EXHIBIT 2.1
_________________________________________________________________
ASSET PURCHASE
AGREEMENT
by and among
D&W FOOD
CENTERS, INC.,
D&W ASSOCIATE
RESOURCES, LLC,
ROBERT A. WOODRICK,
ALEICIA D. WOODRICK, GEORGIA R. GIETZEN,
JEFFREY A. GIETZEN, DOUGLAS E. BLEASE, and GERALD E.
MATTHEWS,
and
FAMILY FARE,
LLC
and
PREVO'S FAMILY
MARKETS, INC.
Dated as of December
17, 2005
_________________________________________________________________
TABLE OF
CONTENTS
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Page
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ARTICLE I - PURCHASE AND SALE OF PURCHASED ASSETS
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1
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1.1
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Basic Transaction
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1
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1.2
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Assumption of Liabilities
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5
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1.3
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Consideration
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6
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1.4
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Proration
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7
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1.5
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Closing Transactions
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9
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ARTICLE II - CONDITIONS TO CLOSING
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10
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2.1
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Conditions to Purchaser's Obligations
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10
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2.2
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Conditions to Seller's Obligations
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13
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ARTICLE III - REPRESENTATIONS AND WARRANTIES OF
SELLER
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14
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3.1
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Organization and Corporate Power
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14
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3.2
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Authorization; No Breach; Approvals
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14
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3.3
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No Material Adverse Change
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15
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3.4
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Financial Statements
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15
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3.5
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Books and Records
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15
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3.6
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Financial Documents
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15
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3.7
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Absence of Certain Developments
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16
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3.8
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Leased Real Property
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16
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3.9
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Assets
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19
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3.10
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Taxes
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19
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3.11
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Contracts and Commitments
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20
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3.12
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Proprietary Rights
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20
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3.13
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Litigation
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21
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3.14
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Brokerage
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21
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3.15
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Employees
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21
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3.16
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Employee Benefit Plans
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22
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3.17
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Compliance with Laws; Permits; Certain Operations
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23
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3.18
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Environmental Matters
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23
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3.19
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Commissary
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24
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3.20
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Insurance
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24
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3.21
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Solvency
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25
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ARTICLE IV - REPRESENTATIONS AND WARRANTIES OR
PURCHASER
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25
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4.1
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Corporate Organization and Power
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25
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4.2
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Authorization
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25
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4.3
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Brokerage
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26
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ARTICLE V - COVENANTS; OTHER AGREEMENTS
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26
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5.1
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Conduct of Business
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26
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5.2
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Access to Information and Premises
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28
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5.3
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Notification of Certain Matters; Schedules
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29
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5.4
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Further Assurances
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29
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-i-
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5.5
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Exclusivity; No Solicitation of Transactions
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31
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5.6
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Further Transfers; Transition Assistance
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32
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5.7
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Confidentiality
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32
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5.8
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Sales and Transfer Taxes
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32
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5.9
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Non-Competition
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33
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5.10
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Coupons and Gift Certificates
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33
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5.11
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Press Release
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33
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5.12
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Condemnation; Damage to Property
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34
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5.13
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Defects
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34
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5.14
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Use of D&W Trademark
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34
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5.15
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[Reserved]
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35
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5.16
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Audited Financial Statements
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35
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5.17
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Confidentiality Agreements
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35
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5.18
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Schedules & Exhibits
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35
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5.19
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Employees
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36
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5.20
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Caledonia Location
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36
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5.21
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Liquor License Agreement
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36
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ARTICLE VI - TERMINATION
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37
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6.1
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Events of Termination
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37
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ARTICLE VII - INDEMNIFICATION
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38
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7.1
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Survival of Representations and Warranties
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38
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7.2
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General Indemnification
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39
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ARTICLE VIII - CERTAIN DEFINITIONS
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42
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ARTICLE IX - MISCELLANEOUS
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49
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9.1
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Amendment and Waiver
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49
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9.2
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Tax Matters
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49
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9.3
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Notices
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51
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9.4
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Assignment
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52
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9.5
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Severability
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52
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9.6
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Interpretation
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52
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9.7
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Entire Agreement
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53
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9.8
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Counterparts
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53
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9.9
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Governing Law
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53
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9.10
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No Strict Construction
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53
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9.11
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Specific Performance
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53
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9.12
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No Third-Party Beneficiaries
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53
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9.13
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Schedules
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53
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9.14
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Expenses
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54
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9.15
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Guaranty
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54
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-ii-
Schedules
Schedule 1.1(a)(iii) - Proprietary Rights Schedule
Schedule 1.1(a)(iv) - Assumed Contracts Schedule
Schedule 1.1(a)(v) - Vehicle Schedule
Schedule 1.1(a)(x) - Permits Schedule
Schedule 1.1(b) - Excluded Assets Schedule
Schedule 1.3(b) - Merchandise Value Schedule
Schedule 2.1(e) - Third Party Approvals Schedule
Schedule 2.1(f) - Government Approvals Schedule
Schedule 3.2 - Restrictions Schedule
Schedule 3.5 - Books and Records Schedule
Schedule 3.7 - Developments Schedule
Schedule 3.8(a) - Wind-Up Stores Schedule
Schedule 3.8(b) - Leased Real Property Schedule
Schedule 3.8(c) - Subleased Real Property Schedule
Schedule 3.8(e) - Leasehold Improvements Schedule
Schedule 3.11 - Contracts Schedule
Schedule 3.13 - Litigation Schedule
Schedule 3.15 - Employee Disclosure Schedule
Schedule 3.16 - Employee Benefits Schedule
Schedule 3.17 - Compliance Schedule
Schedule 3.18 - Environmental Schedule
Schedule 5.1 - Conduct of Business Schedule
Schedule 8 - Non-Acquired Merchandise Schedule
Exhibits
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Exhibit A
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Process and Procedures (Taking Inventory)
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Exhibit B-1
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Assignment and Assumption Agreement (Lease)
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Exhibit B-2
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Assignment and Assumption Agreement (Sublease)
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Exhibit B-3
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Assumption Agreement (General)
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Exhibit C
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Transition Services Agreement
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Exhibit D-1
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Liquor License Transfer Agreement
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Exhibit D-2
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Liquor License Purchase Agreement (Clearance Location)
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Exhibit E-1
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Estoppel Certificate (Landlord/Seller)
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Exhibit E-2
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Agreement Regarding Closing Store
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Exhibit F
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Estoppel Certificate (Subtenant)
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Exhibit G-1
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Noncompetition Agreement (Shareholder)
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Exhibit G-2
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Noncompetition Agreement (Officer)
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Exhibit G-3
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Noncompetition Agreement (Seller)
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Exhibit H
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Wind-Up Store License
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Exhibit I
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Escrow Agreement
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Exhibit J
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Opinion of Counsel
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-iii-
ASSET PURCHASE
AGREEMENT
THIS IS AN ASSET PURCHASE AGREEMENT (this
"Agreement") made as of December 17, 2005 (the "Signing
Date"), by and among (i) D&W Food Centers, Inc., a
Michigan corporation ("D&W"); (ii) D&W Associate
Resources, LLC , a Michigan limited liability company ("DWAR");
(iii) Family Fare, LLC, a Michigan limited liability
company ("Family Fare"); and (iv) Prevo's Family Markets,
Inc. , a Michigan corporation ("Prevo's"). D&W and DWAR,
individually or collectively (as the context requires) are referred
to herein as "Seller." Family Fare and Prevo's, individually or
collectively (as the context requires) are referred to herein as
"Purchaser." Seller and Purchaser are sometimes individually
referred to in this Agreement as a "Party" and collectively as the
"Parties." The shareholders of D&W (together, the "Guarantors")
listed on the signature page hereof join in this Agreement solely
to provide certain indemnification guarantees pursuant to
Section 7.2(a) and 9.15 below. Definitions for
certain capitalized terms may be found in Article VIII .
ARTICLE I
PURCHASE AND SALE OF PURCHASED ASSETS
1.1
Basic Transaction .
(a) Purchased Assets . On
the terms and subject to the conditions set forth in this
Agreement, Purchaser shall purchase from Seller, and Seller shall
sell, convey, assign, transfer and deliver to Purchaser on the
Closing Date, all of Seller's right, title and interest in and to
the business, assets, properties, rights, titles and interests of
every kind and nature owned, licensed or leased by Seller as of the
Closing Date (except for the Excluded Assets), which are used or
located at the Leased Real Property (Leased Real Property is
collectively referred to as the " Premises " and
individually referred to as an " Individual Premises "),
whether tangible or intangible, real or personal and by whomever
possessed (collectively, the " Purchased Assets "), free and
clear of all Liens (other than Permitted Liens), including, but not
limited to, the following:
(i) "register cash" on the
Closing Date in an amount that shall not be less than Twenty
Thousand Dollars ($20,000) in each of the Remaining Retail Stores
(" Register Cash ");
(ii) all inventory of foods,
beverages and other products sold in the Premises, and all goods,
wares and merchandise located in the Premises on the Closing Date,
including warehoused and consignment inventory and inventory on
order for or in transit to or from the Premises (collectively, the
" Merchandise "); provided that "Merchandise" shall
not include Non-Acquired Merchandise;
(iii) all of Seller's interest in
the following that are owned by or licensed to Seller and used in
connection with the operations at the Premises: (1) the
D&W trademark, trade name, service mark and trade dress and the
www.dwfoods.com internet domain name, together with all
goodwill associated
therewith, and all
translations, adaptations, derivations and combinations of the
foregoing (and all logos related to the foregoing);
(2) D&W copyrights and copyrightable works; (3) all
registrations, applications and renewals for any of the foregoing;
(4) subject to obtaining required consents, if applicable,
D&W trade secrets and other confidential information;
(5) subject to obtaining required consents, if applicable, all
other D&W intangible properties and rights relating to the
Premises; and (6) all tangible embodiments of the foregoing;
in each case including the items set forth on the attached
Proprietary Rights Schedule (unless indicated otherwise
therein) (collectively, the " Proprietary Rights ");
(iv) all agreements, contracts,
or other binding arrangements of Seller identified on the attached
Assumed Contracts Schedule (collectively, the " Assumed
Contracts "), including the Leases and the Subleases;
(v) all Leasehold Improvements
and all owned machinery, equipment, vehicles, trucks, trailers,
furniture, testing equipment and office equipment, fixtures, trade
fixtures, store models and displays, computers (and, subject to
obtaining required consents, if applicable, related software),
furniture and all other tangible personal property located in the
Premises and all such property customarily located or based in the
Premises but temporarily located elsewhere (including all vehicles,
trucks and trailers listed on the Vehicle Schedule attached
hereto);
(vi) all warranties, claims,
refunds, credits, causes of action, choses in action, rights of
recovery and rights of set off of any kind relating to the
Purchased Assets;
(vii) the right to all telephone
numbers associated with the Premises, but not such telephone
numbers owned by BRZ Michigan, LLC ("BRZ") or any other
subtenants;
(viii) all lists, records and
other information pertaining to accounts and referral sources; all
lists, records and other information pertaining to suppliers and
customers; all Retail Store accounting records (including without
limitation item sales histories); profit and loss records for each
Retail Store; all stock ledger reports and records for each Retail
Store; all drawings, reports, studies and plans, (including all
financial, business, sales and marketing plans and information);
all environmental reports; and all architectural / engineering and
similar plans, drawings and reports in each case whether evidenced
in writing, electronic data, computer software or otherwise;
provided that, in the event the assets described in this clause
(viii) are not held in a form which relates solely to the Premises
and the operation of the business thereon, such assets will not be
Purchased Assets hereunder but Seller agrees to provide Purchaser
with access to and copies of the foregoing assets upon reasonable
notice from Purchaser;
-2-
(ix) all D&W advertising,
marketing and promotional rights and materials;
(x) subject to Exhibit D-1
, to the extent transferable, all permits, licenses,
certifications, authorizations, approvals and similar rights from
all permitting, licensing, accrediting and certifying agencies
relating to the Leased Real Property (including all of the
foregoing listed or described on the attached Permits
Schedule and including, without limitation, all licenses,
certifications, authorizations, approvals and similar rights
relating to the Leased Real Property, whether held in escrow or in
a similar manner), and the rights to all data and records held by
such agencies;
(xi) all rights to security
deposits previously paid by D&W arising under or in connection
with the Assumed Contracts and cash in the amount of the unapplied
balance of security deposits previously paid to D&W under or in
connection with the Assumed Contracts ("Security Deposits
Owed");
(xii) all D&W goodwill and
other intangible property; and
(xiii) to the extent transferable
and subject to the rights of Starbucks Corporation ("Starbucks"),
all right, title, and interest in and to the Starbucks-specific
equipment, supplies, and Improvements located at the Premises.
(b) Excluded Assets .
Notwithstanding the foregoing, the following properties, assets and
rights (the " Excluded Assets ") are expressly excluded from
the purchase and sale contemplated by this Agreement and are not
included in the Purchased Assets:
(i) all Non-Acquired
Merchandise;
(ii) cash and cash equivalents
(other than the Register Cash, security deposits, and amounts
payable to Purchaser hereunder);
(iii) accounts and notes
receivable;
(iv) all of Seller's corporate
record books, minute books, accounting records and Tax records,
except as provided in Section 1.1(a) ;
(v) any ownership or equity
interest of Seller in and to any Persons;
(vi) investments;
(vii) cash surrender value of
life insurance policies;
(viii) any and all contract
rights arising under agreements, contracts, or other binding
arrangements that are not Assumed Contracts;
-3-
(ix) all inventory, supplies,
leased vehicles, equipment, furniture, permits, customer lists and
the intellectual property rights associated with the "Fresh Thyme"
catering business, as located at 3960 - 44 th Street,
S.W., Grandville, Michigan 49418;
(x) all inventory located in the
Wind-Up Stores at the Closing and the Clearance Location Liquor
License;
(xi) all personnel files and
records; and
(xii) the assets set forth in the
Excluded Assets Schedule .
Seller agrees that, except for inventory located at each Wind-Up
Store Individual Premises, all of the Excluded Assets shall be
removed at Seller's expense from the Premises (to the extent
applicable) not later than the Closing Date.
(c) BRZ Services Agreement
. The BRZ Services Agreement shall become an Assumed Contract if,
and only if, prior to Closing:
(i) the BRZ Services Agreement is
amended to terminate (A) BRZ's rights with respect to all
non-pharmacy-related services, including termination of the "HBC
Management Services" (as defined in Section 2(d) of the BRZ
Services Agreement), and (B) any obligation of Seller to
purchase "Products" (as defined in the BRZ Services Agreement) from
BRZ, including purchase obligations described in Schedule 2(d) to
the BRZ Services Agreement;
(ii) Section 4 of the BRZ
Services Agreement is amended to (A) provide that the BRZ's
exclusive operation rights apply only (x) during the term of
the BRZ Services Agreement to (y) operation of pharmacies at
stores listed on Schedule 1 to the BRZ Services Agreement and that
are being acquired by Purchaser; and (B) delete BRZ's right of
first refusal for newly opened or purchased stores;
(iii) the BRZ Services Agreement
is amended to clarify that Seller, and not Purchaser, shall be
responsible for any "Losses" (as defined in the BRZ Services
Agreement) or other indemnification obligations relating to acts,
omissions, events or obligations prior to Closing or that result
from Seller's conduct; and
(iv) BRZ consents to the
assignment of the BRZ Services Agreement (as amended as described
above) to Purchaser.
-4-
1.2
Assumption of Liabilities .
(a) Assumed Liabilities .
Subject to the conditions set forth in this Agreement, as of the
Closing Date, Purchaser shall assume only the following debts,
liabilities and obligations of Seller to the extent relating to the
Purchased Assets (collectively, the " Assumed Liabilities
"): Seller's obligations under the Assumed Contracts first arising
after the Closing Date (but only to the extent such Assumed
Contracts are assigned to Purchaser, and specifically excluding any
liability or obligation relating to or arising out of such Assumed
Contracts by Seller as a result of (A) any breach of, default
under or event which, with the passage of time, would become a
default under, such Assumed Contract occurring on or prior to the
Closing Date (whether or not any claim has been brought),
(B) any violation of law, breach of warranty, tort or
infringement occurring on or prior to the Closing Date (whether or
not any claim has been brought); or (C) any charge, complaint,
action, suit, proceeding, hearing, investigation, claim or demand
for acts or omissions occurring on or prior to the Closing
Date).
(b) Liabilities Not
Assumed . Notwithstanding anything to the contrary in this
Agreement, Purchaser shall not assume or in any way become liable
for any of Seller's debts, liabilities or obligations of any nature
whatsoever (other than the Assumed Liabilities), whether accrued,
absolute, contingent or otherwise, whether known or unknown,
whether due or to become due, whether related to the Premises or
the Purchased Assets and whether disclosed on the Schedules
attached hereto, and regardless of when or by whom asserted
(collectively referred to herein as the " Excluded
Liabilities "), including, without limitation, any and all
liabilities or obligations (whether imposed on Purchaser as a
successor or otherwise):
(i) relating to or arising under
or in connection with any "employee benefit plan" (as defined in
Section 2(3) of ERISA) or any other benefit plan, program or
arrangement of any kind at any time maintained, sponsored or
contributed or required to be contributed to by Seller or any ERISA
Affiliate, or with respect to which Seller or any ERISA Affiliate
has any liability or potential liability, including the
responsibility for satisfying the continuation coverage
requirements of COBRA for all employees or former employees or
other service providers (and any dependents or beneficiaries
thereof) of Seller or any ERISA Affiliate who are receiving COBRA
continuation coverage as of the Closing Date or who are or become
entitled to elect such coverage on account of a qualifying event
occurring on or before the Closing;
(ii) pertaining to the employment
or service with, or termination from employment or service with,
Seller or any ERISA Affiliate, of any individual, including but not
limited to:
(A) any workers' compensation
claim or other deferred claim;
(B) bonus obligations, accrued
vacation or other paid time off; and
-5-
(C) any severance
obligations.
(iii) to a landlord under any
Lease for a Wind-Up Store Individual Premises (a "Wind-Up Store
Lease") relating to discontinuing operations at that location
and/or vacating the Premises (including, for purposes of greater
clarity and without limitation, any liability or obligation arising
as a result of the closing of such locations at or immediately
following the expiration or termination of the applicable licenses
described in Section 5.1(c) hereof, regardless of the effect
of the prior assignment of the applicable Leases); and
(iv) arising out of or in
connection with any contract or agreement not included among the
Assumed Contracts.
For
purposes of this Section 1.2(b) , " Seller "
shall be deemed to include all Affiliates and Subsidiaries of
Seller and any predecessors to Seller and any Person with respect
to which Seller is a successor-in-interest (including by operation
of law, merger, liquidation, consolidation, assignment, assumption
or otherwise). Seller acknowledges that it is retaining the
Excluded Liabilities, and Seller shall pay, discharge and perform
all such liabilities and obligations as and when due.
1.3
Consideration . In exchange for the Purchased
Assets, Purchaser shall pay to Seller the Purchase Price and assume
the Assumed Liabilities.
(a) Purchase Price . The
aggregate purchase price (the " Purchase Price ") for the
Purchased Assets shall be (i) Forty-five Million Dollars
($45,000,000), plus (ii) the amount of the Merchandise
Value as determined pursuant to Section 1.3(b) .
(b) Merchandise Value .
The Merchandise Value shall be the lesser of (i) Seven Million
Five Hundred Thousand Dollars ($7,500,000) (or such other amount
the Parties may in good faith agree to in writing) or (ii) the
Inventory Value determined by count as provided in this Section
1.3 (the "Merchandise Value"). On or immediately preceding the
Closing Date, an inventory taking firm or firms mutually acceptable
to Purchaser and Seller (the " Inventory Service ") shall
count the inventory of Merchandise at each of the Premises listed
on the Leased Real Property Schedule where any Merchandise is
located. The value of such Merchandise shall be determined in
accordance with the attached Merchandise Value Schedule.
(The sum of the value of the Merchandise shall be the "
Inventory Value "). Representatives of Seller and Purchaser
shall be present at the taking of the physical inventories to
settle all disputes as to the classification of inventory as
Non-Acquired Merchandise. The process and procedures for taking of
inventory at the Premises is set forth on Exhibit A
hereto. Purchaser and Seller agree that the terms set forth on
Exhibit A shall govern for all purposes the
determination of Inventory Value and the rights and obligations of
the Parties with respect to the procedures for the inventory
counts. Purchaser and Seller shall each pay fifty percent (50%) of
the fees and expenses of the Inventory Service. Purchaser and
-6-
Seller agree to
promptly pay the other Party by wire transfer the net amount
calculated pursuant to the reconciliation process described in
Paragraph D of Exhibit A .
(c) Payment . The Purchase
Price shall be paid by Purchaser to Seller as follows:
(i) On Closing Date, Purchaser
shall pay Seller Forty-Three Million Dollars ($43,000,000),
plus (A) the Merchandise Value and (B) the
Proration Amount (if any) to be added pursuant to Section
1.4 , less (V) Thirty Thousand Dollars ($30,000)
for the Clearance Location Liquor License, (W) Security
Deposits Owed, (X) the Estimated Coupon Amount, (Y) the
Estimated Gift Certificates Amount, and (Z) the Proration
Amount (if any) to be deducted pursuant to Section 1.4
(after all such adjustments, the "Closing Date Cash Payment") in
immediately available United States funds by wire transfer pursuant
to instructions provided by Seller prior to the Closing.
(ii) At Closing, Purchaser and
Seller agree that a portion of the Purchase Price equal to Two
Million Dollars ($2,000,000) (the "Escrow Funds") shall be placed
in escrow with a mutually agreed upon escrow agent ("Escrow Agent")
to be held in accordance with the escrow agreement attached as
Exhibit I (the "Escrow Agreement"). The Escrow Agreement shall
provide for the distribution of Escrow Funds in connection with the
amounts that Seller may owe to Purchaser following the Closing
arising pursuant to Section 5.10 (Coupons and Gift
Certificates) and Section 7.2 (General Indemnification). On
the Closing Date, Purchaser shall deposit with Escrow Agent the
Escrow Funds in immediately available United States funds by wire
transfer pursuant to instructions provided by Escrow Agent. The
Escrow Agreement shall also provide the then-total amount of Escrow
Funds exceeding the sum of (i) One Million Dollars
($1,000,000) and (ii) any amounts associated with pending
claims (for which notice has been delivered) against the Escrow
Funds reasonably estimated by Purchaser, shall be disbursed to
Seller on the date that is fifteen (15) months after the Closing
Date (for greater clarity, if the Closing Date is February 15,
2006, the date on which such distribution shall take place shall be
May 15, 2007). All remaining Escrow Funds (less any amounts
associated with pending claims (for which notice has been
delivered) against the Escrow Funds reasonably estimated by
Purchaser) shall be disbursed to Seller on the second (2
nd ) anniversary of the Closing Date.
1.4
Proration . Two (2) days prior to Closing,
Purchaser and Seller shall agree on an estimated net proration
amount (the "Proration Amount"), which shall be determined by
totaling the estimated amounts owed by one Party to the other
pursuant to this Section 1.4 .
(a) Common area maintenance
charges and assessments ("CAM"), insurance, utilities, property
taxes, rent, and other amounts payable by Seller under the Leases,
to the extent paid for by Seller or required to be paid for by
Seller for a period after the Closing Date, shall be prorated as of
the Closing Date. Taxes directly payable to
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governmental entities
shall be prorated on a calendar-year basis (applicable to July 1
and December 1, 2006 tax bills estimated based on 2005 taxes
adjusted for increases in consumer price index and millage rates).
CAM, insurance, utilities, property taxes, rent and any amounts
billed (before or after the Closing) by landlords for other items
under the Leases for the period prior to the Closing Date, and
which (i) Seller has not paid prior to the Closing or
(ii) have not been taken into account in the computation of
the Proration Amount, shall be a continuing obligation of Seller
which shall survive the Closing. Seller's continuing obligations
shall include, without limitation, Seller's pro rata share of all
post-Closing reconciliations and determinations of CAM, insurance,
utilities, property taxes, rent, and other amounts paid in
estimated monthly installments at each Individual Premises as each
landlord makes such reconciliation. If, under the terms of any
Lease, Purchaser is required to pay rent based on percentage of
sales for any period prior to Closing or that includes the Closing
Date, then Seller shall pay its pro rata share of such percentage
rent based on the sales made by Seller from the applicable Leased
Real Property prior to the Closing Date. For purposes of such
proration, the minimum sales base specified in the applicable Lease
shall be prorated between Seller and Purchaser based on the number
of days in such period before and after the Closing Date.
(b) Utilities and other
customarily prorated expenses, including, but not limited to,
water, sewer, gas, electricity, trash removal, snow removal and
fire protection service, if such utilities cannot be transferred as
of the Closing Date, and amounts payable by Seller under the
Assumed Contracts, to be paid for by Seller or required to be paid
for by Seller for a period after the Closing Date, shall be
prorated as of the Closing Date. Purchaser shall arrange with all
utility companies to have accounts placed in Purchaser's name
beginning on the Closing Date; provided, however, that Seller shall
use prompt and reasonable efforts to cooperate with Purchaser in
the transfer of such utilities to Purchaser, including but not
limited to, reasonable efforts to obtain final meter readings and
executing any documents required to assign the existing telephone
numbers for the Retail Stores to Purchaser. Seller shall remain
responsible for any payments due to third-parties attributable to
the period prior to the Closing Date for such utilities.
(c) Security deposits previously
paid by subtenants under the Subleases shall be transferred by
Seller to Purchaser at the Closing. Rents due from subtenants under
the Subleases, and CAM, insurance, utilities, property taxes, and
other amounts payable by subtenants under the Subleases shall be
prorated as of the Closing Date on the basis of the period for
which such amounts are payable (if, as and when collected).
Purchaser shall apply rent and other income received from
subtenants under the Subleases after the Closing Date in the
following order of priority: (i) first, to base rent first
coming due after the Closing Date and applicable to the period of
time after the Closing Date, which amount shall be retained by
Purchaser, (ii) second, to payment of the current base rent
then due in the month in which the Closing Date occurs, which
amount shall be prorated between Seller and Purchaser as of the
Closing Date, (iii) third, to other amounts payable by
subtenants under the Subleases before or after the Closing Date,
and (iv) thereafter, to delinquent base rent which was due and
payable as of the Closing Date but not collected by Seller prior to
the Closing Date.
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(d) Purchaser may, but is not
required to, offset any amount owed it by Seller under this
Section 1.4 against the Escrow Funds pursuant to the terms
of the Escrow Agreement.
1.5
Closing Transactions .
(a) Unless this Agreement is
terminated earlier in accordance with Article VI , the
closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Warner Norcross &
Judd LLP, 111 Lyon Street, NW, Suite 900, Grand Rapids, Michigan,
on (i) the date that is two (2) business days following the
date on which all of the conditions to Closing set forth under
Article II of this Agreement have been satisfied or
waived except those conditions (such as delivery of certain
documents) which are customarily satisfied at a closing or
(ii) such other time and place as the parties may agree. The
day on which the Closing is effective shall be referred to herein
as the "Closing Date." The Closing shall be deemed effective as of
11:59 p.m. Eastern Time on the Closing Date. At the Closing, the
parties shall execute and deliver the documents, agreements and
instruments provided for under this Agreement.
(b) Deliveries . Subject
to the conditions set forth in this Agreement, at the Closing:
(i) Purchaser shall deliver to
Seller the Closing Date Cash Payment as provided under
Section 1.3(c)(i) and shall deliver to Escrow Agent the
Escrow Funds as provided under Section 1.3(c)(ii) ;
(ii) Seller shall convey all of
the Purchased Assets to Purchaser pursuant to executed instruments
of sale, transfer, assignment, conveyance and delivery, assignments
and assumption of leases, bills of sale, intellectual property
assignments, certificates of title, vehicle titles, and all other
instruments of conveyance necessary to effect transfer to Purchaser
of title to the Purchased Assets in accordance with the terms of
this Agreement (free and clear of all Liens, other than Permitted
Liens);
(iii) Purchaser shall assume the
Assumed Liabilities by delivery to Seller of Assignment and
Assumption Agreements in the form of Exhibits B-1, B-2 and
B-3 attached hereto;
(iv) Seller shall deliver to
Purchaser: (A) a certificate signed by an officer of Seller,
dated as of the Closing Date, stating that the conditions specified
in Section 2.1(a) through (f) , inclusive, have
been fully satisfied or waived in writing by Purchaser as of the
Closing; (B) copies of all Third-Party Approvals and
Governmental Approvals obtained by Seller; (C) certified
copies of resolutions of Seller's board of directors and
shareholders authorizing and approving the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby; (D) an opinion of counsel to
Seller, dated as of the Closing Date, in the form attached as
Exhibit J, (E) a
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non-foreign Person
affidavit dated as of the Closing Date, sworn under penalties of
perjury and in form and substance required under the Treasury
Regulations issued pursuant to Section 1445 of the Code stating
that Seller is not a "foreign person" as defined in Code Section
1445, and (F) such other documents or instruments as are
required to be delivered at the Closing pursuant to the terms
hereof or that Purchaser reasonably requests prior to the Closing
Date to effect the transactions contemplated hereby; and
(v) Purchaser shall deliver to
Seller (A) a certificate signed by an officer of Purchaser,
dated the date of the Closing, stating that the conditions
specified in Section 2.2(a) through (d) ,
inclusive, have been fully satisfied, (B) certified copies of
resolutions of Purchaser's board of directors authorizing and
approving the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby and
(C) such other documents or instruments as are required to be
delivered at the Closing pursuant to the terms hereof or that
Seller reasonably requests prior to the Closing Date to effect the
transactions contemplated hereby.
ARTICLE II
CONDITIONS TO CLOSING
2.1
Conditions to Purchaser's Obligations . The
obligations of Purchaser to consummate the transactions
contemplated by this Agreement are subject to the satisfaction or
express written waiver (unless otherwise specified herein) of the
following conditions:
(a) The representations and
warranties made by Seller in this Agreement and in any certificate
delivered by Seller pursuant hereto which are not qualified as to
materiality shall have been true and correct in all material
respects and the representations and warranties which are qualified
as to materiality shall be true and correct in all respects, in
each case at and as of the Closing Date as though then made and as
though the Closing Date were substituted for the date of this
Agreement throughout such representations and warranties;
(b) Seller shall have performed
and complied in all material respects with the obligations and
covenants required by this Agreement to be performed or complied
with by Seller on or prior to the Closing Date;
(c) Since December 31, 2004,
there shall have been no material adverse change or development in
the financial condition, operating results, assets, operations,
prospects, or employee relations relating to the Premises and the
businesses operated thereon taken as a whole (a "Material Adverse
Effect" or "Material Adverse Change") nor shall there have been any
change or development that could reasonably be expected to result
in a Material Adverse Effect;
(d) No suit, action or other
proceeding, or injunction, order, decree or judgment relating
thereto, shall be threatened or pending before any court or
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governmental or
regulatory official, body or authority in which it is sought to
restrain or prohibit or to obtain damages or other relief in
connection with the transactions contemplated hereby, or that could
have a Material Adverse Effect or otherwise adversely affect in any
material respect the right of Purchaser or its Affiliates to own,
operate or control all or any portion of the Purchased Assets;
(e) Seller shall have received
and obtained all third-party consents and approvals necessary to
effect the transactions contemplated hereby as set forth on
Schedule 2.1(e), in each case on terms reasonably satisfactory to
Purchaser and Seller (collectively, the "Third-Party
Approvals");
(f) Purchaser shall have received
and obtained all governmental and regulatory consents and approvals
necessary to effect the transactions contemplated hereby as set
forth on Schedule 2.1(f), in each case on terms reasonably
satisfactory to Purchaser and Seller ("Governmental
Approvals");
(g) Seller and Purchaser shall
have entered into a mutually agreeable transition services
agreement (the "Transition Services Agreement"), if any, in the
form and substance of Exhibit C and the Liquor License
Agreements, in form and substance of Exhibit D-1 and
Exhibit D-2 attached hereto;
(h) Seller shall have obtained
releases of all Liens of whatever nature relating to the Purchased
Assets (other than the Permitted Liens);
(i) All applicable waiting
periods (or any extensions thereof) under the HSR Act, if any,
shall have expired or otherwise been terminated;
(j) [Reserved] ;
(k) [Reserved] ;
(l) Purchaser shall be satisfied
with the results of its due diligence investigation in its sole
discretion (including without limitation Leases, Leasehold
Improvements, Premises, title and survey due diligence, potential
tax liabilities described in Section 9.2(c), and physical and
environmental inspections) of Seller on or before the Due Diligence
Deadline. For purposes of greater clarity, Purchaser's ability to
terminate this Agreement due to its failure to be satisfied with
its due diligence investigation shall not be limited in any way by,
and may be based upon, information provided by Seller to Purchaser
in draft Schedules delivered prior to the Signing Date. Failure of
Purchaser to issue written notice to Seller to exercise its right
to terminate this Agreement due to its failure to be satisfied with
the results of its due diligence investigation on or before the Due
Diligence Deadline, shall constitute a waiver of the condition set
forth under this Section 2.1 (l) ;
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(m) Seller shall have delivered
to Purchaser all other documents, agreements, instruments,
certificates, affidavits and other items required under
clauses (ii) and (iv) of Section 1.5(b) ;
(n) Purchaser must have received
acquisition and working capital financing in amount and on terms
satisfactory to Purchaser, in its sole discretion, to consummate
the transactions contemplated by this Agreement;
(o) Purchaser must have received
all required consents, waivers and approvals of Purchaser's
Affiliates' lenders and Purchaser's and its Affiliates' landlords
required to comply with existing agreements and to avoid default
upon completion of the transactions contemplated by this Agreement,
including any landlord agreements that may be required by
Purchaser's Affiliates' lenders;
(p) Seller shall have obtained
landlord estoppel certificates, dated no earlier than twenty-five
(25) days prior to the Closing Date, from all landlords under the
Leases in the form of Exhibit E-1 , attached hereto, subject
to such changes as may be approved by Purchaser in its reasonable
discretion;
(q) Seller shall have obtained
subtenant estoppel certificates from all subtenants under the
Subleases in the form of Exhibit F attached hereto, subject
to such changes as may be approved by Purchaser in its reasonable
discretion;
(r) Purchaser must have entered
into binding noncompetition agreements with the individuals and
entities identified in Section 5.9 hereof;
(s) Purchaser shall have obtained
from each Landlord of a Wind-Up Store Individual Premises a written
agreement in the form of Exhibit E-2 , subject to such
changes as may be approved by Purchaser in its reasonable
discretion;
(t) Seller must have entered into
a binding agreement with HWA Properties, Inc. (the Portage
landlord) documenting the rebates currently being provided;
(u) Seller, Purchaser, and Escrow
Agent shall have entered into the Escrow Agreement;
(v) Purchaser must have received
authorization from the board of directors of Spartan Stores, Inc.,
to consummate the transactions contemplated by this Agreement;
and
(w) Purchaser must have received
all amendments, waivers and approvals of the Cascade Store (#225)
and Kentwood Store (#223) landlords, respectively, required to
avoid default upon completion of the transactions contemplated by
this Agreement, as specifically and solely relating to radius
restriction provisions in the applicable Lease.
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All proceedings to be taken by Seller in connection with the
consummation of the transactions contemplated hereby and all
certificates, instruments and other documents required to effect
the transactions contemplated hereby reasonably requested by
Purchaser shall be reasonably satisfactory in form and substance to
Purchaser. Any conditions specified in this Section 2.1
may be waived only in writing by Purchaser and specifying in
reasonable detail the provision being waived.
2.2
Conditions to Seller's Obligations . The
obligation of Seller to consummate the transactions contemplated by
this Agreement is subject to the satisfaction or express written
waiver of the following conditions as of the Closing:
(a) The representations and
warranties made by Purchaser in this Agreement and in any
certificate delivered by Purchaser pursuant hereto which are not
qualified as to materiality shall have been true and correct in all
material respects and the representations and warranties which are
qualified as to materiality shall be true and correct in all
respects, in each case at and as of the Closing Date as though then
made and as though the Closing Date were substituted for the date
of this Agreement throughout such representations and
warranties;
(b) Purchaser shall have
performed and complied in all material respects with the
obligations and covenants required by this Agreement to be
performed or complied with by Purchaser on or prior to the Closing
Date;
(c) Purchaser and Seller shall
have received or obtained all Governmental Approvals and
Third-Party Approvals that are necessary for the consummation of
the transactions contemplated hereby;
(d) No suit, action or other
proceeding, or injunction, order, decree or judgment relating
thereto, shall be threatened or pending before any court or
governmental or regulatory official, body or authority in which it
is sought to restrain or prohibit or to obtain damages or other
relief in connection with the transactions contemplated hereby;
(e) All applicable waiting
periods (or any extensions thereof) under the HSR Act shall have
expired or otherwise been terminated;
(f) The BRZ Services Agreement is
amended as described in Sections 1.1(c)(i) through
(iii) ; and
(g) Purchaser shall have
delivered to Seller all other documents, agreements, instruments,
certificates, affidavits and other items required under
clause (v) of Section 1.5(b) .
All proceedings to be taken by
Purchaser in connection with the consummation of the transactions
contemplated hereby and all documents required to be delivered by
Purchaser to effect the transactions contemplated hereby reasonably
requested by Seller shall be reasonably
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satisfactory in form and
substance to Seller. Any condition specified in this
Section 2.2 may be waived only in writing by Seller and
specifying in reasonable detail the provision being waived.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement
and consummate the transactions contemplated hereby, Seller hereby
represents and warrants to Purchaser that:
3.1
Organization and Corporate Power . D&W is
a corporation duly organized, validly existing and in good standing
under the laws of the State of Michigan. DWAR is a limited
liability company duly organized, validly existing and in good
standing under the laws of the State of Michigan. Seller has all
requisite power and authority and all material qualifications
necessary to own and operate the Purchased Assets as now
conducted.
3.2
Authorization; No Breach; Approvals .
(a) The execution, delivery and
performance of this Agreement, the other agreements contemplated
hereby, and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all
requisite corporate action on the part of Seller, and no other
corporate proceedings on the part of the Seller are necessary to
authorize the execution, delivery or performance of this Agreement
or the other agreements contemplated hereby. This Agreement and the
other agreements contemplated hereby to be executed and delivered
by Seller constitute the valid and binding obligations of Seller,
enforceable in accordance with its terms, except as may be limited
by bankruptcy, insolvency or other laws affecting generally the
enforceability of creditors' rights and by limitation on the
availability of equitable remedies.
(b) Except as set forth on
Schedule 3.2, the execution, delivery and performance of this
Agreement and the other agreements contemplated hereby to be
executed and delivered by Seller and the consummation of the
transactions contemplated hereby and thereby does not and will not
(i) conflict with or result in any breach, default or
violation of any of the provisions of, (ii) give any third
party the right to terminate or to accelerate any obligation under,
(iii) result in the creation of any Lien of any kind upon any
of the Purchased Assets, or (iv) require any authorization,
consent, approval, exemption or other action by or notice to or
filing with any court or other governmental or regulatory body or
authority, under the provisions of Seller's articles of
incorporation, operating agreement, or bylaws or any indenture,
mortgage, lease, loan agreement, license, contract, commitment, or
other agreement (including, without limitation, any supplier
agreement) or instrument to which Seller or the Purchased Assets
are bound or affected, or any law, statute, rule or regulation to
which Seller or the Purchased Assets are subject.
(c) Without limiting the
generality of the foregoing, except for this Agreement, there are
no agreements, options, commitments or rights with, of or to
any
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Person to purchase or
otherwise acquire any of the Purchased Assets or any interests
therein, except those entered into in the Ordinary Course of
Business.
3.3
No Material Adverse Change . Since December
31, 2004, there has been no Material Adverse Change or any event
that could reasonably be expected to result in a Material Adverse
Change.
3.4
Financial Statements . Seller has delivered to
Purchaser audited financial statements for Seller's fiscal years
2002, 2003, and 2004, and unaudited financial statements for the
three and nine fiscal periods ended September 4, 2005
(collectively, the "Consolidated Financial Statements"). Before
Closing Seller shall deliver copies of (i) all consolidated
financial statements Seller has prepared for each full period
before the Closing (the "Interim Financial Statements") and (ii)
all Audited Financial Statements required under Section 5.16
of this Agreement. Collectively, the Consolidated Financial
Statements, Interim Financial Statements, and Audited Financial
Statements are referred to as the "Financial Statements." The
Financial Statements have been and will be prepared in accordance
with GAAP (except, as to the unaudited financial statements, for
the omission of notes thereto and normal year-end audit
adjustments, which will not be material, individually or in the
aggregate), do and will fairly and accurately present Seller's
financial position as of the dates indicated and the results of its
operations as of the dates indicated and for the periods covered
thereby, are not misleading, and are and will be true and
correct.
3.5
Books and Records . Except as otherwise
disclosed on Schedule 3.5, Seller's books of account, records, and
work papers (including without limitation all documents delivered
to Purchaser) are complete and correct; have been maintained in
accordance with sound business practices, including the maintenance
of an adequate system of internal controls; have been maintained on
an accrual basis in accordance with GAAP; and accurately reflect,
and will accurately reflect, the basis for the financial condition
and the results of Seller's operations that are (and, as
applicable, will be) set forth in the Financial Statements.
3.6
Financial Documents . All periodic financial
statements and store level financial reports including without
limitation sales reports, inventory reports, and financial
statements (including without limitation the report given in
connection with the computation of the Estimated Gift Certificates
Amount) containing financial information which has been provided to
Purchaser by Seller (or provided to the Auditors by Seller pursuant
to Section 5.16 ) fairly and accurately, in all material
respects, present the financial information contained therein, as
of the dates indicated, accurately, in all material respects,
reflect the information on Seller's books of accounts and records,
and have been prepared in a manner consistent with and have been
and can be reconciled to the financial data presented in Seller's
audited financial statements. Seller has provided Purchaser with a
full accounting of all corporate overhead charges and expenses
(including the underlying data) and a description of all expense
items whose allocation has been changed since December 31, 2004
from corporate overhead to a Retail Store(s) (or from a Retail
Store(s) to corporate overhead), including the approximate date(s)
during which such changes in allocation were made, which accounting
and description are complete and accurate in all material
respects.
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3.7
Absence of Certain Developments . Except as
set forth on Schedule 3.7, since December 31, 2004, Seller has not
with respect to the Premises, the Purchased Assets, or the Assumed
Liabilities:
(a) sold, assigned, licensed,
sublicensed, transferred, encumbered or permitted a Lien to attach
to any Proprietary Rights (including the United States federal
trademark registrations for D&W and the D&W logo) or other
D&W intangible assets, disclosed any confidential information
to any Person (other than Purchaser and Purchaser's
representatives, agents, attorneys and accountants and Persons who
are subject to an agreement to keep such information confidential),
or abandoned or permitted to lapse any of the Proprietary Rights
(including the United States federal trademark registrations for
D&W and the D&W logo)
(b) suffered any extraordinary
Losses in excess of One Hundred Thousand Dollars ($100,000) or
waived any rights of material value, whether or not in the Ordinary
Course of Business;
(c) suffered any damage,
destruction or casualty loss to its tangible assets (including the
Purchased Assets) in excess of One Hundred Thousand Dollars
($100,000), whether or not covered by insurance;
(d) made any change in any method
of accounting or accounting policies, other than those required by
generally accepted accounting principles which have been disclosed
in writing to Purchaser; or
(e) entered into, amended or
terminated any material contract or any government license or
permit or taken any other action or entered into any other
transaction other than in the Ordinary Course of Business.
3.8
Leased Real Property .
(a) The Leased Real Property
Schedule and Wind-Up Stores Schedule set forth the
address of each Leased Real Property and a complete and accurate
list of each lease for each Individual Premises, in each case
identifying the location, date, parties, and amendments to such
agreements (the "Leases"). Seller has delivered to Purchaser
complete and accurate copies of all the leases and subleases
(including all assignments, amendments, extensions, renewals of
such leases and subleases) comprising the Lease of such Leased Real
Property and all guaranties of, and agreements providing for
subordination, non-disturbance or attornment with respect to, each
such Lease (collectively, the "Lease Documents").
(b) Leases . Except as
specified on the Leased Real Property Schedule ,
(A) each Lease is in full force and effect in all material
respects; (B) the assignment of each Lease to Purchaser in
accordance with this Agreement does not require the consent of any
other Person, will not result in a breach of, or default under,
such Lease, or otherwise cause such Lease to cease to be in full
force and effect on identical terms
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following the
Closing; (C) Seller has no material disputes with any
Landlords with respect to any Lease or any Leased Real Property and
to Seller's Knowledge, no Landlord under any Lease has a dispute
with Seller with respect to any Lease or any Leased Property;
(D) neither Seller nor to Seller's Knowledge any other party
to any Lease is in material breach or default under any Lease, and
no event has occurred or circumstance exists which, with the
delivery of notice, the passage of time or both, would constitute a
breach or default under any Lease, or permit the termination or
modification of any Lease or acceleration of rent under any Lease;
(E) no portion of any security deposit tendered in accordance
with any Lease has been applied with respect to a breach or default
under such Lease which has not been restored in full;
(F) Seller does not owe, and will not owe in the future, any
brokerage commissions or finder's fees with respect to any Lease;
(G) no party to any Lease (other than Seller) is an affiliate
of Seller or otherwise has any economic interest in Seller;
(H) Seller has not collaterally assigned or granted any other
security interest in any Lease; (I) there are no Liens or
encumbrances on the estate or interest created by any Lease;
(J) none of the Leases obligates the tenant to operate a
business on the Leased Real Property or prohibits the tenant from
closing the business currently operated on the Leased Real Property
or entitles the landlord to exercise any rights or remedies against
the tenant if the tenant closes the business currently conducted on
the Leased Real Property; (K) none of the Leases contains
restrictions on the tenant's ability to operate or lease a pharmacy
on the Leased Real Property; (L) none of the Leases obligates
the tenant to maintain, repair, or replace the roof or the parking
area of the Improvements on the Leased Real Property (except that
the tenant may be obligated to reimburse the landlord under the
Leases for the tenant's proportionate share of costs incurred by
Landlord to maintain, repair, or replace the roof of the
Improvements or any parking area located on the Leased Real
Property); (M) to Seller's Knowledge, the landlord under the
Leases has good and marketable title to the Leased Real Property
and Seller has good and marketable title to all leasehold interests
under the Leases; and (N) no person or firm possesses or occupies,
or has the right to possess or occupy, any portion of any Leased
Real Property, except for (i) that portion of any Leased Real
Property that is a "common area" under the applicable Lease and
(ii) those portions of any Leased Real Property occupied by
subtenants pursuant to valid Subleases more particularly identified
on Schedule 3.8(c). Notwithstanding the materiality qualifiers in
(C) and (D) above, Seller shall use all commercially reasonable
efforts to provide Purchaser with written information regarding
each dispute, breach and default arising in, under, or in
connection with a Lease.
(c) Sublease Documents .
Schedule 3.8(c) sets forth the address of each Subleased Real
Property and a complete and accurate list in all material respects
of all subleases, licenses and other agreements (including all
assignments, amendments, extensions, renewals of such subleases,
licenses and other agreements) in each case identifying the
location, date and parties to such agreements. Seller has delivered
to Purchaser complete and accurate copies of each lease and
sublease comprising the Sublease of such Subleased Real Property
and all guaranties of, and agreements providing for subordination,
non-disturbance or attornment with respect to, each such Sublease
(collectively, the " Sublease Documents ").
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(d) Subleases . Except as
specified on Schedule 3.8(c), (A) Seller has not subleased,
licensed or otherwise granted any Person the right to use or occupy
any portion of any Leased Real Property; (B) each Sublease is
in full force and effect in all material respects; (C) there
are no material disputes with respect to any Sublease or any
Subleased Real Property; (D) neither Seller or any other party
to any Sublease is in material breach or default under any
Sublease, and no event has occurred or circumstance exists which,
with the delivery of notice, the passage of time or both, would
constitute a breach or default under any Sublease; (E) no
portion of any security deposit tendered in accordance with any
Sublease has been applied with respect to a breach or default under
such Sublease which has not been restored in full; (F) the
subtenant, licensee or occupant of each Subleased Real Property has
not assigned any rights or interests under any Sublease and has not
subleased, licensed or otherwise granted the right to use or occupy
any portion of the Subleased Real Property to any Person;
(G) Seller does not owe, and will not owe in the future, any
brokerage commissions or finder's fees with respect to any
Sublease; (H) no party to any Sublease (other than Seller) is
an affiliate of Seller or otherwise has any economic interest in
Seller; and (I) Seller has not collaterally assigned or
granted any other security interest in any Sublease; (J) to
Seller's Knowledge, there are no Liens or encumbrances on the
estate or interest created by any Sublease; (K) Seller has paid all
inducements owing with respect to each Sublease and has constructed
all improvements required to be constructed in accordance with each
Sublease; and (L) no person or firm possesses or occupies, or has
the right to possess or occupy, any portion of the Subleased Real
Property, except the subtenant under the applicable Sublease.
(e) Improvements . Except
as set forth in the Leasehold Improvements Schedule , Seller
has good and marketable title to its respective Leasehold
Improvements, free and clear of all Liens except Permitted Liens or
any other lien that will be discharged or otherwise satisfied on or
before the Closing Date. Other than the rights of Purchaser under
this Agreement, there are no outstanding and presently existing
options, rights of first offer or rights of first refusal to
purchase any Leasehold Improvements. The Improvements are in a
condition and repair that is sufficient for the operation of the
Purchased Assets on the Leased Real Properties. To Seller's
Knowledge, none of the Improvements encroach on any land that is
not included in the Leased Real Properties or on any easement, and
there are no encroachments on any portion of the Leased Real
Properties by any buildings or improvements from adjoining real
property, which encroachment would materially interfere with the
use or occupancy of such Leased Real Property or the continued
operation of the Purchased Assets.
(f) Access . To Seller's
Knowledge, each Leased Real Property has legal access to an
adjoining public street, and such access is not dependent on any
land or interest in real property that is not included in such
Leased Real Property.
(g) Utility Services . To
Seller's Knowledge, all water, sewer, storm water, gas, electrical,
telecommunications and other utility services for each Leased Real
Property have been installed and are operational and sufficient for
the operation of the Premises in a manner conducted by Seller prior
to Closing. To Seller's Knowledge, all fees to connect and begin
provision of such systems and services have been paid in full.
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To Seller's
Knowledge, each such service enters each Leased Real Property from
an adjoining public street or valid private easement in favor of
the supplier of such service or appurtenant to such Leased Real
Property.
(h) Condemnation and
Litigation . There is no condemnation, expropriation or other
proceedings in the nature of eminent domain pending or, to Seller's
Knowledge, threatened, affecting any interest in any Leased Real
Property.
(i) Compliance with Recorded
Documents . To Seller's Knowledge, the current use and
occupancy of the Leased Real Properties do not violate any
easement, restriction, covenant, condition, restriction or similar
provision in any recorded instrument or any zoning code or
ordinance, building code or other law, regulation, ordinance,
decree, or order regulating the use or occupancy of the Leased Real
Property.
(j) Flood Hazard Area . To
Seller's Knowledge, no portion of any Leased Real Property is
located in a flood hazard area (as defined by the Federal Emergency
Management Agency) that requires federal flood hazard insurance or
any permits, licenses, variances, approvals and authorizations for
the occupancy or use of such Real Property for the operation of the
Purchased Assets.
(k) Insurability of the Real
Property . Seller has not received any notice from any
insurance company or any board of fire underwriters (or any entity
exercising similar functions) (A) requesting that Seller performs
any repairs, alterations, improvements to any Leased Real Property
which Seller or a Subsidiary of Seller has not completed in full or
(B) notifying such Seller of any defects or inadequacies in
any Leased Real Property which would adversely affect the
insurability of such Leased Real Property or the premiums for
insurance.
3.9
Assets . Seller owns good and valid title to,
or holds a valid leasehold interest in, all of the Purchased
Assets, free and clear of all Liens, except for Permitted Liens and
liens to be discharged or otherwise satisfied on or before the
Closing Date. Except for the Excluded Assets and the rights and
services to be provided under the Transition Services Agreement,
the Purchased Assets include all of the assets, properties, rights
(including intellectual property rights), services or interests,
whether tangible or intangible, real or personal, that are
necessary to conduct the businesses and operations historically
conducted at the Premises. The buildings, Improvements, fixtures,
machinery, equipment and other tangible assets (whether owned or
leased) included in the Purchased Assets are, except for ordinary
wear and tear, in good condition and repair, sufficient for the
operation of the Purchased Assets on the Premises and usable in the
Ordinary Course of Business.
3.10 Taxes . D&W's
employer identification number is 38-1612832. DWAR's employer
identification number is 36-4408071. Seller has duly and timely
filed all Tax Returns it is required to file, including without
limitation Tax Returns with respect to the Purchased Assets, except
for those returns for which the time for filing thereof has been
validly extended, and all such Tax Returns are true, correct and
complete in all material respects. All Taxes due and payable by
Seller, including without limitation that with respect to the
Purchased Assets and
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the Premises, have been timely
paid. There are no Liens for Taxes (other than Taxes not yet due
and payable) upon any of the Purchased Assets or on the
Premises.
3.11
Contracts and Commitments .
(a) Schedule 3.11 contains a true
and complete list of any and all contracts and agreements entered
into by Seller with any Person, and which are necessary to, are
used in connection with, or relate to the operation and use of the
Premises and the Purchased Assets (except any contract or agreement
that involves performance of services or delivery of goods or
materials of an annualized amount or value less than Twenty-five
Thousand Dollars ($25,000)).
(b) Except as disclosed on
Schedule 3.11 attached hereto, (i) Seller has performed all
material obligations required to be performed by it and is not in
default, or in breach of, any Assumed Contract, (ii) to
Seller's Knowledge, no Assumed Contract has been breached or
cancelled by the other party, and there is no anticipated breach by
any other party to any Assumed Contract, (iii) no event or
circumstance has occurred that, with notice or lapse of time or
both, would constitute a default or breach under any Assumed
Contract, (iv) except for Subleases, Seller has not assigned,
delegated or otherwise transferred to any Person any of its rights,
title or interest under any Assumed Contract, and (v) the
Assumed Contracts are in full force and effect, and constitute
legal, valid and binding agreements of D&W, enforceable in
accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws and principles of equity generally affecting the enforcement
of creditors' rights.
(c) Purchaser has received a true
and correct copy of all written contracts (and an accurate written
description of all oral contracts) which are listed on the attached
Assumed Contracts Schedule , together with all amendments,
exhibits, attachments, waivers or other changes thereto.
(d) Other than the transactions
contemplated by this Agreement, Seller is not a party to or bound
by any agreement with respect to a possible merger, sale,
restructuring, refinancing or other disposition of all or any
material part of the Premises or the Purchased Assets.
3.12
Proprietary Rights .
(a) The Proprietary Rights
Schedule lists all of the following Proprietary Rights used in
the operation of the Premises: (i) Proprietary Rights registered or
pending with the U.S. Patent and Trademark Office or the U.S.
Copyright Office or any other similar domestic or foreign office,
department or agency; (ii) material unregistered trademarks,
service marks and trade names, (iii) internet domain names; (iv)
material unregistered copyrights; (v) Proprietary Rights licenses;
and (vi) any other material Proprietary Rights.
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(b) Except as disclosed in the
Proprietary Rights Schedule :
(i) Neither Seller's conduct of
the business associated with the operation of the Premises nor
Seller's use of the Purchased Assets has infringed, misappropriated
or otherwise conflicted with an intellectual property right of any
Person. Seller is not aware of any facts that indicate a reasonable
possibility of any of the foregoing and Seller has not received any
notices regarding any of the foregoing, including, without
limitation, any demands or offers to license any intellectual
property from any Person.
(ii) To Seller's Knowledge, no
Person has infringed, misappropriated or otherwise conflicted with
any of the Proprietary Rights and Seller does not have Knowledge of
any facts that indicate a reasonable possibility of any of the
foregoing.
(c) The United States federal
trademark registrations for D&W and the D&W logo are valid
and enforceable and, to Seller's Knowledge, all other Proprietary
Rights are valid and enforceable.
(d) Except for the Excluded
Assets, immediately subsequent to Closing, the Proprietary Rights
will be owned by or available for use by the Purchaser on terms and
conditions identical to those under which the Seller owned or used
the Proprietary Rights immediately prior to Closing.
3.13
Litigation . Except as set forth on Schedule
3.13, there are no actions, suits, proceedings, orders, charges,
complaints, grievances, or investigations pending or, to Seller's
Knowledge, threatened against or affecting the Purchased Assets
(including, without limitation, the Leased Real Property) at law or
in equity, by or before (or that could come before) any federal,
state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign.
Seller is not subject to or bound by any outstanding orders,
judgments or decrees of any court or governmental entity with
respect to the Purchased Assets or the Assumed Liabilities.
3.14
Brokerage . There are no claims for brokerage
commissions, finders' fees or similar compensation in connection
with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of Seller. Seller has
not entered into an agreement with any broker, finder or investment
bank pursuant to which such party would be entitled to any payment
relating to or in connection with this Agreement and the
transactions contemplated by this Agreement.
3.15
Employees .
(a) Except as disclosed on
Schedule 3.15, with respect to the Purchased Assets: (i) there
is no collective bargaining agreement or relationship with any
labor organization; (ii) no manager (including store managers)
at any Individual Premises has delivered notice to Seller
indicating he or she has any present intention to terminate his
or
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her employment;
(iii) no manager is a party to any confidentiality,
non-competition, proprietary rights or other such agreement between
such employee and any other Person with respect to the Premises
that would be material to the performance of such employee's
employment duties, or the ability of Purchaser to operate the
Premises; (iv) no labor organization or group of employees has
filed any representation petition or made any written or oral
demand for recognition; (v) to Seller's Knowledge, no union
organizing or decertification efforts are underway or threatened
and no other question concerning representation exists;
(vi) within the past three (3) years, no labor strike, work
stoppage, slowdown, or other material labor dispute has occurred,
and none is underway or threatened; (vii) there is no material
worker's compensation liability, experience or matter;
(viii) there is no employment-related charge, complaint,
claim, grievance, investigation, inquiry or obligation of any kind,
pending or, to Seller's Knowledge, threatened in any forum,
relating to an alleged violation or breach of any law, regulation
or contract; and, (ix) to Seller's Knowledge, no employee or
agent has committed any act or omission giving rise to liability
for any violation or breach identified in
subsection (viii) above.
(b) Schedule 3.15 sets forth
(i) a list of all written employment agreements or severance
agreements with any employees working at the Premises, and
(ii) a list of all employees working at the Premises including
the Individual Premises at which each employee works, each
employee's status as an hourly or salaried employee, and each
employee's status as full or part-time. Except as set forth in
Schedule 3.15, there are no Employee Handbooks or other written
