ASSET PURCHASE AGREEMENT EXHIBIT 2.1
ASSET PURCHASE AGREEMENT (the "AGREEMENT"), dated as of July 28, 2004, by
and among Movie Star, Inc., a New York corporation, having its principal offices
at 0000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("BUYER"), on the one
hand, and each of Xxxxxx Xxxxxxxxx & Son Lingerie, Inc., a New York corporation,
having its principal office at 000 Xxxxxxx Xxxxxx, Xxxxx 00, Xxx Xxxx, Xxx Xxxx
00000 ("SB&S"), Xxxxxx Xxxxxxxxx, a shareholder of SB&S who resides at 00 Xxxxxx
Xxxx, Xxxxxxxxx, Xxx Xxxx 00000 ("XXXXXX"), and Xxxxx Xxxxxxxxx, a shareholder
of SB&S who resides at 000 Xxxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxx Xxxx 00000
("XXXXX"), on the other hand. SB&S, Xxxxxx and Xxxxx are referred to
collectively herein as the "SELLER PARTIES." The Seller Parties and the Buyer
are each referred to herein individually as a "PARTY" and collectively as the
"PARTIES."
WHEREAS, SB&S is engaged in the design, marketing and sale of women's
lingerie and related apparel and accessories (the "BUSINESS"); and
WHEREAS, SB&S desires to sell and assign to the Buyer, and the Buyer
desires to purchase from the SB&S, all rights, title and interest in and to
certain assets of the Business on the terms and subject to the conditions set
forth in this Agreement (the "ASSET SALE").
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
representations, warrants, covenants and agreements in this Agreement and for
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the Parties agree as follows:
ARTICLE I
SALE AND TRANSFER OF ASSETS
1.1 General.
(a) Sale and Purchase. At the Closing (as defined), SB&S shall, pursuant to
a General Assignment and Xxxx of Sale in the form of EXHIBIT A (the "XXXX OF
SALE") and a Trademark and Copyright Assignment in the form of EXHIBIT B (the
"IP ASSIGNMENT"), sell, assign, transfer, convey, and deliver to the Buyer and
the Buyer shall purchase and accept from SB&S, all of SB&S' (and any other
Seller Party's) rights, title, and interests in, to and under the Acquired
Assets (as defined).
(b) Acquired Assets. The term "ACQUIRED ASSETS" means (i) the Inventory (as
defined) of the Business, including that specified (and valued at the actual
cost of SB&S) on Schedule 1.1(b)(i) (as same shall be revised mutually by the
Parties to reflect a current inventory count immediately prior to Closing), (ii)
the open customer orders itemized on Schedule 1.1(b)(ii) hereto (and as updated
by the Seller Parties immediately prior to Closing), (iii) the name "Xxxxxx
Xxxxxxxxx & Sons Lingerie" and all derivatives and variances thereof and all
other names and trade names used in the Business, including those listed on
Schedule 1.1(b)(iii) hereto, (iv) all designs, copyrights, trademarks and
patents of SB&S and all other intellectual property rights held by any of the
Seller Parties relating to the Inventory, the Business or any of its product
lines, including those listed on Schedule 1.1(b)(iv) and (v) the other tangible
personal property set forth on Schedule 1.1(b)(v).
(c) Inventory. The term "INVENTORY" means finished products,
work-in-progress and raw materials wherever located and whether held by SB&S,
any other Seller Party or any third party, including samples, packaging and
supplies, used or relating to the Business.
(d) Excluded Assets. It is understood and agreed that the only assets being
acquired hereunder are the Acquired Assets and that the Seller Parties are not
selling, transferring, assigning or conveying any Excluded Assets. The term
"EXCLUDED ASSETS" means any asset or assets of any Seller Party not set forth in
Section 1.1(b) above or in Schedules 1.1(b)(i), 1.1(b)(ii), 1.1(b)(iii),
1.1(b)(iv) or 1.1(b)(v) hereto, including without limitation (i) any cash or
cash equivalents of any Seller Party, (ii) any rights, claims and credits of any
Seller Party related to any Excluded Asset or any liability of any Seller Party
other than Assumed Liabilities, including any such items arising under insurance
policies, guaranties, warranties, indemnities and similar rights in favor of a
Seller Party, (iii) all rights of any Seller Party under this Agreement and the
other agreements and instruments executed and delivered in connection with this
Agreement, (iv) all records prepared in connection with the Sale of the Acquired
Assets to the Buyer, except that Seller acknowledges that Buyer can retain
copies furnished to it, (v) all financial and tax records of a Seller Party,
except that Seller acknowledges that Buyer can retain copies furnished to it,
and (vi) all accounts receivable of a Seller Party.
1.2 Assumed Liabilities. It is understood and agreed that, except for (i)
open purchase orders of SB&S in the amounts itemized on Schedule 1.2(a) hereto
and (ii) the other trade payables of the Business in the amounts itemized on
Schedule 1.2(b) hereto (the liabilities under preceding clauses (i) and (ii)
being the "ASSUMED LIABILITIES"), the Buyer is not assuming, and will not be
obligated or liable for, any direct or indirect debts, obligations, claims or
liabilities of the Business, the Seller Parties, the Acquired Assets or
otherwise, whether absolute, accrued, contingent, liquidated or otherwise, and
whether due or to become due, asserted or unasserted, known or unknown,
including the Seller Parties' obligations in respect of taxes, employee benefit
or profit sharing plans, or litigation to which SB&S is a party. The Buyer will
be indemnified, pursuant to Article V, from and against any claims in respect of
any debts, obligations, claims or liabilities of the Seller Parties, except the
Assumed Liabilities.
1.3 Closing. The closing of the Asset Sale (the "CLOSING") will take place
at 11 a.m., Eastern Daylight Time, at the offices of Xxxxxxxx Xxxxxx, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, on the third business day after all conditions
to Closing have been satisfied or such later date as the parties may agree. The
date the Closing takes place shall be referred to herein as the "CLOSING DATE."
1.4 Purchase Price.
(a) General. In consideration of the Acquired Assets, the Buyer shall
pay to SB&S a purchase price ("PURCHASE PRICE") comprised of (i) $500,000 paid
at Closing ("GOODWILL PAYMENT"), plus (ii) an additional amount paid at Closing
("INITIAL INVENTORY PAYMENT" and, together with the Goodwill Payment, the
"INITIAL PAYMENTS") equal to 100% of the aggregate value of Inventory as set
forth on Schedule 1.1(b)(i) as revised by parties immediately prior to Closing,
plus (iii) the Earn Outs (as defined), plus (iv) the Monthly Office Cost (as
defined). Amounts payable to SB&S as Purchase Price shall be delivered by wire
or by check as indicated in writing by SB&S prior to such payment.
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(b) Earn Outs. SB&S shall be entitled to be paid the earn outs ("EARN
OUTS") as set forth below:
(i) Annual Earn Out. SB&S shall be entitled to an earn out
payment with respect to each of the fiscal years ending June 30, 2005, 2006 and
2007 (each, an "ANNUAL EARN OUT") in which Gross Profit (as defined) for such
year is $3,000,000 or more. The Annual Earn Out payable with respect to each
such year shall be equal to (A) $100,000 if Gross Profit during such year is
equal to or between $3,000,000 and $3,500,000, (B) $175,000 if Gross Profit
during such year is equal to or between $3,500,001 and $3,750,000 ($4,000,000
with respect to the years ending June 30, 2006 and 2007) and (C) $250,000 if
Gross Profit during such year is equal to or greater than $3,750,001 ($4,000,001
with respect to the years ending June 30, 2006 and 2007).
(ii) Cumulative Catch-up. SB&S shall be entitled to a one-time
earn out payment with respect to the three-year period commencing July 1, 2004
and ending, June 30, 2007 if aggregate Gross Profit during such three-year
period is more than $10,500,000 (the "CUMULATIVE CATCH-UP"). The Cumulative
Catch-up shall be equal to one and only one of the amounts ("CUMULATIVE CATCH-UP
AMOUNT") indicated below, less any and all amounts paid to Seller Parties under
Section 1.4(b)(i):
If Gross Profit during Three-
Year Period is equal to or more than: Cumulative Catch-up Amount is
------------------------------------- -----------------------------
$10,500,000 $500,000
$11,000,000 $600,000
$11,500,001 $675,000
$11,750,001 $675,000
$12,000,000 $750,000
(iii) Bonus Earn Out. Separate and apart from any payment made in
the foregoing Sections 1.4(b)(i) and 1.4(b)(ii), the Seller Parties shall be
entitled to receive a one-time payment of $250,000 if Gross Profit is at least
$4,500,000 in any of the fiscal years ending June 30, 2005, 2006, 2007 or 2008.
(iv) Reports. Until such time as SB&S is no longer entitled to
receive any Earn Outs, within 90 days of the completion of each fiscal year, the
Buyer shall provide SB&S with a detailed written report setting forth the Gross
Profits for such fiscal year and the basis of calculation of any Annual Earn Out
("REPORT"), together with payment of the applicable Annual Earn Out, Cumulative
Earn Out and/or Bonus Earn Out, if any.
(v) Gross Profits. The term "Gross Profits" shall mean the gross
profits of the Xxxxxx Xxxxxxxxx Division (as defined) as calculated from actual
net sales (gross sales net of discounts, returns, charge backs and allowances
and any and all customer deductions) less the cost of such sales based on the
items set forth on Schedule 1.4(b)(v).
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(vi) Xxxxxx Xxxxxxxxx Division. The term "Xxxxxx Xxxxxxxxx
Division" shall mean (i) the operating division of the Buyer which shall utilize
the Acquired Assets for its commercial operations, (ii) the operations of the
Buyer relating to sales generated by Xxxxxx and any other sales personnel
operating under his direction, and (iii) the operations of the Buyer relating to
sales generated by Xxxxx and any other sales personnel operating under his
direction.
(vii) Condition to Payment of Earn Outs. In the event Daniel's
employment with the Buyer is terminated for any reason other than (i) by Xxxxxx
for "Good Reason," as provided in the Xxxxxx Employment Agreement (as defined),
(ii) as a result of "Death" or "Disability, " as provided in the Xxxxxx
Employment Agreement, or (iii) by the Company without "Cause," as provided in
the Xxxxxx Employment Agreement, the Seller Parties' right to receive any and
all Earn Out payments hereunder that have not been paid, or shall not have
accrued and thereafter become payable, prior to the date of such termination
shall immediately end and shall no longer be of any force or Effect.
(c) Report Procedures and Right to Audit.
(i) Each Report and related calculations shall be prepared by Buyer in
good faith. A Report shall be deemed to be final, binding and conclusive on the
Parties upon the earliest of the date (the "FINAL RESOLUTION DATE") of: (i)
Seller Parties' delivery of a written notice to the Buyer of Seller Parties'
approval of the Report; (ii) the failure of Seller Parties to notify the Buyer
in writing of a dispute regarding the Report within thirty (30) days of the
delivery of such Report to Seller Parties; (y) the resolution of all disputes
pursuant to Section 1.4(c)(ii) by the Parties hereto; and (z) the resolution of
all disputes pursuant to Section 1.4(c)(iii) by the Independent Accounting Firm
(as defined).
(ii) The Seller Parties may dispute a Report (and the amount of any
item included in or forming the basis of any such Report) by delivery of a
written notice to the Buyer setting forth each specific matter to be disputed
and describing the dispute and the underlying facts in reasonable detail
("REPORT DISPUTE NOTICE"). If Seller Parties deliver a Report Dispute Notice to
the Buyer, the Seller Parties, on one hand, and the Buyer, on the other hand,
together with their respective accountants, shall attempt to reconcile the
Parties' differences, and any resolution by them approved in writing by all
Parties hereto as to any disputed amounts shall be final, binding and conclusive
on the Parties.
(iii) If the Parties hereto are unable to reach a resolution within
fifteen (15) days after the delivery of a Report Dispute Notice, they shall
submit their respective determinations and calculations and the items remaining
in dispute for resolution to BDO Xxxxxxx LLP, unless one or more of the Parties
has developed a material relationship with such accounting firm, in which case
the Parties shall select within five (5) days another mutually acceptable
independent accounting firm which does not have a material relationship with any
Party (in any case, the "INDEPENDENT ACCOUNTING FIRM"). The Parties shall cause
the Independent Accounting Firm to submit a report to the Parties, based on the
submissions of the Parties and any additional examination deemed reasonably
necessary by the Independent Accounting Firm, with a determination regarding the
disputed items, within twenty (20) days after submission of the matter, and such
report shall be final, binding and conclusive on the Parties. The fees, costs
and expenses of the Independent Accounting Firm shall be the
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responsibility of the Party against whom the Independent Accounting Firm decides
if the resolution involves an adjustment of more than 10% to the original
amounts in questions. If the adjustment provided by the resolution is less than
10%, the parties shall share equally in all fees, costs and expenses of the
Independent Accounting Firm.
1.5 Set-Off. Subject to the provisions of Article V, any Party hereto shall
have the right to set off any amount to which such Party is entitled hereunder
for indemnification pursuant to Article V against any payment such Party is
required to make hereunder or under any Transaction Document (as defined);
provided, however, that the Buyer shall not have the right to set off any such
amount against payment due to Xxxxxx and/or Xxxxx pursuant to the terms of the
Xxxxxx Employment Agreement or the Xxxxx Employment Letter.
1.6 Purchase Price Allocation. The Purchase Price will be allocated for tax
purposes (the "ALLOCATION") in the manner set forth on Schedule 1.6. The
Allocation will be used by the Parties in preparing all applicable Tax Returns
(as defined below) and shall be binding upon the Parties and upon each of their
successors and assigns, and the Parties shall report the transaction herein for
tax purposes in accordance with the Allocation and shall not take any position
or action inconsistent with the Allocation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES
Each of the Seller Parties hereby represents and warrants to the Buyer
as follows:
2.1 Organization. SB&S is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York. SB&S has the
corporate power and authority to carry on the Business as it is now being
conducted and to own, lease and operate all of its properties and assets and is
duly licensed or qualified to do business in each jurisdiction where the nature
of the Business or the properties it owns, leases or operates requires it to so
qualify, except where the failure to so qualify would not, singly or in the
aggregate, be reasonably expected to have a material adverse effect on the
business, assets, financial condition or results of operations of SB&S or
materially impair any of the Seller Parties' ability to consummate the
transactions contemplated by the Agreement (a "Seller Material Adverse Effect").
2.2 Authorization of Transaction. Each Seller Party has all requisite power
and authority to execute and deliver this Agreement and the other agreements
contemplated hereby to which it or he is a party (collectively, the "TRANSACTION
DOCUMENTS") and to perform its or his obligations hereunder and thereunder. The
execution and delivery of the Transaction Documents and the performance by SB&S
of the transactions contemplated hereby and thereby have been duly and validly
authorized by all requisite corporate action on the part of the SB&S, and no
other corporate proceedings on the part of SB&S are necessary to approve this
Agreement and the Transaction Documents or to authorize and consummate the
transactions contemplated hereby or thereby. The Transaction Documents have been
duly and validly executed and delivered by each of the Seller Parties that is a
party thereto and constitute valid and binding obligations of such Seller
Parties, enforceable against such Seller Party in accordance with their terms,
except as such enforceability may be limited by general principles of equity and
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bankruptcy, insolvency, reorganization and moratorium and other laws relating to
creditors' rights, and is in full force and effect.
2.3 Acquired Assets.
(a) Ownership. SB&S is the lawful owner of or has the right and title
to use and transfer to the Buyer all of the Acquired Assets, free of all liens,
mortgages, pledges, charges, security interests, easements, encroachments,
defects, restrictions, prior assignments, encumbrances, options, legal or
equitable claims of others and other claims of any kind (each, a "LIEN"), except
for the Liens held by Chase Bank, N.A. ("Chase Liens"), which shall be
extinguished ("Chase Release") at Closing upon the Buyer's assumption of the
open purchase orders on Schedule 1.2(a) and the delivery to Chase Bank, N.A. of
a guarantee by Buyer's lender, HSBC Bank USA, N.A. ("HSBC"), of SB&S' existing
related letters of credit ("Chase LOCs"). The delivery to the Buyer of the Xxxx
of Sale and IP Assignment will vest good title to the Acquired Assets in the
Buyer, free and clear of all Liens. Other than the open customer orders itemized
on Schedule 1.1(b)(ii), no Seller Party has previously entered into any Contract
(as defined) of any nature obligating any Seller Party (or affiliate thereof) to
directly or indirectly transfer any of the Acquired Assets or rights or
interests therein to any Person (as defined) other than the Buyer. "PERSON"
shall mean any individual, partnership, joint venture, association, limited
liability company, corporation, trust, unincorporated organization, governmental
authority, or other entity. "CONTRACT" shall mean any contract, agreement and
other instrument or understanding of any kind, including without limitation,
loan agreements, letters of credit, guarantees, notes, leases, employee plans,
and all amendments, supplements, modifications, extensions, or renewals in
respect of the foregoing.
(b) Inventory. All of the Inventory is (i) correctly valued on the
SB&S Balance Sheet (as defined); (ii) accurately and clearly identified in all
material respects on Schedule 1.1(b)(i) by location, style number, unit quantity
and unit cost; (iii) of good and merchantable quality, fit for the purpose
intended, and salable and useable in the ordinary course (subject, in the case
of raw materials and work-in-progress, to the completion of the production
process); (iv) free of material defects and damage; and (iv) not obsolete. It is
understood and agreed that certain of the Inventory consists of items marked as
"irregulars" and (so long as such item has been marked down to lesser cost on
Schedule 1.1(b)(i)) the fact that an item is marked as such does not mean that
such item (A) is not of good and merchantable quality, fit for the purpose
intended, and salable and useable in the ordinary course, or (B) contains a
material defect.
(c) Customer Orders. The only open customer orders of SB&S are those
that are listed on Schedule 1.1(b)(ii). All of such orders were entered into in
the ordinary course of business and the terms of each order are as set forth on
Schedule 1.1(b)(ii).
(d) No other names used in the Business. The only names, trade names,
service names, trademarks or service marks (collectively, "NAMES") utilized by
SB&S in the Business or otherwise are set forth on Schedule 1.1(b)(iii). SB&S is
not the owner, nor does it have the licensed right to use, any other Names,
except those set forth on such Schedule. The use by SB&S of the Names does not
violate the right of any other party.
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(e) Other tangible personal property. All of the tangible personal
property listed on Schedule 1.1(b)(v) is (i) in good operating condition and
repair, ordinary wear and tear excepted; (ii) suitable and adequate for
continued use in the manner in which it is presently being used; (iii)
reasonably adequate to meet all present requirements of the Business; and (iv)
free of material defects (latent and patent).
2.4 Ownership of SB&S; No Conflict; Required Filings and Consents.
(a) Xxxxxx and Xxxxx are the only shareholders of SB&S and own all of
the capital stock of SB&S free and clear of any Liens. No other party has any
right to acquire capital stock of SB&S.
(b) The execution and delivery of the Transaction Documents by each
Seller Party that is a party thereto and the performance by such Seller Party of
its or his obligations hereunder and thereunder will not (i) violate or conflict
with the certificate of incorporation or bylaws of SB&S or any resolution
adopted by the board of directors of SB&S; (ii) conflict with or violate any
provision or requirement of any domestic or foreign, federal, state, or local
law, statute, judgment, order, writ, injunction, decree, award, rule, or
regulation applicable to SB&S or by which any of its properties or assets are
bound or affected; or (iii) violate, result in a breach of, constitute (with due
notice or lapse of time or both) a default under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of SB&S pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which SB&S is a party or by which
any of the properties or assets of SB&S is bound or affected, except, in the
case of clauses (ii) and (iii) above, for any such conflicts, violations,
breaches, defaults or other alterations or occurrences that would not reasonably
be expected to have a Seller Material Adverse Effect.
(c) Except as set forth on Schedule 2.4(c), no consents, approvals,
permits, or authorizations of or notices, reports, filings or registrations with
any third party (including any Governmental Authority) are necessary in
connection with the execution and delivery by any of the Seller Parties of the
Transaction Documents or the consummation by the Seller Parties of the
transactions contemplated hereby and thereby. "GOVERNMENTAL AUTHORITY" shall
mean any United States federal, state or local, or any foreign, government,
governmental, regulatory or administrative authority, agency or commission or
any court, tribunal, or judicial or arbitral body.
2.5 Financial Statements. Attached hereto as Schedule 2.5 is a statement of
operations of SB&S for the period from January 1, 2004 through March 31, 2004
("SB&S STATEMENT OF OPERATIONS"), a balance sheet as of March 31, 2004 ("SB&S
BALANCE SHEET") (setting forth current and long-term liabilities of SB&S) and a
list ("SB&S PARTICULARS") setting forth the following as of March 31, 2004 (i)
all accounts payable (names and amounts), (ii) open letters of credit, (iii) all
accounts receivable (names and amounts, if any), and (iv) all customers (names
and addresses). The SB&S Statement of Operations, SB&S Balance Sheet and the
SB&S Particulars are collectively referred to herein as the "FINANCIAL
INFORMATION." The SB&S Statement of Operations and the SB&S Balance Sheet are
presented in accordance with generally
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accepted accounting principles. Buyer acknowledges that it has had full and fair
opportunity to review all of said information and has been provided with all
other information it has requested.
2.6 Absence of Change or Event. Except as set forth on Schedule 2.6, since
the date of the SB&S Balance Sheet, the Business has been conducted only in the
ordinary course consistent with prior practice and neither SB&S nor any other
Seller Party has:
(a) permitted any Lien to be placed on any of the Acquired Assets;
(b) licensed or leased to others any of the Acquired Assets, except
in the ordinary course of business and consistent with prior
practice;
(c) amended or terminated any Contract; or
(d) made any commitment with respect to any of the foregoing.
2.7 Contracts.
(a) All Contracts to which any Seller Party is a party and that relate
to the Acquired Assets ("MATERIAL CONTRACTS") are listed in Schedule 2.7. True
and complete copies of each Material Contract have been heretofore provided to
the Buyer. Each Material Contract is in full force and effect as of the date
hereof. None of the Seller Parties are, and to the knowledge of each of the
Seller Parties, no other party thereto is, in breach of, or default under, any
Material Contract. No party to a Material Contract has given notice to the other
of termination of such Material Contract or asserted or threatened to assert any
claims with respect to any such Material Contract.
(b) Compliance with Laws and Rules. SB&S has conducted and continues
to operate the Business in accordance with all applicable rules, regulations and
laws of applicable governmental authorities ("LAWS AND RULES") except where a
failure to so act would not reasonably be expected to result in a Seller
Material Adverse Effect. SB&S is not in violation of any Laws and Rules where
such failure could reasonably be expected to result a Seller Material Adverse
Effect.
2.8 Tax Matters.
(a) SB&S has filed, or will prepare and timely file, all returns,
declarations, reports, claims for refund, or information returns or statements
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof (each a "TAX RETURN") that it was required to file for all
periods prior to and including the date hereof, and such Tax Returns were
correct and complete in all material respects. SB&S has paid or adequately
reserved for all Taxes owed by it (whether or not shown on any Tax Return). SB&S
has withheld or collected all Taxes which it was required to withhold or collect
and has paid all such monies over to the appropriate Governmental Authority or
has properly recorded such unpaid amounts as a liability on its books. The
reserves for Taxes reflected in the SB&S Balance Sheet are adequate to cover all
Tax liabilities accrued as of the date hereof. For purposes of this Agreement
"TAXES" shall mean any state, local, or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits,
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environmental (including taxes under Section 59A of the Internal Revenue Code of
1986, as amended (the "CODE"), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not, and any obligation to indemnify, assume or succeed to the
liability of any other Person in respect of the foregoing.
(b) No Tax liens or other encumbrances have attached or, to the
knowledge of the Seller Parties, are in the process of attaching to any of the
Acquired Assets because of a deficiency or delinquency in payment of Taxes by
SB&S and Seller Parties know of no facts or circumstances which would reasonably
be expected to give rise to same.
2.9 Real Property. Schedule 2.9 sets forth all Material Contracts that are
leasehold or subleasehold estates or other rights to use or occupy any land,
buildings, structures, improvements, fixtures or other interest in real
property, including, without limitation, any storage units or facilities
(collectively "LEASED REAL PROPERTY"), and a true and complete list of all
leases for any and all parcels of Leased Real Property, together with the
remaining term of each such lease, the monthly rent due under each such lease,
and a description of the Leased Real Property that is the subject of such lease.
With respect to each parcel of Leased Real Property:
(a) SB&S is in peaceful and undisturbed possession of the space and/or
estate comprising each parcel of Leased Real Property and there are no defaults
by SB&S or, to the knowledge of the Seller Parties, any other party under any
lease. No event has occurred and no condition exists which, with the giving of
notice or the lapse of time or both, would constitute such a default or
termination event or condition;
(b) each lease relating to the Leased Real Property is valid and
binding in all material respects upon SB&S (except as the enforceability thereof
may be limited by any applicable bankruptcy, reorganization, insolvency or other
laws affecting creditors' rights generally or by general principles of equity)
and is in full force and effect, and all rent and other sums and charges payable
by the Seller Parties, as tenant thereunder, are current;
(c) SB&S has a good and valid leasehold interest in each parcel of
Leased Real Property, free and clear of all encumbrances;
(d) SB&S has delivered to the Buyer a true and complete copy of each
lease relating to the Leased Real Property; and
(e) SB&S has good and valid rights of ingress and egress to and from
all of the Leased Real Property from and to the public street systems for all
usual street, road and utility purposes.
2.10 Intellectual Property. Schedule 2.10 sets forth a list and brief
description of all Acquired Assets that are issued patents and/or registered
trademarks, service marks, copyrights, designs and/or all applications for such
that are in the process of being prepared or registered in the name of SB&S (or
any other Seller Party), or of which SB&S is a licensor or licensee
(collectively, "INTELLECTUAL PROPERTY"). SB&S owns all rights, title and
interest in and to the
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Acquired Assets, including, without limitation, the Intellectual Property. The
operations of SB&S and/or the Acquired Assets do not infringe upon or conflict
with the intellectual property rights of any other Person. No claim is pending
or threatened to the effect that the Acquired Assets or any portion thereof
infringe upon the rights of any Person, and there is no known basis for any such
claim (whether or not pending or threatened). No claim is pending or, to the
knowledge of the Seller Parties, threatened to the effect that any of the
Intellectual Property is invalid or unenforceable by the Seller Parties. None of
the current or former stockholders, employees, officers, contractors or
directors of SB&S has (directly or indirectly) any right, title or interest in
any of the rights described in Schedule 2.10.
2.11 Litigation. There are no claims, suits, proceedings, investigations or
other actions ("Actions") by any person or governmental authority relating to
the Seller Parties, the Acquired Assets or the Business or, to the Seller
Parties' knowledge, threatened to be brought by or before any person or
governmental authority relating to the Seller Parties, the Acquired Assets or
the Business, except that which would not have, either singly or in the
aggregate, a Seller Material Adverse Effect.
2.12 Labor and Employment Matters. SB&S has complied in all material
respects with all applicable laws, rules and regulations relating to employment
and termination of employment of all employees of SB&S (the "SB&S EMPLOYEES"),
including without limitation those related to wages, hours, ERISA, collective
bargaining and the payment and withholding of Taxes and other sums as required
by appropriate governmental entities and has withheld and paid to the
appropriate governmental entities or is holding for payment not yet due to such
governmental entities, all amounts required to be withheld from the SB&S
Employees and is not liable for any arrears of wages, taxes, penalties or other
sums for failure to comply with any of the foregoing.
2.13 Brokers. No broker, finder, investment banker, or other Person is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement, based upon arrangements
made by or on behalf of the Seller Parties.
2.14 Disclosure. No representation of warranty by the Seller Parties in
this Agreement contains any untrue statement of a material fact or omits to
state any material fact necessary to make the statements in such representation
or warranty not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller Parties as
follows:
3.1 Organization. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York.
3.2 Authorization of Transaction. The Buyer has all requisite power and
authority to execute and deliver this Agreement and the other Transaction
Documents and to perform its obligations hereunder and thereunder. The execution
and delivery of the Transaction Documents and the performance by the Buyer of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all requisite corporate action on the part of the Buyer, and no
other corporate proceedings on the part of the Buyer are necessary to approve
this Agreement
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and the other Transaction Documents or to authorize and consummate the
transactions contemplated hereby or thereby. The Transaction Documents have been
duly and validly executed and delivered by the Buyer and constitute valid and
binding obligations of the Buyer, enforceable against the Buyer in accordance
with their terms, except as such enforceability may be limited by general
principles of equity and bankruptcy, insolvency, reorganization and moratorium
and other laws relating to creditors' rights, and is in full force and effect.
3.3 No Conflicts. The execution and delivery of the Transaction Documents
by the Buyer and the performance by the Buyer of its obligations hereunder and
thereunder will not (i) violate or conflict with the certificate of
incorporation or bylaws of the Buyer or any resolution adopted by the board of
directors of the Buyer; (ii) conflict with or violate any provision or
requirement of any domestic or foreign, federal, state, or local law, statute,
judgment, order, writ, injunction, decree, award, rule, or regulation applicable
to the Buyer or by which any of the Buyer's properties are assets are bound or
affected; (iii) violate, result in a breach of, constitute (with due notice or
lapse of time or both) a default under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of the Buyer pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Buyer is a
party or by which any of the properties or assets of the Buyer is bound or
affected, except, in the case of clauses (ii) and (iii) above, for any such
conflicts, violations, breaches, defaults or other alterations or occurrences
that would not reasonably be expected to have a material adverse effect on the
business, assets, prospects, financial condition or results of operations of the
Buyer or materially impair the Buyer's ability to consummate the transactions
contemplated by the Agreement.
3.4 Brokers. No broker, finder, investment banker, or other Person is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement, based upon arrangements
made by or on behalf of the Buyer.
3.5 Availability of Funds. The Buyer has sufficient cash available to
enable it to pay the Purchase Price.
3.6 No Knowledge of Misrepresentation or Omission. The Buyer does not have
any actual knowledge that the representations and warranties of the Seller
Parties made in this Agreement qualified as to materiality are not true and
correct, or that those not so qualified are not true and correct in any material
respect. The Buyer does not have any actual knowledge of any material errors in,
or material omissions from, any Schedule to this Agreement.
ARTICLE IV
COVENANTS
4.1 General. Each of the Parties will use its commercially reasonable
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement and the other Transaction Documents (including satisfaction, but not
waiver, of the closing conditions set forth in Section 6 below).
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4.2 Monthly Office Cost. Beginning on the Closing Date, the Buyer shall pay
directly to SB&S an amount each month equal to (i) the monthly lease payment
under the terms of the lease, dated October 10, 2001, between SB&S and Xxxxxx,
Inc., and (ii) utility costs (to the extent same are not provided as part of the
rental costs) and telephone for the premises at 000 Xxxxxxx Xxxxxx, Xxxxx 00,
Xxx Xxxx, Xxx Xxxx 00000 through September 30, 2004 ("MONTHLY OFFICE COST").
Notwithstanding anything to the contrary, the Monthly Office Cost to be paid by
the Buyer for the month of the Closing shall be pro rated from the Closing Date
through the end of such month.
4.3 Employment Arrangements.
(a) Xxxxxx Employment Agreement. On the Closing Date, the Buyer and
Xxxxxx shall enter into the employment agreement in the form attached hereto as
EXHIBIT C ("XXXXXX EMPLOYMENT AGREEMENT").
(b) Xxxxx Employment. On the Closing Date, the Company shall employ
Xxxxx, and Xxxxx shall accept such employment, at an annual salary of
$100,000, as contemplated by the letter agreement attached hereto as EXHIBIT D
("XXXXX EMPLOYMENT LETTER").
4.4 Name Change. On the date of Closing, the Seller Partiers shall take all
actions required to change the corporate name of SB&S to a new name not related
to the Names or any derivative thereof.
4.5 Non-use of Name. After the Closing, none of the Seller Parties or their
affiliates shall establish or otherwise be associated with, as an owner,
partner, stockholder, employee or otherwise, any business that utilizes any of
the Names or any variant or derivative thereof.
4.6 Use of Xxxxxxxx Warehouse. Commencing on the Closing Date, the Seller
Parties shall cause Buyer to have: (i) full access to the warehouse located at
in New Holland, Pennsylvania ("XXXXXXXX WAREHOUSE"), (ii) the right to store any
and all Inventory in the Xxxxxxxx Warehouse and to move Inventory to and
therefrom, (iii) security and other measures to safeguard and maintain the
Inventory and (iv) personnel to operate the Xxxxxxxx Warehouse equal to that
used by SB&S during the ordinary course of the Business prior to the date
hereof. The foregoing shall be provided through December 31, 2004 and in
consideration thereof, the Buyer shall promptly reimburse the Seller Parties for
their expenses in connection therewith based on the Seller Parties' actual costs
(excluding any payments to the Seller Parties).
4.7 Non-Competition.
(i) After the Closing, Xxxxx shall not be employed by, consult to,
operate or own (other than through his employment with the Buyer) any business
engaged in the design, marketing, production and/or sale of women's' lingerie or
related apparel and accessories. After the Closing through the "Term" (as
defined therein) of the Xxxxxx Employment Agreement and for one year thereafter
("XXXXXX NON-COMPETE PERIOD"), Xxxxxx shall not be employed by, consult to,
operate or own (other than through his employment with the Buyer) any business
engaged, as a primary line of business (i.e., representing more than 9.99% of
its revenue) in the design, marketing, production and/or sale of women's'
lingerie or related apparel and accessories ("COMPETITIVE BUSINESS").
Notwithstanding the foregoing, Xxxxxx shall have the
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right to terminate the Xxxxxx Non-Compete Period and to be employed by, consult
to, operate or own a Competitive Business if his employment with the Buyer is
terminated by him for "Good Reason" or by the Company without "Cause" as those
terms are defined in the Xxxxxx Employment Agreement. Notwithstanding the
foregoing, nothing in this Section 4.7(i) shall preclude either Xxxxx and/or
Xxxxxx from investing his personal assets in any manner he chooses, provided,
however, that Xxxxx or Xxxxxx (as the case may be) may not, during the
applicable period referred to in this Section 4.7(i), own more than 4.99% of the
equity securities of any Competitive Business. Notwithstanding anything in this
Section 4.7(i) to the contrary, nothing in this Agreement shall prevent Xxxxxx
(but not Xxxxx) from working for, or providing services to, a business segment
or department of a Competitive Business, or a subsidiary, division or other
entity that controls or is controlled by a Competitive Business, if, the
business segment or department of a Competitive Business for which such person
provides services, or the subsidiary, division or other entity by which such
person is employed, does not itself directly compete with the Buyer. By way of
illustration, Xxxxxx shall be free to be employed by, or provide services to, an
entity which is in the business of production, design, sale or marketing of
apparel generally, including women's lingerie and related apparel, so long as
such person is not employed by, and does not provide direct or indirect services
to, that portion of the entity which relates to women's lingerie and related
apparel and accessories.
(ii) The Seller Parties acknowledge and agree that a portion of the
Purchase Price is attributable to the goodwill of SB&S and to the
non-competition provisions of this Agreement and expressly waives any right to
assert inadequacy of consideration as a defense to enforcement of this Section
should such enforcement become necessary. The Seller Parties further acknowledge
that a remedy at law for any breach or attempted breach of this Section will be
inadequate, agree that any breach of this Section will result in irreparable
harm to Buyer and agrees not to oppose any demand for specific performance and
injunctive and other equitable relief in case of any such breach or attempted
breach. Whenever possible, each provision of this Section shall be interpreted
in such manner as to be effective and valid under applicable law but if any
provision of this Section shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Section. If any provision of this Section shall,
for any reason, be judged by any court of competent jurisdiction to be invalid
or unenforceable, such judgment shall not affect, impair or invalidate the
remainder of this Section but shall be confined in its operation to the
provision of this Section directly involved in the controversy in which such
judgment shall have been rendered. In the event that the provisions of this
Section should ever be deemed to exceed the time or geographic limitations
permitted by the applicable laws, then such provision shall be reformed to the
maximum time or geographic limitations permitted by applicable law.
4.8 Non-Solicitation. Xxxxx shall not, and, during the Xxxxxx Non-Compete
Period, Xxxxxx shall not, directly or indirectly, on his own behalf or on behalf
of others, hire or attempt to hire, or cause any other Person to hire or attempt
to hire, any employee of the Buyer or directly or indirectly entice or solicit
or seek to induce or influence any of such employees to leave their employment
or engagement with the Buyer.
4.9 Ordinary Course Operations. Until the Closing Date, SB&S agrees to
operate and each of Xxxxx and Xxxxxx shall cause SB&S to operate in the ordinary
course in substantially the
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same manner as previously conducted, to pay its debts and taxes when due,
subject to good faith disputes over such debts or taxes in the ordinary course
in substantially the same manner as previously paid, to pay or perform its other
obligations when due in the ordinary course in substantially the same manner as
previously paid or performed, and use all reasonable efforts consistent with
past practices and policies to preserve intact its present business
organization, keep available the services of its present officers, managers, and
key employees and preserve its relationships with customers, suppliers,
distributors, and others having business dealings with it. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or the
Closing Date, without the written consent of Buyer, SB&S shall not:
(a) adopt any amendment to its certificate of incorporation or its
by-laws;
(b) issue, pledge, or sell, or authorize the issuance, pledge or sale
of any securities;
(c) increase the compensation or fringe benefits payable or to become
payable to its directors, officers, or employees;
(d) sell, pledge, lease, dispose of, grant, encumber or otherwise
authorize the sale, pledge, disposition, grant, or encumbrance of any of the
Acquired Assets, except in the ordinary course of business, consistent with past
practice;
(e) acquire any corporation, partnership, other business organization
or any division thereof (or a substantial portion of the assets thereof);
(f) incur, assume, or pre-pay any long term debt or incur or assume
any short-term debt, except consistent with Seller Parties past practice under
existing credit arrangements;
(g) assume, guarantee, endorse, or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person except in the ordinary course of business consistent with
Seller Parties' past practice;
(h) make any loans, advances or capital contributions to, or
investments in, any other person except in the ordinary course of the business
consistent with Seller Parties' past practice;
(i) modify, amend, or terminate any of the Assumed Contracts; and
(j) enter into an agreement, contract, commitment or arrangement to do
any of the foregoing, or to authorize, recommend, propose, or announce an
intention to do any of the foregoing.
4.10 Payment of Sales Tax By Seller Parties. The Seller Parties agree to
pay all sales taxes due, if any, with respect to its sale, conveyance, transfer,
assignment and delivery of the Acquired Assets when and as such taxes become
due.
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4.11 Nondisclosure of Certain Confidential Information.
(a) From and after the date hereof, the Seller Parties shall, and
shall cause each of their respective affiliates, employees and representatives
to (i) maintain in strict confidence and not disclose to any other person, under
any circumstance, any and all information and materials (including, without
limitation, any nonpublic information within the knowledge of the Seller Parties
or any of their respective affiliates, employees or representatives, whether
obtained in written, oral or any other manner) concerning the Buyer and/or the
Business (the "BUYER CONFIDENTIAL INFORMATION") and (ii) refrain from using any
and all Buyer Confidential Information for any of their own benefit or to
compete with or otherwise to the detriment of the Buyer or any of the Buyer's
affiliates, employees or representatives.
(b) In the event that the Seller Parties or any of their respective
affiliates or representatives are required by law to disclose any of the Buyer
Confidential Information, the Seller Parties shall promptly notify the Buyer in
writing so that the Buyer may seek a protective order and/or other motion to
prevent or limit the production or disclosure of such information. If such a
motion is denied, then Seller Parties may disclose only such portion of the
Buyer Confidential Information that in the written opinion of the disclosing
party's outside legal counsel is required by law to be disclosed. The Seller
Parties will not, and will not permit any of its affiliates or representatives
to, oppose any motion for confidentiality brought by the Buyer. The Seller
Parties will continue to be bound by its obligations pursuant to this Section
4.11 for any Confidential Information that is not required to be disclosed by
law pursuant to this Section, or that has been afforded protective treatment
pursuant to any motion of the Buyer.
(c) The Seller Parties agree that money damages would not be a
sufficient remedy for any breach of this Section 4.11 and that the Buyer shall
be entitled to specific performance for any such breach. Such remedy shall not
be deemed to be the exclusive remedy for a breach by Seller Parties of this
Section 4.11, but shall be in addition to all other remedies available at law or
in equity to the Buyer.
4.12 Nondisclosure of Seller Parties' Confidential Information.
(a) From and after the date hereof, the Buyer shall, and shall cause
each of its affiliates, employees and representatives to (i) maintain in strict
confidence and not disclose to any other person, under any circumstance, any and
all information and materials (including, without limitation, any nonpublic
information within the knowledge of the Buyer or any of Buyer's affiliates,
employees or representatives, whether obtained in written, oral or any other
manner) concerning the Business and/or the Seller Parties (the "SELLER
CONFIDENTIAL INFORMATION") and (ii) refrain from using any and all Seller
Confidential Information for its own benefit or to compete with or otherwise to
the detriment of the Seller Parties or any of the Seller Parties' respective
affiliates, employees or representatives. Notwithstanding the foregoing, this
Section 4.12(a) shall not apply to any information relating directly to the
Acquired Assets or the Assumed Liabilities.
(b) In the event that the Buyer or any of its affiliates or
representatives are required by law to disclose any of the Seller Confidential
Information, the Buyer shall promptly notify the Seller Parties in writing so
that the Seller Parties may seek a protective order and/or
15
other motion to prevent or limit the production or disclosure of such
information. If such a motion is denied, then Buyer may disclose only such
portion of the Seller Confidential Information that in the written opinion of
the disclosing party's outside legal counsel is required by law to be disclosed.
The Buyer will not, and will not permit any of its affiliates or representatives
to, oppose any motion for confidentiality brought by the Seller Parties. The
Buyer will continue to be bound by its obligations pursuant to this Section 4.12
for any Seller Confidential Information that is not required to be disclosed by
law pursuant to this Section, or that has been afforded protective treatment
pursuant to any motion of the Seller Parties.
(c) The Buyer agrees that money damages would not be a sufficient
remedy for any breach of this Section 4.12 and that the Seller Parties shall be
entitled to specific performance for any such breach. Such remedy shall not be
deemed to be the exclusive remedy for a breach by Buyer of this Section 4.12,
but shall be in addition to all other remedies available at law or in equity to
the Seller Parties.
4.13 Actions with Respect to Certain SB&S Employees.
(a) On the Closing Date, the Buyer shall offer employment to the
employees of the Business listed on Schedule 4.13(a) ("SUBJECT EMPLOYEES"). Each
such offer of employment shall be for a position substantially similar to the
position held by each such employee on the date of this Agreement. The Buyer
agrees not to terminate the employment of any such Subject Employee for a period
one year from the Closing unless the Buyer, in good faith, determines that cause
exists for such termination. The Buyer shall also have the right, commencing on
the Closing Date, to offer employment to any other employee of the Business on
terms determined by the Buyer.
(b) Employees of SB&S who are being offered employment by the Buyer
(including, but not limited to, the Subject Employees) shall be referred to
herein as "TRANSFERRING EMPLOYEES." SB&S and the other Seller Parties shall (i)
assist the Buyer in extending offers of employment to the Transferring
Employees, (ii) encourage the Transferring Employees to accept such employment
and (iii) reasonably assist in the transitioning of the Transferring Employees.
(c) Transferring Employees will be eligible to participate in the
Buyer's plans and programs as of the date they accept the Buyer's employment
offer; provided, however, that if the Buyer's medical plan does not allow for
such Transferring Employees (and their dependents) to immediately be covered,
the Buyer shall pay any "COBRA" costs of the Transferring Employees (and their
dependents), less any amounts that would otherwise be payable by such
Transferring Employees into the Buyer's plan had they been immediately eligible
for coverage under the Buyer's plan.
(d) In order to secure an orderly and effective transition of employee
benefits for the Transferring Employees and their respective beneficiaries and
dependents, the Parties shall cooperate after the date hereof to exchange
information related to the Transferring Employees, including employment records,
benefits information and financial statements, all to the extent reasonably
requested by the Buyer and in compliance with any applicable Laws and Rules.
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(e) At its sole cost and expense, SB&S shall take all actions
necessary to comply with all appropriate Laws and Rules in connection with its
termination of the Transferring Employees. SB&S shall be solely responsible for
the payment of any amounts required to be paid under any Laws and Rules, and
with respect to any accrued vacation and any other accrued compensation or
benefits, as a result of the termination or layoff of any Transferring Employee
or any other employee of SB&S who is not a Transferring Employee but is
terminated or laid off in connection with the Asset Purchase.
(f) This Section 4.13 is not intended to and does not create any
rights or obligations to or for the benefit of anyone other than the Parties.
Nothing herein shall be construed to entitle any Transferring Employee to
continue his or her employment with the Buyer for any period of time, nor to
interfere with the rights of the Parties to discharge or discipline any
Transferring Employee, to change the terms of any Transferring Employee's
employment, or to amend or terminate any employee benefit plans at any time.
4.14 Accounts Receivable. The Parties hereby agree that all accounts
receivable of the Business generated prior to the Closing Date shall be
collected by the Buyer as and when received and shall be remitted to SB&S as
soon as practicable (but in any event within five business days) after receipt
of same. Buyer's duties under this Section 4.14 shall be purely ministerial and
Buyer shall not be responsible to Seller under this Section 4.14 other than as a
result of its willful misconduct or gross negligence and Buyer shall have no
duty to pursue collection (by initiation of legal proceedings or otherwise) of
these accounts receivable. It is the intention of the Buyer that the
Transferring Employee, Xxxxxx Xxxx, oversee this process and the Buyer agrees to
provide Xx. Xxxx with reasonable time and opportunity to do so.
4.15 Provision of Needed Information for 8-K Filings. In the event Buyer is
required to file a Current Report on Form 8-K ("8-K") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") that includes any
financial statements of SB&S or pro forma financial statements incorporating the
financial statements or financial information of SB&S, SB&S shall make its
related financial statements or related financial information available to Buyer
on a timely basis and shall otherwise cooperate with Buyer in the timely filing
of the 8-K. Buyer understands and agrees that (i) SB& S is not, and has never
been, subject to the reporting requirements of the Exchange Act,(ii) the
financial statements and related financial information of SB&S have not been
prepared in a manner intended to comply with the provisions of the Exchange Act,
and (iii) the financial statements and related financial information of SB&S
have not been audited. All costs and expenses related to the provisions of this
Section 4.15 shall be the sole responsibility of the Buyer.
4.16 Further Assurances. Upon the reasonable request of a Party or Parties
hereto at any time after the date hereof, the other Party or Parties shall
forthwith execute and deliver such further instruments of assignment, transfer,
conveyance, endorsement, direction or authorization and other documents as the
requesting party or parties or its or their counsel may reasonably request in
order to perfect title of the Buyer and its successors and assigns to the
Acquired Assets or otherwise to effectuate the purposes of this Agreement. Each
party agrees to use all reasonable efforts and to exercise good faith in
fulfilling its obligations under this Agreement. Buyer agrees to provide the
Seller Parties with reasonable access to the Transferred Employees
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through March 31, 2005, as needed in connection with matters related to SB&S
after the date hereof
ARTICLE V
SURVIVAL AND INDEMNIFICATION
5.1 Survival. Each covenant contained in this Agreement shall survive the
date hereof indefinitely, unless terminated sooner in accordance with its terms.
Each representation and warranty contained in this Agreement shall survive the
Closing for a period of 18 months, except those representations and warranties
contained in (i) Section 2.12 (Labor and Employment Matters) and Section 2.13
(Brokers) and 3.4 (Brokers), which will survive until the expiration (including
extensions) of the applicable statute of limitations; and (ii) Section 2.8 (Tax
Matters) which will survive for six months after the applicable statute of
limitations. No party will be liable to another under any warranty or
representation contained herein after the applicable expiration of such warranty
or representation; provided, however, if a claim or notice is given under this
Article V with respect to any representation or warranty in reasonable detail
prior to the applicable expiration date, such claim may be pursued to resolution
notwithstanding expiration of the representation or warranty under which the
claim was brought. Completion of the transactions contemplated hereby shall not
be deemed or construed to be a waiver of any right or remedy of any of the
parties.
5.2 Indemnification by the Seller Parties. The Seller Parties and their
respective successors and assigns shall, jointly and severally, indemnify,
defend, reimburse and hold harmless the Buyer and its successors and assigns,
and the officers, directors, employees and agents of each of them (each, a
"BUYER INDEMNITEE" and collectively, the "BUYER INDEMNITEES"), from and against
any and all claims, losses, damages, liabilities, obligations, assessments,
penalties and interest, demands, actions and expenses, whether direct or
indirect (including, without limitation, settlement costs, legal and accounting
fees and expenses and any other expenses for investigating or defending any
actions or threatened actions) ("LOSSES") incurred by any such Buyer Indemnitee,
arising out of or in connection with any of the following:
(a) the ownership or operation of the Business and/or Acquired Assets
on or prior to the Closing;
(b) any material misstatement or omission with respect to any
representation or warranty made by the Seller Parties in this Agreement or
any other Transaction Document;
(c) any material breach of any covenant, representation, warranty,
agreement or obligation of the Seller Parties contained in this Agreement
or Exhibit A or Exhibit B hereto.;
(d) any product liability claims against the Buyer relating to the
ownership, sale and/or operation of the Acquired Assets by the Seller
Parties on or prior to the Closing;
(e) all taxes due or payable by the Seller Parties with respect to the
Business or SB&S for periods (or portions thereof) ending prior or
subsequent to the date hereof, except to the extent assumed by the Buyer;
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(f) any claims against, or liabilities or obligations of, the Seller
Parties not specifically assumed by the Buyer pursuant to this Agreement.
5.3 Indemnification by the Buyer. The Buyer shall indemnify, defend,
reimburse and hold harmless each Seller Party and their affiliates ("SELLER
INDEMNITEES") from and against any and all Losses incurred by such Seller
Indemnitees, arising out of or in connection with any breach of the Buyer's
representation, warranty or covenant contained in this Agreement or Exhibit A or
Exhibit B hereto.
5.4 Indemnification Procedure.
(a) Notice. Whenever any claim shall arise for which a Party is
entitled to indemnification hereunder (a "CLAIM"), such Indemnitee shall
promptly give written notice to the relevant Indemnitor with respect to the
Claim after the receipt by the Indemnitee of reliable information of the facts
constituting the basis for the Claim; but the failure to timely give such notice
shall not relieve the Indemnitor from any obligation under this Agreement,
except (i) to the extent the Indemnitor shall have been actually prejudiced as a
result of such failure and (ii) the Indemnitor shall not be liable for any
Losses incurred during the period in which the Indemnitee failed to give such
notice).. For purposes of this Section 5.4, the Seller Parties and their
respective successors and assigns, on the one hand, and the Buyer and its
successors and assigns, on the other hand, are each individually referred to as
an "INDEMNITOR" and collectively as the "INDEMNITORS".
(b) Third-Party Claims.
(i) Upon receipt of written notice from an Indemnitee of a Claim,
the Indemnitor shall promptly pay the amount of the Claim, unless the Indemnitor
shall dispute the Claim or the amount thereof, and the Indemnitor may provide
counsel (such counsel subject to the reasonable approval of the Indemnitee) to
defend the Indemnitee against the matter from which the Claim arose, at the
Indemnitor's sole cost, risk and expense. If the Indemnitor assumes such
defense, the Indemnitee shall cooperate in all reasonable respects, at the
Indemnitor's sole cost, risk and expense, with the Indemnitor in the
investigation, trial, defense and any appeal arising from the matter from which
the Claim arose; provided, however, that the Indemnitee may (but shall not be
obligated to) participate in any such investigation, trial, defense and any
appeal arising in connection with the Claim. The Indemnitor shall have the right
to elect to settle any Claim for monetary damages without the Indemnitee's
consent, only if the settlement includes a complete release of the Indemnitee.
If the settlement does not include such a release, it will be subject to the
consent of the Indemnitee. The Indemnitor may not admit any liability of the
Indemnitee or waive any of the Indemnitee's rights without the Indemnitee's
prior written consent. If the subject of any Claim results in a final judgment
or settlement, the Indemnitor shall promptly pay such judgment or settlement.
(ii) If the Indemnitor fails to promptly assume the defense of
the subject of any Claim in accordance with the terms of Section 5.4(b)(i), or
fails diligently to prosecute such defense, the Indemnitee may defend against
the subject of the Claim, and the Indemnitor shall be responsible for the
reasonable expenses incurred by the Indemnitee in connection with such defense,
including employment of counsel by the Indemnitee. If the
19
Indemnitee defends the subject of a Claim in accordance with this Section, the
Indemnitor shall cooperate with the Indemnitee and its counsel, at the
Indemnitor's sole expense, in all reasonable respects, and shall deliver to the
Indemnitee or its counsel copies of all pleadings and other information within
the Indemnitor's knowledge or possession reasonably requested by the Indemnitee
or its counsel that are relevant to the defense of the subject of any such
Claim. The Indemnitee shall maintain confidentiality with respect to all such
information consistent with the conduct of a defense hereunder.
5.5 Payment. All payments owing under this Article V will be made promptly
as indemnifiable Losses are incurred.
5.6 Limitations. The Seller Parties indemnification obligation contained in
this Article V shall not apply to any claim for Losses until the aggregate of
all such claims total $25,000, in which event the Seller Parties' indemnity
obligation shall apply from the first dollar of such Losses, subject to a
maximum for all Losses in the aggregate equal to the Purchase Price paid by the
Buyer hereunder. All such Claims made during the relevant survival period shall
be counted in determining whether the thresholds specified above have been
achieved
5.7 Exclusive Remedy. The provisions of this Article V shall constitute the
sole and exclusive remedy of any Indemnitee for Losses arising out of, resulting
from or incurred in connection with any inaccuracy in any representation or the
breach of any warranty or covenant made by a Party in this Agreement (other than
with respect to Sections 4.7 and 4.8, which shall not be subject to the
provisions or limitations of this Section 5.7).
ARTICLE VI
CONDITIONS TO THE CLOSING; CLOSING DELIVERIES
6.1 Closing Deliveries of the Seller Parties. As a condition to the
obligation of the Buyer to consummate the transactions contemplated hereby, the
Buyer shall have received on or prior to the Closing Date, all of the following,
each duly executed by the parties thereto (other than the Buyer) and dated as of
the Closing Date, in form and substance satisfactory to the Buyer:
(a) Copies, certified by the Secretary or an Assistant Secretary of
SB&S of resolutions of its board of directors authorizing the execution,
delivery and performance of this Agreement and the other Transaction Documents
to which the SB&S is a party and the consummation of the transactions
contemplated hereby and thereby;
(b) The Xxxx of Sale, in the form attached hereto as Exhibit A;
(c) The IP Assignment, in the form attached hereto as Exhibit B;
(d) The Xxxxxx Employment Agreement, in the form attached hereto as
Exhibit C;
(e) The Xxxxx Employment Letter, in the form attached hereto as
Exhibit D;
(f) The required consents as set forth on Schedule 2.4(c);
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(g) All documents necessary to effect the Chase Release;
(h) A check in the amount of $317.16 payable to "New York State Sales
Tax" in payment of sales tax relating to transfer to the Buyer of personal
property comprising a portion of Acquired Assets; and
(i) Such further instruments of sale, transfer, conveyance, assignment
or delivery covering the Acquired Assets, or any part thereof, as the Buyer
may reasonably require to assure the full and effective sale, transfer,
conveyance, assignment or delivery to it of the Acquired Assets to be
transferred pursuant to this Agreement.
6.2 Closing Deliveries of the Buyer. As a condition to the obligation of
the Seller Parties to consummate the transactions contemplated hereby, the
Seller Parties shall have received, on or prior to the Closing Date, all of the
following, each duly executed by the Parties thereto (other than the Seller
Parties) and dated as of the date hereof, in form and substance satisfactory to
the Seller Parties:
(a) Copies, certified by the Secretary or an Assistant Secretary of
the Buyer, of resolutions of its board of directors authorizing the execution,
delivery and performance of this Agreement and the other Transaction Documents
to which the Buyer is a party and the consummation of the transactions
contemplated hereby and thereby;
(b) The IP Assignment, in the form attached hereto as Exhibit B;
(c) The Xxxxxx Employment Agreement, in the form attached hereto
as Exhibit C;
(d) The Xxxxx Employment Letter, in the form attached hereto as
Exhibit D;
(e) All documents necessary to create a guarantee by HSBC of the Chase
LOCs; and
(f) The Initial Payments.
ARTICLE VII
TERMINATION
7.1 Rights to Terminate Agreement. The Parties may terminate this Agreement
prior to the Closing upon written notice to the other Party or Parties, as
provided below:
(a) The Parties may terminate this Agreement by mutual written
consent;
(b) By any Party if the Closing has not occurred on or prior to August
31, 2004 through no fault of the terminating Party; and
(c) Any Party (if the terminating Party is not then in material breach
of its obligations hereunder) may terminate this Agreement if (i) a material
default or breach shall be made by the other Party or Parties with respect to
the due and timely performance of any of its or
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his covenants and agreements contained herein and such default cannot be cured
within ten (10) business days, or (ii) a condition to Closing that is within the
other Party's or Parties' control is not satisfied as and when required.
7.2 Effect of Termination. If any Party terminates this Agreement pursuant
to this Article, all obligations of the Parties hereunder shall terminate
without any further liability of any Party to any other Party, except as
provided in this Article.
7.3 Remedies For Breach. Any Party found to have breached the terms of this
Agreement shall be responsible for all reasonable attorneys fees, costs and
disbursements incurred or expended by the non-breaching Party.
ARTICLE VIII
MISCELLANEOUS
8.1 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given (i) upon personal
delivery, (ii) three days after being mailed by certified or registered mail,
postage prepaid, return receipt requested, (iii) one business day after being
sent via a nationally recognized overnight courier service if overnight courier
service is requested from such service or (iv) upon receipt of electronic or
other confirmation of transmission if sent via facsimile and followed by
certified or registered mail, postage prepaid, return receipt requested, to the
parties, their successors in interest or their assignees at the following
addresses and telephone numbers, or at such other addresses or telephone numbers
as the parties may designate by written notice in accordance with this Section
8.1:
If to the Buyer:
Movie Star, Inc.
0000 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxxxxxx Xxxxxx
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx
Telephone: (000) 000-0000
Fax: (000)000-0000
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If to Seller Parties:
Xxxxx Xxxxxxxxx
000 Xxxxxx Xxxxxx
Xxxxxx Xxxxxx, Xxx Xxxx 00000
Xxxxxx Xxxxxxxxx
00 Xxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
With a copy to:.
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
8.2 Publicity. No party shall make any public announcements in respect of
this Agreement or the transactions contemplated herein without the consent of
the other, which consent shall not unreasonably withheld or delayed; provided,
however, that the Buyer or its affiliates may make one or more press releases
("REQUIRED RELEASE") as required by law or the relevant rules of applicable
trading exchanges. Each Required Release shall be provided to the Seller Parties
at least 24 hours prior to dissemination for their reasonable review and
comment. The Seller Parties acknowledge that they already have given approval of
the press release to be disseminated by Buyer upon execution of this Agreement.
8.3 Assignability and Parties in Interest. This Agreement and the rights,
interests or obligations hereunder may not be assigned by any Party without the
written consent of the other Parties. This Agreement shall inure to the benefit
of and be binding upon the Parties and their respective permitted successors and
assigns. Nothing in this Agreement will confer upon any person not a party to
this Agreement, or the legal representatives of such person any rights or
remedies of any nature or kind whatsoever under or by reason of this Agreement.
8.4 Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York, without giving
effect to its conflicts of laws principles or rules that would require the
application of the law of any other jurisdiction.
8.5 Venue. Any civil action or legal proceeding arising out of or relating
to this Agreement shall be brought in the appropriate federal or state court
located in the State of New York, County of New York. Each party consents to the
jurisdiction of such court in any such civil action or legal proceeding and
waives any objection to the laying of venue of any such civil action or legal
proceeding in such court. Service of any court paper may be effected on such
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party by mail, as provided in this Agreement, or in such other manner as may be
provided under applicable laws, rules of procedure or local rules.
8.6 Counterparts. Facsimile transmission of any signed original document or
retransmission of any signed facsimile transmission will be deemed the same as
delivery of an original. At the request of any party, the parties will confirm
facsimile transmission by signing a duplicate original document. This Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which shall constitute but one and the same instrument.
8.7 Complete Agreement. This Agreement, the exhibits and schedules hereto
(which are incorporated herein by this reference) and the other Transaction
Documents contain the entire agreement between the parties hereto with respect
to the transactions contemplated herein and therein and supersede all previous
oral and written and all contemporaneous oral negotiations, commitments, and
understandings.
8.8 Headings; References. The headings contained in this Agreement and the
other Transaction Documents are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. References herein to
Articles, Sections, Schedules and Exhibits refer to the referenced Articles,
Sections, Schedules or Exhibits hereof unless otherwise specified.
8.9 Severability. If any provision of this Agreement is invalid, illegal,
or unenforceable in any jurisdiction, as to that jurisdiction, such provision
shall be deemed amended to the extent required to make it valid, legal and
enforceable, and to the extent that the rights or obligations of the parties
under this Agreement will not be materially and adversely effected thereby, such
amended provision and the remaining provisions of this Agreement will remain in
full force and effect in such jurisdiction and shall not render that or any
other provision of this Agreement invalid, illegal, or unenforceable in any
other jurisdiction.
8.10 Expenses of Transactions. Except as otherwise expressly provided in
this Agreement, all fees, costs and expenses incurred by the Buyer in connection
with the transactions contemplated by this Agreement shall be borne by the
Buyer, and all fees, costs, and expenses incurred by the Seller Parties in
connection with the transactions contemplated by this Agreement shall be borne
by the Seller Parties.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
MOVIE STAR, INC.
By: /s/ Xxxx Xxxxxxxxx
--------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Executive Vice President
XXXXXX XXXXXXXXX & SON LINGERIE, INC.
By: /s/ Xxxxxx Xxxxxxxxx
--------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: President
/s/ Xxxxxx Xxxxxxxxx
------------------------------------------
XXXXXX XXXXXXXXX
/s/ Xxxxx Xxxxxxxxx
------------------------------------------
XXXXX XXXXXXXXX
00
