not
resulted in, or could not reasonably be expected to result in, individually or
in the aggregate, material liability under Environmental Laws; (b) no
modification, revocation, reissuance, alteration, transfer, or amendment of any
of the Environmental Permits, or any review by, or approval of, any third party
of any of the Environmental Permits is required in connection with the execution
or delivery of this Agreement or the consummation of the transactions
contemplated hereby or the continuation of the business of Company and its
subsidiaries following such consummation; (c)
<PAGE> 12
none of the Company and its subsidiaries has received any Environmental Claim,
which has not been corrected or settled, and none of the Company and its
subsidiaries is aware after reasonable inquiry of any threatened Environmental
Claim; (d) none of the Company and its subsidiaries has assumed, contractually
or by operation of law, any contractual liabilities or obligations under any
Environmental Laws, other than under real estate purchases or leases entered
into in the ordinary course of business; (e) to the best knowledge of the
Company or the Sellers, there are no past or present events, conditions,
circumstances, practices, plans or legal requirements that could reasonably be
expected to result in material liability to the Company or any of its
subsidiaries under Environmental Laws, or that could reasonably be expected to
materially increase the burden on the Company or any subsidiary of, complying
with Environmental Laws or of obtaining, renewing, or complying with all
Environmental Permits required under such laws; (f) to the best knowledge of the
Company or the Sellers, there is and has been no generation, treatment,
recycling, storage, disposal or presence, for any reason whatsoever, of any
Hazardous Materials or other conditions at or from any property owned, leased,
operated or otherwise used by the Company or any subsidiary now or in the past
that could reasonably be expected to give rise to material liability of the
Company or any subsidiary under any Environmental Law; (g) to the best knowledge
of the Company or the Sellers, there is not now nor has there ever been any
migration from neighboring properties to, or in the direction of, any property
owned, leased, operated or otherwise used by the Company or any subsidiary of
any Hazardous Materials, nor is the Company aware of any threatened migration of
any Hazardous Materials onto such property; (h) the Company has heretofore
delivered to Buyer true and complete copies of all reports, surveys or
evaluations of or with respect to the environmental condition of any property
owned, leased, operated or otherwise used by the Company or any subsidiary now
or in the past, which were prepared during the Company's or any subsidiary's
ownership, lease, operation or other use of such property or are otherwise in
the Company's possession, and has informed Buyer in writing of any work
previously performed or now contemplated at any property owned, leased, operated
or otherwise used by the Company or any subsidiary which in any way relates to
the environmental condition thereof. For purposes of this Agreement, the
following terms shall have the following meanings:
"Environmental Claim" means any written or oral notice,
claim, demand, action, suit, complaint, proceeding or other communication by any
person alleging liability or potential liability arising out of, relating to,
based on or resulting from (i) the presence, discharge, emission, release or
threatened release of any Hazardous Materials at any location, whether or not
owned, leased or operated by the Company or any of its subsidiaries or (ii)
circumstances forming the basis of any violation or alleged violation of any
Environmental Law or Environmental Permit or (iii) otherwise relating to
obligations or liabilities under any Environmental Laws.
"Environmental Permits" means all permits, licenses,
registrations and other governmental authorizations required for the Company and
the operations of the Company's and its subsidiaries' facilities and otherwise
to conduct its business under Environmental Laws.
<PAGE> 13
"Environmental Laws" means all applicable federal, state and
local statutes, rules, regulations, ordinances, orders, decrees and common law,
as they exist at the date hereof, relating in any manner to contamination,
pollution or protection of human health or the environment, including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act, the Solid Waste Disposal Act, the Resource Conservation and Recovery Act,
the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the
Occupational Safety and Health Act, the Emergency Planning and
Community-Right-to-Know Act, the Safe Drinking Water Act, all as amended, and
similar state laws.
"Hazardous Materials" means all hazardous or toxic
substances, wastes, materials or chemicals, petroleum (including crude oil or
any fraction thereof) and petroleum products, asbestos and asbestos-containing
materials, pollutants and contaminants regulated pursuant to, or that could form
the basis of liability under, any Environmental Law.
Section 4.14. Labor Matters. Except as set forth in Section 4.14
of the Disclosure Schedule, (i) neither the Company nor any of its subsidiaries
is a party to, or bound by, any collective bargaining agreement, contract or
other agreement with a labor union or labor organization; (ii) to the knowledge
of the Company or the Sellers, neither the Company nor any of its subsidiaries
is the subject of any proceeding asserting that it or any of its subsidiaries
has committed an unfair labor practice or seeking to compel it to bargain with
any labor organization as to wages or conditions of employment; (iii) there is
no strike, work stoppage or other labor dispute involving the Company or any of
its subsidiaries pending or, to the Company's or the Sellers's knowledge,
threatened; (iv) to the knowledge of the Company or the Sellers, no material
action, suit, complaint, charge, arbitration, inquiry, proceeding or
investigation by or before any Governmental Entity brought by or on behalf of
any employee, prospective employee, former employee, retiree, labor organization
or other representative of its employees is pending or threatened against the
Company or any of its subsidiaries; (v) to the knowledge of the Company or the
Sellers, no material grievance is pending or threatened against the Company or
any of its subsidiaries; (vi) neither the Company nor any of its subsidiaries is
a party to, or otherwise bound by, any consent decree with, or citation by, any
Governmental Entity relating to employees or employment practices; and (vii) no
labor organization or group of employees of the Company has made a pending
demand for recognition or certification, and there are no representation or
certification proceedings or petitions seeking a representation proceeding
presently pending or, to the knowledge of the Company or the Sellers, threatened
to be brought or filed, with the National Labor Relations Board or any other
labor relations tribunal or authority.
Section 4.15. Trade Names. The Company or its subsidiaries owns
all rights to, or has the valid right to use, all domestic or foreign
trademarks, trade names, brandmarks, brand names, copyrights, applications
pending for trademarks or trade name registrations, and brandmarks or brand name
registrations or copyright registrations and other proprietary rights
("Intellectual Property"), used by the Company and each of its subsidiaries in
the conduct of its operations ("Company Intellectual Property"), in each case,
free and clear of any liens, encumbrances or security interests, other than such
encumbrances, restrictions and limitations imposed under license agreements
which do not materially and adversely affect the Company's use thereof. The
Company Intellectual Property includes all Intellectual Property that is
<PAGE> 14
necessary in the operation of the business of the Company and each of its
subsidiaries as currently conducted. To the best knowledge of the Company and
the Sellers, the use of the Company Intellectual Property by the Company and its
subsidiaries does not infringe on the rights of any person, except for such
infringement which, individually or in the aggregate with other infringements,
could not reasonably be expected to have a Material Adverse Effect.
Section 4.16. Affiliated-Party Transactions. Set forth in Section
4.16 of the Disclosure Schedule is an accurate and complete listing, as of the
date hereof, of all contracts, leases, agreements or understandings, whether
written or oral, between the Company or any of its subsidiaries on the one hand,
and any affiliate or associate of the Company (other than its wholly-owned
subsidiaries), on the other hand ("Affiliate Transactions"), that (a) require
the Company or any of its subsidiaries to make annual expenditures in excess of
$50,000, (b) require the Company or any of its subsidiaries to make total
expenditures in excess of $100,000 or (c) are otherwise material to the Company
or its subsidiaries. Section 4.16 of the Disclosure Schedule (i) identifies
which Affiliate Transactions will and will not survive the Closing, and (ii)
contains a complete and accurate summary of the material terms of the Affiliate
Transactions which will survive the Closing. The terms of each Affiliate
Transaction which will survive the Closing reflect terms no less favorable to
the Company than terms which could have been obtained in arms-length
transactions between unaffiliated parties.
Section 4.17. Disclosure. None of the representations, warranties
or covenants contained in this Agreement, nor in any schedule or exhibit hereto
made by Sellers, contains any untrue statement of material fact or omits a
material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer warrants and represents to and covenants with Sellers as
follows:
Section 5.1. Organization of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority and any necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power, authority and governmental approval could not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
assets, business, condition (financial or otherwise), prospects or results of
operations of Buyer and its subsidiaries taken as a whole.
Section 5.2. Validity and Execution. Buyer has full legal right,
capacity and power and all requisite authority and approval required to enter
into, execute and deliver this Agreement and to perform fully its obligations
hereunder, subject to approval of the transactions contemplated pursuant to this
Agreement and each of the other agreements required to be entered into pursuant
hereto by Buyer by the board of directors of Buyer. This Agreement has been duly
<PAGE> 15
executed and delivered by Buyer and constitutes the valid and binding obligation
of Buyer enforceable against it in accordance with its terms.
Section 5.3. No Conflict; Required Filings and Consents.
(a) The execution, delivery and performance of this
Agreement by Buyer does not and will not: (i) conflict with or violate the
articles of incorporation or code of regulations of the Buyer or the equivalent
organizational documents of any of its subsidiaries; (ii) assuming that all
consents, approvals and authorizations contemplated by clauses (i) and (ii) of
subsection (b) below have been obtained and all filings described in such
clauses have been made, conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Buyer or any of its subsidiaries or by
which its or any of their respective properties are bound or affected; or (iii)
result in any breach or violation of or constitute a default (or an event which
with notice or lapse of time or both could become a default) or result in the
loss of a material benefit under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the properties or assets of Buyer or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Buyer or any of its subsidiaries is a party or by which Buyer or any of
its subsidiaries or its or any of their respective properties are bound or
affected; except for any such conflicts, violations, breaches, defaults, liens
or other occurrences which could not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the Buyer's ability
to perform its obligations hereunder.
(b) The execution, delivery and performance of this
Agreement by Buyer and the consummation of the Stock Purchase pursuant hereto do
not and will not require any consent, approval, authorization or permit of,
action by, filing with or notification to, any Federal, state or local
government or any court, administrative agency or commission or other
governmental authority, official or agency, domestic or foreign (a "Governmental
Entity"), except for (i) the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") (ii) such consents, approvals, authorizations,
permits, actions, filings or notifications the failure of which to make or
obtain could not reasonably be expected to (x) prevent or materially delay
consummation of the Stock Purchase or (y) have a material adverse effect on the
Buyer's ability to perform its obligations hereunder.
Section 5.4. Compliance. Neither Buyer nor any of its subsidiaries
is in conflict with, or in default or violation of, (i) any law, rule,
regulation, order, judgment or decree applicable to Buyer or any of its
subsidiaries or by which its or any of their respective properties are bound or
affected or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Buyer or any of its subsidiaries is a party or by which Buyer or any of its
subsidiaries or its or any of their respective properties are bound or affected,
except for any such conflicts, defaults or violations which could not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the Buyer's ability to perform its obligations hereunder.
<PAGE> 16
Section 5.5. Disclosure. None of the representations, warranties
or covenants contained in this Agreement, nor in any schedule or exhibit hereto
made by Buyer, contains any untrue statement of material fact or omits a
material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE 6.
CERTAIN OBLIGATIONS OF SELLERS PENDING CLOSING
Section 6.1. Investigation. During the period from the date of
this Agreement to the Closing Date (the "Due Diligence Period"), (a) Sellers
shall cause the Company to permit Buyer and its authorized representatives to
have full access to the Company's facilities during normal business hours, to
observe the Business operations, to meet with the Company's officers and
employees engaged in the Business, to contact the Company's auditors, to audit,
examine and copy all files, books and records, and other documents and papers
relating to the Company and the Business, and to perform such other due
diligence procedures as it deems reasonably necessary or appropriate, and (b)
Sellers shall cause the Company to provide to Buyer and its authorized
representatives all information concerning the Company and the Business, and all
information concerning the financial condition of the Company and the Business,
that is reasonably requested by Buyer. Buyer shall not be obligated to
consummate the transactions contemplated by this Agreement if it is not
satisfied with its findings during the Due Diligence Period because of the
discovery of a material adverse condition relating to the Business, operations,
or financial condition of Company or because of a material misrepresentation by
Sellers.
Section 6.2. Conduct of the Business. Between the date of this
Agreement and the Effective Time, except with the prior written consent of Buyer
or as expressly set forth in the agreements listed in Section 4.16 of the
Disclosure Schedule, Sellers shall and shall cause the Company and its
subsidiaries to (i) conduct the Business in a diligent manner consistent with
past practices and in the ordinary course, (ii) not make any change in the
Company's and its subsidiaries business practices, (iii) not make any
distribution by the Company or its subsidiaries or transfer assets of the
Company or its subsidiaries or allow the Company or its subsidiaries to incur
liabilities other than in the ordinary course, and (iv) use their best efforts
to preserve the resources and organization of the Business intact, keeping
available, the services of its current officers, employees, agents and
representatives engaged in the Business, and maintaining the good will of its
customers, suppliers and other persons and entities having business relations
with the Company or its subsidiaries and the Business.
Section 6.3. Acquisition Proposals. Between the date of this
Agreement and the Effective Time, neither Sellers nor any of their
representatives, agents or affiliates, shall, directly or indirectly, solicit,
initiate, encourage or respond to any inquiries or proposals from, or
participate in any discussions or negotiations with, or provide any non-public
information to, any person, entity, or group (other than Buyer and its
respective officers, employees, representatives and agents) concerning any sale
of any of the Company or its subsidiaries or the Business, the assets of the
Business, any sale of shares of capital stock or other securities of the Company
or its subsidiaries, or any merger, consolidation or similar transaction
involving the Company or its
<PAGE> 17
subsidiaries or the Business and the assets of the Business. Sellers shall
immediately advise Buyer of, and communicate to Buyer the terms of, any such
inquiry or proposal received by the Company or Sellers.
Section 6.4. Advice of Changes. Between the date of this Agreement
and the Effective Time, Sellers shall promptly advise Buyer, in writing, of any
fact of which any of them obtains knowledge and which, if existing or known as
of the date of this Agreement, would have been required to be set forth or
disclosed in or pursuant to this Agreement or in order to prevent any
representation or warranty made by Sellers herein from being incorrect or
misleading.
Section 6.5. Reasonable Efforts. Sellers and Buyer shall use their
reasonable efforts to consummate the transactions contemplated by this Agreement
as of the earliest practicable date. Sellers and Buyer shall not take, or cause
to be taken, or to the best of their ability permit to be taken, any action that
would impair the prospect of completing the transactions contemplated by this
Agreement.
Section 6.6. Tax Matters. Buyer shall not take, or cause to be
taken, or permit to be taken, any action that would result in an election under
Section 338(h) of the Code with respect to the Company and/or the transactions
contemplated by this Agreement.
ARTICLE 7.
CONDITIONS TO CLOSING
Section 7.1. Conditions to Sellers' Obligations. The obligations
of Sellers to enter into and complete the Closing are subject to the fulfillment
on or prior to the Closing Date of the following conditions:
(a) The representations and warranties of Buyer contained in
this Agreement shall be true and complete and correct on and as of
the Closing Date with the same force and effect as though made on
and as of the Closing Date;
(b) Buyer shall have performed and complied with all
covenants and agreements required by this Agreement to be
performed or complied with by Buyer on or prior to the Closing
Date; and
(c) Buyer shall have delivered all certifications and other
documents required of it pursuant to this Agreement.
Section 7.2. Conditions to Buyer's Obligations. The obligations of
Buyer to enter into and complete the Closing are subject to the fulfillment on
or prior to the Closing Date of the following conditions:
(a) The representations and warranties of Sellers contained
in this Agreement shall be true and complete and correct on and as
of the Closing Date with the same force and effect as though made
on and as of the Closing Date;
<PAGE> 18
(b) Sellers shall have performed and complied with all
covenants and agreements required by this Agreement to be
performed or complied with by any of them on or prior to the
Closing Date;
(c) The Company shall have received the resignations of
Stephen I. Nacht, Lynda S. Nacht, Victoria N. Hilbrands, Lauren N.
Rackoff, Paul F. Rackoff, and Kirk A. Hilbrands as directors,
officers, and employees of the Company and its subsidiaries,
effective as of the Closing Date and on terms and conditions
satisfactory to Buyer;
(d) Buyer shall have caused the Company to enter into
mutually acceptable employment agreements with John C. Rossler,
Raymond L. Blanton, Debra Ferree, and Michael Levison;
(f) Sellers shall have delivered all certifications and
other documents required pursuant to this Agreement; and
(g) Buyer shall have completed its due diligence review of
the Company to its satisfaction during the Due Diligence Period as
provided in Section 6.1 confirming that there has been no material
adverse change in the Company's financial condition or results of
operations from those reflected in the Financial Statements;
(h) The board of directors of Buyer shall have approved this
transaction after receipt by the special committee of such board
of the opinion of an investment banking firm retained by it, that
the transactions contemplated by this Agreement are fair, from a
financial point of view, to the shareholders of Buyer other than
SSC;
(i) The Buyer shall have received the proceeds of financing,
on terms and conditions satisfactory to Buyer, to enable Buyer to
fund its obligations hereunder;
(j) There shall not be pending by any Governmental Entity
any suit, action or proceeding (or by any other person any suit,
action or proceeding which has a reasonable likelihood, in the
opinion of counsel to Buyer, of success) (i) challenging or
seeking to restrain or prohibit the consummation of the Stock
Purchase or any of the other transactions contemplated by this
Agreement or seeking to obtain from Buyer or any of its affiliates
any damages that are material to any such party, (ii) seeking to
prohibit or limit the ownership or operation by the Company or any
of its subsidiaries of any material portion of the business or
assets of the Company or any of its subsidiaries or (iii) seeking
to impose limitations on the ability of Buyer (or any designee of
Buyer pursuant to this Agreement) or any shareholder of Buyer or
the Company to acquire or hold, or exercise full rights of
ownership of, any shares of Company Common Stock.
<PAGE> 19
Section 7.3. Conditions to the Obligations of Both Parties. The
obligations of Sellers and Buyer under this Agreement are subject to the
fulfillment, prior to or at the Closing of the following conditions:
(a) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing
the consummation of the Stock Purchase shall be in effect;
provided, however, that the parties hereto shall use their best
efforts to have any such injunction, order, restraint or
prohibition vacated; and
(b) The Termination Agreements listed in Schedule 4.16 of
the Disclosure Schedule shall have been executed and delivered by
all parties thereto and remain in full force and effect.
ARTICLE 8.
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination. This Agreement may be terminated and the
Stock Purchase contemplated hereby may be abandoned at any time prior to the
Effective Time:
(a) By mutual written consent of Buyer and the Sellers;
(b) By Buyer or the Sellers if any court of competent
jurisdiction, arbitrator or other Governmental Entity located or having
jurisdiction within the United States or any country or economic region in which
either the Sellers or Buyer, directly or indirectly, has material assets or
operations, shall have issued a final order, decree or ruling or taken any other
final action restraining, enjoining or otherwise prohibiting the consummation of
the Stock Purchase or any of the transactions contemplated by this Agreement, or
otherwise altering the terms of any of the foregoing in any significant respect,
and such order, decree, ruling or other action is or shall have become final and
nonappealable; or
(c) By Buyer or the Sellers if the Stock Purchase shall not
have been consummated on or before May 8, 1998, provided further that the right
to terminate this Agreement under this Section 8.1(c) shall not be available to
the party whose action or failure to act has been the cause of or resulted in
the failure of the Stock Purchase to occur on or before such date and such
action or failure to act constitutes a breach of this Agreement.
Section 8.2. Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 8.1, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto except as set forth in Section 8.3 and Section 9.1.
Section 8.3. Fees and Expenses. Except as otherwise specifically
provided herein, each party shall bear its own expenses in connection with this
Agreement and the transactions contemplated hereby.
<PAGE> 20
Section 8.4. Amendment. This Agreement may be amended by the
parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
Section 8.5. Waiver. At any time prior to the Effective Time, any
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby.
Section 8.6. Remedies/Specific Performance. Sellers recognizes
that in the event Sellers wrongfully refuse to perform the provisions of this
Agreement, monetary damages alone my not be adequate and Buyer shall, therefore,
be entitled in such event to obtain specific performance of the terms of this
Agreement, in which event Buyer shall also be entitled to recovery of reasonable
attorneys' fees and other costs of enforcing its rights hereunder. In any action
to enforce the provisions of this Agreement, Sellers shall waive the defense
that there is an adequate remedy at law or equity and Sellers further agrees
that Buyer shall have the right to obtain specific performance of the terms of
this Agreement without being required to prove actual damages, post bond or
furnish other security.
ARTICLE 9.
GENERAL PROVISIONS
Section 9.1. Non-Survival of Representations, Warranties and
Agreements. The representations and warranties in this Agreement shall terminate
as of the Closing or upon the termination of this Agreement pursuant to Section
8.1, as the case may be except that the agreements set forth in Sections 8.2 and
8.3 and in Article 9 shall survive the Closing and shall survive termination of
this Agreement.
Section 9.2. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by fax or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
if to Buyer:
Value City Department Stores, Inc.
3241 Westerville Road
Columbus, Ohio 43224
Attention: Martin P. Doolan, President and CEO
Fax: 614-478-3563
with copies to:
Porter, Wright, Morris & Arthur Buckingham, Doolittle & Burroughs
LLP
<PAGE> 21
<TABLE>
<CAPTION>
<S> <C>
41 South High Street 88 East Broad Street
Columbus, Ohio 43215 Columbus, Ohio 43215-3506
Attention: Neil Bulman, Jr., Esq. Attention: Brent D. Rosenthal, Esq.
Fax: 614-227-4492 Fax: 614-221-8590
if to the Sellers:
Nacht Management Inc. Schottenstein Stores Corporation
1675 Watkins Road 1800 Moler Road
Columbus, Ohio 43207 Columbus, Ohio 43207
Attention: Stephen Nacht, President Attention: Thomas R. Ketteler, COO
Fax: 614-497-1356 Fax: 614-449-0225
with a copy to:
In the case of: Nacht Management Inc. Schottenstein Stores Corporation
Schottenstein, Zox & Dunn 1800 Moler Road
41 South High Street Columbus, Ohio 43207
Columbus, Ohio 43215 Attention: Irwin A. Bain, Esq.,
Attention: Fredrick L. Fisher, Esq. General Counsel
Fax: 614-464-1135 Fax: 614-443-0972
</TABLE>
Section 9.3. Certain Definitions. For purposes of this Agreement,
the term:
(a) "affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned person;
(b) "associate" of a person means (1) any corporation or
organization (other than the registrant or a majority-owned subsidiary of the
registrant) of which such person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of equity
securities, (2) any trust or other estate of which such person has a substantial
beneficial interest or as to which such person serves as trustee or in a similar
fiduciary capacity, and (3) any relative or spouse of such person, or any
relative of such spouse, who has the same home as such person or who is a
director or officer of the registrant or any of its parents or subsidiaries;
(c) "beneficial owner" with respect to any shares of Company
Common Stock means a person who shall be deemed to be the beneficial owner of
such shares (i) which such person or any of its affiliates or associates (as
such term is defined in Rule 12b-2 of the Exchange Act) beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the exercise of
consideration rights, exchange rights, wan-ants or options, or otherwise, or (B)
the right to vote pursuant to any agreement, arrangement or understanding or
(iii) which are beneficially owned, directly or indirectly, by any other persons
with whom such person or any of its affiliates or person with whom such person
or any of its affiliates or
<PAGE> 22
associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of Company Common Stock;
(d) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(e) "generally accepted accounting principles" shall mean the
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession in the
United States, in each case applied on a basis consistent with the manner in
which the audited financial statements for the fiscal year of the Company ended
January 3, 1998 were prepared;
(f) "person" means an individual, corporation, partnership,
association. trust. unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act);
(g) "subsidiary" or "subsidiaries" of the Company, or any
other person means any corporation, partnership, joint venture or other legal
entity of which the Company or such other person, as the case may be (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holder of
which is generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity; and
(h) "Significant Subsidiary" has the meaning set forth in
Regulation S-X promulgated by the SEC.
Section 9.4. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
Section 9.5. Entire Agreement; Assignment. This Agreement constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof;
provided, however the confidentiality provisions in paragraph (E) of the letter
of intent, dated March 12, 1998, among the parties shall survive the
<PAGE> 23
execution of this Agreement and continue in full force and effect. This
Agreement shall not be assigned by operation of law or otherwise, except that
Buyer may assign all or any of its rights and obligations hereunder to any
direct or indirect wholly owned subsidiary or subsidiaries of Buyer, provided
that no such assignment shall relieve the assigning party of its obligations
hereunder if such assignee does not perform such obligations.
Section 9.6. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and their permitted
assigns. Except as provided in the preceding sentence, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 9.7. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Ohio, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 9.8. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
Section 9.9. Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
Section 9.10. Further Assurances. At any time and from time to time
after the Closing Date, at Buyer's request and expense, and without further
consideration, Sellers shall promptly execute and deliver all such further
agreements, certificates, instruments and documents, and perform such further
actions, as Buyer may reasonably request in order to fully consummate the
transactions contemplated hereby and carry out the purposes and intent of this
Agreement. Seller shall not take any action which is inconsistent with Seller's
treatment for tax purposes of the entire Purchase Price as consideration for its
purchase of the Shares.
Section 9.11. Interpretation. Words used herein, regardless of the
number and gender specifically used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine, feminine,
or neuter, as the context requires.
Section 9.12. Termination of Shareholder Agreements. Each of the
Sellers agree that effective on the Closing, the following agreements relating
to the Sellers' ownership of the Company shall terminate and be of no further
force and effect: Option Agreement, effective December 1, 1989; Amended and
Restated Option Agreement effective January 1, 1990; Close Corporation
Agreement, effective January 1, 1990; and Stock Restriction Agreement, effective
December 31, 1989.
<PAGE> 24
IN WITNESS WHEREOF, Buyer and the Sellers have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
BUYER: SELLERS:
VALUE CITY DEPARTMENT NACHT MANAGEMENT INC.
STORES, INC.
By: _____________________________ By: _____________________________
Its: _____________________ Its: _____________________
SCHOTTENSTEIN STORES
CORPORATION
By: _____________________________
Its: _____________________
<PAGE> 1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of May 1, 1998 by and between VALUE CITY DEPARTMENT STORES, INC., an
Ohio corporation ("Buyer"), and VALLEY FAIR CORPORATION, a Delaware corporation
("Seller").
A. Seller operates, through licensed departments, two discount stores
in New Jersey under the name Valley Fair which sell a variety of apparel, shoes,
and other goods and products (the "Business").
B. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, certain assets owned by Seller and used in the Business on the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
hereinafter contained, the parties hereto agree as follows:
ARTICLE I
ASSETS TO BE PURCHASED
Section 1.1. Sale and Purchase of Assets. On the terms and subject to
the conditions herein expressed, Seller agrees to sell, transfer, assign and
deliver to Buyer, and Buyer agrees to purchase, acquire and accept from Seller
all of Seller's right, title and interest in and to all of the following assets
used in the Business (the "Purchased Assets"):
(a) all assets of the Business pertaining to the store
operations of Seller at its two locations: (1) Store #15 in Irvington, New
Jersey; and (2) Store #31 in Little Ferry, New Jersey (collectively, the
"Stores"), including all licensed departments, store fixtures, and other assets
inherent to operating the Stores (collectively, the "Store Operations"); and
(b) all assets included in the balance sheet dated as of March
28, 1998 (the "March Balance Sheet"), a copy of which is attached hereto as
Schedule 1.1 and incorporated herein by reference and all additions to such
assets from March 28, 1998 through the Effective Time, including, without
limitation, Seller's right, title, and interest in the Lease, dated September
13, 1963, between Seller, as lessee and Tamburelli Properties, Inc., as lessor
(which lease together with all amendments and modifications is hereinafter
called the "Little Ferry Lease") and all license agreements pertaining to the
Store Operations and from which Seller derives its revenues relating to the
Business (the "License Agreements"), a list of the License Agreements is
attached hereto as Schedule 1.1(b) and incorporated herein by reference.
Section 1.2. Retained Assets. The Purchased Assets shall not include
any right, title or interest of Seller in, to or under any of the following: tax
returns, corporate minutes, seals and
<PAGE> 2
capital stock books of account of Seller; provided, however, that all of the
foregoing shall be made available to Buyer for review.
Section 1.3. Assumption of Liabilities. Subject to the terms and
provisions of this Agreement, and except as otherwise provided by Section 1.4,
Buyer shall agree to pay, satisfy and discharge in accordance with their terms
those obligations of Seller specifically identified in the March Balance Sheet,
together with any additional liabilities of the type identified in the March
Balance Sheet incurred by Seller in the ordinary course of business, consistent
with past practices, prior to the Effective Time (collectively, the "Assumed
Liabilities"), subject to the occurrence of the Closing and to any defenses or
offsets asserted in good faith against the obligee to whom such liabilities,
payments, and obligations are owed.
Section 1.4. No Other Liabilities. With the exception of the Assumed
Liabilities, notwithstanding any other provisions of this Agreement, Buyer shall
not purchase the Purchased Assets subject to, and Buyer shall not in any manner
assume or be liable or responsible for any debt, liability or obligation of any
nature, whether secured, unsecured, recourse, nonrecourse, liquidated,
unliquidated, accrued, absolute, fixed, contingent, ascertained, unascertained,
known, unknown or otherwise (collectively referred to as "Obligations") of
Seller, and all Obligations of Seller shall remain the sole responsibility of
Seller. Without limiting the generality of the foregoing, Buyer shall not in any
manner assume or be liable or responsible for any of the following Obligations
of Seller to the extent they are not included in the Assumed Liabilities:
(i) Affiliates. Any Obligation to any current or former
shareholder, partner, director or controlling Person (as defined below) of
Seller, any Obligation to any other Person affiliated with Seller, its
affiliates or predecessors, or any Obligation for intercompany payables or any
guarantees of indebtedness of Seller or any of its affiliates or predecessors.
For purposes of this Agreement, "Person" means any individual, sole
proprietorship, joint venture, partnership, corporation, association,
cooperative, trust, estate, governmental body, administrative agency, regulatory
authority or other entity of any nature.
(ii) Taxes. Any Obligation for any Tax (as defined below),
including but not limited to, (a) any Tax payable by Seller with respect to its
business operations, including without limitation, the Store Operations; (b) any
Tax payable by Seller with respect to the ownership, possession, purchase,
lease, sale, disposition or use of any assets at any time, including without
limitation, the Purchased Assets; (c) any Tax resulting from the sale of the
Purchased Assets to Buyer or otherwise resulting from the transactions
contemplated by this Agreement; or (d) any Obligation for any Tax of any Person
under Treasury Regulation Section 1.1502.6 (or any similar comparable provision
of subsequent law), as a transferee or successor, by agreement or otherwise.
(iii) Post-Closing. Any Obligation that is incurred or arises
after the Effective Time, or that relates to any demand, claim, suit, action,
litigation, investigation, arbitration, administrative hearing or other
proceeding of any nature or other event that occurs or circumstances that exist
after the Effective Time.
<PAGE> 3
(iv) Transaction Related. Except as otherwise expressly
provided herein, any Obligation that was or is incurred in connection with the
negotiation, execution or performance of this Agreement and any other agreements
entered into between Buyer and Seller, or among Buyer, Seller and other parties,
in connection with the transactions contemplated by this Agreement.
(v) Defaults. Any Obligation, the incurrence or existence of
which constitutes or will constitute a breach or failure of, or a default under,
any representation, warranty, covenant or other provision of this Agreement,
including, but not limited to, any Obligation, whether or not known to Seller,
that has not been disclosed to Buyer in writing in this Agreement or on any
schedules and exhibits hereto.
(vi) Employees. Any Obligation to those employees of Seller
listed in Schedule 1.4(vi), including, but not limited to, under Seller's
payroll savings, profit sharing and/or other retirement plans, insurance
policies that constitute group medical, dental, hospitalization, health,
disability and related Employee Benefit Plans (as defined in Section 4.11) of
Seller, and for severance pay and other termination benefits, for those
employees of Seller so listed.
(vii) Infringement. Any Obligation arising in connection with
or related to Seller's infringement or alleged infringement of any Intangibles
of any Person. For purposes of this Agreement, "Intangibles" means any name,
corporate name, fictitious name, trademark, trademark application, service mark,
service mark application, trade name, brand name, product name, slogan, trade
secret, know-how, patent, patent application, copyright, copyright application,
design, logo, formula, invention, product right or other intangible asset of any
nature, whether in use, under development or design, or inactive.
(viii) Environmental. Any Obligation for violation of any
Environmental Laws (as defined in Section 4.13) or regulations, and incurred or
arising prior to the Effective Time.
(ix) Real Estate. Any Obligation pertaining to any of Seller's
Owned Real Property or Leased Real Property (as such terms are defined in
Section 4.10).
(x) Banks. Any Obligation or any other liabilities with
respect to bank accounts, including overdrafts, and any Obligation or any other
liabilities to any banks or other financial institutions, including indebtedness
under any lines of credit, term notes or other evidences of indebtedness.
ARTICLE II
PURCHASE PRICE
Section 2.1. Purchase Price. The purchase price (the "Purchase Price")
for the Purchased Assets shall be Eight Million Dollars ($8,000,000) in cash.
<PAGE> 4
Section 2.2. Payment. The Purchase Price shall be paid by a wire
transfer from Buyer to Seller in the amount of $8,000,000 at the Closing, with
interest on such amount from the Effective Time through the date of payment at
the rate of eight and one-half percent (8.5%) per annum.
Section 2.3. Allocation of Purchase Price. The Purchase Price shall be
allocated to the Purchased Assets in a manner mutually agreed to by Buyer and
Seller.
ARTICLE III
THE CLOSING
Section 3.1. The Closing. This transaction shall be closed (the
"Closing") at 10:00 a.m., local time, on May 8, 1998 (the "Closing Date") at the
offices of Porter, Wright, Morris & Arthur, Columbus, Ohio or at such other time
and place as the parties may agree upon in writing, and shall be effective as of
12:01 a.m., Eastern Standard Time, on the May 3, 1998 (the "Effective Time").
Section 3.2. Buyer's Obligations at the Closing. At the Closing, Buyer
shall deliver to Seller:
(a) The payment of the Purchase Price as provided in Section
2.2; and
(b) A certificate of the Chief Executive Officer of Buyer in
form reasonably satisfactory to Seller stating that the
representations and warranties of Buyer set forth in Article V
are true and correct as of the Closing Date.
Section 3.3. Seller's Obligations at the Closing. At the Closing,
Seller shall deliver to Buyer:
(a) Good and sufficient conveyance documents in form
satisfactory to Buyer vesting title to the Purchased Assets in
Buyer, free and clear of all liens, charges, encumbrances,
conditions, easements, reservations and restrictions
whatsoever;
(b) An executed copy of the Assignment of Lease for the Little
Ferry store, in substantially the form attached hereto as
Schedule 3.3(b) (the "Little Ferry Assignment"); and
(c) An executed copy of the Lease for the Irvington store, in
substantially the form attached hereto as Schedule 3.3(c) (the
"Irvington Lease"); and
(d) A certificate of the Chief Executive Officer of Seller in
form satisfactory to Buyer stating that the representations
and warranties of Seller set forth in Article IV are true and
correct as of the Closing Date.
<PAGE> 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer that, except as set
forth on the Disclosure Schedule delivered by Seller to Buyer in connection with
this Agreement (the "Disclosure Schedule"), but, with respect to any specific
representation and warranty, only to the extent that it would be reasonably
apparent that a reference on the Disclosure Schedule relates to such
representation and warranty:
Section 4.1. Organization and Qualification; No Subsidiaries. Seller is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power and authority and any necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power, authority and governmental approval could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect (as defined below). Seller has no subsidiaries. Seller is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing which could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. When
used in connection with Seller or the Business, the term "Material Adverse
Effect" means any change or effect that, either individually or in the aggregate
with all other changes or effects, is materially adverse to the assets,
business, condition (financial or otherwise), prospects or results of operations
of the Business taken as a whole.
Section 4.2. Title to Assets. Seller has, and pursuant to this
Agreement will convey, sell, transfer and assign to Buyer, good and marketable
title to the Purchased Assets, free and clear of liens, encumbrances,
encroachments, defects of title, easements, licenses, covenants, leases, claims
of third parties, security interests, mortgages, deeds of trust, pledges,
agreements and rights of others. The tangible Purchased Assets are in good
operating condition, order and repair, subject to ordinary wear and tear, and
are suitable for the purposes for which they were designed to be used.
Section 4.3. Contracts. Schedule 1.1(b) is an accurate and complete
list of all of the Licenses, and the Licenses together with the Little Ferry
Lease and the Irvington Lease constitute all material contracts relating to the
Store Operations (collectively, the "Specified Contracts"). Seller is not in
default under the Specified Contracts nor would be in default thereunder with
the passage of time, the giving of notice or both. None of the other parties to
any Specified Contract is in default thereunder or would be in default
thereunder with the passage of time, the giving of notice or both. Seller has
not given or received any notice of default or notice of termination with
respect to any Specified Contract, and each Specified Contract is in full force
and effect in accordance with its terms. To the knowledge of Seller, the
Specified Contracts are all the Contracts necessary and sufficient to operate
the Store Operations as currently operated by Seller.
<PAGE> 6
There are no currently outstanding proposals or offers submitted by Seller to
any customer, prospect, supplier or other Person with respect to the Store
Operations which, if accepted, would result in a legally binding Contract of
Seller involving an amount or commitment exceeding $25,000 in any single case.
Section 4.4. Authority Relative to this Agreement. Seller has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by Seller and the consummation by Seller of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of Seller are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This Agreement
has been duly and validly executed and delivered by Seller and, assuming the due
authorization, execution and delivery hereof by Buyer, constitutes a legal,
valid and binding obligation of Seller enforceable against Seller in accordance
with its terms. The Board of Directors and the shareholders of Seller have
unanimously approved this Agreement and the transactions contemplated hereby.
Section 4.5. No Conflict; Required Filings and Consents.
(a) Assuming the requisite shareholder approval is received,
the execution, delivery and performance of this Agreement by the Seller does not
and will not: (i) conflict with or violate the certificate of incorporation or
bylaws of Seller; (ii) assuming that all consents, approvals and authorizations
contemplated by clause (i) of subsection (b) below have been obtained and all
filings described in such clauses have been made, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Seller or by
which its properties are bound or affected; or (iii) result in any breach or
violation of or constitute a default (or an event which with notice or lapse of
time or both could become a default) or result in the loss of a material benefit
under, or give rise to any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Seller pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Seller is a party or by which Seller or its
properties are bound or affected, except (A) in the case of clauses (ii) and
(iii), for any such conflicts, violations, breaches, defaults or other
occurrences which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect and (B) in the case of clause (iii),
other than as set forth in Section 4.5 of the Disclosure Schedule.
(b) The execution, delivery and performance of this Agreement
by Seller and the consummation of the asset purchase pursuant hereto (the "Asset
Purchase") do not and will not require any consent, approval, authorization or
permit of, action by, filing with or notification to, any Federal, state or
local government or any court, administrative agency or commission or other
governmental authority, official or agency, domestic or foreign (a "Governmental
Entity"), except for (i) such consents, approvals, authorizations, permits,
actions, filings or notifications the failure of which to make or obtain could
not reasonably be expected to (x) prevent or materially delay consummation of
the Asset Purchase or (y) have a Material Adverse Effect.
<PAGE> 7
Section 4.6. Compliance. Seller is not in conflict with, or in default
or violation of (i) any law, rule, regulation, order, judgment or decree
applicable to Seller or by which its properties are bound or affected or (ii)
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Seller is a party
or by which Seller or its properties are bound or affected, except for any such
conflicts, defaults or violations which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Section 4.7. Financial Statements. Seller has heretofore delivered to
Buyer the unaudited financial statements of Seller relating to the Store
Operations and the Purchased Assets and Assumed Liabilities (the "Financial
Statements"). The Financial Statements have been, and will be as of the Closing
Date, prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and fairly present, and will fairly present as
of the Closing Date, an accurate accounting of all assets and liabilities used
in or for the Store Operations at the times and for the periods indicated. Since
March 28, 1998, except as contemplated by this Agreement, Seller has conducted
its businesses only in the ordinary course and, since such date, there has not
been (i) any condition, event or occurrence which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect, (ii)
any material adverse changes to Seller's financial condition or the Store
Operations, or (ii) any condition, event or occurrence which could reasonably be
expected to prevent, hinder or materially delay the ability of Seller to
consummate the transactions contemplated by this Agreement.
Section 4.8. Insurance. To the best knowledge of Seller, the Store
Operations and the Purchased Assets are insured in amounts and against risks
usually insured against by persons operating similar businesses. All such
policies pursuant to which coverage exists are in full force and effect and have
been issued under valid policies for the benefit of Seller by insurance carriers
licensed to do business in New Jersey. To the best knowledge of Seller, all
insurance policies owned or maintained by Seller in connection with or for the
benefit of the Store Operations are adequate for the Store Operations. Seller
has not received notice of cancellation with respect to any such current
insurance policy.
Section 4.9. Absence of Litigation. Except as disclosed in Section 4.9
of the Disclosure Schedule, there are no suits, claims, actions, proceedings or
investigations pending or, to the best knowledge of Seller, threatened against
Seller, or any properties or rights of Seller, before any Governmental Entity,
that (i) individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect or (ii) seek to delay or prevent the consummation of
the transactions contemplated hereby. As of the date hereof, neither Seller nor
any of its properties is or are subject to any order, writ, judgment,
injunction, decree, determination or award having, or which, insofar as can be
reasonably foreseen in the future, could reasonably be expected to have a
Material Adverse Effect or could prevent or materially delay the consummation of
the transactions contemplated hereby. As of the date hereof, no officer or
director of Seller is a defendant in any litigation commenced by shareholders of
Seller with
<PAGE> 8
respect to the performance of his or her duties as an officer and/or director of
Seller under any federal or state law (including litigation under federal and
state securities laws).
Section 4.10. Properties. The Irvington Lease sets forth a complete and
accurate list and description of all real property and interests in real
property owned in fee by Seller relating to the Store Operations (the "Owned
Real Property"). The Little Ferry Assignment sets forth a complete and accurate
list and description of all real property leased, subleased or otherwise
occupied by Seller relating to the Store Operations (the "Leased Real
Property"), such description including, for each Leased Real Property, an
identification of the lease or sublease agreement therefor and any and all
amendments, modifications, side letters (collectively, the "Leases"), default
notices and material estoppel letters related thereto (true and complete copies
of which have previously been delivered by Seller to Buyer), the names of the
lessor and lessee (or sublessor or sublessee) thereunder, the title and date
thereof, the address and approximate size of the premises leased thereunder, the
rental and term thereunder, including any extension options, and the use of such
premises. The Owned Real Property and the Leased Real Property shall be
hereinafter collectively referred to as the "Real Property."
Section 4.11. Employee Benefit Plans. Except as has been disclosed to
Buyer, Seller does not sponsor, maintain or contribute to, or have any ongoing
Obligations with respect to, any "employee benefit plan" (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (including without limitation multiemployer plans within the meaning
of ERISA Section 3(37)), stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, collective bargaining, bonus, incentive,
deferred compensation and all other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not subject to ERISA
(including any funding mechanism therefor now in effect or required in the
future as a result of the transaction contemplated by this Agreement or
otherwise), under which any employee or former employee of Seller has, or could
reasonably be expected to have, any present or future right to benefits or under
which Seller or any subsidiary of Seller has, or could reasonably be expected to
have, any present or future liability. All such plans, agreements, programs,
policies and arrangements shall be collectively referred to as the "Seller
Plans." No Seller Plan is a multiemployer plan within the meaning of Section
4001(a)(3) of ERISA or is an "employee pension plan" within the meaning of
Section 3(2) of ERISA subject to Title IV of ERISA.
(b) With respect to all Seller Plans: (i) all Seller Plans are
in compliance with all applicable laws, including the Internal Revenue Code of
1986, as amended (the "Code") and ERISA, and including all filing and reporting
requirements; and (ii) all contributions required to be made to any Seller Plan
by applicable law or regulation or by any plan document or other contractual
undertaking, and all premiums due or payable with respect to insurance policies
funding any Seller Plan, for any period through the date hereof have been timely
made or paid in full or, to the extent not required to be made or paid on or
before the date hereof, have been fully reflected on the Financial Statements.
<PAGE> 9
Section 4.12. Environmental Laws. Each of Seller and its former
subsidiaries complies and has complied with all Environmental Laws applicable to
the Purchased Assets or the Store Operation, and possesses and complies with and
has possessed and complied with all Environmental Permits required under such
laws except where any noncompliance or failure to possess any Environmental
Permit has not resulted in, or could not reasonably be expected to result in,
individually or in the aggregate, material liability under Environmental Laws;
and to the best knowledge of Seller, there are no past or present events,
conditions, circumstances, practices, plans or legal requirements that could
reasonably be expected to result in material liability to Buyer or the Business
under Environmental Laws, or that could reasonably be expected to materially
increase the burden of complying with Environmental Laws or of obtaining,
renewing, or complying with all Environmental Permits required under such laws.
For purposes of this Agreement, the following terms shall have the following
meanings:
"Environmental Permits" means all permits, licenses,
registrations and other governmental authorizations required for Seller and the
operations of Seller's and its subsidiaries' facilities and otherwise to conduct
its business under Environmental Laws.
"Environmental Laws" means all applicable federal, state and
local statutes, rules, regulations, ordinances, orders, decrees and common law,
as they exist at the date hereof, relating in any manner to contamination,
pollution or protection of human health or the environment, including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act, the Solid Waste Disposal Act, the Resource Conservation and Recovery Act,
the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the
Occupational Safety and Health Act, the Emergency Planning and
Community-Right-to-Know Act, the Safe Drinking Water Act, all as amended, and
similar state laws.
Section 4.13. Labor Matters. Except as set forth in Section 4.13 of the
Disclosure Schedule, (i) Seller is not a party to, or bound by, any collective
bargaining agreement, contract or other agreement with a labor union or labor
organization; (ii) to the knowledge of Seller, Seller is not the subject of any
proceeding asserting that it or any of its subsidiaries has committed an unfair
labor practice or seeking to compel it to bargain with any labor organization as
to wages or conditions of employment; (iii) there is no strike, work stoppage or
other labor dispute involving Seller pending or, to Seller's knowledge,
threatened; (iv) to the knowledge of Seller, no material action, suit,
complaint, charge, arbitration, inquiry, proceeding or investigation by or
before any Governmental Entity brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor organization or other
representative of its employees is pending or threatened against Seller; (v) to
the knowledge of Seller, no material grievance is pending or threatened against
Seller; and (vi) Seller is not a party to, or otherwise bound by, any consent
decree with, or citation by, any Governmental Entity relating to employees or
employment practices; and (vii) no labor organization or group of employees of
Seller has made a pending demand for recognition or certification, and there are
no representation or certification proceedings or petitions seeking a
representation proceeding presently pending or, to the knowledge of Seller,
threatened to be brought or filed, with the National Labor Relations Board or
any other labor relations tribunal or authority.
<PAGE> 10
Section 4.14. Trade Names. Seller owns all material intellectual
property used by Seller in the conduct of the Business ("Seller Intellectual
Property"), in each case, free and clear of any liens, encumbrances or security
interests, other than such encumbrances, restrictions and limitations imposed
under license agreements which do not materially and adversely affect the
Seller's use thereof. To the best knowledge of Seller, the use of Seller
Intellectual Property by Seller does not infringe on the rights of any person,
except for such infringement which, individually or in the aggregate with other
infringements, could not reasonably be expected to have a Material Adverse
Effect. Seller is transferring to Buyer as a part of the Purchased Assets, all
of Seller's right, title and interest in the name "Valley Fair," as to which the
Seller does not have any federal or state trademark or service mark
registrations, and provided, however, Seller shall retain the right to use the
name after the Closing for only corporate purposes on a royalty free basis.
Section 4.15. Affiliated-Party Transactions. Set forth in Section 4.15
of the Disclosure Schedule is an accurate and complete listing, as of the date
hereof, of all contracts, leases, agreements or understandings, whether written
or oral, between Seller on the one hand, and any affiliate or associate of
Seller, on the other hand ("Affiliate Transactions"), that (a) require Seller to
make annual expenditures in excess of $50,000, (b) require Seller to make total
expenditures in excess of $100,000, or (c) are otherwise material to Seller.
Section 4.15 of the Disclosure Schedule contains a complete and accurate summary
of the material terms of the Affiliate Transactions listed therein and
identifies those Affiliate Transactions that will and will not survive the
Closing. The terms of such Affiliate Transactions that will survive the Closing
reflect terms no less favorable to Seller than terms which could have been
obtained in arms-length transactions between unaffiliated parties.
Section 4.16. Disclosure. None of the representations, warranties or
covenants contained in this Agreement, nor in any schedule or exhibit hereto
made by Seller, contains any untrue statement of material fact or omits a
material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer warrants and represents to and covenants with Seller and its
successors and assigns as follows:
Section 5.1. Organization of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority and any necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power, authority and governmental approval could not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
assets, business, condition (financial or otherwise), prospects or results of
operations of Buyer and its subsidiaries taken as a whole.
<PAGE> 11
Section 5.2. Validity and Execution. Buyer has full legal right,
capacity and power and all requisite authority and approval required to enter
into, execute and deliver this Agreement and to perform fully its obligations
hereunder, subject to approval of the transactions contemplated pursuant to this
Agreement and each of the other agreements required to be entered into pursuant
hereto by Buyer by the board of directors of Buyer. This Agreement has been duly
executed and delivered by Buyer and constitutes the valid and binding obligation
of Buyer enforceable against it in accordance with its terms.
Section 5.3. No Conflict; Required Filings and Consents.
(a) The execution, delivery and performance of this Agreement
by Buyer does not and will not: (i) conflict with or violate the articles of
incorporation or code of regulations of the Buyer or the equivalent
organizational documents of any of its subsidiaries; (ii) assuming that all
consents, approvals and authorizations contemplated by clause (i) of subsection
(b) below have been obtained and all filings described in such clauses have been
made, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Buyer or any of its subsidiaries or by which its or any of
their respective properties are bound or affected; or (iii) result in any breach
or violation of or constitute a default (or an event which with notice or lapse
of time or both could become a default) or result in the loss of a material
benefit under, or give rise to any right of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Buyer or any of its subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Buyer or any of its
subsidiaries is a party or by which Buyer or any of its subsidiaries or its or
any of their respective properties are bound or affected; except for any such
conflicts, violations, breaches, defaults, liens or other occurrences which
could not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the Buyer's ability to perform its obligations
hereunder.
(b) The execution, delivery and performance of this Agreement
by Buyer and the consummation of the Asset Purchase pursuant hereto do not and
will not require any consent, approval, authorization or permit of, action by,
filing with or notification to, any Federal, state or local government or any
court, administrative agency or commission or other governmental authority,
official or agency, domestic or foreign (a "Governmental Entity"), except for
(i) such consents, approvals, authorizations, permits, actions, filings or
notifications the failure of which to make or obtain could not reasonably be
expected to (x) prevent or materially delay consummation of the Asset Purchase
or (y) have a material adverse effect on the Buyer's ability to perform its
obligations hereunder.
Section 5.4. Compliance. Neither Buyer nor any of its subsidiaries is
in conflict with, or in default or violation of, (i) any law, rule, regulation,
order, judgment or decree applicable to Buyer or any of its subsidiaries or by
which its or any of their respective properties are bound or affected or (ii)
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Buyer or any of its
subsidiaries is a party or by which Buyer or any of its subsidiaries or its or
any of their respective properties are bound or affected, except for any such
conflicts, defaults or violations which could not, individually or in
<PAGE> 12
the aggregate, reasonably be expected to have a material adverse effect on the
Buyer's ability to perform its obligations hereunder.
Section 5.5. Disclosure. None of the representations, warranties or
covenants contained in this Agreement, nor in any schedule or exhibit hereto
made by Buyer, contains any untrue statement of material fact or omits a
material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE VI
CERTAIN OBLIGATIONS OF SELLER PENDING THE CLOSING DATE
Section 6.1. Investigation. During the period from the date of this
Agreement to the Closing Date (the "Due Diligence Period"), (a) Seller shall
permit Buyer and its authorized representatives to have full access to Seller's
facilities during normal business hours, to observe the Store Operations, to
meet with Seller's officers and employees engaged in the Store Operations, to
contact Seller's major clients/customers, to audit, examine and copy all files,
books and records, and other documents and papers relating to the Store
Operations, and to perform such other due diligence procedures as it deems
reasonably necessary or appropriate, and (b) Seller shall provide to Buyer and
its authorized representatives all information concerning Seller and the Store
Operations and the Purchased Assets, and all information concerning the
financial condition of Seller and the Store Operations, that is reasonably
requested by Buyer.
Section 6.2. Conduct of the Business. Between the date of this
Agreement and the Closing Date, except with the prior written consent of Buyer,
Seller shall (i) conduct the Store Operations in a diligent manner consistent
with past practices and in the ordinary course, (ii) not make any change in its
business practices, (iii) not transfer assets or incur liabilities other than in
the ordinary course, and (iv) use its best efforts to preserve the business
organization of the Store Operations intact, keeping available, the services of
its current officers, employees, salesmen, agents and representatives engaged in
the Store Operations, and maintaining the good will of its customers, suppliers
and other Persons having business relations with the Store Operations. Seller
shall respond to inquiries of Buyer as to the management of the Store Operations
and affairs.
Section 6.3. Acquisition Proposals. Between the date of this Agreement
and the Closing Date, neither Seller nor any of its respective officers,
employees, representatives or agents, or its respective affiliates, shall,
directly or indirectly, solicit, initiate, encourage or respond to any inquiries
or proposals from, or participate in any discussions or negotiations with, or
provide any non-public information to, any Person or group (other than Buyer and
its respective officers, employees, representatives and agents) concerning any
sale of the Store Operations or the Purchased Assets, any sale of stock or other
securities of Seller, or any merger, consolidation or similar transaction
involving Seller, the Store Operations, or the Purchased Assets. Seller shall
immediately advise Buyer of, and communicate to Buyer the terms of, any such
inquiry or proposal received by Seller.
<PAGE> 13
Section 6.4. Advice of Changes. Between the date of this Agreement and
the Closing Date, Seller shall promptly advise Buyer, in writing, of any fact of
which any of them obtains knowledge and which, if existing or known as of the
date of this Agreement, would have been required to be set forth or disclosed in
or pursuant to this Agreement.
Section 6.5. Best Efforts. Seller and Buyer shall use their best
efforts to consummate the transactions contemplated by this Agreement as of the
earliest practicable date. Seller and Buyer shall not take, or cause to be
taken, or to the best of their ability permit to be taken, any action that would
impair the prospect of completing the transactions contemplated by this
Agreement.
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1. Conditions to Seller's Obligations. The obligations of
Seller to enter into and complete the Closing are subject to the fulfillment on
or prior to the Closing Date of the following conditions:
(a) The representations and warranties of Buyer contained in
this Agreement shall be true and complete and correct on and as of the
Closing Date with the same force and effect as though made on and as of
the Closing Date;
(b) Buyer shall have performed and complied with all covenants
and agreements required by this Agreement to be performed or complied
with by Buyer on or prior to the Closing Date; and
(c) Buyer shall have delivered all certifications and other
documents required of it pursuant to this Agreement.
Section 7.2. Conditions to Buyer's Obligations. The obligations of
Buyer to enter into and complete the Closing are subject to the fulfillment on
or prior to the Closing Date of the following conditions:
(a) The representations and warranties of Seller contained in
this Agreement shall be true and complete and correct on and as of the
Closing Date with the same force and effect as though made on and as of
the Closing Date;
(b) Seller shall have performed and complied with all
covenants and agreements required by this Agreement to be performed or
complied with by it on or prior to the Closing Date;
(c) Seller shall have delivered all certifications and other
documents required of it pursuant to this Agreement;
<PAGE> 14
(d) Buyer shall have completed its due diligence review of the
Business to its satisfaction during the Due Diligence Period as
provided in Section 6.1 confirming that there has been no material
adverse change in the financial condition of the Business or its
results of operations from those reflected in the Financial Statements;
(e) The board of directors of Buyer shall have approved this
transaction after receipt by the special committee of such board of the
opinion of an investment banking firm retained by it, that the
transactions contemplated by this Agreement are fair, from a financial
point of view, to the shareholders of Buyer other than Schottenstein
Stores Corporation;
(f) The Buyer shall have received the proceeds of financing,
on terms and conditions satisfactory to Buyer, to enable Buyer to fund
its obligations hereunder; and
(g) There shall not be pending by any Governmental Entity any
suit, action or proceeding (or by any other person any suit, action or
proceeding which has a reasonable likelihood, in the opinion of counsel
to Buyer, of success) (i) challenging or seeking to restrain or
prohibit the consummation of the Asset Purchase or any of the other
transactions contemplated by this Agreement or seeking to obtain from
Buyer or any of its affiliates any damages that are material to any
such party, (ii) seeking to prohibit or limit the ownership or
operation by the Buyer or any of its subsidiaries of any material
portion of the Business or assets of the Business, or (iii) seeking to
impose limitations on the ability of Buyer or any designee of Buyer
pursuant to this Agreement to acquire or hold, or exercise full rights
of ownership of, any of the Purchased Assets.
Section 7.3. Conditions to the Obligations of Both Parties. The
obligations of Seller and Buyer under this Agreement are subject to the
fulfillment, prior to or at the Closing of the following condition:
(a) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction
or other legal restraint or prohibition preventing the consummation of
the Asset Purchase shall be in effect; provided, however, that the
parties hereto shall use their best efforts to have any such
injunction, order, restraint or prohibition vacated.
ARTICLE VIII
PERSONNEL MATTERS
Section 8.1. Employees. Buyer may, but shall not be obligated to, offer
employment to any of Seller's current or former employees as new employees of
Buyer, but this option shall not be deemed to create any obligation or a
contract of continuing employment or of employment for a definite term. Buyer
may also, but shall not be obligated to, engage or contract with any agent or
representative previously engaged by or contractually related to Seller.
<PAGE> 15
Section 8.2. Obligations to Employees. Seller shall have satisfied all
of its accrued (or accruable) obligations with respect to its employees, agents,
and representatives, including without limitation, obligations relating to
payroll, commissions, bonuses, payroll taxes benefit plans, hospitalization,
COBRA, WARN, vacation and sick pay, and any other fringe benefits with respect
to work performed through the Effective Date, whether or not the employees,
agents, or representatives have any vested rights therein. Buyer shall have no
responsibility whatsoever with respect to any such obligations relating to
payroll, payroll taxes, benefit plans, hospitalization, COBRA, WARN, vacation
and sick pay, and any other fringe benefits with respect to Seller's employees,
whether or not the employees have any vested rights therein. Buyer shall have no
responsibility whatsoever with respect to any such obligations, and is not
assuming or continuing any of Seller's Employee Benefit Plans, welfare benefit
plans or other fringe benefits, or any bargaining agreements which Seller may
have with its employees.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated and the Asset
Purchase contemplated hereby may be abandoned at any time prior to the Effective
Time:
(a) By mutual written consent of Buyer and Seller;
(b) By Buyer or Seller if any court of competent jurisdiction,
arbitrator or other Governmental Entity located or having jurisdiction within
the United States or any country or economic region in which either Seller or
Buyer, directly or indirectly, has material assets or operations, shall have
issued a final order, decree or ruling or taken any other final action
restraining, enjoining or otherwise prohibiting the consummation of the Asset
Purchase or any of the transactions contemplated by this Agreement, or otherwise
altering the terms of any of the foregoing in any significant respect, and such
order, decree, ruling or other action is or shall have become final and
nonappealable; or
(c) By Buyer or Seller if the Asset Purchase shall not have
been consummated on or before May 22, 1998, provided further that the right to
terminate this Agreement under this Section 9.1(c) shall not be available to the
party whose action or failure to act has been the cause of or resulted in the
failure of the Asset Purchase to occur on or before such date and such action or
failure to act constitutes a breach of this Agreement.
Section 9.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 9.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto except as
set forth in Section 9.3 and Section 11.5.
Section 9.3 Fees and Expenses. Except as otherwise specifically
provided herein, each party shall bear its own expenses in connection with this
Agreement and the transactions contemplated hereby.
<PAGE> 16
Section 9.4. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
Section 9.5. Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
Section 9.6. Remedies/Specific Performance. Seller recognizes that in
the event Seller wrongfully refuse to perform the provisions of this Agreement,
monetary damages alone my not be adequate and Buyer shall, therefore, be
entitled in such event to obtain specific performance of the terms of this
Agreement, in which event Buyer shall also be entitled to recovery of reasonable
attorneys' fees and other costs of enforcing its rights hereunder. In any action
to enforce the provisions of this Agreement, Seller shall waive the defense that
there is an adequate remedy at law or equity and Seller further agrees that
Buyer shall have the right to obtain specific performance of the terms of this
Agreement without being required to prove actual damages, post bond or furnish
other security.
ARTICLE X
INDEMNIFICATION
Section 10.1. Seller's Indemnity. Seller hereby indemnifies and holds
Buyer harmless from and against, and agrees to promptly defend Buyer from and
reimburse Buyer for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including, without limitation, reasonable
attorneys' fees and other reasonable legal costs and expenses) which Buyer may
at any time suffer or incur, or become subject to, as a result of or in
connection with any failure by Seller to carry out, perform, satisfy and
discharge any of its covenants, agreements, undertakings, liabilities or
obligations or any suit, action or other proceeding brought by any person
arising out of, or in any way related thereto, in each case excluding those
covenants, agreements, undertakings, liabilities or obligations of Seller which
are included in the Assumed Liabilities and which shall be paid by Buyer.
Section 10.2. Buyer's Indemnity. Buyer hereby indemnifies and holds
Seller harmless from and against, and agrees to promptly defend Seller from and
reimburse Seller for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including, without limitation, reasonable
attorneys' fees and other reasonable legal costs and expenses) which Seller may
at any time suffer or incur, or become subject to, as a result of or in
connection with any failure by Buyer to carry out, perform, satisfy and
discharge any of the Assumed Liabilities, or any suit, action or other
proceeding brought by any person arising out of, or in any way related thereto.
<PAGE> 17
Section 10.3 Provisions Regarding Third Party Claims. The indemnified
party shall promptly notify the indemnifying party in reasonable detail of any
claim, demand, action or proceeding for which indemnification will be sought
under Section 10.1 or Section 10.2 of this Agreement, and if such claim, demand,
action or proceeding is a third party claim, demand, action or proceeding, the
indemnifying party will have the right at its expense to assume the defense
thereof using counsel reasonably acceptable to the indemnified party. The
indemnified party shall have the right to participate, at its own expense, with
respect to any such third party claim, demand, action or proceeding. In
connection with any such third party claim, demand, action or proceeding, the
parties shall cooperate with each other and provide each other with access to
relevant books and records in their possession. No such third party claim,
demand, action or proceeding shall be settled without the prior written consent
of the indemnified party. If a firm written offer is made to settle any such
third party claim, demand, action or proceeding and the indemnifying party
proposes to accept such settlement and the indemnified party refuses to consent
to such settlement, then: (i) the indemnifying party shall be excused from, and
the indemnified party shall be solely responsible for, all further defense of
such third party claim, demand, action or proceeding; (ii) the maximum liability
of the indemnifying party relating to such third party claim, demand, action or
proceeding shall be the amount of the proposed settlement if the amount
thereafter recovered from the indemnified party on such third party claim,
demand, action or proceeding is greater than the amount of the proposed
settlement; and (iii) the indemnified party shall pay all attorneys' fees and
legal costs and expenses incurred after rejection of such settlement by the
indemnified party, but if the amount thereafter recovered by such third party
from the indemnified party is less than the amount of the proposed settlement,
the indemnified party shall be reimbursed by the indemnifying party for such
attorneys' fees and legal costs and expenses up to a maximum amount equal to the
difference between the amount recovered by such third party and the amount of
the proposed settlement.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Non-Survival of Representations, Warranties and
Agreements. Notwithstanding any other provision of this Agreement, the
representations and warranties in this Agreement shall terminate at the earlier
of either the Closing or the termination of this Agreement pursuant to Section
9.1.
Section 11.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by fax or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
if to Buyer:
Value City Department Stores, Inc.
3241 Westerville Road
Columbus, Ohio 43224
<PAGE> 18
Attention: Martin P. Doolan, President and CEO
Fax: 614-478-3563
with copies to:
Porter, Wright, Morris & Arthur Buckingham, Doolittle & Burroughs LLP
41 South High Street 88 East Broad Street
Columbus, Ohio 43215 Columbus, Ohio 43215-3506
Attention: Neil Bulman, Jr., Esq. Attention: Brent D. Rosenthal, Esq.
Fax: 614-227-4492 Fax: 614-221-8590
if to Seller:The Valley Fair Corporation
c/o Schottenstein Stores Corporation
1800 Moler Road
Columbus, Ohio 43207
Attention: Thomas R. Ketteler, COO
Fax: 614-449-0225
with a copy to:Schottenstein Stores Corporation
1800 Moler Road
Columbus, Ohio 43207
Attention: Irwin A. Bain, Esq., General Counsel
Fax: 614-443-0972
Section 11.3 Certain Definitions. For purposes of this Agreement, the
term:
(a)"affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, the first mentioned person;
(b)"associate" of a person means (1) any corporation or
organization (other than the registrant or a majority-owned subsidiary
of the registrant) of which such person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10 percent or more of
any class of equity securities, (2) any trust or other estate of which
such person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity, and (3)
any relative or spouse of such person, or any relative of such spouse,
who has the same home as such person or who is a director or officer of
the registrant or any of its parents or subsidiaries;
(c)"beneficial owner" with respect to any shares of Seller
Common Stock means a person who shall be deemed to be the beneficial
owner of such shares (i) which such person or any of its affiliates or
associates (as such term is defined in Rule 12b-2 of the Exchange Act)
beneficially owns, directly or indirectly, (ii) which such person or
any of its affiliates or associates has, directly or indirectly, (A)
the right to acquire (whether such right is exercisable immediately or
subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration
rights, exchange rights, wan-ants or options, or otherwise, or (B) the
right to vote pursuant to any agreement, arrangement or understanding
or (iii) which are beneficially owned, directly or indirectly, by any
other persons with whom such person or any of
<PAGE> 19
its affiliates or person with whom such person or any of its affiliates
or associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
Seller Common Stock;
(d)"control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management policies of a person, whether through the ownership
of stock, as trustee or executor, by contract or credit arrangement or
otherwise;
(e)"generally accepted accounting principles" shall mean the
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a
significant segment of the accounting profession in the United States,
in each case applied on a basis consistent with the manner in which the
audited financial statements for the fiscal year of the Seller ended
January 31, 1998 were prepared;
(f)"person" means an individual, corporation, partnership,
association. trust. unincorporated organization, other entity or group
(as defined in Section 13(d)(3) of the Exchange Act);
(g)"subsidiary" or "subsidiaries" of the Seller, or any other
person means any corporation, partnership, joint venture or other legal
entity of which the Seller or such other person, as the case may be
(either alone or through or together with any other subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity
interests the holder of which is generally entitled to vote for the
election of the board of directors or other governing body of such
corporation or other legal entity; and
(h)"Significant Subsidiary" has the meaning set forth in
Regulation S-X promulgated by the SEC.
Section 11.4 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
Section 11.5 Entire Agreement; Assignment. This Agreement constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof;
provided, however the confidentiality provisions in paragraph (E) of the
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letter of intent, dated March 12, 1998, among the parties shall survive the
execution of this Agreement and continue in full force and effect. This
Agreement shall not be assigned by operation of law or otherwise, except that
Buyer may assign all or any of its rights and obligations hereunder to any
direct or indirect wholly owned subsidiary or subsidiaries of Buyer, provided
that no such assignment shall relieve the assigning party of its obligations
hereunder if such assignee does not perform such obligations.
Section 11.6 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and their permitted
assigns. Except as provided in the preceding sentence, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 11.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Ohio, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 11.8 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
Section 11.9 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
Section 11.10. Interpretation. Words used herein, regardless of the
number and gender specifically used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine, feminine,
or neuter, as the context requires.
Section 11.11. Transition and Cooperation. From and after the Closing
Date, (a) Seller shall fully cooperate to transfer to Buyer the control and
enjoyment of the Store Operations and the Purchased Assets; (b) Seller shall not
take any action, directly or indirectly, alone or together with others, which
obstructs or impairs the smooth assumption by Buyer of the Store Operations and
the Purchased Assets; and (c) Seller shall promptly deliver to Buyer all
correspondence, papers, documents and other items and materials received by
Seller or found to be in the possession of Seller which pertain to the Store
Operations or the Purchased Assets.
Section 11.12. Access to Accounting Information. For a period of three
(3) years after the Closing Date, Seller shall permit Buyer and its authorized
representatives to have full access to, and use of, Seller's books and records,
financial statements, opinions of independent public accountants, and accounting
information, work papers, notes and related materials, prepared, reviewed or
compiled with respect to, or including, the Store Operations (whether in the
possession of Seller or Seller's accountants) for the three years ended January
, 1998, and for the period from January 31, 1998 through and including the
Effective Time, and any interim periods
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therein, for review, duplication, analysis and any other legal use, including
but not limited to, the preparation of audited financial statements for the
Store Operations for any purpose desired by Buyer. Seller shall instruct its
accountants to cooperate with and assist Buyer and its authorized
representatives to the extent reasonably requested by them.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SELLER: BUYER:
THE VALLEY FAIR CORPORATION VALUE CITY DEPARTMENT STORES, INC.
By: By:
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Its: Its:
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