ASSET PURCHASE AGREEMENT
AGREEMENT, made as of this 11th day of July, 2005, by and among G-III
Leather Fashions, Inc., a New York corporation ("Buyer"), G-III Apparel Group,
Ltd. ("G-III"), Winlit Group, Ltd., a New York corporation ("Winlit"), Xxxxx
Xxxx ("Xxxx") and Xxxxxxx Xxxxxx ("Xxxxxx") (Winlit, Xxxx and Xxxxxx
are collectively referred to as the "Winlit Group").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Winlit is an apparel company that manufactures and markets
men's and women's outerwear pursuant to license agreements with Guess, London
Fog, Pacific Trail, Xxxxx Xxxxx Leather, Xxxxx Xxxxxxxx Outerwear and
BCBGMAXAZRIA and under brands owned by Winlit or its Affiliates, among others;
WHEREAS, trusts created by Xxxx and Xxxxxx are the sole shareholders
of Winlit ;
WHEREAS, Winlit desires to sell, and Buyer desires to purchase, with
certain exceptions, the assets owned, and the businesses and operations
conducted, by Winlit upon the terms and subject to the conditions set forth in
this Agreement; and
WHEREAS, Buyer intends to create a new division (the "Division") in
which to use the Assets (as defined below) to commercially exploit the licensed
product and private label business conducted by Winlit together with such other
businesses as may be from time to time assigned to or generated by the Division.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties hereto agree as follows:
1. Definitions. As used herein, the following terms shall have the
following meanings:
1.1 Assets means the tangible and intangible assets used in
connection with the business and operations of Winlit (collectively, the
"Business"), except for the "Excluded Assets" (as hereinafter defined). Without
limiting the generality of the foregoing, the Assets shall include the
following:
(a) all registered and unregistered trademarks, trade names,
service marks, designs, franchises, licenses, permits, privileges and other
proprietary rights if any, owned or held and used by or useful to Winlit in
connection with the Business including, without limitation, those set forth in
Schedule 1.1(a) hereto;
(b) all furniture, fixtures, improvements, office materials and
supplies, and other tangible personal property of every kind and description
owned or held and used by or useful to Winlit in connection with the Business.
(c) all rights and benefits of Winlit under lease agreements,
entered into by, or for the benefit of, Winlit or owned or held and used by or
useful to Winlit in connection with the Business and under all other contracts,
agreements and commitments in connection with their respective businesses and
operations, which are set forth on Schedule 1.1(c) (which shall also specify
those contracts the assignment of which requires third party consent);
(d) all warranties, rights and other intangible assets of any
member of the Winlit Group and/or the shareholders of Winlit in connection with
the Business.
(e) all records and files of Winlit, including, without limitation,
customer and supplier lists, records, files and account statements,
correspondence with customers or suppliers and potential customers or suppliers
and all related documents, records of purchase and invoices recording purchases,
customer orders, stockroom records, financial accounting and credit records,
personnel records, general correspondence and any similar document or record
related to or useful for or in the Business, but specifically excluding the
minute books and records relating solely to the incorporation of Winlit;
(f) all transferable insurance policies owned by, or entered into
by or on behalf of, any member of the Winlit Group in connection with the
Business, other than life insurance policies with respect to Xxxx and Xxxxxx;
(g) all purchase and sales orders in process on the Closing Date
(as defined in Section 1.4 hereof) to the extent merchandise thereunder has not
been shipped to customers of Winlit and which are not, therefore, accounts
receivable ("Orders-in-Process") as are specified on Schedule 1.1(g);
(h) all samples (other than old samples as set forth in
Section 1.2(g)), patterns, drawings, creative designs, ideas (including those in
the possession of third parties, but which are the property of Winlit),
sketches, plans and other similar matters, however evidenced;
(i) all of Winlit Group's goodwill and going concern value in the
Business; and
(j) all inventory of Winlit as set forth on Schedule 1.1(j) hereto
(the "Purchased Inventory").
1.2 Excluded Assets means (a) all cash and marketable securities of
Winlit, whether on hand or in banks, held by or on behalf of or for Winlit and
all bank accounts or accounts with other financial institutions held by or in
the name of or on behalf of Winlit, (b) all prepaid expenses, accounts and notes
receivable of Winlit, (c) the security deposit with respect to the lease at 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, (x) claims or causes of action of Winlit,
(e) inventory of Winlit other than Purchased Inventory, (f) furniture, fixtures
and equipment located at the warehouse leased by Winlit at 000 Xxxxxxx Xxxxxx,
Xxxxxxxx, Xxx Xxxxxx and (g) old samples not related to any products sold within
the past year.
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1.3 Closing means the consummation of the purchase, assignment,
conveyance and sale of the Assets contemplated hereunder. It is contemplated
that the Closing shall take place immediately following the execution and
delivery of this Agreement.
1.4 Closing Date means the date on which this Agreement is executed
and delivered by all the parties hereto or at such other date as the parties may
agree.
1.5 Closing Place means the offices of Fulbright & Xxxxxxxx L.L.P.,
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, xx such other place as the parties may
agree.
1.6 Code means the Internal Revenue Code of 1986, as amended.
1.7 Direct Operating Income or DOI means net sales (inclusive of
accrued returns, markdowns and allowances) of the Division less (i) cost of
sales, including royalties and license fees, except for $100,000 to be paid to
Guess?, Inc. with respect to the years ending January 31, 2007, 2008 and 2009,
and (ii) the direct expenses of the Division set forth on Schedule 1.7 hereof,
all as determined in accordance with Buyer's accounting procedures utilized in
preparing internal financial statements for Buyer's divisions.
1.8 ERISA means the Employee Retirement Income Security Act of
1974, as amended, or any successor law, and regulations and rules issued
pursuant to that Act or any successor law.
1.9 Encumbrances mean any mortgages, pledges, preemptive purchase
rights, security interests, claims, liens, charges, or other encumbrances of any
kind including, without limitation, any liens arising under or in connection
with Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code.
1.10 knowledge of a person means such person's actual knowledge
after reasonable inquiry of all persons who may reasonably be expected to have
knowledge of the matter at issue.
1.11 Tax means (i) any tax of any kind, a levy or other like
assessment, customs, duties, imposts, charges or fees (including income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, sales, use, transfer,
registration, value added, alternative or add-on-minimum, estimated or other tax
of any kind whatsoever) imposed by or payable to the United States or any state,
county, local or foreign government or subdivision or agency thereof, and in
each instance such term shall include any interest, penalties or additions to
tax attributable to any such tax, (ii) any liability for the payment of any
amounts described in (i) as a result of being (or ceasing to be) a member of a
consolidated, combined, unitary or aggregate group for any Tax period, and (iii)
any liability for the payment of any amount described in (i) or (ii) as a result
of being a transferee or successor to any person or as a result of any express
or implied obligation to indemnify any other person.
1.12 Tax Return means any return, statement, claim for refund,
report, estimate, declaration, information return form or other document filed
or required to be filed in connection
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with the determination, assessment or collection of any taxes or the
administration of any laws, regulations or administrative requirements relating
to any Taxes, including any schedule or attachment thereto and any amendment
thereof.
2. Purchase of Assets and Purchase Price.
2.1 Purchase of Assets. Subject to the terms and upon satisfaction
of the conditions contained in this Agreement, at the Closing, Winlit shall
sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase
from Winlit, the Assets, free and clear of all Encumbrances, for the
consideration specified in Section 2.4 hereof.
2.2 Non-Assumption of Liabilities. Except as specifically set forth
on Schedule 2.2, in this Section 2.2 and in Sections 2.4 and 2.5 hereof, Buyer
expressly does not, and shall not, assume or be deemed to have assumed under
this Agreement or by reason of any transaction contemplated hereunder, any
debts, liabilities (contingent or otherwise) or obligations of any of the
members of the Winlit Group or any shareholder of Winlit of any nature
whatsoever. Buyer shall assume the obligations arising subsequent to the Closing
Date under all contracts, agreements, commitments and leases of Winlit being
assigned or transferred to Buyer hereunder, but only to the extent disclosed in
Schedule 1.1(c) or 2.2 hereto (collectively, the "Assumed Obligations");
provided, however, that notwithstanding any other provision of this Agreement,
the Assumed Obligations shall not include any (i) debts, liabilities (contingent
or otherwise) or obligations of any of the members of the Winlit Group or any
shareholder of Winlit (including, without limitation, trade accounts payable and
liabilities that should be accrued on the Financial Statements (as defined
herein) in accordance with generally accepted accounting principles up to the
Closing Date) with respect to those Assumed Obligations referred to in this
section, arising out of any contract, agreement, commitment or lease (a)
required to be listed but not listed on Schedule 1.1(c) hereto (regardless of
any knowledge thereof on the part of Buyer) or (b) the benefits of which are not
validly assigned to Buyer, (ii) any liabilities arising from customer complaints
or any related customer chargebacks (including all deductions of any kind)
relating to the Business prior to the Closing Date, or (iii) any liability or
obligation for Taxes, whether or not accrued, assessed or currently due and
payable, including without limitation any liability for Taxes (a) any member of
the Winlit Group or any shareholder of Winlit, whether or not it relates to the
operation of Winlit's business, (b) arising from the operation of Winlit's
business or the ownership of the Assets on or prior to the Closing Date or (c)
arising out of the consummation of the transactions contemplated hereby (for
purposes of this Section 2.2, all real property Taxes, personal property Taxes
and similar ad valorem obligations levied with respect to the Assets for a Tax
period that includes (but does not end on) the Closing Date shall be apportioned
between Winlit and Buyer based upon the number of days of such period included
in the Tax period before (and including) the Closing Date and the number of days
of such Tax period after the Closing Date). Notwithstanding anything to the
contrary contained herein, it shall be the responsibility of Buyer to reimburse
Winlit for any customs and duty charges paid by Winlit with respect to any of
the Purchased Inventory.
2.3 Transfer and Assumption Documents.
(a) At the Closing, the members of the Winlit Group shall
deliver to Buyer such deeds, bills of sale, endorsements, assignments and other
instruments of sale,
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conveyance, transfer and assignment, satisfactory in form and substance to Buyer
and its counsel, as may be requested by Buyer, in order to convey to Buyer good
and marketable title to the Assets, free and clear of all Encumbrances.
(b) At the Closing, the members of the Winlit Group shall
deliver to Buyer all written consents which are required under any contract or
agreement being assigned to Buyer hereunder; provided, however, that as to any
such contract or agreement the assignment of which by its terms requires prior
consent of the parties thereto, if such consent is not obtained prior to or on
the Closing Date, the members of the Winlit Group shall deliver to Buyer written
documentation setting forth arrangements for the transfer of the economic
benefit of such contracts or agreements to Buyer as of the Closing Date under
terms and conditions acceptable to Buyer.
(c) At the Closing, Buyer will deliver to Winlit such
instruments and documents, satisfactory in form and substance to Winlit and its
counsel, as may be requested by Winlit in order to effect the assumption of the
Assumed Obligations by Buyer.
2.4 Purchase Price.
(a) The aggregate consideration to be paid by Buyer to Winlit,
for the Assets (the "Consideration") shall be equal to the sum of (i)
$5,740,000, and (ii) the amount set forth on Schedule 2.4 hereto for the
Purchased Inventory, payable as set forth on Schedule 2.4. The Consideration
shall be paid by Buyer by the assumption of an amount of Winlit's debt to CIT
(hereinafter defined) equal to the Consideration pursuant to the assumption
agreement attached hereto as Exhibit B.
(b) Subject to the provisions of clauses (i) through (iv) below,
Buyer also agrees to pay to Winlit or its assigns for the period beginning on
the Closing Date and ending on January 31, 2006 and for each of the one-year
periods ending on January 31, 2007, 2008 and 2009 (each an "Earn Out Period" and
collectively, the "Earn Out Periods") such additional amounts (each an "Earn Out
Payment and collectively, the "Earn Out Payments") if the Division achieves a
minimum DOI (the "Minimum DOI") in each period as follows: (i) with respect to
the period ending January 31, 2006, provided the Division achieves a Minimum DOI
for that period of at least $4.0 million, an amount equal to fifteen percent
(15%) of the Division's DOI for that period; provided, however, that if the
Division achieves a DOI of at least $5.5 million (the "Target") for the period
beginning on the Closing Date and ending January 31, 2006, then the amount shall
be equal to twenty-five percent (25%) of the Division's DOI for that period;
provided, further however, that in determining the Division's DOI for the period
beginning on the Closing Date and ending January 31, 2006 (for all purposes
under this Agreement including but not limited to calculating the DOI to
determine the Earn Out Payment and determining whether the Division has achieved
the Minimum DOI and/or the Target for such period), an amount equal to $245,000
shall be added to the actual DOI for such period; (ii) with respect to the
period ending January 31, 2007, provided the Division achieves a Minimum DOI for
that year of at least $2.5 million, an amount equal to twenty percent (20%) of
the Division's DOI for that year; (iii) with respect to the period ending
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January 31, 2008, provided the Division achieves a Minimum DOI for such year of
at least $3.0 million, an amount equal to twenty percent (20%) of the Division's
DOI for that year; and (iv) with respect to the period ending January 31, 2009,
provided the Division achieves a Minimum DOI for such year of $3.0 million, an
amount equal to the excess of twenty percent (20%) of the Division's DOI for
that year over $100,000; and provided further that the Earn-Out Payment with
respect to the period ending (A) January 31, 2008 shall not in any event exceed
$3.0 million; and (B) January 31, 2009 shall not in any event exceed $3.0
million. If no Earn-Out Payment is earned with respect to the year ending
January 31, 2009, the members of the Winlit Group jointly and severally agree to
pay to Buyer an aggregate of $100,000.
(i) If no Earn-Out Payment is made with respect to any one or
more periods because the DOI with respect to such Earn Out Period or Periods is
less than the Minimum DOI, Buyer shall not be required to make any Earn Out
Payment for such Earn Out Period unless the Division's DOI for any one or more
subsequent Earn Out Period exceeds the Minimum DOI for that period or those
periods by an amount at least equal to the deficiency in the prior Earn-Out
Periods. In such event, in determining the required Earn Out Payment, an amount
of DOI from the subsequent Earn Out Periods necessary to have achieved the
Minimum DOI for the prior Earn Out Period shall be added to DOI for the prior
Earn Out Period and deducted from DOI in each such subsequent Earn Out Period.
Earn Out Payments shall be paid with respect to each of these Earn Out Periods
based on the percentage of DOI that applies to each period.
(ii) If the Division does not achieve the Minimum DOI with
respect to any Earn Out Period, an Earn-Out Payment shall be made with respect
to such Earn-Out Period provided that the aggregate DOI for prior Earn-Out
Periods exceeded the aggregate Minimum DOI for such periods by an amount at
least equal to the DOI deficiency in the subsequent Earn Out Period. In such
event, in determining the required Earn Out Payment the Earn Out Payment for
such subsequent Earn Out Period shall be based on the actual DOI for the
Division for such subsequent Earn Out Period.
(iii) If the Division's aggregate DOI for all of the Earn Out
Periods is less than $9.7 million, then any Earn Out Payments previously paid by
Buyer with respect to such Earn Out Periods shall be forfeited by Winlit and
repaid to Buyer. The obligation to repay Earn Out Payments under this clause
(iii) is a joint and several obligation of the members of the Winlit Group.
(iv) Any payment required to be made under this Section 2.4(b)
shall be made within 90 days of the end of the one-year period to which such
payment relates and shall include an accounting (the "Accounting") of the amount
of payment due. Buyer shall make the Division's books and records of account,
budgets, and forecasts reasonably available to Winlit solely for use in
verifying and calculating Earn Out Payments.
(v) As soon as reasonably practicable, but in any event within
30 days of delivery by Buyer to Winlit of the Accounting, Winlit shall inform
the Buyer in writing that the Accounting is acceptable or object to the
Accounting, setting forth a specific description of the objection. If Winlit
does not respond within such 30 day period, it will be deemed to have accepted
the Accounting. If the Buyer does not agree with an objection of Winlit or such
objections are not resolved on a usually agreeable basis within 30 days of the
Buyer's receipt of any objections, any such disagreements shall be promptly
submitted to a
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mutually agreeable independent certified public accounting firm (the
"Independent Firm"). If Winlit and Buyer cannot agree on the selection of the
Independent Firm, they shall request the American Arbitration Association in New
York, New York, to select the Independent Firm. The Independent Firm shall
resolve such dispute within 30 days after submission of the dispute by the
parties. The fees, costs and expenses of the Independent Firm shall be equally
borne by the parties. In the event that the Independent Firm determines that
Buyer underpaid amounts due to Winlit pursuant to Section 2.4, Buyer shall to
pay Winlit interest on such underpaid amount from the time such payment was due
until it is paid at a rate equal to the prime rate of interest as announced by
Fleet National Bank, a Bank of America company, on the date such payment was
due. In the event that the Independent Firm determines that Buyer overpaid
amounts due to Winlit pursuant to Section 2.4. Winlit shall return the amount of
such repayment, without interest.
(c) Any amounts payable by Buyer to Winlit under this Agreement
shall be paid to the CIT Group/Commercial Services Inc. ("CIT") for the account
of Winlit, provided, however, that in the event that Buyer is notified in
writing executed by CIT that it has been paid in full, any further amount
payable by Buyer to Winlit under this Agreement shall be paid directly to Winlit
or its assigns.
2.5 Allocation of Purchase Price. Buyer shall prepare an allocation
of the Consideration (and all other capitalized costs) among the Assets in
accordance with the applicable requirements of Section 1060 of the Code prior to
the time of any required tax filings with respect thereto and subject to any
adjustment to the consideration pursuant to Section 2.4(b). The parties agree to
report this transaction for tax purposes in accordance with the allocation set
forth on Schedule 2.5 hereto. If any taxing authority makes or proposes an
allocation with respect to the Assets that differs materially from the
allocation prepared by Buyer pursuant to this Section 2.5, each of Buyer on the
one hand and Winlit on the other shall have the right, at its election and
expense, to contest such authority's determination. In the event of such a
contest, the other party or parties shall cooperate reasonably with the
contesting party but shall have the right to file such protective claims or
returns as may be reasonably required to protect its interests.
3. Representations and Warranties of the Winlit Group. Each of the
members of the Winlit Group, jointly and severally, represent, warrant and
covenant to Buyer that:
3.1 Organization and Good Standing. Winlit (a) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization as set forth on Schedule 3.1 hereto and
Schedule 3.1 is a complete, correct and accurate list of such jurisdiction of
incorporation, (ii) has all requisite corporate power and authority to enter
into and perform and do all things contemplated under this Agreement and all
documents and agreements necessary to give effect to the provisions of this
Agreement, to own and lease its assets and to carry on and operate its business
and operations as now being conducted and as proposed to be conducted by it
under existing agreements, (c) is duly qualified to do business and is in good
standing as a foreign corporation in every jurisdiction in which the nature of
the business conducted by it requires such qualification and Schedule 3.1 is a
complete, current and accurate list of all such jurisdictions of qualification,
and (d) does not conduct any of its business or operations, through any other
limited liability company, corporation, partnership
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or other entity. La Nouvelle Renaissance, Inc. and XX 00000, Inc. are inactive
subsidiaries of Winlit which neither own any Assets nor have any current
business operations.
3.2 Organizational Documents. A copy of the certificate of
incorporation as amended to the date hereof (certified by the Secretary of State
of the State of New York and the bylaws of Winlit have been delivered to Buyer
and such documents are complete and correct and represent the presently
effective certificate of incorporation and bylaws of Winlit. The minutes of the
meetings of the board of directors of Winlit authorizing the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby (certified by Winlit's Secretary), copies of which have been delivered to
Buyer are true, accurate and complete as of the Closing Date.
3.3 Ownership of Winlit. Schedule 3.3 lists all of the outstanding
shares of capital stock of Winlit and the names of the owners thereof.
3.4 Authorization and Binding Obligations. The execution, delivery
and performance by the members of the Winlit Group of this Agreement have been
duly and validly authorized by all necessary action, including approval of the
entire transaction by the requisite vote of Winlit's board of directors and
shareholders. This Agreement has been duly executed and delivered by each member
of the Winlit Group and constitutes a legal, valid and binding agreement of each
member of the Winlit Group, enforceable in accordance with its terms, except as
its enforceability may be limited by bankruptcy, insolvency, moratorium or other
laws relating to or affecting creditors' rights generally and the exercise of
judicial discretion in accordance with general equitable principles.
3.5 No Contravention. The execution, delivery and performance of
this Agreement, the consummation of the transactions contemplated hereby and the
compliance with the provisions hereof by Winlit does not and as of the Closing
Date will not (a) violate any provisions of the certificate of incorporation or
bylaws of Winlit, (b) conflict with, result in the breach of, or constitute (or
with notice or lapse of time or both constitute) a default under, or result in
the creation of any Encumbrances upon any of the Assets, or require any
authorization, consent, approval, exemption or other action by or notice to any
third party, court or other governmental or administrative body, under or with
respect to any agreement or other instrument to which any member of the Winlit
Group is a party or by which any of the Assets is bound or affected or (c)
violate any laws, regulations, orders or judgments writs, injunctions, awards,
decrees or licenses applicable to any member of the Winlit Group with respect to
any of the Assets.
3.6 Title to Assets. Except as set forth on Schedule 3.6 hereto,
Winlit has good and marketable title to all the real and tangible personal
property and intangible property to be transferred by it to Buyer hereunder,
free and clear of any Encumbrances. The bills of sale, assignments of leases,
agreements, contracts and other arrangements, and other instruments delivered to
Buyer by the Winlit Group on the Closing Date will be in form and substance
sufficient to vest in Buyer, and the transfer to Buyer by Winlit of the Assets
on the Closing Date will convey to Buyer, good and marketable title to the
Assets, free and clear of any Encumbrances whatsoever. The Assets include all
assets which are necessary to conduct the Business as presently conducted. The
Assets are (i) in the possession of the Winlit Group, (ii)
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suitable for the uses and purposes for which they are being used or are
intended, and (iii) in compliance with applicable federal, state or local
statutes, ordinances and regulations.
3.7 Financial Statements and Material Adverse Changes.
(a) Schedule 3.7 contains the following: (i) audited financial
statements, including balance sheets and statements of income, retained earnings
and cash flows of Winlit as of, and for the years ended, December 31, 2002 and
2003, (ii) an unaudited balance sheet, statement of income, retained earnings
and cash flows of Winlit as of and for the year ended December 31, 2004, (iii)
an unaudited balance sheet and statement of income of Winlit for the three month
period ended March 31, 2005, and (iv) unaudited balance sheet and income
statements of Winlit, for each of the four quarters in 2004 (collectively, the
"Financial Statements"). To the knowledge of each of the members of the Winlit
Group, each of the Financial Statements is true, complete and correct in all
material respects, and fairly presents results of operations, financial
condition, assets, liabilities and cash flows of Winlit for the periods
specified. To the knowledge of each of the members of the Winlit Group, the
Financial Statements have been prepared (i) in accordance with generally
accepted accounting principles, applied on a consistent basis throughout the
periods involved, except as may be expressly stated in the related notes
thereto, and (ii) on a consistent basis with each other, except as set forth on
Schedule 3.7. To the knowledge of each of the members of the Winlit Group, the
unaudited Financial Statements reflect all adjustments, consisting only of
normal recurring adjustments necessary to present fairly the financial condition
of Winlit as of the date of such Financial Statements and the results of
operations for the periods then ended. To the knowledge of each of the members
of the Winlit Group, (i) all material liabilities and obligations, whether
accrued, absolute, contingent, direct or indirect, perfected, inchoate,
unliquidated or otherwise and whether due or to become due have been disclosed
in the Financial Statements or in the notes thereto, (ii) the statements of
income included in the Financial Statements do not contain any material items of
special or non-recurring income or other income not earned in the ordinary
course of business except as expressly specified on Schedule 3.7 as attached
hereto on the date hereof, and (iii) all amounts billed to customers of Winlit
reflected on the Financial Statements and Schedule 3.7 hereto are for the
Business and not for any other business. Each member of the Winlit Group
acknowledges and agrees that Buyer is relying on the accuracy and completeness
of the Financial Statements in making its determination as to whether it must
file the Financial Statements with the Securities and Exchange Commission.
(b) There have been no material adverse changes, individually
or in the aggregate, in the Assets, liabilities, business, prospects, revenues,
expenses, results of operations or condition, financial or otherwise, of Winlit
since December 31, 2004, except that Winlit has incurred a net loss in excess of
$6.0 million since January 1, 2005.
(c) The Winlit Group has provided Buyer with projections for
the Business through 2005 which are attached as Schedule 3.7 (c) (the "Winlit
Projections"). The Winlit Projections were prepared in good faith and are based
upon assumptions and estimates that the members of the Winlit Group believed to
be reasonable at the time of preparation; it being understood by Buyer that
projections such as the Winlit Projections are inherently subject to risks,
uncertainties and other factors that may cause actual results to differ from
those stated in such Projections.
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3.8 Inventories. Except as set forth on Schedule 3.8 hereto,
Purchased Inventory does not include any items below standard quality, damaged
or spoiled, obsolete or of a quality or quantity not usable or saleable in the
normal course of the Business as currently conducted within normal inventory
"turn" experience.
3.9 Leases. Schedule 3.9 sets forth a true and complete list of all
leases under which Winlit is a lessee or under which it is operating. Winlit
enjoy peaceful and undisturbed possession under all of their respective leases
and all of such leases are valid and enforceable in accordance with their
respective terms, and there is not under any such lease any existing default or
any condition, event or act which, with notice or lapse of time or both, would
constitute a default.
3.10 Licenses and Authorizations. Schedule 1.1(a) hereto contains a
true and complete list of all licenses and authorizations required for the
continued operation of the Business as now conducted under existing agreements,
if any, and Winlit is the authorized legal holder of each such license and
authorization. Such licenses and authorizations are in full force and effect.
3.11 Contracts. Schedule 1.1(c) contains a true and complete list
of all contracts, leases, agreements and commitments of every nature in full
force and effect with respect to Winlit and the Business. Winlit has complied
(in accordance with their terms) with all of the provisions of such contracts,
leases, agreements and commitments and with all of the provisions of the
Orders-in-Process, and there are no defaults thereunder. All such contracts,
leases, agreements, commitments and Orders-in-Process are valid and binding in
accordance with their terms, and true and complete copies of all such written
contracts, leases, agreements, commitments and Orders-in-Process and all
amendments and modifications thereto have been delivered to Buyer.
3.12 Franchises, Trademarks and Trade Names. Except as set forth on
Schedule 3.12 hereto, all franchises, trademarks, trade names, service marks,
copyrights, licenses, privileges and other proprietary rights held by Winlit, as
described in Section 1.1(a) hereto, are owned by Winlit, or licensed for its use
and are valid and in good standing, free and clear of any Encumbrances
whatsoever. The Winlit Group has taken all necessary action to protect such
proprietary rights. No other trademarks, trade names, service marks, copyrights,
licenses, privileges and other proprietary rights are necessary for the conduct
of the Business. Among the other trademarks set forth on Schedule 3.12 hereto,
Xxxxxx, XXX xxx XX 00000 are valid and enforceable trademarks of Winlit and are
transferable to Buyer. The Business conducted by Winlit does not infringe upon
or conflict with any patent, trademark, trade name, service xxxx, copyright,
license or other proprietary right of any third party, and no member of the
Winlit Group has received any notice of infringement upon or conflict with the
asserted rights of others.
3.13 Employees. Except as set forth in Schedule 3.13 hereto, there
are no collective bargaining agreements, professional or personal service
contracts, incentive plans for salespeople, bonus plans and other similar
agreements, plans, arrangements and practices including employee benefit plans
within the meaning of 3(3) of ERISA (whether or not subject to ERISA), or
employment agreements, bonus commitments or any other material plan,
10
agreement or arrangement covering present or future employees or other personnel
of Winlit or with respect to which Winlit has any direct or indirect liability,
whether in connection with the transactions contemplated by this Agreement or
otherwise (the "Employee Plans"). Schedule 3.13 includes a list of all employees
currently employed by Winlit together with (i) the compensation received by them
in each of 2003 and 2004, their current annual salary and all other compensation
and fringe benefits to which they are or may be entitled; and (ii) the amount of
accrued bonuses, vacation, sick leave, family leave and other leave for such
personnel. Winlit is not in default in any material respect with respect to any
of the foregoing obligations and the Winlit Group will bear full responsibility
for any such obligation outstanding, or due, owing or accrued as of the Closing
Date, except that Buyer agrees to allow persons who become employees of Buyer to
take all accrued vacation and sick days set forth on Schedule 3.13, it being
understood that (i) any vacation or sick days taken by such employee shall first
be credited against the days listed on Schedule 3.13 and (ii) if any such
employee leaves the employ of Buyer and is entitled to be paid for any vacation
and sick days set forth on Schedule 3.13, the members of the Winlit Group shall,
jointly and severally, be liable to reimburse Buyer for any such payments made
by it to any such employee without regard to the limitations of liability set
forth in Section 7(f)(i). Neither Winlit nor any of its Affiliates is in default
with respect to any (a) contributions or material obligations under any Employee
Plan or (b) withholding or other employment taxes or payments on behalf of any
current or former employee for which it is obligated on the date hereof. There
are no labor controversies pending or threatened with respect to the employees
of Winlit. The employees of Winlit are not represented by any labor union and no
union organizational campaign is in progress with respect to such employees.
3.14 Employee Plans. Except as specifically set forth on
Schedule 3.14, (i) Winlit does not maintain, contribute to (or have an
obligation to contribute to) or has not maintained, adopted or contributed to a
pension plan (within the meaning of Section 3(2) of ERISA) which is subject to
Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code, (ii) there
has been no accumulated funding deficiency within the meaning of 302(a)(2) of
ERISA or Section 412 of the Code with respect to any funded pension plan which
has resulted or could result in the imposition of a lien upon any of the Assets,
and (iii) Winlit has not incurred nor will incur any liability, direct or
indirect, contingent or otherwise under Title IV of ERISA.
3.15 Litigation. Except as set forth in Schedule 3.15, (i) there
are no actions, suits, proceedings or investigations of any nature at law or in
equity, pending or, to the knowledge of the members of the Winlit Group,
threatened against or relating to Winlit, or any of the Assets or, to the
knowledge of the members of the Winlit Group, affecting the Winlit Group or any
of the Assets, which might reasonably result in an adverse effect upon the
business or operations or condition, financial or otherwise, of Winlit, or the
Assets, which seeks to enjoin, prohibit or otherwise challenge the transactions
contemplated hereby or which might reasonably result in an adverse effect on the
enjoyment and use by Buyer of any of the Assets to be acquired hereunder, and
(ii) no unsatisfied judgment, award, order or decree has been rendered against
or affecting Winlit or the Assets which might reasonably result in an adverse
effect upon the business or operations or condition, financial or otherwise, of
Winlit, or any of the Assets or which adversely affects the validity or
enforceability of any of the contracts, leases, agreements, commitments or
Order-in-Process listed in the Schedules hereto.
3.16 Taxes.
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(a) Except as set forth in Schedule 3.16, Winlit has duly and
timely filed all foreign, federal, state, county and other Tax Returns required
to be filed, and such Tax Returns were true, complete and correct in all
material respects. Winlit has made available to Purchaser copies of all Tax
Returns with respect to the conduct of its business and the ownership of the
Assets filed by them during the six-year period prior hereto. Winlit has paid,
or made provisions in accordance with generally accepted accounting principles
for the payment of, all Taxes due (whether or not shown on any Tax Return)
through and including the Closing Date, including, but not limited to with
respect to 2004. There is not currently pending any dispute or claim concerning
any Tax liability with respect to the income, business, operations or property
of Winlit either claimed or raised by any Taxing authority. No claim has been
made by a Taxing authority in a jurisdiction where Winlit does not file Tax
Returns that it is or may be subject to Tax in that jurisdiction.
(b) All Taxes which Winlit was required by law to withhold, deposit
or collect in connection with any amount paid or owing to any employee,
independent contractor, creditor, partner or other third party have been duly
withheld, deposited and collected and, to the extent required, have been paid to
the relevant Taxing authority.
(c) None of the Assets are (1) "tax-exempt use property" within the
meaning of Section 168(h)(1) of the Code or (2) "tax-exempt bond financed
property" within the meaning of Section 168(g) of the Code.
(d) No member of the Winlit Group has waived any statute of
limitations in respect of the assessment and collection of Taxes or agreed to
any extension of time with respect to a Tax assessment or deficiency relating to
the ownership of the Assets or the operation of the Business on or prior to the
Closing Date. Except as otherwise provided on Schedule 3.16, no member of the
Winlit Group is currently the beneficiary of any extension of time within which
to file any Tax Return. No member of the Winlit Group is a party to any Tax
allocation or sharing agreement.
(e) None of the Assets is an interest in any entity that is treated
as a partnership for U.S. federal income Tax purposes or would be treated as a
pass-through or disregarded entity for any Tax purpose.
(f) None of the Assets is a "United States real property interest"
within the meaning of Section 897(c) of the Code.
3.17 Books of Account. To the knowledge of each member of the
Winlit Group, the books of account and other records of Winlit relating to its
business and operations are complete and correct, are based on an adequate
system of internal controls and accurately present and reflect all of the
transactions relating to such businesses and operations to which they are
parties or by which they are bound.
3.18 Outside Interests. Except as set forth on Schedule 3.18, none
of Winlit's shareholders, members, officers, directors, managers or employees
owns, directly or indirectly, individually or collectively, an interest in any
entity which is or is expected to be a competitor, customer or supplier of (or
has or is expected to have any existing contractual relationship with)
12
Winlit, nor does any such shareholder, member, officer, director, manager or
employee receive income from any source other than Winlit which relates to, or
should properly accrue to, Winlit.
3.19 Relations. To the knowledge of each member of the Winlit
Group, Winlit has good relations with all its customers, suppliers, licensors
and others having a business relationship with it and any entity and individual
which is expected to be a customer, licensor or supplier of the Division.
Schedule 3.19 sets forth all existing disputes between Winlit and any customer
where the customer alleges it received defective goods or is entitled to any
chargebacks or markdowns against invoices of Winlit. Each of Xxxx and Xxxxxx
shall use his best efforts to assure that such relations continue with Buyer
after the consummation of the transactions contemplated hereby.
3.20 Conduct of the Business. Except as set forth on Schedule 3.20,
the Winlit Group has conducted the business and operations of Winlit in the
ordinary course consistent with past practices since December 31, 2004.
3.21 Insurance. The Winlit Group has maintained valid and
enforceable insurance policies on the Assets and the respective businesses,
operations and personnel of Winlit . Schedule 3.21 contains a correct and
complete description, including policy numbers, of such insurance policies. Such
policies are in full force and effect, and no member of the Winlit Group is in
default under any of them. No member of the Winlit Group has received any notice
of non-renewal, cancellation or intent to cancel, not renew or increase premiums
or deductibles with respect to such insurance policies nor, to the knowledge of
each member of the Winlit Group, is there any basis for such action. Schedule
3.21 also contains a list of all pending claims with any insurance company
(other than health, medical and dental insurance claims of employees). Buyer
shall be entitled to all proceeds paid under such insurance policies after the
Closing Date with respect to any claims which are asserted by or against any of
the parties hereto and are related to any of the Assets or any of the Assumed
Obligations.
3.22 Related Transactions. Since December 31, 2001, except as set
forth on the Schedule 3.22, to the knowledge of each member of the Winlit Group,
no current or former officer, director, partner, shareholder, member or manager
of Winlit (including their respective family members), (i) has engaged in any
transaction with Winlit, or (ii) has been the direct or indirect owner of an
interest in any other officer, director, partner, shareholder, manager or member
which is a present (or potential) competitor, supplier or customer of the
Business, nor does any such officer, director, partner, shareholder, manager or
member receive income from any source other then the Business which relates to,
or should properly accrue to the Business.
3.23 Disclosure. To the knowledge of each member of the Winlit
Group, the Winlit Group has not failed to disclose to Buyer any information
adverse to the assets, liabilities, business, financial condition or results of
operations or prospects of the business of Winlit or to the Business, except as
to matters affecting the economy generally, and no information furnished by or
on behalf of the Winlit Group to Buyer contains any untrue statement of a
material fact or omits to state a material fact necessary to make such
statement, in the light of the circumstances under which it was made, not
misleading. To the knowledge of each member of the Winlit Group, all written
information, in whatever form, furnished by the Winlit Group to Buyer, was
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true and correct as of the date so furnished and, except as the accuracy thereof
is affected by the passage of time, remains true and correct in all material
respects as of the date hereof.
4. Representations and Warranties of Buyer. Buyer represents, warrants
and covenants to the Winlit Group that:
4.1 Organization and Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, with full corporate right, power and authority to enter into and
perform and do all things contemplated under this Agreement and all documents
and agreements necessary to give effect to the provisions of this Agreement.
4.2 Authorization and Binding Obligations. The execution, delivery
and performance of this Agreement has been duly and validly authorized by all
necessary corporate action, including approval of the entire transaction by the
requisite vote of the board of directors of Buyer. This Agreement has been duly
executed and delivered by Buyer and constitutes a valid and binding agreement of
Buyer, enforceable in accordance with its terms, except as its enforceability
may be limited by bankruptcy, insolvency, moratorium or other laws relating to
or affecting creditors' rights generally and the exercise of judicial discretion
in accordance with general equitable principles.
4.3 No Contravention. The execution, delivery and performance of
this Agreement, the consummation of the transactions contemplated hereby and the
compliance with the provisions hereof by Buyer do not (i) violate any provisions
of the articles of incorporation or by-laws of Buyer, (ii) conflict with, result
in the breach of, or constitute a default under, or require any authorization,
consent, approval, exemption or other action by or notice to any third party,
court or other governmental or administrative body, under the provisions of any
agreement or other instrument to which Buyer is a party or by which the property
of Buyer is bound or affected that has not been obtained or (iii) violate any
laws, regulations, orders or judgments applicable to Buyer.
5. Conditions Precedent to the Obligations of the Parties. The
obligations of the parties under this Agreement are subject to the satisfaction
on or prior to the Closing Date of each of the following express conditions
precedent, except such conditions as may be waived by the party to which the
obligation is owed.
5.1 Delivery of Instruments of Conveyance and Transfer. Buyer shall
have received the instruments and other documents required to be delivered to it
pursuant to Sections 2.3(a) and (b) hereof.
5.2 Delivery of Instruments of Assumption. Buyer shall have
delivered to Winlit, in accordance with Section 2.3(c) hereof, instruments
whereby Buyer assumes and agrees to perform the Assumed Obligations.
5.3 Accuracy of Representations and Warranties. The representations
and warranties made herein (and in any document, including any Schedules hereto,
delivered in connection herewith) by each party shall be true and correct as of
the Closing Date.
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5.4 Compliance with Agreement. All of the terms, covenants and
conditions of this Agreement to be performed or complied with by Buyer and the
members of the Winlit Group on or prior to the Closing Date shall have been duly
performed or complied with.
5.5 No Obstructive Proceeding. (i) No action or proceeding shall
have been instituted against any of the parties to this Agreement before any
court or any governmental department, agency or commission to restrain or
prohibit, or to obtain substantial damages in respect of, this Agreement or the
consummation of the transactions contemplated hereby; and (ii) no action or
proceeding shall have been instituted against, and no order, decree or judgment
of any court, agency, commission or governmental authority shall be existing
against, any of the parties which would render it unlawful, as of the Closing
Date, to effect the transactions contemplated hereunder in accordance with the
terms hereof or would affect, as of the Closing Date, the validity of this
Agreement.
5.6 Consents. The Winlit Group shall have obtained and delivered to
Buyer any necessary consents to the assignment to Buyer of all leases, contracts
and agreements listed on any schedule hereto, without change or modification of
the terms thereof. The Winlit Group shall have also delivered to Buyer copies of
any other third party consents or approvals which the Winlit Group has obtained.
5.7 Authorization. Each party shall have received certified copies
of all the respective actions taken by the other party authorizing and approving
the execution and delivery of this Agreement, and the consummation of the
transactions contemplated thereunder.
5.8 Opinion of Counsel. Buyer shall have received the written
opinion of Xxxxxxxxxx Stonehill & Xxxxxxxxx, P.C., counsel for the Winlit Group,
dated the Closing Date, substantially in the form attached to this Agreement as
Exhibit A.
5.9 Employment Agreement. Xxxx shall have entered into an
employment agreement with Buyer, substantially in the form of Exhibit B hereto
(the "Employment Agreement").
5.10 License Agreements. Buyer shall have executed new
license agreements or assignments of existing license agreements with (i)
Guess?, Inc. and Guess? Licensing, Inc. for Guess Mens
outerwear and Guess Ladies outerwear (ii) Xxxxx Xxxxxxxx Licensing, Inc. for
Hilfiger men's outerwear, (iii) London Fog Industries, Inc. for men's and
women's leather outerwear, (iv) Pacific Trail, Inc. for men's and women's
leather outerwear, (v) L.C. Licensing, Inc. for Xxxxx Xxxxx women's outerwear,
and (vi) AZ3, Inc. for BCBGMaxAzria women's outerwear, in each case on terms and
conditions satisfactory to Buyer.
5.11 Lease. Buyer shall have executed a new lease, or an assignment
and assumption of the existing lease with The Arsenal Company, LLC for space at
000 Xxxxxxx Xxxxxx in New York City for the Division, in either case on terms
and conditions satisfactory to Buyer.
5.12 No Material Adverse Change. There shall have occurred no
material adverse change in the assets or condition (financial or otherwise),
results of operations, employee, customer or supplier relations, business
activities or business prospects of Winlit, nor
15
do the members of the Winlit Group know of any such change which is threatened,
nor has there been any damage, destruction or loss materially adversely
affecting any of Assets, or the business condition (financial or otherwise),
results of operations, prospects or activities of Winlit, whether or not covered
by insurance.
6. Brokers. Each of Buyer on the one hand and the Winlit Group on the
other, represents and warrants to the other that it has not engaged a broker or
finder in connection with this Agreement and the transactions contemplated
herein or any aspect thereof, except that the Winlit Group has engaged Marketing
Management Group, Inc. ("MMG") and the Winlit Group is solely responsible for
the fees and expenses of MMG. Each party agrees to indemnify and hold the other
harmless from any and all loss, cost, liability, damage and expense (including
reasonable legal and other expenses incident thereto) in respect of any claim
for a broker's or finder's fee or commission or similar payment by virtue of any
alleged agreements, arrangements or understandings with the indemnifying party.
Notwithstanding any other provision of this Agreement, the representations,
warranties and covenants contained in this Section 6 shall survive the Closing
Date without limitation.
7. Survival and Indemnification.
(a) Except as otherwise provided herein, the several
representations, warranties, covenants, and agreements of the parties contained
in this Agreement (or in any document delivered in connection herewith) shall be
deemed to have been made on the Closing Date, shall be deemed to be material and
to have been relied upon by Buyer and the Winlit Group notwithstanding any
investigation made by Buyer or members of the Winlit Group, shall survive the
Closing Date and shall remain operative and in full force and effect for a
period of two years following the Closing Date, except as to any matters with
respect to which a bona fide written claim has been made or an action at law or
in equity shall have commenced before such date, in which event survival of the
applicable representations and warranties shall continue (but only with respect
to, and the extent of, such claim) until the final resolution of such claim or
action including all applicable periods for appeal; provided, however, the
representations and warranties of the Winlit Group contained in Section 3.6,
3.14 and 3.16 hereof shall survive until 90 days following the expiration of all
applicable statutes of limitation (including periods of extension, whether
automatic or permissive) applicable to claims arising from such representations
and warranties; and provided further, that the respective, covenants and
agreements of Buyer and the Winlit Group contained in Sections 6, 7, and 8
hereof shall continue without any time limitation.
(b) Each of the members of the Winlit Group, jointly and
severally, shall indemnify and hold Buyer and its affiliates and their
respective officers, directors, managers, members, stockholders, employees,
agents and successors and assigns harmless from and against (i) any and all
loss, cost, liability, damage and expense (including legal fees, expert costs
and other expenses incident thereto) (each a "Loss" and, collectively, "Losses")
arising out of or resulting from any inaccuracy, misrepresentation or breach or
non-fulfillment of any representation, warranty, covenant or agreement of any
member of the Winlit Group under this Agreement or any document delivered to
Buyer in connection herewith, (ii) any and all liabilities and obligations of
the members of the Winlit Group (other than the Assumed Obligations) of any
nature whatsoever, whether accrued, absolute, fixed, contingent, or otherwise
known or unknown
16
to the members of the Winlit Group, including, but not limited to, Losses with
respect to any liability of the members of the Winlit Group deemed to have been
assumed by Buyer by virtue of common law, statute or regulation or failure to
comply therewith, which liability Buyer has not expressly agreed to assume
hereunder, including without limitation, Bulk Transfer Laws in effect in the
State of New York; (iii) any liability or obligation for Taxes, whether or not
accrued, assessed or currently due and payable, including without limitation any
liability for Taxes (a) of the members of the Winlit Group, whether or not it
relates to the operation of Winlit's business, (b) arising from the operation of
Winlit's business or the ownership of the Assets on or prior to the Closing Date
or (c) arising out of the consummation of the transactions contemplated hereby
(for purposes of this Section 7(b), all real property Taxes, personal property
Taxes and similar ad valorem obligations levied with respect to the Assets for a
Tax period that includes (but does not end on) the Closing Date shall be
apportioned between Winlit and Buyer based upon the number of days of such
period included in the Tax period before (and including) the Closing Date and
the number of days of such Tax period after the Closing Date), (iv) any Loss
arising from customer complaints or any related customer chargebacks or
markdowns relating to the business of Winlit prior to the Closing, (v) Losses
with respect to the failure by any member of the Winlit Group to obtain any
third party consents required to effect the transactions contemplated by this
Agreement, (vi) any and all Losses arising out of workers compensation claims
relating to periods prior to the Closing Date or any liabilities or obligations
arising under any Employee Plan (as defined in Section 3.13), ERISA, or Section
4980B of the Code and (vii) all claims, actions, suits, proceedings, demands,
assessments, judgments, costs and expenses, including, without limitation, any
legal fees and expenses, incident to any of the foregoing.
(c) Buyer shall indemnify and hold the Winlit Group, and each
of their respective affiliates, officers, directors, stockholders, members,
managers, employees, agents and successors and assigns, harmless from and
against (i) any and all Losses arising out of or resulting from any inaccuracy,
misrepresentation or breach or non-fulfillment of any covenant or agreement of
Buyer under this Agreement or any document delivered by Buyer to Winlit in
connection herewith, (ii) any and all Losses arising out of or in connection
with the ownership or operation of the Assets or the Assumed Obligations, in
each case with respect to periods after the Closing Date, (iii) all claims,
actions, suits, proceedings, demands, assessments, judgments, costs and
expenses, including, without limitation, any legal fees and expenses, incident
to any of the foregoing, (iv) any Loss arising from customer complaints or any
related customer chargebacks or markdowns relating to the business of the
Division after the closing and (v) any and all Losses arising out of workers
compensation claims relating to periods after the Closing Date by employees of
the Division or any liabilities or obligations relating to the Division under
any employee plan of Buyer, ERISA or Section 4980B of the Code.
(d) The indemnity agreements in this Section 7 shall be in
addition to any other indemnity obligations any party may have to another party
pursuant to any other provision of this Agreement and to any liability which any
party may incur to another party and shall not foreclose any other rights or
remedies any party may have to enforce the provisions of this Agreement.
(e) The following indemnification procedure shall apply to the
foregoing agreements:
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(i) The party who is seeking indemnification (the
"Claimant") for a Loss shall give written notice (in accordance with the other
provisions of this Agreement) to the party from whom indemnification is sought
(the "Indemnitor") promptly after the Claimant learns of the claim or
proceeding, provided, that the failure to give such notice shall not relieve the
Indemnitor of its obligations hereunder except to the extent it is actually
damaged thereby.
(ii) With respect to any third-party claims or
proceedings as to which the Claimant is entitled to indemnification, the
Indemnitor shall have the right to select and employ counsel of its own choosing
to defend against any such claim or proceeding, to assume control of the defense
of such claim or proceeding, and (subject to the last sentence of this Section
7(e)(ii)) to compromise, settle or otherwise dispose of the same, if the
Indemnitor deems it advisable to do so, all at the expense of the Indemnitor.
The parties will fully cooperate in any such action, and shall make available to
each other any books or records useful for the defense of any such claim or
proceeding. The Claimant may elect to participate in the defense of any such
third party claim, and may, at its sole expense, retain separate counsel in
connection therewith. Notwithstanding the foregoing, (i) the Claimant shall not
settle or compromise any such third party claim without the prior written
consent of the Indemnitor and (ii) the Indemnitor shall not settle or compromise
any such third party claim without the prior written consent of the Claimant,
provided, that, in each case, consent shall not be unreasonably withheld.
(f) The joint and several obligations of the members of the
Winlit Group pursuant to the provisions of this Section 7 are subject to the
following limitations:
(i) The members of the Winlit Group shall not be liable
to Buyer under this Section 7 until liabilities incurred exceed $50,000 in the
aggregate and then only to the extent of such excess;
(ii) Buyer shall not be entitled to recover from the
members of the Winlit Group under this Section 7 in excess of $5,000,000 in the
aggregate; and
(iii) The limitations of the liability of the members of
the Winlit Group set forth in clauses (i) and (ii) above shall not be applicable
to (A) any claims determined by a court of competent jurisdiction to arise from
fraud by any of the members of the Winlit Group or (B) any amounts required to
be repaid pursuant to Section 2.4(b)(iii).
(g) Buyers obligations pursuant to the provisions of this
Section 7 are subject to the following limitations:
(i) Buyer shall not be liable to the Winlit Group under
this Section 7 until liabilities incurred exceed $50,000 in the aggregate and
then only to the extent of such excess;
(ii) The Winlit Group shall not be entitled to recover
from Buyer under this Section 7 in excess of $5,000,000 in the aggregate; and
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(iii) The limitations of Buyer's liability set forth in
clauses (i) and (ii) above shall not be applicable to any claims determined by a
court of competent jurisdiction to arise from fraud by Buyer.
8. Post-Closing Agreements.
(a) Delivery of Property Received by the Winlit Group or Buyer
After Closing. Each member of the Winlit Group agrees that he or it will
transfer or deliver to Buyer, promptly after the receipt thereof, any property
which he or it receives after the Closing Date in respect of the Assets
transferred or intended to be transferred to Buyer under this Agreement.
(b) Cooperation After the Closing. The parties shall, at any time,
and from time to time, after the Closing Date, execute and deliver such further
instruments of conveyance and transfer and take such additional action or may be
reasonably necessary to effect, consummate, confirm or evidence the transactions
contemplated by this Agreement including using their best efforts to obtain any
third party consents not obtained as of the Closing Date.
(c) Removal of Encumbrances. Each member of the Winlit Group agrees
to assist Buyer and shall act in good faith in assisting Buyer, all to the
extent requested by Buyer, in the removal of any and all Encumbrances whatsoever
on any Asset, including without limitation on any Orders-in-Process.
(d) Insurance. The Winlit Group shall maintain general liability
and product liability insurance policies with respect to the business and
operations of Winlit of a kind and in an amount existing prior to the Closing
Date for a period of one year after the Closing Date.
(e) Non-Competition.
(i) Each of Xxxx and Xxxxxx covenant and agree that (i) in the
case of Xxxxxx, from the Closing Date through December 31, 2006, and (ii) in the
case of Xxxx, from the Closing Date to January 31, 2009, he shall not anywhere
in the United States, Canada or another country where Buyer is conducting
business, directly or indirectly, as owner, partner, joint venturer,
stockholder, employee, broker, agent, principal, trustee, corporate officer,
director, licensor, or in any other capacity whatsoever (as applicable) engage
in, become financially interested in, be employed by, render any consultation or
business advice to, or have any connection with, any person, firm, corporation,
business or other enterprise which is engaged in the manufacture, distribution,
sale, production or promotion of mens' and/or womens' outerwear; provided,
however, that (A) each of Xxxx and Xxxxxx may own any securities of any
corporation which in engaged in such business and is publicly owned and traded
but in an amount not to exceed at any one time the lesser of (a) $500,000 or (b)
4.9% of any class of stock or securities of such company; (B) any association by
Xxxxxx with BCBGMaxAzria shall not be deemed to violate his obligations under
this paragraph; (C) Xxxx'x and Xxxxxx' interest in the facilities disclosed in
Schedule 3.18; and (D) any activities during the nine month period from the
Closing Date with respect to the wind-up of the business of Winlit shall not be
deemed to violate the obligations of Xxxx or Xxxxxx under this paragraph.
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(ii) Each of the Xxxx and Xxxxxx agree that the remedy at law
for any breach of the covenants contained in Section 8(e)(i) hereof would be
difficult to ascertain and therefore, in the event of breach or threatened
breach of any such covenants, Buyer, in addition to any other remedy, shall have
the right to enjoin Xxxx and Xxxxxx from any threatened or actual activities in
violation thereof and each of Xxxx and Xxxxxx hereby consent and agree that
temporary and permanent injunctive relief may be granted in any proceedings
which may be brought to enforce any such covenants without the necessity of
proof of actual damages. If any portion of the restrictions set forth in this
Section 8(e) should, for any reason whatsoever, be declared invalid by a court
of competent jurisdiction, the validity or enforceability of the remainder of
such restrictions shall not thereby be adversely affected. Each of Xxxx and
Xxxxxx declare that the territorial and time limitations set forth in this
Section 8 are reasonable and properly required for the adequate protection of
the business of Winlit being purchased by Buyer. In the event any such
territorial or time limitation is deemed to be unreasonable by a court of
competent jurisdiction, Xxxx and Xxxxxx, as applicable, agree to the reduction
of the applicable territorial or time limitation to the area or period which
such court shall deem reasonable.
(f) Termination of Employment by Xxxx. If, on or prior to
December 31, 2006, Xxxx voluntarily terminates his employment with Buyer, each
member of the Winlit Group, jointly and severally, agrees to immediately pay to
Buyer an aggregate of $1,000,000, it being understood that termination of Xxxx'x
employment by death or disability or justifiable cause (each as defined in the
Employment Agreement) shall not be considered a voluntary termination for
purposes of this Section 8(f).
(g) Working Capital. Buyer agrees that it will provide the Division
with working capital during the period ending December 31, 2005 in order to
operate the Division on a basis consistent with the Winlit Projections.
(h) Xxxxxxx and Employee Bonuses. (i) Subject to the terms of this
paragraph, Buyer agrees to pay Xxxxxxxx Xxxxxxx ("Xxxxxxx") a bonus equal to (i)
0.6% of Division's DOI for the fiscal year ending January 31, 2006, provided
that the Division's DOI for such period is at least $4,000,000, provided,
further, that in determining whether the Division has achieved the Minimum DOI
for the period beginning after the Closing Date and ending January 31, 2006 an
amount equal to $245,000 shall be added to the actual DOI for such period; and
(ii) 1.3% of the Division's DOI for the fiscal years ending January 31, 2007,
2008 and 2009, provided that the Division's DOI for such fiscal years is at
least $2,500,000, $3,000,000 and $3,000,000, respectively. A bonus shall be
payable to Xxxxxxx with respect to a fiscal year only if he is an employee of
Buyer on the last day of such fiscal year. It is understood that nothing in this
paragraph shall constitute an agreement to continue to employ Xxxxxxx and, that
while employed by Buyer, Xxxxxxx shall be an "at will" employee; and (ii) Buyer
agrees that if the Division's DOI for the fiscal year ending January 31, 2006 is
at least $5,500,000, Buyer shall create a bonus pool for the employees of the
Division in an amount equal to 1% of the Division's DOI to be paid to such
employees as agreed to by Buyer and Xxxx.
(i) Additional Financial Statements. The Winlit Group agrees to
prepare and deliver to Buyer no later than thirty days from the Closing Date an
unaudited balance sheet as of the Closing Date and an unaudited income statement
of Winlit for the period
20
from January 2005 through the Closing Date. The Closing Date financial
statements delivered pursuant to this Section 8(i) shall become part of the
"Financial Statements" as defined in Section 3.7(a).
(j) G-III Guaranty. G-III hereby guaranties the payment and
performance of Buyer's obligations under this Agreement.
(k) Change of Name. Winlit agrees to file a Certificate of
Amendment to its Certificate of Incorporation (to be filed with the Secretary of
State of the State of New York immediately following the Closing) changing its
name from "Winlit Group, Ltd." to "Stusam, Inc.". Following the filing of the
Certificate of Amendment with the Secretary of State of the State of New York,
no member of the Winlit Group will use the name "Winlit Group, Ltd.", or any
derivative thereof; provided, however, that Buyer shall permit Winlit for a
period of nine months from the Closing Date to use the Winlit name to collect
Winlit's accounts receivable, liquidate inventory that is not Purchased
Inventory and liquidate all other Excluded Assets.
9. Costs, Expenses, etc. Each of the parties hereto shall bear all
costs and expenses incurred by it in connection with this Agreement and in the
preparation for and consummation of the transactions provided for herein, and
shall not be entitled to any reimbursement therefor from the other party;
provided, however, all transfer, documentary, sales, use, stamp, registration
and other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement shall be paid by Winlit when due, and Winlit
will, at the expense of the Winlit Group, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and fees, and, if required by applicable
law, Buyer will join in the execution of any such Tax Returns and other
documentation; provided further, however, that Buyer shall reimburse Winlit for
one-half of the first $40,000 of sales taxes paid by Winlit related to sales of
Assets pursuant to this Agreement, and for all such sales taxes that are in
excess of $40,000.
10. Notice of Proceedings. Buyer or the Winlit Group as the case may
be, will promptly notify the other in writing upon becoming aware of any order
or decree or any complaint praying for an order or decree restraining or
enjoining the consummation of this Agreement or the transactions contemplated
hereunder, or upon receiving any notice from any governmental department, court,
agency or commission of its intention to institute an investigation into, or
institute a suit or proceeding to restrain or enjoin the consummation of this
Agreement or the transactions contemplated hereby, or to nullify or render
ineffective this Agreement or such transactions if consummated.
11. Notices. All notices, claims, demands and other communications
hereunder shall be in writing and shall be deemed given: (i) in the case of a
facsimile transmission, upon the next business day following confirmation of
transmission, (ii) in the case of delivery by a standard overnight carrier, upon
the date of delivery indicated in the records of such carrier, (iii) in the case
of delivery by hand, when delivered by hand, or (iv) in the case of delivery by
first class mail, upon the expiration of five business days after the date
mailed by registered or certified mail (return receipt requested), addressed to
the respective parties at the addresses shown below.
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(a) If to Buyer or G-III to:
c/o G-III Leather Fashions, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxx Xxxxxx
with a copy to:
Xxxx Xxxx, Esq.
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
(b) If to Winlit to:
Winlit Group, Ltd.
c/o Xxxxx Xxxx
00 Xxxxx Xxxx Xxxx
Xxxxxx, Xxx Xxxx 00000
(c) If to Mr. Xxxxx Xxxx:
00 Xxxxx Xxxx Xxxx
Xxxxxx, Xxx Xxxx 00000
(d) If to Xx. Xxxxxxx Xxxxxx:
0 Xxxx Xxxxx Xxxx
Xxxxxx, Xxx Xxxx 00000
with a copy to:
Xxxxxxx Xxxxxxxxx, Esq.
Xxxxxxxxxx Stonehill & Xxxxxxxxx, P.C.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx
or at such other address as a party shall specify by notice to the
other parties.
12. Headings and Entire Agreement. The section and subsection headings
do not constitute any part of this Agreement and are inserted herein for
convenience of reference only. This Agreement embodies the entire agreement
between the parties with respect to the subject matter hereof and supersedes and
preempts all prior oral and written understandings and
22
agreements with respect to the subject matter hereof. It may not be amended,
modified or changed orally, but only in writing signed by the party against whom
enforcement of any amendment, modification, change, waiver, extension or
discharge is sought.
13. Public Announcements. None of the parties hereto shall make any
press release or other public statement concerning the matters covered by this
Agreement without the approval of the other party hereto, except as in the
opinion of counsel for the party making the release or statement is required by
law or applicable regulation, and shall in all events permit the other party an
opportunity to review any such release or statement prior to dissemination.
14. Waiver. No waiver of a breach of, or default under, any provision
of this Agreement shall be deemed a waiver of such provision or of any
subsequent breach or default of the same or similar nature or of any other
provision or condition of this Agreement.
15. Binding Effect and Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties and their successors and assigns.
No member of the Winlit Group may assign any obligation under this Agreement
except with the prior written consent of the Buyer.
16. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one agreement.
17. Governing Law. This Agreement is to be governed by and interpreted
under the laws of the State of New York, without giving effect to the principles
of conflicts of laws thereof.
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IN WITNESS WHEREOF, each party has caused this Agreement to be duly
executed, sealed and delivered in its name and on its behalf, all as of the date
and year first above written.
G-III LEATHER FASHIONS, INC..
By: /s/ XXXXX X. XXXXXX
-------------------------------
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President
G-III APPAREL GROUP, LTD.
(as to Section 8(j))
By: /s/ XXXXX X. XXXXXX
--------------------------------
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President
WINLIT GROUP, LTD.
By: /s/ XXXXX XXXX
--------------------------------
Name: Xxxxx Xxxx
Title: President
/s/ XXXXX XXXX
-----------------------------------
Xxxxx Xxxx
/s/ XXXXXXX XXXXXX
-----------------------------------
Xxxxxxx Xxxxxx
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Exhibit A
Form of Opinion of Counsel for Winlit Group
1. Winlit is a corporation duly organized, validly existing and in
good standing under the laws of the State of , with full corporate power
and authority to own or lease its properties and carry on its business as
presently conducted and is duly qualified to do business and is in good standing
as a foreign corporation in every jurisdiction in which the nature of the
business conducted by it requires such qualification.
2. Each member of the Winlit Group has all requisite corporate or other
power and authority to execute and deliver the Asset Purchase Agreement and to
perform fully its or his obligations thereunder and to consummate the
transactions contemplated thereby. The execution, delivery and performance by
Winlit of the Asset Purchase Agreement have been duly and validly authorized by
all necessary corporate action, including approval of the entire transaction by
the requisite vote of Winlit's shareholders. The Asset Purchase Agreement has
been duly executed and delivered by each member of the Winlit Group and
constitutes a valid and binding agreement of each member of the Winlit Group,
enforceable in accordance with its terms, except as its enforceability may be
limited by bankruptcy, insolvency, moratorium or other laws relating to or
affecting creditors' rights generally and the exercise of judicial discretion in
accordance with general equitable principles.
3. The execution, delivery and performance of the Asset Purchase
Agreement, the consummation of the transactions contemplated thereby and the
compliance with the provisions thereof by each member of the Winlit Group does
not and as of the Closing Date will not (a) violate any provisions of the
Certificate of Incorporation or by-laws of Winlit, (b) conflict with, result in
the breach of, or constitute a default under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the Assets, or
require any authorization, consent, approval, exemption or other action by or
notice to any third party, court or other governmental or administrative body,
of any agreement or other instrument to which any member of the Winlit Group is
a party or by which the property of any member of the Winlit Group is bound or
affected that are known to us or (c) violate any laws, regulations, orders or
judgments applicable to any member of the Winlit Group.
4. To our knowledge, there are no pending or threatened actions, suits
or proceedings against any member of the Winlit Group in respect of the Purchase
Agreement, the Assets or Winlit.
EXHIBIT B
Form of Employment Agreement
