Note 2 - Business Acquisition

3 Months Ended

Jun. 29, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

2.           Business Acquisition

On June 30, 2014, the Company publicly announced it had entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Vestis Retail Group, LLC, a Delaware limited liability company (“Vestis”), and Everest Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Vestis (“Merger Sub”).

Pursuant to the Merger Agreement, Merger Sub commenced a tender offer (the “Offer”) to purchase all of the outstanding shares of the Class A Common Stock, $0.01 par value per share, of the Company (the “Class A Shares”) and the Class B Common Stock, $0.01 par value per share, of the Company (the “Class B Shares” and together with the Class A Shares, the “Common Stock”) at a price per share of $1.20, net to the seller, in cash without interest, less any applicable withholding taxes, and subject to adjustment as described below. If the shares of Common Stock tendered into the Offer, together with the shares to be acquired by Merger Sub pursuant to the Stock Purchase Agreement and the Top-Up Option (as described in the Merger Agreement) do not constitute at least 90% of each of the Class A Shares and the Class B Shares on a fully diluted basis (as calculated pursuant to the Merger Agreement), the price per share of all Common Stock subject to the Offer will automatically be reduced to $1.04, net to the seller, in cash without interest, less any applicable withholding taxes. On August 3, 2014, the Company entered into Amendment No. 1 (the “Merger Agreement Amendment”), to the Merger Agreement to change the definition of Initial Offer Expiration Time from midnight, New York City time, at the end of August 1, 2014 to midnight, New York City time, at the end of August 15, 2014.

Between July 9 and July 15, 2014, four plaintiffs filed purported class action lawsuits against Sport Chalet, its directors, Everest Merger Sub, Inc., a Delaware corporation (“Purchaser”) and a wholly-owned subsidiary of Vestis Retail Group, LLC, a Delaware limited liability company (“Parent”) in connection with the proposed acquisition of the publicly owned shares of Sport Chalet by Parent and Purchaser (the “Proposed Transaction”) in the Superior Court of the State of California for the County of Los Angeles, captioned Barry Lieberman v. Sport Chalet, Inc. et al., Case No. BC551232 (July 9, 2014), Enrique Grossmann v. Sport Chalet, Inc. et al., Case No. BC551440 (July 11, 2014), David Stec v. Sport Chalet, Inc. et al., Case No. BC551574 (July 14, 2014), and Graeco Inc. v. Sport Chalet, Inc. et al., Case No. BC551746 (July 15, 2014). Versa Capital Management, LLC was also named as a defendant by the plaintiffs in the Barry Lieberman, David Stec and Graeco Inc. cases. The plaintiff in each case alleges that the Sport Chalet directors breached their fiduciary duties to Sport Chalet stockholders, and that the other defendants aided and abetted such breaches, by seeking to sell Sport Chalet through an allegedly flawed process and for inadequate consideration. Each plaintiff also alleges that the directors breached their fiduciary duties with respect to the contents of the tender offer solicitation/recommendation materials on Schedule 14D-9. Each of the lawsuits seeks, among other things, equitable relief that would enjoin the consummation of the Proposed Transaction, rescission of the Proposed Transaction (to the extent it has already been implemented) and attorneys’ fees and costs. We intend to defend the suits vigorously. We are not able to evaluate the likelihood of an unfavorable outcome nor can we estimate a range of potential loss in the event of an unfavorable outcome at the present time. If resolved unfavorably to us, this litigation could have a material adverse effect on our financial condition.