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EXHIBIT 10.37
February 2, 2001
VIA FACSIMILE (425-885-6502)
Xx. Xxxxxxx Xxxxxxxx
Chief Executive Officer
Garden Botanika, Inc.
0000 000xx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxxxxx 00000
Dear Xx. Xxxxxxxx:
This letter sets forth our proposal ("Proposal") to acquire certain
manufacturing assets, intellectual property rights and other intangible assets
of Garden Botanika, Inc. ("Botanika"). This Proposal supersedes all prior
proposals delivered by us to you.
1) POTENTIAL BUYER. The purchaser would be Xxxxxxxxx & Xxxxxxxx Inc. or a
subsidiary thereof ("Buyer").
2) DESCRIPTION OF ASSETS. The assets of Botanika to be acquired by Buyer
would consist of all of Botanika's right, title and interest in and to the
following:
o A representative sample of first quality finished goods inventory of
Botanika located in its distribution center ("Merchandise Inventory).
Merchandise Inventory shall be valued at no less than $350,000, with the
value of the Merchandise Inventory calculated at 35% of the price look up
("PLU"). To construct the representative sample, Merchandise Inventory
shall be allocated between Botanika's liquidator and Buyer on a pro rata
basis.
o All inventory of raw materials and work in process of Botanika, and all
inventory of packaging and shipping supplies, that is located at or held
for use in its Oceanside, California manufacturing facility (the
"Manufacturing Inventory"), that Buyer selects.
o All machinery, equipment, vehicles, furniture, fixtures, supplies,
accessories, spare parts, tools and other items of tangible personal
property, with all warranty rights and operating manuals and keys relating
thereto, presently at the Oceanside, California manufacturing facility of
Botanika ("FFE"); provided that the FFE shall be substantially the same as
when inspected by Buyer.
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o Botanika's patents, trademarks, trade names (including without limitation
the name "Garden Botanika"), service marks, copyrights, logos, all rights
to any pending applications or common law rights to any of the same, and
all license rights with respect to intellectual property of third parties
designated by Buyer ("Intellectual Property").
o Botanika's internet domain name and all other rights of any kind associated
with its on-line business, including without limitation all rights with
respect to internet service providers, third party linking sites and all
rights of Botanika to owned and/or licensed proprietary, customized and
mass market computer software and all computer hardware appropriate for the
continued operation of Botanika's on-line business ("Domain Rights").
o Botanika's catalogs, price lists, mailing lists, subscription lists,
customer lists and all other rights of any kind associated with its catalog
business, including without limitation all rights of Botanika to ad copy,
photography, artwork and all owned and/or licensed proprietary, customized
and mass market computer software and all computer hardware appropriate for
the continued operation of Botanika's catalog business ("Catalog Rights").
o (i) all of Botanika's formulas, whether developed or under development,
including the master batch records, (ii) all plates, dies and film
associated with the products, catalogs and other creative work relating to
the Garden Botanika brand, (iii) all supplier, vendor and agency lists,
(iv) all sales data, including retail prices, product costing and product
movement, for at least the last three fiscal years, and (v) all of
Botanika's product ideas under development, including those related to
future promotions and product launches.
o Botanika's unfulfilled catalog and on-line sales orders for merchandise
inventory as of the Closing, to the extent such sales orders may be filled
either (i) from the Merchandise Inventory or Manufacturing Inventory to be
acquired by Buyer, or (ii) from Buyer's own inventories or sources of
supply.
o Botanika's telephone numbers (for both voice and data transmission), toll
free service providers and similar rights, but only to the extent that the
foregoing are used in connection with the on-line business or catalog
business of Botanika,
3) CONSIDERATION TO BE PAID. Assuming the timetable in paragraph 5 below is
satisfied, the purchase price for the designated assets would be an amount equal
to the sum of (a) One Million Three Hundred Twenty-Five Thousand Dollars
($1,325,000). No obligations of Botanika would be assumed.
4) FORM OF CONSIDERATION. Cash at Closing.
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5) TIMETABLE. The purchase price in this Revised Proposal is offered on the
condition that the parties proceed on an a timetable to complete the Closing no
later than March 12, 2001, in order to prevent any material decrease in value or
market absence of the Botanika name, marks and goodwill after the 2000 holiday
selling season. We anticipate the following deadlines for the interim steps to
achieve an actual closing on March 12, 2001:
February 1, 2001 Acceptance of letter
February 5, 2001 Motion to approve sale filed
February 7, 2001 Execution of definitive agreement
February 28, 2001 Hearing on motion
March 12, 2001 Closing
6) SOURCES OF FINANCING. We anticipate that the financing for this
transaction will be provided by Firstar Structured Capital and other financial
institutions that may elect to participate in that financing.
7) SPECIFIC CONTINGENCIES TO CLOSURE. The material conditions to Closing
would include execution of a satisfactory definitive agreement and Bankruptcy
Court approval. In addition, Botanika shall cause the Merchandise Inventory to
be boxed and prepared for shipment at Closing to one or more warehouse
facilities designated by Buyer. The Buyer would arrange and pay for the costs of
freight and insurance on all such Merchandise Inventory.
8) ADDITIONAL TERMS. Our Revised Proposal also contemplates the following
terms, conditions and covenants of the parties:
a) Botanika shall operate its on-line and catalog businesses in the
normal course of business between now and the Closing, including normal markdown
practices and continued manufacturing, purchasing and order fulfillment in the
normal course.
b) No later than the Closing, Botanika shall commence to close all of
its retail locations and to sell all merchandise inventory and other tangible
personal property not acquired by Buyer, such that all retail locations shall be
fully closed no later than May 15, 2001. All sales shall be conducted as retail
store closing sales, and Botanika shall not sell any merchandise inventory, or
hold it out for sale, to any person or firm that Botanika knows, or has reason
to believe, is acquiring such inventory for resale by any other means. Botanika
shall cause its liquidator to post signs and/or distribute to customers at each
retail store flyers indicating that customers may continue to shop for Botanika
products at xxx.xxxxxxxxxxxxxx.xxx. If Botanika elects to exclude the
Manufacturing Inventory from the assets sold to Buyer, such Manufacturing
Inventory may only be sold at wholesale or retail provided that such items shall
not bear, or be marketed in connection with, any name or xxxx of Botanika being
purchased by Buyer.
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c) Buyer shall grant to Botanika a limited license right to continue
using the "Garden Botanika" name to the extent reasonably required to collect
its outstanding receivables, to conduct going out of business sales and to
liquidate those other assets not purchased by the Buyer
d) If Buyer is prepared to close (or would be prepared to close but for
a breach of the definitive agreement by Botanika) and the assets described above
are not sold to Buyer due to a breach of the definitive agreement by Botanika,
the approval by the Bankruptcy Court of a higher and better offer for such
assets, the liquidation of Botanika or the continued operation of Botanika
through a plan of reorganization, then Botanika shall reimburse Buyer by
February 28, 2001 for documented expenses to a maximum of $100,000, as an
administrative claim.
e) Botanika shall immediately seek Bankruptcy Court approval of the
definitive agreement relating to this Proposal, and shall provide Buyer and its
counsel with a copy of any relevant motion or pleading in advance of the date on
which the same is to be filed, so that Buyer may comment on such motion or
pleading and participate in any hearings before the Bankruptcy Court.
This letter is not binding on the parties unless and until a definitive purchase
agreement for the assets described above is signed and approved by the
respective Boards of Directors of Botanika and Buyer, and thereafter any
liability shall be under the terms of such definitive agreement. If the
definitive agreement is not signed by February 9, 2001, then this Proposal
automatically shall be withdrawn and of no further force or effect.
[THE BALANCE OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
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Please confirm your interest in the foregoing Proposal by signing on behalf of
Botanika and returning this letter by facsimile to the attention of Xxxx
Xxxxxxx, Xx. at 314/615-2046, no later than 6:00 p.m. Central Standard Time on
February 2, 2001. Thank you.
Very truly yours,
XXXXXXXXX & XXXXXXXX INC.
By /s/ Xxxx X. Xxxxxxx Xx.
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Xxxx Xxxxxxx, Xx., President
Confirmed this 2nd day of February, 2001:
GARDEN BOTANIKA, INC.,
debtor-in-possession
By /s/ Xxxxxxx Xxxxxxxx
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Xxxxxxx Xxxxxxxx, Chief Executive Officer
