MANAGEMENT AGREEMENT
by and between
M.T.G.I.-TEXTILE MANUFACTURERS GROUP (ISRAEL) LTD.
and
T.S. WEAR ME & CO.
dated as of August 1, 1999
MANAGEMENT AGREEMENT, dated as of August 1, 1999, by and between
M.T.G.I.-Textile Manufacturers Group (Israel) Ltd., an Israeli corporation
("MTGI"), and T.S. Wear Me & Co., an Israeli corporation (the "MANAGER").
WITNESSETH:
WHEREAS, MTGI is engaged in the business of manufacturing women's knit clothing
(the "BUSINESS");
WHEREAS, MTGI, MBS (Cygne) Company, a Delaware corporation ("MBS"), A.C.
Services, Inc., a Delaware corporation ("ACS" and together with MBS, the "STOCK
SELLERS"), and Jordache Limited, a Delaware corporation and an affiliate of
Manager ("JORDACHE"), are parties to an Acquisition Agreement dated as of March
25, 1999, (the "ORIGINAL AGREEMENT") pursuant to which (i) Jordache agreed to
purchase, and MTGI agreed to sell, the assets of the Business and (ii) Jordache
agreed to purchase, and the Stock Sellers agreed to sell, all the outstanding
stock of Wear & Co.S.r.l., an Italian corporation wholly-owned by the Stock
Sellers (the "WEAR STOCK");
WHEREAS, the parties to the Original Agreement intended that the transactions
contemplated thereby be consummated on or before July 31, 1999;
WHEREAS, Jordache, MTGI and the Stock Sellers are simultaneously herewith
entering into an amended and restated acquisition agreement (the "ACQUISITION
AGREEMENT") pursuant to which the terms and conditions contained in the Original
Agreement and regarding the purchase and sale of the assets of the Business and
the Wear Stock are being amended and restated;
WHEREAS, under the Acquisition Agreement Jordache will be entitled to the
profits of the Business beginning August 1, 1999, as a reduction of the purchase
price and, therefore, the parties have agreed that pending the consummation of
the transactions contemplated by the Acquisition Agreement, the Manager shall
operate the Business during the period commencing on August 1,1999;
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
I. DEFINITIONS
"Acquisition Agreement" has the meaning set forth in the preamble.
"Agreement" means this Management Agreement, as it may be amended from time
to time.
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"Business" has the meaning set forth in the preamble.
"Closing Date" means the date upon which the transactions contemplated in
the Acquisition Agreement takes place.
"Cygne" means Cygne Designs, Inc., a Delaware corporation and the parent of
MTGI and the Stock Sellers.
"Effective Date" means the date of signature of this Agreement.
II. APPOINTMENT
MTGI hereby engages the Manager to furnish, and Manager hereby agrees to
provide, management services in connection with the operation of the
Business and to manage the day-to-day operations of the Business to the
extent set forth herein. Manager shall manage the Business in the ordinary
course and shall make no changes in the operations of the Business without
the written consent of MTGI. The Manager shall have no authority, express
or implied, to commit or otherwise obligate MTGI in any manner whatsoever
except to the extent specifically provided for in this Agreement.
III. TERM
This Agreement shall commence on the Effective Date and shall automatically
terminate on the earlier of (a) the Closing Date; (b) the date upon which
this Agreement is terminated for cause in accordance with the provisions of
Section X of this Agreement; (c) the date upon which the Acquisition
Agreement is cancelled or terminated in accordance with its provisions; or
(d) such other date as the parties may otherwise agree to in writing.
IV. RIGHTS AND OBLIGATIONS OF THE MANAGER
(a) In order to further the intent of the parties set forth in the
Acquisition Agreement that the Manager be entitled to the benefits of
the Business from August 1, 1999, the parties intend that, subject to
the provisions of this Agreement, the Manager shall be entitled to,
and shall have the authority to, make management decisions in the
normal course of daily operations of the Business without the prior
written approval of MTGI and the Chief Executive Officer of Cygne..
(b) The Manager covenants that it will (i) manage and operate the Business
in the name of MTGI upon the terms and subject to the conditions of
this Agreement; (ii)
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faithfully perform its obligations and responsibilities under this
Agreement with due care and diligence; (iii) supervise, manage and
operate the Business in the ordinary course of business and in a
manner consistent with past practice; (iv) comply with the reasonable
requests of MTGI relating to the operation of the Business from time
to time; (v) not take any action and follow no course of conduct which
is illegal or which will or may or is likely to adversely affect the
Business;(vi) abide by all relevant laws, ordinances, rules and
regulations of state, local or federal governments which relate to the
Business; and (vii) procure that the obligations of MTGI under any and
all contracts pertaining to the Business are duly performed in
accordance with the terms of those contracts.
(c) The Manager shall not be entitled under any circumstances to (i)
change the nature or scope of the Business in any manner whatsoever;
(ii) incur any obligation or liability (other than those liabilities
incurred in the normal and ordinary course of the operation of the
business and provided that such liabilities in aggregate do not exceed
$25,000 without the prior written consent of the Chief Executive
Officer of Cygne; (iii) carry out, agree to or effect any change in
any contracts or agreements binding upon MTGI in relation to the
Business; (iv) create or permit to be created any lien, mortgage,
charge or encumbrance over any of the assets of the Business or the
Business; and (v) enter into any contract, arrangement or
understanding (whether oral or written) with any third party in
relation to the Business without the prior written consent of the
Chief Executive Officer of Cygne.
(d) The Manager covenants that it will comply with the provisions of
Section 8.1 of the Acquisition Agreement and in particular, undertakes
that it will not take any action or omit to take any action which act
or omission would or would be likely to result in the inaccuracy of
any of the representations and warranties of MTGI set forth in the
Acquisition Agreement if such representations or warranties were to be
made immediately after the occurrence of such act or omission.
V. REPORTING
The Manager shall use its best efforts, consistent with MTGI's past
practice, to (a) provide MTGI with such information relating to the
Business as it may require from time to time in such manner and form
as may be required by MTGI; (b) timely notify MTGI of any material
event, occurrence, claim, potential claim or circumstances that comes
to its knowledge during the term of this Agreement and which affects
the Business (whether adversely or otherwise); (c) meet with the
designated representatives of MTGI on a regular and consistent basis
in order to report on the operation and conduct of the Business; and
(d) provide such written reports relating to the Business as may be
reasonably requested by MTGI.
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VI. FINANCIAL MATTERS
(a) The Manager shall supervise and direct the collection of all accounts
receivable of the Business and all collection activities shall be
carried out for the benefit of MTGI. The Manager will use its
reasonable best efforts to collects all accounts receivable in full
and expeditiously and shall supervise the issuance of bills and the
collection of accounts in accordance with the charge schedules and
collection policies required by MTGI.
(b) All revenue and receipts from the operation of the Business or
otherwise received by the Manager for and on behalf of MTGI in
relation to the Business shall be deposited in MTGI's bank account.
(c) MTGI shall be responsible for paying all expenses arising in the
ordinary course of the operation of the Business.
(d) The Manager shall supervise, direct and maintain the operation of the
accounting systems utilized by MTGI in relation to the Business and
shall cause to be prepared and delivered to MTGI financial statements
in respect of the Business as follows: (i) an income statement and a
balance sheet within twenty (20) days after the close of the preceding
month showing the results of the Business for the preceding month; and
(ii) the statements so required shall be prepared in accordance with
past accounting practice and the Manager shall not be entitled to make
any changes to accounting principles of the Business without the prior
consent of MTGI. The Manager shall utilize the computer systems
pertaining to the Business as the primary computer systems of the
Business.
(e) The books and records of the Business shall not be removed from the
premises from which the Business is conducted without the express
prior written consent of MTGI and the Chief Executive Officer of
Cygne.
VII. EMPLOYMENT AND PERSONNEL
(a) The Manager shall make available at its expense such personnel and
resources as may be necessary to carry out the day-to-day management
of the Business; provided that the Manager shall be obliged to utilize
the services of the existing employees of the Business. Except as
otherwise specifically provided for in this Agreement, the Manager
shall have full responsibility for assigning and supervising all
operating and service personnel necessary for the proper operation and
conduct of the Business; provided that the Manager shall not be
entitled to do any act in connection with the hiring, discharge or
laying off of employees without the express prior written consent
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of MTGI. Notwithstanding anything to the contrary contained in this
Agreement, the employees of MTGI in respect of the Business shall
remain the employees of MTGI and be paid by MTGI and shall not be
considered or deemed to be employees of the Manager for any purpose
whatsoever.
(b) If the transactions contemplated by the Acquisition Agreement are not
consummated for any reason whatsoever, then for a period of one (1)
year from the date of termination of this Agreement, neither the
Manager nor any of its affiliates shall attempt to hire any person
employed by MTGI or any affiliate thereof without the express written
approval of MTGI and the Chief Executive Officer of Cygne
VIII. RIGHTS AND DUTIES OF MTGI
MTGI shall have the right to enter upon any part of the premises from which
the Business is conducted for the purpose of examining or inspecting the
premises or the Business or making extracts of books and records of the
Business. MTGI shall co-operate with the Manager in operating and
conducting the Business.
IX. GOODWILL
The Manager shall use all reasonable efforts to preserve the Business and
to preserve for MTGI the goodwill of the suppliers, customers and others
having business relations with MTGI in relation to the Business.
X. TERMINATION
This Agreement may be terminated for "Cause" as follows:
(a) Breach. Either party may terminate this Agreement in the event of a
material breach of this Agreement by the other party which is not
cured within fifteen (15) days of written notice thereof given by the
first party; provided, however, that failure to terminate this
Agreement in the event of a breach shall not constitute a waiver of
any breach of this Agreement.
(b) Insolvency. Either party may terminate this Agreement upon written
notice to the other in the event that (i) the other party becomes
insolvent; or (ii) fails to pay or admits in writing its inability to
pay its debts as they mature; or (iii) a trustee or receiver or other
custodian is appointed for such party for all or a substantial part of
such other's property and is not discharged within 60 days; or (iv)
any
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reorganization, bankruptcy, debt, arrangement or other proceeding
under any bankruptcy or insolvency law or any dissolution or
liquidation proceeding is instituted by or against such party and if
instituted against such party is consented to or acquiesced in by such
other party or remains undismissed for 60 days; or (v) any warrant or
attachment is issued against any substantial portion of the property
of such other party which is not released within 60 days of service.
(c) Negligence. MTGI may terminate this Agreement upon 5 (five) days'
written notice in the event of the Manager's negligence or wilful
malfeasance materially impacting the performance of its duties under
this Agreement; provided that MTGI has given the Manager written
notice of its negligence or wilful malfeasance and the Manager has not
cured such negligence or wilful malfeasance within 5 (five) days of
receipt of such notice.
XI. CONSEQUENCES OF TERMINATION
(a) Upon cancellation or termination of this Agreement for any reason
whatsoever, the Manager shall (i) immediately cease to have the
rights, powers and duties set out in this Agreement and MTGI shall
immediately be entitled to manage and conduct the Business (except to
the extent sold pursuant to the Acquisition Agreement) in its own name
and on its own behalf; (ii) immediately hand over all records and
information pertaining to the Business (except to the extent sold
pursuant to the Acquisition Agreement); and (iii) not be entitled to
any compensation of whatever nature in consequence of the termination
of this Agreement.
(b) Upon cancellation or termination of this Agreement for any reason
whatsoever, all further obligations of the parties hereunder shall
terminate and neither party shall have any claim against the other as
a consequence of such termination other than any claim resulting from
a breach of this Agreement.
XII. INDEMNIFICATION
(a) Manager hereby agrees to indemnify and hold harmless MTGI from any and
all claims, damages, losses, liabilities, costs and expenses
(including, without limitation, settlement costs and any legal,
accounting or other expenses for investigating or defending any
actions or threatened actions) reasonably incurred by MTGI in
connection with the operation, management and conduct of the Business
by Manager.
(b) Whenever any claim shall arise for indemnification hereunder MTGI
shall promptly notify Manager of the claim and, when known, the facts
constituting the basis for such claim. In the event any such claim for
indemnification hereunder results from
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or in connection with any claim or legal proceedings by a third party,
the notice to Manager shall specify, if known, the amount or an
estimate of the amount of the liability arising therefrom. MTGI shall
not settle or compromise any claim by a third party for which it is
entitled to indemnification hereunder without the prior written
consent of the Manager, which consent shall not be unreasonably
withheld or delayed.
(c) In connection with any claim giving rise to indemnity hereunder
resulting from or arising out of any claim or legal proceeding by a
person who is not a party to this Agreement, Manager at its sole cost
and expense may, upon written notice to MTGI, assume the defense of
any such claim or legal proceeding. MTGI shall be entitled to
participate in (but not control) the defense of any such action, but
the fees and expenses of its counsel shall be at its own expense
unless the employment of such counsel shall have been authorized by
Manager in connection with the defense of such action, suit or
proceeding. If Manager does not assume the defense of any such claim
or litigation resulting therefrom within 30 days after the date such
claim is made, (i) MTGI may defend against such claim or litigation,
in such manner as it may deem appropriate, (ii) MTGI may settle such
claim in accordance with the last sentence of the prior paragraph, and
(iii) Manager shall be entitled to participate in (but not control)
the defense of such action, with its counsel and at its own expense.
If Manager thereafter seeks to question the manner in which MTGI
defended such third party claim, Manager shall have the burden to
prove by a preponderance of the evidence that MTGI did not defend such
third party claim in a reasonably prudent manner.
XIII. CONFIDENTIAL AND PROPRIETARY INFORMATION
Each party recognizes that due to the nature of this Agreement and the
Acquisition Agreement, it will have access to information of a proprietary
nature owned by another party and/or affiliates of another party including
but not limited to documents and programs (whether or not completed or in
use), operating manuals or similar materials that constitute systems,
policies and procedures, methods of doing business, administrative,
advertising or marketing techniques, financial affairs, trade secrets, and
other proprietary information (collectively the "CONFIDENTIAL
INFORMATION"). Consequently, each party acknowledges and agrees that the
other party and the affiliates of the other party, respectively, have a
proprietary interest in such Confidential Information and that all such
information constitutes confidential and proprietary information and/or
trade secret property of the respective party or parties. Each party hereby
expressly and knowingly waives any and all right, title and interest in and
to the other party's confidential information and agrees to return all
copies of Confidential Information to the provider(s) of such information
at the party's expense upon the expiration or earlier termination of this
Agreement. Notwithstanding the aforegoing, any
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Confidential Information used by the parties after the expiration or
earlier termination of this Agreement shall remain confidential and
proprietary and shall not be shown or disclosed to persons other than the
party's affiliates without the prior written consent of the party
furnishing the Confidential Information or except: (i) as required in
governmental filings or judicial, administrative or arbitration
proceedings, or (ii) as otherwise required by law (including but not
limited to in response to a subpoena from a court or authorized
governmental agency ("hereinafter the "CONFIDENTIALITY EXCEPTION"). Each
party further acknowledges and agrees that the other party and other
parties' affiliates are entitled to prevent their respective competitors
from obtaining and utilizing the Confidential Information. Therefore, each
party agrees to hold the Confidential Information in strictest confidence
and to not disclose such information or allow such information to be
disclosed, whether directly or indirectly, during and after the term of
this Agreement to any person or entity other than those persons or entities
who are legal and financial advisors or employees of, or are otherwise
affiliated with, a party or an affiliate of a party, on a need to know
basis, without the prior written consent of the party or parties furnishing
the confidential information unless a Confidentiality Exception occurs.
Further, each party shall require its representatives that receive the
Confidential Information to abide by the terms of this Section XIII.
Neither a party nor any of its representatives shall use Confidential
Information in any manner other than in connection with the performance of
its obligations under this Agreement. In addition, after the termination of
this Agreement, no party shall disclose to anyone any Confidential
Information obtained by the party, or an affiliate of a party, other than
with the prior written consent of the party furnishing the Confidential
Information, unless a Confidential Exception applies.
The restrictions set forth above shall not apply to any information which
becomes publicly known through no fault of the parties and their affiliates
which received or was given access to such information by the other party
or parties.
XIV. CONSTRUCTION
The parties confirm that this Agreement is not intended to serve as
effecting a sale, joint venture or other transfer of assets to the Manager.
XV. MISCELLANEOUS
(a) Expenses. Each party to this Agreement shall pay its own costs and
expenses (including all legal and accounting fees incurred by it)
relating to this Agreement and the negotiations leading up to this
Agreement.
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(b) Amendment. This Agreement shall not be emended or modified except by a
writing duly executed by MTGI and the Manager indicating an intention
to amend this Agreement.
(c) Entire Agreement. This Agreement contains all the terms, conditions,
representations and warranties agreed upon by the parties relating to
the subject matter of this Agreement and supersedes all prior
agreements, negotiations, correspondence, undertakings and
communications of the parties, oral or written, regarding such subject
matter.
(d) Headings. The headings contained in this Agreement are intended solely
for convenience and shall not affect the rights of the parties to this
Agreement.
(e) Notices. All notices, requests, demands and other communications made
in connection with this Agreement shall be in writing and shall be
deemed to have been duly given (a) on the date of delivery, if
delivered to the persons identified below, (b) seven calendar days
after mailing if mailed, with proper postage, by certified or
registered mail, air mail postage prepaid, return receipt requested,
addressed as follows:
IF TO MTGI:
M.T.G.I - Textile Manufacturers Group (Israel) Limited
c/o Cygne Designs, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx, 00000
Attention: Xxxxxxx Xxxxxx
WITH COPIES OF ANY NOTICES TO:
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
For Attention: Xxxx Xxxxxx
IF TO THE MANAGER:
T.S. Wear Me & Co.
000 Xxxxxxxxx
Xxx Xxxx, Xxxxxx
Attention: President
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WITH A COPY TO:
Xxxxxx Xxxxxxxxxx, Esq.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
or (c) on the date of receipt if sent by telex or telecopy,
and confirmed in writing in the manner set forth in (b) on or
before the next day after the ending of the telex or telecopy.
Such addresses and numbers may be changed, from time to time,
by means of a notice given in the manner provided in this
Section.
(f) Severability. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be adjusted rather than voided,
if possible, in order to achieve the intent of the parties to this
Agreement to the extent possible. In any event, all other provisions
of this Agreement shall be deemed valid and enforceable to the full
extent possible.
(g) Waiver. Waiver of any term or condition of this Agreement by any party
shall only be effective in writing and shall not be construed as a
waiver of any subsequent breach or failure of the same term or
condition, or a waiver of any other term or condition of this
Agreement.
(h) Counterparts. This Agreement may be signed in two or more counterparts
with the same effect as if the signatures to each counterpart were
upon a single instrument, and all such counterparts shall be deemed an
original of this Agreement.
(i) Governing Law This Agreement shall be governed by and construed in
accordance with the law of the State of Israel.
(j) Third Parties. Except as specifically set forth or referred to herein,
nothing herein expressed or implied is intended or shall be construed
to confer upon or give to any person other than the parties hereto and
their successors or assigns any rights or remedies under or by reason
of this Agreement.
(k) Binding Effect; Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, executors, successors and permitted
assigns, but except as contemplated herein, neither this Agreement nor
any of the rights, interests or obligations hereunder shall be
assigned, directly or indirectly, by the Manager or MTGI without the
express prior written consent of the other.
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(l) Arbitration. Any dispute, controversy or claim arising out of or in
connection with or relating to this Agreement, any breach or alleged
breach thereof, or the transaction contemplated hereby, shall be
resolved and settled by arbitration by three arbitrators. Within 15
(fifteen) days after written demand for arbitration is sent by one
party to the other, the Manager and MTGI shall each select one
arbitrator and the two arbitrators so selected shall select the third
arbitrator. The parties shall endeavor to complete arbitration within
60 (sixty) days after delivery of written notice demanding
arbitration. The decision of the arbitrators shall be binding and
conclusive upon the parties. Judgement upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. Any such
arbitration shall be held in New York County, State of New York under
the commercial rules then in effect of the American Arbitration
Association. The expense of the arbitration shall be borne equally by
the parties to the arbitration and each party shall bear and pay for
the cost of its own experts, witnesses, evidence, counsel and other
costs in connection with the preparation and presentation of its case;
provided however in the vent that either party alleges fraud or that
the position of the other party is not supportable in good faith, and
the arbiters find that such fraud or bad faith exists, the arbiters
shall be free to award costs in such arbiters' discretion.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as set
forth above.
T.S. WEAR ME & CO.
By: /s/ Xxxxxx X. Xxxxxxxxxx
Name: Xxxxxx Xxxxxxxxxx
Title: Authorized Signatory
MTGI-TEXTILE
MANUFACTURERS GROUP
(ISRAEL) LTD.
By: /s/ Xxxxxxx Xxxxxx
Name: Xxxxxxx Xxxxxx
Title: Director
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