Item 1.01 Entry into a Material Definitive Agreement.
On October 18, 2018 (the “Closing Date”), Caleres, Inc. (the “Company”) entered into an Equity and Asset Purchase Agreement (the “Purchase Agreement”) with the equity holders of Vionic Group LLC and Vionic International LLC (the “Equity Sellers”), VCG Holdings Ltd., a Cayman Islands corporation, as asset seller (the “Asset Seller”, and together with the Equity Sellers, the “Sellers”), Christopher T. Gallagher and Daniel M. Sanner, solely in their capacity as Sellers’ representative, and, solely with respect to specified provisions, Christopher T. Gallagher and C. Bruce Campbell (the “Individual Parties”), pursuant to which the Company acquired the comfort footwear brand Vionic. Pursuant to the Purchase Agreement, the Company acquired all of the outstanding equity interests of Vionic Group LLC and Vionic International LLC and certain related intellectual property from the Asset Seller on the Closing Date for an aggregate purchase price of approximately $360.0 million in cash, subject to certain adjustments provided for in the Purchase Agreement (the “Purchase Price”).
The Purchase Agreement contains customary representations, warranties and covenants for a transaction of this nature; however, the Sellers’ obligation to indemnify the Company for breaches of the representations and warranties contained in the Purchase Agreement is limited to certain representations and warranties. The Company purchased a representations and warranties insurance policy, under which it may seek coverage for breaches of Sellers’ representations and warranties, subject to customary exclusions and retention amounts. With respect to certain breaches of other representations and warranties by Sellers and certain other claims specified in the Purchase Agreement, the parties have agreed to customary indemnification provisions, subject to certain customary exclusions and caps. The parties have entered into an escrow agreement providing for various escrows to be used to satisfy certain post-closing indemnification obligations of Sellers, as well as any post-closing adjustments to the Purchase Price as described above and certain sales tax matters.
The foregoing description is only a summary and is qualified in its entirety by reference to the full text of the Purchase Agreement, a copy of which is attached hereto as Exhibit 2.1 and incorporated herein by reference.
The Purchase Agreement has been included in this report to provide investors with information regarding its terms. It is not intended to provide any other factual information about the Company, the Sellers or the Vionic Entities (as defined in the Purchase Agreement). The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of the Purchase Agreement as of the specific dates therein, were solely for the benefit of the parties to the Purchase Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Purchase Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Purchase Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of representations and warranties may change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
Item 2.01 Completion of Acquisition or Disposition of Assets.
The information provided above in response to Item 1.01 is hereby incorporated by reference into this Item 2.01.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under anOff-Balance Sheet Arrangement of a Registrant.
The Company maintains a revolving credit facility (the “Credit Agreement”) for working capital needs in an aggregate amount of up to $600.0 million, with the option to increase by up to $150.0 million. On October 18, 2018, in connection with the consummation of the Vionic acquisition, the Company borrowed approximately $360.0 million to fund the Purchase Price and related fees and expenses.
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