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EXHIBIT (c) (2)
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of December 29, 2000, by and
among Flapdoodles, Inc., a Delaware corporation ("Flapdoodles"), MF Showroom
Holdings, Inc., a Nevada corporation ("MF"), Mousefeathers, Inc., a California
corporation ("Mousefeathers") (Flapdoodles, MF and Mousefeathers are
collectively referred to herein as the "Seller"), Flap 2001, Inc., a Delaware
corporation ("Purchaser"), for the purposes of Section 8.2 only, Marisa
Christina Incorporated ("Marisa Christina"), and, for the purposes of Section
2.2 and Article IV only, Marc Ham, an individual ("Ham"), and Carole Bieber, an
individual ("Bieber")(Ham and Bieber are collectively referred to herein as the
"Members").
Seller is engaged in, among other things, the business of
designing, sourcing, marketing, selling and distributing apparel and other
consumer goods (such businesses, and all other business currently conducted by
Seller, being the "Business").
Purchaser desires to purchase substantially all of the assets,
properties and rights of Seller, and Seller desires to sell, and to cause the
sale of, such assets, properties and rights, and Seller desires to assign
substantially all of the liabilities of Seller, and Purchaser desires to assume
such liabilities, all on the terms and subject to the conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties, covenants and agreements contained herein and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
GENERAL
1.1 Definitions. Certain capitalized terms used in this
Agreement have the meanings specified in Annex A hereof.
1.2 Terms Generally. (a) Words in the singular shall be held
to include the plural and vice versa and words of one gender shall be held to
include the other genders as the context requires, (b) the terms "hereof,"
"herein," "hereto" and "herewith" and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement as a whole (including
the Annex and all of the Schedules and Exhibits hereto) and not to any
particular provision of this Agreement, and Annex, Article, Section, paragraph,
Exhibit and Schedule references are to the Annex, Articles, Sections,
paragraphs, Exhibits and Schedules to this Agreement unless otherwise specified,
(c) the word "including" and words of similar import when used in this Agreement
shall mean "including, without limitation," unless otherwise specified, (d) the
word "or" shall not be exclusive, (e) provisions shall apply, when appropriate,
to successive events and transactions and (f) terms not found in Annex A are
defined elsewhere in this Agreement.
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ARTICLE II
THE TRANSACTION
2.1 Sale and Purchase of Assets. Subject to the terms and
conditions of this Agreement, at the Closing, Seller shall sell, assign,
transfer, deliver and convey to Purchaser, and Purchaser shall purchase, the
Acquired Assets, free and clear of all Liens other than Permitted Liens, for the
Purchase Price specified in Section 2.2.
2.2 Purchase Price. Subject to the terms and conditions of
this Agreement, the aggregate purchase price to be paid by Purchaser for the
purchase of the Acquired Assets (the "Purchase Price") shall be equal to (i)
Four Million Three Hundred Thousand and No/100 Dollars ($4,300,000.00) (the
"Closing Payment"), as adjusted in accordance with Section 2.3. As further
consideration, the Purchaser shall transfer to Flapdoodles on the Closing Date
(x) 456,984 shares of the capital stock of Marisa Christina ("Marisa Stock")
registered in the names of the Members and (y) stock options to acquire 280,000
shares of Marisa Stock. Subject to the terms and conditions of this Agreement,
at the Closing (i) the Closing Payment shall be paid by Purchaser to Seller by
wire transfer of immediately available funds to the account designated by Seller
in writing at least two Business Days prior to the Closing Date and (ii) the
Members shall duly endorse and deliver to Flapdoodles (a) all stock certificates
evidencing each Member's ownership of Marisa Stock, (b) stock transfer powers in
form satisfactory to Flapdoodles and (c) any other documents or instruments
reasonably requested by Flapdoodles to effectuate each Member's surrender of its
right, title and interest in and to Marisa Stock (including, but not limited to,
options to acquire Marisa Stock). If it is determined after the Closing that the
Members own Marisa Stock or options to acquire Marisa Stock which were acquired
by the Members prior to Closing, the Members shall promptly transfer such Marisa
Stock or options to acquire Marisa Stock to Seller or its designee.
2.3 Post Closing Purchase Price Adjustment.
(a) As promptly after the Closing Date as practicable, but
in no event later than 60 days after the Closing Date, Purchaser shall notify
Seller in writing of its determination of Closing Modified Working Capital
("Purchaser's Closing Schedule") which determination shall set forth in
reasonable detail Purchaser's calculation of Closing Modified Working Capital.
Purchaser's Closing Schedule shall also set forth, and explain, in reasonable
detail, any differences between Purchaser's calculation of Closing Modified
Working Capital and the Target Closing Modified Working Capital. A copy of all
workpapers and other books and records utilized in the preparation of
Purchaser's Closing Schedule shall be made available to Seller at such time.
Seller will notify Purchaser in writing ("Seller's Dispute Notice") within 30
days after receiving Purchaser's Closing Schedule if Seller disagrees with
Purchaser's calculation of the Closing Modified Working Capital as set forth in
Purchaser's Closing Schedule, which notice shall set forth in reasonable detail
the basis for such disagreement, the dollar amounts involved and Seller's
calculation of the Closing Modified Working Capital. Purchaser will give Seller
and its representatives reasonable access during the normal business hours of
Purchaser to the personnel, books and records of the Business to assist Seller
in the preparation of Seller's Dispute Notice. If no Seller's Dispute Notice is
received by Purchaser within such 30-day period, Purchaser's calculation of
Closing Modified Working Capital as set forth in Purchaser's Closing Schedule
shall be final and binding upon the parties hereto.
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(b) Upon receipt by Purchaser of Seller's Dispute Notice,
Seller and Purchaser shall negotiate in good faith to resolve any disagreement
with respect to Closing Modified Working Capital set forth in Seller's Dispute
Notice. To the extent Purchaser and Seller are unable to agree with respect to
Closing Modified Working Capital within 30 days after receipt by Purchaser of
Seller's Dispute Notice, Purchaser and Seller shall promptly select a mutually
acceptable nationally recognized accounting firm with no material relationship
to Purchaser, Seller or their affiliates and submit their dispute to such
accounting firm for a binding resolution. Closing Modified Working Capital as
agreed upon by Seller and Purchaser, as deemed agreed upon pursuant to the last
sentence of Section 2.3(a) or as determined by such accounting firm, in
accordance herewith, shall be termed the "Final Closing Modified Working
Capital". The fees and expenses of such accounting firm shall be paid by Seller
if the Final Closing Modified Working Capital does not exceed Purchaser's
calculation of Closing Modified Working Capital by more than $100,000;
otherwise, the party hereto whose determination of Closing Modified Working
Capital as initially submitted to such accounting firm is furthest away from the
Final Closing Modified Working Capital.
(c) If Final Closing Modified Working Capital exceeds Target
Closing Modified Working Capital by an amount greater than $100,000, then
Purchaser shall pay to Seller the amount of such excess to the extent that it
exceeds $100,000. In all other cases, there shall be no adjustment for any
difference between Final Closing Modified Working Capital and Target Closing
Modified Working Capital. All payments required to be made by Purchaser pursuant
to this subsection (c) shall be made, without interest, by wire transfer of
immediately available funds to a bank account designated by Seller within five
(5) Business Days of the date of determination of Final Closing Modified Working
Capital.
2.4 Assumption of Assumed Liabilities. Subject to the terms
and conditions of this Agreement, at the Closing, Purchaser shall assume and
perform the Assumed Liabilities.
2.5 Closing. Subject to the terms and conditions of this
Agreement, the closing of the sale and purchase of the Acquired Assets (the
"Closing") shall take place at 10:00 a.m., New York City time, on December 29,
2000 or such later date mutually satisfactory to Purchaser and Seller which is
no later than the fifth Business Day after satisfaction (or waiver) of the
conditions to the Closing set forth in Sections 6.1 and 6.2 hereof (other than
those conditions which require the delivery of any documents or the taking of
other action at the Closing) at the offices of Pryor Cashman Sherman & Flynn
LLP, 410 Park Avenue, 10th Floor, New York, New York (the "Closing Date").
2.6 Deliveries and Proceedings at the Closing. Subject to
the terms and conditions of this Agreement, at the Closing:
(a) Deliveries to Purchaser. Seller shall deliver to
Purchaser:
(i) bills of sale and instruments of assignment, in
forms reasonably satisfactory to Purchaser, to evidence the transfer to
Purchaser of the Acquired Assets in accordance herewith, duly executed by
Seller;
(ii) consents to transfer of all transferable or
assignable Contracts and Permits;
(iii) title certificates to any motor vehicles
included in the Acquired Assets, duly executed by Seller (together with any
other transfer forms necessary to transfer title to such vehicles);
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(iv) U.C.C. termination statements in recordable form
and other appropriate releases, in form and substance reasonably satisfactory to
Purchaser, with respect to all recorded Liens in the Acquired Assets;
(vi) an executed Agreement and Mutual General Release
in the form attached hereto as Exhibit A;
(vii) assignments of trademark in appropriate form for
recording at the PTO and blanket copyright assignments with an obligation to
deliver individual assignments in a form appropriate for recording at the U.S.
Copyright Office upon demand;
(viii) copies of resolutions of the board of directors
of Marisa Christina and Sellers authorizing the transaction contemplated herein;
(ix) all such other documents and instruments of
conveyance as shall, in the reasonable opinion of Purchaser, be necessary to
transfer to Purchaser the Acquired Assets in accordance herewith and, where
necessary or desirable, in recordable form.
(b) Deliveries By Purchaser to Seller. Purchaser will
deliver or cause to be delivered to Seller:
(i) wire transfer of immediately available funds in
an amount equal to the Closing Payment;
(ii) an assumption agreement, in form reasonably
satisfactory to Seller, to evidence the assumption by Purchaser of the Assumed
Liabilities in accordance herewith, duly executed by Purchaser;
(iii) the stock certificates, stock transfer powers
and other documents required to be delivered by Purchaser pursuant to Sections
2.2 hereof;
(iv) an executed Agreement and Mutual General Release
in the form attached hereto as Exhibit A;
(v) a resignation of Marc Ham as an employee,
officer and director of Seller and Marisa Christina; and
(vi) all such other documents and instruments of
assumption as shall, in the reasonable opinion of Seller, be necessary for
Purchaser to assume the Assumed Liabilities in accordance herewith.
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2.7 Consent of Third Parties. Seller will use reasonable
efforts to obtain the consent of the other parties to any Contract or Permit for
the assignment thereof to Purchaser. If such consent is not obtained prior to
the Closing, or if an attempted assignment thereof would be ineffective or would
adversely affect the rights of Seller thereunder so that Purchaser would not in
fact receive all such rights, Seller and Purchaser will cooperate in a mutually
agreeable arrangement under which Purchaser would obtain the benefits and assume
the obligations thereunder, including subcontracting, sublicensing or subleasing
to Purchaser, or under which Seller would enforce for the benefit of Purchaser,
with Purchaser assuming Seller's obligations to the same extent as if it would
have constituted an Assumed Liability and any and all rights of Seller against a
third Person thereto. Seller will pay promptly to Purchaser when received all
monies received by Seller after the Closing under any of the Contracts or any
claim or right or any benefit arising thereunder to the extent that Purchaser
would be entitled thereto pursuant hereto.
2.8 Allocation of Consideration. Not later than sixty (60)
days after the Closing Date, Purchaser and Seller shall negotiate and determine
in good faith an allocation of the Purchase Price among the Acquired Assets (the
"Allocation") which shall be conclusive and final for all purposes of this
Agreement. Purchaser and Seller shall each report the federal, state and local
income and other tax consequences of the transactions contemplated by this
Agreement in a manner consistent with the Allocation including, but not limited
to, the preparation and filing of Form 8594 under Section 1060 of the Code (or
any comparable provisions of state, or local tax law) with their respective
federal, state and local income tax returns for the taxable year that includes
the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
3.1 Qualification; Interests in Other Entities.
(a) Seller is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation and has all
requisite corporate power and authority to own, lease and operate the Acquired
Assets and the Business as presently being conducted. Seller is duly licensed or
qualified to do business and is in good standing as a foreign corporation in all
jurisdictions wherein the nature of the Business or Seller's ownership or use of
the Acquired Assets make such licensing or qualification necessary except for
such failures to be licensed or qualified or to be in good standing, if any,
which when taken together with all such other failures of Seller do not have a
Material Adverse Effect or a material adverse effect on the ability of Seller to
perform its obligations under this Agreement and all other agreements and
instruments to be executed in connection herewith (this Agreement and such other
agreements and instruments being hereinafter referred to collectively as the
"Transaction Documents").
(b) No shares of any corporation or any ownership or other
investment interest, either of record, beneficially or equitably, in any Person
are included in the Acquired Assets.
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3.2 Authorization and Enforceability. Seller has full
corporate power and authority to execute, deliver and perform this Agreement and
the other Transaction Documents to which Seller is a party. The execution,
delivery and performance by Seller of this Agreement and the Transaction
Documents to which Seller is a party have been duly authorized by all necessary
corporate action on the part of Seller and its stockholders. This Agreement has
been duly executed and delivered by Seller, and, as of the Closing Date, the
other Transaction Documents to which Seller is a party will be duly executed and
delivered by Seller. This Agreement is a legal, valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms, except as such
enforceability may be limited by applicable laws relating to bankruptcy,
insolvency, fraudulent conveyance, reorganization or affecting creditors' rights
generally and except to the extent that injunctive or other equitable relief is
within the discretion of a court. As of the Closing Date, each of the other
Transaction Documents to which Seller is a party will be duly executed and
delivered by Seller and will constitute the legal, valid and binding obligations
of Seller, enforceable against Seller in accordance with its terms, except as
such enforceability may be limited by applicable laws relating to bankruptcy,
insolvency, fraudulent conveyance, reorganization or affecting creditors' rights
generally and except to the extent that injunctive or other equitable relief is
within the discretion of a court.
3.3 No Violation of Laws or Agreements. The execution,
delivery, and performance by Seller of this Agreement and the Transaction
Documents to which Seller is a party do not, and the consummation by Seller of
the transactions contemplated hereby and thereby, will not, (a) violate,
conflict with or result in the breach of any provision of the Certificate of
Incorporation or By-Laws (or similar organizational documents) of Seller or (b)
except as set forth on Schedule 3.3, violate, conflict with, result in a breach
of, or constitute a default (or an event which would, with the passage of time
or the giving of notice or both, constitute a default) under, require any
consent under, or result in or permit the termination, amendment, modification,
acceleration, suspensions, revocation or cancellation of, or result in the
creation or imposition of any Lien of any nature whatsoever upon any of the
Acquired Assets or give to others any interests or rights therein under (i) any
indenture, mortgage, loan or credit agreement, license, instrument, lease,
contract, plan, permit or other agreement or commitment, oral or written, to
which Seller is a party, or by which the Business or any of the Acquired Assets
may be bound or affected, except for such violations, conflicts, breaches,
terminations, modifications, amendments, accelerations, suspensions,
revocations, cancellations, Liens, interests or rights which, individually and
in the aggregate, do not have a Material Adverse Effect or a material adverse
effect on the ability of Seller to perform its obligations under this Agreement
and the other Transaction Documents, or (ii) any judgment, injunction, writ,
award, decree, restriction, ruling, or order of any court, arbitrator or
Governmental Entity or any applicable constitutions or Law, to which Seller is
subject or which is applicable to the Business or any of the Acquired Assets
other than those violations, conflicts, breaches or defaults which individually
and in the aggregate would not have a Material Adverse Effect or have a material
adverse effect on the ability of Seller to perform its obligations under this
Agreement and the other Transaction Documents.
3.4 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by Seller of this
Agreement, the other Transaction Documents to which Seller is a party, or the
consummation by Seller of the transactions contemplated hereby or thereby,
including without limitation in connection with the assignment of the Contracts
and Permits contemplated hereby, except (i) as set forth on Schedule 3.4, and
(ii) for such other consents, approvals, authorizations, registrations or
filings the failure of which to obtain or make would not individually or in the
aggregate have a Material Adverse Effect or a material adverse effect on the
ability of Seller to perform its obligations under this Agreement or the other
Transaction Documents.
3.5 Title. Seller has good, valid and marketable title to
all of the Acquired Assets other than the Leased Real Property and good and
valid leasehold title to all of the Leased Real Property, in each case, free and
clear of Liens other than Permitted Liens and recorded Liens existing as of the
date hereof which are listed on Schedule 3.5.
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3.6 Taxes.
(a) Seller and any consolidated, combined or unitary group
of which Seller is or was a member have (i) timely filed all material returns
and reports for Taxes, including information returns, that are required to have
been filed in connection with or relating to the Business, which returns and
reports were true, correct and complete in all material respects at the time
filed, (ii) paid all Taxes that are shown as due pursuant to such returns or
reports and (iii) paid all other material Taxes not required to be reported on
returns in connection with, relating to, or imposed on the property of the
Business for which a notice of assessment or demand for payment has been
received or which have' otherwise become due. All such returns or reports have
been prepared in accordance with all applicable Laws and requirements in all
material respects. Except as set forth on Schedule 3.6, there are in effect no
agreements, waivers or other arrangements providing for an extension of time or
the statute of limitations with regard to the assessment of any Tax, or any
deficiency with respect thereto, in connection with or relating to the Business.
Except as set forth on Schedule 3.6, there are no material actions, suits,
proceedings, investigations or claims now pending, nor, to the best of Seller's
knowledge, proposed against Seller, nor are there any material matters under
discussion with, or pending audits by, the Internal Revenue Service or other
Governmental Entity relating to any Taxes or assessments, or any claims or
deficiencies asserted with respect thereto.
(b) None of the Acquired Assets (i) is property that is
required to be treated as owned by another Person pursuant to the "safe harbor
lease" provisions of former Section 168(o)(8) of the Code, (ii) is "tax-exempt
use property" within the meaning of Section 168(h) of the Code, (iii) directly
or indirectly secures any debt the interest on which is tax-exempt under Section
103(a) of the Code; or (iv) is property that is "tax-exempt bond financed
property" under Section 168(g)(5) of the Code.
(c) Seller is not a foreign person subject to withholding
under Section 1445 of the Code and, at the Closing, Seller shall deliver to
Buyer a certificate or certificates to that effect.
3.7 Patents and Intellectual Property Rights. (a) Schedule
3.7(a) contains a true, correct and complete list of all Intellectual Property.
(b) Part A of Schedule 3.7(b) contains a list which is true,
correct and complete in all material respects of all Intellectual Property which
has been registered in, filed in or issued by the PTO, the United States
Copyright Office, any state trademark offices and the patent, trademark,
copyright and other corresponding offices of foreign jurisdictions. Except as
set forth on Part B of Schedule 3.7(b), such applications and registrations have
been duly filed, and those that are registered and issued are valid and in full
force and effect, except where any such invalidity or failure to be in full
force and effect would be immaterial to the conduct of the Business represented
by the Acquired Assets.
(c) Section 8 and 15 declarations with respect to all U.S.
registered trademarks and service marks listed in Schedule 3.7(b) were timely
filed in and accepted by the PTO. No trademarks or service marks listed in
Schedule 3.7(b) have been abandoned except as set forth on Schedule 3.7(c).
(d) Except as set forth on Schedule 3.7(d), there are no
licenses or other agreements from or with third parties under which Seller uses,
has the right to use or exercises any rights with respect to any of the
Intellectual Property, Technology or the Library.
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(e) Neither Seller nor any Affiliate of Seller has received
(and Seller has no knowledge of) any notice from any other Person pertaining to
or challenging the right of Seller (or any of its Affiliates or any other
Person) to use any of the Intellectual Property or any Technology, and there is
no interference, opposition, cancellation, reexamination or other contest,
proceeding, action, lien, dispute or claim of infringement, or misappropriation,
administrative or judicial, pending or threatened with respect to any
Intellectual Property, Technology or the Library.
(f) Except as set forth on Schedule 3.7(f) no licenses have
been granted and Seller has no obligation to grant licenses with respect to any
Intellectual Property, Technology or the Library. No claims have been made by or
against Seller or any of its Affiliates of any violation or infringement by
others of rights with respect to any Intellectual Property, Technology or the
Library, and neither Seller nor any of its Affiliates knows of any basis for the
making of any such claim. To the best of Seller's knowledge, the use by Seller
and its Affiliates of the Intellectual Property, Technology and the Library
(past and present) has not violated or infringed any rights of other Persons, or
constituted a breach of any Contract (or other agreement or commitment).
(g) The Intellectual Property and Technology includes all
such rights necessary to conduct the Business as now conducted, and such rights
will not be adversely affected by the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.
(h) All statements and representations made by Seller or any
of its Affiliates in any pending patent, copyright and trademark applications
with respect to the Intellectual Property were true in all material respects as
of the time they were made.
3.8 Employee Benefit Plans.
(a) For purposes of this Agreement, a "Benefit Plan" shall
mean any defined benefit or defined contribution plan, stock ownership plan,
executive compensation plan, bonus plan, stock option, stock appreciation or
other incentive compensation plan or arrangement, deferred compensation
agreement or arrangement, supplemental retirement plan or arrangement, vacation
pay, sickness, hospitalization or other medical, dental, vision, disability or
death benefit plan (whether provided through insurance, on a funded or unfunded
basis or otherwise), retiree medical or life insurance plan, employee stock
option or stock purchase plan, severance pay, termination or salary continuation
plan, arrangement or practice, and each other employee benefit plan, program or
arrangement, whether or not an employee benefit plan within the meaning of
Section 3(3) of ERISA (as hereinafter defined) which since January 1, 1993 has
been maintained or contributed to by the Sellers or Marisa Christina for the
benefit of or relating to any of the Business Employees or to any former
employee of Sellers or his/her dependents, survivors or beneficiaries. Schedule
3.8 sets forth a complete and correct list of each Benefit Plan and indicates
further which Benefit Plans are sponsored by Sellers and therefore such Benefit
Plan will be transferred to Purchaser as part of the transaction contemplated
hereby (as such, the "Transferable Benefit Plans"), and which Benefit Plans are
sponsored by Marisa Christina (as such, the "Marisa Christina Plans") and
therefore will not be transferred to Purchaser as part of the transaction
contemplated hereby. All obligations and liabilities with respect to the Marisa
Christina Plans are and shall remain the obligations and liabilities of Marisa
Christina. After the Closing Date, Purchaser will not have any obligations or
liabilities under any Benefit Plans other than the Transferable Benefit Plans
except with respect to any payments for the benefit or on behalf of the Business
Employees due from the Sellers to such Benefit Plans which are assumed by
Purchaser hereunder. Notwithstanding the foregoing, Seller will continue to make
and shall be responsible for all regularly scheduled contributions to the Marisa
Christina Plans due and owing in the month of December, 2000.
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(b) Seller has delivered or made available to Purchaser
true, complete and correct copies of each Transferable Benefit Plan, any summary
plan description with respect to a Transferable Benefit Plan, and any employee
handbook applicable to Business Employees.
3.9 No Pending Litigation or Proceedings. Except as set
forth on Schedule 3.9, there are no claims, actions, suits, arbitrations,
inquiries, investigations or proceedings pending against or affecting, or, to
the best of Seller's knowledge, threatened against, Seller, the Business or
affecting any of the Acquired Assets before any court or arbitrator or
Governmental Entity (including the United States Environmental Protection
Agency, the United States Equal Employment Opportunity Commission or any similar
Governmental Entity) except where such claims, actions, suits, arbitrations,
inquiries, investigations or proceedings, individually and in the aggregate,
would not have a Material Adverse Effect. There are no outstanding judgments,
decrees, writs, injunctions or orders of any court or arbitrator or Governmental
Entity against Seller (nor, to the best of Seller's knowledge, threatened to be
imposed against Seller), which individually or in the aggregate could have a
Material Adverse Effect.
3.10 Brokerage. Neither Seller nor any of its Affiliates have
made any agreement or taken any other action which might cause any Person to
become entitled to a broker's or finder's fee or commission or other fee as a
result of or in connection with the transactions contemplated hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND MEMBERS
Purchaser and the Members represent and warrant to Seller as
follows:
4.1 Organization and Good Standing. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.
4.2 Authorization and Enforceability. Each of Purchaser and
the Members has full power and authority to execute, deliver and perform this
Agreement and all other Transaction Documents to which Purchaser or the Members
are a party. The execution, delivery and performance by Purchaser and the
Members of this Agreement and the other Transaction Documents to which Purchaser
is a party have been duly authorized by all necessary corporate action on the
part of Purchaser. This Agreement has been duly executed and delivered by
Purchaser and the Members, and, as of the Closing Date, the other Transaction
Documents to which Purchaser and the Member are a party will be duly executed
and delivered by Purchaser and the Members. This Agreement is a legal, valid and
binding obligation of Purchaser and the Members, enforceable against Purchaser
and the Members, in accordance with its terms, except as such enforceability may
be limited by applicable laws relating to bankruptcy, insolvency, fraudulent
conveyance, reorganization or affecting creditors' rights generally and except
to the extent that injunctive or other equitable relief is within the discretion
of a court. As of the Closing Date, each of the other Transaction Documents to
which Purchaser and the Members are a party will be duly executed and delivered
by Purchaser and the Members and will constitute the legal, valid and binding
obligations of Purchaser and the Members, enforceable against Purchaser and the
Members, in accordance with its terms, except as such enforceability may be
limited by applicable laws relating to bankruptcy, insolvency, fraudulent
conveyance, reorganization or affecting creditors' rights generally and except
to the extent that injunctive or other equitable relief is within the discretion
of a court.
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4.3 No Violation of Laws or Agreements. The execution,
delivery and performance by Purchaser and the Members of this Agreement and the
Transaction Documents to which Purchaser and the Members are a party do not, and
the consummation by Purchaser or the Members of the transactions contemplated
hereby and thereby, will not, (a) violate, conflict with or result in the breach
of any provision of the Certificate of Incorporation or Bylaws of Purchaser or
(b) violate, conflict with, result in a breach of, or constitute a default (or
an event which would, with the passage of time or the giving of notice or both,
constitute a default) under, require any consent under or result in or permit
the termination, amendment, modification, suspension, revocation, acceleration
or cancellation of, (i) any indenture, mortgage, loan or credit agreement,
license, instrument, lease, contract, plan, permit or other agreement or
commitment, oral or written, to which Purchaser or the Members are a party, or
by which any of its assets or properties may be bound or affected, except for
such violations, conflicts, breaches, terminations, amendments, modifications,
suspensions, revocations, accelerations, cancellations, interests or rights
which, individually and in the aggregate, do not have a material adverse effect
on its ability to perform its obligations under this Agreement and the other
Transaction Documents to which it is a party, or (ii) any judgment, injunction,
writ, award, decree, restriction, ruling, or order of any court, arbitrator or
Governmental Entity or any applicable constitution or law, to which Purchaser or
the Members are subject other than those violations and conflicts which
individually and in the aggregate would not have a material adverse effect on
its ability to perform its obligations under this Agreement and the other
Transaction Documents to which Purchaser or the Members are a party.
4.4 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by Purchaser or the
Members of this Agreement, the other Transaction Documents to which Purchaser or
the Members are a party, or the consummation by Purchaser and the Members of the
transactions contemplated hereby or thereby except for such consents, approvals,
authorizations, registrations or filings the failure of which to obtain or make
would not individually and in the aggregate have a material adverse effect on
its ability to perform its obligations under this Agreement and the other
Transaction Documents to which Purchaser or the Members are a party.
4.5 Brokerage. Neither Purchaser, the Members nor any of
Purchaser's Affiliates has made any agreement or taken any other action which
might cause any Person to become entitled to a broker's or finder's fee or
commission or other fee as a result of or in connection with the transactions
contemplated hereunder.
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ARTICLE V
ADDITIONAL COVENANTS
5.1 Letters of Credit. In the event that Purchaser shall
make any drawn down against any letter of credit to which either Seller or
Marisa Christina is the account party, Purchaser shall promptly reimburse Seller
for the amount of any such draw down.
5.2 Mutual Covenants. The parties hereto mutually covenant
from the date of this Agreement to the Closing Date and, where applicable, from
and after the date of this Agreement (and subject to the other terms of this
Agreement):
(a) to cooperate with each other in determining whether
filings are required to be made or consents required to be obtained in any
jurisdiction in connection with the consummation of the transactions
contemplated by this Agreement and in making or causing to be made any such
filings promptly and in seeking to obtain timely any such consents (each party
hereto shall furnish to the other and to the other's counsel all such
information as may be reasonably required in order to effectuate the foregoing
action); and
(b) to advise the other parties promptly if such party
determines that any condition precedent to its obligations hereunder will not be
satisfied in a timely manner.
5.3 Consents and Filings. Each of the parties hereto shall
(and shall cause its Affiliates to) use all reasonable efforts to obtain or
make, as the case may be, as soon as possible, all filings with the applicable
Government Entities as may be required to be obtained or made, as the case may
be, by it (and/or any of its Affiliates) in order to enable such party (and/or
any of its Affiliates) to perform its obligations under this Agreement.
5.4 Public Announcement. No party hereto shall make or
issue, or cause to be made or issued, any public announcement or written
statement concerning this Agreement or the transactions contemplated hereby
without the prior written consent of the other parties hereto (which will not be
unreasonably withheld or delayed), except if counsel to any party advises that
such announcement or statement is required by law (in which case such party
shall make reasonable efforts to consult with the other party prior to such
required announcement).
5.5 Investigation. From the date hereof until the Closing,
Seller shall give Purchaser and its representatives (including Purchaser's
accountants, consultants, counsel, employees and authorized agents), upon
reasonable notice and during normal business hours, full access to the
properties, contracts, employees, books, records and affairs of Seller, and
shall cause its officers, directors, employees, agents, representatives,
accountants and counsel to furnish to Purchaser all documents, records and
information (and copies thereof), as Purchaser may reasonably request. No
investigation or receipt of information by Purchaser pursuant to, or in
connection with, this Agreement, shall diminish or obviate any of the
representations, warranties, covenants or agreements of Seller under this
Agreement or the conditions to the obligations of Purchaser under this
Agreement.
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5.6 Taxes. Seller and Purchaser shall (a) each provide the
other with such assistance as may reasonably be requested by either of them in
connection with the preparation of any Tax return, any audit or other
examination by any taxing Governmental Entity or any judicial or administrative
proceeding with respect to Taxes as it relates to the Business (or any portion
thereof); (b) each retain and provide the other with any records or other
information which may be relevant to such return, audit, examination or
proceeding; and (c) each provide the other with any final determination of any
such audit or examination, proceeding or determination that affects any amount
required to be shown on any Tax return of the other for any period (which shall
be maintained confidentially). Without limiting the generality of the foregoing,
Purchaser and Seller shall retain, until the applicable statutes of limitations
(including all extensions) have expired, copies of all Tax returns, supporting
workpapers, and other books and records or information which may be relevant to
such returns for all Tax periods or portions thereof ending before or including
the Closing Date, and shall not destroy or dispose of such records or
information without first providing the other party with a reasonable
opportunity to review and copy the same. With respect to Taxes incurred in
connection with, relating to or arising out of the Business prior to the Closing
that are not yet due or owing as of the Closing Date, Seller will (i) timely
file when due all returns and reports for such Taxes, including information
returns, that are required to be filed, (ii) timely pay when due the Taxes that
are shown to be due pursuant to such Tax returns unless such Tax returns are
being contested in good faith, and (iii) timely pay when due all other Taxes
with respect to the Business for all periods ending on or before the Closing
Date which are not required to be reported on returns unless such Taxes are
being contested in good faith.
5.7 Consents. Each of the parties hereto will use its
reasonable best efforts and will cooperate with the other parties hereto to
obtain all consents required from third Persons, whose consent or approval is
required pursuant to any Contract or Permit to consummate the transactions
contemplated hereby.
5.8 Commercially Reasonable Efforts. Without limiting the
specific obligations of any party hereto under any covenant or agreement
hereunder, each party hereto shall use commercially reasonable efforts to take
all action and do all things necessary in order to promptly consummate the
transactions contemplated hereby, including, without limitation, satisfaction,
but not waiver, of the Closing conditions set forth in Article VI.
5.9 Corporate Name. Promptly after the Closing Date, Seller
shall cause the certificate of amendment described in Section 6.1(e) to be duly
and effectively filed with the applicable Delaware authorities.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent to Obligations of Purchaser. The
obligations of Purchaser to purchase the Acquired Assets and assume the Assumed
Liabilities and to consummate the other transactions contemplated hereby are
subject to the satisfaction, on or prior to the Closing Date, of each of the
following conditions (any one or more of which may be waived in writing in whole
or in part by Purchaser in its sole discretion):
(a) Representations, Warranties and Covenants. Each of the
representations and warranties of Seller contained in this Agreement or in any
certificate, document or instrument delivered in connection herewith shall be
true and correct in all material respects on and as of the date of this
Agreement and at and as of the Closing with the same effect as though such
representations and warranties had been made at and as of the Closing, except
for representations and warranties that speak as of a specific date or time
other than the Closing (which need only be true and correct in all material
respects as of such date or time); provided, however, that if any portion of any
such representation or warranty is already qualified by materiality, for
purposes of determining whether this condition has been satisfied with respect
to such portion of such representation or warranty, such portion of such
representation or warranty as so qualified shall be true and correct in all
respects.
(b) Required Consents. Seller shall have obtained, each in
form and substance reasonably satisfactory to Purchaser all statutory and
regulatory consents and approvals which are required under any applicable Laws
and all consents and approvals required from third parties including under
Contracts in order to consummate the transactions contemplated hereby and to
permit Purchaser to conduct the Business as conducted as of the date of this
Agreement.
(c) Injunction; Litigation; Legislation. (i) None of Seller
or Purchaser shall be subject to any order or injunction restraining or
prohibiting the consummation of the transactions contemplated hereby, (ii) no
action or proceeding shall have been instituted before any court or Governmental
Entity to restrain or prohibit, or to obtain substantial damages in respect of,
the consummation of the transactions contemplated hereby, (iii) none of the
parties hereto shall have received written notice from any Governmental Entity
of (A) its intention to institute any action or proceeding to restrain, enjoin
or nullify this Agreement or the transactions contemplated hereby, or to
commence any investigation (other than a routine letter of inquiry, including a
routine civil investigative demand) into the consummation of the transactions
contemplated hereby or (B) the actual commencement of such investigation, (iv)
there shall not be any pending or threatened litigation, suit, action or
proceeding by any party which would reasonably be expected to limit or
materially adversely affect Purchaser's ownership of the Acquired Assets and (v)
no statute, rule or regulation shall have been promulgated or enacted by any
Governmental Entity, which would prevent or make illegal the consummation of the
transactions contemplated hereby.
(d) Documents. Seller shall have delivered to Purchaser at
the Closing such other documents and instruments as shall be reasonably
necessary to transfer to Purchaser the Acquired Assets as contemplated by this
Agreement. Seller shall have delivered all the certificates, instruments,
contracts and other documents specified to be delivered by each such person
hereunder, including pursuant to Section 2.6 hereof.
(e) Corporate Name. Seller shall have delivered to Purchaser
at the Closing a certified copy of a certificate of amendment duly filed with
the applicable state authorities pursuant to which Seller changes its name from
Flapdoodles, Inc. to another name not utilizing "Flapdoodles" or any derivation
thereof.
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6.2 Conditions Precedent to Obligations of Seller. The
obligations of Seller to sell the Acquired Assets and of Seller to consummate
the other transactions contemplated hereby are subject to the satisfaction, on
or prior to the Closing Date, of each of the following conditions (any one or
more of which may be waived in writing in whole or in part by Seller in its sole
discretion):
(a) Representations, Warranties and Covenants. Each of the
representations and warranties of Purchaser and the Members contained in this
Agreement or in any certificate, document or other instrument delivered in
connection herewith shall be true and correct in all material respects on and as
of the date of this Agreement and at and as of the Closing with the same effect
as though such representations and warranties had been made at and as of the
Closing, except for representations and warranties that speak as of a specific
date or time other than the Closing (which need only be true and correct in all
material respects as of such date or time); provided, however, that if any
portion of any such representation or warranty is already qualified by
materiality, for purposes of determining whether this condition has been
satisfied with respect to such portion of such representation or warranty, such
portion of such representation or warranty as so qualified shall be true and
correct in all respects. Purchaser shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed and complied with by it at or prior to the Closing.
(b) Injunction; Litigation; Legislation. Seller shall be
subject to any order or injunction restraining or prohibiting the consummation
of the transactions contemplated hereby, (ii) no action or proceeding shall have
been instituted before any court or Governmental Entity to restrain or prohibit,
or to obtain substantial damages from Seller in respect of, the consummation of
the transactions contemplated hereby, (iii) none of the parties hereto shall
have received written notice from any Governmental Entity of (A) its intention
to institute any action or proceeding to restrain, enjoin or nullify this
Agreement or the transactions contemplated hereby, or to commence any
investigation (other than a routine letter of inquiry, including a routine civil
investigative demand) into the consummation of the transactions contemplated
hereby or (B) the actual commencement of such investigation and (iv) no statute,
rule or regulation shall have been promulgated or enacted by any Governmental
Entity, which would prevent or make illegal the consummation of the transactions
contemplated hereby.
(c) Documents. Purchaser shall have delivered to Seller at
the Closing such other documents and instruments as shall be reasonably
necessary for the assumption by Purchaser of the Assumed Liabilities as
contemplated by this Agreement. Purchaser shall have delivered all the
certificates, instruments, contracts and other documents specified to be
delivered by it hereunder, including pursuant to Section 2.6 hereof.
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ARTICLE VII
CERTAIN ADDITIONAL COVENANTS
7.1 Certain Taxes and Expenses. The parties shall share
equally all state and local sales, use, transfer, real property transfer,
documentary stamp, recording and other similar taxes arising from and with
respect to the sale and purchase of the Acquired Assets. Except as otherwise
expressly provided in this Agreement, each of the parties hereto shall bear its
respective accounting, legal and other expenses incurred in connection with the
transactions contemplated by this Agreement. Purchaser shall be responsible for
all costs of the filing of registrations for the transfer and maintenance of the
Intellectual Property, Technology and the Library.
7.2 Maintenance of Books and Records. Seller and Purchaser
shall cooperate fully with each other after the Closing so that (subject to any
limitations that are reasonably required to preserve any applicable
attorney-client privilege) each party hereto has access to the business records,
contracts and other information existing at the Closing Date and relating in any
manner to the Acquired Assets, the Assumed Liabilities or the conduct of the
Business with respect to the period prior to the Closing (whether in the
possession of Seller or Purchaser). No files, books or records existing at the
Closing Date and relating in any manner to the Acquired Assets or the conduct of
the Business prior to the Closing Date shall be destroyed by any party hereto
for a period of seven (7) years after the Closing Date without giving the other
party at least 30 days prior written notice, during which time such other party
shall have the right (subject to the provisions hereof) to examine and to remove
any such files, books and records prior to their destruction. The access to
files, books and records contemplated by this Section 7.2 shall be during normal
business hours and upon not less than two (2) business days prior written
request, shall be subject to such reasonable limitations as the party having
custody or control thereof may impose to preserve the confidentiality of
information contained therein, and shall not extend to material subject to a
claim of privilege unless expressly waived by the party entitled to claim the
same.
7.3 Seller Covered Claims. For the purposes of this Section,
"Seller Covered Claim" shall mean (a) any claim or litigation specifically
arising from Seller's conduct of the Business during the period beginning August
1, 1993 until the Closing for which Seller or Marisa Christina is entitled to
insurance coverage under any insurance policies then in effect and does, in
fact, recover insurance proceeds pursuant to such coverage and then, only to the
extent of such recovery or (b) any workers compensation claim relating to events
which occurred prior to December 31, 2000. Seller agrees to promptly notify its
insurer of any event which is likely to give rise to a Seller Covered Claim and
Seller further agrees to use commercially reasonable efforts to pursue recovery
of insurance proceeds for any Seller Covered Claim. Seller shall be responsible
for the payment of any deductible in respect of any Seller Covered Claim.
7.4 Returned Checks. Any checks deposited on or prior to
12/31/00 on or for the account of Flapdoodles that are returned for insufficient
funds or which are not paid for any reason shall be the property of Marisa
Christina. Purchaser agrees to assist Marisa Christina in the collection of any
amounts owed in respect of such returned checks.
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ARTICLE VIII
SURVIVAL; INDEMNIFICATION
8.1 Survival. Except for the representations contained in
Section 3.7(b) hereof which shall survive Closing for a period of one (1) year,
No representation or warranty contained in this Agreement or the other
Transaction Documents shall survive the Closing.
8.2 Indemnification by Seller.
(a) Marisa Christina shall indemnify and hold Purchaser and
its directors, officers, stockholders, agents, employees, the Members
(collectively, the "Purchaser Indemnified Parties") harmless from and against,
and agree promptly to defend any Purchaser Indemnified Party from and reimburse
any Purchaser Indemnified Party for, any and all Losses which any Purchaser
Indemnified Party may at any time suffer or incur, or become subject to, as a
result of or in connection with:
(i) any failure by Seller to carry out, perform, satisfy and
discharge any of its covenants, agreements, undertakings, liabilities or
obligations under this Agreement or under any of the other Transaction Documents
delivered by Seller pursuant to this Agreement;
(ii) the Non-Assumed Liabilities;
(iii) Liens against the Acquired Assets (other than Permitted
Liens) which (x) arise out of obligations of Marisa Christina or its Affiliates
(other than the Sellers) and (y) do not relate solely to the conduct of the
Business by Seller;
(iv) any claim by a stockholder or creditor of Marisa
Christina arising out of the sale of the Acquired Assets by Seller; or
(v) all liability or costs and that certain pending or
threatened claim by James Rigby, the Chapter 7 Trustee in bankruptcy of Gray
Skies, Inc., d/b/a Shopstars.com, seeking to avoid alleged preferential
transfers and payments in the amount set forth in the letter from such trustee
dated December 19, 2000; provided that Purchaser shall provide Seller and its
counsel with all reasonable assistance of Purchaser's personnel and access to
its records and further provided that Purchaser shall reimburse Seller for
one-half of the amount of any judgment or settlement with regard to such claim ,
up to a maximum liability by Purchaser in such regard of $25,000.
8.3 Indemnification by Purchaser. Purchaser shall indemnify
and hold Seller and its employees, officers, directors and agents (collectively,
the "Seller Indemnified Parties") harmless from and against, and agree promptly
to defend any Seller Indemnified Party from and reimburse any Seller Indemnified
Party for, any and all Losses which any Seller Indemnified Party may at any time
suffer or incur, or become subject to, as a result of or in connection with:
(i) any failure by Purchaser to carry out, perform, satisfy
and discharge any of its covenants, agreements, undertakings, liabilities or
obligations under this Agreement or under any of the other Transaction Documents
delivered by Purchaser pursuant to this Agreement; or
(ii) the Assumed Liabilities.
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8.4 Notification of Claims. (a) If any Purchaser Indemnified
Party, on the one hand, or Seller Indemnified Party, on the other hand (an
"Indemnified Party"), has a claim or potential claim or receives notice of any
claim, potential claim or the commencement of any action or proceeding which
could give rise to an obligation on the part of Seller or Purchaser, as the case
may be, to provide indemnification (the "Indemnifying Party") pursuant to
Section 8.2 or 8.3, respectively, the Indemnified Party shall promptly give the
Indemnifying Party notice thereof (an "Indemnification Claim"); provided,
however, that the failure to give such prompt notice shall not prevent any
Indemnified Party from being indemnified hereunder for any Losses, except to the
extent that the failure to so promptly notify the Indemnifying Party actually
damages the Indemnifying Party.
(b) In the event of a claim, a potential claim or the
commencement of any action or proceeding by a third party which could give rise
to an obligation to provide indemnification pursuant to Sections 8.2 or 8.3, the
Indemnified Party will give the Indemnifying Party prompt written notice thereof
(the "Third Party Indemnification Claim"); provided, however, that the failure
of the Indemnified Party to so promptly notify the Indemnifying Party shall not
prevent any Indemnified Party from being indemnified for any Losses, except to
the extent that the failure to so promptly notify actually damages the
Indemnifying Party.
(c) Any Indemnification Claim or Third Party Indemnification
Claim will describe the claim in reasonable detail, will include copies of all
material written evidence thereof and will indicate the estimated amount if
reasonably practicable, of the Loss, that has been or may be sustained by the
Indemnified Party. If the Indemnifying Party confirms in writing to the
Indemnified Party within 15 days after receipt of the Third Party
Indemnification Claim the Indemnifying Party's responsibility to indemnify and
hold harmless the Indemnified Party therefore in accordance herewith and within
such 15-day period demonstrates to the Indemnified Party's reasonable
satisfaction that, as of such time the Indemnifying Party has sufficient
financial resources in order to indemnify for the full amount of any potential
liability in connection with such claim, the Indemnifying Party may elect to
compromise or defend, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, which counsel shall be reasonably satisfactory
to the Indemnified Party, any such matter involving the asserted liability of
the Indemnified Party. If the Indemnifying Party elects to compromise or defend
any such asserted liability, it shall within 15 days (or sooner, if the nature
of the asserted liability so requires) notify the Indemnified Party of its
intent to do so, and the Indemnified Party shall cooperate, at the expense of
the Indemnifying Party, in the compromise of, or defense against, any such
asserted liability; provided that (i) the Indemnified Party may, if it so
desires, employ counsel at its own expense to assist in the handling of any such
third party claim, (ii) the Indemnifying Party shall keep the Indemnified Party
advised of all material events with respect to any such third party claim, (iii)
the Indemnifying Party shall obtain the prior written approval of the
Indemnified Party (which approval may not be unreasonably withheld) before
ceasing to defend against such third party claim or entering into any
settlement, adjustment or compromise of such third party claim involving
injunctive or similar equitable relief being asserted against any Indemnified
Party or any of their Affiliates and (iv) no Indemnifying Party will, without
the prior written consent of each Indemnified Party, settle or compromise or
consent to the entry of any judgment in any pending or threatened demand, claim,
action or cause of action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not any such Indemnified
Party is a party to such demand, claim, action or cause of action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of all such Indemnified Parties from all liability arising
out of such claim, action, suit or proceeding. Notwithstanding anything
contained herein to the contrary, the Indemnifying Party shall not be entitled
to have sole control over the defense, settlement,
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adjustment or compromise of any third party non-monetary claim that seeks an
order, injunction or other equitable relief against any Indemnified Party or its
Affiliates which, if successful, could materially interfere with the business,
assets, liabilities, obligations, financial condition or results of operations
of the Indemnified Party or any of its Affiliates. If the Indemnifying Party
elects not to compromise or defend against the asserted liability, or fails to
notify the Indemnified Party of its election as herein provided, the Indemnified
Party may, at the Indemnifying Party's expense, pay, compromise or defend
against such asserted liability.
8.5 Exclusive Remedy. Notwithstanding any other provisions
of this Article VIII to the contrary, the rights and remedies of Purchaser,
Seller, and any Purchaser Indemnified Party or Seller Indemnified Party under
this Article VIII are exclusive and in lieu of any and all other rights and
remedies which Purchaser, Seller, or any Purchaser Indemnified Party or Seller
Indemnified Party may have under this Agreement.
ARTICLE IX
EMPLOYEES AND EMPLOYEE BENEFITS
9.1 Employees. Purchaser shall offer employment, effective
as of the Closing Date, to all Business Employees who are employed as of the
Closing on such terms and conditions generally comparable to those in effect
immediately prior to the Closing. Each such Business Employee who accepts
Purchaser's offer of employment effective as of the Closing Date shall be
referred to herein as a "Transferred Employee". Nothing herein shall, or shall
be construed to, limit Purchaser's right at any time to terminate the employment
of any Transferred Employee or to amend or terminate any employee benefit plan
or otherwise change terms and conditions of employment of any Transferred
Employee.
9.2 Employee Benefits.
(a) The parties agree that, to the extent permissible under
applicable law, Purchaser shall be a successor employer for purposes of the
Federal Insurance Contributions Act, as codified at 26 U.S.C. Sections
3101-3128, the Federal Unemployment Tax Act, as codified at 26 U.S.C. Sections
3301-3311, and, if Purchaser so elects, under any applicable state workers
compensation and unemployment compensation laws. Seller agrees to provide
Purchaser with such wage, tax and other information with respect to Transferred
Employees as Purchaser may reasonably require for such purposes.
(b) Purchaser shall assume and be bound by, obligated and
responsible for any and all duties, responsibilities, commitments, expenses,
obligations or liabilities of Seller relating to the Acquired Assets and/or the
Business (or which may be asserted against or imposed upon Purchaser as a
successor or transferee of Seller as an acquiror of the Acquired Assets or the
Business or otherwise as a matter of law) which arise from, or relate to, any
Transferable Benefit Plan or the employment or termination of employment of any
current or former Business Employee by Seller or any of its Affiliates,
including, but not limited to, the Transferable Benefit Plans, liabilities for
salaries, wages, bonuses, sick pay, severance pay, COBRA continuation coverage
or benefits under any other employee benefit plan or arrangement, workers
compensation or unemployment insurance premiums, tax withholding, occupational
injury, illness or disability, or claims arising under any employment, labor or
discrimination laws whether payable prior to or after the Closing.
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(c) Effective as of the Closing, the Business Employees
shall cease participating in any Marisa Christina Plans.
(d) The parties agree to furnish each other with such
information concerning Business Employees and Transferred Benefit Plans, and to
take all such other action, as is necessary and appropriate to effect the
transactions contemplated by this Article IX.
ARTICLE X
TERMINATION; MISCELLANEOUS
10.1 Termination.
(a) This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date, as
follows: (i) at any time by the mutual written agreement of Purchaser and Seller
or (ii) by Purchaser or Seller if the other shall commit a material breach of
any of the provisions hereunder applicable to such party.
(b) Except for the obligations contained in Section 7.1,
which shall survive any termination of this Agreement, upon the termination of
this Agreement pursuant to Section 10.1, this Agreement shall forthwith become
null and void, and no party hereto or any of its officers, directors, employees,
agents, consultants, stockholders, members or principals shall have any rights,
liabilities or obligations hereunder or with respect hereto; provided, however,
that nothing contained herein shall relieve any party hereto from liability for
any knowing breach or inaccuracy of any representation or warranty contained
herein or any willful failure to comply with any covenant or agreement contained
herein.
10.2 Further Assurances. From time to time prior to, at and
after the Closing Date, Purchaser and Seller shall execute and deliver or cause
to be executed and delivered such further documents, certificates, instruments
of conveyance, assignment and transfer and take such further action as Purchaser
or Seller may reasonably request in order more effectively to sell, assign,
convey, transfer, reduce to possession and record title to any of the Acquired
Assets to Purchaser or to better enable Purchaser to complete, perform and
discharge any of the Assumed Liabilities. Purchaser and Seller agree to
cooperate with each other in all reasonable respects to assure to Purchaser the
continued title to and possession of the Acquired Assets in the condition and
manner contemplated by this Agreement. Each party hereto shall cooperate and
deliver such instruments and take such action as may be reasonably requested by
any other parties hereto in order to carry out the provisions and purposes of
this Agreement and the transactions contemplated hereby. Purchaser and Seller
shall cooperate and shall cause their respective Affiliates, officers,
employees, agents and representatives to cooperate to ensure the orderly
transition of the Business from Seller to Purchaser and to minimize the
disruption to the Business resulting from the transactions contemplated hereby.
10.3 Entire Agreement. This Agreement and the documents and
agreements referred to herein and to be delivered pursuant hereto constitute the
entire agreement between the parties hereto pertaining to the subject matter
hereof, and supersede all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties, whether oral or written.
10.4 Benefit; Assignment. This Agreement shall be binding
upon and inure to the benefit of and shall be enforceable by the parties hereto
and their respective successors and permitted assigns. This Agreement shall not
be assigned by any party hereto without the prior written consent of the other
parties hereto. Any assignment in violation of this Agreement shall be null and
void ab initio.
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10.5 No Presumption. Purchaser and Seller have participated
jointly in the negotiation and drafting of this Agreement. In the event any
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by Purchaser and Seller and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
10.6 Notices. All notices, requests, claims, demands and
other communications provided for herein shall be in writing and shall be deemed
given only if delivered to the party personally or sent to the party by
telecopy, by registered or certified mail (return receipt requested) with
postage and registration or certification fees thereon prepaid, or by any
nationally recognized overnight courier, addressed to the party at its address
set forth below:
If to Seller or Marisa Christina: Marisa Christina Incorporated
1410 Broadway, 20th Floor
New York, New York 10018
Attention: Michael Lerner, CEO
Telecopy No.: (212) 921-7632
With a copy to: Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Blake Hornick
Telecopy No.: (212) 326-0806
If to Purchaser or Members: Flap 2001, Inc.
725 Dawson Drive
Newark, Delaware 19715
Attention: Marc Ham
With a copy to: The Bayard Firm
222 Delaware Avenue, Suite 900
P.O. Box 25130
Attention: Neil B. Glassman
Telecopy No.: (302) 658-6395
or to such other address as a party may from time to time designate in writing
in a notice given in accordance with this Section 10.6. All notices, requests,
claims, demands and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt.
10.7 Counterparts; Headings. 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 an original, but all
of which taken together shall constitute one and the same Agreement. The Article
and Section headings in this Agreement are inserted for convenience of reference
only and shall not constitute a part hereof or affect in any way the meaning or
interpretation of this Agreement.
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10.8 Severability. If any term, provision, clause or part of
this Agreement or the application thereof under certain circumstances is held
invalid, illegal or incapable of being enforced by any Law or public policy, all
other terms, provisions and parts of this Agreement shall nevertheless remain in
full force and effect so long as the economic and legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term, provision or part
of this Agreement 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 an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
10.9 No Reliance. Except for any assignees permitted by
Section 10.4 of this Agreement and the indemnified persons pursuant to Sections
8.2 and 8.3:
(a) no third party is entitled to rely on any of the
representations, warranties or agreements of the parties hereto contained in
this Agreement; and
(b) the parties hereto assume no liability to any third
party because of any reliance on the representations, warranties or agreements
of such parties contained in this Agreement.
10.10 Governing Law. All issues and questions concerning the
construction, validity, interpretation and enforcement of this Agreement and the
exhibits and schedules hereto shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to any choice of
law or conflict of law rules or provisions (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.
10.11 Intentionally Omitted.
10.12 Bulk Transfer. The parties hereto hereby waive
compliance with the provisions of any applicable bulk sales law of any
jurisdiction in connection with the transactions contemplated hereby and no
representation, warranty or covenant contained in this Agreement shall be deemed
to have been breached as a result of such non-compliance.
10.13 Waiver. Any party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations and warranties of the
other parties contained herein or in any document delivered by the other parties
pursuant hereto or (c) waive compliance with any of the agreements or conditions
of the other parties contained herein. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party to be
bound thereby. Any waiver of any term or condition shall not be construed as a
waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this Agreement. The
failure of any party to assert any of its rights hereunder shall not constitute
a waiver of any such rights.
10.14 Amendment. This Agreement may not be amended, modified
or supplemented except (a) by an instrument in writing signed by, or on behalf
of, each of the parties hereto or (b) by a waiver in accordance with Section
10.13.
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10.15 Delivery by Facsimile. This Agreement, the agreements
referred to herein, and each other agreement or instrument entered into in
connection herewith or therewith or contemplated hereby or thereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person. At
the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall reexecute original forms thereof and deliver
them to all other parties. No party hereto or to any such agreement or
instrument shall raise the use of a facsimile machine to deliver a signature or
the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine as a defense to the
formation or enforceability of a contract and each such party forever waives any
such defense.
10.16 Information Disclosed on Exhibits and Schedules.
Disclosure of any fact or item in any Schedule referenced by a particular
section or subsection of this Agreement shall, if it is obvious on the face of
such disclosure that the fact or item or its contents is reasonably related on
its face to any other paragraph or section or subsection of this Agreement, be
deemed to be disclosed with respect to that other section or subsection.
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
FLAPDOODLES, INC.
By:
-----------------------
Name: Michael Lerner
Title: President
MF SHOWROOM HOLDINGS, INC.
By:
-----------------------
Name: Michael Lerner
Title: President
MOUSEFEATHERS, INC.
By:
-----------------------
Name: Michael Lerner
Title: President
MARISA CHRISTINA INCORPORATED,
solely for the purposes of Sections 8.2 and 8.4
By:
-----------------------
Name: Michael Lerner
Title: Chief Executive Officer
FLAP 2001, INC.
By:
-----------------------
Name: Marc Ham
Title: President
--------------------------
Marc Ham, individually, solely for the
purposes of Section 2.2 and Article IV hereof
--------------------------
Carole Bieber, individually, solely for the
purposes of Section 2.2 and Article IV hereof
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ANNEX A
Definitions
1. For purposes of this Agreement, the following terms
shall have the following meanings:
"Acquired Assets" means all of the assets, properties and rights
owned, used or held for use by Seller in connection with, or that are otherwise
related to or required for the conduct of, the Business of every kind, nature
and description (other than the Excluded Assets), wherever such assets,
properties and rights are located and whether such assets, properties and rights
are real, personal or mixed, tangible or intangible, and whether or not any of
such assets, properties and rights have any value for accounting purposes or are
carried or reflected on or specifically referred to in Seller's books or
financial statements, including without limitation all of the assets, properties
and rights owned, used or held for use by Seller in connection with, or that are
otherwise related to for the conduct of, the Business set forth below:
(a) all tangible assets and properties owned, used or held
for use by Seller, including cars, trucks and other transportation equipment,
machinery and equipment, tools, spare parts, furniture, office equipment,
furnishings and fixtures and machinery and equipment under order or construction
(the "Equipment");
(b) all inventories, including finished goods,
work-in-progress, raw materials, accessories, packaging, manufacturing,
administrative and other supplies on hand, goods held for sale or to be
furnished under the Contracts and other inventories owned, used or held for use
by Seller (the "Inventories");
(c) all billed and unbilled accounts receivable, prepaid
assets and all notes receivable of Seller ("Accounts Receivable");
(d) all credits, prepaid expenses, deferred charges, advance
payments, security deposits and deposits owned, used or held for use by Seller;
(e) all intellectual property rights, statutory, common law
or otherwise, including, without limitation, patents (including all reissues,
divisions, continuations and extensions thereof), patent rights, service marks,
trademarks and tradenames, all brand and product names, all assumed or
fictitious names and all logos, copyrights, all domain names and all rights in
and to related internet sites, licenses and other contractual rights and all
registrations, assignments and applications relating to the foregoing and other
such property and intangible rights owned, used or held for use by Seller
(including any and all names and marks of any type whatsoever using the name
Flapdoodles or any derivative thereof), together with the goodwill of the
business in connection with all of the foregoing ("Intellectual Property");
(f) all completed and developing formulae, processes,
procedures, designs, ideas, strategic and other business plans, research
records, inventions, records of inventions, test information, technical
information, engineering data, know-how, proprietary information, and trade
secrets (and all related manuals, books, files, journals, models, instructions,
patterns, drawings, blueprints, plans, designs specifications, equipment lists,
parts lists, descriptions, data, art work, computer software, computer programs
and processes and source code data related thereto including all current and
historical data bases) owned, used or held for use by Seller ("Technology");
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(g) the library, as such term is commonly used in relation
to businesses similar to the Business, inclusive of samples purchased or
produced, design reference books and textile samples (antique or design
swatches) (the "Library");
(h) all customer and supplier lists;
(i) all licensing rights, to the extent assignable;
(j) except for Excluded Assets, (i) all contracts, licenses,
commitments, agreements and instruments, including all customer contracts,
operating contracts and distribution contracts of Seller relating to the
Business, (ii) all sales and purchase orders and supply agreements and other
agreements of Seller relating to the Business, (iii) all leases of Equipment of
Seller relating to the Business, (iv) all restrictive covenants accruing to the
benefit of Seller, including, without limitation, noncompetition and
nonsolicitation covenants, (v) all leases of real property (such leased real
property being hereafter referred to as the "Leased Real Property"), and (vi)
all other contracts, licenses, agreements and instruments of Seller relating to
the Business (collectively, the "Contracts");
(k) all franchises, approvals, permits, authorizations,
licenses, orders, registrations, certificates, variances, and other similar
permits or rights obtained from any Governmental Entity issued to Seller and all
pending applications therefore (the "Permits");
(1) copies, or originals where practicable, of all books,
records, ledgers, files, documents (including originally executed copies of
written Contracts), customer and supplier lists (past, present or future),
correspondence, memoranda, forms, lists, plats, architectural plans, drawings
and specifications, copies of documents evidencing Intellectual Property,
Technology or the Library, new product development materials, creative
materials, advertising and promotional materials, studies, reports, sales and
purchase correspondence, books of account and records relating to the
Transferred Employees, photographs, quality control records and procedures,
equipment maintenance records, manuals and warranty information, research and
development files, in each case, whether in hard copy or magnetic format, in
each instance, of Seller;
(m) all rights or choses in action arising out of
occurrences before or after the Closing Date and related to any portion of the
Business, including third party warranties and guarantees and all related
claims, credits, rights of recovery and set-off contractual rights, as to third
parties held by or in favor of Seller;
(n) all rights to insurance and condemnation proceeds
relating to damage, destruction, taking or other impairment of the Acquired
Assets which damage, destruction, taking or other impairment occurs on or prior
to the Closing Date;
(o) any Transferable Benefit Plan and the assets
attributable or related to such Transferable Benefit Plan; and
(p) any other assets of Seller other than the Excluded
Assets.
"Affiliate" means, with respect to any specified Person, any
other Person that, directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" means this Asset Purchase Agreement, together with
the Annex, Schedules and Exhibits attached hereto, as the same may be amended
from time to time in accordance with the terms hereof.
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"Assumed Liabilities" shall mean any duties, responsibilities,
commitments, expenses, obligations or liabilities of Seller or relating to the
Acquired Assets, the Business Employees, the Transferable Benefit Plans or the
Business (fixed or contingent, known or unknown) other than the Non-Assumed
Liabilities, including, without limitation, all employment or consulting
agreements and other employee commitments, whether written or oral, express or
implied.
"Business Day" means any day other than a Saturday, Sunday, or a
day on which banking institutions in the City of New York are authorized or
obligated by law or executive order to close.
"Business Employees" means the officers, employees, agents and
consultants of Seller employed primarily in connection with the Business.
"Claim" means any claim of any nature whatsoever, including any
demand, liability, obligation, debt, cause of action, suit, proceeding,
judgment, award, or assessment.
"Closing Modified Working Capital" shall mean, as of the Closing
Date, the sum of (i) the book value of inventory of Seller included in Acquired
Assets with reserves for markdowns and damaged or defective items and (ii) the
net book value of accounts receivable, of Seller included in the Acquired Assets
less appropriate reserves for doubtful accounts minus the sum of (x) the
accounts payable of Seller included in the Assumed Liabilities and (y) the
accrued expenses of Seller included in the Assumed Liabilities, in each case,
(i), (ii), (x) and (y) above shall be determined using the same accounting
methods and policies utilized in Seller's past practices.
"Code" means the Internal Revenue Code of 1986, as amended.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means (a) any corporation included with Seller
in a controlled group of corporations within the meaning of Section 414(b) of
the Code, (b) any trade or business (whether or not incorporated) which is under
common control with Seller within the meaning of Section 414(c) of the Code, (c)
any member of an affiliated service group of which Seller is a member within the
meaning of Section 414(m) of the Code or (d) any other person or entity treated
as an affiliate of Seller under Section 4 14(o) of the Code.
"Excluded Assets" means:
(i) except as otherwise set forth herein, any Marisa
Christina Plan and the assets attributable or related to any Marisa Christina
Plan;
(ii) all rights of Seller under this Agreement and other
Transaction Documents;
(iii) duplicate copies of all books and records transferred to
Purchaser, subject to the restrictions contained herein;
(iv) any monies owed by Marisa Christina to Seller;
(v) any rights to Tax refunds or net operating loss
carry-forwards;
(vi) cash on hand;
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(vii) all rights to insurance proceeds that relate to any
Seller Covered Claim.
"GAAP" means United States generally accepted accounting
principles.
"Governmental Entity" means (i) any multinational, federal,
provincial, state, municipal, local or other governmental or public department,
court, commission, board, bureau, agency or instrumentality, domestic or
foreign; (ii) any subdivision, agent, commission, board, or Governmental Entity
of any of the foregoing; or (iii) any quasi-governmental or private body
exercising any regulatory, expropriation or taxing governmental authority under
or for the account of any of the foregoing.
"Laws" means all statutes, codes, ordinances, decrees, rules,
regulations, municipal by-laws, judicial or arbitral or administrative or
ministerial or departmental or regulatory judgments, orders, decisions, rulings
or awards, policies, voluntary restraints, guidelines, or any provisions or
interpretations of the foregoing, including general principles of common and
civil law and equity, binding on or affecting the Person referred to in the
context in which such word is used.
"Lien" means any lien, (including, without limitation,
environmental and tax liens) charge, claim, pledge, security interest,
conditional sale agreement or other title retention agreement, lease, mortgage,
security agreement, right of first refusal, option, restriction, tenancy,
license, covenant, right of way, easement or other encumbrance (including the
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or statute or law of any jurisdiction) preferential arrangement
or restriction of any kind (including, without limitation, any restriction on
the use, voting, transfer, receipt of income or other exercise of any
attributes).
"Losses" means any losses, costs, expenses, damages including
compensatory, exemplary, or punitive damages, Taxes, penalties, fines, charges,
demands, liabilities, obligations and claims of any kind (including interest,
penalties and reasonable attorneys' and consultants' fees, expenses and
disbursements).
"Material Adverse Effect" means a circumstances, change or
effect (or series of related circumstances changes or effects) which has or is
reasonably likely to have a material adverse change in or effect upon the
business, assets, liabilities, condition (financial or otherwise), or results of
operations of Seller, the Business or the Acquired Assets, taken as a whole or
which could materially adversely affect the ability of Purchaser to operate or
conduct the Business in the manner in which it is currently operated or
conducted by Seller.
"Non-Assumed Liabilities" means: (i) any liability for Taxes of
Seller, except as specifically provided herein, (ii) any obligations of Seller
in respect of the Excluded Assets, (iii) any liability of Seller to Marisa
Christina or any Affiliate pursuant to any intercompany or interdivision loans
or otherwise, (iv) any liability of Seller pursuant to any Marisa Christina Plan
or (v) any Seller Covered Claim.
"Permitted Liens" means Liens securing Taxes, assessments,
governmental charges or levies, all of which are not yet due and payable.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, firm, Governmental Entity, a
trust unincorporated organization or other entity or organization.
"PTO" means the United States Patent and Trademark Office.
"Target Closing Modified Working Capital" means $5,650,000.
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"Taxes" means any and all federal, state, local and foreign
taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind
whatsoever, including, without limitation, income, payroll, withholding, excise,
sales, use, lease, personal and other property, use and occupancy, business and
occupation, mercantile, real estate, gross receipts, license, employment,
severance, stamp, premium, windfall profits, social security (or similar
unemployment), disability, transfer, registration, value added, alternative or
add-on minimum, estimated, or capital stock and franchise and other tax of any
kind whatsoever, including any interest, penalty or addition thereto, or
additional amounts imposed with respect thereto, whether disputed or not.
2. The following terms shall have the meanings ascribed to
them in the section of this Agreement indicated below:
DEFINED TERM SECTION
- ------------ -------
"Allocation" 2.8
"Seller's Dispute Notice" 2.3(b)
"Seller Indemnified Parties" 8.3(a)
"Benefit Plans" 3.8(a)
"Closing" 2.5
"Closing Date" 2.5
"Closing Payment 2.2
"COBRA" 9.3
"Final Closing Modified Working Capital" 2.3(b)
"FTC" 5.3
"Indemnification Claim" 8.4(a)
"Indemnified Party" 8.4(a)
"Marisa Christina Plans" 3.8(a)
"Marisa Stock" 2.2
"Non-Assumed Liabilities" 2.4(b)
"Purchase Price" 2.2
"Purchaser Indemnified Parties" 8.2(a)
"Purchaser's Closing Schedule" 2.3(a)
"Seller Covered Claim" 7.3
"Third Party Indemnification Claim" 8.4(b)
"Transaction Documents" 3.1(a)
"Transferable Benefit Plans" 3.8(a)
"Transferred Employee" 9.1
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LIST OF SCHEDULES
AND EXHIBITS
Schedule 3.3 No Violation of Laws or Agreements
Schedule 3.4 Consents
Schedule 3.5 Title; Existing Liens
Schedule 3.6 Taxes
Schedule 3.7 Intellectual Property
Schedule 3.8 Employee Benefit Plans
Schedule 3.9 Pending Litigation
Exhibit A Form of Agreement and Mutual General Release
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