ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of October 5, 1999, is
entered into by and among Ipanema Shoe Corporation, a New York corporation
("Seller"), Sumitomo Corporation of America, a New York corporation ("SCOA"),
and Utopia Marketing, Inc., a Florida corporation ("Purchaser").
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires
to purchase from Seller, the Transferred Assets (as hereinafter defined), on
the terms and subject to the conditions set forth herein; and
WHEREAS, the parties hereto are entering into a Collection Services
Agreement contemporaneously with the execution and delivery of this Agreement
(the "Collection Services Agreement");
NOW, THEREFORE, in consideration of the premises and mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following
defined terms shall have the meanings indicated below:
"Affiliate" means any Person that directly, or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control
of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise and, in any event and without limitation of the previous sentence,
any Person owning more than 50% of the voting securities of a second Person
shall be deemed to control that second Person.
"Agreement" means this Asset Purchase Agreement and the Exhibits,
and the Schedules and attachments annexed hereto and the certificates
delivered in connection herewith, as the same may be amended from time to time
in accordance with the terms hereof.
"Ancillary Agreements" means the Assignment and Assumption
Agreement, the Xxxx of Sale, the Note, the Collection Services Agreement and
the Trademark Assignment.
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"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), operated, owned or
leased by or in the possession of such Person.
"Contract" means any agreement, lease, evidence of Indebtedness,
mortgage, indenture, security agreement or other contract (whether written or
oral).
"Customer Liabilities" means any liabilities relating to
chargebacks, Markdowns and other allowances, reductions, returns, credits and
warranty and other liabilities to customers of Seller arising out of or in
connection with (i) Seller's product sales on or before the date hereof, or
(ii) the disposition of Back Orders, Inventory and Receivables pursuant to
the Collection Services Agreement.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality
of the United States or any foreign country, or any domestic or foreign state,
county, city or other political subdivision.
"Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the
obligations described in clauses (i) through (iv) above of any other Person.
"Knowledge of Seller" or any correlative term means the actual
knowledge of the President or Executive Vice President of Seller.
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision or of any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention Contract or other Contract to
give any of the foregoing.
"Losses" means any and all claims, liabilities, damages, losses,
costs and expenses (including without limitation settlements, judgements,
court costs and reasonable attorneys' fees).
"Markdown" means any Customer Liability in the nature of an
allowance or other incentive payment given to a customer to assist such
customer in realizing the resale of shoes acquired or to be acquired from
Seller in connection with landed business.
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"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Person" means any natural person, corporation, limited liability
company, general partnership, limited partnership, proprietorship, other
business organization, trust, union, association or Governmental or Regulatory
Authority.
"SEC" means the Securities and Exchange Commission or any other
governmental body or agency succeeding to the functions thereof.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor Federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect from time to time.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, bank shares, withholding, payroll, employment, excise,
sales, use, property, alternative or add-on minimum, environmental or other
taxes, assessments, duties, fees, levies or other governmental charges of any
nature whatever, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
"U.S. Dollars"or the symbol "$" means United States Dollars.
"Y2K Compatibility" means the ability of a computer system,
software, hardware or other equipment to correctly perform, process, provide,
receive, display, exchange and handle date-related data for any dates within
and between the twentieth and twenty-first centuries, and other centuries.
1.2 Rules of Construction. The following rules of construction
shall be applicable for all purposes of this Agreement, unless the context
otherwise requires.
(a) the terms "hereby", "herein", "hereof", "hereto",
"hereunder" and any similar terms shall refer to this Agreement, and the term
"hereafter" shall mean after, and the term "heretofore" shall mean before, the
date of this Agreement;
(b) words importing the singular number shall mean and include
the plural number and vice versa;
(c) the terms "include", "including" and similar terms shall be
construed as if followed by the phrase "without being limited to", and the
term "or" shall be construed in the inclusive sense; and
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(d) all references in this Agreement to numbered Articles,
Sections, Schedules and Exhibits are references to the Articles and Sections
of this Agreement and the Schedules and Exhibits to this Agreement.
ARTICLE 2
PURCHASE OF ASSETS
2.1 Sale and Purchase of Transferred Assets. (a) Assets
Transferred. Subject to and upon the terms and conditions set forth in this
Agreement, Seller shall, concurrently with the execution hereof, sell,
transfer, convey, assign and deliver to Purchaser, and Purchaser shall
purchase and accept delivery of, all of Seller's right, title and interest,
free and clear of all Liens, in and to the following assets owned by Seller
(such assets being sometimes collectively referred to as the "Transferred
Assets"):
(i) the corporate name "Ipanema Shoe Corporation" and telephone
and facsimile numbers of Seller as set forth on Schedule 2.1(a)(i)
(collectively, the "Corporate Identity");
(ii) the trade names, trademarks and branded names set forth in
Schedule 2.1(a)(ii) and all governmental registrations therefor and the
goodwill associated therewith and all applications, registrations and renewals
in connection therewith in all jurisdictions ("Trademarks");
(iii) all customer lists, supplier lists and all related
database information and proprietary computer programs, if any (collectively,
"Business Information");
(iv) all other proprietary information and intellectual property
rights including, but not limited to, (i) all inventions and designs (whether
patentable or unpatentable and whether or not reduced to practice), together
with all improvements thereto (ii) all Trademarks, service marks, trade
dress, logos, trade names, domain names, active or inactive web-sites, brand
names and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith, (iii) all copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (iv) all shoe designs,
fabrications, shoe patterns, sales samples for Fall 1999 and Spring 2000,
product configurations and copyrights therein and other proprietary rights
thereto, (v) all trade secrets and confidential secrets (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supply lists, pricing and cost information,
business and marketing plans and proposals) and all other proprietary rights
and (vi) all copies and tangible embodiments thereof (in whatever form or
medium);
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(v) all orders (including first cost and landed), and
receivables from such orders, from Seller's customers as of the date hereof
having a starting scheduled delivery date to the customer of November 1, 1999
or later, as set forth in Schedule 2.1(a)(v) (the "Transferred Orders"),
provided that Purchaser acknowledges that (A) Seller makes no representations,
warranties or assurances that (i) the Transferred Orders will not be canceled
by customers, (ii) that product can be delivered to fill such Transferred
Orders in a timely manner, (iii) that Seller's suppliers are willing or able
to supply product to Purchaser for the purpose of filling such Transferred
Orders, (B) Seller believes it is highly likely that most Transferred Orders
for delivery on or before January 31, 2000 cannot be filled and that certain
Transferred Orders will be canceled by customers; and (C) Seller has begun
notifying its customers that it is unable to fulfill certain Transferred
Orders (although Seller agrees to provide commercially reasonable assistance
to Purchaser until October 31, 1999, provided that all reasonable
out-of-pocket expenses incurred by Seller in connection with such assistance
are advanced or reimbursed (as shall be mutually agreed upon) by Purchaser, in
endeavoring to cause the Transferred Orders not to be canceled by customers,
product to be delivered to fill such Transferred Orders in a timely manner and
Seller's suppliers to supply product to Purchaser for the purpose of filling
such Transferred Orders); and
(vi) covenants not to compete as provided in Article 7 hereof.
(b) Assets Retained. Notwithstanding anything in this Agreement
to the contrary, Purchaser shall not receive the following assets:
(i) all cash and cash equivalents, and all bank and other
accounts in which any of the foregoing is held;
(ii) all orders booked by Seller as of the date hereof, other
than the Transferred Orders ("Back Orders");
(iii) all inventory of Seller as of the date hereof and
thereafter, including without limitation any inventory for filling Back Orders
and inventory in transit ("Inventory");
(iv) all accounts receivable of Seller as of, and resulting from
sales under Back Orders or of Inventory following, the date hereof
("Receivables");
(v) refundable income taxes of Seller;
(vi) insurance policies relating to the business or operations
of Seller and all monies owing from insurance carriers including claims based
upon the failure of Seller's former computer system;
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(vii) minute books, stock transfer books and corporate seal of
Seller;
(viii) the leases with respect to Seller's offices, including
but not limited to 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx and Seller's warehouse
space, wherever located;
(ix) any telephone and fax numbers of Seller other than those
set forth in Schedule 2.1(a)(i); and
(x) the "SUMI" trademark and all governmental registrations
therefor and the goodwill associated therewith; and
(xi) all other assets of Seller not specifically described in
this Agreement as being sold to Purchaser.
(c) Third Party Consents (Transferred Orders). To the extent
that any Transferred Orders are not assignable without the consent of another
party, this Agreement shall not constitute an assignment or an attempted
assignment thereof if such assignment or attempted assignment would constitute
a breach thereof. Seller and Purchaser shall use their best efforts to obtain
the consent of such other party to the assignment of any such Transferred
Orders to Purchaser in all cases in which such consent is or may be required
for such assignment. If any such consent shall not be obtained, Seller shall
cooperate with Purchaser in any reasonable arrangement designed to provide for
Purchaser the benefits intended to be assigned to Purchaser under the relevant
Transferred Order, including enforcement at the cost and for the account of
Purchaser of any and all rights of Seller against the other party thereto
arising out of the breach or cancellation thereof by such other party or
otherwise. If and to the extent that such arrangement cannot be made,
Purchaser shall have no obligation pursuant to Section 2.2(a) and Seller shall
have no obligation pursuant to Section 2.1(a)(v) or otherwise with respect to
such Transferred Orders.
(d) Computer Equipment. (i) Seller hereby grants Purchaser an
option to purchase all or a portion of the computer equipment set forth in
Schedule 2.1(d) (the "Computer Equipment") at fair market value, provided that
(i) Purchaser acknowledges and agrees that Seller has no title or transferable
license to any software contained on or used in connection with the Computer
Equipment and Purchaser will obtain all necessary consents to use such
software prior to utilizing or accepting transfer of any portion of the
Computer Equipment, and (ii) such purchase shall be subject to Purchaser's
assumption of certain maintenance contract obligations of Seller in connection
with the Computer Equipment as shall be mutually agreed upon by the parties.
Such option must be exercised by Purchaser on or prior to March 31, 2000.
(ii) Notwithstanding any provision of this Agreement to the contrary, Seller
shall have no obligation to deliver or transfer title to the Computer
Equipment until the date Purchaser delivers to Seller all necessary consents
(in a form reasonably acceptable to Seller) by vendors of any software
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contained on any part of the Computer Equipment. Furthermore, Seller and
Purchaser shall mutually agree on the timing for physically transferring the
Computer Equipment to Purchaser. Such transfer shall take place after
November 30, 1999 and shall not interfere with the disposition of the Retained
Assets.
(e) DISCLAIMER. NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT
TO THE CONTRARY, SELLER HEREBY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES
(INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY, WARRANTY OF
MERCHANTABILITY, WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, AND ANY
WARRANTY OF Y2K COMPLIANCE) WITH RESPECT TO THE COMPUTER EQUIPMENT. PURCHASER
ACCEPTS THE COMPUTER EQUIPMENT WITH ALL FAULTS AND DEFECTS ON AN AS IS WHERE
IS BASIS.
2.2 Liabilities. (a) Assumed Liabilities. In connection with
the sale, transfer, conveyance, assignment and delivery of the Transferred
Assets pursuant to this Agreement, on the terms and subject to the conditions
set forth in this Agreement, Purchaser hereby agrees to perform when due all
obligations of Seller under the Transferred Orders (the "Assumed
Liabilities").
(b) Retained Liabilities. Purchaser shall not assume by virtue
of this Agreement or the transactions contemplated hereby, and shall have no
liability for, any liabilities or Indebtedness of Seller or its Affiliates of
any kind, character or description whatsoever except for the Assumed
Liabilities (the "Retained Liabilities"). Seller will discharge all of the
Retained Liabilities on a timely basis.
2.3 Further Assurances; Post-Closing Cooperation.
(a) At any time or from time to time after the date hereof,
Seller shall execute and deliver to Purchaser such other instruments, and take
such other actions as Purchaser may reasonably deem necessary in order more
effectively to transfer, convey and assign to Purchaser all of the Transferred
Assets, and to put Purchaser in actual possession of the Transferred Assets.
At any time after the date hereof upon five (5) business days' written notice
of Purchaser to Seller stating the need therefor for litigation, Tax,
accounting or other appropriate purposes, Seller shall make available to
Purchaser the books and records relating to the Transferred Assets and the
Assumed Liabilities, provided that if the parties are in an adversarial
relationship in litigation or arbitration, the furnishing of information,
documents or records shall be subject to applicable rules relating to
discovery. Without limiting the generality of the foregoing, Seller shall
provide commercially reasonable assistance to Purchaser in (i) obtaining the
return of any samples of Seller's shoes that may be in the possession of
former sales employees of Seller, (ii) demanding that any sales efforts by
former sales employees of Seller cease immediately and (iii) securing any
sales orders for Seller's shoes obtained by former sales employees of Seller
that were not for the account of Seller. Such assistance shall include
notifying and demanding such employees to turn over any property in their
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possession that constitute Transferred Assets or that were secured through the
use of Transferred Assets (provided that Seller shall retain sole discretion
over whether to initiate and pursue legal action).
(b) The costs and expenses of Seller: (i) related to the orderly
exit of Seller from the shoe business and the transition of Seller's business
to Purchaser shall be the sole responsibility of Seller; and (ii) incurred at
the request of Purchaser in relation to the prospective business of Purchaser
shall be the sole responsibility of Purchaser.
2.4 Grant-Back License. (a) Purchaser hereby grants to Seller
and SCOA a limited, non-exclusive, non-transferable, non-sublicensable,
paid-up, royalty-free license solely to use those among the Transferred Assets
as are reasonably necessary to dispose of the Back Orders, Inventory and
Receivables (the "Licensed Transferred Assets") during the term of the
Collection Services Agreement and thereafter.
(b) The quality of all products manufactured, promoted or sold
by Seller and SCOA pursuant to the license rights granted under Section 2.4(a)
shall be of a standard consistent with the reputation associated with the
Licensed Transferred Assets and Seller's past use of such Licensed Transferred
Assets, which the parties acknowledge shall conform to Purchaser's quality
control standards. All use of the Trademarks during the term of the license
granted under Section 2.4(a) shall inure to the benefit of Purchaser. Seller
and SCOA shall maintain such standards with respect to the Licensed
Transferred Assets and all related products in all advertising, packaging and
promotion of such products and shall exercise reasonable commercial efforts to
safeguard the established goodwill symbolized by the Licensed Transferred
Assets at the same level of prestige and goodwill as heretofore maintained.
All such products shall be manufactured, sold, labeled, packaged and
advertised in all material respects in accordance with all applicable laws and
regulations. Purchaser shall have the right, without unnecessary interference
in the normal operations of Seller's or SCOA's respective businesses, to have
a member of its management inspect Seller's and SCOA's respective facilities
at any time during normal business hours, subject to reasonable prior written
notice to Seller or SCOA (as the case may be) by Purchaser, for the purpose of
ensuring Seller's and SCOA's compliance with the terms of this Section 2.4.
2.5 Discontinuance of Corporate Name/Trademark Use. Subject to
Section 2.4, Seller shall immediately discontinue use of the Trademarks in
connection with any business operated by Seller or any shareholders of
Seller. As soon as practicable after the date hereof, SCOA will abandon its
use of the "Ipanema" trademark in Belgium, The Netherlands and Luxembourg.
Within three (3) business days following the date hereof, Seller shall cause
to be filed a certificate of amendment of its articles of incorporation and
make such other governmental filings as are required to evidence Seller's
discontinuance of use of "Ipanema Shoe Corporation" as its corporate name.
2.6 Goods-in-Transit. Seller represents and warrants as
follows: (i) Seller has pending orders for product with its sources of supply
which it has received or anticipates receiving on or before October 31, 1999
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(the "Goods-in-Transit"), a summary description of which are set forth in
Schedule 2.6; (ii) all such "Goods-in-Transit" are intended to fill
Transferred Orders, as itemized by reference to the corresponding Transferred
Orders in Schedule 2.6; and (iii) Seller's cost with respect to such
Goods-in-Transit is set forth on an itemized basis in Schedule 2.6 ("Cost of
Goods"). Based on the foregoing, Seller shall sell to Purchaser, and
Purchaser shall purchase from Seller, each shipment of Goods-in-Transit within
10 business days following the date of shipment thereof to the relevant
customer(s), in connection with which Purchaser shall reimburse Seller for its
Cost of Goods; provided that Purchaser shall be under no obligation to
purchase any shipment of Goods-in-Transit if, by the time it is otherwise
obliged to purchase same, the Transferred Order(s) which such Goods-in-Transit
are intended to fill have been canceled by the relevant customer.
ARTICLE 3
CONSIDERATION
3.1 Purchase Price. As consideration for the sale of the
Transferred Assets, concurrently with the execution of this agreement,
Purchaser shall (i) issue to Seller 1,000,000 shares of Purchaser's common
stock (the "Shares"), and (ii) execute and deliver to Seller a convertible
subordinated note in the principal amount of $500,000, in the form of Exhibit
A (the "Note," and, together with the Shares, the "Purchase Price"). With
respect to the Shares, Seller and its permitted transferees will be entitled
to customary anti-dilution rights, as reflected in Sections 6.3 and 6.4 of the
Note.
3.2 Allocation. Seller and Purchaser agree that the Purchase
Price be allocated to the various categories of Transferred Assets in
accordance with Schedule 3.2. Seller and Purchaser agree that the values
assigned to the various categories of the Transferred Assets as set forth in
Schedule 3.2 and the covenants not to compete as set forth in Article 7 are
fair and reasonable values for such assets purchased. The parties agree that
such allocation: (a) reflects and constitutes arms-length negotiations
between Seller and Purchaser; (b) is reasonable based on the parties'
estimates of the fair market value as of the closing date of each class of
Transferred Assets; and (c) shall be binding on the parties for all purposes
and shall be consistently reflected by each party on its United States and
state income tax returns. The parties acknowledge and confirm that the
Purchase Price constitutes the consideration in full for the Transferred
Assets and covenants of Seller.
ARTICLE 4
CLOSING DELIVERIES
4.1 Seller's Obligations. (a) Seller shall execute and
deliver to Purchaser concurrently herewith: (i) the Collection Services
Agreement; (ii) a Xxxx of Sale in the form of Exhibit B; (iii) a Trademark
Assignment in the form of Exhibit C; (iv) an Assignment and Assumption
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Agreement in the form of Exhibit D (the "Assignment and Assumption
Agreement"); (v) resolutions adopted by the Board of Directors of Seller
authorizing and approving the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, certified by Seller's
corporate secretary, in the form of Exhibit E; and (vi) such other good and
sufficient instruments of conveyance, assignment and transfer, in form and
substance reasonably acceptable to Purchaser's counsel, as shall be effective
to vest in Purchaser good title to the Transferred Assets.
4.2 Purchaser's Obligations. (a) Purchaser shall execute and
deliver to Seller concurrently herewith: (i) the Shares; (ii) the Collection
Services Agreement; (iii) the Note; (iv) the Assignment and Assumption
Agreement; and (v) resolutions adopted by the Board of Directors of Purchaser
authorizing and approving the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, certified by Purchaser's
secretary, in the form of Exhibit F.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Seller. Seller hereby
represents and warrants to Purchaser as follows:
5.1.1 Organization of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the Laws of the State
of New York.
5.1.2 Authority Relative to Agreement. Seller has the full
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by Seller of this Agreement
and the Ancillary Agreements to which it is a party and the performance by
Seller of its obligations hereunder and thereunder have been duly and validly
authorized by all necessary corporate action of Seller. This Agreement and
the Ancillary Agreements to which Seller is a party have been duly and validly
executed and delivered by Seller and constitute legal, valid and binding
obligations of Seller, enforceable against it in accordance with their
respective terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws from time to time in
effect and affecting creditors' rights generally and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
5.1.3 No Conflicts. The execution and delivery by Seller of
this Agreement and the Ancillary Agreements to which it is a party do not, the
performance by Seller of its obligations hereunder and thereunder and the
consummation of the transactions contemplated hereby and thereby did not, do
not and will not:
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(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of its certificate of incorporation or
by-laws;
(b) to the Knowledge of Seller, conflict with or result in a
violation or breach of any term or provision of any Law or Order applicable to
Seller or any of the Transferred Assets; or
(c) (i) conflict with or result in a violation or breach of,
(ii) constitute (with or without notice or lapse of time or both) a default
under, (iii) require Seller to obtain any consent, approval or action of, make
any filing with or give any notice to any Person as a result or under the
terms of, or (iv) result in the creation or imposition of any Lien upon Seller
or any of its Assets and Properties under, any Contract to which Seller is a
party or by which any of its Assets and Properties is bound.
5.1.4 Governmental Approvals and Filings. No consent, approval
or action of, filing with or notice to any Governmental or Regulatory
Authority on the part of Seller is required in connection with the execution,
delivery and performance of this Agreement or any of the Ancillary Agreement
to which it is a party or the consummation of the transactions contemplated
hereby or thereby.
5.1.5 Litigation. Except as set forth in Schedule 5.1.5, there
are no claims, actions, proceedings or investigations pending or, to the
Knowledge of Seller, threatened, against or relating to Seller, before any
court or Governmental or Regulatory Authority or body which, if adjudicated
adversely to Seller, could have a material adverse effect on Seller or would
affect Seller's obligations under this Agreement or the ability of Seller to
consummate the transactions contemplated hereby.
5.1.6 Title to Properties; Encumbrances. Seller has good and
marketable title to the Transferred Assets free and clear of any and all
Liens.
5.1.7 Intellectual Property Infringement. (i) To the Knowledge
of Seller, the Intellectual Property Rights do not infringe upon any
intellectual property rights or other rights of any other Person, (ii) Seller
owns or has the right to use all Intellectual Property Rights used in or
necessary to conduct its business as currently conducted without the payment
of any royalties, (iii) Seller is the sole and exclusive owner of the
Intellectual Property Rights, free and clear of all Liens, and (iv) except as
set forth in Schedule 5.1.7, to the Knowledge of Seller, no third party is
infringing the Intellectual Property Rights of Seller. Schedule 5.1.7(a) sets
forth a true, correct and complete list (together with description,
registration number and registration date) of each Trademark registered with
the U.S. Patent and Trademark Office, the U.S. Copyright Office or any similar
state of foreign governmental authority. Schedule 5.1.7(b) discloses a
trademark registration in New Zealand owned by Footwear and Imports Limited, a
New Zealand company; such registration is not included among the Transferred
Assets hereunder. Neither Seller, SCOA nor any Affiliate thereof holds any
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direct or indirect ownership interest in Footwear and Imports Limited. There
are no actual asserted or threatened claims of infringement of the
Intellectual Property Rights of third parties arising out of the business of
Seller and, to the Knowledge of Seller, there is no basis for any such claims.
5.1.8 Financial Statements. Seller has delivered to Purchaser
audited financial statements for the years 1997 and 1998, all of which have
been prepared in accordance with GAAP: and an unaudited balance sheet of
Seller as at June 30, 1999 (the "Interim Balance Sheet") and the related
consolidated statements of income for the six months then ended. All such
financial statements fairly present the financial condition and results of
operations of Seller as of the respective dates thereof and for the respective
periods covered thereby except for normal year adjustments which an audit
would reveal.
5.1.9 No Material Change. Except as set forth in Schedule
5.1.9, since the date of the Interim Balance Sheet, Seller has conducted its
business only in the ordinary course of business and there has not been (other
than sales in the ordinary course of business) any sale, lease, or other
disposition of any asset or property of Seller or mortgage, pledge, or
imposition of any Lien or on any material asset or property of Seller
(including the Transferred Assets).
5.1.10 Liabilities. Except for the Retained Liabilities or as
disclosed in Schedule 5.1.10, Seller has no outstanding claims, liabilities or
Indebtedness, contingent or otherwise, of the Seller or relating to the
Transferred Assets.
5.1.11 Brokers and Finders. Except as disclosed in Schedule
5.1.11, neither Seller nor any Person acting on its behalf has employed any
broker, agent or finder or incurred any liability for any brokerage fees,
agents' commissions or finders' fees in connection with the transactions
contemplated herein.
5.1.12 Accounts Receivable. Schedule 5.1.12 contains a true,
complete and correct list of all accounts receivable of Seller separated into
two categories: (i) Receivables as of the date hereof ("Actual Receivables")
and (ii) to the Knowledge of Seller, the anticipated accounts receivable based
upon Seller's Back Orders ("Anticipated Receivables"), exclusive of Customer
Liabilities applicable thereto, indicating (1) the name of the customer, and
(2) an aging history of all Actual Receivables. The total amount of accounts
receivable of Seller as of September 30, 1999, net of all Customer Liabilities
granted or incurred by Seller as of September 30, 1999 (the actual net amount
of such receivables as of such date, the "Net Receivables Amount"), is not
less than $2,000,000. To the Knowledge of Seller, Schedule 5.1.12 lists all
chargebacks, Markdowns or other allowances, concessions, discounts, product
guarantees, reductions, credits, returns and warranties given by or on behalf
of Seller to any customer of Seller relating to any future sales by Seller.
To the Knowledge of Seller, none of the Receivables as of the date hereof: (i)
is owed by an account debtor that is also a creditor or supplier of Seller;
(ii) is subject to any right of setoff by the account debtor thereof (except
as disclosed in Schedule 5.1.12); and (iii) is subject to the account debtor's
having commenced a voluntary case under the bankruptcy or insolvency laws of
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any jurisdiction or has made an assignment for the benefit of creditors, or
has had entered against it a decree or order for relief by a court in an
involuntary case under the bankruptcy or insolvency Laws of any jurisdiction,
or had filed against it any other petition or other application for relief
under the bankruptcy or insolvency Laws of any jurisdiction or has suspended
business or consented to or suffered a receiver, trustee, liquidator or
custodian to be appointed for it or for all or a significant portion of its
assets or affairs, unless so indicated.
5.1.13 Labor Matters. Except as set forth in Schedule 5.1.13,
during the past two (2) years, there has not been (i) any strike, picketing or
organized work stoppage by any of the employees of Seller, (ii) any
Proceedings pending against or, to the Knowledge of Seller, threatened
against, Seller relating to the alleged material violation of any Law
pertaining to labor relations or other employment matters, including any
charge or complaint filed by an employee or union with any governmental or
regulatory authority, (iii) any application for certification of a collective
bargaining representative or other effort to organize any of its respective
employees for the purpose of forming or joining a union, or (iv) any lockout
of any employees by Seller.
5.1.14 Investment Representations. Each of Seller and SCOA
represents and warrants to the Purchaser that:
(a) it is an "accredited investor" within the meaning of Rule
501 of Regulation D under the Securities Act and, either (i) it was not
organized for the specific purpose of acquiring the Shares, or (ii) each
person who has invested in Purchaser is an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Securities Act;
(b) it has sufficient knowledge and experience in investing in
companies similar to the Purchaser in terms of Purchaser's stage of
development so as to be able to evaluate the risks and merits of its
investment in Purchaser and it is able financially to bear the risks thereof;
(c) it and its advisors have been afforded (a) full access to
all books, records, financial statements, appraisals, agreements and other
documents with respect to or of Purchaser and its assets, liabilities,
agreements and business plans and (b) the opportunity to (i) ask questions of
representatives of Purchaser and obtain answers to any questions it may have
had with respect to such assets, liabilities, agreements and business plans,
and (ii) obtain any additional information to the extent Purchaser possesses
such information or could acquire it without unreasonable effort or expense
(i) relative to Purchaser and its assets, liabilities, agreements and business
plans and (ii) necessary to verify the accuracy of any books, records,
financial statements, appraisals, agreements, documents, securities filings
and other information of Purchaser;
(d) it is the present intention that the Shares being purchased
by Seller are being acquired for Seller's own account for the purpose of
investment and not with a present view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act that would be in
violation of the securities laws of the United States of America or any state
thereof, without prejudice, however, to Seller's right at all times to sell or
otherwise dispose of any part of the Shares pursuant to a registration under
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the Securities Act or pursuant to an exemption from such registration
available under such Act. and subject nevertheless to the disposition of
Seller's property being at all times within its control; and
(e) it understands that (i) the Shares have not been registered
under the Securities Act by reason of their issuance in a transaction exempt
from the registration requirements of the Securities Act pursuant to Section
4(2) thereof or Rule 505 or 506 promulgated under the Securities Act, (ii) the
Shares must be held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration, (iii)
the Shares will bear a legend to such effect, and (iv) Purchaser will make a
notation on its transfer books to such effect.
5.1.15 Disclosure. As of the date of this Agreement, Seller's
representations and warranties in this Agreement, when read together with the
Schedules to this Agreement, do not contain any material misstatement of fact
or omit to state a material fact necessary to make the statements contained
herein, when read together with the Schedules hereto, not misleading.
5.1.16 No Other Representations. Notwithstanding anything to the
contrary contained in this Agreement, it is the explicit intent of each party
hereto that Seller and SCOA are making no representations or warranty,
expressed or implied, except those representations and warranties contained in
this Section 5.1 and in Section 5.2.
5.2 Representations and Warranties of SCOA. SCOA hereby
represents and warrants to Purchaser as follows:
5.2.1 Organization of SCOA. SCOA is a corporation duly
organized, validly existing and in good standing under the Laws of the State
of New York.
5.2.2 Authority Relative to Agreement. SCOA has the full
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by SCOA of this Agreement and
the Ancillary Agreements to which it is a party and the performance by SCOA of
its obligations hereunder and thereunder have been duly and validly authorized
by all necessary corporate action of SCOA. This Agreement and the Ancillary
Agreements to which SCOA is a party have been duly and validly executed and
delivered by SCOA and constitute legal, valid and binding obligations of SCOA,
enforceable against SCOA, in accordance with their respective terms, subject
to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws from time to time in effect and affecting
creditors' rights generally and subject, as to enforceability, to the effect
of general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
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5.2.3 No Conflicts. The execution and delivery by SCOA of this
Agreement and the Ancillary Agreements to which it is a party do not, the
performance by SCOA of its obligations hereunder and thereunder and the
consummation of the transactions contemplated hereby and thereby did not, do
not and will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of its certificate of incorporation or
by-laws;
(b) to the knowledge of SCOA, conflict with or result in a
violation or breach of any term or provision of any Law or Order applicable to
SCOA or any of the Transferred Assets; or
(c) (i) conflict with or result in a violation or breach of,
(ii) constitute (with or without notice or lapse of time or both) a default
under, (iii) require SCOA to obtain any consent, approval or action of, make
any filing with or give any notice to any Person as a result or under the
terms of, any Contract to which SCOA is a party or by which any of its Assets
and Properties is bound.
5.2.4 Governmental Approvals and Filings. No consent, approval
or action of, filing with or notice to any Governmental or Regulatory
Authority on the part of SCOA is required in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
5.3 Representations and Warranties of Purchaser. Purchaser
hereby represents and warrants to Seller and SCOA as follows:
5.3.1 Organization of Purchaser. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Florida.
5.3.2 Authority Relative to Agreement. Purchaser has the full
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by Purchaser of this Agreement
and the Ancillary Agreements to which it is a party, and the performance by
Purchaser of its obligations hereunder and thereunder have been duly and
validly authorized by all necessary corporate action of Purchaser. This
Agreement and the Ancillary Agreements to which it is a party, have been duly
and validly executed and delivered by Purchaser and constitute legal, valid
and binding obligations of Purchaser, enforceable against Purchaser in
accordance with their respective terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
from time to time in effect and affecting creditors' rights generally and
subject, as to enforceability, to the effect of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
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5.3.3 Capitalization; Stock Ownership. The authorized capital
stock of Purchaser consists solely of 45,000,000 shares of Common Stock, par
value of $.001 per share, of which 14,216,367 shares are issued and
outstanding (prior to giving effect to the issuance of the Shares). All of
such issued shares have been duly authorized and validly issued and are fully
paid and non-assessable and none of them was issued in violation of any
preemptive or other right. Except as set forth in Schedule 5.3.3, Purchaser is
not a party to or bound by any contract, agreement or arrangement to issue,
sell or otherwise dispose of or redeem, purchase or otherwise acquire any
capital stock or any other security of Purchaser or any other security
exercisable or exchangeable for or convertible into any capital stock or any
other security of Purchaser, and, except for this Agreement, there is no
outstanding option, warrant or other right to subscribe for or purchase, or
contract, agreement or arrangement with respect to, any capital stock or any
other security of Purchaser or any other security exercisable or convertible
into any capital stock or any other security of Purchaser ("Option"). The
execution, delivery and performance by Purchaser of this Agreement will not
give rise to or result in (with or without the lapse of time or both) any
antidilution adjustment, acceleration or vesting or other change under or to
any Option. Upon delivery of the Shares pursuant to the terms hereof, Seller
will receive good title to the Shares, free and clear of all Liens.
5.3.4 No Conflicts. The execution and delivery by Purchaser of
this Agreement and the Ancillary Agreements to which it is a party do not, the
performance by Purchaser of its obligations under this Agreement and the
Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby did not, do not and will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the certificate of incorporation or
by-laws of Purchaser;
(b) to the best knowledge of Purchaser, conflict with or result
in a violation or breach of any term or provision of any Law or Order
applicable to Purchaser or any of the Transferred Assets; or
(c) (i) conflict with or result in a violation or breach of,
(ii) constitute (with or without notice or lapse of time or both) a default
under, (iii) require Purchaser to obtain any consent, approval or action of,
make any filing with or give any notice to any Person as a result or under the
terms of, or (iv) result in the creation or imposition of any Lien upon
Purchaser or any of its Assets and Properties under, any Contract to which
Purchaser is a party or by which any of its Assets and Properties is bound.
5.3.5 Governmental Approvals and Filings. No consent, approval
or action of, filing with or notice to any Governmental or Regulatory
Authority on the part of Purchaser is required in connection with the
execution, delivery and performance of this Agreement and the Ancillary
Agreements to which it is a party or the consummation of the transactions
contemplated hereby or thereby.
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5.3.6 Litigation. There are no claims, actions, proceedings or
investigations pending or, to its knowledge, threatened, against or relating
to Purchaser, before any court or Governmental or Regulatory Authority or body
which, if adjudicated adversely to Purchaser, would affect Purchaser's
obligations under this Agreement and the Ancillary Agreements to which it is a
party or the ability of Purchaser to consummate the transactions contemplated
hereby or thereby.
5.3.7 Brokers and Finders . Neither Purchaser nor any Person
acting on its behalf has employed any broker, agent or finder or incurred any
liability for any brokerage fees, agents' commissions or finders' fees in
connection with the transactions contemplated herein.
5.3.8. Future Business Conduct.
(a) Purchaser intends to utilize the Transferred Assets to
continue operating an on-going business for the resale of shoes under the
brand name "Ipanema" (the "Future Business");
(b) Purchaser maintains relations with available suppliers that
Purchaser reasonably anticipates will be willing and able to supply Purchaser
with a sufficient quantity of products for the Future Business on 44 or more
days open payment terms; and
(c) Purchaser anticipates that it can secure and maintain
adequate financing and staff to operate the Future Business on an on-going
basis.
ARTICLE 6
SURVIVAL OF REPRESENTATIONS; INDEMNITY
6.1 Survival of Representations. The respective representations
and warranties of Seller, SCOA and Purchaser contained in this Agreement shall
survive the consummation of the transactions contemplated hereby for a period
of one year from the date hereof.
6.2 Indemnifications. (a) Seller and SCOA shall jointly and
severally indemnify and hold harmless Purchaser from, against and in respect
of all Losses assessed, incurred or sustained by or against Purchaser arising
out of or relating to:
(i) any misrepresentation or breach of any warranty of Seller or
SCOA contained in this Agreement or in any Schedule of Seller or any
certificate delivered by or on behalf of Seller or SCOA pursuant hereto;
provided that any claim for indemnification by Purchaser under this subsection
(i) may be made no later than a date one year from and after the date hereof;
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(ii) any breach of any covenant or agreement of Seller and/or
SCOA contained in this Agreement;
(iii) any debt, liability or obligation of Seller other than the
Assumed Liabilities, including, without limitation, the pending litigation
referred to in Schedule 5.1.5, arising out of its conduct of its business
prior to the date hereof; and
(iv) any and all claims, suits, demands, liabilities, losses,
damages or expenses of any kind whatever (including attorneys' fees) with
respect to or arising in any way from the employment, compensation or benefits
(including without limitation payroll benefits, accrued vacation and sick pay)
of any employee relating to periods of employment or engagement by Seller, or
the termination thereof by Seller.
(b) Purchaser shall indemnify and hold harmless Seller and SCOA
from, against and in respect of all Losses assessed, incurred or sustained by
or against Seller and/or SCOA arising out of or relating to:
(i) any misrepresentation or breach of warranty of Purchaser
contained in this Agreement or in any Schedule of Purchaser or in any
certificate delivered by Buyer pursuant hereto; provided that any claim for
indemnification by Seller and/or SCOA under this subsection (i) may be made no
later than a date one year from and after the date hereof;
(ii) any breach of any covenant of Purchaser contained in this
Agreement;
(iii) any of the Assumed Liabilities;
(iv) the conduct by Purchaser of its business utilizing any of
the Transferred Assets following the date hereof;
(v) any claims by employees of Purchaser against Seller arising
from events occurring after the date hereof; and
(vi) any sales, use or transfer taxes levied on the sale of the
Transferred Assets to Purchaser.
(c) Notwithstanding anything to the contrary contained in this
Agreement, no amount of indemnity shall be payable under this Section 6.2:
(i) with respect to any Losses incurred or sustained by or
against Purchaser arising out of or relating to (x) any Customer Liabilities
or (y) a misrepresentation, breach of a representation or warranty that was
actually known to Purchaser on or prior to the date hereof, if Purchaser
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nevertheless elects to close (regardless of whether Purchaser waives such
breach in writing or otherwise);
(ii) by Seller and/or SCOA as a result of any claim arising
under Section 6.2(a) unless, until and then only to the extent that Purchaser
has incurred or sustained Losses in excess of $20,000 in the aggregate;
(iii) by Seller and/or SCOA, to the extent that as a result of
such payment, the cumulative aggregate Losses payable by Seller and SCOA
pursuant to Section 6.2(a)(i) would be in excess of $900,000;
(iv) with respect to any Loss incurred or sustained by Purchaser
to the comparative extent it arises from or was caused by actions taken by
Purchaser or any of its Affiliates after the date hereof;
(v) with respect to any Losses incurred or sustained by
Purchaser arising from any breach of any representation or warranty set forth
in either of the first two sentences of Section 5.1.12 to the extent such
Losses exceed the amount to be paid to Purchaser pursuant to Section 6.4;
(vi) by Purchaser as a result of any claim arising under Section
6.2(b) unless, until and then only to the extent that Seller and SCOA have
incurred or sustained Losses in excess of $20,000 in the aggregate; and
(vii) by Purchaser, to the extent that as a result of such
payment, the cumulative aggregate Losses payable by Purchaser pursuant to
Section 6.2(b)(i) would be in excess of $900,000.
6.3 Procedure for Indemnification Claims. The respective
indemnification obligations of Seller and SCOA pursuant to Section 6.2(a) and
Purchaser pursuant to Section 6.2(b) shall be conditioned upon compliance with
the following procedures for indemnification claims based upon or arising out
of any claim, action or proceeding by any Person not a party to this
Agreement.
(a) If at any time a claim shall be made or threatened, or an
action or proceeding shall be commenced or threatened, against a party hereto
(the "Aggrieved Party") which could result in liability of another party
hereto (the "Indemnifying Party") under its indemnification obligations
hereunder, the Aggrieved Party shall give to the Indemnifying Party prompt
notice of such claim, action or proceeding. Such notice shall state the basis
for the claim, action or proceeding and the amount thereof (to the extent such
amount is determinable at the time when such notice is given) and shall permit
the Indemnifying Party to assume the defense of any such claim, action or
proceeding (including any action or proceeding resulting from any such
claim). Failure by the Indemnifying Party to notify the Aggrieved Party of
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its election to defend any such claim, action or proceeding within a
reasonable time, but in no event more than 15 days after notice thereof shall
have been given to the Indemnifying Party, shall be deemed a waiver by the
Indemnifying Party of its right to defend such claim, action or proceeding;
provided that the Indemnifying Party shall not be deemed to have waived its
right to contest and defend against any claim of the Aggrieved Party for
indemnification hereunder based upon or arising out of such claim, action or
proceeding.
(b) If the Indemnifying Party assumes the defense of any such
claim, action or proceeding, the obligation of the Indemnifying Party as to
such claim, action or proceeding shall be limited to taking all steps
necessary in the defense or settlement thereof and, provided the Indemnifying
Party is held to be liable for indemnification hereunder, to holding the
Aggrieved Party harmless from and against any and all losses, damages and
liabilities caused by or arising out of any settlement approved by the
Indemnifying Party or any judgment or award rendered in connection with such
claim, action or proceeding. The Aggrieved Party may participate in the
defense of such claim, action or proceeding provided that the Indemnifying
Party shall direct and control the defense of such claim, action or
proceeding. The Aggrieved Party agrees to cooperate and make available to the
Indemnifying Party all books and records and such officers, employees and
agents as are reasonably necessary and useful in connection with the defense.
The Indemnifying Party shall not, in the defense of such claim, action or
proceeding, consent to the entry of any judgment or award, or enter into any
settlement, except in either event with the prior consent of the Aggrieved
Party, which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Aggrieved Party of a release from all
liability in respect of such claim, action or proceeding.
(c) If the Indemnifying Party does not assume the defense of any
such claim, action or proceeding, the Aggrieved Party may defend against such
claim, action or proceeding in such manner as it may deem appropriate. The
Indemnifying Party agrees to cooperate and make available to the Aggrieved
Party all books and records and such officers, employees and agents as are
reasonably necessary and useful in connection with the defense. If the
Indemnifying Party, within 20 days after notice shall have been given to it by
the Aggrieved Party of the latter's intention to effect a settlement of any
such claim, action or proceeding, which notice shall describe with
particularity the terms of any such proposed settlement, shall not deposit
with an escrowee mutually satisfactory to the Aggrieved Party and the
Indemnifying Party a sum equivalent to the total amount demanded in such
claim, action or proceeding or deliver to the Aggrieved Party a surety bond or
an irrevocable letter of credit for such sum in form and substance reasonably
satisfactory to the Aggrieved Party, then the Aggrieved Party may settle such
claim, action or proceeding on the terms detailed in its notice to the
Indemnifying Party, and the Indemnifying Party shall be deemed to have agreed
to the terms of such settlement and shall not thereafter in any proceeding by
the Aggrieved Party for indemnification question the propriety of such
settlement. If the Indemnifying Party makes an escrow deposit or delivers a
surety bond or letter of credit as aforesaid and thereafter the Aggrieved
Party settles such claim, action or proceeding, then in any proceeding by the
Aggrieved Party for indemnification in the event the Indemnifying Party is
held liable for indemnification hereunder, the Aggrieved Party shall have the
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burden of proving the amount of such liability of the Indemnifying Party, and
the amount of the payments made in settlement of any claim, action or
proceeding shall not be determinative as between the Aggrieved Party and the
Indemnifying Party of the amount of such indemnification liability, except
that the amount of the settlement payments shall constitute the maximum amount
of the indemnification liability of the Indemnifying Party. Such escrow
deposit, surety bond or letter of credit shall by its respective terms be
payable to the Aggrieved Party in an amount determined in accordance with the
last sentence of this clause (c) and in the event the Indemnifying Party is
held liable for indemnification hereunder. If the Indemnifying Party neither
makes an escrow deposit nor delivers a surety bond or letter of credit as
aforesaid, so that no settlement of such claim, action or proceeding is
effected, in any proceeding by the Aggrieved Party for indemnification in the
event the Indemnifying Party is held liable for indemnification hereunder,
such liability shall be for the amount of any judgment or award rendered with
respect to such claim or in such action or proceeding and of all expenses,
legal and otherwise, incurred by the Aggrieved Party in the defense against
such claim, action or proceeding.
(d) In the event an Aggrieved Party or Indemnifying Party shall
cooperate in the defense or make available books, records, officers, employees
or agents, as required by the terms of clauses (b) and (c), respectively, of
this Section 6.3 the party to which such cooperation is provided shall pay the
out-of-pocket costs and expenses (including legal fees and disbursements) of
the party providing such cooperation and of its officers, employees and agents
reasonably incurred in connection with providing such cooperation, but shall
not be responsible to reimburse the party providing such cooperation for such
party's time or the salaries or costs of fringe benefits or other similar
expenses paid by the party providing such cooperation to its officers and
employees in connection therewith.
6.4 Receivables Indemnity Obligation. In full satisfaction of
the indemnity obligation of Seller and SCOA to Purchaser arising from any
breach of any representation or warranty set forth in either of the first two
sentences of Section 5.1.12, the parties hereto agree as follows:
(a) the Net Receivables Amount shall be mutually determined by
the parties hereto on or before October 8, 1999; and
(b) in the event the Net Receivables Amount, as determined
pursuant to clause (a) above, is less than $2,000,000 (the amount by which the
Net Receivables Amount, as so determined, is less than $2,000,000 being
hereinafter referred to as the "Shortfall Amount"), together with Seller's
payment to Purchaser on October 15, 1999 otherwise required pursuant to
Section 2(c) of the Collection Services Agreement Seller shall pay to
Purchaser an amount equal to 30% of the Shortfall Amount.
6.5 Sole and Exclusive Remedy. Except with respect to fraud,
the respective indemnification obligations of Seller, SCOA and Purchaser under
this Article 6 shall constitute the sole and exclusive remedies of Purchaser,
Seller and SCOA with respect to the matters described in Sections 6.2(a) and
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6.2(b), respectively, and the parties shall not be entitled to a rescission of
this Agreement or to any further indemnification rights or claims of any
nature whatsoever in respect thereof, all of which the parties hereto hereby
waive.
ARTICLE 7
NON-COMPETITION
Seller and SCOA jointly and severally covenant and agree that,
during the period commencing on the date hereof and continuing for the three
(3) year period thereafter, neither Seller nor SCOA shall directly or
indirectly compete with the business of Seller as the same existed immediately
prior to the date hereof. Nothing in this Article shall be construed to
prevent Seller and/or SCOA from disposing of Back Orders, Inventory and
Receivables during the term of the Collection Services Agreement in accordance
with the terms thereof and thereafter.
ARTICLE 8
REGISTRATION RIGHTS
8.1 Registration. Purchaser shall with reasonable promptness,
and in any event not later than December 31, 1999, file a registration
statement on Form S-3 or such other applicable forms with the SEC with respect
to the Shares. Purchaser shall use all reasonable efforts to make such
registration statement become effective and to qualify the same under the Blue
Sky laws of such states as may be requested by the holder of the Shares.
Purchaser shall not be deemed to have complied with its obligations under this
Section 8.1 to effect a registration of the Shares unless and until the
applicable registration statement has been declared effective by the SEC under
the Securities Act and, in the event such registration statement is not so
declared effective, Purchaser shall promptly file a subsequent registration
statement pursuant to this Section 8.1 upon receipt of written notice from the
holder of the Shares.
8.2 Expenses. Except as otherwise specifically provided in this
Article 8, the costs and expenses of any registration and qualification
pursuant to this Article 8 shall be borne by Purchaser. Such costs and
expenses shall include the fees and expenses of counsel for Purchaser and of
its accountants, all other costs, reasonable fees and expenses of Purchaser
incident to the preparation, printing and filing under the Securities Act of
the registration statement and all amendments and supplements thereto, the
cost of furnishing copies of each final prospectus and each amendment or
supplement thereto to underwriters, dealers and other purchasers and the costs
and expenses (including fees and disbursements of counsel) incurred in
connection with the qualification under the Blue Sky laws of various
jurisdictions.
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(a) Procedures.
(i) In the case of each registration or qualification pursuant to
this Article 8, Purchaser will keep the holder of the Shares advised in
writing as to the initiation of proceedings for such registration and
qualification and as to the completion thereof, and will advise the holder of
the Shares, upon request, of the progress of such proceeding.
(ii) At Purchaser's expense, Purchaser will keep each registration
and qualification under this Article 8 effective (and in compliance with the
Securities Act) by such action as may be necessary or appropriate for a period
of one year after the effective date of such registration statement,
including, without limitation, the filing of post-effective amendments and
supplements to any registration statement or prospectus necessary to keep the
registration statement current and the further qualification under any
applicable Blue Sky or other state securities laws to permit such sale or
distribution, all as requested by the holder of the Shares, provided that such
one year period shall be extended until the Shares become freely tradable
under Rule 144(k) of the Securities Act if, as a result of an issuance of
shares of common stock of Purchaser upon conversion of the Note, the period
during which the Shares constitute restricted stock should be extended beyond
one year. Purchaser will immediately notify the holder of the Shares at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.
(iii) In connection with any registration under this Article 8,
Purchaser will provide a transfer agent and registrar and shall cause the
securities being registered to be listed on such securities exchange or
eligible for trading on such over-the-counter market as other securities of
Purchaser of the same class are traded, in each case not later than the
effective date of such registration statement.
(iv) If Purchaser at any time proposes to register any of its
securities under the Securities Act, whether or not for sale for its own
account, and such securities are to be distributed by or through one or more
underwriters, then Purchaser will make reasonable efforts if requested by the
holder of the Shares, to arrange for such underwriters to include such
Securities as requested by the holder of the Shares among the securities to be
distributed by or through such underwriters.
(v) In connection with the preparation and filing of each
registration statement under this Article 8, Purchaser will give the holder of
the Shares and its underwriters, if any, and their respective counsel and
accountants (at their sole expense), the opportunity to participate in the
preparation of such registration statement, each prospectus included therein
or filed with the SEC, and each amendment thereof or supplement thereto, and
will give each of them such access to its books and records and such
opportunities to discuss the business of Purchaser with its officers, its
counsel and the independent public accountants who have certified its
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financial statements, as shall be necessary, in the opinion of the holder of
the Shares or such underwriters or their respective counsel, in order to
conduct a reasonable and diligent investigation within the meaning of the
Securities Act. Without limiting the foregoing, each registration statement,
prospectus, amendment, supplement or any other document filed with respect to
a registration under this Article 8 shall be subject to review and reasonable
approval by the holder of the Shares and by its counsel.
8.4 Provision of Documents. Purchaser will, at the expense of
Purchaser, furnish to the holder of the Shares such number of registration
statements, prospectuses, and other documents incident to any registration or
qualification referred to in this Article 8 as may be reasonably requested.
8.5 Indemnification. (a) Purchaser will indemnify and hold
harmless the holder of the Shares and any underwriters (as defined in the
Securities Act) for the holder of the Shares and each person, if any, who
controls the holder of the Shares or such underwriters within the meaning of
the Securities Act against any losses, claims, damages or liabilities, joint
or several, and expenses (including reasonable attorneys' fees and expenses
and reasonable costs of investigation) to which the holder of the Shares or
such underwriters or such controlling person may be subject, under the
Securities Act or otherwise, insofar as any thereof arise out of or are based
upon (a) any untrue statement of a material fact contained in any registration
statement under which the Shares were registered under the Securities Act
pursuant to this Article 8, any prospectus contained therein, or any amendment
or supplement thereto, or (b) the omission to state in any item referred to in
the preceding clause (a) a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of or are based upon any untrue
statement or alleged untrue statement or omission or alleged omission based
upon information furnished to Purchaser by the holder of the Shares or by any
underwriter for the holder of the Shares in writing specifically for use
therein (with respect to which information the holder of the Shares shall so
indemnify and hold harmless Purchaser, any underwriters for Purchaser and each
person, if any, who controls Purchaser or such underwriters within the meaning
of the Securities Act; provided, that the maximum liability of the holder of
the Shares or such underwriter under this indemnity shall be limited to the
amount of the proceeds received by the holder of the Shares or such
underwriter from the sale of such Shares to which such indemnification
relates). The indemnity contained in this Section 8.5(a) shall not inure to
the benefit of an indemnified party to the extent that the loss, claim,
damage, liability or expense results from an untrue statement in or omission
from a preliminary prospectus and (i) such untrue statement in or omission
from the preliminary prospectus was corrected in the final prospectus and (ii)
the indemnified party failed to cause a copy of such final prospectus to be
delivered to the person asserting such claim at or prior to the written
confirmation of the sale of securities to such person.
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(b) Promptly upon receipt by a party indemnified under this
Section 8.5 of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this Section 8.5, such indemnified party
shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not relieve
it of any liability which it may have to any indemnified party otherwise than
under this Section 8.5 unless such failure materially adversely affects the
defense of such action. In case notice of commencement of any such action
shall be given to the indemnifying party as above provided, the indemnifying
party shall be entitled to participate in and, to the extent it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense of such action at its own expense, with counsel chosen by it. The
indemnified party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of
such counsel shall be paid by the indemnified party unless (a) the
indemnifying party fails to assume the defense of such action or (b) any
indemnified party to any such action (including any impleaded parties) has
been advised in writing by counsel that representation of such indemnified
party and the indemnifying party by the same counsel would be inappropriate
under applicable standards of professional conduct (in which case the
indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party). In the foregoing circumstances,
the indemnified parties shall be entitled to engage, and the indemnifying
party shall pay the reasonable costs and expenses of, one counsel (plus any
necessary local counsel) for all indemnified parties. No indemnifying party
shall be liable for any settlement entered into without its prior written
consent.
(c) If the indemnification provided for in this Section 8.5 is
unavailable or insufficient to hold harmless an indemnified party in respect
of any losses, claims, damages, liabilities, expenses or actions in respect
thereof referred to in this Section 8.5, then each indemnifying party shall in
lieu of indemnifying such indemnified party contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities, expenses or actions in such proportion as is appropriate to
reflect the relative fault of Purchaser, on the one hand, and the holder of
the Shares (and its underwriters) on the other, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities, expenses or actions as well as any other relevant equitable
considerations, including the failure to give the notice required hereunder.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact relates to
information supplied by Purchaser, on the one hand, or the holder of the
Shares (and its underwriters), on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. Purchaser and Seller agree that it would not be
just and equitable if contribution pursuant to this Section 8.5 were
determined by pro rata allocation or by any other method of allocation which
did not take account of the equitable considerations referred to above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or actions in respect thereof referred to above
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentations (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
25
contribution from any person who is not guilty of such fraudulent
misrepresentation.
ARTICLE 9
MISCELLANEOUS
9.1 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by overnight courier service, by cable, by facsimile, by telegram, by
telex or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or to such
other persons with respect to specific provisions hereof or at such other
address for a party, in each case, as shall be specified in a notice given in
accordance with this Section 9.1):
If to Seller and/or SCOA:
Sumitomo Corporation of America
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: General Manager, Investment Division
Telecopier: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000
If to Purchaser:
Utopia Marketing, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Telecopier: (000) 000-0000
26
with a copy to:
Holland & Knight LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxxx, Esq.
Telecopier: (000) 000-0000
9.2 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the greatest extent possible.
9.3 Entire Agreement. This Agreement, together with that
certain confidentiality agreement previously entered into between Seller and
Purchaser (the "Confidentiality Agreement") and the Ancillary Agreements,
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and undertakings,
both written and oral, among the parties with respect to the subject matter
hereof. Notwithstanding any provision of this Agreement, the Confidentiality
Agreement or any Ancillary Agreement to the contrary, Seller shall have the
right to notify all relevant customers that the Transferred Orders have been
transferred to Purchaser and that, if applicable, Seller has not placed any
corresponding orders with its sources of supply.
9.4 Binding Effect; Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. This Agreement may not be assigned or
otherwise transferred, nor may any rights or obligations hereunder be
assigned, delegated, subcontracted or otherwise transferred, by any party
hereto, whether voluntarily or by operation of law, without the prior written
consent of the other parties. Any such attempted assignment, delegation,
subcontract or other transfer without such prior written consent of the other
party shall be void and of no legal force or effect.
9.5 No Third Party Beneficiaries. This Agreement is for the
sole benefit of the parties hereto and their permitted assigns and nothing
herein, express or implied, is intended to or shall confer upon any other
Person or entity any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
9.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York
without giving effect to any choice or conflict of law provision or rule
27
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York.
9.7 Recovery of Litigation Expenses. In connection with any
suit, action or proceeding between or among any parties hereto arising out of
or related to this Agreement, the prevailing party or parties in such suit,
action or proceeding shall be entitled to recover all of its and their costs
and expenses in connection with such suit, action or proceeding, including,
without limitation, all costs and expenses in investigating and prosecuting or
defending such suit, action or proceeding, including, without limitation,
reasonable fees and expenses of counsel, auditors and other consultants.
9.8 Amendment. This Agreement may not be amended or modified
except by an instrument in writing signed by the parties hereto.
9.9 Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but
no such waiver shall be effective unless set forth in a written instrument
duly executed by or on behalf of the party waiving such term or condition. No
waiver by any party of any term or condition of this Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion. All
remedies, either under this Agreement or by Law or otherwise afforded, will be
cumulative and not alternative.
9.10 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart
of this Agreement.
9.11 No Presumption. This Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.
9.12 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.13 Schedules, Exhibits and Attachments. The Schedules,
Exhibits and Attachments to this Agreement are deemed a part of this Agreement
and are subject to all of the provisions herein. All statements contained in
Schedules, Exhibits, certificates and other instruments attached hereto or
delivered or furnished on behalf of Seller pursuant hereto or in connection
with the transactions contemplated hereby, shall be deemed representations and
warranties by Seller or Purchaser, as applicable. Any fact or item which is
clearly disclosed on any Schedule or Exhibit to this Agreement or in the
financial statements referred to in Section 5.1.8 in such a way as to make its
relevance to a representation or representations made elsewhere in this
Agreement or to the information called for by another Schedule or Schedules
28
(or Exhibit or Exhibits) to this Agreement readily apparent shall be deemed to
be an exception to such representation or representations or to be disclosed
on such other Schedule or Schedules (or Exhibit or Exhibits), as the case may
be, notwithstanding the omission of a reference or cross reference thereto.
Any fact or item disclosed on any Schedule or Exhibit hereto shall not by
reason only of such inclusion be deemed to be material and shall not be
employed as a point of reference in determining any standard of materiality
under this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Asset
Purchase Agreement as of the date first written above by their respective
officers thereunto duly authorized.
IPANEMA SHOE CORPORATION
By_________________________________
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
SUMITOMO CORPORATION OF AMERICA
By________________________________
Name: Xxxxxx Xxxxxx
Title: Vice President
UTOPIA MARKETING, INC.
By________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
[Signature Page to Asset Purchase Agreement]
