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ASSET PURCHASE AGREEMENT
BY AND AMONG
XXXXXX XXXXX, INC.,
XXXXXX XXXXXXXX,
XXXXXX XXXXXX, LTD.
AND
XXXXXX XXXXXX OUTLETS, INC.
DATED AS OF MAY 1, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I....................................................................1
1.1 CERTAIN DEFINITIONS...........................................1
1.2 TRANSFER OF THE ASSETS........................................4
1.3 ASSUMPTION BY THE BUYER OF CERTAIN LIABILITIES................4
1.4 NON-ASSUMED LIABILITIES.......................................4
1.5 PURCHASE PRICE FOR THE ASSETS; RESTRICTIONS ON TRANSFER.......5
1.6 CLOSING ADJUSTMENTS...........................................5
ARTICLE II...................................................................5
2.1 THE CLOSING...................................................5
2.2 ADDITIONAL ACTIONS TO BE TAKEN ON THE CLOSING DATE............6
ARTICLE III..................................................................7
3.1 ORGANIZATION AND QUALIFICATION................................7
3.2 SUBSIDIARIES..................................................7
3.3 VALIDITY AND EXECUTION OF AGREEMENT...........................7
3.4 NO CONFLICT...................................................7
3.5 LITIGATION....................................................8
3.6 THE ASSETS....................................................8
3.7 INTANGIBLE PROPERTY...........................................8
3.8 NO MATERIAL ADVERSE CHANGE....................................8
3.9 CONTRACTS AND OTHER AGREEMENTS................................8
3.10 REAL ESTATE...................................................8
3.11 ERISA.........................................................8
3.12 ENVIRONMENTAL MATTERS.........................................9
3.13 LICENSES AND PERMITS..........................................9
3.14 INVESTMENT REPRESENTATIONS....................................9
ARTICLE IV..................................................................10
4.1 ORGANIZATION AND QUALIFICATION...............................10
4.2 VALIDITY AND EXECUTION OF AGREEMENT..........................10
4.3 NO CONFLICT..................................................10
4.4 THE SHARES...................................................11
4.5 SEC REPORTS; DISCLOSURE......................................11
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ARTICLE V...................................................................11
5.1 SURVIVAL.....................................................11
5.2 INDEMNIFICATION AND OTHER COVENANTS..........................12
5.3 METHOD OF ASSERTING CLAIMS...................................12
5.4 SUBROGATION; EXCLUSIVITY OF REMEDY...........................14
5.5 NON-COMPETITION..............................................15
ARTICLE VI..................................................................15
6.1 SALES AND TRANSFER TAXES.....................................15
6.2 POST-CLOSING FURTHER ASSURANCES..............................15
6.3 NOTICES......................................................16
6.4 PUBLICITY....................................................17
6.5 ENTIRE AGREEMENT.............................................17
6.6 WAIVERS AND AMENDMENTS.......................................17
6.7 GOVERNING LAW................................................17
6.8 BINDING EFFECT; NO ASSIGNMENT................................17
6.9 VARIATIONS IN PRONOUNS.......................................17
6.10 COUNTERPARTS.................................................17
6.11 EXHIBITS AND SCHEDULES.......................................17
6.12 EFFECT OF DISCLOSURE ON SCHEDULES............................18
6.13 HEADINGS.....................................................18
6.14 SEVERABILITY OF PROVISIONS...................................18
6.15 BROKERS......................................................18
6.16 CHANGE AND USE OF NAME.......................................18
EXHIBITS
EXHIBIT A - Assignment & Assumption Agreement
EXHIBIT B - Xxxx of Sale
EXHIBIT C - Assignment of Lease and Landlord's Consent
EXHIBIT D - Registration Rights Agreement
EXHIBIT E - Employment Agreement
SCHEDULES
1.1(a) - Excluded Assets
1.2 - Assets
1.3(b) - Assumed Liabilities
3.9 - Material Agreements
3.10 - Real Estate
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of May 1, 1998 by and between Xxxxxx
Xxxxx, Inc., a New York corporation ("Seller), Xxxxxx Xxxxxx Outlets, Inc., a
Delaware corporation (the "Buyer"), Xxxxxx Xxxxxx, Ltd., a New York corporation
("Buyer Parent"), and Xxxxxx Xxxxxxxx ("Xxxxxxxx").
W I T N E S S E T H :
WHEREAS, the Seller is engaged in the business of operating a retail
shoe store under the name Shoe Biz located at 00 Xxxx Xxxxxx, Xxxxxxx, XX 00000
(the "Business"); and
WHEREAS, the Seller owns certain assets comprising the Assets (as
hereinafter defined) which are related to the conduct of the Business; and
WHEREAS, the Seller wishes to transfer, and the Buyer wishes to
purchase, the Assets, subject to the assumption by the Buyer of certain
liabilities of the Seller comprising the Assumed Liabilities (as hereinafter
defined) in exchange for the Shares (as hereafter defined); and
WHEREAS, Seller and Buyer have adopted a plan of reorganization and
intend that the sale of the Assets qualify as a reorganization within the
meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the Seller, Xxxxxxxx, Buyer Parent and the
Buyer hereby agree as follows:
ARTICLE I
DEFINITIONS; PURCHASE OF THE ASSETS;
ASSUMPTION OF ASSUMED LIABILITIES; PURCHASE PRICE;
CLOSING ADJUSTMENTS; CONDITION OF ASSETS; ADDITIONAL SHARES
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
have the following meanings unless the context otherwise requires:
"AFFILIATE" means, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person.
"ASSETS" has the meaning specified in Section 1.2.
"ASSIGNED CONTRACTS AND LEASES" means the unexpired lease(s) set forth
in Schedule 3.10) and executory contracts set forth on Schedule 3.9.
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"ASSIGNMENT AND ASSUMPTION AGREEMENT" means an instrument substantially
in the form of Exhibit A attached hereto.
"ASSIGNMENT OF LEASE AND LANDLORD'S CONSENT" means an instrument
substantially in the form of Exhibit C attached hereto.
"XXXX OF SALE" means an instrument substantially in the form of Exhibit
B attached hereto.
"BUSINESS" has the meaning specified in the Recitals.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which commercial banks are authorized or required by law to close in New York
City.
"BUYER" has the meaning specified in the introductory paragraph of this
Agreement.
"CLAIM NOTICE" has the meaning specified in Section 5.3(a).
"CLOSING" has the meaning specified in Section 2.1(a).
"EFFECTIVE DATE" means 12:01 a.m. on May 1, 1998.
"EMPLOYMENT AGREEMENT" means an instrument substantially in the form of
Exhibit E attached hereto.
"ENVIRONMENTAL LAW" means any and all present and future federal,
state, local and statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, grants, franchises, licenses or agreements relating to
(a) the protection of the environment, health or workers safety; (b) pollution
or environmental contamination; or (c) the use, processing, distribution,
generation, treatment, storage, recycling, transportation, disposal, handling,
Release or threatened or potential Release of any Material of Environmental
Concern.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCLUDED ASSETS" means those assets of the Seller or an Affiliate of
Seller set forth on Schedule 1.1(a).
"GOVERNMENTAL OR REGULATORY BODY" means any government or political
subdivision thereof, whether federal, state, county, local or foreign, or any
agency, authority or instrumentality of any such government or political
subdivision.
"INDEMNIFIED PARTY" has the meaning specified in Section 5.3.
"INDEMNIFYING PARTY" has the meaning specified in Section 5.3.
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"LANDLORD" means Barnet Xxxxxxxxx, the landlord of the Seller's retail
store location at 00 Xxxx xxxxxx, Xxxxxxx, Xxx Xxxx 00000.
"LEASES" has the meaning specified in Section 3.10.
"LIEN" means any lien, pledge, hypothecation, mortgage, security
interest, claim, lease, charge, option, right of first refusal, easement,
servitude, transfer restriction under any stockholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever.
"LOSSES" has the meaning specified in Section 5.2.
"MATERIAL ADVERSE EFFECT" means any change or changes or effect or
effects that individually or in the aggregate are or is reasonably expected to
be materially adverse to (a) the Assets, operations, income or conditions
(financial or otherwise) of the Business or the transactions contemplated by
this Agreement or (b) the ability of the Seller to perform its obligations under
this Agreement.
"MATERIAL AGREEMENTS" has the meaning specified in Section 3.9.
"NON-ASSUMED LIABILITIES" has the meaning specified in Section 1.4.
"PERMITTED LIENS" means Liens for taxes not yet due.
"PERSON" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental or Regulatory Body or other entity.
"PLAN" means any plan, fund, program, understanding, policy,
arrangement, contract or commitment, whether qualified or not qualified for
federal income tax purposes, whether formal or informal, whether for the benefit
of a single individual or more than one individual, which is in the nature of
(a) an employee pension benefit plan (as defined in ERISA Section 3(2)) (b) an
employee welfare benefit plan (as defined in ERISA Section 3(1)) or (c) an
incentive, deferred compensation, or other benefit arrangement for employees,
former employees, their dependents or their beneficiaries.
"PURCHASE PRICE" has the meaning specified in Section 1.5.
"RECORDS" shall mean files and records, including correspondence, books
of account, employment records, customer files, purchase and sales records and
correspondence, advertising records, files and literature, and other written
materials of Seller to the extent relating to the Assets or the Business;
PROVIDED, HOWEVER, that Records shall not mean or include the corporate minute
books and stock records of Seller and any shares of capital stock of Seller, nor
shall they include any communications that do not relate to the Assets or the
Business that are currently protected from disclosure by Seller by virtue of the
attorney-client privilege.
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"REGISTRATION RIGHTS AGREEMENT" means an instrument substantially in
the form of Exhibit D attached hereto.
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment.
"XXXXXXXX" has the meaning specified in the introductory paragraph of
this Agreement.
"SHARES" has the meaning specified in Section 1.5.
"SELLER" has the meaning specified in the introductory paragraph of
this Agreement.
"TAX" or "TAXES" mean all taxes, charges, fees, levies or other
assessments imposed by any federal, state, local or foreign Taxing Authority,
including, without limitation, gross income, gross receipts, income, capital,
excise, property (tangible and intangible), sales, transfer, value added,
employment, payroll and franchise taxes and such terms shall include any
interest, penalties or additions attributable to or imposed on or with respect
to such assessments.
1.2 TRANSFER OF THE ASSETS. Subject to the terms and conditions set
forth in this Agreement, the Seller agrees that, on the date hereof (the
"Closing Date"), the Seller shall sell, transfer, assign, convey and deliver to
the Buyer, without recourse, representation or warranty except as otherwise
expressly provided herein and Buyer shall purchase from the Seller, all of the
assets owned, used or held by the Seller to conduct the Business, including
without limitation the assets set forth on Schedule 1.2, other than the Excluded
Assets (the "Assets"), free and clear of all Liens, other than Permitted Liens.
1.3 ASSUMPTION BY THE BUYER OF CERTAIN LIABILITIES. Subject to the
terms and conditions set forth in this Agreement, Buyer agrees that, on the
Closing Date but effective as of the Effective Date, Buyer shall assume and
thereafter pay, perform or discharge, as the case may be, the following
obligations and liabilities of the Seller (the "Assumed Liabilities"):
(a) all obligations and liabilities of the Seller arising out of, or in
connection with, the Assigned Contracts and Leases;
(b) all liabilities of the Seller outstanding as of the Effective Date
reflected on Schedule 1.3 (b) attached hereto not to exceed $150,000 in the
aggregate; and
(c) all liabilities and obligations of Seller incurred in the ordinary
course of business during the period commencing on the Effective Date and ending
on the Closing Date.
1.4 NON-ASSUMED LIABILITIES. The Buyer shall not assume nor be
responsible for any liabilities or obligations of the Seller or any of its
Affiliates other than the Assumed Liabilities (the "Non-Assumed Liabilities").
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1.5 PURCHASE PRICE FOR THE ASSETS; RESTRICTIONS ON TRANSFER. The
consideration for the Assets shall be the (i) assumption by the Buyer of the
Assumed Liabilities; and (ii) the delivery on the Closing Date of 64,520 shares
of common stock of Buyer Parent (the "Shares") (collectively, the "Purchase
Price"). Except as contemplated by the Note (as hereinafter defined), Seller and
Xxxxxxxx agree (and, if necessary, cause his wife to agree) not to sell,
transfer, pledge, hypothecate or otherwise encumber more than 32,260 shares
during the eighteen (18) month period (the "Restricted Period") following the
date hereof without the prior written consent of the Buyer; provided, however,
that (i) Seller may transfer the Shares to Xxxxxxxx and his wife upon
liquidation of Seller and (ii) Seller or Xxxxxxxx, as the case may be, may sell
such additional shares in order to repay the outstanding principal amount and
accrued and unpaid interest on that certain promissory note dated May 1, 1998
issued by Xxxxxxxx to Buyer (the "Note"). At the conclusion of the Restricted
Period and upon the request of Seller or Xxxxxxxx, Buyer Parent shall cause its
transfer agent to remove any restrictive legend contemplated by the preceding
sentence.
1.6 CLOSING ADJUSTMENTS. (a) Adjustments shall be made between the
Seller and the Buyer as of the Effective Date with respect to the rent and
additional rent or charges (including, but not limited to, additional rent or
charges for real estate taxes, water charges, insurance and common area
maintenance) payable by or to the Seller pursuant to the Lease with the
Landlord.
(b) The net amount of any closing adjustments in favor of the Seller
shall be paid to the Seller on the Closing Date in immediately available funds,
and the net amount of any closing adjustments in favor of the Buyer shall be
paid to the Buyer on the Closing Date in shares of common stock of Buyer Parent
valued as specified in Section 5.3(d).
(c) Any errors or omissions in computing closing adjustments discovered
after Closing Date shall be corrected promptly upon discovery. The obligation of
the parties under this Section shall survive the Closing.
ARTICLE II
CLOSING
2.1 THE CLOSING. (a) The consummation of the transactions contemplated
by this Agreement (the "Closing") shall be held simultaneous with the execution
of this Agreement at the offices of Berlack, Israels & Xxxxxxxx LLP, 000 Xxxx
00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(b) At the Closing, the Seller shall execute and deliver or cause to be
executed and delivered to the Buyer, all documents and instruments necessary to
transfer to the Buyer, all of the right, title and interest of the Seller in and
to the Assets, including, without limitation:
(i) the Assignment and Assumption Agreement, signed by the
Seller;
(ii) the Xxxx of Sale, as applicable, signed by the Seller; and
(iii) the Assignment of Lease and Landlord's Consent, signed by
the Seller and the Landlord.
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(c) At the Closing, the Buyer shall:
(i) execute and deliver to the Seller the Assignment and
Assumption Agreement;
(ii) assume the Assumed Liabilities effective as of the
Effective Date; and
(iii) deliver the Shares to the Seller.
(d) At the Closing, the Buyer and Xxxxxxxx shall execute and deliver
the Employment Agreement.
(e) At the Closing, the Buyer Parent and Seller shall execute and
deliver the Registration Rights Agreement.
2.2 ADDITIONAL ACTIONS TO BE TAKEN ON THE CLOSING DATE.
(a) LIENS/CONSENTS. The Seller shall have satisfied and discharged all
Liens on the Assets, except for Permitted Liens and provided the Buyer with
evidence of such satisfaction and discharge as well as all necessary consents to
transfer or assign the Assets to Buyer, in form and substance satisfactory to
the Buyer.
(b) SHAREHOLDER CONSENT. The Buyer shall have received a consent to the
transactions contemplated by this agreement signed by all of the shareholders of
Seller.
(c) BULK SALES ACT. Other than with respect to the Assumed Liabilities,
Xxxxxxxx agrees to indemnify Buyer and Buyer Parent from any Losses incurred by
Buyer and Buyer Parent arising out of or resulting from the failure of the
Seller to comply with Article 6 of the Uniform Commercial Code of the State of
New York. Buyer and Buyer Parent hereby waive compliance with the provisions of
any applicable bulk sales law of any jurisdiction in connection with the
transactions contemplated hereby and no representation, warranty or covenant
contained in this Agreement shall be deemed to have been breached as a result of
such non-compliance.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND XXXXXXXX
The Seller and Xxxxxxxx jointly and severally represent and warrant to the Buyer
as follows:
3.1 ORGANIZATION AND QUALIFICATION. Seller is a corporation validly
existing and in good standing under the laws of the State of New York doing
business as "Shoe Biz", and has all requisite corporate power and authority to
(a) own, lease and operate its properties and assets as they are now owned,
leased and operated and (b) carry on its business as now presently conducted and
as proposed to be conducted. Seller is duly qualified to do business in each
jurisdiction in which the nature of its business or properties makes such
qualification necessary, except where the failure to do so would not have a
Material Adverse Effect.
3.2 SUBSIDIARIES. Seller has no subsidiaries.
3.3. VALIDITY AND EXECUTION OF AGREEMENT. Seller has the full legal
right, capacity and power and all requisite corporate authority and approval
required to enter into, execute and deliver this Agreement and any other
agreement or instrument contemplated hereby, and to perform fully its
obligations hereunder and thereunder. The shareholders and the board of
directors of Seller have each approved the transactions contemplated pursuant to
this Agreement and each of the other agreements required to be entered into
pursuant hereto by Seller. This Agreement and such other agreements and
instruments have been duly executed and delivered by Seller and each constitutes
the valid and binding obligation of Seller enforceable against it in accordance
with its terms, except as may be limited by any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws (whether
statutory, regulatory or decisional), now or hereafter in effect, relating to or
affecting the rights of creditors generally or by equitable principles
(regardless of whether considered in a proceeding at law or in equity).
3.4 NO CONFLICT. Neither the execution and delivery of this Agreement
nor the performance by the Seller or Xxxxxxxx of the transactions contemplated
hereby will violate or conflict with (a) any of the provisions of the
Certificate of Incorporation or By-Laws or other organizational documents of the
Seller; (b) result in the acceleration of, or entitle any party to accelerate
the maturity or the cancellation of the performance of any obligation under, or
result in the creation or imposition of any Lien in or upon the Assets or
constitute a default (or an event which might, with the passage of time or the
giving of notice, or both, constitute a default) under any material contract to
which Seller is a party other than (1) as specifically set forth on Schedule
3.9, (2) any contract or instrument evidencing any of the Non-Assumed
Liabilities, and (3) such contract violations, accelerations, cancellations,
defaults or Liens as do not individually or in the aggregate have a Material
Adverse Effect; and, (c) any order, judgment, regulation or ruling of any
Governmental or Regulatory Body to which the Seller and Xxxxxxxx is a party or
by which any of its property or assets may be bound or affected or with any
provision of any law, rule, regulation, order, judgment, or ruling of any
Governmental or Regulatory Body applicable to the Seller other than such
violations or conflicts as do not or will not individually or in the aggregate
have a Material Adverse Effect.
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3.5 LITIGATION. There are no outstanding orders, judgments,
injunctions, investigations, awards or decrees of any court, Governmental or
Regulatory Body or arbitration tribunal by which the Seller, or any of its
securities, assets, properties or business is bound. There are no actions,
suits, claims, investigations, legal, administrative or arbitral proceedings
pending or, to the best knowledge of the Seller, threatened (whether or not the
defense thereof or liabilities in respect thereof are covered by insurance)
against or affecting the Seller, or any of its assets or properties, that,
individually or in the aggregate, are reasonably expected to have a Material
Adverse Effect.
3.6 THE ASSETS. The Seller owns outright and has good title to all of
the owned Assets free and clear of any Lien, other than Permitted Liens. The
Assignment and Assumption Agreement and such other conveyancing documents as
shall have been executed and delivered to the Buyer will convey good title to
the Assets, free and clear of any Liens, except for Permitted Liens. Except for
the assets described on Schedule 1.1(a), the Assets transferred pursuant hereto
constitute all of the assets necessary and appropriate for the conduct of the
Business as of the date hereof in substantially the same manner as the Business
has heretofore been conducted.
3.7 INTANGIBLE PROPERTY. To the best knowledge of the Seller without
having conducted any investigation, (i) no patent, invention, trademark, service
xxxx or trade name of any other Person infringes upon, or is infringed upon by
any of the trademarks, service marks, logos or tradenames of the Seller and (ii)
the operation of the Business has not infringed on the intellectual property
rights of others.
3.8 NO MATERIAL ADVERSE CHANGE. Since January 1, 1998, there has been
no material adverse change in the Business, operations or financial condition of
the Seller, or in the assets, liabilities, net worth or properties of the
Seller, and the Seller knows of no such change that is threatened, nor has there
been any damage, destruction or loss which could have a Material Adverse Effect,
whether or not covered by insurance.
3.9 CONTRACTS AND OTHER AGREEMENTS. Schedule 3.9 sets forth all written
agreements (and, to the best knowledge of the Seller, any oral agreement) and
arrangements that materially affect the operations of the Business or to which
Seller is a party (collectively, the "Material Agreements").
3.10 REAL ESTATE. Schedule 3.10 sets forth a list and supplies
descriptions of all leases or subleases (the "Leases") under which the Seller is
lessor or lessee of any real property. A true, correct and complete copy of all
Leases have been delivered or made available to the Buyer. To Seller's
knowledge, the Lease is in full force and effect and the Seller has not received
any notice of any default thereunder.
3.11 ERISA. The Seller does not sponsor, maintain, have any obligation
to contribute to, have any liability under, and is not otherwise a party to, any
Plan.
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3.12 ENVIRONMENTAL MATTERS. The Seller is not in violation of, or
delinquent in respect to, any Environmental Law which violation or delinquency
would have a Material Adverse Effect.
3.13 LICENSES AND PERMITS. Any permits, licenses, registrations and
consents which are necessary in connection with the Seller's operations and
properties, are in full force and effect and in good standing, except for
permits, licenses, registrations or consents which the failure to obtain would
not have a Material Adverse Effect.
3.14 INVESTMENT REPRESENTATIVES. The issuance of the Shares in this
transaction is intended to be a private transaction exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act"), and is made
in reliance upon the representations set forth below.
(a) Seller is acquiring the Shares for its own account for investment
only and not with a view to, or for sale in connection with, a distribution of
the Shares in violation of the Securities Act and any applicable state
securities or blue-sky laws;
(b) Seller acknowledges to the Buyer that:
(i) the Buyer has advised Seller that the Shares have not been
registered under the Securities Act or under the laws of any state on the basis
that the issuance thereof contemplated by this Agreement is exempt from such
registration and the certificate representing the Shares shall contain a
restrictive legend reflecting the fact that the Shares have not been registered;
(ii) the Buyer's reliance on the availability of such
exemption is, in part, based upon the accuracy and truthfulness of Seller's
representations contained herein;
(iii) the Shares cannot be resold without registration or an
exemption under the Securities Act and such state securities laws, and that
certificates representing the Shares will bear a restrictive legend to such
effect as well as a restrictive legend in accordance with the restrictions on
transfer contained in Section 1.5;
(iv) Seller has evaluated the merits and risks of acquiring
the Shares and has such knowledge and experience in financial and business
matters and is capable of evaluating the merits and risks of such acquisition,
is aware of and has considered the financial risks and financial hazards of
acquiring the Shares, and is able to bear the economic risk of acquiring the
Shares, including the possibility of a complete loss with respect thereto.
3.15 EXCLUSIVITY OF REPRESENTATIONS; RELIANCE ON REPRESENTATIONS. The
representations and warranties made by Seller and Xxxxxxxx in this Agreement are
in lieu of and are exclusive of all other representations and warranties,
including, without limitation, any implied warranty of merchantability or of
fitness for a particular purpose and any other implied warranties of Seller and
Xxxxxxxx. Seller and Xxxxxxxx each hereby disclaims any such other or implied
representations or warranties, notwithstanding the delivery or disclosure by
Seller and Xxxxxxxx or any other person to Buyer or Buyer Parent or any of their
directors, officers, employees, agents or representatives, of any documentation
or other information in connection with this Agreement or the transactions
contemplated hereby.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND BUYER PARENT
The Buyer and Buyer Parent, jointly and severally, represent and
warrant to the Seller and Xxxxxxxx as follows:
4.1 ORGANIZATION AND QUALIFICATION. The Buyer is a corporation validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to (a) own, lease and operate its
properties and assets as they are now owned, leased and operated and (b) carry
on its business as now presently conducted and is duly qualified to do business
in each jurisdiction in which the nature of its business or properties makes
such qualification necessary. Buyer will as soon as practicable after the
Closing be duly qualified to do business in the State of New York. Buyer Parent
is a corporation validly existing and in good standing under the laws of the
State of New York.
4.2 VALIDITY AND EXECUTION OF AGREEMENT. The Buyer and Buyer Parent
each has the full legal right, capacity and power and all requisite corporate
authority and approval required to enter into, execute and deliver this
Agreement and any other agreement or instrument contemplated hereby, and to
perform fully its respective obligations hereunder and thereunder. The
respective board of directors of the Buyer and Buyer Parent each has approved to
the extent required by law the transactions contemplated by this Agreement and
each of the other agreements required to be entered into pursuant hereto by the
Buyer and Buyer Parent and no other corporate or shareholder approvals are
required. This Agreement and such other agreements and instruments have been
duly executed and delivered by the Buyer and Buyer Parent and each constitutes
the valid and binding obligation of the Buyer and Buyer Parent enforceable
against them in accordance with their respective terms, except as may be limited
by any bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
or other laws (whether statutory, regulatory or decisional), now or hereafter in
effect, relating to or affecting the rights of creditors generally or by
equitable principles (regardless of whether considered in a proceeding at law or
in equity).
4.3 NO CONFLICT. Neither the execution and delivery of this Agreement
nor the performance by the Buyer of the transactions contemplated herein will
violate or conflict with (a) any of the provisions of their respective
Certificates of Incorporation or By-Laws or other organizational documents of
Buyer and Buyer Parent; or (b) result in the acceleration of, or entitle any
party to accelerate the maturity or the cancellation of the performance of any
obligation under, or result in the creation or imposition of any Lien or
constitute a default (or an event which might, with the passage of time or the
giving of notice, or both, constitute a default) under any material contract to
which Buyer or Buyer Parent is a party, other than (1) such contract violations,
accelerations, cancellations, defaults or Liens as do not individually or in the
aggregate have a material adverse effect on Buyer or Buyer Parent or their
ability to perform their obligations hereunder or under the other agreements
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contemplated hereby, (2) any order, judgment, regulation or ruling of any
Governmental or Regulatory Body to which the Buyer or Buyer Parent is a party or
by which any of its respective property or assets may be bound or affected or
with any provision of any law, rule, regulation, order, judgment, or ruling of
any Governmental or Regulatory Body applicable to the Buyer or Buyer Parent,
other than such violations or conflicts as do not individually or in the
aggregate have a material adverse effect on Buyer or Buyer Parent or their
ability to perform their obligations hereunder or under the other agreements
contemplated hereby.
4.4 THE SHARES. The Shares have been duly and validly authorized and
issued by Buyer Parent and are fully paid and non-assessable.
4.5 SEC REPORTS; DISCLOSURE. .
(a) Buyer has delivered to Seller a true and complete copy of the
Annual Report on Form 10-K for Buyer Parent for the year ended December 31, 1997
and all 10-Q and 8-K reports for Buyer Parent filed since the filing of such
10-K by Buyer Parent with the Securities and Exchange Commission (the
"SEC")(collectively, the "Buyer Reports"). As of their respective dates, Buyer
Reports complied in all material respects with the applicable requirements of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
of the SEC, and, as of their respective dates, no Buyer Report contained any
untrue statement of material fact or omits to state a material fact required to
be stated or incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) The financial statements contained in the Buyer Reports are in
accordance with the books and records regularly maintained with respect to Buyer
Parent and present fairly the financial conditions as of and the results of
operations and cash flow for the dates and periods so indicated, in accordance
with Generally Accepted Accounting Principles ("GAAP").
4.6 NO MATERIAL ADVERSE CHANGE. Since December 31, 1997, there has been
no material adverse change in the business of the Buyer or Buyer Parent, the
liabilities, net worth or properties of the Buyer or Buyer Parent.
ARTICLE V
INDEMNIFICATION AND OTHER COVENANTS
5.1 SURVIVAL. Subject to this Section 5.1, all representations,
warranties, covenants and agreements contained in this Agreement, the
Registration Rights Agreement or in any exhibit, certificate, agreement,
document or statement delivered pursuant hereto (an "Ancillary Instrument")
shall survive (and not be affected in any respect by) the Closing and any
investigation conducted by any party hereto. Notwithstanding the foregoing, the
representations and warranties contained in or made pursuant to this Agreement
or any Ancillary Instrument and the related indemnity obligations set forth in
Article V, shall terminate on, and no claim or action with respect thereto may
be brought after, the date that is two years after the Effective Date, except
that the representations and warranties contained in Sections 3.6 and 4.4 shall
survive in perpetuity.
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5.2 INDEMNIFICATION. (a) The Seller and Xxxxxxxx jointly and severally
agree to indemnify, defend and hold harmless the Buyer and Buyer Parent and
their respective directors, officers, employees, shareholders and any Affiliates
of the foregoing, and their successors and assigns (collectively, the "Buyer
Group") from and against any and all losses, liabilities (including to the
extent arising from third-party claims, punitive or exemplary damages and fines
or penalties and any interest thereon), expenses (including reasonable fees and
disbursements of counsel and expenses of investigation and defense), claims,
Liens or other obligations of any nature whatsoever (hereinafter individually, a
"Loss" and collectively, "Losses") suffered or incurred by the Buyer Group
which, directly or indirectly, arise out of, result from or relate to, (i) any
inaccuracy in or any breach (as of the Effective Date) of any representation or
warranty of the Seller contained in Article III, (ii) any breach of any covenant
or agreement of the Seller, in each case contained in this Agreement or in any
other document contemplated by this Agreement, (iii) any Taxes of the Seller or
Xxxxxxxx attributable to the period prior to the Effective Date, other than any
Taxes included within the Assumed Liabilities (a "Tax Loss") or (iv) any
liability or obligation arising out of the operation of the Business before the
Effective Date, except for the Assumed Liabilities. Notwithstanding anything
provided in this Agreement, Seller and Xxxxxxxx shall not be responsible for any
Losses (other than Tax Losses), until the cumulative aggregate amount of such
Losses exceeds $15,000 (the "Minimum Amount"), in which case Seller and Xxxxxxxx
shall then be liable only for such Losses in excess of the Minimum Amount, and
the cumulative aggregate indemnity obligation of Seller and Xxxxxxxx shall in no
event exceed $500,000 (the "Maximum Amount"). With respect to a Tax Loss, Seller
and Xxxxxxxx'x liability shall not be limited in any manner by the Minimum
Amount or the Maximum Amount.
(b) The Buyer and Buyer Parent jointly and severally agree to
indemnify, defend and hold harmless Xxxxxxxx, the Seller and its respective
directors, officers, employees, and shareholders, and any Affiliates of the
foregoing, and their successors and assigns from and against any and all Losses
suffered or incurred by them which, directly or indirectly, arise out of, result
from or relate to (i) any inaccuracy in or any breach (as of the Effective Date)
of any representation or warranty of the Buyer or Buyer Parent contained in
Article IV, (ii) any breach of any covenant or agreement of the Buyer or Buyer
Parent contained in this Agreement or in any other document contemplated by this
Agreement, (iii) the Assumed Liabilities, or (iv) any liability or obligation
arising out of the operation of the Business after the Effective Date.
5.3 METHOD OF ASSERTING CLAIMS. The party making a claim under this
Article V is referred to as the "Indemnified Party" and the party against whom
such claims are asserted under this Article V is referred to as the
"Indemnifying Party". All claims by any Indemnified Party under this Article V
shall be asserted and resolved as follows:
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(a) In the event that any claim or demand for which an Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted against or
sought to be collected from such Indemnified Party by a third party, said
Indemnified Party shall with reasonable promptness notify in writing the
Indemnifying Party of such claim or demand, specifying the nature of the
specific basis for such claim or demand, and the amount or the estimated amount
thereof to the extent then feasible (which estimate shall not be conclusive of
the final amount of such claim and demand; any such notice, together with any
notice given pursuant to Section 5.3(b) hereof, collectively being the "Claim
Notice"); PROVIDED, HOWEVER, that any failure to give such Claim Notice will not
be deemed a waiver of any rights of the Indemnified Party except to the extent
the rights of the Indemnifying Party are actually prejudiced or harmed. The
Indemnifying Party, upon request of the Indemnified Party, shall retain counsel
(who shall be reasonably acceptable to the Indemnified Party) to represent the
Indemnified Party, and shall pay the fees and disbursements of such counsel with
regard thereto, PROVIDED, FURTHER, that any Indemnified Party is hereby
authorized prior to the date on which it receives written notice from the
Indemnifying Party designating such counsel, to retain counsel, whose reasonable
fees and expenses shall be at the expense of the Indemnifying Party, to file any
motion, answer or other pleading and take such other action which it reasonably
shall deem necessary to protect its interests or those of the Indemnifying Party
until the date on which the Indemnified Party receives such notice from the
Indemnifying Party. After the Indemnifying Party shall retain such counsel, the
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) the named parties of any such
proceeding (including any impleaded parties) include both the Indemnifying Party
and the Indemnified Party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. The Indemnifying Party shall not, in connection with any proceedings or
related proceedings in the same jurisdiction, be liable for the reasonable fees
and expenses of more than one such firm for the Indemnified Party (except to the
extent the Indemnified Party retained counsel to protect its (or the
Indemnifying Party's) rights prior to the selection of counsel by the
Indemnifying Party). The Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any claim or demand which the
Indemnifying Party defends. No claim or demand may be settled by an Indemnifying
Party or, where permitted pursuant to this Agreement, by an Indemnified Party
without the consent of the Indemnified Party in the first case or the consent of
the Indemnifying Party in the second case, which consent shall not be
unreasonably withheld, unless such settlement shall be accompanied by a complete
release of the Indemnified Party in the first case or the Indemnifying Party in
the second case.
(b) In the event any Indemnified Party shall have a claim against any
Indemnifying Party hereunder which does not involve a claim or demand being
asserted against or sought to be collected from it by a third party, the
Indemnified Party shall send a Claim Notice with respect to such claim to the
Indemnifying Party. If the Indemnifying Party does not dispute such claim, the
amount of such claim shall be paid to the Indemnified Party within thirty (30)
days of receipt of the Claim Notice.
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(c) So long as any right to indemnification exists pursuant to this
Article V, the affected parties each agree to retain all books, records,
accounts, instruments and documents reasonably related to the Claim Notice. In
each instance, the Indemnified Party shall have the right to be kept informed by
the Indemnifying Party and its legal counsel with respect to all significant
matters relating to any legal proceedings. Any information or documents made
available to any party hereunder, which information is designated as
confidential by the party providing such information and which is not otherwise
generally available to the public, or which information is not otherwise
lawfully obtained from third parties or not already within the knowledge of the
party to whom the information is provided (unless otherwise covered by the
confidentiality provisions of any other agreement among the parties hereto, or
any of them), and except as may be required by applicable law or requested by
third party lenders to such party, shall not be disclosed to any third Person
(except for the representatives of the party being provided with the
information, in which event the party being provided with the information shall
request its representatives not to disclose any such information which it
otherwise required hereunder to be kept confidential).
(d) To the extent a Loss occurs under Section 5.2(a)(i) or (ii), for so
long as Seller, Xxxxxxxx, an affiliate thereof or any family member of Xxxxxxxx
owns any Shares Buyer shall be indemnified by Seller's surrender for
cancellation of Shares having a fair market value equal to such Loss. For
purposes of this paragraph, fair market value of the Shares shall mean the
average market price of the Shares for five trading days before an
indemnification claim is paid. Notwithstanding the foregoing, to the extent a
Tax Loss occurs, Buyer shall be indemnified by Buyer's payment to Seller of
immediately available funds. Any indemnification pursuant to Section 5.2 shall
be treated as an adjustment to the Purchase Price.
5.4 SUBROGATION; EXCLUSIVITY OF REMEDY.
(a) Notwithstanding anything contained in this Agreement, upon
payment of any amount pursuant to any indemnification claim, the Indemnifying
Party shall be subrogated, to the extent of such payment, to all of the
Indemnified Party's rights of recovery against any third party with respect to
the matters to which such indemnification claim relates.
(b) Notwithstanding anything contained in this Agreement, the
rights and remedies of Seller, Xxxxxxxx, Buyer and Buyer Parent under this
Article V are exclusive and in lieu of any and all other rights and remedies
which Seller and Xxxxxxxx or Buyer and Buyer Parent, as the case may be, may
have against the other, under this Agreement or otherwise, (i) with respect to
(x) the inaccuracy of any representation, warranty, certification or other
statement made (or deemed made) by Seller and Xxxxxxxx or Buyer and Buyer Parent
in or pursuant to this Agreement or any Ancillary Instrument or (y) any breach
of, or failure to perform or comply with, any covenant or agreement set forth in
this Agreement or in any Ancillary Instrument or (ii) with respect to the
transactions contemplated by this Agreement. All claims for indemnification must
be asserted, if at all, in good faith and in accordance with the provisions of
this Article V and, to the extent applicable to such claims, within the relevant
time period set forth in this Article V.
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5.5 NON-COMPETITION.
(a) Seller and Xxxxxxxx acknowledge that (i) Seller's operation of the
Business has brought it in close contact with certain confidential affairs of
the Business not readily available to the public; and (ii) Buyer would not
purchase the Assets and assume the Assumed Liabilities but for the agreements
and covenants of Seller contained in this Section 5.5.
(b) Seller shall not in the New York City metropolitan area, directly
or indirectly, for a period consisting of one year following the Effective Date
(the "Restricted Period"), (i) engage in the Restricted Activities or (ii)
become affiliated with any person engaged in the Restricted Activities (other
than Buyer and Buyer Parent) as a partner, shareholder, principal, agent,
trustee, consultant or lender; provided however, that this Section 5.5 shall not
be construed to prohibit the ownership of not more than 2% of the issued and
outstanding voting securities of any class of any company whose voting capital
stock is traded on a national securities exchange or the over-the-counter
market. "Restricted Activities" means the sale, marketing, design or
distribution of footwear products, or provide technical assistance, advice or
counseling regarding the footwear industry. If any of the restrictions contained
in this Section 5.5 shall be deemed to be unenforceable by reason of the extent,
duration or geographical scope thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration, geographical
scope, or other provisions hereof, and in its reduced form this Section shall
then be enforceable in the manner contemplated hereby.
ARTICLE VI
MISCELLANEOUS
6.1 SALES AND TRANSFER TAXES. All required filings under any applicable
Federal, state, foreign or local sales tax, stamp tax or similar laws or
regulations shall be made in a timely manner by the party responsible therefor
under such laws and regulations, and, within ten (10) days following the
Closing, such party shall deliver to the other parties either (a) proof of the
payment of any sales tax assessed pursuant to such filings or (b) statements of
no sales tax due, as the case may be. Buyer shall pay any and all transfer,
sales or stamp taxes and any similar taxes or assessments imposed on the
transfer of the Assets and the Assumed Liabilities in accordance with the terms
of this Agreement, including but not limited to any New York state real property
transfer tax.
6.2 POST-CLOSING FURTHER ASSURANCES. (a) At any time and from time to
time after the Closing Date at the request of either party, and without further
consideration, the other party will execute and deliver, or cause the execution
and delivery of, such other instruments of sale, transfer, conveyance,
assignment and confirmation and take or cause to be taken such other action as
the party requesting the same may reasonably deem necessary or desirable in
order to transfer, convey and assign more effectively to the requesting party
all of the property and rights intended to be conveyed to such party pursuant to
the provisions of this Agreement.
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(b) Seller, Xxxxxxxx, Buyer and Buyer Parent agree to report the sale
of Assets for income Tax purposes as a tax-free reorganization under Section
368(a)(1)(C) of the Code (and any corresponding provision of state or local
income tax law).
6.3 NOTICES. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
given personally, sent by facsimile transmission or sent by prepaid air courier
or certified, registered or express mail, postage prepaid. Any such notice shall
be deemed to have been given (a) when received, if delivered in person, sent by
facsimile transmission and confirmed in writing within three (3) Business Days
thereafter or sent by prepaid air courier or (b) two (2) Business Days following
the mailing thereof, if mailed by certified first class mail, postage prepaid,
return receipt requested, in any such case as follows (or to such other address
or addresses as a party may have advised the other in the manner provided in
this Section 6.4):
If to Seller and Xxxxxxxx, to:
Xxxxxx Xxxxxxxx
Xxxxxx Xxxxx, Inc.
00 Xxxx Xxxxxx
Xxxxxxx, XX 00000
with a copy to:
Xxxxxx Xxxxxxx & Xxxx, LLP
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Telephone Number (000) 000-0000
Telecopier Number (000) 000-0000
If to Buyer or to Buyer Parent to:
Xxxxxx Xxxxxx Retail, Inc.
00-00 Xxxxxxx Xxxxxx
Xxxx Xxxxxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxx
Telephone Number (000) 000-0000
Telecopier Number (000) 000-0000
with a copy to:
Berlack, Israels & Xxxxxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxx, Esq.
Telephone Number (000) 000-0000
Telecopier Number (000) 000-0000
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6.4 PUBLICITY. No publicity release or announcement concerning this
Agreement or the transactions contemplated hereby shall be made without advance
approval thereof by the Buyer and the Seller.
6.5 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules) and the agreements, certificates and other documents delivered
pursuant to this Agreement contain the entire agreement among the parties with
respect to the transactions described herein, and supersede all prior
agreements, written or oral, with respect thereto.
6.6 WAIVERS AND AMENDMENTS. This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties hereto or, in the case of a waiver, by
the party waiving compliance. No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof.
6.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
6.8 BINDING EFFECT; NO ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors, assigns
and legal representatives. This Agreement is not assignable except by operation
of law and any other purported assignment shall be null and void.
6.9 VARIATIONS IN PRONOUNS. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
6.10 COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
6.11 EXHIBITS AND SCHEDULES. The Exhibits and Schedules are a part of
this Agreement as if fully set forth herein. All references herein to Sections,
subsections, clauses, Exhibits and Schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require.
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6.12 EFFECT OF DISCLOSURE ON SCHEDULES. Any item disclosed on any
Schedule shall be deemed to be disclosed in connection with (a) the specific
representation and warranty to which such Schedule is expressly referenced, (b)
any specific representation and warranty which expressly cross-references such
Schedule and (c) any specific representation and warranty to which any other
Schedule to this Agreement is expressly referenced if such other Schedule
expressly cross-references such Schedule.
6.13 HEADINGS. The headings in this agreement are for reference only,
and shall not affect the interpretation of this Agreement.
6.14 SEVERABILITY OF PROVISIONS. If any provision or any portion of any
provision of this Agreement or the application of such provision or any portion
thereof to any Person or circumstance, shall be held invalid or unenforceable,
the remaining portion of such provision and the remaining provisions of this
Agreement, or the application of such provision or portion of such provision as
is held invalid or unenforceable to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affect thereby.
6.15 BROKERS. Each party hereto represents and warrants that no broker
or finder is entitled to any brokerage or finder's fee or other commission from
such party, based on agreements, arrangements or undertakings made by such
party, in connection with the transactions contemplated hereby.
6.16 CHANGE AND USE OF NAME. The Seller, within ten (10) days from the
date hereof, shall deliver to the Buyer evidence that it has changed its assumed
name "Shoe Biz", in those jurisdictions in which the Seller is licensed or
qualified to do business and, thereafter shall refrain from directly or
indirectly using any name or names, corporate or otherwise, which could be
confusingly similar to the name, "Shoe Biz". Seller covenants that it shall
cause its affiliate Shoe Biz, Inc., a New York corporation, to change its name
within ten days from the date hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
XXXXXX XXXXX, INC.
By: /s/ XXXXXX XXXXXXXX
-----------------------------------
Name: Xxxxxx Xxxxxxxx
Title: President
XXXXXX XXXXXX, LTD.
By: /s/ XXXXXX XXXXXX
-----------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
XXXXXX XXXXXX OUTLETS, INC.
By: /s/ XXXXXX XXXXXX
-----------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
/s/ XXXXXX XXXXXXXX
-----------------------------------
Xxxxxx Xxxxxxxx
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