AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
made on November 17, 1995 between ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ AND COMPANY, a Michigan
corporation ("▇▇▇▇▇▇▇'▇"), and the several shareholders of ▇▇▇▇▇▇▇▇▇
STORES, INC., an Ohio corporation ("▇▇▇▇▇▇▇▇▇"), listed on the signature
page hereof (collectively, the "Shareholders").
The Shareholders are the owners of all of the issued and
outstanding capital stock of ▇▇▇▇▇▇▇▇▇. The Shareholders and the Board
of Directors of ▇▇▇▇▇▇▇'▇ have determined that it is in the best
interests of Steinbach, Crowley's, and the Shareholders to consummate the
acquisition by ▇▇▇▇▇▇▇'▇ of all of the Common Stock of ▇▇▇▇▇▇▇▇▇ held by
the Shareholders (the "Reorganization"). The parties hereto desire that
the Reorganization be made on the terms and subject to the conditions set
forth in this Agreement and qualify as a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
In consideration of the premises and subject to the
representations, warranties, covenants and other terms and conditions
contained herein and for the consideration herein provided, the parties
agree as follows:
I. REORGANIZATION.
1.1 Exchange of ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇'▇ Common Stock. Subject to
and upon the representations, warranties, covenants, agreements, terms
and conditions in this Agreement, at the Closing (as defined herein) and
as of the Closing Date (as defined herein), ▇▇▇▇▇▇▇'▇ shall acquire from
the Shareholders and the Shareholders shall deliver to ▇▇▇▇▇▇▇'▇ an
aggregate of 100 shares of Common Stock, without par value (the
"▇▇▇▇▇▇▇▇▇ Common Stock"), of ▇▇▇▇▇▇▇▇▇, constituting all of the issued
and outstanding shares of the capital stock of ▇▇▇▇▇▇▇▇▇, in exchange for
shares of Common Stock of ▇▇▇▇▇▇▇'▇ (the "▇▇▇▇▇▇▇'▇ Common Stock") in an
aggregate amount equal to that number of shares of ▇▇▇▇▇▇▇'▇ Common
Stock, rounded downward to the nearest 100 shares, that shall be closest
to forty-five percent (45%) (or such lower percentage as shall be
required pursuant to Section 1.5(b) hereof) of the then issued and
outstanding shares of ▇▇▇▇▇▇▇'▇ Common Stock (the "Consideration"). Each
share of ▇▇▇▇▇▇▇▇▇ Common Stock shall be exchanged for one percent (1%)
of the Consideration.
1.2 Nature of Consideration. It is expressly acknowledged and
agreed that the shares of ▇▇▇▇▇▇▇'▇ Common Stock delivered in payment of
the Consideration hereunder shall not be registered under the federal
securities laws or under any securities or Blue Sky laws of the several
states, provided that the Shareholders shall have the rights arising
under the Registration Rights Agreement (as defined in Section 5.5
hereof). Notwithstanding anything in this Agreement to the contrary, in
no event shall the determination of the Consideration be adjusted due to
the increase or decrease of the closing price of the Common Stock on the
American Stock Exchange (i.e., the national securities exchange on which
such Common Stock is listed for trading).
1.3 Procedure for Exchange of Shares. At the Closing and as of
the Closing Date, ▇▇▇▇▇▇▇'▇ will furnish the Shareholders with a
certificate or certificates representing that number of whole shares of
▇▇▇▇▇▇▇'▇ Common Stock which the Shareholders are entitled to receive
pursuant to Section 1.1 in exchange for certificates representing all of
the issued and outstanding ▇▇▇▇▇▇▇▇▇ Common Stock. The certificates
representing all such shares of ▇▇▇▇▇▇▇'▇ Common Stock will bear the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAW. THESE SECURITIES MAY NOT BE SOLD EXCEPT IN ACCORDANCE
WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS OR AN EXEMPTION
THEREFROM.
1.4 Closing of ▇▇▇▇▇▇▇▇▇ Transfer Records. After the close of
business on the Closing Date, transfers of shares of ▇▇▇▇▇▇▇▇▇ Common
Stock outstanding prior to the Closing Date shall not be made on the
stock transfer books of Steinbach.
1.5 Adjustments to Consideration.
(a) Determination of ▇▇▇▇▇▇▇▇▇'▇ Net Book Value. The net
book value of ▇▇▇▇▇▇▇▇▇'▇ assets and liabilities as at the close of
business on December 30, 1995 (i.e., "▇▇▇▇▇▇▇▇▇'▇ Net Book Value") shall
be determined in the manner described below:
(i) Audit. Within thirty (30) days after December
30, 1995 (i.e., January 29, 1996), the Shareholders, at the
Shareholders' sole cost and expense, shall prepare a balance sheet
as at the close of business on December 30, 1995 (the "December
1995 Balance Sheet") in accordance with generally accepted
accounting principles and in accordance with the procedures set
forth on Exhibit 1.5 of the Disclosure Exhibits (as defined
herein), and shall deliver same to ▇▇▇▇▇▇▇'▇. It is acknowledged
and agreed that, without limiting the procedures to be set forth on
such Exhibit 1.5, (x) for purposes of determining ▇▇▇▇▇▇▇▇▇'▇ Net
Book Value, neither the December 1995 Balance Sheet nor ▇▇▇▇▇▇▇▇▇'▇
Net Book Value shall contain or reflect any of the Excluded Assets
(as defined herein) or the Excluded Liabilities (as defined herein)
or any of the actions to be taken by the Shareholders with respect
to the disposition thereof as contemplated in Sections 4.9 and 4.10
hereof, and (y) for purposes of determining ▇▇▇▇▇▇▇▇▇'▇ Net Book
Value, the fixed assets shall be determined at ▇▇▇▇▇▇▇▇▇'▇
historical cost and not in accordance with generally accepted
accounting principles. ▇▇▇▇▇▇▇▇▇'▇ independent auditors shall
thereupon audit the December 1995 Balance Sheet and deliver their
report thereon to the Shareholders and ▇▇▇▇▇▇▇'▇ within sixty (60)
days after December 30, 1995 (i.e., February 28, 1996).
(ii) Review and Observation. With respect to the
performance of such audit, the Shareholders agree that ▇▇▇▇▇▇▇'▇
and its independent auditors and other representatives, shall have
the right to review and observe the performance of such audit and
shall have full and complete access during regular business hours
and after reasonable notice to all books and accounts, workpapers
and other records and files relating to such audit. The
Shareholders shall use their best efforts to provide such access to
all workpapers and supporting collateral documents relating to the
audit in the possession or control of ▇▇▇▇▇▇▇▇▇'▇ independent
auditors or other representatives.
(iii) Final Determination. ▇▇▇▇▇▇▇▇▇'▇ Net Book Value
as determined on the December 1995 Balance Sheet shall be binding
and conclusive on the parties hereto unless within thirty (30) days
after delivery (pursuant to subsection (i)) to ▇▇▇▇▇▇▇'▇ of the
results of such audit certifying ▇▇▇▇▇▇▇▇▇'▇ Net Book Value,
▇▇▇▇▇▇▇'▇ gives written notice to ▇▇▇▇▇▇▇▇▇ of ▇▇▇▇▇▇▇'▇ objection
to any item thereon. In the event such an objection is made, any
item not objected to shall be binding and conclusive on the parties
hereto and if the parties are unable to reach agreement with
respect to any item objected to within fifteen (15) days after
▇▇▇▇▇▇▇'▇ notice of objection, the determination of the respective
office's of the independent auditors of ▇▇▇▇▇▇▇'▇ and the
Shareholders as to any such item shall be binding and conclusive on
the parties hereto. If the offices of the independent auditors
representing the Shareholders and ▇▇▇▇▇▇▇'▇ cannot agree within
twenty (20) days after the expiration of the aforementioned fifteen
(15) day period, at the option of either the Shareholders or
▇▇▇▇▇▇▇'▇, any item so disputed shall be submitted to ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP or such other third independent auditors mutually
selected by the Shareholders and ▇▇▇▇▇▇▇'▇; determinations thus
made shall be binding upon the parties hereto. Each party shall
pay the cost of its own independent auditors for services rendered
in this process and shall bear one-half (1/2) of the cost of the
third independent auditors, if one is selected.
(ii) Time of Final Determination. The parties hereto
shall use their best efforts to complete the final determination of
▇▇▇▇▇▇▇▇▇'▇ Net Book Value no later than seventy-five (75) days
after December 30, 1995 (i.e., March 15, 1996).
(b) Adjustments.
(i) On or Prior to Closing.
(A) If the final determination of ▇▇▇▇▇▇▇▇▇'▇
Net Book Value pursuant to Section 1.5 hereof occurs on or
prior to the Closing and is less than $9 million but greater
than $6 million, then the Consideration as to which the
Shareholders are entitled to receive as described above in
Section 1.1 shall be adjusted such that the aggregate
percentage of the then issued and outstanding shares of
▇▇▇▇▇▇▇'▇ Common Stock comprising the Consideration shall be
decreased by 0.25% for each $100,000 increment (or portion
thereof) by which ▇▇▇▇▇▇▇▇▇'▇ Net Book Value is less than $9
million (the "Adjusted Consideration"). For example, (1) if
▇▇▇▇▇▇▇▇▇'▇ Net Book Value is finally determined to be
$8,750,000, then the Adjusted Consideration shall be 44.25%
(i.e., 45.00% - 0.75%) of the then issued and outstanding
shares of ▇▇▇▇▇▇▇'▇ Common Stock, and (2) if ▇▇▇▇▇▇▇▇▇'▇ Net
Book Value is finally determined to be $8,200,000, then the
Adjusted Consideration shall be 43.25% (i.e., 45.00% -
1.75%) of the then issued and outstanding shares of ▇▇▇▇▇▇▇'▇
Common Stock.
(B) However, if either of the events described
below in subsections (1) or (2) occur, then the provisions of
Section 1.1 and the procedures relative to the Adjustment
Amount described in this Section 1.5(b)(i) shall be of no
force or effect and the parties shall use their best efforts
to agree upon a mutually acceptable exchange ratio with
respect to the exchange of the ▇▇▇▇▇▇▇▇▇ Common Stock and the
▇▇▇▇▇▇▇'▇ Common Stock: (1) if the final determination of
▇▇▇▇▇▇▇▇▇'▇ Net Book Value pursuant to Section 1.5 hereof
occurs on or prior to the Closing and is less than $6
million; or (2) if the net book value of ▇▇▇▇▇▇▇'▇ assets and
liabilities as at the close of business on December 30, 1995,
with the so-called LIFO reserve for inventory added to such
value, as determined by ▇▇▇▇▇▇▇'▇ based upon its books and
records ("▇▇▇▇▇▇▇'▇ Net Book Value") is less than $12.15
million.
(ii) After Closing.
(A) If the final determination of ▇▇▇▇▇▇▇▇▇'▇
Net Book Value pursuant to Section 1.5 hereof occurs after
the Closing and is less than $9 million but greater than $6
million, then each of the Shareholders shall deliver to
▇▇▇▇▇▇▇'▇ within five (5) business days of such final
determination of ▇▇▇▇▇▇▇▇▇'▇ Net Book Value a certificate or
certificates representing such number of shares of ▇▇▇▇▇▇▇'▇
Common Stock equal to the difference between (A) the
Consideration which each of the Shareholders received at the
Closing as described above in Section 1.1, and (B) the
Consideration which each of the Shareholders would have
received at the Closing as described above in Section 1.1
substituting the appropriate Adjusted Consideration for the
Consideration. For example, (1) if ▇▇▇▇▇▇▇▇▇'▇ Net Book
Value is finally determined to be $8,750,000, then the
Shareholders shall deliver to ▇▇▇▇▇▇▇'▇ shares of ▇▇▇▇▇▇▇'▇
Common Stock equal to an aggregate of 0.75% of the issued and
outstanding shares as at the Closing Date (i.e., 45.00% -
44.25%), and (2) if ▇▇▇▇▇▇▇▇▇'▇ Net Book Value is finally
determined to be $8,200,000, then the Shareholders shall
deliver to ▇▇▇▇▇▇▇'▇ shares of ▇▇▇▇▇▇▇'▇ Common Stock equal
to an aggregate of 1.75% of the issued and outstanding shares
as at the Closing Date (i.e., 45.00% - 43.25%).
(B) However, if either of the events described
below in subsections (1) or (2) occur, then the parties shall
use their best efforts to agree upon a mutually acceptable
exchange ratio with respect to the exchange of the ▇▇▇▇▇▇▇▇▇
Common Stock and the ▇▇▇▇▇▇▇'▇ Common Stock and, after
reaching such agreement, shall take such actions as are
necessary to reduce the Consideration received by the
Shareholders at the Closing in accordance with such
agreement: (1) if the final determination of ▇▇▇▇▇▇▇▇▇'▇ Net
Book Value pursuant to Section 1.5 hereof occurs after the
Closing and is less than $6 million; or (2) if ▇▇▇▇▇▇▇'▇ Net
Book Value is less than $12.15 million.
II. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS.
The Shareholders, jointly and severally, hereby represent, warrant,
and covenant to ▇▇▇▇▇▇▇'▇, on and as of the date hereof, as follows:
2.1 Organization and Standing. ▇▇▇▇▇▇▇▇▇ is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Ohio. ▇▇▇▇▇▇▇▇▇ is qualified and in good standing as a foreign
corporation to do business in Connecticut, New Hampshire, New Jersey, New
York and Vermont and, other than the foregoing, ▇▇▇▇▇▇▇▇▇ is not required
to be licensed or qualified except where such failure to be so qualified
or in good standing would not have a material and adverse effect on the
Acquired Assets (as defined herein), the results of operations, the
financial condition or the future prospects of the Acquired Business (as
defined herein), or relate in any material and adverse way to the
transactions contemplated in this Agreement (a "Material Adverse
Effect"). ▇▇▇▇▇▇▇▇▇ has all requisite corporate power and authority and
all licenses, franchises, permits and authorizations to own and lease its
properties and assets and to carry on its business as presently
conducted, except where the failure to do so would not have a Material
Adverse Effect.
2.2 Authority and Action. ▇▇▇▇▇▇▇▇▇ has full corporate power and
authority to enter into this Agreement and each of the other agreements,
instruments and other documents to be delivered at the Closing (as
defined herein) or thereafter by ▇▇▇▇▇▇▇▇▇ pursuant to this Agreement or
otherwise and to perform and consummate the transactions contemplated
herein and therein. The Shareholders have full power and authority to
enter into this Agreement and each of the other agreements to be
delivered at the Closing or thereafter by the Shareholders pursuant to
this Agreement or otherwise and to perform and consummate the
transactions contemplated herein and therein. This Agreement, as well as
the other agreements to be delivered at the Closing or thereafter by
▇▇▇▇▇▇▇▇▇ and/or by the Shareholders, are collectively referred to as the
"▇▇▇▇▇▇▇▇▇ Delivered Documents". All corporate action required to be
taken by or on the part of ▇▇▇▇▇▇▇▇▇ to authorize the execution and
delivery of this Agreement and the ▇▇▇▇▇▇▇▇▇ Delivered Documents and to
authorize ▇▇▇▇▇▇▇▇▇ to perform and consummate the transactions
contemplated hereby and thereby have been, or prior to the Closing will
be, duly and properly taken. This Agreement and each of the ▇▇▇▇▇▇▇▇▇
Delivered Documents have been or will be duly executed and delivered by
▇▇▇▇▇▇▇▇▇ and by the Shareholders. This Agreement and each of the
▇▇▇▇▇▇▇▇▇ Delivered Documents constitute valid and binding obligations of
▇▇▇▇▇▇▇▇▇ and of the Shareholders and, except to the extent enforcement
may be restricted by bankruptcy or other laws affecting creditors rights
of general applicability and general principles of equity, are
enforceable in accordance with their respective terms.
2.3 Financial Information; Undisclosed Liabilities.
(a) Schedule 2.3 of the Disclosure Schedules (as defined
herein) will contain certain financial information relative to the
financial condition and results of operations of ▇▇▇▇▇▇▇▇▇ and the
Acquired Business, including, without limitation, financial information
relative to (i) balance sheets and statements of income as of and for the
fiscal year ended January 28, 1995 ("▇▇▇▇▇▇▇▇▇'▇ Most Recent Fiscal Year
End"), and (ii) balance sheets and statements of income as of and for the
period beginning on January 29, 1995 and ending on the most recent
practicable date ("▇▇▇▇▇▇▇▇▇'▇ Most Recent Fiscal Month End")
(collectively, the "Steinbach Financial Information"). Except as set
forth in Schedule 2.3 of the Disclosure Schedules, the Steinbach
Financial Information (x) has been prepared in accordance with the books
and records of Steinbach, (y) is true and correct and present fairly the
results of operations for the periods then ended and the financial
condition as of the dates indicated, and (z) has been prepared in
accordance with generally accepted accounting principles applied on a
basis consistent with preceding years.
(b) Except as disclosed in Schedule 2.3 of the Disclosure
Schedules, ▇▇▇▇▇▇▇▇▇ has no liabilities, whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due
or to become due, except for (i) liabilities set forth on the face of the
balance sheets (rather than in any notes thereto) contained within the
Steinbach Financial Information, and (ii) liabilities which have arisen
after the date of ▇▇▇▇▇▇▇▇▇'▇ Most Recent Fiscal Month End in the
ordinary course of business (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract,
breach of warranty, tort, infringement, or violation of law).
2.4 Capitalization and Ownership of ▇▇▇▇▇▇▇▇▇. The entire
authorized capital stock of ▇▇▇▇▇▇▇▇▇ consists of 850 shares of ▇▇▇▇▇▇▇▇▇
Common Stock, without par value, of which 100 shares are issued and
outstanding. The Shareholders own all of the ▇▇▇▇▇▇▇▇▇ Common Stock free
and clear of any restrictions on transfer (other than any restrictions
under the Securities Act of 1933, as amended (the "Securities Act"), and
state securities laws), taxes, security interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands.
All of the issued and outstanding shares of ▇▇▇▇▇▇▇▇▇ Common Stock have
been duly authorized, are validly issued, fully paid, and nonassessable.
There are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to any shares of
▇▇▇▇▇▇▇▇▇ Common Stock. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of any shares of
▇▇▇▇▇▇▇▇▇ Common Stock. Except for this Agreement, none of ▇▇▇▇▇▇▇▇▇ nor
the Shareholders is a party to any option, warrant, purchase right, or
other contract or commitment that could require a Shareholder or
▇▇▇▇▇▇▇▇▇ to sell, transfer, or otherwise dispose of any shares of
▇▇▇▇▇▇▇▇▇ Common Stock. ▇▇▇▇▇▇▇▇▇ does not control, directly or
indirectly, or have any direct or indirect equity participation in any
corporation, partnership, trust, or other business association. The
Shareholders constitute all of the shareholders of ▇▇▇▇▇▇▇▇▇.
2.5 Acquired Assets -- General.
(a) Ownership. Except as described in Schedule 2.5 of the
Disclosure Schedules and except for the Excluded Assets (as defined
below), ▇▇▇▇▇▇▇▇▇ owns and has good and marketable title to, or a valid
leasehold interest in, all of the properties and assets used by it,
located on the Acquired Stores (as defined below), or shown in the
Steinbach Financial Information or acquired after the date thereof, free
and clear of all liens, claims, encumbrances, security interests, and
other restrictions ("Liens").
(b) Utilization of Assets. Except for the Excluded Assets,
▇▇▇▇▇▇▇▇▇'▇ assets (the "Acquired Assets") constitute all or
substantially all of the assets (tangible or intangible) being used by
▇▇▇▇▇▇▇▇▇ in the operation of the business related to the Acquired Stores
and the Acquired Assets (the "Acquired Business") as presently conducted.
(c) Location. Except as described in Schedule 2.5 of the
Disclosure Schedules and except for the Excluded Assets, all of the
Acquired Assets are now, and on the Closing Date will be, in ▇▇▇▇▇▇▇▇▇'▇
possession and located at the Acquired Stores.
2.6 Inventory. All of ▇▇▇▇▇▇▇▇▇'▇ inventory related to the
Acquired Stores (the "Steinbach Inventory"), including the Steinbach
Inventory reflected in the ▇▇▇▇▇▇▇▇▇ Financial Information, is accounted
for on the first-in, first-out (FIFO) basis and is in good and saleable
condition, all of the ▇▇▇▇▇▇▇▇▇ Inventory for the Summer 1995 and Fall
1995 retail selling seasons has been written down in accordance with
▇▇▇▇▇▇▇▇▇'▇ normal standards and past practices and with appropriate
reserves therefor reflected in the Steinbach Financial Information and
all of the ▇▇▇▇▇▇▇▇▇ Inventory which is obsolete, damaged or below
standard quality has been written down in accordance with ▇▇▇▇▇▇▇▇▇'▇
normal standards and past practices and with appropriate reserves
therefor reflected in the Steinbach Financial Information.
2.7 Condition of Assets. Except as disclosed on Schedule 2.7 of
the Disclosure Schedules, all of the machinery, equipment, fixed assets,
furniture, fixtures, leasehold improvements and other tangible personal
property which are owned or otherwise used by ▇▇▇▇▇▇▇▇▇ in the Acquired
Business is in good, useable condition and repair, ordinary wear and tear
and routine maintenance excepted, and in conformity with all material
applicable ordinances, regulations and other laws.
2.8 Relationship with Suppliers. Except as disclosed on Schedule
2.8 of the Disclosure Schedules, with respect to the Acquired Business,
no information has come to the attention of ▇▇▇▇▇▇▇▇▇ or the Shareholders
which might reasonably lead it to believe that any suppliers of ▇▇▇▇▇▇▇▇▇
relating to the Acquired Business would or intend to cease dealing with
▇▇▇▇▇▇▇▇▇ or would or intend to alter or modify the amount of such
supplier's dealings with ▇▇▇▇▇▇▇▇▇ in the event of the consummation of
the transactions contemplated hereby, except to the extent such cessation
or modification would not have a Material Adverse Effect.
2.9 Intellectual Property.
(a) Set forth on Schedule 2.9 of the Disclosure Schedules
will be a list of all of ▇▇▇▇▇▇▇▇▇'▇ intellectual property rights used in
and related to the Acquired Business, including, without limitation, (i)
all trademark registrations and applications therefor and all tradenames
and trademarks, whether or not registered or registrable, and the
goodwill pertaining thereto (including, without limitation, the name
"▇▇▇▇▇▇▇▇▇" and variations thereof), (ii) all copyrights, whether or not
registered, (iii) all patents and pending patent applications, (iv) all
trade secrets, (v) all know-how, computer programs and software, and
other related items and other data used in and related to the Acquired
Business, (vi) all trademark licenses, royalty agreements, patent
licenses and other licenses used in the Acquired Business, and (vii) all
causes of action for infringement by third parties of the foregoing
(collectively, the "▇▇▇▇▇▇▇▇▇ Intellectual Property").
(b) Except for the ▇▇▇▇▇▇▇▇▇ Intellectual Property and
except for any rights that may exist under common law, there are no
patents, patent applications, copyrights, trademarks or trade names owned
by or registered in the name of ▇▇▇▇▇▇▇▇▇ and there are no licensing
agreements with respect to any patents, patent applications, trademarks
or trade names to which ▇▇▇▇▇▇▇▇▇ is a party either as a licensor or
licensee. ▇▇▇▇▇▇▇▇▇ has no knowledge of and has received no notice of
any conflict with, or any infringement of, third party-owned patents,
patent applications, copyrights, trademarks, tradenames, trade secrets,
know-how, or inventions caused by ▇▇▇▇▇▇▇▇▇'▇ use of or ownership
interest in the ▇▇▇▇▇▇▇▇▇ Intellectual Property. ▇▇▇▇▇▇▇▇▇ has no
knowledge of and has received no notice of any conflict with, or any
infringement of, the ▇▇▇▇▇▇▇▇▇-owned ▇▇▇▇▇▇▇▇▇ Intellectual Property
caused by a third-party's use of or ownership interest in the ▇▇▇▇▇▇▇▇▇
Intellectual Property. No officer, director, shareholder or employee of
▇▇▇▇▇▇▇▇▇, or any affiliate of the foregoing or of ▇▇▇▇▇▇▇▇▇, has an
ownership interest in or claim with respect to any of the ▇▇▇▇▇▇▇▇▇
Intellectual Property.
2.10 Contracts and Other Commitments.
(a) Set forth on Schedule 2.10 of the Disclosures Schedules
will be a description or a list, as of the date of the Disclosure
Schedules, of the following contracts and other agreements to which
▇▇▇▇▇▇▇▇▇ is a party:
(i) The leases and agreements, together with all
amendments and modifications thereof, and a list of all agreements
pursuant to which such leases and agreements have been subordinated
to any mortgages and other liens, pertaining to the premises at
each of the Acquired Stores, which description shall include, for
each such lease and agreement and for each such subordination
agreement, its execution date, all of the parties thereto, store
number and location (the "Lease Contracts").
(ii) The purchase orders or contracts for the purchase
by ▇▇▇▇▇▇▇▇▇ from third parties of merchandise, products or
services in the ordinary course of business.
(iii) All other material contracts or agreements of
▇▇▇▇▇▇▇▇▇ which will remain in effect as of the Closing Date,
including, without limitation, the following:
(A) all of the material contracts or
commitments with respect to the so-called licensed or leased
departments in the several Acquired Stores.
(B) all material contracts or commitments for
the performance or receipt of services or for the purchase,
sale, lease, license, use or acquisition of real or personal
property of any kind or character, except for (1) purchase
orders for inventory in the ordinary course of business, (2)
other purchase orders for furniture, fixtures or equipment
which, in the aggregate, involve less than $5,000 and (3)
contracts terminable at will by ▇▇▇▇▇▇▇▇▇ upon thirty (30)
days' notice.
(C) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other
basis;
(D) all written agreements with sales agents,
purchasing agents, distributors, dealers and representatives;
(E) all other leases and subleases of any
property, real or personal, with respect to which ▇▇▇▇▇▇▇▇▇
is either lessor or lessee;
(F) all loan or credit agreements and any
agreements of guarantee, indemnity or suretyship;
(G) any agreement concerning confidentiality or
noncompetition;
(H) any agreement with any of the Shareholders;
(I) any agreement under which ▇▇▇▇▇▇▇▇▇ has
advanced or loaned any amount to any of its directors,
officers, or leased employees, other than travel advances,
outside the ordinary course of business;
(J) any other contract or agreement (or group
of related contracts or agreements) the performance of which
involves consideration in excess of $10,000 or any other
contract or agreement with a term in excess of one year; and
(K) any other agreement or understanding (oral
or written) under which the consequences of a default or
termination could have a material adverse effect on
▇▇▇▇▇▇▇▇▇'▇ business, financial condition, operations,
results of operations or future prospects.
The foregoing are collectively referred to as the "Contracts".
(b) ▇▇▇▇▇▇▇'▇ will be given true and correct and complete
copies of all written instruments evidencing the Contracts or summaries
of all oral Contracts on or before the delivery of the Disclosure
Schedules and on or prior to the Closing shall be given true and correct
copies of all written instruments evidencing the Contracts or summaries
of all oral Contracts as updated after the date thereof.
(c) All of the Contracts are in full force and effect and
are valid and binding obligations of the parties thereto in accordance
with their respective terms. There exists no condition, event or act
(including, without limitation, the consummation of the transactions
contemplated by this Agreement) which, with the giving of notice, the
lapse of time or the happening of any other event or condition, would (i)
become a default or an event of default, or would constitute a breach of
any provision of any such Contracts, or (ii) would permit the
acceleration of any obligation of any party thereto or the creation of a
lien or encumbrance upon any of the Acquired Assets. ▇▇▇▇▇▇▇▇▇ has not
received any notice of default from any of the other parties to any of
the Contracts and, to the best of ▇▇▇▇▇▇▇▇▇'▇ knowledge, Steinbach is not
in material default under any of the Contracts. As to each of the Lease
Contracts, all rent and other charges have been paid through the date set
forth in Schedule 2.10 of the Disclosure Schedules..
2.11 Licenses. ▇▇▇▇▇▇▇▇▇ currently holds all necessary licenses,
permits and approvals of all applicable federal, state and local
authorities with respect to the operation of the Acquired Business and
the ownership of the Acquired Assets (collectively, the "▇▇▇▇▇▇▇▇▇
Licenses"), except where the failure to hold such ▇▇▇▇▇▇▇▇▇ Licenses
would not have a Material Adverse Effect. Set forth on Schedule 2.11 of
the Disclosure Schedules will be a list of such ▇▇▇▇▇▇▇▇▇ Licenses. All
such ▇▇▇▇▇▇▇▇▇ Licenses are in good standing and there is no
investigation or proceeding pending or threatened with respect to such
▇▇▇▇▇▇▇▇▇ Licenses.
2.12 Litigation and Investigations. Except as set forth on
Schedule 2.12 of the Disclosure Schedules, there are no actions, suits,
claims, demands, legal or administrative proceedings or governmental
investigations existing or, to the best knowledge of ▇▇▇▇▇▇▇▇▇,
threatened against or affecting ▇▇▇▇▇▇▇▇▇, the Acquired Business, or any
of its property or assets, nor any judgments, decrees, orders, rulings,
writs or injunctions specifically referring to ▇▇▇▇▇▇▇▇▇ which (either by
reason of adherence or default) may have a material and adverse effect on
▇▇▇▇▇▇▇▇▇'▇ business (including the Acquired Business), properties or
assets, prospects or financial condition or relate in any way to the
transactions contemplated in this Agreement.
2.13 Labor Relations and Employee Matters.
(a) Except as described on Schedule 2.13 of the Disclosure
Schedules, ▇▇▇▇▇▇▇▇▇ is not a party to any written sales representative
agreement, consulting agreement or other independent contractor agreement
with respect to the sale of merchandise or services by ▇▇▇▇▇▇▇▇▇ in the
Acquired Stores. ▇▇▇▇▇▇▇▇▇ is not aware of any circumstances which would
reasonably characterize the contracts between ▇▇▇▇▇▇▇▇▇ and its employees
as anything other than at will.
(b) Except as described on Schedule 3.14 of the Disclosure
Schedules, (i) there is no collective bargaining agreement or union
contract binding on ▇▇▇▇▇▇▇▇▇ with respect to the operation of Acquired
Business, (ii) there is no labor strike, dispute, slowdown, organization
drive, stoppage or other material labor difficulty, pending or, to the
best knowledge of ▇▇▇▇▇▇▇▇▇, threatened against ▇▇▇▇▇▇▇▇▇ with respect to
the operation of the Acquired Business, and (iii) there are no disputes,
claims or grievances involving employees of ▇▇▇▇▇▇▇▇▇ or by others
concerning employment with ▇▇▇▇▇▇▇▇▇ threatened, pending against or
otherwise affecting ▇▇▇▇▇▇▇▇▇, other than in the ordinary course of
business. ▇▇▇▇▇▇▇▇▇ is not a party to any pending unfair labor practice
charge nor do there exist any facts which would provide a basis for the
filing of such a charge.
(c) ▇▇▇▇▇▇▇▇▇ has previously delivered to ▇▇▇▇▇▇▇'▇ a list
of all of ▇▇▇▇▇▇▇▇▇'▇ employees (identifying those involved in the
Acquired Business) and the location of their employment, together with a
statement of the current annual or weekly compensation thereof and any
bonus or other benefits payable thereto.
(d) With respect to all of ▇▇▇▇▇▇▇▇▇'▇ employees who will
potentially suffer a loss of employment prior to the Closing Date,
▇▇▇▇▇▇▇▇▇ shall comply with the applicable requirements, if any, of the
federal Worker Adjustment and Retraining Notification Act (the "WARN
Act"), as well as any state laws equivalent thereto, and shall promptly
notify ▇▇▇▇▇▇▇'▇ as to any notices or other actions taken by ▇▇▇▇▇▇▇▇▇
with regard to such Act or such state laws. ▇▇▇▇▇▇▇▇▇ shall, on behalf
of ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇'▇, as the case may be, issue such notices as are
required under the WARN Act, as well as any state laws equivalent
thereto, in connection with ▇▇▇▇▇▇▇▇▇'▇ intended closing of one or more
facilities as contemplated in Section 4.9 hereof. Such notices shall be
given sufficiently in advance of any time of closing of such facilities
so that neither ▇▇▇▇▇▇▇▇▇'▇ nor ▇▇▇▇▇▇▇'▇ will be liable under the WARN
Act, or under any state laws equivalent thereto, for any penalty or
payment in lieu of such notice to any employee or governmental entity.
2.14 Employee Benefit Matters.
(a) Schedule 2.14 of the Disclosure Schedules will contain
a true and complete list of all plans, contracts, programs and
arrangements, including, but not limited to, employment agreements, union
contracts and supplemental agreements, pensions, profit sharing
arrangements, bonuses, deferred compensation, retirement, stock option,
severance, medical and hospitalization, insurance, vacation, dependent
care, salary continuation, severance and other employee benefit plans,
programs or arrangements, now or at any time maintained by ▇▇▇▇▇▇▇▇▇ or
under which ▇▇▇▇▇▇▇▇▇ has or had any obligations in respect of any
employee of ▇▇▇▇▇▇▇▇▇ (the "▇▇▇▇▇▇▇▇▇ Plans"). All current and prior
material documents, including all amendments thereto, with respect to
each ▇▇▇▇▇▇▇▇▇ Plan will be listed on Schedule 2.14 of the Disclosure
Schedules and will be delivered to ▇▇▇▇▇▇▇'▇ on or before the delivery of
such Disclosure Schedules. With respect to each "employee benefit plan",
within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), as will be listed in Schedule
2.14 of the Disclosure Schedules, true and complete copies of the
following will be delivered to ▇▇▇▇▇▇▇'▇ on or before the delivery of
such Disclosure Schedules: (i) all current and prior plan and trust
documents, if any, and summary plan descriptions relating thereto, (ii)
the three most recent annual actuarial valuation reports, if any, (iii)
the five most recently filed Form 5500s or 5500-C/Rs and Schedules A, B
and P thereto, as applicable, (iv) all IRS rulings, if any, and (v) the
most recent IRS determination letter, if any.
(b) Except as specifically set forth in Schedule 2.14 of
the Disclosure Schedules, with respect to any and all of the ▇▇▇▇▇▇▇▇▇
Plans: (i) all the "employee pension benefit plans", within the meaning
of Section 3(2) of ERISA, to be listed in Schedule 2.14 of the Disclosure
Schedules, and the trusts, if any, forming a part thereof (each referred
to herein as a "Pension Plan and Trust") now meet, and since their
inception have met, the requirements for qualification under Section
401(a) of the Code and are now, and since their inception have been,
exempt from taxation under Section 501(a) of the Code; (ii) the IRS has
issued a favorable determination letter with respect to the qualified
status of each Pension Plan and Trust, if any, and has not taken any
action to revoke such letter; (iii) ▇▇▇▇▇▇▇▇▇ has performed all
obligations required to be performed by it under the ▇▇▇▇▇▇▇▇▇ Plans
(including, but not limited to, the making of all contributions required
by any collective bargaining agreement), is not in default under or in
violation of, and has no knowledge of any such default or violation by
any other party to, any and all of the ▇▇▇▇▇▇▇▇▇ Plans; (iv) to the best
of ▇▇▇▇▇▇▇▇▇'▇ knowledge, ▇▇▇▇▇▇▇▇▇ is in compliance with the
requirements prescribed by any and all statutes, orders or governmental
rules or regulations applicable to such ▇▇▇▇▇▇▇▇▇ Plans, including but
not limited to ERISA and the Code; (v) neither ▇▇▇▇▇▇▇▇▇ nor, to the best
knowledge of the Shareholders, any other "disqualified person" or "party
in interest", within the meanings of Section 4975 of the Code and Section
3(14) of ERISA, respectively, has engaged in any "prohibited
transaction", as such term is defined in Section 4975 of the Code or
Section 406 of ERISA, which could, following the Closing Date, subject
any ▇▇▇▇▇▇▇▇▇ Plan (or its related trust), Crowley's, Steinbach, or any
officer, director or employee of ▇▇▇▇▇▇▇'▇ or ▇▇▇▇▇▇▇▇▇, to any material
tax or penalty imposed under the Code or ERISA; (vi) there are no
material actions, suits or claims pending (other than routine claims for
benefits) or, to the best knowledge of ▇▇▇▇▇▇▇▇▇, threatened against any
▇▇▇▇▇▇▇▇▇ Plan or against the assets of any ▇▇▇▇▇▇▇▇▇ Plan; (vii) no
▇▇▇▇▇▇▇▇▇ Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA or Section 412 of the Code has incurred any "accumulated funding
deficiency", as such term is defined in Code Section 412(a), whether or
not waived, nor does any such ▇▇▇▇▇▇▇▇▇ Plan have any unfunded "current
liability" (as defined in Code Section 412(1)(7)); (viii) each "plan
official", within the meaning of Section 412 of ERISA, of each ▇▇▇▇▇▇▇▇▇
Plan is bonded to the extent required by such Section 412; (ix) no
proceeding has been initiated to terminate any ▇▇▇▇▇▇▇▇▇ Plan and no
"reportable event", within the meanings of Section 4043(b) or 4063(a) of
ERISA, has occurred with respect to any ▇▇▇▇▇▇▇▇▇ Plan (other than those
which may result from the transactions contemplated hereby); (x) no
▇▇▇▇▇▇▇▇▇ Plan is a "multiple employer plan", within the meaning of the
Code or ERISA, or a "multiemployer plan", within the meaning of Section
3(37) of ERISA; (xi) ▇▇▇▇▇▇▇▇▇ has complied with the reporting and
disclosure requirements of ERISA and with applicable federal and state
securities laws; (xii) there are no leased employees (as defined in Code
Section 414(n)) that must be taken into account under any ▇▇▇▇▇▇▇▇▇ Plan
pursuant to Code Section 414(n)(3); (xiii) no retiree benefits are
payable pursuant to any "employee welfare benefit plan" (as defined in
ERISA Section 3(1)) and there are no agreements in effect that would
obligate ▇▇▇▇▇▇▇▇▇ to pay any such benefits in the future; (xiv) each
▇▇▇▇▇▇▇▇▇ Plan which is a "group health plan" (as defined in Code Section
5000(b)) complies and in each case has complied in all respects with the
applicable requirements of ERISA Sections 601 and 602, Code Section
162(k) (through December 31, 1988) and Code Section 4980(B) (commencing
on January 1, 1989); and (xv) each employee welfare benefit plan (as
defined in (xiii) preceding, including any such plan which covers former
employees of ▇▇▇▇▇▇▇▇▇), may be amended or terminated by ▇▇▇▇▇▇▇▇▇ or by
▇▇▇▇▇▇▇'▇ on or at any time after the Closing Date.
(c) With respect to each ▇▇▇▇▇▇▇▇▇ Plan which is subject to
the minimum funding requirements of Code Section 412 and, if applicable,
Title IV of ERISA: (i) as of the Closing Date, ▇▇▇▇▇▇▇▇▇ shall have made
all required premium payments to the PBGC; (ii) the termination of or
withdrawal from any such ▇▇▇▇▇▇▇▇▇ Plan, on or prior to the Closing Date,
has not and will not subject ▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇'▇ to any liability
(other than routine administrative expenses) to the PBGC or to any other
person or party; (iii) no amendment of such ▇▇▇▇▇▇▇▇▇ Plan has occurred
which required or could require ▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇'▇ to provide
security to such ▇▇▇▇▇▇▇▇▇ Plan under Code Section 401(a)(29); and (iv)
the termination of, or withdrawal from, any such ▇▇▇▇▇▇▇▇▇ Plan during
any part of the 60 calendar month period ending on the Closing Date has
not and will not subject ▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇'▇ to any liability to the
PBGC or to any other person.
(d) The market value of the net assets of each ▇▇▇▇▇▇▇▇▇
Plan which is subject to Title IV of ERISA is at least equal to the
actuarial present value of the benefit liabilities (as defined in ERISA
Section 4041) under the ▇▇▇▇▇▇▇▇▇ Plan, based on actuarial methods,
tables and assumptions satisfactory to ▇▇▇▇▇▇▇'▇, which present value is
not less than the projected benefit obligation for such ▇▇▇▇▇▇▇▇▇ Plan
under FAS 87; all required contributions to each such ▇▇▇▇▇▇▇▇▇ Plan have
been made and the contribution for the period from the first day of the
current plan year to the Closing Date for each such ▇▇▇▇▇▇▇▇▇ Plan shall
have been made or accrued by the ▇▇▇▇▇▇▇▇▇ Plan sponsor in accordance
with the current actuarial report prepared with respect to the ▇▇▇▇▇▇▇▇▇
Plan by the ▇▇▇▇▇▇▇▇▇ Plan's actuary; and no events have occurred or are
expected to occur with respect to any such ▇▇▇▇▇▇▇▇▇ Plan that would
cause a material change in the market value of the net assets (other than
market fluctuations) or in the present value of the benefit liabilities
thereunder.
(e) ▇▇▇▇▇▇▇▇▇ has made or will have made all required
employer contributions, including any salary deferrals and matching
contributions, to each ▇▇▇▇▇▇▇▇▇ Plan which is a defined contribution
plan (as defined in ERISA Section 3(34)) for all prior plan years and for
the current plan year through the Closing Date.
(f) Between the date of this Agreement and the Closing
Date, no ▇▇▇▇▇▇▇▇▇ Plan will (i) be terminated, (ii) be amended in any
manner which would directly or indirectly increase the benefits accrued
or to be accrued by any participant thereunder, or (iii) be amended in
any manner which would materially increase the cost of maintaining such
▇▇▇▇▇▇▇▇▇ Plan.
2.15 Environmental Laws.
(a) For purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) The term "Environmental Laws" shall include,
without limitation, any and all federal, state or local laws
(including, statutes, regulations, ordinances, codes, rules,
policies, guidelines and other governmental restrictions and
requirements and any common law doctrines) relating to
environmental pollution, contamination or other impairment of any
nature, any hazardous or other toxic substances of any nature,
whether liquid, solid and/or gaseous, including smoke, vapor,
fumes, soot, acids, alkalis, chemicals, wastes, by-products,
products, and recycled materials, which shall include, but not be
limited to, the Federal Solid Waste Disposal Act, the Federal Clean
Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976 ("RCRA"), the Federal
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), the Federal Toxic Substance
Control Act, regulations, ordinances, codes, rules, policies,
guidelines and other governmental restrictions and requirements of
the Environmental Protection Agency, state governmental
authorities, and local governmental authorities.
(ii) The terms "hazardous substance," "release" and
"threatened release", "solid waste" and "disposal" (or "disposed")
shall have the meanings specified in the Environmental Laws;
provided, however, in the event multiple Environmental Laws define
any such term, and any one Environmental Law defines such term more
broadly than any other, or any amendment broadens the meaning of
any term defined therein, such broader meaning shall apply.
(iii) The term "Hazardous Materials" shall include,
without limitation, (i) any flammable substances, explosives,
radioactive materials, hazardous substances, hazardous wastes,
toxic substances, pollutants, contaminants, effluents, dredge or
fill material or any related materials or substances as defined in,
identified in or regulated by any of the Environmental Laws, as
defined herein (including but not limited to any "hazardous
substance" as defined in CERCLA, as amended by the Superfund
Amendments and Reauthorization Act, 42 USC Sec. 9601 et. seq., or
"hazardous waste" as defined in RCRA), and (ii) asbestos,
polychlorinated biphenyls, urea formaldehyde, nuclear fuel or
material, chemical waste, explosives, known and suspected
carcinogens, petroleum products and by-products (including any
fraction thereof) and radon.
(b) Except as described on Schedule 2.15 of the Disclosure
Schedules:
(i) No Hazardous Materials are currently or have been
stored (unless stored in compliance with all applicable
Environmental Laws), released, emitted or disposed of, or otherwise
deposited, at, on, in, under or about the Acquired Stores or at any
other real property owned, operated or leased by ▇▇▇▇▇▇▇▇▇ prior to
the date hereof (collectively, the "▇▇▇▇▇▇▇▇▇ Real Property").
(ii) No activity has been undertaken on the ▇▇▇▇▇▇▇▇▇
Real Property that would cause or is likely to have caused:
(A) The ▇▇▇▇▇▇▇▇▇ Real Property to become a
treatment, storage or disposal facility within the meaning of
the Environmental Laws;
(B) A release or threatened release of any
Hazardous Materials in any quantity that requires
investigation, reporting, or clean up under any applicable
Environmental Laws; or
(C) The discharge of Hazardous Materials into
the air, any surface water, ground water, wetlands or other
water source or system thereof, or the dredging or filling of
any waters or wetlands, that would require a permit under the
Environmental Laws.
(iii) There are no substances or conditions at, on, in,
under or about the ▇▇▇▇▇▇▇▇▇ Real Property that may give rise to a
claim or cause of action under the Environmental Laws.
(iv) There are not, and never have been, any
underground storage tanks located in, on or under the ▇▇▇▇▇▇▇▇▇
Real Property.
(v) With respect to the operation of the Acquired
Business and the use of the Acquired Stores, as well as the
operation and use of any other portions of the ▇▇▇▇▇▇▇▇▇ Real
Property which may be the subject of the Non-Acquired Stores
Operation Agreement (as defined herein), ▇▇▇▇▇▇▇▇▇ has obtained all
permits, licenses and other authorizations required under the
Environmental Laws relating to pollution or protection of the
environment (indoor or outdoor, relating to air, land, water (i.e.,
surface water, ground water, wetlands or other water source or
system thereof), waste (hazardous or non-hazardous), noise, odor or
otherwise), and all such permits, licenses and other authorizations
are in full force and effect as of the date hereof. To the best of
▇▇▇▇▇▇▇▇▇'▇ and the Shareholders' knowledge, ▇▇▇▇▇▇▇▇▇ is and has
at all times been in full compliance with all such permits,
licenses and authorizations, and is, as of the date hereof, in full
compliance with all such Environmental Laws related thereto.
(vi) ▇▇▇▇▇▇▇▇▇ is not aware of, and has not received
any notice of, (A) any pending or threatened claims,
investigations, administrative proceedings, litigation, regulatory
hearings or requests or demands for remedial or response actions or
for compensation, with respect to the ▇▇▇▇▇▇▇▇▇ Real Property,
alleging noncompliance with or violation of any Environmental Law
or seeking relief under any Environmental Law, or (B) any past,
present or future events, conditions, actions or plans which may
interfere with or prevent continued compliance with the
Environmental Laws with respect to the Acquired Stores or the
Acquired Business, as well as any other portions of the ▇▇▇▇▇▇▇▇▇
Real Property which may be the subject of the Non-Acquired Stores
Operation Agreement (as defined herein), or which may give rise to
any common law or legal liability, or otherwise form the basis of
any claim, action, suit, proceeding, hearing or investigation with
respect to the ▇▇▇▇▇▇▇▇▇ Real Property.
(vii) The ▇▇▇▇▇▇▇▇▇ Real Property has not and never
have been listed on the United States Environmental Protection
Agency's National Priorities List of Hazardous Waste Sites or, to
the knowledge of ▇▇▇▇▇▇▇▇▇, any other list, schedule, log,
inventory or record of hazardous waste sites maintained by any
federal, state or local agency.
(viii) ▇▇▇▇▇▇▇▇▇ has disclosed and delivered to
▇▇▇▇▇▇▇'▇ all material environmental reports and investigations
which ▇▇▇▇▇▇▇▇▇ has ever obtained or ordered or which ▇▇▇▇▇▇▇▇▇ has
in its possession or control with respect to environmental, health
and safety matters with respect to the ▇▇▇▇▇▇▇▇▇ Real Property.
(ix) To the best of ▇▇▇▇▇▇▇▇▇'▇ and the Shareholders'
knowledge, the ▇▇▇▇▇▇▇▇▇ Real Property in full compliance with all
Environmental Laws.
2.16 Compliance with Laws. Except for the Environmental Laws
(which are the subject of Section 2.15 hereof), ▇▇▇▇▇▇▇▇▇ is not in
violation of any applicable laws, statutes, regulations, rules, orders or
other requirements of any governmental authority, the violation of which
might have a Material Adverse Effect. There is no pending or, to
▇▇▇▇▇▇▇▇▇'▇ knowledge, threatened review or investigation of an alleged
violation by ▇▇▇▇▇▇▇▇▇ of any such laws, statutes, regulations, rules,
orders or other requirements.
2.17 Tax Matters.
(a) For purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) The term "Affiliated Group" means any affiliated
group within the meaning of Code Section 1504.
(ii) The term "Tax" means any federal, state, local,
or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A), customs
duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not.
(iii) The term "Tax Return" means 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.
(b) ▇▇▇▇▇▇▇▇▇ has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by ▇▇▇▇▇▇▇▇▇ (whether or not shown on any Tax
Return) have been paid. ▇▇▇▇▇▇▇▇▇ is not currently the beneficiary of
any extension of time within which to file any Tax Return. No claim has
ever been made by an authority in a jurisdiction where ▇▇▇▇▇▇▇▇▇ does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no security interests on any of the assets of
▇▇▇▇▇▇▇▇▇ that arose in connection with any failure (or alleged failure)
to pay any Tax, except with respect to Taxes not yet due and payable.
(c) ▇▇▇▇▇▇▇▇▇ has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to
an employee, independent contractor, creditor, stockholder, or other
third party.
(d) No Shareholder, director or officer (or employee
responsible for Tax matters) of ▇▇▇▇▇▇▇▇▇ expects any authority to assess
any additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax liability of
▇▇▇▇▇▇▇▇▇ either (i) claimed or raised by any authority in writing, or
(ii) as to which any Shareholder, director or officer (or employee
responsible for Tax matters) of ▇▇▇▇▇▇▇▇▇ has knowledge based upon
personal contact with any agent of such authority. Schedule 2.17 of the
Disclosure Schedules will list all federal, state, local, and foreign
income Tax Returns filed with respect to ▇▇▇▇▇▇▇▇▇ for taxable periods
ended on or after December 31, 1993 that have been audited or that
currently are the subject of audit. ▇▇▇▇▇▇▇▇▇ has delivered to ▇▇▇▇▇▇▇'▇
correct and complete copies of all federal income Tax Returns,
examination reports and statements of deficiencies assessed against or
agreed to by ▇▇▇▇▇▇▇▇▇ since September 1, 1994.
(e) ▇▇▇▇▇▇▇▇▇ has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(f) ▇▇▇▇▇▇▇▇▇ has not filed a consent under Code Section
341(f) concerning collapsible corporations. ▇▇▇▇▇▇▇▇▇ is not a party to
any Tax allocation or sharing agreement. ▇▇▇▇▇▇▇▇▇ (i) has not been a
member of an Affiliated Group filing a consolidated federal income Tax
Return, or (ii) has no liability for the Taxes of any person under Treas.
Reg. Sec. 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
(g) Schedule 2.17 of the Disclosure Schedules will set
forth, as of the most recent practicable date, (i) the basis of ▇▇▇▇▇▇▇▇▇
in its assets, and (ii) the amount of any net operating loss, net capital
loss, unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to ▇▇▇▇▇▇▇▇▇.
(h) The unpaid Taxes of ▇▇▇▇▇▇▇▇▇ (i) did not, as of
▇▇▇▇▇▇▇▇▇'▇ Most Recent Fiscal Month End, exceed the reserve for Tax
liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the
face of the balance sheets as at ▇▇▇▇▇▇▇▇▇'▇ Most Recent Fiscal Month End
(rather than in any notes thereto), and (ii) do not exceed that reserve
as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of ▇▇▇▇▇▇▇▇▇ in filing its
Tax Returns.
(i) The Shareholders will prepare and file all Tax Returns
and will pay all Taxes related thereto relative to ▇▇▇▇▇▇▇▇▇ which are
required to be filed and paid on or before the Closing Date.
2.18 Insurance Coverage. ▇▇▇▇▇▇▇▇▇ presently maintains and has at
all times prior to the date hereof, maintained liability, casualty,
property loss and other insurance coverages upon its properties and with
respect to the conduct of its business. Schedule 2.18 of the Disclosure
Schedules will set forth a complete and correct list of all insurance
policies maintained by ▇▇▇▇▇▇▇▇▇ with respect to the Acquired Business
and the Acquired Stores, and identifies the insurance company, type of
coverage, expiration date and annual premium for each.
2.19 No Material Adverse Change. Except as set forth in Schedule
2.19 of the Disclosure Schedules, since ▇▇▇▇▇▇▇▇▇'▇ Most Recent Fiscal
Year End, there has been no material adverse change in the business,
operations, properties, results of operations, financial condition or
future prospects of ▇▇▇▇▇▇▇▇▇, or any circumstance which, by reason of
passage of time or otherwise, may reasonably be expected to result in any
such material adverse change. Without limiting the generality of the
foregoing, ▇▇▇▇▇▇▇▇▇ has not taken any action or agreed to or otherwise
committed to take any action, except in the ordinary course of business
and consistent with past practice or as set forth on Schedule 2.19 of the
Disclosure Schedules.
2.20 Investment. The Shareholders (a) understand that the shares
of ▇▇▇▇▇▇▇'▇ Common Stock which the Shareholders will receive pursuant to
Section 1 above are not registered under the Securities Act, or under any
state securities law, and are being offered and sold in reliance upon
federal and state exemptions for transactions not involving any public
offering, (b) are acquiring the ▇▇▇▇▇▇▇'▇ Common Stock solely for their
own account for investment purposes, and not with a view to the
distribution thereof, (c) are a sophisticated investor with knowledge and
experience in business and financial matters, (d) have received certain
information concerning ▇▇▇▇▇▇▇'▇ and have had the opportunity to obtain
additional information as desired in order to evaluate the merits and the
risks inherent in holding the ▇▇▇▇▇▇▇'▇ Common Stock, (e) are able to
bear the economic risk and lack of liquidity inherent in holding the
▇▇▇▇▇▇▇'▇ Common Stock and (f) are an accredited investor a defined in
Regulation D promulgated under the Securities Act.
2.21 Real Property Matters. Except as described in Schedule 2.21
of the Disclosure Schedules, ▇▇▇▇▇▇▇▇▇ does not own, or have the
obligation to purchase, any real property. Except for the Lease
Contracts and except as described in Schedule 2.21 of the Disclosure
Schedules, ▇▇▇▇▇▇▇▇▇ is not a party to any lease of real property, nor is
▇▇▇▇▇▇▇▇▇ under any obligation to become a party to any lease of real
property. Except as described in Schedule 2.21 of the Disclosure
Schedules, ▇▇▇▇▇▇▇▇▇ has no interest in any real property nor the
obligation to acquire an interest in any real property. The Shareholders
shall deliver to ▇▇▇▇▇▇▇'▇ on or before the delivery of the Disclosure
Schedules a correct and complete copy of any lease of real property to
which ▇▇▇▇▇▇▇▇▇ is a party or any other material document relating to the
ownership of an interest in real property by ▇▇▇▇▇▇▇▇▇.
2.22 No Default. ▇▇▇▇▇▇▇▇▇ is not in breach or violation of, and
neither the execution and delivery of this Agreement or the ▇▇▇▇▇▇▇▇▇
Delivered Documents by ▇▇▇▇▇▇▇▇▇ or the Shareholders nor performance of
or compliance with its or their terms will result in a breach or
violation of, (a) the Articles of Incorporation or Bylaws of ▇▇▇▇▇▇▇▇▇,
(b) any agreement, indenture, mortgage, lease or other obligation or
instrument to which ▇▇▇▇▇▇▇▇▇ or the Shareholders are a party or their
respective assets are subject, except where such breach or violation
would not have a Material Adverse Effect, or (c) any law, statute, rule,
regulation or any judgment, order or decree to which ▇▇▇▇▇▇▇▇▇ is a party
or by which ▇▇▇▇▇▇▇▇▇ or any of its properties or assets may otherwise be
subject, except where such violation or breach would not have a Material
Adverse Effect.
2.23 Insider Interests. Schedule 2.23 of the Disclosure Schedules
will set forth each interest which any present officer, director,
shareholder or significant employee of ▇▇▇▇▇▇▇▇▇ has in the Acquired
Assets or pertaining to the Acquired Business, and all loans or advances
outstanding to ▇▇▇▇▇▇▇▇▇ from any such person or employee or from
▇▇▇▇▇▇▇▇▇ to any such person or any employee, and any other business
relationship between ▇▇▇▇▇▇▇▇▇ and any such person other than in his
capacity as an officer, director, shareholder or significant employee.
2.24 Sensitive Transactions. To the best of ▇▇▇▇▇▇▇▇▇'▇
knowledge, neither ▇▇▇▇▇▇▇▇▇ nor any employee, agent or representative
thereof has directly or indirectly used funds or other assets of
▇▇▇▇▇▇▇▇▇ for illegal contributions, gifts, or payments to or for the
benefit of any governmental official or employee.
2.25 Fees and Commissions. Neither ▇▇▇▇▇▇▇▇▇ nor any Shareholder
has agreed to pay or become liable to pay any broker's, finder's or
originator's fees or commission by reason of services alleged to have
been rendered for or at the instance of ▇▇▇▇▇▇▇▇▇ or any Shareholder in
connection with this Agreement and the transactions contemplated hereby.
2.26 Misstatement or Omission. No representation or warranty by
the Shareholders in this Agreement or in the ▇▇▇▇▇▇▇▇▇ Delivered
Documents, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading. Except as already disclosed in this Agreement or in the
▇▇▇▇▇▇▇▇▇ Delivered Documents, there are no events, transactions or other
facts which, either individually or in the aggregate, might reasonably
give rise to circumstances or conditions which might have a Material
Adverse Effect.
III. REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇▇'▇.
▇▇▇▇▇▇▇'▇ represents, warrants and covenants to the Shareholders,
on and as of the date hereof, as follows:
3.1 Organization and Standing. ▇▇▇▇▇▇▇'▇ is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Michigan.
3.2 Authority and Action. ▇▇▇▇▇▇▇'▇ has full corporate power and
authority to enter into this Agreement and each of the other agreements,
instruments and other documents to be delivered at the Closing or
thereafter by ▇▇▇▇▇▇▇'▇ pursuant to this Agreement or otherwise and to
perform and consummate the transactions contemplated herein and therein.
This Agreement, as well as the other agreements to be delivered at the
Closing or thereafter by ▇▇▇▇▇▇▇'▇, are collectively referred to as the
"▇▇▇▇▇▇▇'▇ Delivered Documents". All corporate action required to be
taken by or on the part of ▇▇▇▇▇▇▇'▇ Board of Directors to authorize the
execution and delivery of this Agreement and the ▇▇▇▇▇▇▇'▇ Delivered
Documents and to authorize ▇▇▇▇▇▇▇'▇ to perform and consummate the
transactions contemplated hereby and thereby have been duly and properly
taken. This Agreement and each of the ▇▇▇▇▇▇▇'▇ Delivered Documents have
been or will be duly executed and delivered by ▇▇▇▇▇▇▇'▇. This Agreement
and each of the ▇▇▇▇▇▇▇'▇ Delivered Documents constitute valid and
binding obligations of ▇▇▇▇▇▇▇'▇ and, except to the extent enforcement
may be restricted by bankruptcy or other laws affecting creditors rights
of general applicability and general principles of equity, are
enforceable in accordance with their respective terms.
3.3 Capitalization of ▇▇▇▇▇▇▇'▇. The authorized capital stock of
▇▇▇▇▇▇▇'▇ consists entirely of 4,000,000 shares of Common Stock. As of
the date hereof, 966,069 shares of ▇▇▇▇▇▇▇'▇ Common Stock were validly
issued and outstanding, fully paid and nonassessable. Except as
described on ANNEX A attached hereto, there are no outstanding options or
convertible securities or , to ▇▇▇▇▇▇▇'▇ knowledge, other agreements or
commitments relating to ▇▇▇▇▇▇▇'▇ Common Stock, including, without
limitation, (a) all rights to purchase shares under outstanding options
granted under the ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and Company Incentive Stock Plan,
as amended, and under the ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and Company Director Stock
Option Plan, and (b) all shares of ▇▇▇▇▇▇▇'▇ Common Stock subject to that
certain Restricted Stock Agreement, dated August 24, 1994 and as amended
March 22, 1995, between ▇▇▇▇▇▇▇'▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
3.4 ▇▇▇▇▇▇▇'▇ Common Stock. Upon consummation of the
Reorganization and the delivery of a certificate or certificates
representing the ▇▇▇▇▇▇▇'▇ Common Stock to the Shareholders in payment of
the Consideration, such shares of ▇▇▇▇▇▇▇'▇ Common Stock will be duly
authorized, validly issued, fully paid and nonassessable. The shares of
▇▇▇▇▇▇▇'▇ Common Stock to be delivered by ▇▇▇▇▇▇▇'▇ to the Shareholders
in the Reorganization will be "voting stock" within the meaning of the
Code.
3.5 ▇▇▇▇▇▇▇'▇ SEC Documents; Financial Information. Exhibit 3.5
of the Disclosure Exhibits will set forth true and complete copies of the
documents that ▇▇▇▇▇▇▇'▇ was required to file with the Securities and
Exchange Commission (the "SEC") for the period of January 1, 1995 through
the date of the Disclosure Exhibits pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (collectively, the
"▇▇▇▇▇▇▇'▇ SEC Documents"). None of the ▇▇▇▇▇▇▇'▇ SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of ▇▇▇▇▇▇▇'▇ included in
the ▇▇▇▇▇▇▇'▇ SEC Documents complied in all material respects with
applicable accounting requirements, were prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of unaudited statements, to recurring audit
adjustments normal in nature and amount) the consolidated financial
position of ▇▇▇▇▇▇▇'▇ as at the dates thereof and the consolidated
results of its operations and cash flows or changes in financial position
for the periods then ended.
3.6 Absence of Certain Changes or Events; Undisclosed
Liabilities.
(a) Except as disclosed in ▇▇▇▇▇▇▇'▇ SEC Documents filed by
▇▇▇▇▇▇▇'▇ with the SEC prior to the date of this Agreement, since January
28, 1995 to the date of this Agreement, there has not been any change in
the financial condition, results of operations or business of ▇▇▇▇▇▇▇'▇
that either individually or in the aggregate would have a material
adverse effect on the financial condition of ▇▇▇▇▇▇▇'▇.
(b) Except as disclosed in Exhibit 3.6 of the Disclosure
Exhibits or in ▇▇▇▇▇▇▇'▇ SEC Documents, ▇▇▇▇▇▇▇'▇ has no liabilities,
whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due, except for (i)
liabilities set forth on the face of the balance sheets (rather than in
any notes thereto) contained within ▇▇▇▇▇▇▇'▇ SEC Documents, and (ii)
liabilities which have arisen after January 28, 1995 in the ordinary
course of business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach
of warranty, tort, infringement, or violation of law).
3.7 Inventory. Each item of ▇▇▇▇▇▇▇'▇ inventory ("▇▇▇▇▇▇▇'▇
Inventory") is accounted for on the last-in, first-out (LIFO) basis and
is in good and saleable condition, all of ▇▇▇▇▇▇▇'▇ Inventory for the
Summer 1995 and Fall 1995 retail selling seasons has been written down in
accordance with ▇▇▇▇▇▇▇'▇ normal standards and past practices and with
appropriate reserves therefor reflected in the ▇▇▇▇▇▇▇'▇ financial
statements and all of ▇▇▇▇▇▇▇'▇ Inventory which is obsolete, damaged or
below standard quality has been written down in accordance with ▇▇▇▇▇▇▇'▇
normal standards and past practices and with appropriate reserves
therefor reflected in the ▇▇▇▇▇▇▇'▇ financial statements.
3.8 Litigation and Investigations. Except as set forth on
Exhibit 3.8 of the Disclosure Exhibits, there are no actions, suits,
claims, demands, legal or administrative proceedings or governmental
investigations existing or, to the best knowledge of ▇▇▇▇▇▇▇'▇,
threatened against or affecting ▇▇▇▇▇▇▇'▇, its business, or any of its
property or assets, nor any judgments, decrees, orders, rulings, writs or
injunctions specifically referring to ▇▇▇▇▇▇▇'▇ which (either by reason
of adherence or default) may have a material and adverse effect on their
business, properties or assets, prospects or financial condition or
relate in any way to the transactions contemplated in this Agreement.
3.9 Labor Relations and Employee Matters.
(a) ▇▇▇▇▇▇▇'▇ is not a party to any written sales
representative agreement, consulting agreement or other independent
contractor agreement with respect to the sale of merchandise or services
by ▇▇▇▇▇▇▇'▇ in its several stores.
(b) There is no collective bargaining agreement or union
contract binding on ▇▇▇▇▇▇▇'▇ with respect to the operation of its
business. There is no labor strike, dispute, slowdown, organization
drive, stoppage or other material labor difficulty, pending or, to the
best knowledge of ▇▇▇▇▇▇▇'▇, threatened against ▇▇▇▇▇▇▇'▇ with respect to
the operation of its business. There are no disputes, claims or
grievances involving employees of ▇▇▇▇▇▇▇'▇ or by others concerning
employment with ▇▇▇▇▇▇▇'▇ threatened, pending against or otherwise
affecting ▇▇▇▇▇▇▇'▇, other than in the ordinary course of business.
▇▇▇▇▇▇▇'▇ is not a party to any pending unfair labor practice charge nor
do there exist any facts which would provide a basis for the filing of
such a charge.
3.10 Environmental Matters. Except as described on Exhibit 3.10
of the Disclosure Exhibits:
(a) No Hazardous Materials are currently or have been
stored (unless stored in compliance with all applicable Environmental
Laws), released, emitted or disposed of, or otherwise deposited, at, on,
in, under or about the premises at ▇▇▇▇▇▇▇'▇ several store or at
▇▇▇▇▇▇▇'▇ headquarters and distribution center ("▇▇▇▇▇▇▇'▇ Premises").
(b) No activity has been undertaken on the ▇▇▇▇▇▇▇'▇
Premises that would cause or is likely to have caused:
(i) The ▇▇▇▇▇▇▇'▇ Premises to become a treatment,
storage or disposal facility within the meaning of the
Environmental Laws;
(ii) A release or threatened release of any Hazardous
Materials in any quantity that requires investigation, reporting,
or clean up under any applicable Environmental Laws; or
(iii) The discharge of Hazardous Materials into the
air, any surface water, ground water, wetlands or other water
source or system thereof, or the dredging or filling of any waters
or wetlands, that would require a permit under the Environmental
Laws.
(c) There are no substances or conditions at, on, in, under
or about the ▇▇▇▇▇▇▇'▇ Premises that may give rise to a claim or cause of
action under the Environmental Laws.
(d) There are not, and never have been, any underground
storage tanks located in, on or under the ▇▇▇▇▇▇▇'▇ Premises.
(e) With respect to the operation of ▇▇▇▇▇▇▇'▇ business and
the use of the ▇▇▇▇▇▇▇'▇ Premises, ▇▇▇▇▇▇▇'▇ has obtained all permits,
licenses and other authorizations required under the Environmental Laws
relating to pollution or protection of the environment (indoor or
outdoor, relating to air, land, water (i.e., surface water, ground water,
wetlands or other water source or system thereof), waste (hazardous and
non-hazardous), noise, odor or otherwise), and all such permits, licenses
and other authorizations are in full force and effect as of the date
hereof. To the best of ▇▇▇▇▇▇▇'▇ knowledge, ▇▇▇▇▇▇▇'▇ is and has at all
times been in full compliance with all such permits, licenses and
authorizations, and is, as of the date hereof, in full compliance with
all such Environmental Laws related thereto.
(f) ▇▇▇▇▇▇▇'▇ is not aware of, and has not received any
notice of, (i) any pending or threatened claims, investigations,
administrative proceedings, litigation, regulatory hearings or requests
or demands for remedial or response actions or for compensation, with
respect to the ▇▇▇▇▇▇▇'▇ Premises, alleging noncompliance with or
violation of any Environmental Law or seeking relief under any
Environmental Law, or (ii) any past, present or future events,
conditions, actions or plans which may interfere with or prevent
continued compliance with the Environmental Laws with respect to the
▇▇▇▇▇▇▇'▇ Premises or its Business or which may give rise to any common
law or legal liability, or otherwise form the basis of any claim, action,
suit, proceeding, hearing or investigation with respect to the ▇▇▇▇▇▇▇'▇
Premises or its business.
(g) The ▇▇▇▇▇▇▇'▇ Premises are not and never have been
listed on the United States Environmental Protection Agency's National
Priorities List of Hazardous Waste Sites or, to the knowledge of
▇▇▇▇▇▇▇'▇, any other list, schedule, log, inventory or record of
hazardous waste sites maintained by any federal, state or local agency.
(h) ▇▇▇▇▇▇▇'▇ has disclosed and delivered to ▇▇▇▇▇▇▇▇▇ all
material environmental reports and investigations which ▇▇▇▇▇▇▇'▇ has
ever obtained or ordered or which the ▇▇▇▇▇▇▇'▇ has in its possession or
control with respect to environmental, health and safety matters with
respect to ▇▇▇▇▇▇▇'▇ Premises and its Business.
(i) To the best of ▇▇▇▇▇▇▇'▇ knowledge, the ▇▇▇▇▇▇▇'▇
Premises and its business are in full compliance with all Environmental
Laws.
3.11 Compliance with Laws. Except for the Environmental Laws
(which are the subject of Section 3.10 hereof), ▇▇▇▇▇▇▇'▇ is not in
violation of any applicable laws, statutes, regulations, rules, orders or
other requirements of any governmental authority, the violation of which
might have a material and adverse effect on the assets, the results of
operations, the financial condition or the future prospects of ▇▇▇▇▇▇▇'▇
business, or relate in any material and adverse way to the transactions
contemplated in this Agreement. There is no pending or, to ▇▇▇▇▇▇▇'▇
knowledge, threatened review or investigation of an alleged violation of
by ▇▇▇▇▇▇▇▇▇ of any such laws, statutes, regulations, rules, orders or
other requirements.
3.12 Insurance Coverage. ▇▇▇▇▇▇▇'▇ presently maintains and has at
all times prior to the date hereof, maintained liability, casualty,
property loss and other insurance coverages upon its properties and with
respect to the conduct of its business. Exhibit 3.12 of the Disclosure
Exhibits will set forth a complete and correct list of all insurance
policies maintained by ▇▇▇▇▇▇▇'▇ with respect to its business and its
several department stores and identifies the insurance company, type of
coverage, expiration date and annual premium for each.
3.13 Tax Matters.
(a) ▇▇▇▇▇▇▇'▇ has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by ▇▇▇▇▇▇▇'▇ (whether or not shown on any Tax
Return) have been paid. ▇▇▇▇▇▇▇'▇ is not currently the beneficiary of
any extension of time within which to file any Tax Return. No claim has
ever been made by an authority in a jurisdiction where ▇▇▇▇▇▇▇'▇ does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no security interests on any of the assets of
▇▇▇▇▇▇▇'▇ that arose in connection with any failure (or alleged failure)
to pay any Tax, except with respect to Taxes not yet due and payable.
(b) ▇▇▇▇▇▇▇'▇ has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to
an employee, independent contractor, creditor, stockholder, or other
third party.
(c) No officer or employee responsible for Tax matters of
▇▇▇▇▇▇▇'▇ expects any authority to assess any additional Taxes for any
period for which Tax Returns have been filed. There is no dispute or
claim concerning any Tax liability of ▇▇▇▇▇▇▇'▇ either (i) claimed or
raised by any authority in writing, or (ii) as to which any officer or
employee responsible for Tax matters of ▇▇▇▇▇▇▇'▇ has knowledge based
upon personal contact with any agent of such authority. Exhibit 3.13 of
the Disclosure Exhibits will list all federal, state, local, and foreign
income Tax Returns filed with respect to ▇▇▇▇▇▇▇'▇ for taxable periods
ended on or after December 31, 1993 that have been audited or that
currently are the subject of audit.
(d) ▇▇▇▇▇▇▇'▇ has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) ▇▇▇▇▇▇▇'▇ has not filed a consent under Code Section
341(f) concerning collapsible corporations. ▇▇▇▇▇▇▇'▇ is not a party to
any Tax allocation or sharing agreement. ▇▇▇▇▇▇▇'▇ (i) has not been a
member of an Affiliated Group filing a consolidated federal income Tax
Return, or (ii) has no liability for the Taxes of any person under Treas.
Reg. Sec. 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
(f) The unpaid Taxes of ▇▇▇▇▇▇▇'▇ did not, as of July 29,
1995, ▇▇▇▇▇▇▇'▇ most recent reported fiscal quarter end ("▇▇▇▇▇▇▇'▇ Most
Recent Fiscal Quarter End"), exceed the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the
balance sheets as at ▇▇▇▇▇▇▇'▇ Most Recent Fiscal Quarter End (rather
than in any notes thereto), and (ii) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance
with the past custom and practice of ▇▇▇▇▇▇▇'▇ in filing its Tax Returns.
3.14 Ownership of Assets Except as described in Exhibit 3.14 of
the Disclosure Exhibits, ▇▇▇▇▇▇▇'▇ owns and has good and marketable title
to, or a valid leasehold interest in, all of the properties and assets
used by it, located in its several department stores, or shown in the
▇▇▇▇▇▇▇'▇ SEC Documents or acquired after the date thereof, free and
clear of all Liens.
3.15 Condition of Assets. Except as disclosed on Exhibit 3.15 of
the Disclosure Exhibits, all of the machinery, equipment, fixed assets,
furniture, fixtures, leasehold improvements and other tangible personal
property which are owned or otherwise used by ▇▇▇▇▇▇▇'▇ in its business
is in good, useable condition and repair, ordinary wear and tear and
routine maintenance excepted, and in conformity with all material
applicable ordinances, regulations and other laws.
3.16 Relationship with Suppliers. Except as disclosed on Exhibit
3.16 of the Disclosure Exhibits, no information has come to the attention
of ▇▇▇▇▇▇▇'▇ which might reasonably lead it to believe that any suppliers
of ▇▇▇▇▇▇▇'▇ would or intend to cease dealing with ▇▇▇▇▇▇▇'▇ or would or
intend to alter or modify the amount of such supplier's dealings with
▇▇▇▇▇▇▇'▇ in the event of the consummation of the transactions
contemplated hereby, except to the extent such cessation or modification
would not have a material and adverse effect on the assets, the results
of operations, the financial condition or the future prospects of
▇▇▇▇▇▇▇'▇ business, or relate in any material and adverse way to the
transactions contemplated in this Agreement.
3.17 Intellectual Property.
(a) Set forth on Exhibit 3.17 of the Disclosure Exhibits
will be a list of all of ▇▇▇▇▇▇▇'▇ intellectual property rights used in
and related to its business, including, without limitation, (i) all
trademark registrations and applications therefor and all tradenames and
trademarks, whether or not registered or registrable, and the goodwill
pertaining thereto, (ii) all copyrights, whether or not registered, (iii)
all patents and pending patent applications, (iv) all trade secrets, (v)
all know-how, computer programs and software, and other related items and
other data used in and related to ▇▇▇▇▇▇▇'▇ business, (vi) all trademark
licenses, royalty agreements, patent licenses and other licenses used in
▇▇▇▇▇▇▇'▇ business, and (vii) all causes of action for infringement by
third parties of the foregoing (collectively, "▇▇▇▇▇▇▇'▇ Intellectual
Property").
(b) Except for ▇▇▇▇▇▇▇'▇ Intellectual Property and except
for any rights that may exist under common law, there are no patents,
patent applications, copyrights, trademarks or trade names owned by or
registered in the name of ▇▇▇▇▇▇▇'▇ and there are no licensing agreements
with respect to any patents, patent applications, trademarks or trade
names to which ▇▇▇▇▇▇▇'▇ is a party either as a licensor or licensee.
▇▇▇▇▇▇▇'▇ has no knowledge of and has received no notice of any conflict
with, or any infringement of, third party-owned patents, patent
applications, copyrights, trademarks, tradenames, trade secrets,
know-how, or inventions caused by ▇▇▇▇▇▇▇'▇ use of or ownership interest
in ▇▇▇▇▇▇▇'▇ Intellectual Property. ▇▇▇▇▇▇▇'▇ has no knowledge of and
has received no notice of any conflict with, or any infringement of, the
▇▇▇▇▇▇▇'▇-owned ▇▇▇▇▇▇▇'▇ Intellectual Property caused by a third-party's
use of or ownership interest in ▇▇▇▇▇▇▇'▇ Intellectual Property. No
officer, director, shareholder or employee of ▇▇▇▇▇▇▇'▇, or any affiliate
of the foregoing or of ▇▇▇▇▇▇▇'▇, has an ownership interest in or claim
with respect to any of ▇▇▇▇▇▇▇'▇ Intellectual Property.
3.18 Employee Benefit Matters.
(a) Exhibit 3.18 of the Disclosure Exhibits will contain a
true and complete list of all plans, contracts, programs and
arrangements, including, but not limited to, employment agreements, union
contracts and supplemental agreements, pensions, profit sharing
arrangements, bonuses, deferred compensation, retirement, stock option,
severance, medical and hospitalization, insurance, vacation, dependent
care, salary continuation, severance and other employee benefit plans,
programs or arrangements, now or at any time maintained by ▇▇▇▇▇▇▇▇▇ or
under which ▇▇▇▇▇▇▇'▇ has or had any obligations in respect of any
employee of ▇▇▇▇▇▇▇'▇ (the "▇▇▇▇▇▇▇'▇ Plans"). All current and prior
material documents, including all amendments thereto, with respect to
each ▇▇▇▇▇▇▇'▇ Plan will be listed on Exhibit 3.18 of the Disclosure
Exhibits and will be delivered to the Shareholders on or before the
delivery of such Disclosure Exhibits. With respect to each "employee
benefit plan", within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), as will be
listed in Exhibit 3.18 of the Disclosure Exhibits, true and complete
copies of the following will be delivered to the Shareholders on or
before the delivery of such Disclosure Exhibits: (i) all current and
prior plan and trust documents, if any, and summary plan descriptions
relating thereto, (ii) the three most recent annual actuarial valuation
reports, if any, (iii) the five most recently filed Form 5500s or
5500-C/Rs and Schedules A, B and P thereto, as applicable, (iv) all IRS
rulings, if any, and (v) the most recent IRS determination letter, if
any.
(b) Except as specifically set forth in Exhibit 3.18 of the
Disclosure Exhibits, with respect to any and all of the Plans: (i) all
the "employee pension benefit plans", within the meaning of Section 3(2)
of ERISA, to be listed in Exhibit 3.18 of the Disclosure Exhibits, and
the trusts, if any, forming a part thereof (each referred to herein as a
"Pension Plan and Trust") now meet, and since their inception have met,
the requirements for qualification under Section 401(a) of the Code and
are now, and since their inception have been, exempt from taxation under
Section 501(a) of the Code; (ii) the IRS has issued a favorable
determination letter with respect to the qualified status of each Pension
Plan and Trust, if any, and has not taken any action to revoke such
letter; (iii) ▇▇▇▇▇▇▇'▇ has performed all obligations required to be
performed by it under the ▇▇▇▇▇▇▇'▇ Plans (including, but not limited to,
the making of all contributions required by any collective bargaining
agreement), is not in default under or in violation of, and has no
knowledge of any such default or violation by any other party to, any and
all of the ▇▇▇▇▇▇▇'▇ Plans; (iv) to the best of ▇▇▇▇▇▇▇'▇ knowledge,
▇▇▇▇▇▇▇'▇ is in compliance with the requirements prescribed by any and
all statutes, orders or governmental rules or regulations applicable to
such Plans, including but not limited to ERISA and the Code; (v) neither
▇▇▇▇▇▇▇'▇ nor, to the best knowledge of ▇▇▇▇▇▇▇'▇, any other
"disqualified person" or "party in interest", within the meanings of
Section 4975 of the Code and Section 3(14) of ERISA, respectively, has
engaged in any "prohibited transaction", as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, which could, following
the Closing Date, subject any ▇▇▇▇▇▇▇'▇ Plan (or its related trust), the
Shareholder's, ▇▇▇▇▇▇▇'▇ or any officer, director or employee of
▇▇▇▇▇▇▇'▇ or ▇▇▇▇▇▇▇▇▇, to any material tax or penalty imposed under the
Code or ERISA; (vi) there are no material actions, suits or claims
pending (other than routine claims for benefits) or, to the best
knowledge of ▇▇▇▇▇▇▇'▇, threatened against any ▇▇▇▇▇▇▇'▇ Plan or against
the assets of any ▇▇▇▇▇▇▇'▇ Plan; (vii) no ▇▇▇▇▇▇▇'▇ Plan which is
subject to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the
Code has incurred any "accumulated funding deficiency", as such term is
defined in Code Section 412(a), whether or not waived, nor does any such
▇▇▇▇▇▇▇'▇ Plan have any unfunded "current liability" (as defined in Code
Section 412(1)(7)); (viii) each "plan official", within the meaning of
Section 412 of ERISA, of each ▇▇▇▇▇▇▇'▇ Plan is bonded to the extent
required by such Section 412; (ix) no proceeding has been initiated to
terminate any ▇▇▇▇▇▇▇'▇ Plan and no "reportable event", within the
meanings of Section 4043(b) or 4063(a) of ERISA, has occurred with
respect to any ▇▇▇▇▇▇▇'▇ Plan (other than those which may result from the
transactions contemplated hereby); (x) no ▇▇▇▇▇▇▇'▇ Plan is a "multiple
employer plan", within the meaning of the Code or ERISA, or a
"multiemployer plan", within the meaning of Section 3(37) of ERISA; (xi)
▇▇▇▇▇▇▇'▇ has complied with the reporting and disclosure requirements of
ERISA and with applicable federal and state securities laws; (xii) there
are no leased employees (as defined in Code Section 414(n)) that must be
taken into account under any ▇▇▇▇▇▇▇'▇ Plan pursuant to Code Section
414(n)(3); (xiii) no retiree benefits are payable pursuant to any
"employee welfare benefit plan" (as defined in ERISA Section 3(1)) and
there are no agreements in effect that would obligate ▇▇▇▇▇▇▇'▇ to pay
any such benefits in the future; (xiv) each ▇▇▇▇▇▇▇'▇ Plan which is a
"group health plan" (as defined in Code Section 5000(b)) complies and in
each case has complied in all respects with the applicable requirements
of ERISA Sections 601 and 602, Code Section 162(k) (through December 31,
1988) and Code Section 4980(B) (commencing on January 1, 1989); and (xv)
each employee welfare benefit plan (as defined in (xiii) preceding,
including any such plan which covers former employees of ▇▇▇▇▇▇▇'▇), may
be amended or terminated by ▇▇▇▇▇▇▇'▇ on or at any time after the Closing
Date.
(c) With respect to each ▇▇▇▇▇▇▇'▇ Plan which is subject to
the minimum funding requirements of Code Section 412 and, if applicable,
Title IV of ERISA: (i) as of the Closing Date, ▇▇▇▇▇▇▇'▇ shall have made
all required premium payments to the PBGC; (ii) the termination of or
withdrawal from any such ▇▇▇▇▇▇▇'▇ Plan, on or prior to the Closing Date,
has not and will not subject the Shareholders or ▇▇▇▇▇▇▇'▇ to any
liability (other than routine administrative expenses) to the PBGC or to
any other person or party; (iii) no amendment of such ▇▇▇▇▇▇▇'▇ Plan has
occurred which required or could require ▇▇▇▇▇▇▇'▇ to provide security to
such ▇▇▇▇▇▇▇'▇ Plan under Code Section 401(a)(29); and (iv) the
termination of, or withdrawal from, any such ▇▇▇▇▇▇▇'▇ Plan during any
part of the 60 calendar month period ending on the Closing Date has not
and will not subject the Shareholders or ▇▇▇▇▇▇▇'▇ to any liability to
the PBGC or to any other person.
(d) The market value of the net assets of each ▇▇▇▇▇▇▇'▇
Plan which is subject to Title IV of ERISA is at least equal to the
actuarial present value of the benefit liabilities (as defined in ERISA
Section 4041) under the ▇▇▇▇▇▇▇'▇ Plan, based on actuarial methods,
tables and assumptions satisfactory to ▇▇▇▇▇▇▇'▇, which present value is
not less than the projected benefit obligation for such ▇▇▇▇▇▇▇'▇ Plan
under FAS 87; all required contributions to each such ▇▇▇▇▇▇▇'▇ Plan have
been made and the contribution for the period from the first day of the
current plan year to the Closing Date for each such ▇▇▇▇▇▇▇'▇ Plan shall
have been made or accrued by the ▇▇▇▇▇▇▇'▇ Plan sponsor in accordance
with the current actuarial report prepared with respect to the ▇▇▇▇▇▇▇'▇
Plan by the ▇▇▇▇▇▇▇'▇ Plan's actuary; and no events have occurred or are
expected to occur with respect to any such ▇▇▇▇▇▇▇'▇ Plan that would
cause a material change in the market value of the net assets (other than
market fluctuations) or in the present value of the benefit liabilities
thereunder.
(e) ▇▇▇▇▇▇▇'▇ has made or will have made all required
employer contributions, including any salary deferrals and matching
contributions, to each ▇▇▇▇▇▇▇'▇ Plan which is a defined contribution
plan (as defined in ERISA Section 3(34)) for all prior plan years and for
the current plan year through the Closing Date.
(f) Between the date of this Agreement and the Closing
Date, no ▇▇▇▇▇▇▇'▇ Plan will (i) be terminated, (ii) be amended in any
manner which would directly or indirectly increase the benefits accrued
or to be accrued by any participant thereunder, or (iii) be amended in
any manner which would materially increase the cost of maintaining such
▇▇▇▇▇▇▇'▇ Plan.
3.19 Real Property Matters. Except as described in Exhibit 3.19
of the Disclosure Exhibits, ▇▇▇▇▇▇▇'▇ does not own, or have the
obligation to purchase, any real property. Except as described in
Exhibit 3.19 of the Disclosure Exhibits, ▇▇▇▇▇▇▇'▇ is not a party to any
lease of real property, nor is ▇▇▇▇▇▇▇'▇ under any obligation to become a
party to any lease of real property. Except as described in Exhibit 3.19
of the Disclosure Exhibits, ▇▇▇▇▇▇▇'▇ has no interest in any real
property nor the obligation to acquire an interest in any real property.
▇▇▇▇▇▇▇'▇ shall deliver to the Shareholders on or before the delivery of
the Disclosure Exhibits a correct and complete copy of any lease of real
property to which ▇▇▇▇▇▇▇'▇ is a party or any other material document
relating to the ownership of an interest in real property by ▇▇▇▇▇▇▇'▇.
3.20 No Default. ▇▇▇▇▇▇▇'▇ is not in breach or violation of, and
neither the execution and delivery of this Agreement or the ▇▇▇▇▇▇▇'▇
Delivered Documents by ▇▇▇▇▇▇▇'▇ nor performance of or compliance with
its or their terms will result in a breach or violation of, (a) the
Articles of Incorporation or Bylaws of ▇▇▇▇▇▇▇'▇, (b) any agreement,
indenture, mortgage, lease or other obligation or instrument to which
▇▇▇▇▇▇▇'▇ is a party or its assets are subject, except where such breach
or violation would not have a material and adverse effect on the assets,
the results of operations, the financial condition or the future
prospects of ▇▇▇▇▇▇▇'▇ business, or relate in any material and adverse
way to the transactions contemplated in this Agreement, or (c) any law,
statute, rule, regulation or any judgment, order or decree to which
▇▇▇▇▇▇▇'▇ is a party or by which ▇▇▇▇▇▇▇'▇ or any of its properties or
assets may otherwise be subject, except where such violation or breach
would not have a material and adverse effect on the assets, the results
of operations, the financial condition or the future prospects of
▇▇▇▇▇▇▇'▇ business, or relate in any material and adverse way to the
transactions contemplated in this Agreement.
3.21 Insider Interests. Exhibit 3.21 of the Disclosure Exhibits
will set forth each interest which any present officer, director,
shareholder or significant employee of ▇▇▇▇▇▇▇'▇ has in ▇▇▇▇▇▇▇'▇ assets
or pertaining to its business, and all loans or advances outstanding to
▇▇▇▇▇▇▇'▇ from any such person or employee or from ▇▇▇▇▇▇▇'▇ to any such
person or any employee, and any other business relationship between
▇▇▇▇▇▇▇'▇ and any such person other than in his capacity as an officer,
director, shareholder or significant employee.
3.22 Sensitive Transactions. To the best of ▇▇▇▇▇▇▇'▇ knowledge,
neither ▇▇▇▇▇▇▇'▇ nor any employee, agent or representative thereof has
directly or indirectly used funds or other assets of ▇▇▇▇▇▇▇'▇ for
illegal contributions, gifts, or payments to or for the benefit of any
governmental official or employee.
3.23 Licenses. ▇▇▇▇▇▇▇'▇ currently holds all necessary licenses,
permits and approvals of all applicable federal, state and local
authorities with respect to the operation of its Business and the
ownership of its assets (collectively, the "▇▇▇▇▇▇▇'▇ Licenses"), except
where the failure to hold such ▇▇▇▇▇▇▇'▇ Licenses would not have a a
material and adverse effect on the assets, the results of operations, the
financial condition or the future prospects of ▇▇▇▇▇▇▇'▇ business, or
relate in any material and adverse way to the transactions contemplated
in this Agreement. Set forth on Schedule 3.23 of the Disclosure Exhibits
will be a list of such ▇▇▇▇▇▇▇'▇ Licenses. All such ▇▇▇▇▇▇▇'▇ Licenses
are in good standing and there is no investigation or proceeding pending
or threatened with respect to such ▇▇▇▇▇▇▇'▇ Licenses.
3.24 Fees and Commissions. ▇▇▇▇▇▇▇'▇ has not agreed to pay or
become liable to pay any broker's, finder's or originator's fees or
commission by reason of services alleged to have been rendered for or at
the instance of ▇▇▇▇▇▇▇'▇ in connection with this Agreement and the
transactions contemplated hereby.
3.25 No Misstatement or Omission. No representation or warranty
by ▇▇▇▇▇▇▇'▇ in this Agreement or in the ▇▇▇▇▇▇▇'▇ Delivered Documents,
contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact required to be stated therein
or necessary to make the statements contained therein not misleading.
IV. CERTAIN COVENANTS.
4.1 General. Each of the parties will use its best efforts to
take all action and to do all things necessary, proper, or advisable in
order to consummate and make effective the transactions contemplated by
this Agreement (including satisfaction, but not waiver, of the closing
conditions set forth in Sections 5 and 6 below).
4.2 Covenants of ▇▇▇▇▇▇▇▇▇ and Shareholders. The Shareholders,
jointly and severally, hereby covenant and agree with ▇▇▇▇▇▇▇'▇ as
follows:
(a) Access and Information. Between the date hereof and
the Closing Date, ▇▇▇▇▇▇▇▇▇ shall permit ▇▇▇▇▇▇▇'▇ and its counsel,
accountants and other representatives reasonable access during normal
business hours to all of the properties, books, contracts, commitments
and records of ▇▇▇▇▇▇▇▇▇, and during such period ▇▇▇▇▇▇▇▇▇ shall furnish
▇▇▇▇▇▇▇'▇ with all such statements (financial and otherwise), records and
documents or copies thereof, and other information concerning the affairs
of ▇▇▇▇▇▇▇▇▇ as ▇▇▇▇▇▇▇'▇ shall, from time to time, reasonably request.
▇▇▇▇▇▇▇▇▇ shall request its independent public accountants, attorneys and
other representatives to cooperate with the representatives of ▇▇▇▇▇▇▇'▇
in connection with the right of access granted herein.
(b) Delivery of Disclosure Schedules. The Shareholders
shall deliver the several Schedules described herein as being part of the
Disclosure Schedules (collectively, the "Disclosure Schedules") within
thirty (30) days after the date hereof.
(c) Conduct of Business. Except as otherwise permitted or
contemplated in this Agreement, from and after the date hereof and until
the Closing Date, ▇▇▇▇▇▇▇▇▇ and the Shareholders shall use all reasonable
efforts to conduct the Acquired Business in substantially the same manner
as heretofore conducted and, with respect to the Acquired Business,
maintain its business organization intact, retain its present employees
and preserve the confidence of its suppliers, distributors, dealers,
representatives and customers. Without limiting the generality of the
foregoing, and with respect to the Acquired Business and the Acquired
Assets, ▇▇▇▇▇▇▇▇▇ shall not (and the Shareholders will not cause or
permit ▇▇▇▇▇▇▇▇▇ to), without the prior written consent of ▇▇▇▇▇▇▇'▇,
except in the ordinary course of business and consistent with past
practice or as otherwise permitted or contemplated by the terms of this
Agreement:
(i) sell, mortgage, encumber or lease (as lessor or
lessee) any properties or assets, except for sales of inventory in
the ordinary course and renewals of current leases;
(ii) fail to maintain all its assets and properties
which are material to its business and included in the Acquired
Assets or fail to maintain its books of account and records in the
usual and regular manner and in accordance with principles and
practices consistent with prior years;
(iii) fail to pay and perform in its ordinary course
any and all liabilities and obligations in respect of the Acquired
Assets or the Acquired Business as the same mature and become due,
or cause or permit any default by ▇▇▇▇▇▇▇▇▇ to exist or occur or
any penalties to be imposed as a consequence thereof under any of
its material contracts or commitments;
(iv) suffer or permit any default by ▇▇▇▇▇▇▇▇▇ or any
event which, with the passage of time or the giving of notice, or
both, may become a default by ▇▇▇▇▇▇▇▇▇ under any material
contract, agreement or understanding;
(v) take any action or omit to take any action which
will affect in any material respect the accuracy, on and as of the
Closing Date, of the representations and warranties set forth in
Section 3 hereof; or
(vi) declare, set aside, or pay any dividend or make
any distribution with respect to its capital stock or redeem,
purchase, or otherwise acquire any of its capital stock.
(d) Advice of Adverse Change. From and after the execution
of this Agreement until the Closing Date, the Shareholders will promptly
notify ▇▇▇▇▇▇▇'▇ in writing of any event which is likely to result in a
material adverse change in the business, assets, prospects, results of
operations or financial condition or any adverse change in the earnings
of ▇▇▇▇▇▇▇▇▇, and any other event that would, with the passage of time or
otherwise, materially impair or materially otherwise affect the accuracy
of any of the representations and warranties of the Shareholders
contained herein on and as of the Closing Date.
4.3 Covenants of ▇▇▇▇▇▇▇'▇. ▇▇▇▇▇▇▇'▇ hereby covenants and
agrees with the Shareholders as follows:
(a) Access and Information. Between the date hereof and
the Closing Date, ▇▇▇▇▇▇▇'▇ shall permit the Shareholders and their
counsel, accountants and other representatives reasonable access during
normal business hours to all of the properties, books, contracts,
commitments and records of ▇▇▇▇▇▇▇'▇, and during such period ▇▇▇▇▇▇▇'▇
shall furnish the Shareholders with all such statements (financial and
otherwise), records and documents or copies thereof, and other
information concerning the affairs of ▇▇▇▇▇▇▇'▇ as the Shareholders
shall, from time to time, reasonably request. ▇▇▇▇▇▇▇'▇ shall request
its independent public accountants, attorneys and other representatives
to cooperate with the representatives of the Shareholders in connection
with the right of access granted herein.
(b) Delivery of Disclosure Exhibits. ▇▇▇▇▇▇▇'▇ shall
deliver the several Exhibits described herein as being part of the
Disclosure Exhibits (collectively, the "Disclosure Exhibits") within
thirty (30) days after the date hereof.
(c) Conduct of Business. Except as otherwise permitted or
contemplated in this Agreement, from and after the date hereof and until
the Closing Date, ▇▇▇▇▇▇▇'▇ shall use all reasonable efforts to conduct
its business in substantially the same manner as heretofore conducted and
maintain its business organization intact, retain its present employees
and preserve the confidence of its suppliers, distributors, dealers,
representatives and customers.
(d) Advice of Adverse Change. From and after the execution
of this Agreement until the Closing Date, ▇▇▇▇▇▇▇'▇ will promptly notify
the Shareholders in writing of any event which is likely to result in a
material adverse change in the business, assets, prospects, results of
operations or financial condition or any adverse change in the earnings
of ▇▇▇▇▇▇▇'▇, and any other event that would, with the passage of time or
otherwise, materially impair or materially otherwise affect the accuracy
of any of the representations and warranties of ▇▇▇▇▇▇▇'▇ contained
herein on and as of the Closing Date.
4.4 Consents; Approvals. From and after the date hereof, the
parties shall use their best efforts and cooperate in obtaining all
consents, assignments, novations, approvals, orders, qualifications,
licenses, permits or other authorizations, and waivers from any
governmental entity or other third parties necessary to permit the
consummation of the transactions contemplated by this Agreement.
4.5 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings. Promptly after the date hereof,
each of the Shareholders and ▇▇▇▇▇▇▇'▇ will make the necessary filings,
if any, required to consummate this Agreement pursuant to the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇") and
will use their respective best efforts to cooperate and to complete any
incomplete filings and to cause the applicable waiting period under such
law to expire. Copies of all proposed filings pursuant to the HSR Act
shall be delivered to the other parties for their prompt review and
approval prior to any such filing, which approval shall not be
unreasonably withheld or delayed. The initial filings required under the
HSR Act shall include a request for early termination and shall be made
by no later than ten (10) days after the date hereof. The filing fee
with respect to such filings required under the HSR Act shall be borne by
each party which is required to make a filing under the HSR Act.
4.6 Deliveries. Each party hereto shall provide and deliver to
any other party such information and documents relating to the
transactions covered hereby which are reasonably requested by such other
party.
4.7 ▇▇▇▇▇▇▇'▇ Net Operating Losses. Subject to the Consideration
to be delivered to the Shareholders hereunder, the parties agree to use
their best efforts to ensure that the consummation of the transactions
contemplated herein shall maximize the use and preservation of ▇▇▇▇▇▇▇'▇
net operating losses for income tax purposes under the Code.
4.8 ▇▇▇▇▇▇▇'▇ Proxy Materials and Current Report on Form 8-K.
The Shareholders shall use their best efforts to provide, at the
Shareholders' sole cost and expense, all of the information relative to
▇▇▇▇▇▇▇▇▇ and the Acquired Business and the Acquired Assets necessary for
▇▇▇▇▇▇▇'▇ to (a) prepare, timely file with the SEC and distribute to its
shareholders proxy materials (in compliance with Regulation 14A
promulgated under the Exchange Act) for purposes of soliciting proxies
from ▇▇▇▇▇▇▇'▇ shareholders to approve the Reorganization, and (b)
prepare and timely file with the SEC a Current Report on Form 8-K arising
from the transactions contemplated by this Agreement. Without limiting
the generality of the foregoing, such information shall include any
necessary audited financial information relative to ▇▇▇▇▇▇▇▇▇, the
Acquired Business and the Acquired Assets.
4.9 Disposition of Excluded Assets and Excluded Liabilities.
Between the date hereof and the Closing Date, ▇▇▇▇▇▇▇▇▇ and the
Shareholders shall use their respective best efforts to take such actions
as are necessary in order to transfer to another person or persons or to
otherwise dispose of those assets (the "Excluded Assets") and liabilities
(the "Excluded Liabilities") of ▇▇▇▇▇▇▇▇▇'▇ which are not related to the
operation of the fifteen (15) retail department stores described on ANNEX
B attached hereto (the "Acquired Stores"). Schedule 4.9 of the
Disclosure Schedules will set forth a description of the Excluded Assets
and the Excluded Liabilities and a description of such actions to be
taken by ▇▇▇▇▇▇▇▇▇ and the Shareholders in connection with the
disposition thereof prior to the Closing Date. Without limiting the
generality of the foregoing, such actions shall include the following:
(a) The termination of all of ▇▇▇▇▇▇▇▇▇'▇ employees except
for those actively involved in the day-to-day operations of the Acquired
Stores and specifically identified by ▇▇▇▇▇▇▇'▇ as employees to be
retained after the Closing Date. The Shareholders shall pay all
separation costs related to the terminated employees, including
applicable COBRA requirements arising under ERISA or the Code.
(b) The termination and pay-off all outstanding debt under
▇▇▇▇▇▇▇▇▇'▇ loan agreement with National City Bank.
(c) The termination of any and all Liens on the Acquired
Assets.
(d) The payment in full of any and all indebtedness owed by
▇▇▇▇▇▇▇▇▇ to the directors, officers and employees of ▇▇▇▇▇▇▇▇▇ and to
the other affiliates of ▇▇▇▇▇▇▇▇▇ or the Shareholders.
(e) The collection in full of any and all accounts
receivable due to ▇▇▇▇▇▇▇▇▇ from, and the payment in full of any and all
accounts payable owed by ▇▇▇▇▇▇▇▇▇ to, the directors, officers and
employees of ▇▇▇▇▇▇▇▇▇ and to the other affiliates of ▇▇▇▇▇▇▇▇▇ or the
Shareholders.
(f) The termination or other disposition of the leases
pertaining to ▇▇▇▇▇▇▇▇▇'▇ corporate offices in White Plains, New York
(the "Corporate Offices") and ▇▇▇▇▇▇▇▇▇'▇ central accounting offices in
Bridgeport, Connecticut (the "Central Accounting Offices").
(g) The disposition to a third party of the assets and
liabilities related to ▇▇▇▇▇▇▇▇▇'▇ distribution center in Eatontown, New
Jersey (the "Distribution Center").
(h) To the extent terminable prior to the Closing Date, the
termination of all contracts between ▇▇▇▇▇▇▇▇▇ and third parties which
are specifically identified by ▇▇▇▇▇▇▇'▇.
(i) The transfer of the non-Acquired Stores (and the assets
and liabilities related thereto), if any, which are the subject of the
Non-Acquired Stores Operation Agreement to a person or persons other than
▇▇▇▇▇▇▇▇▇.
(j) The distribution of cash to the Shareholders in such
amounts as they may determine in their sole discretion, provided that, on
the Closing Date, the cash physically on hand at the Acquired Stores
(i.e., located in the vaults, safes, cash registers, etc.) shall not be
distributed to the Shareholders.
4.10 Transition Matters. From and after the date hereof, the
parties shall use their best efforts and cooperate in connection with the
following transition matters:
(a) Operation of the Acquired Stores. During the period of
December 31, 1995 through the Closing Date, ▇▇▇▇▇▇▇'▇ shall operate the
Acquired Stores, and the assets and liabilities related thereto (i.e.,
beginning with the assets and liabilities which, as of the close of
business on December 30, 1995, comprise ▇▇▇▇▇▇▇▇▇'▇ Net Book Value), on a
basis pursuant to which all losses and profits relative to such operation
shall be borne by and to inure to the benefit of ▇▇▇▇▇▇▇'▇, pursuant to
the terms and conditions of an operation agreement in form and substance
satisfactory to ▇▇▇▇▇▇▇'▇ and the Shareholders (the "Acquired Stores
Operation Agreement").
(b) Operation of Certain Non-Acquired Stores. During the
period of December 31, 1995 through the Closing Date or such other date
mutually agreed upon by ▇▇▇▇▇▇▇'▇ and the Shareholders, ▇▇▇▇▇▇▇'▇ shall,
at ▇▇▇▇▇▇▇▇▇'▇ request, operate certain of the non-Acquired Stores for a
fee based upon a pro rata allocation of ▇▇▇▇▇▇▇'▇ corporate overhead,
with all losses and profits relative to such operation to be borne by and
to inure to the benefit of the Shareholders, pursuant to the terms and
conditions of an operation agreement in form and substance satisfactory
to ▇▇▇▇▇▇▇'▇ and the Shareholders (the "Non-Acquired Stores Operation
Agreement").
(c) Pyramid Leases. With respect to the three (3)
so-called Pyramid Lease Contracts relative to the Acquired Stores No. 15,
Watertown, New York (with the Pyramid Company of Watertown as the
landlord), ▇▇. ▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ (with the Senpike Mall
Company as the landlord), and ▇▇. ▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ (with Pyramid
Champlain as the landlord), the Shareholders shall promptly reimburse
▇▇▇▇▇▇▇'▇ in an amount equal to any termination fees payable by ▇▇▇▇▇▇▇▇▇
to the respective Pyramid landlords in connection with the consummation
of the transactions contemplated herein.
(d) Use of Corporate Offices, Central Accounting Offices
and Distribution Center. During the period after December 31, 1995,
▇▇▇▇▇▇▇▇▇ and the Shareholders, as the case may be, shall take such
action as is necessary to make the Corporate Offices, the Central
Accounting Offices and/or the Distribution Center available for use by
▇▇▇▇▇▇▇'▇ upon such terms and conditions as shall be mutually agreed upon
by ▇▇▇▇▇▇▇'▇, the Shareholders and ▇▇▇▇▇▇▇▇▇ (as the case may be).
(e) Other. During the period after December 31, 1995,
▇▇▇▇▇▇▇'▇ and the Shareholders shall use their best efforts and cooperate
with each other in connection with all other transition matters,
including those matters related to the disposition of accounting
services, leases for personal property, payroll matters, employee benefit
plans, workers compensation matters, etc.
4.11 Further Assurances. The parties hereto agree that each of
them will, from time to time after the Closing Date when so requested by
the other, perform, execute, acknowledge or deliver or cause to be
performed, executed, acknowledged or delivered, all such further acts,
deeds, assignments, transfers, conveyances and assurances as may be
required to consummate the Reorganization and the transactions
contemplated herein.
4.12 Representation on ▇▇▇▇▇▇▇'▇ Board of Directors. Promptly
after the Closing Date, ▇▇▇▇▇▇▇'▇ shall take such action as is necessary
to appoint one (1) nominee of the Shareholders as a member of ▇▇▇▇▇▇▇'▇
Board of Directors to serve a term which will expire at ▇▇▇▇▇▇▇'▇ 1997
Annual Meeting of Shareholders. Thereafter, on or prior to the fourth
(4th) anniversary of the Closing Date, ▇▇▇▇▇▇▇'▇ shall take such actions
as are reasonably necessary to either appoint or nominate for election in
connection with ▇▇▇▇▇▇▇'▇ Annual Meetings of Shareholders such additional
nominees of the Shareholders so that the Shareholders' aggregate
percentage of representation on the then Board of Directors approximates
the Shareholders' aggregate percentage of ownership of the then issued
and outstanding shares of ▇▇▇▇▇▇▇'▇ Common Stock. ▇▇▇▇▇▇▇'▇ obligations
under this Section 4.12 automatically shall terminate at such time as the
Shareholders own less than ten percent (10%) of the then issued and
outstanding shares of ▇▇▇▇▇▇▇'▇ Common Stock.
V. CONDITION TO OBLIGATIONS OF SHAREHOLDERS.
The obligation of the Shareholders to go forward on the Closing
Date with the consummation of the Reorganization and the other
transactions contemplated herein is subject to the satisfaction, or
waiver by the Shareholders, of each of the following conditions
precedent:
5.1 Representations and Warranties of ▇▇▇▇▇▇▇'▇; Performance by
▇▇▇▇▇▇▇'▇; Certificate of ▇▇▇▇▇▇▇'▇. On and as of the Closing Date, all
of the representations and warranties of ▇▇▇▇▇▇▇'▇ set forth in Section 3
hereof shall be true and correct in all material respects, except for
changes that have occurred in the ordinary course of ▇▇▇▇▇▇▇'▇ business
and consistent with past practices or which are expressly permitted or
contemplated by this Agreement (for this purpose substituting the Closing
Date for the date of this Agreement wherever a representation or warranty
shall have been made with reference to the date of this Agreement), and
▇▇▇▇▇▇▇'▇ shall have performed in all material respects all agreements
and covenants required by this Agreement to be performed by them prior to
or at the Closing Date. ▇▇▇▇▇▇▇'▇ shall have delivered to the
Shareholders a written certificate of the President of ▇▇▇▇▇▇▇'▇, dated
the Closing Date and in form and substance reasonably satisfactory to the
Shareholders and their respective counsel, reaffirming such
representations and warranties as of the Closing Date, certifying to the
fulfillment of such agreements and covenants, and such other matters as
the Shareholders shall reasonably request.
5.2 Absence of Litigation. No action, suit or proceeding shall
have been instituted or threatened seeking to enjoin or restrain or which
would materially adversely affect the transactions contemplated hereby.
5.3 Opinion of Counsel. On the Closing Date, ▇▇▇▇▇▇▇'▇ shall
have delivered to the Shareholders the written opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
PLLC, Detroit, Michigan, dated the Closing Date, in form and substance
satisfactory to the Shareholders and their counsel.
5.4 Consents -- HSR Act. The applicable waiting period
prescribed by regulations adopted pursuant to the HSR Act shall have
expired without the receipt by the Shareholders and/or ▇▇▇▇▇▇▇'▇ of
notice from the Department of Justice or the Federal Trade Commission of
any contemplated legal action to restrain or nullify the transactions
contemplated by this Agreement.
5.5 Registration Rights Agreement. The Shareholders and
▇▇▇▇▇▇▇'▇ shall have executed and delivered a Registration Rights
Agreement on or before the Closing Date in form and substance
satisfactory to the parties and providing for not more than one (1)
demand registration right and for piggyback rights for up to four (4)
years after the Closing Date relative to certain rights granted to the
Shareholders with respect to the registration of the ▇▇▇▇▇▇▇'▇ Common
Stock delivered in exchange for the ▇▇▇▇▇▇▇▇▇ Common Stock (the
"Registration Rights Agreement").
5.6 Shareholder Agreement. The Shareholders and ▇▇▇▇▇▇▇'▇ shall
have executed and delivered a Shareholder Agreement on or before the
Closing Date in form and substance satisfactory to the parties and
relative to, among other things, the agreement by the Shareholders and
their affiliates not to acquire, at any time up to four (4) years after
the Closing Date, more than forty-five percent (45%) (with appropriate
antidilution provisions relative thereto) of the then issued and
outstanding shares of ▇▇▇▇▇▇▇'▇ Common Stock (the "Shareholder
Agreement").
5.7 Acquired Stores Operation Agreement. ▇▇▇▇▇▇▇▇▇, the
Shareholders and ▇▇▇▇▇▇▇'▇ shall have executed and delivered the Acquired
Stores Operation Agreement on or before the Closing Date in form and
substance satisfactory to the Shareholders.
5.8 Non-Acquired Stores Operation Agreement. The Shareholders,
▇▇▇▇▇▇▇'▇ and/or the then owner of the non-Acquired Stores shall have
executed and delivered the Non-Acquired Stores Operation Agreement on or
before the Closing Date in form and substance satisfactory to the
Shareholders.
5.9 Due Diligence Review. The Shareholders shall have completed
their due diligence review of the Disclosure Exhibits, ▇▇▇▇▇▇▇'▇ and the
transactions contemplated herein to their sole satisfaction and the
results of such review shall have been satisfactory to the Shareholders
and their advisors as determined in their sole discretion. The condition
precedent set forth in this Section 5.9 shall expire forty-five (45) days
after the date hereof.
5.10 Revised Exchange Ratio. If either of the events described
above in Section 1.5(b)(i)(B) occur, ▇▇▇▇▇▇▇'▇ and the Shareholders shall
have agreed upon a mutually acceptable exchange ratio with respect to the
exchange of the ▇▇▇▇▇▇▇▇▇ Common Stock and the ▇▇▇▇▇▇▇'▇ Common Stock on
or prior to the Closing Date.
VI. CONDITIONS TO OBLIGATIONS OF ▇▇▇▇▇▇▇'▇.
The obligation of ▇▇▇▇▇▇▇'▇ to go forward on the Closing Date with
the consummation of the Reorganization and the other transactions
contemplated herein is subject to the satisfaction, or waiver by
▇▇▇▇▇▇▇'▇, of each of the following conditions precedent:
6.1 Representations and Warranties of Shareholders; Performance
by Shareholder; and Certificate of Shareholders. On and as of the
Closing Date, all of the representations and warranties of the
Shareholders set forth in Section 2 hereof shall be true and correct in
all material respects except for changes that have occurred in the
ordinary course of ▇▇▇▇▇▇▇▇▇'▇ business and consistent with past
practices or which are expressly permitted or contemplated by, or not
inconsistent with, this Agreement (for this purpose substituting the
Closing Date for the date of this Agreement wherever a representation or
warranty shall have been made with reference to the date of this
Agreement), and the Shareholders shall have performed all of the
agreements and covenants required by this Agreement to be performed by
them prior to or at the Closing Date. Each of the Shareholders shall
have delivered to ▇▇▇▇▇▇▇'▇ a written certificate, dated the Closing Date
and in form and substance reasonably satisfactory to ▇▇▇▇▇▇▇'▇ and its
counsel, reaffirming such representations and warranties made as of the
Closing Date, certifying to the fulfillment of such agreements and
covenants, and such other matters as ▇▇▇▇▇▇▇'▇ shall reasonably request.
6.2 Consents.
(a) Approval by ▇▇▇▇▇▇▇'▇ Shareholders. This Agreement and
the consummation of the transactions contemplated herein shall have been
approved by the shareholders of ▇▇▇▇▇▇▇'▇.
(b) Approval by Congress Financial Corporation. This
Agreement and the consummation of the transactions contemplated herein
shall have been approved by Congress Financial Corporation (Central)
("Congress Financial") pursuant to the terms and conditions of that
certain Loan and Security Agreement, dated November 4, 1994, between
Congress Financial and ▇▇▇▇▇▇▇'▇.
(c) Consents. The parties shall have received all
consents, assignments, novations, approvals, orders, qualifications,
licenses, permits or other authorizations, and waivers from any
governmental entity or other third parties necessary to permit the
consummation of the transactions contemplated by this Agreement.
(d) HSR Act. The applicable waiting period prescribed by
regulations adopted pursuant to the HSR Act shall have expired without
the receipt by the Shareholders and/or ▇▇▇▇▇▇▇'▇ of notice from the
Department of Justice or the Federal Trade Commission of any contemplated
legal action to restrain or nullify the transactions contemplated by this
Agreement.
(e) Consents of Landlords. With respect to each of the
Lease Contracts which, in the opinion of counsel for ▇▇▇▇▇▇▇'▇ (based
upon, among other things, the status of the documentation relative to
such Lease Contract), reasonable prudence would dictate requires the
receipt of a consent from the landlord under such Lease Contract to
consummate the transactions contemplated in this Agreement, ▇▇▇▇▇▇▇▇▇
shall have delivered to ▇▇▇▇▇▇▇'▇, as to each of the Lease Contracts, a
"Landlord Consent" (in form and substance reasonably satisfactory to
▇▇▇▇▇▇▇'▇ and its counsel) validly executed by the landlord under such
Lease Contract and dated not more than ten (10) days prior to the Closing
Date.
6.3 Opinions of Counsel. On the Closing Date, the Shareholders
shall have delivered to ▇▇▇▇▇▇▇'▇ the written opinion of Porter, Wright,
▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel for the Shareholders, dated the Closing Date, in
form and substance satisfactory to ▇▇▇▇▇▇▇'▇ and its counsel.
6.4 Absence of Litigation. No action, suit or proceeding shall
have been instituted which has resulted in temporary or preliminary
injunctive relief of a continuing nature preventing the consummation of
the transactions contemplated hereby, or which, in the bona fide opinion
of ▇▇▇▇▇▇▇'▇ counsel, is not fully covered by insurance maintained by
▇▇▇▇▇▇▇▇▇ and will have material adverse effect on the ability of
▇▇▇▇▇▇▇▇▇ to continue to operate its Acquired Business as presently
conducted in all material respects. No labor dispute shall have
occurred, and no unfair labor practice charge shall have been filed which
would materially adversely affect the business, financial condition,
properties or prospects of ▇▇▇▇▇▇▇▇▇ or the transactions contemplated
hereby.
6.5 Casualty Loss. No casualty losses shall have occurred to the
Acquired Assets which would have a material adverse affect on the ability
of ▇▇▇▇▇▇▇▇▇ to operate the Acquired Business as presently conducted or
would otherwise deprive ▇▇▇▇▇▇▇'▇ of the benefits of the transactions
contemplated hereby. For purposes of this Agreement, casualty losses
causing the closing of two (2) or more of the Acquired Stores shall
constitute a material adverse affect on the ability of ▇▇▇▇▇▇▇▇▇ to
operate the Acquired Business.
6.6 Due Diligence Review. ▇▇▇▇▇▇▇'▇ shall have completed its due
diligence review of the Disclosure Schedules, ▇▇▇▇▇▇▇▇▇, the Acquired
Assets, the Acquired Business and the transactions contemplated herein to
its sole satisfaction and the results of such review shall have been
satisfactory to ▇▇▇▇▇▇▇'▇ and its advisors as determined in ▇▇▇▇▇▇▇'▇
sole discretion. The condition precedent set forth in this Section 6.6
shall expire forty-five (45) days after the date hereof.
6.7 Registration Rights Agreement. The Shareholders and
▇▇▇▇▇▇▇'▇ shall have executed and delivered the Registration Rights
Agreement on or before the Closing Date.
6.8 Shareholder Agreement. The Shareholders and ▇▇▇▇▇▇▇'▇ shall
have executed and delivered the Shareholder Agreement on or before the
Closing Date.
6.9 Loan Agreement -- Schottenstein Stores Corporation.
Schottenstein Stores Corporation ("SSC") and ▇▇▇▇▇▇▇'▇ shall have
executed and delivered a Loan Agreement on or before the Closing Date in
form and substance satisfactory to ▇▇▇▇▇▇▇'▇ relative to the availability
after the Closing Date of additional or contingent financing of up to the
principal amount of $6,000,000, provided that the condition precedent set
forth in this Section 6.9 shall only be in effect in the event ▇▇▇▇▇▇▇'▇
is not successful in obtaining additional financing relative to the
operation of ▇▇▇▇▇▇▇▇▇ after the Closing on reasonable terms and
conditions, and provided further that, any such Loan Agreement between
SSC and ▇▇▇▇▇▇▇'▇ shall be on terms and conditions similar to those set
forth in that certain Credit and Security Agreement, dated May 20, 1993,
between SSC and ▇▇▇▇▇▇▇'▇, which terms and conditions would include a
first lien on all of the post-Closing assets of ▇▇▇▇▇▇▇▇▇ as security for
the repayment any indebtedness under any such Loan Agreement (the "Loan
Agreement").
6.10 Acquired Stores Operation Agreement. ▇▇▇▇▇▇▇▇▇, the
Shareholders and ▇▇▇▇▇▇▇'▇ shall have executed and delivered the Acquired
Stores Operation Agreement on or before the Closing Date in form and
substance satisfactory to ▇▇▇▇▇▇▇'▇.
6.11 Non-Acquired Stores Operation Agreement. The Shareholders,
▇▇▇▇▇▇▇'▇ and/or the then owner of the non-Acquired Stores shall have
executed and delivered the Non-Acquired Stores Operation Agreement on or
before the Closing Date in form and substance satisfactory to ▇▇▇▇▇▇▇'▇.
6.12 Fairness Opinion. ▇▇▇▇▇▇▇'▇ shall have received a fairness
opinion from an investment banking and/or appraisal firm to the effect
that the transaction contemplated herein is fair, from a financial point
of view, to the shareholders of ▇▇▇▇▇▇▇'▇ (excluding the Shareholders and
any of their respective affiliates).
6.13 ▇▇▇▇▇▇▇'▇ Proxy Materials and Current Report on Form 8-▇.
▇▇▇▇▇▇▇▇▇ shall have provided to ▇▇▇▇▇▇▇'▇, at ▇▇▇▇▇▇▇▇▇'▇ sole cost and
expense, (a) all of the information relative to ▇▇▇▇▇▇▇▇▇ and the
Acquired Business and the Acquired Assets necessary for ▇▇▇▇▇▇▇'▇ to
prepare, timely file with the SEC and distribute to its shareholders
proxy materials (in compliance with Regulation 14A promulgated under the
Exchange Act) for purposes of soliciting proxies from ▇▇▇▇▇▇▇'▇
shareholders to approve the Reorganization, and (b) or before the Closing
Date, all of the information relative to ▇▇▇▇▇▇▇▇▇ and the Acquired
Business and the Acquired Assets necessary for ▇▇▇▇▇▇▇'▇ to prepare and
timely file with the Securities and Exchange Commission a Current Report
on Form 8-K arising from the transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, such information shall
include any necessary audited financial information relative to ▇▇▇▇▇▇▇▇▇
and the Acquired Business and the Acquired Assets.
6.14 Resignations. ▇▇▇▇▇▇▇'▇ shall have received the
resignations, effective as of the Closing, of each director and officer
of ▇▇▇▇▇▇▇▇▇.
6.15 Revised Exchange Ratio. If either of the events described
above in Section 1.5(b)(i)(B) occur, ▇▇▇▇▇▇▇'▇ and the Shareholders shall
have agreed upon a mutually acceptable exchange ratio with respect to the
exchange of the ▇▇▇▇▇▇▇▇▇ Common Stock and the ▇▇▇▇▇▇▇'▇ Common Stock on
or prior to the Closing Date.
VII. CLOSING MATTERS.
7.1 Closing and Closing Date. The closing of the exchange of
▇▇▇▇▇▇▇▇▇ Common Stock and ▇▇▇▇▇▇▇'▇ Common Stock contemplated herein
(the "Closing") shall take place at 10:00 a.m., local time, at the
offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC, Detroit, Michigan, on the third business
day following the later of (a) the date on which all of the conditions
set forth in Sections 5 and 6 have been fulfilled to the satisfaction of,
or are waived by, the party whose obligations hereunder are so
conditioned or (b) the expiration of the applicable waiting period
prescribed by regulations adopted pursuant to the HRS Act, without
receipt by the Shareholders and/or ▇▇▇▇▇▇▇'▇ of notice from the
Department of Justice or the Federal Trade Commission of any contemplated
legal action to refrain or nullify the transactions contemplated by this
Agreement (the "Closing Date"). The parties shall use their best efforts
to consummate the Closing hereunder on or before February 29, 1996.
7.2 Actions and Deliveries. At the Closing, the Shareholders and
▇▇▇▇▇▇▇'▇ shall take the following actions and make the following
deliveries:
(a) Consideration. Subject to the adjustments described in
Section 1.5 of this Agreement, ▇▇▇▇▇▇▇'▇ shall deliver to the
Shareholders the shares of ▇▇▇▇▇▇▇'▇ Common Stock, and the Shareholders
shall deliver to ▇▇▇▇▇▇▇'▇ certificates evidencing all of the issued and
outstanding shares of the ▇▇▇▇▇▇▇▇▇ Common Stock, all in the manner
described in Section 1 of this Agreement.
(b) Secretary's Certificate.
(i) From ▇▇▇▇▇▇▇'▇. ▇▇▇▇▇▇▇'▇ shall deliver to the
Shareholders a certificate of its secretary (or assistant secretary)
certifying (A) the incumbency of the officers executing this Agreement
and the ▇▇▇▇▇▇▇'▇ Delivered Documents, (B) the due adoption of corporate
resolutions authorizing and approving the execution, delivery and
performance of this Agreement and all of the transactions contemplated
herein, and (C) correct and complete copies of Articles of Incorporation
and Bylaws.
(ii) From Shareholders. The Shareholders shall
deliver to ▇▇▇▇▇▇▇'▇ a certificate of ▇▇▇▇▇▇▇▇▇'▇ secretary (or assistant
secretary) certifying correct and complete copies of Articles of
Incorporation and Bylaws.
(c) Officer's and Shareholder's Certificates.
(i) From ▇▇▇▇▇▇▇'▇. ▇▇▇▇▇▇▇'▇ shall deliver to the
Shareholders the certificate of their respective authorized officers as
described in Section 5.1 hereof.
(ii) From Shareholders. Each of the Shareholders
shall deliver to ▇▇▇▇▇▇▇'▇ the certificate as described in Section 6.1
hereof.
(d) Minute Books. The Shareholders shall deliver to
▇▇▇▇▇▇▇'▇ the minute books and related stock and corporate records of
▇▇▇▇▇▇▇▇▇.
(e) Other. All other documents and instruments
contemplated by this Agreement to be delivered at the Closing and all
other actions contemplated by this Agreement to be taken at the Closing
shall be delivered and taken.
VIII. TERMINATION.
8.1 Methods. This Agreement may be terminated as follows:
(a) At any time by mutual written agreement of the
Shareholders and ▇▇▇▇▇▇▇'▇;
(b) By ▇▇▇▇▇▇▇'▇ if any of the conditions set forth in
Section 6 shall not be fulfilled for reasons beyond the reasonable
control of ▇▇▇▇▇▇▇'▇ and are not waived by ▇▇▇▇▇▇▇'▇;
(c) By the Shareholders if any of the conditions set forth
in Section 5 shall not be fulfilled for reasons beyond the reasonable
control of the Shareholders and are not waived by the Shareholders; or
(d) On or before the expiration of forty-five (45) days
after the date hereof, by the Shareholders if the conduct or results of
the Shareholders' due diligence review described in Section 5.9 hereof
shall not have been satisfactory to the Shareholders and their advisors
as determined in their sole discretion.
(e) On or before the expiration of forty-five (45) days
after the date hereof, by ▇▇▇▇▇▇▇'▇ if the conduct or results of
▇▇▇▇▇▇▇'▇ due diligence review described in Section 6.6 hereof shall not
have been satisfactory to ▇▇▇▇▇▇▇'▇ and its advisors as determined in
their sole discretion.
(f) On or before December 30, 1995, by either ▇▇▇▇▇▇▇'▇ or
the Shareholders if ▇▇▇▇▇▇▇▇▇, the Shareholders and ▇▇▇▇▇▇▇'▇ shall not
have entered into the Acquired Stores Operation Agreement on terms and
conditions satisfactory to the Shareholders and ▇▇▇▇▇▇▇'▇.
(g) On or before December 30, 1995, by either ▇▇▇▇▇▇▇'▇ or
the Shareholders if ▇▇▇▇▇▇▇▇▇, the Shareholders and ▇▇▇▇▇▇▇'▇ shall not
have entered into the Non-Acquired Stores Operation Agreement on terms
and conditions satisfactory to the Shareholders and ▇▇▇▇▇▇▇'▇.
(h) By either the Shareholders or ▇▇▇▇▇▇▇'▇ if the Closing
has not occurred on or before March 31, 1996.
In the event of termination as provided above, this Agreement shall
terminate without further action by any of the parties hereto. In
addition, if the Shareholders, on the one hand, or ▇▇▇▇▇▇▇'▇, on the
other hand, waive in writing compliance with any such condition to their
respective obligations, the right to terminate provided herein shall no
longer exist with respect to that particular condition.
8.2 Liability. If this Agreement is terminated as provided in
Section 8.1, neither ▇▇▇▇▇▇▇'▇, on the one hand, nor the Shareholders, on
the other hand, shall be under any liability to the other by reason of
this Agreement, its negotiation or its termination, or by reason of any
of the transactions contemplated under this Agreement, whether for costs,
expenses, damages or otherwise (except that the letter agreement, dated
September 29, 1995, between ▇▇▇▇▇▇▇'▇ and ▇▇▇▇▇▇▇▇▇ relative to
confidentiality matters shall remain in full force and effect to the
extent set forth therein (the "Confidentiality Agreement")); provided,
however, that, if the election to terminate is due to the default of a
party hereunder, then the non-defaulting party shall be entitled to any
and all remedies available at law or in equity.
IX. INDEMNIFICATION.
9.1 Indemnification by Shareholders. The Shareholders, jointly
and severally, agree to indemnify and hold harmless ▇▇▇▇▇▇▇'▇, its
successors and assigns, and its officers, directors, employees and
shareholders, against and with respect to, any and all loss, injury,
liability, claim, assessment, damage or expense (including, without
limitation, reasonable attorneys' fees), court costs and amounts paid in
settlement of claims, of any kind or character arising out of or in any
manner incident, relating or attributed to, any of the following:
(a) Any inaccuracy in, or breach or violation of, the
representations and warranties made by the Shareholders and the covenants
and agreements undertaken by them pursuant to this Agreement and the
▇▇▇▇▇▇▇▇▇ Delivered Documents.
(b) Any liability or obligation arising from or related to
(i) the actions taken by ▇▇▇▇▇▇▇▇▇ and/or the Shareholders with respect
to the Excluded Assets and the Excluded Liabilities and the disposition
thereof as described above in Section 4.9, or (ii) the failure by
▇▇▇▇▇▇▇▇▇ or the Shareholders to timely take the actions described above
in Section 4.9.
(c) With respect to facts and circumstances on or prior to
the Closing Date, any liability arising from or related to compliance
with Environmental Laws at the ▇▇▇▇▇▇▇▇▇ Real Property, irrespective of
the source or cause of the condition, or any condition existing at any
other property caused by, arising from, or relating to, ▇▇▇▇▇▇▇▇▇'▇
operation of its business. In addition, with respect to facts and
circumstances after the Closing Date, any liability arising from or
related to compliance with Environmental Laws at any portions of the
▇▇▇▇▇▇▇▇▇ Real Property (excluding the Acquired Stores) which are not
transferred from ▇▇▇▇▇▇▇▇▇, or otherwise disposed of by ▇▇▇▇▇▇▇▇▇ or the
Shareholders, to another person or persons, irrespective of the source or
cause of the condition.
9.2 Indemnification by ▇▇▇▇▇▇▇'▇. ▇▇▇▇▇▇▇'▇ agrees to indemnify
and hold harmless the Shareholders, and their respective successors and
assigns, against and with respect to, any and all loss, injury,
liability, claim, assessment, damage or expense (including, without
limitation, reasonable attorneys' fees), court costs and amounts paid in
settlement of claims, of any kind or character arising out of or in any
manner incident, relating or attributed to, any inaccuracy in, or breach
or violation of, the representations and warranties made by ▇▇▇▇▇▇▇'▇ and
the covenants and agreements undertaken by it pursuant to this Agreement
and the ▇▇▇▇▇▇▇'▇ Delivered Documents.
9.3 Liability Threshold; Ceiling. Notwithstanding anything to
the contrary herein, neither the Shareholders, on the one hand, nor
▇▇▇▇▇▇▇'▇, on the other hand, shall be liable hereunder to the other as a
result of any claim for indemnity permitted hereunder unless the losses,
liabilities or damages incurred by the subject party as a result of the
actions giving rise to the claim shall exceed, in the aggregate $100,000
(the "Threshold Amount") in which event the injured party shall be
entitled to full recovery without regard to the Threshold Amount;
provided, however, that the total aggregate recovery of all claims shall
not exceed $1,000,000.
9.4 Claims Procedure. If any action, claim or demand shall be
brought or asserted against any party in respect of which indemnity may
be sought pursuant to this Section, the party seeking indemnification
shall promptly notify the parties from whom indemnification is to be
sought, stating the name and address of any claimant and of counsel to
any claimant (if known), the amount claimed to be due and payable, the
basis of the claim as alleged by any claimant and the provision or
provisions of this Agreement under which such claim for indemnity is
asserted. The notice shall be accompanied by copies of any documents
relied on by any claimant and furnished to the party seeking
indemnification. Within 30 days after receipt of such notice, the
parties from whom indemnification is sought shall by written notice
either (i) concede liability in whole as to the amount claimed in such
notice; (ii) deny liability in whole as to such amount; (iii) concede
liability in part and deny liability; or (iv) in the case of claims by
third parties, assume the defense thereof. Provided that the notice
required hereunder is properly given, failure by such parties to assume
the defense of a third party claim for which a party is entitled to
indemnity under this Agreement shall cause the indemnity obligations of
the parties from whom indemnification is sought to extend to whatever
outcome results from such third party claim. Any settlement or
compromise of a claim shall be agreed upon by all parties. If the party
seeking indemnification declines to accept a bona fide offer of
settlement which is recommended by the party from whom indemnification is
sought, the maximum liability of the parties from whom indemnification is
sought shall not exceed that amount which it would have been liable for
had such settlement been accepted. If the party from whom
indemnification is sought declines to accept a bona fide offer of
settlement recommended by the party seeking indemnification, the party
from whom indemnification is sought shall be liable for whatever outcome
results from such third party claim. The obligation of any party to
another in respect of a claim for indemnity hereunder shall be reduced by
any tax or other financial benefits realized by the party seeking
indemnification.
X. MISCELLANEOUS.
10.1 Entire Agreement; Amendment. This Agreement (including the
Exhibits and Schedules hereto and the ▇▇▇▇▇▇▇▇▇ Delivered Documents and
the ▇▇▇▇▇▇▇'▇ Delivered Documents) constitutes the entire agreement and
understanding of the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings of the
parties with respect to the subject matter hereof. No representation,
inducement, agreement, promise or understanding altering, modifying,
amending, taking from or adding to the terms and conditions hereof shall
have any force and effect unless the same is in writing and validly
executed by the parties hereto.
10.2 Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed to have been
duly given (i) if physically delivered, (ii) if telephonically
transmitted by telecopier or other similar means, with subsequent oral
confirmation, (iii) five (5) days after having been deposited in the
United States Mail, as certified mail with return receipt requested and
with postage prepaid, or (iv) one (1) business day after having been
transmitted to a third party providing delivery services in the ordinary
course of business which guarantees delivery on the next business day
after such transmittal (e.g., via Federal Express), all of which notices
or other communications shall be addressed to the recipient as follows:
(a) If to ▇▇▇▇▇▇▇'▇, to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and Company
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇-▇▇▇-▇▇▇▇; fax ▇▇▇-▇▇▇-▇▇▇▇)
Attention: President
with a courtesy copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇-▇▇▇-▇▇▇▇; fax ▇▇▇-▇▇▇-▇▇▇▇)
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
(b) If to the Shareholders, to:
▇▇▇▇▇▇▇▇▇ Stores, Inc.
c/o Schottenstein Stores Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
(▇▇▇-▇▇▇-▇▇▇▇; fax ▇▇▇-▇▇▇-▇▇▇▇)
Attention: President
with a courtesy copy to:
Porter, Wright, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇-▇▇▇-▇▇▇▇; fax ▇▇▇-▇▇▇-▇▇▇▇)
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
The addresses so indicated for any party may be changed by similar
written notice.
10.3 Parties in Interest. This Agreement shall be binding upon
and inure to the benefit of, and be enforceable by, the parties hereto
and their respective permitted successors and assigns, heirs and personal
representatives.
10.4 Assignment. The rights and obligations provided by this
Agreement shall not be assignable by any party without the prior written
consent of the other parties, except that ▇▇▇▇▇▇▇'▇ shall be entitled to
assign any of their respective rights and obligations hereunder to any of
their respective affiliates (as defined in Rule 12b-2 of the Rules and
Regulations promulgated by the SEC under the Exchange Act), provided that
▇▇▇▇▇▇▇'▇ retains liability for all of its respective obligations
hereunder.
10.5 Severability. In the event that any one or more of the
provisions of this Agreement should be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
10.6 Captions. The captions and headings of the sections and the
subsections have been inserted as a matter of convenience and reference
only and shall not control or affect the meaning or construction of this
Agreement.
10.7 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be treated as an original but all of
which, collectively, shall constitute a single instrument.
10.8 Press Releases and Public Announcements. No party will issue
any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written
approval of the other parties, provided that, notwithstanding anything to
the contrary in the foregoing or in the Confidentiality Agreement, the
parties agree that, immediately after the execution and delivery of this
Agreement by the parties, ▇▇▇▇▇▇▇'▇ shall be authorized to notify the
American Stock Exchange and to issue a general press release (in form and
substance reasonably satisfactory to the Shareholders) relative to the
transactions contemplated by this Agreement and ▇▇▇▇▇▇▇▇▇ shall be
authorized to notify its employees relative to the transactions
contemplated by this Agreement, and provided further that,
notwithstanding anything to the contrary in the foregoing or in the
Confidentiality Agreement, any party may make any public disclosure
required by applicable law or any listing or trading agreement concerning
its publicly-traded securities (in which case the disclosing party will
use its best efforts to advise the other parties prior to making the
disclosure and give the other parties an opportunity to comment).
10.9 Survival. The representations, warranties, covenants and
agreements of the parties (or any of them) contained in this Agreement
and in the ▇▇▇▇▇▇▇▇▇ Delivered Documents and in the ▇▇▇▇▇▇▇'▇ Delivered
Documents shall be continuing representations, warranties, covenants and
agreements that shall survive the Closing Date, provided that the
representations and warranties contained in this Agreement shall expire
on the third (3rd) anniversary of the Closing Date.
10.10 Fees and Expenses. Except as otherwise expressly set forth
herein, each of the parties hereto shall bear any and all fees and
expenses (including, without limitation, legal, accounting, consulting
and other professional fees and expenses) incurred by it in connection
with the negotiation and the consummation of this Agreement and the
transactions contemplated herein.
10.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan (without
regard to its rules regarding choice of law).
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ AND COMPANY,
▇▇▇▇▇▇▇'▇
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Its: PRESIDENT/CEO
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ SUB CHAPTER S
TRUST NO. 1, a Shareholder
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Its: TRUSTEE
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ SUB CHAPTER S
TRUST NO. 2, a Shareholder
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Its: TRUSTEE
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ SUB CHAPTER S
TRUST NO. 3, a Shareholder
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Its: TRUSTEE
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ SUB CHAPTER S
TRUST NO. 4, a Shareholder
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Its: TRUSTEE
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ SUB CHAPTER S
TRUST NO. 5, a Shareholder
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Its: TRUSTEE
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ SUB CHAPTER S
TRUST NO. 6, a Shareholder
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Its: TRUSTEE
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ SUB CHAPTER S
TRUST NO. 7, a Shareholder
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Its: TRUSTEE
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ SUB CHAPTER S
TRUST NO. 8, a Shareholder
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Its: TRUSTEE
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ SUB CHAPTER S
TRUST NO. 9, a Shareholder
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Its: TRUSTEE
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ SUB CHAPTER S
TRUST NO. 10, a Shareholder
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Its: TRUSTEE
Annexes:
(attached hereto)
A Capitalization of ▇▇▇▇▇▇▇'▇
B Acquired Stores
Exhibits:
(to be prepared by ▇▇▇▇▇▇▇'▇)
1.5 Procedures -- Audit of ▇▇▇▇▇▇▇▇▇'▇ Net Book Value
3.3 ▇▇▇▇▇▇▇'▇ Common Stock -- Outstanding Options
3.5 ▇▇▇▇▇▇▇'▇ SEC Documents
3.6 Undisclosed Liabilities
3.8 Litigation and Investigations
3.12 Insurance Matters
3.10 Environmental Matters
3.13 Tax Matters
3.14 Ownership of Assets
3.15 Condition of Assets
3.16 Relationship with Suppliers
3.17 Intellectual Property Rights
3.18 Employee Benefit Matters
3.19 Real Property Matters
3.21 Insider Interests
Schedules:
(to be prepared by Steinbach)
2.3 ▇▇▇▇▇▇▇▇▇ Financial Information
2.5 Acquired Assets -- General
2.7 Condition of Assets
2.8 Relationship with Suppliers
2.9 Intellectual Property Rights
2.10 Contracts
Part (i) Lease Contracts
Part (ii) Purchase Contracts
Part (iii) Other Contracts
2.11 Licenses
2.12 Litigation and Investigations
2.13 Labor Relations and Employee Matters
2.14 Employee Benefit Matters
2.15 Environmental Matters
2.17 Tax Matters
2.18 Insurance Matters
2.19 Material Adverse Changes
2.21 Real Property Matters
2.23 Insider Interests
4.9 Description -- Excluded Assets and Excluded Liabilities
ANNEX A
to
Agreement and Plan of Reorganization
Capitalization of ▇▇▇▇▇▇▇'▇ Common Stock
Outstanding shares held by public 531,302
Shares subject to ▇▇▇▇▇▇▇ Family
Shareholder Agreement 390,062
Restricted Stock Awarded to ▇▇. ▇▇▇▇▇▇▇▇ (1) 30,000
Shares issued in September, 1995 through
401(k) Plan (2) 14,705
-------
966,069
=======
(1) 30,000 shares have been issued, with the 20,000 of such shares
subject to possible forfeiture if performance objectives are not
achieved.
(2) Shares are issued to 401(k) participants during the last month of
each calendar quarter (March, June, September, December) based upon
their elections. Based on the current market price of the
company's stock the estimated shares to be issued in December, 1995
will be 1,000 shares.
Stock Options Granted
Grant Date Shares Exercise Price
---------- ------ --------------
03/25/92 6,000 $ 5.875
04/23/92 10,000 5.5625
10/14/92 10,000 5.8125
03/23/94 10,000 10.375
04/13/94 20,000 10.00
03/22/95 40,000 4.125
05/16/95 20,000 4.75
------
TOTAL 116,000
=======
ANNEX B
to
Agreement and Plan of Reorganization
Acquired Stores
New England
▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ (store #22)
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ (store
#20)
▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ (store #39)
Albany
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ (store #4)
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ (store #11)
Syracuse
▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ (store #19)
▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ (store #15)
▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
(store #18)
Mid New York
▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ (store #6)
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ (store #9)
Connecticut
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
(store #23)
▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ (store #25)
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
(store #24)
South New Jersey
▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ (store #55)
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ (store #64)
