1
Exhibit 10.51
ASSET AND STOCK PURCHASE AGREEMENT
BY AND AMONG
VCM, LTD.,
MAZEL STORES, INC.,
VALLEY FAIR CORPORATION
X. X. XXXXXXX, INC.
and
VALUE CITY DEPARTMENT STORES, INC.
(and certain of its direct and indirect subsidiaries)
TABLE OF CONTENTS
SECTION 1 - DEFINITIONS. . . . . . . . . . . . . . . . . . . . .2
1.1 "Assets" . . . . . . . . . . . . . . . . . . . . . . .2
1.2 "Asset Closing Statement". . . . . . . . . . . . . . .2
1.3 "Audited Stock Closing Statement". . . . . . . . . . .2
1.4 "Buyer's Product Liability Obligations". . . . . . . .3
1.5 "Closing". . . . . . . . . . . . . . . . . . . . . . .3
1.6 "Closing Date" . . . . . . . . . . . . . . . . . . . .3
1.7 "Claims" . . . . . . . . . . . . . . . . . . . . . . .3
1.8 "COBRA" . . . . . . . . . . . . . . . . . . . . . . .3
1.9 "Code" . . . . . . . . . . . . . . . . . . . . . . . .3
1.10 "Damages" . . . . . . . . . . . . . . . . . . . . . .3
1.11 "Effective Date" . . . . . . . . . . . . . . . . . . .3
1.12 "ERISA" . . . . . . . . . . . . . . . . . . . . . . .3
1.13 "Excluded Xxxxxxx Assets". . . . . . . . . . . . . . .3
1.14 "GAAP" . . . . . . . . . . . . . . . . . . . . . . . .3
1.15 "HBA Inventory". . . . . . . . . . . . . . . . . . . .3
1.17 "Intellectual Property". . . . . . . . . . . . . . . .4
1.18 "Net Book Value of the Assets" . . . . . . . . . . . .4
1.19 "Net Book Value of the Xxxxxxx Assets" . . . . . . . .4
1.20 "Other Group Members". . . . . . . . . . . . . . . . .4
1.21 "Plan" or "Plans". . . . . . . . . . . . . . . . . . .4
1.22 "Related Entity" . . . . . . . . . . . . . . . . . . .4
1.23 "Specified Losses" . . . . . . . . . . . . . . . . . .5
1.24 "Stipulated Rate". . . . . . . . . . . . . . . . . . .5
1.25 "Taxes". . . . . . . . . . . . . . . . . . . . . . . .5
2
1.26 "Tax Returns". . . . . . . . . . . . . . . . . . . . .5
1.27 "Toys/Sports Department Inventory" . . . . . . . . . .5
1.28 "Toy/Sports License Agreement" . . . . . . . . . . . .5
1.29 "Trade Secrets". . . . . . . . . . . . . . . . . . . .5
1.30 "Valley Fair Stores" . . . . . . . . . . . . . . . . .6
1.31 "Valley Fair Store Lease". . . . . . . . . . . . . . .6
1.32 "VCD Employee" . . . . . . . . . . . . . . . . . . . .6
1.33 "VCD's Product Liability Obligations". . . . . . . . .6
1.34 "VCD's Warranty Claims". . . . . . . . . . . . . . . .6
1.35 "VCD Warehouse Facilities" . . . . . . . . . . . . . .6
1.36 "VCD Warehouse Facilities Leases" . . . . . . . . . .6
1.37 "WARN" . . . . . . . . . . . . . . . . . . . . . . . .6
1.38 "Xxxxxxx Financial Statements" . . . . . . . . . . . .6
1.39 "Xxxxxxx Product Liability Obligations". . . . . . . .7
1.40 "Xxxxxxx Stock". . . . . . . . . . . . . . . . . . . .7
1.41 "Xxxxxxx Warehouse Facility" . . . . . . . . . . . . .7
1.42 "Xxxxxxx Warehouse Facility Lease" . . . . . . . . . .7
1.43 "Xxxxxxx Warranty Claims". . . . . . . . . . . . . . .7
SECTION 2 - SALE AND PURCHASE OF ASSETS. . . . . . . . . . . . .7
2.1 Sale of Assets . . . . . . . . . . . . . . . . . . . .7
2.2 Excluded Assets. . . . . . . . . . . . . . . . . . . .7
2.3 Consideration. . . . . . . . . . . . . . . . . . . . .8
2.4 Asset Purchase Price And Payment . . . . . . . . . . .8
(a) Final Asset Purchase Price . . . . . . . . . . .8
(b) Estimated Asset Purchase Price . . . . . . . . .8
(c) Determination of Final Asset Purchase Price. . .8
(d) Settlement of Final Asset Purchase Price . . . 10
2.5 Allocation of Purchase Price . . . . . . . . . . . . 10
2.6 Prorations. . . . . . . . . . . . . . . . . . . . . 10
2.7 Assumption of Liabilities. . . . . . . . . . . . . . 11
2.8 Unassumed Liabilities. . . . . . . . . . . . . . . . 11
2.9 Further Assurances . . . . . . . . . . . . . . . . . 12
SECTION 3 - PURCHASE OF XXXXXXX STOCK. . . . . . . . . . . . . 12
3.1 Purchase of Xxxxxxx Stock. . . . . . . . . . . . . . 12
3.2 Inventory Taking . . . . . . . . . . . . . . . . . . 12
3.3 . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 Stock Purchase Price and Payment . . . . . . . . . . 12
(a) Final Stock Purchase Price . . . . . . . . . . 12
(b) Estimated Stock Purchase Price . . . . . . . . 12
(c) Determination of Final Stock Purchase Price. . 13
(d) Settlement of Purchase Price . . . . . . . . . 14
(e) Purchase Price Adjustment for Specified Losses 14
3
SECTION 4 - CLOSING DATE AND EFFECTIVE DATE. . . . . . . . . . 16
SECTION 5 - REPRESENTATIONS AND WARRANTIES OF VCD. . . . . . . 16
5.1 Organization, Qualification and Authority of VCD.. . 16
(a) Due Organization and Qualification . . . . . . 17
(b) Power and Authority to Conduct Business. . . . 17
(c) No Defaults or Violations. . . . . . . . . . . 17
(d) Power and Authority to Enter Into Agreements . 17
(e) Due Execution and Enforceability . . . . . . . 18
5.2 Title to Assets; No Claims, Liens, Etc.. . . . . . . 18
5.3 Intellectual Property. . . . . . . . . . . . . . . . 18
5.4 Trade Secrets. . . . . . . . . . . . . . . . . . . . 18
5.5 Contracts. . . . . . . . . . . . . . . . . . . . . . 18
5.6 Toys/Sports Department Inventory . . . . . . . . . . 18
5.7 Product Warranties . . . . . . . . . . . . . . . . . 19
5.8 Tax Returns. . . . . . . . . . . . . . . . . . . . . 19
5.9 Pending Claims, Litigation and Governmental
Proceedings . . . . . . . . . . . . . . . . . . . . 19
5.10 Judgments, Orders and Consent Decrees . . . . . . . 19
5.11 VCD Employees. . . . . . . . . . . . . . . . . . . . 20
5.12 Labor Matters. . . . . . . . . . . . . . . . . . . . 20
5.13 Employee Benefit Plans . . . . . . . . . . . . . . . 20
5.14 Environmental Matters. . . . . . . . . . . . . . . . 20
5.15 OSHA Matters . . . . . . . . . . . . . . . . . . . . 21
5.16 Customer Deposits. . . . . . . . . . . . . . . . . . 21
5.17 Compliance with Laws. . . . . . . . . . . . . . . . 21
5.18 Conduct of Business in Ordinary Course . . . . . . . 21
5.19 Broker's or Finder's Fees. . . . . . . . . . . . . . 21
5.20 Full Disclosure . . . . . . . . . . . . . . . . . . 22
5.21 Duty of VCD to Make Inquiry. . . . . . . . . . . . . 22
SECTION 6 - REPRESENTATIONS AND WARRANTIES OFVALLEY FAIR AND
WIDMANN22
6.1 Organization, Qualification and Authority of Valley Fair
and Xxxxxxx . . . . . . . . . . . . . . . . . . . . 22
(a) Due Organization and Qualification of
Valley Fair. . . . . . . . . . . . . . . . . . . . 22
(b) Due Organization and Qualification of Xxxxxxx. 22
(c) Power and Authority to Conduct Business. . . . 23
(d) No Defaults or Violations. . . . . . . . . . . 23
(e) Power and Authority to Enter Into Agreements . 23
(f) Due Execution and Enforceability . . . . . . . 24
6.2 Capital Structure. . . . . . . . . . . . . . . . . . 24
6.3 Title to Shares and Xxxxxxx Assets . . . . . . . . . 24
6.4 Xxxxxxx Financial Statements . . . . . . . . . . . . 24
6.5 Intellectual Property. . . . . . . . . . . . . . . . 25
6.6 Trade Secrets. . . . . . . . . . . . . . . . . . . . 25
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6.7 Licenses . . . . . . . . . . . . . . . . . . . . . . 25
6.8 Conduct of Business in Ordinary Course . . . . . . . 25
6.9 Environmental Matters. . . . . . . . . . . . . . . . 26
6.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 26
6.11 HBA Inventory. . . . . . . . . . . . . . . . . . . . 27
6.12 Product Warranties . . . . . . . . . . . . . . . . . 28
6.13 Real Property. . . . . . . . . . . . . . . . . . . . 28
6.14 Tangible Personal Property . . . . . . . . . . . . . 28
6.15 Other Property . . . . . . . . . . . . . . . . . . . 29
6.16 Banking Facilities . . . . . . . . . . . . . . . . . 29
6.17 Loan Agreements, Etc.. . . . . . . . . . . . . . . . 29
6.18 Other Contracts. . . . . . . . . . . . . . . . . . . 29
6.19 Defaults and Third Party Consents. . . . . . . . . . 30
6.20 Employee Benefit Plans. . . . . . . . . . . . . . . 34
6.21 Insurance. . . . . . . . . . . . . . . . . . . . . . 34
6.22 Pending Claims, Litigation and Governmental
Proceedings . . . . . . . . . . . . . . . . . . . . 34
6.23 Judgments, Orders and Consent Decrees. . . . . . . . 35
6.24 Employment/Labor Matters . . . . . . . . . . . . . . 35
6.25 Customer Deposits. . . . . . . . . . . . . . . . . . 36
6.26 Purchase Orders. . . . . . . . . . . . . . . . . . . 36
6.27 Compliance with Laws . . . . . . . . . . . . . . . . 36
6.28 Broker's or Finder's Fees. . . . . . . . . . . . . . 36
6.29 Full Disclosure. . . . . . . . . . . . . . . . . . . 36
6.30 Duty of Valley Fair to Make Inquiry. . . . . . . . . 36
SECTION 7 - REPRESENTATIONS AND WARRANTIES OF MAZEL. . . . . . 37
7.1 Organization, Qualification and Authority of Mazel . 37
(a) Due Organization and Qualification . . . . . . 37
(b) Power and Authority to Conduct Business. . . . 37
(c) No Defaults or Violations. . . . . . . . . . . 37
(d) Power and Authority to Enter Into Agreements . 37
(e) Due Execution and Enforceability . . . . . . . 38
7.2 Judgments, Orders and Consent Decrees. . . . . . . . 38
7.3 Broker's or Finder's Fees. . . . . . . . . . . . . . 38
7.4 Compliance with Laws . . . . . . . . . . . . . . . . 38
7.5 Full Disclosure. . . . . . . . . . . . . . . . . . . 39
7.6 Duty of Mazel to Make Inquiry. . . . . . . . . . . . 39
SECTION 8 - COVENANTS OF VCD, XXXXXXX AND/OR VALLEY FAIR . . . 39
8.1 Conduct and Preservation of Business . . . . . . . . 39
8.2 Injunctions. . . . . . . . . . . . . . . . . . . . . 39
8.3 Conduct Prior to Effective Date. . . . . . . . . . . 40
8.4 Resignations . . . . . . . . . . . . . . . . . . . . 41
8.5 Further Assurances . . . . . . . . . . . . . . . . . 41
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SECTION 9 - CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO
CLOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.1 Representations and Warranties True on Effective Date45
9.2 Compliance with Agreement. . . . . . . . . . . . . . 45
9.3 Secretary's Certificate. . . . . . . . . . . . . . . 45
9.4 Compliance Certificate . . . . . . . . . . . . . . . 45
9.5 No Litigation. . . . . . . . . . . . . . . . . . . . 46
9.6 Proceedings and Instruments Satisfactory . . . . . . 46
9.7 Consents and Approvals . . . . . . . . . . . . . . . 46
9.8 Damage or Destruction. . . . . . . . . . . . . . . . 46
9.9 No Material Adverse Change . . . . . . . . . . . . . 46
9.10 Warehouse Arrangements . . . . . . . . . . . . . . . 46
9.11 Injunctions. . . . . . . . . . . . . . . . . . . . . 46
9.12 License Agreements . . . . . . . . . . . . . . . . . 46
9.13 Insurance Arrangements . . . . . . . . . . . . . . . 46
9.14 Valley Fair Store Lease. . . . . . . . . . . . . . . 46
9.15 Dissolution of Xxxxxxx . . . . . . . . . . . . . . . 47
9.16 Good Standing Certificates . . . . . . . . . . . . . 47
9.17 Corporate Authority. . . . . . . . . . . . . . . . . 47
SECTION 10 - CONDITIONS PRECEDENT TO VCD'S AND VALLEY FAIR'S
OBLIGATION TO CLOSE. . . . . . . . . . . . . . . . . . . . . . 47
10.1 Representations and Warranties True at the Effective
Date . . . . . . . . . . . . . . . . . . . . . . . . 47
10.2 Compliance With Agreement. . . . . . . . . . . . . . 47
10.3 No Litigation. . . . . . . . . . . . . . . . . . . . 47
10.4 License Agreements . . . . . . . . . . . . . . . . . 47
10.5 Warehouse Arrangements . . . . . . . . . . . . . . . 48
10.6 Insurance Arrangements . . . . . . . . . . . . . . . 48
10.7 Valley Fair Store Lease. . . . . . . . . . . . . . . 48
10.8 Proceedings and Instruments Satisfactory . . . . . . 48
10.9 Consents and Approvals . . . . . . . . . . . . . . . 48
SECTION 11 - FURTHER AGREEMENTS OF THE PARTIES . . . . . . . . 48
11.1 Employees. . . . . . . . . . . . . . . . . . . . . . 48
11.2 Nondisclosure. . . . . . . . . . . . . . . . . . . . 49
SECTION 12 - RISK OF LOSS. . . . . . . . . . . . . . . . . . . 50
12.1 Risk of Loss . . . . . . . . . . . . . . . . . . . . 50
SECTION 13 - TERMINATION AND ABANDONMENT . . . . . . . . . . . 50
13.1 Termination. . . . . . . . . . . . . . . . . . . . . 50
13.2 Notice of Termination. . . . . . . . . . . . . . . . 50
SECTION 14 - INDEMNIFICATION AND REIMBURSEMENT . . . . . . . . 50
14.1 Indemnification by VCD and Valley Fair . . . . . . . 50
6
14.2 Indemnification by Buyer and Mazel . . . . . . . . . 52
14.3 Claims for Reimbursement . . . . . . . . . . . . . . 53
14.4 Defense of Third-Party Claims. . . . . . . . . . . . 53
14.5 Provisions Regarding Indemnities . . . . . . . . . . 54
(a) Insurance Recoveries . . . . . . . . . . . . . 54
(b) Exclusivity. . . . . . . . . . . . . . . . . . 54
(d) Limitations on Liability . . . . . . . . . . . 54
(e) Waiver of Consequential and Punitive Damages . 55
SECTION 15 - MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . 55
15.1 Costs and Expenses . . . . . . . . . . . . . . . . . 55
15.2 Amendment and Modification . . . . . . . . . . . . . 55
15.3 No Assignment. . . . . . . . . . . . . . . . . . . . 55
15.4 Notices. . . . . . . . . . . . . . . . . . . . . . . 55
15.5 Counterparts . . . . . . . . . . . . . . . . . . . . 57
15.6 Headings . . . . . . . . . . . . . . . . . . . . . . 57
15.7 Recitals, Exhibits and Schedules . . . . . . . . . . 57
15.8 Schedules and Exhibits . . . . . . . . . . . . . . . 57
15.9 Waiver; Remedies . . . . . . . . . . . . . . . . . . 57
15.10 Governing Law . . . . . . . . . . . . . . . . . 57
15.11 Severability. . . . . . . . . . . . . . . . . . 57
15.12 Entire Agreement. . . . . . . . . . . . . . . . 57
7
ASSET AND STOCK PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into as of the 14th day of July, 1997, by
and among VALUE CITY DEPARTMENT STORES, INC., an Ohio corporation and its
direct and indirect subsidiaries identified on the signature pages herein
(collectively, "VCD"), VALLEY FAIR CORPORATION, a Delaware corporation ("Valley
Fair") (VCD and Valley Fair are sometimes referred to collectively herein as
"Sellers"), X. X. XXXXXXX, INC., a Pennsylvania corporation and a wholly-owned
subsidiary of Valley Fair ("Xxxxxxx"), VCM, Ltd., an Ohio limited liability
company ("Buyer"), and MAZEL STORES, INC., an Ohio corporation ("Mazel") is to
evidence the following agreements and understandings:
W I T N E S S E T H:
WHEREAS, VCD owns and operates retail department stores specializing in
the sale of retail merchandise consisting in part of certain toys and sporting
goods departments (the "Toys/Sports Departments") located in the VCD department
stores;
WHEREAS, Xxxxxxx operates the health and beauty aids departments in the
VCD department stores and the two department stores operated by Valley Fair
(the "HBA Departments") and operates health and beauty aid retail stores at
other locations (the "Non-VCD Stores"), each of which is listed on EXHIBIT "A"
hereof;
WHEREAS, VCD, through its indirect wholly-owned subsidiary, GB Retailers,
Inc., a Delaware corporation, and Mazel, through its indirect wholly-owned
subsidiary, Odd Job Trading Corp., a New York corporation, each own fifty
percent (50%) membership interests in Buyer and have formed Buyer for the
purpose of acquiring and operating the Toys/Sports Departments and acquiring
and operating Xxxxxxx;
WHEREAS, Buyer desires to purchase from VCD, and VCD desires to sell to
Buyer, substantially all of the properties, rights and assets of VCD used in
connection with the operation of the Toys/Sports Departments on the terms and
conditions hereinafter set forth;
WHEREAS, Valley Fair owns all of the issued and outstanding shares of
Xxxxxxx; and
WHEREAS, Buyer desires to purchase from Valley Fair 100% of the issued and
outstanding capital stock of Xxxxxxx.
NOW, THEREFORE, in consideration of the mutual promises made herein and
for other good and valuable consideration, the receipt, adequacy and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1 - DEFINITIONS
8
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in this Section 1.
1.1 "Assets" means the following assets, rights, interests and properties of
VCD:
(a) All Toys/Sports Department Inventory;
(b) Packaging and labeling material and sales literature relating
exclusively to the Toys/Sports Department Inventory;
(c) All of VCD's Warranty Claims relating exclusively to the Toys/Sports
Department Inventory;
(d) All books, accounts, and records relating exclusively to the
Toys/Sports Department Inventory;
(e) VCD's unfulfilled purchase commitments relating to the Toys/Sports
Department Inventory (the "Purchase Orders") as identified on SCHEDULE 1.1(e)
to be attached at Closing; and
(f) VCD's equipment, machinery, vehicles, leasehold improvements,
warehouse supplies and other fixed assets relating exclusively to the
Toys/Sports Department Inventory as identified on SCHEDULE 1.1(f).
1.2 "Asset Closing Statement" means the portion of the balance sheet of VCD
that pertains to the Assets, as of the Effective Date, prepared by VCD in a
manner consistent with its normal practices for financial accounting purposes.
1.3 "Audited Stock Closing Statement" means the balance sheet of Xxxxxxx
reflecting the assets and liabilities of Xxxxxxx (excluding the Excluded
Xxxxxxx Assets) as of the Effective Date, prepared in accordance with GAAP, and
as audited by Xxxxxx, Xxxxxxxxx & Company.
1.4 "Buyer's Product Liability Obligations" means any claims for product
liability (whether for bodily injury or death or property loss or damage or
otherwise) arising from inventory sold by Buyer on or after the Effective Date.
1.5 "Closing" means the Closing defined in Section 4.
1.6 "Closing Date" means the Closing Date defined in Section 4.
1.7 "Claims" means all liens, encumbrances, security interests, mortgages,
charges, equities, interests, options or pledges of every kind, nature and
description.
1.8 "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985.
9
1.9 "Code" means the Internal Revenue Code of 1986 and any amendments,
predecessor laws, or successor laws.
1.10 "Damages" means all liabilities, deficiencies, losses, costs or expenses,
including, but not limited to, reasonable attorneys' and other professional
fees, costs of litigation, interest and penalties.
1.11 "Effective Date" means the end of August 2, 1997.
1.12 "ERISA" means the Employee Retirement Income Securities Act of 1974, as
amended.
1.13 "Excluded Xxxxxxx Assets" means the Xxxxxxx Warehouse Facility and the
Valley Fair Stores.
1.14 "GAAP" means generally accepted accounting principles consistently
applied.
1.15 "HBA Inventory" means, collectively, the inventory owned by Xxxxxxx and
located in the HBA Departments, the Non-VCD Stores and the Xxxxxxx Warehouse
Facility and the replenishment inventory and all related points of sale
inventory, i.e., displays, display headers (on pallets and dies) and components
thereof.
1.16 "HBA License Agreements" means the license agreements by and between Buyer
and VCD and by and between Buyer and Valley Fair with respect to the HBA
Departments in the form attached as SCHEDULE 1.16.
1.17 "Intellectual Property" includes, but is not limited to: all Trade
Secrets, patents, and patent applications, if any, trade names, trademarks,
trade dress, logos and service marks (whether domestic or foreign, registered
or unregistered), and all copyrights (registered or unregistered).
1.18 "Net Book Value of the Assets" means the adjusted book value of the Assets
as of the Effective Date based on the books and records of VCD maintained for
financial accounting purposes, which in the case of Toys/Sports Department
Inventory reflect VCD's normal and customary shrinkage factor of three percent
(3%).
1.19 "Net Book Value of the Xxxxxxx Assets" means the adjusted book value of
the Xxxxxxx assets, reduced by the liabilities of Xxxxxxx, as of the Effective
Date based on the books and records of Xxxxxxx maintained for financial
accounting purposes excluding the Excluded Xxxxxxx Assets.
1.20 "Other Group Members" has the meaning set forth in Section 6.10(a).
1.21 "Plan" or "Plans" means any: single and/or multi-employer "employee
benefit plan" as defined by Section 3(3) and/or Section 3(37) of ERISA, fringe
benefit plan as defined in Code Section 6039D and any other bonus, incentive
compensation, deferred compensation, profit sharing, stock option, stock
purchase, tax-sheltered annuity, medical reimbursement, stay,
10
flexible benefit, cafeteria, hospitalization, disability insurance, accident,
workers compensation, accident, savings, severance, supplemental unemployment,
layoff, golden parachute, executive compensation, salary continuation,
retirement, pension, health, life insurance, disability, group insurance,
vacation, holiday, sick leave, fringe benefit or welfare plan, or any other
similar plan, contract, fund, arrangement, program, practice, agreement, policy
or understanding (whether written or oral, formal or informal, qualified or
nonqualified, and whether or not in effect at the Effective Date), and any
trust, escrow, custody or other agreement related thereto, which provides or
provided benefits, or describes policies or procedures applicable to any
officer, employee, agent, representative, service provider, former officer or
former employee or the dependents of any thereof, regardless of whether funded.
1.22 "Related Entity". means any entity required to be aggregated with VCD or
Xxxxxxx, as the context requires, under Code Section 414.
1.23 "Specified Losses" means the net losses realized by Buyer within two (2)
years of the Effective Date (based on Buyer's books and records maintained for
financial accounting purposes prepared on a basis consistent with Xxxxxxx'x
past practices) directly attributable to (i) moving the HBA Inventory from the
Xxxxxxx Warehouse Facility to a different warehouse facility, and (ii) closing
any of the Non-VCD Stores, but excluding losses incurred in the operation of a
Non-VCD Store prior to the date of the final determination by Buyer to close
such store. For purposes of calculating the net losses realized by Buyer under
this definition, items of income or loss realized by Buyer from matters not
identified in (i) or (ii) of the preceding sentence shall not be taken into
account.
1.24 "Stipulated Rate" means the rate of interest publicly announced as the
"prime rate" of interest by National City Bank, Cleveland (or its successor)
and will float on a daily basis.
1.25 "Taxes" shall mean any taxes, charges, fees, levies, penalties, or other
assessments imposed by any United States federal, state, local or foreign
taxing authority, including, but not limited to, income, excise, property,
sales, use, gross receipts, transfer, franchise, capital stock, net worth,
equity, payroll, gains, withholding, ad valorem, social security, or other
taxes including any interest, penalties or additions attributable to taxes.
1.26 "Tax Returns". shall mean any return, report or information return
required to be filed with any taxing authority with respect to Taxes.
1.27 "Toys/Sports Department Inventory" means, collectively, the inventory
owned by VCD and located in the Toys/Sports Departments, in lay-away or at the
VCD Warehouse Facilities and the replenishment inventory and all related
point-of-sale inventory, i.e., displays, display headers (on pallets and dies)
and components thereof that relates exclusively to the Toys/Sports Departments,
as and to the extent such inventory is identified on SCHEDULE 1.27.
1.28 "Toy/Sports License Agreement" means the license agreement by and between
Buyer and VCD with respect to the Toys/Sports Departments in the form attached
as SCHEDULE 1.28.
11
1.29 "Trade Secrets" includes, but is not limited to any confidential computer
software and data bases, records, development data and reports, quality control
specifications, cost analysis, flow charts, process sheets, "know-how",
memoranda, customer lists, vendor lists, or other confidential information
relating to sales, pricing and marketing data and any other confidential
information of like nature.
1.30 "Valley Fair Stores" means the real property currently owned by Xxxxxxx
and to be distributed to Valley Fair prior to the Effective Date on which the
three (3) Non-VCD stores identified on SCHEDULE 1.30 operate.
1.31 "Valley Fair Store Lease" means the master store lease in the form
attached as SCHEDULE 1.31, pertaining to the Valley Fair Stores.
1.32 "VCD Employee" means any person employed by VCD pursuant to either a
contractual or at will relationship who works for VCD at the VCD Warehouse
Facilities in connection with the Toys/Sports Department Inventory or is a
buyer with respect to the Toys/Sports Department Inventory.
1.33 "VCD's Product Liability Obligations" means any claims for product
liability (whether for bodily injury or death or property loss or damage or
otherwise) in respect of the Toys/Sports Department Inventory sold by VCD prior
to the Effective Date.
1.34 "VCD's Warranty Claims" means all warranty, indemnification, or other
contract claims of VCD against third parties whether implied, express or
otherwise, or refunds due to VCD from third party manufacturers, vendors, or
carriers arising from or relating to the sale of the Toys/Sports Department
Inventory.
1.35 "VCD Warehouse Facilities" means the warehouse located at 0000 Xxxxxxx
Xxxxxx, Xxxxxxxx, Xxxx, leased by VCD and one-half (1/2) of the warehouse
located at 0000 Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxx, leased by VCD.
1.36 "VCD Warehouse Facilities Leases" means the two (2) leases in the form
attached as SCHEDULE 1.36 pertaining to the VCD Warehouse Facilities.
1.37 "WARN" means the Worker Adjustment Retraining Notification Act of 1988.
1.38 "Xxxxxxx Financial Statements" means the balance sheets of Xxxxxxx as of
January 28, 1996 and February 2, 1997, and the related operating statements for
the fiscal years then ended, attached hereto as SCHEDULE 1.38, each audited by
Xxxxxx, Xxxxxxxxx & Company as a part of their audit of the consolidated
financial statements of Valley Fair and without a separate audit report for the
Xxxxxxx financial statements. Also attached as part of schedule 1.38 is a
statement providing the adjusted cost basis of the Xxxxxxx assets for federal
income tax purposes as of February 2, 1997.
1.39 "Xxxxxxx Product Liability Obligations" means any claim for product
liability (whether for
12
bodily injury or death or property loss or damage or otherwise) in respect of
the HBA Inventory sold by Xxxxxxx prior to the Effective Date.
1.40 "Xxxxxxx Stock" means all of the capital stock of Xxxxxxx consisting of 51
shares of common stock, $2121.50 par value per share, all of which 51 shares
are issued and outstanding.
1.41 "Xxxxxxx Warehouse Facility" means the warehouse located at Xxxxxxx Xxxxxx
Xxxxxxxxxx Xxxx, XxXxxxxxxx, Xxxxxxxxxxxx currently owned by Xxxxxxx but to be
distributed to Valley Fair prior to the Effective Date.
1.42 "Xxxxxxx Warehouse Facility Lease" means the one (1) lease in the form
attached as SCHEDULE 1.42.
1.43 "Xxxxxxx Warranty Claims" means all warranty, indemnification, or other
contact claims of Xxxxxxx against third parties whether implied, express or
otherwise, or refunds due to Xxxxxxx from third party manufacturers, vendors,
carriers or utilities arising from or relating to the sale of HBA Inventory.
SECTION 2 - SALE AND PURCHASE OF ASSETS
2.1 Sale of Assets. Subject to the terms and conditions of this Agreement, VCD
agrees to sell, transfer, assign, grant, set-over and deliver the Assets to
Buyer, free and clear of all Claims of title to the Assets excepting only the
Excluded Assets (as defined in Section 2.2).
The Assets of VCD constituting tangible personal property shall be
conveyed to Buyer by execution and delivery of a General Assignment and Xxxx of
Sale in the form attached hereto as EXHIBIT "B".
2.2 Excluded Assets. Buyer shall not purchase or acquire hereunder any right,
title or interest in or to any of the properties, rights or assets of VCD not
described in Section 2.1 hereof (collectively, the "Excluded Assets"). Such
Excluded Assets include, but are not limited to (a) any right, title, interest,
liability or obligation of VCD or of any Related Entity under any Plans adopted
by VCD or by any Related Entity in favor of the employees of VCD or of any
Related Entity, or under any trust agreement, escrow or custody arrangement
related to any Plan, (b) VCD's franchise to be a corporation and its articles
of incorporation, corporate seal, minute books, stock books and other corporate
records pertaining to its corporate existence and (c) any Intellectual Property
owned by VCD.
2.3 Consideration. Upon the terms and subject to the conditions set forth in
this Agreement and in consideration for the Assets, Buyer shall pay and remit
to VCD the Final Asset Purchase Price (as defined in Section 2.4 hereof) in the
manner described in Section 2.4 hereof.
2.4 Asset Purchase Price And Payment.
(a) Final Asset Purchase Price. The aggregate purchase price payable to
VCD for the Assets
13
(the "Final Asset Purchase Price") will be an amount equal to the Net Book
Value of the Assets as shown on the books and records of VCD as determined
pursuant to Section 2.4(c), plus or minus the proration adjustments described
in Section 2.6.
(b) Estimated Asset Purchase Price. The amount payable to VCD at Closing
("Estimated Asset Purchase Price") shall be based on the "Estimated Asset
Closing Statement" provided to Buyer on the Closing Date, which presents VCD's
best estimate of the Net Book Value of the Assets on the Effective Date, plus
or minus the proration adjustments described in Section 2.6. The Estimated
Asset Purchase Price reduced by (in order to reflect that such amount is being
paid prior to the Effective Date) interest thereon at the Stipulated Rate
calculated from the Closing Date through the Effective Date shall be paid by
wire transfer of immediately available funds to an account designated by VCD
pursuant to wire transfer instructions that VCD will deliver to Buyer not less
than two (2) business days prior to the Closing Date.
(c) Determination of Final Asset Purchase Price.
(i) VCD shall, on or before the forty-fifth (45th) day following the
Closing Date, cause to be prepared and delivered to Buyer, at Buyer's expense,
the Asset Closing Statement reflecting VCD's determination of the Net Book
Value of the Assets and a statement providing the adjusted cost basis of the
Assets for federal income tax purposes as of the Effective Date. Buyer shall be
entitled to inspect and review the work papers, other materials, reporting
methodologies, and reporting systems used by VCD to prepare the Asset Closing
Statement. Buyer shall also be entitled to conduct due diligence, which may
include physical inspections and pricing checks at the Toys/Sports Departments
and the VCD Warehouse to ensure that the Asset Closing Statement accurately
reflects the Net Book Value of the Assets. The Asset Closing Statement shall be
accompanied by a schedule showing, in reasonable detail, the manner and method
in which VCD made its determination of the Net Book Value of the Assets. If
after such review Buyer does not object to the amounts reflected on the Asset
Closing Statement, the Net Book Value of the Assets shall be based on such
statement for purposes of determining the Final Asset Purchase Price.
(ii) If Buyer has any objection to any amounts reflected on the Asset
Closing Statement, Buyer shall so notify VCD in writing, within thirty (30)
days after its receipt of the Asset Closing Statement, specifying its
objections in reasonable detail. Buyer and VCD shall attempt to resolve any
disputed amounts. If they are unable to reach a resolution within thirty (30)
days of written notice of objection to VCD, then the disputed items shall be
resolved as provided in Section 2.4(c)(iii).
(iii) VCD and Buyer shall submit the remaining disputed items to
mediation in accordance with the Commercial Mediation Rules of the American
Arbitration Association (hereinafter the "AAA"), using a mutually agreed upon
neutral Mediator. The locale of such mediation shall be in Columbus, Ohio. If
Buyer and VCD cannot mutually agree upon a Mediator, one will be selected in
accordance with the Rules of the AAA. Any administrative fees that may be
levied by the AAA and the costs of the Mediator shall be borne equally by Buyer
and VCD. Each party shall bear its own costs and attorneys fees. The parties
may, by
14
written agreement, forego mediation. If they are unable to reach a resolution
through mediation, the items remaining in dispute shall be submitted for
resolution to the accounting firm of Xxxxxx Xxxxxxxx or another national
certified public accounting firm reasonably satisfactory to Buyer and VCD (the
"Deciding CPA's"). The Deciding CPA's shall be instructed by VCD and Buyer to
determine and report to the parties within twenty (20) business days after
submission of such remaining disputed items (or as soon thereafter as the
Deciding CPA's deem practicable), and such report shall be final, binding and
conclusive on the parties hereto. The fees and disbursements of the Deciding
CPA's shall be allocated between VCD and Buyer in the same proportion that the
aggregate amount of the disputed amounts, as finally determined by the Deciding
CPA's, bears to the total sum of disputed amounts. The Deciding CPA's shall
have no right, authority or discretion to employ any accounting standard or
principles except for those used by VCD in accordance with GAAP.
(d) Settlement of Final Asset Purchase Price. To the extent that the Final
Asset Purchase Price, as finally determined pursuant to Section 2.4(c), is
greater or less than the Estimated Asset Purchase Price (such excess or
deficiency being hereinafter referred to as the "Adjustment"), not later than
the third (3rd) business day following the date upon which the Final Asset
Purchase Price is finally determined, Buyer shall pay to VCD (if the Final
Asset Purchase Price is greater than the Estimated Asset Purchase Price) or VCD
shall pay to Buyer (if the Final Asset Purchase Price is less than the
Estimated Asset Purchase Price), by certified check or by wire transfer of
immediately available federal funds pursuant to wire transfer instructions
received at least two (2) days prior to the date of payment, the amount of the
Adjustment plus interest thereon at the Stipulated Rate calculated from the
Effective Date to the date of payment of such amounts.
2.5 Allocation of Purchase Price. The Final Asset Purchase Price represents the
amount agreed upon by the parties to be the fair market value of the Assets.
The Final Asset Purchase Price shall be allocated for income tax purposes among
the Assets in accordance with the amounts ultimately agreed upon by the parties
for each class of Assets as determined pursuant to Section 2.4 above, which
allocation shall be consistent with Code Section 1060 ("Purchase Price
Allocation"). Each of the parties hereby covenants and agrees that it will not
take a position on any federal, state or local tax return, before any
governmental agency charged with the collection of any tax, or in any judicial
proceeding that is in any way inconsistent with the Purchase Price Allocation
and will cooperate with one another in the timely filing consistent with such
Purchase Price Allocation on Form 8594 with the Internal Revenue Service.
2.6 Prorations. The following items shall be prorated as of the Effective Date
to the extent that VCD has paid for such items for any period after the
Effective Date or Buyer will be required to pay such items for any period prior
to the Effective Date:
(a) Personal property taxes and other taxes with respect to the Assets;
(b) amounts payable by VCD or Buyer in respect of the use and occupancy of
the VCD Warehouse Facilities ; and
(c) any other item that may be mutually agreed to by the parties.
15
Any net amount owed hereunder shall be paid within thirty (30) days
following the Closing Date by the party owing such amount.
2.7 Assumption of Liabilities.
Buyer and VCD agree that Buyer is assuming and accepting any debts,
liabilities or obligations of VCD, contingent or non-contingent, liquidated or
unliquidated, asserted or unasserted under the Purchase Orders and Buyer's
Product Liability Obligations (collectively, the "VCD Assumed Liabilities").
2.8 Unassumed Liabilities. Other than the VCD Assumed Liabilities and Buyer's
obligations prescribed in the VCD Warehouse Facilities Leases, the Toy/Sports
License Agreement, and the HBA License Agreements, Buyer shall not assume or be
liable to VCD or any other person or entity for or in respect of any debts,
liabilities and obligations of VCD whatsoever, including but not limited to,
the following debts, liabilities and obligations of VCD:
(a) Any debt, liability or obligation of VCD to taxing or other
governmental authorities for any foreign or domestic, federal, state or local
income taxes or similar taxes based upon the income of VCD;
(b) Any debt, liability or obligation of VCD with respect to any event
that shall have occurred on or prior to the Effective Date whether or not such
event and the liability relating thereto is insured against under any of the
coverages under the insurance policies and/or self-insurance programs of VCD;
(c) VCD's Product Liability Obligations;
(d) Any debt, liability or obligation of VCD under or in respect of any
compensation or benefit plan, policy or arrangement in favor of the employees
of VCD;
(e) Any debt, liability or obligation of VCD to any of its shareholders,
directors, officers or employees arising out of the transactions contemplated
hereby, including, without limitation, any liability for severance or
termination pay; or
(f) Any debt, liability, cost, contribution, or obligation of VCD or of
any Related Entity arising from or relating to, directly or indirectly, any
Plan of VCD or of any Related Entity, including, but not limited to, excise
taxes, interest, and penalties, and whether to current or former employees,
retired employees, alternative payees under qualified domestic relations
orders, any eligible participants, or the beneficiaries of any such party or
parties, to the Internal Revenue Service, Department of Labor, Pension Benefit
Guaranty Corporation or other government agency, to any multi-employer plan or
fund or to any other party, and Buyer shall not be a successor employer under
any such Plan.
2.9 Further Assurances. VCD, from time to time after the Closing Date, at
Buyer's request and expense, shall execute, acknowledge and deliver to Buyer
such other instruments of conveyance
16
and transfer and shall take such other actions and execute and deliver such
other documents, certificates and further assurances as Buyer may reasonable
require to vest more effectively in Buyer or to put Buyer more fully in
possession of, any of the Assets.
SECTION 3 - PURCHASE OF XXXXXXX STOCK
3.1 Purchase of Xxxxxxx Stock. Pursuant to the terms and provisions of this
Agreement and subject to the conditions hereinafter set forth, on the Closing
Date, Buyer shall purchase from Valley Fair, and Valley Fair shall sell,
assign, tender and deliver to Buyer all of the issued and outstanding Xxxxxxx
Stock free and clear of all Claims thereon.
3.2 Inventory Taking. Preceding the Effective Date, a "wall-to-wall" physical
inventory of the HBA Inventory to be purchased on such date will be conducted
at the HBA Warehouse Facility, the HBA Departments and the Non-VCD Stores by a
third party selected by Valley Fair and by Mazel. Buyer will pay the expense of
such inventory taking. In order to facilitate the taking of the "wall-to-wall"
physical inventory, no HBA Inventory shall be shipped and no goods or materials
shall be received during the taking of such physical inventory. Representatives
of Mazel and Valley Fair shall be entitled to participate at their respective
cost and expense in the observation of the taking of the physical inventory.
3.3 Stock Purchase Price and Payment.
(a) Final Stock Purchase Price. The aggregate purchase price payable to
Valley Fair for the Xxxxxxx Stock (the "Final Stock Purchase Price") will be an
amount equal to the Net Book Value of the Xxxxxxx Assets as shown on the books
and records of Xxxxxxx as determined pursuant to Section 3.3(c).
(b) Estimated Stock Purchase Price. The amount payable to Valley Fair at
Closing ("Estimated Stock Purchase Price") shall be based on an estimated stock
closing statement provided to Buyer on the Closing Date, which presents Valley
Fair's best estimate of the Net Book Value of the Xxxxxxx Assets. The Estimated
Stock Purchase Price reduced by (in order to reflect that such amount is being
paid prior to the Effective Date) interest thereon at the Stipulated Rate
calculated from the Closing Date through the Effective Date shall be paid by
wire transfer of immediately available funds to an account designated by Valley
Fair pursuant to wire transfer instructions that Valley Fair will deliver to
Buyer not less than two (2) business days prior to the Closing Date.
(c) Determination of Final Stock Purchase Price.
(i) Valley Fair shall, on or before the forty-fifth (45th) day
following the Closing Date, cause to be prepared and delivered to Buyer, at
Buyer's expense, the Audited Stock Closing Statement reflecting Valley Fair's
accountant's determination of the Net Book Value of the Xxxxxxx Assets and a
statement providing the adjusted cost basis of the Xxxxxxx assets for federal
income tax purposes as of the Effective Date. Buyer (or its accountants) shall
be entitled to inspect and review the work papers, other materials, reporting
methodologies, and reporting
17
systems used by Valley Fair and its accountants to prepare the Audited Stock
Closing Statement. Buyer shall also be entitled to conduct due diligence, which
may include physical inspections and pricing checks at the HBA Departments,
Non-VCD Stores, and the Xxxxxxx Warehouse Facility to ensure that the Audited
Stock Closing Statement accurately reflects the Net Book Value of the Xxxxxxx
Assets. If Mazel does not object to the amounts reflected on the Audited Stock
Closing Statement, the Net Book Value of the Xxxxxxx Assets shall be based on
such statement for purposes of determining the Final Stock Purchase Price.
(ii) If Buyer has any objection to any amounts reflected on the
Audited Stock Closing Statement, Buyer shall so notify Valley Fair in writing,
within thirty (30) days after its receipt of the Audited Stock Closing
Statement, specifying its objections in reasonable detail. Buyer and Valley
Fair shall attempt to resolve any disputed amounts. If they are unable to reach
a resolution within thirty (30) days of written notice of objection to Valley
Fair, then the disputed items shall be resolved as provided in Section
3.3(c)(iii).
(iii) Valley Fair and Buyer shall submit the remaining disputed items
to mediation in accordance with the Commercial Mediation Rules of the American
Arbitration Association (hereinafter the "AAA"), using a mutually agreed upon
neutral Mediator. The locale of such mediation shall be in Columbus, Ohio. If
Buyer and Valley Fair cannot mutually agree upon a Mediator, one will be
selected in accordance with the Rules of the AAA. Any administrative fees that
may be levied by the AAA and the costs of the Mediator shall be borne equally
by Buyer and Valley Fair. Each party shall bear its own costs and attorneys
fees. The parties may, by written agreement, forego mediation. If they are
unable to reach a resolution through mediation, the items remaining in dispute
shall be submitted for resolution to the accounting firm of Xxxxxx Xxxxxxxx or
another national certified public accounting firm reasonably satisfactory to
Buyer and Valley Fair (the "Deciding CPA's"). The Deciding CPA's shall be
instructed by Valley Fair and Buyer to determine and report to the parties
within twenty (20) business days after submission of such remaining disputed
items (or as soon thereafter as the Deciding CPA's deem practicable), and such
report shall be final, binding and conclusive on the parties hereto. The fees
and disbursements of the Deciding CPA's shall be allocated between Valley Fair
and Buyer in the same proportion that the aggregate amount of the disputed
amounts, as finally determined by the Deciding CPA's, bears to the total sum of
disputed amounts. The Deciding CPA's shall have no right, authority or
discretion to employ any accounting standard or principles except for those
used by Xxxxxxx in accordance with GAAP.
(d) Settlement of Purchase Price. To the extent that the Final Stock
Purchase Price, as finally determined pursuant to Section 3.3(c), is greater or
less than the Estimated Stock Purchase Price (such excess or deficiency being
hereinafter referred to as the "Adjustment"), not later than the third (3rd)
business day following the date upon which the Final Stock Purchase Price is
finally determined, Buyer shall pay to Valley Fair (if the Final Stock Purchase
Price is greater than the Estimated Stock Purchase Price) or Valley Fair shall
pay to Buyer (if the Final Stock Purchase Price is less than the Estimated
Stock Purchase Price), by certified check or by wire transfer of immediately
available federal funds pursuant to wire transfer instructions received at
least two (2) days prior to the date of payment, the amount of the Adjustment
plus interest thereon at the Stipulated Rate calculated from the Effective Date
to the date of payment of such amounts.
18
(e) Purchase Price Adjustment for Specified Losses.
(i) Buyer shall cause to be prepared and delivered to Valley Fair, at
Buyer's expense, two statements, one for each fiscal year following the
Effective Date (the "Specified Losses Statements"), showing in detail the
computation of the amount of the Specified Losses actually realized during each
of the twelve fiscal month periods ending nearest to the first two
anniversaries of the Effective Date. Valley Fair (or its accountants) shall be
entitled to inspect and review the work papers, other materials, reporting
methodologies, and reporting systems used by Buyer to prepare each Specified
Losses Statement. Valley Fair shall also be entitled to conduct due diligence,
which may include physical inspections and pricing checks at the HBA
Departments, Non-VCD Stores, and the Xxxxxxx Warehouse Facility to ensure that
each Specified Losses Statement accurately reflects the Specified Losses for
the period. If Valley Fair does not object to the amounts reflected on a
Specified Losses Statement, the Specified Losses for that period shall be as
set forth in the Specified Losses Statement. However, if Valley Fair has any
objection to any amounts reflected on a Specified Losses Statement, Valley Fair
shall so notify Buyer in writing within thirty (30) days after its receipt of
the Specified Losses Statement, specifying its objections in reasonable detail.
Buyer and Valley Fair shall attempt to resolve any disputed amounts. If they
are unable to reach a resolution within thirty (30) days of written notice of
objection to Buyer, then the disputed items shall be resolved as provided in
Section 3.3(e)(ii).
(ii) Valley Fair and Buyer shall submit the remaining disputed items
to mediation in accordance with the Commercial Mediation Rules of the American
Arbitration Association (hereinafter the "AAA"), using a mutually agreed upon
neutral Mediator. The locale of such mediation shall be in Columbus, Ohio. If
Buyer and Valley Fair cannot mutually agree upon a Mediator, one will be
selected in accordance with the Rules of the AAA. Any administrative fees that
may be levied by the AAA and the costs of the Mediator shall be borne equally
by Buyer and Valley Fair. Each party shall bear its own costs and attorneys
fees. The parties may, by written agreement, forego mediation. If they are
unable to reach a resolution through mediation, the items remaining in dispute
shall be submitted for resolution to the accounting firm of Xxxxxx Xxxxxxxx or
another national certified public accounting firm reasonably satisfactory to
Buyer and Valley Fair (the "Deciding CPA's"). The Deciding CPA's shall be
instructed by Valley Fair and Buyer to determine and report to the parties
within twenty (20) business days after submission of such remaining disputed
items (or as soon thereafter as the Deciding CPA's deem practicable), and such
report shall be final, binding and conclusive on the parties hereto. The fees
and disbursements of the Deciding CPA's shall be allocated between Valley Fair
and Buyer in the same proportion that the aggregate amount of the disputed
amounts, as finally determined by the Deciding CPA's, bears to the total sum of
disputed amounts. The Deciding CPA's shall have no right, authority or
discretion to employ any accounting standard or principles except for those
used by Xxxxxxx in accordance with GAAP.
(iii) Upon the final determination of the Specified Losses, if any,
for each one of the two fiscal years, Valley Fair shall refund the portion of
the Final Stock Purchase Price equal to (i) one-third of the cumulative total
Specified Losses for both years that are less than or equal to Six Million
Dollars ($6,000,000), plus (ii) the amount of the cumulative total Specified
Losses for
19
both years in excess of Six Million Dollars ($6,000,000). Additionally, the
license fee provided under the Toys/Sports License Agreement shall be reduced
from 11% of net sales to 10% of net sales (as defined in the Toys/Sports
License Agreement) until the time that the cumulative amount of the 1%
reductions equal the amount of the Specified Losses not otherwise refunded to
Buyer under the above provisions of this Section 3.3(e) (which amount will not
exceed Four Million Dollars ($4,000,000)).
SECTION 4 - CLOSING DATE AND EFFECTIVE DATE
The transactions contemplated by this Agreement shall be deemed to have
occurred simultaneously and shall be effective as of the end of August 2, 1997
unless otherwise agreed to by the parties hereto. The Closing will occur at the
offices of Porter, Wright, Xxxxxx & Xxxxxx, 00 Xxxxx Xxxx Xxxxxx, Xxxxxxxx,
Xxxx on or before August 1, 1997 (the "Closing Date"). Concurrently with the
Closing, Buyer will deliver to Seller, and Seller will deliver (or cause to be
delivered) to Buyer, those agreements and certificates required to be delivered
hereunder.
SECTION 5 - REPRESENTATIONS AND WARRANTIES OF VCD
In order to induce Buyer to purchase the Assets and perform its other
obligations herein, VCD hereby makes the following representations, warranties
and covenants, each of which shall be true and correct on the date hereof and
shall be true and correct on the Effective Date and which shall survive the
Effective Date to the extent specified in Section 14 herein.
5.1 Organization, Qualification and Authority of VCD.
(a) Due Organization and Qualification. VCD is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio and is qualified to transact business as a foreign corporation in all
jurisdictions where the nature of its business or the ownership, leasing or
operation of VCD's properties or assets requires qualification and where the
failure to so qualify would have a material adverse effect on the business,
results of operations or financial condition of VCD.
(b) Power and Authority to Conduct Business. VCD has the full power and
authority to own or lease its properties and to conduct its business in the
manner and in the places where such property is owned or leased and its
business is conducted by it. VCD possesses all permits and licenses from state,
local, or Federal agencies or subdivisions necessary to operate its business,
all of which are in full force and effect, the absence of which permits and
licenses would have a material adverse effect on the business, results of
operations or financial condition of VCD.
(c) No Defaults or Violations. As of the Effective Date, except as
disclosed in SCHEDULE 5.1(c), the execution and delivery of this Agreement, and
the performance of the obligations by VCD under this Agreement: (i) will not
violate, contravene, be in conflict with, result in a breach of or constitute
(with or without notice or lapse of time or both) a default under or violation
of: (A) any provision of law; (B) any order, rule or regulation of any court,
arbitrator or
20
other agency of government; (C) any provision of the Articles of Incorporation
or Code of Regulations of VCD; or (D) any lease, indenture, agreement or other
instrument to which VCD, or any of the Assets is or may be bound; (ii) will not
result in the creation or imposition of any Claim of any nature whatsoever upon
the Assets.
(d) Power and Authority to Enter Into Agreements. VCD has the right, power
and authority to enter into and perform its obligations under this Agreement
and the other agreements provided for herein by and on behalf of VCD. No
consent, approval or authorization of, or registration, declaration, or filing
with any court, governmental authority (federal, state or local), collective
bargaining unit, lending institution or other third party is required in
connection with the execution and delivery by VCD of this Agreement or its
performance of, or compliance with, the terms, provisions, and conditions
hereof.
(e) Due Execution and Enforceability. The execution, delivery and
performance of this Agreement and the other agreements provided for herein by
and on behalf of VCD have been duly and validly authorized and approved by the
Board of Directors of VCD. VCD has taken and will take all such other corporate
action as is necessary or required to enter into, execute and deliver this
Agreement and the other agreements provided for herein and to perform its
obligations hereunder and thereunder. This Agreement and the other agreements
provided for herein constitute the valid and legally binding obligations of
VCD, enforceable against VCD in accordance with their respective terms and
conditions (except to the extent the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by general equitable principles).
5.2 Title to Assets; No Claims, Liens, Etc. As of the Effective Date, VCD will
have good and marketable title to all of the Assets to be transferred and sold
to Buyer on the Effective Date, free and clear of all Claims whatsoever.
5.3 Intellectual Property. VCD has not received any notification, and has no
knowledge that it has infringed, nor is now infringing, on any trade name,
trademark, service xxxx or copyright belonging to any other person, firm, or
corporation relating to the Assets. To the knowledge of VCD, it owns or holds
adequate licenses or other rights to use all trademarks, service marks, trade
names, and copyrights necessary for its business as now conducted, and that use
does not, and will not, conflict with, infringe on, or otherwise violate any
rights of others relating to the Assets.
5.4 Trade Secrets. To the knowledge of VCD, it is not using, or in any way
making use of, any Trade Secrets of any third party relating to the Assets in
violation of the rights of any such third party.
5.5 Contracts. Except for this Agreement and as set forth on SCHEDULE 5.5, VCD
is not, and on the Closing Date will not be a party to any contracts or
commitments (whether oral or written), including, without limitation, any
franchise agreement, licensing agreement, sales representative agreement,
distributorship agreement, or employment agreement, that relates exclusively to
the sale of the Toys/Sports Department Inventory.
21
5.6 Toys/Sports Department Inventory.
(a) To be attached hereto as SCHEDULE 1.27 (which Schedule shall be
separately furnished to Buyer at the same time the Asset Closing Statement is
provided to Buyer pursuant to Section 2.4(c)(i), initialed by the parties
hereto and deemed delivered hereunder) are the stock ledgers prepared under
VCD's customary practices that completely and accurately in all material
respects identify the cost to VCD (computed using the retail method) of all
Toys/Sports Department Inventory owned by VCD on the Effective Date with such
costs adjusted to reflect VCD's normal and customary shrinkage factor of 3%
used for financial accounting purposes in accordance with GAAP.
(b) All of the Toys/Sport Department Inventory is located at the VCD
Warehouse Facilities and/or at the Toys/Sports Departments and/or in transit
between the two and is owned by VCD, and none of such inventory is on
consignment from, or has been consigned to others.
5.7 Product Warranties. Except for any manufacturer's warranties or those
implied by law, there are no outstanding product warranty obligations of VCD,
nor any representations, guarantees or indemnifications given or made by VCD in
connection with the sale of Toys/Sports Department Inventory.
5.8 Tax Returns. VCD has filed with the Internal Revenue Service and with all
other appropriate foreign, federal, state, provincial and local governmental
agencies, and will continue to file through and after the Effective Date, all
personal property tax returns and tax reports required to be filed by VCD in
respect of its ownership of the Assets prior to the Effective Date and has paid
and will pay or continue to pay when due all amounts due in connection
therewith. No claims for assessment or collection of taxes in respect of the
Assets has been asserted against VCD, and VCD does not know of any proposed tax
assessment against or in respect of the Assets. There are no tax liens on the
Assets.
5.9 Pending Claims, Litigation and Governmental Proceedings. Set forth on
SCHEDULE 5.9 is a list and description of each complaint, claim, suit, action,
arbitration or regulatory, administrative, or governmental proceeding or
investigation or any other proceeding or investigation relating to the Assets
filed against or commenced by VCD in the last year. Except as set forth on
SCHEDULE 5.9, no proceeding or investigation is pending or, to the knowledge of
VCD, threatened against VCD which relates to or affects the Assets.
5.10 Judgments, Orders and Consent Decrees. VCD is not subject to any judgment,
ruling, injunction, order, writ or decree of, or agreement with, any court,
arbitrator or regulatory authority limiting, restricting or adversely affecting
the sale by VCD of the Toys/Sports Department Inventory or VCD's ownership of
the Assets.
5.11 VCD Employees. [INTENTIONALLY OMITTED]
5.12 Labor Matters.
22
(a) VCD acknowledges that Buyer is not assuming any of VCD's obligations
or liabilities relating to or arising from any employment contract, collective
bargaining agreement, Plan or program in favor of VCD's employees, all of which
remain the sole obligation of VCD.
(b) Except as disclosed in SCHEDULE 5.12 to VCD's knowledge, no unions or
other collective bargaining units have been, or are required to be, certified
or recognized by VCD as representing the VCD Employees, and no union organizing
efforts exist with respect to any of the VCD Employees.
(c) Except as disclosed in SCHEDULE 5.12 there are no controversies
pending or, to the best of VCD's knowledge, threatened between VCD and any of
the VCD Employees; and there has not been within the last year, nor was there,
or is there threatened or contemplated, any strike, slowdown, picketing or work
stoppage by any employees against VCD, wherever located, any lockout by VCD of
any of its employees or other occurrence, event or condition of a similar
character affecting or which affected VCD. To the knowledge of VCD, it has
complied in all material respects with all laws relating to the employment of
labor, including, but not limited to, any provisions thereof relating to equal
employment opportunities, civil rights, working conditions, wages, hours,
COBRA, WARN, and the payment of social security and similar taxes, and VCD is
not liable for any arrearage of wages or any taxes or penalties for failure to
comply with any of the foregoing.
5.13 Employee Benefit Plans. VCD and/or any Related Entity will comply with
Code Section 4980B and ERISA Sections 601-609 with respect to matters arising
out of the transactions contemplated by this Agreement.
5.14 Environmental Matters. As relates solely to the operation of the VCD
Warehouse Facilities, to the knowledge of VCD, it is in compliance in all
material respects with all federal, state, and local laws, regulations, and
ordinances relating to the environment or to the discharge of matter into the
air, water, or earth, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, and
the Resource Conservation and Recovery Act of 1976, as amended. There are no
actions, suits, or proceedings pending or, to the knowledge of VCD, threatened
against VCD in connection with the VCD Warehouse Facilities by or before any
federal, state, or local court or government authority or agency concerning any
non-compliance or alleged non-compliance with any such laws, regulations, and
ordinances in respect of said facility.
5.15 OSHA Matters. As relates solely to the operation of the VCD Warehouse
Facilities, to the knowledge of VCD, it is in compliance in all material
respects with all requirements of the Occupational Safety and Health Act
("OSHA") the regulations promulgated thereunder and the Ohio state, local, and
regional laws relating to employee health, welfare and safety. VCD has not
received any citation from the OSHA, any inspector therefor, or any state,
local or regional agency setting forth any reason for which the VCD Warehouse
Facilities is not in compliance with OSHA, the regulations thereunder, or any
comparable state, local, or regional law.
5.16 Customer Deposits. Except for customer layaway deposits in the ordinary
course of
23
business, VCD has not received, and will not receive prior to the Closing Date,
any deposits, payments on account or similar payment with respect to the
Toys/Sports Department Inventory, and no such deposits, payments on account or
similar payments are due or owing to VCD.
5.17 Compliance with Laws. To the knowledge of VCD, it has at all times
conducted its business in compliance and in conformity in all material respects
with all applicable federal, state and local laws, statutes and ordinances and
the rules and regulations promulgated thereunder relating to the Assets; and,
to the knowledge of VCD, there are no pending or threatened claims or notices
of violation by VCD of any such laws, statutes, ordinances, rules and
regulations or claims which are likely of assertion relating to the Assets.
5.18 Conduct of Business in Ordinary Course. Except as set forth on SCHEDULE
5.18, since May 3, 1997, the Toys/Sports Departments have been operated in the
usual and ordinary course consistent with past practice and there has not been
any change since May 3, 1997 in the properties, assets, business or condition
of the Toys/Sports Departments, financial or otherwise, that have resulted in
or which might reasonably be expected to result in a material adverse change in
the business, results of operations, or financial condition of the Toys/Sports
Departments taken as a whole.
5.19 Broker's or Finder's Fees. No person or firm other than VCD (and its
directors, officers, employees and independent accountants and attorneys) have
arranged, or participated in arranging, on behalf of VCD, the transactions
provided for herein. There are no broker's or finder's fees to be paid by VCD
and except as described in this Section, VCD has no knowledge of any claim (or
the reasonable basis therefor) for a broker's or finder's fee to be paid by
Buyer in connection with the consummation of the transactions provided for
herein.
5.20 Full Disclosure. No representation or warranty by VCD and Schedule or
Exhibit furnished by VCD to Buyer pursuant to this Agreement omits to state a
material fact necessary to make the representations and warranties of VCD under
this Agreement not misleading.
5.21 Duty of VCD to Make Inquiry. To the extent that any of the representations
and warranties made by VCD in this Agreement are qualified by the knowledge or
belief of VCD, VCD represents and warrants that it has made reasonable inquiry
and investigation concerning the matters to which such representations and
warranties relate, including, without limitation, diligent inquiry of any
relevant management personnel of VCD.
SECTION 6 - REPRESENTATIONS AND WARRANTIES OF
VALLEY FAIR AND XXXXXXX
In order to induce Buyer to purchase the Xxxxxxx Stock and perform its
other obligations herein, Valley Fair and Xxxxxxx, jointly and severally,
hereby make the following representations, warranties and covenants, each of
which shall be true and correct on the date hereof and shall be true and
correct on the Effective Date and which shall survive the Effective Date to the
extent specified in Section 14 herein:
24
6.1 Organization, Qualification and Authority of Valley Fair and Xxxxxxx.
(a) Due Organization and Qualification of Valley Fair. Valley Fair is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and is qualified to transact business as a
foreign corporation in all jurisdictions where the nature of its business or
the ownership, leasing or operation of its properties or assets requires
qualification and where the failure to so qualify would have a material adverse
effect on the business, results of operations or financial condition of Valley
Fair.
(b) Due Organization and Qualification of Xxxxxxx. Xxxxxxx is a
corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania and is qualified to transact business
as a foreign corporation in Ohio and in all jurisdictions where the nature of
its business or the ownership, leasing or operation of its properties or assets
requires qualification and where the failure to so qualify would have a
material adverse effect on the business, results of operations or financial
condition of Xxxxxxx.
(c) Power and Authority to Conduct Business. Each of Valley Fair and
Xxxxxxx has the full power and authority to own or lease its properties and to
conduct its business in the manner and the places where such property is owned
or leased and the business is conducted by it. Valley Fair and Xxxxxxx possess
all material permits and licenses from state, local or Federal agencies or
subdivisions necessary to operate their respective businesses, all of which are
in full force and effect, the absence of which permits and licenses would have
a material adverse effect on the business, results of operations or financial
condition of Xxxxxxx.
(d) No Defaults or Violations. As of the Effective Date, except as
disclosed in SCHEDULE 6.1(d), the execution and delivery of this Agreement, and
the performance of the obligations by Valley Fair under this Agreement: (i)
will not violate, contravene, be in conflict with, result in a breach of or
constitute (with or without notice or lapse of time or both) a default or
violation under: (A) any provision of law; (B) any order, rule or regulation of
any court, arbitrator or other agency of government; (C) any provision of the
Articles of Incorporation or By-laws of Valley Fair; or (D) any lease,
indenture, agreement or other instrument to which Valley Fair or Xxxxxxx,
respectively, or any of the assets of either of them is or may be bound; and
(ii) will not result in the creation or imposition of any Claim of any nature
whatsoever upon the Xxxxxxx Stock.
(e) Power and Authority to Enter Into Agreements. Each of Valley Fair and
Xxxxxxx has the right, power and authority to enter into and perform their
respective obligations under this Agreement and the other agreements provided
for herein. No consent, approval or authorization of, or registration,
declaration, or filing with any court, governmental authority (federal, state
or local), collective bargaining unit, lending institution or other third party
is required in connection with the execution and delivery by Valley Fair or
Xxxxxxx of this Agreement or their respective performance of, or compliance
with, the terms, provisions, and conditions hereof, except as disclosed in
SCHEDULE 6.1(e)
(f) Due Execution and Enforceability. The execution, delivery and
performance of this
25
Agreement and the other agreements provided for herein by and on behalf of
Valley Fair and Xxxxxxx have been duly and validly authorized and approved by
the Shareholders and Board of Directors of Valley Fair. Valley Fair has taken
and will take all such other corporate action as is necessary or required to
enter into, execute and deliver this Agreement and the other agreements
provided for herein and to perform its obligations hereunder and thereunder.
This Agreement and the other agreements provided for herein constitute the
valid and legally binding obligations of Valley Fair, enforceable against
Valley Fair in accordance with their respective terms and conditions (except to
the extent the same may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditor's rights generally or by general
equitable principles).
6.2 Capital Structure. The authorized capital stock of Xxxxxxx consists solely
of 51 shares of common stock, par value $2,121.50 per share. As of the date
hereof, 51 shares of Xxxxxxx Stock are issued and outstanding and no shares are
held in treasury. All of the outstanding shares of Xxxxxxx Stock are owned by
Valley Fair and are validly issued, fully paid and nonassessable. Except for
this Agreement, there are no outstanding options, warrants or rights to acquire
or other commitments or agreements with respect to, or any outstanding
securities or obligations convertible into, any shares of Xxxxxxx Stock or
other securities of Xxxxxxx, or any interest therein, nor are there any
obligations to pay any dividend or to make any distribution in respect thereof.
No shares of Xxxxxxx Stock are reserved for issuance. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the Xxxxxxx stock. There are no restrictions on the transferability
of the Xxxxxxx Stock.
6.3 Title to Shares and Xxxxxxx Assets. Valley Fair has good and marketable
title to the Xxxxxxx Stock, free and clear of any Claims. At the Closing,
Valley Fair will transfer assign, and deliver good and marketable title to the
Xxxxxxx Stock to Buyer, free and clear of any and all Claims whatsoever.
Additionally, at the Closing, Xxxxxxx will have good marketable title to all of
its assets, free and clear of all Claims whatsoever other than the Claims shown
on the Audited Stock Closing Statement.
6.4 Xxxxxxx Financial Statements. The Xxxxxxx Financial Statements fairly
present the financial position of Xxxxxxx as of January 28, 1996 and February
2, 1997, and the results of Xxxxxxx'x operations for the twelve (12) month
periods then ended, all in accordance with GAAP other than the absence of
footnote disclosures. Since February 2, 1997, other than the closing of one
Non-VCD Store and the transactions contemplated herein, there have been no
asset dispositions or obligations incurred by Xxxxxxx other than in the
ordinary course.
6.5 Intellectual Property.
(a) Set forth on SCHEDULE 6.5 is a list of all Intellectual Property both
domestic and foreign, owned by Xxxxxxx and used in its business at the date
hereof (the "Xxxxxxx Intellectual Property"), and indicating any registration
numbers and dates of registration. Except as set forth on SCHEDULE 6.5 hereto,
Xxxxxxx owns all right, title and interest in and to the Xxxxxxx Intellectual
Property.
26
(b) Xxxxxxx has not received any notification, and has no knowledge that
it has infringed, nor is now infringing, on any trade name, trademark, service
xxxx or copyright belonging to any other person, firm, or corporation. To the
knowledge of Valley Fair and Xxxxxxx, Xxxxxxx owns or holds adequate licenses
or other rights to use all trademarks, service marks, trade names, and
copyrights necessary for its business as now conducted, and that use does not,
and will not, conflict with, infringe on, or otherwise violate any rights of
others.
6.6 Trade Secrets. To the knowledge of Valley Fair and Xxxxxxx, Xxxxxxx does
not use any Trade Secrets in its business operations. To the knowledge of
Valley Fair and Xxxxxxx, Xxxxxxx is not using, or in any way making use of, any
Trade Secrets of any third party in violation of the rights of any of such
third parties. There are no suits pending or to Xxxxxxx'x knowledge, threatened
with respect to any Trade Secrets involving Xxxxxxx.
6.7 Licenses. Set forth on SCHEDULE 6.7 attached hereto is a list and
description of all licenses of computer programs, software, technology or
similar rights granted to Xxxxxxx and used in connection with its business.
6.8 Conduct of Business in Ordinary Course. Except as set forth on SCHEDULE
6.8, since February 2, 1997, Xxxxxxx has been operated in the usual and
ordinary course consistent with past practice and there has not been any change
since February 2, 1997 in the properties, assets, business or condition of
Xxxxxxx, financial or otherwise, which has resulted in or which might
reasonably be expected to result in a material adverse change in the business,
results of operations, or financial condition of Xxxxxxx taken as a whole,
other than ongoing and continuing significant operating losses. Except as set
forth on SCHEDULE 6.8, since February 2, 1997, there has not been (a) any
increase in compensation payable or to become payable by Xxxxxxx to its
employees (except in the ordinary course of business and consistent with past
practices) or the adoption of any bonus, pension or other employee benefit plan
or arrangement, (b) any cancellation or waiver of any claims or rights with a
value to Xxxxxxx in excess of $100,000, individually or in the aggregate or (c)
any agreements, oral or written, by Xxxxxxx to take any action described in
this sentence.
6.9 Environmental Matters. To the knowledge of Valley Fair and Xxxxxxx, Xxxxxxx
is in compliance in all material respects with all federal, state, and local
laws, regulations, and ordinances relating to the environment or to the
discharge of matter into the air, water, or earth, including, but not limited
to, the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, and the Resource Conservation and Recovery Act of 1976, as
amended. There are no actions, suits, or proceedings pending or, to the
knowledge of Valley Fair or Xxxxxxx, threatened against Xxxxxxx by or before
any federal, state, or local court or governmental authority or agency
concerning any non-compliance or alleged non-compliance with any such laws,
regulations, and ordinances in respect of Xxxxxxx'x facilities.
6.10 Taxes.
(a) Except as disclosed on SCHEDULE 6.10(a), Valley Fair, Xxxxxxx and any
corporation that is a member of an affiliated group with Valley Fair or Xxxxxxx
for federal income tax
27
purposes under Code Section 1504 or similar provisions of state, local or
foreign law ("Other Group Members") have duly filed with the appropriate
federal, state, local, and foreign taxing authorities all Tax Returns required
to be filed by Valley Fair, Xxxxxxx and the Other Group Members on or before
the date hereof, and such tax returns are true, correct and complete in all
material respects and, as of the time of filing, correctly in all material
respects reflected the facts regarding the income, business, activities, status
and other relevant matters of Valley Fair, Xxxxxxx and the Other Group Members,
or any other information required to be shown thereon. All monies that Valley
Fair, Xxxxxxx and the Other Group Members are required by law to withhold from
employees have been withheld and either timely paid to the proper governmental
authority or set aside in accounts for such purposes and accrued on the books
of Valley Fair, Xxxxxxx or the Other Group Members, as the case may be. Valley
Fair, Xxxxxxx and the Other Group Members have paid in full on a timely basis
all Taxes due on such Tax Returns or such Taxes that are otherwise due. Except
as disclosed on SCHEDULE 6.10(a), the balance for Taxes on Valley Fair's,
Xxxxxxx'x and the Other Group Members' most recent balance sheets, for the
payment of all accrued but unpaid Taxes through the date thereof has been
determined in accordance with GAAP.
(b) Except as set forth in SCHEDULE 6.10(b), neither Valley Fair , Xxxxxxx
nor the Other Group Members have received any notice of a deficiency or
assessment with respect to Taxes of Valley Fair, Xxxxxxx and the Other Group
Members from any federal, state, local, or foreign taxing authority that have
not been fully paid or finally settled, and any such deficiency or assessment
shown on SCHEDULE 6.10(b) is being contested in good faith through appropriate
proceedings described in SCHEDULE 6.10(b). There are no ongoing audits or
examinations of any Tax Return that includes Xxxxxxx, Valley Fair or the Other
Group Members and no notice of audit or examination of any such Tax Return has
been received by Valley Fair, Xxxxxxx or the Other Group Members; and no issue
has been raised (either in writing or verbally, formally or informally) on
audit or in any other proceeding (and is currently pending) with respect to
Taxes of Valley Fair, Xxxxxxx or the Other Group Members by any federal, state,
local, or foreign taxing authority which, if resolved against Xxxxxxx, Valley
Fair or the Other Group Members would have a material adverse effect on the
business, results of operations or financial condition of Xxxxxxx.
(c) After the date hereof, no election with respect to taxes will be made
by Xxxxxxx without the prior written consent of Buyer provided Valley Fair may
make a Code Section 338(h)(10) election and Buyer shall consent to same.
(d) Xxxxxxx is not a party to or bound by (nor will Xxxxxxx become a party
to or be bound by) any tax-indemnity, tax-sharing, or tax allocation agreement
other than pursuant to rules provided in Treasury Regulations.
6.11 HBA Inventory.
(a) To be attached hereto as SCHEDULE 6.11(a) (which Schedule shall be
separately furnished to Buyer at the same time the Audited Stock Closing
Statement is provided to Buyer pursuant to Section 3.3(c)(i), initialed by the
parties hereto and deemed delivered hereunder) are
28
the stock ledgers prepared under Xxxxxxx'x customary practices that in all
material respects identify the cost to Xxxxxxx of all HBA Inventory items owned
by Xxxxxxx (computed using the retail method for store inventory and the
average cost method for warehouse inventory) on the Effective Date.
(b) Except as described in SCHEDULE 6.11(a), all of the HBA Inventory is
located at the Xxxxxxx Warehouse Facility, the HBA Departments, the Non-VCD
Stores, or in transit between any of the foregoing and is owned by Xxxxxxx, and
none of such inventory is on consignment from, or has been consigned to others.
6.12 Product Warranties. Except for manufacturer's warranties or warranties
implied by law, there are no outstanding product warranty obligations of
Xxxxxxx, nor any representations, guarantees or indemnifications given or made
by Xxxxxxx in connection with the sale of HBA Inventory.
6.13 Real Property. Set forth on SCHEDULE 6.13 attached hereto is a list and
brief description of each lease, easement, royalty and other agreement under
which Xxxxxxx will be lessee of, or will hold or operate, any real property as
of the Effective Date.
To the knowledge of Xxxxxxx, each lease or such similar agreement listed
on SCHEDULE 6.13 is in full force and effect and constitutes a legal, valid and
binding obligation of Xxxxxxx, enforceable in accordance with its terms
(subject to bankruptcy, insolvency, fraudulent transfer and other laws of
general applicability affecting creditors' rights generally and to general
principles of equity (whether applied in a proceeding in equity or at law);
there has been no pledge or assignment of Xxxxxxx'x rights thereunder; all
rents due thereunder have been paid; and Xxxxxxx has taken no action, or failed
to take any action, which action or failure would constitute an event of
default (or with notice or lapse of time, or both, would constitute an event of
default) thereunder, except in each case as listed on SCHEDULE 6.13.
6.14 Tangible Personal Property. To be attached hereto as SCHEDULE 6.14 (which
Schedule shall be separately furnished to Buyer on the Closing Date, initialed
by the parties hereto and deemed delivered hereunder) is a list, brief
description, cost and net book value by category of all machinery, equipment
and all other tangible personal property (other than HBA Inventory and items of
tangible personal property not having an individual net book value of more than
$5,000) owned or leased by Xxxxxxx on the Effective Date. All such property is
owned or leased by Xxxxxxx free and clear of all Claims except as set forth in
the Xxxxxxx Financial Statements or in SCHEDULE 6.14. To the knowledge of
Xxxxxxx, except as set forth in the Xxxxxxx Financial Statements or in SCHEDULE
6.14, all leases pursuant to which it leases personal property are in full
force and effect and constitute legal, valid and binding obligations of
Xxxxxxx, enforceable against Xxxxxxx, in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, or other similar laws affecting
the enforcement of creditors' rights generally and by general principles of
equity (whether applied in a proceeding in equity or at law).
6.15 Other Property. Xxxxxxx owns outright all other properties and assets
(other than leased
29
assets) shown on Xxxxxxx'x balance sheet as of February 2, 1997, as being owned
outright, and all such other properties acquired since that date, except, in
either case, as subsequently sold or otherwise disposed of in the ordinary
course of business, and to the knowledge of Xxxxxxx, all such other properties
and assets are free and clear of all Claims whatsoever except those described
in the Xxxxxxx financial Statements or in SCHEDULE 6.15 hereto.
6.16 Banking Facilities. Attached hereto as SCHEDULE 6.16 is a true and
complete list and brief description of all bank accounts, lock box arrangements
and safety deposit boxes in which Xxxxxxx has any interest, with the names of
authorized signatories or persons having access thereto.
6.17 Loan Agreements, Etc. Attached hereto as SCHEDULE 6.17 is a true and
complete list of all instruments, agreements or arrangements pursuant to which
Xxxxxxx has borrowed money, incurred any indebtedness or established any line
of credit or guaranteed the payment by any party of any indebtedness which
represents a liability of Xxxxxxx'x on the date hereof. Xxxxxxx has performed
all the obligations required to be performed by it, to date, and, is not in
default in any material respect under any mortgage, indenture, note or other
obligation for, or related to, borrowed money to which Xxxxxxx is a party, or
to which any business property or asset of Xxxxxxx is subject, and there has
not occurred any event, which, but for the passage of time or giving of notice
or both, would constitute such a default.
6.18 Other Contracts. Attached hereto as SCHEDULE 6.18 is a true, complete and
correct list and brief description of all material contracts, agreements, or
other commitments, whether oral or written, to which Xxxxxxx is a party as of
the date hereof. For purposes of this Section 6.18, any routine purchase order
or sales order entered into in the ordinary and regular course of business
which do not involve an amount greater than One Hundred Thousand Dollars
($100,000) shall be deemed not to be a material contract, agreement or other
commitment. Except as described on SCHEDULE 6.18, Xxxxxxx is not a party to
any material oral or written (a) contract for the employment of any officer or
employee which is not terminable without premium or penalty on no more than
thirty (30) days' notice; (b) license agreement or distributor, dealer,
manufacturer's representative, sales agency or advertising contract which is
not terminable without premium or penalty on no more than thirty (30) days'
notice; (c) contract for the future purchase of materials, supplies, services,
utilities, merchandise or equipment continuing from the date hereof for a
period of more than six (6) months or involving either truck leases or payments
of more than One Hundred Thousand Dollars ($100,000) over its remaining term
(including periods covered by any option to renew); (d) trade discount, trade
promotion, selling or distribution contract; (e) bonus, deferred compensation,
stock option, severance pay or other such employee agreements other than as
shown on SCHEDULE 6.18; (f) agreement or arrangement for the sale of, or the
grant of any preferential rights to, or requiring the consent of any party to
the transfer and assignment of any of the assets or properties of Xxxxxxx,
except in the ordinary and regular course of business; (g) agreement to
indemnify any officer, employee, director or creditor of Xxxxxxx or to hold any
of them harmless from any type of liability except as otherwise provided in the
articles of organization of bylaws of Xxxxxxx; or (h) any other significant
written or oral contract, or agreement, or instruction of any kind or
character. To the knowledge of Xxxxxxx, each of Xxxxxxx'x material contracts
are valid and binding obligations
30
of Xxxxxxx, are in full force and effect and are enforceable against Xxxxxxx,
in accordance with their terms, subject to the bankruptcy, insolvency,
fraudulent transfer, or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
applied in a proceeding in equity or at law). Except as set forth on SCHEDULE
6.18, there is no pending or, to the knowledge of Xxxxxxx, threatened
cancellation or termination of any material contract. Xxxxxxx has not
repudiated or waived any provision of any such material contract which
repudiation or waiver would result in a materially adverse effect on the
business, results of operations or financial condition of Xxxxxxx taken as a
whole and no third party is in default under any such material contract that
would result in a materially adverse effect on the business, results of
operations or financial conditions of Xxxxxxx taken as a whole.
6.19 Defaults and Third Party Consents. Except as otherwise noted in SCHEDULE
6.19, Xxxxxxx has not been advised that it is in default on any agreement,
lease, contract, commitment, instrument or obligation to which it is a party.
Except for any consents required for the transactions contemplated by this
Agreement, to the knowledge of Valley Fair and Xxxxxxx, there is no condition
constituting a default of any material contract to which it is a party and
there exists no event which, after notice or lapse of time, or both, would
constitute a default by it under any such contract, or would permit
termination, modification, or acceleration against Xxxxxxx under any such
contract. Furthermore, to the knowledge of Xxxxxxx, no state of facts exists
in connection with any material contract, whether or not a default, which is
reasonably likely to materially adversely affect the business, results of
operations or financial condition of Xxxxxxx, taken as a whole.
6.20 Employee Benefit Plans. Except as disclosed on SCHEDULE 6.20, neither
Xxxxxxx nor any Related Entity sponsors, maintains, has any obligation to
contribute to, has liability under or is otherwise a party to any Plan or has
acted in such capacity or had such liability in the past. With respect to each
Plan listed on SCHEDULE 6.20 to the extent applicable:
(a) (i) To the best knowledge of Xxxxxxx, each such Plan has been
administered, maintained and operated in full compliance with its terms and
with applicable provisions of ERISA, the Code, all requirements, regulations,
rulings and other authority issued thereunder, and all other applicable
governmental laws and regulations, including, without limitation, bonding
requirements, and requirements for the filing of applicable reports, documents,
and notices with the Secretary of Labor and the Secretary of the Treasury, and
for the furnishing of documents to the participants or beneficiaries of each
such Plan; (ii) no notice has been received of the violation of the terms of
any Plan or of any applicable laws, requirements, regulations, rulings or other
authority and (iii) to the best knowledge of Xxxxxxx, there is no reason to
believe any action or notice with respect to a violation is forthcoming;
(b) Neither Xxxxxxx nor any Related Entity sponsors, maintains, has any
obligation to contribute to, has liability under or is otherwise a party to any
Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Code Section
412, or Title IV of ERISA;
(c) Each such Plan intended to qualify under Code Section 401(a) is
qualified under Code Section 401(a) and is the subject of a favorable unrevoked
determination letter issued by the IRS
31
as to its qualified status under the Code, and each trust established in
conjunction with each such Plan is exempt from federal income tax under Code
Section 501 (a) and is the subject of a favorable unrevoked determination
letter issued by the IRS as to its exempt status under the Code, which
determination letter may still be relied upon as to such tax qualified and
exempt status, and no circumstances have occurred that would adversely affect
the tax qualified status of any such Plan or the exempt status of any such
trust or which would result in, or be likely to result in, the revocation of
such determination;
(d) There is no suit, action, dispute, claim, arbitration or legal,
administrative or other proceeding or governmental investigation pending or to
the best knowledge of Xxxxxxx, threatened, alleging any breach of the terms of
any such Plan or of any fiduciary duties thereunder or violation of any
applicable law with respect to any such Plan, nor any arbitration, proceeding
or investigation;
(e) To the best knowledge of Widmann, Widmann, each Related Entity, each
"party in interest" (as defined in ERISA Section 3(14)), and each "disqualified
person" (as defined in Code Section 4975) or any agent of any such party with
respect to any such Plan has not engaged in a "prohibited transaction" within
the meaning of Code Section 4975 or a violation of ERISA Sections 404, 405, 406
or 407, and no actions have been taken, or have failed to have been taken,
which could subject Xxxxxxx, the Plans, any Related Entity, any Plan fiduciary
or administrator, or Buyer, or any agent of any such party to any excise tax,
penalty, claim or liability thereunder for any prohibited transaction, for any
breach of any fiduciary duty or for any other action or failure to act with
respect to a Plan;
(f) Except as disclosed on SCHEDULE 6.20(f), (i) none of such Plans that
are "employee welfare benefit plans" as defined in ERISA Section 3(1) provides
for continuing benefits or coverage for any participant or beneficiary of a
participant after such participant's retirement or termination of employment,
except to the extent required by law; (ii) there has been no violation of Code
Section 4980B or ERISA Sections 601-608 with respect to any such Plan; (iii) no
such Plans are "multiple employer welfare arrangements" within the meaning of
ERISA Section 3 (40); (iv) with respect to any such Plans that are
self-insured, no claims have been made pursuant to any such Plan that have not
yet been paid other than in the normal course of business and to the best
knowledge of Xxxxxxx, no injury, sickness or other medical condition has been
incurred with respect to which claims may be made pursuant to any such Plan
(such disclosure to include the amount thereof); (v) Xxxxxxx and each Related
Entity do not maintain and do not have any obligation to contribute to any
"voluntary employees' beneficiary association" within the meaning of Code
Section 501(c)(9) or other funding arrangement for the provision of welfare
benefits (such disclosure to include the amount of any such funding); and (vi)
each Plan which is an employee welfare benefit plan as defined in ERISA Section
3(1) is adequately funded through insurance or otherwise, using reasonable
actuarial assumptions, to provide the benefits contemplated thereunder;
(g) Xxxxxxx, each Related Entity and each trade or business (whether or
not incorporated) under common control with Xxxxxxx or a Related Entity within
the meaning of ERISA Section 4001 (b)(1) has not, and at any time has not had,
any liability or any funding deficiency with
32
respect to or obligation to contribute to any "multi-employer plan" as defined
in ERISA Section 3(37) or ERISA Section 4001 (a)(3), Xxxxxxx, each Related
Entity and each trade or business (whether or not incorporated) under common
control with Xxxxxxx or a Related Entity within the meaning of ERISA Section
4001(b)(1) has not at any time withdrawn in any complete or partial withdrawal
from any "multi-employer plan" as defined in ERISA Section 3(37) or ERISA
Section 4001(a)(3) and no event has occurred and there exists no condition or
set of circumstances which presents a risk of the occurrence of the withdrawal
from or the partition, termination, reorganization, or insolvency of any
multi-employer plan which would result in any liability to Buyer with respect
to a multi-employer plan;
(h) With respect to each such Plan, true, correct, and complete copies of
the applicable following documents have been delivered to Buyer: (i) all
current Plan documents and related trust documents, and any amendment thereto;
(ii) Forms 5500, financial statements, annual reports, and actuarial reports
for the last three Plan Years; (iii) the most recently issued IRS determination
letter; and (iv) summary plan description and summary of material
modifications;
(i) Except as listed in SCHEDULE 6.20(i) the consummation of the
transactions contemplated by this Agreement will not: (i) entitle any current
or former employee or officer of Xxxxxxx or of any Related Entity to severance
pay or to any other payment, (ii) accelerate the time of payment or vesting, or
increase the amount of compensation due any such employee or officer, or (iii)
directly or indirectly cause Xxxxxxx, any Related Entity or Buyer to transfer
or set aside any assets to fund or otherwise provide for benefits for any
current or former employee or officer; and none of the Plans provides benefits
or payments contingent upon, triggered by or increased as a result of a change
in the ownership or effective control of Xxxxxxx, or in the ownership of a
substantial portion of its assets (within the meaning of Code Section 280G);
(j) To the best knowledge of Xxxxxxx, all benefit payments due from any
Plan or trust established thereunder have been paid through normal
administrative proceedings to the Plan participants or beneficiaries entitled
thereto in accordance with the terms of said Plan and applicable law,
requirements, regulations, rulings, and other authority applicable thereto;
(k) (i) Neither the Plans, Xxxxxxx, nor any Related Entity has any
liability to the Department of Labor or to the Internal Revenue Service under
the provisions of ERISA, the Code, or other applicable laws, requirements,
regulations, rulings or other authority, and (ii) to the best knowledge of
Xxxxxxx, there are no facts or circumstances which could give rise to any
liability of or claims against the Plans, Xxxxxxx, any Related Entity or Buyer
to or by the Department of Labor or the Internal Revenue Service.
(l) All contributions to or benefit payments under the Plans for any
required period have been or will be timely paid by Xxxxxxx, the termination of
or withdrawal from any Plan (as a result of the transactions contemplated by
this Agreement and as a result of the terms and conditions of any such Plan)
immediately after the Effective Date will not subject Buyer to any liability,
tax or penalty whatsoever, and the execution or performance of the transactions
contemplated by this Agreement will not create, accelerate or increase any
obligations under any Plan; and
33
(m) To the best knowledge of Xxxxxxx, no representation or communication,
oral or written, with respect to participation, eligibility for benefits,
vesting, benefit accrual or coverage under any Plan has been made to the
employees of Xxxxxxx or any Related Entity which are not in accordance with the
terms of the Plan and applicable laws, requirements, regulations, rulings and
other authority applicable thereto.
6.21 Insurance. SCHEDULE 6.21 sets forth all of the insurance policies,
binders, or bonds maintained by or on behalf of Xxxxxxx (the "Insurance
Policies"). To the knowledge of Xxxxxxx, all of the Insurance Policies are in
full force and effect prior to the Effective Date, neither Valley Fair nor
Xxxxxxx is in default thereunder and all claims thereunder have been filed in a
due and timely fashion.
6.22 Pending Claims, Litigation and Governmental Proceedings. Set forth on
SCHEDULE 6.22 is a list and description of each complaint, claim, suit, action,
arbitration or regulatory, administrative, or governmental proceeding or
investigation or any other proceeding or investigation filed against or
commenced by Xxxxxxx in the last year. Except as set forth on SCHEDULE 6.22, no
proceeding or investigation is pending or, to the knowledge of Xxxxxxx,
threatened against Xxxxxxx.
6.23 Judgments, Orders and Consent Decrees. Xxxxxxx is not subject to any
judgment, ruling, injunction, order, writ or decree of, or agreement with, any
court, arbitrator or regulatory authority materially limiting, restricting or
adversely affecting the business operations of Xxxxxxx.
6.24 Employment/Labor Matters. To Xxxxxxx'x knowledge, attached hereto as
SCHEDULE 6.24 is a complete current list of the names and addresses of all
sales representatives, employees, agents, independent consultants (excluding
attorneys and accountants), and contractors currently providing services to
Xxxxxxx stating the rates of compensation payable to each of them and their
titles or job classifications.
(a) Except as set forth on SCHEDULE 6.24(a), To Xxxxxxx'x knowledge,
Xxxxxxx is in compliance in all material respects with all applicable laws
regarding employment matters, including, without limitation, laws related to
the termination of employment.
(b) Except as disclosed in SCHEDULE 6.24(b), no unions or other collective
bargaining units have been, or are required to be, certified or recognized by
Xxxxxxx as representing Xxxxxxx'x employees, and no union organizing efforts
exist with respect to any employees of Xxxxxxx.
(c) Except as disclosed in SCHEDULE 6.24(c), there are no material
controversies pending or, to Valley Fair's knowledge, threatened between
Xxxxxxx and any of its employees. To Xxxxxxx'x knowledge, there has not been
within the last year, nor was there, or is there threatened or contemplated,
any strike, slowdown, picketing or work stoppage by any employees against
Xxxxxxx, wherever located, any lockout by Xxxxxxx of any of its employees or
any
34
labor trouble or other occurrence, event or condition of a similar character
affecting or which affect Xxxxxxx. To the knowledge of Xxxxxxx, it has complied
in all material respects with all laws relating to the employment of labor,
including, but not limited to, any provisions thereof relating to equal
employment opportunities, civil rights, working conditions, wages, hours,
COBRA, WARN, and the payment of social security and similar taxes, and Xxxxxxx
is not liable for any arrearage of wages or any taxes or penalties for failure
to comply with any of the foregoing.
6.25 Customer Deposits. Except for customer layaway deposits, Xxxxxxx has not
received, and will not receive prior to the Closing Date, any deposits,
payments on account or similar payment with respect to any of its HBA
Inventory, contracts or orders, and no such deposits, payments on account or
similar payments are due or owing to Xxxxxxx.
6.26 Purchase Orders. Identified on SCHEDULE 6.26 are all unfulfilled purchase
commitments of Xxxxxxx as of the Effective Date (which Schedule shall be
furnished to Buyer on the Closing Date, initialed by the parties hereto and
deemed delivered hereunder).
6.27 Compliance with Laws. To the knowledge of Xxxxxxx, it has at all times
conducted its business in compliance and in conformity in all material respects
with all applicable federal, state and local laws, statutes and ordinances and
the rules and regulations promulgated thereunder; and, there are no pending or
threatened claims or notices of violation by Xxxxxxx of any such laws,
statutes, ordinances, rules and regulations or claims which are likely of
assertion.
6.28 Broker's or Finder's Fees. No person or firm other than Valley Fair,
Xxxxxxx and/or VCD (and their respective directors, officers, employees and
independent accountants and attorneys) have arranged, or participated in
arranging, on behalf of Valley Fair, the transactions provided for herein.
There are no broker's or finder's fees to be paid by Valley Fair, Xxxxxxx
and/or VCD, and except as described in this Section, Valley Fair, Xxxxxxx
and/or VCD have no knowledge of any claim (or the reasonable basis therefor)
for a broker's or finder's fee to be paid by Buyer in connection with the
consummation of the transactions provided for herein.
6.29 Full Disclosure. No representation or warranty by Valley Fair or Xxxxxxx
pursuant to this Agreement omits to state a material fact necessary to make the
representations and warranties of Valley Fair or Xxxxxxx under this Agreement
not misleading.
6.30 Duty of Valley Fair to Make Inquiry. To the extent that any of the
representations and warranties made by Valley Fair in this Agreement is
qualified by the knowledge or belief of Valley Fair, Valley Fair represents and
warrants that it has made reasonable inquiry and investigation concerning the
matters to which such representations and warranties relate, including, without
limitation, diligent inquiry of any relevant personnel of Valley Fair or
Xxxxxxx.
SECTION 7 - REPRESENTATIONS AND WARRANTIES OF MAZEL
In order to induce VCD to sell the Assets and perform its other
obligations hereunder and in
35
order to induce Valley Fair to sell the Xxxxxxx Stock and perform its other
obligations hereunder, Mazel hereby makes the following representations and
warranties to Sellers, each of which shall be true and correct as of the date
hereof and shall be true and correct on the Effective Date and which shall
survive the Effective Date to the extent specified in Section 14.
7.1
Organization, Qualification and Authority of Mazel
(a) Due Organization and Qualification. Mazel is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio and is qualified to transact business as a foreign corporation in all
jurisdictions where the nature of its business or the ownership, leasing or
operation of Mazel's properties or assets requires qualification.
(b) Power and Authority to Conduct Business. Mazel has the full power and
authority to own or lease its properties and to conduct its business in the
manner and in the places where such property is owned or leased and its
business is conducted by it. Mazel possesses all permits and licenses from
state, local, or Federal agencies or subdivisions necessary to operate its
business, all of which are in full force and effect.
(c) No Defaults or Violations. As of the Effective Date, the execution and
delivery of this Agreement, and the performance of the obligations by Mazel
under this Agreement: (i) will not violate, contravene, be in conflict with,
result in a breach of or constitute (with or without notice or lapse of time or
both) a default under (A) any provision of law; (B) any order, rule or
regulation of any court, arbitrator or other agency of government; (C) any
provision of the Articles of Incorporation or Code of Regulations of Mazel, or
(D) any lease, indenture, agreement or other instrument to which Mazel, or any
of its assets is or may be bound; (ii) will not result in the creation or
imposition of any Claim of any nature whatsoever upon the assets of Mazel or
Buyer.
(d) Power and Authority to Enter Into Agreements. Mazel has the right,
power and authority to enter into and perform its obligations under this
Agreement and the other agreements provided for herein by and on behalf of
Mazel. No consent, approval or authorization of, or registration, declaration,
or filing with any court, governmental authority (federal, state or local),
collective bargaining unit, lending institution or other third party is
required in connection with the execution and delivery by Mazel of this
Agreement or its performance of, or compliance with, the terms, provisions, and
conditions hereof.
(e) Due Execution and Enforceability. The execution, delivery and
performance of this Agreement and the other agreements provided for herein by
and on behalf of Mazel have been duly and validly authorized and approved by
the Board of Directors of Mazel. Mazel has taken and will take all such other
corporate action as is necessary or required to enter into, execute and deliver
this Agreement and the other agreements provided for herein and to perform its
obligations hereunder and thereunder. This Agreement and the other agreements
provided for herein constitute the valid and legally binding obligations of
Mazel, enforceable against Mazel in accordance with their respective terms and
conditions (except to the extent the same may be
36
limited by bankruptcy; insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by general equitable principles).
7.2 Judgments, Orders and Consent Decrees. Mazel is not subject to any
judgment, ruling, injunction, order writ or decree of , or Agreement with, any
court, arbitrator or regulatory authority limiting, restricting or adversely
affecting the performance by Mazel of its obligations under this Agreement and
the other agreements provided for herein.
7.3 Broker's or Finder's Fees. No person or firm other than Mazel and its
affiliated companies (and their respective partners, directors, officers,
employees and independent accountants and attorneys) have arranged or
participated in arranging, on behalf of Mazel or Buyer, the transactions
provided for herein. There are no broker's or finder's fees to be paid by Mazel
or Buyer, and Mazel has no knowledge of any claim (or the reasonable basis
therefor) for a broker's or finder's fee to be paid by Buyer, VCD or Valley
Fair in connection with the consummation of the transactions provided for
herein.
7.4 Compliance with Laws. To the knowledge of Mazel, it has at all times
conducted its business in compliance and in conformity in all material respects
with all applicable federal, state and local laws, statutes and ordinances and
the rules and regulations promulgated thereunder; and, to the knowledge of
Mazel, there are no pending or threatened claims or notices of violation by
Mazel of any such laws, statutes, ordinances, rules and regulations or claims
which are likely of assertion.
7.5 Full Disclosure. No representation or warranty by Mazel pursuant to this
Agreement omits to state a material fact necessary to make the representations
and warranties of Mazel under this Agreement not misleading.
7.6 Duty of Mazel to Make Inquiry. To the extent that any of the
representations and warranties made by Mazel in this Agreement is qualified by
the knowledge or belief of Mazel, Mazel represents and warrants that it has
made reasonable inquiry and investigation concerning the matters to which such
representations and warranties relate, including, without limitation, diligent
inquiry of any relevant personnel of Mazel.
SECTION 8 - COVENANTS OF VCD, XXXXXXX AND/OR VALLEY FAIR
8.1 Conduct and Preservation of Business. From and after the date of this
Agreement and until the Effective Date, VCD, Valley Fair, and Xxxxxxx each
hereby covenant and agree as follows:
(a) Full Access. Buyer and its authorized representatives shall have full
access during normal business hours, but without unreasonably interrupting
business, to the premises and to all books of account, financial records,
contracts, pricing practices and other business information of VCD, Valley Fair
and/or Xxxxxxx and to each of their respective personnel, and each of VCD,
Valley Fair and Xxxxxxx shall furnish or cause to be furnished to Buyer and its
authorized representatives all information with respect to the business and
affairs of VCD, Valley Fair and Xxxxxxx as Buyer and its authorized
representatives may reasonably request in each case to the
37
extent that it relates to the Toy/Sports Departments or Xxxxxxx.
(b) Compliance with Laws. VCD, Valley Fair and Xxxxxxx shall comply in all
material respects with all applicable statutes, laws, ordinances, rules and
regulations as may be required in connection with the maintenance and operation
of the Assets or the operation of the business of Xxxxxxx or for the valid and
effective transfer to Buyer of the Assets or the Xxxxxxx Stock and the
consummation of the transactions contemplated by this Agreement.
8.2 Injunctions. If any court of competent jurisdiction over VCD, Valley Fair
or Xxxxxxx, as the case may be, or the Assets or Xxxxxxx Stock, issues or
otherwise promulgates any injunction order or decree that prohibits the sale
of, or otherwise adversely affects the Assets or the Xxxxxxx Stock, VCD, Valley
Fair or Xxxxxxx, as the case may be, shall use their best efforts to have such
injunction dissolved or otherwise eliminated as promptly as possible or,
alternatively, may terminate this Agreement, without liability to the other
parties..
8.3 Conduct Prior to Effective Date. During the period from the date of this
Agreement to the Effective Date, and except as otherwise contemplated herein,
or consented to by Buyer, Valley Fair shall cause Xxxxxxx to use best efforts
to preserve intact its existing organization, properties, businesses and
relations. Without limiting the generality of the foregoing, except as
otherwise contemplated herein or consented to by Buyer, Valley Fair shall cause
Xxxxxxx to conduct its business only in the ordinary course and shall not
permit Xxxxxxx, to:
(a) issue, sell or deliver any shares of its capital stock or issue or
sell any securities convertible into its capital stock or warrants to purchase
or other rights to subscribe for or acquire any shares of its capital stock;
(b) declare or pay any dividend or distribution in cash or other property,
effect any recapitalization, reclassification, stock dividend, stock split or
like change in capitalization, other than the distribution prior to the Closing
Date to Valley Fair as a dividend of Xxxxxxx'x entire right and interest in the
Excluded Xxxxxxx Assets;
(c) amend its Articles of Incorporation or Bylaws (or similar governing
documents);
(d) merge or consolidate with, acquire the capital stock of, or acquire
substantially all of the assets of any other entity;
(e) sell, transfer, lease, or encumber a material amount of assets, other
than the sale of inventory in the ordinary course;
(f) grant to any officer, employee, or consultant any material increase in
compensation or benefits, except in the ordinary course of business, consistent
with past practice;
(g) grant any severance or termination pay to, or enter into or materially
amend any employment or severance agreement with, any person;
38
(h) adopt any new or amend any existing Plan;
(i) incur any amount of debt above the amounts currently available to
Xxxxxxx and Valley Fair under existing lending arrangements (in this regard,
the parties acknowledge that Xxxxxxx will borrow on its bank line to pay
intercompany liabilities to Valley Fair on or prior to the Effective Date);
(j) make any change in the accounting principles or methods from those
currently employed, except as required by GAAP;
(k) grant any mortgage or security interest in, or make any pledge of, or
permit any Claim to be placed on, any of its assets or properties;
(l) make any capital expenditures in excess of $25,000 per project or
$100,000 in the aggregate.
(m) accelerate, terminate or cancel any material contract;
(n) terminate, cancel or fail to renew any insurance coverage maintained
by or for the benefit of Xxxxxxx which is not replaced by insurance coverage
that is at least as broad in scope, with limits as high as the limits on the
insurance being replaced, maintained with or provided by reputable insurers,
and deductibles or retentions no higher than those being replaced, or amend any
insurance coverage maintained by or for the benefit of Xxxxxxx unless such
amendment enhances, broadens, or increases the limits of such insurance
coverage;
(o) establish any new facilities;
(p) settle or compromise any claims in excess of $50,000 but not in the
aggregate amount of more than $100,000; or
(q) agree to any of the foregoing.
8.4 Resignations. Valley Fair shall cause to be delivered to Buyer at the
Closing duly signed resignations, effective immediately upon the Effective Date
of all directors and officers of Xxxxxxx not being retained by Buyer.
8.5 Further Assurances. On and after the Closing, the parties will take all
appropriate action and execute all documents, instruments or conveyances of any
kind which may reasonably be necessary or advisable to carry out any of the
provisions of this Agreement.
8.6 Xxxxxxx Tax Covenants.
(a) Valley Fair Consolidated Group. Valley Fair and Buyer agree that
Xxxxxxx will be included in the consolidated Federal income tax return filed by
Valley Fair (or Other Group Member) for the period from February 2, 1997,
through the Effective Date and Valley Fair shall
39
be responsible for making all required payments associated with such return.
(b) Tax Liability Proration.
(i) Valley Fair shall indemnify and hold Buyer harmless against any
and all Taxes of the affiliated group of which Valley Fair and Xxxxxxx are
members for federal income tax purposes or similar provision of state, local or
foreign law or of Xxxxxxx for any taxable year or period ending on or before
the Effective Date, and Valley Fair shall be entitled to all refunds of such
Taxes. Taxes attributable to intercompany transactions recognized or taken
into account by reason of this sale of Xxxxxxx (including restoration of
deferrals) under the provisions of Code Section 1502 or the regulations
thereunder by Valley Fair, Xxxxxxx, or any Other Group Member (as defined in
Section 6.10) or any prior consolidated return of them (and similar Taxes under
state and local tax laws), and Taxes attributable to adjustments under Code
Section 481 (or any predecessor Code or similar provisions of other tax laws)
with respect to pre-sale changes of accounting methods shall be treated as
Taxes for a taxable year or period ending on or before the Effective Date.
(ii) Buyer shall indemnify and hold Valley Fair harmless against any and
all Taxes, interest, and penalties due by Xxxxxxx or any affiliated group of
which Xxxxxxx becomes a member after the Effective Date for any taxable year or
period beginning on or after the Effective Date and Buyer shall be entitled to
all refunds of such Taxes.
(iii) The Taxes of Xxxxxxx for a taxable year or period that begins before
and ends after the Effective Date shall be apportioned between Buyer and Valley
Fair, with Buyer responsible for Taxes attributable to the post-sale portion of
such period and Valley Fair responsible for taxes attributable to the pre-sale
portion of such period. The determination of the Taxes attributable to each
portion shall be made by assuming that Xxxxxxx had two taxable periods, with
the pre-sale portion representing the first such period and the post-sale
portion representing the second such period. Exemptions, allowances or
deductions that are calculated on an annual basis, such as the deduction for
depreciation, shall be apportioned on a daily basis. If necessary, the actual
tax for such taxable year or period shall be apportioned between the two
portions of such year or period in proportion to the ratio of taxes that would
result for such portions if such portions were separate taxable periods.
(a) Preparation of Tax Returns.
(i) Buyer shall file or cause to be filed when due all returns in
respect of Taxes of Xxxxxxx for taxable years or periods ending after the
Effective Date and shall pay or cause to be paid the taxes shown to be due on
any such return. Upon notification and satisfactory documentation from the
Buyer, Valley Fair shall pay to Buyer the Taxes to be paid with such return
that Valley Fair is liable for pursuant to Section 8.6(b) of this Agreement.
(ii) Valley Fair agrees that it shall be responsible for the
preparation of all returns in respect of Taxes for Xxxxxxx for taxable years or
periods ending on or before the Effective Date. To the extent that any such
return requires a tax payment, Valley Fair shall deliver such
40
return to Buyer who will pay or cause to be paid the amount due with the return
and file the return with the proper tax authority. Buyer's responsibility for
the payment of such Taxes shall be limited to amounts as to which Valley Fair
has set up an adequate reserve on the Audited Stock Closing Statement of
Xxxxxxx. Buyer also agrees that it will be responsible for payment of all other
Taxes as to which Valley Fair has set up an adequate reserve on the Audited
Stock Closing Statement of Xxxxxxx. To the extent any Taxes payable hereunder
by Buyer exceed such reserve, Valley Fair shall reimburse Buyer such excess
amount prior to the due date of such Taxes.
(b) Assistance and Cooperation. After the Closing Date, Buyer and Valley
Fair agree to:
(i) assist the other party and cooperate in preparing any Tax Returns
or other tax filings in connection with or resulting from the transactions
contemplated by this Agreement or with respect to Xxxxxxx.
(ii) assist and cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding any tax returns or other tax filings
in connection with or resulting from the transactions contemplated by this
Agreement or with respect to Xxxxxxx.
(iii) make available to the other and to any taxing authority as
reasonably requested all relevant information, records and documents relating
to Taxes with respect to Xxxxxxx; and
(iv) retain and maintain accounting and tax records used in preparing
any Tax Returns or other tax filings contemplated by this Agreement until such
time as Valley Fair and Buyer reasonably agree that such retention and
maintenance is no longer necessary.
(c) Disputes.
(i) Buyer shall notify Valley Fair in writing promptly after learning
of any governmental inquiry, examination or proceeding (a "tax proceeding")
that could result in a determination with respect to Taxes due or payable by
Buyer for which Valley Fair is liable or against which Valley Fair may be
required to reimburse or indemnify Buyer pursuant to the terms of this
Agreement. Valley Fair shall exercise at its cost and expense control over the
handling, disposition and settlement of any such tax proceeding for any tax
period ending on or prior to the Effective Date; provided that Buyer may
participate at its cost and expense, in the handling, disposition and
settlement thereof; and provided, further, that Valley Fair shall not enter
into any compromise or agreement with respect to any such tax proceeding
without the prior written consent of Buyer, which consent shall not be
unreasonably withheld or delayed. Buyer shall exercise at its cost and expense
control over the handling, disposition and settlement of any such tax
proceedings for any tax period ending after the Effective Date, provided, that
Valley Fair may participate at its sole cost and expense in the handling,
disposition and settlement thereof and provided, further, the Buyer shall not
enter into any compromise or agreement with respect to any such tax proceeding
if such compromise or agreement would give rise to an indemnification
obligation for Valley Fair hereunder without the prior written consent of
Valley Fair, which consent shall not be unreasonably withheld or delayed. Each
of Buyer and Valley Fair shall cooperate with the other
41
party and the affiliates of such other party during the course of any such tax
proceeding.
(ii) If Buyer and Valley Fair are unable to agree on any issue
arising in connection with any Tax Return that either Buyer or Valley Fair is
entitled to review hereunder, then Buyer and Valley Fair shall each submit
their position with respect to the Tax Return to the accounting firm of Xxxxxx
Xxxxxxxx or another national certified public accounting firm reasonably
satisfactory to Buyer and Valley Fair (the "Deciding CPA's"). The Deciding
CPA's shall be instructed by Valley Fair and Buyer to determine and report to
the parties within twenty (20) business days after submission of such remaining
disputed items (or as soon thereafter as the Deciding CPA's deem practicable),
and such report shall be final, binding and conclusive on the parties hereto.
The fees and disbursements of the Deciding CPA's shall be allocated between
Valley Fair and Buyer in the same proportion that the aggregate amount of the
disputed amounts, as finally determined by the Deciding CPA's, bears to the
total sum of disputed amounts. The Deciding CPA's shall have no right,
authority or discretion to employ any accounting standard or principles except
for those used by Xxxxxxx in accordance with GAAP.
SECTION 9 - CONDITIONS PRECEDENT TO BUYER'S
OBLIGATION TO CLOSE
Each and every obligation of Buyer to be performed on the Effective Date
shall be subject to the satisfaction on or prior thereto of each of the
following conditions any one or more of which conditions may be waived by Buyer
in writing in its sole and absolute discretion:
9.1 Representations and Warranties True on Effective Date. The representations
and warranties made by VCD, Valley Fair and Xxxxxxx in this Agreement and in
the Schedules and Exhibits hereto shall be true and correct in all material
respects on and as of the Effective Date as though such representations and
warranties had been made again and reaffirmed on and as of the Effective Date.
9.2 Compliance with Agreement. Each of VCD, Valley Fair and Xxxxxxx shall have
performed and complied in all material respects with all of their respective
obligations under this Agreement which are to be performed or complied with by
them on or prior to the Effective Date.
9.3 Secretary's Certificate. Each of VCD and Valley Fair shall have delivered
to Buyer the certificate of their respective Secretary or Assistant Secretary
certifying as of the Effective Date to the authorization and approval of this
Agreement and the transactions provided for herein by duly adopted resolutions
of each of their Boards of Directors and the shareholders of Valley Fair.
9.4 Compliance Certificate. Each of VCD and Valley Fair shall have delivered to
Buyer the certificate of the President and/or Chief Executive Officer of each
of them certifying, as of the Effective Date, the fulfillment of the conditions
set forth in Sections 9.1, 9.2, 9.3, 9.15, and 9.16 hereof.
42
9.5 No Litigation. No investigation, suit, action or other proceeding shall be
pending or threatened before or by any court of governmental agency which in
the reasonable opinion of Buyer, may adversely affect this Agreement or the
consummation of the transactions provided for herein.
9.6 Proceedings and Instruments Satisfactory. All proceedings, corporate or
otherwise, to be taken by each of VCD, Valley Fair and Xxxxxxx, respectively,
in connection with the transactions provided for herein, and all documents
incident thereto, shall be reasonably satisfactory in form and substance to
Buyer; and each of VCD, Valley Fair and Xxxxxxx shall have made available to
Buyer for examination the originals or true and correct copies of all documents
which Buyer may reasonably request in connection with said transactions.
9.7 Consents and Approvals. All of the parties hereto shall have obtained all
necessary and material authorizations, consents and approvals required for the
valid consummation of the transactions provided for in this Agreement, and each
of them shall be in full force and effect.
9.8 Damage or Destruction. There shall not have been any damage to or
destruction of a material portion of the Assets; the HBA Inventory, the Xxxxxxx
Warehouse Facility or any other material properties of Xxxxxxx (whether or not
covered by insurance).
9.9 No Material Adverse Change. Since the date of execution of this Agreement,
there shall not be any event or condition that materially and adversely affects
the Assets, or the operations of the Toys/Sports Department.
9.10 Warehouse Arrangements. Buyer and the respective landlords shall have
entered into the VCD Warehouse Facilities Leases and the Xxxxxxx Warehouse
Facility Lease.
9.11 Injunctions. There shall not be in effect any injunctions, decrees or
orders prohibiting the sale of, or otherwise adversely affecting, the Assets or
the operations of Xxxxxxx.
9.12 License Agreements. Buyer and VCD shall have entered into the Toy/Sports
License Agreement and Buyer and VCD or Valley Fair (as the case may be) shall
have entered into the HBA License Agreements.
9.13 Insurance Arrangements. Buyer shall have obtained adequate product
liability insurance coverage for the Toys/Sports Department Inventory and the
HBA Inventory as is customary for retailers of such goods.
9.14 Valley Fair Store Lease. Buyer shall have entered into the Valley Fair
Store Lease.
9.15 Dissolution of Xxxxxxx. Except as otherwise agreed upon, Valley Fair and
Buyer have prepared, executed and filed all necessary documents to cause
Xxxxxxx to merge into Buyer or dissolve immediately upon Buyer's acquisition of
Xxxxxxx hereunder.
9.16 Good Standing Certificates. Buyer shall have received good standing
certificates from the
43
respective states of incorporation of each of VCD, Valley Fair and Xxxxxxx,
copies of articles of incorporation (or similar charter documents) certified by
their respective states of incorporation; and by-laws (or similar governing
documents) of each entity certified by the secretary or assistant secretary of
each entity.
9.17 Corporate Authority. Buyer shall have received certified copies of
resolutions adopted by the Board of Directors of VCD and Valley Fair,
respectively, and Shareholders of Valley Fair approving the execution, delivery
and performance of this Agreement.
SECTION 10 - CONDITIONS PRECEDENT TO VCD'S AND VALLEY FAIR'S
OBLIGATION TO CLOSE
Each and every obligation of VCD and Valley Fair to be performed on the
Effective Date shall be subject to the satisfaction on or prior thereto of each
of the following conditions any one or more of which conditions may be waived
in writing by VCD or Valley Fair, in their sole and absolute discretion:
10.1 Representations and Warranties True at the Effective Date. The
representations and warranties of Mazel contained in this Agreement shall be
true and correct in all material respects on and as of the Effective Date as
though such representations and warranties had been made again and reaffirmed
on and as of the Effective Date.
10.2 Compliance With Agreement. Buyer and Mazel shall have each performed and
complied in all material respects with all of its obligations under this
Agreement that are to be performed or complied with by it on or prior to the
Effective Date.
10.3 No Litigation. No investigation, suit, action or other proceeding shall be
pending or threatened before or by any court or governmental agency which in
the reasonable opinion of VCD or Valley Fair may adversely affect this
Agreement or the consummation of the transactions provided for herein.
10.4 License Agreements. Buyer and VCD shall have entered into the Toys/Sports
License Agreement and Buyer and VCD or Valley Fair (as the case may be) shall
have entered into the HBA License Agreement.
10.5 Warehouse Arrangements. Buyer shall have entered into the VCD Warehouse
Facilities Leases and the Xxxxxxx Warehouse Facility Lease.
10.6 Insurance Arrangements. Buyer shall have obtained adequate product
liability insurance coverage for the Toys/Sports Department Inventory and the
HBA Inventory as is customary for retailers of such goods.
10.7 Valley Fair Store Lease. Buyer shall have entered into the Valley Fair
Store Lease.
10.8 Proceedings and Instruments Satisfactory. All proceedings to be taken by
Buyer and Mazel
44
in connection with the transactions provided for herein, and all documents
incident thereto, shall be reasonably satisfactory in form and substance to VCD
and Valley Fair; and Buyer and Mazel shall make available to VCD and Valley
Fair for examination the originals or true and correct copies of all documents
that VCD and Valley Fair reasonably request in connection with said
transactions.
10.9 Consents and Approvals. All of the parties hereto shall have obtained all
necessary and material authorizations, consents and approvals required for the
valid consummation of the transactions provided for in this Agreement, and each
of them shall be in full force and effect.
SECTION 11 - FURTHER AGREEMENTS OF THE PARTIES
11.1 Employees.
(a) VCD agrees to notify Buyer prior to terminating, laying off or
otherwise taking any action directly affecting the employment status of the VCD
Employees. Buyer may, but shall not be obligated pursuant to this Agreement or
for any other reason, to offer full or part-time employment to any present or
future employees of VCD on such terms and conditions as Buyer, in its sole
discretion, may determine. Buyer may communicate with the VCD Employees prior
to the Closing upon reasonable prior notice to VCD. VCD shall not directly or
indirectly induce, suggest or recommend to the VCD Employees that they reject
offers of employment or other association with Buyer. VCD shall cooperate with
Buyer in all reasonable respects in connection with any offers of employment or
other association that Buyer may make to the VCD Employees and to transition
any such employees from VCD's employment to possible association with Buyer.
(b) VCD hereby agrees that it will not, without the prior written consent
of Buyer, notify, promise, represent, advise, state or otherwise communicate to
any employee of VCD that Buyer will be hiring any or all such employees or make
any offer of employment or other association on behalf of Buyer.
(c) Xxxxxxx agrees to notify Buyer prior to terminating, laying off or
otherwise taking any action directly affecting the employment status of Xxxxxxx
employees. Buyer may, but shall not be obligated pursuant to this Agreement or
for any other reason, to offer full or part-time employment to any present
employee of Xxxxxxx on such terms and conditions as Buyer, in its sole
discretion, may determine. Buyer may communicate with the Xxxxxxx employees, or
their representatives, prior to the Closing upon reasonable prior notice to
Xxxxxxx. Xxxxxxx shall not directly or indirectly induce, suggest or recommend
to the Xxxxxxx employees that they reject offers of employment or other
association with Buyer. Xxxxxxx shall cooperate with Buyer in all reasonable
respects in connection with any offers of employment or other association that
Buyer may make to the Xxxxxxx employees and to transition any such employees
from Xxxxxxx'x employment to possible association with Buyer.
(d) Xxxxxxx hereby agrees that it will not, without the prior written
consent of Buyer, notify, promise, represent, advise, state or otherwise
communicate to any employee of Xxxxxxx
45
that Buyer will be hiring any or all such employees or make any offer of
employment or other association on behalf of Buyer.
(e) After the Effective Date, Buyer will be responsible for complying with
all applicable laws regarding employment matters relating to employees of
Xxxxxxx and the VCD Employees retained by Buyer, including, without limitation,
laws relating to the termination of employment, e.g., WARN.
11.2 Nondisclosure. Each of the parties shall not disclose, directly or
indirectly, the terms of this Agreement to any person, firm or entity other
than their respective attorneys, accountants, lenders, and representatives who
are required to be informed thereof in connection with their representation of
the parties in connection with the transactions contemplated hereby. No press
release or governmental notification, report or other filing by any of the
parties shall be made without the prior written approval of the content thereof
by all parties. The parties will issue a joint press release upon the
consummation of the transactions contemplated by this Agreement.
SECTION 12 - RISK OF LOSS
12.1 Risk of Loss. Risk of Loss with respect to the Assets and the assets of
Xxxxxxx being transferred on the Effective Date shall pass to Buyer effective
as of the end of August 2, 1997 (i.e., the Effective Date).
SECTION 13 - TERMINATION AND ABANDONMENT
13.1 Termination. This Agreement may be terminated forthwith upon the receipt
of notice of termination as provided for in Section 13.2 hereof, and the
purchase and sale and the other transactions provided for by this Agreement may
be abandoned, without liability on the party of either party to the other:
(a) By mutual written consent of the parties hereto;
(b) By Buyer, if any of the conditions of Section 9 of this Agreement have
not been satisfied on the Closing Date and have not been waived by Buyer in
writing;
(c) By VCD, Valley Fair or Xxxxxxx, if any of the conditions of Section 10
of this Agreement have not been satisfied on the Closing Date and have not been
waived by Sellers in writing;
(d) By any party hereto, if any of them files on or before the Closing
Date a petition in bankruptcy, reorganization, liquidation or receivership or a
petition in bankruptcy, reorganization, liquidation or receivership is filed on
or before the Closing Date against such other party.
13.2 Notice of Termination. In the event of termination and abandonment by any
party as provided in Section 13.1 hereof, prompt written notice thereof shall
forthwith be given to the other party.
46
SECTION 14 - INDEMNIFICATION AND REIMBURSEMENT
14.1 Indemnification by VCD and Valley Fair.
(a) In order to induce Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, each of VCD and Valley Fair
covenants and agrees severally and not jointly, to indemnify Buyer and its
members, officers, employees and agents, and their successors and assigns
(collectively, the "Buyer Interests") and shall hold the Buyer Interests
harmless against and with respect to any and all Damages incurred in connection
with or arising out of or resulting from or incident to:
(i) any misrepresentation, omission, breach of warranty,
representation or covenant, or non-fulfillment of any obligation on the part of
VCD, Valley Fair or Xxxxxxx, respectively, under this Agreement, any
certificate, Schedule or Exhibit, or other instrument furnished to Buyer in
connection with this Agreement;
(ii) any debt, liability or obligation of Xxxxxxx with respect to any
matter, transaction or event that existed, arose or occurred on or prior to the
Effective Date other than (A) the liabilities expressly identified on the
Audited Closing Stock Statement, which are assumed only up to the amount as
finally determined pursuant to Section 3.3(c), (B) Buyer's Product Liability
Obligations, (C) any continuing contractual obligations disclosed in the
Agreement, and the Schedules and Exhibits attached hereto for goods and
services to be provided after the Effective Date, and (D) the Specified Losses,
which shall be indemnified only to the extent and as provided in Section 3.3(e)
herein;
(iii) the filing (or failure to file) or payment (or non-payment) of
any Taxes by VCD, Valley Fair or the Other Group Members, respectively, any
deficiencies in any taxes payable by or on behalf of VCD, Valley Fair or the
Other Group Members;
(iv) the filing (or failure to file) or payment (or non-payment) of
any Taxes by Xxxxxxx as provided in Section 8.6;
(v) any and all suits, actions, liabilities, or claims arising under
or resulting from any Plan of VCD, Xxxxxxx or any Related Entity of VCD and/or
of Xxxxxxx pertaining to periods on or prior to the Effective Date and not
accrued on the Audited Stock Closing Statement, including, but not limited to,
any suit, action, liability or claim arising out of the allegation or
imposition of successor employer status upon Buyer, any suit, action, liability
or claim for benefits or contributions, or any suit, action, liability or claim
for taxes, including without limitation, income taxes, excise taxes, penalties
or interest with regard to any Plan; and
(vi) any and all actions, suits, proceedings, demands, assessments,
penalties, fines, judgments, costs and legal and other expenses incident to any
of the foregoing.
47
(b) The indemnification of this Section shall survive the Effective Date
for a period of two (2) years except that matters relating to Taxes shall
survive until the expiration of any applicable statute of limitations
pertaining thereto.
14.2 Indemnification by Buyer and Mazel.
(a) In order to induce VCD and Valley Fair to enter into this Agreement
and to consummate the transactions contemplated hereby, each of Buyer and Mazel
covenants and agrees severally and not jointly, to indemnify each of VCD and
Valley Fair, their shareholders, directors, officers, employees, agents,
successors and assigns (collectively, the "VCD Interests") and shall hold the
VCD Interests harmless against and with respect to any and all Damages,
incurred in connection with or arising out of or resulting from or incident to:
(i) any misrepresentation, omission, breach of warranty,
representation or covenant, or non-fulfillment of any obligation on the part of
Buyer or Mazel, respectively, under this Agreement, any certificate, Schedule
or Exhibit, or other instrument furnished to VCD or Valley Fair in connection
with this Agreement;
(ii) Buyer's Product Liability Obligations;
(iii) the failure of Buyer to pay or perform any of the VCD Assumed
Liabilities; and
(iv) any and all actions, suits, proceedings, demands, assessments,
penalties, fines, judgments, costs and legal and other expenses incident to any
of the foregoing.
(b) The indemnification in this Section shall survive the Effective Date
for a period of two (2) years, except that matters relating to Taxes shall
survive until the expiration of any applicable statute of limitations
pertaining thereto.
14.3 Claims for Reimbursement. In the event that the Buyer Interests or the VCD
Interests shall have suffered any Damages (as hereinabove defined) with respect
to any liability or claim to which the foregoing indemnities relate, the party
seeking indemnity hereunder (the "Indemnified Party"), shall give the party
from whom indemnity is sought (the "Indemnifying Party"), prompt written notice
of the nature and amount of such Damages and the Indemnified Party's claim for
reimbursement therefor. The Indemnifying Party shall have thirty (30) days from
the date of said notice to investigate and dispute the nature, validity or
amount of any such claim. During said 30-day period, the Indemnifying Party
shall have reasonable access, during normal business hours, to the books and
records of the Indemnified Party for the purpose of such investigation. In the
event that the Indemnifying Party shall dispute the nature, validity or amount
of said claim, the Indemnifying Party shall give the Indemnified Party written
notice of such dispute within said 30-day period, and the parties shall attempt
in good faith to resolve such dispute.
In the absence of a dispute, the Indemnifying Party shall promptly, and in
any event not later than the expiration of said 30-day period, reimburse the
Indemnified Party in full for any such Damages, as set forth in the Indemnified
Party's notice. In the event that the Indemnifying Party
48
shall dispute only the amount of the claim, the Indemnifying Party shall,
concurrently with the delivery of its notice of dispute, pay to the Indemnified
Party the undisputed portion of the claim.
14.4 Defense of Third-Party Claims. If any lawsuit or enforcement action is
filed against an Indemnified Party by a third party and the Indemnified Party
is entitled to indemnification pursuant to this Agreement, written notice
thereof shall be given to the Indemnifying Party as promptly as practicable
(and in any event within thirty (30) days after the service of the citation or
summons); provided, however, that the failure of any Indemnified Party to give
timely notice shall not affect rights to indemnification hereunder except to
the extent that the Indemnifying Party demonstrates actual damages caused by
such failure, if (i) such failure to give timely notice does not materially
affect the ability or right of the Indemnifying Party to participate in the
defense of such lawsuit or enforcement action, (ii) actual notice is given to
the Indemnifying Party within a reasonable time, and (iii) to the extent that
such failure to give timely notice causes the Indemnifying Party to incur
additional expense with respect to such lawsuit or enforcement action, the
Indemnified Party promptly reimburses the Indemnifying Party for such
additional expense.
After such notice, if the Indemnifying Party shall acknowledge in writing
to such Indemnified Party that such Indemnifying Party may be obligated under
the terms of its indemnity hereunder in connection with such lawsuit or action,
then the Indemnifying Party shall be entitled, if it so elects, to take control
of the defense and investigation of such lawsuit or action, and to employ and
engage attorneys of its own choice to handle and defend the same, at the
Indemnifying Party's cost, risk and expense; and such Indemnified Party shall
cooperate in all reasonable respects, at its cost, risk and expense, with the
Indemnifying Party and such attorneys in the investigation, trial and defense
of such lawsuit or action any appeal arising therefrom. No such lawsuit or
action shall be settled without the prior written consent of the Indemnified
Party. If a firm written offer is made to settle any such lawsuit or action and
the Indemnifying Party proposes to accept such settlement and the Indemnified
Party refuses to consent to such settlement, then: (i) the Indemnifying Party
shall be excused from, and the Indemnified Party shall be solely responsible
for, all further defense of such third party claim, demand, action or
proceeding; (ii) the maximum liability of the Indemnifying Party relating to
such lawsuit or action shall be the amount of the proposed settlement if the
amount thereafter recovered from the Indemnified Party on such lawsuit or
action is greater than the amount of the proposed settlement; and (iii) the
Indemnified Party shall pay all attorney's fees and legal costs and expenses
incurred after rejection of such settlement by the Indemnified Party, but if
the amount thereafter recovered by such third party from the Indemnified Party
is less than the amount of the proposed settlement, the Indemnified Party shall
be reimbursed by the Indemnifying Party for such attorneys' fees and legal
costs and expenses up to a maximum amount equal to the difference between the
amount recovered by such third party and the amount of the proposed settlement.
14.5 Provisions Regarding Indemnities.
(a) Insurance Recoveries. The amounts of Damages for which an Indemnifying
Party shall be liable under this Agreement shall be net of any insurance
proceeds and tax benefits actually
49
received by the Indemnified Party in connection with the facts giving rise to
the right of indemnification.
(b) Exclusivity. The rights of indemnity provided by this Section 14 of
this Agreement shall be exclusive of all other rights of indemnity or
contribution, whether created by Law or otherwise, either before or after the
Closing, relating in any way to the subject matter of this Agreement.
(c) Termination of Rights. The termination of the rights of an Indemnified
Party to receive indemnity under this Agreement shall not affect that party's
right to prosecute to conclusion any claim made by that party in writing in
accordance with Section 14.3 of this Agreement prior to the time that the
relevant right of indemnity terminates.
(d) Limitations on Liability. Except in the case of the Specified Losses,
which shall not be indemnified by Sellers and which the provisions of Section
3.3(e) shall control, the liability of an Indemnifying Party under this
Agreement shall be recoverable only if and to the extent the cumulative damages
suffered by the party for all indemnifiable breaches under this Section 14
exceed Five Hundred Thousand Dollars ($500,000). An Indemnified Party shall not
be entitled to more than one recovery for any single loss, Damage, cost,
expense, liability, obligation or claim even though such may have resulted from
the breach or inaccuracy of more than one of the representations, warranties or
provisions of this Agreement.
(e) Waiver of Consequential and Punitive Damages. Each party hereby waives
and agrees to forfeit any right it may have to seek consequential or punitive
damages under or related to this Agreement.
SECTION 15 - MISCELLANEOUS PROVISIONS
15.1 Costs and Expenses.
Each party covenants and agrees that its respective costs and expenses in
connection with, or arising out of, the negotiation and execution of this
Agreement and consummation of the transactions provided for herein, including,
but not limited to, any and all sales or transfer taxes applicable to the
transfer of Assets provided for herein shall be paid by the Buyer as an expense
of the acquisition of the Assets and Xxxxxxx Stock.
15.2 Amendment and Modification. This Agreement may be amended, modified or
supplemented only in writing executed by each of the parties hereto.
15.3 No Assignment. No party hereto shall assign, in whole or in part, this
Agreement or its respective rights and obligations hereunder without the prior
written consent of the other party hereto, not to be unreasonably withheld or
delayed, and, absent such consent, any assignment (including, without
limitation, any assignment by merger, death, dissolution or operation of law)
shall be null and void.
50
15.4 Notices. All notices, requests, demands or other communications hereunder
must be in writing executed by an authorized representative of the party
responsible therefor, and must be given either by hand or telex, telecopy,
telefax or other telecommunications device capable of creating a written record
(confirmed by registered or certified mail or by overnight courier) as follows
or to such other person or place as any party shall furnish to the others in
writing:
To VCD: Value City Department Stores, Inc.
0000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxxx 00000
Attn.: Xxxxxx X. Xxxxxxxx,
Senior Vice President
Telecopier No.: 000-000-0000
With a copy to: Xxxxx X. Xxxx, Esq.
c/o Schottenstein Stores Corporation
0000 Xxxxx Xxxx
Xxxxxxxx, Xxxx 00000
Telecopier No.: 000-000-0000
To Valley Fair or Xxxxxx X. Xxxxxxxx, Vice President
Xxxxxxx: c/o Schottenstein Store Corporation
0000 Xxxxx Xxxx
Xxxxxxxx, Xxxx 00000
Telecopier No.: 000-000-0000
To Buyer: VCM, Ltd.
c/o Mazel Stores, Inc.
00000 Xxxxxx Xxxx
Xxxxx, Xxxx 00000
Attn.: Xxxxxx X. Xxxxxxx, Chairman
Telecopier No.: (000) 000-0000
With a copy to: Kahn, Kleinman, Xxxxxxxx & Xxxxxx, Co., L.P.A.
0000 Xxxx 0xx Xxxxxx, Xxxxx 0000
Tower at Erieview
Xxxxxxxxx, Xxxx 00000
Attn.: Xxxx X. Xxxxxxxxxxx
Telecopier No.: (000) 000-0000
To Mazel: c/o Mazel Stores, Inc.
00000 Xxxxxx Xxxx
Xxxxx, Xxxx 00000
Attn.: Xxxxxx X. Xxxxxxx, Chairman
Telecopier No.: (000) 000-0000
15.5 Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
51
15.6 Headings. Section and paragraph headings in this Agreement are provided
for convenience of reference only and shall not be deemed to constitute a part
hereof.
15.7 Recitals, Exhibits and Schedules. The recitals contained at the beginning
of this Agreement and all Schedules and Exhibits attached hereto shall be
deemed an integral part of this Agreement and shall be incorporated herein by
reference.
15.8 Schedules and Exhibits. Any Schedules and Exhibits which are to be
attached hereto at Closing or thereafter, updated as of the Closing Date or
thereafter, or delivered separately upon execution hereof or on the Closing
Date or thereafter shall be initialed by the parties hereto and shall be deemed
delivered under this Agreement.
15.9 Waiver; Remedies. No waiver of any breach of any provision of this
Agreement shall be held to be a waiver of any other subsequent breach, and the
failure of a party to enforce at any time any provision hereof shall not be
deemed a waiver of any right of such party to subsequently enforce such
provision or any other provision hereof. All remedies afforded in this
Agreement shall be taken and construed as cumulative, that is, in addition to
every other remedy provided herein or by law.
15.10 Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Ohio and applicable
federal law.
15.11 Severability. In the event that any provision or any portion of any
provision of this Agreement shall be held invalid, illegal or unenforceable
under applicable law, the remainder of this Agreement shall remain valid and
enforceable to the maximum extent permitted by law.
15.12 Entire Agreement. This Agreement, the Schedules and Exhibits hereto and
the ancillary documents executed hereunder set forth the entire agreement and
understanding between the parties hereto with respect to the transactions
provided for herein and supersede and cancel any and all prior discussions,
correspondence, agreements or understandings (whether oral or written) between
the parties hereto with respect to such matters (including, but not limited to,
the Letter of Intent dated as of April 9, 1997.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto, intending to be legally
52
bound, have caused this Agreement to be executed by their authorized
representatives on and as of the date first above set forth.
VCM, LTD.
By:__________________________________
X. X. Xxxxxxxxxxxxx, Director
By:__________________________________
Xxxxxx X. Xxxxxxxx, Director
By:__________________________________
Xxxxxx X. Xxxxxxx, Director
By:__________________________________
Xxxxx Churches, Director
MAZEL STORES, INC.
By:__________________________________
Xxxxxx X. Xxxxxxx, Chairman
By:__________________________________
Xxxxx Churches, President
X.X. XXXXXXX, INC.
By:__________________________________
Xxx X. Xxxxxxxxxxxxx, Chairman
VALLEY FAIR
By:_________________________________
53
Xxx X. Xxxxxxxxxxxxx, Chairman
VALUE CITY DEPARTMENT STORES, INC.
and its direct and indirect subsidiaries:
Value City of Michigan, Inc. a Michigan
corporation
VC Retailers, Inc., a Delaware corporation
GB Retailers, Inc., a Delaware corporation
Westerville Road GP, Inc., a Delaware
corporation,
as general partner of Value City LP,
an Ohio limited partnership
By:____________________________________
Xxx X. Xxxxxxxxxxxxx, Chairman
By:____________________________________
Xxxxxx X. Xxxxxxxx, Xx. Vice President