Asset Purchase Agreement - Converse Inc. and Footwear Acquisition Inc.
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
CONVERSE INC.,
SELLER
AND
FOOTWEAR ACQUISITION, INC.,
BUYER
DATED AS OF
APRIL 6, 2001
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TABLE OF CONTENTS
Page
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ARTICLE I. TERMS OF PURCHASE AND SALE...................................... 1
1.01 Purchase and Sale................................................... 1
1.02 Excluded Assets..................................................... 4
1.03 The Closing......................................................... 4
1.04 Payment of Purchase Price........................................... 4
1.05 Post-Closing Adjustment............................................. 6
1.06 Assumption of Certain Obligations................................... 8
1.07 Retained Liabilities................................................ 8
1.08 Payment of Transfer Taxes and Other Charges......................... 10
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF SELLER........................ 10
2.01 Organization and Standing........................................... 10
2.02 Authorization by Seller............................................. 10
2.03 Assumed Contracts; Information...................................... 11
2.04 Intellectual Property............................................... 12
2.05 Title to Purchased Assets; Absence of Liens and Encumbrances........ 14
2.06 Litigation.......................................................... 15
2.07 Inventory........................................................... 15
2.08 Insurance........................................................... 15
2.09 Compliance with Laws................................................ 15
2.10 Tax and Other Returns and Reports................................... 15
2.11 Environmental Matters............................................... 16
2.12 Accounts Receivable; Collection..................................... 16
2.13 Software............................................................ 16
2.14 Customers and Suppliers............................................. 18
2.15 Changes in Accounting Method........................................ 18
2.16 Absence of Undisclosed Liabilities.................................. 18
2.17 Subsidiary Assets................................................... 19
2.18 Schedules........................................................... 19
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BUYER......................... 19
3.01 Organization and Standing........................................... 19
3.02 Authorization by Buyer.............................................. 19
3.03 Available Funds..................................................... 20
3.04 HSR Matters......................................................... 20
3.05 Litigation.......................................................... 20
ARTICLE IV. COVENANTS OF SELLER............................................. 20
4.01 Cooperation......................................................... 20
4.02 Court Approval...................................................... 21
4.03 Conduct of Business................................................. 22
4.04 Disclosure Supplements.............................................. 23
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4.05 Closing............................................................. 24
4.06 Confidentiality..................................................... 24
4.07 Transitional Arrangements Agreement................................. 24
4.08 Further Assurances.................................................. 24
4.09 Inspection.......................................................... 24
4.10 Maintain Insurance.................................................. 25
4.11 Maintenance of, and Access to, Records.............................. 25
4.12 Accounts Receivable................................................. 25
4.13 Consents............................................................ 25
4.14 Specific Enforcement of Covenants................................... 26
4.15 Acquisition Proposals............................................... 26
ARTICLE V. COVENANTS OF BUYER.............................................. 26
5.01 Cooperation......................................................... 26
5.02 Confidentiality..................................................... 27
5.03 Employees........................................................... 27
5.04 Shipped Inventory Matters........................................... 27
ARTICLE VI. CONDITIONS TO BUYER'S OBLIGATIONS............................... 27
6.01 Covenants........................................................... 27
6.02 Representations and Warranties True................................. 27
6.03 Delivery of Certificates............................................ 27
6.04 Instruments of Transfer............................................. 28
6.05 Consents............................................................ 28
6.06 Approval Order...................................................... 28
6.07 HSR Waiting Period.................................................. 28
6.08 Injunction.......................................................... 28
6.09 Material Adverse Change............................................. 28
6.10 Ancillary Agreements................................................ 28
ARTICLE VII. CONDITIONS TO SELLER'S OBLIGATIONS.............................. 28
7.01 Covenants of Buyer.................................................. 28
7.02 Representations and Warranties True................................. 29
7.03 Delivery of Certificates............................................ 29
7.04 Instruments of Assumption........................................... 29
7.05 Tender of Purchase Price............................................ 29
7.06 Approval Order...................................................... 29
7.07 HSR Waiting Period.................................................. 29
7.08 Injunction.......................................................... 29
7.09 Further Action...................................................... 29
7.10 Ancillary Agreements................................................ 29
ARTICLE VIII. TERMINATION PRIOR TO CLOSING.................................... 29
8.01 Termination......................................................... 29
8.02 Effect on Obligations............................................... 30
8.03 Return of Deposit to Buyer.......................................... 30
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ARTICLE IX. INDEMNIFICATION................................................. 30
9.01 Survival............................................................ 30
9.02 Indemnification by Seller........................................... 31
9.03 Indemnification by Buyer............................................ 31
9.04 Limitations......................................................... 31
9.05 Indemnification Procedure........................................... 33
ARTICLE X. MISCELLANEOUS................................................... 34
10.01 Entire Agreement.................................................... 34
10.02 Use of Names........................................................ 34
10.03 Successors and Assigns.............................................. 34
10.04 Counterparts........................................................ 35
10.05 Headings, Interpretation............................................ 35
10.06 Modification and Waiver............................................. 35
10.07 Expenses, etc....................................................... 35
10.08 Notices............................................................. 35
10.09 Governing Law....................................................... 36
10.10 Announcements....................................................... 36
10.11 Compliance with Bulk Sales Laws..................................... 37
10.12 Binding Nature of Agreement......................................... 37
10.13 Seller's Knowledge.................................................. 37
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") dated as of April 6, 2001
by and between Converse Inc., a Delaware corporation ("Seller"), and Footwear
Acquisition, Inc., a Delaware corporation ("Buyer").
W I T N E S S E T H :
WHEREAS, Seller is willing to sell, and Buyer desires to purchase, certain
intellectual property, contracts, accounts receivable, inventory and other
assets of Seller;
WHEREAS, Seller has filed a voluntary petition for relief under Chapter 11
of the United States Bankruptcy Code (the "Bankruptcy Code"), case no. 01-0223
(the "Bankruptcy Case"), which is currently pending in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court");
WHEREAS, Seller has determined that it is in its best interests to sell to
Buyer, and for Buyer to purchase from Seller, pursuant to Sections 363 and 365
of the Bankruptcy Code, the Purchased Assets (as defined herein) for
consideration, and upon the terms and conditions, hereinafter set forth; and
WHEREAS, Seller and Buyer intend that the Closing under this Agreement
will not occur until after a Notification and Report Form pursuant to the
Hart-Scott-Rodino Antitrust Improvement Act of 1976 ("HSR Act") with respect to
the transaction is filed, if required, with the U.S. Department of Justice and
Federal Trade Commission, and any applicable waiting period under the HSR Act
has expired or been earlier terminated ("HSR Clearance").
NOW, THEREFORE, in consideration of the premises and mutual promises and
covenants contained herein, Buyer and Seller agree as follows:
ARTICLE I
TERMS OF PURCHASE AND SALE
1.01 Purchase and Sale. Subject to the terms and conditions set forth
herein, Buyer agrees to purchase and pay for, and Seller agrees to sell, assign,
transfer and convey to Buyer, on the Closing Date (as defined in Section 1.03),
free and clear of all Liens (as defined in Section 4.02(b)(ii) below) subject in
the case of the Intellectual Property (as defined in Section 2.04 hereof) to
licenses pursuant to the agreements set forth on Schedule 2.04 to this
Agreement, all of the assets set forth in this Section 1.01 existing on the
Closing Date, wherever located (the "Purchased Assets"). The Purchased Assets
consist of and shall include only the items set forth in this Section 1.01,
subject to Buyer's rights to exclude certain specified assets prior to the
Closing in accordance with Section 1.02.
(a) The following items of intellectual property, contracts,
inventory and accounts receivable:
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(i) all general intangibles and intangible property, including
the Intellectual Property owned by Seller;
(ii) all of Seller's rights under license and sublicense
agreements, pursuant to which Seller's Intellectual Property is
licensed to third parties, whether domestic or international,
including those listed or described on Schedule B hereto (the
"Licenses");
(iii) all of Seller's rights under supplier, services or
vendor agreements, purchase orders issued by Seller and other
contracts entered into by Seller in connection with the design,
testing, manufacture, warehousing, or transport of its products, and
all contractor and outsourcing agreements otherwise entered into in
connection with the products, including (x) those listed or
described on Schedule C and (y) existing agreements, arrangements or
understandings with E.M.I. of Taiwan, Buyer's Far East production
agent ("E.M.I.") for services and information provided by E.M.I.
(together, the "Vendor Agreements"); provided, however, that with
respect to all current and future production orders for inventory
that has not been received into Seller's distribution center as of
the Closing, and for which Seller has not yet placed or opened
letters of credit to the manufacturers of such inventory, Buyer
agrees to open letters of credit or secure credit terms on a timely
basis, as necessary to purchase such inventory, so long as such
inventory conforms to the purchase orders placed by Seller with
respect to such inventory and so long as Seller has provided Buyer
with the terms of the letters of credit or credit terms which are
summarized on Schedule C, and provided further that with respect to
all production orders for inventory for which Seller has opened
letters of credit for which sufficient time exists for Buyer to open
substitute letter of credit or secure credit terms to replace the
letters of credit opened by Seller, Buyer hereby agrees to open
substitute letters of credit or obtain substituted credit terms on a
timely basis so long as Seller has provided Buyer with the terms of
such letters of credit or credit terms;
(iv) all of Seller's rights under existing purchase orders,
including customer order backlog and customer agreements and other
agreements entered into by Seller for the purchase, distribution,
sale, consignment or other disposition of Seller's products,
including those listed or described on Schedule D hereto (the
"Customer Agreements");
(v) all of Seller's rights under any marketing agreements and
commitments to trade shows, media advertising, event sponsorships,
celebrity endorsements, endorsements with high school, college and
other organizations, including any prepayments or deposits with
respect thereto, as listed or described on Schedule E hereto (the
"Marketing Agreements");
(vi) all finished goods inventory wherever located, owned by
Seller, including (w) all finished products or goods that are to
become finished product prior to Closing that are in transit to or
from Seller's distribution and
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manufacturing facilities, (x) finished goods at Seller's
manufacturing facility not yet shipped that are or become finished
product prior to Closing, (y) all inventory located at Seller's
retail locations (including any of Seller's inventory located at
retail stores owned by Seller's subsidiaries) and (z) inventory
listed on Schedule F hereto (the "Inventory");
(vii) all information technology software and hardware
("Information Technology") necessary to conduct Seller's business,
other than its manufacturing and retail store businesses, as carried
out during the twelve (12) month period immediately prior to the
date of this Agreement, including the applications described on
Schedule G (the "Applications");
(viii) all of Seller's rights under any lease agreements to
computer hardware that is necessary to run the Applications (the
"Hardware Lease Agreements"); and
(ix) all trade receivables, royalty receivables and license
fee receivables owned by Seller (the "Accounts Receivable"), unpaid
interest accrued on any such accounts receivable and any security or
collateral relating thereto.
For purposes of this Agreement, "Assumed Contracts" shall mean all
Licenses, IP License Agreements (as defined in Section 2.04(d), below),
Vendor Agreements, Customer Agreements, Applications (but only to the
extent they constitute executory contracts), Hardware Lease Agreements and
Marketing Agreements, but shall not include any licenses, contracts or
agreements listed on Schedule 1.02 or deleted from the schedules prior to
the Closing Date.
(b) The following items of personal property (together, the
"Supplementary Items") as follows:
(i) Marketing materials, including brochures, newsletters,
selling tools, point-of-sale materials, corporate and consumer
videos and photos, trade show booths, displays and materials,
in-store concept shops, fixtures and other point of sale materials,
including those located at customer locations, co-op agreements with
vendors and customers, written materials and paraphernalia relating
to Converse's heritage and history, including artifacts, original
products, models and product designs, historical photos,
descriptions and documentation and such other items identified by
Buyer to Seller in writing prior to Closing.
(ii) Existing and future designs of Seller's products,
including prototypes, drawings, logos, specifications and artwork
associated with each, and all Seller owned or controlled footwear
lasts and molds.
(iii) Such furniture, fixtures and equipment including
computer hardware owned by Seller, located at Seller's headquarters
and identified by Buyer to Seller in writing prior to Closing.
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(iv) Copies of books, records, supplier lists, customer lists
and order history, vendor lists with production and pricing data
past and pending, detailed inventory data, business records, other
data owned by Seller and used or held for use in connection with any
of the foregoing Intellectual Property, Assumed Contracts,
Inventory, Applications and Supplementary Items.
1.02 Excluded Assets. Notwithstanding the foregoing, Seller is not selling
and Buyer is not purchasing pursuant to this Agreement, and the term "Purchased
Assets" shall not include, any assets not specifically listed in Section 1.01
(the "Excluded Assets"); provided, however, that within the fourteen-day period
following the date the Approval Order (as defined below) is signed by the
Bankruptcy Court Buyer may, by written notification to Seller, provide to Seller
a Schedule 1.02 that specifically lists certain assets, licenses, agreements or
contracts to be excluded from purchase or assignment hereunder, which Schedule
1.02 shall be deemed to the extent necessary to amend such other Schedules
hereto that may have listed such assets, licenses, agreements or contracts as
Purchased Assets, and such assets, licenses, agreements or contracts shall
become Excluded Assets; provided, further, that in no event shall the Purchase
Price (as defined below) be reduced with respect to such deletions or
exclusions.
1.03 The Closing. Upon the terms and subject to the conditions contained
herein, the closing of the transactions contemplated hereby (the "Closing")
shall take place at 10:00 a.m. on later of (i) April 30, 2001 and (ii) the first
business day after the last condition in Articles VI and VII is satisfied (other
than those conditions requiring deliveries at the Closing itself) at Willkie
Farr & Gallagher, 787 Seventh Avenue, New York, New York, or at another location
or time mutually agreed upon by the parties (such date being hereinafter
referred to as the "Closing Date").
1.04 Payment of Purchase Price. (a) The price to be paid by Buyer for the
Purchased Assets at the Closing shall be $117,500,000 (the "Purchase Price")
minus (i) the Deposit (together with any interest earned thereon) and (ii)
$10,000,000 (the "Retention Amount"), which Retention Amount shall be held by
Buyer and reduced and/or paid in accordance with Section 1.05(c). On the date of
entry of the Approval Order (as defined below) by the Bankruptcy Court, as
evidence of its good faith, Buyer shall deposit $4,700,000 (together with the
$300,000 previously delivered to Seller, the "Deposit") in escrow with an escrow
agent selected by the parties (the "Escrow Agent") pursuant to an agreement
substantially in the form set forth as Exhibit A hereto (the "Deposit Escrow
Agreement"). The Deposit Escrow Agreement shall provide, among other things, for
the Deposit to be held in escrow until the earlier of the Closing or the
termination of this Agreement and released as follows: (A) upon Closing, the
Deposit and all interest earned thereon shall be released by the Escrow Agent to
Seller in order to partially fund the acquisition of the Purchased Assets, (B)
in the event of a termination of this Agreement by Seller pursuant to Section
8.01(c), the Deposit and all interest earned thereon shall be released by the
escrow agent to Seller as liquidated damages, which liquidated damages shall be
the sole and exclusive remedy of Seller as a result of such termination or (C)
in the event of any other termination of this Agreement, the Deposit and all
interest earned thereon shall be released by the Escrow Agent to Buyer.
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(b) Of the Purchase Price, $10,000,000 (the "Accounts
Receivable/Inventory Holdback Amount") shall be deposited into escrow pursuant
to an agreement substantially in the form set forth as Exhibit B hereto (the
"Post Closing Escrow Agreement") which Buyer, Seller and the Escrow Agent shall
enter into at the Closing. The Post Closing Escrow Agreement shall provide,
among other things, for the Accounts Receivable/Inventory Holdback Amount to be
deposited in escrow with the Escrow Agent for the period commencing on the
Closing Date and ending on the later of (i) ninety (90) days following the
Closing and (ii) fifteen (15) days following the resolution of any dispute
relating to the Audit (as defined below). The Accounts Receivable/Inventory
Holdback Amount shall be used to satisfy (x) any Estimated Adjustment Amount
pursuant to subsection 1.04(e); (y) any Downward Adjustment Amount owed to Buyer
pursuant to Section 1.05 and (z) any indemnification claims arising from the
breach of representations and warranties of Seller with respect to Sections 2.07
(Inventory) and 2.12 (Accounts Receivable) pursuant to and in accordance with
Article IX hereof. After the later of (i) ninety (90) days following the Closing
and (ii) fifteen (15) days following the resolution of any dispute relating to
the Audit, if the aggregate amount of claims made by Buyer against the Accounts
Receivable/Inventory Holdback Amount is less than $10,000,000 ("Holdback
Claims"), then Buyer and Seller shall countersign a certificate instructing the
Escrow Agent to release to Seller an amount equal to the difference between (x)
$10,000,000 and (y) the Holdback Claims plus any unpaid administrative expenses
of the Escrow Agent (the "Holdback Release Amount"); provided that if any
amounts payable from the Accounts Receivable/Inventory Holdback Amount are the
subject of an unresolved dispute, Buyer and Seller shall countersign a
certificate instructing the Escrow Agent to release to Seller the Holdback
Release Amount less any amounts subject to dispute (which amounts subject to
dispute shall be released as disputes are resolved in accordance with the terms
of the Post Closing Escrow Agreement).
(c) Of the Purchase Price, $5,000,000 (the "Escrow Amount") shall be
deposited into escrow pursuant the Post Closing Escrow Agreement. The Post
Closing Escrow Agreement shall provide, among other things, for the Escrow
Amount to be deposited in escrow with the Escrow Agent for a period of six (6)
months following the Closing. The Escrow Amount shall be used to satisfy any
indemnification claims arising from the representations and warranties of Seller
with respect to Sections 2.03 (Assumed Contracts), 2.04 (Intellectual Property),
2.05 (Title) and 2.13 (Software) pursuant to and in accordance with Article IX
hereof. After the 180th day from the Closing Date, if the aggregate amount of
indemnification claims made by Buyer against the Escrow Amount pursuant to this
Section 1.04(c) ("Indemnification Claim Amount") is less than $5,000,000, then
Buyer and Seller shall countersign a certificate instructing the Escrow Agent to
release to Seller an amount equal to the difference between (i) $5,000,000 and
(ii) the Indemnification Claim Amount plus any unpaid administrative expenses of
the Escrow Agent (the "Escrow Release Amount"); provided that if any amounts
payable from the Escrow Amount are the subject of an unresolved dispute, Buyer
and Seller shall countersign a certificate instructing the Escrow Agent to
release to Seller the Escrow Release Amount less any amounts subject to dispute
(which amounts subject to dispute shall be released as disputes are resolved in
accordance with the terms of the Post Closing Escrow Agreement).
(d) Buyer shall pay the Purchase Price to Seller at the Closing in
immediately available funds wire transferred into an account maintained by
Seller and which shall be
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designated by Seller at least five (5) business days prior to the Closing Date,
less (i) the Deposit plus any interest accumulated thereon, (ii) the Retention
Amount, (iii) the Accounts Receivable/Inventory Holdback Amount and (iv) the
Escrow Amount. The Accounts Receivable/Inventory Holdback Amount and the Escrow
Amount shall be wired transferred to the Escrow Agent pursuant to the terms of
the Post Closing Escrow Agreement.
(e) The appropriate financial officers of Seller shall close the
books of Seller as of April 28, 2001 in accordance with its normal course of
business consistent with past practice, and shall deliver to Buyer no later than
May 20, 2001, a report setting forth the estimated value of (i) the Account
Receivables as of April 28, 2001 (the "Estimated Accounts Receivable Value") and
(ii) the Inventory as of April 28, 2001 (the "Estimated Inventory Value"). The
sum of the Estimated Accounts Receivable Value and the Estimated Inventory
Values shall be the "Estimated Value." If the Estimated Value exceeds
$80,300,000, there will be no adjustment of the purchase price until the Auditor
Report is available in accordance with Section 1.05. If the difference between
$80,300,000 and the Estimated Value exceeds the Retention Amount (which excess
shall be referred to as the "Estimated Adjustment Amount") then an amount equal
to the excess of (i) the Estimated Adjustment Amount over (ii) $1,000,000 (One
Million Dollars) shall be immediately paid to Buyer (the "Estimated Payment")
from the Accounts Receivable/Inventory Holdback Amount upon delivery to the
Escrow Agent by Buyer of a certificate setting forth such amount. Seller shall
have no right to interfere with the payment by the Escrow Agent of the Estimated
Payment.
1.05 Post-Closing Adjustment. (a) Following the Closing, Buyer shall cause
Arthur Andersen L.L.P. or such other "big five" accounting firm selected by
Buyer and approved by Seller (which approval shall not be unreasonably withheld)
(the "Auditor") to prepare a valuation of Accounts Receivable and Inventory (the
"Auditor Report"). The Auditor Report shall be prepared in accordance with the
principles set forth on Exhibit C, and shall set forth the value of Accounts
Receivable as of the Closing Date (the "Accounts Receivable Value") and the
value of the Inventory as of the Closing Date (the "Inventory Value"), in each
case in accordance with GAAP applied in accordance with Exhibit C. In addition,
the Audit Report shall set forth the value of all deposits and prepayments made
by Seller in respect of Assumed Contracts, which deposits and prepayments will
inure to the benefit of Buyer and are identified on Schedule 1.05(a) (the
"Deposit/Prepayment Value"). For purposes of this Agreement and the Auditor
Report, the aggregate Deposit/Prepayment Value shall not exceed $500,000. The
Audit Report shall state the sum of the Accounts Receivable Value plus the
Inventory Value plus the Deposit/Prepayment Value (the "Audited Value"). The
Auditor shall deliver the Auditor Report to Buyer and Seller within thirty (30)
business days of the Closing Date (the "Audit Report Date"). Buyer and Seller
shall share equally the cost of the Auditor Report.
(b) If Seller disputes the Auditor Report, Seller shall so notify Buyer in
writing (a "Notice of Dispute") within ten (10) days after the date of Seller's
receipt of the Auditor Report, specifying its calculation of the Accounts
Receivable Value and the Inventory Value and any other points of disagreement.
Upon receipt of a Notice of Dispute, Buyer shall promptly consult with Seller
with respect to such alternate calculation and points of disagreement in an
effort to resolve such dispute (in connection with such effort to resolve
disputes, and in connection with the Auditor's preparation of the Auditor
Report, Buyer shall
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grant to Seller, its agents and the Auditors reasonable access to the books and
records of Buyer pertaining to the Inventory and Accounts Receivable). If any
such dispute cannot be resolved by Seller and Buyer within five (5) days after
Buyer receives a Notice of Dispute from Seller, Seller and Buyer shall
immediately appoint the Boston, Massachusetts office of Ernst & Young LLP to act
as an arbitrator (the "Accounting Arbitrator") to determine the appropriate
calculation of each of the Accounts Receivable Value, the Inventory Value, the
Deposit/Prepayment Value, the Audited Value and all other remaining points of
disagreement with respect to the Auditor Report (the "Review"). Seller and Buyer
understand and agree that, in resolving any dispute with respect to the Auditor
Report, the Accounting Arbitrator shall apply GAAP and the standards set forth
on Exhibit C. All determinations made by the Accounting Arbitrator shall be
final, conclusive and binding. The Accounting Arbitrator shall be directed to
hold a hearing within ten (10) days of appointment (which hearing shall be held
in Boston, Massachusetts) and to make a determination within five (5) days after
such hearing, unless otherwise mutually agreed by the parties. The fees and
expenses of the Accounting Arbitrator shall be borne equally by Seller and by
Buyer. Each of the parties shall bear its own attorneys' and accounting fees and
expenses incurred in connection with the Review.
(c) Within five (5) business days of the later of (x) the Audit
Report Date and (y) in the case of any dispute of pursuant to Section 1.05(b),
the resolution of such dispute:
(i) If the Audited Value exceeds $80,300,000 (the amount of
such excess being the "Additional Purchase Price"), then (A) Buyer
shall pay Seller by wire transfer of immediately available funds an
amount equal to the Additional Purchase Price and (B) Buyer shall
pay to Seller the Retention Amount by wire transfer of immediately
available funds. Under no circumstances shall the Additional
Purchase Price exceed $25,000,000.
(ii) If the Audited Value is less than $80,300,000, then Buyer
shall be entitled to the difference between $80,300,000 and the
Audited Value (the "Downward Adjustment Amount"); provided, however,
that under no circumstances shall the Downward Adjustment Amount
exceed $25,000,000. If the Downward Adjustment Amount exceeds the
sum of the Retained Amount plus the Estimated Payment (such excess
being herein referred to as the "Required Additional Payment"), then
(A) first, the Retention Amount shall be credited to and retained by
Buyer and (B) the Escrow Agent shall pay to Buyer from the existing
Accounts Receivable/Inventory Holdback Amount by wire transfer of
immediately available funds the Required Additional Payment;
provided further that if the Downward Adjustment Amount exceeds
$20,000,000, Seller shall pay to Buyer by wire transfer of
immediately available funds such excess amount up to an amount not
to exceed $5,000,000.
(iii) If a Downward Adjustment Amount has been determined and
no Estimated Payment was made pursuant to Section 1.04(e), then (A)
first, the Retention Amount shall be reduced and credited to Buyer
by an amount equal to the Downward Adjustment Amount, and (B) to the
extent the Downward Adjustment Amount exceeds the Retention Amount
(the "Excess Amount"), the
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Escrow Agent shall pay to Buyer from the Accounts
Receivable/Inventory Holdback Amount by wire transfer of immediately
available funds the Excess Amount; provided further that if the
Downward Adjustment Amount exceeds $20,000,000, Seller shall pay to
Buyer by wire transfer of immediately available funds such excess
amount up to an amount not to exceed $5,000,000. Any Retention
Amount remaining after the reduction thereto pursuant to subclause
(A) above shall be paid by Buyer to Seller by wire transfer of
immediately available funds.
(iv) If the Downward Adjustment Amount is less than the sum of
Retention Amount and Estimated Payment (such shortfall being herein
referred to as the "Required Refund"), then (A) if the Required
Refund is less than or equal to the Estimated Payment then Buyer
shall pay to the Escrow Agent for deposit into the Accounts
Receivable/Inventory Holdback Amount by wire transfer of immediately
available funds an amount equal to the Required Refund or (B) if the
Required Refund is greater than the Estimated Payment then Buyer
shall (x) pay to the Escrow Agent for deposit into the Accounts
Receivable/Inventory Holdback Amount by wire transfer of immediately
available funds an amount equal to the Estimated Payment and (y) pay
to Seller from the Retention Amount an amount equal to the excess of
the Required Refund over the Estimated Payment by wire transfer of
immediately available funds.
Notwithstanding anything to the contrary contained herein, Buyer agrees that
under no circumstance shall Escrow Agent release any of the Escrow Amount to
Buyer to satisfy any amounts owed to Buyer in respect of the Downward Adjustment
Amount except as otherwise permitted pursuant to Section 9.04(b). Any payment by
Seller, the Escrow Agent or Buyer required by this subsection (c) shall bear
interest at the rate equal to the interest being earned on the Accounts
Receivable/Inventory Holdback Amount pursuant to the Post Closing Escrow
Agreement from the Closing Date until the date of payment. The Additional
Purchase Price or the Downward Adjustment Amount, as the case may be (excluding
payments attributable to interest), will be treated by the parties as an
increase or decrease, as the case may be, in the Purchase Price.
(d) The allocation for tax purposes of the Purchase Price will be
agreed upon by the parties prior to the Closing.
1.06 Assumption of Certain Obligations. Upon the sale, transfer,
assignment, conveyance, and delivery of the Purchased Assets to Buyer at the
Closing, Buyer shall assume and thereafter pay, perform, and discharge all
obligations to be performed or arising after the Closing under all of the
Assumed Contracts (the "Assumed Obligations"). Other than the Assumed
Obligations, Buyer shall not assume or be liable for any other obligations or
liabilities of Buyer (including any cure amounts payable to other parties to the
Assumed Contracts).
1.07 Retained Liabilities. (a) Seller shall retain and pay, discharge and
perform any and all obligations and liabilities not expressly assumed by
Purchaser in Section 1.06 above,
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including the following obligations and liabilities (all such obligations and
liabilities, the "Retained Liabilities"):
(i) liabilities for unpaid Taxes (as defined in Section 2.10);
(ii) all obligations or liabilities of Seller that relate to
any of the Excluded Assets;
(iii) all obligations or liabilities for any borrowed money
incurred by Seller whether pre-petition or post-petition;
(iv) all obligations and liabilities resulting from, caused by
or arising out of, directly or indirectly, the conduct of Seller's
business or ownership or lease of any of its properties or assets or
any properties or assets previously used by Seller at any time prior
to the Closing Date, including such of the foregoing as constitute,
may constitute or are alleged to constitute a tort, breach of
contract, or violation or requirement of any law or governmental
regulation;
(v) any and all liabilities of Seller under any employee
benefit plans, whether formal or informal, whether or not set forth
in writing, and whether covering one person or more than one person,
sponsored or maintained by Seller. For the purposes hereof, the term
"employee benefit plan" includes all plans, funds, pension funds,
programs, policies, arrangements, practices, customs and
understandings providing benefits of economic value to any employee,
former employee, or present or former beneficiary, dependent or
assignee of any such employee or former employee other than regular
salary, wages or commissions paid substantially concurrently with
the performance of the services for which paid. The term "employee
benefit plan" includes all employee welfare benefit plans within the
meaning of Article 3(1) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and all employee pension benefit
plans within the meaning of Article 3(2) of ERISA. Seller shall
retain liability for all employee pension benefits;
(vi) any alleged or actual liability for the investigation,
cleanup or removal of any Hazardous Material (as defined in Section
2.11), or for death or injury to person or property, as a result of
the generation, transportation, disposal, storage, release, emission
or discharge of any Hazardous Material onsite or offsite and in, on,
under, from or onto any real property subject to any lease or
otherwise, past or present, that occurred or existed on or before
the Closing Date;
(vii) any alleged or actual liability and penalties for
violations of or noncompliance with environmental laws and that
occurred or existed on or before the Closing Date; and
(viii) liability for all compensation, salary, wages, bonuses,
commissions, incentive payments or any other benefit, perquisite,
cost, expense,
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liability or obligation attributable to services provided prior to
the Closing but payable on or after the Closing to the employees,
contractors, athletes or celebrities solicited and hired by Buyer
pursuant to Section 5.03, if any. Buyer shall have no liability for
compensation, salary, wages, bonuses, commissions, incentive
payments or any other benefit, perquisite, cost, expense, liability
or obligation relating to the employment or termination of
employment by Seller before or after the Closing of any of Seller's
employee's, contractors, athletes or celebrities.
(b) At the Closing, Seller shall deliver to Buyer (i) duly executed
instruments of assignment and assumption including an assignment and assumption
agreement (the "Assignment and Assumption Agreement"), in form and substance
reasonably satisfactory to Buyer and its counsel, and sufficient for the
assignment of the Purchased Assets and the assumption by Buyer of the Assumed
Obligations and (ii) take all acts reasonably necessary to give Buyer possession
of, or control over, the Purchased Assets; provided, however, that in the case
of Inventory located at retail stores, Seller agrees to take all action
necessary to have such Inventory delivered to Seller's Charlotte, North Carolina
distribution center within 45 days following the Closing, provided further that
Buyer agrees to pay the freight charges incurred in connection with such
delivery.
1.08 Payment of Transfer Taxes and Other Charges. At or after the Closing,
Seller shall pay all transfer taxes, sales taxes (including retail sales taxes),
stamp taxes, withholding taxes, and other similar taxes which are due in
connection with the transactions contemplated hereby.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
2.01 Organization and Standing. Seller is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all corporate power and authority to carry on its business as it is
currently conducted, subject to Bankruptcy Court approval. Seller is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where the conduct of its business renders such qualification
necessary, except where failure to be so qualified would not have Material
Adverse Effect. For purposes of this Agreement, a Material Adverse Effect means
a material adverse effect on the value or condition of the Purchased Assets,
taken as a whole.
2.02 Authorization by Seller.
(a) The execution, delivery and performance by Seller of this
Agreement and the consummation by Seller of the transactions contemplated hereby
have been or will by the Closing Date be, as the case may be, duly authorized by
all requisite corporate action of Seller. This Agreement has been duly and
validly executed and delivered by Seller and, upon entry of
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the Approval Order, will be the legal, valid, and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except as
enforceability may be limited by equitable principles (regardless of whether
enforcement is brought in a proceeding in equity or at law).
(b) Except as set forth on Schedule 2.02(b), neither the execution
and delivery of this Agreement or any other agreements and documents to be
executed or delivered pursuant hereto, nor the consummation of the transactions
contemplated hereby, will (i) violate, or conflict with, any provision of
Seller's Certificate of Incorporation or By-Laws, (ii) violate, or conflict
with, or result in a breach of any provisions of, or constitute a default under,
or result in the termination of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets being sold hereunder by Seller under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, license, agreement, lease or other instrument to which Seller is a
party or by which it or any of its properties is bound, or (iii) violate, or
conflict with, any order, writ, injunction, arbitral award, judgment or decree
of any court, governmental body or arbitrator applicable to Seller, except, in
the case of clause (ii), for any such violations, conflicts, breaches, defaults,
terminations, accelerations or other matters which, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect.
2.03 Assumed Contracts; Information.
(a) Except as set forth on Schedule 2.03(a):
(i) Each of the Assumed Contracts was duly executed and
delivered by Seller and each constitutes the valid and legally
binding obligations of the parties thereto and is enforceable by
Seller in accordance with its terms.
(ii) Except with regard to compliance under Assumed Contracts
that is excused pursuant to Section 365(b)(2) of the Bankruptcy
Code, Seller is in compliance in all material respects with the
terms and conditions of the Assumed Contracts and all laws, rules
and regulations applicable thereto.
(iii) Except with regard to defaults under Assumed Contracts
that (A) can be cured pursuant to Section 365(b)(1) of the
Bankruptcy Code or (B) can be excused pursuant to Section 365(b)(2)
of the Bankruptcy Code, to Seller's knowledge, no event of default
(or term of like intent) has occurred under any Assumed Contract
(iv) To Seller's knowledge, Seller has not received or sent
notice that an event has occurred which, with the lapse of time or
the giving of notice, or both, would constitute an event of default
(or term of like intent) under the terms of any Assumed Contract.
(v) To Seller's knowledge, Seller has not received notice from
any person that any Assumed Contract has been, or is to be,
terminated, or that any
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Assumed Contract has been, or is to be, terminated prior to its
stated term, nor to Seller's knowledge, does there exist any basis
for a termination of any Assumed Contract.
(vi) No consent of any party is required to sell, assign and
transfer to Buyer any Assumed Contract that provides for the
provision of goods or services or the payment of money having a
value in excess of $100,000 per annum.
(vii) Seller has provided Buyer with full and complete copies
of all Assumed Contracts and any written amendments, modifications
or waivers with respect thereto. To Seller's knowledge, there exists
no oral amendments, modifications or waivers with respect to any of
the Assumed Contracts, except for such oral amendments,
modifications or waivers which, individually or in the aggregate,
would not result in a change in the provision of goods or services
or the payment of money having a value in excess of $100,000 per
annum.
(b) Schedule B sets forth (i) a complete list of Licenses to which
Seller is a party and all other licenses to which Seller was a party since March
30, 2000, (ii) amendments to any License, (iii) the names, addresses, phone and
fax numbers (and e-mail addresses, if known to Seller) of each licensee under a
License, (iv) key contact persons at each licensee of a License and (v) names of
Seller personnel who have been dealing with each licensee of a License.
(c) Schedule 2.03(c) sets forth (i) all outstanding purchase orders
with each of Seller's vendors of finished goods, (ii) all other material
agreements with vendors and (iii) copies of all outstanding letters of credit
issued by Seller to such vendors.
(d) Schedule 2.03(d) sets forth, with respect to all of Seller's 100
highest revenue generating customers ("Material Customers"), (i) credit terms,
(ii) margin allowances and discounts and (iii) return information.
(e) Schedule 2.03(e) sets forth the terms and conditions of Seller's
employment of or contractual arrangements with, Seller's internal and external
U.S. and overseas sales personnel, including commissions and bonuses.
(f) With respect to any Assumed Contracts listed or described on
Schedule 2.03(a) as exceptions to the representations set forth in 2.03(a)(vi),
Seller shall obtain appropriate consents to the sale, assignment and transfer
contemplated herein together with an estoppel agreed to by the consenting
parties to each such Assumed Contract acknowledging the transfer to Buyer of
such Assumed Contract. Notwithstanding the foregoing, Seller shall only be
required to use commercially reasonable efforts to obtain any consent required
under (i) the agreements listed on Schedule 2.03(f)(i), which would require
Buyer to establish itself as a "qualified" vendor, and (ii) the license
agreement listed in Schedule 2.03(f)(ii).
2.04 Intellectual Property. Except as set forth on Schedule 2.04:
(a) Seller owns all right, title and interest in and to the Owned
Intellectual Property. Seller has all rights necessary to use the Licensed
Intellectual Property in the manner
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presently used in its business. None of the Intellectual Property infringes or
violates the intellectual property rights of any third parties or, to Seller's
knowledge, is being infringed upon by third parties. Consummation of the
transactions contemplated hereby shall not impair any rights or impose any
obligations with respect to Intellectual Property, except for any notices,
recordings or filings that are required to be given or made by applicable law as
a result of the transfer of the Intellectual Property to Buyer. On the Closing
Date, Seller will transfer the Intellectual Property to Buyer, free and clear of
Liens. None of the Intellectual Property is subject to any outstanding order,
decree, judgment, stipulation, injunction, written restriction or agreement
restricting the scope of use thereof by Seller anywhere in the world.
(b) There is no pending or, to Seller's knowledge, threatened (or
unasserted but considered probable of assertion) claim against Seller, nor has
Seller received any written notice of any claim (i) asserting that any of the
Intellectual Property as used in Seller's business infringes or violates the
intellectual property rights of any third parties, (ii) asserting that any of
the Intellectual Property is being infringed upon or diluted by others, (iii)
asserting that any third parties have any rights to use any of the Intellectual
Property except for Licensed Intellectual Property licensed to Seller on a
nonexclusive basis, except for such claims which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
(c) During the prior twelve months, Seller has not given notice to
any third parties asserting material infringement by such third parties of any
of the Intellectual Property, and to Seller's knowledge, there is no basis for
any such claim against a third party.
(d) All of the Licensed Intellectual Property is licensed pursuant
to valid written agreements (the "IP License Agreements").
(e) Seller has not adversely used any confidential information,
trade secrets or known patentable inventions of any person relating to the
conduct of its business, and Seller, to its knowledge, does not have any product
which, if commercially developed and sold, would adversely use any such
confidential information, trade secrets or other inventions except as would not
have a Material Adverse Effect.
(f) There is no pending or, to Seller's knowledge, threatened claim
that Seller is in breach of any IP License Agreement and, to Seller's knowledge,
no basis for any such claim exists, except as would not have a Material Adverse
Effect.
(g) There is no pending or, to Seller's knowledge, threatened claim
against Seller of any Licensed Intellectual Property asserting that any of the
Licensed Intellectual Property infringes or conflicts with the rights of third
parties, and to Seller's knowledge, no basis for any such claim exists.
(h) Seller has performed all of the obligations required to be
performed by it, and is not in default under any agreement relating to any
Intellectual Property, except where such failure to perform would not have a
Material Adverse Effect.
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(i) Schedule 2.04(i) hereto identifies each trade name,
fictitious business name, or other similar name under which Seller has conducted
any part of its business during the five (5) years preceding the date hereof,
and the trademark status reports set forth in Schedule A-5 contain true and
correct information regarding the Trademarks set forth therein.
(j) For purposes of this Agreement:
(i) "Copyrights" shall mean all registered and
unregistered copyrights and applications for copyright
registration in every country of the world, including those
identified in Schedule A-1;
(ii) "Intellectual Property" shall mean the Owned
Intellectual Property and the Licensed Intellectual Property;
(iii) "Know-How" shall mean technical information, trade
secrets, inventions, processes, specifications, manuals, reports,
documents, drawings, procedures, processes, devices, software and
source code, software documentation, research and development
data, marketing information, customer lists, database rights,
industrial design rights, other tangible embodiments of
information and all other intellectual property or proprietary
rights other than Patents, Trademarks and Copyrights, in every
country of the world, owned by Seller and its subsidiaries,
including those identified in Schedule A-2;
(iv) "Licensed Intellectual Property" shall mean all
intellectual property owned by third parties and licensed to
Seller and its subsidiaries, including those identified in
Schedule A-3;
(v) "Owned Intellectual Property" shall mean all Patents,
Trademarks, Copyrights and Know-How owned by Seller and its
subsidiaries, including those listed on Schedules A-1, A-2, A-3,
A-4 and A-5;
(vi) "Patents" shall mean all utility and design patents
and patent applications (including any divisions, continuations,
continuations-in-part, reexaminations, extensions, renewals or
reissues thereof), design, design registrations, utility models
and any similar rights and applications therefor, in every
country of the world, owned by Seller and its subsidiaries,
including those identified in Schedule A-4; and
(vii) "Trademarks" shall mean all registered and
unregistered trademarks, service marks, trade dress, trade names,
Internet domain names, fictitious business names or other similar
names, and any other identification of source or origin, and
applications for registration of any of the foregoing, together
with associated goodwill, in every country of the world, owned by
Seller and its subsidiaries, including those trademarks
identified in the trademark status report attached hereto as
Schedule A-5.
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2.05 Title to Purchased Assets; Absence of Liens and Encumbrances.
Seller owns all right, title and interest in and to, and has good and marketable
title to, all Purchased Assets transferred pursuant to this Agreement. Seller
will transfer all right, title and interest in the Purchased Assets, including
any Purchased Assets located outside of the United States, to Buyer at the
Closing Date free and clear of Liens. Without limiting the foregoing, on the
Closing Date the Purchased Assets will not be in any manner encumbered by any
Liens arising out of unpaid state, federal, local and foreign income, sales, or
ad valorem taxes which are due and payable.
2.06 Litigation. Except as set forth on Schedule 2.06, there is no
litigation pending or, to Seller's knowledge, threatened (a) against Seller, its
business, subsidiaries or any of its Intellectual Property or other assets
which, if adversely determined, would affect the Purchased Assets, or (b) which
seeks to enjoin or obtain damages in respect of the consummation of the
transaction contemplated hereby.
2.07 Inventory. Seller has or will have on the Closing Date good and
marketable title to the Inventory free and clear of any Lien or other right of
any third party and Seller will transfer the Inventory to Buyer at the Closing,
free and clear of Liens. The Inventory is recorded on the books and records of
Seller at the lower of actual FIFO cost or market, net of any reserves (taking
into account obsolete, defective or unmerchantable goods, odd sizes, excess
quantities, unsaleable returns, other unsaleable merchandise), as determined in
accordance with GAAP.
2.08 Insurance. Seller has maintained and currently maintains sufficient
insurance coverage to protect its business and the full replacement value of the
Purchased Assets, as well as business interruption insurance with respect to
Seller's manufacturing facilities located in the United States and Mexico, in
each case with reputable insurance companies in amounts consistent with other
companies in its industry.
2.09 Compliance with Laws. Except as set forth on Schedule 2.09, Seller
is not aware of any violation of any applicable statute, ordinance, code,
restriction, regulation, or other governmental requirements, which violation,
individually or in the, aggregate, would have a Material Adverse Effect.
2.10 Tax and Other Returns and Reports. Except as listed in Schedule
2.10, all material federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by Seller in
connection with its operation of the business as it pertains to the Purchased
Assets (the "Tax Returns") with respect to any federal, state, local or foreign
taxes, assessments, interests, penalties, deficiencies, fees and other
governmental charges or impositions, as well as all transfer taxes, sales taxes
(including retail sales taxes), duties and customs fees, stamp taxes,
withholding taxes, and other similar taxes (all such tax liabilities relating to
the manufacture, importation, delivery, shipment and use of the Purchased
Assets, including Inventory in transit, for all periods ended prior to the
Closing Date referred to herein as the "Taxes") have been filed with the
appropriate governmental agencies in all jurisdictions in which such Tax Returns
are required to be filed. Except as listed in Schedule 2.10, all Taxes,
including those which are called for by the Tax Returns, or heretofore or
hereafter claimed to be due by any taxing authority from Seller, have been
properly accrued or paid. Seller shall be solely responsible for Taxes accrued
during periods ended on or prior to the Closing Date and
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Seller shall have the sole right to contest any such claim or deficiency in any
administrative or judicial forum of its choosing, or pursue or forego any appeal
of any administrative judicial decision, or to terminate or settle an
administrative proceeding.
2.11 Environmental Matters. Except as set forth on Schedule 2.11(a),
neither Seller nor, to Seller's knowledge, any other person has (x) discharged
or disposed of any Hazardous Materials at Seller's Charlotte, North Carolina
distribution facility or North Reading, Massachusetts headquarters in a manner
which at the time of such act was is in violation of any law, rule or regulation
affecting the use, discharge, or disposal of any Hazardous Material.
Additionally, none of such real property is being used, or to Seller's
knowledge, after due inquiry has ever previously been used, for the discharge or
disposal of any Hazardous Materials in a manner which at the time of such act
was in violation of any law, rule or regulation affecting the use, discharge, or
disposal of any Hazardous Material or, (y) received any notice from any
governmental authority indicating that the real property has been or may be
placed on any federal or state "Superfund" or "Superlien" list. The term
"Hazardous Material" means any substance that is defined as a "hazardous waste"
or "hazardous substance" under any applicable federal, state, or local statute,
regulation, or ordinance and shall include any (A) "hazardous waste" as defined
by the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Article 6901 et
seq.), as amended from time to time, and regulations promulgated thereunder; and
(B) any "hazardous substance" as defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. Article 9601 et
seq.) ("CERCLA"), as amended from time to time and regulations promulgated
thereunder.
2.12 Accounts Receivable; Collection. Schedule H sets forth a listing
showing aging by customer of the Accounts Receivable that are outstanding as of
the date hereof. The Accounts Receivable are not subject to any written or, to
Seller's knowledge, oral agreement or understanding providing for any credit,
chargeback, counterclaim, setoff, discount, returns or co-operative marketing
payments in respect thereof, except for any such credits, chargebacks,
counterclaims, setoffs, discounts, returns or co-operative marketing payments
that have been estimated and reserved for based on historical experience (either
generally or specifically) on the books and records of Seller. Seller has not
accelerated or delayed collection of Accounts Receivable in advance of or beyond
their regular due dates or the dates when the same would otherwise have been
collected other than in the ordinary course of business. Accounts Receivable
with extended payment terms providing for payments over more than 90 days are
carried at no greater than present value.
2.13 Software.
(a) Seller's rights in and to (i) the Applications that are
required to process Inventory and Accounts Receivable (the "Accounts
Receivable/Inventory Software") and (ii) all other Applications not requiring
the consent of third parties for the assignment thereof will be granted to
Buyer, either by transfer of title, assignment of rights or grant of license at
the Closing. Schedule 2.13(a) sets forth a list of the Applications ("Licensed
Software") requiring the consent of the owners and/or licensors ("Licensors")
thereof ("Licensors' Consent"). Subject to receipt of Licensors' Consent,
Seller's rights in and to Licensed Software will be granted to Buyer, either by
transfer of title, assignment of rights or grant of license at the Closing.
Seller
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shall use commercially reasonable efforts to obtain Licensors' Consent prior to
Closing.
Upon receipt of Licensors' Consent, if applicable, Seller shall, at the request
of Buyer, provide programming code, source code and documentation in Seller's
possession and execute and deliver such other instruments of sale, transfer,
conveyance, assignment or license as Buyer may reasonably request in order to
effectively vest in Buyer the rights contemplated hereby.
(b) The activities and operations of Seller with regard to the
Applications prior to the Closing, are not, and have not been, in violation of
any agreement, or in violation of any rights held by any Person except for
pre-petition amounts owed under license agreements between Seller and Licensors
relating to the Applications.
(c) Seller holds either:
(i) sole and exclusive ownership of all rights in and to
the Applications; or
(ii) valid rights and licenses to utilize the Applications
in its operations and activities as carried out during the
twelve-month period prior to the date of this Agreement.
The Accounts Receivable/Inventory Software constitutes substantially all
the computer software necessary for Buyer to conduct the operations and
activities necessary to manage and dispose of Inventory and Accounts Receivable.
All Licensed Software is transferable to Buyer with Licensors' Consent. The
Applications and computer hardware leased pursuant to the Hardware Lease
Agreements constitute all of the computer software and hardware necessary to
conduct the operations and activities of Seller (other than its manufacturing
and retail store operations) during the prior twelve months. The Information
Technology, whether transferred to Buyer hereunder, or in the form of services
provided by Seller pursuant to Section 4.01, constitutes or will constitute on
the Closing Date, all of the computer software and hardware necessary to conduct
the operations and activities of Seller (other than its manufacturing and retail
store operations) during the prior twelve months.
(d) In the case of each Application indicated in Schedule 2.13(d)
as being owned by Seller (hereafter "Owned Software"), Seller has good and
marketable right, title and interest in and to all forms, versions and releases
of the Owned Software, including all copyright rights and all applicable patent
and trade secret rights, free and clear of any Liens other than rights of
authors which may not be legally waived except for the language and database
licensed by third parties which is used to operate the Owned Software. No item
of Owned Software is a derivative work (as defined in U.S. Copyright Law) of any
other work that is not owned in its entirety by, or properly licensed such that
no one may claim any rights in such derivative work other than, Seller. Except
as indicated in Schedule 2.13(d), Seller is in actual possession of the complete
source code and object code, and is in possession of all documentation necessary
for the effective use, distribution and support of each such item of Owned
Software.
(e) Except as indicated in Schedule 2.13(e), Seller:
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(i) maintains master machine readable reproducible copies,
source code listings, technical documentation and user
documentation for the most current releases and versions thereof;
and
(ii) maintains the machine readable copies such that they
substantially conform to the corresponding source code listings,
programming and user manuals, and published specifications (if
any).
(f) All Applications which are not Owned Software (herein
referred to as "Third Party Software") are subject to restrictions on
assignment, transfer, relocation, use, copying, distribution, preparation of
derivative works, display, performance, sale, offer for sale, manufacture or
disclosure (such activities collectively and individually referred to herein as
"Use") as are contained in the corresponding license agreements identified in
Schedule 2.13(f).
(g) Subject to Licensors' Consent, if applicable, the continued
or further Use of any Application by Buyer after the Closing, which Use is
consistent with the Use of such item by Seller prior to the Closing, will not
give rise to any obligation to pay any royalty, fee, penalty, damages or
compensation to any Person.
(h) All contracts, agreements, commitments or obligations of
Seller for the maintenance, support, upgrade, correction of defects or
deficiencies, or for continuing or for renewing rights to, any Third Party
Software, and any payment obligations or options therefor, are identified in
Schedule 2.13(h).
2.14 Customers and Suppliers. Since January 1, 2001 and except as
disclosed in Schedule 2.14(i), there has been no written complaint or, to
Seller's knowledge, oral complaint from any Material Customer and no notice of
breach or of termination under any contract with a Material Customer. Seller has
not been advised in writing or, to Seller's knowledge, orally by any Material
Customer or supplier of finished goods ("Finished Goods Supplier") that such
Material Customer or Finished Goods Supplier was or is intending to terminate
its relationship or would not continue to purchase or sell supplies or services
for future periods on account of any dissatisfaction with Seller's performance.
All order backlog is described on Schedule D hereto, and such backlog has been
accurately accounted for in the records of Seller in accordance with Seller's
historical practices; and, to Seller's knowledge, the order backlog represents
good orders consistent with Seller's and industry practice. Seller has not been
advised in writing or, to Seller's knowledge, orally that any customer intends
to cancel or change the material terms of any orders included in such order
backlog. Notwithstanding any of the foregoing, with respect to the Material
Customers identified on Schedule 2.14(ii) as potentially requiring Buyer to
establish itself as a "qualified" vendor ("Requalification Customers"), Seller
makes no representation to Buyer in respect of any Requalification Customer that
following the date hereof gives notice of termination or its intention to
terminate its relationship with Seller or its intention not to continue to
purchase supplies or services for future periods because of the failure of Buyer
to so "qualify".
2.15 Changes in Accounting Method. Since December 1, 2000, Seller has
not made any material change in any method of accounting or accounting practice
related to the Inventory or the Accounts Receivable.
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2.16 Absence of Undisclosed Liabilities. Except for the Assumed
Obligations, to Seller's knowledge there are no material liabilities with
respect to the Purchased Assets other than those disclosed or provided in this
Agreement and in the Schedules hereto; Seller is not aware of any facts or
circumstances that could be expected to result in such liabilities.
2.17 Subsidiary Assets. To Seller's knowledge, there are no assets owned
by any of its subsidiaries that are necessary for Buyer, following the Closing,
to carry on the business conducted by Seller prior to the Closing (other than
Seller's manufacturing and retail store operations). Schedule 2.17 sets forth
all material accounts receivable and inventories (other than those related to
Seller's manufacturing and retail stores) that are owned by Seller's
subsidiaries, if any (the "Subsidiary A/R and Inventory"). Buyer and Seller
acknowledge and agree that the Subsidiary A/R and Inventory is not a part of the
Purchased Assets.
2.18 Schedules. All of the information contained on the Schedules to
this Agreement with respect to the Purchased Assets and Assumed Contracts is
complete, accurate and correct in all material respects.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
3.01 Organization and Standing. Buyer is a corporation validly existing
and in good standing under the laws of Delaware, and has all requisite corporate
power to enter into this Agreement, to perform its obligations hereunder, and to
carry out the transactions contemplated hereby. Buyer has the requisite
corporate power to carry on its business as it is now being conducted.
3.02 Authorization by Buyer. (a) the execution, delivery, and
performance by Buyer of this Agreement and the consummation by Buyer of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action of Buyer. This Agreement has been duly and validly executed and
delivered by Buyer and constitutes the legal, valid, and binding obligation of
Buyer enforceable against Buyer in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, receivership or similar laws affecting or referring to the
enforcement of creditors' rights generally or by equitable principles
(regardless of whether enforcement is brought in a proceeding in equity or at
law).
(b) Neither the execution and delivery of this Agreement and all
other agreements and documents to be executed or delivered hereunder, nor the
performance and fulfillment by Buyer of all its representations, warranties,
covenants and obligations hereunder, will (i) violate, or conflict with, any
provision of Buyer's Articles of Incorporation or By-Laws, (ii) violate, or
conflict with, or result in a breach of any provisions of, or constitute a
default under, or result in a breach of any provisions of, or constitute a
default under, or result in the termination of, or accelerate the performance
required by, or result in the creation of any lien,
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security interest, charge or encumbrance upon any of the properties or assets of
Buyer under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, agreement, lease or other
instrument to which Buyers is a party or by which its is bound, or (iii)
violate, or conflict with, any order, writ, injunction, arbitral award, judgment
or decree of any court, governmental body or arbitrator applicable to Buyer.
3.03 Available Funds. Upon satisfaction of all conditions to Buyer's
obligation to purchase the Purchased Assets, Buyer will have the funds necessary
to pay the Purchase Price.
3.04 HSR Matters. Buyer shall notify Seller within three days hereof as
to whether the transactions contemplated by this Agreement require the parties
hereto to file a Notification and Report Form pursuant to the HSR Act. In the
event that Buyer notifies Seller that no such filing is necessary, Buyer hereby
represents and warrants that as of the Closing Buyer (i) is its own "ultimate
parent entity," as such term is defined under the Premerger Notification Rules
(the "Rules") to the HSR Act and (ii) (x) had annual net sales of less than
$10,000,000 and (y) has less than $10,000,000 in total assets, each as
determined in accordance with Section 801.11 of the Rules to the HSR Act.
3.05 Litigation. There is no litigation pending (a) against Buyer in
connection with the conduct of its business which, if adversely determined,
would materially and adversely affect the business or financial condition of
Buyer or (b) which seeks to enjoin or obtain damages in respect of the
consummation of the transactions contemplated by this Agreement.
ARTICLE IV.
COVENANTS OF SELLER
Seller hereby covenants and agrees with Buyer as follows:
4.01 Cooperation. Subject to the terms and conditions herein provided,
Seller agrees to use its reasonable best efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, and to cooperate with Buyer in
connection with the foregoing, including using its reasonable best efforts (i)
to obtain all necessary waivers, consents and approvals from other parties to
any Assumed Contract and any other material agreements, leases and contracts
included in the Purchased Assets; (ii) to obtain all necessary consents,
approvals and authorizations as are required to be obtained under any federal,
state or foreign law or regulations, including the Approval Order; (iii) to lift
or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions contemplated
hereby (including, at Buyer's request, to defend any lawsuit brought against
Buyer that threatens to enjoin, restrain or adversely affect the ability of the
parties to consummate the transactions contemplated hereby); (iv) to effect all
necessary registrations, filings and submissions of information requested by
governmental authorities; (v) to fulfill all conditions to this Agreement; and
(vi) to provide Buyer promptly with all information and assistance with respect
to the foregoing and the Purchased Assets as Buyer may reasonably request, in
writing or otherwise. Without limiting the foregoing, on the Closing Date
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or as promptly as reasonably practicable thereafter, Seller will execute and
deliver to Buyer all applications for transfer of trademark registrations and
other documents reasonably requested by Buyer to effectuate the unconditional
transfer of the Intellectual Property upon the Closing Date, free and clear of
all Liens subject, in the case of the Intellectual Property, to licenses granted
pursuant to the agreements set forth on Schedule 2.04 to this Agreement that may
exist on the Closing Date, and will waive any other right, title and interest of
Seller in and to the Intellectual Property. Effective upon the Closing Date,
Seller will and does hereby grant to Buyer an exclusive, irrevocable, worldwide,
fully-paid, royalty-free right and license to exercise all rights in and to the
Intellectual Property to permit Buyer's full enjoyment of its ownership rights
during the period before Buyer becomes the record owner, and while Seller is the
record owner, of the applicable Intellectual Property, which license shall be
for the benefit of Buyer, its licensees, successors and assigns. Upon the
Closing Date, Seller shall execute and deliver to Buyer such documents as Buyer
may reasonably request to effect the foregoing. Effective as of the Closing
Date, Seller grants to Buyer an irrevocable power of attorney, with full power
of substitution, with respect to the Intellectual Property. Upon the Closing
Date, Seller agrees to execute in favor of Buyer or its designee a specific
irrevocable power of attorney with full power of substitution, in form and
substance satisfactory to Buyer, to record the assignment of the Intellectual
Property from Seller to Buyer. In furtherance of the foregoing, to the extent
that Seller is unable to transfer right, title and interest in and to any
Assumed Contract to Buyer on the Closing Date, Seller agrees, to the extent
permitted by law, to provide Buyer with the benefits of any such Assumed
Contract, provided, however, that Buyer agrees to perform the Assumed
Obligations, if any, in respect thereof and provided further that the provision
to Buyer of such benefits shall not relieve Seller of (i) its obligations to
obtain any required consents hereunder nor (ii) such consequences as may be
provided for hereunder for failure to obtain such consents.
4.02 Court Approval. (a) Prior to Closing, the sale of the Purchased
Assets to Buyer pursuant to this Agreement and the other transactions
contemplated by this Agreement shall have been approved by the Bankruptcy Court
pursuant to sections 105, 363, 365 and 1146(c) of the Bankruptcy Code, pursuant
to an order in substantially the form attached hereto as Exhibit D (with no
modifications or changes except those approved by Buyer and Seller, the
"Approval Order"), and the Approval Order shall have become a Final Order. Buyer
and Seller agree to use reasonable efforts to cause the Bankruptcy Court to
enter the Approval Order. Promptly following entry of the Approval Order, Seller
shall serve such entered Approval Order to all parties to the Assumed Contracts.
(b) For purposes of this Agreement, (i) a Final Order means an
order or a judgment entered by the Bankruptcy Court (x) that has not been
reversed, stayed, modified or amended, (y) as to which no appeal or petition for
review or motion for rehearing or reargument has been taken or has been made,
and (z) as to which the time for filing a notice of appeal, a petition for
review or a motion for reargument or rehearing has expired, (ii) "Liens" means
all title defects or objections, mortgages, deeds of trust, liens, claims,
charges, pledges, security interests, obligations, interests or other
encumbrances of any nature whatsoever, whether domestic or foreign; provided,
however, that any claims, credits, obligations, charges or similar rights of
customers of Seller that offset or reduce any Accounts Receivable relating to
such customers shall not constitute "Liens" on such Accounts Receivable.
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(c) Seller shall cooperate reasonably with Buyer and its
representatives in connection with the Approval Order and the bankruptcy
proceedings in connection therewith. Seller further covenants and agrees that if
the Approval Order is entered the terms of any plan submitted by Seller to the
Bankruptcy Court for confirmation shall not conflict with, supersede, abrogate,
nullify, modify or restrict the terms of this Agreement and the rights of Buyer
hereunder, or in any way prevent or interfere with the consummation or
performance of the transactions contemplated by this Agreement including any
transaction that is contemplated by or approved pursuant to the Approval Order.
(d) If the Approval Order or any other orders of the Bankruptcy
Court relating to this Agreement shall be appealed by any Person (or a petition
for certiorari or motion for rehearing or reargument shall be filed with respect
thereto), Seller agrees to take all steps as may be reasonable and appropriate
to defend against such appeal, petition or motion, and Buyer agrees to cooperate
in such efforts, and each party hereto agrees to use its reasonable efforts to
obtain an expedited resolution of such appeal; provided, however, that nothing
herein shall preclude the parties hereto from consummating the transactions
contemplated herein if the Approval Order shall have been entered and has not
been stayed and Buyer, in its sole discretion, waives in writing the requirement
that the Approval Order be a Final Order.
4.03 Conduct of Business.
(a) Between the date hereof and the Closing Date, Seller will use
its commercially reasonable efforts to preserve, protect, and maintain the
Purchased Assets, and to operate its business in the same manner it currently
operates. Seller will not harm the Purchased Assets and will not take any action
that will materially adversely affect the Assumed Contracts. Seller shall (i)
maintain the Inventory in all material respects in the manner in which it has
been maintained during the fifteen-month period immediately prior to the date
hereof and (ii) comply in all material respects with all provisions of any
Assumed Contract. Without limiting the foregoing, Seller shall conduct its
business diligently and in the ordinary and normal course and consistent with
past practice (including using its commercially reasonable efforts to preserve
beneficial relationships with distributors, agents, lessors, suppliers and
customers).
(b) Seller shall not engage in any transaction relating to the
purchase or sale of goods, inventories, capital expenditures, marketing programs
or other operating or production items or accounts receivable, from the date
hereof until the Closing other than: (i) transactions in the ordinary course of
business or (ii) transactions not objected to by Buyer. For the purposes of this
Section 4.03, (A) any transaction involving the sale of excess, close-out or
obsolete goods in excess of $25,000, (B) any transaction involving the sale of
goods at or below cost (other than transactions involving the sale of excess,
close-out or obsolete goods of less than $25,000 in the aggregate) or (C) any
commitment or expenditure exceeding $25,000 (excluding payroll expenditures)
shall be deemed to be outside the ordinary course of business. Buyer shall
communicate to Seller the names of one or more representatives of Buyer who
shall be "Designated Representatives" and as such shall be authorized to object
to transactions outside the ordinary course of business. Seller shall notify the
Designated Representatives of each transaction outside the ordinary course of
business, and Buyer shall notify Seller of any objection to such transaction as
soon as reasonably practicable, but in no event more than two (2) business
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days following receipt of notice of such proposed transaction. If Seller has not
received notice of an objection to any such transaction within such two (2)
business day period, Seller may assume Buyer does not object to such
transaction.
(c) Without limiting the generality of the foregoing and except
as approved by Buyer or otherwise expressly provided in this Agreement, during
the period from the date hereof through the Closing Date, Seller shall not:
(i) sell, transfer, license or otherwise dispose of, or
agree to sell, transfer, license or otherwise dispose of, any
Purchased Assets, except in the ordinary and normal course of
business consistent with industry practice, including, without
limitation, fulfilling customer orders prior to normal shipment
periods inconsistent with industry practices (which industry
practices shall include seasonality requirements);
(ii) modify, waive or accelerate or delay collection of
accounts receivable in advance of or beyond their regular due
dates or the dates when the same would otherwise have been
collected other than with respect to accounts receivable not
exceeding $5,000 and otherwise in the ordinary course of
business;
(iii) enter into any new agreements that would be included
in Assumed Contracts, or amend or alter in any material way any
existing Assumed Contracts;
(iv) take any action the taking of which, or omit to take
any action the omission of which, would cause any of the
representations and warranties contained in Article II to fail to
be true and correct in all material respects as of the Closing as
though made at and as of the Closing; or
(v) agree to do any of the foregoing.
4.04 Disclosure Supplements.
(a) From time to time prior to the Closing, Seller shall promptly
supplement or amend the disclosures contained in the Schedules or Exhibits with
respect to any matter: (i) which may arise hereafter and which, if existing or
occurring at or prior to the date hereof, would have been required to be set
forth or described therein; or (ii) which makes it necessary to correct any
information in the Schedules or Exhibits or in any representation and warranty
of Sellers which has been rendered inaccurate thereby. No supplement or
amendment to the Schedules or Exhibits or any delivery of Schedules after the
date hereof, unless expressly consented in writing by Buyer, shall be deemed to
cure any breach of any representation or warranty made in this Agreement, or
modify, affect or diminish Buyer's right to terminate this Agreement pursuant to
Section 8.01(c).
(b) During the period from the date hereof to the Closing, Seller
shall promptly: (i) furnish or make available to Buyer copies of all financial
or other reports relating to the Purchased Assets as soon as they become
available, all certified by a duly authorized officer of Seller that such
financial statements were generated in the ordinary course of business
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consistent with past accounting or past applicable operational reporting
practices; and (ii) notify Buyer of the occurrence of any event having a
Material Adverse Effect.
4.05 Closing. Seller shall use its reasonable best efforts to cause the
conditions set forth in Article VI to be satisfied by the Closing Date,
including undertaking such measures as may be appropriate, including written
notice letters, required to obtain the necessary consents.
4.06 Confidentiality. If the Closing does not occur, Seller will
maintain in confidence all information relating to Buyer furnished to it by
Buyer, or any agents of Buyer, including information concerning the businesses,
financial condition or stockholders of Buyer, and will not disclose such
information to others, or use such information for any purpose unless and until
such information is or becomes in the public domain by reason other than
disclosure by Seller, except as such information may be required to be disclosed
by Seller under applicable law or which has previously been made public. If this
Agreement is terminated, Seller shall return all confidential information
received from Buyer and all copies and summaries thereof.
4.07 Transitional Arrangements Agreement. At the Closing, Seller and
Buyer shall execute and deliver a Transitional Arrangements Agreement, in
substantially the form of Exhibit E hereto.
4.08 Further Assurances. At any time or from time to time after the
Closing Date, Seller shall execute and deliver any further instruments or
documents, and take all such further action as Buyer may request, including
procuring assurance and cooperation from Seller's officers and employees, in
order to transfer to and vest in Buyer all of Seller's right, title and interest
in and to the Purchased Assets, including using its best efforts, at Buyer's
expense, to assist and cooperate with Buyer in Buyer's preparation and filing of
documents relating to the transfer of the Intellectual Property. In the event
that Seller fails to promptly execute and deliver any such instruments or
documents reasonably requested by Buyer, Seller hereby irrevocably appoints
Buyer as its power-of-attorney, effective only upon the Closing, with full right
of substitution for the purpose of executing such documents. This power of
attorney shall be for the benefit of Buyer, its licensees, successors and
assigns.
4.09 Inspection. For all periods prior to the Closing, Seller agrees to
grant Buyer full and complete access to all of its properties at any time and to
its customers, vendors and suppliers during normal business hours and upon
reasonable notice from Buyer and to cooperate with any request of Buyer to
permit Buyer to inspect or review any location owned or leased by Seller,
including the making available of such personnel of Seller as Buyer may
reasonably request. At Buyer's discretion, Buyer may arrange for its employees,
officers, accountants and attorneys to visit and inspect any such location and
to review any all documentation pertaining to the Purchased Assets. Without
limiting the foregoing, Seller agrees to make available to Buyer or its auditors
or attorneys, and to provide full and complete access to, for inspection and
copying, documentation relating to any of the following:
(a) All financial records for the last five years including
accounts receivable, accounts payable, capital spending, income statements,
balance sheets, accounting work papers,
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tax files, all agreements for the past three years with any financial
institution with whom Seller has had dealings;
(b) Employee records for the past three years of full and
part-time employees and contract employee, including salary information and
employment contracts and all agreements with outside organizations providing
labor or employment services to Seller; provided, however, that employee records
shall in no event include employee medical records or any other information
reasonably determined by Seller to be of a confidential nature;
(c) All records, including order and payment histories, of the
customers and vendors of Seller's subsidiaries and the names and contact numbers
of all managers and other employees of such subsidiaries;
(d) All Assumed Contracts, including purchase orders;
(e) Records of all transfers of Inventory and goods in connection
with the closing of Seller's manufacturing facilities and retail locations;
(f) all documentation pertaining to any investigation,
institution, settlement or agreement to settle any litigation, action or
proceeding before any governmental entity in connection with the businesses of
Seller, including under the Foreign Corrupt Practices Act, for five years prior
to the Closing; and
(g) reasonable access to employees for the purposes of conducting
interviews; provided, however, that Buyer shall give Seller reasonable advance
notice thereof to Buyer.
4.10 Maintain Insurance. Seller shall maintain insurance coverage
sufficient to protect its business and the Purchased Assets.
4.11 Maintenance of, and Access to, Records. After the Closing Date,
Seller shall provide Buyer with access (with an opportunity to make copies),
during normal business hours, and upon reasonable notice, to any records
relating to the Purchased Assets and Assumed Obligations. Seller shall preserve
and maintain any books and records relating to the Purchased Assets that are not
otherwise provided to Buyer for at least two years after the Closing Date.
4.12 Accounts Receivable. In the event that Seller receives any payment
relating to any Account Receivable outstanding on or after the Closing Date,
such payment shall be the property of Buyer. Seller will promptly endorse and
deliver to Buyer any cash, checks or other documents received by it on account
of any such Accounts Receivable. Seller shall advise Buyer (promptly following
its becoming aware thereof) of any counterclaims or set-offs that may arise
subsequent to the Closing Date with respect to any Account Receivable.
4.13 Consents. Following the Closing, Seller shall use its best efforts
to obtain all necessary consents of third parties to those contracts that but
for obtaining such consent would have been Assumed Contracts transferred to
Buyer on the Closing Date. Immediately after obtaining any required consents,
Seller agrees to take all necessary action to assign such
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contracts to Buyer, including the execution and delivery to Buyer of instruments
of assignment in form and substance reasonably satisfactory to Buyer and its
counsel.
4.14 Specific Enforcement of Covenants. Seller acknowledges that
irreparable damage would occur in the event that any of the covenants and
agreements of Seller set forth in Article IV of this Agreement were not timely
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that Buyer shall be entitled to an injunction or
injunctions to prevent or cure any breach of such covenants and agreements of
Seller and to enforce specifically the terms and provisions thereof, this being
in addition to any other remedy to which it may be entitled at law or in equity
or under the terms of this Agreement.
4.15 Acquisition Proposals. Between the date hereof and the Closing,
Seller shall not, directly or indirectly, (a) take any action to solicit,
initiate submission of or knowingly encourage any Acquisition Proposal or (b)
participate in any substantive discussions or negotiations regarding an
Acquisition Proposal with anyone, except in the case of each of the foregoing
for Acquisition Proposals by or on behalf of Buyer or its affiliates. During
such period, Seller shall promptly notify Buyer upon receipt of any indication
of interest or any offer with respect to an Acquisition Proposal. For purposes
hereof, an "Acquisition Proposal" shall include any proposal for any acquisition
or purchase by anyone of all or a portion of the Purchased Assets or any equity
interest in Seller or any of its subsidiaries, of any merger or business
combination with, or any acquisition of, Seller or any of its subsidiaries. If,
after the entry of the Approval Order, Seller enters into a written agreement to
accept any Acquisition Proposal, Seller shall, in addition to returning Buyer's
Deposit (together with any interest), promptly reimburse Buyer for all of
Buyer's expenses incurred in connection with preparing its Bid, its
investigation of Seller and its negotiation and preparation of this Agreement,
including the fees and expenses of Buyer's attorneys, accountants and advisors,
such reimbursement being in addition to any other remedy to which Buyer may be
entitled at law or in equity or under the terms of this Agreement.
Notwithstanding anything herein to the contrary, until the Bankruptcy Court
enters the Approval Order Seller may (and may authorize and/or permit any of its
officers, directors, employees, attorneys, agents or representatives to) furnish
information with respect to Seller to any person or persons making an
unsolicited proposal or inquiry and shall notify Buyer in writing of any such
proposal or inquiry.
ARTICLE V.
COVENANTS OF BUYER
Buyer hereby covenants and agrees with Seller as follows:
5.01 Cooperation. Subject to the terms and conditions herein provided,
Buyer agrees to use its reasonable best efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, and to cooperate with Seller in
connection with the foregoing, including using its reasonable best efforts (i)
to obtain all necessary consents, approvals and authorizations as are required
to be obtained under any federal, state or foreign law or regulations required
to be obtained by Buyer; (ii) to lift or rescind
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any injunction or restraining order or other order adversely affecting the
ability of Buyer to consummate the transactions contemplated hereby; (iii) to
effect all necessary registrations, filings and submissions of information
requested of Buyer by governmental authorities; (iv) to fulfill all conditions
to this Agreement capable of being fulfilled by Buyer; and (v) to provide Seller
promptly with all information and assistance with respect to the foregoing,
including obtaining the Approval Order, as Seller may reasonably request, in
writing or otherwise.
5.02 Confidentiality. Buyer agrees that if the Closing does not occur,
it will maintain in confidence all information relating to Seller furnished to
it by Seller, or any agents of Seller, including information concerning Seller's
business, the Purchased Assets, the liabilities of Seller related to the
business and the financial condition of Seller, and will not disclose such
information to others, or use such information for any purpose unless and until
such information is in or enters the public domain by reason other than
disclosure by Buyer, except as such information may be required to be disclosed
by Buyer under applicable law. If this Agreement is terminated, Buyer shall
return all confidential information received from Seller and all copies and
summaries thereof.
5.03 Employees. Buyer may consider making an offer of employment to
certain current or former employees of Seller, upon such terms, and with
compensation and benefits as Buyer may determine in its sole discretion.
5.04 Shipped Inventory Matters. Set forth on Schedule 5.04 is a form of
letter sent to the Finished Goods Suppliers listed thereon requesting that such
Finished Goods Suppliers ship inventory to Seller without letters of credit to
secure the purchase of such inventory. Buyer hereby acknowledges such letters
and agrees to purchase such inventory from such Finished Goods Suppliers
following the Closing so long as such inventory conforms to the purchase orders
placed by Seller in respect thereof.
ARTICLE VI.
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to purchase the Purchased Assets shall be
subject to the satisfaction on or prior to Closing of all of the following
conditions:
6.01 Covenants. Seller shall have complied in all material respects with
all of its agreements and covenants contained herein to be performed at or prior
to Closing.
6.02 Representations and Warranties True. All representations and
warranties of Seller in this Agreement or in any Exhibit or Schedule delivered
pursuant to this Agreement shall be true, complete and correct on the Closing
Date, except for such failures to be true, complete and correct as would not,
individually or in the aggregate, have a Material Adverse Effect.
6.03 Delivery of Certificates. Buyer shall have received a certificate
or certificates, dated as of the Closing Date, executed by a duly authorized
executive of Seller certifying, without personal liability on the part of the
officer executing the same, in such detail as Buyer
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may reasonably request that the conditions specified in Sections 6.01 and 6.02
hereof have been fulfilled.
6.04 Instruments of Transfer. Buyer shall have received a bill of sale
and such other duly executed instruments of transfer, conveyance, and
assignment, duly executed by an authorized officer of Seller, in form and
substance reasonably satisfactory to Buyer and its counsel, as is necessary or
desirable to effect the transfers, conveyances, and assignments to Buyer of the
Purchased Assets as contemplated by this Agreement.
6.05 Consents. Except for consents identified on Schedules 2.03(f)(i)
and 2.03(f)(ii), all requisite third party consents and estoppels shall have
been obtained and shall be in full force and effect except where the failure to
have obtained such consents or estoppels would not have a Material Adverse
Effect. For the purposes of this Section 6.05, the failure to obtain any consent
or estoppel related to Assumed Contracts which, individually or in the
aggregate, account for payments to Seller in excess of $500,000 per year, shall
be deemed to have a Material Adverse Effect.
6.06 Approval Order. The Approval Order shall have been entered by the
Bankruptcy Court.
6.07 HSR Waiting Period. The waiting period under the HSR Act shall have
expired or terminated, if applicable.
6.08 Injunction. No court or governmental body of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any law, statute,
ordinance, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and (i)
restrains, enjoins or otherwise prohibits the consummation of the transaction
contemplated hereby or (ii) would materially adversely affect the value of the
Purchased Assets, and no governmental body shall have instituted any proceeding
therefor.
6.09 Material Adverse Change. Since February 1, 2001 there shall have
occurred no change, or discovery of a condition or occurrence of any event which
would reasonably be expected to result in a Material Adverse Effect.
6.10 Ancillary Agreements. Seller shall have executed and delivered the
Post Closing Escrow Agreement and the Transitional Arrangements Agreement.
ARTICLE VII.
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to sell the Purchased Assets shall be subject
to the satisfaction on or prior to Closing of all of the following conditions:
7.01 Covenants of Buyer. Buyer shall have complied in all material
respects with all of its agreements and covenants contained herein to be
performed at or prior to Closing.
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7.02 Representations and Warranties True. All representations and
warranties of Buyer in this Agreement shall be true and correct on the Closing
Date.
7.03 Delivery of Certificates. Seller shall have received a certificate
or certificates, dated as of the Closing Date, executed by a duly authorized
executive of Buyer certifying, without personal liability on the part of the
officer executing the same, in such detail as Seller may reasonably request that
the conditions specified in Sections 7.01 and 7.02 hereof have been fulfilled.
7.04 Instruments of Assumption. Seller shall have received duly executed
instruments of assumption of the Assumed Obligations, duly executed by an
authorized officer of Buyer, in form and substance reasonably satisfactory to
Seller and its counsel, as is necessary or desirable to effect the assumption by
Buyer of the Assumed Contracts as contemplated by this Agreement.
7.05 Tender of Purchase Price. Buyer shall have tendered the Purchase
Price.
7.06 Approval Order. The Approval Order shall have been entered by the
Bankruptcy Court and shall have become a Final Order.
7.07 HSR Waiting Period. The waiting period under the HSR Act shall have
expired or terminated, if applicable.
7.08 Injunction. No court or governmental body of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any law, statute,
ordinance, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and restrains,
enjoins or otherwise prohibits the consummation of the transaction contemplated
hereby, and no governmental body shall have instituted any proceeding therefor.
7.09 Further Action. All actions, consents, approvals (temporary or
permanent), authorizations, exemptions and waivers from third parties that shall
be required in order to enable Seller to consummate the transactions
contemplated hereby shall have been duly obtained, (except for such actions,
consents, approvals, authorizations, exemptions and waivers of non-governmental
third parties, the absence of which would not prohibit consummation of such
transactions or render such consummation illegal).
7.10 Ancillary Agreements. Buyer shall have executed and delivered the
Post Closing Escrow Agreement and the Transitional Arrangements Agreement.
ARTICLE VIII.
TERMINATION PRIOR TO CLOSING
8.01 Termination. This Agreement may be terminated:
(a) By the mutual written consent of Buyer and Seller;
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(b) By either Buyer or Seller in writing, if the Closing does not
occur by April 30, 2001 provided that neither Buyer nor Seller may terminate
this Agreement pursuant to this clause (b) if the Closing shall not have been
consummated within such time period by reason of the failure of such party to
perform in all material respects any of its covenants or agreements contained in
this Agreement;
(c) By either Seller or Buyer in writing, without liability to
the terminating party (provided the terminating party is not otherwise in
material default or in breach of this Agreement) if there has been a material
misrepresentation or material breach of this Agreement by the other party which
is not cured within fifteen (15) days after such party has been notified in
writing of such breach and the intent to terminate this Agreement pursuant to
this clause 8.01(c); or
(d) By Buyer by not later than April 20, 2001 if the Bankruptcy
Court does not enter the Approval Order by April 13, 2001.
8.02 Effect on Obligations. Termination of this Agreement pursuant to
this Article shall terminate all obligations of the parties hereunder, except
for Seller's obligations under Section 4.06 and Buyer's obligations under
Section 5.02 hereof, except that (a) in the event of a termination under Section
8.01(c) by Seller, the Deposit shall be paid to Seller as liquidated damages,
which liquidated damages shall be the sole and exclusive remedy of Seller as a
result of such termination, or (b) in the event of a termination under Section
8.01(c) by Buyer, Buyer shall retain all its rights in law and in equity;
provided, however, that Buyer hereby agrees that Seller shall have no liability
to Buyer in excess of $5,000,000 as a result of any termination of this
Agreement. Buyer acknowledges that the agreements contained in this Section 8.02
are an integral part of the transactions contemplated by this Agreement and
that, without these agreements, Seller would not enter into this Agreement.
8.03 Return of Deposit to Buyer. Upon the termination by either party of
this Agreement pursuant to Section 8.01(a) or (b) or upon the termination by
Buyer of this Agreement pursuant to Section 8.01(c), the Escrow Agent shall pay
the Deposit (together with any earned interest) to Buyer.
ARTICLE IX.
INDEMNIFICATION
9.01 Survival.
The representations and warranties of Seller with respect to Sections
2.07 (Inventory) and 2.12 (Accounts Receivable) will survive the Closing and
shall expire 90 days after the Closing Date. The representations and warranties
of Seller with respect to Sections 2.03 (Assumed Contracts), 2.04 (Intellectual
Property), 2.05 (Title) and 2.13 (Software) shall survive for 6 months after
Closing. The representations and warranties of Buyer with respect to Section
3.04 (HSR Matters) shall survive for 6 months after Closing. No other
representations or warranties of Buyer or Seller shall survive Closing.
Following the Closing, the right to indemnification
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based on representations, warranties, covenants and obligations in this
Agreement as set forth in this Article IX shall be the sole remedy of the
parties hereto and will not be affected by any investigation conducted with
respect to, or any knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this Agreement or
the Closing Date, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant or obligation. The waiver of
any condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification based on such representations, warranties,
covenants and obligations.
9.02 Indemnification by Seller
From and after the Closing, Seller hereby agrees to indemnify, defend
and hold Buyer and its officers, directors, agents and employees (the "Buyer
Indemnified Parties"), harmless from, against and in respect of any and all
losses, claims, suits, actions, proceedings, awards, judgments, settlements,
fines, penalties, liabilities, obligations, damages, deficiencies, costs or
expenses (including reasonable expenses of investigation and attorneys' fees)
net of any insurance proceeds and tax benefits if, as and when received, in
either case to which such Buyer Indemnified Party is entitled by virtue of any
of the foregoing (collectively "Claims") arising out of or resulting from:
(i) any breach of a covenant or misrepresentation by
Seller of a representation or warranty which expressly survives
Closing pursuant to Section 9.1 hereof;
(ii) any liability for Taxes incurred on or before the
Closing Date;
(iii) the Excluded Assets; and
(iv) the Retained Liabilities.
9.03 Indemnification by Buyer
From and after the Closing, Buyer hereby agrees to indemnify, defend and
hold harmless Seller and its officers, directors, agents and employees (the
"Seller Indemnified Parties") from, against and in respect of any and all Claims
arising out of or resulting from (i) any breach of any warranty or
misrepresentation by Buyer or the breach or nonperformance of any covenant,
agreement or obligation to be performed on the part of Buyer under this
Agreement, or in any closing certificate contemplated hereby or in any Schedule
hereto, (ii) any Assumed Obligations and (iii) except for the Retained
Liabilities and the Excluded Assets, the use of the Purchased Assets after the
Closing Date.
9.04 Limitations
(a) Notwithstanding anything contained in this Agreement to the
contrary, neither party shall be liable for any amounts for which an Indemnified
Party (as defined below) is otherwise entitled to indemnification in connection
with the breach or inaccuracy of any
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representation or warranty or any breach of any covenant contained herein until
the aggregate amount for which such Indemnified Party is entitled to
indemnification with respect to all such Claims for indemnification in the
aggregate exceeds One Million Dollars ($1,000,000) (the "Threshold"), at which
time such party shall be liable for any such excess. In determining the
foregoing Threshold and in otherwise determining the amount to which the
Indemnified Party is entitled to assert a claim for indemnification pursuant to
this Article IX, only actual losses shall be considered. The Threshold shall not
apply (i) with respect to Buyer's claims hereunder, as to any Claims related to
(A) the Excluded Assets, (B) the Retained Liabilities or (C) any breach or
inaccuracy of any representation or warranty relating to Sections 2.07
(Inventory) and 2.12 (Accounts Receivable) and (ii) with respect to Seller's
claims hereunder, as to any Claims related to the payment of all amounts due to
Seller pursuant to Sections 1.05 (Payment of Purchase Price) and 1.05
(Post-Closing Adjustment). The Threshold shall not apply as to any Claims
arising from fraud committed by the Indemnifying Party against the Indemnified
Party with respect to the transactions contemplated under this Agreement. The
parties hereto waive as against each other any claim to consequential, special,
exemplary or punitive damages except to the extent consequential, special,
exemplary or punitive damages are awarded to a third person against an
Indemnified Party in circumstances in which such Indemnified Party is entitled
to indemnification hereunder such consequential, special, exemplary or punitive
damages so awarded shall be payable to such Indemnified Party hereunder.
(b) Notwithstanding anything to the contrary contained in this
Article IX, the amount for which Buyer shall be entitled to, and Seller liable
for, indemnification hereunder shall not exceed the following: (i) the aggregate
amount recoverable from Seller for indemnification claims arising from the
representations and warranties of Seller with respect to Sections 2.07
(Inventory) and 2.12 (Accounts Receivable) shall not exceed the excess of
$25,000,000 over the Downward Adjustment Amount and (ii) the aggregate amount
recoverable from Seller for indemnification claims arising from the breach of
any covenant by Seller or the representations and warranties of Seller with
respect to Sections 2.03 (Assumed Contracts), 2.04 (Intellectual Property), 2.05
(Title) and 2.13 (Software) shall not exceed $5,000,000. Indemnification claims
arising from the representations and warranties of Seller with respect to
Sections 2.07 (Inventory) and 2.12 (Accounts Receivable) shall be satisfied
first from the Accounts Receivable/Inventory Holdback Amount and, to the extent
the Accounts Receivable/Inventory Holdback Amount is insufficient to cover any
such claims (subject to the maximum allowable amounts set forth in the preceding
sentence), Seller agrees to satisfy any such claims. Indemnification claims
arising from the representations and warranties of Seller with respect to
Sections 2.03 (Assumed Contracts) and 2.04 (Intellectual Property), 2.05 (Title)
and 2.13 (Software) shall be satisfied solely from the Escrow Amount. Seller and
Buyer agree that under no circumstances shall the Escrow Agent release any of
the Escrow Amount to Buyer to satisfy any amounts owed to Buyer in respect of
any indemnification claims arising from the representations and warranties of
Seller with respect to Sections 2.07 (Inventory) and 2.12 (Accounts Receivable).
Notwithstanding the foregoing, if Seller has not paid any amounts due to Buyer
on account of an undisputed Downward Adjustment Amount pursuant to Section 1.05
hereof, Seller agrees to use any funds remaining in the Escrow Amount
immediately prior to its release to Seller, towards the satisfaction of each
unpaid Downward Adjustment.
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(c) The obligation of Seller to indemnify Buyer in connection
with the representations and warranties of Seller contained in Sections 2.07
(Inventory) and 2.12 (Accounts Receivable) shall terminate on the later of (i)
ninety (90) days following the Closing or (ii) fifteen (15) days following the
resolution of any dispute relating to the Audit. The obligation of Seller to
indemnify Buyer in connection with the representations and warranties of Seller
contained in Sections 2.03 (Assumed Contracts), 2.04 (Intellectual Property),
2.05 (Title) and 2.13 (Software) shall terminate 6 months after the Closing
Date. Notwithstanding the foregoing, the respective indemnification obligations
of the parties hereunder shall not expire with respect to any Claim brought
within such specified time periods until the indemnification obligation, if any,
with respect to such Claim shall have been finally determined and paid.
9.05 Indemnification Procedure
In any case under this Agreement where Seller has indemnified a Buyer
Indemnified Party or Buyer has indemnified a Seller Indemnified Party (the
indemnifying party hereinafter the "Indemnifying Party" and the party entitled
to indemnification hereinafter the "Indemnified Party") against any Claim,
indemnification shall be conditioned on compliance with the procedure and shall
be subject to the limitations outlined below:
(a) Provided that prompt notice is given of a Claim for which
indemnification might be claimed under this Article IX, unless the failure to
provide such notice does not actually and materially prejudice the interests of
the Indemnifying Party, the Indemnifying Party promptly will defend, contest, or
otherwise protect against any such Claim at its own cost and expense. Such
notice shall describe the Claim in reasonable detail and shall indicate the
amount (estimated, if necessary) of the loss that has been or may be suffered by
an Indemnified Party.
(b) An Indemnified Party may, but will not be obligated to,
participate at its own expense in a defense thereof by counsel of its own
choosing, but the Indemnifying Party shall be entitled to control the defense
unless such Indemnified Party has relieved the Indemnifying Party from liability
with respect to the particular matter, provided that the Indemnifying Party may
only settle or compromise the matter subject to indemnification without the
consent of the Indemnified Party if such settlement includes a complete release
of all Indemnified Parties as to the matters in dispute and provided further
that such Indemnified Party will not unreasonably withhold consent to any
settlement or compromise that requires its consent.
(c) In the event the Indemnifying Party fails to timely defend,
contest, or otherwise protect against any such Claim, an Indemnified Party may,
but will not be obligated to, defend, contest, or otherwise protect against the
same, and make any reasonable compromise or settlement thereof and recover
(subject to the limitations set forth in Section 9.04) the entire costs thereof
from the Indemnifying Party, including reasonable attorneys' fees, disbursements
and all amounts paid as a result of such Claim or the compromise or settlement
thereof; provided, however, that (i) an Indemnified Party may only settle or
compromise the matter subject to indemnification without the consent of the
Indemnifying Party if such settlement includes a complete release of the
Indemnifying Party as to the matters in dispute and provided further that the
Indemnifying Party will not unreasonably withhold consent to any settlement or
compromise that requires its consent and (ii) if the Indemnifying Party
subsequently undertakes the defense of
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such matter, an Indemnified Party shall be entitled to recover from the
Indemnifying Party only those costs incurred in the defense prior to such time
the Indemnifying Party undertakes the defense of such matter together with the
reasonable costs of providing assistance.
(d) The Indemnified Parties shall cooperate and provide such
assistance as the Indemnifying Party may reasonably request in connection with
the defense of the matter subject to indemnification and in connection with
recovering from any third parties amounts that the Indemnifying Party may pay or
be required to pay by way of indemnification hereunder. The Indemnified Parties
shall take commercially reasonable steps to protect its position with respect to
any matter that may be the subject of indemnification hereunder in the same
manner as it would any similar matter where no indemnification is available.
ARTICLE X.
MISCELLANEOUS
10.01 Entire Agreement. This Agreement (including the attached
Schedules) constitutes the sole understanding of the parties with respect to the
subject matter hereof. Matters disclosed by Seller to Buyer pursuant to any
Article of this Agreement shall be deemed to be disclosed with respect to all
Articles of this Agreement. No amendment, modification, or alteration of the
terms or provisions of this Agreement shall be binding unless the same shall be
in writing and duly executed by the parties hereto.
10.02 Use of Names. Effective upon the Closing, Seller shall have no
right to use the "Converse" name and any of the Trademarks and other
Intellectual Property acquired by Buyer and Seller shall take all necessary and
appropriate steps to avoid the use of such names or variants thereof; provided,
however, that (a) Seller shall have the right to use the name "Converse" in
connection with the Bankruptcy Case and (b) Buyer grants Seller the limited
right, for a period not to exceed 120 days after the Closing, to use the name
"Converse" or variants thereof in connection with the orderly sale of its
remaining assets, so long as such use does not interfere with the operation of
Buyer's business and its use of the Purchased Assets. At any time following the
Closing when Seller has any rights to use the name "Converse" pursuant to the
proviso contained in the foregoing sentence, Seller agrees to take necessary
steps to avoid any confusion over the ownership of the "Converse" name. Subject
to the foregoing, at the Closing, Seller shall take all actions necessary to (i)
change its name in accordance with this paragraph, and (ii) execute such
documents as are necessary to permit Buyer to utilize the "Converse" name in its
corporate name.
10.03 Successors and Assigns. This Agreement may not be assigned by
either Buyer or Seller without the prior written consent of the other party
hereto, and any such assignment contrary to the terms hereof shall be null and
void and of no force or effect. If this Agreement is assigned with such consent,
the terms and conditions hereof shall be binding upon and shall inure to the
benefit of the parties hereto and their respective assigns. Notwithstanding the
provisions of this Section 10.03, Buyer may assign its rights and obligations
under this Agreement to any subsidiary of Buyer, without the prior written
consent of Seller provided that Buyer shall remain obligated to pay the Purchase
Price.
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10.04 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes by deemed to be an original
and all of which shall constitute the same instrument.
10.05 Headings, Interpretation. The headings of the Articles and
paragraphs of this Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the construction
hereof. For purposes of this Agreement, the words "include", "includes" or
"including" shall be deemed to incorporate and be followed by the phrase
"without limitation."
10.06 Modification and Waiver. At any time prior to the Closing Date,
the parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall only be valid if set forth in an
instrument in writing signed on behalf of such party.
10.07 Expenses, etc. Except as specifically provided herein, each of
Seller and Buyer shall pay all costs and expenses incurred by it or on its
behalf in connection with this Agreement and the transactions contemplated
hereby, including, without limiting the generality of the foregoing, fees and
expenses of its own consultants, accountants, and counsel. Each party shall bear
the expenses of any finder, broker, agent or other intermediary who may have
acted for or on behalf of Buyer or Seller in connection with the negotiation or
consummation of the transactions contemplated by this Agreement.
10.08 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered by hand,
transmitted via facsimile or sent via nationally recognized overnight courier
(receipt confirmed) addressed
IF TO SELLER TO:
Converse Inc.
One Fordham Road
North Reading, MA 01864
Attention: Glenn N. Rupp and Jack Green, Esq.
Facsimile: 978-664-7529/7579
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
Attention: Myron Trepper, Esq.
Michael J. Kelly, Esq.
Facsimile: 212-728-8111
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IF TO BUYER TO:
c/o Cre-8-net Ventures
591 Redwood Highway
Suite 2180
Mill Valley, CA 94941
Attention: Mr. Marsden S. Cason, President
Facsimile: 415-383-7698
with a copy to:
Arnold & Porter
555 Twelfth Street N.W.
Washington, D.C. 20004-1206
Attention: Robert Ott, Esq.
Facsimile: (202) 942-5999
and
Stutman, Treister & Glatt
3699 Wilshire Boulevard
Suite 900
Los Angeles, CA 90010-2739
Attention: Robert A Greenfield
Ronald L. Fein
Facsimile: (213) 251-5288
Any notice which is delivered in the manner provided herein shall be deemed to
have been duly given to the party to whom it is directed upon actual receipt by
such party (or its agent for notices hereunder) or at such time as delivery is
refused by the addressee upon presentation.
10.09 Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York without reference to its
conflicts of laws principles.
10.10 Announcements. From the date hereof until the Closing Date, Seller
and Buyer shall afford each other the opportunity to review in advance any
public announcements, including those to either party's employees, of the
transaction contemplated by this Agreement. For all periods prior to Closing, no
public announcement shall be made without such prior review and the consent of
the other party to the form of the public announcement, such consent not to be
unreasonably withheld. However, prior review and consent of the other party
shall not be required with respect to any legally required communication either
to a party's employees or otherwise.
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10.11 Compliance with Bulk Sales Laws. Buyer and Seller hereby waive
compliance by Buyer and Seller with the bulk sales law and any other similar
laws in any applicable jurisdiction in respect of the transactions contemplated
by this Agreement.
10.12 Binding Nature of Agreement. This Agreement shall not be binding
on Seller unless and until the Approval Order is entered.
10.13 Seller's Knowledge. As used in this Agreement, the term "Seller's
knowledge" refers to the actual knowledge of Glenn Rupp, Herbert Rothstein,
Alistair Thorburn, Jack Green, James Lawlor, Robert Sharp, Steven Dodge, Laura
Kelley and James Faulkner.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
CONVERSE INC.
By: /s/Glenn N. Rupp
--------------------------------------------
Title: Chairman and Chief Executive Officer
FOOTWEAR ACQUISITION, INC.
By: /s/Marsden S. Cason
--------------------------------------------
Title: President
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