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EXHIBIT 10.30
ASSET PURCHASE AGREEMENT
dated July 1, 1995
by and between
BEEBA'S CREATIONS, INC.
and
THE DESIGN AND SOURCE HOLDING COMPANY, LTD.
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TABLE OF CONTENTS
Page
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1. Purchase and Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 First Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Second Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Assignment of Trade Names and Copyrights . . . . . . . . . . . . . . . 2
2. Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Independent Sales Representative Agreement . . . . . . . . . . . . . . . . . . . 2
4. Restrictive Covenant Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.1 Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.2 Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.3 Payment for Styles . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.4 Security for Obligations . . . . . . . . . . . . . . . . . . . . . . . 4
5.5 Credits and Chargebacks . . . . . . . . . . . . . . . . . . . . . . . 4
6. Representations and Warranties of Seller . . . . . . . . . . . . . . . . . . . . 4
6.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . 4
6.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6.3 No Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.4 Title to Assets; Absence of Encumbrances . . . . . . . . . . . . . . . 5
6.5 Financial Information Concerning Seller . . . . . . . . . . . . . . . 5
6.6 Product Liability Insurance . . . . . . . . . . . . . . . . . . . . . 5
6.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.8 Broker's or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . 5
6.9 Representations Accurate at Closing Date . . . . . . . . . . . . . . . 6
7. Representations and Warranties of Buyer . . . . . . . . . . . . . . . . . . . . 6
7.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . 6
7.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7.3 No Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7.4 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.6 Broker's or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . 7
7.7 Representations Accurate at Closing Date . . . . . . . . . . . . . . . 7
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8. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8.1 Covenants of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8.1.1 Access to Documents; Opportunity to Ask Questions . . . . . . . . . . . . . 7
8.1.2 Quality Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.1.3 Physical Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.1.4 Future Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.2 Covenants of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.2.1 Future Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.2.2 No Market Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.2.3 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.1 Conditions Precedent to the Obligations of Seller at the First Closing Date . . . . . . . 9
9.1.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 9
9.1.2 Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.1.3 Authorization; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.1.4 Legal Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.1.5 Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1.6 Satisfaction with Financial Projections . . . . . . . . . . . . . . . . . . 10
9.1.7 Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1.8 Delivery of Related Agreements . . . . . . . . . . . . . . . . . . . . . . . 10
9.1.9 Employee Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1.10 Consents to Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1.11 Officers Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1.12 Secretary's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.2 Conditions Precedent to Buyer's Obligations at the First Closing Date . . . . . . . . . . 11
9.2.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 11
9.2.2 Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.2.3 Authorization; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.2.4 Legal Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.2.5 Good Standing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.2.6 No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.2.7 Delivery of Related Agreements . . . . . . . . . . . . . . . . . . . . . . . 11
9.2.8 Xxxx of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.2.9 Seller's Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.2.10 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.2.11 Secretary's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.3 Conditions Precedent to Seller's Obligations at the Second Closing Date . . . . . . . . . 12
9.4 Conditions Precedent to Buyer's Obligations at the Second Closing Date . . . . . . . . . . 12
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10. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.2 Indemnification Notice and Procedure . . . . . . . . . . . . . . . . . . 13
11. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12.1 Protection of Confidential Information . . . . . . . . . . . . . . . . . 14
12.2 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14. Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.1 Waiver of Bulk Sale . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.3 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.4 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
14.5 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
14.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
14.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
14.8 Prior Agreements; Amendments and Waivers . . . . . . . . . . . . . . . . 17
14.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
14.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
14.11 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
14.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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SCHEDULES
Schedule 1.1.1 Patterns and Style Library
Schedule 1.1.3 Customer List
Schedule 1.1.4 Furniture, Fixtures and Equipment
Schedule 1.2.1 List of Styles
Schedule 1.2.2 List of Tradenames
Schedule 2.1 List of Employees
Schedule 5.2 Purchase Price Allocation
Schedule 6.6 Product Liability Insurance Policies
Schedule 6.7 Litigation
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EXHIBITS
Exhibit 1.1.2 License Agreement
Exhibit 1.1.5 Sublease Agreement
Exhibit 3 Independent Sales Representative
Exhibit 4 Restrictive Covenant Agreement
Exhibit 5.1 Promissory Note
Exhibit 5.4 Security Agreement
Exhibit 9.1.9 Form of Employee Release
Exhibit 9.1.10 Form of Consent to Assignment
Exhibit 9.2.8 Xxxx of Sale
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement"), is made and entered into
as of July 1, 1995 by and between Beeba's Creations, Inc., a California
corporation ("Seller"), and The Design and Source Holding Company, Ltd., a New
York corporation ("Buyer"), with respect to the following facts:
RECITALS
A. Seller is in the business of designing, manufacturing (through
contract manufacturers), and selling (at the wholesale level) clothing and
produces a number of different lines of clothing through several different
divisions within Seller's corporate organization.
B. Seller contracts for the manufacture of its garments in
several countries outside the United States and leases a warehouse/distribution
facility in San Diego, California and a showroom facility in New York, New
York.
C. Buyer desires to acquire from Seller, and Seller is willing to
transfer to Buyer, certain of the assets and liabilities used in the designing,
manufacturing (through contract manufacturers) and selling (at the wholesale
level) of Seller's junior, girls and maternity woven tops, junior, girls and
maternity woven bottoms, junior, girls and maternity knit tops and junior,
girls and maternity knit bottoms product lines (the " Business"), all upon the
terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows.
1. Purchase and Sale of Assets. Subject to the terms and
conditions of this Agreement, Buyer agrees to purchase from Seller, and Seller
agrees to sell, transfer, convey, and deliver to Buyer the assets described in
this Section 1 (collectively, the "Assets"). The purchase and transfer of the
Assets will take place on two separate closing dates.
1.1 First Closing Date. Concurrently with the execution
of this Agreement (the "First Closing Date"), Seller shall sell to Buyer and
Buyer shall purchase from Seller, the following:
1.1.1 The patterns and styles library listed on
Schedule 1.1.1 hereto;
1.1.2 A license in all copyrights associated
with and owned or licensed by Seller in connection with the items listed on
Schedule 1.1.1 hereto pursuant to the terms and conditions of a License
Agreement in the form attached hereto as Exhibit 1.1.2.
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1.1.3 The list of all customers of the Business
set forth on Schedule 1.1.3 hereto;
1.1.4 The furniture, fixtures and equipment
listed on Schedule 1.1.4 hereto;
1.1.5 The right to use of a portion of the New
York showroom, pursuant to the terms and conditions of the Sublease Agreement
attached hereto as Exhibit 1.1.5; and
1.1.6 The goodwill associated with the Business.
1.2 Second Closing Date. On November 10, 1995 (the
"Second Closing Date"), Seller shall sell to Buyer and Buyer shall purchase
from Seller the following:
1.2.1 The inventory as of October 31, 1995 of
finished goods of the garment styles listed on Schedule 1.2.1 hereto (the
"Styles"); and
1.2.2 The tradenames listed on Schedule 1.2.2
hereto, to be transferred pursuant to the terms and conditions of the License
Agreement; provided, however, that Seller may delay transfer of the trade names
until it has collected all accounts receivable from sales of inventory of the
Styles prior to October 31, 1995; however, the license of the trademarks is
effective as of July 1, 1995.
1.3 Assignment of Trade Names and Copyrights. Seller
also agrees upon satisfaction and performance of all of the obligations of
Buyer under the Security Agreement of even date (the "Security Agreement")
between Seller, as secured party, and Buyer, as debtor, that Seller shall
execute such further instruments and documents and are reasonably requested by
Buyer or its counsel in order to assign the tradenames and copyrights described
in the License Agreement to Buyer.
2. Assumption of Liabilities. Buyer shall assume and be
responsible for the following liabilities of Seller (collectively, the
"Liabilities") and no others:
(i) all accrued vacation time for the employees listed
and in the amounts set forth on Schedule 2.1 hereto such employees being those
who will terminate their employment with Seller, and commence employment with
Buyer, as of July 15, 1995 (the "Terminating Employees");
(ii) all commissions due to independent sales
representatives for customer sales orders for Styles taken prior to the Second
Closing Date, but not shipped to customers until after the Second Closing Date;
and
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3. Independent Sales Representative Agreement. Concurrently with
the execution of this Agreement, the parties will enter into an Independent
Sales Representative Agreement (the "Independent Sales Representative
Agreement") in the form of Exhibit 3 hereto, pursuant to which Seller shall
appoint Buyer independent sales representative for sales of the Styles from the
date hereof through the Second Closing Date.
4. Restrictive Covenant Agreement. Concurrently with the
execution of this Agreement, the parties will enter into a Restrictive Covenant
Agreement in the form hereto pursuant to which Seller shall covenant not to
compete with the Business in the United States for a period of three years.
5. Purchase Price.
5.1 Price. In full payment for all of the Assets (except
for the inventory of finished goods of the Styles to be transferred and paid
for on the Second Closing Date), Buyer will deliver to Seller concurrently with
the execution of this Agreement:
(i) $750,000 in immediately available funds;
(ii) its Promissory Note in the form attached
hereto as Exhibit 3.1 (the "Promissory Note") in the principal amount of
$950,000; and
(iii) $49,003.22 as reimbursement for gross
payroll costs, employer taxes, employee benefits and travel costs related to
the Terminating Employees for the period from July 1, 1995 through July 31,
1995.
5.2 Allocation. The purchase price shall be allocated
among the Assets as set forth on Schedule 5.2. Buyer shall be responsible for
payment of any sales taxes incurred in connection with the transactions
contemplated in this Agreement.
5.3 Payment for Styles. On November 10, 1995, Buyer
shall pay Seller in immediately available funds for the inventory of Styles
transferred on the Second Closing Date. Upon receipt of such payment, Seller
shall ship the inventory of Styles to Buyer's warehouse on a freight collect
basis. In the event that Buyer fails to make payment for the inventory of
Styles, refuses delivery of the Styles or is otherwise unable to accept
delivery of the Styles and such Styles are warehoused at Seller's warehouse
building, Buyer shall pay Seller $30,000 per month or any portion thereof, for
storage of the inventory of Styles. The purchase price for the Styles shall be
the Full Landed Duty Paid Cost of the Styles as defined in Section 5.1 of the
Independent Sales Representative Agreement less the amount of liabilities
assumed by Buyer for accrued vacation time for Terminating Employees under
Section 2(i) hereof. The calculation of the Full Landed Duty Paid Cost for the
Styles is likely to contain good faith estimates at November 10, 1995. On
November 30, 1995, Seller shall prepare and deliver to Buyer a schedule (a
"Final Amount Schedule"), which shall identify each item used in calculating
the final Landed Duty Paid
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Cost for the Styles (the "Final Amount"). Upon receipt of the Final Amount
Schedule, Buyer shall be permitted during the 30-day period following such
receipt (the "Review Period") to examine the books, records and inventory of
Seller and to deliver a written statement to Seller of any objections to the
Final Amount Schedule. If no such statement is delivered to Seller by Buyer
within the Review Period, the Final Amount shall be binding on Seller and
Buyer. If, however, Buyer delivers such a statement to Seller, then Seller and
Buyer shall attempt to resolve the objections contained therein. Failing their
agreement, such objections shall be resolved by arbitration in accordance with
Section 14.3 hereof, which determination shall be conclusive and binding upon
the parties hereto. Within five business days after the last to occur of (i)
the end of the Review Period, or (ii) if Buyer delivers to Seller a statement
of objections to the Final Amount Schedule, the resolution of any such
objections, or (iii) failing such resolution, the date of determination as to
such objections by arbitration, Seller or Buyer, as appropriate, shall make a
final payment on the basis of the Final Amount, as adjusted by the resolution
or arbitral determination of any objections.
5.4 Security for Obligations. Buyer's obligations
hereunder shall be secured pursuant to the terms of a Security Agreement,
including appropriate UCC filings, in the form attached hereto as Exhibit 5.4.
5.5 Credits and Chargebacks. All credits and chargebacks
arising after the Second Closing Date shall be allocated properly between the
respective parties. Such chargebacks are to be determined mutually by Xxxxxx
X. Xxxxxx or Arjun X. Xxxxx for the Seller or Xxxxxx Xxxxxxx or Xxxxxx X.
Xxxxxxx for the Buyer.
6. Representations and Warranties of Seller. Seller hereby
represents and warrants to Buyer on each of the First Closing Date and the
Second Closing Date (as appropriate, the "Closing Date"), as follows:
6.1 Organization and Good Standing. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California, and has full corporate power and authority to
own its properties and carry on its business as it is now being conducted.
6.2 Authorization. Seller has the full corporate power
and authority to enter into this Agreement and each of the agreements which is
an exhibit to this Agreement (the "Ancillary Agreements") and to perform all
its obligations hereunder and under the Ancillary Agreements. This Agreement
and the Ancillary Agreements have been duly authorized by all required Board
and Shareholder action of Seller and, upon execution, delivery, and
satisfaction of the conditions stated herein, shall constitute the legal, valid
and binding obligations of Seller enforceable against Seller in accordance with
their terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditor's rights generally and by general principles of equity.
No approval or authorization of any governmental authority or agency or any
private entity is required, which has
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not been obtained, for the sale of the Assets by Seller to Buyer and the
performance by Seller of its obligations under this Agreement and under the
Ancillary Agreements.
6.3 No Restrictions. As of the Closing Date, neither the
execution or delivery of this Agreement or the Ancillary Agreements nor the
consummation of the transactions contemplated hereby or thereby will violate
any provision of Seller's Articles of Incorporation or Bylaws, or conflict with
or result in a breach of, or give rise to a right of termination under, or
accelerate the performance required by, any terms of any agreement to which
Seller is a party or to which it or its assets is subject, or constitute a
default thereunder, or result in the creation of any lien, claim or encumbrance
upon, or give rise to rights in any other person to, the Assets, or violate any
law, ordinance, rule, regulation, judgment, writ, injunction, or court order to
which Seller is subject.
6.4 Title to Assets; Absence of Encumbrances. As of the
First Closing Date and the Second Closing Date, Seller will have good and
marketable title to such of the Assets as are then being sold and transferred,
free and clear of any and all liens, mortgages, pledges, security restrictions,
prior assignments, claims, leases, encumbrances or rights of others of any kind
whatsoever.
6.5 Financial Information Concerning Seller. Buyer
acknowledges receipt of the 1994 Annual Report to shareholders of Seller, its
SEC Form 10-K report for the fiscal year ended August 31, 1994 and its SEC Form
10-Qs for the quarters ended November 30, 1994, February 28, 1995 and May 31,
1995.
6.6 Product Liability Insurance. Schedule 6.6 hereto
contains a true, correct and complete list of all policies of insurance which
insure or have insured Seller for product liability claims, which policies have
been in force at any time during the last five years. True, correct and
complete copies of each such policy, including all amendments, riders,
assignments and relevant correspondence relating thereto, have been furnished
by Seller to Buyer. The policy which provides current coverage is in full
force and effect and free from any right of termination (other than standard
provisions regarding cancellation after a reasonable notice period) on the part
of the insurance carrier.
6.7 Litigation. There are no private or governmental
actions, suits, proceedings, arbitrations, administrative or other proceedings
or claims, or investigations by governmental agencies (domestic or foreign),
pending or, to the best of Seller's knowledge, threatened against or involving
Seller or the Assets in which the amount in controversy exceeds $50,000, except
as set forth on Schedule 6.7. There is no outstanding judgment, order,
injunction or decree of any court or governmental agency (domestic or foreign)
or any arbitration decision against or naming Seller or involving the Assets.
There is no lawsuit, proceeding or investigation pending or, to the best of
Seller's knowledge, threatened against Seller which might question the validity
or propriety of this Agreement or the consummation of any of the transactions
contemplated hereby.
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6.8 Broker's or Finder's Fees. No agent, broker, person
or firm acting on behalf of Seller is, or will be, entitled to any commission
or fees from any party in connection with this Agreement.
6.9 Representations Accurate at Closing Date. The
representations and warranties and all information contained in this Agreement
(including any of the Exhibits, Schedules or certificates delivered pursuant
hereto) or in any writing delivered to Buyer by Seller will be true, correct
and complete in all respects as of the Closing Date as though then made and as
though the Closing Date were substituted for the date of this Agreement
throughout this Agreement except as affected by the transactions provided for,
or as otherwise expressly contemplated by, this Agreement.
7. Representations and Warranties of Buyer. Buyer hereby
represents and warrants to Seller on each Closing Date, as follows:
7.1 Organization and Good Standing. Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of New York and has full corporate power and authority to own
its properties and carry on its business as it is now being conducted.
7.2 Authorization. Buyer has the full corporate power
and authority to enter into this Agreement and the Ancillary Agreements and to
perform all its obligations hereunder and under the Ancillary Agreements. This
Agreement and the Ancillary Agreements have been duly authorized by all
required Board and Shareholder action of Buyer and, upon execution, delivery,
and satisfaction of the conditions stated herein, shall constitute the legal,
valid and binding obligations of Buyer enforceable against Buyer in accordance
with their terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditor's rights generally and by general principles of equity.
No approval or authorization of any governmental authority or agency or any
private entity is required, which has not been obtained, for the purchase of
the Assets by Buyer from Seller and the performance by Buyer of its obligations
under this Agreement and under the Ancillary Agreements.
7.3 No Restrictions. As of the Closing Date, neither the
execution or delivery of this Agreement or the Ancillary Agreements nor the
consummation of the transactions contemplated hereby or thereby will conflict
with or result in a breach of, or give rise to a right of termination under, or
accelerate the performance required by, any terms of any agreement to which
Buyer, or any shareholder, director, officer, employee, or other agent of Buyer
(an "Affiliate of Buyer") is a party or to which Buyer or any Affiliate of
Buyer, or its assets is subject, or constitute a default thereunder, or result
in the creation of any lien, claim or encumbrance upon, or give rise to rights
in any other person to, any assets of Buyer or any Affiliate of Buyer, or
violate any law, ordinance, rule, regulation, judgement, writ, injunction, or
court order to which Buyer or any Affiliate of Buyer is subject.
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7.4 Tangible Net Worth. Buyer shall have immediately
prior to the First Closing Date, Net Worth and cash on hand of at least
$900,000. For these purposes, Net Worth shall mean total shareholders' equity
in accordance with generally accepted accounting principles.
7.5 Litigation. There are no private or governmental
actions, suits, proceedings, arbitrations, administrative or other proceedings
or claims, or investigations by governmental agencies (domestic or foreign),
pending or, to the best of Buyer's knowledge, threatened against Buyer or
involving any of its assets or properties or against an Affiliate of Buyer or
involving any of the assets of any Affiliate of Buyer. There is no outstanding
judgment, order, injunction or decree of any court or governmental agency
(domestic or foreign) or any arbitration decision against or naming Buyer or an
Affiliate of Buyer. There is no lawsuit, proceeding or investigation pending
or, to the best of Buyer's knowledge, threatened against Buyer or an Affiliate
of Buyer which might question the validity or propriety of this Agreement or
the consummation of any of the transactions contemplated hereby.
7.6 Broker's or Finder's Fees. No agent, broker, person
or firm acting on behalf of Buyer is, or will be, entitled to any commission or
fees from any party in connection with this Agreement.
7.7 Representations Accurate at Closing Date. The
representations and warranties of Buyer and all information contained in this
Agreement (including any of the Schedules or certificates delivered pursuant
hereto) or in any writing delivered to Seller by Buyer will be true, correct
and complete in all respects as of the Closing Date as though then made and as
though the Closing Date were substituted for the date of this Agreement
throughout this Agreement except as affected by the transactions provided for,
or as otherwise expressly contemplated by, this Agreement.
8. Covenants.
8.1 Covenants of Seller. From and after the date hereof
to the Second Closing Date in respect of Sections 8.1.1, 8.1.2 and 8.1.3, and
thereafter in respect of Section 8.1.4 and 8.1.5, Seller hereby covenants and
agrees that:
8.1.1 Access to Documents; Opportunity to Ask
Questions. Seller will make confidentially available for inspection by Buyer
or its representatives, during normal business hours, Seller's properties,
corporate records, books of account, contracts and all other documents related
to the Business and the Assets and Liabilities reasonably requested by Buyer,
its employees, counsel, auditors and other representatives in order to permit
Buyer and such representatives to make a reasonable inspection and examination
of the properties, business and affairs of Seller with respect to the Business.
The furnishing of any information to Buyer or any investigation made by Buyer
or its authorized representatives or any knowledge of the principals or
employees of Buyer concerning Seller or the Business shall not affect or
otherwise diminish
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or obviate the representations and warranties made by Seller in this Agreement
and Buyer's right to rely thereon.
8.1.2 Quality Control. Seller shall cooperate
with Buyer in resolving quality control and manufacturing problems relating to
the Styles.
8.1.3 Physical Inventory. Seller will take a
physical inventory of the Styles as of the Second Closing Date, at Buyer's
expense at the actual cost incurred by Seller. Seller shall promptly deliver
the results of such inventory to Buyer and Buyer shall have the right to have a
representative present during the inventory.
8.1.4 Future Claims. Seller will give Buyer
prompt written notice of its receipt of (i) any claim concerning or relating to
the Assets, or (ii) any product liability claim involving products associated
with the Business.
8.1.5 Name Change. Seller shall cause a vote to
be taken at its next regularly scheduled annual shareholder's meeting on a
proposal to amend its Articles of Incorporation to change its corporate name to
a name that bears no resemblance to Beeba's Creations, Inc. and that will not
interfere in any jurisdiction with the use by Buyer of such name. Upon
effectiveness of the license of Seller's tradenames to Buyer pursuant to
Section 1.2.2 hereof and the License Agreement, (a) Seller shall file a
Fictitious Business Name Statement other than Beeba's Creations, Inc. or a
similar name, and shall cease doing business under that tradename, and (b)
Seller shall consent to Buyer's filing a Fictitious Business Name Statement to
do business as "Beeba's Creations, Inc."
8.2 Covenants of Buyer. From and after the date hereof
to the Second Closing Date and thereafter as applicable, Buyer hereby covenants
and agrees that:
8.2.1 Future Operations. Buyer acknowledges
that its past relationship with Seller has provided it with access to certain
proprietary information. Buyer shall conduct its future operations in
compliance with the terms of the License Agreement and the confidentiality
provisions contained in Section 12 hereof.
8.2.2 No Market Transactions. In connection
with the negotiation of this Agreement, Buyer may receive material non-public
information concerning Seller. Buyer will treat all such information as
Confidential, as defined in Section 12 hereof. As a consequence of such
access, Buyer agrees that for a period of one year following the First Closing
Date, neither it nor any person or entity affiliated with it, will purchase any
of the capital stock of Seller or any security convertible into the capital
stock of Seller, except pursuant to an exercise of an option or employee
benefit plan or other right in such person's possession at the First Closing
Date, and will not sell any capital stock of Seller or any security convertible
into the capital stock of Seller.
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8.2.3 Financial Information. Prior to the First
Closing Date, Buyer shall provide Seller with the following financial
information, prepared in accordance with GAAP, consistently applied:
(i) Buyer's most recent interim
unaudited financial statement;
(ii) statements of Buyer's projected
monthly income and cash flows for a period of 12 months after the First Closing
Date;
(iii) Buyer's projected Balance
Sheets for a period of 12 months after the First Closing Date.
Prior to the Second Closing Date, Buyer shall provide Seller with the following
financial information, prepared in accordance with GAAP, consistently applied:
(i) Buyer's most recent unaudited
financial statement.
9. Conditions Precedent.
9.1 Conditions Precedent to the Obligations of Seller at
the First Closing Date. The obligation of Seller to sell the Assets on the
First Closing Date is, at the option of Seller, subject to satisfaction by
Buyer of the following conditions, each of which shall be deemed material.
9.1.1 Representations and Warranties. Each of
the representations and warranties of Buyer contained in this Agreement shall
be true, correct and complete in all respects.
9.1.2 Performance of Covenants. Buyer shall have
performed and complied in all respects to the reasonable satisfaction of Seller
with the covenants and provisions in this Agreement required herein to be
performed or complied with by Buyer on or before the First Closing Date.
9.1.3 Authorization; Consents. All corporate
action necessary to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby shall
have been duly and validly taken by Buyer. All notices to, and declarations,
filings and registrations with, and consents, authorizations, approvals and
waivers from, governmental and regulatory bodies required to enable Buyer to
consummate the transactions contemplated hereby, which, either individually or
in the aggregate, if not made or obtained, would have a material adverse effect
shall have been made or obtained.
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9.1.4 Legal Action. No action or proceeding
shall have been instituted or threatened, or claim or demand made before any
court or other governmental body, seeking to restrain or prohibit or to obtain
damages with respect to the consummation of any of the transactions
contemplated hereby or which in the reasonable opinion of Seller makes it
inadvisable to consummate such transactions.
9.1.5 Good Standing. Buyer shall have delivered
to Seller certificates from the Secretary of State of New York to the effect
that Buyer is in good standing, and a certificate as to the non-default tax
status of Buyer in New York.
9.1.6 Satisfaction with Financial Projections.
Seller shall have reviewed the financial statements, including financial
projections, delivered pursuant to Section 8.2.3, and shall be satisfied, in
its discretion, that the presumptions underlying Buyer's projections are
reasonable and that Buyer will have sufficient cash flow to meet the payment
terms called for under the Promissory Note.
9.1.7 Cash Consideration. Buyer shall have
delivered to Seller the cash consideration specified in Section 5.
9.1.8 Delivery of Related Agreements. Buyer
shall have delivered to Seller executed copies of each of the following
agreements, each of which are Exhibits to this Agreement:
(i) Promissory Note;
(ii) Security Agreement, including
UCC-1's;
(iii) Independent Sales
Representative Agreement;
(iv) Sublease Agreement; and
(v) License Agreement.
9.1.9 Employee Releases. Seller shall have
received a release, in the form attached hereto as Exhibit 9.1.9, from each
Terminating Employee.
9.1.10 Consents to Assignment. Seller shall have
received a consent to assignment, in the form attached hereto as Exhibit
9.1.10, from each of Seller's commissioned sales representatives who will
receive commissions that will be payable by Buyer pursuant to its assumption of
the Liabilities in accordance with Section 2.
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9.1.11 Officers Certificate. Seller shall have
received a certificate from the President and Chief Financial Officer of Buyer,
dated the Closing Date, to the effect set forth in Section 9.1.1, 9.1.2, 9.1.3
and 9.1.4.
9.1.12 Secretary's Certificate. Seller shall have
received a certificate from the Secretary of Buyer, dated the Closing Date,
certifying to the resolutions in respect of this Agreement adopted by the Board
of Directors and Shareholders of Buyer.
9.2 Conditions Precedent to Buyer's Obligations at the
First Closing Date. The obligation of Buyer to consummate the purchase of the
Assets on the First Closing Date is, at the option of Buyer, subject to
satisfaction by Seller of the following conditions, each of which shall be
deemed material.
9.2.1 Representations and Warranties. Each of
the representations and warranties of Seller contained in this Agreement shall
be true, correct and complete in all respects on the Closing Date with the same
force and effect as if made on the Closing Date.
9.2.2 Performance of Covenants. Seller shall
have performed and complied in all respects to the reasonable satisfaction of
Buyer with the covenants and provisions in this Agreement required herein to be
performed or complied with by Seller on or before the Closing Date.
9.2.3 Authorization; Consents. All corporate
action necessary to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby shall
have been duly and validly taken by Seller. All notices to, and declarations,
filings and registrations with, and consents, authorizations, approvals and
waivers from, governmental and regulatory bodies required to consummate the
transactions contemplated hereby, which, either individually or in the
aggregate, if not made or obtained, would have a material adverse effect shall
have been made or obtained; provided, however, that Buyer expressly waives
Seller's obligation to deliver the Master Lessor's consent to the Sublease
Agreement.
9.2.4 Legal Action. No action or proceeding
shall have been instituted or threatened, or claim or demand made before any
court or other governmental body, seeking to restrain or prohibit, or to obtain
damages with respect to, the consummation of any of the transactions
contemplated hereby, or which might materially and adversely affect the Assets
or increase the assumed Liabilities, or which in the reasonable opinion of
Buyer makes it inadvisable to consummate such transactions.
9.2.5 Good Standing Certificates. Seller shall
have delivered to Buyer a certificate from the Secretary of State of California
to the effect that Seller is in good standing in such jurisdiction, and a
certificate as to the non-default tax status of Seller in California.
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9.2.6 No Adverse Change. There shall be no
material adverse change, whether or not covered by insurance, in the Assets or
increase in the assumed Liabilities.
9.2.7 Delivery of Related Agreements. Seller
shall have delivered to Buyer executed copies of each of the following
agreements, each of which are Exhibits to this Agreement:
(i) Independent Sales Representative
Agreement;
(ii) Restrictive Covenant Agreement;
(iii) Sublease Agreement; and
(iv) License Agreement.
9.2.8 Xxxx of Sale. Seller shall have executed a
xxxx of sale in the form of Exhibit 9.2.8 and shall have delivered it to Buyer
along with all such other deeds, bills of sale, endorsements, assignments,
drafts, checks and other documents of transfer, conveyance and assignment valid
to transfer all of Seller's right, title and interest in and to the Assets to
Buyer and to vest in Buyer good and indefeasible title to the Assets, in form
and substance satisfactory to Buyer and Buyer's counsel.
9.2.9 Seller's Records. Buyer shall have
received Seller's records pertaining to the Assets. (Unless otherwise
requested by Buyer, delivery of the foregoing will not be effected by physical
delivery at the Closing but by surrendering to Buyer access to the premises
containing the foregoing.)
9.2.10 Officers' Certificate. Buyer shall have
received a certificate signed by the President and Chief Financial Officer of
Seller to the effect set forth in Sections 9.2.1, 9.2.2, 9.2.3, 9.2.4 and
9.2.6, dated the Closing Date.
9.2.11 Secretary's Certificate. Buyer shall have
received a certificate from the Secretary of Seller, dated the Closing Date,
certifying to the resolutions in respect of this Agreement adopted by the Board
of Directors and Shareholders of Seller.
9.3 Conditions Precedent to Seller's Obligations at the
Second Closing Date. The obligation of Seller to sell the Assets to be
transferred on the Second Closing Date is, at the option of Seller, subject to
satisfaction by Buyer of the conditions set forth in Sections 9.1.1, 9.1.2,
9.1.3, 9.1.4, 9.1.5, 9.1.7, 9.1.11 and 9.1.12, as of the Second Closing Date,
substituting the term "Second Closing Date" for "First Closing Date" wherever
it appears in such sections.
9.4 Conditions Precedent to Buyer's Obligations at the
Second Closing Date. The obligation of Buyer to consummate the purchase of the
Assets to be transferred on the Second
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Closing Date is, at the option of Buyer, subject to satisfaction by Seller of
the conditions set forth in Sections 9.2.1, 9.2.2, 9.2.3, 9.2.4, 9.2.5, 9.2.6,
9.2.8, 9.2.9, 9.2.10 and 9.2.11, as of the Second Closing Date, substituting
the term "Second Closing Date" for "First Closing Date" wherever it appears in
such sections.
10. Indemnification.
10.1 General. Each party hereto agrees to and does hereby
indemnify, defend and hold harmless ("Indemnify") each other party hereto and
their heirs, successors, assigns, directors, officers, employees, agents and
affiliates (collectively the "Indemnified Representatives"), against any and
all losses, damages, costs and expenses, including reasonable attorneys' fees
(collectively the "Losses"), whether upon a claim by a third party or
otherwise, incurred by reason of (i) the failure of any representation or
warranty of the indemnifying party contained herein to be true and correct in
all respects, or (ii) the failure by the indemnifying party to fully comply
with all covenants or agreements contained herein. Buyer shall also indemnify
Seller and its Indemnified Representatives from (i) all claims for accrued
vacation pay for the Terminating Employees, and (ii) any Losses that Buyer may
suffer arising out of the conduct of the Business after the Closing Date.
Seller shall also indemnify Buyer against any Losses Buyer may suffer arising
out of (i) the conduct of the Business prior to the Closing Date, (ii) any
claim or lawsuit by a shareholder of Seller in its capacity as such, (iii) the
failure or alleged failure to comply with any applicable bulk sales law, or
(iv) Buyer becoming obligated for any liability or obligation of Seller not
assumed by Buyer pursuant to Section 2 hereof.
10.2 Indemnification Notice and Procedure. In connection
with any claim which might give rise to indemnification hereunder, the
indemnified party shall give prompt written notice to the indemnifying party
specifying the nature of the claim in reasonable detail and the amount thereof,
to the extent known to the indemnified party but the failure to so notify the
indemnifying party shall not relieve the indemnifying party from any liability
which he or it may have to the indemnified party hereunder, unless and to the
extent that the indemnifying party is ultimately found to have been prejudiced
thereby and then only to that extent. The indemnifying party shall defend
against such claim at its own cost and expense. If the claim is by a third
party, the indemnified party shall be entitled to participate in the defense of
such claim, by counsel reasonably acceptable to the indemnifying party, at the
indemnified parties' cost and expense. The indemnified party shall cooperate
with the indemnifying party in such defense. The indemnifying party shall
consult with the indemnified party prior to settling or otherwise disposing of
any such claim.
11. Survival. All representations, warranties, covenants,
agreements and indemnifications contained in this Agreement, including any
Exhibit, Schedule or certificate delivered pursuant hereto, or in any other
document or statement delivered in connection herewith, shall survive the
execution and delivery of this Agreement and the Closing Date and any
investigation made by any party or on his or its behalf for a period of two
years after Closing.
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If this Agreement is terminated, the provisions of Sections 8.2.1, 10, 12, 13,
14.1, 14.2, 14.5, 14.6, 14.7, and 14.8 shall continue to apply.
12. Confidentiality.
12.1 Protection of Confidential Information. In
connection with the transactions contemplated hereby, each party to this
Agreement may have access to Confidential Information (as defined below) of the
other party. Each party will (i) use the same effort to protect the
Confidential Information of the other party as it does with respect to its own
similar information, (ii) allow access to the Confidential Information only to
those of its employees having a need to know, and (iii) give appropriate
instructions to its employees concerning the nature of the Confidential
Information and the steps which its employees are to take in safeguarding such
information. Each agreement between a party to this Agreement and its
employees concerning confidential information shall be deemed to apply to the
Confidential Information of the other party. All Confidential Information in
the possession of Seller concerning the Business shall be considered
Confidential Information of Buyer commencing on the first Closing Date.
Confidential Information shall include, but not be limited to
financial projections; lists of vendors, suppliers, customers, potential
customers and employees, including all statistical and financial information
associated therewith; customer credit information; sales, marketing and
strategic plans; and pricing policies. Each party has maintained, and will
continue to maintain, its Confidential Information as its own private,
proprietary and confidential information and as its business trade secrets.
Confidential Information disclosed to a party hereto will sometimes, but not
always, be marked "Confidential" to designate its status. Where so marked, not
all pages may be so marked. The lack of marking will not be an indication that
such information is not Confidential Information.
Each party shall take every reasonable precaution to prevent
disclosure to any unauthorized person or entity and any unauthorized use of the
Confidential Information; provided, however, that Buyer recognizes that Seller
will be obligated to file a Current Report on Form 8-K and an Annual Report on
Form 10-K, as well as other reports regarding the transaction with the SEC and
nothing contained herein shall prohibit disclosure required by the Securities
Exchange Act of 1934, the rules and regulations promulgated thereunder or in
order for Seller to prepare its financial reports in accordance with generally
accepted accounting principles.
Neither party will, at any time, use any Confidential
Information of the other party in any manner which may, directly or indirectly,
have an adverse effect on the business or potential business of the other
party, nor will either party perform any acts which would tend to reduce the
proprietary value of such Confidential Information to other party.
12.2 Enforcement. In the event of a breach or threatened
breach of the obligation to maintain Confidential Information without
disclosure or unauthorized use, the following agreements, procedures and
remedies will apply:
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12.2.1 A breach would cause irreparable harm, and
the injured party would not have an adequate remedy at law with respect to
disclosure or threatened disclosure of such Confidential Information.
12.2.2 A breach or threatened breach alleged in a
verified complaint or affidavit filed with a proper Federal or State court
shall entitle the injured party to the immediate issuance, without notice or
hearing, of a temporary restraining order precluding the continuance of the
conduct in question until hearing on a preliminary injunction.
12.2.3 A preliminary injunction may be issued,
without bond, upon a proper showing of (i) the breach or threatened breach,
(ii) the confidential nature of the information, which may be shown by
affidavit and in camera to the court, (iii) ownership of the information by the
injured party, and (iv) that the Confidential Information was furnished to the
other party.
12.2.4 Upon issuance of a preliminary injunction,
and upon issuance of a permanent injunction, or upon a court finding of a
breach or threatened breach, the injured party shall be entitled to an award of
its actual attorney's fees and costs incurred in pursuing the remedy involved.
12.2.5 The remedies provided herein are not
exclusive of any other lawful remedies which may be available to either party.
13. Expenses. Each party shall be responsible for expenses
incurred by it in connection with the negotiation and implementation of this
Agreement.
14. Miscellaneous Provisions.
14.1 Waiver of Bulk Sale. Buyer hereby waives compliance
with California Bulk Sale requirements to the extent they apply to the sale of
the Assets contemplated by this Agreement.
14.2 Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
California without giving any effect to principles of conflicts of laws.
14.3 Arbitration. Except for injunctive proceedings
brought in connection with an alleged breach of paragraph 1.2.2, 4, 8.1.5 or
12, all disputes which cannot be resolved by the parties shall be determined,by
binding arbitration before a single arbitrator selected by and acting in
accordance with the rules for arbitration of commercial disputes of the
American Arbitration Association. Any arbitration shall be held in San
Francisco, California. The provisions of California Code of Civil Procedure
Section 1283.05 are applicable to this agreement to arbitrate.
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14.4 Jurisdiction. Any judicial or other proceeding
permitted to be brought by the parties to this Agreement or to enforce any
arbitral award shall be brought only in the courts of the State of California
for the County of San Francisco, or in the United States District Court for the
Northern District of California, or, if subject to arbitration, only pursuant
to paragraph 14.3 hereof. Each of the parties to this Agreement accepts for
itself the exclusive jurisdiction of the aforesaid courts or arbitration, as
applicable, and irrevocably agrees to be bound by any judgment rendered thereby
in connection with this Agreement, but neither party waives its right to appeal
any judgment or order. The foregoing consent to jurisdiction shall not
constitute a general consent to service of process in the State of California
for any purpose except as provided above and shall not be deemed to confer
rights on any person other than the respective parties to this Agreement.
14.5 Attorneys' Fees. The prevailing party in any
litigation or arbitration shall be entitled to an award of its reasonable
attorneys' fees and costs incurred.
14.6 Notices. All notices and other communications
hereunder shall be in writing and shall be given by personal delivery, courier,
facsimile transmission or first class certified United States Mail, postage
prepaid, addressed to the address below stated of the party to which notice is
given, or to such other address as such party may have fixed by notice:
To Seller: Beeba's Creations, Inc.
0000 Xxxxxxxx Xxxx
Xxx Xxxxx, XX 00000
Attn: President
FAX (000) 000-0000
To Buyer: The Design and Source Holding Company, Ltd.
000 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: President
FAX (000) 000-0000
Notices shall be effective upon courier delivery, personal delivery,
acknowledgment of receipt of facsimile or receipt of first class certified
United States mail. Notices by facsimile must be confirmed by one of the other
methods of transmission, but will be deemed effective upon confirmation of
receipt of the facsimile.
14.7 Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns, provided that this Agreement and all rights and obligations hereunder
may not be assigned or transferred without the prior written consent of the
other party hereto.
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14.8 Prior Agreements; Amendments and Waivers. This
Agreement, including the related Schedules and Exhibits, sets forth the entire
understanding of the parties with respect to the transactions contemplated
hereby and supersedes all prior agreements and understandings between the
parties with respect to the subject matter hereof. This Agreement may be
amended only by a writing signed by all of the parties hereto. Any breach of
or failure to comply with any covenant, agreement, warranty or representation
herein may be waived only in a written instrument making specific reference to
this Agreement signed by the party against whom enforcement of such waiver is
sought.
14.9 Severability. In case any provision of this
Agreement shall be held to be invalid, illegal or unenforceable under any
particular circumstances or for any reason whatsoever, (i) the validity,
legality and enforceability of the remaining provisions of this Agreement, or
the validity, legality or enforceability under any other circumstances shall
not in any way be affected or impaired thereby and (ii) to the fullest extent
possible consistent with applicable law, the provisions of this Agreement shall
be deemed revised, and shall be construed so as to give effect to the intent
manifested by this Agreement.
14.10 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
14.11 Further Assurances. Each of the parties shall take
such further action and execute and deliver such further documents as the other
party may reasonably request to effect the transaction contemplated by this
Agreement.
14.12 Headings. The headings in this Agreement are for
reference purposes only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
BEEBA'S CREATIONS, INC. THE DESIGN AND SOURCE HOLDING
COMPANY, LTD.
By: XXXXXX X. XXXXXX By: XXXXXX X. XXXXXXX
-------------------------------- ----------------------------
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxxx
President President
By: XXXXX X. XXXXXXXXX By: XXXXXX XXXXXXX
-------------------------------- ---------------------------
Xxxxx X. Xxxxxxxxx Xxxxxx Xxxxxxx
Secretary Secretary
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Schedule 1.2.2
THE LICENSED PROPERTY
Trade Names
Beeba's Creations, Inc.
Beeba's
Trademarks
BCI Clothing Co.
BCI Jr.
In Short
ISD
Kyoto
Kyoto Kasuals
Pinot Noir
Red Rover
Bim-Bom-Bay
Copyrights
All copyrights associated with the library of patterns and styles
identified on Schedule 1.1.1 of the Asset Purchase Agreement, of even date
herewith, between Licensor, as seller, and Licensee, as buyer.
25
Schedule 5.2
PURCHASE PRICE ALLOCATION
Patterns and styles library $ 300,000
License in copyrights 225,000
Customers list 400,000
Furniture and fixtures 15,000
Equipment 10,000
Leasehold improvements 25,000
Goodwill 200,000
Tradenames 225,000
Covenants not to compete 300,000
----------
$1,700,000
==========
The cash portion of the purchase price ($750,000.00) shall be allocated to the
customer list, furniture and fixtures, equipment, leasehold improvements, and
covenant not to compete. The promissory note portion of the purchase price
($950,000.00) shall be allocated to the patterns and styles library, the
license for the copyrights, the goodwill and the tradenames.
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Schedule 6.7
Litigation
1. Goody's Family Clothing, Inc. x. Xxxxx'x Creations, Incorporated.
2. Xxx X. Childre x. Xxxxx'x Creations, Inc.
3. Xxx v. Body Drama, Inc., Beeba's Creations, Inc., et al.
4. Xxxx International Group, Ltd. x. Xxxxx'x Creations, Inc.
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LICENSE AGREEMENT
This License Agreement ("Agreement"), made as of the 1st day of July,
1995, by and between Beeba's Creations, Inc., a California corporation
("Licensor") and The Design and Source Holding Company, Ltd., a New York
corporation ("Licensee") and is made with reference to the following facts:
A. Licensor is the owner of the trade names and trademarks, and
copyrights set forth in Exhibit A attached hereto (hereinafter, "Licensed
Property"); and
B. Licensor and Licensee mutually desire to enter into this
Agreement in accordance with the provisions hereof.
NOW, THEREFORE, Licensor and Licensee, in consideration of their
respective promises herein contained and for other good and valuable
consideration, acknowledged by each of them to be satisfactory and adequate, do
hereby agree as follows:
1. Definitions.
1.1 Territory. World-wide.
1.2 Product(s). Clothing.
2. Grant of License Rights.
2.1 Grant of License Rights. Subject to the terms and
conditions hereof, Licensor hereby grants to Licensee, and Licensee accepts
from Licensor, for the term of this Agreement, an exclusive, royalty-free
license, nontransferable except in accordance with the provisions herein, to
use and sublicense the Licensed Property for and in connection with all
activities relating to the production, distribution, packaging, marketing, and
licensing of the Products in the Territory (subject to the provisions hereof).
2.2 Sublicense Rights. Subject to the terms and
conditions hereof, Licensee shall be entitled to sublicense any entity the
right to use the Licensed Property for and in connection with the production,
distribution, packaging, marketing, and licensing of the Products in the
Territory; provided that any such sublicense shall be on terms substantially
similar to and consistent with those herein, shall not reduce or otherwise
affect Licensee's obligations hereunder, shall be subject to the prior approval
of Licensor, which shall not be unreasonably withheld, and shall provide that
Licensee shall serve as Licensor's agent for the purpose of maintaining the
quality standards set forth below.
2.3 Reservation of Rights. Notwithstanding the exclusive
license granted herein, Licensor shall have the right to market and distribute
its existing inventory of Styles (as defined in the Asset Purchase Agreement of
even date herewith between Licensor, as Seller, and
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Licensee, as Buyer), including inventory in process and in transit, and
returned Styles during the term of the Independent Sales Representative
Agreement of even date herewith between Licensor and Licensee. The License for
the use of the trade names identified on Exhibit A shall not be effective until
Licensor collects its accounts receivable for sales of existing inventory of
the Styles.
3. Representations and Warranties of Licensor. Licensor
represents and warrants to Licensee that:
3.1 To the best of its knowledge, it is the owner of the
Licensed Property and has enforceable legal rights in the Unites States of
American in and to the Licensed Property, subject to no pledge, lien, charge or
security interest of any kind or character whatsoever; provided, however, that
Licensor does not have the right to use the name "Beeba's" or "Beeba's
Creations, Inc." in any capacity other than as a corporate name (i.e. it may
not use such names as a brand name or place such names on hang tags), and,
provided, further, that while applications for registration of the trademarks
for "BCI Clothing Co." and "BCI Jr." have been filed, no registration for those
marks has been issued and Licensor makes no representations or warranties that
such registrations will ever be issued. The application for the "BCI Clothing
Co." xxxx is currently pending. The application for the "BCI Jr." xxxx is
pending, but suspended.
3.2 To the best of its knowledge, subject to the
provisions of Section 3.1, it has the sole and exclusive right to grant a
license in and to the Licensed Property.
3.3 Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will result in
(i) to the best of its knowledge, the infringement or other violation of the
rights of any other person or entity, or (ii) the breach of or a default under
any other agreement, arrangement or understanding to which it is a party.
4. Quality Standards.
4.1 Standards. The quality and technical specifications
("Standards") for the Products shall be that all products shall be of at least
as high a quality as those currently produced or marketed by Licensor.
4.2 Rights of Inspection. To ensure that the Standards
hereinabove described are maintained, Licensor and its authorized agents and
representatives shall have the right to inspect Licensee's Products at all
reasonable times, with prior notice.
5. Ownership of the Licensed Property; Modifications.
5.1 Licensor's Ownership Rights. Licensee acknowledges
Licensor's exclusive right, title, and interest in and to the Licensed Property
in the Territory and acknowledges that nothing herein shall be construed to
grant to Licensee any rights in any of the Licensed Property except as
expressly provided herein. Licensee acknowledges that its use of the Licensed
Property
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in the Territory hereunder will not create in it any right, title or interest
in the Licensed Property and that all such use of the Licensed Property in the
Territory and the goodwill generated thereby will inure to the benefit of
Licensor. Licensee warrants and represents with respect thereto as follows:
(a) Licensee will not at any time challenge
Licensor's right, title, or interest in the Licensed Property or the validity
of any of the Licensed Property or any registration thereof;
(b) Licensee will not do or cause to be done or
omit to do anything, the doing, causing, or omitting of which would contest or
in any way impair or tend to impair the rights of Licensor in the Licensed
Property;
(c) Licensee will not represent that it has any
ownership in or rights with respect to the Licensed Property in the Territory
other than rights conferred by this Agreement; and
(d) Licensee will not, either during or
subsequent to the term of this Agreement, use in the Territory any trademark,
service xxxx, trade name, insignia or logo that is confusingly similar to or a
colorable imitation of any of the Licensed Property.
6. Undertakings of Licensee Respecting the Licensed Property.
During the term of this Agreement:
6.1 Marking; Compliance with Trademark Laws. Licensee
shall, and shall require each of its sublicensees to (1) cause the appropriate
designation "TM" or the registration symbol "(R)" to be placed adjacent to
trademarks included in the Licensed Property in connection with each use or
display thereof; and (2) comply with all laws pertaining to trademarks in
force.
6.2 Display of the Marks. Licensee shall, and shall
require each of its sublicensees to, display, in a manner consistent with
Licensor's standards, the trademarks included in the Licensed Property on the
Products and in marketing activities for the Products.
6.3 No Use Objectionable to Licensor. Licensee shall
not, and Licensee shall not permit its sublicensees to, use the Licensed
Property on or in connection with any Product, display, packaging, or marketing
material to which Licensor at any time reasonably objects.
6.4 Restrictions on Use of Trade Names. Licensee shall
not use the trade names "Beeba's" or "Beeba's Creations" as a trademark,
service xxxx or product label.
6.5 Prosecution and Maintenance of Registrations.
Licensee shall be responsible for all filings and fees necessary to prosecute
all pending trademark applications and to maintain
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all state or federal registrations of the Licensed Property in full force and
effect and Licensor shall cooperate fully with Licensee in such regard.
7. Prosecution and Defense of Infringement Claims. During the
term of this Agreement:
7.1 Notice and Prosecution of Infringement of Marks.
Licensee and Licensor shall each provide the other with prompt notice of any
apparent infringement of the Licensed Property within the Territory, any
petition to cancel any registration of any of the Licensed Property, or any
attempted use of or any application to register any xxxx confusingly similar
to, or a colorable imitation of, any of the Licensed Property within the
Territory of which it becomes aware. Licensee shall have primary
responsibility to:
(a) Institute and prosecute any actions for such
infringement of the Licensed Property within the Territory;
(b) Defend any petition to cancel any
registration of any of the Licensed Property; and
(c) Oppose any attempted use of or any
application to register any xxxx confusingly similar to, or a colorable
imitation of, any of the Licensed Property within the Territory.
Any damages and costs recovered through such proceedings shall belong
exclusively to Licensee, and Licensee shall be solely responsible for all costs
and expenses (including attorney's fees) of prosecuting such actions. Licensor
shall provide Licensee with reasonably requested assistance in connection with
such proceedings, and Licensee shall reimburse Licensor's reasonable out-of-
pocket costs of providing such assistance. Licensee shall keep Licensor
informed of the status of any such proceeding and supply Licensor with any
reasonably requested documents regarding such proceeding.
7.2 Licensor Right to Institute Infringement Actions. In
the event Licensee does not institute and prosecute any action for infringement
of the Licensed Property within the Territory, defend any petition to cancel
any registration of any of the Licensed Property, or oppose any attempted use
of or any application to register any xxxx confusingly similar to, or a
colorable imitation of, any of the Licensed Property within the Territory
within a reasonable period of time (having due regard for the protection of the
Licensed Property), Licensor shall have the right to do so, but shall not be
obligated to, either in its own name or in the name of Licensee. Any damages
or costs recovered through such proceeding shall belong exclusively to
Licensor, and Licensor shall be solely responsible for all costs and expenses
(including attorney's fees) of prosecuting such proceeding. If Licensor elects
to prosecute an alleged infringement, Licensor shall obtain Licensee's approval
before entering into any compromise, settlement or stipulation with respect to
such proceeding, which approval Licensee shall not unreasonably withhold.
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7.3 Notice and Defense of Third-Party Infringement
Claims. Licensee and Licensor shall each provide the other with prompt notice
of any claim alleging trademark or copyright infringement involving the use by
Licensee or any sublicensee of the Licensed Property on the Products within the
Territory of which it becomes aware. Licensee shall have primary
responsibility for defending against any and all claims charging trademark
infringement involving the use by Licensee or any sublicensee of the Licensed
Property on the Products within the Territory. Licensor shall provide Licensee
with reasonably requested assistance in connection with such proceedings, and
Licensee shall reimburse Licensor's reasonable out-of-pocket costs of providing
such assistance. Licensee shall keep Licensor informed of the status of such
proceeding and supply Licensor with any reasonably requested documents
regarding such proceedings. Except with regard to claims that are defended by
Licensor, any expenses, losses, damages, or judgments (including attorney's
fees) in connection with claims alleging trademark infringement involving the
use by Licensee or any sublicensee of the Licensed Property on the Products
within the Territory shall be the responsibility of Licensee without any claim
over against Licensor for any portion thereof;provided that Licensee may claim
over against Licensor for any breach of a representation or warranty made by
Licensor hereunder. Licensee shall obtain Licensor's approval before entering
into any compromise, settlement in stipulation regarding such proceeding, which
approval Licensor shall not unreasonably withhold.
7.4 Licensor Rights to Defend Infringement Claims. In
the event Licensee does not within a reasonable period (having due regard for
the protection of the Licensed Property) defend against a claim alleging
trademark infringement involving the use by Licensee or any sublicensee of the
Licensed Property on the Products within the Territory, Licensor shall have the
right, but shall not be obligated, to defend such claim. Any expenses, losses,
damages, or judgments (including attorney's fees) in connection with such
claims defended by Licensor shall be the sole responsibility of Licensor. If
Licensor elects to defend an alleged infringement, Licensor shall secure
Licensee's approval before entering into any compromise, settlement, or
stipulation with respect to such proceeding, which approval Licensee shall not
unreasonably withhold.
8. Licensee Defense and Indemnification of Licensor. Licensee
shall defend, indemnify and save harmless Licensor, its subsidiaries and
affiliates, and their respective successors and assigns from all losses, costs,
liabilities, damages, claims, and expenses of every kind and description,
including reasonable attorney's fees, arising out of or resulting from any act
or omission of Licensee or any sublicensee relating to the production,
distribution, licensing, or marketing of any of the Products in connection with
which the Licensed Property is used, including, but not limited to (1) unfair
or fraudulent advertising claims, warranty claims, and product defect or
liability claims pertaining to the Products; and (2) claims for unauthorized
use or misuse of any patent, trademark, copyright, or other proprietary right
owned, used or controlled by any third party pertaining to the production,
distribution, licensing, or marketing of the Products.
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32
9. Licensor Defense and Indemnification of Licensee. Licensor
shall defend, indemnify and save harmless Licensee, its successors and assigns,
from all losses, costs , liabilities, damages, claims and expenses of every
kind and description, including reasonable attorneys' fees, arising out of or
resulting from any breach of a representation or warranty made by Licensor
hereunder.
10. Compliance With Laws by Licensee and Sublicensees. In
addition to compliance with laws governing trademark usage as provided in
Section 6 hereof, Licensee agrees to comply with, and agrees to require each
sublicensee to comply with, all laws governing production, distribution,
licensing, and marketing of the Products.
11. Term and Termination.
11.1 Term. This Agreement shall be perpetual unless
terminated pursuant to the terms hereof. Upon the termination of this
Agreement, the rights granted hereunder to all sublicensees of Licensee shall
likewise terminate, and all sublicensees shall so provide.
11.2 Events of Termination. If any of the following
events shall occur with respect to Licensee, each such occurrence shall be
deemed an "Event of Termination," and Licensor shall have the right to
terminate this Agreement pursuant to Section 11.3 hereof:
11.2.1 Bankruptcy of Licensee. The occurrence of a
"Bankruptcy" with respect to Licensee. For this purpose, "Bankruptcy" means a
"Voluntary Bankruptcy" or an "Involuntary Bankruptcy." A "Voluntary
Bankruptcy" means an admission in writing by Licensee of its inability to pay
its debts generally or a general assignment by Licensee for the benefit of
creditors; the filing of any petition or answer by Licensee seeking to
adjudicate it a bankrupt or insolvent, or seeking for itself any liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of Licensee or its debts under any law relating to bankruptcy,
insolvency, or reorganization or relief of debtors, or seeking, consenting to,
or acquiescing in the entry of an order for relief or the appointment of a
receiver, trustee, custodian, or other similar official for Licensee or for any
substantial part of its property; or corporate action taken by Licensee to
authorize any of the actions set forth above. An "Involuntary Bankruptcy"
means without the consent or acquiescence of Licensee, the entering of an order
for relief or approving a petition for relief or reorganization or any other
petition seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or other similar relief under any present or future
bankruptcy, insolvency or similar statute, law or regulation, or the filing of
any such petition against Licensee, which petition shall not be dismissed
within ninety (90) days, or, without the consent or acquiescence of Licensee,
the entering of an order appointing a trustee, custodian, receiver, or
liquidator of Licensee or of all or any substantial part of the property of
Licensee which order shall not be dismissed within sixty (60) days.
11.2.2 Breach of Agreements. Licensee fails to
perform in accordance with any of the material terms and conditions contained
herein or there occurs an Event of Default
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under (and as defined in) that certain Security Agreement of even date herewith
between Licensor, as secured party, and Licensee, as debtor.
11.3 Licensor's Right to Terminate Upon Event of
Termination. Licensor may, at its option, without prejudice to any other
remedies it may have, terminate this Agreement by giving written notice of such
termination to Licensee as follows:
(a) Immediately, upon the occurrence of any Event
of Termination pursuant to Section 11.2.1; or
(b) After the expiration of thirty (30) days from
Licensee's receipt of notice from Licensor of the occurrence of any Event of
Termination pursuant to Section 11.2.2, if such Event of Termination is then
still uncured.
11.4 Availability of Injunctive Relief. Licensee agrees
that the remedy at law of Licensor for any act or event that constitutes an
Event of Termination under this Agreement, other than the failure of Licensee
to pay any monies when due, will be inadequate and that Licensor shall be
entitled to injunctive relief, forfeiture of the Products, specific performance
or other such equitable relief, and that Licensee shall not urge in any such
proceeding that an adequate remedy exists at law.
11.5 Post-Termination Obligations of Licensee. Upon the
termination of this Agreement as herein provided, all rights of Licensee and
any sublicensee to use the Licensed Property in the Territory shall immediately
cease. Licensee shall not thereafter operate or conduct business under any
name or in any manner in the Territory that might tend to give the general
public the impression that this Agreement is still in force, or that Licensee
has any right to use any of the Licensed Property in the Territory.
12. Miscellaneous.
12.1 Independent Contractor. It is understood and agreed
that each party to this Agreement shall be acting only in the capacity of an
independent contractor insofar as this Agreement is concerned, and not as a
partner, co-venturer, agent, employee, franchisee or representative of the
other party.
12.2 Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
California without giving any effect to principles of conflict of laws.
12.3 Arbitration. All disputes which cannot be resolved
by the parties shall be determined,by binding arbitration before a single
arbitrator selected by and acting in accordance with the rules for arbitration
of commercial disputes of the American Arbitration Association.
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34
Any arbitration shall be held in San Francisco, California. The provisions of
California Code of Civil Procedure Section 1283.05 are applicable to this
agreement to arbitrate.
12.4 Jurisdiction. Any judicial or other proceeding
permitted to be brought by the parties to this Agreement or to enforce any
arbitral award shall be brought only in the courts of the State of California
for the County of San Francisco or in the United States District Court for the
Northern District of California, or, if subject to arbitration, only pursuant
to Section 12.3 hereof. Each of the parties to this Agreement accepts for
itself the exclusive jurisdiction of the aforesaid courts or arbitration, as
applicable, and irrevocably agrees to be bound by any judgment rendered thereby
in connection with this Agreement, but neither party waives its right to appeal
any judgment or order. The foregoing consent to jurisdiction shall not
constitute a general consent to service of process in the State of California
for any purpose except as provided above and shall not be deemed to confer
rights on any person other than the respective parties to this Agreement.
12.5 Attorneys' Fees. The prevailing party in any
litigation or arbitration shall be entitled to an award of its reasonable
attorneys' fees and costs incurred.
12.6 Notices. All notices and other communications
hereunder shall be in writing and shall be given by personal delivery, courier,
facsimile transmission or first class certified United States Mail, postage
prepaid, addressed to the address below stated of the party to which notice is
given, or to such other address as such party may have fixed by notice:
To Licensor: Beeba's Creations, Inc.
0000 Xxxxxxxx Xxxx
Xxx Xxxxx, XX 00000
Attn: President
FAX (000) 000-0000
To Licensee: The Design and Source Holding Company, Ltd.
000 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: President
FAX (000) 000-0000
Notices shall be effective upon courier delivery, personal delivery,
acknowledgment of receipt of facsimile or receipt of first class certified
United States mail. Notices by facsimile must be confirmed by one of the other
methods of transmission, but will be deemed effective upon confirmation of
receipt of the facsimile.
12.7 Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns, provided that this Agreement and all
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35
rights and obligations hereunder may not be assigned or transferred without the
prior written consent of the other party hereto, except as specifically
provided in Section 2.2.
12.8 Prior Agreements: Amendments and Waivers. This
Agreement sets forth the entire understanding of the parties with respect to
the transactions contemplated hereby and supersedes all prior agreements and
understandings between the parties with respect to the subject matter hereof.
This Agreement may be amended only by a writing signed by the parties hereto.
Any breach of or failure to comply with any covenant, agreement, warranty or
representation herein may be waived only by a written instrument making
specific reference to this Agreement signed by the party against whom
enforcement of such waiver is sought.
12.9 Severability. In case any provision or provisions of
this Agreement shall be held to be invalid, illegal or unenforceable under any
particular circumstances or for any reason whatsoever, (i) the validity,
legality and enforceability of the remaining provisions of this Agreement, or
the validity, legality or enforceability under any other circumstances shall
not in any way be affected or impaired thereby and (ii) to the fullest extent
possible consistent with applicable law, the provisions of this Agreement shall
be deemed revised, and shall be construed so as to give effect to the intent
manifested by this Agreement.
12.10 Headings. The headings in this Agreement are for
reference purposes only and shall not constitute a part hereof.
12.11 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
12.12 Expenses. Except as otherwise provided for herein,
each party hereto shall be responsible for its own expenses accrued in
connection with the negotiation, execution and consummation of the transactions
contemplated by this Agreement, including fees of his or its respective
attorneys, accountants or consultants.
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12.13 Time is of the Essence. Time is of the essence in
this Agreement, and all of the terms, covenants and conditions hereof.
LICENSOR: LICENSEE:
BEEBA'S CREATIONS, INC. THE DESIGN AND SOURCE HOLDING COMPANY, LTD.
By: XXXXXX X. XXXXXX By: XXXXXX X. XXXXXXX
------------------------------------------------ ------------------------------------------------
Xxxxxx X. Xxxxxx, President Xxxxxx X. Xxxxxxx, President
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EXHIBIT A
THE LICENSED PROPERTY
Trade Names
Beeba's Creations, Inc.
Beeba's
Trademarks
BCI Clothing Co.
BCI Jr.
In Short
ISD
Kyoto
Kyoto Kasuals
Pinot Noir
Red Rover
Bim-Bom-Bay
Copyrights
All copyrights associated with the library of patterns and styles
identified on Schedule 1.1.1 of the Asset Purchase Agreement, of even date
herewith, between Licensor, as seller, and Licensee, as buyer.
38
SUBLEASE
This Sublease ("Sublease") is made and entered into as of July 1,
1995, by and between BEEBA'S CREATIONS, INC., a California corporation
("Sublessor") and The Design and Source Holding Company, Ltd., a New York
corporation ("Sublessee"), with reference to the following facts:
RECITALS
A. Pursuant to that certain Standard Form Of Office Lease dated
as of August 17, 1989 ("Master Lease"), entered into by and between Sublessor,
as lessee thereunder, and Broadway and 41st Associates Limited Partnership, as
lessor thereunder ("Master Lessor"), Master Lessor leased to Sublessor the
entire eighteenth (18th) floor designated as unit 1800 in the building commonly
known as 0000 Xxxxxxxx, Xxxxxxxxx, Xxx Xxxx (the "Premises"), as more
particularly described in the Master Lease.
B. A copy of the Master Lease is attached hereto as Exhibit "A"
and incorporated herein by this reference.
C. Sublessor and Sublessee desire to enter into this Sublease in
order for Sublessee to sublease a portion of the Premises on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as set forth below.
1. Sublease Premises. Sublessor hereby subleases to Sublessee
and Sublessee hereby subleases from Sublessor, on and subject to the terms,
conditions and covenants hereinafter set forth, a portion of the Premises as
more described on Exhibit "B" attached hereto and incorporated herein
("Sublease Premises"). Sublessee's percentage share of the Premises is
fifty-one percent (51%) ("Percentage Share") for purposes of determining
Sublessee's percentage of (i) all rental obligations under the Master Lease
including, without limitation, taxes, insurance, utilities, escalations and
other costs payable to Master Lessor and (ii) all other costs associated with
leasing the Premises including without limitation repairs, utilities and
maintenance expenses payable to third party vendors except to the extent the
costs are attributable to the sole actions or omissions of either Sublessor or
Sublessee in which case the costs shall be paid by such party.
2. Use. Sublessee agrees to use the Sublease Premises for
showroom(s) and general office in connection with Sublessee's apparel related
business, as well as incidental use in regard thereto and for no other purpose.
Sublessee agrees Sublessee is subleasing the Sublease Premises "As Is" except
for the construction of walls and doors stated in Section 28 and the
rearrangement of equipment as stated in 31(d). Sublessee shall not make any
improvements to the Sublease Premises without prior written consent from (i)
Sublessor, which shall not be unreasonably
39
withheld or delayed and (ii) Master Lessor as may be required by the Master
Lease. Any improvements made by Sublessee which are regarded as fixtures
under the laws of New York and which cannot be removed without causing damage,
will become the property of the Sublessor upon expiration or termination of
this Sublease unless Sublessee removes and repairs damage; provided, however,
Sublessee shall not remove any such improvements if Sublessee is then in
default under this Sublease. Equipment or other personal property installed
in the Sublease Premises, which Sublessor and Sublessee agree should not be
viewed as fixtures and should not become a part of the real property, shall be
identified prior to installation as "Personal Property." Sublessee shall
repair any damage to the Sublease Premises caused by removal of Sublessee's
Personal Property upon termination of this Sublease and return the Sublease
Premises to Sublessor in the same condition as of the date of this Sublease,
reasonable wear and tear and partitions excepted.
3. Term. The term of this Sublease shall commence on July 1,
1995 ("Commencement Date") and shall end on February 28, 2000, unless sooner
terminated pursuant to the provisions hereof. Sublessee acknowledges and
understands the term of the Master Lease expires on February 28, 2000.
4. Rent. Sublessee shall pay to Sublessor annual rent equal to
One Hundred Sixty-Nine Thousand Four Hundred One Dollars and Sixty cents
($169,401.60) payable in monthly installments equal to Fourteen Thousand One
Hundred Sixteen Dollars and Eighty cents ($14,116.80). Sublessee shall pay the
monthly rent in advance on the first day of each calendar month of the term of
this Sublease, without deduction, offset, prior notice or demand. Rent shall
deemed delinquent if not received by Sublessor on or before the fifth (5th) day
of each month. Rent shall be paid to Sublessor at the address to which notices
to Sublessor are to be delivered pursuant to this Sublease. The installment of
rent payable for any portion of a calendar month shall be a pro rata portion of
the installment payable for a full calendar month.
5. Additional Rent. All amounts payable by Sublessee to
Sublessor hereunder constitute rent and Sublessor, may at Sublessor's
discretion, require Sublessee to pay Master Lessor directly for all rental
obligation's hereunder. Sublessee shall pay to Sublessor within ten (10) days
from receipt of billing statements from either Sublessor or Master Lessor, for
all additional rent and costs associated with the Master Lease based on
Sublessee's Percentage Share and additional rent for purposes of this Sublease
shall include without limitation (i) all rental obligations under the Master
Lease including, without limitation, taxes, insurance, utilities, escalations
and other costs payable to Master Lessor and (ii) all other costs normally
associated with the leasing of the Premises including without limitation
repairs, utilities and maintenance expenses payable to third party vendors
except to the extent such costs are attributable to the sole actions or
omissions of either Sublessor or Sublessee in which case the costs shall be
paid by such party. Except for costs incurred under the terms of the Master
Lease, neither party shall seek reimbursement for costs in excess of $50.00
without the other party's prior written consent.
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6. Security Deposit. Sublessee shall deposit with Sublessor the
sum of $29,493.88 Dollars, which shall throughout the term of this Sublease, be
equal to the percentage share of the total security deposit then existing under
the Master Lease. The deposit shall be security for the faithful performance
and observance by Sublessee of the terms, provisions and conditions of this
Sublease. It is agreed that in the event Sublessee defaults in respect of any
the terms, provisions and conditions of this Sublease, including, but not
limited to the payment of rent and additional rent, Sublessor may use, apply or
retain the whole or any part of the security so deposited to the extent
required for the payment of any rent and additional rent or any other sum as to
which Sublessee is in default or for any sum which Sublessor may expend or may
be required to expend by reason of Sublessee's default in respect of any of the
terms, covenants and conditions of this Sublease. In the event the amount of
the deposit required under the Master Lease is increased, Sublessee shall
within ten (10) days from receipt of notice from Sublessor, deliver to
Sublessor its Percentage Share of the increase.
7. Obligations Under Master Lease.
7.1 This Sublease (except as provided herein) is made
subject to all of the terms and conditions of the Master Lease. The terms and
conditions, and the respective rights and obligations of Sublessor and
Sublessee to each other under this Sublease, shall be as set forth in the
Master Lease except (i) Sections relating to tenant improvements and initial
occupancy at the commencement of the Master Lease shall not be applicable to
Sublessee, (ii) obligations of Master Lessor for functions within the control
of Master Lessor such as those relating to repair, maintenance, operation,
insurance and management of the Premises shall not be assumed by Sublessor,
(iii) Sections 45, 46, 59, 68, and 72, (iv) where consent is required,
Sublessor may not unreasonably withhold its consent, and (v) Sections 57 and 58
may only be invoked by Sublessor if Sublessee's actions have caused the Master
Lessor to invoke same against Sublessor, and (vi) those provisions of the
Master Lease that are inconsistent with this Sublease, in which event, as
between Sublessor and Sublessee, the terms of this Sublease shall control over
the Master Lease. Therefore, for the purpose of this Sublease, except as
provided herein, whenever in the Master Lease the words "lease," "Owner" and
"Tenant" are used, they shall be deemed to mean the "Sublease," "Sublessor" and
"Sublessee" respectively as used in this Sublease and the words ""demised
premises"" shall mean the "Sublease Premises". Sublessee hereby agrees, for
the benefit of Sublessor, to assume and perform the obligations of Sublessor as
the "lessee" under the Master Lease, except as expressly modified by the terms
of this Sublease. Sublessor does not assume any obligations of Master Lessor
under the Master Lease and Sublessee shall look solely to the Master Lessor for
performance of any and all of Master Lessor's obligations under the Master
Lease. Sublessor shall cooperate with Sublessee and send notices as may be
necessary to protect Sublessor's interest under the Master Lease.
7.2 Sublessor and Sublessee each acknowledge that their
possession is subject to all the terms and conditions of the Master Lease and
Sublessee agrees that they will do nothing to breach any of the terms,
covenants and/or conditions of the Master Lease. In the event of termination
of the Master Lease for any reason, including, without limitation, a voluntary
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surrender by Sublessor, or in the event of any re-entry or repossession of the
Sublease Premises by Master Lessor, Master Lessor shall have the option at its
election to either take over all right, title and interest of Sublessor under
this Sublease, in which case Sublessee shall attorn to Master Lessor or enter
into a new lease based on the terms for which Sublessee is bound under this
Sublease.
7.3 If the Master Lease terminates, as between Sublessor
and Sublessee, this Sublease shall also terminate and Sublessor and Sublessee
shall be released from all liabilities and obligations under this Sublease
except with respect to Sections 7.2, 8, 14, 15, 19 herein.
7.4 Sublessor shall not modify the Master Lease if it
affects Sublessee obligations or rights without the prior written consent of
Sublessee.
8. Insurance. Sublessee and Sublessor shall maintain insurance
as required by the Master Lease. Sublessor will name both Master Lessor and
Sublessee as additional insureds under such liability insurance policy.
Sublessee will name both Master Lessor and Sublessor as additional insureds
under such liability insurance policy. Sublessor and Sublessee each hereby
release and relieve the other, and waive their entire right of recovery against
the other for loss or damage arising out of or incident to the perils insured
against which perils occur in, on or about the Premises and each shall give
notice to its insurance company of such release and waiver of subrogation
contained herein. Sublessee shall maintain adequate insurance to insure
against all losses and damage to Sublessee's products and personal property
stored or located in, on or about the Sublease Premises.
9. Assignment and Subletting. Sublessee shall not, without the
prior written consent of Sublessor, assign this Sublease or any interest in it
and shall not transfer, lease or sublet the Sublease Premises or any part
thereof or any right, interest or privilege appurtenant thereto. Sublessor
shall not withhold its consent unreasonably. Any purported assignment,
transfer, or underletting shall be null and void.
10. Entry by Sublessor. Sublessor and Master Lessor both reserve
and shall have the right to enter the Sublease Premises upon prior notice to
Sublessee. Sublessor shall have the right to enter the Sublease Premises upon
24 hour prior written notice to Sublessee; except in the event of an emergency,
in which event, Sublessor shall have the right to enter the Sublease Premises
immediately and shall promptly provide written notice to Sublessee of such
entry.
11. Master Sublessor Consent. This Sublease and the obligations
of the parties hereunder are conditioned upon Sublessor obtaining Master
Lessor's consent hereto by Master Lessor executing the Consent of Master Lessor
attached to this Sublease.
12. No Brokers. Sublessor and Sublessee each hereby represent and
warrant that they have had no dealings with any real estate broker or agents in
connection with the negotiation of this Sublease. Each party agrees to
indemnify and hold harmless the other from any and all
4
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claims, costs, expenses, damages, liabilities (including but not limited to
reasonable attorneys fees) arising from or in connection with any claim by any
broker or agent for a commission or fee or other amount due in connection with
this Sublease based upon the action of the indemnifying party.
13. Cooperation. Sublessor and Sublessee each agree to execute
and deliver to the other such other and further documents or instruments and
take such other acts as may reasonably be required to carry out and effectuate
the provisions and purposes of this Sublease.
14. Waiver of Liability. Unless caused by the other party's
negligence or illegal misconduct, neither party shall be liable to the other
(or any sublessee, assignee, licensee or invitee of the other party) for any
injury or damage that may result to any person or property by or from any cause
whatsoever, and without limiting the generality of the foregoing, whether
caused by interruption of utilities or services to be provided by Master
Lessor, or water leakage of any character from the room, walls, basement or
other portion of the Premises, the Sublease Premises or the Common Area (as
defined below), or caused by gas, fire, oil, electricity or any cause
whatsoever, in, on or about the Premises, the Sublease Premises, the Common
Area or any part thereof, or upon any default by Master Lessor related to the
Premises.
15. Indemnity. Sublessor agrees to indemnify and hold Sublessee
harmless from and defend Sublessee against any and all claims or liabilities
for any injury or damage to any person or property whatsoever (i) arising from
(x) Sublessor's conduct of business in or management of the Premises or (y) any
work or thing whatsoever done by Sublessor, or any condition created in or
about the Premises by Sublessor during the term of the Master Lease, if any, or
(ii) arising from any negligence or otherwise wrongful act or omission of
Sublessor or invitees or its or their employees, agents, or contractors; and,
(b) all costs; expenses and liabilities incurred in or in connection with each
such claim or action or proceeding brought against Sublessee by reason of any
such claim. Sublessor, upon notice from Sublessee, shall resist and defend
such action or proceeding by counsel chosen by Sublessee who shall be
reasonably satisfactory to Sublessor. Sublessee agrees to indemnify and hold
Sublessor harmless from and defend Sublessor against any and all claims or
liabilities for any injury or damage to any person or property whatsoever (i)
arising from (x) Sublessee's conduct of business in or management of the
Sublease Premises or (y) any work or thing whatsoever done by Sublessee, or any
condition created in or about the Premises by Sublessee during the term of the
Master Lease, if any, or (ii) arising from any negligence or otherwise wrongful
act or omission of Sublessee or invitees or its or their employees, agents, or
contractors; and, (b) all costs; expenses and liabilities incurred in or in
connection with each such claim or action or proceeding brought against
Sublessor by reason of any such claim. Sublessee, upon notice from Sublessor,
shall resist and defend such action or proceeding by counsel chosen by
Sublessor who shall be reasonably satisfactory to Sublessee. Both parties
shall keep each other fully appraised at all times of the status of such any
claims or defense of claims arising under this Section.
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16. Late Charges. Sublessee's failure to pay any of Sublessee's
obligations promptly may cause Sublessor to incur unanticipated costs, the
exact amount of which are impractical or extremely difficult to ascertain.
Such costs may include, but are not limited to, processing and accounting
charges and late charges which may be imposed on Sublessor by the Master Lease.
Therefore, if Sublessor does not receive any rent or additional rent payment
within five (5) days after it becomes due, Sublessee shall pay Sublessor a late
charge equal to four percent (4%) of the overdue amount. The parties agree
that such late charge represents a fair and reasonable estimate of the costs
Sublessor will incur by reason of such late payment.
17. Interest. Any amount owed by Sublessee hereunder which is not
paid when due shall bear interest at the rate of prime plus 2% per annum from
the due date. The payment of interest on such amounts shall not excuse or cure
any default by Sublessee under this Sublease. If the interest rate specified
in this Sublease is higher than the rate permitted by law, the interest rate is
hereby decreased to the maximum legal interest rate permitted by law. Interest
shall not be payable on late charges.
18. Remedies Upon Default. In addition to the default provisions
set forth in the Master Lease, which shall govern any default hereunder,
Sublessor shall have the remedies set forth in this Section. Notwithstanding
anything in this Sublease or the Master Lease to the contrary, in the event of
any default after applicable notice and cure periods ("Cross-Default") under
any of the Asset Purchase Agreement, License Agreement, Promissory Note,
Restrictive Covenant Agreement, Security Agreement, or Independent Sales
Representative Agreement, all of even date herewith and all of which have been
entered into by and between Sublessor and Sublessee ("Ancillary Agreements"),
Sublessee shall be deemed to be in default hereunder, and in addition to other
rights of Sublessee upon a default, Sublessor may terminate this Sublease upon
thirty (30) days written notice to Sublessee, unless Sublessee cures the
Cross-Default prior to the expiration of such thirty (30) day notice period.
18.1 Right of Sublessor to Re-Enter. In the event of any
termination of this Sublease, Sublessor shall have the right to bring an action
to repossess the Sublease Premises under any applicable laws including without
limitation summary procedure, and any Personal Property of Sublessee may be
removed from the Sublease Premises and stored in any public warehouse at the
risk and reasonable expense of Sublessee.
18.2 Sublessor's Right to Pursue Other Remedies. In the
event of any breach of this Sublease, Sublessor may pursue any of the foregoing
remedies, and Sublessor may consecutively or concurrently therewith pursue any
other remedy or enforce any right to which Sublessor may be by law entitled.
19. Attornment. Sublessee acknowledges that Sublessor may not in
the future be the Sublessor of the Sublease Premises and that if Sublessor is
not the Sublessor at some time in the future and if the holder of any mortgage,
deed of trust, leasehold or similar instrument succeeds to Sublessor's interest
in the Sublease Premises, the following shall apply:
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(a) Sublessee shall not disaffirm this Sublease or any of
its obligations hereunder;
(b) At the request of such holder, Sublessee shall attorn
to such holder and pay all rents payable under this Sublease and execute a new
lease for the Sublease Premises, setting forth all of the provisions of this
Sublease except that the term of the new lease shall be for the balance of the
term of this Sublease.
20. Signs. Except for signage reasonably approved by Master
Lessor and Sublessor, Sublessee shall not place or permit to be placed, any
sign, advertisement, notice or other similar matter on the doors, windows,
exterior walls, roof or other areas of the Sublease Premises without the prior
written consent of Sublessor and Master Lessor, which consent may be withheld
for any reason.
21. Statement of Status (Estoppel Certificate). Upon request by
Sublessor or Master Lessor, Sublessee agrees to execute and return, within ten
(10) days of request, a customary and reasonable statement of status of its
tenancy in the form approved by Sublessor and Master Lessor.
22. No Recordation Permitted. Sublessee is prohibited from
recording any memorandum of this Sublease or any other document referencing or
incorporating this Sublease.
23. Governing Law. This Sublease has been negotiated and entered
into in the State of New York, and shall be governed by, construed and enforced
in accordance with the internal laws of the State of New York, applied to
contracts made in New York by New York domiciliaries to be wholly performed in
New York.
24. Attorneys' Fees. The prevailing party in any litigation or
arbitration shall be entitled to an award of its reasonable attorneys' fees and
costs incurred.
25. Notices. All notices and other communications hereunder shall
be in writing and shall be given by personal delivery, courier, facsimile
transmission or first class certified United States Mail, postage prepaid,
addressed to the address below stated of the party to which notice is given, or
to such other address as such party may have fixed by notice:
To the Sublessee: The Design and Source Holding Company, Ltd.
000 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: President
FAX (000) 000-0000
To Beeba's: Beeba's Creations, Inc.
0000 Xxxxxxxx Xxxx
0
00
Xxx Xxxxx, XX 00000
Attn: President
FAX (000) 000-0000
Notices shall be effective upon courier delivery, personal delivery,
acknowledgment of receipt of facsimile or receipt of first class certified
United States mail.
26. Prior Agreements; Amendments. This Sublease and the Ancillary
Agreements listed in Section 19 set forth the entire understanding of the
parties with respect to the transactions contemplated hereby and supersedes all
prior agreements and understandings between the parties with respect to the
subject matter hereof. This Sublease may be amended only by a writing signed
by the parties hereto. Any breach of or failure to comply with any covenant,
agreement, warranty or representation herein may be waived only by a written
instrument making specific reference to this Agreement signed by the party
against whom enforcement of such waiver is sought.
27. Counterparts. This Sublease may be executed in two (2) or
more counterparts, each of which shall be an original, and all of which shall
constitute one and the same instrument.
28. Sublessor and Sublessee shall promptly build demising walls
and doors in places marked on Exhibit B. The cost of building the demising
walls shall be shared in accordance with Sublessee's Percentage Share.
Sublessor and Sublessee shall share equally in the hiring and supervision of
the contractor to perform such work.
29. If Sublessor defaults under the Master Lease, Sublessee may,
after delivering prior written notice to Sublessor, pay any rent or additional
rent directly to Master Lessor.
30. Sublessor shall deliver to Sublessee copies of all
documentation received from Master Lessor and Sublessee may independently
investigate such information so long as all correspondence to the Master Lessor
or third parties is approved by Sublessor in advance.
31. Sublessor represents:
(a) No notice of default has been received under Master
Lease regarding an existing default.
(b) The Master Lease has not been terminated and has not
been amended or modified.
(c) Sublessor will not cause a termination or forfeiture
of the Master Lease or voluntarily accept an early termination thereof.
(d) Sublessor shall rearrange equipment, being purchased
by Sublessee in the Subleased Premises, within 30 days of approval of this
Sublease.
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(e) Sublessor shall use all reasonable efforts to cause
Master Lessor to give its consent.
(f) Sublessor shall pay 49% of all costs under the Master
Lease and under Section 5(ii) of this Sublease.
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32. Common Area. Sublessor and Sublessee shall share the
reception, kitchen, mail room and supply room areas depicted on Exhibit B (the
"Common Area"). Sublessor and Sublessee shall be jointly responsible for the
repair and maintenance of the Common Area, and agree to reasonably cooperate in
that regard. Each party shall provide insurance for their interest in the
Common Area pursuant to the terms hereof. In addition, each party shall
indemnify the other for events occurring in the Common Areas in accordance with
the terms hereof.
IN WITNESS WHEREOF, this Sublease is executed as of the date first set
forth above.
SUBLESSEE:
THE DESIGN AND SOURCE HOLDING COMPANY, LTD.,
a New York corporation
By: XXXXXX X. XXXXXXX
-------------------------------------
Xxxxxx X. Xxxxxxx, President
SUBLESSOR:
BEEBA'S CREATIONS, INC.,
a California corporation
By: XXXXXX X. XXXXXX
-------------------------------------
Xxxxxx X. Xxxxxx, President
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CONSENT OF MASTER LESSOR
The undersigned is the Master Lessor under the Master Lease described
in the Sublease dated July 1, 1995. Master Lessor hereby consents to the
sublease of the Sublease Premises described in the Sublease to The Design and
Source Holding Company, Ltd., a New York corporation ("Sublessee") on the terms
set forth in the Sublease without waiver of the restriction in the Master Lease
concerning further subletting.
MASTER LESSOR:
Date: _______________, 1995 _____________________________________
49
INDEPENDENT SALES REPRESENTATIVE AGREEMENT
This Independent Sales Representative Agreement (this "Agreement") is
made and entered into as of July 1, 1995, by and between Beeba's Creations,
Inc., a California corporation ("Beeba's), and The Design and Source Holding
Company, Ltd., a New York corporation ("DSHC"), with respect to the following
facts:
A. Beeba's is engaged in the business of designing, manufacturing
(through contract manufacturers), and selling (at the wholesale level) clothing
and produces a number of different lines of clothing through several different
divisions within its corporate organization.
B. Concurrently herewith Beeba's is selling to DSHC, and DSHC is
purchasing from Beeba's, certain assets used in the designing, manufacturing
(through contract manufacturers) and selling (at the wholesale level) of
Beeba's junior woven tops, junior woven bottoms, junior knit tops and junior
knit bottoms (the "Business"), pursuant to the terms of an Asset Purchase
Agreement between Beeba's and DSHC of even date herewith (the "Asset Purchase
Agreement").
C. Among the assets of the Business is an inventory of finished
goods, work in process and work in transit of specific clothing styles
identified on Schedule I attached hereto (collectively, the "Styles").
D. Under the terms of the Asset Purchase Agreement, DSHC will act
as sales representative for the sale of Styles from the date hereof until
October 31, 1995, at which time DSHC will purchase the balance of the inventory
of the Styles from Beeba's.
X. Xxxxx'x is willing to appoint DSHC as the sales representative
for the Styles, and DSHC is willing to accept such appointment, all on the
terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
1. Appointment as Sales Representative. Beeba's hereby appoints
DSHC, and DSHC accepts appointment as, sales representative for the Styles,
with authority to sell the Styles in the United States on the terms and
conditions set forth herein. DSHC's duties as sales representative shall be to
use its best efforts to obtain orders for the sale of the Styles and to provide
such follow up services as are needed by the customers, with the same degree
of care and with the same purpose, expertise and timeliness as DSHC uses in the
conduct of its own business.
2. Supplies and Deliveries. Beeba's shall use its best efforts
to provide only the Styles in quantities equal to numbers covered by existing
purchase orders or for which Beeba's has opened letters of credit to suppliers
as of the date of this Agreement, and shall have no obligation to manufacture
or cause the manufacture of additional quantities of the Styles or additional
styles. Beeba's shall furnish to DSHC such information relating to the
delivery of the Styles into its warehouse in San Diego, or other designated
destination, as DSHC may reasonably require. The
50
parties acknowledge that the same garment suppliers may be supplying some of
the Styles to Beeba's at the same time they are supplying other garments to
DSHC. In the event that a supplier combines on a single shipment to Beeba's
some of the Styles (or other products ordered by Beeba's) with garments ordered
by DSHC, then DSHC will immediately remit to Beeba's all amounts required to be
paid by Beeba's for the clearance of the DSHC garments through U.S. customs.
Such amount may be equal to the FOB value of the garments, duty, brokerage fees
and pro rata freight. Beeba's shall have no obligation to advance funds in
order to release DSHC's merchandise from U.S. customs.
3. Pricing and Terms of Sales. DSHC shall be responsible for all
direct customer contact, including soliciting orders for the Styles , and shall
have the right to negotiate the prices and terms of each sale, subject to
Beeba's approval only if the price of any such sale would be lower than Beeba's
full Landed Duty Paid cost (as defined in Section 5.1) for the Styles being
sold. Beeba's shall not be under any obligation to accept any orders taken by
DSHC for the Styles. Without limiting the generality of the foregoing, Beeba's
shall not ship any customer orders which are not approved for factoring by
Congress Xxxxxxx under the terms of the Non-Notification Factoring Agreement
dated April 1, 1991, between Congress Xxxxxxx and Beeba's, as amended, unless
(i) the shipment can be made on a cash before delivery or COD basis, (ii) an
acceptable standby letter of credit is opened by the customer to Beeba's, or
(iii) Beeba's, in its sole discretion, determines to ship the goods, and DSHC
agrees in writing to accept the credit risk for the shipment.
4. Warehouse Services, Invoicing and Collections. Beeba's shall
be responsible for all warehouse services, invoicing and collections in
connection with orders solicited by DSHC and accepted by Beeba's. Beeba's will
maintain the finished Styles in its San Diego warehouse, and will provide all
necessary warehouse personnel for their receiving, handling and shipping.
Beeba's shall directly invoice each customer for sales of the Styles. Full
responsibility for all collections rests with Beeba's, which shall exercise
complete control over the approval of all customer credits, orders, and
contracts. DSHC shall make no allowances or adjustments in accounts, or
authorize the return of any Styles unless given specific advance authorization,
in individual cases, in writing by Beeba's. In the event that DSHC receives
any item of value from customers related to sales of the Styles, DSHC shall
immediately remit the exact amount received to Beeba's without deduction or
offset. In the event that any customer returns any Styles to DSHC instead of
Beeba's, DSHC shall immediately contact Beeba's and advise Beeba's of the
return. At Beeba's request, DSHC shall return the Styles to Beeba's San Diego
warehouse on a freight prepaid basis.
5. Commissions Payable. DSHC shall be entitled to a commission
(the "Commission") from the sale of the Styles equal to net cash receipts (the
"Cash Receipts") from customers for all sales of the Styles, less all of the
following expenses incurred by Beeba's (collectively, the "Expenses"):
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5.1 The full Landed Duty Paid cost of the goods sold for
the Styles, including, without limitation, all costs incurred by Beeba's for
the following:
5.1.1 FOB payments to suppliers,
5.1.2 Duty,
5.1.3 Brokerage fees,
5.1.4 Buying commissions provided that the
recipient of such commissions is identified to DSHC and such
commission relates solely to the Styles,
5.1.5 Freight from overseas suppliers up to U.S.
Customs,
5.1.6 Freight from U.S. Customs to Beeba's San
Diego warehouse, if an independent freight company is used,
5.1.7 All insurance payments made by Beeba's based
related to the Styles, based upon a proration of Beeba's total
insurance premium, and
5.1.8 All other identified miscellaneous costs
incurred in connection with the production, importation and delivery
of the Styles to Beeba's San Diego warehouse or other destination in
the U.S. prior to shipment to retail customers.
All costs for the items in Section 5.1 above shall be separately identified by
file in the accounting for the Commission, and Seller shall make the supporting
documentation for such costs available for Buyers review, upon reasonable
advance notice of a request for inspection.
5.2 All costs associated with the opening, amendment and
negotiation incurred on or after July 1, 1995, of all letters of credit
relating to the Styles opened by Beeba's to suppliers or opened by customers to
Beeba's.
5.3 All factoring fees and banking fees paid to Congress
Xxxxxxx or any of its affiliates related to the sales or cash receipts of the
Styles.
5.4 All costs for any facilities charges for DSHC
personnel located at Beeba's San Diego office during the term of this Agreement
for Warehousing, Traffic, Trucking, Order Entry and Invoicing, Data Processing,
Finance and Accounts Receivable Collections in accordance with the rates listed
on Schedule II attached hereto.
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5.5 All warehouse labor (including employer taxes and
employee benefits paid by Beeba's) related to the receiving, handling and
shipping of the Styles during the term of this Agreement, based on actual wage
rates and hours incurred by Beeba's warehouse staff.
5.6 All sales commissions paid to independent sales
representatives and internal sales staff.
5.7 All freight costs incurred by Beeba's for the
shipment of the Styles to the customers and any freight charges paid by Beeba's
related to Styles returned by customers to Beeba's.
5.8 All out-of-pocket costs for staff of DSHC located at
Beeba's San Diego warehouse during the term of this Agreement.
5.9 All payments made by Beeba's after July 1, 1995 for
production samples, retail samples, courier costs for production samples,
design costs and other miscellaneous costs for garments or research regarding
garments for the fall 1995 season or seasons later than fall 1995.
5.10 $300 per month as payment for all overhead costs
incurred by Beeba's Creations Far East Limited ("BCFE") during the term of this
Agreement, plus all fabric and trims purchased by BCFE, all long distance
telephone charges and fax costs incurred in connection with the Styles.
5.11 Courier costs between Beeba's New York Showroom and
its San Diego office incurred in connection with the Styles.
5.12 Monthly rent and related costs, including deposits,
in connection with DSHC's Sublease of Beeba's New York Showroom.
5.13 All Draws against the Commission, as described below.
The exact amount of the Commission will not be determinable until all customers
have paid all amounts due to Beeba's or Beeba's has issued agreed upon credit
memos to such customers. The collection of receivables is not likely to be
completed until January 31, 1996 or later, and to a large extent will depend on
the sale terms on the orders taken by DSHC from customers. On December 20,
1995, Beeba's will make its existing accounting records relating to the
Commission available to DSHC for inspection and review. If after such review,
Beeba's determines, in its reasonable judgment, that an advance against the
Commission can be made without exceeding the amount of the Commission that will
ultimately be owed, then Beeba's shall advance such funds to DSHC on December
20, 1995 as an additional draw under Section 6 below. As soon as practical
after receipt of all relevant information regarding Cash Receipts and Expenses,
Beeba's will forward a bank check or wire transfer to DSHC in payment of the
Commission, along with
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a statement showing the calculation of the Commission in reasonable detail.
The Commission will not include any amounts attributable to Styles shipped
after the term hereof, even if DSHC obtained the customer order prior to the
end of the term.
6. Draws. DHSC may request from Beeba's, upon at least three (3)
day's prior written notice before the Payment Dates specified below, and
Beeba's will pay to DHSC a draw against the Commission ("Draw") to DSHC equal
to a percentage of Gross Sales less certain expenses, as follows:
PERCENTAGE OF
SHIPMENT PERIOD PAYMENT DATE GROSS SALES DRAW PERCENTAGE
--------------- ------------ ------------- ---------------
July 1-15 July 17 93% 7%
July 16-31 August 1 93% 7%
August 1-15 August 16 93% 12%
August 16-30 September 1 93% 12%
September 1-15 September 18 93% 12%
September 16-30 October 2 93% 12%
October 1-15 October 16 93% 12%
October 16-31 November 1 93% 12%
(For example, if the gross sales of the Styles for the first shipment period in
July amounted to $1,000,000, the Draw to be paid on July 17, 1995 would amount
to $1,000,000 multiplied by the Percentage of Gross Sales and multiplied by the
Draw Percentage.) The following amounts will be subtracted to determine the
actual Draw payable for the first payment date of each month: (i) from the
Draw payable on August 1, the monthly rent and related costs and deposits due
under Section 5.12 above for the months of July and August; (ii) from the Draw
payable for the first payment date of each successive month, the monthly rent
due under Section 5.12 for that month as well as the Expenses identified in
5.6, 5.7, 5.9 and 5.10 above for the shipment month two months prior to the
Draw payment date. (For example, the expenses incurred in the July shipment
month will be deducted from the Draw paid on September 1). In the event that
Beeba's determines, in the reasonable exercise of its discretion, that the
cumulative Draws paid by Beeba's are likely to exceed the Commission earned at
any point in time, then Beeba's can cease paying the Draws until such time as
the Commissions are likely, in Beeba's reasonable judgment, to exceed Draws
paid to date. In the event that Beeba's determines not to pay a Draw, it shall
provide to DSHC a copy of all available information supporting its decision.
7. Offset. From time to time, DSHC will owe monies to Beeba's which
are payable in accordance with the terms of other agreements between the
parties. Beeba's shall have the right, upon presentation to DSHC of
appropriate documentation, to offset against the Commission and
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54
any Draws, any amounts due to Beeba's from DSHC under the terms of any
agreement or arrangement between the parties, except for the $950,000
Promissory Note of even date herewith, executed by DSHC to the order of
Beeba's. The right of offset provided hereunder is granted solely to Beeba's,
in its sole discretion, and except as provided herein or in the specific
agreement giving rise to the obligation, all sums due from one party to the
other shall be paid without deduction or offset.
8. Relationship Created. Neither DSHC nor any representative of
DSHC is an employee of Beeba's for any purpose whatsoever. Beeba's is
interested only in the results obtained by DSHC, which shall have sole control
of the manner and means of performing its obligations under this Agreement.
All expenses and disbursements, including, but not limited to, those for travel
and maintenance, entertainment, office, clerical, and general selling expenses,
that may be incurred by DSHC in connection with this Agreement shall be borne
wholly and completely by DSHC, and Beeba's shall not be in any way responsible
or liable therefor. DSHC does not have, nor shall it hold itself out as
having, any right, power, or authority to create any contract or obligation,
either express or implied, on behalf of, in the name of, or binding upon
Beeba's, or to pledge Beeba's credit, or to extend credit in Beeba's name
unless Beeba's shall consent thereto in advance in writing. DSHC shall have
the right to appoint or otherwise designate suitable and desirable salesmen,
employees, agents, and representatives (collectively referred to as "DSHC's
Representatives"). DSHC shall be solely responsible for DSHC's Representatives
and their acts. DSHC's Representatives shall be retained at DSHC's own risk,
expense, and supervision, and DSHC's Representatives shall not have any claim
against Beeba's for salaries, commissions, items of cost, or other forms of
compensation or reimbursement, and DSHC represents, warrants, and covenants
that DSHC's Representatives shall be subordinate to DSHC and subject to each
and all of the terms, provisions, and conditions of this Agreement which apply
to DSHC.
9. Term. This Agreement shall commence on the date hereof and
shall terminate on October 31, 1995; provided, however, that Beeba's shall have
the right to terminate this Agreement upon the occurrence or (i) any material
breach by DSHC of this Agreement or (ii) any event of default under the
Security Agreement of even date herewith between Beeba's and DSHC. The
provisions of Sections 10 and 11 (excluding Section 11.6) shall survive any
termination of this Agreement.
10. Confidentiality.
10.1 Protection of Confidential Information. In the
performance of their respective obligations hereunder, each party to this
Agreement may have access to Confidential Information (as defined below) of the
other party. Each party will (i) use the same effort to protect the
Confidential Information of the other party as it does with respect to its own
similar information, (ii) allow access to the Confidential Information only to
those of its employees having a need to know, and (iii) give appropriate
instructions to its employees concerning the nature of the Confidential
Information and the steps which its employees are to take in safeguarding such
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55
information. Each agreement between a party to this Agreement and its
employees concerning confidential information shall be deemed to apply to the
Confidential Information of the other party. All Confidential Information in
the possession of Seller concerning the Business shall be considered
Confidential Information of Buyer commencing on the first Closing Date.
10.2 "Confidential Information" Defined. Confidential
Information shall include, but not be limited to financial projections; lists
of vendors, suppliers, customers, potential customers and employees, including
all statistical and financial information associated therewith; customer credit
information; sales, marketing and strategic plans; and pricing policies. Each
party has maintained, and will continue to maintain, its Confidential
Information as its own private, proprietary and confidential information and as
its business trade secrets. Confidential Information disclosed to a party
hereto will sometimes, but not always, be marked "Confidential" to designate
its status. Where so marked, not all pages may be so marked. The lack of
marking will not be an indication that such information is not Confidential
Information.
Each party shall take every reasonable precaution to prevent
disclosure to any unauthorized person or entity and any unauthorized use of the
Confidential Information; provided, however, that DSHC realizes that Beeba's
will be obligated to file a Current Report on Form 8-K and an Annual Report on
Form 10-K, as well as other reports regarding the transaction with the SEC and
nothing contained herein shall prohibit disclosure required by the Securities
Exchange Act of 1934, the rules and regulations promulgated thereunder or in
order for Seller to prepare its financial reports in accordance with generally
accepted accounting principles.
Neither party will, at any time, use any Confidential
Information of the other party in any manner which may, directly or indirectly,
have an adverse effect on the business or potential business of the other
party, nor will either party perform any acts which would tend to reduce the
proprietary value of such Confidential Information to other party.
10.3 Enforcement. In the event of a breach or threatened
breach of the obligation to maintain Confidential Information without
disclosure or unauthorized use, the following agreements, procedures and
remedies will apply:
10.3.1 A breach would cause irreparable harm, and
the injured party would not have an adequate remedy at law with respect to
disclosure or threatened disclosure of such Confidential Information.
10.3.2 A breach or threatened breach alleged in a
verified complaint or affidavit filed with a proper Federal or State court
shall entitle the injured party to the immediate issuance, without notice or
hearing, of a temporary restraining order precluding the continuance of the
conduct in question until hearing on a preliminary injunction.
10.3.3 A preliminary injunction may be issued,
without bond, upon a proper showing of (i) the breach or threatened breach,
(ii) the confidential nature of the information,
7
56
which may be shown by affidavit and in camera to the court, (iii) ownership of
the information by the injured party, and (iv) that the Confidential
Information was furnished to the other party.
10.3.4 Upon issuance of a preliminary injunction,
and upon issuance of a permanent injunction, or upon a court finding of a
breach or threatened breach, the injured party shall be entitled to an award of
its actual attorney's fees and costs incurred in pursuing the remedy involved.
10.3.5 The remedies provided herein are not
exclusive of any other lawful remedies which may be available to either party.
11. Miscellaneous.
11.1 Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
California without giving any effect to principles of conflict of laws.
11.2 Arbitration. Except for injunctive proceedings
brought in connection with an alleged breach of Section 10, all disputes which
cannot be resolved by the parties shall be determined, by binding arbitration
before a single arbitrator selected by and acting in accordance with the rules
for arbitration of commercial disputes of the American Arbitration Association.
Any arbitration shall be held in San Francisco, California. The provisions of
California Code of Civil Procedure Section 1283.05 are applicable to this
agreement to arbitrate.
11.3 Jurisdiction. Any judicial or other proceeding
brought by the parties to this Agreement or any dispute arising out of this
Agreement or any matter related hereto shall be brought only in the courts of
the State of California for the County of San Francisco, or in the United
States District Court for the Northern District of California, or, if subject
to arbitration, only pursuant to paragraph 11.2 hereof. Each of the parties to
this Agreement accepts for itself the exclusive jurisdiction of the aforesaid
courts or arbitration, as applicable, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement, but neither party
waives its right to appeal any judgment or order. The foregoing consent to
jurisdiction shall not constitute a general consent to service of process in
the State of California for any purpose except as provided above and shall not
be deemed to confer rights on any person other than the respective parties to
this Agreement.
11.4 Attorneys' Fees. The prevailing party in any
litigation or arbitration shall be entitled to an award of its reasonable
attorneys' fees and costs incurred.
11.5 Notices. All notices and other communications
hereunder shall be in writing and shall be given by personal delivery, courier,
facsimile transmission or first class certified United States Mail, postage
prepaid, addressed to the address below stated of the party to which notice is
given, or to such other address as such party may have fixed by notice:
8
57
To DSHC: The Design and Source Holding Company, Ltd.
000 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: President
FAX: (000) 000-0000
To Beeba's: Beeba's Creations, Inc.
0000 Xxxxxxxx Xxxx
Xxx Xxxxx, XX 00000
Attn: President
FAX (000) 000-0000
Notices shall be effective upon courier delivery, personal delivery,
acknowledgment of receipt of facsimile or receipt of first class certified
United States mail. Notices by facsimile must be confirmed by one of the other
methods of transmission, but will be deemed effective upon confirmation of
receipt of the facsimile.
11.6 Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns, provided that this Agreement and all rights and obligations hereunder
may not be assigned or transferred without the prior written consent of the
other party hereto, except that Beeba's may, on 30 days prior written notice,
assign its rights and obligations hereunder to an affiliate of Beeba's without
such consent, provided such affiliate shall be reasonably capitalized and
staffed to perform the duties of Beeba's hereunder.
11.7 Prior Agreements: Amendments and Waivers. This
Agreement sets forth the entire understanding of the parties with respect to
the transactions contemplated hereby and supersedes all prior agreements and
understandings between the parties with respect to the subject matter hereof.
This Agreement may be amended only by a writing signed by the parties hereto.
Any breach of or failure to comply with any covenant, agreement, warranty or
representation herein may be waived only by a written instrument making
specific reference to this Agreement signed by the party against whom
enforcement of such waiver is sought.
11.8 Severability. In case any provision or provisions of
this Agreement shall be held to be invalid, illegal or unenforceable under any
particular circumstances or for any reason whatsoever, (i) the validity,
legality and enforceability of the remaining provisions of this Agreement, or
the validity, legality or enforceability under any other circumstances shall
not in any way be affected or impaired thereby and (ii) to the fullest extent
possible consistent with applicable law, the provisions of this Agreement shall
be deemed revised, and shall be construed so as to give effect to the intent
manifested by this Agreement.
11.9 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
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58
11.10 Headings. The headings in this Agreement are for
reference purposes only and shall not constitute a part hereof.
11.11 Actions by Parties. All actions required, permitted
or desired to be taken by Beeba's hereunder shall be taken by Xxxxxx X. Xxxxxx
or in his absence by Arjun X. Xxxxx, and by DSHC by Xxxxxx X. Xxxxxxx or in her
absence Xxxxxx Xxxxxxx.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first written above.
THE DESIGN AND SOURCE HOLDING COMPANY, LTD
By: XXXXXX X. XXXXXXX
--------------------------------------
Xxxxxx X. Xxxxxxx, President
BEEBA'S CREATIONS, INC.
By: XXXXXX X. XXXXXX
--------------------------------------
Xxxxxx X. Xxxxxx, President
10
59
RESTRICTIVE COVENANT AGREEMENT
AGREEMENT made this 1st day of July, 1995 by and among THE DESIGN AND
SOURCE HOLDING COMPANY, LTD., a New York corporation ("Buyer"), having its
principal place of business at 000 Xxxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxxxx 00000,
and BEEBA'S CREATIONS INC., a California corporation ("Seller"), having its
principal place of business at 0000 Xxxxxxxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx 00000.
W I T N E S S E T H:
WHEREAS, concurrently herewith Seller is selling to Buyer and Buyer is
purchasing from Seller certain assets used in designing, manufacturing (through
contract manufacturers) and selling (at the wholesale level) of Seller's knit
and woven tops and bottoms (the "Product") for its junior, girls and maternity
product lines (the "Business"), including the goodwill associated therewith, as
described in and subject to the terms and conditions of an Asset Purchase
Agreement between Seller and Buyer dated as of the date hereof (the "Asset
Purchase Agreement); and
WHEREAS, upon such acquisition, Buyer and Seller intend that Buyer
will have acquired from Seller the Business including Seller's activities
associated with the designing, importing and selling of the Business' product
lines in the United States; and
WHEREAS, in order to implement the intentions of the parties with
respect to the effect of such acquisition, and as a condition to closing of the
transaction contemplated by the Asset Purchase Agreement, Buyer requires that
Seller agree to certain restrictions with respect to its business activities,
and Seller is willing to agree to such restrictions;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
1. In consideration of Buyer's execution and delivery of
the Asset Purchase Agreement and consummation of the transactions contemplated
thereby, during the period commencing on the date hereof and ending on June 30,
1998, Seller will not (i) directly or indirectly own, manage, operate, join,
control, participate in, invest in, or otherwise be connected with, in any
manner, whether as a stockholder, partner, venturer, investor or otherwise, any
business entity that is engaged anywhere in the world in (a) the design,
manufacture, sale, import or export of junior or girls or maternity Product,
whether under brand name or private label, or (b) the financing of any such
business entity; provided that nothing herein shall constrain Seller from
operating that business conducted on the date hereof by Body Drama, Body Drama
Far East, Beeba's Creations Far East, Gaviota, Khazana, Ulterior Motives, and
Adobe Rose (all existing subsidiaries or divisions of Seller) which includes,
as a minority volume, Product that contains both missy and junior size labels
(referred to as cross ticketing), Product that is considered related separates
incorporating the same fabric and prints used in Seller's then current dress
business for other styles (i.e. dresses, skirts, blouses and jackets) and
Product that is made from stretch fabric that is used for intimate apparel;
(ii) for itself or on behalf of any other person, firm or
60
corporation, directly or indirectly or by action together with others (x) call
on any person, firm or corporation that is, was or will be a customer or client
of Seller or Buyer with respect to the Business, for the purpose of soliciting,
diverting or taking away any customer or client from Buyer, provided that
Seller shall not be prohibited from contacting new, existing or previous
customers in connection with the business that it conducts from and after the
Second Closing Date (as defined in the Asset Purchase Agreement), or (y)
induce, influence or seek to induce or influence any person who has been
engaged as an employee or representative of Buyer to terminate any relationship
with Buyer, or employ or retain such person, provided that nothing herein shall
constrain Seller from employing or retaining any person who voluntarily leaves
any such relationship with Buyer without having been so induced or influenced;
or (iii) disclose or divulge any information, knowledge or data relating to or
concerned with the Business, including without limitation its operations,
affairs, methods of doing business, revenues, results of operations, financial
condition, customers or clients, to any person, firm or corporation other than
Buyer (or any affiliate, officer, employee or designee of Buyer), provided that
(a) Buyer recognizes that Seller will be obligated to file a Current Report on
Form 8-K and an Annual Report on Form 10-K, as well as other reports regarding
the transaction with the SEC and nothing contained herein shall prohibit
disclosure required by the Securities and Exchange Act of 1934, the rules and
regulations of the SEC promulgated thereunder or in order for the Seller to
prepare its financial reports in accordance with Generally Accepted Accounting
Principles, and (b) if Seller otherwise becomes legally compelled to disclose
any such information, knowledge or data, Seller will so advise Buyer so that
Buyer may seek a protective order or other appropriate judicial remedy and/or
waive compliance with the provisions of this clause (iii). Nothing herein
contained shall be deemed to prohibit Seller from investing funds, solely on a
passive basis, in securities of a corporation or partnership if the securities
of such corporation or partnership are listed for trading on a national stock
exchange or are traded in the over-the-counter market and Seller's holdings
therein represent less than 5% of the total number of shares or principal
amount of other securities of such corporation or partnership outstanding.
2. This Agreement shall commence on the date hereof and
shall terminate on June 30, 1998; provided, however, that Seller shall have the
right to terminate this Agreement upon the occurrence of any event of default
under the Security Agreement of even date herewith between Seller and Buyer.
The provisions of Sections 6, 7 and 8 shall survive any termination of this
Agreement.
3. Seller acknowledges that the provisions of Section 1
are reasonable and necessary for the protection of Buyer and that each
provision, and the period or periods of time, geographic areas and types and
scope of restrictions on the activities specified therein are, and are intended
to be, divisible. In the event that any provisions of Section 1, including any
sentence, clause or part thereof, shall be deemed contrary to law or invalid or
unenforceable in any respect by a court of competent jurisdiction, the
remaining provisions shall not be affected, but shall, subject to the
discretion of such court, remain in full force and effect and any invalid and
unenforceable provisions shall be deemed, without further action on the part of
the parties hereto, modified, amended and limited to the extent necessary to
render the same valid and enforceable.
2
61
4. The parties hereto acknowledge that in the event of a
breach or a threatened breach by Seller of any of its obligations under this
Agreement, Buyer will not have adequate remedy at law. Accordingly, in the
event of any such breach or threatened breach by Seller, Buyer shall be
entitled to such equitable and injunctive relief as may be available to
restrain Seller and any person, firm or corporation participating in such
breach or threatened breach from violating the provisions hereof. Nothing
herein shall be construed as prohibiting Buyer from pursuing any other remedies
available under this Agreement for such breach or threatened breach, including
the recovery of damages.
5. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
giving any effect to principles of conflict of laws.
6. Except for injunctive proceedings brought in
connection with an alleged breach of Section 1, all disputes which cannot be
resolved by the parties shall be determined by binding arbitration before a
single arbitrator selected by and acting in accordance with the rules for
arbitration of commercial disputes of the American Arbitration Association.
Any arbitration shall be held in New York, New York.
7. Any judicial or other proceeding brought by the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto shall be brought only in the courts of the State of New
York for the County of New York, or in the United States District Court for the
Southern District of New York, or, if subject to arbitration, only pursuant to
Section 5 hereof. Each of the parties to this Agreement accepts for itself the
exclusive jurisdiction of the aforesaid courts or arbitration, and irrevocably
agrees to be bound by any judgment rendered thereby in connection with this
Agreement, but neither party waives its right to appeal any judgment or order.
The foregoing consent to jurisdiction shall not constitute a general consent to
service of process in the State of New York for any purpose except as provided
above and shall not be deemed to confer rights on any person other than the
respective parties to this Agreement.
8. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns.
9. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
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62
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
THE DESIGN AND SOURCE HOLDING COMPANY, LTD.
By: XXXXXX X. XXXXXXX
--------------------------------------
Xxxxxx X. Xxxxxxx, President
BEEBA'S CREATIONS INC.
By: XXXXXX X. XXXXXX
---------------------------------------
Xxxxxx X. Xxxxxx, President
4
63
PROMISSORY NOTE
$950,000.00 July 1, 0000
Xxx Xxxxx, Xxxxxxxxxx
FOR VALUE RECEIVED, The Design and Source Holding Company, Ltd.
("Maker"), promises to pay to Beeba's Creations, Inc., a California corporation
("Holder"), or order, at San Diego, California, the principal amount of Nine
Hundred Fifty Thousand Dollars ($950,000.00), with interest on such amount
until paid, at the rate set forth below and payable as follows:
1. Interest Rate. The amount of outstanding principal shall bear
interest at the rate of 6.83551% per annum. Interest shall accrue on the
principal balance from and after July 1, 1995, and shall be calculated on the
basis of a 360-day year.
2. Payment. Principal and interest shall be payable in 10
installments as reflected on Schedule A attached hereto. Any payment hereunder
shall be applied first to the payment of costs and charges of collection, if
any, then to accrued interest, and the balance, if any, shall be then applied
to reduction of principal. Principal and interest are payable in lawful money
of the United States of America.
3. Late Payment. Maker agrees that if for any reason it fails to
make any of the periodic payments required herein, including the amount due at
the Maturity Date, within five (5) days after the due date, Holder shall be
entitled to damages for the detriment caused thereby, the extent of which
damages are extremely difficult and impractical to ascertain. Maker therefore
agrees that a sum equal to four percent (4%) of such delinquent payment is a
reasonable estimate of such damages and Makers agrees to pay such sum upon
demand by Holder. Acceptance of such late charge by the Holder shall in no
event constitute a waiver of Makers' default with respect to such overdue
amount nor prevent the Holder from exercising any of the other rights and
remedies granted hereunder. The acceptance by the Holder of any payment under
this Note after the date that such payment is due shall not constitute a waiver
of the right to require prompt payment when due of any succeeding payments or
to declare a default as herein provided for any failure to so pay. Acceptance
by the Holder of the payment or a portion of any installment at any time that
such installment is due and payable in its entirety shall neither cure nor
excuse the default caused by failure to pay the whole of such installment and
shall not constitute a waiver of the Holder's rights to require full payment
when due of all future or succeeding installments.
4. Security Agreement. This Note is secured pursuant to the
terms of a Security Agreement executed contemporaneously herewith, which grants
a security interest in substantially all of Maker's tangible and intangible
assets (the "Security Agreement").
5. Default/Acceleration. If any one or more of the following
events shall occur (hereinafter called an "Event of Default"), namely: (i)
default shall be made in the payment of any installment hereunder and shall
continue for a period of three (3) days after the date due; or (ii) Maker shall
become insolvent, or shall be unable to pay its debts as they mature; or shall
64
admit in writing its inability to pay its debts as they mature; or shall make
an assignment for the benefit of its creditors; or shall file or commence or
have filed or commenced against it any proceeding for any relief under any
bankruptcy or insolvency law or any law or laws relating to the relief of
debtors, readjustment of indebtedness, reorganizations, compositions or
extensions, or a receiver or trustee shall be appointed for the undersigned,
and in the case of any such proceeding commenced by any other person or entity
against Maker or the appointment of any such receiver or trustee other than as
a result of the actions of Maker, such proceeding or appointment is not
dismissed, vacated or terminated within 60 days; or (iii) a default shall have
occurred and be continuing under the Security Agreement beyond any applicable
grace period provided in the Security Agreement, THEN, upon the occurrence of
any such Event of Default, or upon the expiration of the term of this Note,
Holder at its election, and without presentment, demand, notice of any kind,
all of which are expressly waived by Maker, may declare the entire outstanding
balance of principal and interest thereon immediately due and payable, together
with all costs of collection, including attorneys' fees, or may exercise upon
or enforce its rights to its collateral, as may be set forth in the Security
Agreement.
6. No Waiver by Holder. The acceptance by Holder of any payment
under this Note after the date such payment is due, or the failure to declare
an Event of Default as herein provided, shall not constitute a waiver of any of
the terms of this Note or the right to require the prompt payment when due of
future or succeeding payments or to declare an Event of Default for any failure
to so pay or for any other default. The acceptance by Holder of a payment of a
portion of any installment at any time that such installment is due in full
shall not cure or excuse the default caused by the failure to pay such
installment in full and shall not constitute a waiver of the right to require
full payment when due of all future or succeeding installments.
7. Attorneys' Fees and Costs. In the event Holder takes any
action to enforce any provision of this Note, either through legal proceedings
or otherwise, Maker promises to immediately reimburse Holder for reasonable
attorneys' fees and all other costs and expenses so incurred. Maker shall also
reimburse Holder for all attorneys' fees and costs reasonably incurred in the
representation of Holder in any bankruptcy, insolvency, reorganization or other
debtor-relief proceeding of or relating to Maker, or for any action to enforce
any judgment rendered hereon or relating to enforcement hereof.
8. Waivers. Maker, endorsers, guarantors and sureties of this
Note hereby waive diligence, demand, presentment, notice of non-payment,
protest and notice of protest; expressly agree that this Note, or any payment
hereunder, may be renewed, modified or extended from time to time and at any
time; and consent to the acceptance or release of security for this Note or the
release of any party or guarantor, all without in any way affecting their
liability and waive the right to plead any and all statutes of limitations as a
defense to any demand on this Note, or on any guaranty thereof, or to any
agreement to pay the same to the full extent permissible by law.
9. Maximum Interest. In no event whatsoever shall the amount
paid, or agreed to be paid, to Holder for the use, forbearance or detention of
money to be loaned hereunder or
2
65
otherwise, for the performance or payment of any covenant or obligation
contained herein, exceed the maximum amount permissible under applicable law.
If from any circumstance whatsoever fulfillment of any provision hereof exceeds
the limit of validity prescribed by law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if from any such
circumstance Holder shall ever receive as interest under this Note or otherwise
an amount that would exceed the highest lawful rate, such amount that would be
excessive interest shall be applied to the reduction of the principal amount
owing hereunder and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal, such excess shall be refunded
to Maker.
10. Prepayment. Maker may prepay this Note in full or in part at
any time without prepayment charge, but with interest accrued on the amount
prepaid to and including the date of payment. No partial prepayment shall
release Maker from thereafter tendering all regular scheduled monthly payments
required herein until the Note is paid in full.
11. Miscellaneous. The terms of this Note shall inure to the
benefit of and bind the parties hereto and their successors and assigns. As
used herein the term "Maker" shall include the undersigned Maker and any other
person or entity who may subsequently become responsible for the payment
hereof. The term "Holder" shall include the named Holder as well as any other
person or entity to whom this Note or any interest in this Note is conveyed,
transferred or assigned; provided, however, that Beeba's Creations, Inc. may
not transfer or assign any interest hereunder or discount this Note to an
individual or foreign entity without Maker's prior written consent, and;
provided, further, that Beeba's Creations, Inc. may not transfer, assign or
discount this Note for less than the amount currently due hereunder, without
first offering Maker the opportunity to prepay the entire balance due with the
same discount as proposed in the transfer or assignment or discount. Each
person signing this Note on behalf of Maker represents and warrants that he has
full authority to do so and that this Note binds the corporation. If Maker
consists of more than one person or entity, their obligations under this Note
shall be joint and several.
12. Governing Law. This Note shall be governed by and construed
under the laws of the State of California.
Entered into on this 1st day of July, 1995, at San Diego, California.
THE DESIGN AND SOURCE HOLDING COMPANY, LTD.
By: XXXXXX X. XXXXXXX
---------------------------------------
Xxxxxx X. Xxxxxxx, President
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Schedule A
BEGINNING ENDING
MONTH MONTH BALANCE INTEREST PRINCIPAL PAYMENT BALANCE
----- ----- --------- -------- --------- ------- -------
9 4/1/96 950,000 48,703 48,703 950,000
12 7/1/96 950,000 16,234 16,234 950,000
18 1/1/97 950,000 32,469 105,260 137,729 844,740
24 7/1/97 844,740 28,871 108,858 137,729 735,882
30 1/1/98 735,882 25,151 112,578 137,729 623,304
36 7/1/98 623,304 21,303 116,426 137,729 506,878
42 1/1/99 506,878 17,324 120,405 137,729 386,473
48 7/1/99 386,473 13,209 124,520 137,729 261,953
54 1/1/2000 261,953 8,953 128,776 137,729 133,177
60 7/1/2000 133,177 4,552 133,177 137,729
------- ------- ---------
TOTAL 216,769 950,000 1,166,769
750,000
---------
Total Cash Outflow Including Down payment 1,916,769
=========
4
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SECURITY AGREEMENT
This Security Agreement ("Agreement") is made and effective this 1st
day of July, 1995 by The Design and Source Holding Company, Ltd., a New York
corporation ("Debtor").
1. Property Subject To Security Interest. In consideration of
the terms, covenants and conditions contained in this Agreement, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Debtor hereby grants to Beeba's Creations, Inc.,a California
corporation ("Secured Party") a security interest in all property described on
Exhibit "A" attached hereto and incorporated herein by this reference, now
owned or hereafter acquired by Debtor (the "Collateral").
2. Obligations Secured. Such security interest is granted to
secure (i) the payment of all indebtedness under and the performance of, and
compliance with, all of the terms, covenants and conditions of this Agreement,
the obligations under Section 1.2.1 of the Asset Purchase Agreement and the
Promissory Note, and (ii) the payment of all monetary obligations under the
Sublease Agreement, all of even date herewith, between Secured Party and Debtor
(collectively, the "Ancillary Agreements").
3. Debtor's Representations And Warranties. Debtor hereby
covenants, warrants, represents and agrees as follows:
3.1 No Liens. Debtor is, and at all times hereafter will
be, the sole owner of the Collateral and, unless expressly consented to in
writing by the Secured Party, subsequent to the execution of this Agreement,
there are no liens or encumbrances or adverse claims whatsoever on or against
the Collateral, or any part thereof, created or incurred by Debtor nor will
there be any such liens, encumbrances, or claims at any time hereafter, except
the security interest granted hereby and for such security interest as may be
granted to Republic Finance Corporation or other factor or lender as
contemplated by in Section 4 hereof. There are no existing prior security
interests in the Collateral, created or incurred by Debtor, other than as set
forth on Exhibit B.
3.2 Taxes. Debtor will pay, prior to delinquency, all
taxes, liens and assessments of any kind whatsoever levied or assessed against
the Collateral or any part thereof and should Debtor fail to do so, Secured
Party may pay the same and any amount so paid shall bear interest at the same
rate as the principal of the major indebtedness secured hereby and said
interest shall be secured hereby and shall be immediately repayable by Debtor
to Secured Party.
3.3 Maintenance and Insurance. Except as set forth on
Exhibit B, Debtor will at all times maintain the Collateral essential to the
conduct of its business in good condition and repair, ordinary wear and tear
excepted, and will keep the Collateral insured against all loss by fire, theft
and other risks, liabilities and perils in form and amounts customary in the
industry and with companies of recognized standing, with loss proceeds payable
to Secured Party as its interest may appear; said insurance policies shall
provide for at least thirty (30) days written cancellation notice to Secured
Party; in the event Debtor does not procure such insurance required hereunder
68
upon being requested to do so, Secured Party may do so and any sums expended
for insurance premiums shall bear interest at the same rate as the principal of
the major indebtedness secured hereby bears interest and said amount of
interest shall be secured hereby and shall be immediately repayable by Debtor
to Secured Party.
3.4 Location of Collateral. Except (i) as set forth on
Exhibit B; or (ii) in the ordinary course of its business; or (iii) as
contemplated by Section 4 hereof, Debtor will keep the Collateral separate and
identifiable and will not sell, lease, transfer, hypothecate, consign or permit
or suffer any attachment, judgment or other judicial or involuntary lien
against, or otherwise dispose of, the Collateral or any part thereof without
Secured Party's prior written consent; Debtor will not grant any security
interest to any other party on any of the Collateral or any part thereof
without Secured Party's prior written consent; Debtor shall not remove any
Collateral from its original location without the prior written permission of
Secured Party.
3.5 Information. All information at any time supplied to
Secured Party by Debtor (including information regarding the value or the
condition of the Collateral, financial statements and documentary collateral)
is, and shall be at the time it is supplied to Secured Party, correct and
complete in all material respects.
3.6 Location of Records. The address of the chief
executive office and chief place of business of Borrower is its address set
forth on the signature page hereof, and Borrower has no other places of
business except as disclosed to Secured Party. All records pertaining to
accounts and subscription contracts (including computer records) are kept at
the addresses heretofore provided to Secured Party; and Debtor will notify
Secured Party, no later than thirty (30) days prior to any change in address of
the chief executive office or chief place of business of Debtor or the change
of the location of any of the Collateral or records pertaining thereto.
3.7 Inspection. Secured Party or its representative may,
at any time during the continuance hereof, upon prior notice during normal
business hours and at reasonable intervals, enter upon the premises of Debtor
where the Collateral, or any part thereof, is kept or maintained and examine
the same.
3.8 Discharge of Obligations. Debtor will pay, in
accordance with its terms, all indebtedness secured hereby and will observe all
conditions, comply with all terms, perform all acts and discharge all
obligations secured hereby.
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3.9 Compliance with Agreements. Debtor will perform all
acts and comply with all terms of any agreement, the performance of and/or
compliance with which are secured by a lien that is, or appears to be,
superior, prior, subordinate, or subsequent to the security interest created
hereby; provided, however, that nothing in this paragraph shall limit,
compromise or restrict the Secured Party's interest pursuant to the other
provisions of this Agreement.
3.10 Defense of Claims. Subject to the provisions of
Section 4 hereof and the arrangements contemplated thereby, Debtor at its own
cost and expense will defend the Collateral against all claims, liens, security
interests, demands and other encumbrances of third parties which may affect
Secured Party's security interest in, or Debtor's title to, any Collateral.
3.11 Notice. Debtor will promptly notify Secured Party in
the event of any damage to or loss of any material portion of the Collateral or
any part thereof from any source whatsoever.
3.12 Verification of Information. Debtor will, at
reasonable intervals, upon written demand from Secured Party, establish the
correctness of information supplied and will notify Secured Party of any
changes to information supplied.
3.13 Further Assurances. Debtor will execute any and all
further agreements, assignments, documents and Financing Statements that
Secured Party may reasonably request from time to time in order to perfect or
continue the security interest of Secured Party in the Collateral or otherwise
carry out the purposes and intent of this Agreement.
3.14 Attorney In Fact. Upon the occurrence and during the
continuance of a default (as defined in Section 5 hereof), Debtor hereby
authorizes Secured Party to perform any act which Secured Party may deem
necessary in order to protect and preserve the Collateral, or any part thereof,
and the interest of Secured Party therein. In addition, Debtor hereby
irrevocably appoints Secured Party as Debtor's attorney-in-fact for the purpose
of executing, on Debtor's behalf and in Debtor's name, such Financing
Statement, Financing Statement Change, Continuation Statements, and any and all
other documents required in order to give Secured Party a continuing first lien
upon the Collateral or any part thereof, subject to the provisions of Section 4
hereof.
3.15 Books and Records. Secured Party may, upon prior
notice during normal business hours and at reasonable intervals, examine any of
Debtor's records, books, accounts, ledgers and assets of any kind and may take
copies therefrom and may utilize any duplication equipment located on the
premises.
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3.16 Operation of Business. Debtor will at all times
operate Debtor's business in a manner consistent with any and all rules,
regulations and statutes of governmental agencies having jurisdiction over the
Debtor's business applicable to the operation of such a business and will
comply with any and all requirements specified by companies insuring the
Collateral, or any part thereof, as conditions for such insurance.
3.17 Attorneys' Fees. In the event an attorney may be
employed by Secured Party to enforce any of the terms hereof, Debtor will pay
all costs and reasonable attorneys' fees as incurred by Secured Party in
connection therewith including without limitation all attorneys' fees and costs
incurred in connection with any bankruptcy, liquidation receivership or other
debtor-relief proceeding of Debtor or relating to any of the Collateral, and
said amount shall be secured hereby and shall be immediately repayable by
Debtor to Secured Party.
3.18 Financial Statements and Information. Debtor shall
furnish to Secured Party audited financial statements within 90 days of each
fiscal year-end of Debtor, and quarterly unaudited financial statements within
45 days after the end of each quarter. Each unaudited financial statement
shall consist of at least a balance sheet and profit and loss statement as of
close of such accounting period and for the period from the beginning such
fiscal year to the close of such accounting period. Quarterly financial
statements shall be prepared in accordance with GAAP consistent with the
preparation of the annual financial statements and shall be certified by the
Chief Financial Officer of Debtor.
4. Subordination. Notwithstanding anything to the contrary
contained herein, Debtor may grant a priority interest in the Collateral (i) to
Republic Finance Corporation or to another nationally recognized or industry
recognized factor, or (ii) another lender selected by Debtor and reasonably
acceptable to Secured Party as security for a factoring line with Secured
Party's prior written consent, which shall not be unreasonably withheld or
delayed. Upon the grant of any such interest, Secured Party shall execute a
Subordination Agreement and such other documents as Republic Finance
Corporation shall reasonably request in order to establish the priority of its
interest in the Collateral.
5. Acts Constituting Default.
5.1 The happening of any of the following events, at the
option of Secured Party, shall constitute a default by Debtor under this
Security Agreement:
(a) if any warranty, representation or statement
made or furnished by or on behalf of Debtor, whether or not made herein, proves
to have been false in any material respect when made or furnished;
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(b) failure by Debtor to keep or perform any of
the material terms, covenants or conditions of this Agreement, the obligations
under Section 1.2.1 of the Asset Purchase Agreement and the Promissory Note, or
the payment of any monetary obligations under the Sublease Agreement, beyond
any applicable grace periods;
(c) the levy of any attachment, execution or
other process against Debtor or against the Collateral, or any part thereof,
and the failure of removal of such process within sixty (60) days;
(d) the loss, theft, damage, destruction, or sale
to or of the Collateral or any part thereof which is not replaced with other
property of a value at least equal to that lost, which property shall become
subject to this Agreement; or
(e) if Debtor (or any of Debtor's successors or
assigns) shall make a general assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts as they become due, or shall
file or have filed against it a petition for relief under any chapter or
provision of the Bankruptcy laws of the United States, as amended from time to
time, or shall be adjudged a bankrupt or insolvent, or shall file a petition,
complaint, pleading, certificate, formal request or matter of a similar nature
seeking any reorganization, arrangement, composition, liquidation, dissolution
or financial relief of a similar nature under any present or future statute,
law or regulation, or shall file an answer or response admitting or not
contesting the material allegations of a petition or other document filed
against it in any proceeding commenced for the purpose of affecting debtor's
rights and/or creditors' remedies; and in the case of any such proceeding
commenced by any other person or entity against Debtor, or in the event that a
receiver, trustee or other court officer or administrative officer is appointed
for the purpose of taking possession of all or any part of the Collateral, or
of the premises of Debtor, or Debtor's successors or assigns, or any interest
of Debtor or Debtor's successors or assigns in the Collateral, and said
proceeding is not terminated or discharged within sixty (60) days of its
commencement or said receiver, trustee, court officer or administrative officer
is not removed within sixty (60) days of such appointment.
5.2 Upon the occurrence of any act, event or condition
which would constitute a default under this Agreement, Debtor shall not be
deemed to be in default hereunder unless such act, event or condition is
unremedied thirty (30) days after notice thereof by Secured Party to Debtor;
provided, however, that such notice and opportunity to cure shall not be
applicable: (a) in cases of monetary defaults; (b) if, in the reasonable
judgment of Secured Party, any such act, event or condition is incurable; (c)
if a specific provision regarding notice or time period for performance is set
forth elsewhere herein, in which case such specific provisions shall control;
or (d) to defaults arising under other documents, including, without
limitation, the Ancillary Agreements, in which case the applicable provisions
of such other documents shall control.
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6. Secured Party's Remedies Upon Default. Upon, or at any time
after, a default by Debtor, as set forth above, Secured Party may, in addition
to all other remedies provided under the Note, or otherwise, at Secured Party's
option, do any one or more of the following:
6.1 declare the entire indebtedness secured hereby
immediately due and payable;
6.2 terminate the Restrictive Covenant Agreement, the
Independent Sales Representative Agreement, the Sublease Agreement and the
License Agreement, all of even date herewith, between Secured Party and Debtor;
6.3 exercise all rights and remedies of a secured party
under the California Commercial Code;
6.4 require Debtor to assemble the Collateral and make it
available to Secured Party in a place designated by Secured Party which is
reasonably convenient to both parties;
6.5 without removal, render the Collateral unusable and
dispose of the same on the premises;
6.6 enter upon Debtor's premises where the Collateral is
kept and possess and remove the same without legal process if Secured Party can
do so without a breach of the peace or proceed by legal action to obtain
possession;
6.7 proceed against Debtor with or without proceeding
against the Collateral, including proceeding against the separate property of
Debtor;
6.8 proceed against Debtor for any deficiency after
proceeding against the Collateral;
6.9 proceed against any other security securing any
indebtedness secured hereby with or without proceeding against the Collateral;
6.10 notify or require Debtor to notify any and all
customers or account debtors of Debtor that the Collateral has been assigned to
Secured Party and/or that Secured Party has a security interest in the
Collateral; endorse the name of Debtor upon any notes, checks, acceptances,
drafts, money orders, or other instruments of payment (including payments made
under any policy of insurance) that may come into possession of Secured Party
in full or part payment of any amount owing to Secured Party; sign and endorse
the name of Debtor upon any invoice, xxxx, receipt, draft, assignment,
verification or notice in connection with accounts and all contract rights, and
any instrument or document relating thereto, or to rights of Debtor therein;
notify the post office authorities to change the address for delivery of mail
of Debtor to an address designated by Secured Party and to receive, open and
dispose of all mail addressed to Debtor; send requests for verification of
Collateral to customers or account debtors;
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6.11 notify applicable phone company or service
authorities or personnel to transfer phone exchanges or lines of Debtor as
designated by Secured Party and effectuate a transfer of any phone numbers,
exchanges or lines to the name or for the benefit of Secured Party or any other
person as Secured Party may designate;
6.12 enter and/or remain upon the premises of Debtor
without any obligation to pay rent to Debtor or others, or any other place or
places where any of the Collateral is located and kept;
6.13 Secured Party shall be deemed as the attorney-in-fact
of Debtor, with full power of substitution and full power to do any and all
things necessary to be done in and about the premises fully and effectually and
with respect to the Collateral as Debtor might or could do but for this
appointment, hereby ratifying all that said attorney-in-fact shall lawfully do
or cause to be done by virtue hereof;
6.14 incur expenses, including reasonable attorneys' fees
and costs including, but not by way of limitation, any fees and costs incurred
in any bankruptcy liquidation, receivership or other debtor-relief proceeding
by Debtor or relating to any of the Collateral, in the exercise of any right or
remedy hereunder; and
6.15 do any and all other acts allowed by law to enforce
Secured Party's rights hereunder.
7. Notices. The following shall control the giving of any notice
hereunder:
7.1 Unless the Collateral is perishable or threatens to
decline speedily in value or is of the type customarily sold on a recognized
market, Secured Party will give the Debtor reasonable notice of the time and
place of any public sale thereof, or of the time on or after which any private
sale or other intended disposition thereof is to be made.
7.2 Debtor waives any right to require that the sale or
disposition take place where the Collateral is located.
7.3 The requirements of reasonable notice shall be met if
such notice is mailed or delivered as provided in Section 7.4 below at least
fifteen (15) days before the time of the sale or disposition.
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7.4 Notices. All notices and other communications
hereunder shall be in writing and shall be given by personal delivery, courier,
facsimile transmission or first class certified United States Mail, postage
prepaid, addressed to the address below stated of the party to which notice is
given, or to such other address as such party may have fixed by notice:
To DSHC: The Design and Source Holding Company, Ltd.
000 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: President
FAX: (000) 000-0000
To Beeba's: Beeba's Creations, Inc.
0000 Xxxxxxxx Xxxx
Xxx Xxxxx, XX 00000
Attn: President
FAX (000) 000-0000
Notices shall be effective upon courier delivery, personal delivery,
acknowledgment of receipt of facsimile or receipt of first class certified
United States mail. Notices by facsimile must be confirmed by one of the other
methods of transmission, but will be deemed effective upon confirmation of
receipt of the facsimile.
7.5 Debtor shall provide to Secured Party a complete and
up-to-date listing of the names and addresses of all parties to whom notices
should be mailed. Unless Debtor has, in writing by certified or registered
mail, informed Secured Party of any changes in address, notice mailed to
addresses on this Agreement shall be deemed to be effective.
8. Use Of Proceeds. The proceeds of any disposition of
Collateral shall be applied in the following priority:
8.1 to pay reasonable expenses of taking, holding,
preparing for sale, selling, leasing and the like, including reasonable
attorneys' fees and legal expenses incurred by Secured Party;
8.2 to satisfy the indebtedness secured by this
Agreement; and
8.3 to satisfy any indebtedness secured by any
subordinate security interest in the Collateral, if written notification or
demand therefor is received before distribution of the proceeds is completed.
In the event the Collateral is sold or otherwise disposed of as aforesaid and a
sufficient sum is not realized to pay in full all indebtedness secured by this
Agreement after application of the proceeds as aforesaid, Debtor promises and
agrees to pay to Secured Party any deficiency.
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9. Miscellaneous.
9.1 Survival. All covenants, agreements,
representations, and warranties made herein, and in documents delivered
pursuant hereto, or in connection herewith, shall be deemed to have been
material and relied upon by Secured Party and shall survive the execution and
delivery to Secured Party.
9.2 Time. Time is of the essence of this Agreement.
9.3 No Waiver. No course of dealing between Debtor and
Secured Party, or failure, neglect, or delay by Secured Party in exercising any
and all of Secured Party's rights hereunder shall operate as a waiver,
forfeiture or abandonment of any such right except only to the extent expressly
waived in writing.
9.4 Rights Cumulative. All rights and remedies provided
in this Agreement shall be cumulative and may be exercised and enforced without
notice or demand being first made to Debtor.
9.5 Receiver. In any suit brought to enforce any of the
provisions of this or any other agreement between the Secured Party and the
Debtor upon request of Secured Party as plaintiff or cross-complainant, the
court having jurisdiction over such suit may appoint a receiver to take
possession of and control the Collateral and such receiver may exercise such
powers over the Collateral as the court shall confer. The Secured Party may
obtain the appointment of a receiver ex parte and Debtor waives the right to
any prior notice.
9.6 Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
California without giving any effect to principles of conflict of laws.
9.7 Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns, provided that this Agreement and all rights and obligations hereunder
may not be assigned or transferred without the prior written consent of the
other party hereto, except that Secured Party may, on 30 days prior written
notice, assign its rights and obligations hereunder to an affiliate of Secured
Party without such consent, provided such affiliate shall be reasonably
capitalized and staffed to perform the duties of Secured Party hereunder.
9.8 Prior Agreements: Amendments and Waivers. This
Agreement sets forth the entire understanding of the parties with respect to
the transactions contemplated hereby and supersedes all prior agreements and
understandings between the parties with respect to the subject matter hereof.
This Agreement may be amended only by a writing signed by the parties hereto.
Any breach of or failure to comply with any covenant, agreement, warranty or
representation
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herein may be waived only by a written instrument making specific reference to
this Agreement signed by the party against whom enforcement of such waiver is
sought.
9.9 Severability. In case any provision or provisions of
this Agreement shall be held to be invalid, illegal or unenforceable under any
particular circumstances or for any reason whatsoever, (i) the validity,
legality and enforceability of the remaining provisions of this Agreement, or
the validity, legality or enforceability under any other circumstances shall
not in any way be affected or impaired thereby and (ii) to the fullest extent
possible consistent with applicable law, the provisions of this Agreement shall
be deemed revised, and shall be construed so as to give effect to the intent
manifested by this Agreement.
Address: THE DESIGN AND SOURCE HOLDING
000 Xxxxxxxx Xxxx COMPANY, LTD.
Xxxxxxxxx, XX 00000
By: XXXXXX X. XXXXXXX
------------------------------------
Xxxxxx X. Xxxxxxx, President
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EXHIBIT "A"
Description of Collateral
(a) All accounts, contract rights, instruments, documents, chattel
paper, general intangibles (including, but not limited to chooses in action,
tax refunds, and insurance proceeds), subscriber contracts and rights,
monitoring agreements, deposit accounts, leases, securities, cash, inventory,
names under which Debtor may at any time be operated or known, and rights to
carry on business under any such names, or any variation thereof, patents,
trademarks, tradenames, copyrights, registrations, and goodwill;
(b) All merchandise, fixtures, furnishings, machinery, equipment,
materials, supplies, phone lines, systems, exchanges and numbers, appliances,
vehicles and goods of any kind and every nature whatsoever;
(c) All ledger sheets, files, records (including without
limitation computer programs, tapes and related electronic data processing
software), plans, specifications, maps, studies, data, drawings, reports,
permits, licenses, books of account and other documents of any kind;
(d) All proceeds, including insurance proceeds, and claims arising
on account of any damage to or taking of the Collateral or any part thereof and
all causes of action and recoveries from loss or diminution in value of the
Collateral or any part thereof and all products, substitutions, replacements,
additions, accessions, and increases of any and all of the foregoing.
(e) All of the foregoing, now existing or hereafter acquired or
arising.
THE DESIGN AND SOURCE HOLDING
COMPANY, LTD.
By: XXXXXX X. XXXXXXX
------------------------------------
Xxxxxx X. Xxxxxxx
