Exhibit 10.1
TRANSACTION AGREEMENT
dated as of
May 3, 1999
among
FS EQUITY PARTNERS IV, L.P.,
THE LIMITED, INC.
and
XXXXXX'X TRADING COMPANY, INC.
TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS
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SECTION 1.01. Definitions ....................................................... 1
ARTICLE 2
SUBSCRIPTION FOR SHARES; CLOSING
SECTION 2.01. Subscription for Shares ........................................... 8
SECTION 2.02. Closing ........................................................... 8
SECTION 2.03. Statement of Closing Date Adjusted Net Assets ..................... 10
SECTION 2.04. Post Closing Payment .............................................. 12
SECTION 2.05. Purchases by Certain Non-Employee Directors ....................... 12
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE LIMITED
SECTION 3.01. Corporate Existence and Power ..................................... 13
SECTION 3.02. Corporate Authorization ........................................... 13
SECTION 3.03. Governmental Authorization ........................................ 14
SECTION 3.04. Non-contravention ................................................. 14
SECTION 3.05. Capitalization .................................................... 15
SECTION 3.06. Subsidiaries ...................................................... 15
SECTION 3.07. Financial Statements .............................................. 15
SECTION 3.08. Absence of Certain Changes ........................................ 16
SECTION 3.09. Litigation ........................................................ 18
SECTION 3.10. Properties ........................................................ 18
SECTION 3.11. Licenses and Permits .............................................. 19
SECTION 3.12. Inventory ......................................................... 19
SECTION 3.13. Environmental Matters ............................................. 19
SECTION 3.14. Finders' Fees ..................................................... 20
SECTION 3.15. Trademarks ........................................................ 20
SECTION 3.16. Compliance with Law ............................................... 21
SECTION 3.17. Contracts and Other Obligations ................................... 21
SECTION 3.18. Certain Related Party Contracts ................................... 22
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE FS STOCKHOLDER
SECTION 4.01. Organization and Existence ........................................ 22
SECTION 4.02. Corporate Authorization ........................................... 22
SECTION 4.03. Governmental Authorization ........................................ 23
SECTION 4.04. Non-contravention ................................................. 23
SECTION 4.05. Finders'Fees ...................................................... 23
SECTION 4.06. Litigation ........................................................ 24
SECTION 4.07. Inspections ....................................................... 24
SECTION 4.08. Financing ......................................................... 24
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 5.01. Shares to Be Issued to the FS Stockholder ......................... 25
SECTION 5.02. Warrant ........................................................... 25
ARTICLE 6
COVENANTS OF THE LIMITED
SECTION 6.01. Conduct of the Business ........................................... 25
SECTION 6.02. Access to Information ............................................. 27
SECTION 6.03. Maintenance of Insurance Policies ................................. 28
ARTICLE 7
COVENANTS OF THE FS STOCKHOLDER
SECTION 7.01. Confidentiality ................................................... 29
SECTION 7.02. Access after Closing .............................................. 29
SECTION 7.03. Insurance ......................................................... 30
SECTION 7.04. Reimbursement of Year 2000 Stores Costs ........................... 30
ARTICLE 8
COVENANTS OF THE PARTIES
SECTION 8.01. Use of Proceeds ................................................... 30
SECTION 8.02. Future Capital Contribution ....................................... 30
SECTION 8.03. Agreement with Respect to Certain Real Property ................... 31
SECTION 8.04. Reimbursement of Payments by The Limited .......................... 35
SECTION 8.05. Obligations with Respect to the Company's Credit Facility ......... 35
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SECTION 8.06. Further Assurances ................................................ 35
SECTION 8.07. Certain Filings ................................................... 35
SECTION 8.08. Public Announcements, Etc ......................................... 35
SECTION 8.09. HSR Filings ....................................................... 36
ARTICLE 9
TAX MATTERS
SECTION 9.01. Tax Representations ............................................... 36
SECTION 9.02. Tax Covenants ..................................................... 36
SECTION 9.03. Termination of Existing Tax Sharing Agreements .................... 38
SECTION 9.04. Cooperation on Tax Matters ........................................ 38
SECTION 9.05. Tax Indemnification ............................................... 38
SECTION 9.06. Dispute Resolution ................................................ 41
SECTION 9.07. Survival .......................................................... 41
ARTICLE 10
EMPLOYEE BENEFITS
SECTION 10.01. Employee Benefits Definitions ..................................... 41
SECTION 10.02. ERISA Representations ............................................. 42
SECTION 10.03. Welfare Plans Following the Closing ............................... 43
SECTION 10.04. Savings and Retirement Plan ....................................... 44
SECTION 10.05. Other Employee Plans and Benefit .................................. 45
SECTION 10.06. Necessary Action .................................................. 45
SECTION 10.07. Restricted Share Awards ........................................... 46
SECTION 10.08. Stock Options ..................................................... 46
SECTION 10.09. Indemnification ................................................... 46
SECTION 10.10. Third Party Beneficiaries ......................................... 46
ARTICLE 11
CONDITIONS TO CLOSING
SECTION 11.01. Conditions to the Obligations of the FS Stockholder, the
Company and The Limited ........................................... 47
SECTION 11.02. Conditions to Obligations of the FS Stockholder ................... 48
SECTION 11.03. Conditions to Obligations of The Limited and the
Company ........................................................... 48
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ARTICLE 12
SURVIVAL; INDEMNIFICATION
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SECTION 12.01. Survival .......................................................... 49
SECTION 12.02. Indemnification ................................................... 50
SECTION 12.03. Procedures ........................................................ 50
ARTICLE 13
TERMINATION
SECTION 13.01. Grounds for Termination ........................................... 51
SECTION 13.02. Effect of Termination ............................................. 52
ARTICLE 14
MISCELLANEOUS
SECTION 14.01. Notices ........................................................... 52
SECTION 14.02. Amendments; No Waivers ............................................ 54
SECTION 14.03. Expenses .......................................................... 54
SECTION 14.04. Successors and Assigns ............................................ 54
SECTION 14.05. Governing Law ..................................................... 54
SECTION 14.06. Counterparts; Effectiveness ....................................... 54
SECTION 14.07. Entire Agreement .................................................. 55
SECTION 14.08. Jurisdiction ...................................................... 55
SECTION 14.09. WAIVER OF JURY TRIAL .............................................. 55
SECTION 14.10. Captions .......................................................... 55
Attachment A - Form of Warrant
Attachment B - Form of Stockholders Agreement
Attachment C - Form of Registration Rights Agreement
Attachment D - Form of Services Agreement
Attachment E - Base Adjusted Net Assets
Attachment F - Form of Lease
Attachment G - Amendments to Certificate of Incorporation and Eylaws
Attachment H - Capital Costs for the Company's Account
Schedule 2.02 - Fees Payable by the Company
Schedule 7.04 - Inactive Year 2000 Stores
Schedule 8.03 - Sale-Leaseback Properties
Appendix I - Disclosure Schedule
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TRANSACTION AGREEMENT
AGREEMENT dated as of May 3, 1999 among FS EQUITY PARTNERS IV, L.P.
(the "FS Stockholder"), THE LIMITED, INC., a Delaware corporation ("The
Limited"), and XXXXXX'X TRADING COMPANY, INC., an Indiana corporation (the
"Company").
WITNESSETH:
WHEREAS, on the terms and subject to the conditions set forth in this
Agreement, the FS Stockholder desires to subscribe for shares of Class A Common
Stock, without par value, of the Company; and
WHEREAS, on the terms and subject to the conditions set forth in this
Agreement, the parties hereto desire to effect the other transactions
contemplated hereby;
The parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein,
have the following meanings:
"Adjusted Net Assets" means, at any date, the sum of (i) the Company's
net asset balance at such date, determined in accordance GAAP (except that
preopening store costs shall be capitalized and the costs of computer software
developed or obtained for internal use will be expensed as incurred even if in
either case such treatment is not in accordance with GAAP) and consistent with
the Company's historical audited financial statements excluding the following
accounts: goodwill and other intangibles, property, plant and equipment, other
long-term assets, income taxes, deferred taxes, intercompany payable and other
long-term liabilities (except for the amount payable to Xxxxxxx Xxxxxx under the
Separation Agreement dated as of June 29, 1997), (ii) the Company's Capital
Expenditures at such date and (iii) the Store Planning CIP at such date. Without
limiting the generality of the foregoing, it is understood that "Adjusted Net
Assets" at any date shall reflect, among other things, accruals for those
liabilities to be assumed by the Company in accordance with the terms of this
Agreement
(other than investment banking, accounting, legal and other transaction-related
fees and expenses to be paid by the Company).
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person. For purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. Notwithstanding the foregoing, the
Company shall not be considered an Affiliate of The Limited.
"Balance Sheet" means the unaudited balance sheet of the Company as of
January 30, 1999, including all notes thereto.
"Balance Sheet Date" means January 30, 1999.
"Base Adjusted Net Assets" means the Company's Adjusted Net Assets at
the close of business on May 30, 1998 as set forth in Attachment E; provided
that the FS Stockholder reserves the right to challenge the inventory reserves
included in Attachment E if it believes that such inventory reserves were not
determined in accordance with GAAP. Any dispute with respect to such inventory
reserves shall be resolved in the manner contemplated by, and if relevant,
together with any dispute arising under, Section 2.03.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or required by
law to close.
"Capital Expenditures" means, at any date, (i) the change in the
Company's property, plant and equipment balance net of accumulated depreciation
between May 30, 1998 and such date, plus (ii) depreciation expense incurred
between May 30, 1998 and such date;provided all items that constitute capital
expenditures are in accordance with GAAP and are consistent with the Company's
capitalization policies and procedures or depreciation policies for the
specified period.
"Change of Control" means (i) the direct or indirect acquisition (by
merger, consolidation, business combination or otherwise) by any Person or group
of Persons of beneficial ownership (as defined in Rule 13d-1 and Rule 13d-5
under the Securities Exchange Act of 1934) of 50% or more of the outstanding
Class A Common Stock, (ii) any merger, consolidation or other business
combination of the Company or a Subsidiary with any Person after giving effect
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to which (x) the shareholders of the Company immediately prior to such
transaction do not own at least 50% of the outstanding common stock of the
ultimate parent entity of the parties to such transaction or (y) individuals who
were directors of the Company immediately prior to such transaction (or their
designees) do not constitute a majority of the board of directors of such
ultimate parent entity and (iii) the direct or indirect acquisition by any
Person or group of Persons of all or substantially all of the assets of the
Company.
"Class A Common Stock" means the Class A voting common stock,
without par value, of the Company; provided however, that at such time as the
Class A Common Stock and the Class B Common Stock converts into a single class
of voting stock pursuant to the Certificate of Incorporation of the Ccmpany, all
references in this Agreement to "Class A Common Stock" shall mean such single
class of voting stock.
"Class B Common Stock" means the Class B nonvoting common stock,
without par value, of the Company; provided however, that at such time as the
Class A Common Stock and the Class B Common Stock converts into a single class
of voting stock pursuant to the Certificate of Incorporation of the Company,
all references in this Agreement to "Class B Common Stock" shall mean such
single class of voting stock.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Class A Common Stock and the Class B Common
Stock.
"Credit Facility" means a credit agreement between the Company and a
bank of national recognized standing or other Person acceptable to The Limited
and the FS Stockholder. The aggregate principal amount of the credit facility
shall be at least $125 million.
"Damages", with respect to a Person, means all demands, claims, actions
or causes of action, assessments, losses, damages, costs, expenses, liabilities,
judgments, awards, fines, sanctions, penalties, charges and amounts paid in
settlement, including (x) interest on cash disbursements in respect of any of
the foregoing at the Reference Rate in effect from time to time, compounded
quarterly, from the date each such cash disbursement is made until the Person
incurring the same shall have been indemnified in respect thereof and (y) costs,
fees and expenses of attorneys, experts, accountants, appraisers, consultants,
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witnesses, investigators and any other agents of such Person, in each case to
the extent actually incurred by such Person.
"Disclosure Schedule" means the Disclosure Schedule attached as
Appendix I to this Agreement.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements or any other restrictions relating to
the effect of the environment on human health, the environment or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or wastes or the
clean-up or other remediation thereof. Without limiting the generality of the
foregoing, "Environmental Laws' include, without limitation: (a) The Resource
Conservation and Recovery Act 42 U.S.C. Section 6901 et seq.; (b) The
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601 et seq.; (c) The Clean Air Act, 42 U.S.C.
Section 7401 et seq.; (d) The Clean Water Act, 33 U.S.C. Section 1251 et
seq.; (e) The Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; (f) the
Occupational Safety and Health Act of 1970, 29 U.S.C. Sections 651-671; (g)
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq.; and
(h) all rules and regulations promulgated under any of the foregoing.
"Xxxxxxx Xxxxxx" means Xxxxxxx Xxxxxx & Co. LLC, a Delaware limited
liability company.
"GAAP" means United States generally accepted accounting principles
consistent with past practice and policy applied during the specified period.
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, asbestos, underground tanks of any type or any substance
having any constituent elements displaying any of the foregoing characteristics,
regulated under Environmental Laws.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
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"Lien" means, with respect to any asset, any mortgage, lien (including
tax liens), restriction on transfer, pledge, charge, security interest or
encumbrance of any kind in respect of such asset.
"Material Adverse Effect" means an event or occurrence that
individually or in the aggregate could reasonably be expected to have a material
adverse effect on the condition (financial or otherwise), properties, prospects
or liabilities (absolute, accrued, contingent or otherwise) of the Company.
"1933 Act" means the Securities Act of 1933, as amended and the rules
and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended and
the rules and regulations promulgated thereunder.
"Permits" means all governmental licenses, permits, certificates,
consents, approvals, franchises or other governmental authorizations owned by,
or granted to, the Company.
"Permitted Liens and Exceptions" means (i) Liens disclosed in the
Disclosure Schedule; (ii) Liens disclosed on the Balance Sheet or notes thereto
or securing liabilities reflected on the Balance Sheet or notes thereto;
(iii) Liens for taxes, assessments and similar charges that are not yet due or
are being ccntested in good faith; (iv) mechanic's, materialman's, carrier's,
repairer's and other similar Liens arising or incurred in the ordinary course of
business or that are not yet due and payable or are being contested in good
faith; (v) Liens incurred in the ordinary course of business since the Balance
Sheet Date; or (vi) other Liens that do not secure payment of indebtedness for
borrowed money and could not reasonably be expected to have a Material Adverse
Effect.
"Person" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"Pre-Closing Tax Period" means any Tax period, or portion thereof,
ending on or before the Closing Date.
"Post-Closing Tax Period" means any Tax period, or portion thereof,
beginning after the Closing Date.
"Reference Rate" means the rate publicly announced from time to time by
Xxxxxx Guaranty Trust Company of New York (or such other bank as may be agreed
upon by The Limited and Xxxxxxx Xxxxxx) as its prime rate then in effect.
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"Registration Rights Agreement" means the registration rights agreement
to be dated as of the Closing Date, which agreement shall be substantially in
the form of Attachment C hereto.
"Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto and including any amendment thereof.
"Services Agreement" means the transitional services agreement to be
dated as of the Closing Date, which agreement shall be substantially in the form
of Attachment D hereto.
"Stockholders Agreement" means the stockholders agreement to be dated
as of the Closing Date, which agreement shall be substantially in the form of
Attachment B hereto.
"Store Planning CIP" means, at any date, (a) the investment in the
Company's stores (excluding that by Galyans Property Holding Co.) by The
Limited's Store Planning Division at such date less (b) the Company's
construction allowances at such date less (c) amounts transferred by The
Limited's Store Planning Division to the Company between May 30, 1998 and such
date; provided that construction allowances related to the Washingtonian and One
Schaumburg Place stores (which are $12 million in the aggregate) shall be
excluded from the calculation of the Store Planning CIP.
"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by the Company.
"Tax" means (i) any income, gross receipts, alternative minimum,
franchise, excise, business and occupation, withholding, payroll, employment,
unemployment, disability, social security (or other similar), sales or use tax
or any other tax, governmental fee or other like assessment or charge of any
kind, together with any interest, penalty, addition to tax or additional amount,
imposed by any governmental authority, domestic or foreign (a "Taxing
Authority"), responsible for the imposition thereof and (ii) any liability for
the payment of any amount of the type described in clause (i) as a result of the
Company's being a member of an affiliated, consolidated, combined or unitary
group with any other corporation at any time on or prior to the Closing Date.
"Tax Asset" means any net operating loss, net capital loss, investment
tax credit, foreign tax credit, charitable deduction or any other credit or tax
attribute
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that could be carried forward or back to reduce Taxes (including without
limitation deductions and credits related to alternative minimum Taxes).
"Taxing Authority" has the meaning set forth in the definition of
"Tax".
"Title IV Plan" means an Employee Plan subject to Title IV of ERISA
other than any multi employer plan.
"Transaction Documents" means this Agreement, the Stockholders
Agreement, the Registration Rights Agreement, the Sale-Leaseback Agreements, the
Services Agreement and any Lease Assignments.
"to the best of the knowledge of The Limited" (or any similar phrase)
means to the best of the knowledge of(i) the officers of the Company and (ii)
the officer of The Limited with responsibility for the relevant substantive
matter, after due inquiry, it being understood that any such executive officer
of The Limited will rely on information provided by management of the Company.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Audited Financials 13.01
Benefit Arrangement 10.01
Claim 12.03
Closing 2.02
Closing Date Adjusted Net Assets 2.03
Code 10.01
Company Preamble
Company Employee 10.01
Company Employee Options 10.08
Company Securities 3.05
Employee Plan 10.01
ERISA 10.01
ERISA Affiliate 10.01
Estimated Closing Date Adjusted Net 2.03
Assets
Final Closing Date Adjusted Net 2.04
Assets
FS Stockholder Preamble
Lease Assignments 8.03
Leases 3.10
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Term Section
Limited Indemnitees 12.02
Loss 9.05
Mezzanine Securities 2.02
Power Mall 8.03
Purchase Price 2.02
Real Property 3.10
Sale-Leaseback Agreements 8.03
Sale-Leaseback Leases 8.03
Sale-Leaseback Properties 8.03
Savings and Retirement Plan 10.04
Sawmill Property 8.03
Statement of Net Adjusted Assets 2.03
Successor Plan 10.04
Surviving Representation or Covenant 12.01
Tax Allowance 9.05
The Limited Preamble
Trademarks 3.15
Warrants 2.02
ARTICLE 2
SUBSCRIPTION FOR SHARES; CLOSING
SECTION 2.01. Subscription for Shares. Upon the terms and subject to
the conditions of this Agreement, at the Closing, The Limited agrees to cause
the Company to issue to (i) the FS Stockholder an aggregate of 5,400,000 shares
of Class A Common Stock and (ii) The Limited or an Affiliate of The Limited an
aggregate of 3,599,900 shares of Class A Common Stock, so that after the
Closing, the FS Stockholder will own approximately 60%, and The Limited or an
Affiliate of The Limited will own approximately 40%, of the then outstanding
Common Stock. It is understood that The Limited will continue to hold 100 shares
of Common Stock so that immediately after the Closing, The Limited will own an
aggregate of 3,600,000 shares of Class A Common Stock.
SECTION 2.02. Closing. The closing (the "Closing") of the subscription
of shares of Class A Common Stock contemplated by Section 2.01 and the other
matters referred to in this Section 2.02 shall take place at the offices of
Xxxxx Xxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, as soon as
possible, but in no event later than two Business Days, after satisfaction or
waiver of the
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conditions set forth in Article 11, or at such other time or place as Xxxxxxx
Xxxxxx and The Limited may agree. At the Closing:
(a) The Company shall issue to The Limited or an Affiliate of The
Limited (as may be directed by The Limited) as a distribution with respect to
the Common Stock owned by The Limited or an Affiliate of The Limited immediately
prior to the issuance of Class A Common Stock to the FS Stockholder (i)
3,599,900 shares of newly issued Class A Common Stock and (ii) warrants to
acquire 1,350,000 million shares of Class A Common Stock or Class B Common
Stock, as the case may be, with the terms set forth in Attachment A (the
"Warrants");
(b) The Limited shall cause the contribution to the Company of all of
the Trademarks held by G Trademark, Inc.;
(c) The Company shall pay to The Limited or an Affiliate of The
Limited (as may be directed by The Limited) as a distribution with respect to
the Common Stock owned by The Limited or an Affiliate of The Limited immediately
prior to the issuance of Class A Common Stock to the FS Stockholder an amount of
cash equal to $7,127,000 in immediately available funds by wire transfer to an
account of The Limited or such Affiliate of The Limited designated by The
Limited by notice to the Company not later than two Business Days prior to the
Closing;
(d) The Company shall issue to the FS Stockholder an aggregate of
5,400,000 shares of newly issued Class A Common Stock to the FS Stockholder;
(e) The FS Stockholder shall pay, or shall cause to be paid, to the
Company, as the purchase price for the shares of Class A Common Stock to be
issued to such FS Stockholder pursuant to Section 2.01, $54 million (the
"Purchase Price") in immediately available funds by wire transfer to an account
of the Company with a bank designated by the Company to Xxxxxxx Xxxxxx no later
than two Business Days prior to the Closing Date;
(f) The Company shall, in partial repayment of the Company's
intercompany obligations to The Limited and its Affiliates, deliver to The
Limited or an Affiliate of The Limited (as may be directed by The Limited)
$61,873,000 in immediately available funds by wire transfer to an account of The
Limited or such Affiliate of The Limited designated by The Limited by notice to
the Company not later than two Business Days prior to the Closing;
(g) The Company shall, in further repayment of the Company's
intercompany obligations to The Limited and its Affiliates, deliver to The
Limited
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or an Affiliate of The Limited (as may be directed by The Limited) an amount
equal to the Estimated Closing Date Adjusted Net Assets minus the Base Adjusted
Net Assets in immediately available funds by wire transfer to an account of The
Limited or such Affiliate of The Limited designated by The Limited by notice to
the Company not later than two Business Days prior to the Closing;
(h) The Company shall pay the fees up to the amounts and to the
entities set forth on Schedule 2.02 in immediately available funds by wire
transfer to the accounts designated by the relevant payee indicated on Schedule
2.02 to the Company no later than two Business Days prior to the Closing Date;
(i) The Company shall issue to a third party investor or investors
"mezzanine" debt or equity securities on terms satisfactory to The Limited and
the FS Stockholder (the "Mezzanine Securities");
(j) The third party investor or investors referred to in paragraph (i)
above shall pay, or shall cause to be paid, to the Company as purchase price for
the Mezzanine Securities to be issued to such third party, $50 million in
immediately available funds by wire transfer to an account of the Company with a
bank designated by the Company to Xxxxxxx Xxxxxx no later than two Business Days
prior to the Closing Date;
(k) The Credit Facility, on terms and conditions satisfactory to The
Limited and the FS Stockholder, shall be executed and delivered by the parties
thereto;
(l) The FS Stockholder, the Company and The Limited shall enter into
the Stockholders Agreement, the Registration Rights Agreement, and the Services
Agreement;
(m) The Sale-Leaseback Agreements and any Lease Assignments shall be
entered into by the parties thereto; and
(n) The Company shall amend its Certificate of Incorporation and
Bylaws so that the terms set forth on Attachment G are reflected in such
Certificate of Incorporation and Bylaws.
Section 2.03. Statement of Closing Date Adjusted Net Assets. (a) Not
later than five days prior to the Closing Date, The Limited will deliver a
certificate setting forth its good faith estimate of the Adjusted Net Assets as
of the close of business on the Closing Date (the "Estimated Closing Date
Adjusted Net Assets").
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(b) As promptly as practicable, but no later than 60 days, after the
Closing Date, The Limited will cause to be prepared and delivered to the Company
and Xxxxxxx Xxxxxx a Statement of Adjusted Net Assets as of the close of
business on the Closing Date (the "Statement of Adjusted Net Assets"). The
Statement of Adjusted Net Assets shall fairly present the Adjusted Net Assets of
the Company calculated as at the close of business on the Closing Date (the
"Closing Date Adjusted Net Assets"), and shall be based upon, among other
things, a customary physical inventory count (the costs of which,
notwithstanding the provisions of Section 14.03, shall be borne by the Company).
(c) If Xxxxxxx Xxxxxx disagrees with The Limited's calculation of
Closing Date Adjusted Net Assets delivered pursuant to Section 2.03(b), Xxxxxxx
Xxxxxx may, within 45 days after delivery of the documents referred to in
Section 2.03(b), deliver a notice to The Limited disagreeing with such
calculation and setting forth Xxxxxxx Xxxxxx'x calculation of such amount. Any
such notice of disagreement shall specify those items or amounts as to which
Xxxxxxx Xxxxxx disagrees, and Xxxxxxx Xxxxxx shall be deemed to have agreed with
all other items and amounts contained in the Statement of Adjusted Net Assets
and the calculation of Closing Date Adjusted Net Assets delivered pursuant to
Section 2.03(b).
(d) If a notice of disagreement shall be delivered pursuant to Section
2.03(c), the matter shall be submitted to the Chief Financial Officer of The
Limited and a general partner of Xxxxxxx Xxxxxx for their review and resolution
in such manner as they deem necessary or appropriate. If any disagreement
regarding the calculation of Closing Date Adjusted Net Assets cannot be resolved
by The Limited and Xxxxxxx Xxxxxx within 45 days after the delivery of a notice
of disagreement, The Limited and Xxxxxxx Xxxxxx shall cause a nationally
recognized accounting firm mutually agreed upon by The Limited and Xxxxxxx
Xxxxxx promptly to review this Agreement and the disputed items or accounts for
the purpose of calculating Closing Date Adjusted Net Assets. In making such
calculation, such independent accountants shall consider only those items or
amounts in The Limited's calculation of Closing Date Adjusted Net Assets as to
which Xxxxxxx Xxxxxx has disagreed. Such accounting firm shall be instructed to
deliver a report setting forth such calculation. Such report shall be final and
binding upon the parties hereto. The cost of such review and report shall be
borne (i) by The Limited if the difference between Final Closing Date Adjusted
Net Assets and The Limited's calculation of Closing Date Adjusted Net Assets
delivered pursuant to Section 2.03(b) is greater than the difference between
Final Closing Date Adjusted Net Assets and Xxxxxxx Xxxxxx'x calculation of
Closing Date Adjusted Net Assets delivered pursuant to Section 2.03(c), (ii) by
Xxxxxxx Xxxxxx if the first such difference is less than the second such
difference and (iii) otherwise equally by The Limited and Xxxxxxx Xxxxxx.
11
(e) The parties agree that they will, and agree to cause their
respective independent accountants and the Company to, cooperate and assist in
the preparation of the Statement of Adjusted Net Assets and the calculation of
Closing Date Adjusted Net Assets and in the conduct of the audits and reviews
referred to in this Section 2.03, including, without limitation, the making
available to the extent reasonably necessary of books, records, work papers and
personnel.
SECTION 2.04. Post Closing Payment. (a) If Estimated Closing Date
Adjusted Net Assets exceeds Final Closing Date Adjusted Net Assets, The Limited
shall pay to the Company, in the manner and with interest as provided in Section
2.04(b), the amount of such excess. If Final Closing Date Adjusted Net Assets
exceeds Estimated Closing Date Adjusted Net Assets, the Company shall pay to The
Limited or an Affiliate of The Limited (as may be directed by The Limited), in
the manner and with interest as provided in Section 2.04(b), the amount of such
excess. In the event that the payments under this Section 2.04 and Sections
2.02(f) and 2.02(g) are not sufficient to satisfy the net intercompany
obligations of the Company to The Limited and its Affiliates such remaining
obligations shall be deemed contributed to the capital of the Company. "Final
Closing Date Adjusted Net Assets" means Closing Date Adjusted Net Assets (i) as
shown in The Limited's calculation delivered pursuant to Section 2.03(b), if no
notice of disagreement with respect thereto is duly delivered pursuant to
Section 2.03(c) or (ii) if such a notice of disagreement is delivered, as agreed
by the Limited and Xxxxxxx Xxxxxx or as determined by the mutually agreed upon
accounting firm pursuant to Section 2.03(d).
(b) Any payment pursuant to Section 2.04(a) shall be made at a
mutually convenient time and place within five days after the Final Closing Date
Adjusted Net Assets has been determined by delivery by The Limited or the
Company, as the case may be, of a certified or official bank check payable in
immediately available funds to the other party or by causing such payments to be
credited to such account of such other party as may be designated by such other
party. Any such amount payable shall bear interest from and including the
Closing Date to but excluding the actual date of payment at the Reference Rate.
Such interest shall be payable at the same time as the payment to which it
relates and shall be calculated daily on the basis of a year of 365 days and the
actual number of days elapsed.
SECTION 2.05. Purchases by Certain Non-Employee Directors. The
FS Stockholder agrees that purchases or grants of Common Stock and other capital
stock of the Company made by Xxxxxx Xxxxxxxx and Xxxxx Xxxxxxxx shall be made as
follows: (i) purchases of Common Stock on the Closing Date by any such Person
shall be of shares of Common Stock owned by the FS Stockholder (or
12
shares of Common Stock which are to be issued to the FS Stockholder at the
Closing pursuant to this Agreement) and (ii) purchases (whether direct
purchases, upon the exercise of options or other convertible or exchangeable
securities or otherwise) or grants of shares of Common Stock or other capital
stock of the Company after the Closing Date shall be of newly issued shares of
Common Stock up to an aggregate amount of 250,000 shares (subject to appropriate
adjustment in the case of stock splits, recapitalizations and similar matters)
for all such individuals as a group, and purchases (whether direct purchases,
upon the exercise of options or other convertible or exchangeable securities or
otherwise) or grants above such amount shall be (x) of shares owned by the FS
Stockholder and not issuances by the Company or (y) on other terms reasonably
satisfactory to The Limited such that The Limited does not suffer dilution as a
result of any such purchase or grant. The limitation set forth in clause (ii)
above shall not apply to purchases made by Xx. Xxxxxxxx or Xx. Xxxxxxxx in
capital raising issuances by the Company not targeted to such individuals where
such individuals participate on the same terms as all other purchasers. In
addition, such restrictions shall not apply to purchases made pursuant to
Article III of the Stockholders Agreement. The provisions of this Section 2.05
shall terminate upon consummation of an Initial Public Offering (as such term is
defined in the Stockholders Agreement).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE LIMITED
The Limited represents and warrants to the FS Stockholder that:
SECTION 3.01. Corporate Existence and Power. Each of The Limited and
the Company is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation. The Company has
all corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where the
failure to have such licenses, authorizations, consents and approvals would not
constitute a Material Adverse Effect. The Company is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities make such qualification necessary to carry on its business as now
conducted, except where the failure to be so qualified would not constitute a
Material Adverse Effect.
SECTION 3.02. Corporate Authorization. The execution, delivery and
performance by each of The Limited and the Company of the Transaction
13
Documents to which it is a party, and the consummation by each of The Limited
and the Company of the transactions contemplated by such Transaction Documents,
are within its corporate powers and have been duly authorized by all necessary
corporate action on its part. Except for amendments to the articles of
incorporation and bylaws of the Company to permit the issuance of new shares of
Common Stock and Preferred Stock as contemplated by this Agreement and the
Warrant, no other corporate proceedings on the part of The Limited and the
Company, or proceedings or approvals by their respective stockholders, are
necessary to authorize (i) the execution and delivery by The Limited or the
Company of the Transaction Documents, (ii) the consummation of the transactions
contemplated hereby and thereby by The Limited and the Company or (iii) the
performance of the respective obligations of The Limited and the Company
hereunder or thereunder. Each of the Transaction Documents constitutes a valid
and binding obligation of each of The Limited and the Company party thereto
enforceable against it in accordance with its respective terms (i) except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally, including the effect of statutory and other laws concerning
fraudulent conveyances and preferential transfers, and (ii) subject to the
limitations imposed by general equitable principles (regardless of whether such
enforceability is considered in proceeding at law or in equity).
SECTION 3.03. Governmental Authorization. The execution, delivery and
performance by The Limited and the Company of the Transaction Documents require
no action by or in respect of, or consent or approval of, or filing with, any
federal, state or foreign governmental body, agency, official or authority other
than:
(i) compliance with any applicable requirements of the HSR
Act;
(ii) compliance with any applicable requirements of the 1934
Act;
(iii) filings necessary to transfer the Trademarks to the
Company; and
(iv) any such action or filing as to which the failure to
make or obtain would not singly or in the aggregate constitute a
Material Adverse Effect.
SECTION 3.04. Non-contravention. Except as set forth on the Disclosure
Schedule, the execution, delivery and performance by each of The Limited and
14
the Company of the Transaction Documents to which it is a party do not and will
not (i) contravene or conflict with the respective certificate or articles of
incorporation or bylaws of The Limited and the Company when amended as described
in Section 3.02, (ii) assuming compliance with the matters referred to in
Section 3.03, contravene or conflict with or constitute a violation of any
provision of any law, statute, rule, regulation, judgment, injunction, writ,
order, award or decree binding upon or applicable to either of The Limited and
the Company, (iii) with or without the giving of notice or the lapse of time, or
both, constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of The Limited and the
Company, or to a loss of any benefit to which The Limited and the Company are
entitled, under any provision of any agreement, contract or other instrument
binding upon The Limited or the Company or (iv) result in the creation or
imposition of any Lien on any asset of the Company, other than Permitted Liens
and Exceptions, except, in the case of clauses (ii) and (iii), for any such
contravention, conflict, violation, default, termination, cancellation,
acceleration or loss that would not constitute a Material Adverse Effect.
SECTION 3.05. Capitalization. (a) As of the date hereof, the authorized
capital stock of the Company consists of 1,000 shares of Common Stock. As of the
date hereof, there are outstanding 100 shares of Common Stock.
(b) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable.
Except as set forth in this Section 3.05 and as contemplated by any Transaction
Document, there are no outstanding (i) shares of capital stock or voting
securities of the Company, (ii) securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company or
(iii) options or other rights to acquire from the Company, or other obligation
of the Company to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company (the items in clauses 3.05(b)(i), 3.05(b)(ii) and 3.05(b)(iii) being
referred to collectively as the "Company Securities"). There are no outstanding
obligations of the Company to repurchase, redeem or otherwise acquire any
Company Securities.
SECTION 3.06. Subsidiaries. The Company has no Subsidiaries.
SECTION 3.07. Financial Statements. (a) The Balance Sheet and the
related unaudited statements of income and cash flows for the Company for the
year ended January 30, 1999 present fairly, in all material respects, the
financial position of the Company as of their respective dates and the results
of its operations and cash flows for the fiscal year then ended in accordance
with generally accepted accounting principles except that such financial
statements do
15
not reflect matters included in the line item captioned "Construction in Process
net of Transfers to Xxxxxx'x Trading Company, Inc." on the balance sheet dated
as of January 30, 1999 of the Store Planning division of The Limited. Such line
item reflects all of the funds expended by The Limited and its Affiliates for
site work, land, building, interiors and improvements for the Company's stores
then under construction except site work, land and building costs for the
properties listed in Schedule I.
(b) The unaudited divisional balance sheet of the Company as of
May 30, 1998 presents fairly, in all material respects, the financial position
of the Company as of May 30, 1998 in accordance with internal accounting
procedures, except that such balance sheet does not reflect (i) matters included
in the line item captioned "Construction in Process net of Transfers to Xxxxxx'x
Trading Company, Inc." on the balance sheet dated as of May 30, 1998 of the
Store Planning division of The Limited and (ii) income taxes and allocation, of
overhead and other costs.
SECTION 3.08. Absence of Certain Changes. Except as set forth in the
Disclosure Schedule or as contemplated by the Transaction Documents, since the
Balance Sheet Date, the business of the Company has been conducted in all
material respects in the ordinary course, and there has not been:
(a) any event, occurrence, development or state of circumstances or
facts that could reasonably be expected to have a Material Adverse Effect, other
than those resulting from changes in general business conditions applicable to
the business of the Company or general economic conditions;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company of any outstanding
shares of capital stock or other securities of the Company;
(c) any amendment of any material term of any outstanding security of
the Company;
(d) any incurrence, assumption or guarantee by or on behalf of the
Company of any indebtedness for borrowed money other than in the ordinary
course of business;
(e) any damage, destruction or other casualty loss (whether or not
insured) affecting the Company that could reasonably be expected to have a
Material Adverse Effect;
16
(f) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any relinquishment by the Company of any
contract or other right, in each case other than transactions and commitments
made or entered into in the ordinary course of business;
(g) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any relinquishment by the Company of any
contract or other right which would be materially inconsistent with the
provisions of Section 8.03;
(h) any creation or assumption of any Lien on any asset of the Company
other than Permitted Liens and Exceptions;
(i) the making of any loan, advance or capital contribution to or
investment in any Person by the Company other than travel and other similar
advances made in the ordinary course of business;
(j) any (i) employment, deferred compensation, severance, retirement
or other similar agreement entered into with any director, officer or employee
of the Company (or any amendment to any such existing agreement), (ii) grant of
any severance or termination pay to any director, officer or employee of the
Company or (iii) other than in the ordinary course of business consistent with
past practice, any increase in benefits payable under existing severance or
retirement policies or employment agreements or any increase in compensation,
bonus or other benefits payable (including, but not limited to, benefits payable
pursuant to any Employee Plan or Benefit Arrangement) to any director, officer
or employee of the Company;
(k) any material labor dispute, material work stoppages or threats
thereof with respect to the employees of the Company;
(1) any transaction between the Company, on the one hand, and The
Limited or any of its Affiliates, on the other hand, other than transactions
which were entered into in the ordinary course of business consistent with past
practice;
(m) any change in the level of sales promotion and advertising
expenditures of the Company except in the ordinary course of business;
(n) any change in any method of accounting or accounting practice with
respect to the Company, except as may have been required under generally
accepted accounting principles or law; or
17
(o) fail to maintain capital expenditures except in the ordinary
course of business consistent with past practices.
SECTION 3.09. Litigation. Except as set forth in the Disclosure
Schedule, there is no claim, legal action, suit, arbitration, investigation or
proceeding pending against, or to the best of the knowledge of The Limited,
threatened against or affecting, the Company or any of its properties or, to the
extent relating to the Company or any of its properties or to the transactions
contemplated by the Transaction Documents, The Limited or its Affiliates before
any court or arbitrator or any governmental body, agency, official or authority
which may reasonably be expected to have a Material Adverse Effect or which in
any manner challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by the Transaction Documents.
SECTION 3.10. Properties. (a) The Disclosure Schedule correctly
describes each parcel of real property leased or subleased by the Company (the
"Real Property"). The Company does not own any real property except the building
and improvements with respect to the Plainfield store in Indianapolis, Indiana.
(b) The Disclosure Schedule contains an accurate and complete list and
summary description of all Real Property. Complete and correct copies of all
leases, including all amendments or modifications thereto (collectively, the
"Leases"), have been made available to the FS Stockholder. Each Lease set forth
in the Disclosure Schedule (or required to be set forth in the Disclosure
Schedule) is in full force and effect; all rents and additional rents due to
date on each such Lease have been paid; in each case, the lessee has been in
peaceable possession since the commencement of the original term of such Lease
and is not in default thereunder, except for defaults which would not constitute
a Material Adverse Effect, and no waiver, indulgence or postponement of the
lessee's obligations thereunder has been granted by the lessor; and except as
set forth on the Disclosure Schedule, there exists no event of default or event,
occurrence, condition or act which, with the giving of notice or the lapse of
time or both, would become a default under such Lease which would constitute a
Material Adverse Effect. The Company has not violated any of the terms or
conditions under any such Lease in any material respect, and, to the best of the
knowledge of The Limited, all of the covenants to be performed by any other
party under any such Lease have been fully performed. With respect to all Real
Property, the Company has adequate rights of ingress and egress for operation of
the business of the Company in the ordinary course and consistent in all
material respects with past practice and with the Company's business plans as in
effect on the date hereof. Except as set forth in the Disclosure Schedule, no
condemnation proceeding or other litigation is pending or, to the best of the
knowledge of The
18
Limited, threatened which would preclude or impair the use of any such Real
Property by the Company for the purposes for which it is currently used or
proposed to be used as of the date hereof.
SECTION 3.11. Licenses and Permits. The Disclosure Schedule correctly
sets forth all material Permits necessary for the operation of the business of
the Company in the same manner in all material respects as such business is
currently being conducted or proposed to be conducted as of the date hereof. The
Company is not in default or noncompliance under any of such Permits, except for
any such default or noncompliance which would not constitute a Material Adverse
Effect.
SECTION 3.12. Inventory. Subject to any reserve therefor included in
the Balance Sheet, at the Balance Sheet Date, all inventories of the Company
(including inventory ordered but not yet received) consisted of items of a
quality usable or saleable in the normal course of the business of the Company
consistent with past practices and are in quantities sufficient for the normal
operation of the business of the Company in accordance with past practices. The
values at which inventories are shown on the Balance Sheet have been determined
in accordance with the customary valuation policy of the Company (which is the
lower of average cost or market) and in accordance with generally accepted
accounting principles consistently applied. Since the Balance Sheet Date, the
Company has continued to replenish its inventory in a normal and customary
manner consistent with past practices prevailing in the business of the Company.
SECTION 3.13. Environmental Matters. (a) The following items have been
made available to the FS Stockholder on or prior to the date hereof: (i) all
environmental audits or other studies or reports prepared by third parties to
assess Hazardous Substances risks at any of the Real Property which are in the
possession of The Limited, its Affiliates or the Company or are reasonably
available to any of them; (ii) to the best of the knowledge of The Limited,
information relating to all underground storage tanks at any of the Real
Property; and (iii) all communications and agreements with any governmental or
regulatory authority or agency (federal, state or local) or any private entity
or individual, including, but not limited to, any prior owners or occupants of
any of the Real Property, which are in the possession of any of The Limited, its
Affiliates or the Company or are reasonably available to any of them and which
relate in any way to the presence, release, threat of release, placement in, on,
under or about any of the Real Property, or the use, manufacture, handling,
generation, storage, treatment, discharge, burial or disposal in, on, under or
about any of the Real Property, or the transportation to or from any of the Real
Property, of any Hazardous Substances. As of the date hereof, The Limited is not
in possession of any environmental audits or other studies or reports prepared
by third parties to assess Hazardous Substances risks at the following Real
Properties: (A) Sawmill
19
Road in Columbus, Ohio; (B) Castleton Square Mall in Indianapolis, Indiana;
(C) Mall of Georgia in Atlanta, Georgia; (D) Xxxxxx'x Main Office in
Indianapolis, Indiana; (E) Xxxxxxxxx@ Xxxxx Xxxxxx xx Xxxxxxxxxxxx, Xxxxxxxx;
(F) Minneapolis Warehouse in Eagan, Minnesota; and (G) Xxxxxxx Road in Lenexa,
Kansas.
(b) Except as set forth in any environmental audits referenced
Section 3.13(a), to the knowledge of The Limited: (i) each of the Company and
the Real Property is in compliance with all applicable Environmental Laws,
except where the failure to be in such compliance would not constitute a
Material Adverse Effect; (ii) none of the Company and the Real Property has been
alleged by any governmental agency or third party to be in violation of or has
been subject to any administrative or judicial proceeding pursuant to, any
Environmental Law, which has not been resolved; (iii) there are no facts or
circumstances which could reasonably form the basis for the assertion of any
claim against the Company under Environmental Laws including, but not limited
to, any claim arising from past or present environmental practices asserted
under any Environmental Laws, which would constitute a Material Adverse Effect;
(iv) there is no asbestos contained in or forming part of any building
component, structure or office space at any of the Real Property, except where
the presence of such asbestos would not constitute a Material Adverse Effect;
(v) no polychlorinated biphenyls are used or stored at any of Real Property in
such quantities as would constitute a violation of Environmental Laws; (vi) the
Company has all permits, licenses and other authorization required under
Environmental Laws for the operation of the business of the Company and (vii) in
the manner operated on the date hereof, each of the Company, and the Real
Property is in compliance with all of such permits, licenses and authorizations,
except where the failure to hold same or to be in such compliance would not
constitute a Material Adverse Effect.
SECTION 3.14. Finders' Fees. Except for (a) Lazard Freres & Co. and
Xxxxxxx, Xxxxx & Co. whose fees are (i) to be paid by the Company up to a
maximum of $500,000 in aggregate pursuant to Section 2.02(h) and (ii) to be paid
by The Limited with respect to the remainder thereof and (b) The Limited's legal
and accounting advisor fees up to a maximum of $500,000 in aggregate pursuant to
Section 2.02(h), there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of The
Limited, its Affiliates or the Company who might be entitled to any fee or
commission from the FS Stockholder in connection with the transactions
contemplated by the Transaction Documents.
SECTION 3.15. Trademarks. The Disclosure Schedule contains a list of
all material trademarks (the "Trademarks") owned by the Company or any of its
Affiliates and used by the Company in its business. Except as set forth in the
20
Disclosure Schedule, (a) each Trademark is registered in the name of
G Trademark, Inc. or the Company on the principal register of the United States
Patent and Trademark Office and in the foreign countries indicated thereon,
(b) as of the date hereof, to the best knowledge of The Limited, there is no
infringement of the Trademarks by others, (c) the continued use of the
Trademarks in the business of the Company (as heretofore conducted and as
currently planned by the Company) will not result in any infringement of the
rights of others in the United States, and to the best knowledge of The Limited,
there is no such claim as to any Trademarks registered in the foreign countries
identified in the Disclosure Schedule, (d) the owner of the Trademarks as
indicated in the Disclosure Schedule is the sole and legal owner of the relevant
Trademarks in the United States and, as of the date hereof, to the best of the
knowledge of The Limited, there is no claim by any other Person that such other
Person is the legal owner of such Trademarks and (e) none of the Company and
G Trademark, Inc. has granted any license or right to use any Trademark other
than to the Company. Following the Closing Date, the Company shall have all of
G Trademark, Inc.'s rights with respect to the Trademarks owned by G Trademark,
Inc. immediately prior to the Closing.
SECTION 3.16. Compliance with Law. The business of the Company has
been and is being conducted in all respects in compliance with all applicable
federal, state, local or foreign laws, regulations, rulings or orders (including
but not limited to, any of the foregoing relating to employment discrimination,
occupational safety, environmental protection, conservation, restraints of
trade, antitrust, unfair competition or corrupt practices), the noncompliance
with which would constitute a Material Adverse Effect; and the Company has not
received any governmental notice within three years of the date hereof of any
such noncompliance by the Company.
SECTION 3.17. Contracts and Other Obligations. Except as contemplated
by the Transaction Documents, the Company does not have nor is bound by (i) any
agreement, indenture or other instrument relating to the borrowing of money,
other than in connection with the issuance of letters of credit in the ordinary
course of business consistent with past practices, (ii) any agreement, contract
or commitment relating to capital expenditures of greater than $100,000
individually except the expenditures related to the 1998 stores and 1999 stores
listed in Attachment H, (iii) any loan or advance to, or investment in, any
Person or any agreement, contract or commitment relating to the making of any
such loan, advance or investment, other than travel and similar advances to
employees in the ordinary course of business, (iv) any guarantee or other
contingent liability in respect of any indebtedness or obligations of any Person
(other than in connection with relocation of employees or the endorsement of
negotiable instruments for collection in the ordinary course of business),
(v) any management service, sales
21
agency, sales representative, distributorship or any other similar type
contract, except for any such agreements with The Limited or any of its
Affiliates, (vi) any agreement, contract or commitment limiting the freedom of
the Company to engage in any line of business or to compete with any Person
except for certain exclusives and restrictions as may be contained in leases or
other occupancy contracts that relate to a certain shopping center and not the
business generally or (vii) any franchise or similar type agreement. Each
contact or agreement required to be disclosed pursuant to this Section 3.17 is
in full force and effect, and there exists no default or event of default or
event, occurrence, condition or act which, with the giving of notice, the lapse
of time or the happening of any other event or condition, would become a default
or event of default thereunder which would singly or in the aggregate constitute
a Material Adverse Effect. The Company is not now in violation, and in the past
12 months has not violated, any of the terms or conditions of any contract or
agreement which would constitute a Material Adverse Effect, and, to the best of
the knowledge of The Limited, all of the covenants to be performed by any other
party thereto have been fully performed.
SECTION 3.18. Certain Related Party Contracts. Except as set forth in
the Disclosure Schedule or as contemplated by the Transaction Documents, there
are no agreements, contracts or understandings by and between The Limited or its
Affiliates and the Company which are material to the business of the Company,
including, without limitation, any tax-sharing agreements or other agreement
pursuant to which The Limited or such Affiliate provides any support services
to the Company (including, but not limited to accounting, tax, data processing
and legal services).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE FS STOCKHOLDER
The FS Stockholder represents and warrants to The Limited that:
SECTION 4.01. Organization and Existence. The FS Stockholder is a
limited partnership duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization.
SECTION 4.02. Corporate Authorization. The execution, delivery and
performance by the FS Stockholder of the Transaction Documents to which it is a
party, and the consummation by the FS Stockholder of the transactions
contemplated by such Transaction Documents, are within its corporate powers
22
and have been duly authorized by all necessary corporate, partnership or limited
liability company action on its part. No other corporate, partnership or limited
liability company proceedings on the part of such FS Stockholder or proceedings
or approvals by its stockholders, partners or members are necessary to authorize
(i) the execution and delivery by the FS Stockholder of such Transaction
Documents, (ii) the consummation of the transactions contemplated hereby or
thereby by such FS Stockholder or (iii) the performance of the respective
obligations of the FS Stockholder hereunder or thereunder. Each of the
Transaction Documents constitutes a valid and binding obligation of the FS
Stockholder enforceable against it in accordance with its respective terms,
(i) except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to or affecting
creditors' rights generally, including the effect of statutory and other laws;
concerning fraudulent conveyances and preferential transfers, and (ii) subject
to the limitations imposed by general equitable principles (regardless of
whether such enforceability is considered in a proceeding at law or in equity).
SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by the FS Stockholder of the Transaction Documents require no action
by or in respect of, or consent or approval of, or filing with, any federal,
state or foreign governmental body, agency, official or authority other than
compliance with any applicable requirements of the HSR Act.
SECTION 4.04. Non-contravention. The execution, delivery and
performance by the FS Stockholder of the Transaction Documents to which it is a
party do not and will not (i) contravene or conflict with the respective
charter, bylaws, partnership agreement, limited liability company agreement or
other organizational documents of the FS Stockholder, (ii) assuming compliance
with the matters referred to in Section 4.03, contravene or conflict with or
constitute a violation of any provision of any law, statute, rule, regulation,
judgment, injunction, writ, order, award or decree binding upon or applicable to
the FS Stockholder, (iii) with or without the giving of notice or the lapse of
time, or both, constitute a default under or give rise to any right of
termination, cancellation or acceleration of any right or obligation of the
FS Stockholder, or to a loss of any benefit to which the FS Stockholder is
entitled, under any provision of any agreement, contract or other instrument
binding upon the FS Stockholder or (iv) result in the creation or imposition of
any material Lien on any asset of the FS Stockholder, except, in the case of
clauses (ii), (iii) and (iv), for any such contravention, conflict, violation,
default, termination, cancellation, acceleration or loss that would not have a
material adverse effect on the FS Stockholder.
SECTION 4.05. Finders' Fees. Except for Xxxxxxx Xxxxxx whose fees
(including investment, legal and accounting fees) of $3,250,000 are to be paid
by
23
the Company pursuant to Section 2.02(h), there is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of the FS Stockholder who might be entitled to any fee or commission
from The Limited, the Company or any of their Affiliates upon consummation of
the transactions contemplated by the Transaction Documents.
SECTION 4.06. Litigation. There is no claim, legal action, suit
arbitration, investigation or proceeding pending against, or to the best of the
knowledge of the FS Stockholder or any of its Affiliates, threatened against or
affecting, the FS Stockholder or any of its Affiliates before any court or
arbitrator or any governmental body, agency or official which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay any of the
transactions contemplated by the Transaction Documents.
SECTION 4.07. Inspections. The FS Stockholder is an informed and
sophisticated participant in the transactions contemplated by the Transaction
Documents, experienced in the evaluation and purchase of companies such as the
Company. The FS Stockholder has undertaken an investigation and have been
provided with, has evaluated and has relied upon certain documents and
information to assist it in making an informed and intelligent decision with
respect to the execution of the Transaction Documents. The FS Stockholder will
undertake prior to Closing such further investigation and request such
additional documents and information as they deem necessary. The FS Stockholder
acknowledges that none of The Limited, its Affiliates and the Company has made
any representation or warranty as to the prospects, financial or otherwise, of
the business of the Company, except as expressly set forth in the Transaction
Documents. The FS Stockholder agrees to accept the shares of Class A Common
Stock to be subscribed for hereunder and the Company in the condition they are
in on the Closing Date based upon its own inspections, examinations and
determinations with respect thereto as to all matters, and without reliance upon
any express or implied representations or warranties of any nature, whether in
writing, orally or otherwise, made by or on behalf of or imputed to The Limited
or any Affiliate of The Limited, except as expressly set forth in the
Transaction Documents.
SECTION 4.08. Financing. The FS Stockholder has or will have prior to
the Closing, sufficient cash, available lines of credit or other sources of
immediately available funds to enable it to make payment of the Purchase Price
and any other amounts to be paid by it hereunder.
24
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 5.01. Shares to Be Issued to the FS Stockholder. The Company
represents and warrants to the FS Stockholder that when issued in accordance
with the terms of this Agreement, (i) assuming payment therefor in accordance
with the terms hereof, the shares of Class A Common Stock to be issued to the
FS Stockholder at the Closing will be duly authorized, validly issued, fully
paid and non-assessable and issued free and clear of any Liens (other than any
Liens created by or pursuant to arrangements entered into at the direction of
the FS Stockholder) and (ii) the FS Stockholder will have valid title to such
shares of Class A Common Stock.
SECTION 5.02. Warrant. The Company represents and warrants to The
Limited that effective after the Closing and assuming due authorization as
represented in Section 3.02, (a) the Warrant shall constitute a valid and
binding obligation of the Company enforceable against it in accordance with its
terms (i) except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to or affecting creditors' rights generally, including the effect of statutory
and other laws concerning fraudulent conveyances and preferential transfers and
(ii) subject to the limitations imposed by general equitable principles
(regardless of whether such enforceability is considered in proceeding at law or
in equity), (b) shares of Common Stock to be issued to The Limited pursuant to
the Warrant or upon conversion or exchange of the Class B Common Stock will,
when issued pursuant to the terms of the Warrant, the Class B Common Stock, be
duly authorized, validly issued, fully paid and non-assessable and free and
clear of any Liens and (c) shares of Class A Common Stock to be issued to The
Limited at Closing pursuant to this Agreement will, when issued in accordance
with the terms of this Agreement, be duly authorized, validly issued, fully paid
and non-assessable and free and clear of any Liens.
ARTICLE 6
COVENANTS OF THE LIMITED
SECTION 6.01. Conduct of the Business. From the date of this Agreement
until the Closing Date and except as set forth in the Disclosure Schedule or as
contemplated by the Transaction Documents, The Limited shall cause the Company
to conduct its business in the ordinary course, and use its best efforts to
preserve intact its business relationships with third parties, keep available
the
25
services of its present employees and to preserve and maintain the goodwill and
reputation associated with its business. Without limiting the generality of the
foregoing, from the date hereof until the Closing Date and except as
contemplated by the Transaction Documents, The Limited will not permit the
Company to:
(a) adopt or propose any change in its articles of incorporation or
bylaws;
(b) declare, set aside or pay any dividend or other distribution with
respect to any shares of capital stock of the Company;
(c) merge or consolidate with any other Person or acquire a material
amount of assets from any other Person other than (i) pursuant to existing
contracts, agreements or commitments that are disclosed herein or in the
Disclosure Schedule and (ii) the acquisition of inventory in the ordinary course
of business;
(d) sell, lease or otherwise dispose of or encumber any material
assets or property except (i) pursuant to existing contracts, agreements or
commitments, (ii) for the sale of inventory in the ordinary course of business
consistent with past practices and (iii) for the sale, lease, disposition or
encumbrance of amounts of assets in the ordinary course of business in an amount
not material to the Company;
(e) fail to perform or cause to be performed maintenance and repair
services in the ordinary course of business consistent with past practices;
(f) make any material change in inventory policies, procedures and
carrying values, operating policies and procedures, and advertising and
promotion policies and procedures;
(g) increase the rates of compensation or vacation or other benefits
of employees, except (i) as required by any law, statute or other governmental
regulation, (ii) in the ordinary course of business consistent with past
practices or (iii) pursuant to any contract in effect on the date hereof and
disclosed herein or in the Disclosure Schedule,
(h) fail to conduct its relations with employees, including without
limitation, termination and hiring practices, in the ordinary course of business
consistent with past practices;
26
(i) make any loan, advance or capital contribution to or investment in
any Person, except for travel and similar advances in the ordinary course of
business consistent with past practices;
(j) enter into any new leases for real property, terminate any
existing leases for real property, fail to exercise any option to extend any
such leases or discontinue the operations of any facility;
(k) make, permit or enter into any amendment, cancellation,
termination, relinquishment, waiver or release of any contract or lease for real
property other than in the ordinary course of business;
(l) incur, assume or guarantee any debt for borrowed money, other than
in the ordinary course of business consistent with past practices;
(m) enter into any transaction between The Limited or its Affiliates,
on the one hand, and the Company, on the other hand, other than transactions
that are entered into in the ordinary course of business consistent with past
practices;
(n) adopt any change in its method of accounting or accounting
practice except as required by law or generally accepted accounting principles;
(o) take any action or cause any action to be taken which would delay
or accelerate the payment of accounts payable beyond the time of payment which
is consistent with past practice;
(p) enter into any new contract or agreement providing for capital
expenditures which individually exceeds $100,000;
(q) enter into any contract, agreement or commitment which would be
materially inconsistent with the provisions of Section 8.03; or
(r) enter into a binding agreement to do any of the foregoing.
SECTION 6.02. Access to Information. (a) From the date of this
Agreement until the Closing Date, The Limited (i) will give, and will cause the
Company to give, the FS Stockholder and its counsel, auditors and other
authorized representatives and potential lenders to the Company reasonable
access to the offices, properties, books and records of the Company and, to the
extent related primarily to the Company, the offices, properties, books and
records of The Limited, during normal business hours and upon reasonable prior
notice, (ii) will furnish, and will cause the Company to furnish, to the
FS Stockholders and its counsel, financial advisors, auditors and other
authorized representatives and
27
potential lenders to the Company such financial and operating data and other
information relating to the Company as the FS Stockholder may reasonably request
and (iii) will instruct the employees, counsel and financial advisors of The
Limited or the Company to cooperate with the FS Stockholder in its investigation
of the Company.
(b) From and after the Closing Date, The Limited will give the Company
and its counsel, auditors and other authorized representatives and potential
lenders to the Company reasonable access to its offices, properties, books and
records to the extent they relate primarily to the Company and to the extent
necessary for the Company in connection with any audit, investigation, dispute
or litigation or any other reasonable business purpose relating to the Company;
provided that any such access by the Company and its counsel, auditors and other
authorized representatives and potential lenders to the Company shall not
unreasonably interfere with the conduct of the business of The Limited. The
Company shall bear all of the out-of-pocket costs and expenses (including,
without limitation, attorneys' fees, but excluding reimbursement for general
overhead, salaries and employee benefits) reasonably incurred in connection with
the foregoing.
(c) After the Closing, The Limited and its Affiliates will hold, and
will use reasonable efforts to cause their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of law, all confidential documents and information
concerning the Company, except to the extent that such information can be shown
to have been (i) previously known on a nonconfidential basis by The Limited or
its Affiliates, (ii) in the public domain through no fault of The Limited or its
Affiliates or (iii) later lawfully acquired by The Limited or its Affiliates
from sources other than those related to its prior ownership of the Company. The
obligation of The Limited and its Affiliates to hold any such information in
confidence shall be satisfied if they exercise the same care with respect to
such information as they would take to preserve the confidentiality of their own
similar information.
SECTION 6.03. Maintenance of Insurance Policies. Prior to the Closing,
The Limited and its Affiliates will use reasonable efforts to maintain insurance
policies for the Company in the amount and scope consistent with past practices.
The Limited and its Affiliates shall not take or fail to take any action if such
action or inaction, as the case may be, would adversely affect the applicability
of any insurance policy in effect on the Closing Date that covers all or any
part of the Company. The Company shall after the Closing continue to have
coverage under such insurance policies with respect to events occurring prior to
the Closing, and
28
it is understood that the Company shall continue to be responsible for amounts
(including deductibles) not covered by such insurance policies.
ARTICLE 7
COVENANTS OF THE FS STOCKHOLDER
SECTION 7.01. Confidentiality. The FS Stockholder agrees that, subject
to the proviso to this sentence, until the Closing Date, all information
provided to it and any of the Persons referred to in Section 6.02 will be held,
in confidence, unless the FS Stockholder and such Persons are compelled to
disclose by judicial or administrative process or by other requirements of law,
except to the extent that such information can be shown to have been
(a) previously known on a nonconfidential basis by the FS Stockholder or such
Persons, (b) in the public domain through no fault of the FS Stockholder or such
Persons or (c) later lawfully acquired by the FS Stockholder or such Persons
from sources other than The Limited, the Company or any Affiliate thereof;
provided that (i) information that does not relate to the Company shall remain
subject to the confidentiality restrictions set forth in this Section 7.01 after
the Closing Date and (ii) any such information relating to the Company may be
disclosed to potential lenders to the Company if such potential lenders agree
with The Limited (in form and substance reasonably satisfactory to The Limited)
to be bound by the provision of this Section 7.01. The obligation of
FS Stockholder and its Affiliates to hold any such information in confidence
shall be satisfied if they exercise the same care with respect to such
information as they would take to preserve the confidentiality of their own
similar information. If this Agreement is terminated, the FS Stockholder and the
Persons referred to in Section 6.02 will destroy or deliver to The Limited, upon
request, all documents and other materials, and all copies thereof, obtained by
the FS Stockholder and such Persons or on their behalf from The Limited, the
Company or any Affiliate thereof in connection with this Agreement that are
subject to such confidence.
SECTION 7.02. Access after Closing. On and after the Closing Date, the
FS Stockholder and the Company will afford to The Limited, its Affiliates and
their agents reasonable access to the books and records relating to the Company
(as well as the employees and auditors of such Persons with knowledge of the
Company) during normal business hours and upon reasonable prior notice to permit
The Limited and its Affiliates to determine any matter relating to their rights
and obligations under any Transaction Document or other document or agreement
contemplated hereby and to permit The Limited to prepare and file any
29
and all tax reports or returns required to be filed by The Limited or any of its
Affiliates.
SECTION 7.03. Insurance. The FS Stockholder agrees that all insurance
policies covering the Company maintained by or on behalf of The Limited shall be
terminated on the Closing Date and that, from and after the Closing Date, The
Limited and its Affiliates shall have no obligation of any kind to maintain any
form of insurance covering the Company.
SECTION 7.04. Reimbursement of Year 2000 Stores Costs. The FS
Stockholder acknowledges that prior to the Closing Date, The Limited incurred
certain costs payable to third parties on behalf of the Company with respect to
the stores listed on Schedule 7.04 and the costs to The Limited, which are also
set forth on Schedule 7.04, are not reflected in the consideration to be paid to
The Limited pursuant to this Agreement. The FS Stockholder, therefore, agrees
that in the event that the Company decides to activate plans to open any of the
stores listed on Schedule 7.04, the Company will promptly notify The Limited of
such decision and promptly pay to The Limited the amount set forth opposite such
store.
ARTICLE 8
COVENANTS OF THE PARTIES
SECTION 8.01. Use of Proceeds. The parties agree that any portion of
the Purchase Price which is not otherwise required to be paid to another party
or third Person pursuant to the terms hereof shall be retained and used by the
Company for working capital and other general corporate purposes.
SECTION 8.02. Future Capital Contribution. Both the FS Stockholder and
The Limited intend that, to the extent practicable, the Company's operation will
be funded out of internally generated funds and debt financing, rather than
through additional capital contribution (it being understood that, except as
expressly provided herein, neither the FS Stockholder nor The Limited has any
obligation to make capital contributions to the Company). In this regard, the FS
Stockholder will work in good faith to cause the Company to explore obtaining
debt or other sources of financing prior to making (or to the making by any
Affiliate of the FS Stockholder) any capital contribution or other equity
investment in the Company and will consult in good faith with The Limited as to
sources of financing other than capital contributions or other equity
investments in the Company. If, notwithstanding the FS Stockholder's compliance
with the
30
foregoing provisions of this Section 8.02, the FS Stockholder determines in good
faith that obtaining debt or other sources of financing (rather than the making
of a capital contribution or other equity investment in the Company) would be
disadvantageous to the stockholders of the Company then, subject to the terms of
the Stockholders Agreement, such capital contribution or other equity investment
may be made. Nothing in this Section 8.02 will limit the scope or effect of the
provisions of Article III of the Stockholders Agreement. The provisions of this
Section 8.02 shall not apply to any registered public offering and shall
terminate upon the consummation of the Initial Public Offering.
SECTION 8.03. Agreement with Respect to Certain Real Property.
(a) Sale-Leaseback Agreements. (i) The Limited shall negotiate an agreement or
agreements pursuant to which The Limited will sell, or cause its Affiliates to
sell, the real property listed in Schedule 8.03 (the "Sale-Leaseback
Properties") to a third party and such third party will lease such property to
the Company. Such sale-leaseback agreement or agreements and any other
agreements related thereto are referred to herein as the "Sale-Leaseback
Agreements". The form of lease pursuant to which the third party will lease the
Sale-Leaseback Properties to the Company shall be substantially in the form of
Attachment F hereto (the "Sale-Leaseback Leases"). The Limited shall pay all
transfer taxes, fees and other expenses (other than the legal fees and expenses
of the FS Stockholder) related to any of the transactions contemplated by the
Sale-Leaseback Agreements. The Limited shall use all reasonable efforts to enter
into such Sale-Leaseback Agreements on or prior to the Closing.
(ii) The parties agree that all proceeds from the sale of the
Sale-Leaseback Properties pursuant to the Sale-Leaseback Agreements
shall be for the benefit of The Limited or an Affiliate of The Limited.
(iii) The Limited shall have the right to negotiate agreements
pursuant to which The Limited will, or cause its Affiliates to, buy
from the current owner and sell, or cause its Affiliates to sell, the
real property located at Sawmill Road in Columbus, Ohio (the "Sawmill
Property") to a third party and such third party will lease such
property to the Company. The parties agree that all proceeds from the
sale of the Sawmill Property shall be for the benefit of The Limited or
an Affiliate of The Limited. The Company agrees to enter into such
lease pursuant to which such third party will lease the Sawmill
Property to the Company so long as the economic terms of such lease are
not more adverse to the Company than the existing lease for the Sawmill
Property. The sale and leaseback of the Sawmill Property shall occur as
soon as practicable after the Closing.
(b) Leases; Rent.
31
(i) The parties agree that aggregate rent payable by the
Company with respect to the Sale-Leaseback Properties (excluding any
rents payable to any ground lessor) shall not exceed (A) $7,600,000
(determined in each case by reference to the first 12 months after the
closing date for such Sale-Leaseback transaction during which the
relevant Sale-Leaseback Property is open for business), and (B) for
each respective 12-month period thereafter, an amount equal to the
aggregate rent payable in the immediately prior 12-month period plus
1.5% thereof.
(ii) Until the closing under the Sale-Leaseback Agreements has
occurred, the Company shall pay rent on Properties 1 through 6 at rents
currently in effect to The Limited. Subsequent to the closing under the
Sale-Leaseback Agreements, the Company shall pay rent in accordance
with the Sale-Leaseback Leases for such Properties 1 through 6, subject
to the limit on aggregate rent in Section 8.03(b)(i) minus $1 million,
which is attributable to the rent for Property 7. The parties expect
that the Sale-Leaseback Agreement with respect to Property 7 will close
prior to the time such property is available to the Company for
occupancy; however, in the event the Sale-Leaseback Agreement has not
closed by such time, the Company shall pay annual rent to The Limited
equal to 10.75% of the hard and soft costs of construction of the
building shell (which is estimated to be $9,259,000), and the rent for
the initial 12-month period shall not exceed the greater of (A) $1
million per annum or (B) an amount per 12-month period equal to the
amount set forth in Section 8.03(b)(i) above, minus the aggregate
rents payable for Properties 1 through 6 for such 12-month period. The
rent for Property 7 shall first become payable on the date on which the
shell building on such property is fully constructed and available to
the Company for occupancy.
(c) Guarantees. The Company shall use reasonable efforts to cause the
unconditional release of The Limited and its Affiliates from any guarantees
provided by them or obligations (contingent or otherwise) to provide guarantees
in connection with any lease for the Real Property. In addition, with respect to
any Real Property of which the Company's obligations under the lease applicable
thereto are or may be guaranteed by The Limited or an Affiliate of The Limited
and for which the Company cannot cause the unconditional release of The Limited
and its Affiliates from their obligations thereunder, the Company agrees to
assign its rights and obligations under such lease to The Limited or an
Affiliate of The Limited, as The Limited may designate, and The Limited agrees
to sublease, or cause such Affiliate to sublease, such Real Property to the
Company on terms substantially identical to those which the Company would have
been subject if not for this assignment and leaseback arrangement. The parties
agree
32
that the aforementioned assignment and lease agreements (the "Lease
Assignments") shall be entered into on or prior to the Closing.
(d) Easton Store. FS Stockholder agrees to cause the Company to enter
into a lease with The Limited or the developer of such property (either entity
being the "Developer"), for the lease of property located at the Fashion
District in Columbus, Ohio which shall contain economic terms which are not more
adverse to the Company than the existing lease at Easton Market located in
Columbus, Ohio (the "Power Mall"). Such lease shall provide that (i) the
Developer shall construct a store which shall be, and have fixtures,
substantially similar to the existing prototype at Castleton Mall, (ii) the
Company shall agree that the Developer may move, and the Company shall provide
access to, the fixtures currently located at the Power Mall (which the Developer
deems appropriate to move) to the new store at the Fashion District, (iii) the
Company shall close its store at the Power Mall prior to the opening of the
store at the Fashion District, (iv) the store at the Fashion District shall be
scheduled to open for business upon the later of the spring of 2001 or promptly
after the date on which the anchor tenant, which is expected to be a large
nationally recognized department store, at the Fashion District opens for
business (provided, however, that the Company may, in its discretion, elect to
open such store at an earlier date but not earlier than the opening of as least
one department store at the Fashion Mall), (v) the costs of moving inventory and
any movable fixtures from the Power Mall store to the Fashion District store
shall be borne by the Developer, however, all other costs incurred in connection
with the Company's obligations in connection with the closing of the store at
the Power Mall and opening the store at the Fashion District, including any
costs associated with store closure, shall be borne by the Company, and
(vi) from and after the opening of the new store at the Fashion District, the
Company shall be indemnified by the Developer for payment obligations under its
current lease at the Power Mall so long as the Company complies with the terms
of such lease.
(e) General. (i) The Limited and the FS Stockholder agree that they
shall vote, or cause to be voted, their respective shares of Class A Common
Stock and shall, to the extent permitted by law, cause their respective
designees on the Board of Directors of the Company, to approve any actions on
the part of the Company necessary or appropriate to consummate the transactions
contemplated in this Section 8.03. The Company shall enter into any agreement
which is necessary or appropriate to consummate the transactions contemplated in
this Section 8.03.
(ii) Any references to "Properties" followed by number
references shall mean those real properties set forth on, and numbered
in such manner, on Schedule 8.03.
33
(iii) The Limited and the FS Stockholder agree that,
notwithstanding any provision of the Agreement to the contrary, for
avoidance of doubt, the allowances from developers with respect to the
Washingtonian and One Schaumburg Place stores shall be retained by The
Limited and the allowances from developers with respect to the
Castleton Square and Mall of Georgia stores shall be retained by the
Company.
(iv) The Limited and FS Stockholder agree that to the extent
the applicable costs for construction of the stores listed in
Attachment H in the aggregate exceed the sum of the total amounts for
the 1998 stores and the 1999 stores as set forth in Attachment H, such
excess costs shall be for the account of The Limited. It is understood
that The Limited shall build the stores at Lenox Marketplace and Mall
of Georgia in Atlanta, Georgia in accordance with the plan
specifications for each store as set forth in Attachment H.
(f) The Limited agrees that, prior to the Closing, it will use its
reasonable best efforts to negotiate (on behalf of the Company) a firm
commitment for a sale-leaseback transaction for the Company's currently proposed
store in Buffalo, New York with the party to the sale-leaseback transaction
referred to in Section 8.03(a) on terms comparable to the terms of such
sale-leaseback transaction. If it is possible to negotiate such a sale-leaseback
transaction, The Limited will finance (or arrange the financing by a third-party
of) the construction of the proposed store on arm-length terms for construction
loans of this type for comparable companies (with the Company to be responsible
for all principal and interest under such financing), and the Company will enter
into a sale-leaseback arrangement with respect to the store pursuant to which
the Company will sell the store to the third-party referred to in Section
8.03(a) (with the proceeds from the sale to be used to repay the financing
referred to above, it being understood that the Company will be obligated to
repay such financing even if the sale-leaseback transaction is not consummated)
and the third party will lease the store to the Company on terms substantially
as set forth in Attachment F hereto with the rent to be determined on the basis
of market conditions at the time of the opening of the store (which is scheduled
to occur during the year 2000). It is understood that the terms of any such
sale-leaseback and related financing must be mutually satisfactory to The
Limited and Xxxxxxx Xxxxxx. In addition, The Limited agrees to provide a
customary "completion guarantee" in connection with the Company's efforts to
finance the construction of the currently proposed store in Buffalo, New York.
If, notwithstanding the use of the reasonable best efforts contemplated by the
first sentence of this Section 8.03(f), it is not possible to negotiate a
sale-leaseback transaction for the proposed Buffalo store in the manner
contemplated above, The Limited and the FS Stockholder prior to the Closing will
34
work in good faith to develop a mutually satisfactory plan for financing the
construction of the proposed Buffalo store.
SECTION 8.04. Reimbursement of Payments by The Limited. In order to
assist the Company in its business operations after the consummation of the
transactions contemplated hereby, The Limited or an Affiliate of The Limited
may, but shall have no obligation to, make cash payments to, or on behalf of,
the Company. Any such cash payments plus interest thereon accruing at a rate
equal to the lowest applicable short term rate payable by the Company under the
Credit Facility, compounding on a monthly basis, shall be reimbursed by the
Company on a quarterly basis and shall be paid to The Limited or an Affiliate of
The Limited, as The Limited may designate, within five business days after the
end of each such quarter, unless otherwise agreed to by the Company and The
Limited.
SECTION 8.05. Obligations with Respect to the Company's Credit
Facility. The FS Stockholder shall use reasonable efforts to negotiate on the
Company's behalf the Credit Facility.
SECTION 8.06. Further Assurances. Subject to the terms and conditions
of this Agreement, each party shall use all reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary or
desirable under applicable laws to consummate the transactions contemplated by
the Transaction Documents. The Limited and the FS Stockholder agree, and The
Limited, prior to the Closing, and the FS Stockholder, after the Closing, agrees
to cause the Company, to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be necessary
or desirable in order to consummate or implement expeditiously the transactions
contemplated by the Transaction Documents.
SECTION 8.07. Certain Filings. The Limited and the FS Stockholder
shall cooperate with one another (a) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or authority
is required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any contracts, in connection with the consummation of
the transactions contemplated by the Transaction Documents and (b) subject to
the terms and conditions of this Agreement, in taking such actions or making any
such filings, furnishing information required in connection therewith and
seeking timely to obtain any such actions, consents, approvals or waivers.
SECTION 8.08. Public Announcements, Etc. The parties shall consult
with each other before issuing any press release or making any public statement
with respect to any Transaction Document or the transactions contemplated hereby
and thereby and, except as may be required by applicable law or any listing
agreement
35
with any national or international securities exchange, will not issue any such
press release or make any such public statement prior to such consultation.
Notwithstanding the foregoing, no provision of this Agreement shall relieve any
party from any of its obligations Section 7.01.
SECTION 8.09. HSR Filings. The Limited and the FS Stockholder shall
promptly make the filing required by the HSR Act.
ARTICLE 9
TAX MATTERS
SECTION 9.01. Tax Representations. The Company represents and warrants
that (a) all material Returns that are required to be filed by, or with respect
to, the Company on or before the Closing Date for any Tax period ending on or
before the Closing Date have been filed or will be filed in accordance with all
applicable laws; (b) as of the time of filing, the Returns were true and
complete in all material respects; (c) all Taxes shown as due and payable on the
Returns that have been filed have been timely paid, or withheld and remitted to
the appropriate Taxing Authority; (d) the charges, accruals and reserves for
Taxes payable by the Company in respect of any Pre-Closing Tax Period reflected
on the books of the Company (excluding any provision for deferred taxes) are
adequate to cover such Taxes; (e) the Company has not requested (A) any
extension of time within which to file any Return which has not already been
filed or (B) any extension of the statute of limitations in which Taxes payable
by the Company in respect of any Pre-Closing Tax Period may be collected, which
extension has not yet expired; (f) there is no audit, claim, action, suit,
proceeding or investigation now proposed or pending against or with respect to
the Company in respect of any Tax; (g) there are no Liens for Taxes (other than
Permitted Liens) upon the assets of the Company; and (h) the Company has not
filed a consent under Section 341(f) of the Code.
SECTION 9.02. Tax Covenants. (a) All material Returns required to be
filed after the Closing Date with respect to the Company (excluding separate
Returns required to be filed by the Company) relating to any Pre-Closing Tax
Period will be filed by The Limited when due (taking into account any extension
of a required filing date) and will be completed in a manner that is consistent
with past practice of the Company.
(b) The Limited shall be entitled to any Tax deduction that may become
available in respect of options discussed in Section 10.08. The Returns of The
36
Limited and the Company shall reflect the entitlement of The Limited to such
deduction. To the extent that any such deductions are disallowed because a
Taxing Authority determines that the Company should have claimed such deduction,
the Company shall (x) claim the deductions to the maximum extent possible and
(y) pay to The Limited the Tax benefit received by the Company from the use of
such deduction. Any such Tax benefit shall be considered equal to the excess of
(i) the amount of Taxes that would have been payable (or of the Tax refund that
would have been receivable) by the Company, in the absence of the deduction, for
the Taxable year in which the deduction is utilized over (ii) the amount of
Taxes actually payable (or of the Tax refund actually receivable) by, or taken
into account in determining any adjustment arising on audit of, the Company for
such Taxable year. Payment of the amount of such benefit shall be made within
15 days after the filing of any Return in which the deduction is claimed, or of
any adjustment attributable to the deduction. The Limited shall be responsible
for the withholding and payment of any Taxes for which an employer would be
otherwise be responsible arising in connection with the exercise of any of such
stock options and shall indemnify and hold harmless the Company to the extent
any such Taxes are imposed on the Company (including costs and expenses, such as
legal or accounting costs, relating thereto).
(c) The Company shall promptly pay to The Limited all refunds of Taxes
and interest thereon received by the Company with respect to any Pre-Closing Tax
Period, except to the extent that any portion of any such refund or interest
thereon has given rise to another payment to The Limited under this Agreement.
(d) The Company shall elect, where permitted by applicable law, to
carry forward any Tax Asset arising in a Post-Closing Tax Period that would,
absent such election, be carried back to a Pre-Closing Tax Period. If, despite
the first sentence of this Section 9.02(d), the Company carries back to a
Pre-Closing Tax Period any Tax Asset of the Company arising in a Post-Closing
Tax Period, The Limited shall pay to the Company the Tax benefit, if any,
received by The Limited from the use of such Tax Asset. The Company shall pay to
The Limited the Tax benefit received by the Company from the use in any
Post-Closing Tax Period of a carryforward of any Tax Asset of the Company
arising in a Pre-Closing Tax Period. To the extent that either The Limited or
the Company cannot receive a Tax benefit from the use of any of its own Tax
Assets as a consequence of the use of a carryback (in the case of The Limited)
or carryforward (in the case of the Company) that has given rise, or would
otherwise give rise, to a payment under this Section 9.02(d), the party that
received the relevant payment under this Section 9.02(d) shall, within 15 days
after the receipt of written notice from the other party, refund such payment or
the party that would otherwise be required to make the relevant payment under
this Section
37
9.02(d) shall not be required to make it. Subject to the next sentence of this
Section 9.02(d), the Tax benefit received by The Limited or the Company, as the
case may be, from the use of a carryback or carryforward shall be considered
equal to the excess of (i) the amount of Taxes that would have been payable (or
of the Tax refund that would have been receivable) by The Limited or the
Company, as the case may be, in the absence of the relevant carryback or
carryforward, for the Taxable year in which the carryback or carryforward is
used over (ii) the amount of Taxes actually payable (or of the Tax refund
actually receivable) by, or taken into account in determining any adjustment
arising on audit of, The Limited or the Company, as the case may be, for such
Taxable year. In addition, the Tax benefit received by The Limited from the use
of a carryback described in this Section 9.02(d) shall be determined by taking
into account the consequences of the use of such carryback on The Limited's tax
basis in the stock of the Company. Payment of the amount of such Tax benefit
shall be made within 15 days after the filing of the applicable Return, or of
any adjustment, for the Taxable year in which the carryback or carryforward is
used. The Company shall not be required under this Section 9.02(d) to pay The
Limited for the use of any carryforward to the extent that the Company is
required under Section 9.05(b) to pay The Limited for the use of such
carryforward.
SECTION 9.03. Termination of Existing Tax Sharing Agreements. Any and
all existing Tax sharing agreements between the Company and any member of the
affiliated group of corporations of which The Limited is a member shall be
terminated as of the Closing Date. After the Closing Date, neither the Company,
The Limited nor any Affiliate of The Limited shall have any further rights or
liabilities thereunder.
SECTION 9.04. Cooperation on Tax Matters. The parties agree to furnish
or cause to be furnished to each other party, upon request, as promptly as
practicable, such information and assistance relating to the Company as is
reasonably necessary for the filing of any Return, for the preparation for any
audit, and for the prosecution or defense of any claim, suit or proceeding
relating to any proposed adjustment.
SECTION 9.05. Tax Indemnification. (a) The Limited shall indemnify the
Company against, and hold it harmless from, on an after-Tax basis, (i) any Tax
imposed on the Company with respect to any Pre-Closing Tax Period and (ii) any
liabilities, costs and expenses (including, without limitation, reasonable
expenses of investigation and attorneys' fees and expenses) incurred or suffered
by the Company arising out of or incident to the imposition, assessment,
assertion or proposed adjustment of any Tax described in (i) (the sum of (i) and
(ii) being referred to herein as a "Loss").
38
(b) If The Limited's indemnification obligation under this Section
9.05 arises in respect of an adjustment that makes allowable to the Company any
deduction, amortization, exclusion from income or other allowance (a "Tax
Allowance") that would not, but for such adjustment, be allowable, the Company
shall (x) claim such Tax Allowance to the maximum extent possible and (y) pay to
The Limited the Tax benefit received by the Company from the use of such Tax
Allowance. The Thx benefit received from the use of the portion of a Tax
Allowance that is used in the Taxable year in which the related indemnification
payment is made, or in an earlier Taxable year, shall be considered equal to the
excess of (i) the amount of Taxes that would have been payable (or of the Tax
refund that would have been receivable) by the Company, in the absence of such
Tax Allowance, for such Taxable year over (ii) the amount of Taxes actually
payable (or of the Tax refund actually receivable) by, or taken into account in
determining any adjustment arising on audit of, the Company for such Taxable
year. The Tax benefit received from the use of the portion of a Tax Allowance
that is not used either in the Taxable year in which the related indemnification
payment is made or, in an earlier Taxable year, shall be determined by
(i) multiplying such portion of the Tax Allowance by the maximum applicable
corporate Tax rate in effect at the time the calculation is made (or if the
Company believes that another Tax rate is appropriate, such Tax rate as The
Limited shall have agreed to in writing after good-faith negotiation with the
Company) or, in the case of a credit, 100%, (ii) using a discount rate equal to
the mid-term applicable federal rate in effect at that time and (iii) using
reasonable assumptions regarding the Taxable year or years in which the Company
will utilize such portion of the Tax Allowance.
(c) Any payment by The Limited pursuant to Section 9.05(a) shall be
made not later than 15 days after receipt by The Limited of written notice from
the Company stating that any Loss has been paid by the Company and the amount
thereof and of the indemnity payment requested. Any payment by the Company
pursuant to Section 9.05(b) shall be made not later than 15 days after the
filing of the relevant Return of the Company for the Taxable year in which The
Limited makes the related indemnification payment or, if earlier, 15 days after
the filing of any amended Return of the Company in which any portion of the
relevant Tax Allowance is claimed.
(d) Within a reasonable period of time prior to filing any Return for
any Pre-Closing Tax Period, the Company shall deliver a copy of such Return to
The Limited. If The Limited disagrees with any items on the Return, it shall so
inform the Company in writing at least 10 days prior to the date on which the
Return is due, taking into account any extension of the time for filing such
Return. The Limited and the Company shall negotiate in good faith to resolve the
disputed items and, if they cannot reach agreement, shall immediately refer the
matter to a
39
nationally recognized independent certified public account firm reasonably
acceptable to each of them, which accounting firm shall resolve the disputed
items prior to the due date for such Return, taking into account any extension.
The costs, fees and expenses of the accounting firm shall be borne equally by
The Limited and the Company. Immediately after the resolution of any dispute
with respect to such Return or, if there is no dispute, as promptly as
practicable after it receives the draft Return, The Limited shall deliver to the
Company its written consent to payment of the Taxes shown as due and payable on
the Return.
(e) If any claim or demand for Taxes in respect of which indemnity
may be sought pursuant to this Section 9.05 is asserted in writing against the
Company, or if any request is made for an extension of the statute of
limitations for any Tax in respect of which indemnity may be sought pursuant to
this Section 9.05, the Company shall notify The Limited of such claim, demand or
request within 15 days of receipt thereof, or such earlier time that would allow
The Limited to respond in a timely manner to such claim, demand or request and
shall give The Limited such information with respect thereto as The Limited may
reasonably request. The Limited may discharge, at any time, its indemnification
obligation under this Section 9.05 by paying to the Company the amount of the
applicable Loss, calculated on the date of such payment. The Limited shall
assume the defense of any claim, suit, action, litigation or proceeding relating
to Taxes in respect of which indemnity may be sought pursuant to this Section
9.05. The Company shall have the right, but not the duty, to participate in such
defense at its own expense. After assuming the defense of any claim, suit,
action, litigation or proceeding, The Limited shall not assert that the Loss, or
any portion thereof, with respect to which the Company seeks indemnification is
not within the ambit of this Section 9.05.
(f) The Limited shall not be liable under this Section 9.05 for
(i) any Tax the payment of which was made without The Limited's prior written
consent or (ii) any settlements effected without the prior written consent of
The Limited. The Company's failure to provide notice in the time required by
Section 9.05(e) shall not relieve The Limited of its indemnity obligation under
this Section 9.05, except that The Limited shall not be liable under this
Section 9.05 to the extent any such delay in providing notice actually
prejudiced The Limited.
(g) For purposes of this Section 9.05, 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 and including the Closing Date shall (x) in
the case of any Tax other than a gross receipts, sales or use Tax or a Tax based
upon or related to income, 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
40
the Tax period ending on and including 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 and any gross receipts, sales or use Tax, be
deemed equal to the amount that would be payable if the relevant Tax period
ended on and included the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of the Company.
SECTION 9.06. Dispute Resolution. In the event that The Limited and
the Company are unable to agree on the amount of any payment under Section 9.02
or 9.05, The Limited and the Company shall engage a nationally recognized
independent certified public accounting firm reasonably acceptable to each of
them to resolve the issue as promptly as possible. Such firm (x) shall be chosen
within 10 days of the date on which the need to choose it arises and (y) shall
resolve any disputed item within 30 days of having the item referred to it. The
decision of such firm shall be final and binding upon The Limited and the
Company. The relevant payment shall be made within 15 days of the date on which
the accounting firm has resolved the issue. The costs, fees and expenses of the
accounting firm shall be borne equally by The Limited and the Company.
SECTION 9.07. Survival. The covenants and agreements set forth in
Sections 9.02, 9.03, 9.04 and 9.05 shall survive for the applicable Statute of
limitations, including all extensions thereof.
ARTICLE 10
EMPLOYEE BENEFITS
SECTION 10.01. Employee Benefits Definitions. The following terms, as
used herein, having the following meanings:
"Benefit Arrangement" means each employment, severance, continuation
pay, termination pay, layoff, or other similar written contract, arrangement or
policy and each written plan or arrangement providing for health, medical, life
or other welfare benefit insurance coverage (including any insured, self-insured
or other arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, holiday, dependent care assistance, education or vacation
benefits, retirement benefits or deferred compensation, profit-sharing, benefits
in the event of a sale of the Company or other change in the control, management
or the ownership of the Company, bonuses, stock options, stock purchase, stock
appreciation or other foims of incentive compensation or post-retirement
41
insurance, compensation or benefits which (i) is not an Employee Plan, (ii) is
or has been entered into, maintained, administered or contributed to, as the
case may be, by The Limited, any of its Affiliates or the Company and (iii)
covers any employee or former employee of the Company. An agreement will not
fail to be a "Benefit Arrangement" simply because it only covers one employee or
former employee of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Employee" means each individual who is a current or former
employee, including retired employees, of the Company.
"Employee Plan" means each "employee benefit plan", as such term is
defined in Section 3(3) of ERISA, which (i) is subject to any provision of
ERISA, (ii) is or has been entered into, maintained, administered or contributed
to, as the case may be, by The Limited, any of its Affiliates or the Company and
(iii) covers any employee or former employee of the Company. An agreement will
not fail to be an "Employee Plan" simply because it only covers one employee or
former employee of the Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any entity means any other entity which, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
SECTION 10.02. ERISA Representations. The Limited represents and
warrants to the FS Stockholder that:
(a) The Disclosure Schedule sets forth each Employee Plan. With respect
to each such Employee Plan, The Limited has furnished or made available to the
FS Stockholder a true and complete copy of the plan document, the most current
summary plan description and the most recently filed Form 5500, as applicable,
of each such Plan. Each Employee Plan has been maintained in compliance with its
terms and with the requirements prescribed by any and all applicable statutes,
orders, rules and regulations, including but not limited to ERISA and the Code.
(b) The Disclosure Schedule sets forth each Benefit Arrangement. The
Limited has furnished or made available to the FS Stockholder copies of each
such Benefit Arrangement. Each Benefit Arrangement has been maintained in
42
compliance with its terms and with the requirements prescribed by any and all
applicable statutes, orders, rules and regulations.
(c) The Internal Revenue Service has issued a favorable determination
letter with respect to each Employee Plan that is intended to qualify under
Section 401 (a) of the Code, and no event has occurred before or after the date
of such letter that would disqualify such Employee Plan.
(d) Neither the Company nor The Limited has within the past three
years made any contributions (or has been obligated to make any contributions)
to a "multiemployer plan," as defined in Section 3(37) of ERISA or to a "defined
benefit pension plan," as defined in Section 3(35) of ERISA. Neither The Limited
nor the Company has any outstanding liability with respect to a multiemployer
plan or a defined benefit plan.
(e) No Employee Plan or Benefit Arrangement, individually or
collectively, could give rise to the payment to any Company Employee of any
amount which would constitute an "excess parachute payment" (within the meaning
of Section 280G of the Code).
(f) Except as provided in Sections 10.07 and 10.08, no Company
Employee shall be entitled to any severance or similar benefit solely as a
result of the transactions contemplated hereby.
(g) There are no plans that provide (or will provide) medical, life
insurance or death benefits with respect to former employees (including
retirees) of the Company, other than benefits that are required to be provided
pursuant to Section 4980B of the Code or state law continuation coverage rights.
(h) Section 10.02(h) of the Disclosure Schedule sets forth the names
of each Company Employee on leave of absence.
SECTION 10.03. Welfare Plans Following the Closing. (a) The Company
shall, as of the Closing Date, assume all obligations and liabilities
(including, without limitation, all obligations and liabilities attributable to
the period prior to the Closing Date) in respect of Company Employees under each
Employee Plan that is a welfare plan (as defined in Section 3(1) of ERISA) other
than obligations and liabilities in respect of medical and dental benefits
attributable to claims incurred prior to the Closing Date. For purposes of this
Section 10.03(a), a medical or dental claim shall be incurred when the relevant
service is provided or item is purchased. All life insurance and long-term
disability insurance benefits are fully insured and all premiums due and payable
therefor have been or will have been paid in the ordinary course prior to the
Closing.
43
(b) The Company plans provided for Company Employees that are welfare
plans (as defined in Section 3(1) of ERISA) shall not treat any transaction
contemplated hereby as an event which, in and of itself, would cause Company
Employees to be subject to any preexisting condition limitation and shall
otherwise satisfy the requirements of Section 4980B(f)(2)(B)(iv)(I) of the Code
(solely with respect to Company Employees) and shall provide that any expenses
incurred by a Company Employee during 1999 on or before the Closing Date shall
be taken into account during the fist plan year of such welfare plans for the
purposes of satisfying deductible and coinsurance requirements and satisfaction
of maximum out-of-pocket provisions to the same extent as if such expenses had
been incurred after the Closing Date.
(c) The Company's obligations under this Section 10.03 are in addition
to the Company's obligations under Sections 10.04 and 10.05.
SECTION 10.04. Savings and Retirement Plan. (a) On or prior to the
Closing Date or as soon as practicable thereafter, The Limited shall (i) cause
the trustee of The Limited Savings and Retirement Plan (the "Savings and
Retirement Plan") to segregate the assets of such Savings and Retirement Plan
representing the full account balances of Company Employees as of the Closing
Date, (ii) make any and all filings and submissions to the appropriate
governmental agencies arising in connection with such segregation of assets and
(iii) make all necessary amendments to such Savings and Retirement Plan and
related trust agreement to provide for such segregation of assets and the
transfer of assets as described below. The manner in which the account balances
of Company Employees under the Savings and Retirement Plan are transferred shall
not be affected by such segregation of assets.
(b) On or prior to the Closing Date, with the approval of the
FS Stockholder, the Company shall establish or designate an individual account
plan for the benefit of Company Employees (the "Successor Plan"), shall take all
necessary action, if any, to qualify such plan under the applicable provisions
of the Code and shall make any and all filings and submissions to the
appropriate governmental agencies required to be made by it in connection with
the transfer of assets described below. The transfer shall not occur until
(i) the Company shall have provided The Limited with a certification from the
Company, with appropriate indemnities, as to such qualified status satisfactory
to The Limited and (ii) The Limited shall have issued indemnities as to the
qualified status of the Savings and Retirement Plan satisfactory to the
FS Stockholder. The Limited, the FS Stockholder and the Company shall act
expeditiously and in good faith in satisfying the above conditions. As soon as
practicable following the satisfaction of the conditions set forth above, The
Limited shall cause the trustee of the Savings and Retirement Plan to transfer
(in the form of cash, marketable
44
securities, including shares of The Limited and Intimate Brands, Inc., and/or
investment and insurance contracts, and, to the extent practicable, in the same
relative proportions as the account balances of the Company Employees are
invested as of the date of the special valuation conducted in connection with
such transfer) the full account balances of Company Employees under the Savings
and Retirement Plan, as well as actual earnings (including, but not limited to,
any losses or expenses related thereto) attributable to the period from the
Closing Date to the date of transfer described herein, reduced by any necessary
benefit or withdrawal payments to or in respect of Company Employees occurring
during the period from the Closing Date to the date of transfer described
herein, to the appropriate trustee as designated by the Company (with the
cooperation and approval of the FS Stockholder) under the trust agreement
forming a part of the Successor Plan.
(c) In consideration for the transfer of assets described herein, the
Company shall, effective as of the date of transfer described herein, assume all
of the obligations of The Limited and its ERISA Affiliates in respect of the
account balances accumulated by Company Employees under the Savings and
Retirement Plan (exclusive of any portion of such account balances which are
paid or otherwise withdrawn prior to the date of transfer described herein) on
or prior to the Closing Date. Neither the Company nor the FS Stockholder shall
assume any other obligations or liabilities arising under or attributable to the
Savings and Retirement Plan.
SECTION 10.05. Other Employee Plans and Benefit. (a) As of the Closing
Date, the obligations and liabilities (including, without limitation, all
obligations and liabilities attributable to the period prior to the Closing
Date) of The Limited in respect of Company Employees under The Limited
Supplemental Retirement Plan and The Limited Deferred Compensation Plan shall be
identified and the benefits thereunder shall be distributed pursuant to the
terms of each such plan.
(b) In addition to the provisions of Sections 10.03 (except as provided
therein) and 10.04 with respect to Employee Plans that are welfare plans and the
Savings and Retirement Plan, the Company shall, as of the Closing Date, assume
all obligations and liabilities (including, without limitation, all obligations
and liabilities attributable to the period prior to the Closing Date) of The
Limited and its ERISA Affiliates in respect of Company Employees under each
other Employee Plan and Benefit Arrangement set forth on the Disclosure Schedule
and not covered by Sections 10.03 and 10.04.
SECTION 10.06. Necessary Action. The Limited, the Company and the
FS Stockholder agree to take all action, or cause such action to be taken, which
may be necessary in order to effectuate the transactions contemplated by this
Article,
45
including, without limitation, adopting any necessary amendments to the Employee
Plans and Benefit Arrangements and making all filings and submissions to the
appropriate governmental agencies required to be made in connection with the
segregation and/or transfer of assets contemplated by Section 10.04.
SECTION 10.07. Restricted Share Awards. All awards of restricted
shares of The Limited's common stock outstanding under any of The Limited's
Benefit Arrangements and held by Company Employees shall vest on the terms and
subject to the conditions in effect on the date hereof. The foregoing obligation
is subject to approval of the Compensation Committee of The Limited's Board of
Directors. The Vice Chairman of The Limited will recommend that such
Compensation Committee approve the foregoing.
SECTION 10.08. Stock Options. Options held by Company Employees
("Company Employee Options") to purchase shares of The Limited's common stock
and outstanding under any of The Limited's Benefit Arrangements shall continue
to vest through February 28, 2001, provided the holder thereof remains employed
by the Company through the end of such period. The expiration of each such
option shall be determined in accordance with the terms thereof and the Benefit
Arrangement pursuant to which such option was granted. The foregoing obligation
is subject to approval of the Compensation Committee of The Limited's Board of
Directors. The Vice Chairman of The Limited will recommend that such
Compensation Committee approve the foregoing.
SECTION 10.09. Indemnification. The Company hereby indemnifies The
Limited and each of its ERISA Affiliates against and agrees to hold The Limited
and each of its ERISA Affiliates harmless from any and all Damages that the The
Limited and each of its ERISA Affiliates may incur or suffer as a result of any
failure by the Company to satisfy and discharge its obligations under this
Article. The Limited and each of its ERISA Affiliates hereby indemnifies the
Company against and agrees to hold the Company harmless from any and all Damages
that the Company may incur as a result of any failure by The Limited to satisfy
and discharge its obligations under this Article.
SECTION 10.10. Third Party Beneficiaries. No provision of this Article
shall create any third party beneficiary rights in any Company Employee
(including any beneficiary or dependent thereof).
46
ARTICLE 11
CONDITIONS TO CLOSING
SECTION 11.01. Conditions to the Obligations of the FS Stockholder, the
Company and The Limited. The obligation of the FS Stockholder, the Company and
The Limited to consummate the Closing are subject to the satisfaction or waiver
of the following conditions:
(a) Any applicable waiting period under the HSR Act relating to the
transactions contemplated by the Transaction Documents shall have expired or
been terminated.
(b) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the Closing, and no action or
proceeding shall be pending before any court, arbitrator or governmental body,
agency or official with respect to which counsel reasonably satisfactory to
Xxxxxxx Xxxxxx and The Limited shall have rendered a written opinion that there
is a substantial likelihood of a determination that would prohibit the Closing.
(c) All actions by or in respect of or filings with any governmental
body, agency, official or authority required to permit the consummation of the
Closing shall have been obtained.
(d) The Sale-Leaseback Agreements and any Lease Assignments shall
have been entered into by the parties thereto.
(e) The Credit Facility (i) shall have been executed and delivered by
the Company and the lenders party thereto, and all conditions to the initial
funding thereunder shall be satisfied and (ii) shall be in form and substance
reasonably satisfactory to The Limited and the FS Stockholder.
(f) The Company shall have issued the Mezzanine Securities to a third
party in exchange for $50 million and the terms of such Mezzanine Securities
shall be in form and substance reasonably satisfactory to The Limited and the
FS Stockholder.
(g) The Company shall have amended its Certificate of Incorporation
and Bylaws in form and substance satisfactory to The Limited and the
FS Stockholder to include the terms set forth on Attachment G.
47
SECTION 11.02. Conditions to Obligations of the FS Stockholder. The
obligation of the FS Stockholder to consummate the Closing are subject to the
satisfaction or waiver of the following further conditions:
(a)(i) The Limited shall have performed in all material respects all
of its material obligations under the Transaction Documents required to be
performed by it on or prior to the Closing Date, (ii) the representations and
warranties of The Limited contained in the Transaction Documents shall be
accurate at and as of the Closing Date (without regard to any materiality
qualifier contained therein), as if made at and as of such date, except for any
inaccuracies which, individually or in the aggregate, do not constitute a
Material Adverse Effect and (iii) the FS Stockholder shall have received a
certificate signed by an executive officer of The Limited to the foregoing
effect.
(b) The FS Stockholder shall have received an opinion of Xxxxx Xxxx &
Xxxxxxxx, special counsel to The Limited, or other counsel (which shall be
Indiana counsel, as appropriate) reasonably satisfactory to the FS Stockholder,
dated the Closing Date to the effect specified in Sections 3.01 (other than the
final sentence thereof), 3.02, 3.03, 3.04 and 3.09. In rendering such opinion,
such counsel may rely upon certificates of public officers, as to matters
governed by the laws other than the laws of the State of New York, the General
Corporation Law of the State of Delaware or the federal laws of the United
States of America, upon opinions of counsel reasonably satisfactory to the
FS Stockholder, and as to matters of fact, upon certificates of officers of The
Limited or the Company, copies of which opinions and certificates shall be
contemporaneously delivered to the FS Stockholder.
(c) The Limited shall have entered into the Stockholders Agreement.
(d) During the period from the date hereof to the Closing Date, no
event, occurrence, development or state of circumstances or facts that
constitute a Material Adverse Effect shall have occurred, other than those
resulting from changes in general business conditions applicable to the business
of the Company or general economic conditions.
(e) The consent referred to in Section 3.04(iii) of the Disclosure
Schedule shall have been obtained on a basis which does not impose conditions or
obligations on the Company or on the FS Stockholder which do not exist on the
date hereof.
SECTION 11.03. Conditions to Obligations of The Limited and the
Company. The obligation of The Limited and the Company to consummate the Closing
is subject to the satisfaction or waiver of the following further conditions:
48
(a)(i) The FS Stockholder shall have performed in all material
respects all of its material obligations under the Transaction Documents
required to be performed by it at or prior to the Closing Date, (ii) the
representations and warranties of the FS Stockholder contained in the
Transaction Documents shall be accurate at and as of the Closing Date (without
regard to any materiality qualifier contained therein), as if made at and as of
such date, in all material respects and (iii) The Limited shall have received a
certificate signed by a partner of Xxxxxxx Xxxxxx to the foregoing effect.
(b) The Limited shall have received an opinion of O'Melveny & Xxxxx
LLP or other counsel (which shall be Indiana counsel, as appropriate) reasonably
satisfactory to The Limited, dated the Closing Date to the effect specified in
Sections 4.01, 4.02, 4.03, 4.04 and 4.06. In rendering such opinion, such
counsel may rely upon certificates of public officers, as to matters governed by
laws other than the laws of the State of California, the General Corporation Law
of the State of Delaware or the federal laws of the United States of America,
upon opinions of counsel reasonably satisfactory to The Limited and as to
matters of fact, upon certificates of officers of the FS Stockholder, copies of
which shall be contemporaneously delivered to The Limited.
(c) The FS Stockholder shall have entered into the Stockholders
Agreement and the Registration Rights Agreement.
(d) The Warrant shall have been executed and delivered to The Limited.
ARTICLE 12
SURVIVAL; INDEMNIFICATION
SECTION 12.01. Survival. None of the covenants, agreements,
representations and warranties of the parties contained in this Agreement or in
any certificate or other writing delivered pursuant to this Agreement shall
survive the Closing except (a) for those contained in Sections 3.13, 3.15 and
6.01 which shall survive until the second anniversary of the date hereof and (b)
for those contained in Sections 3.01, 3.02, 3.05, 3.12, 3.14, 4.01, 4.02, 4.05,
4.07, 5.01, 5.02, 7.04, 8.01, 8.02 and 8.03 and Articles 2, 10, 12, and 14 and
those covenants and agreements set forth in this Agreement (other than those set
forth in Article 9 the survival of which is governed by Section 9.07) which, by
their terms, are to have effect or to be performed after the Closing Date which
shall survive indefinitely (each, a "Surviving Representation or Covenant").
49
SECTION 12.02. Indemnification. (a) The FS Stockholder hereby
indemnifies The Limited and its Affiliates and the directors, officers,
employees and agents of The Limited or any of its Affiliates (the "Limited
Indemnitees"), against and agree to hold them harmless on an after-tax basis
from any and all Damages incurred or suffered by any of them arising out of or
related in any way to any Surviving Representation or Covenant made by the
FS Stockholder.
(b) The Limited hereby indemnifies the FS Stockholder and its
Affiliates and the directors, officers, employees and agents of the
FS Stockholder or any of its Affiliates, against and agrees to hold them
harmless on an after-tax basis from any and all Damages incurred or suffered by
any of them arising or related in any way to any of any Surviving Representation
or Covenant made by The Limited.
(c) The Company hereby indemnifies (i) the FS Stockholder and its
Affiliates and the directors, officers, employees and agents of the
FS Stockholder or any of its Affiliates, against and agree to hold them harmless
on an after-tax basis from any and all Damages incurred or suffered by any of
them arising out of or related in any way to Section 5.01 and (ii) The Limited
and its Affiliates and the directors, officers, employees and agents of The
Limited or any of its Affiliates, against and agree to hold them harmless on an
after-tax basis from any and all Damages incurred or suffered by any of them
arising out of or related in any way to Section 5.02.
SECTION 12.03. Procedures. If a third party asserts a claim against
any indemnified party for which indemnification would be available under
Section 12.02 (a "Claim"), the indemnified party shall promptly give notice of
such Claim, describing such Claim with reasonable specificity, to the
indemnifying party; provided, that the failure to give such notice shall not
affect the right of the indemnified party to indemnification under Section 12.02
except to the extent that such failure materially prejudices the ability of the
indemnifying party to defend such Claim. The indemnifying party may employ
counsel reasonably satisfactory to the indemnified party; provided that in the
event that the indemnified party reasonably determines in good faith that its
interest with respect to such Claim cannot appropriately be represented by the
indemnifying party, such indemnified party shall have the right to participate
in the defense of such Claim and to have its expenses reimbursed promptly with
respect to such Claim. In addition, in the event that such indemnifying party,
within a reasonable time after notice of any such Claim, fails to defend any
indemnified party, such indemnified party will (upon further notice to such
indemnifying party) have the right to undertake the defense of such Claim for
the account of such indemnifying party and to have its expenses reimbursed
promptly with respect to such Claim. Regardless of which party is controlling
the defense of any Claim, (i) both the indemnifying party and the indemnified
party shall act in good faith and (ii) no settlement of any such
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Claim which could reasonably be expected to have a material adverse effect on a
party may be agreed to without the written consent of such party. The
controlling party shall deliver, or cause to be delivered, to the other party
copies of all correspondence, pleadings, motions, briefs, appeals or other
written statements relating to or submitted in connection with the defense of
any such Claim and timely notices of, and the right to participate in (as
observer), any hearing or other court proceeding relating to such Claim.
ARTICLE 13
TERMINATION
SECTION 13.01. Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing:
(i) by mutual written agreement of The Limited and the
FS Stockholder;
(ii) by any party if the Closing shall not have been
consummated by August 31, 1999; provided, however, that neither The
Limited nor the FS Stockholder may terminate this Agreement pursuant to
this clause if the Closing shall not have been consummated by August
31, 1999 by reason of the failure of such party or any of its
Affiliates to perform in all material respects any of its or their
respective covenants or agreements contained in this Agreement;
(iii) by any party if there shall be any law or regulation that
makes consummation of the transactions by the Transaction Documents
illegal or otherwise prohibited or if consummation of the transactions
contemplated by the Transaction Documents would violate any
nonappealable final order, decree or judgment of any court or
governmental body having competent jurisdiction; or
(iv) by the FS Stockholder, if the audited January 30, 1999
financial statements (including the notes thereto) for the Company (the
"Audited Financials") to be provided to the FS Stockholder by The
Limited (which will be provided to the FS Stockholder no later than May
7, 1999) disclose information not provided to the FS Stockholder or any
of its representatives prior to the date hereof which the FS
Stockholder reasonably believes materially alters the nature or value
of the Company; provided that (x) for purposes of this clause (iv), the
draft Audited
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Financials delivered to the FS Stockholder on May 1, 1999 shall not be
deemed to have been delivered to the FS Stockholder prior to the date
hereof and (y) the termination right set forth in this clause (iv)
shall be deemed waived unless exercised within five Business Days of
receipt by the FS Stockholder of the Audited Financials. In addition,
the FS Stockholder acknowledges that it has received, among other
things, Company store-level cash flow and profit information prepared
by the Company through March 31, 1999 and monthly division-level
financial statements prepared by The Limited through March 31, 1999.
The party desiring to terminate this Agreement pursuant to clauses
13.01(a)(ii), 13.01(a)(iii) or 13.01(a)(iv) shall give notice of such
termination to the other parties.
SECTION 13.02. Effect of Termination. If this Agreement is terminated
as permitted by Section 13.01, such termination shall be without liability of
any party (or any Affiliate, shareholder, director, officer, employee, agent,
consultant or representative of such party) to any other party; provided that if
the transactions contemplated by the Transaction Documents fail to close as a
result of a breach of any Transaction Document by The Limited or the
FS Stockholder, such party shall be fully liable for any and all Damages
incurred or suffered by any other party as a result of all such breaches. The
provisions of Sections 7.01, 14.03, 14.05, 14.08 and 14.09 shall survive any
termination hereof pursuant to Section 13.01.
ARTICLE 14
MISCELLANEOUS
SECTION 14.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including telecopy or similar
writing) and shall be given,
if to the Company:
Xxxxxx'x Trading Company, Inc.
0000 X. Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Chief Executive Officer
Telecopy: (000) 000-0000
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if to the FS Stockholder:
FS Equity Partners IV, L.P.
c/o Xxxxxxx Xxxxxx & Co.
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxx
Telecopy: 000-000-0000
with a copy to:
O'Melveny & Xxxxx LLP
Citicorp Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxx
Telecopy: 000-000-0000
if to The Limited:
The Limited, Inc.
Three Limited Parkway
Xxxxxxxx, Xxxx 00000
Attn: Xxxxxx X. Xxxxx
Telecopy: 000-000-0000
with a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx
Telecopy: 000-000-0000
or to such other address or telecopy number and with such other copies, as such
party may hereafter specify for the purpose by notice to the other parties. Each
such notice, request or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified in
this Section and evidence of receipt is received or (ii) if given by any other
means, upon delivery or refusal of delivery at the address specified in this
Section 14.01.
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SECTION 14.02. Amendments; No Waivers. (a) Any provision of any
Transaction Document may be amended or waived prior to the Closing Date if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by The Limited, the Company and the FS Stockholder, or in the case of
a waiver, by the party against whom the waiver is to be effective. After the
Closing, except as expressly stated therein, any such Document may be amended
only if such amendment is in writing and signed by all parties thereto.
(b) No failure or delay by any party in exercising any right, power or
privilege under any Transaction Document shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
SECTION 14.03. Expenses. All costs and expenses incurred in connection
with the Transaction Documents or the transactions contemplated thereby shall be
paid by the party incurring such cost or expense; provided that the fees and
expenses set forth on Schedule 2.02 annexed hereto shall be paid by the Company.
SECTION 14.04. Successors and Assigns. The provisions of the
Transaction Documents shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns; provided that no party may
assign, delegate or otherwise transfer any of its rights or obligations under
the Transaction Documents without the consent of The Limited and the
FS Stockholder, or except as expressly provided under the relevant Transaction
Document. Notwithstanding the foregoing, the FS Stockholder may assign its
rights to subscribe for shares of Common Stock on the same terms and conditions
set forth in this Agreement to officers and directors of the Company mutually
agreed to by The Limited up to a aggregate maximum of 500,000 shares unless The
Limited and the FS Stockholder mutually agree; provided that persons purchasing
Common Stock pursuant to this Section 14.04 shall not be considered a
FS Stockholder for purposes of this Agreement.
SECTION 14.05. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of New York (without regard
to the choice of law provisions thereof).
SECTION 14.06. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same instrument.
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Each Transaction Document shall become effective when each party hereto or
thereto shall have received a counterpart hereof signed by the other parties
hereto.
SECTION 14.07. Entire Agreement. The Transaction Documents (and any
other agreements contemplated thereby), the Warrants and any correspondence
concerning actions to be taken in connection with the Closing, constitute the
entire agreement among the parties with respect to the subject matter of such
documents and supersede all prior agreements, understandings and negotiations,
both written and oral, between the parties with respect to the subject matter
thereof. No representation, inducement, promise, understanding, condition or
warranty not set forth herein has been made or relied upon by any party hereto.
No Transaction Document or any provision thereof is intended to confer upon any
Person other than the parties any rights or remedies hereunder.
SECTION 14.08. Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, any of the Transaction Documents or the transactions contemplated thereby
may be brought against any of the parties in the United States District Court
for the Southern District of New York or any state court sitting in the City of
New York, Borough of Manhattan, and each of the parties hereby consents to the
exclusive jurisdiction of such court (and of the appropriate appellate courts)
in any such suit, action or proceeding and waives any objection to venue laid
therein. Process in any such suit, action or proceeding may be served on any
party anywhere in the world, whether within or without the State of New York.
Without limiting the foregoing, the parties agree that service of process upon
such party at the address referred to in Section 14.01, together with written
notice of such service to such party, shall be deemed effective service of
process upon such party.
SECTION 14.09. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 14.10. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
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IN WITNESS WHEREOF, the parties hereto caused this Agreement to be
duly-executed by their respective authorized officers on the day and year first
above written.
FS EQUITY PARTNERS IV, L.P.
a Delaware limited partnership
By: FS Capital Partners, LLC
its: General Partner
By: /s/ Xxxx X. Xxxx
------------------------------
Name: Xxxx X. Xxxx
Title: Vice President
THE LIMITED, INC.
By:
------------------------------
Name:
Title:
XXXXXX'X TRADING COMPANY, INC.
By:
------------------------------
Name:
Title:
56
