Exhibit 2
ASSET PURCHASE AGREEMENT
BY AND AMONG
XXXXXX A.S.L., LTD.
XXXX XXXXX COMPANY LLC
AND
TAKIHYO INC.
DATED AS OF MARCH 15, 1999
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of March 15, 1999 by and among
XXXXXX A.S.L., LTD., a corporation having its principal office at 00 Xxxxx Xxx,
Xxxxxxxx, Xxx Xxxxxx 00000 ("Purchaser"), XXXX XXXXX COMPANY LLC, a limited
liability company having its principal office at 00 Xxxx 00xx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 ("Seller") and TAKIHYO INC., ("Takihyo") a corporation having its
principal office at 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
W I T N E S S E T H:
WHEREAS, Seller owns all right, title and interest to the trademarks "Xxxx
Xxxxx," "Xxxx Xxxxx XX" and "A Line Xxxx Xxxxx," and any and all other
trademarks, trade names, logos and intellectual property rights, as set forth on
Schedule 6.07 hereto, as well as certain other assets relating thereto;
WHEREAS, Seller desires to sell, and Purchaser wishes to purchase, the
Assets (as hereinafter defined) subject to the terms and conditions of this
Agreement;
WHEREAS, in connection with the execution and delivery of this Agreement,
on the date hereof, (i) Purchaser and Seller are entering into a license
agreement (the "License Agreement") pursuant to which Seller is licensing to
Purchaser certain of Seller's trademarks; (ii) Purchaser and Seller are entering
into an agreement (the "Omnibus Agreement") pursuant to which, among other
things, Purchaser is agreeing to purchase certain of Seller's inventory, (iii)
Purchaser and Seller are entering into a management consulting and services
agreement (the "Management Consulting Agreement") pursuant to which Purchaser is
providing certain services to Seller relating to the wind down of certain
aspects of Seller's business and (iv) Purchaser and Seller are
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entering into a services agreement (the "Services Agreement") pursuant to which
Seller is providing certain services to Purchaser in connection with Purchaser's
operations pursuant to the License Agreement (collectively, the "Transaction
Documents" and the transactions contemplated by the Transaction Documents, the
"Xxxx Xxxxx Transactions");
WHEREAS, the consummation of certain transactions contemplated by this
Agreement and certain of the Transaction Documents, and the effectiveness of
certain provisions of the License Agreement, are subject to, among other things,
receipt of FTC Approval (as defined in Section 11.06 of this Agreement).
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
Condition of FTC Approval; Early Termination of this Agreement
1.01 FTC Approval; Early Termination. The purchase of the Assets, the
payment of the Purchase Price (as hereinafter defined), the assumption of the
obligations of Seller under the Trademark License Agreements, the Other
Trademark Agreements and the Other Assumed Agreements (all as hereinafter
defined) and the consummation of the other transactions contemplated hereby,
except for the provisions of Section 11.06, are expressly and absolutely subject
to obtaining FTC Approval. In the event that FTC Approval is not obtained prior
to May 31, 1999, or on such other date upon which Purchaser and Seller shall
mutually agree in writing, then (a) this Agreement (other than the provisions of
Article X to the extent such Article related to the indemnification obligations
of Seller and Takihyo of the Purchaser Indemnified Parties (as hereinafter
defined) in respect of Excluded Liabilities (as hereinafter
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defined) and any other provision hereunder that by its terms expressly shall
survive the termination of this Agreement) shall terminate in its entirety as of
such date and (b) except for the foregoing, none of the parties hereto shall
have any further rights or obligations of any nature pursuant hereto or thereto.
ARTICLE II
Definitions
2.01 Defined Terms. As used in this Agreement, the following defined terms
shall have the meanings assigned to them below, which meanings shall be
applicable equally to the singular and plural forms of the terms so defined:
"Actual Knowledge" of, or "Actually Known" to, or "knowledge" of, Seller or
Takihyo, or Seller or Takihyo becoming "aware" or similar expressions shall mean
the actual knowledge of Xxxxx Xxxx, Xxxxx Xxxx, Xxxxxxx Xxxx, Xxxxxxxx Xxxxx, or
Xxxxxxx Xxxxxxxx as long as they are employed and (if they are not so employed)
their respective replacements or substitutes.
"Agreement" shall mean this Asset Purchase Agreement, together with all
schedules and exhibits hereto, as the same may be supplemented, modified,
amended or restated from time to time in the manner provided herein.
"Apparel Business" shall mean the development, design, production,
marketing, distribution and sale by Seller of women's and girl's apparel under
the Trademarks.
"Asset" and "Assets" shall mean all right, title and interest of Seller in
and to any or all of the following:
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(a) all state (including common law), federal and foreign trademarks,
service marks and trade names, corporate names, certification marks, collective
marks, company names, business names, fictitious business names, d/b/a's, domain
names, trade styles, trade dress, logos, other source or business identifiers,
designs and general intangibles of like nature, as well as any and all patents,
ideas, inventions, services, know-how, programs, procedures, strategies,
customer lists and other trade secrets and works of authorship, including any
copyrights thereof, in each case relating to or derivative of the trademarks
"Xxxx Xxxxx," "Xxxx Xxxxx XX," "A Line Xxxx Xxxxx" and the "Lion Head Design",
whether now existing or hereafter acquired by Seller, and all developments,
refinements, documentation, registrations and recordings thereof, and all
applications filed or to be filed in connection therewith, including
registrations and applications in the United States Patent and Trademark Office
and U.S. Copyright Office, any State of the United States or any other country
or any political subdivision thereof, and all extensions or renewals thereof,
including the trademarks identified on Schedule 6.07 of the Seller Disclosure
Schedules (as hereinafter defined) attached hereto (as the same may be amended,
modified or supplemented from time to time), and the right (but not the
obligation) to register claims under any state or federal trademark, copyright
or patent law or regulation or any trademark, copyright or patent law or
regulation of any foreign country and to apply for, renew and extend any of the
same, to bring opposition or cancellation proceedings and all rights arising
therefrom throughout the world (collectively, the "Trademarks");
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(b) all claims, causes of action and rights to xxx for past, present or
future infringement or unconsented use of any Trademarks and all rights arising
therefrom and pertaining thereto;
(c) the goodwill of the Business symbolized by the Trademarks or otherwise
appurtenant thereto;
(d) Subject to obtaining required consents or approvals from the other
parties thereto, all right, title and interest of Seller in and to, and all of
Seller's obligations from and after the Closing and which arise after the
Closing under (A) any and all license, distribution, trademark, trade name or
other agreements to which Seller is a party relating to the use of any of the
Trademarks and any amendments, modifications, waivers or supplements thereto as
set forth on Schedule 6.05 (collectively, the "Trademark License Agreements"),
and the New Trademark Agreements (as hereinafter defined) and License Amendments
(as hereinafter defined) entered into pursuant to Section 11.02, in each case
which are in effect on the Closing Date; (B) any and all concurrent use
agreements, registered user agreements, settlement agreements or consents to
which Seller is a party relating to the Trademarks as set forth on Schedule 6.05
and such of the foregoing types of agreements as are entered into between the
date hereof and the Closing pursuant to Section 11.02 (collectively, the "Other
Trademark Agreements"), in each case which are in effect on the Closing Date,
(C) all other agreements to which Seller is a party related to the use of the
Assets, including, without limitation, advertising agreements, as set forth on
Schedule 6.05 without giving effect to any Updates other than with respect to
agreements Seller shall enter into in the ordinary course of business during the
period from and after the date hereof to the Closing of the following types:
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(1) advertising agreements and freelance design services agreements in
accordance with Trademark License Agreements, New Trademark Agreements and
License Amendments and (2) agreements for the design and production of
promotional, packaging and similar materials in connection with Trademark
License Agreements, New Trademark Agreements and License Amendments
(collectively, the "Other Assumed Agreements"), in each case which are in effect
on the Closing Date;
(e) except as otherwise provided in the Transaction Documents, all proceeds
of any and all the foregoing to the extent arising from or relating to the
Trademark License Agreements, the Other Trademark Agreements, the Other Assumed
Agreements or the operation of the Business after Closing; and
(f) all books and records of Seller relating to the foregoing, including
Seller's style books, any trademark usage manuals or any other documents
relating to the use of the Trademarks.
"Bank Pledge" shall mean the security interests (now existing or hereafter
granted) of The Chase Manhattan Bank, First Union National Bank and Chase
Equipment Leasing, Inc., and all of their respective assignees and participating
lenders, in all Seller's existing and future domestic and foreign inventory,
accounts, equipment under certain equipment leases, Trademarks and Existing
Trademark Agreements (as hereinafter defined) or other assets as may be
requested by such lenders and the proceeds of the foregoing.
"Business" shall mean the business of Seller directly or indirectly
relating to or arising from the ownership and/or use of the Assets other than
the Apparel Business.
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"Business Day" shall mean any day other than any Saturday, Sunday or other
applicable U.S. federal or New York State holiday. "Confidentiality Agreement"
shall mean that certain letter agreement between Takihyo and the Purchaser dated
November 23, 1998 (executed by Purchaser on November 24, 1998).
"Loss" shall mean any loss, damage, liability, claim, demand, action, suit,
investigation, proceeding, settlement, judgment, award, arbitration, fine,
penalty, tax, fee, charge, cost or expense (including reasonable attorneys' and
professional advisor's fees, disbursements and other expenses and any costs of
investigation); provided, that any Loss shall be deemed reduced by the amount of
any insurance proceeds received in connection therewith and any offsetting tax
benefit accruing to the claiming party or its affiliates.
"Material Adverse Event" shall mean (a) the termination or expiration (but
not the expiration of the term of any Trademark License Agreement for which a
new term commences upon such expiration) of Trademark License Agreements after
the date hereof pursuant to which the aggregate royalties (including percentage
and minimum royalties) paid or payable thereunder during calendar year 1998
exceeded $2,000,000 (excluding additional royalties that may have been or may
become payable as the result of an audit by Seller or any of its Representatives
pursuant to the terms of any such agreement) or (b) a default in the payment of
royalties (whether percentage or minimum royalties) under the Trademark License
Agreements (excluding additional royalties that may have been or may become
payable as the result of an audit by Seller or any of its Representatives
pursuant to the terms of any such agreement) in an amount as of the date
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of determination equal to $2,000,000 or more after the respective cure periods
set forth in such agreements (but without giving effect to any requirement of
notice by any party).
"Organizational Documents" shall include (without limitation) each and any
of the following with respect to any entity: (a) the articles of incorporation,
certificate of incorporation, by-laws, partnership certificate, partnership
agreement, limited liability company certificate of formation, limited liability
company operating agreement and/or any and all other constituent documents of
such entity, if any; (b) any resolution with continuing effect adopted by the
board of directors, stockholders, members, managing partners or managers of such
entity and/or any committee thereof; or (c) any term or provision of any written
agreement or trust to which such entity is a party respecting the securities or
other ownership interests issued by such entity or any related rights; in each
case, whether now or hereafter existing, and as each has been and hereafter may
be supplemented, modified, amended or restated from time to time.
"Person" shall mean any individual, firm, company, corporation,
partnership, trust, body of persons, joint venture, governmental authority,
labor organization, or other entity, and shall include any successor (by merger
or otherwise) of such entity.
"Purchase Price" shall mean the price to be paid by Purchaser for the
purchase of the Assets as provided in Section 4.01.
"Representative" and "Representatives" shall mean, with respect to
Purchaser, its directors, officers, financial advisors, counsel, independent
public accountants, bankers, financiers and other representatives, and, with
respect to Seller and Takihyo, their respective members, stockholders,
directors, officers, financial advisors,
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counsel, independent public accountants, bankers, financiers, controlling
persons and other representatives.
"Transfer Documents" shall mean such assignments, instruments and other
documents evidencing (i) the sale, assignment or other transfer or delivery of
any Asset to Purchaser, all as reasonably requested by Purchaser and reasonably
acceptable to Seller (including, without limitation, the xxxx of sale in
substantially the form attached hereto as Exhibit A) and (ii) the assignment to
and assumption by the Purchaser of the Trademark License Agreements, the Other
Trademark Agreements and the Other Assumed Agreements, all as reasonably
requested by Seller and reasonably acceptable to Purchaser (including, without
limitation, an assignment and assumption agreement in substantially the form
attached hereto as Exhibit B).
ARTICLE III
Purchase and Sale of Assets; Assumption of Liabilities
3.01 Sale and Purchase of Assets; Assumption of Liabilities. Subject to the
terms and conditions set forth herein:
(a) Assets. At Closing (as hereinafter defined), Seller will sell,
transfer, convey, assign and deliver to Purchaser, and Purchaser hereby agrees
to accept and purchase from Seller, in exchange for the Purchase Price specified
in Section 4.01 hereof, all Seller's right, title and interest in and to the
Assets, free and clear of all liens, claims, pledges, security interests and any
and all other encumbrances, including, without limitation, the Bank Pledge, (the
"Encumbrances") other than (a) the Trademark License Agreements, Other Trademark
Agreements and Other Assumed Agreements which are in effect on the Closing Date,
(b) Seller's right to continue using the Trademarks as
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described in Section 11.11 of this Agreement and Section 2.01(a)(ii) of the
License Agreement and (c) Encumbrances created by or imposed upon Purchaser.
(b) Assumption of Liabilities. At Closing, Seller will assign to Purchaser,
and Purchaser will assume and agree to pay, perform and discharge when due and
payable, in accordance with their respective terms, all liabilities and
obligations of Seller from and after the Closing which arise after the Closing
Date, pursuant to the Trademark License Agreements, the Other Trademark
Agreements, the Other Assumed Agreements, and the New Trademark Agreements and
the License Amendments entered into pursuant to Section 11.02 and, in each case,
which have not terminated or expired prior to the Closing Date, subject to
obtaining any required consent for such assignment and assumption (the "Assumed
Agreements"); provided, that in no event shall Purchaser be deemed to have
assumed the Excluded Liabilities.
3.02 Liabilities Not Assumed. Except as expressly set forth in Section
3.01(b) or in any of the other Transaction Documents, Purchaser shall not assume
or be liable or responsible for, any liability or obligation of, or with respect
to, any of Seller, Takihyo, or any of their respective affiliates (the "Excluded
Liabilities"), including, without limitation, any liability or obligation of
Seller, Takihyo or any such affiliates arising out of or relating to: (a) any
violation of any applicable law by Seller, Takihyo, or their respective
affiliates; (b) any pending or threatened action, suit, investigation or
proceeding at law, in equity, in arbitration or by or before any authority
involving or affecting Seller, Takihyo, or their respective affiliates; (c) any
foreign, federal, state, county or local taxes, assessments, fees or other
governmental charges of any kind or nature, or any interest or penalties
thereon, accrued for, applicable to or arising from any period, whether prior to
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or after the date hereof; (d) the ownership or use of the Assets or the
operation of the Business prior to Closing; (e) the employment by Seller,
Takihyo or their respective affiliates of any employee; (f) salary, wages,
commissions, benefits, severance, accrued vacation, or pension, health, welfare,
hospitalization, medical and other funds (such pension, health, welfare,
hospitalization, medical and other funds being hereinafter collectively referred
to as the "Funds") to which Seller, Takihyo or their respective affiliates
contribute or contributed for their respective employees, as well as any other
amounts, whether required under any collective bargaining agreement, any of the
Funds, other agreements, applicable law or otherwise; (g) any labor organization
representing employees of Seller, Takihyo or their respective affiliates with
respect to such employees; or (h) any collective bargaining agreement covering
any employees, or any bargaining unit, of Seller, Takihyo or their respective
affiliates. Notwithstanding the foregoing, Seller shall not assume or be liable
or responsible for, and Excluded Liabilities expressly shall not include, any
liability or obligation of, or with respect to, Purchaser or any of its
affiliates arising out of or relating to (i) any collective bargaining agreement
covering any employees, or any bargaining unit, of Purchaser or its affiliates,
including without limitation any Funds to which Purchaser or its affiliates
contribute for their respective employees, (ii) any labor organization
representing employees of Purchaser or its affiliates with respect to such
employees, or (iii) any Losses incurred by Purchaser or its affiliates arising
out of or relating to any claim or assertion against Purchaser or its affiliates
under any collective bargaining agreement covering any employees of Seller,
Takihyo or their respective affiliates (the "Purchaser's Liabilities").
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3.03 Third Party Offers. Seller and Takihyo hereby agree on their behalf
and on behalf of their Representatives that, except as otherwise provided
herein, during the period from the date hereof to and including the Closing Date
(or if earlier, the dates on which this Agreement terminates pursuant to Section
1.01 or Article XII), none of Seller or Takihyo, or any of their respective
Representatives will, directly or indirectly, (a) solicit, initiate or otherwise
engage in any discussions with any person, corporation or other entity (each, a
"Person") other than Purchaser concerning, (b) afford access to the properties,
books and records, or other information of or concerning Seller, Takihyo or any
of their respective affiliates, to any Person other than Purchaser and its
Representatives with respect to, or (c) enter into any agreement, arrangement or
understanding with any Person other than Purchaser with respect to, (i) the
license, distribution, sale or other disposition of any or all of the Assets
other than dealings with licensees in the ordinary course of business and other
than New Trademark Agreements (as hereinafter defined) and License Amendments
(as hereinafter defined) contemplated by Section 11.02, (ii) any sale of Seller
prior to the Closing Date to one or more Persons, however structured, (iii) any
merger or consolidation of Seller prior to the Closing Date with or into another
Person, or (iv) any transaction substantially similar to the foregoing.
Notwithstanding the foregoing, clauses (a) and (b) above shall not prevent or
restrict internal discussions among Seller, Takihyo and their respective
Representatives, or the review by such Representatives of the properties, books
and records or other information concerning Seller, Takihyo or their respective
Representatives for internal discussion and decision making purposes and conduct
of their respective businesses. If Seller or Takihyo receives any written
proposal from any Person other than Purchaser or its
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Representatives with respect to any such matters, then Seller or Takihyo, as the
case may be, shall notify Purchaser thereof immediately.
3.04 Confidentiality; Disclosure.
(a) In connection with the transactions contemplated by this Agreement and
the other Transaction Documents, each of Takihyo and Seller, on the one hand,
and Purchaser, on the other hand or, in either case, their Representatives have
been or will be furnished with or have access to certain Proprietary Information
(as hereinafter defined) relating to the other parties. Except as expressly
provided herein, each party hereby agrees with regard to the Proprietary
Information of the other party, unless otherwise expressly consented to in each
case in advance in writing by Xx. Xxxxx Xxxx, with regard to Takihyo and Seller,
and the Chairman of the Board, Chief Operating Officer, President, Executive
Vice President-Finance and Administration, or Chief Financial Officer of
Purchaser, with regard to Purchaser, (i) to keep, and cause its Representatives
to keep, all information concerning the other parties hereto to the extent
furnished by the other parties or their respective Representatives, whether
furnished before or after the date hereof, whether oral or written and
regardless of the manner in which it is furnished ("Proprietary Information"),
confidential and not disclose or reveal any Proprietary Information to any
Person other than its Representatives who are involved in the Xxxx Xxxxx
Transactions, and (ii) not use the Proprietary Information for any purpose other
than in connection with the transactions contemplated by this Agreement or any
of the other Transaction Documents. For purposes hereof, Proprietary Information
includes all analyses, compilations, studies, summaries or extracts of any
information or materials which contain, are derived from or otherwise reflect
Proprietary
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Information, whether prepared by any party hereto or its Representatives. Each
party shall be responsible for any breach of this Section 3.04 by any of its
Representatives. For purposes hereof, the term "Proprietary Information" shall
not include information which (i) is presently available to the public, or
hereafter shall become available to the public other than as a result of a
disclosure by a party or its Representatives in breach of this Agreement, or
(ii) becomes available to Seller and Takihyo, on the one hand, or Purchaser, on
the other hand, from a source other than the other parties or their respective
Representatives; provided; that such source does not provide such information in
violation of a confidentiality obligation with respect to such information,
which confidentiality obligation is known to the party receiving the information
after making reasonable inquiry as to the existence of such confidentiality
obligation at the time such information is disclosed.
(b) During the period from the date hereof until the Closing, Purchaser, on
the one hand, and Seller and Takihyo, on the other hand, will not, and will
cause their respective Representatives not to, without the prior written consent
of the other party, (i) make any release to the press or other public
disclosure, or (ii) make any statement with regard to this Agreement, the
Transaction Documents or the Xxxx Xxxxx Transactions, to any competitor,
customer, client, licensee or supplier of Seller or any of its affiliates, or
any other Person, other than (A) the parties' respective Representatives and (B)
subject to Section 3.04(c) below, any Persons to which any party has a
contractual obligation to disclose or provide notice in connection with
obtaining third party consents and approvals contemplated hereby; provided, that
none of the parties shall hold any other party responsible hereunder for any
statement with respect to any of
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the foregoing made prior to November 23, 1998 to Xxxx Xxxx, Xxxxxxx Xxxx, PG
Capital LLC, Schottenstein Stores Corporation or any of their affiliates or
representatives. Each party shall be responsible for any breach of the foregoing
by any of its Representatives.
(c) The restrictions in Section 3.04(b) shall not prohibit the disclosure
of any information by Purchaser, on the one hand, and Seller and Takihyo, on the
other hand, (i) in connection with obtaining the consents and approvals to be
obtained by them pursuant to the Transaction Documents (including, without
limitation, obtaining consents and approvals of the holders of Purchaser's
Senior Notes as contemplated herein), or (ii) the disclosure of information
required by law, rule or regulation (including, without limitation, the rules
and regulations of the Securities and Exchange Commission and any stock exchange
(including The NASDAQ National Market) upon which any of the securities of
Purchaser or Seller are listed) subject to compliance with the following
provisions: (A) the disclosing party shall give the other parties hereto written
notice of such requirement as soon as possible after becoming aware of such
requirement; (B) the disclosing party shall provide the other parties hereto
with a copy of any proposed disclosure a reasonable period of time in advance of
actual disclosure to any third party for review and comment on such proposed
disclosure, and the disclosing party will use its commercially reasonable
efforts to address any concerns raised by a non-disclosing party consistent with
the disclosing party's legal obligations (including, without limitation,
reporting and filing requirements under Federal and State securities laws); (C)
in case of disclosures being compelled by legal process, prior to making such
disclosure the disclosing party shall afford the non-disclosing parties an
opportunity to seek an appropriate protective order with respect to such
information, and the disclosing party
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shall provide the non-disclosing parties with reasonable cooperation and
assistance in connection therewith; and (D) with respect to any information
which is disclosed to a third party in accordance with these provisions, the
disclosing party, consistent with its legal obligations, shall use its best
efforts to obtain assurances from such third party that such information will be
treated as confidential by such third party. The parties shall issue a joint
press release upon the signing of this Agreement and the Transaction Documents,
upon the consummation of the closing of the transactions contemplated by this
Agreement (or, if applicable, upon termination of this Agreement) and as they
shall thereafter otherwise mutually agree.
(d) Purchaser may use any information, including Proprietary Information,
in Purchaser's Financial Statements, including its pro forma financial
statements, required pursuant to its legal obligations, including, without
limitation, under applicable Federal and State securities laws.
(e) Purchaser, on the one hand, and Seller and Takihyo, on the other hand,
will not, and will cause their respective Representatives not to, without the
prior written consent of the other party, make any release to the press or other
public disclosure or make any statement to any other Person with regard to the
negotiation process with respect to this Agreement, the Transaction Documents
and the transactions contemplated hereby and thereby. In addition, Purchaser
will not, and will cause its Representatives not to, without the prior written
consent of Xx. Xxxxx Xxxx, make any disparaging or derogatory settlement to any
other Person with regard to the conduct by Seller or Takihyo of their respective
businesses prior to Closing. Each party shall be responsible for any breach of
the foregoing by any of its Representatives. The restrictions in this Section
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3.04(e) shall not prohibit the disclosure of any information by Purchaser, on
the one hand, and Seller and Takihyo, on the other hand, required by law, rule
or regulation (including, without limitation, the rules and regulations of the
Securities and Exchange Commission and any stock exchange (including The NASDAQ
National Market) upon which any of the securities of Purchaser or Seller are
listed) subject to compliance with the following provisions: (A) the disclosing
party shall give the other parties hereto written notice of such requirement as
soon as possible after becoming aware of such requirement; (B) the disclosing
party shall provide the other parties hereto with a copy of any proposed
disclosure a reasonable period of time in advance of actual disclosure to any
third party for review and comment on such proposed disclosure, and the
disclosing party will use its commercially reasonable efforts to address any
concerns raised by a non-disclosing party consistent with the disclosing party's
legal obligations (including, without limitation, reporting and filing
requirements under Federal and State securities laws); (C) in case of
disclosures being compelled by legal process, prior to making such disclosure
the disclosing party shall afford the non-disclosing parties an opportunity to
seek an appropriate protective order with respect to such information, and the
disclosing party shall provide the non-disclosing parties with reasonable
cooperation and assistance in connection therewith; and (D) with respect to any
information which is disclosed to a third party in accordance with these
provisions, the disclosing party, consistent with its legal obligations, shall
use its best efforts to obtain assurances from such third party that such
information will be treated as confidential by such third party.
(f) The provisions of clause (iii) of the second paragraph and the fourth
paragraph of the Confidentiality Agreement shall terminate at Closing and be of
no
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further force or effect. In addition, to the extent of an inconsistency between
the terms and conditions of Section 3.04 of this Agreement and the
Confidentiality Agreement, the terms and provisions of Section 3.04 shall
govern.
3.05 Net Tangible Assets. Seller and/or Takihyo shall maintain net tangible
assets (as hereinafter defined) during the following periods and in the amounts
set forth below: (a) during the period from and after the date hereof to and
including the first anniversary of the Closing, in an amount not less than
$5,000,000; and (b) during the period from and after the first anniversary of
the Closing to and including the second anniversary of the Closing, in an amount
not less than $2,500,000. The term "net tangible assets" shall mean the excess
of all tangible assets of Seller and/or Takihyo over all liabilities of Seller
and/or Takihyo, determined in accordance with generally accepted accounting
principles as in effect from time to time ("GAAP"); provided, that the portion
of the excess required to be maintained pursuant to clauses (a) and (b) above
shall at all times be comprised of cash, marketable securities, or such other
assets as are reasonably acceptable to Purchaser (and Purchaser acknowledges and
agrees that shares of the Common Stock, $0.01 par value per share, of Xxxxx
Karan International Inc. ("DK Shares") held by Seller or Takihyo shall be assets
of a type that are reasonably acceptable to Purchaser), further provided that to
the extent that the DK Shares would not be considered "tangible assets" under
GAAP, such shares shall be considered "tangible assets" for the purposes of this
Section 3.05. Seller and/or Takihyo shall from time to time at the request of
Purchaser furnish to Purchaser such information as Purchaser shall reasonably
request in order to confirm the maintenance of the foregoing. All such
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information shall be deemed Proprietary Information and shall be subject to the
provisions of Section 3.04.
ARTICLE IV
Purchase Price
4.01 Purchase Price. The aggregate purchase price for the Assets and the
assignment and assumption of the Assumed Agreements shall be Sixty Million
Dollars ($60,000,000.00) less the aggregate amount of any licensing fee actually
paid by Purchaser to Seller prior to Closing pursuant to Section 8.04 of the
License Agreement (the "Purchase Price"). The Purchase Price shall be payable at
Closing in consideration for the transfer of the Assets and the assignment and
assumption of the Assumed Agreements in accordance with the terms and conditions
of this Agreement, in immediately available funds by wire transfer to an account
specified by Seller to Purchaser in writing at least two (2) Business Days prior
to Closing.
4.02 Allocation of Purchase Consideration. An amount equal to the sum of
the Purchase Price and the liabilities to be assumed by Purchaser under the
Assumed Agreements (the "Purchase Consideration") shall be allocated among the
Assets in accordance with an allocation schedule to be mutually agreed upon by
Seller and Purchaser within fourteen (14) days of the date hereof, which
allocation schedule shall be prepared in accordance with the rules under Section
1060 of the Internal Revenue Code of 1986, as amended (the "Tax Code") and the
Treasury Regulations promulgated thereunder. Unless otherwise required by
applicable law, Purchaser and Seller agree to report the allocation of the
Purchase Consideration in accordance with such schedule for all purposes and
neither Purchaser nor Seller will take any position inconsistent therewith with
respect to any tax return, audit or examination by any taxing authority,
litigation,
20
proceeding or otherwise. In this regard, and without limiting the foregoing,
Purchaser and Seller agree to act, and cause their respective affiliates to act,
in accordance with the computations and allocations contained in such schedule
in any forms or reports required to be filed pursuant to Section 1060 of the Tax
Code or the Treasury Regulations promulgated thereunder ("1060 Forms"), to
cooperate in the preparation of any 1060 Forms and to file such 1060 Forms in
the manner required by applicable law.
ARTICLE V
Closing
5.01 Closing. The closing of the purchase and sale of the Assets
("Closing") shall take place at the offices of Xxxxxx Xxxxxx Flattau & Klimpl,
LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 A.M. local
time on the earlier of, July 10, 1999 or that date that is thirty (30) Business
Days after the later of receipt of all consents and approvals listed on
Schedules 8.01 and 8.02 hereof, the satisfaction of the conditions set forth in
Section 8.01(i) and the receipt by Purchaser of the requisite consents or
approvals contemplated by Section 11.15, or at such other place, time or date as
the parties may mutually agree in writing (the date of Closing being referred to
herein as the "Closing Date").
ARTICLE VI
Representations and Warranties of Seller and Takihyo
To induce Purchaser to enter into this Agreement and the Transaction
Documents to which it is or will be a party and to purchase the Assets, each of
Seller and Takihyo hereby, jointly and severally, represents and warrants to
Purchaser, as of the date hereof, that:
21
6.01 Organization, Powers, Etc. Xxxx Xxxxx is a limited liability company
validly existing and in good standing under the laws of New York and has all
requisite power and authority to enter into this Agreement, the Transfer
Documents and the other Transaction Documents to which it is or will be a party
and to carry out the transactions contemplated hereby and thereby. Takihyo is a
corporation, validly existing and in good standing under the laws of Delaware.
Takihyo has all requisite power and authority to enter into this Agreement, the
Transfer Documents and the other Transaction Documents to which it is or will be
a party and to carry out the transactions contemplated hereby and thereby.
6.02 Equity Owners. Takihyo, Tolara Triangle Inc. ("TT") and First
Resources Marketing, Inc. ("FRM") are the legal and beneficial owners of all of
the outstanding equity interests of Seller. Xxxxx X. Xxxx and Xxxxx Xxxx are the
legal and beneficial owners of all of the outstanding equity interests of
Takihyo. Mr. Taki is the legal and beneficial owner of all of the outstanding
equity interests of TT. Xx. Xxxx is the legal and beneficial owner of all of the
outstanding equity interests of FRM, except that Xxxxxxxxxxx Xxxx and Xxxxxxx
Xxxx each own 10% of the outstanding capital stock of FRM.
6.03 Execution, Delivery and Performance. Except as set forth on Schedule
6.03, the authorization, execution, delivery and performance of this Agreement,
the Transfer Documents and the other Transaction Documents to which each of
Seller and Takihyo is or will be a party, and the consummation by each of Seller
and Takihyo of the transactions contemplated hereby and thereby, will not (i)
conflict with or result in a breach of the Organizational Documents of Seller or
Takihyo, (ii) violate any U.S. or
22
foreign laws, statutes or regulations to which Seller or Takihyo is subject or
by which Seller, Takihyo or their respective assets are bound, (iii) violate any
order, writ, injunction, judgment, award, arbitration or decree of any court,
governmental body, administrative agency, arbitrator or other competent
authority (collectively, "Orders") to which Seller, Takihyo or their respective
assets are subject, (iv) violate, conflict with, result in or constitute (with
the giving of notice, the lapse of time, or both) a breach or default under, or
result in the termination or acceleration of any obligation to any third party
under any material agreement, mortgage, indenture, note, lease, license,
insurance policy, or other material commitment, obligation or instrument to
which Seller or Takihyo is a party or by which any of their respective
properties or assets are bound, including, without limitation, the Existing
Trademark Agreements (collectively, "Seller's or Takihyo's Contracts"), or (v)
create or impose any lien on any Asset pursuant to Seller's or Takihyo's
Contracts or any other agreement to which Seller is a party. Except for FTC
Approval and as set forth on Schedule 6.03, no consent, approval or
authorization of, notice to, or filing or registration with, any court,
governmental body, administrative agency, arbitrator or other competent
authority, or any other Person, is required, pursuant to the terms of any of
Seller's or Takihyo's Contracts, applicable law, or any Orders to which Seller
or Takihyo is subject or by which Seller, Takihyo or their respective assets are
bound to be made or obtained by Seller or Takihyo in connection with the
execution, delivery and performance by Seller or Takihyo of this Agreement, the
Transfer Documents or the other Transaction Documents to which it is or will be
a party, and the consummation of the transactions contemplated hereby and
thereby.
23
6.04 Authority. All proceedings required to be taken by each of Seller and
Takihyo to authorize the execution, delivery and performance by it of this
Agreement, the Transfer Documents and the other Transaction Documents to which
it is or will be a party have been duly and properly taken. This Agreement
constitutes, and the Transfer Documents and the other Transaction Documents to
which Seller or Takihyo will be a party, when duly executed and delivered by the
parties thereto, will constitute, the valid and binding obligations of Seller
and Takihyo, as the case may be, enforceable against it in accordance with their
respective terms, except as such enforcement may be limited by bankruptcy and
other laws affecting the enforceability of creditors' rights generally or laws
governing the availability of specific performance or other equitable remedies.
6.05 Existing Trademark Agreements. Schedule 6.05 sets forth a complete and
correct list of the Trademark License Agreements, the Other Trademark
Agreements, and the Other Assumed Agreements in each case as in effect on the
date hereof (collectively, the "Existing Trademark Agreements"), complete and
correct copies of which (including all amendments thereto) have been delivered
to Purchaser. Except as set forth on Schedule 6.05, the Existing Trademark
Agreements are valid, binding, enforceable and in full force and effect subject
to bankruptcy and other laws affecting the enforceability of creditors' rights
generally or laws governing the availability of specific performance or other
equitable remedies. Except as set forth on Schedule 6.05, to Seller's and
Takihyo's Actual Knowledge, (i) Seller is not in material default, (ii) no
written notice has been received by Seller or Takihyo and (iii) there exists no
condition or event which, with notice or lapse of time or both, would constitute
a material default by Seller, under or with respect to any of the Existing
Trademark Agreements. To the Actual Knowledge of
24
Seller, except as set forth on Schedule 6.05, (a) no other party to any of the
Existing Trademark Agreements is in material default under any of the Existing
Trademark Agreements, and (b) there exists no condition or event which, with
notice or lapse of time or both, would constitute a material default by any
other party to any such Existing Trademark Agreements. Except as set forth on
Schedule 6.05, each of the Existing Trademark Agreements may be assigned to
Purchaser without the consent of any person in connection with the transactions
contemplated by this Agreement and the Transaction Documents.
6.06 No Material Adverse Event. Since January 1, 1999, there has been no
Material Adverse Event.
6.07 Trademarks and Other Assets. Schedule 6.07 sets forth a true and
correct list of all of the registered or issued Trademarks subject to the
Updates provided pursuant to Section 11.12 relating to the maturity to
registration of applications previously filed, the filing of new applications
for registrations and the conversion of intent to use applications to use based
applications. Each of the Trademarks listed in Schedule 6.07 is subsisting and,
except as disclosed in Schedule 6.07, has not been adjudged invalid or
unenforceable, in whole or in part, and, to the Actual Knowledge of Seller, each
of the registered or issued Trademarks is valid and enforceable in the
countries, as set forth and qualified on Schedule 6.07. Seller has rights in and
good and defensible title to the Trademarks. Except as set forth on Schedule
6.07, Seller is the sole and exclusive owner of (i) the Trademarks in the
countries where the Trademarks are registered or issued (and to the Actual
Knowledge of Seller or Takihyo, no other person is claiming ownership of the
Trademarks in any other country), and (ii) the other Assets, in each case which
are
25
free and clear of any liens, claims, pledges, security interests or any other
encumbrances and rights of others, except for those rights granted by Seller to
licensees in the Trademarks pursuant to the Existing Trademark Agreements, those
rights granted by Seller pursuant to the Bank Pledge and Seller's rights to
continue to use the Trademarks solely in accordance with the provisions of
Section 11.11 of this Agreement and Section 2.0l(a)(ii) of the License
Agreement. The Trademarks listed on Schedule 6.07 are the only assets of the
type described in clause (a) of the definition of Assets owned or used by Seller
on the date hereof and material to the business of Seller as presently
conducted. To the Actual Knowledge of Seller, the past and present use of the
Trademarks and the other Assets by Seller has not, does not and will not
infringe upon or violate any right, privilege or license agreement of or with
any other Person, except as set forth on Schedule 6.07. To the Actual Knowledge
of Seller, except as otherwise set forth on Schedule 6.07, no material
infringement or unauthorized use presently is being made of any of the
Trademarks by any Person.
6.08 Litigation. Except as set forth on Schedule 6.08, there are no
actions, suits, arbitrations or proceedings pending against Seller or Takihyo,
and neither Seller nor Takihyo has Actual Knowledge, or has received written
notice, of any threatened action, suit, or proceeding, at law, in equity, in
arbitration or by or before any other authority, involving or affecting the
Business or any of the Assets, or any of the transactions contemplated by this
Agreement, the Transfer Documents or the other Transaction Documents. Except as
set forth on Schedule 6.08, none of Seller or Takihyo is in default with respect
to any judgment, order, writ, injunction, award, arbitration, decree or consent
of any court, governmental body, administrative agency, arbitrator or other
competent
26
authority applicable to any of them and which involves or affects the Business,
any of the Assets, or any of the transactions contemplated by this Agreement,
the Transfer Documents or the other Transaction Documents.
6.09 Compliance with Law. Except as set forth on Schedule 6.09, Seller is
in material compliance with all laws, rules, regulations, orders and decrees
applicable to Seller in connection with ownership and/or use of the Assets or
the operation of the Business.
ARTICLE VII
Representations and Warranties of Purchaser
To induce Seller and Takihyo to enter into this Agreement and the
Transaction Documents to which they are or will be a party and to sell the
Assets, Purchaser hereby represents and warrants to Seller and Takihyo as of the
date hereof that:
7.01 Organization, Powers, Etc. Purchaser is a corporation, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority to enter into this Agreement, the Transfer
Documents and the other Transaction Documents to which it is or will be a party,
and to carry out the transactions contemplated hereby and thereby.
7.02 Execution, Delivery and Performance. Except as set forth on Schedule
7.02, the authorization, execution, delivery and performance of this Agreement,
the Transfer Documents and the other Transaction Documents to which Purchaser is
or will be a party, and the consummation by Purchaser of the transactions
contemplated hereby and thereby will not (i) conflict with or result in a breach
of the Organizational Documents of Purchaser, (ii) violate any U.S. or foreign
laws, statutes or regulations to which Purchaser is subject or by which
Purchaser or its assets are bound, (iii) violate any
27
Order to which Purchaser or its assets are subject, or (iv) violate, conflict
with, result in or constitute (with the giving of notice, the lapse of time, or
both) a breach or default under, or result in the termination or acceleration of
any obligations to any third party under, or the creation or imposition of a
lien on any of its assets pursuant to, any material agreement, mortgage,
indenture, note, lease, license, insurance policy, or other material commitment,
obligation or instrument to which Purchaser is a party or by which any of its
properties or assets are bound (collectively, the "Purchaser Contracts"). Except
for the FTC Approval and as set forth on Schedule 7.02, no consent, approval or
authorization of, notice to, or filing or registration with, any governmental,
administrative or regulatory authority, or any other Person, is required,
pursuant to the terms of any of the Purchaser Contracts, applicable law, or any
Orders to which Purchaser is subject or by which its assets are bound, to be
made or obtained by Purchaser in connection with the execution, delivery and
performance by Purchaser of this Agreement, the Transfer Documents and the other
Transaction Documents to which it is or will be a party and the consummation of
the transactions contemplated hereby and thereby.
7.03 Authority. All proceedings required to be taken by Purchaser to
authorize the execution, delivery and performance by it of this Agreement, the
Transfer Documents and the other Transaction Documents to which it is or will be
a party have been duly and properly taken. This Agreement constitutes, and the
Transfer Documents and the other Transaction Documents, when duly executed and
delivered by the parties thereto, will constitute, the valid and binding
obligations of Purchaser, enforceable against it in accordance with their
respective terms, except as such enforcement may be limited by
28
bankruptcy and other laws affecting the enforceability of creditors' rights
generally or laws governing the availability of specific performance or other
equitable remedies.
ARTICLE VIII
Conditions Precedent to Closing
8.01 Conditions Precedent to Purchaser's Obligations to Close. The
obligation of Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Purchaser) prior to or on the Closing Date of each of the following conditions:
(a) (i) Subject to Section 11.12, the representations and warranties of
Seller and Takihyo contained in this Agreement shall have been true and correct
when made, (ii) the representations and warranties of Seller and Takihyo
contained in Sections 6.01 through 6.04 shall be true and correct in all
material respects on the Closing Date as if made on the Closing Date (without
giving effect to any Updates), (iii) the representations and warranties of
Seller or Takihyo contained in Section 6.07 with regard to trademarks "Xxxx
Xxxxx," "Xxxx Xxxxx XX," "A Line Xxxx Xxxxx" and the "Lion Head Design" shall be
true and correct in all material respects on the Closing Date as if made on the
Closing Date (qualified to the extent any Update relates to the maturity to
registration of applications previously filed, the filing of new applications
for registrations and conversion of intent to use applications to use based
applications) and (iv) subject to Section 11.12, all other representations and
warranties of Seller and Takihyo shall be true and correct in all material
respects on the Closing Date as if made on the Closing Date; provided, however,
that if any representation or warranty is already qualified by materiality, for
purposes of determining whether this condition has been
29
satisfied, such representation or warranty as so qualified shall be true and
correct in all respects.
(b) The covenants and agreements of Seller and Takihyo contained in this
Agreement and required to be complied with or performed on or prior to the
Closing Date shall have been complied with or performed in all material
respects.
(c) Purchaser shall have received a certificate dated the Closing Date and
executed by the Managing Member of Seller and the President of Takihyo or, in
each case, such other duly authorized representatives reasonably acceptable to
Purchaser, certifying the satisfaction of the conditions referred to in Sections
8.01(a) and (b).
(d) All consents of, and releases from, any governmental entity or other
Person listed in Schedule 8.01 attached hereto, each in form and substance
reasonably satisfactory to Purchaser, shall have been received.
(e) Purchaser shall have received a certificate of the Member Manager of
Seller (the "Seller's Certificate") and a certificate from the Secretary of
Takihyo ("Takihyo's Certificate") or, in each case, such other duly authorized
representatives of Seller and Takihyo reasonably acceptable to Purchaser,
certifying the resolutions duly and validly adopted by Seller and Takihyo
evidencing, in each case, their respective authorization of the execution and
delivery of this Agreement, the Transfer Documents and the other Transaction
Documents to which each of Seller and Takihyo is or will be a party and the
consummation of the transactions contemplated hereby and thereby, and the names
and signatures of the members of Seller and officers of Takihyo authorized to
sign this Agreement, the Transfer Documents and the other Transaction Documents.
30
(f) On the Closing Date: (i) there shall be no effective injunction, writ
or preliminary restraining order or any order of any kind whatsoever issued by a
court, governmental body, administrative agency, arbitrator or other competent
authority, which restrains or prohibits the consummation of the transactions
contemplated hereby; (ii) there shall be no law, rule or regulation in effect
which restrains or prohibits the consummation of the transactions contemplated
hereby; and (iii) there shall be no proceeding, lawsuit or arbitration pending
or, to the knowledge of Purchaser or Seller, threatened in writing, which seeks
to restrain or prohibit the consummation of the transactions contemplated
hereby.
(g) Since January 1, 1999, no Material Adverse Event shall have occurred
(without giving effect to any Updates).
(h) The form and substance of all certificates, consents, instruments, and
other documents delivered to Purchaser under this Agreement shall be reasonably
satisfactory in all respects to Purchaser and its counsel.
(i) Purchaser shall have obtained financing from banks or financial
institutions, in amounts and on terms and conditions reasonably satisfactory to
it and necessary, in Purchaser's good faith judgment, for Purchaser to
consummate the transactions contemplated by this Agreement (the "Purchaser's
Financing").
(j) Purchaser shall have received such termination statements (which
statements shall be delivered to Purchaser at the Closing for filing), lien
releases and satisfactions of liens, in form and substance reasonably
satisfactory to Purchaser, evidencing the termination, release and satisfaction
of all Encumbrances on the Assets, except for those rights granted by Seller to
licensees in the Trademarks pursuant to the
31
Existing Trademark Agreements, Seller's rights to continue to use the Trademarks
solely in accordance with the provisions of Section 11.11 of this Agreement and
Section 2.01(a)(ii) of the License Agreement and Encumbrances created by or
imposed upon Purchaser.
(k) Purchaser shall have received the Transfer Documents dated the Closing
Date and executed by the Member Manager of Seller.
8.02 Conditions Precedent to Seller's and Takihyo's Obligations to Close.
The obligation of Seller and Takihyo to consummate the transactions contemplated
hereby is subject to the satisfaction (or waiver by Seller and Takihyo) prior to
or on the Closing Date of each of the following conditions:
(a) The representations and warranties of Purchaser contained in this
Agreement shall have been true and correct when made and shall be true and
correct in all material respects as of the Closing Date as if made on the
Closing Date, provided, however, that if any representation or warranty is
already qualified by materiality, for purposes of determining whether this
condition has been satisfied, such representation or warranty as so qualified
shall be true and correct in all respects.
(b) The covenants and agreements of Purchaser contained in this Agreement
and required to be complied with or performed on or prior to the Closing Date
shall have been complied with or performed in all material respects.
(c) Seller and Takihyo shall have received a certificate dated the Closing
Date and executed by an executive officer of Purchaser, certifying to the
satisfaction of the conditions referred to in Sections 8.02(a) and (b).
32
(d) All consents of, and releases from, any governmental entity or other
Person listed in Schedule 8.02 attached hereto, each in form and substance
reasonably satisfactory to Seller, shall have been received.
(e) Seller and Takihyo shall have received a certificate of the Secretary
of Purchaser (the "Purchaser's Certificate") or such other duly authorized
representative reasonably acceptable to Seller, certifying the resolutions duly
and validly adopted by Purchaser evidencing its authorization of the execution
and delivery of this Agreement, the Transfer Documents and the other Transaction
Documents to which Purchaser is a party and the consummation of the transactions
contemplated hereby and thereby, and the names and signatures of the officers of
Purchaser authorized to sign this Agreement, the Transfer Documents and the
other Transaction Documents.
(f) On the Closing Date: (i) there shall be no effective injunction, writ
or preliminary restraining order or any order of any kind whatsoever issued by a
court, governmental body, administrative agency, arbitrator or other competent
authority, which restrains or prohibits the consummation of the transactions
contemplated hereby; (ii) there shall be no law, rule or regulation in effect
which restrains or prohibits the consummation of the transactions contemplated
hereby; and (iii) there shall be no proceeding, lawsuit or arbitration pending
or, to the knowledge of Seller or Purchaser, threatened in writing which seeks
to restrain or prohibit the consummation of the transactions contemplated
hereby.
(g) The form and substance of all certificates, consents, instruments and
other documents delivered to Seller and Takihyo under this Agreement shall be
reasonably satisfactory in all respects to Seller and Takihyo and their counsel.
33
(h) Seller shall have received the Transfer Documents dated the Closing
Date and executed by an executive officer of Purchaser.
ARTICLE IX
Closing Deliveries
9.01 Deliveries of Seller and Takihyo. At Closing, Seller and Takihyo shall
deliver or cause to be delivered the following items to Purchaser:
(a) the certificate referred to in Section 8.01(c), duly executed by Seller
and Takihyo;
(b) the Seller's Certificate referred to in Section 8.01(e); and Takihyo's
Certificate referred to in Section 8.01(e);
(c) the Transfer Documents referred to in Section 8.01(k), each duly
executed by Seller and/or Takihyo, as applicable; and
(d) the termination statements, lien releases and satisfaction of liens
referred to in Section 8.01(j).
9.02 Deliveries of Purchaser. At Closing, Purchaser shall deliver or cause
to be delivered the following items to Seller:
(a) the certificate referred to in Section 8.02(c), duly executed by an
executive officer of Purchaser;
(b) the Purchaser's Certificate referred to in Section 8.02(e);
(c) the Transfer Documents referred to in Section 8.02(h), each duly
executed by Purchaser; and
(d) the Purchase Price.
34
ARTICLE X
Indemnification
10.01 Indemnification by Seller and Takihyo. Seller and Takihyo shall,
jointly and severally, indemnify, defend and hold the Purchaser, and its
officers, directors, employees, affiliates and agents (the "Purchaser
Indemnified Parties") harmless from and against any and all Losses to which any
of the Purchaser Indemnified Parties becomes subject based upon, arising out of,
or otherwise in respect of (a) the Assets or the Business with regard to all
periods prior to Closing and with regard to all periods, whether prior to or
subsequent to Closing, to the extent based upon, arising out of or otherwise in
respect of any event occurring prior to Closing, (b) the Excluded Liabilities
and (c) any breach of any representation, warranty, covenant or agreement of
Seller or Takihyo contained in this Agreement or the Transfer Documents to which
they are a party.
10.02 Indemnification by Purchaser. Purchaser shall indemnify, defend and
hold Seller and its officers, directors, members, employees, affiliates and
agents (the "Seller Indemnified Parties") harmless from and against any and all
Losses to which any of the Seller Indemnified Parties becomes subject based
upon, arising out of or otherwise in respect of (a) the Assets, the liabilities
and obligations assumed by Purchaser under the Assumed Agreements and the
operation of Purchaser's business relating to the Assets and the Assumed
Agreements with regard to all periods from and after the Closing to the extent
based upon, arising out of, or otherwise in respect of any event occurring after
the Closing, but in no event based upon, arising out of, or otherwise in respect
of the Excluded Liabilities, (b) any breach of any representation, warranty,
covenant
35
or agreement of Purchaser contained in this Agreement or the Transfer Documents
to which it is a party and (c) the Purchaser's Liabilities.
10.03 Notice and Opportunity to Defend. Promptly after receipt by either
party hereto of notice of the assertion of any Losses or discovery of any facts
upon which such party expects to make a claim for indemnification hereunder,
such party (the "Indemnified Party") shall give the other party who may become
obligated to provide indemnification hereunder (the "Indemnifying Party")
written notice describing such Losses or facts in reasonable detail; provided,
however, that any delay or failure by an Indemnified Party to provide such
notice shall not impair or affect its rights hereunder or the obligation of the
Indemnifying Party with respect to such Losses, except to the extent the
Indemnifying Party can demonstrate that it was materially prejudiced by the
Indemnified Party's delay in giving or failure to give such notice. Such
Indemnifying Party shall have the right, at its option, to compromise or defend,
at its own expense and by its own counsel, any such matter involving the
asserted liability of the Indemnified Party; provided, however, that no
Indemnifying Party shall compromise or settle any asserted liability (except a
liability settled or compromised for monetary consideration or damages only
payable solely by other than the Indemnified Party and such compromise or
settlement provides for a full and unconditional release of the claims asserted
against the Indemnified Party and its affiliates) without the prior written
consent of the Indemnified Party (such consent not to be unreasonably withheld).
If any Indemnifying Party shall undertake to compromise or defend any such
asserted liability, it shall promptly notify the Indemnified Party of its
intention to do so, and shall diligently defend against such claims with counsel
reasonably acceptable to the Indemnified Party. The
36
Indemnified Party agrees to cooperate fully with the Indemnifying Party and its
counsel in the compromise of, or defense against, any such asserted liability.
No Indemnified Party shall compromise or settle any asserted liability (except a
liability settled or compromised for monetary consideration or damages only
payable solely by other than the Indemnifying Party and such compromise or
settlement provides for a full and unconditional release of the claims asserted
against the Indemnifying Party and its affiliates) without the prior written
consent of the Indemnifying Party. All costs and expenses incurred in connection
with such cooperation shall be borne by the Indemnifying Party up until the date
that the Indemnifying Party actually assumes the defense with respect thereto
pursuant to this Section. In any event, the Indemnified Party shall have the
right at its own expense and by its own counsel to participate in the defense of
such asserted liability; provided, however, that if after having notified the
Indemnified Party of its intention to assume the defense of a claim or asserted
liability as aforesaid, the Indemnifying Party fails to do so in a reasonably
prompt and diligent manner or the Indemnified Party is advised in writing by
counsel reasonably satisfactory to the Indemnifying Party that there is a
conflict between the interests of the Indemnified Party and the Indemnifying
Party with respect to such defense under the applicable code or rules of
professional responsibility, then the Indemnifying Party shall be responsible
for the reasonable fees and expenses of one firm of separate counsel for the
Indemnified Party. Except as may otherwise be agreed in writing between an
Indemnifying Party and an Indemnified Party, an Indemnifying Party shall not be
deemed liable under this Article X with respect to third party claims unless and
until (i) a final judgment or award shall have been rendered by a court,
arbitration board or administrative agency of competent
37
jurisdiction with respect to such claim and the time in which to appeal
therefrom shall have expired or (ii) a settlement of such claim shall have been
agreed to with the third party in compliance with this Article X which requires
the payment of monetary damages by the Indemnifying Party provided, that clauses
(i) and (ii) above shall not be applicable to third party claims based upon, or
arising out of, or otherwise in respect of Excluded Liabilities or Purchaser's
Liabilities.
10.04 Limitations on Seller's and Takihyo's Liability
(a) "Basket" Limitation. Neither Seller nor Takihyo shall be liable to all
or any of the Purchaser Indemnified Parties under this Article X unless the
aggregate amount of any Claims which are covered by Seller's and/or Takihyo's
obligations under Section
10.01 ("Seller's Covered Claims") exceed $500,000 (the "Seller's Basket")
and in such event Seller and Takihyo shall only be liable for Seller's Covered
Claims in excess of the Seller's Basket.
(b) "Cap" Limitation. The amount that the Purchaser Indemnified Parties may
recover under this Article X in the aggregate for all Seller's Covered Claims
shall not exceed an amount equal to $20,000,000.
(c) Survival. The representations and warranties of Seller and Takihyo
contained in this Agreement and Seller's and Takihyo's obligation to indemnify
and hold the Purchaser Indemnified Parties harmless relating thereto under this
Article X shall survive for a period of two (2) years after the Closing Date;
provided, that if Purchaser shall have given, on or prior to the second
anniversary of the Closing Date, to Seller and Takihyo any notice of assertion
of any claim or discovery of any facts upon which Purchaser expects in good
faith to make a claim for indemnification under this
38
Agreement as contemplated by the first sentence of Section 10.03, the
limitations set forth in this Section 10.04(c) shall not be applicable in
respect of the matters set forth in such notice.
(d) Excluded Liabilities. Notwithstanding anything contained in this
Agreement to the contrary, the provisions of this Section 10.04 shall not be
applicable to, and shall not limit, the obligations of Seller and Takihyo to
indemnify, defend and hold harmless the Purchaser Indemnified Parties in respect
of Losses based upon, arising out of or otherwise in respect of, the Excluded
Liabilities.
(e) Termination Reimbursement. Subject to Section 10.06, if Seller shall
terminate this Agreement pursuant to Section 12.01(b) and there shall exist a
material breach by Purchaser of any representation, warranty, covenant or
agreement contained herein which breach is the cause of such termination and
with respect to which Seller has provided written notice to Purchaser, then the
indemnification obligations of Purchaser set forth above in this Article X shall
not be applicable and, in lieu thereof, Purchaser shall pay or cause to be paid,
by wire transfer in immediately available funds in accordance with wire transfer
instructions provided to Purchaser by Seller, an amount, not to exceed
$2,000,000, equal to all of Seller's and Takihyo's out-of-pocket fees and
expenses, including, without limitation, the fees and expenses of attorneys,
consultants, accountants, banks and financial institutions and other
professional advisors, but excluding internal overhead and similar expense
allocations, incurred by Seller or Takihyo from and after November 23, 1998 in
respect of the transactions contemplated by the Confidentiality Agreement, this
Agreement and the other Transaction Documents.
39
10.05 Limitations on Purchaser's Liability
(a) "Basket" Limitation. Purchaser shall not be liable to all or any of the
Seller Indemnified Parties under this Article X unless the aggregate amount of
any Claims which are covered by Purchaser's obligations under Section 10.02
("Purchaser's Covered Claims") exceed $500,000 (the "Purchaser's Basket") and
Purchaser shall be liable for Purchaser's Covered Claims in excess of the
Purchaser's Basket.
(b) "Cap" Limitation. The amount that the Seller Indemnified Parties may
recover under this Article X in the aggregate for all Purchaser's Covered Claims
shall not exceed an amount equal to $20,000,000.
(c) Survival. The representations and warranties of Purchaser contained in
this Agreement and Purchaser's obligation to indemnify and hold the Seller
Indemnified Parties harmless relating thereto under this Article X shall survive
for a period of two (2) years after the Closing Date; provided, that if Seller
or Takihyo shall have given, on or prior to the second anniversary of the
Closing Date, to Purchaser any notice of assertion of any claim or discovery of
any facts upon which Seller or Takihyo expect in good faith to make a claim for
indemnification under this Agreement as contemplated by the first sentence of
Section 10.03, the limitations set forth in this Section 10.05(c) shall not be
applicable in respect of the matters set forth in such notice.
(d) Purchaser's Liabilities. Notwithstanding anything contained in this
Agreement to the contrary, the provisions of this Section 10.05 shall not be
applicable to, and shall not limit, the obligations of Purchaser to indemnify,
defend and hold harmless the Seller Indemnified Parties in respect of Losses
based upon, arising out of or otherwise in respect of, the Purchaser's
Liabilities.
40
(e) Termination Reimbursement. Subject to Section 10.06, if Purchaser shall
terminate this Agreement pursuant to Section 12.01(b) and there shall exist a
material breach by Seller or Takihyo of any representation, warranty, covenant
or agreement contained herein which breach is the cause of such termination,
with respect to which Purchaser has provided written notice to Seller and
Takihyo, then the indemnification obligations of Seller and Takihyo set forth
above in this Article X shall not be applicable and, in lieu thereof, Seller and
Takihyo shall pay or cause to be paid, by wire transfer in immediately available
funds in accordance with wire transfer instructions provided to Seller by
Purchaser, an amount, not to exceed $2,000,000, equal to all of Purchaser's
out-of-pocket fees and expenses, including, without limitation, the fees and
expenses of attorneys, consultants, accountants, bank and financial institutions
and other professional advisors, but excluding internal overhead and similar
expense allocations, incurred by Purchaser from and after November 23, 1998 in
respect of the transactions contemplated by the Confidentiality Agreement, this
Agreement and the other Transaction Documents.
10.06 Exclusive Remedy. The provisions of Article X of this Agreement
contain the exclusive remedies of the parties hereto and the Purchaser
Indemnified Parties and Seller Indemnified Parties with respect to any breach or
alleged breach of any representation, warranty or covenant contained herein and
with respect to any claim otherwise arising from or relating to the transactions
contemplated by this Agreement; provided, that (i) the provisions of Article X
of this Agreement shall not be the exclusive remedies of (x) Purchaser for
Losses or claims based upon, arising out of or relating to, the Excluded
Liabilities, or (y) Seller for Losses or claims based upon, arising out of or
41
relating to, the Purchaser's Liabilities, (ii) nothing herein, including,
without limitation, Sections 10.04(e) and 10.05(e), shall be deemed to limit or
restrict any party's rights or remedies in respect of any willful breach of this
Agreement or any representation, warranty, covenant or agreement contained
herein prior to Closing or termination pursuant to Article XII, including rights
or remedies based upon equitable principles (including specific performance and
injunctive relief), and (iii) nothing herein, including, without limitation,
Sections 10.04(e) and 10.05(e), shall be deemed to limit or restrict any party's
rights or remedies in respect of any breach, alleged breach of, or claim under,
this Agreement based upon, or arising out of or otherwise in respect of, fraud.
Each party agrees that money damages would not be a sufficient remedy for any
such breach of this Agreement (including, without limitation, Section 3.03
hereof) prior to the Closing and that the other party will be entitled, without
the necessity of actual monetary loss being proved or the posting of a bond, to
the foregoing equitable remedies.
ARTICLE XI
Certain Additional Covenants and Agreements
11.01 Additional Equity Interests. From the date hereof until Closing (or,
if earlier, the date on which this Agreement terminates pursuant to Section 1.01
or Article XII), no existing equity interest in Seller shall be sold, pledged,
encumbered, transferred, assigned or otherwise disposed of (each, a "Transfer")
by any legal or beneficial owner thereof (the "Equity Owners") and no new equity
interest shall be issued by Seller and none of Xx. Xxxxx Xxxx, Xx. Xxxxxxxxxxx
Xxxx, Xx. Xxxxxxx Xxxx or Xx. Xxxxx Xxxx (each, an "Ultimate Owner") will
Transfer any equity interest in any Equity Owner; provided that any of the
Equity Owners or Ultimate Owners may Transfer any existing equity interest in
Seller or in any Equity Owner to another Equity Owner or Ultimate
42
Owner or to a corporation or other entity in which they, or any of them, are the
sole legal and beneficial owner of all equity interests therein. Seller or the
Equity Owner thereof in which such equity interest is to be transferred shall
give Purchaser prior written notice pursuant to Section 14.01 of each proposed
transfer.
11.02 Ordinary Course. Commencing as of the date hereof, Seller and
Takihyo, jointly and severally, agree that, except as otherwise set forth in or
as contemplated by the Transaction Documents, Seller shall conduct the Business
only in the ordinary course and in conformity with past practice. Without
limiting the generality of the foregoing, Seller and Takihyo, jointly and
severally, covenant that from the date hereof until Closing (or, if earlier, the
date on which this Agreement terminates pursuant to Section 1.01 or Article
XII), Seller shall provide notice to Purchaser with respect to the following
matters and shall provide Purchaser with such information with respect thereto
as Purchaser shall reasonably request, but Seller shall not be required to
obtain Purchaser's consent thereto: (i) entering into or granting any new
license, distribution, trademark, trade name, concurrent use, registered user,
settlement or similar agreement (each a "New Trademark Agreement"), or (ii)
amending, modifying, waiving, terminating or supplementing any Existing
Trademark Agreement (each, a "License Amendment"); provided, that
notwithstanding the foregoing, nothing in this Section 11.02 shall be deemed to
prohibit Seller's dealings with Fashions of Seventh Avenue in the ordinary
course of business pursuant to the existing oral license with Fashions of
Seventh Avenue. Purchaser acknowledges and agrees that the delivery by Seller of
such notice and information shall constitute full compliance with the provisions
of the preceding sentence of this Section 11.02. Except as otherwise provided
above with regard to Fashions of Seventh Avenue,
43
from the date hereof until Closing (or, if earlier, the date on which this
Agreement terminates pursuant to Section 1.01 or Article XII), without the prior
written consent of Purchaser, Seller shall not enter into any New Trademark
Agreement or License Amendment with any officer, director, member, stockholder,
employee, affiliate, or other Person related in any way to Seller, Takihyo or
any of the foregoing Persons.
11.03 Trademark Infringement and Other Events. From the date hereof until
Closing (or, if earlier, the date on which this Agreement terminates pursuant to
Section 1.01 or Article XII), Seller and/or Taikihyo shall promptly notify
Purchaser of any infringement, counterfeiting or passing-off of a Trademark of
which Seller becomes aware, whether by the use of the Trademark, a similar
trademark or trademarks or by the imitation of packaging, label designs or
otherwise. Seller shall take such legal action to protect the Trademarks against
an infringement, counterfeiting or passing-off as is consistent with Seller's
past practices. Seller will promptly, but in any event within five (5) Business
Days, give Purchaser written notice of the occurrence of any event of which
Seller becomes aware that could reasonably be expected to result in a Material
Adverse Event, including the following: (a) any petition under the Bankruptcy
Code filed by or against any licensee of any of the Trademarks as to which
Seller is licensor, the filing of which is Actually Known to Seller and Takihyo,
(b) any notice of opposition or petition for cancellation filed against any of
the Trademarks of which Seller actually becomes aware, (c) any other claim
asserted in a judicial, administrative or other proceeding concerning the
Trademarks, the filing of which is Actually Known to Seller and Takihyo, (d)
receipt by Seller or Takihyo of any written notice or other written
communication from any third Person alleging that the consent of such third
Person is or may be required
44
in connection with the transactions contemplated by this Agreement or the
Transfer Documents, (e) any notice of any pending claim, suit, proceeding,
arbitration or governmental body investigation relating to the Business or the
Assets, or which is threatened against Seller, and in each case of which Seller
or Takihyo receives written notice or has Actual Knowledge, and (f) the receipt
by Seller of any written notice or any other notice Actually Known to Seller
from any licensee of Seller alleging a material default by Seller under any of
the Existing Trademark Agreements or any written notice sent by Seller to any
licensee alleging a material default by such licensee under any of the Existing
Trademark Agreements. Seller shall, from the date hereof until either the
Closing or the termination of this Agreement pursuant to Article XII, as the
case may be, consistent with its past practice, (i) maintain all registrations
for the Trademarks and, in that connection, not abandon any Trademark or use
thereunder, (ii) prosecute any trademark applications for the Trademarks pending
as of the date of this Agreement, file and prosecute opposition and cancellation
proceedings and (iii) otherwise preserve and maintain all rights in the
Trademarks and preserve intact the Business, consistent with Seller's past
practice. All legal and other expenses incurred in connection with the foregoing
shall be borne by Seller.
11.04 Rights Acquired Prior to Closing. If and when Seller shall obtain
rights to any new Trademarks, or any reissue, renewal or extension of any
Trademarks, such Trademarks shall be covered by, and deemed to be incorporated
into, this Agreement.
11.05 Access Prior to Closing. Subject to the last two sentences in this
Section 11.05 and subject to the prior approval of Xx. Xxxxx Xxxx (which
approval shall be granted or denied in the commercially reasonable judgment of
Xx. Xxxx), (i) upon
45
reasonable notice, Seller shall afford Purchaser and its Representatives
reasonable access during regular business hours during the period from the date
hereof up to and including the Closing to any and all of the premises,
properties, contracts, books, records, data and personnel of Seller relating to
the Business and the Assets and (ii) Seller shall, and shall use reasonable
efforts to cause each of its directors, officers, members, managers, agents
and/or employees to cooperate in a reasonable manner in connection with the
foregoing. All information disclosed in the course of such due diligence shall
be subject to the provisions of Section 3.04 hereof. In the event that Purchaser
or its Representatives shall desire such access or any such information or
documents concerning the Business or the Assets, Purchaser, through its Chairman
of the Board, Chief Operating Officer or Executive Vice President-Finance and
Administration shall provide the aforementioned reasonable notice in accordance
with Section 14.01. Within a reasonable time thereafter, Seller shall afford
Purchaser and its Representatives such access or such information or documents,
as the case may be, in each case to the extent consistent with the foregoing
provisions of this Section 11.05.
11.06 FTC Approval. As promptly as practicable after the execution and
delivery of this Agreement and the other Transaction Documents, Seller and
Purchaser shall each file or cause to be filed a notification and report form
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), with the Federal Trade Commission and the Department of Justice. The
purchase of the Assets, the payment of the Purchase Price, the assumption of the
obligations of Seller under the Trademark License Agreements, the Other
Trademark Agreements and the Other Assumed Agreements and the consummation of
the transactions contemplated hereby are
46
expressly and absolutely subject, in each case, to the expiration or termination
of all applicable waiting periods under the HSR Act, without any party hereto
(or, if different, any "person" in which such party is included for purposes of
the HSR Act) having been formally or informally advised by the Federal Trade
Commission or the Department of Justice that either of them will or may seek to
enjoin the consummation of, or otherwise will or may challenge, the transactions
contemplated by this Agreement or the other Transaction Documents and without
either Seller or Purchaser (or their respective "persons") being obligated to
divest itself of any assets or reorganize its existing corporate structures
("FTC Approval"). Each of Seller and Purchaser shall use its best efforts to
prosecute all such applications, as soon as possible after the filing thereof,
and will cooperate with the other and take all steps reasonably necessary,
proper or desirable to expedite the prosecution of such applications (provided
that there is no obligation to agree to any divestiture or reorganization).
11.07 Preserve Accuracy of Representations and Warranties. Between the date
hereof and the Closing Date, except as otherwise provided herein, including,
without limitation, Section 11.02, each of the parties hereto shall refrain from
knowingly taking any action which would render any of its respective
representations or warranties contained in Articles VI or VII of this Agreement
inaccurate as of the Closing Date, provided, that in no event shall Seller or
Takihyo be deemed in breach of this provision by virtue of the conduct by Seller
of its business in compliance with this Agreement and the other Transaction
Documents.
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11.08 Employees of Seller.
(a) Purchaser shall have the right, but shall not be obligated, to hire or
otherwise establish an independent contractor, consultant or other business
relationship with (collectively "Hire") any employees of Seller, but shall have
no right to Hire any employees of Seller's licensing operations unless and until
the closing of the transactions contemplated under this Agreement are
consummated, although Purchaser shall not be restricted from making offers to
Hire such employees provided such offers are conditioned on the consummation of
such closing. Purchaser shall provide to Seller reasonable advance written
notice of any employee of Seller to whom Purchaser intends to extend an offer to
Hire and shall keep Seller informed of the status of any such offer and the
acceptance thereof.
(b) In the event that Seller shall notify Purchaser in writing that any
employees of Seller who are not represented by a labor organization to whom
Purchaser intends to extend or shall have extended an offer to Hire shall be, in
the commercially reasonable judgment of Xx. Xxxxx Xxxx, necessary to the
wind-down of Seller's business as contemplated by this Agreement, the Omnibus
Agreement and the License Agreement, Seller and Purchaser shall in good faith
attempt to agree upon a sharing arrangement with respect to such employees on
terms and conditions reasonably acceptable to both Seller and Purchaser;
provided, that any such sharing arrangement shall contain, among other things,
the following terms: (i) within thirty (30) days of receipt by Purchaser from
Seller of vouchers and/or receipts or other documentation reasonably requested
by Purchaser, Purchaser shall reimburse Seller with respect to the services of
any employee of Seller who shall perform services for Purchaser pursuant to any
such sharing arrangement in an
48
amount equal to the pro rata portion of such employee's salary based upon the
portion of such employee's working time spent in performing such services, and
(ii) if Purchaser shall fail to reimburse Seller for such pro rata portion of
the salary of any shared employee as provided above in this Section 11.08(b),
and such failure shall continue for a period of three (3) Business Days after
Seller shall have notified Purchaser, in accordance with Section 14.01 hereof,
of such failure, Seller shall have the right to terminate the sharing
arrangement with respect to such employee. In such event, except for the pro
rata portion of the salary of such employee that Purchaser shall not have paid,
neither Seller nor Purchaser shall have any further rights or obligations with
respect to such sharing arrangement.
(c) Purchaser shall reimburse Seller, in an amount not to exceed $180,000,
for any liability actually incurred by Seller as a result of Seller's inability
to fully comply with the provisions of the Worker Adjustment and Retraining
Notification Act, as amended, 29 U.S.C. Sections 2101 et seq. ("Warn Act") in
connection with the transactions contemplated by this Agreement, upon written
notice to Purchaser by Seller of such liability and upon receipt by Purchaser of
documentation reasonably satisfactory to it in respect thereof.
11.09 Continuing Advertising Obligations. During the period from the date
hereof until Closing, Seller shall continue to advertise and promote the
Trademarks and the Business as required under the Existing Trademark Agreements.
11.10 Post-Closing Reconciliations. Prior to the Closing, Seller shall use
its commercially reasonable efforts to collect promptly all royalties (including
minimum royalties) ("Royalties"), distribution fees and other payments
(collectively, with
49
Royalties, "Fees") due under each Trademark License Agreement, Other Trademark
Agreement and Other Assumed Agreement and from and after the Closing, Purchaser
shall use its commercially reasonable efforts to promptly collect all such Fees.
The parties agree that, upon consummation of the Closing, Seller and Purchaser
allocate the economic benefit of the Trademark License Agreements, Other
Trademark Agreements and the Other Assumed Agreements listed below among Seller
and Purchaser as follows:
(a) Accrual Basis of Sharing of Royalties under Trademark License
Agreements. Except as provided in subsections (b) and (c) below, Seller and
Purchaser shall share Royalties under each Trademark License Agreement for the
calendar quarter in which the closing occurs (the "Closing Quarter") on an
accrual basis based upon net sales or other applicable transactions for which
Royalties are payable thereunder. Seller shall be entitled to retain or receive,
as the case may be, Royalties in respect of such net sales or other applicable
transactions occurring prior to the Closing Date, including, without limitation,
Royalties that become due and payable in respect thereof as the result of an
audit under any Trademark License Agreement, and Purchaser shall be entitled to
retain or receive, as the case may be, Royalties in respect of such net sales or
other applicable transactions occurring from and after the Closing Date,
including, without limitation, Royalties that become due and payable in respect
thereof as the result of an audit under any Trademark License Agreement. Seller
and Purchaser shall provide to each other, promptly upon receipt, all reports
from the other party or parties to such Trademark License Agreement received by
them, including, without limitation, monthly reports thereunder. To the extent
that monthly or other more frequent reports are not required under any Trademark
License Agreement, Seller and Purchaser shall each use its
50
commercially reasonable efforts to obtain from the other party or parties to
each such Trademark License Agreement monthly or other more frequent reports of
net sales and other transactions in such detail as shall be reasonably necessary
to effect the sharing of Royalties under such Trademark License Agreement on an
accrual basis as contemplated by Section 11.10(a). At Closing, subject to such
information being reasonably available to Seller, Seller shall deliver to
Purchaser a schedule (a "Pre-Closing Royalty Schedule") identifying by Trademark
License Agreement and licensee the amount of royalties (including minimum
royalties) paid to Seller under each Trademark License Agreement in the Closing
Quarter through the end of the month preceding the month in which the Closing
occurs, along with copies of all reports and statements, including monthly and
other more frequent reports, from the other parties to the Trademark License
Agreements theretofore received by Seller, and within ten (10) Business Days
after the Closing Date, Seller shall deliver to Purchaser a revised Pre-Closing
Royalty Schedule (a "Final Pre-Closing Royalty Schedule") setting forth the
amount of Royalties paid to Seller under each Trademark License Agreement in the
Closing Quarter through the Closing Date, along with copies of any further
reports and statements from the other parties to the Trademark License
Agreement. Promptly upon Purchaser's receipt of a monthly, quarterly or other
report from any licensee of Royalties payable in the Closing Quarter, Purchaser
shall deliver to Seller a detailed schedule (a "Reconciliation Schedule"),
identifying by Trademark License Agreement and licensee the aggregate amount of
Royalties payable pursuant to each Trademark License Agreement for the Closing
Quarter and indicating, based on the Final Pre-Closing Royalty Schedule, and the
monthly, quarterly or other reports from the other parties to the Trademark
License Agreement received by Seller or Purchaser from and after the Closing for
the Closing Quarter, the portion of such royalties to which each of Seller and
Purchaser is entitled pursuant to the sharing arrangement set forth in the first
sentence of this Section 11.10(a). At such time, Purchaser shall also provide to
Seller a copy of all monthly, quarterly or other reports that Purchaser shall
have received pursuant to the Trademark License
51
Agreements. Within ten (10) Business Days following Seller's receipt of the
Reconciliation Schedule, each party shall notify the other whether the notifying
party is in agreement with the Final Pre-Closing Schedule or the Reconciliation
Schedule, as the case may be. In the event of any dispute among Seller and
Purchaser as to the sharing of such Royalties and, in that connection, the Final
Pre-Closing Schedule or the Reconciliation Schedule, Seller and Purchaser shall
in good faith attempt to resolve their differences. In the event, however, that
any dispute shall not be so resolved, the parties shall submit their differences
for resolution to Ernst & Young, or other independent certified public
accountants who shall be mutually chosen by Seller and Purchaser (the
"Accountants"). The Accountants shall be instructed to, and shall determine and
report to Seller and Purchaser upon, such differences no later than twenty (20)
days after submission of the applicable Reconciliation Schedule to it. Such
report shall be final, binding and conclusive on the parties hereto. The fees
and disbursements of the Accountants shall be borne equally by Seller and
Purchaser. Within three (3) days following the resolution of all differences by
Seller and Purchaser or the Accountants, as applicable, Seller shall pay to
Purchaser, or Purchaser shall pay to Seller, as the case may be, the amount due
to the other by wire transfer in immediately available funds.
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(b) (i) Inability to Effect Accrual Basis of Sharing of Royalties. In the
event that Seller and Purchaser shall determine that they have been unable to
obtain sufficiently detailed information to effect the sharing of the Royalties
on a reasonably accurate basis in accordance with Section 11.10(a) with respect
to any Trademark License Agreement, then Royalties under such Trademark License
Agreement shall be shared for the Closing Quarter on a pro rata basis, based
upon (i) the number of days in the Closing Quarter up to and including the
Closing Date, for the benefit of Seller, and (ii) the number of days in the
Closing Quarter after the Closing Date, for the benefit of Purchaser. In such
event, at Closing, subject to such information being reasonably available to
Seller, Seller shall deliver to Purchaser a Pre-Closing Royalty Schedule
identifying by Trademark License Agreement and licensee the amount of Royalties
paid to Seller under each Trademark License Agreement in the Closing Quarter
through the end of the month preceding the month in which the Closing occurs,
and within ten (10) Business Days after the Closing Date, Seller shall deliver
to Purchaser a Final Pre-Closing Royalty Schedule setting forth the amount of
Royalties paid to Seller under each Trademark License Agreement in the Closing
Quarter through the Closing Date. Promptly upon Purchaser's receipt of a report
from any licensee of royalties payable in the Closing Quarter, Purchaser shall
deliver to Seller a Reconciliation Schedule, identifying by Trademark License
Agreement and licensee the aggregate amount of Royalties payable pursuant to
each Trademark License Agreement for the Closing Quarter and indicating, based
on the Final Pre-Closing Royalty Schedule, the pro rata portion of such
royalties to which each of Seller and Purchaser is entitled pursuant to the
sharing arrangement set forth in this Section 11.l0(b)(i). At such time,
Purchaser
53
shall also provide to Seller a copy of all monthly, quarterly or other reports
that Purchaser shall have received pursuant to the Trademark License Agreements.
Royalties payable as a result of an audit of any Trademark License Agreement
shall be payable to the party that would have been entitled to such Royalties
(e.g., Seller with respect to Royalties payable for periods up to and including
the Closing Date and Purchaser with respect to Royalties payable for periods
after the Closing Date). The payment and dispute resolution procedures set forth
in Section 11.10(a) shall also be applicable to this Section 11.10(b)(i).
(ii) Notwithstanding Section 11.10(a) and Section 11.l0(b)(i) above, Seller
and Purchaser agree that, because the royalties payable by Vogue Pattern Service
division of Butterick Company, Inc. ("Vogue") are computed and paid only twice
per year (in July and January for the immediately preceding six-month period),
the Vogue royalties payable for sales in 1999 shall be pro rated based upon (i)
the number of days in the six-month period ending June 30, 1999 or December 31,
1999, as applicable, in which the Closing occurs or any shorter period in the
event of termination of such Trademark License Agreement prior to June 30, 1999
or December 31, 1999, as applicable (the "Vogue Half Year") up to and including
the Closing Date, for the benefit of Seller and (ii) the number of days in the
Vogue Half Year after the Closing Date, for the benefit of Purchaser. Seller and
Purchaser also agree that, because the royalties in excess of the minimum
royalties payable by Takihyo Company Ltd. ("TCL") are paid only twice yearly (in
October and April for the immediately preceding six-month period), the TCL
royalties payable for sales in 1999 shall be pro rated based upon (i) the number
of days in the six-month period ending August 31, 1999 or February 29, 2000, as
applicable, in
54
which the Closing occurs or any shorter period in the event of termination of
such Trademark License Agreement prior to August 31, 1999 or February 29, 2000,
as applicable (the "TCL Half Year") up to and including the Closing Date, for
the benefit of Seller and (ii) the number of days in the TCL Half Year after the
Closing Date, for the benefit of Purchaser. Promptly upon Purchaser's receipt of
a report from Vogue or TCL, as applicable, of royalties payable in the Vogue
Half Year or TCL Half Year, as applicable, and in any event, on or prior to the
45th day after the last day of the Vogue Half Year or the 60th day after the
last day of the TCL Half Year, as applicable, Purchaser shall deliver to Seller
a Reconciliation Schedule identifying the aggregate amount of royalties
(including minimum royalties) payable pursuant to the Vogue Trademark License
Agreement for the Vogue Half Year or the TCL Trademark License Agreement for the
TCL Half Year, as applicable, and indicating, based on the Final Pre-Closing
Royalty Schedule, the pro rata portion of such royalties to which each of Seller
and Purchaser is entitled pursuant to the sharing arrangement set forth in this
Section 11.10(b)(ii). At such time, Purchaser shall also provide to Seller a
copy of all monthly, quarterly or other reports that Purchaser shall have
received pursuant to the Vogue or TCL Trademark License Agreements, as
applicable. The payment and dispute resolution procedures set forth in Section
11.10(a) shall also be applicable to this Section 11.10(b)(ii).
(c) Distribution Fees. The parties acknowledge and agree that, with respect
to the Other Trademark Agreement between Seller and Xxxxx Xxxxx & Co. Ltd.
("Xxxxx"), all distribution fees payable with respect to (A) all merchandise
purchased by Xxxxx for all seasons through and including the Fall 1999 season
and (B) all "Initials"
55
merchandise purchased by Xxxxx from Seller shall be for the benefit of Seller.
In the event that Purchaser shall receive any such fees at any time after the
Closing, Purchaser shall promptly remit them to Seller in immediately available
funds within two (2) Business Days after Purchaser's receipt thereof. The
payment and dispute resolution procedures set forth in Section 11.10(a) shall
also be applicable to this Section 11.10(c).
(d) Image Fund Payments. As of the date hereof, Seller has (i) produced
advertising and promotion materials and incurred media placement commitments for
the Spring 1999 advertising campaign and (ii) initiated planning of the
advertising and promotion materials for the Fall 1999 advertising campaign for
which production-related expenses will be incurred during the period prior to
June 1999 and media commitments will be made during the period prior to August
1999, and with respect to which payment will be due in the period from September
1, 1999 through December 31, 1999 (collectively, "1999 Advertising Expenses").
All image fund payments made pursuant to the Trademark License Agreements (the
"Image Fund Payments") received by Seller on or prior to the Closing Date shall
be applied by Seller to recoup Seller's 1999 Advertising Expenses. At Closing,
subject to such information being reasonably available to Seller, Seller shall
deliver to Purchaser a schedule (the "Pre-Closing 1999 Advertising Expense
Schedule") identifying the amount of 1999 Advertising Expenses actually incurred
by Seller and the amount of such expenses that has been recouped by Seller, in
each case through the end of the month preceding the month in which the Closing
occurs, and within ten (10) Business Days after the Closing Date Seller shall
deliver to Purchaser a revised Pre-Closing 1999 Advertising Expense Schedule
(the "Final Pre-Closing 1999 Advertising Expense Schedule") setting forth the
56
amount of 1999 Advertising Expenses actually incurred by Seller and the amount
of such expenses that has been recouped by Seller, in each case through the
Closing Date. From and after the Closing, Purchaser shall remit to Seller,
within two (2) Business Days of their receipt by Purchaser, all Image Fund
Payments received by Purchaser pursuant to the Trademark License Agreements,
together with a report identifying the amount and source of all such Image Fund
Payments received by Purchaser since the Closing Date, until such time as Seller
shall have recouped all 1999 Advertising Expenses actually incurred by Seller as
set forth on the Final Pre-Closing 1999 Advertising Expense Schedule. If the
aggregate Image Fund Payments received by Purchaser that are attributable to the
year ending December 31, 1999 (including Image Fund Payments attributable to the
fourth calendar quarter of 1999 and received by Purchaser after December 31,
1999) (collectively, the "1999 Image Fund Payments") are less than the aggregate
amount of 1999 Advertising Expenses actually incurred by Seller, then Purchaser
shall have no obligation to pay to Seller any amount in excess of the 1999 Image
Fund Payments actually received by Purchaser. To the extent that the aggregate
1999 Image Fund Payments received by Purchaser exceed the aggregate amount of
1999 Advertising Expenses actually incurred by Seller, Purchaser shall be
entitled to retain such excess for use in accordance with the applicable
Trademark License Agreements.
(e) Audit Rights. Seller and Purchaser shall from time to time promptly
provide to each other such documentation as reasonably requested by them to
enable them to confirm the matters contemplated by this Section 11.10. In
addition, upon reasonable notice during normal business hours, Seller and
Purchaser shall be entitled to audit each others' books and records for purposes
of confirming such accounting.
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(f) Payment. From and after the Closing (i) in the event that Seller
receives any Fees to which Purchaser is entitled pursuant to this Section 11.10,
Seller shall promptly pay such amount to Purchaser and (ii) in the event that
Purchaser receives any Fees to which Seller is entitled pursuant to this Section
11.10, Purchaser shall promptly pay such amount to Seller.
11.11 Rights to Use Trademarks After Closing. Until the earlier of March 1,
2000 or upon receipt by Purchaser of written notice from Seller as to its
completion of the wind down of the Apparel Business of Seller contemplated by
the Management Consulting Agreement and the License Agreement (the "Trademark
Use Period"), Seller shall be entitled to use the Trademarks in accordance with
the following:
(a) Within forty-five (45) Business Days after the Closing Date (and, with
respect to the "Initials" inventory, within 45 Business Days after the date of
purchase thereof by Purchaser under the Omnibus Agreement (the "Initials Closing
Date")), Seller shall provide to Purchaser a complete and accurate list of
Seller's inventory of (i) finished goods of apparel items for the Fall 1999
season, (ii) "Initials" inventory not purchased by Purchaser pursuant to the
Omnibus Agreement, (iii) piece goods relating to the Fall 1999 season and prior
seasons, (iv) work-in-progress related to any of the foregoing and (v) raw
materials then on hand (collectively, the "Existing Inventory"). The list shall
be prepared as of the close of business on the day immediately preceding the
Closing Date (or the Initials Closing Date, as applicable).
(b) During the Trademark Use Period, Seller may manufacture apparel items
using the Trademarks. During the Trademark Use Period, Seller (but no other
Person, including, without limitation, any Person having a security interest,
lien or other
58
Encumbrance in or on any Existing Inventory) shall be entitled, on a
non-exclusive basis, to use the Trademarks in connection with the sale or other
disposal of the Existing Inventory and cut-ups (the Existing Inventory, and
cut-ups, wherever produced, are collectively referred to as "Inventory"). All
such sales and disposals shall be through Normal Retail Channels (as defined in
the License Agreement) or to those retail outlets identified on Schedule 2.03 to
the License Agreement on the date hereof (without regard to any amendment or
modification thereof unless otherwise agreed to by Purchaser) (the "Outlets").
Without limiting the generality of the foregoing, during the Trademark Use
Period, Seller may accept and fulfill orders for Inventory and such Inventory
may bear any of the Trademarks in a form consistent with such use by Seller
prior to Closing, including, without limitation, the Trademark "XXXX XXXXX
CLASSICS". At the end of the Trademark Use Period, if Seller has additional
remaining Inventory (the "Remaining Inventory"), Seller shall notify Purchaser
and Purchaser shall, in such event, have a right of first refusal to purchase
all of the Remaining Inventory, at a price and on the terms, including, without
limitation, the timing of payment for and taking delivery of the Remaining
Inventory as may be mutually agreed, which right shall be exercisable only by
notice in writing delivered to Seller within five (5) Business Days after Seller
gives written notice to Purchaser in accordance with Section 14.01 setting forth
the pertinent details of the proposed sale, including, without limitation, a
description of the Remaining Inventory and the proposed purchase price and
terms. If Purchaser does not exercise its rights to purchase hereunder, Seller
may proceed to sell such Remaining Inventory after the Trademark Use Period in
accordance with the other terms and conditions of this Section 11.11 or, with
Purchaser's prior written consent, which consent shall not be
59
unreasonably withheld, in such other manner as Seller may reasonably request,
for a period not to exceed thirty (30) days after the end of the Trademark Use
Period.
(c) Except as otherwise specifically provided in this Section 11.11, from
and after the Closing Seller shall have no right to use the Trademarks or any
variation or simulation thereof and shall, promptly upon Purchaser's written
request, free of charge, execute any and all documents Purchaser may deem
necessary or desirable to the effect that Seller no longer has the right to use
the Trademarks (and if Seller fails to do so promptly, Purchaser shall have the
right to sign such documents as it deems reasonably necessary on Purchaser's
behalf). In addition, at the end of the Trademark Use Period, except as
otherwise provided in Section 11.11(b) with respect to the Remaining Inventory,
Seller shall destroy, or, if requested by Purchaser, shall deliver to Purchaser
all Inventory and all other materials of all kinds in its possession with the
Trademarks thereon for which Purchaser shall pay Seller's actual cost.
(d) If, during the Trademark Use Period, Seller wishes to sell any of the
Inventory other than in Normal Retail Channels or those Retail Outlets
identified on Schedule 2.03 to the License Agreement, or if Seller wishes to
sell all or substantially all of the Inventory to a single purchaser or group of
related purchasers, Purchaser shall, in such event, have a right of first
refusal with respect to any such sale at a price equal to the price to be paid
to Seller by the proposed purchaser, which right shall be exercisable only by
notice in writing delivered to Seller within five (5) Business Days after
Purchaser receives written notice from Seller setting forth the proposed
purchase price of the Inventory covered by the proposed sale and all of the
other pertinent details thereof, including without limitation, the name of the
proposed purchaser and the proposed
60
purchase price. If Purchaser does not exercise its rights to purchase hereunder,
Seller may proceed with the proposed sale with the purchaser and at the price
offered to Seller.
(e) Seller's right to use the Trademarks shall terminate immediately, if
Seller commences or becomes the subject of any case or proceeding under any
applicable federal, state or other bankruptcy laws or if, during the Trademark
Use Period, a court appoints a receiver liquidator, assignee, trustee,
custodian, sequestrator or similar official for Seller and any such involuntary
proceeding or appointment is not discharged within sixty (60) days. In addition,
Seller's right to use the Trademarks shall terminate upon notice to Seller by
Purchaser in the event that Seller fails to perform any of the other terms,
conditions, agreements or covenants it is obligated to perform under this
Section 11.11 and (i) such breach is curable but continues uncured for a period
of forty-five (45) days after Purchaser gives Seller written notice thereof; or
(ii) if said breach is curable but not within forty-five (45) days and all
reasonable steps necessary to cure have not been taken within forty-five (45)
days after Purchaser gives Seller written notice of breach. Purchaser may
terminate the Trademark Use Period immediately upon giving notice at any time
after said forty-fifth day, without prejudice to any other rights of Purchaser.
However, if any such breach is not curable, Purchaser may terminate such rights
to use the Trademark immediately upon giving notice at any time, without
prejudice to any other rights of Purchaser.
(f) Unless otherwise provided by law, no receiver, liquidator, assignee,
trustee or custodian appointed to administer the affairs of Seller, sheriff or
any other officer of the court or official charged with taking custody of
Seller's assets or business shall have the right to use the Trademarks in any
way.
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(g) Notwithstanding the foregoing, if the United States Bankruptcy Code or
any amendment, supplement or successor thereto (the "Code") permits a trustee in
bankruptcy of Seller (or Seller as Debtor-in-Possession) to assume this Section
11.11 or this Agreement and either does so and, thereafter, desires to assign
this Section 11.11 or this Agreement to a third person in compliance with the
requirements of the Code, the trustee or Seller, as the case may be, shall
notify Purchaser of the same in writing. Said notice shall set forth the name
and address of the proposed assignee, the proposed consideration for the
assignment and all other relevant details thereof. The giving of such notice
shall be deemed to constitute the grant to Purchaser of an option to have this
Agreement or Section assigned to it or to its designee for such consideration,
or its equivalent in money, and upon such terms as are specified in the notice.
Said option may be exercised only by written notice given to the trustee or
Seller, as the case may be, by Purchaser within fifteen (15) days after Seller's
receipt of the aforesaid notice from such party, or within such shorter period
as may be deemed appropriate by the court in the bankruptcy proceeding. If
Purchaser fails to exercise its said option within the aforestated exercise
period, the trustee or Seller, as the case may be, may complete the assignment
referred to in its notice, but only if such assignment is to the entity named in
said notice and for consideration and upon the terms specified therein. Nothing
contained herein shall be deemed to preclude or impair any rights or remedies
which Purchaser may have.
(h) Not later than five (5) Business Days after the end of the Trademark
Use Period, Seller shall have, or arranged to have, amended its Organizational
Documents, in form and substance reasonably satisfactory to Purchaser, to change
its
62
name so as to remove any reference to "Xxxx Xxxxx" or any other Trademark and to
cease otherwise doing business under any name referencing "Xxxx Xxxxx" or any
other Trademark, including, without limitation under assumed name filings. At
such time, Seller shall provide Purchaser with such official documents and such
other documents reasonably requested by Purchaser to indicate that the name
change and the cessation of the use of such name has been duly recorded with the
appropriate authorities or that such steps have been taken by Seller which are
reasonably satisfactory to Purchaser to effect such change and cessation.
11.12 Schedule Updates.
(a) Upon execution and delivery of this Agreement, Seller and Takihyo shall
prepare and deliver to Purchaser the Seller Disclosure Schedules and Purchaser
shall also prepare and deliver to Seller the Purchaser Disclosure Schedules.
Seller or Takihyo shall have the right to update the Seller Disclosure Schedules
on a monthly basis (the "Updates"), which Updates, if any, shall be delivered to
Purchaser within five (5) Business Days following the end of each calendar month
until Closing. Final Updates, if any, shall be delivered three (3) Business Days
prior to Closing. Updates shall contain any information, condition or
circumstance of which Seller or Takihyo shall become aware including, without
limitation, any change in or omission from the Seller Disclosure Schedules that
would cause the representations and warranties of Seller and Takihyo to be
incomplete or incorrect in any respect.
(b) The representations and warranties contained in Section 6.01 through
6.04 of this Agreement shall not be qualified by information contained in any
Updates. The representations and warranties contained in Section 6.07 of this
63
Agreement, as such section relates to the Trademarks "Xxxx Xxxxx," "Xxxx Xxxxx
XX," "A Line Xxxx Xxxxx" and the "Lion Head Design" automatically shall be
qualified as of the date such representations and warranties were made by
information, conditions and circumstances of which Seller becomes aware and
which occur from and after the date hereof to and including the Closing as
reflected in Updates of such section with regard to the following matters: the
maturity to registration of applications previously filed, the filing of new
applications for registrations and the conversion of intent to use applications
to use based applications (except to the extent that any such information,
condition or circumstance results from a breach of any of the covenants
contained herein). The representations and warranties contained in Sections
6.05, 6.06, 6.07 (other than as provided in the immediately preceding sentence),
6.08 and 6.09 automatically shall be qualified as of the date such
representations and warranties were made by information, conditions and
circumstances of which Seller becomes aware and which occur from and after the
date hereof to and including the Closing as reflected in Updates of such
sections (except to the extent that any such information, condition or
circumstance results from a breach of any of the covenants contained herein).
(c) In the event that any Update shall reflect a breach of, change to or
omission from any representation and warranty of Seller when made, without
giving effect to any prior Updates, Purchaser shall have a period of ten (10)
Business Days during which it may object to such Update and terminate this
Agreement. Any such objection and termination shall be in writing and shall be
sent to the other parties hereto pursuant to Section 14.01. Failure of Purchaser
to object to any such Updates within ten (10) Business Days of receipt of such
Updates shall constitute a waiver of Purchaser's
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rights or remedies for breach of any of the representations and warranties of
the other parties to the extent such representations and warranties shall have
been updated by such Updates and such representations and warranties shall be
deemed modified as of the date such representations and warranties were made to
the extent of the information set forth in such Updates. The provisions of
Article XII shall be applicable in the event of any termination under this
Section 11.12(c).
(d) Purchaser hereby agrees that the consummation of the Closing shall
constitute a waiver by it of any rights or remedies for breach of any of the
representations and warranties of Seller and Takihyo to the extent such
representations and warranties shall have been updated by the Updates; provided,
that the delivery of the Updates shall not, absent consummation of the Closing,
constitute a waiver of any breach of any such representations and warranties or
any rights or remedies with respect thereto, except as otherwise expressly
provided in this Agreement.
11.13 Post-Closing Cooperation. From and after Closing, the parties agree
to cooperate with each other from time to time as may be reasonably required in
connection with any claim, action or suit asserted or filed against, or any
proceeding, arbitration or investigation involving, any of the parties or their
respective Representatives and arising out of or relating to the operation of
the Business or the ownership or use of the Assets prior to or after Closing, as
the case may be.
11.14 Bank Financing. From and after the date hereof, Purchaser shall in
good faith use all commercially reasonable efforts to obtain in an expeditious
manner, but in any event at or prior to July 10, 1999, the Purchaser's
Financing. In addition, Purchaser shall from time to time after the date hereof,
at Seller's request, discuss the status of
65
Purchaser's efforts and Purchaser shall promptly give Seller written notice of
having received a commitment for the Purchaser's Financing.
11.15 Noteholders' Consent. From and after the date hereof, Purchaser shall
in good faith use its commercially reasonable efforts to obtain in an
expeditious manner, but in any event at or prior to July 10, 1999, in compliance
with applicable law and the terms and conditions of the Indenture dated as of
June 4, 1997 by and between Purchaser and IBJ Xxxxxxxx Bank & Trust Company, as
Trustee (as amended and supplemented, the "Indenture"), any requisite consent or
approval under the Indenture or otherwise of the holders of Purchaser's Senior
Notes in connection with the Purchaser's Financing and the consummation of the
transactions contemplated by this Agreement and the other Transaction Documents.
Purchaser shall from time to time after the date hereof, at Seller's request,
discuss the status of the foregoing matters and shall give Seller prompt written
notice of having received the requisite consent or approval of such holders. The
provisions of Section 3.04 shall apply to the actions contemplated by this
Section 11.15 to the extent applicable.
11.16 Further Assurances. Consistent with the terms and conditions hereof,
each party hereto xxxx cooperate with each other and execute and deliver any and
all instruments and take any and all other actions, either before or after the
Closing, which may be necessary, proper or advisable to effect or evidence the
provisions of this Agreement and the other Transfer Documents and to consummate
the transactions contemplated hereby and thereby as promptly as practicable.
Except as otherwise expressly provided herein, (a) the parties hereto shall use
their respective commercially reasonable efforts to obtain in an expeditious
manner, but in any event on or prior to
66
July 10, 1999, all approvals, authorizations and consents of all third Persons
which are necessary for the consummation of the transactions contemplated
hereby, (b) shall keep each other informed on a regular and timely basis with
respect to all such matters and (c) except as otherwise provided in Sections
11.14 or 11.15, shall provide written notice to the other party within five (5)
Business Days of receipt of any consent listed on Schedules 8.01 or 8.02.
Nothing in this Section 11.16 shall be construed as requiring Purchaser to
assume any of the Excluded Liabilities.
11.17 Transfer Tax Filings. Each tax return (and any exemption, clearance
or similar filing or certificate) with respect to any sales, use, transfer,
stamp, value-added, motor vehicle transfer or registration, documentary,
registration, recording, excise, real estate transfer or similar taxes or fees
("Transfer Taxes") required to be paid to any relevant taxing authority (or for
which an exemption is being sought) in connection with the transactions
contemplated by this Agreement shall be timely filed by the party legally
obligated to file such tax return (or exemption, clearance or similar fling or
certificate) with respect thereto. In this regard, Seller and Purchaser agree to
cooperate, and to cause their respective affiliates to cooperate, with each
other in the making of all such filings required in connection with any such
Transfer Taxes. Purchaser shall deliver to Seller prior to the Closing Date all
exemption, clearance, resale or similar certificates which would under
applicable law enable the transactions contemplated by this Agreement to be
exempt from any Transfer Taxes.
11.18 Trademark Documentation. Without limiting the generality of Section
11.16, promptly, but in no event later than thirty (30) days after receipt of
Purchaser's request from time to time, Seller shall furnish to Purchaser, at
Seller's cost and expense
67
(including the reimbursement of applicable filing and recording fees as provided
below), all documents and instruments in Seller's possession or otherwise
publicly available, necessary, or reasonably requested by Purchaser to reflect
all corporate and other mergers and reorganizations of Seller, its predecessors
and affiliates and the ownership of the Trademarks, the other Assets and correct
parties to the Assumed Agreements as a result thereof and to enable Purchaser,
at Seller's cost and expense, to file and/or record with all governmental and
other agencies and authorities (collectively, the "Trademark Authorities") such
documents and instruments necessary or reasonably requested by Purchaser to
reflect that as the result of such corporate and other reorganizations, the
Trademarks and the other Assets were owned by Seller and that Seller is the
correct party to the Assumed Agreements. In addition, Seller shall furnish to
Purchaser (at Purchaser's cost and expense), promptly, but in no event later
than thirty (30) days after receipt of Purchaser's request from time to time,
all documents and instruments necessary or reasonably requested by Purchaser to
reflect that the Trademarks and the other Assets have been sold to and purchased
by Purchaser and that the Assumed Agreements have been assigned to and assumed
by Purchaser and to enable Purchaser to file and/or record with all Trademark
Authorities to reflect such sale, purchase, assignment and assumption. Each of
Seller and Purchaser shall cooperate with the other as reasonably required to
effect the foregoing. Purchaser shall bear the cost and expense of each such
filing and recordation; provided, that Seller shall reimburse Purchaser for
Purchaser's costs and expenses of the filing and recording fees (including the
expense of legalization, if required) related to the filing and/or recordation
of the documents set forth in the first
68
sentence of this Section 11.18 within three (3) Business Days of Purchaser's
written request therefor.
11.19 Bulk Transfer Laws. Subject to Article X, the parties hereto hereby
waive compliance with all applicable bulk sales and similar laws with respect to
the Xxxx Xxxxx Transactions.
ARTICLE XII
Termination
12.01 Termination. Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may also be terminated at any time prior to the
Closing Date:
(a) By the mutual consent of Purchaser and Seller;
(b) By Purchaser or Seller, upon written notice to the other party, if
Closing shall not have occurred on or before July 10, 1999 (or such later date
as shall be mutually agreed to in writing by Purchaser, Seller and Takihyo);
provided that the party seeking termination is not in default or breach of this
Agreement; or
(c) By Purchaser, upon written notice to Seller, as provided in Section
11.12.
12.02 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 12.01, all further obligations of the parties
under this Agreement (other than the provisions of Section 3.04) shall be
terminated without further liability of any party or its shareholders, members,
directors, or officers to the other parties, provided that (a) if either
Purchaser or Seller terminates this Agreement pursuant to Section 12.01(b),
then, to the extent applicable, the provisions of Section 10.04(e), with respect
to Seller, and Section 10.05(e), with respect to Purchaser, shall be applicable
and shall survive any such termination, (b) the provisions of Article X to the
extent such Article relates to the indemnification obligations of (i) Seller and
Takihyo with respect to the Purchaser Indemnified Parties in respect of Excluded
Liabilities and (ii) Purchaser with respect to the Seller Indemnified Parties in
respect of Purchaser's Liabilities, shall
69
survive the termination of this Agreement, and (c) the provisions of Article X
to the extent such Article relates to the indemnification obligations of any
party in respect of fraud and willful breaches of this Agreement shall survive
the termination hereof. In no event shall the termination of this Agreement
affect in any way the terms and conditions of, or the rights or obligations of
the parties pursuant to, the License Agreement.
ARTICLE XIII
Governing Law, Etc.
13.01 New York Governing Law. This Agreement and each of the other Purchase
Documents shall be governed by and construed in accordance with the applicable
laws pertaining in the State of New York, without regard to principles of
conflicts of law or choice of law that defer to the substantive laws of another
jurisdiction, other than Section 5-1401 of the New York General Obligations Law.
13.02 No Fiduciary Relationship, Etc. The parties hereto acknowledge and
agree that the sole relationship between Seller and Takihyo, on the one hand,
and Purchaser, on the other, is that of arm's-length seller and purchaser,
respectively, and that no term or provision of this Agreement or any other
Transaction Document is intended to create, nor shall any such term or provision
be deemed or construed to have created, any joint venture, partnership, trust,
agency, employee, employer or other fiduciary or other relationship among the
parties hereto. The parties acknowledge and agree that they have independently
and fully reviewed and evaluated this Agreement, the transactions
70
contemplated hereunder and the potential effects of such transactions on the
Assets, Business, operations, properties and condition (financial or otherwise)
of Seller and Takihyo, which review and evaluation was made (a) together with
counsel and (to the extent deemed prudent by the parties) financial and other
advisors, and (b) without any reliance upon any oral or written advice, analysis
or assurance of any kind whatsoever from any other party. Sections 13.01 and
13.02 shall survive the termination of this Agreement, the other Transaction
Documents, the rights and obligations of the parties hereunder or thereunder,
and the transactions contemplated hereby and thereby.
ARTICLE XIV
Miscellaneous
14.01 Notice. Any and all notices or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given if given by personal delivery, by certified or
registered mail, postage prepaid, return receipt requested, or by telecopier
with verified answer back or by a recognized major overnight delivery service.
Any such notice shall be deemed given when personally delivered against written
receipt therefor, five (5) Business Days after posting, postage prepaid, in the
mails of the United States of America, upon receipt of verified answer back with
respect to transmission by telecopier (with the original sent postage prepaid by
first class mail) or, with respect to delivery by major overnight delivery
service, upon its receipt against written receipt therefor, at the following
addresses or to such other address or to such other addressee as any party may
from time to time specify by notice to the other party given as aforesaid:
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If to Purchaser:
Xxxxxx A.S.L., Ltd.
00 Xxxxx Xxx
Xxxxxxxx, XX 00000
Attention: Chief Financial Officer
Facsimile No.: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxx Flattau & Klimpl, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
If to Seller and Takihyo:
Xxxx Xxxxx Company LLC
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxx
Facsimile No.: (000) 000-0000
and:
Takihyo Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxx
Facsimile No.: (000) 000-0000
With a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx Xxxx, Esq.
Facsimile No.: (000) 000-0000
14.02 Entire Agreement. This Agreement, the Schedules and Exhibits hereto,
together with the agreements, certificates and other documents referred to
herein, and together with the Confidentiality Agreement, constitute the entire
agreement and set forth the entire understanding of the parties with respect to
the subject matter hereof, supersede
72
all prior agreements, covenants, arrangements, letters, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of either party, relating to the subject matter hereof, and
may not be modified or amended, except by a written agreement specifically
referring to this Agreement signed by the parties hereto and any other party to
be charged.
14.03 No Waiver. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
of the same or similar nature. No failure on the part of any party to exercise,
and no delay in exercising any right, remedy, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
14.04 Assignment. Neither party may transfer or assign this Agreement or
its rights hereunder or delegate its performance hereunder without the prior
written consent of the other party, and any purported assignment without such
consent shall be void and of no effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective permitted
successors and assigns.
14.05 Headings. The section and paragraph headings contained herein are for
the purposes of convenience only and are not intended to define or limit the
contents of any Section or paragraph.
14.06 Transaction Expenses. Whether or not the transactions contemplated
hereby are consummated, all legal and other costs and expenses incurred in
connection
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with this Agreement, the Transfer Documents and the Transaction Documents and
the transactions contemplated hereby or thereby shall be paid by the party
incurring such expenses, except as otherwise specifically provided herein or
therein.
14.07 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
14.08 No Third Party Beneficiaries. Nothing herein, express or implied, is
intended to or shall confer upon any person or entity including, without
limitation, any employee, contractor, vendor or distributor of the Business or
labor organization, other than the parties hereto, the Purchaser Indemnified
Parties and Seller Indemnified Parties pursuant to Article X hereof, any legal
or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
[PAGE INTENTIONALLY ENDS HERE]
74
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
XXXXXX A.S.L., LTD.
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Chief Operating Officer
XXXX XXXXX COMPANY LLC,
a New York limited liability company,
by its Member Manager
TAKIHYO INC.
By: /s/ Xxxxx X. Xxxx
--------------------------------
Name: Xxxxx X. Xxxx
Title: President
TAKIHYO INC.
By: /s/ Xxxxx X. Xxxx
-------------------------------
Name: Xxxxx X. Xxxx
Title: President
73
EXHIBIT A
FORM OF XXXX OF SALE
This Xxxx of Sale ("Xxxx of Sale") dated the ____ day of ______, 1999, is
made by Xxxx Xxxxx Company LLC ("Seller"), a New York limited liability company
with its principal office at 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000.
WHEREAS, in connection with that certain Asset Purchase Agreement (the
"Purchase Agreement") dated as of ____, 1999, between Xxxxxx A.S.L., Ltd.
("Purchaser"), a Delaware corporation with its principal office at 00 Xxxxx Xxx,
Xxxxxxxx, XX 00000 and Seller, which is incorporated herein by reference, Seller
desires to transfer to, and Purchaser desires to acquire, all Seller's right,
title and interest in and to the Assets (all capitalized terms used but not
otherwise defined herein shall have the meaning assigned thereto in the Purchase
Agreement);
NOW, THEREFORE, Seller, in exchange for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, hereby grants and
assigns, transfers and conveys to Purchaser, its successors and assigns, all
Seller's right, title and interest in and to the Assets free and clear of all
liens, claims, pledges, security interests and other encumbrances other than (a)
the Trademark License Agreements, Other Trademark Agreements and Other Assumed
Agreements which are in effect on the Closing Date and (b) Seller's rights to
continue using the Trademarks as described in Section 11.11 of the Purchase
Agreement and Section 2.01(a)(ii) of the License Agreement;
TO HAVE AND TO HOLD, all the Assets, hereby granted and assigned unto
Purchaser, its successors, assigns and legal representatives, to and for its and
their own use and benefit forever.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THE PURCHASE AGREEMENT, THE
ASSETS ARE BEING DELIVERED TO THE TRANSFEREE BY THE TRANSFEROR IN "AS IS" "WHERE
IS" CONDITION AND THE TRANSFEROR MAKES NO REPRESENTATIONS, WARRANTIES,
GUARANTEES OF ANY KIND, EITHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE,
REGARDING THE ASSETS. THE TRANSFEREE WAIVES, RELEASES AND RENOUNCES ALL
WARRANTIES, OBLIGATIONS AND LIABILITIES OF SELLER, EXPRESS OR IMPLIED, ARISING
BY LAW OR OTHERWISE, WITH RESPECT TO ANY NONCONFORMITY OR DEFECT IN THE ASSETS.
Setter will from time to time, at Purchaser's request and without further
cost or expense to Purchaser, execute and deliver to Purchaser such other
instruments of transfer and take such other action as Purchaser may reasonably
request so as to more effectively transfer the Assets to Purchaser.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
XXXXXX A.S.L., LTD.
By: ____________________________________
Name:
Title:
XXXX XXXXX COMPANY LLC,
a New York limited liability company,
by its Member Manager
TAKIHYO INC.
By: ___________________________________
Name:
Title:
TAKIHYO INC.
By: ____________________________________
Name:
Title:
A-2
EXHIBIT B
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") is entered into
as of ___________, 1999, by and between Xxxxxx A.S.L., Ltd., a Delaware
corporation ("Purchaser") and Xxxx Xxxxx Company LLC, a New York limited
liability company ("Seller").
WHEREAS, in connection with that certain Asset Purchase Agreement (the
"Purchase Agreement") dated as of ___________, 1999, Purchaser and Seller which
is incorporated herein by reference, Seller has agreed to assign to Purchase,
and Purchaser has agreed to assume the Assumed Agreements (as hereinafter
defined) and Assumed Liabilities (all capitalized terms used but not otherwise
defined herein shall have the meaning assigned thereto in the Purchase
Agreement);
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties to this Agreement hereby agree as follows:
1. Assignment by Seller. Seller hereby transfers and assigns to Purchaser
all of its rights, title and interest in and to, and all of its obligations
under (a) the Assumed Agreements listed on Schedule I (the "Assumed Agreements")
and (b) the Assumed Liabilities.
2. Assumption by Purchaser. Purchaser hereby consents to the transfer and
assignment of the Assumed Agreements and Assumed Liabilities to Purchaser and
assumes and agrees to pay, perform and discharge, all of the liabilities and
obligations of Seller from and after the Closing and which arise after the
Closing, when due and payable in accordance with their respective terms of
Seller pursuant to the Assumed Agreements and the Assumed Liabilities.
3. Further Assurances. The parties shall, upon request of each other from
time to time, do and execute and deliver, or cause to be done, executed or
delivered, all such further acts, deeds, assignments, transfers and conveyances
as each of them may reasonably request to more completely consummate and make
effective the transactions contemplated hereby.
4. Entire Agreement. This Agreement, together with the Purchase Agreement
and other agreements referenced therein, constitute the entire and sole
agreement and understanding between the parties hereto with respect to the
subject matter hereof and thereof supersede any prior or contemporaneous
understanding, agreement, representation or warranty, whether oral or written,
with respect to the subject matter hereof and thereof.
5. Amendment and Waiver. No modifications or amendment of any provision of
this Agreement shall be effective unless approved in writing by the parties to
this Agreement. No party shall be deemed to have waived compliance by any other
party
B-1
with any provision of this Agreement unless such waiver is in writing, and the
failure of any party at any time to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such provisions and shall
not affect the rights of any party thereafter to enforce such provisions in
accordance with their terms. No waiver of any provision of this Agreement shall
be deemed to be a waiver of any other provision of this Agreement. No waiver of
any breach of any provision of this Agreement shall be deemed the waiver of any
subsequent breach thereof or of any other provision of this Agreement.
6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF NEW YORK WITHOUT
CONSIDERATION OF PRINCIPLES OF CONFLICTS OR CHOICE OF LAWS.
7. Severability. Any provision of this Agreement which may be determined by
competent authority to be prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in such jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
8. Counterparts. This Agreement may be executed in one or more counterparts
and in separate counterparts, each of which shall be deemed to be an original
copy of this Agreement, and all of which, when taken together, shall be deemed
to constitute one and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
B-2
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
XXXX XXXXX COMPANY LLC,
a New York limited liability company,
by its Member Manager
TAKIHYO INC.
By:_______________________________
Name:_____________________________
Title:____________________________
XXXXXX A.S.L., LTD.
By:_______________________________
Name:_____________________________
Title:____________________________
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