EXHIBIT 4.1
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT
Agreement made as of the 13th day of April, 1999 by and among Happy Kids
Inc., a New York corporation with its principal office at 000 Xxxx 00xx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 (the "Buyer"), on the one hand, and D.
Glasgow & Sons, Inc., a New York corporation with its principal offices at 000
Xxxx 00xx Xxxxxx, Xxxxx 000, Xxx Xxxx, Xxx Xxxx 00000 (the "Seller"), and Xxxxxx
Xxxxxxx ("A. Glasgow"), the sole shareholder of all of the issued and
outstanding capital stock of the Seller (the "Shareholder"), on the other hand.
The Seller and the Shareholder are sometimes collectively referred to herein as
the "Selling Parties."
Preliminary Statement
---------------------
The Seller is engaged principally in the business of designing,
manufacturing and selling children's apparel products (the "Business"). The
Buyer desires to purchase, and the Seller desires to sell, certain of the assets
and the Business of the Seller, for the consideration set forth below and the
assumption by the Buyer of certain of the Seller's liabilities set forth below,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. SALE AND DELIVERY OF THE ASSETS.
1.1. DELIVERY OF THE ASSETS.
(a) Subject to and upon the terms and conditions of this Agreement, except
as specifically provided in Section 1.1(b) hereof, at the closing of the
transactions contemplated by this Agreement (the "Closing"), the Seller shall
sell, transfer, convey, assign and deliver to the Buyer, and the Buyer shall
purchase from the Seller, free and clear of all liens, liabilities, security
interests, leasehold interests and encumbrances of any nature whatsoever (except
as otherwise expressly provided herein), all of the claims, rights and interests
of the Seller of whatever kind, character or description in the following:
(i) all rights under Seller's licensing arrangements with such of
Seller's licensors as are listed on Schedule 2.11(b) attached hereto, including,
without limitation, the following material licenses (the "Material Licenses"):
Warner Brothers, National Football League Properties, Inc., Major League
Baseball Properties, Inc., NBA Properties, Inc., NHL Enterprises, L.P. and
cross-overs of sports licenses with Warner Brothers and Saban Merchandising,
Inc. (for Power Rangers), whether evidenced by license agreement or otherwise
(collectively, the "License Agreements").
(ii) all right, title and interest of the Seller in and to all
intangible property rights relating to the Business, including but not limited
to inventions, discoveries, trade secrets, processes, formulas, know-how, United
States and foreign patents, patent applications, trade names, including, but not
limited to, the name "D. Glasgow & Sons, Inc.", or any derivation thereof and
those names listed on Schedule 2.16 attached hereto, trademarks, trademark
registrations, applications for trademark registrations, copyrights, copyright
registrations, certification marks, industrial designs, technical expertise,
research data and other similar property and the registrations and applications
for registration thereof owned by the Seller or, where not owned, used by the
Seller in the Business and all goodwill associated thereto and all licenses and
other agreements to which the Seller is a party (as licensor or licensee) or by
which the Seller is bound, such licenses and other agreements listed on Schedule
2.11(b) attached hereto, relating to any of the foregoing kinds of property or
rights to any "know-how" or disclosure or use of ideas (collectively, the
"Intangible Property");
(iii) all apparel inventories, including raw materials, work in
process, goods in transit (i.e., inventories purchased by, but not delivered to,
the Seller) and finished goods (collectively, the "Apparel Inventory");
(iv) all of the machinery and equipment, computers,
telecommunication systems, fittings and other office equipment, furniture,
leasehold improvements and construction in progress on the date hereof whether
or not reflected as capital assets in the accounting records of the Seller which
are owned or leased by the Seller and used or useful in the Business and located
at each of: (i) the Seller's showroom facility, located at 000 Xxxx 00xx, Xxx
Xxxx, Xxx Xxxx 00000; and (ii) the Seller's facility located at 000 Xxxxx Xxxx
Xxxx in Keasbey, New Jersey, except for the production equipment at each such
location (collectively, the "Fixed Assets");
(v) all rights under the contracts, agreements, leases, licenses,
purchase orders, customer sales agreements and other instruments set forth on
Schedule 2.8(b) and Schedule 2.11(b) attached hereto (collectively, the
"Contract Rights").
(vi) all books (other than the corporate books and tax records of
Seller, copies of which have been made available to Buyer); payment records;
accounts; customer lists; environmental reports or studies; correspondence;
production records; technical, accounting, manufacturing and procedural manuals;
engineering data; development and design data; designs, plans, blueprints,
specifications and drawings; employment and personnel records; and other useful
business records, including electronic media, and any confidential or other
information which has been reduced to writing, utilized in the conduct of or
relating to the Assets or Business, subject to the Seller's right to retain
copies thereof which the Seller reasonably requires for its ongoing operation,
winding-up or dissolution;
(vii) all rights of the Seller under express or implied warranties
from the suppliers of the Assets to the extent transferable (but excluding such
rights insofar as the same pertain to liabilities retained by the Seller
hereunder);
-2-
(viii) all transferable approvals, authorizations, certifications,
consents, variances, permissions, licenses and permits to or from, or filings,
notices or recordings to or with, federal, state, foreign, and local
governmental authorities as held or effected by the Seller in connection with
the Assets;
(ix) all of the Seller's goodwill and the exclusive right to use the
names of the Seller as all or part of a corporate name; and
(x) except as specifically provided in Section 1.1(b) hereof, all
other assets, properties, claims, rights and interests of the Seller which
relate to the Assets that exist on the date hereof, of every kind and nature and
description, whether tangible or intangible, real, personal or mixed.
(b) Notwithstanding the provisions of Section 1.1(a) above, the assets to
be transferred to the Buyer under this Agreement shall not include any of the
assets listed on Schedule 1.1(b) attached hereto, including, without limitation
(but except to the extent paid by Buyer to Seller), cash and cash equivalents,
security deposits, refunds of insurance premiums, prepaid expenses, rights,
claims and recoveries from pending litigation, accounts receivables (including
all claims relating thereto) and equipment located in Seller's factory in Perth
Amboy, New Jersey (collectively, the "Excluded Assets").
(c) The License Agreements, Intangible Property, Apparel Inventory, Fixed
Assets and other properties, assets and business of the Seller described in
Section 1.1(a) above, other than the Excluded Assets, shall be referred to
collectively as the "Assets."
1.2. FURTHER ASSURANCES.
(a) At the Closing, the Seller shall execute and deliver a Xxxx of Sale
(the "Xxxx of Sale") substantially in the form attached hereto as Exhibit A, and
the assignments described in Sections 7.12(c) hereof in the forms attached
hereto as Exhibit 1.2(a)(1). At any time and from time to time after the
Closing, at the Buyer's request and without further consideration, the Selling
Parties (or their successors) promptly shall execute and deliver, at the Buyer's
expense, such assignments of leases and other instruments of sale, transfer,
conveyance, assignment and confirmation, and take such other action, as the
Buyer may reasonably request to more effectively transfer, convey and assign to
the Buyer, and to confirm the Buyer's title to, all of the Assets, to put the
Buyer in actual possession and operating control thereof, to assist Buyer in
exercising all rights with respect thereto and to carry out the purpose and
intent of this Agreement. In addition to the foregoing and not in limitation
thereof, to the extent lawful, each of the Selling Parties hereby appoints Buyer
as its respective Attorney-in-Fact (without requiring Buyer to act as such) to
execute all such documents and to perform all other acts to assist Buyer in
exercising all rights under this Agreement and to carry out the purpose and
intent of this Agreement (the "Special Power of Attorney"). Each of the Selling
Parties shall execute and deliver to Buyer at Closing a Special Power of
Attorney in connection herewith.
(b) To the extent not obtained and delivered at Closing, and such failure
to so obtain and deliver is reasonably acceptable to the Buyer, the Buyer may
nonetheless, in its sole and
-3-
absolute discretion, elect to close the transaction contemplated hereby,
provided that the Selling Parties and the Buyer each will use its commercially
reasonable efforts to obtain as promptly as possible written consents to the
transfer, assignment or sublicense to the Buyer of all agreements, commitments,
contracts, License Agreements, leases, rights and other contract documents being
transferred pursuant to Section 1.1(a) hereof where the approval or other
consent of any other person is required. If any such approval or consent cannot
be obtained, or if the parties hereafter agree in writing that it is not in
their respective best interests to obtain any such approval or other consent,
the Selling Parties will cooperate with the Buyer in any reasonable arrangement
designed to provide the Buyer with substantially the same economic benefits as
if such approval or other consent had been obtained and the transfer effected on
or before the date hereof.
1.3. ASSUMPTION OF LIABILITIES.
(a) At the Closing, the Buyer shall execute and deliver an Instrument of
Assumption of Liabilities (the "Assumption Agreement") substantially in the form
attached hereto as Exhibit B, pursuant to which it shall assume and agree to
fully assume, perform, pay and discharge: (i) all those liabilities, claims and
obligations set forth on Schedule 1.3(a) attached hereto, with respect to the
Assets that are outstanding on or arising after the date hereof (the obligations
set forth in this sub-section 1.3(a)(i) are collectively, the "Assumed Current
Liabilities"); (ii) those liabilities, claims, or obligations outstanding on or
arising after the date hereof under the Contract Rights, including, without
limitation, the License Agreements; and (iii) those liabilities, claims or
obligations outstanding on or arising after the date hereof from any agreement,
contract, commitment or other contract documents which the Buyer has requested
be transferred to it pursuant to Section 1.1(a) but which has not been so
transferred due to the failure of the Seller to obtain the consent or approval
required for such transfer, provided that the Buyer has received substantially
the same economic benefit of such contract as if such consent or approval had
been obtained and (iv) any liabilities, claims, or obligations resulting from or
arising out of any matters set forth on any Schedule hereto or disclosed in any
other writing to, and accepted by, the Buyer (the obligations set forth in (i),
(ii), (iii) and (iv) are, collectively, the "Assumed Liabilities").
(b) Except as otherwise provided herein or on any Schedule hereto, the
Buyer shall not assume any of the liabilities of the Selling Parties and shall
purchase the Assets free and clear of all liens, mortgages, security interests,
encumbrances and claims. Without limiting the foregoing, the Buyer shall not at
the Closing assume or agree to perform, pay or discharge, any obligations,
liabilities and commitments, fixed or contingent, of the Selling Parties other
than the Assumed Liabilities, including but not limited to:
(i) severance, termination or other payments or benefits (including
but not limited to post-retirement benefits) including but not limited to those
owing under the Seller's severance policy or any employment agreement to any
employees (union or non-union), sales agents or independent contractors employed
by the Seller prior to the Closing (collectively, "Seller's Employees"),
liabilities arising under any federal, state, local or foreign "plant closing
law", liabilities accruing under the Seller's employee benefit plans, vacation
pay plans or programs, retirement plans, and liabilities for any Employee Plan
(as defined in Section 2.17)
-4-
except those liabilities to Seller's Employees who become employees of the Buyer
after the Closing relating solely to and arising solely out of their term of
employment with the Buyer;
(ii) worker's compensation claims arising from events prior to the
Closing;
(iii) stock option or other stock-based awards made to Seller's
Employees;
(iv) liabilities for any federal, state, local or foreign income
taxes (including interest, penalties and additions to such taxes) or any
deferred income taxes of the Selling Parties;
(v) liabilities for any payroll taxes (including interest, penalties
and additions to such taxes), except those liabilities to Seller's Employees who
become employees of the Buyer after the Closing relating solely to and arising
solely out of their term of employment with the Buyer;
(vi) liabilities incurred for violations of occupational safety,
wage, health, welfare, employee benefit or environmental laws or regulations
prior to the date hereof;
(vii) except as otherwise agreed to between the parties, liabilities
to the extent related solely to the Excluded Assets;
(viii) except as provided in Section 11 hereof, any tax (including
but not limited to any federal, state, local or foreign income, franchise,
single business, value added, excise, customs, intangible, sales, transfer,
recording, documentary or other tax) imposed upon, or incurred by, the Selling
Parties, if any, in connection with or related to this Agreement or the
transactions contemplated hereby (including interest, penalties and additions to
such taxes);
(ix) liabilities for any commercial rent taxes to the extent accrued
but not paid prior to the date hereof;
(x) other than the Assumed Liabilities, any liabilities of the
Seller to third parties arising out of the failure of the Seller to obtain any
necessary consents to the assignment to the Buyer of contracts or leases to
which the Seller is a party (including damages asserted by third parties for
breach of such contracts or leases due to the failure to obtain such consents);
(xi) liabilities, contingent or otherwise, which are not disclosed
on Schedule 1.3(a);
(xii) liabilities for borrowed money or liabilities, contingent or
otherwise, to creditors of the Selling Parties, other than the Assumed
Liabilities;
(xiii) liabilities of the Seller for any state franchise taxes or
annual license or other fees relating to qualification as a foreign corporation
or authorization to do business in such states (including interest, penalties
and additions to such taxes and fees); and
-5-
(xiv) any other liabilities of any kind or nature whether now in
existence or arising hereafter not expressly assumed by the Buyer under Section
1.3(a) hereof.
1.4. PURCHASE PRICE.
(a) Subject to the provisions of Section 1.5, in consideration of the
transfer of the Assets of the Seller to the Buyer hereunder, the Buyer will: (i)
assume the Assumed Liabilities; (ii) pay an aggregate purchase price (the
"Purchase Price") equal to $3,700,000 in cash (the "Cash Consideration") payable
to the Seller, which amount includes (A) the $500,000 non-refundable deposit
(the "Deposit") previously paid in cash by the Buyer to the Seller on February
4, 1999 for the Assets; and (B) an additional $3,200,000 to be paid for the
Assets; (iii) pay an additional amount in cash (the "Additional Cash
Consideration") for the Apparel Inventory that is equal to the fair market value
thereof as reflected by the valuation prepared in good faith by the Seller,
setting forth quantities purchased and the fair market value thereof, and
delivered to Buyer at Closing, subject only to adjustment as set forth in
Section 1.4(b); and (iv) issue restricted shares of the Company's Common Stock
(the "Securities") to the Seller or its designees, having an aggregate fair
market value equal to $1,000,000 as determined by reference to the average
closing price of the Company's Common Stock, on the Nasdaq National Market, for
ten (10) trading days immediately preceding the Closing and having such rights
as set forth in Section 1.4(c) (which Securities shall be subject to the terms
of that certain Pledge Agreement, by and among the parties hereto, dated as of
the date hereof).
(b) Buyer shall arrange for, and Seller shall accommodate, a physical
count of the Apparel Inventory to be taken on the day of Closing by Buyer's
independent auditors. As promptly as possible after such physical count, and in
no event later than thirty (30) days after Closing, any discrepancies between
such physical count and the quantities previously disclosed by Seller to Buyer
shall be resolved by mutual agreement of Buyer and Seller and the appropriate
adjustments shall be made to the Purchase Price that was paid by Buyer to Seller
on the date of Closing for the Apparel Inventory.
(c) In the event Buyer shall, at any time, undertake an underwritten
public offering (the "Offering") of its Common Stock, either for its own account
or for the benefit of one or more of the principal shareholders of Buyer
(consisting of Messrs. Xxxx X. Xxxxx, Xxxx X. Xxxxx and Xxxxx Xxxx), or any
other third party, Buyer shall, upon Seller's request, include all of the
Securities for sale in such Offering; provided, however, that: (i) Seller shall
notify Buyer of Seller's intention to participate in the Offering and of the
level of such participation within five (5) days of receiving written notice
from Buyer of the Offering at least twenty (20) days prior thereto; (ii) Seller
retains the right to withdraw from such Offering, upon written notice to Buyer
delivered at least five (5) days prior to the effective date of the Registration
Statement filed in connection with such Offering; and (iii) Seller's right to so
participate in the Offering is subject to the pro rata limitations, set forth in
writing, that the managing underwriter may impose upon Seller and all other
selling securityholders in connection with such Offering, including, without
limitation, any pro rata cutback in the number of shares of Common Stock to be
offered, if the managing underwriter determines that the maximum number of
shares of Common Stock
-6-
proposed to be sold in such Offering exceeds the maximum number of shares of
Common Stock that can be sold in such Offering.
1.5. THE CLOSING.
(a) The Closing shall take place at the offices of Xxxxxxxx Ingersoll
Professional Corporation, counsel to the Buyer, on or before April 15, 1999, or
such other time or place as the parties may mutually agree. The transfer of the
Assets by the Seller to the Buyer shall be deemed to occur on the date of the
Closing.
(b) At the Closing, the Buyer shall pay the Purchase Price in the
following manner:
(i) by the assumption of the Assumed Liabilities;
(ii) payment of the Cash Consideration (less the Deposit);
(iii) payment of the Additional Cash Consideration; and
(iv) issuance of the Securities.
(c) The Cash Consideration (less the Deposit) and the Additional Cash
Consideration shall be paid to the Seller by wire transfer to an account to be
specified by the Seller.
1.6. USE OF PROCEEDS. The Seller covenants and agrees that it will utilize
a requisite portion of the Cash Consideration and the Additional Cash
Consideration to pay in full all outstanding obligations of Seller under the
Material Licenses as of the date of Closing.
1.7. PRO RATION OF EXPENSES. Buyer shall reimburse Seller for Seller's pro
rata portion of prior operating costs and security deposits incurred by Seller
as of Closing for which Buyer derives a benefit.
2. REPRESENTATIONS OF THE SELLING PARTIES.
The representations and warranties made by the Selling Parties herein or
in any instrument or document furnished in connection herewith (except for that
certain Letter Agreement, dated the date hereof, in respect of Sellers' Required
Facilities and the operation thereof (the "Operating Agreement") referenced in
Section 7.12 hereof) shall survive the Closing until (and including) eighteen
(18) months from the date hereof; provided, however, that the representations
and warranties made by the Selling Parties pursuant to Section 2.21 hereof shall
survive Closing until the later of (i) eighteen (18) months from the date hereof
or (ii) the termination of that certain Securities Pledge and Securities
Agreement by and between Buyer and A. Glasgow (collectively, the "Survival
Period"). The representations and warranties in this Section 2 or in any
document delivered to the Buyer pursuant to this Agreement are deemed to be
material and the Buyer is entering into this Agreement relying on such
representations and warranties. The Selling Parties, jointly and severally,
represent and warrant to the Buyer as follows (it being understood that all
references in this Section 2 to the Seller shall be deemed to include any of
Seller's subsidiaries, unless the context otherwise requires):
-7-
2.1. ORGANIZATION. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York, and has
all requisite corporate power and authority (corporate and other) to own its
properties, to carry on its business as now being conducted, to execute and
deliver this Agreement and the agreements contemplated herein, and to consummate
the transactions contemplated hereby. Schedule 2.1 sets forth the authorized and
outstanding capital stock of the Seller as well as the record and beneficial
owners thereof. Except as set forth on Schedule 2.1, the Seller does not own or
control, directly or indirectly, any corporation, partnership, association or
business entity. The Seller is duly qualified to do business and in good
standing in all jurisdictions in which its ownership of property or the
character of its business requires such qualification, except where the failure
to be so would not have a material adverse effect on the Business. Schedule 2.1
contains a true, correct and complete list of all of the jurisdictions in which
the ownership of the property used in the Business or the nature of the Business
requires qualification.
2.2. AUTHORIZATION.
(a) The execution and delivery of this Agreement and the Operating
Agreement (the "Operating Agreement") (and all other agreements provided for
herein or therein) by the Seller, and the consummation by the Seller of all
transactions contemplated hereby, have been duly authorized by all requisite
corporate and shareholder action. This Agreement and the Operating Agreement and
all such other agreements and obligations entered into and undertaken in
connection with the transactions contemplated hereby or thereby to which the
Seller is a party constitute the valid and legally binding obligations of the
Seller, enforceable against it, in accordance with their respective terms except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or similar laws affecting creditors' rights
generally. Except as set forth on Schedule 2.2, the execution, delivery and
performance by the Seller of this Agreement and the Operating Agreement and the
agreements provided for herein or therein, and the consummation by the Buyer of
the transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to the Seller; (b) violate the provisions
of the Certificate of Incorporation or Bylaws of the Seller; (c) violate any
material judgment, decree, order or award of any court, governmental body or
arbitrator; or (d) conflict with or result in the material breach or termination
of any term or provision of, or constitute a default under, or cause any
acceleration under, or cause the creation of any lien, charge or encumbrance
upon the properties or assets of the Seller pursuant to any material indenture,
mortgage, deed of trust or other instrument or agreement to which any of them is
a party or by which any of them or any of their properties is or may be bound,
other than with respect to obligations of Seller which will be discharged at or
prior to Closing. Schedule 2.2 attached hereto sets forth a true, correct and
complete list of all consents, approvals, permissions, licenses, authorizations
and other requirements prescribed by law, rule, regulation or by contract in
connection with the consummation by the Seller of the transactions contemplated
by this Agreement and the Operating Agreement. Except as otherwise contemplated
herein, or as indicated on Schedule 2.2, all such items have been or will be,
prior to the Closing, obtained and satisfied.
-8-
(b) The Shareholder has, and as of the Closing will have, all requisite
power and authority to execute, deliver and perform this Agreement and the
Operating Agreement and to consummate the transactions and all other agreements
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the Operating Agreement, all of the other agreements contemplated
hereby and thereby and the consummation of the transactions contemplated hereby
and thereby, have been duly and validly authorized by all necessary action on
the part of the Shareholder. This Agreement and the Operating Agreement have
been duly executed and delivered by the Shareholder and constitutes the legal,
valid and binding obligation, enforceable against the Shareholder in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or fraudulent conveyance or
similar laws affecting creditors' rights generally. Neither the execution and
delivery of this Agreement, the Operating Agreement, all of the other agreements
contemplated hereby or thereby nor the consummation by the Shareholder of the
transactions contemplated hereby or thereby, violates any law, statute,
ordinance, regulation, order, judgment or decree of any court or governmental
agency applicable to Shareholder, or violates, or conflicts with, any contract,
commitment, agreement, understanding or arrangement of any kind to which
Shareholder is a party or by which Shareholder is bound.
2.3. OWNERSHIP OF THE ASSETS. Schedule 2.3 attached hereto sets forth a
true, correct and complete list of all claims, liabilities, liens, mortgages,
pledges, charges, security interests, restrictions, prior assignments,
encumbrances and equities of any kind affecting their respective Assets
(collectively, the "Encumbrances"). Except as otherwise set forth on Schedule
2.3, the Seller has good and marketable title to the Assets, and has the right
to and will sell and transfer to the Buyer good and marketable title to the
Assets, free and clear of all Encumbrances. Except as otherwise set forth on
Schedule 2.3, the delivery to the Buyer of the instruments of transfer of
ownership contemplated by this Agreement will vest good and marketable title to
the Assets in the Buyer, free and clear of all Encumbrances and claims of any
kind or nature whatsoever.
2.4. FINANCIAL STATEMENTS.
(a) The Seller has previously delivered to the Buyer its audited balance
sheet as of November 30, 1997 and unaudited balance sheet as of November 30,
1998, and the related statements of operations, shareholders' equity and changes
in financial position of the Seller for the fiscal years then ended
(collectively, the "Financial Statements"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles applied
consistently with past practice, except as set forth in Schedule 2.4.
(b) The Financial Statements are accurate and complete, and, except as set
forth in Schedule 2.4, in all material respects fairly present, as of their
respective dates, the financial condition, retained earnings (deficit), assets
and liabilities of the Seller and the results of operations of the Seller's
business for the periods indicated. Nothing has come to the attention of the
Seller since the date of the Financial Statements which would lead it to believe
that the reserves and accruals shown thereon are inadequate for all reasonably
anticipated losses, costs and expenses and the Seller reasonably believes that
such reserves and accruals are adequate for all of such losses, costs and
expenses.
-9-
2.5. LITIGATION. Except as set forth on Schedule 2.5, the Seller is not a
party to, or to the Selling Parties' best knowledge threatened with, and (to the
best of the Selling Parties' knowledge in any material respect) none of the
Assets are subject to, any litigation, suit, action, investigation, grievance,
arbitration, proceeding, or controversy or claim before any court,
administrative agency or other governmental authority affecting the Assets in
any material respect. The Seller is not in material violation of or in default
with respect to any judgment, order, award, writ, injunction, decree or rule of
any court, governmental department, commission, agency, instrumentality,
arbitrator, administrative agency or governmental authority or any regulation of
any administrative agency or governmental authority, where such violation or
default would have a material adverse effect upon the Assets, the business,
properties, condition (financial or otherwise) of the Business or the
consummation of the transactions contemplated hereby. Except as set forth in
Schedule 2.5, the Seller has not received written notice of any product
liability claim, warranty claim or other claim whatsoever which, if decided
adversely, would have a material adverse effect on the Assets or the business,
condition (financial or otherwise), properties of the Business.
2.6. INSURANCE. Schedule 2.6 sets forth a true, correct and complete list
of all fire, theft, casualty, general liability, workers compensation, business
interruption, environmental impairment, product liability, automobile and other
insurance policies insuring the Assets or the Business and of all life insurance
policies maintained for any employees of the Business, specifying the type of
coverage, the amount of coverage, the premium, the insurer and the expiration
date of each such policy (collectively, the "Insurance Policies"). True, correct
and complete copies of all of the Insurance Policies have been previously
delivered by the Seller to the Buyer. The Insurance Policies are in full force
and effect. All premiums due on the Insurance Policies or renewals thereof have
been paid and there is no known default under any of the Insurance Policies.
Except as set forth on Schedule 2.6, the Seller has not received any written
notice from any issuer of the Insurance Policies canceling or materially
amending any of the Insurance Policies, materially increasing any deductibles or
retained amounts thereunder, or materially increasing the annual or other
premiums payable thereunder, and, to the best knowledge of the Selling Parties,
no such cancellation, amendment or increase of deductibles, retainers or
premiums is threatened.
2.7. FIXED ASSETS. Schedule 2.7 sets forth a true, correct and complete
list of all Fixed Assets as of the date hereof, including a description and the
cost and accumulated depreciation on an aggregate basis with respect to all
Fixed Assets. Except as set forth in Schedule 2.7, as of the date hereof, the
Fixed Assets are in good operating condition and repair (apart from ordinary
wear and tear).
2.8. LEASES. Schedule 2.8(a) attached hereto sets forth a true, correct
and complete list as of the date hereof of all leases of real estate,
identifying separately each ground lease, to which the Seller is a party as
lessee or tenant or which the Seller uses in the operations of the Business.
Schedule 2.8(b) attached hereto sets forth a list of all leases of real estate
which the Buyer will assume pursuant to this Agreement (the "Leases"). True,
correct and complete copies of the Leases, and all amendments, modifications and
supplemental agreements thereto, have previously been delivered by the Seller to
the Buyer. The Leases are in full force and effect, are
-10-
binding and enforceable against each of the parties thereto in accordance with
their respective terms and, except as set forth on Schedule 2.8(b) attached
hereto, have not been modified or amended since the date of delivery to the
Buyer. No party to any Lease has sent written notice to the other claiming that
such party is in default thereunder, which default remains uncured. Except as
set forth on Schedule 2.8(b) attached hereto, there has not occurred any event
which would constitute a material breach of or material default in the
performance of any material covenant, agreement or condition contained in any
Lease by either party thereto, nor has there occurred any event which with the
passage of time or the giving of notice or both would constitute such a material
breach or material default. The Seller is not obligated to pay any leasing or
brokerage commission relating to any Lease and will not have any enforceable
obligation to pay any leasing or brokerage commission upon the renewal or
extension of any Lease. No material construction, alteration or other leasehold
improvement work with respect to any of the Leases remains to be paid for or to
be performed by any party under any Lease. Seller has fulfilled all material
obligations required pursuant to the Leases to have been performed by Seller.
None of the Leases imposes any restrictions that would materially interfere with
the continued operation of the business as currently conducted on any of the
properties that are the subject of the Leases. There is no pending or, to the
best of the Selling Parties' knowledge, threatened eminent domain taking or
condemnation that will or may affect any of the properties that are the subject
of the Leases.
2.9. CHANGE IN FINANCIAL CONDITION AND ASSETS. Since November 30, 1998,
there has been no change which materially and adversely affects the Assets or
the business, properties, condition (financial or otherwise) or prospects of the
Business.
2.10. BOOKS AND RECORDS. The general ledgers, minute books and books of
account of the Seller with respect to the Business, all federal, state, local
and foreign income, franchise, property and other tax returns filed by the
Seller, with respect to the Assets, and all other books and records of the
Seller with respect to the Business, all of which have been made available to
the Buyer, are in all material respects complete and correct and have been
maintained in accordance with good business practice and in accordance with all
applicable procedures required by laws and regulations other than any digression
from such practice and procedures which has no material adverse effect on the
Assets or the Business, or the valuations thereof for the purposes of this
Agreement, as conducted as of and prior to the date hereof.
2.11. LICENSES, CONTRACTS AND COMMITMENTS.
(a) Schedule 2.11(a) attached hereto contains a true, complete and correct
list of the following licenses, contracts and agreements which relate to the
Assets and to the Business:
(i) the License Agreements, including, without limitation, the
Material Licenses, whether evidenced by license agreement or otherwise.
(ii) all loan agreements, indentures, mortgages and guaranties to
which the Seller is a party or by which the Seller or its property is bound;
-11-
(iii) all pledges, conditional sale or title retention agreements,
security agreements, equipment obligations, personal property leases and lease
purchase agreements relating to any of the Assets to which the Seller is a party
or by which the Seller or any of its property is bound;
(iv) all contracts, agreements, commitments, purchase orders (other
than merchandise deliveries to customers in the normal course of business upon
standard terms) or other understandings or arrangements to which the Seller is a
party or by which any of their respective property is bound which (A) involve
payments or receipts by any of them of more than $25,000 in the case of any
single contract, agreement, commitment, understanding or arrangement under which
full performance (including payment) has not been rendered by all parties
thereto or (B) may materially adversely affect the condition (financial or
otherwise) or the properties, Assets, business or prospects of the Business;
(v) all collective bargaining agreements, employment and consulting
agreements, non-competition agreements, trust agreements, executive compensation
plans, bonus, 401(k), or profit-sharing plans, deferred compensation agreements,
pension plans, retirement plans, employee stock option or stock purchase plans
and group life, health and accident insurance and other employee benefit plans,
agreements, memoranda of understanding, arrangements or commitments to which the
Seller is a party or by which the Seller or any of its property is bound;
(vi) all contracts, agreements or other understandings or
arrangements, whether written or oral, between the Seller and any shareholder,
employee, officer or director of the Seller which may affect the Business as
conducted as of and prior to the date hereof or the Assets;
(vii) all leases, whether operating, capital or otherwise, under
which the Seller is lessor or lessee, including, without limitation, all
equipment leases;
(viii) all contracts, agreements and other documents or information
relating to past disposal of waste (whether or not hazardous) which are
available;
(ix) all return policies and product warranties relating to products
or goods manufactured or distributed by the Business as the same are currently
in effect or may have been in effect from time to time since December 31, 1997,
as well as any exception to such policies, all cooperative advertising
arrangements and all rebate, discount or allowance arrangements;
(x) all contracts related to operation, maintenance or management of
the leased facilities under any Leases (the "Leased Premises"), other than
immaterial contracts; and
(xi) any other licensing agreements, franchise agreements and other
material agreement or contract entered into by the Seller.
(b) Schedule 2.11(b) attached hereto sets forth a true, correct and
complete list of the licenses, contracts and agreements, whether written or
oral, which are to be assigned from the Seller to the Buyer at the Closing
(collectively, the "Contracts"). Schedule 2.11(a) attached
-12-
hereto sets forth a true, correct and complete list of all licenses and other
agreements to which Seller is a party (as licensor or licensee) or by which the
Seller is bound.
(c) Except as set forth on Schedule 2.11(c):
(i) each Contract is a valid and binding agreement of the Seller,
enforceable against the Seller in accordance with its terms, and the Selling
Parties have no knowledge that any Contract is not a valid and binding agreement
of the other parties thereto;
(ii) the Seller has fulfilled all material obligations required
pursuant to the Contracts to have been performed by it prior to the date hereof;
(iii) the Seller is not in material breach of or material default
under any Contract, and no event has occurred which with the passage of time or
giving of notice or both would constitute such a default, result in a loss of
rights or result in the creation of any lien, charge or encumbrance, thereunder
or pursuant thereto (an "Inchoate Default"); and
(iv) to the best knowledge of the Selling Parties, there is no
existing material breach or material default by any other party to any Contract,
and no Inchoate Default.
(d) True, correct and complete copies of all of the foregoing licenses,
contracts and agreements, including but not limited to the Contracts, and all
unfilled customer orders, have been delivered or made available by the Seller to
the Buyer prior to the date hereof.
2.12. COMPLIANCE WITH LAWS. The Seller has all requisite material
licenses, permits and certificates, including health and safety permits, from
federal, state, local and foreign authorities necessary to conduct the Business
and own and operate the Assets (collectively, the "Permits"). Schedule 2.12 sets
forth a true, correct and complete list of all such Permits, copies of which
previously have been delivered by the Seller to the Buyer. The Seller has not
engaged in any activity which would cause or, to the knowledge of the Selling
Parties, permit revocation or suspension of any such Permit and no action or
proceeding looking to revocation or suspension of any such Permit is pending or
to the knowledge of the Selling Parties threatened. There are no existing
material defaults or Inchoate Defaults by the Seller under any Permit. The
Selling Parties have no knowledge of any material default or Inchoate Defaults
on the part of any party in the performance of any obligation to be performed or
paid by any party under any Permit. Except as set forth in Schedule 2.12, the
consummation of the transactions contemplated by this Agreement will in no way
affect the continuation, validity or effectiveness of the Permits or require the
consent of any third party under any such Permit. The Seller is not in violation
of any material law, regulation or ordinance (including but not limited to laws,
regulations or ordinances relating to building, zoning, land use or similar
matters) relating to its properties, the violation of which could have a
material adverse effect on the Assets or the business, properties, condition
(financial or otherwise) of the Seller. The business of the Seller does not
violate, in any material respect, and the Seller is not in violation of, any
federal, state, local or foreign laws, regulations or orders, the violation or
enforcement of which would have a material and adverse effect on the Assets,
business, properties, condition (financial or otherwise) of the Seller. Except
as set forth on Schedule 2.12, the Seller has not received any written notice
from any federal, state, foreign,
-13-
or local governmental or regulatory authority or otherwise of any such violation
or noncompliance.
2.13. EMPLOYEE RELATIONS.
(a) The Seller is in material compliance with all material federal, state,
local and foreign laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours, and is not engaged in any unfair
labor practice, and there are no arrears in the payment of wages or taxes or
workers compensation assessments or penalties.
(b) Except as set forth on Schedule 2.13:
(i) none of Seller's Employees are represented by any labor
union;
(ii) there is no unfair labor practice complaint against the Seller
pending before the National Labor Relations Board or any state, foreign, or
local agency affecting the Seller;
(iii) there is no pending labor strike or other material labor
trouble affecting the Seller (including but not limited to any organizational
campaign);
(iv) there is no material labor grievance pending against or
affecting the Seller;
(v) there is no pending organizing activities respecting the
Seller's Employees;
(vi) except as set forth on Schedule 2.13, there are no pending
arbitration proceedings arising out of or under any collective bargaining
agreement to which the Seller is a party, or any collective bargaining agreement
to which the Seller is a party affecting the Seller's Employees; and
(vii) there is no pending litigation, or other proceeding against
the Seller by any employee or group of employees or independent contractor or
group of independent contractors which is based on claims arising out of any
employee's or group of employees' employment relationship with the Seller or any
independent contractor's or group of independent contractors' independent
consulting relationship with the Seller (insofar as such relationship pertains
to the Business of the Seller), including but not limited to claims for
contract, tort, discrimination, employee benefits, commissions, wrongful
termination, age discrimination, sexual harassment, sexual discrimination and
any and all common law or statutory claims.
(c) The Seller has not violated the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. Sections 0000-00 (xxx "XXXX Xxx") or any similar
state or local law and has provided all requisite notices pursuant to the WARN
Act. Since July 1, 1998, the Seller has terminated sixty (60) employees.
(d) The Selling Parties hereby acknowledge that, except as otherwise set
forth herein, the Buyer has no current plans to offer employment to all of the
Seller's Employees affected by the transactions contemplated hereby. The Buyer
may, however, offer employment to some of
-14-
the Seller's Employees under such terms and conditions as may be set by the
Buyer. The Selling Parties agree and acknowledge that, except as otherwise set
forth herein, the Buyer shall not assume any collective bargaining agreement
between the Seller and any of the Seller's Employees, notwithstanding any
specific terms to the contrary contained in any such collective bargaining
agreement.
2.14. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Schedule 2.14, since November 30, 1998, the Seller has not entered into any
transaction which is not in the usual and ordinary course of business, and,
without limiting the generality of the foregoing, the Seller has not:
(a) Mortgaged, pledged or subjected to lien, charge or other
encumbrance any of the Assets;
(b) Sold or purchased, assigned or transferred any of its Assets (except
for Inventory sold in the ordinary course of business);
(c) Made any material amendment to or termination of any Contract or done
any act or omitted to do any act which would cause the breach of any Contract;
(d) Suffered any casualty losses, whether insured or uninsured, and
whether or not in the control of the Seller, in excess of $25,000 in the
aggregate, or waived any rights of any value unless such loss or waiver is
reflected in the Financial Statements;
(e) Authorized or issued recall notices for any of its products relating
to the Business or initiated any safety investigations relating to the Business;
or
(f) Received written notice of any litigation, warranty claim or products
liability claims relating to the Business.
2.15. PREPAYMENTS AND DEPOSITS. Except as set forth on Schedule 2.15, the
Seller has no prepayments or deposits from customers for products to be shipped,
or services to be performed, by the Seller after the date hereof.
2.16. TRADE NAMES AND OTHER INTANGIBLE PROPERTY.
(a) Schedule 2.16 attached hereto sets forth a true, correct and complete
list and a description of all Intangible Property. True, correct and complete
copies of all licenses and other agreements relating to the Intangible Property
have been previously delivered by the Seller to the Buyer. The Selling Parties
have no knowledge of any default or claimed or purported or alleged default or
state of facts which with notice or lapse of time or both would constitute a
default on the part of any party in the performance of any obligation to be
performed or paid by any party under any such license or agreement. During the
past five years the only name by which the Seller has been known or which the
Seller has used as its corporate name is set forth in the preamble of this
Agreement.
-15-
(b) Except as otherwise disclosed in Schedule 2.16 attached hereto, the
Seller is the sole and exclusive owner, free and clear of all liens, claims and
restrictions, of all Intangible Property and all designs, permits, labels and
packages used on or in connection therewith. The Intangible Property owned by
the Seller is sufficient to conduct the Business, as presently conducted. The
Seller has received no notice of, and has no knowledge of any basis for, a claim
against it that any of its operations, activities, products or publications
infringes on any patent, trademark, trade name, copyright or other property
right of a third party, or that it is illegally or otherwise using the trade
secrets, formulae or any property rights of others. Except as otherwise
disclosed in Schedule 2.16, the Seller (i) has no disputes with or claims
against any third party for infringement by such third party of any trade name
or other Intangible Property of the Seller, and (ii) is not obligated or under
any liability whatsoever to make any payments by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, trade name, copyright or other property right, with respect to the
use thereof or in connection with the conduct of the Business or otherwise. The
Seller has taken all steps reasonably necessary to protect its right, title and
interest in and to the Intangible Property. Except as set forth in Schedule
2.16, the consummation of the transactions contemplated by this Agreement
(including any required financing) will in no way affect the continuation,
validity or effectiveness of the Intangible Property or require the consent of
any third party in respect of the Intangible Property.
2.17. EMPLOYEE BENEFIT PLANS.
(a) ERISA. Except as set forth on Schedule 2.17, neither the Seller nor
any person, firm, corporation or entity which is (or within the past five years
has been) a member with the Seller of a "controlled or affiliated group", within
the meaning of Section 414(b), (c), (m), (n) or (o) of the Internal Revenue Code
of 1986, as amended (the "Code"), has maintained, sponsored or contributed to
any "pension plan" within the meaning of Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), any "welfare plan" within the
meaning of Section 3(1) of ERISA, or any other employee benefit plan, program,
practice or arrangement, whether or not subject to ERISA (a "non-ERISA plan")
(such pension plans, welfare plans and non-ERISA plans of the Seller being
herein referred to as the "Employee Plans"). Except as set forth on Schedule
2.17, the Seller has provided the Buyer with a true, correct and complete copy
of each pension plan, each welfare plan and each non-ERISA plan listed on such
Schedule, together with a copy of the most recent summary plan description and
annual report (if applicable) with respect to each such plan. Except as set
forth on Schedule 2.17, each pension plan listed on such Schedule is a
"qualified plan" within the meaning of Section 401 of the Code. Except as set
forth on Schedule 2.17, each pension plan, each welfare plan and each non-ERISA
plan listed on such Schedule has been administered in accordance with its terms,
and each pension plan and welfare plan has been operated and administered in
accordance with all applicable requirements of ERISA and the Code. Without
limiting the generality of the foregoing, no trustee, administrator, sponsor, or
other party-in-interest or disqualified person, has engaged or participated in
any "prohibited transaction", as that term is defined in Section 4975(c)(1) of
the Code, with respect to any pension plan or welfare plan listed on Schedule
2.17. Without limiting the generality of the foregoing, in connection with all
welfare or non-ERISA plans which are subject to continuation coverage under
Section 4980B of
-16-
the Code, all notices and elections with respect to such coverage have been made
in compliance with the requirements of Section 4980B. With respect to each
"defined benefit pension plan", as defined in Section 3(35) of ERISA, identified
on Schedule 2.17: (i) the fair market value of the assets thereof as of the date
hereof is as set forth on such Schedule; (ii) the present value of all accrued
benefits thereunder, determined as if such pension plan terminated on the date
hereof, is as set forth on Schedule 2.17; (iii) if any such plan is a
"multiemployer plan", as defined in Section 3(37) of ERISA, the present value of
the contingent liability of the Seller both in the event of the termination of
such plan and in the event that the Seller withdraws therefrom is as set forth
on Schedule 2.17; (iv) no such plan has incurred an "accumulated funding
deficiency", as such term is defined in Section 302 of ERISA, and (v) no such
pension plan has terminated, nor has any "reportable event", within the meaning
of Section 4043 of ERISA, occurred with respect to such plan. All contributions
for all periods ending prior to the date hereof (including periods from the
first day of the current plan year to the date hereof) will be made prior to the
date hereof by the Seller in accordance with past practice with respect to
pension plans, welfare plans and non-ERISA plans. All insurance premiums
(including premiums to the Pension Benefit Guaranty Corporation) have been paid
in full, subject only to normal retrospective adjustments in the ordinary course
of business, with regard to applicable plans for policy years or other
applicable policy periods ending on or before the date hereof.
(b) Claims and Litigation. Except as set forth on Schedule 2.17(b), to the
best of the Selling Parties' knowledge, there are no threatened or pending
claims, suits or other proceedings by present or former employees of Seller,
plan participants, beneficiaries or spouses of any of the above, the Internal
Revenue Service, the Pension Benefit Guaranty Corporation, or any other pension
or entity involving any Employee Plan, including claims against the assets of
any trust, involving any Employee Plan, or any rights or benefits thereunder,
other than ordinary and usual claims for benefits to participants or
beneficiaries, including claims pursuant to domestic relations orders and there
is no basis for any legal action, proceeding or investigation with respect to
such plans.
2.18. LEASED PREMISES.
(a) Schedule 2.18 contains a true, correct and complete list of addresses
and legal description of all Leased Premises.
(b) Except as set forth on Schedule 2.18, no work has been performed on or
materials supplied to the Leased Premises within any applicable statutory period
which could give rise to mechanics or materialmen's liens; all bills and claims
for labor performed and materials furnished to or for the benefit of the Leased
Premises for all periods prior to the Closing shall be paid in full, and the
Selling Parties have no knowledge of any mechanic's or materialmen's liens,
whether or not perfected, on or affecting any portion of the Leased Premises.
(c) There is no pending or, to the Selling Parties' knowledge, threatened
condemnation or eminent domain proceeding with respect to the Leased Premises.
(d) Except as set forth on Schedule 2.18, there are no taxes or betterment
or special assessments other than ordinary real estate taxes pending or payable
against the Leased Premises
-17-
and there are no contingencies existing under which any assessment for real
estate taxes may be retroactively filed against the Leased Premises; the Selling
Parties have no knowledge of any proposed special assessment that may affect the
Leased Premises or any part thereof; there are no penalties due with respect to
real estate taxes and/or impositions, and all real estate taxes and/or
impositions (excepting those for the current year that are not yet due and
payable) with respect to the Leased Premises have been paid in full; there are
no taxes or levies, permit fees or connection fees which must be paid respecting
existing curb cuts, sewer hookups, water-main hookups or services of a like
nature.
(e) The Leased Premises comply in all material respects with the
requirements of all building, zoning, subdivision, health, safety,
environmental, pollution control, waste products, sewage control and all other
applicable statutes, laws, codes, ordinances, rules, orders, regulations and
decrees (collectively, the "Government Regulations") of any and all government
agencies. To the extent set forth in Schedule 2.12, the Seller has obtained and
provided to the Buyer all consents, permits, licenses and approvals required by
such Government Regulations, such consents, permits, licenses and approvals are
in full force and effect, have been properly and validly issued, and on or prior
to the date hereof will be assigned to the Buyer by the Seller to the extent the
same are assignable. Except as set forth in Schedule 2.12, there is no uncured
material breach of any condition or requirement imposed by, or pursuant to, any
permit or license issued with respect to the Leased Premises. There is no action
pending or, to the best of the Selling Parties' knowledge, threatened by any
government agencies claiming that the Leased Premises violates such Government
Regulations or threatening to shut down the Business or the use of the Assets or
to prevent the Assets from being used as presently used.
(f) Except as set forth on Schedule 2.18, there are no actions, suits,
petitions, notices or proceedings pending, given or, to the best of the Selling
Parties knowledge, threatened by any persons or government agencies before any
court, government agencies or instrumentalities, administrative or otherwise,
which if given, commenced or concluded would have a material adverse effect on
the value, occupancy, use or operation of the Leased Premises.
(g) To the best knowledge of the Selling Parties, the structural
components of all of the buildings located on the Leased Premises are in good
condition and repair, normal wear and tear excepted.
(h) The Selling Parties (i) have not received written notice and (ii) have
no knowledge of the existence of any outstanding written notice:
(A) from any federal, state, county, municipal or foreign
authority alleging any health, safety, pollution, environmental, zoning or other
material violation of law with respect to the Leased Premises or any part
thereof that has not been entirely corrected; or
(B) from any insurance company or bonding company with respect
to any defects or inadequacies in the Leased Premises or any part thereof that
would materially adversely affect the insurability of same or cause the
imposition of extraordinary premiums or charges therefor or any termination or
threatened termination of any policy of insurance or bond relating thereto.
-18-
2.19. BROKERS. Except for MMG Incorporated, all negotiations relative to
this Agreement and the transactions contemplated hereby have been carried on by
the Seller without the intervention of any other person in such manner as to
give rise to any valid claim for a finder's fee, brokerage commission or other
like payment. All such fees shall be borne by the Seller.
2.20. PRESERVATION OF ASSETS. The Seller has not sold, assigned or
transferred any of the Assets, other than in the ordinary course of business.
2.21. ENVIRONMENTAL COMPLIANCE.
(a) The Seller has obtained all permits, licenses and other authorizations
required under Federal, state and local laws, relating to protection of the
Environment (as defined below), including laws relating to any Release (as
defined below) of or presence of pollutants, contaminants, or hazardous or toxic
materials or wastes into or in soil, surface waters, groundwaters, land, stream
sediments, surface or subsurface strata, ambient air, and/or any environmental
medium (the "Environment") or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants or hazardous or toxic materials or waste. Schedule 2.21
hereto sets forth a complete and accurate list of all such permits, licenses and
other authorizations obtained by the Seller, copies of which have been delivered
to the Buyer. The Seller is in full compliance with all terms and conditions of
such permits, licenses and other authorizations. To the best of the Selling
Parties' knowledge, except as set forth on Schedule 2.21, there are no proposed
or pending changes in the federal, state, county or local laws, regulations,
standards, or in the Seller's permits, licenses or authorizations relating to
pollution or protection of the Environment that would increase the present costs
of compliance with such laws or change any methods of operation.
(b) Except as indicated on Schedule 2.21 neither the Seller has, and, to
the best of the Selling Parties' knowledge, after due inquiry, none of the
Seller's employees, agents, contractors or subcontractors have, used, generated,
processed, stored, transported, recycled, Released or otherwise handled any
Hazardous Materials (as defined below) except as permitted by law on or about
any real property related to the Seller's business or the Seller's contractual
relations with any such agents, contractors or subcontractors, including, but
not limited to, real property formerly owned by the Seller (collectively, the
"Seller Real Property") and the facilities now or formerly leased or operated by
the Seller (collectively, the "Seller Facilities"). Additionally, except as
indicated on Schedule 2.21, neither the Seller Facilities nor the Seller Real
Property is being used or has ever previously been used for the generation, use,
processing, storage, transportation, recycling, Release or handling of any
Hazardous Materials, except as such use may have been permitted by law. In
addition, except as indicated on Schedule 2.21, neither the Seller Facilities
nor the Seller Real Property has or has ever had any Hazardous Materials
Contamination or Environmental Condition. The Seller, in the conduct of its
business, is and has been in compliance with all Environmental Laws.
Notwithstanding any statement or representation to the contrary in any affidavit
or other document, the Seller affirmatively represents that as of the date
hereof, the Seller has made all filings required by RCRA and that there have
been no failures by the Seller to timely report under any Environmental Law. The
-19-
Seller has not received any written notice from any governmental authority or
any other person respecting or related to any actual, threatened or potential
Release or presence of any Hazardous Materials or any non-compliance with any
Environmental Laws as to which any such claimed noncompliance presently exists.
No investigation, administrative proceeding, consent order or agreement,
limitation or settlement with respect to Hazardous Materials, Hazardous
Materials Contamination or Environmental Condition has been or is, to the best
of the Selling Parties' knowledge, proposed, threatened, anticipated or in force
with respect to its business, nor has such property ever been on any Federal or
state "Superfund" or "Super Lien" list.
As used in this Section 2.21, "due inquiry" shall mean that Selling
Parties have made inquiry of all Seller's executives, corporate officers and
directors and any employee or agent of Seller with responsibility for
environmental matters.
As used herein "Hazardous Materials" include any (i) "Hazardous Waste" as
defined by The Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section
6901 et seq.), as amended from time to time ("RCRA"), and regulations
promulgated thereunder; and "Hazardous Substance" as defined by The
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Section 9601 et seq.), as amended from time to time ("CERCLA"), and
regulations promulgated thereunder; (ii) asbestos; (iii) polychlorinated
biphenyls; (iv) any substance, the presence of which on the premises of the
Seller's business, is prohibited by Environmental Laws; (v) oil, petroleum or
any petroleum products or by-products; (vi) any other substance which, pursuant
to Environmental Laws, requires special handling or notification of any Federal,
state or local governmental entity in its collection, processing, handling,
storage, transport, treatment or disposal or exposure thereto; (vii) any
substance, which if not properly disposed of, may pollute, contaminate, harm or
have any detrimental effect on the Environment; (viii) underground storage
tanks, whether empty, filled or partially filled with any substance; and (ix)
any other pollutant, toxic substance, hazardous substance, hazardous waste,
hazardous material or hazardous substance as regulated by or defined in or
pursuant to any Environmental law or any other Federal, state, or local
environmental law, regulation, ordinance, rule, or by-law, whether existing on
or prior to the date hereof.
As used herein, "Hazardous Materials Contamination" shall mean, with
respect to any Seller's Real Property, Seller's Facilities, or the Environment,
contamination by a Release or the presence of Hazardous Materials.
As used herein, "Environmental Condition" shall mean any condition with
respect to the Environment on or off the Seller Real Property and Seller
Facilities, whether or not yet discovered, which could or does result in any
damage, loss, cost, expense, claim, demand, order, or liability to or against
the parties hereto by any third party (including, without limitation, any
government entity), including, without limitation, any condition resulting from
the operation of Seller's business and/or the operation of the business of any
other property owner or operator in the vicinity of the Seller Real Property and
Seller Facilities and/or any activity or operation formerly conducted by any
person or entity on or off the Seller Real Property and Seller Facilities.
-20-
As used herein, "Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing.
As used herein, "Environmental Laws" shall mean any environmental or
health and/or safety-related law, regulation, rule, ordinance, or by-law at the
Federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted, including but not limited to: (i)
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USCA
601 et seq.; (ii) Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid
Waste Amendments of 1984, 42 USCA 6901 et seq.; (iii) Federal Water Pollution
Control Act of 1972 as amended by the Clean Water Act of 1977, as amended, 33
USCA 1251 et seq.; (iv) Toxic Substances Control Act of 1976, as amended, 15
USCA 2601 et seq.; (v) Emergency Planning and Community Right-to-Know Act of
1986, 42 XXXX 00000 et seq.; (vi) Clean Air Act of 1966, as amended; (vii)
Rivers and Harbors Act of 1970, as amended, 33 USCA 401 et seq.; (viii)
Endangered Species Act of 1973, as amended, 16 USCA 1531, et seq; (ix)
Occupational Safety and Health Act of 1970, as amended, 29 USCA 651 et seq.; (x)
Safe Drinking Water Act of 1974, as amended, 42 USCA 300 et seq., and any other
federal, state, or local law, regulation, rule, ordinance or order currently in
existence which governs:
(i) the existence, cleanup and/or remediation of toxic or
Hazardous Materials;
(ii) the Release, emission, discharge or presence of Hazardous
Materials into or in the Environment;
(iii) the control of Hazardous Materials; or
(iv) the use, generation, transport, treatment, storage, disposal,
removal or recovery of Hazardous Materials.
(c) Release of Environmental Escrow.
The Seller agrees to place the Securities into escrow to guarantee payment
of any environmental liabilities that may be incurred by Buyer in connection
with Environmental Conditions that may exist at the Seller's Real Property, or
Seller's Facilities at the closing.
Seller further agrees to provide Buyer (or a person designated by Buyer)
with copies of all inspections, investigations, studies, audits, tests, reviews,
government communications or other analyses that are in the possession of the
Seller or performed on behalf of the Seller, and which relate to Environmental
Conditions at the Seller's Real Property and Seller's Facilities.
If any of the Seller's Real Property or Seller's Facilities are required
to undergo review pursuant to the provisions of the New Jersey Industrial State
Recovery Act, N.J.S.A. 13:1K-6 et seq. ("ISRA"), Seller shall, at Seller's
expense, comply with the provisions of ISRA and shall provide Buyer (or a person
designated by Buyer) with copies of all filings and reports required to comply
with ISRA. If an ISRA Remedial Investigation identifies Environmental Conditions
that
-21-
must be remediated and Seller is required to establish a source of remediation
funding pursuant to ISRA, then any escrowed Securities having a value in excess
of the cost of required remediation funding shall be released from the escrow
subject to the conditions set forth below. The balance of the escrowed
Securities shall be released upon receipt of a No Further Action ("NFA") letter
from the New Jersey Department of Environmental Protection ("DEP").
If any of the Seller's Real Property or Seller's Facilities are not
required to comply with ISRA, then Seller shall obtain, at Seller's expense,
either a Letter of Non-Applicability or a De Minimis Quantity Exemption Letter
as appropriate from the DEP confirming that such properties are not subject to
ISRA. In addition, Seller will perform, as appropriate, and at Seller's expense,
a Phase I environmental site assessment ("Phase I ESA") that is consistent with
the ASTM Standard Practice for Environmental Site Assessments (E-1527-94). The
Phase I ESA shall be performed by a consultant who is mutually acceptable to the
Buyer and Seller. If the Phase I ESA does not identify any Environmental
Conditions that require further investigation, the escrowed Securities shall be
released.
However, if the Phase I ESA identifies potential Environmental Conditions,
then Seller shall have a Phase II ESA performed, at Seller's expense, to
delineate the nature and extent of any Environmental Condition identified in the
Phase I ESA. If the Phase II ESA determines that there are no hazardous
substances present at the properties in concentrations that exceed DEP
remediation standards or migrating from the Seller's Real Property or Seller's
Facilities in concentrations that exceed DEP remediation standards, then the
balance of the escrowed Securities may be released provided, however, that if
the presence of the hazardous substances triggers a reporting obligation under
Environmental Laws, then the escrowed Securities may not be released until the
receipt of an NFA letter. The Phase II ESA shall be performed by a consultant
who is mutually acceptable to the Buyer and Seller.
If the Phase II ESA reveals an Environmental Condition which requires
remediation pursuant to Environmental Laws, then Seller shall enter into a
memorandum of agreement ("MOA") with the DEP to perform the required cleanup, at
Seller's expense. Escrowed Securities shall continue to be held in escrow in an
amount determined to be sufficient by an environmental consultant mutually
acceptable to the Buyer and Seller to cover the costs of any cleanup required to
achieve DEP remediation standards, and any escrowed Securities in excess of the
estimated remediation costs shall be released. Upon receipt of a NFA letter from
the DEP, the balance of the escrowed Securities may be released.
For purposes of this Section 2.21 only, and in the event a valuation of
the escrowed Securities must be made, the fair market value of the escrowed
Securities shall be determined by reference to the average closing price of the
Company's Common Stock, on the Nasdaq National Market, for the ten (10) trading
days immediately preceding the date of such valuation.
2.22. SOLVENCY. The Seller is not now insolvent, and will not be rendered
insolvent by any of the transactions contemplated by this Agreement. In
addition, immediately after giving effect to the consummation of the
transactions contemplated by this Agreement, (i) the Seller will be able to pay
its debts as they become due, (ii) the property of the Seller does not and will
-22-
not constitute unreasonably small assets, and the Seller will not have
unreasonably small assets and will not have insufficient assets with which to
conduct its present or proposed business, and (iii) taking into account all
pending and threatened litigation, final judgments against the Seller in actions
for money damages are not reasonably anticipated to be rendered at a time when,
or in amounts such that, the Seller will be unable to satisfy any such judgments
promptly in accordance with their terms (taking into account the maximum
probable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered) as well as all other
obligations of the Seller. The cash available to the Seller, after taking into
account all other anticipated uses of the cash of the Seller, will be sufficient
to pay all such judgments promptly in accordance with their terms. As used in
this Section 2.22, (x) "insolvent" means that the sum of the present fair
saleable value of the Seller's assets does not equal or exceed the Seller's
debts and other probable liabilities, and (ii) the term "debts" includes any
legal liability, whether matured or unmatured, liquidated or unliquidated,
absolute, fixed or contingent, disputed or undisputed or secured or unsecured.
2.23. TRANSACTIONS WITH RELATED PARTIES. Except as set forth on Schedule
2.23, the Shareholder (a) has not borrowed from or loaned money or other
property to the Seller which has not been repaid or returned, (b) has no
contractual or other claims, express or implied, of any kind whatsoever against
the Seller or (c) has no interest in any property used by the Seller.
2.24. NO OTHER AGREEMENTS TO SELL THE ASSETS OR THE BUSINESS. Neither the
Seller nor the Shareholder has any legal obligation, absolute or contingent, to
any other person to sell the Assets or the Business or to sell any capital stock
of the Seller or to effect any merger, consolidation or other reorganization of
the Seller or to enter into any agreement with respect thereto, except pursuant
to this Agreement.
2.25. YEAR 2000 COMPLIANCE. The Seller has reviewed its products,
business, services and operations which could be adversely affected by the risk
that computer applications developed, marketed, sold and delivered or used by
the Seller may be unable to recognize and properly perform date-sensitive
functions involving dates prior to and after December 31, 1999 (the "Year 2000
Problem"). Except as set forth on Schedule 2.25, the products, services,
applications or other deliverables provided or delivered by the Seller to, or on
behalf of, its customers prior to the Closing, and the products, services,
applications and other deliverables currently offered by the Seller to, or on
behalf of, its customers will not give rise to claims against the Seller based
upon the Year 2000 Problem based upon warranties applicable to the Seller's
products or services or statements made by the Seller with respect to such
product services.
2.26. CERTAIN SECURITIES LAW REPRESENTATIONS. Each of the Selling Parties
represents as follows with respect to the Securities to be acquired in
connection with this Agreement. Such Selling Party:
(a) has such knowledge and experience in financial business matters such
that he or it is capable of evaluating the merits and risks of the investment in
the Securities;
-23-
(b) is receiving the Securities for investment for his or its own account
and not with a view to, or for resale in connection with, the distribution of
other disposition thereof, other than as contemplated hereby;
(c) has been given the opportunity to obtain any information or documents
relating to an ask questions and receive answers about, Buyer and the business
and prospects of Buyer which he or it deems necessary to evaluate the merits and
risks related to his or its investment in the Securities and to verify the
information received, and such person's knowledge and experience in financial
and business matters are such that he or it is capable of evaluating the merits
and risks of his or its receipt of the Securities;
(d) represents that his, her or its financial condition is such that he or
it can afford to bear the economic risk of holding the Securities for an
indefinite period of time and has adequate means for providing for current needs
and contingencies and to suffer a complete loss of the investment in the
Securities;
(e) has been advised that (i) the Securities will not have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), (ii) the
Securities may need to be held indefinitely, and such person must continue to
bear the economic risk of the investment in the Securities unless they are
subsequently registered under the Securities Act or an exemption form such
registration is available, (iii) there may not be a public market for the
Securities, (iv) when and if the Securities may be disposed of without
registration in reliance on Rule 144 promulgated under the Securities Act, such
disposition can be made only in limited amounts in accordance with the terms and
conditions of such Rule, (v) if the Rule 144 exemption is not available, public
sale without registration will require compliance with an exemption under the
Securities Act and (vi) a restrictive legend in the following form shall be
placed on the certificates representing the Securities:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR QUALIFIED UNDER ANY APPLICABLE STATE
SECURITIES LAWS (THE "STATE ACTS"), HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND QUALIFICATION UNDER THE
STATE ACTS OR EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS
(INCLUDING, IN THE CASE OF THE SECURITIES ACT, THE EXEMPTION AFFORDED BY RULE
144). UNLESS WAIVED BY HAPPY KIDS INC., HAPPY KIDS INC. SHALL BE FURNISHED WITH
AN OPINION OF COUNSEL OPINING AS TO THE AVAILABILITY OF EXEMPTIONS FROM SUCH
REGISTRATION AND QUALIFICATION AS A PRECONDITION TO ANY SUCH TRANSFER.
THESE SHARE ARE FURTHER SUBJECT TO CERTAIN PLEDGE ARRANGEMENTS, DATED
APRIL 13, 1999, AND MAY BE TRANSFERRED ONLY IN
-24-
COMPLIANCE THEREWITH. SUCH PLEDGE ARRANGEMENTS ARE ON FILE AT THE PRINCIPAL
OFFICE OF HAPPY KIDS INC.
2.27. CUSTOMERS. Schedule 2.27 sets forth a true, correct and complete
list of the names and addresses of the top twenty (20) customers of the Seller,
based upon dollar volume of purchases. None of the ten (10) customers which
accounted for the largest dollar volume of purchases from the Seller for the
twelve month periods ended December 31, 1997 and December 31, 1998,
respectively, has notified the Seller that it intends to discontinue its
relationship with the Seller.
2.28. SUPPLIERS. Schedule 2.28 sets forth a true, correct and complete
list of the names and addresses of the ten suppliers of the Seller which
accounted for the largest dollar volume of purchases by the Seller for the
twelve month periods ended December 31, 1997 and December 31, 1998,
respectively. The Seller is not a party to any requirements contract relating to
the purchase of inventory, finished goods or other property used in the conduct
of the Business. None of the Seller's suppliers has notified the Seller that it
intends to discontinue its relationship with the Seller, nor raise its prices so
as to materially adversely affect the Business.
3. REPRESENTATIONS OF THE BUYER.
Representations and warranties made by the Buyer herein or in any
instrument or document furnished in connection herewith shall survive the
Closing until (and including) eighteen (18) months from the date hereof. The
Buyer represent and warrants to the Seller as follows:
3.1. ORGANIZATION AND AUTHORITY. The Buyer is duly organized and validly
existing and in good standing under the laws of the State of New York, and has
requisite power and authority to own its properties and to carry on its business
as now being conducted. The Buyer has full power to execute and deliver this
Agreement, the Operating Agreement and the agreements contemplated herein or
therein and to consummate the transactions contemplated hereby and thereby.
3.2. AUTHORIZATION. The execution and delivery of this Agreement and the
Operating Agreement by the Buyer and the agreements provided for herein or
therein to which Buyer is a party, and the consummation by the Buyer of all
transactions contemplated hereby and thereby, have been duly authorized by all
requisite corporate action. This Agreement, the Operating Agreement and all such
other agreements and written obligations entered into and undertaken in
connection with the transactions contemplated hereby or thereby constitute the
respective valid and legally binding obligations of the Buyer, enforceable
against it in accordance with their respective terms except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors rights generally. The execution, delivery and
performance of this Agreement, the Operating Agreement and the agreements
provided for herein or therein, and the consummation by the Buyer of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to the Buyer; (b) violate the provisions
of the organizational documents of the Buyer; (c) violate any judgment, decree,
order
-25-
or award of any court, governmental body or arbitrator applicable to the Buyer;
or (d) conflict with or result in the breach or termination of any term or
provision of, or constitute a default under, or cause any acceleration under, or
cause the creation of any lien, charge or encumbrance upon the properties or
assets of the Buyer pursuant to, any indenture, mortgage, deed of trust or other
agreement or instrument to which it or its properties is a party or by which the
Buyer is or may be bound. Schedule 3.2 attached hereto sets forth a true,
correct and complete list of all consents and approvals of third parties that
are required of the Buyer in connection with the consummation by the Buyer of
the transactions contemplated by this Agreement and the Operating Agreement.
3.3. REGULATORY APPROVALS. All consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Buyer and which are necessary for its consummation
by the Buyer of the transactions contemplated by this Agreement and the
Operating Agreement have been, or will be prior to the Closing, obtained and
satisfied.
3.4. BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Buyer without the
intervention of any other person in such manner as to not give rise to any valid
claim for a finder's fee, brokerage commission or other like payment.
3.5. PUBLIC REPORTS. As of the date of filing, each report filed by Buyer
with the Securities and Exchange Commission was accurate in all material
respects and did not contain any untrue statement of a material fact or omit any
fact necessary in order to make the statements therein not misleading.
4. ACCESS TO INFORMATION; PUBLIC ANNOUNCEMENTS.
4.1. CONFIDENTIALITY. All information not previously disclosed to the
public or not generally known to persons engaged in the business of the Seller
or the Buyer which shall have been furnished by the Buyer or the Seller to the
other party in connection with the transactions contemplated hereby shall not be
disclosed by such receiving party to any person other than their respective
employees, directors, attorneys, accountants or financial advisors or other than
as contemplated herein. In the event that the transactions contemplated by this
Agreement shall not be consummated, all such information which shall be in
writing shall be returned to the party furnishing the same, including, to the
extent reasonably practicable, all copies or reproductions thereof which may
have been prepared, and neither party shall at any time thereafter disclose to
third parties, or use, directly or indirectly, for its own benefit, any such
information, written or oral, about the business of the other party hereto.
4.2. PUBLIC ANNOUNCEMENTS. Any public announcement, press release or
similar publicity with respect to this Agreement or the transactions
contemplated hereby shall be issued, if at all, at such time and in such manner
as the Buyer determines. Unless consented to by the Buyer in advance or required
by applicable law, prior to the Closing, the Selling Parties shall keep this
Agreement strictly confidential and may not make any disclosure related to this
Agreement to any person. The Selling Parties and the Buyer shall consult with
each other
-26-
concerning the means by which the Seller's Employees, customers, suppliers and
others having a business relationship with the Selling Parties will be informed
of the transactions contemplated hereby, and the Buyer shall have the right to
be present for any such communication.
5. EMPLOYEE MATTERS.
5.1. SELLER'S EMPLOYEES. The Seller has furnished to the Buyer a list
containing the names of Seller's Employees, including each such employee's
status, social security number and current compensation. Notwithstanding the
execution of this Agreement or the Operating Agreement, however, Buyer has not,
and nothing herein or therein shall require Buyer to retain Seller's Employees
for any period of time after the date hereof. Seller shall maintain full
responsibility and control of all of Seller's Employees, including, but not
limited to, issues of hiring, firing and compensation.
5.2. PLANT CLOSING. None of the Selling Parties has, directly or
indirectly, taken or omitted to take any action which may result in the Seller's
or the Buyer's liability to any person or entity under the WARN Act and Seller
is in full compliance with the provisions of the WARN Act as of the date hereof.
The term "any action" does not include the sale and acquisition contemplated by
this Agreement and the liability under the WARN Act, if any, which results from
the Seller's termination of employees in connection with such sale and
acquisition is the sole responsibility of the Seller.
5.3. REPORTING OF DATA. The Buyer and the Seller shall compile and furnish
to each other such actuarial and employee data as shall be required from time to
time for each party to perform and fulfill its obligations under this Section 5.
6. BEST EFFORTS TO OBTAIN SATISFACTION OF CONDITIONS.
The Selling Parties and the Buyer covenant and agree to use their best
efforts to obtain the satisfaction of the conditions specified in this
Agreement.
7. CONDITIONS TO OBLIGATIONS OF THE BUYER.
The obligations of the Buyer under this Agreement are subject to the
fulfillment, at the Closing, of the following conditions precedent, each of
which may be waived in the sole discretion of the Buyer:
7.1. CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE SELLING
PARTIES: COMPLIANCE WITH COVENANTS AND OBLIGATIONS. The representations and
warranties of the Selling Parties shall be true in all material respects on and
as of the date hereof. The Seller shall have performed and complied in all
material respects with all covenants required by this Agreement to be performed
or complied with by it prior to or at the date hereof.
7.2. CORPORATE AND SHAREHOLDER PROCEEDINGS. All corporate and other
proceedings required to be taken on the part of the Seller to authorize or carry
out this Agreement and the
-27-
Operating Agreement and to convey, assign, transfer and deliver the Assets shall
have been taken.
7.3. OTHER GOVERNMENTAL APPROVALS. All courts of law, governmental
agencies, departments, bureaus, commissions and similar bodies, the consent,
authorization or approval of which is necessary under any applicable law, rule,
order or regulation for the consummation by the Seller of the transactions
contemplated by this Agreement and the Operating Agreement, shall have consented
to, authorized, permitted or approved such transactions including but not
limited to, all clearance certificates required pursuant to any applicable
retail sales tax legislation required in connection with the completion of the
transactions contemplated herein.
7.4. CONSENTS OF LICENSORS, LENDERS, LESSORS AND OTHER THIRD PARTIES;
CONTRACTS RELATING TO INTANGIBLE PROPERTY. The Seller shall have received, and
shall have delivered to the Buyer, the consents and approvals of all licensors
who are party to Material Licenses and lenders and lessors whose consent or
approval is required in order for the Seller to consummate the transactions
contemplated by this Agreement.
7.5. ADVERSE PROCEEDINGS. No action or proceeding by or before any court
or other governmental body shall have been instituted by any governmental body
or person whatsoever which shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement.
7.6. OPINION OF COUNSEL. The Buyer shall have received an opinion of Xxxxx
Xxxxxxx Xxxxxxx & Xxxxx LLP, counsel to the Seller, dated as of the date hereof,
substantially in the form attached hereto as Exhibit C (the "Opinion of Seller's
Counsel").
7.7. BOARD OF DIRECTORS AND SHAREHOLDER APPROVAL. The directors and
shareholders of the Seller shall have duly authorized the transactions
contemplated by this Agreement and the Operating Agreement.
7.8. TITLE TO ASSETS. Except as otherwise set forth herein or as disclosed
in the Schedules, at the Closing, the Buyer shall receive good and marketable
title to all Assets, free and clear of all liens, mortgages, pledges, security
interests, restrictions, prior assignments, encumbrances and claims of any kind
or nature whatsoever.
7.9. ENVIRONMENTAL REPORTS; COMPLIANCE WITH LAWS. The Buyer shall not have
received unsatisfactory environmental reports from its environmental consultants
and at any time prior to the Closing shall not have discovered that any Leased
Premises fails to comply in any material respect with all applicable federal,
foreign, state or local environmental, zoning, land use, and wetlands laws,
rules and regulations.
7.10. EMPLOYMENT AGREEMENTS. A. Glasgow shall have entered into an
Employment Agreement with the Buyer, substantially in the form attached hereto
as Exhibit D (the "Employment Agreement").
-28-
7.11. OPERATING AGREEMENT. The Seller shall have entered into the
Operating Agreement with the Buyer, substantially in the form attached hereto as
Exhibit E.
7.12. CLOSING DELIVERIES. The Buyer shall have received at or prior to the
Closing each of the following documents:
(a) the Xxxx of Sale;
(b) such instruments of conveyance, assignment and transfer, and motor
vehicle transfers and safety inspection certificates, if any, in form and
substance satisfactory to the Buyer, as shall be appropriate to convey, transfer
and assign to, and to vest in, the Buyer, good and marketable title to the
Assets other than the Intangible Property;
(c) such instruments of conveyance, assignment and transfer to convey,
transfer and assign to, and to vest in, the Buyer, good and marketable title to
the Intangible Property;
(d) all technical data, formulations, product literature and other
documentation relating to the Assets;
(e) copies of all federal, state, local and foreign income, franchise,
capital, property and other tax returns filed by the Seller with respect to the
Assets since January 1, 1996;
(f) such certificates of the Seller's officers and such other documents
evidencing satisfaction of the conditions specified in this Section 7 as the
Buyer shall reasonably request;
(g) certificate of the Secretary of the Seller attesting to the incumbency
of the Seller's officers, and the authenticity of the resolutions authorizing
the transactions contemplated by the Agreement and the organizational documents
of the Seller;
(h) the originals, if in the Seller's possession, of all building permits,
certificates of occupancy, and other governmental licenses, permits and
approvals, and all plans and specifications relating to the Leased Premises not
previously delivered to the Buyer;
(i) the Employment Agreement, executed by A. Glasgow;
(j) the Opinion of Seller's Counsel;
(k) the Amendment of the Certificate of Incorporation of the Seller to
discontinue the use of the name "D. Glasgow & Sons, Inc." and to file any
instruments as may be necessary with any governmental authority to change their
corporate names and foreign qualifications;
(l) the Operating Agreement, executed by Seller;
(m) such other documents, instruments or certificates as the Buyer may
reasonably request in order to evidence the accuracy of the Selling Parties'
representations or compliance by Seller with its covenants hereunder; and
-29-
(n) a Special Power of Attorney from and executed by each of the Selling
Parties.
8. CONDITIONS TO OBLIGATIONS OF THE SELLER.
The obligations of the Seller under this Agreement are subject to the
fulfillment, at the Closing, of the following conditions precedent, each of
which may be waived in writing at the sole discretion of the Seller:
8.1. CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE BUYER;
COMPLIANCE WITH COVENANTS AND OBLIGATIONS. The representations and warranties of
the Buyer in this Agreement shall be true on and as of the date hereof. The
Buyer shall have performed and complied in all material respects with all
covenants required by this Agreement to be performed or complied with by each of
them prior to or at the date hereof.
8.2. CORPORATE PROCEEDINGS. All corporate, legal and other proceedings
required to be taken on the part of the Buyer to authorize or carry out this
Agreement and the Operating Agreement shall have been taken.
8.3. APPROVALS. All other governmental agencies, departments, bureaus,
commissions and similar bodies, the consent, authorization or approval of which
is necessary under any applicable law, rule, order or regulation for the
consummation by the Buyer of the transactions contemplated by this Agreement and
the Operating Agreement shall have consented to, authorized, permitted or
approved such transactions.
8.4. CONSENTS OF LENDERS, LESSORS AND OTHER THIRD PARTIES. Except as set
forth on Schedule 8.4, the Buyer shall have received all requisite and material
consents and approvals of all lenders, lessors and other third parties whose
consent or approval is required in order for the Buyer to consummate the
transactions contemplated by this Agreement and the Operating Agreement,
including but not limited to those set forth on Schedule 3.2 attached hereto.
8.5. ADVERSE PROCEEDINGS. No action or proceeding by or before any court
or other governmental body shall have been instituted by any governmental body
or person whatsoever which shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement or which might affect the right of
the Seller to transfer the Assets or would affect the right of the Buyer to
acquire the Assets.
8.6. CLOSING DELIVERIES. The Seller shall have received at or prior to the
Closing each of the following documents:
(a) such certificates of the Buyer's officers and such other documents
evidencing satisfaction of the conditions specified in this Section 8 as the
Seller shall reasonably request;
(b) a certificate of the Secretary of the Buyer attesting to the
incumbency of the Buyer's officers, and the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement and the
organizational documents of the Buyer;
-30-
(c) the Assumption Agreement executed by the Buyer and accepted by the
Seller;
(d) payment of the Purchase Price;
(e) the Employment Agreement, executed by the Buyer; and
(f) such other documents, instruments or certificates as the Seller may
reasonably request.
9. POST-CLOSING AGREEMENTS.
9.1. PROPRIETARY INFORMATION.
(a) The Seller shall hold in confidence, and use its best efforts to have
all officers, shareholders, directors and personnel hold in confidence, all
knowledge and information of a secret or confidential nature with respect to the
Business, and shall not disclose, publish or make use of the same without the
consent of the Buyer, except to the extent that such information shall have
become public knowledge other than by breach of this Agreement by the Seller or
by any other persons who have agreed not to disclose, publish or make use of
such information.
(b) The Seller agrees that the remedy at law for any breach of this
Section 9.1 would be inadequate and that the Buyer shall be entitled to
injunctive relief in addition to any other remedy it may have upon breach of any
provision of this Section 9.1.
9.2. SOLICITATION OR HIRING OF FORMER EMPLOYEES. Except as provided by law
or with the written consent of the Buyer, for a period of five (5) years after
the date hereof, the Selling Parties, any persons or entities that are not
natural persons, that directly or indirectly, through one or more
intermediaries, control, are controlled by, or are under common control with,
the Seller (the "Corporate Affiliates") shall not solicit any person who was a
Seller's Employee on the date hereof, and has been employed, and not terminated
without cause, by the Buyer, to terminate his employment with the Buyer or to
become an employee of the Seller or its Corporate Affiliates or hire any person
who was such an employee on the date hereof.
9.3 NON-COMPETITION AGREEMENT.
(a) For a period of three (3) years after the date hereof, neither the
Selling Parties nor any Corporate Affiliate thereof shall directly or
indirectly, except as contemplated by the Operating Agreement: (i) design,
manufacture, market or sell any product or service which has the same or
substantially the same function and primary application as any existing or
proposed product or service manufactured, marketed or sold by the Seller on or
prior to the date hereof or (ii) engage in, manage, operate, be connected with
or acquire any interest in, as an employee, consultant, advisor, agent, owner,
partner, co-venturer, principal, director, shareholder, lender or otherwise, any
business competitive with the business of the Seller or the Buyer as conducted
on the date hereof (a "Competitive Business"), in any state or any foreign
country in which the Seller conducted business during the two (2) years prior to
the date hereof, except that the Seller may own, in the aggregate, not more than
five percent (5%) of the outstanding shares of any
-31-
publicly held corporation which is a Competitive Business which has shares
listed for trading on a securities exchange registered with the Securities and
Exchange Commission or through the automatic quotation system of a registered
securities association.
(b) The parties hereto agree that the duration and geographic scope of the
non-competition provision set forth in this Section 9.3 are reasonable. In the
event that any court determines that the duration or the geographic scope, or
both, are unreasonable and that such provision is to that extent unenforceable,
the parties hereto agree that the provision shall remain in full force and
effect for the greatest time period and in the greatest area that would not
render it unenforceable. The parties intend that this non-competition provision
shall be deemed to be a series of separate covenants, one for each and every
county of each and every state of the United States of America and each and
every political subdivision of each and every country outside the United States
of America where this provision is intended to be effective. The Seller agrees
that damages are an inadequate remedy for any breach of this provision and that
the Buyer shall, whether or not it is pursuing any potential remedies at law, be
entitled to equitable relief in the form of preliminary and permanent
injunctions without bond or other security upon any actual or threatened breach
of this non-competition provision. If the Seller or any Corporate Affiliate
shall violate this Section 9.3, the duration of this Section 9.3 automatically
shall be extended as against such violating party for a period equal to the
period during which such party shall have been in violation of this Section 9.3.
The covenants contained in this Section 9.3 are deemed to be material and the
Buyer is entering into this Agreement relying on such covenants.
9.4. SHARING OF DATA. The Seller shall have the right for a period of
seven (7) years following the date hereof to have reasonable access to such
books, records and accounts, including financial and tax information,
correspondence, production records, employment records and other similar
information as are transferred to the Buyer pursuant to the terms of this
Agreement for the limited purposes of concluding its involvement in the business
of the Seller prior to the date hereof and for complying with its obligations
under applicable securities, tax, environmental, employment or other laws and
regulations. The Buyer shall have the right for a period of seven (7) years
following the date hereof to have reasonable access to those books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other records which are retained by the Seller
pursuant to the terms of this Agreement to the extent that any of the foregoing
relates to the Business transferred to the Buyer hereunder or is otherwise
needed by the Buyer in order to comply with its obligations under applicable
securities, tax, environmental, employment or other laws and regulations.
9.5. COOPERATION IN LITIGATION. Each party hereto will fully cooperate
with the other in the defense or prosecution of any litigation or proceeding
already instituted or which may be instituted hereafter against or by such party
relating to or arising out of the conduct of the Business prior to or after the
date hereof (other than litigation arising out of the transactions contemplated
by this Agreement and except as otherwise expressly provided herein). The party
requesting such cooperation shall pay the out-of-pocket expenses (including
legal fees and disbursements) of the party providing such cooperation and of its
officers, directors, employees and agents reasonably incurred in connection with
providing such cooperation, but shall not be
-32-
responsible to reimburse the party providing such cooperation for such party's
time spent in such cooperation or the salaries or costs of fringe benefits or
similar expenses paid by the party providing such cooperation to its officers,
directors, employees and agents while assisting in the defense or prosecution of
any such litigation or proceeding.
9.6. CUSTOMER AND OTHER BUSINESS RELATIONSHIPS. The Selling Parties will
cooperate with the Buyer in its efforts to continue and maintain, with lessors,
licensors, customers, suppliers and other business associates of any of the
Selling Parties, the same business relationships with the Buyer after the
Closing as maintained with such Selling Party before the Closing, with respect
to the business to be carried on by the Buyer utilizing the Assets. The Selling
Parties will refer to the Buyer all inquiries relating to the Business from
customers and all such other persons. The Selling Parties will not take any
action designed or intended to have the effect of discouraging any customer or
such other person from continuing or maintaining the same such business with the
Buyer after the Closing.
9.7. REMAINING LICENSES. Seller shall exercise all commercially reasonable
efforts to obtain all requisite consents not otherwise provided at Closing for
the transfer of Licenses hereunder from Seller to Buyer as soon as practicable,
but in no event later than sixty (60) days after Closing.
10. INDEMNIFICATION AND REIMBURSEMENT.
10.1. INDEMNIFICATION.
(a) The Selling Parties shall indemnify, defend and hold harmless the
Buyer and any parent, subsidiary or affiliate thereof and all directors,
officers, employees, agents and consultants of each of the foregoing
(collectively, the "Buyer Group") from and against all demands, claims, actions
or causes of action, assessments, losses, damages, liabilities (whether
absolute, accrued, contingent or otherwise), costs and expenses, including but
not limited to, interest, penalties and attorneys' fees and expenses
(collectively, "Damages"), asserted against, imposed upon or incurred by the
Buyer Group or any member thereof, directly or indirectly, by reason of or
resulting from or relating to any of the following (but in any event excluding
the Assumed Liabilities) at such time as the Damages, whether actual or alleged,
exceed $100,000 and only to the excess thereof, but limited to the sum of the
Cash Consideration plus the Additional Cash Consideration plus $1,000,000:
(i) liability and obligation of the Selling Parties, including,
without limitation, the liabilities set forth in Section 1.3(b)(i) through
(xiv);
(ii) misrepresentation or breach of warranty or covenant or
agreement by the Selling Parties made or contained in this Agreement, the
Operating Agreement, or in any certificate, document, writing or instrument
furnished or to be furnished to the Buyer under this Agreement or the Operating
Agreement;
(iii) failure to comply with any bulk sales or similar laws
applicable to the transactions contemplated hereby;
-33-
(iv) litigation or other claim arising from acts, failures to act or
events which occurred prior to the date hereof and any claims for product
failure or defect (including but not limited to claims for personal injury,
property damages and breach of warranty) which relate to any product
manufactured and sold prior to the date hereof; and
Notwithstanding anything herein to the contrary, the limitation on
indemnification set forth above in this Section 10.1(a) shall not apply if and
to the extent that any member of the Seller Group, as hereinafter defined, shall
have been determined (whether by a court of competent jurisdiction, arbitration,
mediation, or settlement) to have committed fraud against the Buyer Group with
respect to any of the transactions contemplated herein.
(b) The Buyer shall indemnify, defend and hold harmless the Selling
Parties and any parent, subsidiary or affiliate thereof and all directors,
officers, employees, agents and consultants of the foregoing (collectively, the
"Seller Group") from and against all Damages asserted against, imposed upon or
incurred by the Seller Group or any member thereof, directly or indirectly, by
reason of or resulting from or relating to the breach of any representation,
warranty or covenant set forth herein, or the operation of the Business
post-closing, or the Assumed Liabilities, at such time as the Damages, whether
actual or alleged, exceed $100,000 and only to the excess thereof, but limited
to $1,000,000.
Notwithstanding anything herein to the contrary, the limitation on
indemnification set forth above in this Section 10.1(b) shall not apply if and
to the extent that any member of the Buyer Group shall have been determined
(whether by a court of competent jurisdiction, arbitration, mediation, or
settlement) to have committed fraud against the Seller Group with respect to any
of the transactions contemplated herein.
(c) Unless the Indemnifying Party shall have been determined (whether by a
court of competent jurisdiction, arbitration, mediation, or settlement) to have
committed fraud, the indemnity provisions set forth herein shall be the
exclusive remedy for the Indemnified Party, except in the case of any injunctive
relief that may otherwise be available to the Indemnified Party pursuant to the
restrictive covenants contained herein.
10.2. CERCLA. Nothing contained in this Agreement shall be deemed a waiver
of the right of the Buyer to maintain a private party cost recovery action under
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 et seq.
10.3. NOTICE AND DEFENSE OF CLAIMS. The parties' obligations and
liabilities hereunder with respect to claims resulting from the assertion of
liability by the Buyer Group, the Seller Group or third parties shall be subject
to the following terms and conditions:
(a) Notice. The party seeking indemnification hereunder (each, an
"Indemnified Party") shall give prompt written notice to the party from whom
indemnification is being sought (each, an "Indemnifying Party") of any claim or
event known to it prior to the expiration of the Survival Period which does or
may give rise to a claim by the Indemnified Party against the Indemnifying
Parties for which the Indemnified Party believes it is entitled to
indemnification pursuant to this Section 10 of this Agreement, stating the
nature and basis of said claims or
-34-
events and the amounts thereof, to the extent known, and in the case of any
claim, action, suit or proceeding brought by any third party, a copy of any
claim, process or legal pleadings with respect thereto promptly after any such
documents are received by the indemnified party. Such notice shall be given in
accordance with Section 12 hereof.
(b) Third Party Claims or Actions.
(i) In the event any claim, action, suit or proceeding is made or
brought by any third party against the Indemnified Party, with respect to which
the Indemnifying Party may have liability for Damages under this Section 10 of
this Agreement, the Indemnifying Party shall, at its own expense, be entitled to
participate in and, to the extent that it shall wish, jointly and with any other
Indemnifying Party, to assume the defense, with independent counsel reasonably
satisfactory to the Indemnified Party.
(ii) If the Indemnifying Party elects to assume control of such
defense or settlement, they shall conduct such defense or settlement in a manner
reasonably satisfactory and effective to protect the Indemnified Party fully;
such Indemnifying Party and its counsel will keep the Indemnified Party fully
advised as to the conduct of such defense or settlement, and no compromise or
settlement shall be agreed or made without the written consent of the
Indemnified Party which shall not be unreasonably withheld or delayed. In any
case, the Indemnified Party shall have the right to employ its own counsel and
such counsel may participate in such action, but the reasonable fees and
expenses of such counsel shall be at the expense of the Indemnified Party, when
and as incurred, unless (A) the employment of counsel by the Indemnified Party
has been authorized in writing by the Indemnifying Party, (B) the Indemnified
Party shall have reasonably concluded that there may be a conflict of interest
between the Indemnifying Party and the Indemnified Party in the conduct of the
defense of such action, (C) the Indemnifying Party shall not in fact have
employed independent counsel reasonably satisfactory to the Indemnified Party to
assume the defense of such action and shall have been so notified by the
Indemnified Party, (D) the Indemnified Party shall have reasonably concluded and
specifically notified the Indemnifying Party either that there may be specific
defenses available to it which are different from or additional to those
available to it or that such claim, action, suit or proceeding involves or could
have a material adverse effect upon it beyond the financial resources of the
Indemnifying Party or the scope of this Agreement, or (E) the Indemnifying Party
fails to conduct such defense or settlement in a manner reasonably satisfactory
to protect the Indemnified Party fully. If clause (B), (C), (D) or (E) of the
preceding sentence shall be applicable, then counsel for the Indemnified Party
shall have the right to direct the defense of such claim, action, suit or
proceeding on behalf of the Indemnified Party and the reasonable fees and
disbursements of such counsel shall constitute Damages hereunder.
(iii) If the Indemnifying Party do not elect to assume the defense
of any such claim, or if they fail to conduct said defense or settlement in a
manner reasonably satisfactory to protect the Indemnified Party fully, the
Indemnified Party may engage independent counsel selected by the Indemnified
Party to assume the defense and may, with the prior written consent of the
Indemnifying Parties, which shall not be unreasonably withheld or delayed,
contest, pay, settle or compromise any such claim on such terms and conditions
as the Indemnified Party may
-35-
determine. The reasonable fees and disbursements of such counsel shall
constitute Damages hereunder.
(iv) The Buyer and the Selling Parties, as the case may be, shall be
kept fully informed of such claim, action, suit or proceeding at all stages
thereof whether or not such party is represented by its own counsel.
10.4. COOPERATION. The parties hereto agree to render to each other such
assistance as they may reasonably require of each other and to cooperate in good
faith with each other in order to ensure the proper and adequate defense of any
claim, action, suit or proceeding brought by any third party. Where counsel has
been selected by the Selling Parties or by the Buyer pursuant to Section 10.3,
the Selling Parties or the Buyer, as the case may be, shall be entitled to rely
upon the advice of such counsel in the conduct of the defense.
10.5. CONFIDENTIALITY. The parties agree to cooperate in such a manner as
to preserve in full the confidentiality of all confidential business records and
the attorney-client and work-product privileges. In connection therewith, each
party agrees that (a) it will use its best efforts, in any action, suit or
proceeding in which it has assumed or participated in the defense, to avoid
production of confidential business records and (b) all communications between
any party hereto and counsel responsible for or participating in the defense of
any action, suit or proceeding shall, to the extent possible, be made so as to
preserve any applicable attorney-client or work-product privilege.
10.6. REMEDIES. The parties acknowledge and agree that the indemnification
provisions contained in Section 10 shall be the sole and exclusive remedy for
Damages, except for injunctive relief that may be available with respect to the
breach, or potential breach, of the protective covenants set forth herein.
Notwithstanding anything herein to the contrary, the limitation on
indemnification set forth in this Section 10.6 shall not apply if and to the
extent that any member of the Buyer Group shall have been determined (whether by
a court of competent jurisdiction, arbitration, mediation, or settlement) to
have committed fraud against the Seller Group with respect to any of the
transactions contemplated herein.
11. TRANSFER AND SALES TAX.
The Buyer shall be responsible for and pay all filing and recording taxes
and fees, including trademark registration fees, and all sales, use and transfer
taxes and fees, if any, upon the sale and transfer of the Assets hereunder.
12. NOTICES.
Any notices or other communications required or permitted hereunder shall
be sufficiently given if in writing (including telecommunications) and delivered
personally or sent by telex, telecopy or other wire transmission (with request
for assurance in a manner typical with respect to communications of that type),
federal express or other overnight air courier (postage
-36-
prepaid), registered or certified mail (postage prepaid with return receipt
requested), addressed as follows or to such other address of which the parties
may have given notice:
To the Seller: D. Glasgow & Sons, Inc.
000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, President
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
With a copy to: Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxxxx, Esq.
and Xxxxxxx Xxxxxx, Esq.
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
To the Buyer: Happy Kids Inc.
000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxx, President
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
With a copy to: Xxxxxxxx Xxxxxxxxx Professional Corporation
000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxx X. Xxxxx, Esq.
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally or by wire
transmission; (b) on the next business day after mailing or deposit with an
overnight air courier; or (c) five business days after being sent, if sent by
registered or certified mail.
13. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. The parties may not
assign all or a portion of its rights and obligations hereunder without the
prior written consent of the other party. Any assignment in contravention of
this provision shall be void.
-37-
14. ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS.
(a) This Agreement, all Schedules and Exhibits hereto, the Operating
Agreement and all agreements and instruments to be delivered by the parties
pursuant hereto represent the entire understanding and agreement between the
parties hereto with respect to the subject matter hereof and supersede all prior
oral and written and all contemporaneous oral negotiations, commitments and
understandings between such parties except as expressly provided herein. The
Buyer and the Seller, by the consent of their respective Boards of Directors, or
officers authorized by such Boards, may amend or modify this Agreement, in such
manner as may be agreed upon, by a written instrument executed by the Buyer and
the Selling Parties.
(b) If the provisions of any Schedule or Exhibit to this Agreement are
inconsistent with the provisions of this Agreement, the provisions of the
Agreement shall prevail. The Exhibits and Schedules attached hereto or to be
attached hereafter are hereby incorporated as integral parts of this Agreement.
15. EXPENSES.
Except as otherwise expressly provided herein, the Buyer and the Seller
shall each pay their own expenses in connection with this Agreement and the
transactions contemplated hereby.
16. GOVERNING LAW.
This Agreement and its validity, construction and performance shall be
governed in all respects by the laws of New York, without giving effect to
principles of conflicts of law. Each party submits to the non-exclusive
jurisdiction of any state or federal court in the State and County of New York
in any action arising out of or relating to this Agreement or the transactions
contemplated hereby.
17. SECTION HEADINGS.
The section headings are for the convenience of the parties and in no way
alter, modify, amend, limit, or restrict the contractual obligations of the
parties.
18. SEVERABILITY.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
19. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which shall be one and the same
document.
-38-
20. WAIVER.
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party, (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given, and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
21. AMBIGUITY IN DRAFTING.
Each party shall have been deemed to have participated equally in the
drafting of this Agreement and the agreements contemplated hereby and any
ambiguity in any such contracts shall not be construed against any purported
author thereof.
22. REDUNDANT DISCLOSURE. All information disclosed in any Schedule hereto
as exceptions to any representation or warranty or in connection with any other
particular section hereof shall be deemed to be disclosed in every other
Schedule, or in connection with any other section hereof, if relevant thereto.
[Signature page follows]
-39-
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
SELLING PARTIES:
D. GLASGOW & SONS, INC.
/s/ Xxxxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxx
----------------------------- ---------------------------
Witness Name: Xxxxxx Xxxxxxx
Title: President
/s/ Xxxxxxx Xxxxxx /s/ Xxxxxx Xxxxxxx
------------------------------- ------------------------------
Witness Xxxxxx Xxxxxxx
-40-
BUYER:
ATTEST: HAPPY KIDS INC.
/s/ Xxxx Xxxxx By: /s/ Xxxx Xxxxx
----------------------------- ---------------------------
Secretary Name: Xxxx Xxxxx
Title: President and Chief Executive
Officer
-41-
