EXECUTION COPY
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EXHIBIT 2.2
MARSHALLS OF ROSEVILLE, MINN., INC.
_____________________________
STOCK PURCHASE AGREEMENT
_____________________________
between
The TJX Companies, Inc.
as Buyer
and
Melville Corporation,
as Seller
Dated as of October 14, 1995
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TABLE OF CONTENTS
1. DEFINITIONS............................................................ 1
1.1. Certain Matters of Construction................................. 1
1.2. Cross Reference Table........................................... 2
1.3. Certain Definitions............................................. 4
2. ACQUISITION; EXCLUDED LIABILITIES...................................... 12
3. PAYMENT AND CLOSING.................................................... 12
3.1. Transaction Price............................................... 12
3.2. Time and Place of Closing....................................... 13
3.3. Delivery........................................................ 13
3.4. Cash Price Adjustment........................................... 13
4. REPRESENTATIONS AND WARRANTIES OF SELLER............................... 16
4.1. Corporate Matters, etc.......................................... 16
4.2. Financial Statements, etc....................................... 18
4.3. Change in Condition............................................. 19
4.4. Liabilities..................................................... 22
4.5. Assets.......................................................... 22
4.6. Intellectual Property Rights.................................... 24
4.7. Accounts; Funds, etc............................................ 25
4.8. Certain Contractual Obligations................................. 25
4.9. Insurance, etc.................................................. 27
4.10. Transactions with Affiliates.................................... 28
4.11. Compliance with Laws, etc....................................... 28
4.12. Tax Matters..................................................... 28
4.13. [Intentionally Omitted.]........................................ 30
4.14. Employee Benefit Plans.......................................... 30
4.15. Environmental Matters, etc...................................... 31
4.16. Employees and Labor Relations................................... 32
4.17. Litigation, etc................................................. 32
4.18. [Intentionally Omitted]......................................... 33
4.19. Brokers, etc.................................................... 33
5. REPRESENTATIONS AND WARRANTIES OF BUYER................................ 33
5.1. Corporate Matters............................................... 33
5.2. Authorization and Enforceability................................ 33
5.3. Non-Contravention, etc.......................................... 33
5.4. Investment Intent............................................... 34
5.5. Litigation...................................................... 35
5.6. Financing.................................................... 35
5.7. Brokers, etc................................................. 35
6. CERTAIN AGREEMENTS OF THE PARTIES................................... 35
6.1. No Solicitation of Other Offers.............................. 35
6.2. Access to Premises and Information........................... 36
6.3. Confidentiality Covenant of Buyer............................ 36
6.4. Operation of Business in the Ordinary Course................. 36
6.5. Certain Notices.............................................. 38
6.6. Preparation for Closing...................................... 38
6.7. Tax Matters.................................................. 39
6.8. Expenses of Transaction...................................... 44
6.9. Confidentiality Covenants.................................... 45
6.10. Books and Records; Personnel................................. 46
6.11. Use of Certain Names and Marks............................... 46
6.12. Further Assurances........................................... 47
6.13. Reimbursement by the Parties................................. 47
6.14. Open and Closed Stores....................................... 47
6.15. Financial Statement Deliveries............................... 47
6.16. Insurance Policies........................................... 48
6.17. Divestiture.................................................. 48
6.18. Failed Consents.............................................. 51
6.19. No Solicitation or Employment................................ 53
6.20. Manchester, CT and Staten Island, NY Stores; Etc............. 53
7. CONDITIONS TO THE OBLIGATION TO CLOSE OF BUYER...................... 53
7.1. Representations, Warranties and Covenants.................... 53
7.2. Closing Agreements........................................... 54
7.3. Legality; Governmental Authorization; Litigation............. 54
7.4. Affiliate Debt............................................... 54
7.5. Financing.................................................... 54
7.6. Opinion of Counsel........................................... 55
7.7. General...................................................... 55
8. CONDITIONS TO THE OBLIGATION TO CLOSE OF SELLER..................... 55
8.1. Representations, Warranties and Covenants.................... 55
8.2. Closing Agreements; Buyer Stock.............................. 55
8.3. Legality; Government Authorization; Litigation............... 56
8.4. Opinion of Counsel........................................... 56
9. EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS....................... 56
9.1. Definitions.................................................. 56
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9.2. Disposition of Company Plans and Benefit Arrangements... 57
9.3. Employment.............................................. 58
9.4. Liabilities Retained or Assumed by Seller............... 58
9.5. Certain Severance Arrangements.......................... 60
9.6. Qualified Plans......................................... 60
9.7. Service Credit.......................................... 61
9.8. WARN Act................................................ 61
10. INDEMNIFICATION................................................ 61
10.1. Indemnification......................................... 61
10.2. Time Limitation on Indemnification...................... 63
10.3. Monetary Limitations on Seller's Indemnification........ 63
10.4. Certain Matters of Construction......................... 64
10.5. Third Party Claims...................................... 64
10.6. No Circular Recovery.................................... 64
10.7. Nature of Indemnification Payments...................... 65
11. CONSENT TO JURISDICTION; JURY TRIAL WAIVER...................... 66
11.1. Consent to Jurisdiction................................. 66
11.2. WAIVER OF JURY TRIAL.................................... 66
12. TERMINATION..................................................... 67
12.1. Termination of Agreement................................ 67
12.2. Effect of Termination................................... 68
13. MISCELLANEOUS................................................... 68
13.1. Entire Agreement; Waivers............................... 68
13.2. Amendment or Modification............................... 69
13.3. Survival, etc........................................... 69
13.4. Independence of Representations and Warranties.......... 69
13.5. Severability............................................ 69
13.6. Knowledge............................................... 69
13.7. Successors and Assigns.................................. 70
13.8. Notices................................................. 70
13.9. Public Announcements.................................... 71
13.10. Headings, etc........................................... 71
13.11. Third Party Beneficiaries............................... 71
13.12. Counterparts............................................ 71
13.13. Governing Law........................................... 72
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EXHIBITS
Exhibit A - Preferred Stock Subscription Agreement
Exhibit B - Standstill and Registration Rights Agreement
Exhibit C - Forms of Legal Opinions of Seller's Counsel
Exhibit D - Forms of Legal Opinions of Buyer's Counsel
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SCHEDULES
Schedule 3.4A Form of Company Net Assets Statement
Schedule 3.4B Estimated Statement of Company Net Assets as of
October 30, 1995
Schedule 4.1.4 Required Approvals, Consents, Filings, Etc.
Schedule 4.1.7 List of Company Subsidiaries
Schedule 4.3 Changes in Condition
Schedule 4.3(b)(i) Budget
Schedule 4.3(b)(iv)(A) Cash Management Program
Schedule 4.3(b)(iv)(B) Distributions Made by the Company
Schedule 4.5.1 Real Property; Liens on Assets
Schedule 4.5.2(a) Real Property Leases-In
Schedule 4.5.2(b) Real Property Leases, Etc. Under Which
Company or a Subsidiary is Lessor
Schedule 4.6 Intangibles
Schedule 4.7 Bank Accounts
Schedule 4.8 Contractual Obligations
Schedule 4.9(a) Insurance Policies and Binders
Schedule 4.10 Affiliate Relationships
Schedule 4.11 Violations and Defaults; Permits and Applications
Therefor
Schedule 4.12 Tax Exceptions
Schedule 4.14 Company Plans and Benefit Arrangements
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Schedule 4.15 Environmental Matters
Schedule 4.16 Disputes with Employees
Schedule 4.17 Litigation Against Company or Subsidiaries
Schedule 6.4(d) Certain Debt Incurrences
Schedule 6.20 Principal Terms of Manchester, CT and Staten Island, NY
Leases
Schedule 7.2(i) Terms of Transitional Services
Section 9.5 Severance Benefits
Section 9.5A Limit on Buyer Responsibility for Severance Benefits
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of the 14th
day of October, 1995, between The TJX Companies, Inc., a Delaware corporation
(the "Buyer"), and Melville Corporation, a New York corporation (the "Seller").
Recitals
1. Seller owns all of the issued and outstanding shares of capital
stock (the "Shares") of Marshalls of Roseville, Minn., Inc., a Minnesota
corporation (the "Company").
2. Seller desires to sell and transfer the Shares to Buyer, and Buyer
desires to purchase (the "Purchase") the Shares from Seller, all upon the terms
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and subject to the conditions set forth in this Agreement.
Agreement
Therefore, in consideration of the foregoing and the mutual agreements
and covenants set forth below, the parties hereto hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
1.1. Certain Matters of Construction. In addition to the definitions
referred to as set forth below in this Section 1:
(a) The words "hereof", "herein", "hereunder" and words of similar
import shall refer to this Agreement as a whole and not to any particular
Section or provision of this Agreement, and reference to a particular
Section of this Agreement shall include all subsections thereof.
(b) The words "party" and "parties" shall refer to Seller and Buyer.
(c) Definitions shall be equally applicable to both the singular and
plural forms of the terms defined, and references to the masculine,
feminine or neuter gender shall include each other gender.
(d) Accounting terms used herein and not otherwise defined herein
are used herein as defined by generally accepted accounting principles in
effect as of the date hereof.
(e) All references in this Agreement to any Exhibit or Schedule
shall, unless the context otherwise requires, be deemed to be a reference
to an Exhibit or Schedule, as the case may be, to this Agreement, all of
which are made a part of this Agreement.
1.2. Cross Reference Table. The following terms defined in this Agreement
in the Sections set forth below shall have the respective meanings therein
defined:
Term Definition
---- ----------
"Accountants" Section 6.7(g)
"Accounting Policy Changes" Section 3.4(a)
"Affected Store" Section 6.17
"Affiliate Relationships" Section 4.10
"Affiliated Group" Section 4.12
"Agreement" Preamble
"Annual Balance Sheet" Section 4.2.1(a)
"Annual Financials" Section 4.2.1(a)
"Assets" Section 4.5.1
"Assumed Store Contribution" Section 6.17.1
"Benefit Arrangement" Section 9.1(d)
"Benefit Transition Period" Section 9.2
"Books and Records" Section 6.10(b)
"Budget" Section 4.3(b)(i)
"Buyer" Preamble
"Buyer's Closed Store Damages" Section 6.17.2
"Buyer's Deemed Sales Price Notice" Section 6.7(g)
"Cash Management Program" Section 4.3(b)(iv)
"Cash Price Adjustment" Section 3.4(b)
"Cash Purchase Price" Section 3.1
"Closing" Section 3.2
"Closing Agreements" Section 7.2
"Closing Balance Sheet" Section 3.4(a)
"Closing Date" Section 3.2
"Commitment Letter" Section 5.6
"Company" Recitals
"Company Net Assets" Section 3.4(a)
"Company Net Assets Statement" Section 3.4(a)
"Company Plan" Section 9.1(c)
"Confidentiality Agreement" Section 6.3
"Consent" Section 6.18
"Contracts" Section 4.8
"Coopers" Section 3.4(a)
"Coopers Report" Section 3.4(a)
"Delivered Lease" Section 6.18
"DOL" Section 4.14(a)
"Employee" Section 9.1(a)
"Environmental Condition" Section 10.8
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"Equipment" Section 4.8(f)
"Estimated Cash Purchase Price" Section 3.1
"Estimated Purchase Price" Section 3.1
"Eviction" Section 6.18
"Financial Statements" Sections 4.2.1(a) & 6.2
"Former Employee" Section 9.1(b)
"General Survival Period" Section 10.2
"Goldman" Section 5.7
"HSR Act" Section 4.1.4
"Indemnifying Party" Section 10.1
"Indemnitee" Section 10.1
"Insurance Policies" Section 4.9
"Intangibles" Section 4.6
"Interim Balance Sheet" Section 4.2.1(b)
"Interim Financials" Sections 4.2.1(b) & 6.2
"Inventory Firm" Section 3.4(a)
"Inventory Statement" Section 3.4(a)
"IRS" Section 4.14(a)
"Landlord" Section 6.18
"Lead Lenders" Section 5.6
"Leases" Section 4.5.2
"Leases-In" Section 4.5.2
"Licenses" Section 4.6
"Miscellaneous Taxes" Section 6.7(c)
"Monthly Financials" Sections 4.2.1(c) & 6.2
"Morgan Stanley" Section 4.19
"New Buyer Store" Section 6.17.1
"New Seller Store" Section 6.17.1
"Non-Active Employees" Section 9.3
"Permits" Section 4.11
"Post-Closing Claims" Section 6.16
"Post-Closing Tax Period" Section 6.7(c)
"Pre-Closing Tax Period" Section 6.7(c)
"Purchase" Recitals
"Purchase Price" Section 3.1
"Real Property" Section 4.5.1
"Rent Increase" Section 6.18
"Reserved Claims" Section 10.2
"Salomon" Section 5.7
"Section 338(h)(10) Election" Section 6.7(a)
"Securities Act" Section 5.4(b)
"Seller" Preamble
"Seller's Employee Stock Ownership Plan" Section 9.1(e)
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"Seller's 401(k) Profit Sharing Plan" Section 9.1(f)
"Shares" Recitals
"Similar Sales Volume Stores" Section 6.17.1
"Store Contribution" Section 6.17.1
"Store Schedule" Section 6.17
"Target Net Asset Amount" Section 3.4(a)
"Tax Loss" Section 6.7(c)(i)
"Transfer Taxes" Section 6.7(e)
"Transitional Services Agreement" Section 7.2
"Undelivered Leases" Section 4.5.2
1.3. Certain Definitions. The following terms shall have the following
meanings:
1.3.1. Action. The term "Action" shall mean any claim, action,
cause of action or suit (in contract or tort or otherwise), arbitration,
proceeding or investigation by or before any Governmental Authority (and
whether brought by any Governmental Authority or any other Person).
1.3.2. Affiliate. The term "Affiliate" shall mean, as to the
Company (or other specified Person), each Person directly or indirectly
controlling, controlled by or under direct or indirect common control with
the Company (or such specified Person); provided that neither the Company
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nor any Subsidiary shall be considered an Affiliate of Seller.
1.3.3. Affiliate Debt. "Affiliate Debt" shall mean all Debt between
the Company or any Subsidiary, on the one hand, and Seller or any Affiliate
of Seller, on the other hand, and all intercompany advances of funds
between the Seller or any of its Affiliates, on the one hand, and the
Company or any Subsidiary, on the other hand.
1.3.4. Alternative Accountants. The term "Alternative Accountants"
shall mean an accounting firm of recognized national standing (other than
Coopers and KPMG Peat Marwick) mutually acceptable to Seller and Buyer or
if Seller and Buyer do not designate such a mutually acceptable firm within
three Business Days of the date any dispute under this Agreement is
required to be submitted to such a firm then an accounting firm of
nationally recognized standing (other than Coopers and KPMG Peat Marwick)
chosen by lot.
1.3.5. Business. The term "Business" shall mean the business of
the Company and its Subsidiaries as such business is currently conducted.
1.3.6. Business Day. The term "Business Day" shall mean any day on
which banking institutions in New York, New York and Boston, Massachusetts
are customarily open for the purpose of transacting business.
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1.3.7. Buyer Stock. The term "Buyer Stock" shall mean the shares of
Buyer's Series D Cumulative Convertible Preferred Stock, par value $1 per
share, and Series E Cumulative Convertible Preferred Stock, par value $1
per share, to be issued by Buyer to Seller at Closing pursuant and subject
to the terms of the Preferred Stock Subscription Agreement.
1.3.8. By-laws. The term "By-laws" shall mean all written rules,
regulations and by-laws, and all other documents (other than the Charter),
relating to the management, governance or internal regulation of a Person
(other than an individual) or interpretative of the Charter of such Person,
each as from time to time in effect.
1.3.9. Charter. The term "Charter" shall mean the certificate or
articles of incorporation or organization, statute, constitution, joint
venture or partnership agreement or articles or other charter documents of
any Person (other than an individual), each as from time to time in effect.
1.3.10. Company Marks. The term "Company Marks" shall mean the name
"Marshalls" and those trademarks required to be listed on Schedule 4.6, and
all variations of the foregoing.
1.3.11. Code. The term "Code" shall mean the Internal Revenue Code
of 1986, as amended.
1.3.12. Compensation. The term "Compensation", as applied to any
Person, shall mean all salaries, compensation, remuneration or bonuses of
any character, and medical, surgical, dental, hospital, disability,
unemployment, retirement, pension, vacation, insurance or fringe benefits
of any kind, or other payments or benefits of any kind whatsoever made or
provided directly or indirectly by or on behalf of the Company to such
Person or members of the immediate family of such Person.
1.3.13. Contractual Obligation. The term "Contractual Obligation"
shall mean, with respect to any Person, any contract, agreement, deed,
mortgage, lease, sublease, license, indenture, Guarantee, commitment,
undertaking or arrangement, written or oral, or other consensual document
or instrument, including, without limitation, any document or instrument
evidencing or otherwise relating to any indebtedness but excluding the
Charter and By-laws of such Person, to which or by which such Person is a
party or otherwise subject or bound or to which or by which any property or
right of such Person is subject or bound.
1.3.14. Controlled Group. The term "Controlled Group", with respect
to any Person, shall mean any Person which is a member of the same
"controlled group", or under "common control", within the meaning of
Section 414(b) or (c) of the Code or Section 4001(b) of ERISA, with such
Person.
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1.3.15. Debt. "Debt" of any Person shall mean all obligations of
such Person (i) in respect of indebtedness for borrowed money, (ii)
evidenced by notes, bonds, debentures or similar instruments, (iii) for the
deferred purchase price of goods or services (other than trade payables or
accruals incurred in the Ordinary Course of Business), (iv) under capital
leases and (v) in the nature of Guarantees of the obligations described in
clauses (i) through (iv) above of any other Person.
1.3.16. Distribution. The term "Distribution" shall mean, with
respect to the capital stock of or other equity interests in any Person,
(i) the declaration or payment of any dividend on or in respect of any
shares of any class of such capital stock or in respect of any such equity
interest; (ii) the purchase, redemption or other retirement of any shares
of any class of such capital stock or of any such equity interest,
directly, or indirectly through a Subsidiary or otherwise; and (iii) any
other distribution on or in respect of any shares of any class of such
capital stock or on or in respect of any such equity interest.
1.3.17. Enforceable. The term "Enforceable" shall mean, with
respect to any Contractual Obligation, that such Contractual Obligation is
the legal, valid and binding obligation of the Person in question,
enforceable against such Person in accordance with its terms.
1.3.18. Environmental Laws. The term "Environmental Laws" shall mean
any Federal, state or local law relating to (i) releases or threatened
releases of Hazardous Substances; (ii) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances or
materials containing Hazardous Substances; or (iii) otherwise relating to
pollution of the environment or the protection of human health.
1.3.19. Equity Securities. The term "Equity Securities" shall mean,
with respect to any Person that is not a natural person, all shares of
capital stock or other equity or beneficial interests issued by or created
in or by such Person, all stock appreciation or similar rights or grants
of, or other Contractual Obligation for, any right to share in the equity,
income, revenues or cash flow of such Person, and all securities or other
rights, warrants or other Contractual Obligations to acquire any of the
foregoing, whether by conversion, exchange, exercise or otherwise.
1.3.20. Excluded Liabilities. The term "Excluded Liabilities" shall
mean all Liabilities (other than Liabilities for Taxes, which are referred
to in Section 6.7) whenever arising with respect to any of the following
(whether or not such matters are the subject of any representation or
warranty made by or on behalf of Seller herein or are disclosed in any
Schedule hereto or otherwise disclosed to Buyer):
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(i) operations and assets discontinued at any time on or prior
to the Closing Date or leased or subleased or otherwise transferred
to Persons other than the Company and its Subsidiaries at any time on
or prior to the Closing Date or stores closed at any time on or prior
to the Closing Date (including, without limitation, Liabilities for
severance and other employee costs, lease and other occupancy costs
and contingent lease obligations);
(ii) product liability claims whenever arising from products
sold on or prior to the Closing Date;
(iii) general, automobile or public liability claims (whether or
not insured, including as a result of deductibles, retentions or
limits in any insurance policies), other than product liability
claims, arising from occurrences on or prior to the Closing Date;
(iv) any Action pending or, to the knowledge of Seller,
threatened in writing against the Company or any Subsidiary on or
prior to the Closing Date (including without limitation the matter
disclosed on Schedule 4.17 related to the Americans with Disabilities
Act ), except insofar as any such Action is brought as a result of
the transactions contemplated hereby;
(v) any Liability for which Seller is responsible under Section
9;
(vi) corporate owned life insurance directly or indirectly
benefitting Seller or any of its Affiliates and any related employee
or death benefits;
(vii) the environmental contamination on or adjacent to or
emanating from the portion of the property leased by Gasolinas de
Puerto Rico at the Bayamon, Puerto Rico Store No. 626 of the Company
or any Subsidiary and on or adjacent to or emanating from the portion
of the property leased by Gasolinas de Puerto Rico or Isla Petroleum
Corporation at the Carolina, Puerto Rico owned Real Property, in each
case as reported in certain environmental site assessment reports
previously provided by Seller to Buyer (and including any
contamination arising from the spread, migration or leaching of such
reported contamination);
(viii) environmental contamination emanating from (y) a 5,000
gallon underground storage tank removed in 1993 and located at the
Company's warehouse/distribution center in Woburn, Massachusetts (but
only to the extent the Liabilities resulting from the matters
described in this clause (y) exceed $50,000), and (z) two underground
storage tanks removed in 1983 and a sandy area possibly used for the
disposal of waste located at the Company's warehouse/distribution
center in Chelmsford, Massachusetts (but only to the
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extent the Liabilities resulting from the matters described in this
clause (z) exceed $50,000).
(ix) any Liability of the Company or any Subsidiary to Seller or
any of its Affiliates in respect of Affiliate Debt or in respect of
other obligations, states of facts or conditions in existence at or
prior to the Closing Date, except for (A) Liabilities incurred after
the Closing Date under agreements or leases to be entered into
between the Company or its Subsidiaries, on the one hand, and Seller
and its Affiliates, on the other hand, pursuant to Sections 6.20 and
7.2(i) and (B) any Guarantee by Seller or its Affiliates of any Lease
or the Guarantee of Seller disclosed in Schedule 4.8(e);
(x) except for capital lease obligations set forth in the
Interim Balance Sheet and incurred since such date in the Ordinary
Course of Business and in amounts consistent with the Budget, any
Liability of the Company or any Subsidiary in respect of Debt
incurred prior to the Closing (other than Debt owed solely to the
Company or any wholly owned Subsidiary) or any other Liability of the
Company or any Subsidiary incurred prior to, or arising out of the
conduct of the Business prior to, the Closing of a category properly
classified as long-term in accordance with generally accepted
accounting principles consistently applied by the Company (and
including the current portion of any such long-term Liability and the
remaining portion of any Liability that when incurred or arising
should have been properly classified as a long-term Liability in
accordance with generally accepted accounting principles and as to
which only the current portion remains); and
(xi) all Liabilities of a category set forth under the caption
"Items to be Assumed/Retained by Seller" in Schedule 3.4B, including
Appendix A thereto (whether or not any such Liability would be
required to be set forth on a balance sheet prepared as of the
Closing Date in accordance with generally accepted accounting
principles).
1.3.21. ERISA. The term "ERISA" shall mean the federal Employee
Retirement Income Security Act of 1974 or any successor statute, and the
rules and regulations thereunder, and in the case of any referenced section
of any such statute, rule or regulation, any successor section thereto,
collectively and as from time to time amended and in effect.
1.3.22. Generally Accepted Accounting Principles. The term
"generally accepted accounting principles" shall mean generally accepted
accounting principles, as in effect on the date hereof.
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1.3.23. Governmental Authority. The term "Governmental Authority"
shall mean any U.S. federal, state or local or any foreign government,
governmental authority, regulatory or administrative agency, governmental
commission, court or tribunal (or any department, bureau or division
thereof) or any arbitral body.
1.3.24. Governmental Order. The term "Governmental Order" shall
mean any order, writ, judgment, injunction, decree, stipulation,
determination or award entered by or with any Governmental Authority.
1.3.25. Guarantee. The term "Guarantee", with respect to any
Person, shall mean (i) any guarantee of the payment or performance of, or
any contingent obligation in respect of, any Debt or other obligation of
any other Person, (ii) any other arrangement whereby credit is extended to
any other Person on the basis of any promise or undertaking of such Person
(A) to pay the Debt of such other Person, (B) to purchase any obligation
owed by such other Person, (C) to purchase or lease assets (other than
inventory in the ordinary course of business) under circumstances that
would enable such other Person to discharge one or more of its obligations,
or (D) to maintain the capital, working capital, solvency or general
financial condition of such other Person, and (iii) any liability of such
Person as a general partner of a partnership or as a venturer in a joint
venture in respect of Debt or other obligations of such partnership or
venture.
1.3.26. Hazardous Substances. The term "Hazardous Substances" shall
mean (i) substances which contain substances defined in or regulated under
the following Federal statutes, as amended, and their state counterparts,
as well as these statutes' implementing regulations as amended from time to
time and as interpreted by administering Governmental Authorities: the
Hazardous Materials Transportation Act, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act, the Clean Water Act, the Safe Drinking Water Act, the
Asbestos Hazard Emergency Response Act, the Atomic Energy Act, the Toxic
Substances Control Act, the Federal Insecticide, Fungicide, and Rodenticide
Act, and the Clean Air Act; (ii) petroleum and petroleum products,
including crude oil and any fractions thereof; (iii) natural gas, synthetic
gas and any mixtures thereof; (iv) radon; (v) PCBs; (vi) asbestos; (vii)
any substance with respect to which a Governmental Authority requires
environmental investigation, monitoring, reporting or remediation; and
(viii) any other hazardous, noxious, radioactive or toxic materials or
substances.
1.3.27. Income Tax. The term "Income Tax" means any Tax which is,
in whole or in part, based on or measured by income or gains.
1.3.28. Legal Requirement. The term "Legal Requirement" shall mean
any U.S. federal, state or local or any foreign law, statute, standard,
ordinance, code,
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order, rule, regulation, resolution or promulgation, or any Governmental
Order, or any license, franchise, consent, approval, permit or similar
right granted under any of the foregoing, or any similar provision having
the force and effect of law.
1.3.29. Liabilities. The term "Liabilities" shall mean any and all
liabilities and obligations, whether accrued, fixed, absolute or
contingent, matured or unmatured or determined or determinable, or
otherwise.
1.3.30. Lien. The term "Lien" shall mean any mortgage, pledge,
lien, security interest, charge, attachment, equity or other encumbrance,
or restriction on the creation of any of the foregoing, whether relating to
any property or right or the income or profits therefrom; provided,
however, that the term "Lien" shall not include (i) statutory liens for
Taxes to the extent that the payment thereof is not in arrears or otherwise
due, (ii) encumbrances in the nature of zoning restrictions, easements,
rights or restrictions of record on the use of real property if the same do
not detract from the value of the property encumbered thereby or impair the
use of such property in the Business as currently conducted or proposed to
be conducted, (iii) statutory or common law liens to secure landlords,
lessors or renters under leases or rental agreements confined to the
premises rented to the extent that no payment or performance under any such
lease or rental agreement is in arrears or is otherwise due, (iv) deposits
or pledges made in connection with, or to secure payment of, worker's
compensation, unemployment insurance, old age pension programs mandated
under applicable Legal Requirements or other social security, (v) statutory
or common law liens in favor of carriers, warehousemen, mechanics and
materialmen, statutory or common law liens to secure claims for labor,
materials or supplies and other like liens, which secure obligations to the
extent that (A) payment of such obligations is not in arrears or otherwise
due and (B) such liens do not and will not, individually or in the
aggregate, have a Material Adverse Effect or materially affect the use of
any Real Property, and (vi) restrictions on transfer of securities imposed
by applicable state and federal securities laws.
1.3.31. Losses. The term "Losses" shall mean any and all losses,
damages, obligations, Liabilities, claims, awards (including, without
limitation, awards of punitive or treble damages or interest), assessments,
amounts paid in settlement, judgments, orders, decrees, fines and
penalties, costs and expenses (including, without limitation, reasonable
legal costs and expenses and costs and expenses of collection).
1.3.32. Material Adverse Effect. The term "Material Adverse Effect"
shall mean any adverse change in or effect on the business, condition
(financial or otherwise), operations, performance, properties or prospects
of the Company or any of its Subsidiaries (or of another specified Person)
that, when considered either singly or together with all other adverse
changes and effects with respect to which such phrase is used in this
Agreement, is material to the Company and its Subsidiaries (or to such
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other specified Person and its Subsidiaries), taken as a whole; provided,
--------
however, that when such term is used in reference to Buyer, such term shall
-------
not include any change or effect attributable to the Company or any
Subsidiary.
1.3.33. Ordinary Course of Business. The term "Ordinary Course of
Business" shall mean the ordinary course of the Business consistent with
past custom and practice.
1.3.34. Preferred Stock Subscription Agreement. The term"Preferred
Stock Subscription Agreement" shall mean the Preferred Stock Subscription
Agreement to be entered into by Buyer and Seller at or prior to the Closing
in the form of Exhibit A hereto.
1.3.35. Person. The term "Person" shall mean any individual,
partnership, corporation, association, trust, joint venture, unincorporated
organization or other entity, and any Governmental Authority.
1.3.36. Standstill and Registration Rights Agreement. The term
"Standstill and Registration Rights Agreement" shall mean the Standstill
and Registration Rights Agreement to be entered into by Buyer and Seller at
or prior to the Closing in the form of Exhibit B hereto.
1.3.37. Subsidiary. The term "Subsidiary" shall mean any Person of
which the Company (or other specified Person) shall own directly or
indirectly at least a majority of the outstanding capital stock (or other
shares of equity interest) entitled to vote generally in the election of
directors or in which the Company (or other specified Person) is a general
partner or joint venturer without limited liability.
1.3.38. Taxes. The term "Tax" shall mean any federal, state, local,
or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
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, fee, levy, duty, impost or charge of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or
not.
1.3.39. Tax Return. The term "Tax Return" shall mean any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
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2. ACQUISITION; EXCLUDED LIABILITIES. Upon the terms, subject to the
conditions, and in reliance on the representations, warranties and covenants set
forth herein, Seller agrees to sell and transfer to Buyer, and Buyer agrees to
purchase from Seller, on the Closing Date, all of the Shares. At the Closing,
Seller shall retain and assume and remain or become primarily obligated with
respect to all Excluded Liabilities.
3. PAYMENT AND CLOSING.
3.1. Transaction Price. (a) In consideration of the sale and transfer
of the Shares by Seller to Buyer and of the agreement by Seller to perform each
of the other obligations and covenants to be fulfilled or complied with by them
hereunder, including, without limitation, the agreement of Seller to perform its
obligations and covenants set forth in Section 6.9 hereof, Buyer shall:
(i) pay to Seller at the Closing (by wire transfer of
immediately available federal funds to an account designated by
Seller by notice to Buyer not fewer than three Business Days prior to
the Closing Date) an aggregate amount (the "Estimated Cash Purchase
Price") equal to $375,000,000; and
(ii) issue and deliver to Seller the Buyer Stock.
At the option of Buyer, Buyer may increase the amount of the Estimated Cash
Purchase Price by all or any portion of the proceeds received by Buyer after the
date hereof from the sale of any operating Subsidiary or division of Buyer or
the sale by Buyer of shares of its common stock or preferred stock mandatorily
convertible into common stock. If Buyer elects such option, the amount of
Series D Preferred Stock to be issued and delivered at Closing as part of the
Buyer Stock shall be reduced (and the Estimated Cash Purchase Price shall be
appropriately increased) so that the aggregate liquidation preferences of the
outstanding Series D Preferred Stock immediately following issuance of the
Series D Preferred Stock actually issued equals the amount such preferences
would have been if Buyer had not elected such option minus the amount by which
-----
Buyer has elected to increase the Estimated Cash Purchase Price. For all
purposes of this Agreement, the terms Estimated Cash Purchase Price and Buyer
Stock shall mean the amounts thereof after giving effect to the provisions of
this paragraph.
The Buyer Stock and the Estimated Cash Purchase Price are referred to
herein collectively as the "Estimated Purchase Price". The Estimated Cash
Purchase Price and the Estimated Purchase Price (but not the Buyer Stock) shall
be subject to adjustment following the Closing as set forth in Section 3.4
below. The Estimated Cash Purchase Price and the Estimated Purchase Price as so
adjusted are referred to herein as the "Cash Purchase Price" and the "Purchase
Price", respectively. The parties agree that the value of the Buyer Stock
equals $175,000,000.
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3.2. Time and Place of Closing. The closing of the purchase and sale
of the Shares and the other transactions contemplated by this Agreement (the
"Closing") shall take place at the Conference Center of Ropes & Gray in Boston,
Massachusetts at 10:00 a.m. (local time) on November 16, 1995, or at such other
time or place upon which the parties may agree, provided that all conditions to
Closing have been satisfied or waived as provided in Sections 7 and 8 (the day
on which the Closing takes place being referred to herein as the "Closing
Date").
3.3. Delivery. At the Closing, Seller will convey, transfer and assign the
Shares to Buyer free and clear of any Liens (including without limitation
restrictions on transfer or voting), and will deliver to Buyer a certificate or
certificates evidencing all of the Shares duly endorsed or accompanied by
separate stock power(s) duly endorsed, in each case with signature(s)
guaranteed, with all required stock transfer Tax stamps affixed and in form
proper for transfer, against delivery by Buyer of the Estimated Purchase Price
as set forth in Section 3.1 above.
3.4. Cash Price Adjustment.
(a) As promptly as possible following the Closing Date, the Company
shall prepare a consolidated balance sheet of the Company and its
Subsidiaries as of a time immediately prior to the Closing (the "Closing
Balance Sheet") in accordance with generally accepted accounting principles
applied consistently with the Company's past practices used in the
preparation of the Annual Financials, except that inventory will be
determined using the first-in first-out inventory cost method and without
regard to the Company's adoption of Financial Accounting Standard No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," and the change in the Company's accounting
policy with respect to the capitalization of internally developed software
(the "Accounting Policy Changes"). During the fourteen (14) days preceding
the Closing Date, RGIS (the "Inventory Firm") shall conduct a wall-to-wall
physical count of all the owned inventory located at the stores,
distribution centers and warehouses of the Company and its Subsidiaries.
Buyer, Seller and their respective accountants shall have the opportunity
to observe the physical count of the inventory. As promptly as practicable
and no later than fourteen (14) days following the Closing Date, the
Inventory Firm shall deliver to Seller and Buyer a written statement
setting forth the counted value of the inventory (the "Inventory
Statement"). The inventory reflected on the Closing Balance Sheet shall be
calculated in accordance with generally accepted accounting principles
consistently applied by the Company based on the Inventory Statement,
utilizing the retail method for the store inventory and the cost method for
the warehouse and distribution centers as consistently applied by the
Company in preparation of the Annual Financials, except inventory cost will
be determined using the first-in first-out inventory cost method. Amounts
reflected on the Closing Balance Sheet for those elements, accounts or
items to be included in the calculation of Company Net Assets shall include
all known and estimated assets and
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liabilities as of the Closing Date consistent with the Company's fiscal
year-end cut-off procedures.
As promptly as possible following the receipt of the unaudited
Closing Balance Sheet, Coopers & Lybrand L.L.P. ("Coopers") shall perform
procedures agreed upon by the parties and Coopers (as set forth in Appendix
B to Schedule 3.4B) in connection with the elements, accounts or items of
the Closing Balance Sheet that are to be included in the calculation of
Company Net Assets for the purposes of issuing a report (the "Coopers
Report") thereon detailing the results of such procedures as applied by
Coopers in accordance with standards established by the American Institute
of Certified Public Accountants (and prior to the issuance by Coopers of
such report, KPMG Peat Marwick and representatives of Seller and the
Company reasonably designated by Seller shall have the opportunity to
review Coopers' work papers and to be present during the performance of all
such procedures). Adjustments proposed by Coopers to the elements, accounts
or items of the Closing Balance Sheet to be included in the calculation of
Company Net Assets will be aggregated and to the extent the total of such
adjustments exceeds $750,000 on a net basis, such excess adjustments shall
be reflected in the Closing Balance Sheet for the purpose of calculating
Company Net Assets. Coopers shall furnish the Coopers Report to Seller and
Buyer within 75 days following the Closing or as soon thereafter as
practicable.
Within 10 days following delivery of the Coopers Report, Coopers
shall prepare and deliver a Company Net Assets Statement in substantially
the form of Schedule 3.4A, which will include a calculation of the Cash
Purchase Price in the form of Appendix A thereto. Assets and liabilities on
the Company Net Assets Statement will be equal to such items in the Closing
Balance Sheet except as otherwise specified in Schedule 3.4A and will
exclude the impact of the Accounting Policy Changes and will reflect
property on a gross cost basis. The Company Net Assets Statement will
exclude those assets and liabilities detailed in Schedule 3.4B, including
Appendix A thereto, under the columns titled "Items to be Assumed/Retained
by Seller" and "Other Adjustments". "Company Net Assets" shall mean the net
asset figure appearing on the Company Net Assets Statement.
Schedule 3.4B sets forth Company Net Assets on an estimated basis as
of October 30, 1995. The "Target Net Asset Amount" shall mean $968,372,000
(which amount equals the net asset figure shown under the column styled
"Estimated Statement of Net Assets" on said Schedule 3.4B).
(b) If the amount of Company Net Assets as set forth on the Company
Net Assets Statement is: (i) less than the Target Net Asset Amount, then
the amount by which Company Net Assets are less than the Target Net Asset
Amount shall be paid to Buyer by Seller; or (ii) greater than the Target
Net Asset Amount, then the amount by which Company Net Assets are greater
than the Target Net Asset Amount shall be paid
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to Seller by Buyer but in no event shall such payment to Seller be greater
than $50 million. Any amount due as a result of the operation of this
Section 3.4(b) shall be referred to herein as the "Cash Price Adjustment"
and shall be treated for all purposes as an adjustment to the Purchase
Price. The Cash Purchase Price shall be the Estimated Cash Purchase Price
decreased or increased, as the case may be, by the Cash Price Adjustment.
(c) If Seller disagrees with the Company Net Assets Statement or the
Cash Purchase Price, Seller shall, within twenty (20) Business Days after
receipt of the Company Net Assets Statement furnish to Buyer a written
statement of such disagreement, together with an explanation of the reasons
therefor. If Seller does not furnish such a statement to Buyer within such
period, the amount of Company Net Assets set forth on the Company Net
Assets Statement and the amount of the Cash Purchase Price derivable
therefrom shall be binding and conclusive on all parties hereto. If Seller
does furnish such a statement to Buyer within such period, the parties
hereto shall first use commercially reasonable efforts to resolve such
disagreement among themselves. If the parties are unable to resolve the
dispute within 20 calendar days after delivery of such notification, the
dispute shall be submitted to the Alternative Accountants for resolution.
The parties shall request the Alternative Accountants to resolve the
dispute within 30 calendar days after submission. The determination of the
Alternative Accountants as to the resolution of any dispute shall be
binding and conclusive upon all parties hereto. All determinations
pursuant to this Section 3.4(c) shall be in writing and shall be delivered
to the parties hereto. Any award made pursuant to this Section 3.4(c) may
be entered in and enforced by any court referred to in Section 11.1 hereof
and the parties hereby consent and commit themselves to the jurisdiction of
any such court for purposes of the enforcement of any such award.
(d) The fees and expenses of Coopers related to the matters set
forth in this Section 3.4 shall be borne by Buyer and the fees and expenses
of KPMG Peat Marwick related to the matters set forth in this Section 3.4
shall be borne by Seller. Each party will bear all expenses for any special
work performed at its request in connection with the matters that are the
subject of this Section 3.4. The fees and costs of the Inventory Firm
associated with the taking of the physical inventory shall be shared
equally by Buyer and Seller. The fees and expenses of the Alternative
Accountants in connection with the resolution of disputes pursuant to
paragraph (d) above shall be shared equally by Buyer and Seller.
(e) The amount of the Cash Price Adjustment shall bear interest at
an annual rate equal to the reference rate from time to time of Morgan
Guaranty Trust Company of New York plus 1% from and including the Closing
Date to, but excluding, the date of payment. The Cash Price Adjustment,
together with accrued interest thereon, shall be paid within three Business
Days after the later of (i) five Business Days after delivery of the
Company Net Assets Statement, including the calculation of the Cash
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Purchase Price appended thereto, and (ii) the earlier of the resolution of
any dispute by Buyer and Seller following notification of Seller's
disagreement to Buyer pursuant to Section 3.4(c) above or a determination
by the Alternative Accountants pursuant to Section 3.4(c) above. Any such
amount shall be paid by wire transfer of immediately available funds to an
account designated by the party to receive such payment.
(f) The provisions of this Section 3.4 and the Schedules referred to
in this Section 3.4 shall be used solely for the purpose of calculating the
amount of the Cash Price Adjustment, if any, and shall not affect the
ownership of any assets or rights or the responsibility for any
liabilities, except to the extent set forth in the definition of Excluded
Liabilities.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. In order to induce Buyer to
enter into and perform this Agreement and to consummate the transactions
contemplated hereby, Seller represents and warrants to Buyer as follows:
4.1. Corporate Matters, etc.
4.1.1. Incorporation and Authority of Seller. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of New York and has all requisite power and authority,
corporate and otherwise, to enter into this Agreement and each of the
Closing Agreements, to carry out and perform its obligations hereunder and
to consummate the transactions contemplated hereby.
4.1.2. Organization, Power and Standing. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Minnesota, and each of the Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
jurisdiction of its incorporation or organization. Each of the Company and
each of its Subsidiaries has all requisite power and authority, corporate
and otherwise, to carry on the Business as currently conducted, and to
consummate the transactions contemplated hereby. Each of the Company and
its Subsidiaries is duly qualified or licensed to do business as a foreign
corporation or otherwise, and is in good standing as such, in each
jurisdiction where the nature of the Company's or such Subsidiary's
activities or its ownership or leasing of property require such
qualification, except such failures to be so qualified as have not had and
will not have a Material Adverse Effect.
4.1.3. Authorization and Enforceability. This Agreement has been
duly authorized, executed and delivered by Seller and is Enforceable
against Seller. Each of the Closing Agreements to which Seller or any of
its Affiliates is intended to be party has been duly authorized, and, on or
before the Closing Date, will be duly executed and delivered by Seller or
its applicable Affiliate and be Enforceable against Seller or such
Affiliate.
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4.1.4. Non-Contravention, etc. No approval, consent, waiver,
authorization or other order of, and no filing, registration, qualification
or recording with, any Governmental Authority or any other Person (other
than any party to any Lease-In other than the Company or any Subsidiary) is
required to be obtained or made by or on behalf of Seller or the Company or
any of its Subsidiaries in connection with the execution, delivery or
performance of this Agreement and the consummation of the transactions
contemplated hereby, except for (i) satisfaction of the requirements of the
Hart-Scott-Rodino Antitrust Improvements of 1976, as amended (the "HSR
Act"), (ii) items listed on Schedule 4.1.4 which shall have been obtained
or made and shall be in full force and effect at the Closing (subject to
the materiality exception set forth at the end of the next sentence) and
(iii) any other of the foregoing items required to be obtained from or made
with any Person other than any Governmental Authority which the failure to
obtain or make, individually or in the aggregate, have and could reasonably
be expected to have neither a Material Adverse Effect nor a material
adverse effect on the ability of Seller to consummate the transactions
contemplated hereby. Except as set forth on Schedule 4.1.4, neither the
execution, delivery and performance of this Agreement nor the consummation
of any of the transactions contemplated hereby (including, without
limitation, the execution, delivery and performance of the Closing
Agreements) does or will constitute, result in or give rise to (i) a breach
or violation or default under any Legal Requirement applicable to Seller,
the Company or any of its Subsidiaries, (ii) a breach of or a default under
any Charter or By-Laws provision of Seller, the Company or any of its
Subsidiaries, (iii) the acceleration of the time for performance of any
obligation under any Contractual Obligation (other than any Lease-In) of
Seller, the Company or any of its Subsidiaries, (iv) the imposition of any
Lien upon or the forfeiture of any Asset, other than any Asset held under
any Lease-In, (v) a breach of or a default under any Contractual Obligation
(other than any Lease-In) of Seller, the Company or any of its
Subsidiaries, or (vi) right to any severance payments other than by
operation of law (including without limitation if such payments become due
only if employment is terminated following the Closing), termination, right
of termination, modification of terms or change in benefits or burdens
under any Contractual Obligation (other than any Lease-In), other than in
the case of clauses (i), (iii), (iv), (v) and (vi) such as, individually or
in the aggregate, have and could reasonably be expected to have neither a
Material Adverse Effect nor a material adverse effect on the ability of
Seller to consummate the transactions contemplated hereby.
4.1.5. Title, etc. Seller has good and marketable title to all
Shares free and clear of any Liens (including without limitation
restrictions on transfer or voting). Except for this Agreement, there is no
Contractual Obligation pursuant to which Seller has, directly or
indirectly, granted any option, warrant or other right to any Person to
acquire the Shares or any other securities of the Company or any of its
Subsidiaries. Upon delivery of certificates representing the Shares, and
delivery of the consideration therefor as herein contemplated, Buyer will
receive good and marketable title to the
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Shares, free and clear of any Liens (including without limitation
restrictions on transfer or voting) and subject to no rescission or similar
rights or equities of any kind.
4.1.6. Capitalization. The only issued and outstanding shares of
capital stock of the Company are the Shares, all of which are duly
authorized, validly issued, fully paid and non-assessable, and all of which
are beneficially owned and held of record by Seller. There is no
Contractual Obligation or Charter or By-law provision that obligates the
Company or any Subsidiary to issue, purchase or redeem, or make any payment
in respect of, any Equity Security.
4.1.7. Subsidiaries. Except as indicated therein, the Company has
only the Subsidiaries listed in Schedule 4.1.7. Not later than the tenth
day after the date hereof, Seller will deliver to Buyer a complete
substitute Schedule 4.1.7 that lists no Persons other than those that are
Subsidiaries as of the date hereof and sets forth the name and jurisdiction
of incorporation or organization, the date of incorporation or
organization, the issued and outstanding shares of capital stock, and the
federal or foreign taxpayer identification number of each such Subsidiary.
The Company is the direct or indirect record and beneficial owner of all of
the issued and outstanding shares of capital stock of each of its
Subsidiaries, such shares have been duly authorized and validly issued and
are fully paid and nonassessable, and the Company or a wholly owned direct
or indirect Subsidiary has good and marketable title to such shares free
and clear of any Liens (including without limitation restrictions on
transfer or voting). There is no outstanding Equity Security of any
Subsidiary other than its issued and outstanding shares of capital stock.
The Company has no investment in any Person other than (a) its
Subsidiaries, (b) demand deposit or money market accounts and (c) advances
made to suppliers in the Ordinary Course of Business. No Subsidiary has
any investment in any Person other than (a) demand deposit or money market
accounts and (b) advances made to suppliers in the Ordinary Course of
Business.
4.1.8. Charter and By-laws. Seller has heretofore delivered to
Buyer a true and complete copy of the Charter and By-laws of the Company
and each of its material Subsidiaries, in each case in the form currently
in effect and as will be in effect immediately prior to the Closing, and at
least ten Business Days prior to the Closing, Seller will have delivered to
Buyer a true and complete copy of the Charter and By-laws of each of the
other Subsidiaries, in each case in the form then in effect and as will be
in effect immediately prior to the Closing.
4.2. Financial Statements, etc.
4.2.1. Financial Information. Buyer has been furnished with true
and complete copies of each of the following:
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(a) The unaudited consolidated balance sheet of the Company and
its Subsidiaries as of December 31, 1994 (the "Annual Balance Sheet")
and the related statement of earnings for the fiscal year then ended,
and similar financial statements as at the end of and for each of the
preceding two fiscal years (the "Annual Financials" and, together
with the Interim Financials and the Monthly Financials, the
"Financial Statements").
(b) The unaudited consolidated balance sheets of the Company and
its Subsidiaries as of July 1, 1995 (the "Interim Balance Sheet") and
as of July 1, 1994 and related unaudited consolidated statements of
earnings of the Company and its Subsidiaries for each of the six-
month periods then ended (the "Interim Financials").
(c) Monthly unaudited consolidated statements of earnings of the
Company and its Subsidiaries for the months of July and August, 1995,
such monthly income statements having been prepared in the form
customarily prepared by management for internal use (the "Monthly
Financials").
(d) The adjusted unaudited consolidated balance sheet of the
Company and its Subsidiaries as of December 31, 1994 and the related
statement of earnings for the fiscal year then ended, and similar
financial statements as at the end of and for each of the preceding
two fiscal years.
4.2.2. Character of Financial Information. The Annual Financials
and the Interim Financials were prepared in accordance with generally
accepted accounting principles consistently applied by the Company
throughout the periods specified therein and present fairly, in all
material respects, the consolidated financial position and results of
operations of the Company and its Subsidiaries for the periods specified
therein, subject to an absence of footnotes and in the case of the Interim
Financials to normal year-end audit adjustments which will not in the
aggregate be material. Such financial information reflects the Company's
accounting policies currently in effect and does not reflect the impact of
the Accounting Policy Changes.
4.3. Change in Condition. Except for the matters set forth in
Schedule 4.3, since the date of the Interim Balance Sheet:
(a) The Business has been conducted only in the Ordinary Course of
Business (except as otherwise required by the terms of this Agreement), and
without limiting the generality of the foregoing, the Company and its
Subsidiaries have made capital expenditures in the Ordinary Course of
Business and in an aggregate amount consistent with the Budget;
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(b) Neither the Company nor any of its Subsidiaries has:
(i) made any capital expenditures except routine expenditures
for repairs and maintenance and except in an aggregate amount
consistent with the budget set forth on Schedule 4.3(b)(i) hereto
(the "Budget");
(ii) incurred or otherwise become liable in respect of any Debt
(other than Affiliate Debt, none of which will be outstanding as of
the Closing) or become liable in respect of any Guarantee, other than
Debt, intercompany advances or any Guarantee between the Company and
its wholly owned Subsidiaries or between wholly owned Subsidiaries;
(iii) mortgaged or pledged an Asset or subjected any Asset to
any Lien except Liens disclosed on Schedule 4.5.1;
(iv) declared or made any Distribution (other than (A)
distributions of cash to Seller in the Ordinary Course of Business
pursuant to the cash management program of Seller and its
Subsidiaries, a true and correct description of which is included on
Schedule 4.3(b)(iv)(A) (the "Cash Management Program"); (B) the
distributions set forth on Schedule 4.3(b)(iv)(B); (C) distributions
of cash or of any receivable constituting Affiliate Debt in
connection with the repayment or cancellation of Affiliate Debt; and
(D) distributions or contributions in connection with an increase in
or the repayment or cancellation (in whole or in part) of Debt or
intercompany advances between the Company and its wholly owned
Subsidiaries or between wholly owned Subsidiaries);
(v) sold, leased to others or otherwise disposed of any of its
Assets (except for sales of inventory in the Ordinary Course of
Business and except as contemplated by clause (iv) of this Section
4.3(b));
(vi) purchased any Equity Security of any Person other than of
a direct or indirect wholly owned Subsidiary of the Company, or any
assets (other than inventory) material in amount or constituting a
business, or been party to any merger, consolidation or other
business combination or entered into any Contractual Obligation
relating to any such purchase, merger, consolidation or business
combination;
(vii) made any loan, advance or capital contribution to or
investment in any Person other than loans, advances or capital
contributions to or investments in or to the Company or its wholly
owned Subsidiaries and other than loans or advances to suppliers in
the Ordinary Course of Business;
-20-
(viii) canceled or compromised any Debt or claim other than in
the Ordinary Course of Business and other than any Affiliate Debt or
any Debt, intercompany advances or claim between the Company and a
wholly owned Subsidiary or between wholly owned Subsidiaries;
(ix) sold, transferred, licensed or otherwise disposed of any
Intangibles other than in the Ordinary Course of Business;
(x) made or agreed to make any material change in its customary
methods of accounting or accounting practices except for the
Accounting Policy Changes;
(xi) engaged in or become obligated in respect of any
transaction with Seller or any Affiliate of Seller, except in
accordance with the Cash Management Program or as described on
Schedule 4.3(b)(iv)(B) or Schedule 4.10.
(xii) waived or released or permitted to lapse any right of
material value except in the Ordinary Course of Business; or
(xiii) instituted, settled or agreed to settle any material
Action;
(c) Neither the Company nor any of its Subsidiaries has (i) had any
material change in its relationships with its employees, agents, customers
or suppliers, or (ii) made any changes in the rate of Compensation payable
(or paid or agreed or orally promised to pay, conditionally or otherwise,
any extra Compensation) to any director, officer, manager, employee,
consultant or agent of the Company (other than increases granted in the
Ordinary Course of Business and consistent with past practices, which
increases will not have a Material Adverse Effect);
(d) There has been no amendment of any material provision of any
Equity Security of the Company or any Subsidiary;
(e) Neither Seller nor any of its Affiliates nor the Company nor any
of its Subsidiaries has entered into any Contractual Obligation (and Seller
and its Affiliates have not entered into any Contractual Obligation
obligating the Company or any of its Subsidiaries) to do any of the things
referred to in clauses (a) through (d) above with respect to the Company,
any Subsidiary or the Business; and
(f) No Material Adverse Effect has occurred.
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4.4. Liabilities. Neither the Company nor any of its Subsidiaries has
any Liabilities, other than, to the extent the existence thereof is consistent
with all other representations and warranties of Seller:
(a) set forth on the Interim Balance Sheet;
(b) incurred in usual amounts since the date of the Interim Balance
Sheet in the Ordinary Course of Business;
(c) in respect of the Leases and Contracts; or
(d) in respect of purchase orders or similar Contractual
Obligations for the purchase of inventory in the Ordinary Course of
Business.
(e) between the Company and a wholly owned Subsidiary or between
wholly owned Subsidiaries;
(f) any Excluded Liabilities; or
(g) other undisclosed Liabilities which, individually or in the
aggregate, are not material to the Company or its Subsidiaries, taken as a
whole.
4.5. Assets.
4.5.1. Title to Assets; Owned Real Estate. The Company and its
Subsidiaries have good and marketable title to, or, in the case of property
held under lease or other Contractual Obligation, a valid and enforceable
right to use under an Enforceable Lease or License, all of their
properties, rights and assets, whether real, personal or intellectual and
whether tangible or intangible (collectively, the "Assets"), including,
without limitation, all properties, rights and assets reflected in the
Interim Balance Sheet or acquired after the date of the Interim Balance
Sheet (except as sold or otherwise disposed of since the date of the
Interim Balance Sheet in the Ordinary Course of Business or as otherwise
permitted by this Agreement to be disposed of since the date of the Interim
Balance Sheet). Schedule 4.5.1 contains a true, correct and complete list
of all real property and improvements (collectively, "Real Property") which
are owned by the Company or any Subsidiary. Seller has furnished to Buyer
true and correct copies of all title reports and title insurance policies
with respect to the Real Property listed in Schedule 4.5.1. The Assets are
not subject to any Lien except as described in said Schedule. The Assets
(including, without limitation, Real Property, the Intangibles, the Leases
and the Contracts), together with the services to be provided to the
Company after the Closing pursuant to the Transitional Services Agreement,
constitute all properties, rights and Assets held for or used in or
necessary for the conduct of the Business as currently conducted.
-22-
4.5.2. Real Property Leases.
Schedule 4.5.2(a) sets forth a true, correct and complete list of each Real
Property location which is leased or subleased, or which has been agreed to be
leased or subleased, as lessee or sublessee by the Company or any Subsidiary
(all of the leases, subleases or other Contractual Obligations pursuant to which
such Real Property locations are held or are to be held being referred to herein
collectively as the "Leases-In"). Section A of said Schedule lists for each
Lease-In pertaining to the retail department stores the store ID number, the
name of the lessee, and the city and state of its location. Section B of said
Schedule lists Leases-In pertaining to the home office facilities. Section C of
said Schedule lists Leases-In pertaining to regional and local offices,
distribution facilities and local warehouses. Section D of such Schedule lists
those other properties in which the Company or a Subsidiary retains an interest.
Sections B, C and D include information comparable to that required in Section
A. Schedule 4.5.2(b) sets forth a true, correct and complete list of each lease,
sublease or other Contractual Obligation under which the Company or a Subsidiary
is a lessor or sublessor of any Real Property (together with the Leases-In, the
"Leases") and includes information comparable to that required in Schedule
4.5.2(a). True, correct and complete copies of the Leases, and all material
amendments, modifications and supplemental agreements thereto, have been
previously delivered to Buyer. Each Lease to which Seller or an Affiliate of
Seller is a party is noted on Schedule 4.5.2(a) and 4.5.2(b). All of the retail
department stores operated in the Business are owned or leased as lessee or
subleased as sublessee by the Company or a Subsidiary.
Except as set forth on Schedules 4.5.2 to the best of Seller's knowledge:
(i) each Lease is an Enforceable agreement of the Company
or the Subsidiary party thereto, and Seller does not have any
knowledge that any Lease is not an Enforceable agreement of the other
parties thereto, other than as a result of or arising out of the
transactions contemplated hereby;
(ii) the Company or the Subsidiary party thereto has
fulfilled all material obligations required pursuant to the Leases to
have been performed by the Company or the Subsidiary party thereto on
its part, other than as a result of or arising out of the
transactions contemplated hereby;
(iii) neither the Company nor the Subsidiary party thereto
is in material breach of or default under any Lease, and no event has
occurred which with the passage of time or giving of notice or both
would constitute such a default, result in a loss of rights or result
in the creation of any Lien thereunder or pursuant thereto (other
than as a result of or arising out of the transactions contemplated
hereby);
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(iv)(A) there is no existing material breach or default by
any other party to any Lease, and (B) no event has occurred which
with the passage of time or giving of notice or both would constitute
a material default by such other party, result in a loss of rights or
result in the creation of any Lien thereunder or pursuant thereto;
(v) neither the Company nor any Subsidiary is obligated to
pay any material leasing or brokerage commission as a result of the
transaction contemplated hereby; and
(vi) there is no pending or threatened eminent domain
taking affecting any of the properties which are the subject of the
Leases.
4.6. Intellectual Property Rights. Schedule 4.6 lists and identifies
all trade and product names; patents, patent applications, trademarks, service
marks, logos and copyrights (including registrations and applications); trade
secrets, know-how; computer software; and all other intellectual or intangible
property and rights; in each case that are directly or indirectly owned,
licensed or otherwise used by and are material to the Company or any Subsidiary
(the "Intangibles", which term shall also include any other proprietary or
confidential information that is directly or indirectly owned, licensed or
otherwise used by the Company or any Subsidiary) and identifies the owner and
any licensee or other user thereof; provided, however, that there have been only
generally described on such Schedule such of the Intangibles (including trade
secrets, know-how and computer software) as are not readily susceptible to
listing. Schedule 4.6 also lists and identifies the term of each license or
other Contractual Obligation (including all amendments) under which any material
Intangible is held or used by the Company or any Subsidiary in the conduct of
the Business or otherwise (the "Licenses") and identifies the owner and any
licensee or other user thereof. Except as disclosed on Schedule 4.6, all
Intangibles are owned solely by the Company or a Subsidiary or licensed to the
Company or its Subsidiaries under an exclusive perpetual License not requiring
payment of any royalty or fee (other than in the case of licenses of software in
the Ordinary Course of Business). Except as set forth on Schedule 4.6, there is
no material license or other Contractual Obligation under which the Company or
any Subsidiary is liable as licensor with respect to any Intangibles and neither
the Company nor any Subsidiary has granted any material license to any third
party with respect to any Intangible. Except as set forth on Schedule 4.6 and
to the Seller's knowledge, the use or sale by the Company and its Subsidiaries
of any products or services in the Business and use by the Company and its
Subsidiaries of the Intangibles does not infringe and has not infringed any
rights of any third party, and no activity of any third party infringes upon the
rights of the Company or any Subsidiary with respect to any of the Intangibles.
Except as set forth on Schedule 4.6, no Action alleging or relating to any such
infringement against the rights of the Company or any Subsidiary or any third
parties is currently pending or, to the knowledge of Seller, threatened.
-24-
4.7. Accounts; Funds, etc. Subject to the provisions of Section 6.13,
after the Closing Date, all monies and bank or other depository accounts arising
out of, relating to or established for the Business or the Company or any
Subsidiary shall be held by, and accessible only to, the Company or the relevant
Subsidiary; provided, however, that all such monies or accounts in respect of
change funds shall be held by, and accessible only to, the Company or the
relevant Subsidiary on or after the Closing Date. Schedule 4.7 identifies each
bank account or similar account for the deposit of cash or securities maintained
by or on behalf of the Company or any Subsidiary (indicating the name and
address of the bank or other financial institution, the account name and number
and the individuals with signing authority with respect to such account).
4.8. Certain Contractual Obligations. Set forth on Schedule 4.8 is a
true and complete list of all of the following Contractual Obligations of the
Company or any Subsidiary:
(a) All collective bargaining agreements and other labor agreements;
all employment or material consulting agreements; and all other plans,
agreements, arrangements or practices which constitute Compensation or
benefits to any of the directors, officers or employees of the Company or
any Subsidiary, except to the extent any of the foregoing constitute a
Company Plan or Benefit Arrangement;
(b) All Contractual Obligations under which the Company or any
Subsidiary is or may become obligated to pay any legal, accounting,
brokerage, finder's or similar fees or expenses in connection with, or
incur any severance pay or special Compensation obligations which would
become payable by reason of, this Agreement or the consummation of the
transactions contemplated hereby;
(c) All Contractual Obligations under which the Company or any
Subsidiary is or will after the Closing be restricted from carrying on any
business or other activities anywhere in the world;
(d) All Contractual Obligations (including, without limitation,
options) to: (i) sell or otherwise dispose of any Assets except in the
Ordinary Course of Business or (ii) purchase or otherwise acquire any
material property or properties or other assets except pursuant to purchase
orders for inventory and other arrangements with suppliers in the Ordinary
Course of Business;
(e) All Contractual Obligations under which the Company or any
Subsidiary has any liability for Debt or obligation for Debt or
constituting or giving rise to a Guarantee of any liability or obligation
of any Person (other than any Lease, any Debt or intercompany advances
between the Company and any wholly owned Subsidiary or between wholly owned
Subsidiaries, or any Affiliate Debt), or under which any Person has any
liability or obligation constituting or giving rise to a Guarantee of any
liability
-25-
or obligation of the Company or any Subsidiary (including, without
limitation, partnership and joint venture agreements) other than any
Guarantee by Seller or any of its Affiliates of any Lease or the Guarantee
of Seller disclosed in Schedule 4.8(e), or under which any default could
arise or penalty or payment could be required in the event of any action or
inaction of Seller or any of its Affiliates other than any Guarantee by
Seller or its Affiliates of any Lease or the Guarantee of Seller disclosed
in Schedule 4.8(e);
(f) Any lease or other Contractual Obligation under which any
tangible personal property other than inventory (the "Equipment") having a
cost or capital lease obligation in excess of $250,000 is held or used by
the Company or any Subsidiary;
(g) Any Contractual Obligation under which the Company or any
Subsidiary may become obligated to pay any amount in excess of $500,000 in
respect of indemnification obligations or purchase price adjustment
provisions in connection with any (i) acquisition or disposition of assets
or securities, real property or of property constituting a product line,
(ii) other acquisition or disposition of assets other than sales of
inventory in the Ordinary Course of Business, (iii) assumption of
liabilities or warranty, (iv) settlement of claims, (v) merger,
consolidation or other business combination, or (vi) series or group of
related transactions or events of a type specified in subclauses (i)
through (v); and if with respect to any such Contractual Obligation there
exists any pending or, to the knowledge of Seller, threatened Action that
could reasonably be expected to result in the Company and its Subsidiaries
being liable to pay an amount in excess of $100,000 or there currently
exist circumstances that would reasonably be expected to give rise to such
an Action, such Action or circumstances are described on Schedule 4.17; and
(h) Any other Contractual Obligation of a type not specifically
covered in clauses (a) through (g) above entered into other than in the
Ordinary Course of Business or which in the case of such other Contractual
Obligations individually is likely to involve payments by or on behalf of,
or to, the Company or any of its Subsidiaries in excess of $250,000 during
the calendar year ended December 31, 1995 or $500,000 over the remaining
term of such Contractual Obligation or the termination of which may
reasonably be expected to require payments by the Company or any of its
Subsidiaries exceeding $250,000 (other than (i) purchase orders for
inventory and other arrangements with suppliers entered into in the
Ordinary Course of Business, (ii) agreements pertaining to common area
maintenance entered into in the Ordinary Course of Business, (iii)
concessionaire and other store related contracts applicable to fewer than
10 stores entered into in the Ordinary Course of Business, and (iv)
purchase and lease commitments, construction contracts and other capital
expenditure and maintenance and repair commitments reflected in the
Company's capital expenditure and maintenance and repair budgets and
entered into in the Ordinary Course of Business).
-26-
Seller has heretofore delivered to Buyer a true and complete copy (or, in the
case of oral contracts or arrangements, a full and accurate written summary) of
each of the Contractual Obligations listed on Schedule 4.8, each as in effect on
the date hereof and (except as otherwise required by this Agreement) as it will
be in effect at the Closing, including, without limitation, all amendments (such
Contractual Obligations required to be listed on Schedule 4.8, together with the
Licenses, and Insurance Policies, but excluding the Company Plans and Benefit
Arrangements, being referred to herein collectively as the "Contracts"). Each
Contract is Enforceable by the Company or the Subsidiary party thereto, against
each Person (other than the Company or such Subsidiary) party thereto, except:
(i) as otherwise required by the terms of this Agreement and (ii) as such
enforceability may be limited by or as a result of (A) bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally, (B)
general principles of equity (whether considered in a proceeding at law or in
equity) and (C) execution, delivery and performance of this Agreement and the
Closing Agreements. No material breach or default by the Company or any
Subsidiary under any of the Contracts has occurred and is continuing, and no
event has occurred or circumstance exists which with notice or lapse of time
would constitute such a breach or default or permit termination, modification or
acceleration by any other Person under any of the Contracts or would result in a
loss of rights or creation of any lien, charge or encumbrance thereunder or
pursuant thereto except as would arise from execution, delivery and performance
of this Agreement and the Closing Agreements. To the knowledge of Seller, no
material breach or default by any other Person under any of the Contracts has
occurred and is continuing, and no event has occurred or circumstance exists
that with notice or lapse of time would constitute such a breach or default or
permit termination, modification or acceleration by the Company or any
Subsidiary under any of the Contracts or would result in a loss of rights or
creation of any lien, charge or encumbrance thereunder or pursuant thereto
except as would arise from execution, delivery and performance of this Agreement
and the Closing Agreements.
4.9. Insurance, etc. All material properties of the Company and its
Subsidiaries are covered by valid and currently effective insurance policies
issued in favor of the Company and its Subsidiaries or are self-insured in
amounts that are customary in the place in which such properties are located for
companies operating similar businesses and operations. All insurance coverages
required under the Leases are in force under valid and currently effective
insurance policies. Set forth on Schedule 4.9(a) is a summary of all policies
or binders of insurance by which the Company or any Subsidiary (or any risk of
the Business) is insured (the "Insurance Policies") together with (i) the name
and telephone number of the agent or broker, (ii) the name of the insurer and
the names of the principal insured and each named insured, (iii) the policy
number and period of coverage, the type, scope (including an indication of
whether the coverage is on a claims made, occurrence or other basis) and amounts
(including a description of how deductibles, retentions, aggregates and
retroactive premium adjustments or other loss-sharing arrangements are
calculated and operate) of coverage. Seller has provided Buyer with true and
correct copies of all Insurance Policies in the forms that are available to
Seller. All premiums due under such policies have been paid,
-27-
and none of Seller, the Company, any Subsidiary or any of Seller's other
Affiliates is in default with respect to its respective obligations under any of
such policies.
4.10. Transactions with Affiliates. Except for the matters specified in
Schedule 4.10 (the "Affiliate Relationships"), none of Seller or any of its
Affiliates is an officer, director, employee, consultant, distributor, supplier
or vendor of, or is party to any Contractual Obligation with, the Company or any
Subsidiary, and after the Closing neither the Company nor any Subsidiary will
have any liability or obligation to or for the benefit of Seller or any of its
Affiliates except pursuant to the Transitional Services Agreement. Except for
the matters specified in Schedule 4.10, there are no Assets (including without
limitation Intangibles, franchises and know-how) that Seller or any of its
Affiliates owns or is licensed or otherwise has the right to use which are used
in or necessary to the conduct of the Business.
4.11. Compliance with Laws, etc. The operations of the Business as
heretofore or currently conducted were not since June 30, 1991 and are not in
violation of, nor is the Company or any Subsidiary in default under, any Legal
Requirement, except for such violations or defaults listed on Schedule 4.11 or
as have not had and will not have individually or in the aggregate a Material
Adverse Effect. The Company and its Subsidiaries have been duly granted and
continue to hold, and at the Closing will hold, all licenses, permits, consents,
approvals, franchises and other authorizations under any Legal Requirement or
trade practice necessary for the conduct of the Business as currently conducted
(the "Permits"), except such as have not had and will not have individually or
in the aggregate a Material Adverse Effect. All of the Permits are now and after
giving effect to the Closing will be in full force and effect, except such as
will not have a Material Adverse Effect. Schedule 4.11 includes a list of all
Permits and applications therefor that are material to the Business. Neither
the Company nor any Subsidiary nor Seller has received any notice that any
Governmental Authority or other licensing authority or association will revoke,
cancel, rescind, materially modify or refuse to renew in the ordinary course any
of the Permits, which individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect.
4.12. Tax Matters. Except as set forth in Schedule 4.12 or the Interim
Balance Sheet:
(i) To Seller's knowledge, (a) all material Tax Returns required to
be filed on or before the date hereof with respect to any Pre-Closing Tax
Period (as defined in Section 6.7(c)) by, or with respect to the Company or
any Subsidiary have been duly and timely filed (taking into account
extensions); (b) no position is reflected in a Tax Return referred to in
(a) for which the applicable limitation period has not expired (and for
which a closing agreement has not been entered into) which (x) was not, at
the time such Tax Return was filed, supported by substantial authority (as
determined for purposes of Section 6662 of the Code, or any predecessor
provision, and any comparable provisions of applicable federal, state, or
local tax statutes, rules or regulations) and (y) would have a Material
Adverse Effect if decided against the taxpayer; (c) the Company and its
Subsidiaries have timely paid, withheld or made
-28-
provision for all Taxes shown as due and payable on any Tax Return and
have timely paid, withheld, or made provision for all material Taxes,
whether or not shown on any Tax Return; (d) no Liens for Taxes upon the
assets of the Company or any Subsidiary exist; (e) neither the Company nor
any of its Subsidiaries currently is the beneficiary of any extension of
time within which to file any Tax Return; and (f) no claim has ever been
made by an authority in a jurisdiction where any of the Company and its
Subsidiaries does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
(ii) The Company and each of its Subsidiaries other than New York
Department Stores de Puerto Rico, Inc. is a member of the affiliated group,
within the meaning of Section 1504(a) of the Code, of which Seller is the
common parent (the "Affiliated Group"), and such Affiliated Group files a
consolidated federal Income Tax Return. Since the acquisition of
Marshalls, Inc. by Seller and Brandon's Plantation, Inc., Brandon's
Kendall, Inc., Brandon's Town Center, Inc., Brandon's N. Miami, Inc. and
Brandon's S. Miami, Inc., neither the Company nor any of its Subsidiaries
has at any time been a member of an affiliated group filing a consolidated
federal Income Tax Return other than a group, the common parent of which is
Seller. To Seller's knowledge, all Income Taxes shown on any Tax Return of
the Affiliated Group have been paid for each taxable period during which
any of the Company and its Subsidiaries was a member of the Affiliated
Group.
(iii) To Seller's knowledge, each of the Company and its
Subsidiaries has withheld and paid all material Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, foreign person, or other
third party.
(iv) There is no dispute or claim concerning any material Tax
liability of any of the Company and its Subsidiaries either (A) claimed or
raised by any taxing authority in writing or (B) as to which Seller has
knowledge based upon personal contact with any agent of such taxing
authority. Schedule 4.12 lists all federal, state, local, and foreign
Income Tax Returns filed with respect to the Company or any of its
Subsidiaries for taxable periods ended on or after December 31, 1992,
indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. Seller has delivered to
Buyer correct and complete copies of all portions of federal Income Tax
Returns and examination reports which pertain to the Company and its
Subsidiaries, and statements of deficiencies assessed against or agreed to
by any of the Company and its Subsidiaries since December 30, 1992.
(v) To Seller's knowledge, neither the Company nor any of its
Subsidiaries has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or
deficiency.
-29-
(vi) Neither the Company nor any of its Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any agreement
that under certain circumstances could obligate it to make any payments
that will not be deductible under Code Section 280G.
4.13. [Intentionally Omitted.]
4.14. Employee Benefit Plans.
(a) Schedule 4.14 lists all Company Plans and Benefit Arrangements.
The following have previously been delivered to Buyer: (i) true and
complete copies of all Company Plans and Benefit Arrangements that have
been reduced to writing, together with all amendments; (ii) written
summaries of the material terms of all other Company Plans and Benefit
Arrangements and related amendments; (iii) in the case of each Company Plan
and Benefit Arrangement, copies of each of the following to the extent
applicable: summary plan descriptions and similar employee summaries
(including employee handbooks), trust agreements, and insurance contracts;
(iv) in the case of each Company Plan or Benefit Arrangement for which a
Form 5500 Series annual report is required to be filed, a copy of the most
recent such annual report, together with all schedules, attachments, and
related opinions; (v) in the case of each Company Plan or Benefit
Arrangements intended to be qualified under Section 401(a) of the Code, a
copy of the most recent Internal Revenue Service ("IRS") determination
letter (plus, if a request for determination is currently pending, a copy
of the request); and (vi) in the case of each Company Plan or Benefit
Arrangement, copies of any correspondence from or to the IRS, the
Department of Labor ("DOL"), or other U.S. government department or agency
relating to an audit or penalty assessment with respect to such Plan or
Arrangement or relating to requested relief from any liability or penalty
(including, but not limited to, any correspondence relating to the IRS's
Voluntary Compliance Resolution Program or Closing Agreement Program, or
the DOL's amnesty programs for late filers and non-filers). Except as
indicated on Schedule 4.14, all Company Plans and Benefit Arrangements are
maintained by Melville Corporation.
(b) Section 401(a)(11) of the Code does not apply to any participant
in Seller's 401(k) Profit Sharing Plan (as defined in Section 9.1(f)).
(c) There have been no prohibited transactions (within the meaning
of Section 406 of ERISA or Section 4975 of the Code) that have resulted or
could result in the Company, any of its Subsidiaries, or any of their
employees being held liable for a civil penalty under Section 502 or ERISA
or an excise tax under Section 4975 of the Code.
-30-
(d) Each of the Company Plans and the Benefit Arrangements has been
maintained and administered in all material respects in accordance with its
terms and applicable law (including the provisions of the Code). No event
has occurred that has resulted or could result in the Company or any of its
Subsidiaries being liable with respect to a Tax under Chapter 43 of the
Code.
(e) Neither the Company nor any of its Subsidiaries has any
obligation or liability with respect to any plan (including, without
limitation, any multiemployer plan) subject to Part 3 of Title I of ERISA,
Title IV of ERISA, or Section 412 of the Code.
(f) All required contributions to, premium payments or assessments
on account or, and benefit payments under each Company Plan and each
Benefit Arrangement that are due or accruable through the Closing Date, for
which the Company or any Subsidiary is or may be liable, have been paid or
properly accrued.
(g) Except as set forth in Schedule 4.14, there are not pending or,
to the knowledge of Seller, threatened actions or other controversies
relating to any Company Plan or Benefit Arrangement, other than claims for
benefits in the normal course.
(h) Other than as required under Section 601 et seq. of ERISA or as
specifically set forth in Schedule 4.14, no Company Plan or Benefit
Arrangement provides benefits or coverage in the nature of severance or
health or life insurance following retirement or other termination of
employment. No event has occurred that has resulted or could result in a
loss of any deduction to the Company or any of its Subsidiaries under
Section 162(n) of the Code. Except for individual employment agreements,
neither the Company nor any Subsidiary is obligated under any Company Plan
or Benefit Arrangement that cannot be amended, terminated or modified
prospectively without the consent of any Employee or beneficiary.
4.15. Environmental Matters, etc.
(a) Except as set forth in Schedule 4.15, or except as has not had
and will not have a Material Adverse Effect, the Company and each
Subsidiary is and has at all times been in compliance in all respects with
all Environmental Laws and any other applicable Legal Requirements relating
to environmental, natural resource, health or safety matters. Except as
set forth in Schedule 4.15, the Company has not received notice of any
Action pending against the Company or any Subsidiary nor, to the knowledge
of Seller, is there any basis for any Action or is any Action threatened,
in each case in respect of (i) noncompliance by the Company or any
Subsidiary with any Environmental Laws or any such Legal Requirement, or
(ii) the presence or release or threatened release into the environment of
any Hazardous Substance whether or not generated by the Company or any
Subsidiary or located at or about or emanating from
-31-
or to a site included in the Real Property currently or heretofore owned,
leased or otherwise used by the Company or any Subsidiary or any
predecessor entity.
(b) Except as set forth in Schedule 4.15 and for any other matters
that would not result in any material liability to the Company and its
Subsidiaries taken as a whole, no event has occurred or condition exists or
operating practice is being employed that could give rise to any Liability
or Losses on the part of the Company or any Subsidiary (or, after the
Closing, Buyer) either at the present or at any future time (including,
without limitation, any obligation to conduct any remedial or monitoring
work) under any Environmental Laws or otherwise resulting from or relating
to the handling, storage, use, transportation or disposal of any Hazardous
Substance by or on behalf of the Company or any Subsidiary or any of their
respective predecessors or otherwise.
(c) To the knowledge of the Seller, the Seller has previously
provided to Buyer true and correct copies of all written reports or other
documents arising out of environmental inspections, investigations,
studies, audits, tests, reviews or other analyses conducted with respect to
any Real Property listed on Schedule 4.5.1. or any Real Property leased by
the Company or any of its Subsidiaries as warehouse space.
4.16. Employees and Labor Relations. None of the employees of the Company
or any Subsidiary is represented by a labor union, and no petition has been
filed or proceedings instituted by any employee or group of employees with any
labor relations board seeking recognition of a bargaining representative. To the
knowledge of Seller, there is no organizational effort currently being made or
threatened by or on behalf of any labor union to organize any employees of the
Company or any Subsidiary. Except as set forth on Schedule 4.16, there are no
controversies or disputes pending between the Company or any Subsidiary on the
one hand and any of their respective employees on the other hand, except for
controversies and disputes with individual employees arising in the Ordinary
Course of Business that have not had and will not have a Material Adverse
Effect. Other than G. Politzer and certain internal auditors and tax, bad check
processing or workmen's compensation related personnel, no individual who is an
employee of Seller or any of its Affiliates devotes his or her business time
primarily to the affairs of the Company or any Subsidiary.
4.17. Litigation, etc. There is no Action against the Company or any
Subsidiary, pending or, to the knowledge of Seller, threatened, which could
reasonably be expected to have a Material Adverse Effect, except for such of
the foregoing as are described in Schedule 4.17. Except as set forth on
Schedule 4.17, there is no Action pending or, to the knowledge of Seller,
threatened with respect to which Seller or any of its Affiliates, on the one
hand, and the Company or any of its Subsidiaries, on the other hand, are or
would be parties. There is no Action pending or, to the knowledge of Seller,
threatened, that seeks rescission of, seeks to enjoin the consummation of, or
otherwise relates to, this Agreement or any of the transactions contemplated
hereby and that could reasonably be expected to have a Material
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Adverse Effect or a material adverse effect on Seller's ability to consummate
the transactions contemplated hereby. No Governmental Order specifically
directed at the Company or any of its Subsidiaries has been issued which has had
or could reasonably be expected to have a Material Adverse Effect.
4.18. [Intentionally Omitted]
4.19. Brokers, etc. Except for Morgan Stanley & Co. Incorporated ("Morgan
Stanley") and Financo, Inc., no broker, finder, investment bank or similar agent
is entitled to any brokerage, finder's or other fee, Compensation or
reimbursement of expenses in connection with the transactions contemplated by
this Agreement based upon agreements or arrangements made by or on behalf of (or
the conduct of) Seller, the Company, any Subsidiary or any of their respective
Affiliates. Seller shall be solely responsible for the payment of the fees and
expenses of Morgan Stanley and Financo, Inc.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. In order to induce Seller to
enter into and perform this Agreement and to consummate the transactions
contemplated hereby, Buyer represents and warrants to Seller as follows:
5.1. Corporate Matters. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority, corporate and otherwise, to enter into this
Agreement, to carry out and perform its obligations hereunder and to consummate
the transactions contemplated hereby.
5.2. Authorization and Enforceability. This Agreement has been duly
authorized, executed and delivered by Buyer, and is Enforceable against Buyer.
5.3. Non-Contravention, etc. No approval, consent, waiver,
authorization or other order of, and no filing, registration, qualification or
recording with, any Governmental Authority or any other Person is required to be
obtained or made by or on behalf of Buyer or any of its Subsidiaries in
connection with the execution, delivery or performance of this Agreement and the
consummation of the transactions contemplated hereby, except for (i)
satisfaction of the requirements of the HSR Act and (ii) any item required to be
obtained from or made with any Person other than a Governmental Authority the
failure to obtain or make which, individually or in the aggregate, have and
could reasonably be expected to have neither a Material Adverse Effect on Buyer
nor a material adverse effect on the ability of Buyer to consummate the
transactions contemplated hereby. Neither the execution, delivery and
performance of this Agreement nor the consummation of any of the transactions
contemplated hereby (including, without limitation, the execution, delivery and
performance of the Closing Agreements and performance by Buyer of its
obligations in respect of the Buyer Stock in accordance with its terms) does or
will constitute, result in or give rise to (i) a breach or violation or default
under any Legal Requirement applicable to Buyer or any of its Subsidiaries
(assuming the accuracy of the representations and warranties of Seller in
Section
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4.4 of the Preferred Stock Subscription Agreement), (ii) a breach of or a
default under any Charter or By-Laws provision of Buyer or any of its
Subsidiaries, (iii) the acceleration of the time for performance of any
obligation under any Contractual Obligation of Buyer or any of its Subsidiaries,
(iv) the imposition of any Lien upon or the forfeiture of any asset of Buyer or
any of its Subsidiaries, (v) a breach of or a default under any Contractual
Obligation of Buyer or any of its Subsidiaries, or (vi) termination, right of
termination, modification of terms or change in benefits or burdens under any
Contractual Obligation of Buyer or any of its Subsidiaries, other than in the
case of clauses (i), (iii), (iv), (v) and (vi) such as, individually or in the
aggregate, have and could reasonably be expected to have neither a Material
Adverse Effect on Buyer nor a material adverse effect on the ability of Buyer to
consummate the transactions contemplated hereby (including, without limitation,
Buyer's ability to consummate its obligations under the other Closing Agreements
and its obligations in respect of the Buyer Stock in accordance with its terms).
5.4. Investment Intent.
(a) Buyer is acquiring the Shares hereunder for its own account, for
investment, and not with a view to, or for sale in connection with, any
distribution thereof within the meaning of the Securities Act.
(b) Buyer understands and agrees that the Shares will not be
registered or qualified under the Securities Act of 1933, as amended (the
"Securities Act"), or state "blue-sky" or other securities laws and
therefore cannot be resold unless they are registered under the Securities
Act and applicable state laws or unless an exemption from such registration
requirement is available.
(c) Buyer is able to bear the economic risk of holding the Shares
for an indefinite period of time and is experienced and has such knowledge
and experience in financial and business matters that it is capable of
evaluating the risks and merits of acquiring the Shares. Buyer acknowledges
that the Shares will bear a legend to the effect that transfers are
restricted unless (i) the transfer is exempt from the registration
requirements under the Securities Act and the Company receives an opinion
of counsel reasonably satisfactory to the Company to that effect or (ii)
the transfer is made pursuant to an effective registration statement under
the Securities Act.
(d) Buyer understands that the Company is under no obligation to
effect a registration of the Shares under the Securities Act.
(e) Buyer is an Accredited Investor within the definition set forth
in Rule 501(a) of the Securities Act.
(f) Nothing in this Section 5.4 shall limit or qualify the
representations, warranties, covenants or agreements made by Seller herein
or in any Closing
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Agreement or in any certificate or document delivered pursuant hereto or
thereto. Seller acknowledges and agrees that the purpose of this Section
5.4 is solely to ensure that the sale of the Shares pursuant hereto
complies with the transfer restrictions under the Securities Act and the
transfer restrictions under other applicable securities laws.
5.5. Litigation. There is no Action against Buyer or any of its
Subsidiaries, pending or, to the knowledge of Buyer, threatened, which could
reasonably be expected to have a Material Adverse Effect on Buyer. There is no
Action pending or, to the knowledge of Buyer, threatened, that seeks rescission
of, seeks to enjoin the consummation of, or otherwise relates to, this Agreement
or any of the transactions contemplated hereby and that could reasonably be
expected to have a Material Adverse Effect on Buyer or a material adverse effect
on Buyer's ability to consummate the transactions contemplated hereby. No
Governmental Order specifically directed at Buyer or any of its Subsidiaries has
been issued which has had or could reasonably be expected to have a Material
Adverse Effect on Buyer.
5.6. Financing. Buyer has received and delivered to Seller a letter
from The First National Bank of Chicago, Bank of America Illinois, The Bank of
New York and Pearl Street L.P. ("Lead Lenders") dated as of the date hereof (the
"Commitment Letter"), with respect to debt financing in an amount sufficient to
enable Buyer to pay the Cash Purchase Price. Buyer represents and warrants that
the terms of such letter have not been altered or amended by Buyer or Lead
Lenders in a manner that would have a material adverse effect upon Buyer's
ability to perform its obligations under this Agreement and that such letter
remains in full force and effect (unless superseded by definitive credit
documentation that would not have a material adverse effect upon Buyer's ability
to perform its obligations under this Agreement).
5.7. Brokers, etc. Except for Goldman Sachs & Co. ("Goldman") and
Salomon Brothers Inc ("Salomon"), no broker, finder, investment bank or similar
agent is entitled to any brokerage, finder's or other fee, Compensation or
reimbursement of expenses in connection with the transactions contemplated by
this Agreement based upon agreements or arrangements made by or on behalf of (or
the conduct of) Buyer or its Affiliates. Buyer shall be solely responsible for
the payment of the fees and expenses of Goldman and Salomon.
6. CERTAIN AGREEMENTS OF THE PARTIES.
6.1. No Solicitation of Other Offers. Seller will not, and will cause
all of its Affiliates and all of its and their respective employees,
representatives and agents not to, directly or indirectly, solicit or initiate
or enter into discussions or transactions or Contractual Obligations with or
encourage or provide any information to any Person (other than Buyer and its
designees) concerning any sale of stock of, or any merger or share exchange or
sale or other disposition of securities or substantial assets or any
recapitalization or any similar transaction involving, the Company or any of its
Subsidiaries. Seller will notify Buyer immediately upon becoming aware that any
Person has made any proposal, offer, inquiry, or
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contact with respect to any such transaction, which notice shall include the
identity of all relevant parties and the content of such communication.
6.2. Access to Premises and Information. Prior to the Closing, Seller
will cause the Company and its Subsidiaries to permit Buyer and its prospective
lenders, and their respective representatives, to have full access to their
premises and documents, books and records and to make copies during normal
business hours of such financial and operating data and other information with
respect to the Company as Buyer, such lenders, or any of their representatives
shall reasonably request; provided, however, that Seller shall not be required
to provide access to, or copies of, the portions of any documents, books and
records or other data that contain information relating solely to entities other
than the Company and its Subsidiaries. In addition, Seller shall cause the
Company's and its Subsidiaries' management to be available to Buyer and its
prospective lenders at such times, and from time to time, as Buyer and its
prospective lenders may reasonably request in connection with the transactions
contemplated hereby and their review of the Business. Seller will cause to be
delivered such additional information and copies of documents, books and records
relating to the Company, its Subsidiaries or the Business as may be reasonably
requested by Buyer, such lenders, or any of their representatives, including,
without limitation, all quarterly and monthly financial statements that become
available prior to the Closing (which financial statements shall be included
within the meaning of the term Financial Statements for all purposes of this
Agreement from and after their respective dates).
6.3. Confidentiality Covenant of Buyer. The provisions of that
certain letter agreement between Buyer and Seller dated June 26, 1995 (the
"Confidentiality Agreement") are hereby confirmed and remain in effect;
provided, however, that the Confidentiality Agreement is hereby amended so that
(i) it shall terminate not later than the consummation of the Closing, (ii) it
shall not prohibit any retention of records or disclosure made in connection
with the enforcement of any right or remedy relating to this Agreement or the
transactions contemplated hereby and (iii) in the event the Closing does not
occur and this Agreement is terminated, the term of such Confidentiality
Agreement shall be extended until the fifth anniversary of the date hereof.
6.4. Operation of Business in the Ordinary Course. On and prior to
the Closing Date, except as otherwise required by this Agreement (including
without limitation Section 6.14), Seller will cause the Company to conduct the
Business only in the Ordinary Course of Business and use its reasonable best
efforts to maintain the value of the Business as a going concern and the
relationships of the Company with customers, suppliers, vendors, employees,
agents and Governmental Authorities. Seller agrees to cause the Company and its
Subsidiaries to make capital expenditures in the Ordinary Course of Business up
to the Closing Date and prior to the Closing Date to consult with Buyer before
making significant decisions regarding merchandise markdowns, inventory
purchases and promotional activity. Without limiting the generality of the
foregoing, on and prior to the Closing Date Seller will cause the Company not
to, without the prior written consent of Buyer:
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(a) Enter into any transactions with Seller or any of its Affiliates
except in the Ordinary Course of Business or with respect to Affiliate Debt
or as set forth on Schedules 4.10 or 7.2(i);
(b) Pay or accrue any Compensation other than in the Ordinary Course
of Business or increase any Compensation of any officer or employee other
than such increases in Compensation for individual employees as may be made
in the Ordinary Course of Business;
(c) Make any Distribution other than (i) distributions of cash to
Seller in the Ordinary Course of Business pursuant to the Cash Management
Program, Seller's Employee Stock Ownership Plan as currently in effect or
Seller's VEBA as currently in effect; (ii) the distributions set forth on
Schedule 4.3(b)(iv)(B); (iii) distributions of cash or of any receivable
constituting Affiliate Debt in connection with the repayment or
cancellation of Affiliate Debt; and (iv) distributions or contributions in
connection with an increase in or the repayment or cancellation (in whole
or in part) of Debt or intercompany advances between the Company and its
wholly owned Subsidiaries or between wholly owned Subsidiaries;
(d) Except as set forth on Schedule 6.4(d), incur any Debt except
capitalized leases entered into in the Ordinary Course of Business and in
amounts consistent with the Budget or Debt or intercompany advances between
the Company and any wholly owned Subsidiary or between wholly owned
Subsidiaries, or incur any Lien except in the Ordinary Course of Business;
(e) Amend the Charter or Bylaws of the Company or any Subsidiary;
(f) Allow any material Permit or License to lapse or terminate or
fail to renew any Permit or License in accordance with prudent business
practice;
(g) Fail to operate the Business and maintain the Company's and its
Subsidiaries' books, accounts and records in the Ordinary Course of
Business and maintain in good repair the Company's and its Subsidiaries'
business premises, fixtures, machinery, furniture and equipment in a manner
consistent with past practice;
(h) Engage any new employee of the Company or its Subsidiaries for a
salary in excess of $100,000 per annum;
(i) Enter into, amend in any material respect, extend, terminate or
permit any renewal notice period or option to lapse with respect to any
Lease or any other Contractual Obligation that contains either
consideration to be given or performed by the Company or any of its
Subsidiaries of a value exceeding $250,000 or a term exceeding one year
(except for purchases of inventory in the Ordinary Course of
-37-
Business and the making of capital expenditures in an aggregate amount
consistent with the Budget and except to the extent otherwise required by
this Agreement or to the extent the obligation is between the Company and a
wholly owned Subsidiary or between wholly owned Subsidiaries);
(j) Purchase or otherwise acquire any Real Property;
(k) Take any of the actions specified in any of subsections (a)
through (d) of Section 4.3; or
(l) Consent or agree to do any of the foregoing.
6.5. Certain Notices. Prior to the Closing, Seller will promptly upon
becoming aware thereof give Buyer written notice of any material development
affecting the Business, or the financial condition of the Company and any
material breach of or inaccuracy in any representation or warranty of Seller
contained in this Agreement; provided, however, that no such disclosure shall be
deemed to amend any Schedule hereto, or prevent or cure any breach of or
inaccuracy in, or disclose any exception to, any of the representations and
warranties set forth herein.
6.6. Preparation for Closing. Each party will use its reasonable best
efforts to bring about the timely fulfillment of each of the conditions
precedent to the obligations of the other parties hereto set forth in this
Agreement. Without limiting the generality of the foregoing, the parties shall
take the actions set forth below in this Section 6.6.
6.6.1. HSR Filing. Promptly upon execution and delivery of this
Agreement, each of Seller and Buyer will prepare and file, or cause to be
prepared and filed, with the appropriate Governmental Authorities, a
notification with respect to the transactions contemplated by this
Agreement pursuant to the HSR Act. Each of Seller and Buyer will promptly
provide all additional information requested, and take all other actions
necessary or appropriate, to comply with notification requirements under
the HSR Act and to cause the expiration of all waiting periods under the
HSR Act.
6.6.2. Closing Agreements. Seller will enter into each of the
Closing Agreements to which it is intended to be a party, and Seller will
cause each of its Affiliates, the Company and any Subsidiary which is
intended to be a party to any Closing Agreement to enter into each Closing
Agreement to which such Person is intended to be a party. Buyer will enter
into each of the Closing Agreements to which it is intended to be a party,
and Buyer will cause each of its Affiliates which is intended to be party
to any Closing Agreement to enter into each Closing Agreement to which such
Affiliate is intended to be a party.
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6.7. Tax Matters.
(a) Section 338(h)(10) Election and Corporate Structure. Buyer and
Seller agree to join in making a timely, effective and irrevocable election
under Section 338(h)(10) of the Code (and any corresponding elections under
state, local, or foreign tax law, other than Puerto Rican law)
(collectively, the "Section 338(h)(10) Election") with respect to the
Company and each of its Subsidiaries, and to file such election in
accordance with applicable regulations. Seller and Buyer agree to
cooperate (and cause their respective subsidiaries to cooperate) in all
respects for the purpose of effectuating a timely and effective Section
338(h)(10) Election, including without limitation, the execution and filing
of any forms or returns.
(b) Buyer's Covenants. Buyer covenants that it will not cause or
permit the Company, any Subsidiary or any Affiliate of Buyer to take any
action on the Closing Date other than in the ordinary course of business,
including but not limited to the distribution of any dividend or the
effectuation of any redemption that could give rise to any tax liability to
the Seller Affiliated Group or the reduction of any loss of the Seller or
the Seller Affiliated Group. Except for the transactions contemplated by
this Agreement, Buyer agrees that Seller is to have no liability for any
Tax resulting from any action of the Company, Buyer or any Affiliate of
Buyer on the Closing Date, which action is not within the ordinary course
of business of such persons, and agrees to indemnify and hold harmless
Seller and its Affiliates against any such tax. Seller agrees to give
prompt notice to Buyer of the assertion of any claim, or the commencement
of any action or proceeding, in respect of which indemnity may be sought
under this Section 6.7(b). Buyer may participate in and assume the defense
of any such suit, action or proceeding at its own expense. If Buyer
assumes such defense, Seller shall have the right (but not the duty) to
participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by Buyer. Whether or not Seller
chooses to defend or prosecute any claim, the parties hereto shall
cooperate in the defense or prosecution thereof.
(c) Tax Indemnification.
(i) Seller shall be liable for and shall pay (and shall
indemnify and hold Buyer harmless from) (x) all Income Taxes with
respect to the Company and its Subsidiaries for any Pre-Closing Tax
Period (including without limitation any Income Taxes attributable to
the Section 338(h)(10) Elections), (y) all Taxes other than Income
Taxes and Transfer Taxes ("Miscellaneous Taxes") with respect to any
Pre-Closing Tax Period, but only to the extent the amount payable
exceeds the amount reflected on the Company Net Assets Statement for
Miscellaneous Taxes and (z) any and all federal Income Taxes of the
Affiliated Group of which Seller is a member imposed on the Company
or any of its Subsidiaries pursuant to Section 1.1502-6 of the
Treasury Regulations, in each
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case incurred or suffered by Buyer, any of its Affiliates or,
effective upon the Closing, the Company or any Subsidiary (the sum of
(x), (y) and (z) being referred to as a "Tax Loss"); provided,
--------
however, that Seller shall have no liability for the payment of any
-------
Tax Loss attributable to or resulting from any action described in
Section 6.7(b) hereof. For purposes of this Section 6.7, (A) the term
"Pre-Closing Tax Period" shall mean all taxable periods ending on or
before the close of the Closing Date and the portion ending at the
close of the Closing Date of any taxable period that includes (but
does not end on) the Closing Date, and (B) the term "Post-Closing Tax
Period" shall mean all taxable periods that begin on or after the day
following the Closing Date and the portion ending after the Closing
Date of any taxable period that includes (but does not end on) the
Closing Date. In the case of a taxable period that includes (but does
not end on) the Closing Date, the Tax attributable to the Pre-Closing
Tax Period shall be the responsibility of Seller (and not the Company
and its Subsidiaries) and the Taxes attributable to the Post-Closing
Tax Period shall be the responsibility of Buyer and the Company and
its Subsidiaries.
(ii) For purposes of this Section 6.7(c), in the case of
any Taxes that are imposed on a periodic basis and are payable for a
Tax period that includes (but does not end on) the Closing Date, the
portion of such Tax related to the portion of such Tax period ending
on the Closing Date shall (x) in the case of any Taxes other than
Taxes based upon or related to income, sales, gross receipts, wages,
capital expenditures or expenses, be deemed to be the amount of such
Tax for the entire Tax period multiplied by a fraction the numerator
of which is the number of days in the Tax period ending on the
Closing Date and the denominator of which is the number of days in
the entire Tax period, and (y) in the case of any Tax based upon or
related to income, sales, gross receipts, wages, capital expenditures
or expenses, be deemed equal to the amount which would be payable if
the relevant Tax period ended on the Closing Date. In the case of
Income Taxes described in the preceding sentence, if either Buyer or
Seller is adversely affected (as a consequence of an increase in
liability or a reduction of refund or other tax attribute) that would
have been available to it if the relevant tax period had ended on the
Closing Date, and the other party is benefitted from such
circumstance, the party benefitted shall reimburse the party
adversely affected to the extent of the benefit realized.
(iii) If as a result of an adjustment Seller makes a
payment to any taxing authority in respect of a Miscellaneous Tax of
the Company with respect to any Pre-Closing Tax Period, then Buyer
shall promptly pay to Seller an amount equal to such payment made by
Seller, provided, however, that the aggregate of such payments by
-------- -------
Buyer shall not exceed the amount reflected on the Company Net Assets
Statement for Miscellaneous Taxes.
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(iv) Any payment by Seller pursuant to this Section 6.7(c)
shall be made (x) if reflected on a Tax Return, contemporaneously
with the filing of such Return and (y) in all other cases, not later
than 30 days after receipt by Seller of written notice from Buyer
stating that any Tax Loss has been paid by Buyer, any of its
Affiliates or, effective upon the Closing, the Company or any
Subsidiary and the amount thereof and of the indemnity payment
requested.
(v) If any claim or demand for Taxes in respect of which
indemnity may be sought pursuant to this Section 6.7(c) is asserted
in writing against Buyer, any of its Affiliates or, effective upon
the Closing, the Company or any Subsidiary, Buyer shall promptly
notify Seller of such claim or demand within sufficient time that
would allow Seller to timely respond to such claim or demand, and
shall give Seller such information with respect thereto as Seller may
reasonably request. Seller may discharge, at any time, its
indemnification obligation under this Section 6.7(c) by paying to
Buyer the amount of the applicable Tax Loss, calculated on the date
of such payment. Seller may, at its own expense, participate in and,
upon notice to Buyer, assume the defense of any such claim, suit,
action, litigation or proceeding (including any Tax audit). If Seller
assumes such defense and if the relevant claim, suit, action,
litigation or proceeding relates to a taxable period that includes
(but does not end on) the Closing Date, Buyer shall have the right
(but not the duty) to participate in the defense thereof and to
employ counsel, at its own expense, separate from the counsel
employed by Seller. Whether or not Seller chooses to defend or
prosecute any claim, all of the parties hereto shall cooperate in the
defense or prosecution thereof. Seller shall not be liable under this
Section 6.7(c), for (x) any Tax claimed or demanded by any taxing
authority, the payment of which was made without Seller's prior
written consent unless Seller refused to participate in the
proceedings and assume the defense or (y) any settlements effected
without the consent of Seller, or resulting from any claim, suit,
action, litigation or proceeding in which Seller was not permitted an
opportunity to participate.
(vi) Except with respect to Taxes described in clause (z)
of Section 6.7(c)(i) or any tax detriment attributable to any
agreement entered into prior to the Closing Date obligating the
Company or any Subsidiary to make payments that are not deductible
under Code Section 280G, for which Seller shall indemnify Buyer and
which shall be treated as a Tax Loss, Buyer shall be liable for any
Taxes pertaining to any Post-Closing Tax Period, and any transactions
described in Section 6.7(b).
(vii) No action of Buyer, the Company or any Subsidiary
with respect to the ownership or corporate existence of the Company
or any Subsidiary undertaken subsequent to the Closing Date shall in
any way expand or limit the
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amount or scope of any obligation of either Buyer or Seller under
this Section 6.7(c).
(d) Tax Sharing Agreements. All Tax sharing agreements or similar
agreements with respect to or involving the Company and its Subsidiaries
shall be terminated as of the Closing Date and, after the Closing Date, the
Company and its Subsidiaries shall not be bound thereby or have any
liability thereunder.
(e) Transfer Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement ("Transfer Taxes")
shall be borne by the party on whom such Tax is imposed under the relevant
law, except that the aggregate liability for any New York State Real
Property Gains Tax and New York City Real Estate Transfer Tax shall be
shared equally by Buyer and Seller.
(f) Return Filings, Refunds and Credits.
(i) Seller shall include the income of the Company and its
Subsidiaries in Seller's federal consolidated Income Tax Returns, and
shall file all state, foreign and local Income Tax Returns of the
Company and its Subsidiaries, for all Tax periods ending on or before
the Closing Date and shall be responsible for remitting all Taxes
reflected on such Income Tax Returns. Seller shall also prepare or
cause to be prepared and file or cause to be filed all Miscellaneous
Tax Returns due on or before the Closing Date (taking into account
extensions) and shall be responsible for remitting all Miscellaneous
Taxes reflected on such Miscellaneous Tax Returns. Copies of all such
Tax Returns (or the relevant portion thereof relating to the Company
and its Subsidiaries) shall be furnished to Buyer.
(ii) Buyer shall prepare or cause to be prepared and file
or cause to be filed on a timely basis (with the assistance of Seller
to the extent provided in any separate agreement for continuing
services) all Income Tax Returns with respect to the Company and its
Subsidiaries for taxable periods including (but not ending on) the
Closing Date and all Miscellaneous Tax Returns due after the Closing
Date (taking into account extensions) and shall be responsible for
remitting all Taxes reflected on such Tax Returns. Any such Tax
Return shall be prepared in a manner consistent with past practice
and without a change of any election or any accounting method and
shall be submitted by Buyer to Seller in sufficient time to permit a
reasonable review prior to the due date (including extensions) of
such Tax Return. Seller shall have the right to review all work
papers and procedures used to prepare any such Tax Return. If Seller,
within 10 business days after delivery of any such Tax Return,
notifies Buyer in writing that it objects to any items in such Tax
Return, the parties shall proceed
-42-
in good faith to resolve the disputed items and, if they are unable
to do so within 10 business days, the disputed items shall be
resolved (within a reasonable time, taking into account the deadline
for filing such Tax Return) by the Accountants (as defined in Section
6.7(g), provided, however, that if the Accountants shall determine
that two or more alternative positions with respect to the matter in
question are equally supported by applicable law, the party that is
liable for such item under Section 6.7(c) shall determine which
position shall be taken on the relevant Tax Return. Upon resolution
of all disputed items, the relevant Tax Return shall be adjusted to
reflect such resolution and shall be binding upon the parties without
further adjustment. The costs, fees and expense of such accounting
firm shall be borne equally by Buyer and Seller.
(iii) Seller and Buyer shall reasonably cooperate, and shall
cause their respective Affiliates, agents, auditors, representatives,
officers and employees reasonably to cooperate, in preparing and
filing all Tax Returns (including amended returns and claims for
refund), including maintaining and making available to each other all
records necessary in connection with Taxes and in resolving all
disputes and audits with respect to all taxable periods relating to
Taxes. Buyer and Seller agree to retain or cause to be retained all
books and records pertinent to the Company and the Subsidiaries until
the applicable period for assessment under applicable law (giving
effect to any and all extensions or waivers) has expired, and to
abide by or cause the abidance with all record retention agreements
entered into with any taxing authority. The Company and its
Subsidiaries agree to give Seller reasonable notice prior to
transferring, discarding or destroying any such books relating to Tax
matters and, if Seller so requests, the Company or any Subsidiary
shall allow Seller to take possession of such books and records.
Buyer and Seller shall cooperate with each other in the conduct of
any audit or other proceedings involving the Company or any
Subsidiary for any Tax purposes and each shall execute and deliver
such powers of attorney and other documents as are necessary to carry
out the intent of this subsection. For any Income Tax Return of the
Company or its Subsidiaries that Seller is responsible for filing and
that requires the signature of an officer of the Company or one of
its Subsidiaries, Seller shall present a completed Income Tax Return
for the signature of an appropriate officer designated by the Company
or the applicable Subsidiary. Seller shall give such officer any
support for the Tax Return reasonably requested by such officer. The
officer shall sign the return and deliver it to Seller as soon as
reasonably practicable.
(iv) Except in the case of refunds attributable to carrybacks
from Post-Closing Tax Periods, any refunds with respect to Income Tax
Returns paid to Buyer for any period ending on or before the Closing
Date which were not reflected on the Company Net Assets Statement
shall be paid to Seller by Buyer
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within three (3) business days after receipt in cash or as a credit
to Buyer's Tax liability.
(g) Allocation of Purchase Price. In connection with the Section
338(h)(10) Election, Buyer and Seller shall cooperate as provided herein in
determining the modified ADSP (as such term is defined in Treasury
Regulations Section 1.338(h)(10)-1) of the assets of the Company and the
allocation of the modified ADSP for purposes of Section 338(a)(1) of the
Code in accordance with all applicable Treasury Regulations promulgated
under Section 338 of the Code. Buyer initially shall determine such
modified ADSP and allocation of the modified ADSP and shall notify Seller
in writing of the price and allocation so determined ("Buyer's Deemed Sales
Price Notice") within 120 days after the Closing Date. Seller shall be
deemed to have accepted such determination unless, within 30 days after
receipt of Buyer's Deemed Sales Price Notice, Seller notifies Buyer in
writing of (i) the amount that Seller proposes as the deemed sales price
(if it differs from that proposed by Buyer), (ii) the allocation of the
deemed sales prices proposed by Seller and (iii) the reasons for Seller's
allocations. If Seller provides such notice to Buyer, the parties shall
proceed in good faith to determine mutually the matters in dispute and, if
they are unable to do so within 30 days, the matter shall be referred to a
nationally recognized independent accounting firm chosen and mutually
acceptable to both Buyer and Seller (the "Accountants") who shall within 30
days decide the matter. The decision of the Accountants shall be final and
bind both parties. The Accountants' fees shall be shared equally by Buyer
and Seller. Neither Buyer nor Seller shall take, nor shall they permit any
affiliated corporation (including, without limitation, the Company and its
Subsidiaries) to take, any position for Tax purposes that is inconsistent
with the deemed sales price and allocation as finally determined hereunder;
provided, however, that the deemed purchase price of the assets shall
differ from the deemed sales price to the extent necessary to reflect the
inclusion in the total deemed purchase price of items (for example, Buyer's
capitalized acquisition costs in addition to the Purchase Price) not
included in the total deemed sales price.
6.8. Expenses of Transaction.
6.8.1. Transaction Costs of Seller. Except to the extent
specifically otherwise provided by Section 3.4(d), Seller shall pay all
financial advisory, legal, accounting and other fees and expenses incurred
by Seller, the Company or any of their Affiliates in connection with the
transactions contemplated by this Agreement (including, without limitation,
any sale bonus or retention or similar forms of Compensation payable by the
Company or any of its Subsidiaries to any directors, officers or employees
of any Person in connection with or as a result of the sale of the Shares
or otherwise in preparation for or connection with the transactions
contemplated hereby); provided that with respect to the Company and its
Subsidiaries the Seller shall pay only fees and expenses incurred prior to
Closing.
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6.8.2. Transaction Costs of Buyer and Affiliates. Except to the
extent specifically otherwise provided by Section 3.4(d), Buyer shall bear
all financial advisory, legal, accounting and other fees and expenses
incurred by Buyer in connection with the transactions contemplated by this
Agreement.
6.9. Confidentiality Covenants. Seller acknowledges that the success
of the Company after the Closing and its ability to generate earnings sufficient
to service the financing of the Purchase Price depends upon the continued
preservation of the confidentiality of certain information possessed by Seller
and its Affiliates, that the preservation of the confidentiality of such
information and its Affiliates is an essential premise of the bargain between
the parties, and that Buyer would be unwilling to enter into this Agreement in
the absence of this Section 6.9. Accordingly, Seller hereby agree with Buyer as
follows:
6.9.1. Confidentiality Covenant. For a period beginning on the date
hereof and ending five years after the Closing, Seller will not, and will
cause its Affiliates (and the Company and each Subsidiary of the Company
until the Closing Date) not to, directly or indirectly, without the prior
written consent of Buyer, disclose any confidential or proprietary
information involving or relating to Buyer, the Company or their respective
Subsidiaries or, insofar as such information relates exclusively to Buyer
and its Subsidiaries (other than the Company and its Subsidiaries), use
such information in any manner adverse to Buyer and its Subsidiaries;
provided, however, that the information subject to the foregoing provisions
of this sentence shall be deemed not to include any information known
generally in the industry or otherwise in the public domain (other than as
a result of disclosure in violation hereof by Seller or any such Affiliate
thereof); and provided, further, that the provisions of this Section 6.9.1
shall not prohibit any retention of records or disclosure required by law
or made in connection with the enforcement of any right or remedy relating
to this Agreement or the transactions contemplated hereby.
6.9.2. Enforcement. Seller acknowledges and agrees that (i) it
regards the restrictions contained in this Section 6.9 as reasonable and
designed to provide Buyer with limited, legitimate and reasonable
protection against subsequent diminution of the value of the Shares
attributable to any actions of Seller or any of its Affiliates contrary to
such covenants and (ii) because the legal remedies of Buyer may be
inadequate in the event of a breach of, or other failure to perform, any of
the covenants and obligations set forth in this Section 6.9, Buyer may, in
addition to obtaining any other remedy or relief available to it
(including, without limitation, damages at law), obtain specific
enforcement of this Section 6.9 and other equitable remedies. Seller also
acknowledges and agrees that no breach by Buyer of, or other failure by
Buyer to perform, any of the covenants or obligations of Buyer under this
Agreement or otherwise shall relieve Seller of any of its obligations under
this Section 6.9.
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6.10. Books and Records; Personnel. (a) Seller acknowledges and agrees
that from and after the Closing the Company will be entitled to own and possess,
subject to the next succeeding sentence, all documents, books, records,
agreements and financial data of any sort relating to the Company, its
Subsidiaries or the Business. Seller agrees to deliver and cause its Affiliates
to deliver, prior to the Closing, all such books and records in their possession
to the Company or, to the extent such books and records are not readily
separable from the books and records of Seller or any of its Affiliates relating
to their businesses other than the Business, true and complete copies of such
books and records.
(b) From and after the Closing Date:
(i) Buyer shall not, and shall cause the Company not to, dispose
of or destroy any of the books and records of the Company or its
Subsidiaries relating to periods prior to the Closing ("Books and Records")
in a manner or at a time inconsistent with Seller's ordinary policies and
procedures with respect to document retention as in effect prior to the
Closing without first offering to turn over possession thereof to Seller by
written notice to Seller at least 30 days prior to the proposed date of
such disposition or destruction.
(ii) Buyer shall, and shall cause the Company to, allow Seller
and its agents reasonable access to all Books and Records during normal
working hours at Buyer's principal place of business or at any location
where the Books and Records are stored, and Seller shall have the right, at
its own expense, to make copies of any Books and Records; provided,
however, that any such access or copying shall be had or done (A) in such a
manner so as not to interfere with the normal conduct of Buyer's or the
Company's business and (B) for a legitimate business purpose (such as tax
preparation) that does not involve direct or indirect competition with the
Business.
(iii) Buyer shall, and shall cause the Company to, make
available to Seller upon written request (A) copies of any Books and
Records, (B) Buyer's and the Company's personnel to assist Seller in
locating and obtaining any Books and Records, and (C) any of Buyer's and
the Company's personnel whose assistance or participation is reasonably
required by Seller or any of its Affiliates in anticipation of, or
preparation for, existing or future Actions, Tax returns or other matters
in which Seller or any of its Affiliates is involved.
(iv) Seller shall reimburse Buyer, the Company or its Subsidiaries
for the reasonable out-of-pocket expenses incurred by any of them in
performing the covenants contained in this Section 6.10 and shall protect
and accord confidential treatment to the information disclosed pursuant to
this Section 6.10 as provided in Section 6.9.1.
6.11. Use of Certain Names and Marks. Seller acknowledges and confirms
that: (i) from and after the Closing, neither Seller nor any of its Affiliates
has or shall have any
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rights in the Company Marks, and (ii) neither Seller nor any of its Affiliates
will contest the ownership or validity of any rights of Buyer or the Company in
or to any of the Company Marks, or registrations (or applications for
registration) thereof. Promptly following the Closing, Seller will deliver to
the Company or, at the option of Buyer destroy, all letterhead, invoices and
other documents bearing any of the Company Marks and related symbols. Neither
Seller nor any of its Affiliates shall have any right, after the Closing, to use
or exploit any of the Company Marks, or any name confusingly similar thereto.
6.12. Further Assurances. Each party, upon the request from time to time of
any other party hereto after the Closing, and without further consideration,
will do each and every act and thing as may be necessary or reasonably requested
to consummate the transactions contemplated hereby in an orderly fashion.
6.13. Reimbursement by the Parties. To the extent that Seller, on the one
hand, or the Company or Buyer, on the other hand, receives any payment after the
Closing which belongs to the other party, it shall promptly pay over such
payment to the other party.
6.14. Open and Closed Stores. Seller shall cause the Company and its
Subsidiaries to operate as of the Closing Date all of the stores listed under
the caption "Open Stores" in the document entitled "Open Stores, Store
Commitments and Store Closings" initialed by the parties (the "Section 6.14
Letter"). Until the Closing, Seller shall cause the Company and its
Subsidiaries not to make any commitment or expenditure with respect to any store
location not open on the date hereof without the written consent of Buyer (which
consent may be withheld in Buyer's sole discretion), except for store locations
specified in the Section 6.14 Letter under the caption "Permitted Future Store
Locations". Seller shall cause the Company and its Subsidiaries to close the
stores listed under the caption "Stores to be Closed" in the Section 6.14 Letter
on or prior to the applicable date specified therein if such date occurs prior
to the Closing Date (and if not so closed by such applicable date prior to the
Closing Date, such stores shall be deemed closed prior to such date for all
purposes of this Agreement, including, without limitation, the definition of
Excluded Liabilities).
6.15. Financial Statement Deliveries. As soon as reasonably practicable
following the date hereof and in any event not later than 50 days after the date
hereof (or in the case of clause (c) below, such later date as shall be
specified by Buyer), Seller shall cause to be delivered to Buyer, at the cost
and expense of Seller, each of the following:
(a) The consolidated balance sheet of the Company and its
Subsidiaries as of December 31, 1994 and the related statements of
earnings, stockholders' equity and cash flows for the fiscal year then
ended, accompanied by the notes thereto and the unqualified report thereon
of KPMG Peat Marwick and similar financial statements for each of the two
preceding fiscal years accompanied by the notes thereto and the unqualified
report thereon of KPMG Peat Marwick.
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(b) The unaudited consolidated balance sheets of the Company and its
Subsidiaries as of March 31, 1995, July 1, 1995 and October 1, 1995 and
related unaudited consolidated statements of earnings and stockholders
equity and cash flows for the Company and its Subsidiaries for the three-
month and year-to-date periods then ended, together with comparable
information for the same periods in 1994 and a review report thereon of
KPMG Peat Marwick (the expense of which report up to $45,000 shall be borne
by Buyer).
(c) Such additional financial statements of the Company and its
Subsidiaries for such periods and dates as Buyer shall request for the
purpose of permitting Buyer to make required filings pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Seller shall cause all financial statements (including the notes thereto)
referred to in this Section 6.15 to be prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
specified therein (other than as a result of the Accounting Policy Changes), and
to present fairly in all material respects, the consolidated financial position
and results of operations of the Company and its Subsidiaries for the periods
specified therein, subject in the case of financial statements for interim
periods to an absence of footnotes and to normal year-end audit adjustments
which will not in the aggregate be material. In the case of any financial
statements referred to in this Section 6.15 that reflect the Accounting Policy
Changes, Seller shall deliver to Buyer with such financial statements, a written
reconciliation showing the effects of the Accounting Policy Changes on such
financial statements. Seller shall cause KPMG Peat Marwick to consent in
writing (and to deliver such consent to Buyer) to the inclusion of its report on
the financial statements referred to in clause (a) of this Section 6.15 in any
filings made by Buyer under the Securities Act or the Exchange Act.
6.16. Insurance Policies. Seller will cause insurance coverage to remain in
effect following the Closing for claims made under the Insurance Policies
following the Closing in respect of events occurring prior to the Closing
("Post-Closing Claims"), and will not take or fail to take any action that would
impair the ability of the Company and its Subsidiaries to make claims thereunder
or to obtain the benefits afforded them thereby in accordance with the terms of
the Insurance Policies as in effect on the date hereof; provided, however, that
following the Closing, the Company and any Subsidiary shall not be entitled to
make claims under the Insurance Policies in respect of Post-Closing Claims to
the extent that the Company or the applicable Subsidiary has been fully
compensated for its Losses in respect of such Post-Closing Claims by reason of
the operation of Section 10 hereof.
6.17. Divestiture. If at any time prior to or subsequent to the
Closing, Buyer shall cease to operate or shall vacate or transfer to any Person,
or shall agree to cease to operate or to vacate or transfer to any Person, any
store designated as a "Seller Store" or "Buyer Store" listed on the document
captioned "Divestiture and Failed Consent Store Schedule" initialed by
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the parties (the "Store Schedule") (any store so listed on such schedule being
referred to in this Section 6.17 and in Section 6.18 as an "Affected Store") as
the result of any agreement with or order of any Governmental Authority
(including, without limitation, an order consented to by Buyer) related to any
written inquiry, investigation or complaint by any Governmental Authority
received by Buyer prior to or within one year after the Closing, the parties
agree as follows:
6.17.1. Open Stores. If the Affected Store is listed on the Store
Schedule under the caption "Open Store Schedule," Seller shall, upon
written notice thereof furnished to Seller by Buyer at any time within 30
days following the cessation of operations, vacation or transfer of such
Affected Store pursuant to such agreement or order, promptly pay to Buyer
an amount in cash equal to 3 multiplied by, in the case of a Seller Store,
the store contribution for such store as listed on the Open Store Schedule
or, in the case of a Buyer Store, the store contribution for such store for
the fiscal year of Buyer ended January 28, 1995 as certified to Seller by
Buyer (and calculated in accordance with Buyer's customary methods of
calculation thereof) (any such store contribution of either a Seller Store
or a Buyer Store being referred to herein as "Store Contribution"), but in
no event shall the amount of any such payment be less than $250,000;
provided that in respect of any Seller Store that was in operation for less
than all of the Company's fiscal year ended December 31, 1994 or opened
thereafter (a "New Seller Store") or any Buyer Store that was in operation
for less than all of Buyer's fiscal year ended January 28, 1995 or opened
thereafter (a "New Buyer Store"), the Store Contribution shall be equal to
the Assumed Store Contribution. The term "Assumed Store Contribution"
shall mean 66% of the weighted average Store Contribution (such weighting
to be based on sales volumes) for the applicable fiscal year for Similar
Sales Volume Stores of Seller in the case of a New Seller Store or of Buyer
in the case of a New Buyer Store. The term "Similar Sales Volume Stores"
shall mean (i) in the case of a New Seller Store, Seller Stores (other than
New Seller Stores) that produced sales volume for the fiscal year of Seller
ended December 31, 1994 equal to at least 90% and not more than 110% of the
sales volume of the applicable New Seller Store for the most recent full 12
calendar months for which such New Seller Store has been in operation prior
to the Closing Date (or if such New Seller Store has been in operation for
less than 12 full calendar months prior to the Closing Date, then the
annualized sales volume based upon the number of full calendar months for
which such New Seller Store has been in operation prior to the Closing
Date) and (ii) in the case of a New Buyer Store, Buyer Stores (other than
New Buyer Stores) that produced sales volume for the fiscal year of Buyer
ended January 28, 1995 equal to at least 90% and not more than 110% of the
sales volume of the applicable New Buyer Store for the most recent full 12
calendar months for which such New Buyer Store has been in operation prior
to the Closing Date (or if such New Buyer Store has been in operation for
less than 12 full calendar months prior to the Closing Date, then the
annualized sales volume based upon the number of full calendar months for
which such New Buyer Store has been in operation prior to the Closing
Date.)
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6.17.2. Closed Stores. If the Affected Store is listed on the Store
Schedule under the caption "Closed Stores Schedule," Seller shall, subject
to the provisions of this Section 6.17.2 regarding dispute resolution, upon
written notice thereof furnished to Seller by Buyer at any time or from
time to time within two years following any such cessation of operations,
vacation or transfer of such Affected Store pursuant to such agreement or
order, promptly pay to Buyer an amount (in aggregate) that constitutes 50%
of Buyer's Closed Store Damages with respect to such cessation, vacation or
transfer, but in no event more than $250,000. "Buyer's Closed Store
Damages" shall mean the present value (applying a discount rate of 9%) of
all actual Losses that are incurred by Buyer as a result of such cessation,
vacation or transfer, after netting out from such amount the present value
(applying a discount rate of 9%) of all actual Losses that Buyer reasonably
would have been expected to incur if such store had been voluntarily closed
by Buyer in the ordinary course of business. If the parties fail to agree
upon the amount payable from Seller to Buyer in the event of an occurrence
subject to this Section 6.17.2, the parties shall first use commercially
reasonable efforts to resolve such disagreement among themselves. If such
disagreement shall not have been resolved within 30 days following delivery
of a notice by Buyer to Seller referred to in the first sentence of this
Section 6.17.2, the dispute shall be submitted to Alternative Accountants
for resolution within 30 calendar days after submission. The determination
of the Alternative Accountants as to the resolution of any dispute shall be
binding and conclusive upon all parties hereto. All determinations
pursuant to this Section 6.17 shall be in writing and shall be delivered to
the parties hereto. Any award made pursuant to this Section 6.17 may be
entered in and enforced by any court referred to in Section 11.1 hereof and
the parties hereby consent and submit themselves to the jurisdiction of any
such court for purposes of the enforcement of any such award.
Buyer agrees to keep Seller generally apprised of the status of any written
inquiry, investigation or complaint by any Governmental Authority that may
result in an event to which this Section 6.17 would apply. Buyer and Seller
agree that the provisions of this Section 6.17 constitute a material inducement
upon which each is relying and will rely in entering into this Agreement and any
other agreements relating hereto or contemplated hereby, and that the Purchase
Price has been determined in light of the provisions of this Section 6.17.
Buyer and Seller acknowledge and agree that the amount of Losses that will be
incurred by Buyer will be difficult or impossible to determine if an event
occurs which is the subject matter of this Section 6.17 and that the payments
required under this Section 6.17 are intended to compensate Buyer for such
Losses and to be the sole remedy for such Losses. Buyer shall have no duty to
take any action in respect of any such event for the purpose of mitigating such
Losses.
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6.18. Failed Consents.
If prior to the first anniversary of the Closing Date, neither Seller nor
Buyer has received any written objection from a lessor or sublessor (a
"Landlord") under a lease or other Contractual Obligation for any Seller Store
indicating that a consent or other approval (a "Consent") of such Landlord is
required under such lease or other Contractual Obligation in connection with the
transactions contemplated hereby, a Consent shall be deemed to have been
delivered with respect to such lease or other Contractual Obligation (a
"Delivered Lease"). If prior thereto either Seller or Buyer has received any
such written objection from a Landlord, the related lease or other Contractual
Obligation shall not be considered a Delivered Lease until (a) two (2) years
have elapsed from the Closing Date without the commencement of legal proceedings
by such Landlord against Seller, Buyer, the Company or any of its Subsidiaries
or (b) such Landlord irrevocably withdraws its objections in writing or legal
proceedings having been commenced within two years after the Closing Date are
discontinued with prejudice or otherwise finally resolved against such Landlord
without further right of appeal on the part of such Landlord. If legal
proceedings are commenced against Seller, Buyer, the Company or any Subsidiary
regarding any such Consent more than two (2) years after the Closing Date, Buyer
shall be responsible for defending such action at Buyer's sole cost and expense.
If at any time prior to or subsequent to the Closing, Buyer or any of its
Subsidiaries shall be required by court order, judgment or other proceeding, or
any settlement of any such proceeding, to cease to operate or to vacate any
Affected Store (other than a Store covered by a Delivered Lease) designated as a
"Seller Store" on the Store Schedule (an "Eviction"), or shall reasonably agree
to an increase in the rent (including, without limitation, rent retroactive to
the Closing) (a "Rent Increase") for any Affected Store (other than a Store
covered by a Delivered Lease) designated as a Seller Store on the Store
Schedule, in either case as the result of any alleged breach or default under,
or lessor's or sublessor's right of termination under, the lease or other
Contractual Obligation applicable to such store primarily as a result of the
transactions contemplated hereby, the parties agree as follows:
6.18.1. Evictions. In the case of an Eviction:
(i) If such Affected Store is listed on the Store Schedule
under the caption "Open Store Schedule," Seller shall, upon written
notice thereof furnished to Seller by Buyer at any time within 30
days following the cessation of operations or vacation of such
Affected Store, promptly pay to Buyer an amount in cash equal to 3
multiplied by the Store Contribution for such store but in no event
less than $250,000.
(ii) If such Affected Store is listed on the Store Schedule
under the caption "Closed Stores Schedule," Seller shall, subject
to the provisions of this Section 6.18.1(ii) regarding dispute
resolution, upon written notice thereof furnished to Seller by
Buyer at any time or from time to time within two years
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following any such cessation of operations or vacation of such
Affected Store, promptly pay to Buyer an amount that constitutes
50% of Buyer's Closed Store Damages with respect to such cessation
or vacation, but in no event more than $250,000. If the parties
fail to agree upon the amount payable from Seller to Buyer in the
event of an occurrence subject to this clause (ii), such dispute
shall be resolved in the manner and on the terms set forth for the
resolution of disputes in Section 6.17.2 (with references therein
to Section 6.17.2 being understood to apply to this clause (ii)).
6.18.2. Rent Increases. In the event of a Rent Increase:
(i) If such Affected Store is listed on the Store Schedule
under the caption "Open Store Schedule" Seller shall, upon written
notice thereof furnished to Seller by Buyer at any time within 30
days following the date Buyer, the Company, any Subsidiary or any
of their respective Affiliates enters into an agreement providing
for a Rent Increase with respect to such Affected Store, promptly
pay to Buyer in cash an amount equal to 50% of the present value
(applying a discount rate of 9%) of the increase in rent for the
remainder of the current lease term and, only if the rent increase
is applicable thereto, any available renewals thereof under the
applicable lease. A rent increase shall not be deemed a Rent
Increase unless the existing minimum or base rent (the "Original
Minimum Rent") for the applicable lease is increased from such
Original Minimum Rent to a new minimum rent (the "New Minimum
Rent") more than the sum of the Original Minimum Rent and the
percentage rent (if any) paid on such lease for the most recent
twelve-month period ending prior to the Closing Date governing
percentage rent and the breakpoint used to calculate the percentage
rent is adjusted to reflect the New Minimum Rent. In no event shall
the amount required to be paid under this Section 6.18.2(i) exceed
the amount which Seller would be required to pay under Section
6.18.1(i) if the applicable store were subject to an Eviction.
(ii) If such Affected Store is listed on the Store
Schedule under the caption "Closed Stores Schedule," Seller shall
have no liability for any Rent Increase.
Buyer agrees to keep Seller generally apprised of the status of any matter
that may result in an event to which this Section 6.18 would apply. Buyer and
Seller agree that the provisions of this Section 6.18 constitute a material
inducement upon which each is relying and will rely in entering into this
Agreement and any other agreements relating hereto or contemplated hereby, and
that the Purchase Price has been determined in light of the provisions of this
Section 6.18. Buyer and Seller acknowledge and agree that the amount of Losses
that will be incurred by Buyer will be difficult or impossible to determine if
an event occurs which is the subject matter of this Section 6.18 and that the
payments required under
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this Section 6.18 are intended to compensate Buyer for such Losses and to be the
sole remedy for such Losses. Buyer shall have no duty to take any action in
respect of any such event for the purpose of mitigating such Losses
6.19. No Solicitation or Employment. Except as provided by law, for a
period beginning on the date hereof and ending two years after the Closing Date,
neither the Seller nor any of its Affiliates shall solicit to employ or employ
any individual who is an employee of the Company or any of its Subsidiaries on
the date hereof, or at any time following the date hereof, and who on or prior
to the Closing Date occupies a home office position (other than a secretarial or
clerical position) or a management position, unless at least six months shall
have elapsed following the Closing and following the cessation of such
individual's employment with Buyer or any of its Affiliates. The restrictions
of this Section 6.19 shall not apply to any individual listed on the document
entitled "Listed Employees" initialed by the parties to the extent specified
therein. Any individual specified therein shall be treated for purposes of
Section 9 of this Agreement and all other purposes as between the parties in the
manner specified in such document.
6.20. Manchester, CT and Staten Island, NY Stores; Etc. Prior to the
Closing, Seller or any Affiliate of Seller and the Company shall enter into
leases for the stores of the Company open or to be opened in Manchester,
Connecticut and Staten Island, New York on the terms set forth in Schedule 6.20.
7. CONDITIONS TO THE OBLIGATION TO CLOSE OF BUYER. The obligations of Buyer
at the Closing to purchase the Shares and to execute and deliver the Closing
Agreements to which it is party are subject to the satisfaction, at or prior to
the Closing, of all of the following conditions, compliance with which, or the
occurrence of which, may be waived prior to the Closing in writing by Buyer in
its sole discretion:
7.1. Representations, Warranties and Covenants.
7.1.1. Continued Accuracy of Representations and Warranties. All
representations and warranties of Seller contained in this Agreement or any
Closing Agreement that include qualifications as to materiality or Material
Adverse Effect shall be true and correct as of the Closing and all other
representations and warranties of Seller contained in this Agreement or any
Closing Agreement shall be true and correct in all material respects as of
the Closing, in each case with the same force and effect as if such
representations and warranties were made at and as of the Closing.
7.1.2. Performance of Agreements. Seller shall have performed and
satisfied in all material respects all covenants and agreements required by
this Agreement or any Closing Agreement to be performed or satisfied by it
at or prior to the Closing.
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7.1.3. Closing Certificate. At the Closing, Seller shall furnish to
Buyer an unqualified certificate, signed by the President or Chief
Financial Officer of Seller, dated the Closing Date, to the effect that the
conditions specified in Sections 7.1.1 and 7.1.2 hereof have been
satisfied.
7.2. Closing Agreements. At or prior to the Closing, the parties
thereto other than Buyer shall have entered into each of the following
Agreements (the "Closing Agreements"), in substantially the form thereof
attached hereto without change other than such changes as may be reasonably
satisfactory to Buyer:
(i) a Transitional Services Agreement having substantially the terms
set forth in Schedule 7.2(i) (the "Transitional Services Agreement");
(ii) the Preferred Stock Subscription Agreement;
(iii) the Standstill and Registration Rights Agreement.
7.3. Legality; Governmental Authorization; Litigation. Buyer's purchase of
and payment for the Shares, and the consummation of the other transactions
contemplated hereby, shall not be prohibited by any Legal Requirement (other
than any Permit). All necessary filings, if any, pursuant to the HSR Act shall
have been made and all applicable waiting periods thereunder shall have expired
or been terminated. No Action shall have been instituted at or prior to the
Closing by any Governmental Authority that seeks to delay, enjoin or otherwise
make illegal the consummation of the transactions contemplated hereby; provided
that if such Action shall have been instituted by a non-federal Governmental
Authority, there must be a reasonable likelihood that the result of such Action
could be to delay, enjoin or otherwise make illegal Buyer's purchase of the
Shares or the consummation of any other transaction contemplated hereby.
7.4. Affiliate Debt. There shall not be outstanding any Affiliate Debt. In
addition, there shall not be outstanding any Debt or other advances owed to the
Company or any Subsidiary by Seller or any of its Affiliates or by any present
or former employee, stockholder or director of Seller.
7.5. Financing. Buyer shall have obtained the funds to be provided
pursuant to the Commitment Letter, unless Buyer shall have failed to have
obtained such funds exclusively as a result of Buyer's failure to pay any fees
or expenses required to be paid by Buyer under the Commitment Letter.
7.6. Opinion of Counsel. Seller shall have furnished Buyer with favorable
opinions of Davis Polk & Wardwell and Arthur V. Richards, general counsel of
Seller, each dated the Closing Date, in substantially the forms of Exhibits C-1
and C-2 hereto.
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7.7. General. Seller shall have furnished Buyer with such officers'
certificates, good standing certificates, incumbency certificates and other
customary closing documents as it may reasonably request in connection with the
transactions contemplated hereby, including, without limitation (i) an
instrument of assumption by Seller of the Excluded Liabilities, (ii) either a
"sworn affidavit" or a "qualifying statement" that complies with Section 1445 of
the Code and (iii) such director and officer resignation letters as Buyer may
reasonably have requested of any of the officers or directors of the Company or
any Subsidiary prior to Closing.
8. CONDITIONS TO THE OBLIGATION TO CLOSE OF SELLER. The obligations of Seller
at the Closing to sell and transfer the Shares and to execute and deliver the
Closing Agreements to which it is party are subject to the satisfaction, at or
prior to the Closing, of all of the following conditions, compliance with which,
or the occurrence of which, may be waived prior to the Closing in writing by
Seller in its sole discretion:
8.1. Representations, Warranties and Covenants.
8.1.1. Continued Accuracy of Representations and Warranties. All
representations and warranties of Buyer contained in this Agreement or any
Closing Agreement that include qualifications as to materiality shall be
true and correct as of the Closing and all other representations and
warranties of Buyer contained in this Agreement or any Closing Agreement
shall be true and correct in all material respects as of the Closing, in
each case with the same force and effect as if such representations and
warranties were made at and as of the Closing.
8.1.2. Performance of Agreements. Buyer shall have performed and
satisfied in all material respects all covenants and agreements required by
this Agreement or any Closing Agreement to be performed or satisfied by
Buyer at or prior to the Closing.
8.1.3. Officer's Certificate. At the Closing, Buyer shall furnish
to Seller an unqualified certificate signed by the President or Senior Vice
President - Finance and Chief Financial Officer of Buyer dated the Closing
Date, to the effect that the conditions specified in Sections 8.1.1 and
8.1.2 hereof have been satisfied.
8.2. Closing Agreements; Buyer Stock. At or prior to the Closing,
Buyer shall have entered into each of the Closing Agreements to which it is
party, such agreements being in substantially the form attached hereto without
change other than such changes as may be reasonably satisfactory to Seller, and
Buyer shall have issued to Seller the Buyer Stock.
8.3. Legality; Government Authorization; Litigation. Seller's sale of
the Shares, and the consummation of the other transactions contemplated hereby,
shall not be prohibited by any Legal Requirement (other than any Permit). All
necessary filings, if any, pursuant to the HSR Act shall have been made and all
applicable waiting periods thereunder shall have
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expired or been terminated. No Action shall have been instituted at or prior to
the Closing by any Governmental Authority that seeks to delay, enjoin or
otherwise make illegal the consummation of the transactions contemplated hereby;
provided that if such Action shall have been instituted by a non-federal
Governmental Authority there must be a reasonable likelihood that the result of
such Action could be to delay, enjoin or otherwise make illegal Seller's sale of
the Shares or the consummation of any other transaction contemplated hereby.
8.4. Opinion of Counsel. Buyer shall have furnished Seller with
favorable opinions of Ropes & Gray and Jay Meltzer, Senior Vice President,
General Counsel and Secretary of Buyer, each dated the Closing Date, in
substantially the forms of Exhibits D-1 and D-2 hereto.
8.5. General. Seller shall have received copies of such officers'
certificates, good standing certificate, incumbency certificates and other
customary closing documents as it may reasonably request in connection with the
transactions contemplated hereby.
9. EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS.
9.1. Definitions. As used in this Agreement:
(a) the term "Employee" means an individual who, as of the Closing
Date, is employed (including persons absent from active service by reason
of layoff, illness, disability, or leave of absence, whether paid or
unpaid) by the Company or any of its Subsidiaries.
(b) the term "Former Employee" means an individual who at any time
prior to the Closing Date was employed by the Company or any of its
Subsidiaries, but excluding any such person who is an Employee.
(c) the term "Company Plan" means each "employee benefit plan" as
defined at Section 3(3) of ERISA which (i) is maintained, sponsored,
contributed to, or participated in by Seller, the Company, any Subsidiary,
any other Person in the same Controlled Group as any of the foregoing, or
any of their respective predecessors, and (ii) covers or benefits one or
more Employees or their spouses or dependents or with respect to which the
Company or any of its Subsidiaries has or may have a material Liability.
(d) the term "Benefit Arrangement" means each plan, arrangement,
contract, policy or practice (any of the foregoing, an "arrangement") of
Seller, the Company, any Subsidiary, any other Person in the same
Controlled Group as any of the foregoing, or any of their respective
predecessors, which arrangement (i) provides any of the following benefits,
coverages or insurance: pension, profit-sharing, savings, bonus, stock
bonus, supplemental pension, deferred compensation (including so-called
"excess" or "top-hat" deferred compensation), health (including dental,
vision,
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prescription drug and hospitalization), life insurance, short-term
disability, long-term disability, severance, salary continuation, holiday,
vacation, sick leave, scholarship, tuition assistance, dependent care
spending, employee assistance, relocation, company car or automobile
allowance, stock options, stock purchase, restricted stock, stock
appreciation rights, phantom stock, or any other retirement, welfare,
fringe benefit, or other employment- or service-related benefit (including
any arrangement that facilitates the provision of such benefits, such as a
"cafeteria plan" or spending account under Section 125 of the Code); (ii)
covers or benefits one or more Employees or their spouses or dependents or
with respect to which the Company or any Subsidiary has or may have a
material Liability; and (iii) is not a Company Plan.
(e) the term "Seller's Employee Stock Ownership Plan" means the
Melville Corporation and Subsidiaries Employee Stock Ownership Plan, as
amended from time to time.
(f) the term "Seller's 401(k) Profit Sharing Plan" means the 401k
Profit Sharing Plan of Melville Corporation and Affiliated Companies.
9.2. Disposition of Company Plans and Benefit Arrangements. Except as
otherwise provided in this Agreement, Seller shall take such steps as are
necessary to ensure that, as of the Closing, the Company and its Subsidiaries
shall cease to participate in all Company Plans and Benefit Arrangements, other
than those Company Plans and Benefit Arrangements, if any, sponsored and
maintained solely by the Company or its Subsidiaries. At Buyer's request,
Seller shall continue to cover Employees (and eligible spouses or dependents)
under the Company Plans which provide medical, life insurance and disability
benefits, from the Closing Date until such day after the Closing Date not later
than April 30, 1996 as Buyer shall specify (the "Benefit Transition Period").
Buyer shall pay the cost (including any employee contributions received by
Buyer) of such coverage on the basis of an equitable allocation determined in
accordance with the Transitional Services Agreement. Seller acknowledges
Buyer's interest in integrating Employees into benefit programs currently
maintained or to be established by Buyer, and to that end agrees promptly to
transfer to Buyer such employee- and benefits-related records and other
information relating to Employees and Former Employees as Buyer may reasonably
request, and otherwise to cooperate with Buyer. If so requested by Buyer,
Seller shall make reasonable endeavors, including correspondence and cooperation
with insurers or service providers to facilitate the creation or continuation by
Buyer of transition plans or arrangements for Employees similar to those Company
Plans and Benefit Arrangements which provide welfare benefits or insurance
coverage. Except as provided in Section 9.3, Section 9.4 or Section 9.5, after
the Benefit Transition Period, Buyer shall make available to Employees medical,
life-insurance and disability benefits on terms substantially comparable to
those generally available to other employees of Buyer and its subsidiaries or to
those available under the applicable Company Plan, without limitation for
preexisting conditions other than any such condition or limitation (including,
without limitation, preexisting condition exclusions, waiting periods, actively-
at-work requirements, and other
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similar exclusions and conditions) as to which the relevant Company Plan
provided only a conditional waiver and as to which the Employee (or in the case
of his or her spouse or dependents, such spouse or dependents) had not, as of
the Closing, satisfied the relevant conditions for such waiver. Buyer may
provide, at Buyer's expense, or cause the Company and its Subsidiaries to
continue or provide, at the Company's or its Subsidiaries' expense, such other
benefits, if any, as Buyer in its sole discretion shall determine.
9.3. Employment. Buyer may identify by separate letter to Seller
individuals who will not continue in the employ of the Company or its
Subsidiaries after the Closing, but any such individual, if employed immediately
prior to the Closing, shall be treated for purposes of this Agreement as having
been terminated following the Closing. Individuals who are Employees but who
for any reason are not in active service at the Closing ("Non-Active
Employees"), other than individuals described in the preceding sentence, shall
be entitled to resume work for the Company or its Subsidiaries if and when they
are able and willing to return to active service, subject to such limitations
and restrictions, consistent with applicable law, as may apply under the
Company's or Buyer's employment policies as in effect at the time of such
return. Buyer shall cause the Company to retain all obligations relating to all
vacation and personal holidays to which each individual who is an Employee
immediately prior to the Closing is entitled as of the Closing under the
applicable Company Plan or Benefit Arrangement in effect on the date hereof, and
each such Employee shall be entitled to use and to be compensated for such
vacation, sick days and personal holidays for the period ending December 31,
1995 under such Company Plan or Benefit Arrangement and for the period
commencing January 1, 1996 in accordance with Buyer's policies and practices.
9.4. Liabilities Retained or Assumed by Seller. From and after the
Closing, the Seller shall, at its sole cost and expense, continue to provide and
administer the benefits set forth below that are currently provided through
Company Plans and Benefit Arrangements, and shall reimburse Buyer for other
benefits to the extent specified below.
(a) With respect to all Employees and their dependents, Seller shall
provide and be liable for any and all medical, dental, vision and life
insurance claims incurred, and other welfare and fringe benefits that are
incurred or payable or for which claims for payment are made, on or before
the Closing Date. In the case of any individual described in the first or
second sentences of Section 9.4(b) who is receiving long-term disability
benefits or worker's compensation (or employer's liability) benefits at the
Closing, and his or her spouse and eligible dependents, Seller shall also
provide and be liable for any and all welfare benefits and fringe benefits
in accordance with the terms of the applicable Company Plan or Benefit
Arrangement (including workers' compensation program) or a comparable
replacement plan or arrangement of Seller, including without limitation any
extended benefits, waiver of premium, survivor health, COBRA, conversion
and any other applicable continuation of coverage provision, until such
time, if any, as such individual returns to active service with the Company
and its Subsidiaries, and without limiting the foregoing Seller shall be
liable for all claims
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under such benefit programs that are incurred prior to the time such
individual returns to active service with the Company and its Subsidiaries.
In the case of any other individual who is described in the first or second
sentences of Section 9.4(b) or who is not described in Section 9.4(b) but
is receiving short-term disability (including salary continuation) benefits
at the Closing (or who later receives short-term disability or salary-
continuation benefits in respect of an injury, illness or other condition
sustained or occurring on or prior to the Closing), and the spouse and
eligible dependents of any such individual, Seller shall reimburse Buyer
for any and all welfare benefit claims (other than short-term disability
payments) incurred and fringe benefits provided prior to such time, if any,
as such individual returns to active service with the Company and its
Subsidiaries. Following the return to active service with the Company and
its Subsidiaries of an individual described in the second sentence of
Section 9.4(b), Seller shall continue to be liable for any continuing
worker's compensation medical benefits to the individual, but Buyer shall
be liable for other welfare and fringe benefits (including dependent
coverage) and for any future workers' compensation claims with respect to
the individual. For purpose of this Section, a claim will be deemed to
have been incurred when an individual is provided with medical, dental,
vision or other services that are covered expenses and give rise to the
claim; provided that a claim for life insurance or similar death benefits
will be deemed to have been incurred at time of death (except that any life
insurance waiver-of-premium claims shall be deemed to have been incurred as
of the date of disability).
(b) Seller from and after the Closing shall continue to provide and
be liable for long-term disability benefits in accordance with the terms of
the applicable Company Plan or Benefit Arrangement (or under a comparable
plan or arrangement of Seller) to each individual who as of the Closing is
receiving long-term disability benefits or who later becomes entitled to
long-term disability benefits relating to an injury, illness or other
condition sustained or occurring on or prior to the Closing Date. Seller
from and after the Closing shall continue to provide and be liable for
workers' compensation benefits and employer's liability benefits in
accordance with the terms of the applicable workers' compensation program
and applicable law to each individual who as of the Closing is receiving
workers' compensation benefits or employer's liability benefits or who
later becomes entitled to workers' compensation benefits or employer's
liability benefits relating to an injury, illness or other condition
sustained or occurring on or prior to the Closing Date.
(c) Without limiting the foregoing, Seller shall provide and remain
liable for any and all continuation of coverage required under Sections 601
through 608 of ERISA and Section 4980B of the Code with respect to any
person as to whom the qualifying event (as defined at Section 6503 of
ERISA) occurred at or prior to the Closing, other than individuals
identified pursuant to the first sentence of Section 9.3.
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(d) Without limiting the foregoing, Seller shall be liable for all
Compensation (including deferred compensation and severance) and benefits
related claims and liabilities arising prior to or on or after the Closing
Date, including without limitation all claims and liabilities under Company
Plans and Benefit Arrangements, with respect to any Person (and such
Person's spouse and dependents and beneficiaries) who is or becomes a
Former Employee or who dies prior to the Closing.
(e) Any Liability for welfare and fringe benefits for which Seller
is liable pursuant to this Section 9 shall not be reflected in the Closing
Balance Sheet.
9.5. Certain Severance Arrangements. Buyer agrees that any Employee
whose employment is involuntarily terminated by Buyer other than for cause
during the period commencing on the Closing Date and ending on the day which is
six months after the Closing Date and who furnishes Buyer with a fully executed
release satisfactory to Buyer (and the period, if any, within which such release
may be revoked has expired) shall receive a severance benefit consisting of (i)
cash severance determined in accordance with Schedule 9.5, plus (ii) any non-
cash benefits to which the Employee would be entitled if the terms of Schedule
9.5A rather than the terms of Schedule 9.5 were applied, in each case based on
the Employee's rate of pay, salary grade (or position) and service as of the
Closing Date; provided, that Seller shall be liable and shall reimburse Buyer
for the amount by which any cash severance determined in accordance with
Schedule 9.5 in respect of an involuntary termination other than for cause
during such six-month period exceeds the applicable cash severance amount set
forth in Schedule 9.5A, in each case based on the Employee's rate of pay, salary
grade (or position) and service as of the Closing Date.
9.6. Qualified Plans. Buyer shall take such steps as are necessary to
enable Employees entitled to receive an eligible rollover distribution (as
defined at Section 402(c)(4) of the Code) from Seller's Employee Stock Ownership
Plan in connection with the Purchase to transfer the distribution in accordance
with Section 402(c) of the Code to a tax-qualified plan maintained by Buyer. In
the case of Seller's 401(k) Profit Sharing Plan, Seller shall cause account
balances for affected participants to be transferred on a non-elective basis
pursuant to section 414(l) of the Code to one or more 401(k) plan or plans
designated by Buyer. Buyer shall not be obligated to cause its plans to accept
(i) any eligible rollover distribution or other transfer in respect of an
individual who is not employed by Buyer or its subsidiaries at the time of the
transfer, (ii) any assets other than cash or other property acceptable to the
trustee of the recipient plan, or (iii) any transfer unless and until Buyer is
reasonably satisfied that the transferor plan is, and Seller is reasonably
satisfied that the transferee plan is, at the time of transfer, qualified under
section 401(a) of the Code. In respect of any Employee described in clause (i)
of the preceding sentence who becomes entitled to a distribution under Seller's
401(k) Profit Sharing Plan upon termination of employment after the Closing by
the Company and its Subsidiaries, and as to any other Employee with respect to
records under Buyer's control, Buyer agrees to cooperate with Seller in
obtaining all necessary consents in respect of any distribution to be made from
Seller's 401(k) Profit Sharing plan to such individual.
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9.7. Service Credit. Buyer shall take such steps as are necessary to
ensure that for purposes of determining service for eligibility and, for
qualified plans other than any defined benefit plan maintained by Buyer, vesting
service under any of Buyer's employee benefit plans for which an Employee is
otherwise eligible, an Employee's service shall include his or her service for
the Company and the Persons in the same Controlled Group as the Company prior to
Closing. Nothing herein shall be construed as requiring that pre-Closing
service be credited under Buyer's plans for purposes of determining benefit
accrual except for purposes of determining any individual's benefit under a
vacation or severance plan.
9.8. WARN Act. Buyer shall indemnify Seller and its Affiliates and
hold each of them harmless from and against any Losses which may be incurred or
suffered by any of them under the Worker Adjustment and Retraining Notification
Act or any state or Puerto Rico plant closing or notification law arising out
of, or relating to, any actions taken by Buyer or the Company or any Subsidiary
after the Closing. Seller shall indemnify Buyer and its Affiliates (including,
without limitation, the Company and each Subsidiary of the Company from and
after the Closing) and hold each of them harmless from and against any Losses
that may be incurred or suffered by any of them under the Worker Adjustment and
Retraining Notification Act or any state or Puerto Rico plant closing or
notification law arising out of, or relating to, any actions taken by Seller or
the Company or any Subsidiary of the Company before the Closing.
10. INDEMNIFICATION.
10.1. Indemnification. Seller (in its capacity as indemnifying party,
the "Indemnifying Party") hereby agrees to indemnify each of Buyer and its
Affiliates (including, without limitation, the Company and each Subsidiary of
the Company from and after the Closing) (each in its capacity as indemnified
party, an "Indemnitee") and hold each of Buyer and such Affiliates harmless, and
Buyer (in its capacity as indemnifying party, the "Indemnifying Party") hereby
agrees to indemnify Seller and its Affiliates other than the Company or any
Subsidiary of the Company (each in its capacity as indemnified party, an
"Indemnitee") and hold each of Seller and such Affiliates harmless, from,
against and in respect of any and all Losses arising from or related to any of
the following:
10.1.1. Seller. In the case of Seller as Indemnifying Party:
(i) any breach of or inaccuracy in (or any allegation by any
third party of facts which, if true as alleged, would constitute such
a breach or inaccuracy in) any representation or warranty made by or
on behalf of Seller in this Agreement (including, without limitation,
the Schedules hereto) or in any Closing Agreement or other document,
instrument or certificate delivered pursuant hereto (as such
representation or warranty would read if all qualifications as to
knowledge, materiality or Material Adverse Effect were deleted
therefrom);
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(ii) any breach or violation of any covenant or agreement made
by Seller in this Agreement (including, without limitation, the
Schedules hereto) or in any document, instrument or certificate
delivered pursuant hereto;
(iii) any Excluded Liability;
(iv) any Liability of the Company or any of its Subsidiaries
for Taxes (other than Taxes for which Seller indemnifies Buyer
pursuant to Section 6.7) of any Person other than the Company or such
Subsidiaries;
(v) any Liability of the Company related to Company Plans and
Benefit Arrangements to the extent they relate to Persons other than
Employees; or
(vi) any Liability of the Company or any of its Subsidiaries
arising solely as a result of the Company or any of its Subsidiaries
being a member of a group of companies or other entities controlled
by Seller or any other Person (other than the Company or any of its
Subsidiaries) prior to the Closing; or
(vii) any Liability asserted by any Governmental Authority
against the Company or any Subsidiary with respect to the escheat of
any unclaimed funds or asset which are asserted to have become
payable to such Governmental Authority (x) prior to the Closing Date,
or (y) subsequent to the Closing Date as a consequence of specific
transactions or events that occurred prior to the Closing Date (such
as the sale of gift certificates, etc.) to the extent such amounts
claimed by such Governmental Authority, when treated in the same
manner as other Liabilities in such category on the Company Net
Assets Statement (i.e., the obligation to redeem gift certificates),
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result in the total obligations of the Company and its Subsidiaries
exceeding the amount carried on the Company Net Assets Statement for
such category of Liability.
10.1.2. Buyer. In the case of Buyer as Indemnifying Party:
(i) any breach of or inaccuracy in (or any allegation by any
third party of facts which, if true as alleged, would constitute such
a breach or inaccuracy in) any representation or warranty made by or
on behalf of Buyer in this Agreement (including, without limitation,
the Schedules hereto) or in any Closing Agreement or other document,
instrument or certificate delivered pursuant hereto;
(ii) any breach or violation of any covenant or agreement made
by Buyer in this Agreement (including, without limitation, the
Schedules hereto) or in any document, instrument or certificate
delivered pursuant hereto;
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(iii) any Liability of Seller or any of its Affiliates arising
out of, with respect to or in connection with any Guarantee of any
Lease of the Company or any of its Subsidiaries other than to the
extent the obligations under such Guarantee or Lease constitute an
Excluded Liability; or
(iv) any Liability incurred by Seller or any of its Affiliates
at any time after the Closing arising out of, with respect to or in
connection with the Business or any matter or circumstance involving
the Company or any of its Subsidiaries, other than (a) any Excluded
Liabilities (b) any Losses covered by Section 6.7 or the indemnity in
Section 10.1.1. or (c) any Losses arising out of an illegal or
tortious course of conduct on the part of Seller or any of its
Affiliates.
10.2. Time Limitation on Indemnification. Notwithstanding the foregoing, no
claim may be made or suit instituted under any provision of this Section 10 more
than 90 days following the availability of the audited financial statements of
Buyer for its fiscal year ending nearest to January 31, 1997 (the "General
Survival Period") except for Reserved Claims. The term "Reserved Claims" shall
mean (a) all claims as to which any Indemnitee has given any Indemnifying Party
notice on or prior to the end of the General Survival Period or, if later, for a
claim referred to in clause (c) or (d) of this sentence, on or prior to the end
of the period by which such claim may be made in accordance with this Section
10.2, (b) all claims by any Indemnitee based upon an alleged or actual breach of
or inaccuracy in the representations or warranties contained in Sections 4.1,
4.19, 5.1 or 5.7 or contained in Section 3.1.2 or 3.1.3(b) of the Preferred
Stock Subscription Agreement (but only insofar as said Section 3.1.3(b) relates
to the General Corporation Law of the State of Delaware), (c) all claims by any
Indemnitee based upon an alleged or actual breach of or inaccuracy in the
representations or warranties contained in Section 4.15, (d) all claims based
upon an alleged or actual breach of or inaccuracy in the representations or
warranties contained in Section 4.14 and all claims pursuant to clause (vii) of
Section 10.1.1, (e) all claims pursuant to clauses (ii), (iii), (iv), (v) or
(vi) of Section 10.1.1 or clause (ii), (iii) or (iv) of Section 10.1.2 and (f)
all claims based upon fraud. As to the Reserved Claims referred to in clause (c)
of the definition thereof, no claim may be made or suit instituted after five
years from the Closing Date. As to Reserved Claims referred to in clause (d) of
the definition thereof, no claim may be made or suit instituted after thirty
(30) days after the expiration of the applicable statute of limitations. As to
Reserved Claims referred to in clause (a), (b), (e) or (f) of the definition
thereof, any claim may be made or suit instituted at any time without
limitation.
10.3. Monetary Limitations on Seller's Indemnification. Except with
respect to claims (i) arising out of the representations or warranties contained
in Section 4.1, 4.14 or 4.19, (ii) under clauses (ii), (iii), (iv), (v) or (vi)
of Section 10.1.1 hereof, or (iii) referred to in clause (f) of the definition
of Reserved Claims, Seller as Indemnifying Party shall not have any obligation
to indemnify Buyer or any of its Affiliates as Indemnitees under Section 10.1.1
in respect of any Loss incurred by Buyer and/or any of its Affiliates as
Indemnitees unless the
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aggregate cumulative total of all Losses (other than Losses arising out of
claims referred to in clauses (i), (ii) and (iii) of this sentence) incurred by
Buyer and/or any of its Affiliates as Indemnitees exceeds $10,000,000, whereupon
Buyer and each of its Affiliates as Indemnitees shall be entitled to
indemnification for the aggregate cumulative amount of such Losses in excess of
$5,000,000. With respect to claims referred to in clauses (i), (ii) or (iii) of
the first sentence of this Section 10.3, no such minimum dollar limitation shall
apply.
10.4. Certain Matters of Construction. References in this Section 10 to
claims with respect to or based upon a representation or warranty set forth in a
particular Section or Schedule shall be deemed to include without limitation
claims relating to such representations or warranties based upon the
certificates to be furnished pursuant to Sections 7.1.3 and 8.1.3 hereof.
10.5. Third Party Claims. Promptly after the receipt by any Indemnitee of
notice of the commencement of any Action against such Indemnitee by a third
party (other than any Action relating to Taxes or any Tax Return, which shall be
governed by Section 6.7) such Indemnitee shall, if a claim with respect thereto
is or may be made against any Indemnifying Party pursuant to this Section 10,
give such Indemnifying Party written notice thereof. The failure to give such
notice shall not relieve any Indemnifying Party from any obligation hereunder
except where, and then solely to the extent that, such failure actually and
materially prejudices the rights of such Indemnifying Party. Such Indemnifying
Party shall have the right to defend such Action, at such Indemnifying Party's
expense and with counsel of its choice reasonably satisfactory to the
Indemnitee, provided that the Indemnifying Party so notifies the Indemnitee
within 15 days after receipt of such notice and then actually commences the
defense of such Action, and otherwise the Indemnitee shall have the right to
defend such Action and the Indemnifying Party will reimburse the Indemnitee
promptly and periodically for the costs of defending against such Action,
including attorneys' fees and expenses. If the Indemnifying Party is defending
such Action, the Indemnitee may retain separate co-counsel at its sole cost and
expense and may participate in defense of such Action. The Indemnifying Party
will not be liable for any judgment or settlement with respect to such Action
effected without its prior written consent (unless the Indemnifying Party is not
conducting the defense of such Action pursuant to the provisions of this Section
10.5).
10.6. No Circular Recovery. Seller hereby agrees that it will not make
any claim for indemnification against Buyer, Company or any of its Subsidiaries
by reason of the fact that it or any of its officers, directors, agents or other
representatives was a controlling person, director, officer, employee, agent or
other representative of the Company or any of its Subsidiaries or was serving as
such for another Person at the request of the Company or any Subsidiary of the
Company (whether such claim is for Losses of any kind or otherwise and whether
such claim is pursuant to any statute, Charter, By-law, Contractual Obligation
or otherwise) with respect to any Action brought by Buyer or any of its
Affiliates against Seller (whether such Action is pursuant to this Agreement,
applicable law, or otherwise).
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10.7. Nature of Indemnification Payments. Any and all indemnification
payments pursuant to this Section 10 shall be deemed for all purposes to be
adjustments to the Purchase Price.
10.8. Exclusive Remedy. Notwithstanding anything to the contrary in this
Section 10, Section 6.7 hereof (and not this Section 10) shall be the exclusive
remedy for any breach of or inaccuracy in any representation or warranty
contained in Section 4.12 and any claim in respect of Taxes referred to in said
Section 6.7, and no claim may be made or suit instituted under Section 6.7 after
30 days after the expiration of the applicable statute of limitations. After the
Closing, this Section 10 (other than as set forth in the immediately preceding
sentence) will provide the exclusive remedy for any breach of or inaccuracy in
any representation or warranty referred to in this Section 10, any breach or
violation of any covenant or other agreement referred to in this Section 10
(other than as provided in Section 3.4), or other claim arising out of this
Agreement, any Closing Agreement or the transactions contemplated hereby or
thereby. Without limiting the generality of the foregoing, Buyer and, effective
at the Closing, the Company and its Subsidiaries hereby waive all rights for
contribution or any other rights of recovery (except as otherwise provided in
this Section 10) with respect to any Losses arising under or related to
Environmental Laws that it might have by statute or otherwise against Seller
insofar as such rights relate to the real property listed on Schedule 4.5.1 or
any real property subject to any Lease. Notwithstanding anything in this
Agreement to the contrary, (a) Seller shall not be responsible for indemnifying
Buyer or any of its Affiliates (including the Company and any of its
Subsidiaries after the Closing) for any Losses pursuant to this Section 10 (to
the extent such indemnification relates to environmental conditions,
contamination, release of Hazardous Substances or any other environmental
matters (each, an "Environmental Condition")) unless (i) Buyer or any of its
Affiliates is required to incur such Losses pursuant to any Environmental Law or
any Governmental Order or by any Governmental Authority or (ii) in the
reasonable judgment of Buyer, investigation, remediation, clean up or any other
action is required in connection with such Environmental Condition due to a
substantial risk to human health or the environment; provided that Buyer shall
--------
exercise all reasonable efforts to (A) limit or reduce any such remediation or
cleanup to the extent reasonable and (B) conduct such remediation or cleanup
efficiently and taking into account economic considerations to the same extent
as would a prudent business person. Prior to undertaking any remediation,
cleanup or other action (other than investigation) referred to in clause (ii) of
the immediately preceding sentence with respect to any Environmental Condition
which has resulted from the actions of a lessee of the Company or any of its
Subsidiaries or a known third party, Buyer shall notify such lessee or known
third party of such Environmental Condition in writing and shall request therein
that such lessee or known third party undertake or pay for such cleanup,
remediation or other action. If such lessee or known third party (i) does not
agree in writing, and in Buyer's reasonable judgment does not otherwise agree,
to undertake or pay for such cleanup, remediation or other action within 60 days
of receipt of such notice from Buyer, (ii) does so agree within such time period
but in Buyer's reasonable judgment does not have the resources to comply with
such agreement, or (iii) does so agree within such time period but does not
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diligently pursue such cleanup, remediation or other action, Buyer may undertake
such cleanup, remediation or other action. Buyer shall, prior to or after
commencing cleanup, remediation or other action (other than investigation) in
accordance with this Section 10.8, take such actions as Seller shall reasonably
request, at the cost and expense of Seller, for the purpose of making any such
lessee or known third party undertake or pay for such cleanup, remediation or
other action, including without limitation pursuing the remedies available to
the Company or any of its Subsidiaries under the Stock Purchase Agreement dated
as of April 20, 1994 between Marshalls, Inc. and NYDS Holding Limited.
11. CONSENT TO JURISDICTION; JURY TRIAL WAIVER.
11.1. Consent to Jurisdiction. Each party to this Agreement, by its
execution hereof, (i) hereby irrevocably submits, and agrees to cause each of
its Subsidiaries to submit, to the exclusive jurisdiction of the Federal courts
located in the County of New York, State of New York, and in the event that such
Federal courts shall not have subject matter jurisdiction over the relevant
proceeding, then of the state courts located in the County of New York, State of
New York, for the purpose of any Action arising out of or based upon this
Agreement or any Closing Agreement or relating to the subject matter hereof or
thereof or the transactions contemplated hereby or thereby, (ii) hereby waives,
and agrees to cause each of its Subsidiaries and Affiliates to waive, to the
extent not prohibited by applicable law, and agrees not to assert, and agrees
not to allow any of its Subsidiaries and Affiliates to assert, by way of motion,
as a defense or otherwise, in any such Action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that any such proceeding brought
in one of the above-named courts is improper, or that this Agreement or any
other Closing Agreement, or the subject matter hereof or thereof, may not be
enforced in or by such court and (iii) hereby agrees not to commence or to
permit any of its Subsidiaries or Affiliates to commence any Action arising out
of or based upon this Agreement or any Closing Agreement or relating to the
subject matter hereof or thereof other than before one of the above-named courts
nor to make any motion or take any other action seeking or intending to cause
the transfer or removal of any such Action to any court other than one of the
above-named court whether on the grounds of inconvenient forum or otherwise.
Each party hereby consents to service of process in any such proceeding in any
manner permitted by New York law, and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified
pursuant to Section 13.9 hereof is reasonably calculated to give actual notice.
11.2. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
THAT CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND AGREES TO
CAUSE EACH OF ITS SUBSIDIARIES AND AFFILIATES TO WAIVE, AND COVENANTS THAT
NEITHER IT NOR ANY OF ITS SUBSIDIARIES OR AFFILIATES WILL ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE OR ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR
ANY OTHER CLOSING AGREEMENT OR THE SUBJECT MATTER HEREOF OR THEREOF OR IN ANY
WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS
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CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING.
SELLER ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY BUYER THAT THIS SECTION 11.2
CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH BUYER IS RELYING AND WILL RELY IN
ENTERING INTO THIS AGREEMENT AND ANY OTHER AGREEMENTS RELATING HERETO OR
CONTEMPLATED HEREBY. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION 11.2 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
12. TERMINATION.
12.1. Termination of Agreement. This Agreement may be terminated by
the parties only as provided below:
(a) Buyer and Seller may terminate this Agreement by mutual written
consent at any time prior to the Closing.
(b) Buyer may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing (i) in the event that any
representation or warranty made by or on behalf of Seller herein or
pursuant hereto or in any Closing Agreement containing qualifications as to
materiality or Material Adverse Effect shall have been inaccurate when
made, or any other representation or warranty made by or on behalf of
Seller herein or in any Closing Agreement shall have been inaccurate in any
material respect when made, or in each case if then made would be so
inaccurate, and such inaccuracy is not capable of cure or if capable of
cure is not so cured within a reasonable period following notice of such
inaccuracy, (ii) in the event that Seller materially breaches or violates
any covenant or agreement contained herein or in any Closing Agreement to
be performed by Seller and such breach or violation is not capable of cure
or if capable of cure is not so cured within a reasonable period following
notice of such breach or violation, or (iii) if the Closing shall not have
occurred on or before January 31, 1996 by reason of the failure of any
condition set forth in Section 7 hereof to be satisfied (unless the failure
results primarily from the failure of any representation or warranty made
by or on behalf of Buyer herein or in any Closing Agreement containing
qualifications as to materiality or Material Adverse Effect to be true and
correct or any other representation or warranty made by or on behalf of
Buyer herein or in any Closing Agreement to be true and correct in all
material respects or from the material breach or violation by Buyer of any
covenant or agreement contained herein or in any Closing Agreement.
(c) Seller may terminate this Agreement by giving written notice to
Buyer at any time prior to the Closing (i) in the event that any
representation or warranty made by or on behalf of Buyer herein or pursuant
hereto or in any Closing Agreement containing qualifications as to
materiality or Material Adverse Effect shall have been inaccurate when
made, or any other representation or warranty made by or on behalf of
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Buyer herein or in any Closing Agreement shall have been inaccurate in any
material respect when made, or in each case if then made would be so
inaccurate, and such inaccuracy is not capable of cure or if capable of
cure is not so cured within a reasonable period following notice of such
inaccuracy, (ii) in the event that Buyer materially breaches or violates
any covenant or agreement contained herein or in any Closing Agreement to
be performed by Buyer and such breach or violation is not capable of cure
or if capable of cure is not so cured within a reasonable period following
notice of such breach or violation, or (iii) if the Closing shall not have
occurred on or before January 31, 1996 by reason of the failure of any
condition set forth in Section 8 hereof to be satisfied (unless the failure
results primarily from the failure of any representation or warranty made
by or on behalf of Seller herein or in any Closing Agreement containing
qualifications as to materiality or Material Adverse Effect to be true and
correct or any other representation or warranty made by or on behalf of
Seller herein or in any Closing Agreement to be true and correct in all
material respects or from the material breach or violation by Seller of any
covenant or agreement contained herein or in any Closing Agreement).
12.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 12.1, all obligations of the parties hereunder
(other than the obligations under Sections 6.3, 6.8, 6.9 (insofar as Section 6.9
relates to Buyer and its Subsidiaries), 11.1, 11.2, 13.1, 13.2, 13.8, 13.9,
13.11 and 13.13, which shall survive termination) shall terminate without any
liability of any party to any other party; provided, however, that no
termination shall relieve any party from any liability arising from or relating
to breach prior to termination.
13. MISCELLANEOUS.
13.1. Entire Agreement; Waivers. This Agreement, the Closing Agreements and
the Confidentiality Agreement constitute the entire agreement among the parties
hereto pertaining to the subject matter hereof and thereof and supersede all
prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the parties with respect to such
subject matter. No waiver of any provision of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), shall constitute a continuing waiver unless otherwise expressly
provided nor shall be effective unless in writing and executed (i) in the case
of a waiver by Buyer, by Buyer and (ii) in the case of a waiver by Seller, by
Seller.
13.2. Amendment or Modification. The parties hereto may not amend or modify
this Agreement except in such manner as may be agreed upon by a written
instrument executed by Buyer and Seller.
13.3. Survival, etc. All representations, warranties, covenants and
agreements made by or on behalf of any party hereto in this Agreement
(including, without limitation, the
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Schedules hereto), or pursuant to any document, certificate or other instrument
referred to herein or delivered in connection with the transactions contemplated
hereby, shall be deemed to have been material and relied upon by the parties
hereto, notwithstanding any investigation made by or on behalf of any of the
parties hereto or any opportunity therefor (including without limitation the
availability for review of any document), and, subject to the provisions of
Section 10, shall survive the execution and delivery of this Agreement and the
Closing. Neither the period of survival nor the liability of any party with
respect to such party's representations, warranties covenants and agreements
shall be reduced by any investigation made at any time by or on behalf of any
party. If written notice of a claim has been given prior to the expiration of
any time period set forth herein for any such notice by a party in whose favor
such representations, warranties, covenants or agreements have been made to any
party that made such representations, warranties, covenants or agreements, then
the relevant representations, warranties, covenants or agreements shall survive
as to such claim until such claims have been finally resolved.
13.4. Independence of Representations and Warranties. The parties hereto
intend that each representation, warranty, covenant and agreement contained
herein shall have independent significance. If any party has breached any
representation, warranty, covenant or agreement contained herein in any respect,
the fact that there exists any other representation, warranty, covenant or
agreement relating to the same subject matter (regardless of the relative levels
of specificity) that the party has not breached shall not detract from or
mitigate the fact that such party is in breach of the first representation,
warranty, covenant or agreement.
13.5. Severability. In the event that any provision hereof (including,
without limitation, any of the provisions of Section 6.9 hereof) would, under
applicable law, be invalid or unenforceable in any respect, such provision shall
(to the extent permitted under applicable law) be construed by modifying or
limiting it so as to be valid and enforceable to the maximum extent compatible
with, and possible under, applicable law. The provisions hereof (including,
without limitation, each of the provisions of Section 6.9 hereof) are severable,
and in the event any provision hereof should be held invalid or unenforceable in
any respect, it shall not invalidate, render unenforceable or otherwise affect
any other provision hereof.
13.6. Knowledge. Whenever reference is made herein to the knowledge of any
Person with respect to any matter, it is understood that such knowledge extends
only to the officers of such Person (and in the case of Seller, the officers of
the Company or any of its Subsidiaries) having responsibility for the areas of
such Person's (and in the case of Seller, also the Company's or any of its
Subsidiaries') business covering such matter, which officers have made an
inquiry that is reasonably appropriate to determine the accuracy of the
statement in question or, in the case of Actions, have made an inquiry that is
reasonably appropriate to determine the existence of Actions threatened in
writing against such Person (and in the case of Seller, against the Company or
any of its Subsidiaries).
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13.7. Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees, successors and assigns (each of which
such transferees, successors and assigns shall be deemed to be a party hereto
for all purposes hereof); provided, however, that (i) Seller may not assign or
transfer (by operation of law or otherwise) any of its rights or obligations
hereunder, (ii) Buyer may assign its rights and obligations hereunder (other
than to issue the Buyer Stock) to an Affiliate of Buyer (but Buyer shall not be
relieved of its obligations hereunder), and (iii) no transfer or assignment by
any party shall relieve such party of any of its obligations hereunder.
13.8. Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if in writing (including telecopy or
similar teletransmission), addressed as follows:
If to Seller, to it at: Melville Corporation
One Theall Road
Rye, New York 10580
Telecopier: 914-925-4052
Attention: Chief Executive Officer, Chief
Financial
Officer and General Counsel
With a copy to: Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopier: 212-450-5744
Attention: Dennis S. Hersch
If to Buyer, to it at: The TJX Companies, Inc.
770 Cochituate Road
Framingham, MA 01701
Telecopier: 508-390-2457
Attention: President and General Counsel
With a copy to: Ropes & Gray
One International Place
Boston, MA 02110
Telecopier: 617-951-7050
Attention: Arthur G. Siler, Esq.
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) in the case of any notice or communication sent other than
by mail, on the date actually delivered to such address (evidenced, in the case
of delivery by overnight courier, by confirmation of delivery from the overnight
courier service making such delivery, and in the
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case of a telecopy, by receipt of a transmission confirmation form or the
addressee's confirmation of receipt), or (b) in the case of any notice or
communication sent by mail, three Business Days after being sent, if sent by
registered or certified mail, with first-class postage prepaid. Each of the
parties hereto shall be entitled to specify a different address by giving notice
as aforesaid to each of the other parties hereto.
13.9. Public Announcements. At all times at or before the Closing, no
party hereto will issue or make any reports, statements or releases to the
public or generally to the suppliers or other Persons to whom Buyer or the
Company sells goods or provides services or with whom Buyer or the Company
otherwise has significant business relationships with respect to this Agreement
or the transactions contemplated hereby without the consent of the other party
hereto, which consent shall not be unreasonably withheld. If any party hereto
is unable to obtain, after reasonable effort, the approval of its public report,
statement or release from the other parties hereto and such report, statement or
release is, in the opinion of legal counsel to such party, required by law in
order to discharge such party's disclosure obligations, then such party may make
or issue the legally required report, statement or release and promptly furnish
the other parties with a copy thereof. Each party hereto will also obtain the
prior approval by the other parties hereto of any press release to be issued
immediately following the Closing announcing the consummation of the
transactions contemplated by this Agreement.
13.10. Headings, etc. Section and subsection headings are not to be
considered part of this Agreement, are included solely for convenience, are not
intended to be full or accurate descriptions of the content thereof and shall
not affect the construction hereof.
13.11. Third Party Beneficiaries. Except as otherwise provided in Section
10, nothing in this Agreement is intended or shall be construed to entitle any
Person other than the parties, the Company or their respective transferees,
successors and assigns permitted hereby to any claim, cause of action, remedy or
right of any kind.
13.12. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts each of which
shall be deemed an original, but all of which together shall constitute but one
and the same instrument.
13.13. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive law of the State of New York, without
giving effect to any choice or conflict of law provision or rule that would
cause the application of the law of any other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Stock Purchase Agreement to be executed, as of the date
first above written by their respective officers thereunto duly authorized.
SELLER: MELVILLE CORPORATION
By /s/ H. Rosenthal
----------------------------
Name: Harvey Rosenthal
Title: President
BUYER: THE TJX COMPANIES, INC.
By /s/ Donald G. Campbell
-------------------------
Name: Donald G. Campbell
Title: Chief Financial Officer
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