EXHIBIT 2.1
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Execution Copy
PURCHASE AGREEMENT
by and among
SB ACQUISITION CORP.,
SIMPLY BLUE, INC.,
XXXXXXX X. BLUE, LLC,
XXXXXX X. XXXXXX,
XXXXXXX X. XXXXXX
and
XXXXXX XXXXXXX
dated as of October 31, 2005
TABLE OF CONTENTS
Page
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ARTICLE I PURCHASE AND SALE OF ASSETS.............................................................................1
Section 1.1 Purchase and Sale of Assets...................................................................1
Section 1.2 Assumption of Liabilities.....................................................................3
Section 1.3 Excluded Liabilities..........................................................................4
Section 1.4 Purchase Price; Allocation....................................................................4
Section 1.5 Closing.......................................................................................5
Section 1.6 Deliveries by Sellers.........................................................................5
Section 1.7 Deliveries by Buyer...........................................................................6
Section 1.8 Earnout Payment...............................................................................6
Section 1.9 Covenants During Earnout Payment Periods......................................................8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLING PARTIES..................................................9
Section 2.1 Corporate Organization; Subsidiaries..........................................................9
Section 2.2 Authorization.................................................................................9
Section 2.3 Consents and Approvals; No Violation.........................................................10
Section 2.4 Financial Statements.........................................................................10
Section 2.5 No Undisclosed Liabilities...................................................................10
Section 2.6 Absence of Certain Changes...................................................................11
Section 2.7 Real Property................................................................................12
Section 2.8 Intellectual Property........................................................................12
Section 2.9 Certain Contracts............................................................................13
Section 2.10 Permits and Other Authorizations.............................................................14
Section 2.11 Assets.......................................................................................14
Section 2.12 Insurance....................................................................................14
Section 2.13 Labor Relations..............................................................................14
Section 2.14 Benefit Plans; ERISA.........................................................................15
Section 2.15 Taxes........................................................................................16
Section 2.16 Environmental Matters........................................................................17
Section 2.17 Litigation...................................................................................17
Section 2.18 Compliance with Law..........................................................................17
Section 2.19 Personnel....................................................................................17
Section 2.20 Related Party Transactions...................................................................17
Section 2.21 Inventory....................................................................................17
Section 2.22 Accounts Receivable..........................................................................18
Section 2.23 Customers and Suppliers......................................................................18
Section 2.24 Orders and Commitments.......................................................................18
Section 2.25 Product Warranties...........................................................................18
Section 2.26 Brokers and Finders..........................................................................18
Section 2.27 Disclosure...................................................................................19
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................19
Section 3.1 Corporate Organization.......................................................................19
Section 3.2 Authorization................................................................................19
Section 3.3 No Violation; Consents.......................................................................19
Section 3.4 Brokers and Finders..........................................................................20
ARTICLE IV.......................................................................................................20
Section 4.1 Taxes; Post-Closing Access...................................................................20
Section 4.2 Employee Benefits............................................................................21
Section 4.3 Publicity....................................................................................21
Section 4.4 Confidentiality..............................................................................21
Section 4.5 Non-Competition..............................................................................22
Section 4.6 Further Assurances...........................................................................22
Section 4.7 Change of Name...............................................................................22
Section 4.8 Discharge of Business's Liabilities; Post Closing Operations of Seller.......................23
Section 4.9 Hartmarx Guaranty............................................................................23
Section 4.10 Worn and L. Paseo............................................................................23
ARTICLE V SURVIVAL AND INDEMNIFICATION...........................................................................23
Section 5.1 Survival of Representations, Warranties and Covenants........................................23
Section 5.2 Indemnification..............................................................................24
Section 5.3 Claims for Indemnification...................................................................24
Section 5.4 Limitations on Indemnification...............................................................25
Section 5.5 Exclusive Remedy.............................................................................25
Section 5.6 Right to Set-off.............................................................................26
ARTICLE VI MISCELLANEOUS.........................................................................................26
Section 6.1 Amendment, Extension and Waiver..............................................................26
Section 6.2 Expenses.....................................................................................26
Section 6.3 Entire Agreement; No Third-Party Beneficiaries...............................................26
Section 6.4 Headings.....................................................................................26
Section 6.5 Notices......................................................................................26
Section 6.6 Assignment...................................................................................27
Section 6.7 Severability.................................................................................27
Section 6.8 Applicable Law...............................................................................28
Section 6.9 Interpretation...............................................................................28
Section 6.10 Jurisdiction.................................................................................28
Section 6.11 Service of Process...........................................................................29
Section 6.12 WAIVER OF JURY TRIAL.........................................................................29
Section 6.13 Specific Performance.........................................................................29
Section 6.14 Counterparts.................................................................................30
ARTICLE VII CERTAIN DEFINITIONS..................................................................................30
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of October 31, 2005 (this "Agreement"), by and
among SB Acquisition Corp., a Delaware corporation ("Buyer"), Hartmarx
Corporation, a Delaware corporation ("Hartmarx") (solely with respect to Section
4.9 and Article VI), Simply Blue, Inc., a Washington corporation ("Simply"),
Xxxxxxx X. Blue, LLC, a Washington limited liability company ("Seymour" and
together with Simply, "Sellers" and each a "Seller"), Xxxxxx Xxxxxx ("X.
Xxxxxx"), Xxxxxxx X. Xxxxxx ("X. Xxxxxx") and Xxxxxx Xxxxxxx ("Xxxxxxx" and
together with X. Xxxxxx and X. Xxxxxx, the "Securityholders," and together with
the Sellers, the "Selling Parties")
WHEREAS, Sellers are engaged in the business of designing,
sourcing, marketing and selling women's apparel products (the "Business");
WHEREAS, X. Xxxxxx, as Trustee of the Xxxxxx X. Xxxxxx
Revocable Trust, and X. Xxxxxx, as Trustee of the Xxxxxxx X. Xxxxxx Revocable
Trust, own all of the outstanding capital stock of Simply, and X. Xxxxxx, as
Trustee of the Xxxxxx X. Xxxxxx Revocable Trust, and Hermann are the sole
members of Seymour; and
WHEREAS, Buyer desires to purchase from Sellers, and Sellers
desire to sell, assign, transfer, convey and deliver to Buyer, substantially
all the assets, business and operations of Sellers, together with certain
obligations and liabilities relating thereto, all in the manner and subject to
the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the premises and the
covenants, agreements, representations and warranties contained herein,
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
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Section 1.1 Purchase and Sale of Assets.
(a) Acquired Assets. Subject to the terms of this
Agreement, Sellers agree to sell, assign, transfer, convey and deliver to
Buyer, and Buyer agrees to purchase and acquire from Sellers, free and clear
of all Liens other than Permitted Liens, all of Sellers' right, title and
interest in and to all of their respective rights, properties and assets of
every kind, nature, character and description (whether real, personal or
mixed, whether tangible or intangible, and wherever located) and whether or
not required to be reflected on a balance sheet prepared in accordance with
GAAP (collectively, the "Assets"), including without limitation, the
following:
(i) all goodwill of the Business as a going
concern;
(ii) all contracts, agreements, leases,
instruments, obligations, arrangements or other understandings (whether
written or oral) (including amendments and supplements, modifications,
and side letters or agreements) (the "Business Contracts"), including
those identified in Section 1.1(a)(ii) of the written statement delivered
to Buyer by Sellers herewith and dated as of the date hereof (the "Seller
Disclosure Schedule");
(iii) all trade accounts receivable and all notes,
bonds and other evidences of indebtedness and rights to receive payments
arising out of sales ("Accounts Receivable"), including those identified
in Section 1.1(a)(iii) of the Seller Disclosure Schedule;
(iv) all marketing, sales and promotional
literature, books, records, files, documents, financial records, bills,
accounting, internal and audit records, operating manuals, personnel
records, customer and supplier lists and files, preprinted materials and
similar materials;
(v) all rights, title and interests in and to all
real property leases, including improvements, fixtures, fittings thereon
and appurtenances thereto, including those identified in Section
1.1(a)(v) of the Seller Disclosure Schedule;
(vi) all rights to all telephone numbers;
(vii) all intangible assets, including Intellectual
Property and other intangible assets of an intellectual property nature,
including the Intellectual Property listed on Section 1.1(a)(vii) of the
Seller Disclosure Schedule;
(viii) all payments, deposits (including security
deposits) and prepaid expenses and all rights to insurance proceeds;
(ix) all raw materials, components,
work-in-process, finished products, inventory, office and other supplies,
spare parts, packaging materials, samples and other accessories related
thereto, wherever located, including any of the foregoing purchased
subject to any conditional sales or title retention agreement in favor of
any other Person, together with all rights against suppliers of such
inventories;
(x) all furnishings, furniture, fixtures,
equipment, tools, machinery, vehicles, art work and other tangible
personal property, including the tangible personal property listed on
Section 1.1(a)(x) of the Seller Disclosure Schedule;
(xi) all rights under warranties, representations
and guarantees made by suppliers, manufacturers or contractors;
(xii) all Permits, including the Permits listed on
Section 1.1(a)(xii) of the Seller Disclosure Schedule;
(xiii) except to the extent set forth in Section
1.1(b) below, all cash and cash equivalents such as bank deposits,
certificates of deposit and marketable securities (together, "Cash"); and
(xiv) all claims and causes of action against other
Persons (regardless of whether or not such claims and causes of action
have been asserted), and all rights of indemnity, warranty rights, rights
of contribution, rights to refunds, rights of reimbursement and other
rights of recovery (regardless of whether such rights are currently
exercisable).
(b) Excluded Assets. Notwithstanding anything contained
herein to the contrary, Sellers shall not sell, assign, transfer, convey or
deliver to Buyer, and Buyer shall not purchase from Sellers the following
assets, properties, interests and rights of Sellers (the "Excluded Assets"):
(i) the organizational documents, seals, minute
books, and other documents relating exclusively to the organization,
maintenance and existence of Sellers as legal entities, including
taxpayer and other identification numbers, Tax Returns, Tax information
and Tax records, and books and records related exclusively to the
Excluded Assets or the Excluded Liabilities;
(ii) the rights of Sellers under this Agreement;
(iii) any refunds (or rights thereto) relating to
income Taxes attributable to Sellers for all periods ending on or prior
to the date hereof;
(iv) all Cash in excess of $125,000; and
(v) any right, property or asset which is listed in
Section 1.1(b)(iv) of the Seller Disclosure Schedule.
Section 1.2 Assumption of Liabilities. Subject to the terms
of this Agreement and excluding the Excluded Liabilities, Buyer hereby agrees
to assume only the following liabilities and obligations (collectively, the
"Assumed Liabilities"):
(a) the accounts payable and accrued expenses of
Sellers incurred in the ordinary and usual course of business consistent with
past practice described in Section 1.2(a) of the Seller Disclosure Schedule;
and
(b) the obligations of Sellers under the Business
Contracts listed in Section 1.2(b) of the Seller Disclosure Schedule but only
to the extent such obligations (i) pertain to the furnishing of goods and
services after the Closing Date or to the payment for goods and services
provided to Sellers prior to the Closing Date in the ordinary and usual course
of business consistent with past practice, (ii) do not arise from or relate to
any breach by a Seller of any such Business Contracts and (iii) do not arise
from or relate to any event, circumstance or condition occurring or existing
on or prior to the date hereof that, with notice or lapse of time, would
constitute or result in a breach of any of such Business Contracts.
Section 1.3 Excluded Liabilities. Except as expressly
provided in Section 1.2, Buyer shall not assume or be liable for any other
Liabilities of Sellers or any other Person, whether or not relating to the
Business (the "Excluded Liabilities"), including the following:
(a) all Liabilities relating to Taxes attributable to
or imposed upon Sellers or any of their respective affiliates (or for which
Sellers or any of their respective affiliates may otherwise be liable) for any
period (or portion thereof) ending on or prior to the date hereof (including,
without limitation, all Liabilities of Sellers and their respective affiliates
for Taxes related to the transactions contemplated by this Agreement);
(b) any Liability of Sellers arising out of or relating
to the execution, delivery or performance of this Agreement;
(c) any Liability of Sellers for any fees, costs or
expenses of the type referred to in Section 6.2;
(d) any Liability relating to any Excluded Asset;
(e) any Liability that relates to, or arises out of,
directly or indirectly, the operation of the Business or Sellers' ownership,
control or use of the Assets prior to the date hereof;
(f) any Liability under or otherwise attributable to
the Benefit Plans (as defined in Section 2.14(a)), including any Liability for
benefits payable thereunder;
(g) any Liability in any way attributable to the
performance of services for Sellers prior to the date hereof by any employee,
independent contractor or agent of Sellers or any other individuals rendering
services to Sellers; and
(h) any Liability for payment of bonus compensation
based upon the earnings of any Seller or the payment of any bonus contingent
upon the sale of the Assets or calculated with respect to the Purchase Price.
Section 1.4 Purchase Price; Allocation.
(a) Upon the terms and subject to the conditions set
forth herein, in consideration for the aforesaid sale, assignment, transfer
and conveyance of the Assets, Buyer shall (i) deliver or cause to be delivered
to Sellers at the Closing $21,000,000.00 (the "Closing Payment") by wire
transfer of immediately available funds to an account or accounts designated
by Sellers and (ii) deliver or cause to be delivered to Sellers the payments,
if any, required by Section 1.8 at such time as any such payments are
required. For purposes of this Agreement, "Purchase Price" means the sum of
the Closing Payment and the net amount of any payments made pursuant to
Section 1.8.
(b) The Purchase Price (plus the Assumed Liabilities
assumed pursuant to Section 1.2(a)) will be allocated among the Assets and the
restrictive covenant contained in Section 4.5 in the manner required by
Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code").
Within 90 days following the date hereof, Buyer shall prepare and deliver to
Sellers IRS Form 8594 and any required exhibits thereto, setting forth the
allocation of the Purchase Price (plus the Assumed Liabilities) among the
Assets and the restrictive covenant contained in Section 4.5 in the manner
required by Section 1060 of the Code. At Buyer's option, Buyer may engage, at
Buyer's expense, an independent appraisal firm selected by Buyer to determine
the fair market value of the Assets to facilitate such allocation. If any
addition to the Purchase Price is made pursuant to Section 1.8(f), the amount
of such addition will be allocated by the Buyer among the Assets in accordance
with Section 1060 of the Code. Buyer and Sellers agree to file any additional
Tax Return required to be filed pursuant to Section 1060 of the Code or other
applicable local law.
(c) Sellers and Buyer shall (i) be bound by the
allocation for all Tax purposes; (ii) prepare and file all Tax Returns in a
manner consistent with the allocation; and (iii) take no position inconsistent
with the allocation in any Tax Return, any proceeding before any taxing
authority or otherwise. In the event that the allocation is disputed by any
taxing authority, the party receiving notice of such dispute shall promptly
notify and consult with the other party and keep the other party apprised of
material developments concerning resolution of such dispute.
Section 1.5 Closing. The purchase and sale of the Assets
(the "Closing") shall take place at the offices of Skadden, Arps, Slate,
Xxxxxxx & Xxxx LLP, 000 Xxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, effective
as of the close of business, on the date hereof.
Section 1.6 Deliveries by Sellers. At the Closing, Sellers
shall deliver, or cause to be delivered, to Buyer the following:
(a) one or more assignments and bills of sale for the
Assets, in a form reasonably satisfactory to Buyer;
(b) instruments of assignment with respect to the
Intellectual Property and real property leases included in the Assets;
(c) a certification of non-foreign status of each
Seller in the form which complies with the requirements of Section 1445 of the
Code and the regulations promulgated thereunder;
(d) employment agreements with each of X. Xxxxxx and
Xxxxxxx, duly executed by X. Xxxxxx and Hermann, as applicable (the
"Employment Agreements"),
(e) an opinion of Xxxx Xxxxxx Xxxxxxxx, counsel to the
Selling Parties, dated as of the Closing Date, substantially in the form
attached hereto,
(f) a collateral access letter from the lessor under
each Real Property Lease, substantially in the form attached hereto;
(g) an estimated statement of the Assets and the
Assumed Liabilities as of the close of business on October 31, 2005, which
shall be prepared in good faith in conformity with GAAP; and
(h) all other previously undelivered documents,
instruments or writings required to be delivered by any of the Selling Parties
to Buyer at or prior to the Closing, pursuant to this Agreement or otherwise
required in connection herewith.
Section 1.7 Deliveries by Buyer. At the Closing, Buyer
shall deliver, or cause to be delivered, to Sellers the following:
(a) the Closing Payment;
(b) an assumption agreement with respect to the Assumed
Liabilities, in a form reasonably satisfactory to Sellers;
(c) the Employment Agreements,
(d) an opinion of Xxxxx X. Xxxxxxx, General Counsel of
Hartmarx, dated as of the Closing Date, substantially in the form attached
hereto, and
(e) all other previously undelivered documents,
instruments or writings required to be delivered by Buyer to Sellers at or
prior to the Closing, pursuant to this Agreement or otherwise required in
connection herewith.
Section 1.8 Earnout Payment.
(a) As soon as practicable, but in no event later than
90 days following the end of each Earnout Payment Period, Buyer shall deliver
to Sellers, a written computation statement prepared by Buyer setting forth
(i) the EBIT, and (ii) the Earnout Payment, if any, for such Earnout Payment
Period (the "Earnout Payment Statement").
(b) After receipt of the Earnout Payment Statement,
Sellers shall have 30 days to review it. Unless Sellers deliver written notice
to Buyer on or prior to the 30th day after receipt of the Earnout Payment
Statement of its disagreement as to any amount included in or omitted from the
Earnout Payment Statement specifying in reasonable detail the basis for its
disagreement, Sellers shall be deemed to have accepted and agreed to the
Earnout Payment Statement. If Sellers so notify Buyer of such an objection to
an Earnout Payment Statement, Sellers and Buyer shall, within 30 days
following the date of such notice (the "Earnout Resolution Period"), attempt
to resolve their differences. Any resolution by them as to any disputed amount
shall be final, binding, conclusive and nonappealable. Any amounts set forth
in the Earnout Payment Statement which are not in dispute ("Undisputed
Amounts") shall be paid in immediately available funds by wire transfer to the
account(s)designated by Sellers within five business days after the date on
which Sellers notify Buyer that such amounts are not in dispute.
(c) If at the conclusion of an Earnout Resolution
Period there are amounts still remaining in dispute, then all amounts
remaining in dispute shall be submitted to a firm of nationally recognized
independent public accountants reasonably acceptable to Buyer and Seller (the
"Neutral Auditor"). If the Buyer and the Sellers are unable to agree on the
choice of an accounting firm, they shall select a nationally recognized
accounting firm by lot (after excluding their respective regular outside
accounting firms). Buyer and Sellers agree to execute, if requested by the
Neutral Auditor, a reasonable engagement letter. The Neutral Auditor shall act
as an arbitrator to determine, based solely on presentations by Buyer and
Sellers, and not by independent review, only those amounts still in dispute.
The Neutral Auditor's determination shall be made within 30 days of its
engagement, shall be set forth in a written statement delivered to Buyer and
Sellers and shall be final, binding and conclusive. The fees and expenses of
the Neutral Auditor shall be allocated between Buyer and Sellers so that
Sellers' share of such fees and expenses shall be equal to the product of (i)
and (ii), where (i) is the aggregate amount of such fees and expenses, and
where (ii) is a fraction, the numerator of which is the amount in dispute that
is ultimately unsuccessfully disputed by Sellers (as determined by the Neutral
Auditor) and the denominator of which is the total amount in dispute submitted
to arbitration. The term "Final Earnout Payment Statement," means a definitive
Earnout Payment Statement accepted by Sellers or agreed to by Buyer and
Sellers in accordance with Section 1.8(b) or a definitive Earnout Payment
Statement resulting from the determinations made by the Neutral Auditor in
accordance with this Section 1.8(c) (in addition to those items theretofore
accepted by Sellers or agreed to by Buyer and Sellers).
(d) The Earnout Payments, if any, as reflected on a
Final Earnout Payment Statement, shall be paid in immediately available funds
by wire transfer to the account(s) designated by Sellers in accordance with
Section 1.8(b) in the case of Undisputed Amounts and within five business days
after the date that the applicable Final Earnout Payment Statement is agreed
to by Sellers and Buyer or is determined by the Neutral Auditor as to Disputed
Amounts.
(e) For purposes of this Section 1.8:
(i) "Earnout Payment" shall be calculated for each
Earnout Payment Period as follows (with EBIT for each such Period
computed separately and without regard to any other period, whether
through loss carry backs or loss carryovers or otherwise, and with each
such Payment determined without any cap or limitation as to amount as to
each such Period or in the aggregate):
(A) if EBIT is less than $6.7 million, there
shall be no Earnout Payment;
(B) if EBIT is $6.7 million or greater but
less than $9.0 million, the Earnout Payment shall be an amount equal
to (1) 20% of EBIT less (2) the applicable Jag Termination
Allowance; and
(C) if EBIT is $9.0 million or greater, the
Earnout Payment shall be an amount equal to (1) 33% of EBIT less (2)
the applicable Jag Termination Allowance.
(ii) "Earnout Payment Period" means each of the
12-month periods beginning December 1 and ending November 30 during the
five-year period beginning December 1, 2005 and ending November 30, 2010.
(iii) "EBIT" means for each Earnout Payment Period,
the earnings of the Business as conducted by Buyer before interest and
income Taxes for such period calculated in accordance with GAAP utilized
by Buyer and excluding (a) all interest expense and other financing costs
of Buyer related to the financing of the Closing Payment, any Earnout
Payments or the assets employed in the Business and (b) amortization of
goodwill, if any, related to the Business or Assets; provided, that the
calculation of EBIT shall exclude the impact of purchase accounting
adjustments arising from applying the provisions of Financial Accounting
Standards Nos. 141 and 142 from time to time for the potential impact, if
any, of goodwill impairment and goodwill amortization and amortization of
intangibles arising from the allocation of the Purchase Price and shall
also exclude non-specific or general allocations of Hartmarx corporate
administrative expenses.
(iv) "Jag Termination Allowance" means with respect
to an Earnout Payment Period, the percentage of net wholesale sales of
the Jag brand calculated in accordance with GAAP utilized by Buyer as
follows: for the Earnout Payment Period ending November 30, 2006, the Jag
Termination Allowance shall be 3% of such net wholesale sales, for the
Earnout Payment Periods ending November 30, 2007 and 2008, the Jag
Termination Allowance shall be 4% of such net wholesale sales up to $16
million of such sales and 5% of such sales in excess of $16 million, and
for the Earnout Payment Periods ending November 30, 2009 and 2010, the
Jag Termination Allowance shall be 5% of such net wholesale sales.
(f) Buyer and Sellers agree that payments made pursuant
to this Section 1.8 will be treated for Tax purposes as adjustments to the
Purchase Price and shall be allocated to goodwill.
Section 1.9 Covenants During Earnout Payment Periods. From
the Closing and continuing until November 30, 2010:
(a) No general corporate overhead expenses of Hartmarx
shall be allocated to the Business in determining EBIT for any Earnout Payment
Period; provided that, the Business shall be charged for all services and
employees and other costs associated with the Business or employees of the
Business by Hartmarx or any of its affiliates (including audit, legal,
insurance and treasury) at the same rate generally charged to Hartmarx's other
businesses for similar services consistent with Hartmarx's applicable
accounting practices.
(b) At Closing, Buyer shall initially adopt the various
operating practices followed by Sellers including, but not limited to, sales
practices, price increases or decreases, inventory procurement, customer
relations, employee base salary and bonus opportunities (other than the salary
and bonus opportunities for the X. Xxxxxx and Xxxxxxx, which shall be governed
by their respective employment agreements with Buyer) and the accounting
thereof. The day-to-day operational decisions and decision-making authority
with respect to the operations of the Business shall be made by X. Xxxxxx (for
so long as he serves as President of Buyer), consistent with the provisions of
this Section 1.9(c) and the authority of other Hartmarx operating unit
presidents and subject to Hartmarx's general policies and procedures,
including such policies and procedures relating to GAAP, financial reporting
and compliance with financing arrangements. Sellers, Securityholders, Buyer
and Hartmarx acknowledge that changes in the general economic conditions of
the retail and apparel industries or to other factors could result in changes
to Buyer's business practices in the future. Annual budgets, capital
expenditure plans and long-term plans shall be prepared by Buyer, and reviewed
and approved by Hartmarx in a manner substantially consistent with other
Hartmarx operating units. However, Hartmarx may require such changes and may
make such operational decisions regarding the Business as it deems appropriate
in its sole discretion if the Business is not operated in accordance with such
approved annual budgets, capital expenditure plans and long-term plans, or if
general economic conditions or other factors make it necessary, appropriate or
advisable for Buyer to change its operating practices, consistent with
Hartmarx's over all responsibilities for the corporate enterprise as a whole
and its rights as the sole stockholder of Buyer.
(c) Buyer will be operated as a separate entity or
separate division sufficient to permit the calculation of EBIT and the Earnout
Payment provided in Section 1.8.
(d) The location of the Business and the principal
place of business of the Buyer shall be in the Seattle, Washington
metropolitan area.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLING PARTIES
------------------------------
The Selling Parties jointly and severally represent and
warrant to Buyer that:
Section 2.1 Corporate Organization; Subsidiaries.
(a) Each Seller (a) is duly organized, validly existing
and in good standing under the laws of its jurisdiction of formation or
organization; (b) has full power and authority to carry on its businesses as
they are now being conducted by it and to own the properties and assets it now
owns; and (c) is duly qualified or licensed to do business as a foreign Person
in good standing in all the jurisdictions in which such qualification or
licensing is required. Each jurisdiction in which a Seller is qualified or
licensed is listed in Section 2.1(a) of the Seller Disclosure Schedule. True
and complete copies of the certificate of incorporation and by-laws of each
Seller, as amended to date, have been delivered to Buyer.
(b) No Seller, directly or indirectly, owns, of record
or beneficially, any equity interests in any Person.
Section 2.2 Authorization. Each Securityholder is competent
and has full power, and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. Each Seller has the full
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and performance
by each Seller of this Agreement and the consummation of the transactions
contemplated hereby, have been duly authorized and no other corporate or
securityholder actions on the part of such Seller are necessary to authorize
the execution and delivery by such Seller of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Selling Parties, and (assuming due and
valid authorization, execution and delivery hereof by Buyer) is a valid and
binding obligation of the Selling Parties enforceable against the Selling
Parties in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally and by the availability of equitable remedies.
Section 2.3 Consents and Approvals; No Violation. Except as
disclosed in Section 2.3 of the Seller Disclosure Schedule, neither the
execution, delivery or performance of this Agreement by any of the Selling
Parties nor the consummation by any of the Selling Parties of the transactions
contemplated hereby will (i) conflict with or violate any provision of the
organizational documents of a Seller; (ii) conflict with or result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of notice, modification,
payment, termination, cancellation or acceleration) under, or result in the
creation of any Lien upon any of the assets or properties of any of the
Selling Parties under, any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, lease, license, permit, contract,
agreement or other instrument, obligation, arrangement or understanding to
which any of the Selling Parties is a party or by which any of them or any of
their properties or assets may be bound; (iii) violate any material order,
writ, judgment, injunction, decree, law, statute, rule or regulation or other
similar authoritative matter ("Law") applicable to any of the Selling Parties
or any of their properties or assets or (iv) require on the part of any of the
Selling Parties any material filing or registration with, notification to, or
authorization, consent or approval of, any court, legislative, executive or
regulatory authority or agency (a "Governmental Authority") or any other
Person.
Section 2.4 Financial Statements. Sellers have heretofore
delivered to Buyer (i) the unaudited balance sheet of each Seller and the
related statements of income as of, and for the fiscal year ended, December
31, 2004, (ii) the unaudited balance sheet of each Seller and the related
statement of income as of, and for the nine month period ended, September 30,
2005 ((i) and (ii) collectively, the "Financial Statements"). The Financial
Statements are true, complete and accurate in all material respects and
present fairly in all material respects the financial position of Sellers as
of the respective dates thereof, and the results of operations of Sellers for
the periods then ended. The Financial Statements have been derived from the
books and records of Sellers and are consistent with the books and records of
Sellers. Except as disclosed in Section 2.4 of the Seller Disclosure Schedule,
the Financial Statements have been prepared in accordance with GAAP
consistently applied throughout the periods involved (except for the absence
of footnotes). As used herein, the term "Balance Sheet" shall refer to the
unaudited balance sheet of each Seller as of September 30, 2005.
Section 2.5 No Undisclosed Liabilities. No Seller has any
Liabilities of any kind whatsoever, and none of the Selling Parties know of
any valid basis for the assertion of any such Liabilities, and no existing
condition, situation or set of circumstances exists which could be expected to
result in a Liability, other than:
(a) Liabilities which are adequately and expressly
reflected and reserved for in the Balance Sheet;
(b) Liabilities incurred in the ordinary and usual
course of business consistent with past practice since September 30, 2005; and
(c) Liabilities and obligations that are set forth in
Section 2.5(c) of the Seller Disclosure Schedule.
Section 2.6 Absence of Certain Changes. Except as and to the
extent set forth in Section 2.6 of the Seller Disclosure Schedule, since
December 31, 2004, (a) the Sellers have conducted the Business only in the
ordinary and usual course of business consistent with past practice, including
but not limited to, (i) fabric and production commitments, (ii) inventory,
(iii) scheduling and delivery, (iv) customer pricing and shipping arrangements
and (v) employment practices, and (b) no Seller has
(a) suffered any adverse change in its business,
customers, prospects, operations, properties, working capital, condition
(financial or otherwise), assets, properties or Liabilities which resulted in
or could result in a Material Adverse Effect, and there has not been any
damage, destruction, loss or other event which resulted in or could result in
a Material Adverse Effect;
(b) incurred any Liabilities except current Liabilities
for trade or business obligations in connection with the purchase of goods or
services in the ordinary and usual course of business consistent with past
practice;
(c) paid, discharged or satisfied any Liabilities other
than the payment, discharge or satisfaction in the ordinary and usual course
of business and consistent with past practice of current Liabilities incurred
in the ordinary and usual course of business consistent with past practice;
(d) permitted or allowed any of its properties or
assets (real, personal or mixed, tangible or intangible) to be subjected to
any Liens, except for Permitted Liens;
(e) written down the value of any inventories or
written off as uncollectible any accounts receivable, in either case, in
excess of $15,000;
(f) cancelled any debts or waived any claims or rights;
(g) sold, transferred, or otherwise disposed of any of
its properties or assets (real, personal or mixed, tangible or intangible),
except in the ordinary and usual course of business consistent with past
practice;
(h) disposed of or permitted to lapse any Intellectual
Property rights, or disposed of or disclosed to any Person, other than
representatives of Buyer, any Intellectual Property rights not theretofore a
matter of public knowledge;
(i) made any change in the rate of compensation,
commission, bonus or other direct or indirect remuneration payable, or paid or
agreed or orally promised to pay, conditionally or otherwise, any bonus,
incentive, retention or other compensation, or made any addition to or other
change in any retirement, welfare, fringe or severance benefit or vacation
plan, to or in respect of any shareholder, director, officer, employee,
broker, salesman, distributor or agent;
(j) made any material change in its selling,
purchasing, pricing, advertising or personnel practices;
(k) instituted, settled or agreed to settle any
litigation, action or proceeding by or before any Governmental Authority;
(l) made any single capital expenditure or commitment
in excess of $15,000 for additions to property, plant, equipment or intangible
capital assets or made aggregate capital expenditures and commitments in
excess of $50,000 for additions to property, plant, equipment or intangible
capital assets;
(m) made any change in any method of financial or Tax
accounting or reporting or financial or Tax accounting or reporting practice;
or
(n) agreed, whether in writing or otherwise, to take
any action described in this Section 2.6.
Section 2.7 Real Property.
(a) No Seller owns any real property.
(b) Section 1.1(a)(v) of the Seller Disclosure Schedule
contains a complete list of all real property leased by a Seller, together
with all leases related to such properties (the "Real Property Leases").
Sellers have heretofore made available to Buyer true and complete copies of
the Real Property Leases (including any amendments, modifications or
supplements thereto). Each Real Property Lease is legal, valid, binding,
enforceable, and in full force and effect, except as enforcement may be
limited by bankruptcy, insolvency, reorganization and similar laws affecting
creditors generally and by the availability of equitable remedies. No Seller
or, to the Knowledge of Sellers, any other party is in default, violation or
breach in any material respect under any Real Property Lease, and no event has
occurred and is continuing that constitutes or, with notice or the passage of
time or both, would constitute a default, violation or breach by either
Seller, or to the Knowledge of Sellers, any other party, in any material
respect under any Real Property Lease. The applicable Seller has good and
valid title to the leasehold estate under each Real Property Lease to which it
is a party, free and clear of all Liens, other than Permitted Liens.
Section 2.8 Intellectual Property. Section 1.1(a)(vii) of
the Seller Disclosure Schedule sets forth a true and complete list of all
Intellectual Property used or held for use in connection with the operation of
the Business or the design or manufacture of any products sold by the Business
or owned or licensed by a Seller, together with all licenses related to the
foregoing, whether such Seller is the licensee or licensor thereunder. A
Seller either owns, or is licensed to use all such Intellectual Property (the
"Business Intellectual Property"), and the consummation of the transactions
contemplated by this Agreement will not alter or impair such ability in any
respect. There are no oppositions, cancellations, invalidity proceedings,
interferences, re-examination or other proceedings presently pending with
respect to the Business Intellectual Property. Except as set forth in Section
2.8 of the Seller Disclosure Schedule, the conduct of the Business and the
Business Intellectual Property has not infringed and does not infringe on any
Intellectual Property or other proprietary rights of any Person, and no
Selling Party has received any notice from any other Person pertaining to or
challenging the right of a Seller to use any Business Intellectual Property.
No Seller has made any claim of a violation or infringement by others of its
rights to or in connection with Business Intellectual Property.
Section 2.9 Certain Contracts.
(a) Section 2.9(a) of the Seller Disclosure Schedule
lists, by reference to the applicable subsection of this Section 2.9(a), all
material contracts, agreements, leases, instruments, obligations, arrangements
or other understandings (whether written or oral), to which a Seller is a
party or by which it or any of the Assets may be bound or affected (the
"Listed Business Contracts"), including (i) all employment or other contracts
(including non-competition, confidentiality, loans to employees, directors or
officers, severance or indemnification agreements) with or in respect of any
employee or current or former officer or director or securityholder of a
Seller; (ii) all consulting contracts; (iii) instruments for borrowed money
(including any indentures, guarantees, loan agreements, sale and leaseback
agreements, mortgages, pledges, hypothecations, deeds of trust, conditional
sale or title retention agreements, security agreements or equipment financing
obligations); (iv) agreements for acquisitions or dispositions (by merger,
purchase or sale of assets or stock or otherwise) of material assets, as to
which a Seller has continuing obligations or rights; (v) joint venture or
partnership agreements, licensing arrangements, contracts for sharing of
profits or proprietary information; (vi) purchase contracts or agreements
giving rise to Liabilities of a Seller; (vii) guarantees, suretyships,
indemnification, contribution agreements or other sources of contingent
liability in respect of any indebtedness or obligations of any other Person;
(viii) all leases of personal property; (ix) all contracts (individually or
together with any related contracts) providing for payments by or to a Seller
in excess of $15,000 per year; (x) all contracts obligating a Seller to
provide or obtain products or services for a period of one year or more; (xi)
all contracts containing covenants purporting to limit a Seller's freedom to
compete with any Person or in any geographic area; (xii) all contracts
(individually or together with any related contracts) requiring payments in
excess of $15,000 for construction or the purchase of real estate,
improvements, equipment, machinery and other items which under GAAP constitute
capital expenditures or which involve or are reasonably expected to involve
capital expenditures; (xiii) all contracts relating to Business Intellectual
Property (not otherwise identified in Section 1.1(a)(vii) of the Seller
Disclosure Schedule); (xiv) any agreement or contract not terminable or
cancelable by a Seller upon notice of not longer than 60 days and without
liability, penalty or premium; and (xv) any agreement or contract which was
not made in the ordinary and usual course of business consistent with past
practice.
(b) Sellers have heretofore provided to Buyer a true
and complete copy (or a written description in the case of an oral Listed
Business Contract) of each Listed Business Contract (together with all
amendments thereto). Each Listed Business Contract is a legal, valid and
binding obligation of the parties thereto enforceable against such parties in
accordance with its terms except as enforceability may be limited by
bankruptcy, insolvency, reorganization and similar laws affecting creditors
generally and by the availability of equitable remedies. No Seller or, to the
Knowledge of Sellers, any other party is in default, violation or breach in
any material respect under any Listed Business Contract, and no event has
occurred and is continuing that constitutes or with notice or the passage of
time would constitute, a default, violation or breach in any material respect
under any Listed Business Contract.
Section 2.10 Permits and Other Authorizations. Section 2.10
of the Seller Disclosure Schedule lists all licenses, permits, franchises and
other authorizations of any Governmental Authority (the "Permits") necessary
or for the conduct of the Business as currently conducted or proposed to be
conducted. Except as set forth in Section 2.10 of the Seller Disclosure
Schedule, all such Permits are in full force and effect, and no proceeding is
pending or, to the Knowledge of the Sellers, threatened seeking the revocation
or limitation of any such Permit.
Section 2.11 Assets. Except as set forth on Section 2.11 of
the Seller Disclosure Schedule, Sellers own all of the Assets, and shall
transfer to Buyer at the Closing, good, valid and marketable title (in the
case of the Real Property Leases, valid leasehold interests therein) to the
Assets, free and clear of all Liens, except Permitted Liens. The Assets
include all rights, properties and other assets (tangible or intangible) used
to conduct the Business or necessary to permit Buyer to conduct the Business
after the Closing in the same manner as the Business has been conducted by
Sellers prior to the date hereof. The plants, structures and equipment
included in the Assets are in all material respects (i) structurally sound
with no known defects, (ii) in good operating condition and repair and (iii)
adequate for the uses to which they are being put. None of such plants,
structures or equipment are in need of maintenance or repairs except for
ordinary, routine maintenance and repairs which are not material in nature or
cost. Neither the whole nor any portion of any Asset is subject to any
governmental decree or order to be sold or is being condemned, expropriated or
otherwise taken by any public authority with or without payment of
compensation therefor, nor, to the Knowledge of Sellers, has any such
condemnation, expropriation or taking been proposed.
Section 2.12 Insurance. Section 2.12 of the Seller
Disclosure Schedule contains an accurate and complete list of all policies of
property, fire, liability, worker's compensation and other forms of insurance
owned or held by a Seller. Sellers have heretofore delivered copies of such
insurance policies to Buyer. All such policies are in full force and effect,
and all premiums with respect thereto covering all periods up to the date
hereof have been paid, and no notice of cancellation or termination has been
received with respect to any such policy. Such policies: (a) are sufficient
for compliance with all requirements of Law and of all contracts to which a
Seller is a party; (b) are valid, outstanding and enforceable; and (c) provide
adequate insurance coverage for each Seller's assets and operations.
Section 2.13 Labor Relations. Except to the extent set forth
in Section 2.13 of the Seller Disclosure Schedule: (a) no Seller is a party to
any collective bargaining agreements, other contracts, agreements,
arrangements or understandings, written work rules or practices agreed to with
any labor organization, employee association or works council; (b) each Seller
is and at all times has been in compliance in all material respects with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment, occupational safety and health and wages and hours,
and are not engaged in any unfair labor practice as defined in the National
Labor Relations Act or other applicable Law; (c) there is no labor strike,
dispute, slowdown, lockout or stoppage pending or, to the Knowledge of
Sellers, threatened against or affecting a Seller or the Business and during
the past five years there has not been any such action; (d) none of the
employees employed by a Seller is represented by a labor organization,
employee association or works council and there are no current union
organizing activities among such employees, nor does any question concerning
representation exist concerning such employees; and (e) there are no written
personnel policies, rules or procedures applicable to employees employed by a
Seller, other than those set forth in Section 2.13 of the Seller Disclosure
Schedule, true and correct copies of which have heretofore been delivered to
Buyer.
Section 2.14 Benefit Plans; ERISA.
(a) Section 2.14(a) of the Seller Disclosure Schedule
contains a true and complete list of each deferred compensation plan, each
incentive compensation or equity compensation plan, "welfare" plan, fund or
program (within the meaning of section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")); "pension" plan, fund or program
(within the meaning of section 3(2) of ERISA); each employment, retention,
termination or severance agreement; and each other employee benefit plan,
fund, program, agreement or arrangement, in each case, that is sponsored,
maintained or contributed to or required to be contributed to by a Seller or
by any trade or business, whether or not incorporated (an "ERISA Affiliate"),
that together with a Seller would be deemed a "single employer" within the
meaning of section 414(b), (c), (m) or (o) of the Code, or to which Seller or
an ERISA Affiliate is party, whether written or oral, for the benefit of any
employee or former employee of a Seller or any subsidiary of a Seller (the
"Benefit Plans").
(b) Except as set forth in Section 2.14(b) of the
Seller Disclosure Schedule, no Benefit Plan is or ever has been subject to
Title IV or Section 302 of ERISA. No liability under Title IV or section 302
of ERISA has been incurred by a Seller or any ERISA Affiliate that has not
been satisfied in full, and no condition exists that presents a material risk
to a Seller or any ERISA Affiliate of incurring any such liability.
(c) Each Benefit Plan has been operated and
administered in accordance with its terms and applicable law, including but
not limited to ERISA and the Code.
(d) Each Benefit Plan intended to be "qualified" within
the meaning of section 401(a) of the Code is so qualified and the trusts
maintained thereunder are exempt from taxation under section 501(a) of the
Code in all material respects.
(e) Except as set forth in Section 2.14(e) of the
Seller Disclosure Schedule, the consummation of the transactions contemplated
by this Agreement will not, either alone or in combination with another event,
(i) entitle any current or former employee or officer of a Seller or any ERISA
Affiliate (or any other Person in respect of whom a Seller or any ERISA
Affiliate could have any Liability) to severance pay, unemployment
compensation or any other payment or benefit or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such
employee, officer or other person.
(f) No representations or communications, oral or
written, with respect to the participation, eligibility for benefits, vesting,
benefit accrual or coverage under any Benefit Plan have been made to
employees, directors, agents or leased employees (or any of their
representatives or beneficiaries) of a Seller which are not in all material
respects in accordance with the terms and conditions of the Benefit Plans.
(g) Neither a Seller nor any ERISA Affiliate has used
the services or workers provided by third party contract labor suppliers,
temporary employees, leased employees, or individuals who have provided
services as independent contractors who may be eligible to participate in the
Benefit Plans or used the services of individuals to an extent that could
result in the disqualification of any of the Benefit Plans or the imposition
of penalties or excise Taxes with respect to the Benefit Plans by the Internal
Revenue Service, the Department of Labor or any other Governmental Authority.
Section 2.15 Taxes.
(a) (i) Sellers have duly and timely filed, or will so
file when due, with the appropriate Governmental Authorities (or there have
been or will be duly and timely filed on their behalf) all Tax Returns
required to be filed by them or with respect to the Business (including Tax
Returns relating to the payment of the Purchase Price), and all such Tax
Returns were or will be true, correct and complete in all material respects
when filed, (ii) all Taxes of Sellers, which have become, will become or are
due, and any assessments received by Sellers, regarding any period through or
ended prior to the date hereof (including any Taxes due as a result of its
receipt of the Purchase Price) have been timely paid (or will be duly and
timely paid and adequate reserves have been made therefor) except for Taxes
that are being contested by Sellers in good faith by appropriate proceedings
and for which adequate reserves have been made, and (iii) no notice of a
claim, audit or pending investigation has been received by Seller, or to the
Knowledge of Sellers, has been threatened, by any federal, state, local,
foreign or other jurisdiction with respect to Taxes.
(b) No waivers or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or Tax
Return have been executed by a Seller.
(c) Section 2.15(c) of the Seller Disclosure Schedule
sets forth a list of each jurisdiction with respect to which a Seller has
filed a Tax Return during the last three years, the type of Tax or Taxes to
which such Tax Return relates (e.g., sales Tax, income Tax, etc.), the latest
year for which such Tax Return was filed and a description of the
transaction(s), if applicable, to which such Tax Return relates.
(d) No claim has ever been made by an authority in a
jurisdiction where Seller has not filed Tax Returns that a Seller is or may be
subject to taxation by that jurisdiction.
(e) No Seller is a "Foreign Person" within the meaning
of Section 1445(a) of the Code.
(f) There are no Liens for Taxes upon any of the
Assets, other than Liens for Taxes not yet due and payable.
(g) Each Seller has duly and timely withheld, and paid
to the proper Governmental Authority when due, all Taxes required to be
withheld and paid.
Section 2.16 Environmental Matters. Each Seller (a) is and
has been in compliance with all Laws relating to pollution or protection of
human health or the environment ("Environmental Laws"), and (b) has not
received any communication, notice or claim alleging that it is not in such
compliance or otherwise has any Liability or potential Liability under
Environmental Laws. To the Knowledge of Sellers, there are no facts or
circumstances, including the release of any hazardous substance at any
property currently or formerly owned or operated by a Seller, that could
result in any Liability under Environmental Laws.
Section 2.17 Litigation. Except as set forth in Section 2.17
of the Seller Disclosure Schedule, there is no action, claim, suit, inquiry,
judicial or administrative proceeding, audit or investigation by or before any
Governmental Authority or arbitral body pending or, to the Knowledge of
Sellers, threatened against or involving a Seller, the Business or the Assets.
No Seller is a subject to any judgment, order, injunction, rule or decree of
any Governmental Authority or arbitral body.
Section 2.18 Compliance with Law. Except as set forth in
Section 2.18 of the Seller Disclosure Schedule, the Business has been
conducted in all material respects in accordance with all applicable Laws and
other requirements of all Governmental Authorities, including all Laws and
other requirements relating to customs, customs reporting, the payment of
applicable duties or the import or export of goods or services. No Seller has
received any notification of any asserted present or past failure by a Seller
to comply with such Laws or other requirements.
Section 2.19 Personnel. Section 2.19 of the Seller
Disclosure Schedule sets forth a list of all employees of each Seller as of
the date hereof. Such list indicates as to each such individual: (a) date of
commencement of service; (b) job title or brief job description and place of
work; (c) salary and bonus, if applicable, or other rate of pay for the fiscal
year ended December 31, 2004 and for the fiscal year commencing January 1,
2005; (d) with respect to salaried individuals, the date of the last salary
increase; and (e) any commitments or arrangements with such individuals as to
salary or bonus, if applicable, or other rate of pay. To the Knowledge of
Sellers, no such individual has any plans to terminate his or her employment
with or service to the Business as a result of the transactions contemplated
by this Agreement or otherwise.
Section 2.20 Related Party Transactions. Except as disclosed
in Section 2.20 of the Seller Disclosure Schedule, no officer, director,
interest holder, relative, affiliate or associate of any Selling Party or any
affiliate or associate of the foregoing (collectively "Related Parties")
provides or causes to be provided any assets, services or facilities to a
Seller or the Business or has any other business relationship with a Seller.
No Related Party conducts a business similar to the Business. As of the date
hereof, no Selling Party, Related Party or employee of a Seller has any
interest in Indigo Visions.
Section 2.21 Inventory. All of the inventories of each
Seller consist of a quality and quantity usable and salable in the ordinary
and usual course of business, except for items of obsolete materials and
materials of below-standard quality, all of which items have been written off
or written down to fair market value on the Balance Sheet or for which
adequate reserves have been provided therein. All inventories not written off
have been priced at the lower of cost or market. The quantities of each type
of inventory are not excessive, but are reasonable and warranted in Sellers'
present circumstances. All inventory held by a Seller is free of any defect or
other deficiency, meet such Seller's specifications and industry standards,
and do not infringe on any third-party Intellectual Property. Sellers and
Buyer will conduct a physical inventory within 10 days of the date hereof and
a true and correct copy of such physical inventory shall be promptly delivered
to Buyer and Sellers.
Section 2.22 Accounts Receivable. Section 1.1(a)(iii) of the
Seller Disclosure Schedule accurately lists as of September 30, 2005 all
Accounts Receivable of each Seller. All Accounts Receivable, whether reflected
on the Financial Statements or arising thereafter, (i) arose in the ordinary
and usual course of business from bona fide arm's-length transactions for the
sale of goods or performance of services; (ii) are valid; and (iii) are
collectible in the ordinary and usual course of the business in accordance
with their terms (subject to reserves reflected on the Balance Sheet) , and
are not subject to counterclaims or setoffs. To the Knowledge of Sellers,
there are no claims, allowances or other price adjustments (other than the
discount arrangements referenced in Section 2.9 of the Seller Disclosure
Schedule).
Section 2.23 Customers and Suppliers. Section 2.23 of the
Seller Disclosure Schedule sets forth for each Seller the name of any customer
who accounted for more than 5% of such Seller's sales during the period from
January 1, 2005 through the date hereof, and the name of any supplier from
whom such Seller purchased more than 5% of the goods or services which it
purchased during the same period. Since January 1, 2005, no customer or
supplier listed in Section 2.23 of the Seller Disclosure Schedule has
cancelled or otherwise adversely modified its relationship and, to the
Knowledge of Sellers (a) no such customer or supplier has any intention to do
so and (b) the consummation of the transactions contemplated by this Agreement
will not adversely affect any of such relationships.
Section 2.24 Orders and Commitments. The aggregate of all
accepted and unfulfilled orders for the sale of products entered into by
Sellers does not exceed amounts which would be outstanding in the ordinary
course of the Business, and the aggregate of all commitments for the purchase
of inventory by Sellers does not exceed amounts which would be outstanding in
the ordinary course of the Business. All such commitments and orders were made
in the ordinary course of business consistent with past practice.
Section 2.25 Product Warranties. All products sold or
delivered by a Seller, have been in conformity in all material respects with
all applicable contractual commitments and all express and implied warranties,
and no Seller has any material Liability, and, except as set forth in Section
2.25 of the Seller Disclosure Schedule, to the Knowledge of Sellers, there is
no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand giving rise to any such
Liability or replacement or repair thereof or other damages in connection
therewith. No products sold or delivered by a Seller are subject to any
guarantee, express warranty or other indemnity other than the representation
that the product is a reproduction of a sample theretofore shown to the
customer.
Section 2.26 Brokers and Finders. Except for Xxxxx Xxxxx and
Xxxx Xxxxx, whose fees and expenses will be paid by Sellers in accordance with
Sellers' agreement with such persons, none of the Selling Parties or any of
their respective officers, directors or employees has employed any broker or
finder or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated by this
Agreement.
Section 2.27 Disclosure. To the Knowledge of Sellers, no
representations or warranties by any of the Selling Parties in this Agreement,
and, except as set forth in Section 2.27 of the Seller Disclosure Schedule, no
statement contained in any document (including financial statements and the
Seller Disclosure Schedule), certificate, or other writing furnished or to be
furnished by or on behalf of any of the Selling Parties to Buyer or any of its
representatives pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, contains an untrue statement of material
fact or omits to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein
or therein not misleading, and all of the foregoing accurately, completely and
correctly present the information required or purported to be set forth herein
or therein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to the Selling Parties
that:
Section 3.1 Corporate Organization. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware.
Section 3.2 Authorization. Buyer has the full corporate
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and performance
by Buyer of this Agreement and the consummation of the transactions
contemplated hereby, have been duly authorized and no other corporate or
shareholder actions on the part of Buyer are necessary to authorize the
execution and delivery by Buyer of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Buyer and (assuming due and valid authorization, execution and
delivery hereof by the Selling Parties) is a valid and binding obligation of
Buyer enforceable against Buyer in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally and by the
availability of equitable remedies.
Section 3.3 No Violation; Consents. Neither the execution,
delivery or performance of this Agreement by Buyer nor the consummation by
Buyer of the transactions contemplated hereby will (i) conflict with or
violate any provision of the certificate of incorporation or by-laws of Buyer;
(ii) conflict with or result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of notice, modification, payment, termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, lease, license, permit, contract,
agreement or other instrument, obligation, arrangement or understanding to
which Buyer is a party or by which it or any of its properties or assets may
be bound; (iii) violate any Law applicable to Buyer or any of its properties
or assets or (iv) require on the part of Buyer any material filing or
registration with, notification to, or authorization, consent or approval of,
any Governmental Authority, except in the case of clause (ii) or (iv) for such
violations, breaches or defaults which, or filings, registrations,
notifications, authorizations, consents or approvals the failure of which to
obtain would prevent Buyer from consummating the transactions contemplated by
this Agreement.
Section 3.4 Brokers and Finders. Neither Buyer nor any of
its officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement.
ARTICLE IV
Section 4.1 Taxes; Post-Closing Access.
(a) Buyer pay all sales, use, documentary and/or
transfer Taxes, and other similar Taxes, if any, imposed on Buyer in
connection with the transactions contemplated by this Agreement. Seller pay
all sales, use, documentary and/or transfer Taxes, and other similar Taxes, if
any, imposed on Seller in connection with the transactions contemplated by
this Agreement. Within 10 days after the Closing, Seller shall provide Buyer
with a tax clearance certificate to reflect the payment of the applicable
business and occupation tax.
(b) All real estate Taxes, personal property Taxes and
similar ad valorem obligations levied with respect to the Assets for a taxable
period that includes (but does not end on) the date hereof shall be
apportioned between Sellers, on the one hand, and Buyer, on the other hand, as
of the date hereof based on the number of days of such taxable period included
in the period ending with and including the date hereof (with respect to any
such taxable period, the "Pre-Closing Tax Period"), and the number of days of
such taxable period beginning after the date hereof (with respect to any such
taxable period, the "Post-Closing Tax Period"). Sellers shall be liable for
the proportionate amount of such Taxes that is attributable to the Pre-Closing
Tax Period, and Buyer shall be liable for the proportionate amount of such
Taxes that is attributable to the Post-Closing Tax Period. For the avoidance
of doubt, the foregoing shall not apply to any real estate Taxes payable by
Sellers pursuant to terms of the Real Property Leases.
(c) After the Closing, upon reasonable notice, Buyer,
on the one hand, and Sellers, on the other hand, agree to furnish or cause to
be furnished to each other and their representatives, employees, counsel and
accountants access, during normal business hours, to such information
(including access to books and records) and assistance relating to the Assets
as are reasonably necessary for financial reporting and accounting matters
relating to the Assets, the preparation and filing of any Tax Returns, reports
or forms relating to the Assets, the making of any election relating to Taxes,
the preparation for any audit by any taxing authority, the defense of any Tax
or other claim or assessment relating to the Assets or, in the case of
Sellers, for any lawful purpose relating to the conduct of the Business prior
to the Closing, provided, however, that such access and assistance do not
unreasonably disrupt the normal operations of Buyer, in the case of access and
assistance given to Sellers, or Sellers, in the case of access and assistance
given to Buyer.
(d) Each party hereto hereby waives compliance by
Sellers and Buyer with the provisions of the "bulk sales," "bulk transfer" or
similar laws of any state or political subdivision. The Selling Parties agree
to jointly and severally indemnify and hold Buyer harmless against any and all
claims, losses, damages, Liabilities (including Tax Liabilities), costs and
expenses incurred by Buyer or any of its affiliates as a result of any failure
to comply with any such "bulk sales," "bulk transfer" or similar laws in
connection with this Agreement or the transactions contemplated thereby.
(e) Buyer and Sellers shall, to the extent possible,
(i) treat Buyer as a "successor employer" and Sellers as a "predecessor,"
within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the Code, with
respect to employees of Sellers to be employed by Buyer for purposes of Taxes
imposed under the United States Federal Unemployment Tax Act or the United
States Federal Insurance Contributions Act and (ii) cooperate with each other
to avoid the filing of more than one IRS Form W-2 with respect to each such
employee for the calendar year in which the Closing occurs.
Section 4.2 Employee Benefits. At the Closing, Buyer shall
offer, or cause to be offered, employment to each employee of Sellers who is
listed on Section 2.19 of the Seller Disclosure Schedule (each, a "Designated
Employee"), such employment to be effective as of the date hereof. Such offer
of employment shall be on terms and conditions relating to salary and position
that are comparable (but not necessarily identical) to those terms and
conditions of employment applicable to such Designated Employees immediately
prior to the Closing.
Section 4.3 Publicity. None of the Selling Parties or any of
their respective affiliates, shall issue any press release with respect to
this Agreement without the prior approval of Buyer. To the extent reasonably
feasible, the initial press release regarding the transactions contemplated by
this Agreement shall be made jointly by the parties.
Section 4.4 Confidentiality.
(a) The Selling Parties represent and warrant that they
have delivered to Buyer all material Confidential Information, including all
copies thereof, which are in their possession, or under their control,
including such Confidential Information as may be held by their agents or
representatives, without making or retaining any copies or extracts thereof.
The Selling Parties agree that, from and after the date hereof, except as
otherwise consented to in writing by Buyer, (i) they will not directly or
indirectly disclose or use in a manner adverse to Buyer or the Business, any
Confidential Information, and (ii) if any of the Selling Parties receive a
request to disclose all or any part of the Confidential Information in
connection with a legal proceeding, such party will (A) immediately notify
Buyer of the existence, terms and circumstances surrounding such request, (B)
seek a protective order or other appropriate remedy, and (C) in the event no
such protective order or other remedy is obtained and disclosure of such
information is required, exercise their best efforts to obtain an order or
other reliable assurance that confidential treatment will be accorded to the
Confidential Information required to be disclosed.
(b) "Confidential Information" means any and all
information relating to the management, operations, finances, products, trade
secrets, technology or services related to the Business, including but not
limited to any and all financial data, employee information, computer programs
and systems, computer based information, plans, projections, existing and
proposed and contemplated projects or investments, formulae, processes,
methods, products, manuals, drawings, supplier lists, customer lists, purchase
and sales records, marketing information, commitments, correspondence and
other information relating to the Business, whether written, oral or computer
generated, other than such information as may at any time be or become
lawfully available to the general public through no fault of the disclosing
party or its representatives.
Section 4.5 Non-Competition.
(a) Except as set forth in this Section 4.5,
Securityholders agree that, to assure that Buyer will retain the value of the
Business as a "going concern," for the period beginning on the date hereof and
continuing through the end of the last Earnout Payment Period, no
Securityholder shall, directly or indirectly, through one or more affiliates,
engage or have an interest, anywhere in the United States, alone or in
association with others, as partner or stockholder or through the investment
of capital, lending of money or property, or otherwise, in any business that
competes with the products and services provided by the Business as of the
date hereof. During the period beginning on the date hereof and continuing
through the end of the last Earnout Payment Period, no Securityholder shall,
directly or indirectly, through one or more affiliates, on behalf of itself or
any other Person, (i) recruit or otherwise solicit or induce any person who is
an employee of, or otherwise engaged by, Buyer or the Business or any
successor to Buyer or the Business to terminate his or her employment or other
relationship with Buyer or the Business or (ii) offer employment to or employ
a person who is at that time an employee (other than secretarial or clerical
employees) of Buyer or the Business or who was such an employee within two
years of the time of such offer or employment.
(b) Notwithstanding anything to the contrary contained
in this Agreement, Section 4.5(a) shall not apply to the X. Xxxxxx or Hermann,
whose obligations related to matters contained in Section 4.5(a) shall be
governed exclusively by the terms of their respective Employment Agreements.
(c) Notwithstanding the provisions of Section 1.4, the
parties agree to allocate, for all Tax purposes, $25,000 of the consideration
paid by Buyer pursuant to Section 1.4 for the rights, interests and
obligations of the parties pursuant to Section 4.5(a).
Section 4.6 Further Assurances. After the Closing, the
Selling Parties shall, from time to time, at the request of Buyer, and without
further expense to Buyer, execute and deliver such other instruments of
conveyance and transfer (including powers of attorney) as Buyer may reasonably
request, in order to more effectively consummate the transactions contemplated
hereby and to vest in Buyer good and marketable title to the Assets (or in the
case of real property leases, valid leasehold interests), including assistance
in the collection or reduction to possession of any such Assets.
Section 4.7 Change of Name. On the date hereof, the
Securityholders shall cause Sellers to amend their respective organizational
documents so as to delete therefrom the words "Seymour Blue " and " Simply
Blue" and will file, as promptly as practicable, such documents as are
necessary to reflect such name change in its state of formation or
organization and the other jurisdictions where it is qualified to do business
as a foreign Person. Sellers further agree that, from and after the date
hereof, Sellers will not adopt any name that is confusingly similar to, or a
derivation of, "Seymour Blue" or " Simply Blue."
Section 4.8 Discharge of Business's Liabilities; Post
Closing Operations of Seller. From and after the Closing, Sellers shall pay
and discharge, and shall hold Buyer harmless from, the Excluded Liabilities.
From and after the Closing, Sellers shall cease their respective operations
and shall not engage in any business whatsoever other than activities related
solely to the collection and distribution to the Securityholders of any
payments pursuant to this Agreement and the liquidation of Sellers.
Section 4.9 Hartmarx Guaranty.Hartmarx guarantees all
payment obligations of Buyer under this Agreement, including, without
limitation, all Earnout Payments. The guaranty being given by Hartmarx
hereunder is a primary obligation of Hartmarx and Sellers shall not be
required to exhaust their remedies against Buyer before instituting legal
proceedings against Hartmarx. Any change or modification of any of the terms
or provisions of this Agreement or any waiver of any rights hereunder by Buyer
shall not discharge or otherwise affect the guaranty being given by Hartmarx
hereunder.
Section 4.10 Worn and L. Paseo. Notwithstanding the
provisions of Section 2.3 hereof, the Selling Parties make no representations
or warranties regarding the assignability of or the effect of assignment on
the Worn and L. Paseo arrangements. The parties hereto acknowledge that it is
Buyer's intention, after the Closing, to assume full responsibility for the
design, sourcing, purchasing and marketing of apparel bearing the Worn and L.
Paseo trademarks independently of any third party. Accordingly, the Selling
Parties agree to use commercially reasonable efforts (but at no cost to the
Selling Parties) to assist Buyer in terminating the existing arrangements with
Western Glove relating to the Worn and L. Paseo product lines.
ARTICLE V
SURVIVAL AND INDEMNIFICATION
----------------------------
Section 5.1 Survival of Representations, Warranties and
Covenants. All representations and warranties of each party contained in this
Agreement shall survive the Closing, for a period ending two (2) years from
the date hereof, except that: (a) the representations and warranties set forth
in Sections 2.1, 2.2, 2.11, 3.1 and 3.2 shall survive without limitation; (b)
the representations and warranties set forth in Sections 2.8, 2.14, 2.15, 2.16
and 2.26, shall survive until the applicable statute of limitations has run
plus ninety (90) days; and (c) all representations or warranties shall survive
beyond such period with respect to any inaccuracy therein or breach thereof
specified in a notice given within such applicable period in accordance with
Section 5.3(a) hereof. The covenants and agreements contained herein shall
survive the Closing without limitation as to time unless the covenant or
agreement specifies a term, in which case such covenant or agreement shall
survive for such specified term. The right to indemnification or any other
remedy based on representations, warranties, covenants and obligations in this
Agreement shall not be affected by any investigation conducted with respect
to, or any knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant or obligation.
Section 5.2 Indemnification.
(a) Subject to the limits set forth in this Article V,
the Selling Parties agree to jointly and severally indemnify, defend and hold
Buyer, its officers, directors, employees, agents, representatives and
affiliates, harmless from and in respect of any and all losses, damages, costs
and expenses (including, demands, suits, claims, actions, assessments,
Liabilities, Taxes, judgments, expenses of investigation and fees and
disbursements of counsel and other professionals), but excluding, except with
respect to third-party claims, punitive damages (collectively, "Losses"), that
they may incur arising out of or due to (i) the inaccuracy or breach of any
representation or warranty of any of the Selling Parties contained in this
Agreement (without giving effect to any "materiality" or "Material Adverse
Effect" or other similar qualifier contained therein), (ii) the breach by any
of the Selling Parties of any covenant, undertaking or other agreement of any
of the Selling Parties contained in this Agreement, (iii) the Excluded
Liabilities, (iv) any of the matters set forth on Section 5.2(a) of the Seller
Disclosure Schedule and (iv) enforcing the indemnification rights of Buyer
pursuant to this Article V.
(b) Subject to the limits set forth in this Article V,
Buyer agrees to indemnify, defend and hold the Selling Parties and their
respective officers, directors, employees, agents, representatives and
affiliates, harmless from and in respect of any and all Losses that they may
incur arising out of or due to (i) the inaccuracy or breach of any
representation or warranty of Buyer contained in this Agreement (without
giving effect to any "materiality" or other similar qualifier contained
therein), (ii) the breach by Buyer of any covenant, undertaking or other
agreement of Buyer contained in this Agreement and (iii) enforcing the
indemnification rights of the Selling Parties pursuant to this Article V.
Section 5.3 Claims for Indemnification.
(a) The parties intend that all indemnification claims
be made as promptly as practicable by the party seeking indemnification (the
"Indemnified Party"). Whenever any claim shall arise for indemnification, the
Indemnified Party shall promptly notify the party from whom indemnification is
sought ("Indemnifying Party") of the claim, and the facts constituting the
basis for such claim. The failure to so notify the Indemnifying Party shall
not relieve the Indemnifying Party of any liability that it may have to the
Indemnified Party, except to the extent the Indemnifying Party demonstrates
that the defense of such action is materially prejudiced thereby.
(b) With respect to claims made by third parties, the
Indemnifying Party, upon acknowledgment of its obligations under the terms of
the indemnity hereunder in connection with such third-party claim, shall be
entitled to assume the defense of such action or claim with counsel reasonably
satisfactory to the Indemnified Party. No Indemnifying Party shall consent to
the entry of any judgment or enter into any settlement without the consent of
the Indemnified Party (A) if such judgment or settlement does not include as
an unconditional term thereof the giving by each claimant or plaintiff to each
Indemnified Party of a release from all liability in respect to such claim,
(B) if such judgment or settlement would result in the finding or admission of
any violation of Law, or (C) if as a result of such consent or settlement
injunctive or other equitable relief would be imposed against the Indemnified
Party or such judgment or settlement would interfere with or adversely affect
the business, operations or assets of the Indemnified Party. The Indemnified
Party agrees to cooperate with the Indemnifying Party and its counsel in the
defense against any such asserted liability. The Indemnified Party shall have
the right to participate at its own expense in the defense of such asserted
liability, but shall not be entitled to settle or compromise such asserted
liability without the prior written consent of the Indemnifying Party, such
consent not to be unreasonably withheld. Notwithstanding the foregoing, if (i)
the claim for indemnification is with respect to a criminal proceeding,
action, indictment, allegation or investigation against the Indemnified Party,
(ii) the Indemnified Party has been advised by counsel that a reasonable
likelihood exists of a conflict of interest between the Indemnifying Party and
the Indemnified Party, (iii) the Indemnifying Party has failed or is failing
to vigorously prosecute or defend such claim or shall have failed to have
engaged counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time or (iv) the claim seeks an injunction or other
equitable relief against the Indemnified Party, then (A) the Indemnifying
Party shall not be entitled to assume the defense of any such claim or action,
(B) the Indemnified Party shall have the right to conduct and control the
defense of such action or claim with counsel of its choosing and the legal and
other expenses incurred by the Indemnified Party shall be borne by the
Indemnifying Party and (C) the Indemnifying Party shall be bound by any
defense or settlement that the Indemnified Party shall make in respect to such
action or claim.
Section 5.4 Limitations on Indemnification. (a)
Notwithstanding anything to the contrary contained herein, neither the Selling
Parties on the one hand, nor Buyer on the other hand (or, in each case, such
party's officers, directors, employees, agents, representatives and
affiliates), shall be entitled to recover from the other under Section
5.2(a)(i) or 5.2(b)(i) unless and until the total of all such party's Losses
(including the Losses such party's officers, directors, employees, agents,
representatives and affiliates) under Section 5.2(a)(i) or 5.2(b)(i), as
applicable, exceeds $100,000, and then only to the extent such Losses exceed
such amount (i.e. there shall be no liability under such Sections for the
first $100,000 of Losses); provided, however, that no claim for
indemnification by Buyer hereunder with respect to Losses resulting from a
breach of Sections 2.1, 2.2, 2.11, 2.14, 2.15 and 2.26 hereof or resulting
from fraud or intentional misrepresentation shall be subject to the
limitations contained in this Section 5.4(a).
(b) For purposes of Section 5.2(a)(i) or 5.2(b)(i), the
maximum aggregate amount the Selling Parties on the one hand, or Buyer on the
other hand (or, in each case, such party's officers, directors, employees,
agents, representatives and affiliates) shall be entitled to recover shall be
$5,000,000; provided, however, that no claim for indemnification by Buyer
hereunder with respect to Losses resulting from a breach of Sections 2.1, 2.2,
2.11, 2.14, 2.15 and 2.26 hereof or resulting from fraud or intentional
misrepresentation shall be subject to the limitations contained in this
Section 5.4(b).
Section 5.5 Exclusive Remedy. From and after the Closing
Date, the parties hereto acknowledge and agree that the indemnification
provisions of this Section shall be the sole and exclusive remedy for any
breach of or inaccuracy in any representation or warranty contained in this
Agreement, except for claims based upon fraud or intentional
misrepresentation.
Section 5.6 Right to Set-off. Notwithstanding anything to
the contrary contained herein, Buyer, at its election, shall have the right to
withhold and set-off against any amount due Sellers under this Agreement the
amount of any claim for indemnification or payment of damages or any other
amount to which Buyer or any of its Affiliates may be entitled under this
Agreement.
ARTICLE VI
MISCELLANEOUS
-------------
Section 6.1 Amendment, Extension and Waiver. Any provision
of this Agreement may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed, in the case of an amendment, by each party
to this Agreement, or in the case of a waiver, by the party against whom the
waiver is to be effective. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
Section 6.2 Expenses. Each party shall pay its own legal,
accounting and other miscellaneous expenses incident to the negotiation,
preparation and execution of this Agreement.
Section 6.3 Entire Agreement; No Third-Party Beneficiaries.
This Agreement, the Confidentiality Agreement (which shall terminate at the
Closing) and the Seller Disclosure Schedule (a) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and
thereof, including that certain letter agreement dated August 18, 2005 and (b)
except as provided in Article V, as are not intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
Section 6.4 Headings. The Article and Section headings
contained herein are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
Section 6.5 Notices. All notices, requests, demands and
other communications made under or by reason of the provisions of this
Agreement shall be in writing and shall be given by hand delivery or air
courier to the parties at the addresses set forth below.
If to any of the Selling Parties:
Simply Blue, Inc.
00000 XX 00xx Xxxxxx, Xxx. 000
Xxxxxxx, XX 00000
Attn: Xxx Xxxxxx and Xxxxxx Xxxxxxx
With a copy (which shall not constitute notice) given in the
manner prescribed above, to:
Xxxx Xxxxxx Xxxxxxxx X.X.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attn: Xxxx X. Silver, Esq., and Xxxxxx X. Xxxx III, Esq.
If to Buyer:
Hartmarx Corporation
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Chief Financial Officer
With a copy (which shall not constitute notice) given in the
manner prescribed above, to:
Hartmarx Corporation
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: General Counsel
With a copy (which shall not constitute notice) given in the
manner prescribed above, to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxx, Esq.
Fax: (000) 000-0000
Any such notice, request, demand or other communication shall be deemed to have
been received (i) when delivered, if delivered by hand, or (ii) on the second
business day after dispatch, if sent by overnight air courier.
Section 6.6 Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors, legal representatives and assigns, but this Agreement may not be
assigned by any party without the written consent of the other parties;
provided, that Buyer may assign all or any portion of its respective rights
hereunder without the prior written consent of either any of the Selling
Parties to an affiliate of Buyer or to any of its financing sources.
Section 6.7 Severability. Any term or provision of this
Agreement that is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction. If the final
judgment of a court of competent jurisdiction or other authority declares that
any term or provision hereof is invalid, void or unenforceable, the parties
agree that the court making such determination shall have the power to reduce
the scope, duration, area or applicability of the term or provision, to delete
specific words or phrases, or to replace any invalid, void or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision.
Section 6.8 Applicable Law. This Agreement shall be governed
by and construed and enforced in accordance with the internal laws of the
State of Delaware, without giving effect to the conflict of laws provisions
thereof.
Section 6.9 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." As used in this Agreement, the terms
"affiliate" and "associate" shall have the meanings set forth in Rule 12b-2 of
the Exchange Act. The words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa. The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement. Each exception set forth in the Seller Disclosure Schedule and each
other response to this Agreement set forth in the Seller Disclosure Schedule
shall be identified by reference to, or be grouped under a heading referring
to, a specific individual section, subsection, paragraph or subparagraph of
this Agreement and shall relate only to such section, subsection, paragraph or
subparagraph, as applicable, except to the extent that one portion of the
Seller Disclosure Schedule specifically refers to another portion thereof by
cross reference.
Section 6.10 Jurisdiction. Each of the parties hereto hereby
expressly and irrevocably submits to the non-exclusive personal jurisdiction
of the United States District Court for the Northern District of Illinois, and
to the jurisdiction of any other competent court of the State of Illinois
located in the County of Xxxx (collectively, the "Illinois Courts") and of the
United States District Court for the Western District of Washington, and to
the jurisdiction of any other competent court of the State of Washington
located in King County (the "Washington Courts"), preserving, however, in each
case, all rights of removal to such federal court under 28 U.S.C. Section
1441, in connection with all disputes arising out of or in connection with
this Agreement or the transactions contemplated hereby and agrees not to
commence any litigation relating thereto except (a) in the case of litigation
commenced by any Selling Party, in the Illinois Courts or (b) in the case of
litigation commenced by Buyer, in the Washington Courts. If the aforementioned
courts do not have subject matter jurisdiction, then the proceeding shall be
brought in any other state or federal court located in the State of Illinois
or Washington, as applicable, preserving, however, in each case, all rights of
removal to such federal court under 28 U.S.C. Section 1441. Each party hereby
waives the right to any other jurisdiction or venue for any litigation arising
out of or in connection with this Agreement or the transactions contemplated
hereby to which any of them may be entitled by reason of its present or future
domicile. Each party hereby waives, to the fullest extent it may legally and
effectively do so (i) any objection which it may now or hereafter have to the
laying of venue of any action or proceeding arising out of or relating to this
Agreement or any related matter in any Illinois Court or Washington Court, as
applicable, and (ii) the defense of an inconvenient forum to the maintenance
of such action or proceeding in any Illinois Court or Washington Court, as
applicable. Notwithstanding the foregoing, each of the parties hereto agrees
that each of the other parties shall have the right to bring any action or
proceeding for enforcement of a judgment entered by the Illinois Courts or the
Washington Courts, as applicable, in any other court or jurisdiction.
Section 6.11 Service of Process. Each party irrevocably
consents to the service of process outside the territorial jurisdiction of the
courts referred to in Section 6.10 hereof in any such action or proceeding by
mailing copies thereof by registered United States mail, postage prepaid,
return receipt requested, to its address as specified in or pursuant to
Section 6.5. However, the foregoing shall not limit the right of a party to
effect service of process on the other party by any other legally available
method.
Section 6.12 WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO
THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING
ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF
ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. THE PARTIES ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY
RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY
FURTHER WARRANTS AND REPRESENTS IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE
TRANSACTION CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
Section 6.13 Specific Performance. Each of the parties
acknowledges and agrees that the other party would be damaged irreparably in
the event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached. Accordingly,
each of the parties agrees that the other party shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States
or any state thereof having jurisdiction over the parties and the matter, in
addition to any other remedy to which it may be entitled, at law or in equity.
Section 6.14 Counterparts. This Agreement may be executed
simultaneously in several counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
ARTICLE VII
CERTAIN DEFINITIONS
-------------------
"GAAP" means generally accepted accounting principles, as in
effect in the United States.
"Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service xxxx rights, service names and service name rights, brand
names, inventions, copyrights and copyright rights, processes, formulae, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, processes, patterns, designs, methodologies, computer programs
(including all source codes) and related documentation, technical information,
manufacturing, engineering and technical drawings, know-how and all pending
applications for and registrations of patents, trademarks, service marks and
copyrights.
"Knowledge of the Sellers" means the knowledge of X. Xxxxxx,
Hermann and Xxxx Xxxxxxxx after reasonable inquiry of those employees of each
Seller whose duties would, in the normal course of such Seller's affairs,
result in such employees having knowledge concerning such subject, area or
aspect.
"Liabilities" means any and all debts, losses, expenses,
liabilities, damages, fines, costs, royalties, proceedings, deficiencies or
obligations of any nature (whether known or unknown, asserted or unasserted,
absolute or contingent, accrued or unaccrued, liquidated or unliquidated, due
or to become due, and whether or not resulting from third-party claims) and
any out-of-pocket costs and expenses (including attorneys, accountants or
other fees) including any liability for Taxes.
"Liens" means all mortgages, pledges, security interests,
deeds of trust, liens, charges, options, conditional sales contracts, claims,
restrictions, covenants, easements, rights of way, title defects or other
encumbrances or restrictions of any nature whatsoever.
"Material Adverse Effect" means an (i) individual or
cumulative material adverse change in, or effect on, the business, customers,
prospects, operations, properties, working capital, condition (financial or
otherwise), assets, properties or Liabilities of Sellers or the Business, or
(ii) individual or cumulative change that would be reasonably likely to impair
the ability of any of the Selling Parties to consummate the transactions
contemplated by this Agreement.
"Permitted Liens" means (a) liens for Taxes, assessments and
governmental charges or levies not yet due and payable; (b) materialmen's,
mechanics', carriers', workmen's and repairmen's liens and other similar liens
arising in the ordinary course of business that are not, individually or in
the aggregate, material; and (c) with respect to real property only, minor
survey exceptions or imperfections of title that do not, individually or in
the aggregate, materially adversely affect the value of such real property or
the use of such real property.
"Person" means any corporation, individual, joint stock
company, joint venture, partnership, limited liability company, unincorporated
association, Governmental Authority, country, state or political subdivision
thereof, trust or other entity.
"Tax" or "Taxes" means all taxes, assessments, charges,
duties, fees, levies, imposts or other governmental charges, including all
federal, state, local, foreign and other income, environmental, add-on,
minimum, franchise, profits, capital gains, capital stock, capital structure,
transfer, sales, gross receipt, use, ad valorem, service, service use, lease,
recording, customs, occupation, property, excise, gift, severance, windfall
profits, premium, stamp, license, payroll, social security, employment,
unemployment, disability, value-added, withholding, escheat and other taxes,
assessments, charges, duties, fees, levies, imposts or other governmental
charges of any kind whatsoever (whether payable directly or by withholding and
whether or not requiring the filing of a return) and all estimated taxes,
deficiency assessments, additions to tax, additional amounts imposed by an
governmental authority (domestic or foreign), penalties, fines and interest,
and shall include any liability for such amounts as a result either of being a
member of a combined, consolidated, unitary or affiliated group or of a
contractual obligation to indemnify any person, regardless of whether
disputed.
"Tax Return" means any return, report, declaration,
information return, filing or other document (including any amendments thereto
or related or supporting information) filed or required to be filed with
respect to Taxes.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by the duly authorized officer of
each of the Sellers, Buyer and Hartmarx and by the Securityholders as of the
day and year first above written.
SB ACQUISITION CORP.
By:/s/ XXXXX X. XXXXXX
------------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
HARTMARX CORPORATION
(solely with respect to Section 4.9 and Article VI)
By:/s/ XXXXX X. XXXXXXX
------------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior President
SIMPLY BLUE, INC.
By: /s/ XXXXXX X. XXXXXX
------------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
XXXXXXX X. BLUE, LLC
By/s/ XXXXXX XXXXXXX
-------------------------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
/s/ XXXXXX X. XXXXXX
---------------------------------------------------
XXXXXX X. XXXXXX
/s/ XXXXXXX X. XXXXXX
---------------------------------------------------
XXXXXXX X. XXXXXX
/s/ XXXXXX XXXXXXX
---------------------------------------------------
XXXXXX XXXXXXX
Index of Schedules*
Disclosure Schedule Section 1.1(a)(ii)--Business Contracts
Disclosure Schedule Section 1.1(a)(iii)--Accounts Receivable
Disclosure Schedule Section 1.1(a)(v)--Real Estate Leases
Disclosure Schedule Section 1.1(a)(vii)--Intellectual Property
Disclosure Schedule Section 1.1(a)(x)--Tangible Personal Property
Disclosure Schedule Section 1.1(a)(xii)--Permits
Disclosure Schedule Section 1.1(b)(iv)--Excluded Assets
Disclosure Schedule Section 1.2(a)--Description of Accounts Payable and
Accrued Expenses
Disclosure Schedule Section 1.2(b)--Assumed Business Contracts
Disclosure Schedule Section 2.1(a)--Corporate Organization; Subsidiaries
Disclosure Schedule Section 2.3--Consents and Approvals; No Violation
Disclosure Schedule Section 2.4--Financial Statements
Disclosure Schedule Section 2.5(c)--Undisclosed Liabilities
Disclosure Schedule Section 2.6--Absence of Certain Changes
Disclosure Schedule Section 2.8--Intellectual Property
Disclosure Schedule Section 2.9(a)--Certain Contracts
Disclosure Schedule Section 2.9(b)--Permits and Other Authorizations
Disclosure Schedule Section 2.11--Assets
Disclosure Schedule Section 2.12--Insurance
Disclosure Schedule Section 2.13--Labor Matters
Disclosure Schedule Section 2.14(a)--Benefit Plans
Disclosure Schedule Section 2.14(b)-- Benefit Plans
Disclosure Schedule Section 2.14(b)-- Benefit Plans
Disclosure Schedule Section 2.15(c)--Tax Returns
Disclosure Schedule Section 2.17--Litigation
Disclosure Schedule Section 2.18--Compliance with Law
Disclosure Schedule Section 2.19--Personnel
Disclosure Schedule Section 2.20--Related Party Transactions
Disclosure Schedule Section 2.23--Customers and Suppliers
Disclosure Schedule Section 2.25--Product Warranties
Disclosure Schedule Section 2.27--Disclosure
Disclosure Schedule Section 5.2(a)--Indemnification
____________
* Schedules to the Purchase Agreement are not being filed herewith. The
Registrant undertakes to furnish supplementally a copy of any omitted
schedule to the Commission upon request, pursuant to Item 601(b)(2) of
Regulation S-K.
