ASSET PURCHASE AGREEMENT BY AND AMONG ICONIX BRAND GROUP, INC., EXETER BRANDS GROUP LLC AND NIKE, INC. Dated November 15, 2007
Exhibit
2.1
Execution
Version
BY
AND
AMONG
EXETER
BRANDS GROUP LLC
AND
NIKE,
INC.
Dated
November 15, 2007
ASSET
PURCHASE AGREEMENT (this “Agreement”), dated November 15, 2007, by and among
Iconix Brand Group, Inc., a Delaware corporation (“Buyer”), Exeter Brands Group
LLC, an Oregon limited liability company (“Seller”) and NIKE, Inc., an Oregon
corporation (“Parent”). Parent joins in this Agreement solely in order to be
bound to provide the Guaranty.
RECITALS:
WHEREAS,
Seller is engaged, among other things, in the business of designing,
manufacturing, promoting, selling and distributing apparel products under the
brand name Starter®;
WHEREAS,
Seller desires to sell to Buyer, and Buyer desires to purchase from Seller,
in
accordance with the provisions of this Agreement, certain assets of the Seller
and its Affiliates related to the Business;
WHEREAS,
Parent directly or indirectly owns or controls all of the equity interests
in
Seller;
WHEREAS,
Parent will benefit from the transactions contemplated pursuant to this
Agreement and as an inducement for the Buyer to enter into this Agreement,
Parent has agreed to deliver a Guaranty to the Buyer;
WHEREAS,
each of the managing board and the holder of all of the outstanding membership
interests of Seller has approved the sale of such assets by Seller pursuant
to
this Agreement;
WHEREAS,
the board of directors of Buyer has approved the acquisition of such assets
by
Buyer pursuant to this Agreement;
NOW,
THEREFORE, in consideration of the mutual covenants, representations, warranties
and agreements herein contained, the parties hereto agree as
follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions.
For
purposes of this Agreement, the term:
(a) “Affiliate”
means a person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, another
person.
(b) “Agreement”
has the meaning set forth in the introduction.
(c) “Approval”
has the meaning set forth in Section 5.15.
(d) “Assigned
Contracts” has the meaning set forth in Section 2.1(a)(ii).
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(e) “Assumed
Liabilities” shall include the following liabilities and obligations of the
Seller and its Affiliates to the extent not paid, performed or discharged upon
or prior to the Closing: (i) all of the Seller's and its Affiliates’ liabilities
and obligations arising under or in connection with the Assigned Contracts
after
the Closing, and which do not relate to events or circumstances that occurred
or
existed prior to the Closing; (ii) all of the Seller's and its Affiliates’
liabilities and obligations arising after the Closing under or in connection
with the permits and registrations included in the Purchased Assets, and which
do not relate to events or circumstances that occurred or existed prior to
the
Closing; (iii) the Seller's and its Affiliates’ liabilities and obligations, if
any, arising after the Closing with respect to the Intangibles and which do
not
relate to events or circumstances that existed or occurred prior to the Closing;
and (iv) the additional liabilities and obligations of the Seller and its
Affiliates set forth on Schedule 2.2(a).
(f) “Basket”
has the meaning set forth in Section 9.4(a).
(g) “Business”
means the business conducted by the Seller and its Affiliates of designing,
promoting, selling and distributing apparel products under the Starter® brand
name as of the Closing Date.
(h) “Buyer”
has the meaning set forth in the introduction.
(i) “Closing”
has the meaning set forth in Section 7.1.
(j) “Closing
Date” has the meaning set forth in Section 7.1.
(k) “Commitment
Letter” has the meaning set forth in Section 4.7.
(l) “Contract”
means any written or oral contract, agreement, indenture, note, bond, loan,
instrument, lease, conditional sales contract, mortgage, license, franchise,
insurance policy, commitment or other binding arrangement or
agreement.
(m) “Contract
Right” means any right, power or remedy under any Contract, including but not
limited to rights to receive property or services or otherwise to derive
benefits from the payment, satisfaction or performance of another party’s
obligations.
(n) "Core
Marks" means STARTER, S and STAR DESIGN, and
S and
STAR DESIGN when connected to, or immediately adjacent to, the word
STARTER.
(o) “Deposit”
has the meaning set forth in Section 2.4.
(p) “Documents”
means and includes any document, agreement, instrument, certificate, notice,
consent, approval, affidavit, correspondence (by letter, electronic mail, telex
or otherwise), written statement, schedule or exhibit whatsoever.
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(q) “Encumbrance”
means any lien, security interest, pledge, mortgage, easement, leasehold,
assessment, covenant, restriction, or any other encumbrance, claim, burden
or
charge of any kind or nature whatsoever; provided,
however,
that
for
purposes of this Agreement the term “Encumbrance” shall exclude (i) any
statutory liens for Taxes that are not yet due and payable, (ii) purchase money
liens and statutory or common law liens to secure obligations to landlords,
lessors or renters under leases or rental agreements that are not past due
or in
default in any material respect, (iii) statutory or common law liens in favor
of
carriers, warehousemen, mechanics and materialmen to secure claims for
non-employee labor, materials or supplies that are not past due or in default
in
any material respect and (iv) adverse claims, if any, for infringement,
misappropriation or violation of the proprietary rights of any Person with
respect to Intangibles that have not been received by Seller in writing as
it
relates to any international Intangibles and as it relates to United States
Intangibles either has no Knowledge or has not received adverse claims in
writing.
(r) “Employee
Benefit Plans” has the meaning set forth in Section 3.9.
(s) “Environmental
Law” has the meaning set forth in Section 3.19(c).
(t) “Escrow
Agent” has the meaning set forth in Section 2.4.
(u) “Escrow
Agreement” has the meaning set forth in Section 2.4.
(v) “Excluded
Assets” means those assets of Seller and its Affiliates referred to or
identified as follows: (i) Tax refunds attributable to the operations of the
Business, if any, for periods before or ending upon the Closing Date, and
prepaid Taxes; (ii) the rights of Seller and its Affiliates applicable to or
associated with the obligations and liabilities of the Business which are not
Assumed Liabilities; (iii) the equity interest of Seller or its Affiliates
in
Exeter Hong Kong Limited and all Contracts between Exeter Hong Kong Limited
and
Wal-Mart; (iv) all other Contracts other than the Assigned Contracts; and (v)
any other assets or interests identified on Schedule 2.1(b).
(w) “Final
Reconciliation” has the meaning set forth in Section 2.6(a).
(x) “Financial
Statements” has the meaning set forth in Section 3.7.
(y) “Financing”
has the meaning set forth in Section 4.7.
(z) “Governmental
Authority” means any nation or government, any state or other political
subdivision thereof, any agency, district, board, bureau, commission, court,
department, official, tribunal, taxing authority or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or
pertaining to government.
(aa) “Guaranty”
has the meaning set forth in Section 7.1(a)(viii).
(bb) “Hazardous
Substances” has the meaning set forth in Section 3.19(a).
(cc) “HSR
Act”
has the meaning set forth in Section 3.6.
(dd) “HSR
Filing” has the meaning set forth in Section 3.6.
(ee) “Indemnified
Party” has the meaning set forth in Section 9.1.
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(ff) “Indemnifying
Party” has the meaning set forth in Section 9.1.
(gg) “Intangible”
means, throughout the world, all of the Seller's and its Affiliates’ right,
title and interest in and to the Marks; to the extent that they exist and are
used in connection with the Business, if any, all trade secrets related to
the
Purchased Assets bearing the Marks; promotional material, know-how; patents;
patent applications; inventions and formula used in the Business that may be
patentable; Web sites, including the content contained therein; domain names;
domain name registrations; software and databases used in connection with the
Business; all designs and patterns and artwork used in connection with the
Business; copyrights, copyright applications and copyright registration with
regard to samples, products and product development of the Business; and all
good will with respect to the foregoing, whether arising under statutory or
common law in any jurisdiction or otherwise; and includes, without limitation,
any and all Intellectual Property Rights in and to the foregoing.
(hh) “Intellectual
Property Right(s)” means any and all worldwide proprietary rights arising under
statutory or common law, Contract, or otherwise, and whether or not perfected,
including without limitation, all (a) rights associated with patents, reissues,
divisions, divisionals, continuations, continuations-in-part, substitutes,
renewals, and reexamined patents, and extensions of the foregoing (as and to
the
extent applicable) and patent applications, whenever filed and wherever issued,
and all priority rights resulting from such applications; (b) rights associated
with works of authorship including, but not limited to, copyrights, moral
rights, design rights, copyright applications, copyright registrations, and
rights to prepare derivative works; (c) rights relating to the protection of
trade secrets and confidential information related to the Marks and Purchased
Assets; (d) rights in and to trademarks, service marks, trade names, logos,
and
symbols, and (e) the right to ▇▇▇ for past infringement of any Intangible and/or
Intellectual Property Rights, provided in every case that such right is related
to the Business.
(ii) “Knowledge”
of the Seller means the actual knowledge of any of ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, after a commercially
reasonable inquiry of those persons at Seller or Parent who would be responsible
for the matter being represented or warranted.
(jj) “Leased
Real Property” has the meaning set forth in Section 2.1(a)(iii).
(kk) “Leasehold
Improvements” means all buildings, structures, improvements and fixtures located
on any Leased Real Property which are owned by the Seller or one of its
Affiliates, regardless of whether title to such buildings, structures,
improvements or fixtures are subject to reversion to the landlord or other
third
party upon the expiration or termination of the lease for such Leased Real
Property.
(ll) “Liabilities”
has the meaning set forth in Section 10.8(b).
(mm) “Liability
Termination Date” has the meaning set for in Section 10.8(b).
(nn) “Licenses”
has the meaning set forth in Section 3.17.
(oo) “Loss”
or
“Losses” has the meaning set forth in Section 9.1.
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(pp) “Marks”
means all of the following owned or used by the Seller or one of its Affiliates
in connection with the Business: names, corporate names, domain names,
fictitious names, trademarks, trademark applications, trademark registrations,
service marks, service ▇▇▇▇ applications, service ▇▇▇▇ registrations, trade
names, brand names, product names, logos, trade dress, symbols, or
slogans.
(qq) “Material
Adverse Effect” means a material adverse effect on the business, operations,
liabilities, properties, assets or financial condition of the Seller and its
Subsidiaries taken as a whole, and in the case of Buyer, Buyer and its
Subsidiaries taken as a whole.
(rr) “Parent”
has the meaning set forth in the introduction.
(ss) “Person”
means an individual, sole proprietorship, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization, cooperative, trust, estate, Governmental Entity or authority
(including any branch, subdivision or agency thereof), administrative or
regulatory authority, or, as applicable, any other entity.
(tt) “Proceeding”
means any action, arbitration, audit, claim, equitable action, hearing,
investigation, litigation, trademark opposition, cancellation action,
cancellation action, administrative hearing or any other judicial or
administrative proceeding of any kind or nature whatsoever, or suit (whether
civil, criminal, administrative, judicial or investigative, whether formal
or
informal, whether public or private) commenced, brought, conducted or heard
by
or before, or otherwise involving, any Governmental Body or arbitrator, or
any
formal demand which might lead to any of the foregoing.
(uu) “Purchased
Assets” has the meaning set forth in Section 2.1(a).
(vv) “Purchase
Price” has the meaning set forth in Section 2.5.
(ww) “Real
Property” means
any
real estate, land, building, structure, improvement or other real property
of
any kind or nature whatsoever owned, leased or occupied by the Seller or one
of
its Affiliates for purposes of conduct of the Business, and all appurtenant
and
ancillary rights thereto, including, without limitation, easements, covenants,
water rights, sewer rights and utility rights.
(xx) “Retained
Liabilities” has the meaning set forth in Section 2.2(b).
(yy) “Royalties”
has the meaning set forth in Section 2.6(a).
(zz) “Seahawks
LLC” has the meaning set forth in Section 2.3.
(aaa) “Seller”
has the meaning set forth in the introduction.
(bbb) “Subsidiary”
means any person of which at least a majority of the outstanding shares or
other
equity interests having ordinary voting power for the election of directors
or
comparable managers of such person are owned, directly or indirectly, by another
person.
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(ccc) “Tax”
or
“Taxes” means all taxes and governmental impositions of any kind in the nature
of (or similar to) taxes, payable to any federal, state, local or foreign taxing
authority or other governmental authority, including, but not limited to, those
on or measured by or referred to as income, franchise, profits, gross receipts,
capital, ad valorem, custom duties, alternative or add-on minimum taxes,
estimated, environmental, disability, registration, value added, sales, use,
service, real or personal property, capital stock, license, payroll,
withholding, employment, social security, workers’ compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes, and interest, penalties
and additions to tax imposed with respect thereto.
(ddd) “Tax
Return” shall mean any return (including any information return), report,
statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information (including any amendments
thereto) that is, has been or may in the future be filed with or submitted
to,
or required to be filed with or submitted to, any governmental authority in
connection with the determination, assessment, collection or payment of any
Tax
or in connection with the administration, implementation or enforcement of
or
compliance with any law relating to any Tax.
(eee) “Termination
Date” has the meaning set forth in Section 8.1(b)(ii).
(fff) “Third
Party Claim” has the meaning set forth in Section 9.2.
(ggg) “Transferred
Employees” has the meaning set forth in Section 5.11(a).
(hhh) “Trademark
Use Agreement” has the meaning set forth in Section 5.12.
(iii) “Transitional
Services and License Agreement” has the meaning set forth in Section
5.13.
(jjj) “Wal-Mart”
has the meaning set forth in Section 3.21.
ARTICLE
II
PURCHASE
AND SALE
2.1 Assets
To Be Sold.
(a) On
the
terms and subject to the conditions of this Agreement, the Seller shall on
the
Closing Date sell, assign, transfer and convey to Buyer (and
shall cause its Affiliates to sell, assign, transfer or convey, as
applicable),
and
Buyer shall purchase from the Seller and its Affiliates, on the Closing Date
all
of the Seller’s and its Affiliates’ right, title and interest in and to the
following assets of the Seller or one of its Affiliates free and clear of all
Encumbrances (collectively, the “Purchased Assets”):
(i) All
Intangibles owned by the Seller or one of its Affiliates relating to or used
in
connection with the Business (other than the Excluded Assets), which includes
without limitation those Intangibles listed on Schedule 2.1(a)(i), and all
Intellectual Property Rights associated therewith, all goodwill, licenses and
sublicenses granted or obtained with respect thereto, and rights thereunder,
remedies against infringements thereof, and rights to protection of interests
therein under the laws of all jurisdictions;
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(ii) All
of
the
Seller’s or its Affiliates’
rights,
powers and privileges in and to the Contracts described on
Schedule 2.1(a)(ii) (the “Assigned Contracts”) and all Contract Rights
thereunder;
(iii) The
Real
Property leased by the Seller or one of its Affiliates listed on Schedule
2.1(a)(iii) (the “Leased Real Property”),
including all right and interest, if any, in and to all Leasehold Improvements
and all personal property and interests (including furniture and office
furnishings) located at the Leased Real Property;
(iv) All
historical samples, sample books, prototypes, archive files or other similar
items used in or related to the Business that are not Intangibles or Excluded
Assets;
(v) All
prepaid assets, including the pro rata portion of advances or guaranteed minimum
royalty and advertising
payments
relating to periods after the Closing Date under the Assigned Contracts or
payments under terminated license agreements related to the Marks (which are
Purchased Assets) with payments due post-Closing and any liquidated damages
under the Assigned Contracts
and the
signing bonuses, marketing fees and other one time payments paid pursuant to
those Contracts listed on Schedule 2.1(a)(v); and
(vi) All
of
the Seller’s and its Affiliates’ claims, causes of action and other legal rights
and remedies, whether or not known as of the Closing, relating to the Seller’s
or one of its Affiliates’ ownership of the Purchased Assets, but excluding
claims against Buyer with respect to the transactions contemplated
herein.
(b) There
is
excluded from the sale and purchase contemplated by this Agreement all assets
of
Seller and its Affiliates of whatever nature, whether presently in existence
or
arising hereafter, other than the Purchased Assets, including without
limitation, the Excluded Assets.
2.2 Assumption
of Liabilities.
(a) On
the
terms set forth herein, on and after the Closing Date, Buyer shall assume,
perform and pay the Assumed Liabilities.
(b) Buyer
is
assuming only the Assumed Liabilities from the Seller and its Affiliates and
is
not assuming any other liability of the Seller or any of its Affiliates of
whatever nature, whether presently in existence or arising hereafter (the
“Retained Liabilities”) and Buyer does not assume and shall in no event be
liable for any such Retained Liabilities, including, but not limited
to:
(i) all
liabilities to the extent arising out of or relating to the operation or conduct
by the Seller or any of its Affiliates of any retained businesses and all
liabilities to the extent arising out of or relating to any Excluded
Asset;
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(ii) all
liabilities and commitments of the Seller or its Affiliates in respect of Taxes
incurred with respect to periods ending on or prior to the Closing
Date;
(iii) all
liabilities
and
commitments relating to current or former employees of the Seller or its
Affiliates, including without limitation (a) any compensation or benefits
payable to present or past employees of the Seller or its Affiliates, including
without limitation, any liabilities arising under any Employee Benefit Plan
of
the Seller or its Affiliates and any of the Seller’s or its Affiliates’
liabilities for vacation, holiday or sick pay, and (b) any liabilities under
any
employment, consulting or non-competition agreement, change of control
agreement, indemnity agreement, any retention or performance-based bonus or
other compensation agreement, and any similar agreements, whether written or
oral, and any liabilities arising out of the termination by the Seller or its
Affiliates of any of their employees in anticipation or as a consequence of,
or
following, consummation of the transactions contemplated by the Documents
executed or delivered pursuant to this Agreement;
(iv) all
debt
of
Seller or its Affiliates for borrowed money;
(v) all
liabilities
to any
broker, finder or agent or similar intermediary for any broker’s fee, finders
fee or similar fee or commission relating to the transactions contemplated
by
this Agreement for which the Seller or its Affiliates is responsible pursuant
to
Section 3.22;
(vi) all
liabilities
of Seller and its Affiliates
with
respect to any Environmental Law or environmental conditions, events, or
circumstances, including with respect to any release of Hazardous Substances
after the Closing Date to the extent said liabilities arise from or in
connection with conditions, events or circumstances occurring on or before
the
Closing Date, including without limitation the migration of Hazardous Substances
which were released on or prior to the Closing Date;
(vii) any
other
liabilities
of the
Seller or current or former Affiliates thereof, including without limitation
Exeter Hong Kong Ltd., if any, other than the Assumed Liabilities.
2.3 Delivery
of Certain Assets.
At the
Closing, the Seller shall deliver (or shall cause to be delivered) all of their
right, title and interest in the Purchased Assets directly to a direct or
indirect subsidiary of Buyer (“Seahawks LLC”). The parties hereto acknowledge
and agree that, notwithstanding this Section, all of the Purchased Assets,
including the Purchased Assets subject to this Section, are being acquired
by
Buyer hereunder and the delivery by the Seller of the Purchased Assets, subject
to this Section, to Seahawks LLC shall be deemed to be a delivery of such
Purchased Assets initially to Buyer followed by a contribution of such Purchased
Assets by Buyer to the capital of Seahawks LLC.
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2.4 Deposit.
Within
one (1) business day of the date hereof, Buyer shall deposit with U.S. Bank
National Association, as escrow agent (the “Escrow Agent”), in readily available
funds Six Million Dollars ($6,000,000) (such amount, without interest, the
“Deposit”) pursuant to the escrow agreement in the form attached hereto as
Exhibit
A
dated as
of the date hereof and signed by the Buyer, the Escrow Agent and the Seller
(the
“Escrow Agreement”). If this Agreement is terminated prior to the Closing
pursuant to Article VIII, then under the circumstances provided for in Section
8.2(b), the Deposit, as well as any interest and any other income earned
thereon, shall be promptly released by the Escrow Agent to the Seller. In the
event of any other termination of this Agreement, the Deposit, as well as any
interest and any other income earned thereon, shall be promptly released by
Escrow Agent to Buyer. In
the
event of the consummation of the transactions contemplated by this Agreement,
the Deposit, as well as any interest and any other income earned thereon
between the date hereof and the Closing Date, shall be promptly released by
Escrow Agent to the Seller at the Closing.
2.5 Purchase
Price.
In
consideration of the sale, transfer, conveyance and delivery of the Purchased
Assets, and in reliance upon the representations
and warranties made herein by the Seller, Buyer shall, in full payment thereof,
pay to the Seller Sixty Million Dollars ($60,000,000) (the “Purchase Price”), in
consideration for the Purchased Assets. At the Closing, Buyer agrees to pay
the
Seller Fifty Four Million Dollars ($54,000,000) (the "Buyer Closing Payment")
and to cause the Escrow Agent to deliver the Deposit to Seller, in cash by
wire
transfer of immediately available funds, in accordance with the written
instructions (which may include multiple payees) of the Seller given to Buyer
and Escrow Agent at least two (2) business days prior to the Closing
Date.
2.6 Reconciliation
of Royalty Payments.
(a) Within
ninety (90) days after the Closing Date, Seller shall, with the assistance
of
Buyer, prepare in good faith a written calculation (the “Final Reconciliation”)
of the actual amount by which the license fees, franchise fees, royalty fees,
or
other fees, payments, consideration or compensation (excluding any and all
marketing fees) with respect to the Assigned Contracts (“Royalties”) earned by
the Seller on or prior to the Closing Date but not yet collected exceeded (or,
as applicable, was exceeded by) the amount of Royalties collected by the Seller
as of the Closing Date for periods after the Closing Date.
(b) For
purposes of the calculation described in Section 2.6(a) above, the Royalties
with respect to each Assigned Contacts shall have been or be earned by Seller
and Buyer pro rata based on the percentage of the applicable royalty period
for
each such Assigned Contract during which Seller or Buyer, as applicable, owned
the Assigned Contract.
(c) If
the
Royalties earned by the Seller on or prior to the Closing Date but not yet
collected exceed the amount of the Royalties collected by the Seller as of
the
Closing Date for periods after the Closing Date, Buyer shall remit the amount
of
the difference to Seller by check or wire transfer within ten (10) days of
the
Final Reconciliation. If the Royalties collected by the Seller as of the Closing
Date for periods after the Closing Date exceed the Royalties earned by the
Seller on or prior to the Closing Date but not yet collected, Seller shall
remit
the amount of the difference to Buyer by check or wire transfer within ten
(10)
days of the Final Reconciliation.
(d) Notwithstanding
the foregoing, the Seller shall not be entitled to any Royalties with respect
to
licenses for which a signing bonus or one time payment is paid to any Seller
prior to the Closing Date, including without limitation, the signing bonuses
and
one time payments paid pursuant to those Contracts listed on Schedule
2.1(a)(v).
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2.7 Allocation
of Purchase Price.
The
Purchase Price shall be allocated among the Purchased Assets as of the Closing
Date in accordance with Schedule 2.7. For all tax purposes, Buyer and the Seller
agree to report the transactions contemplated by this Agreement in a manner
consistent with the terms of this Agreement, including the allocation set forth
in Schedule 2.7, and that neither of them will take any position inconsistent
therewith in any tax return, in any refund claim, in any litigation or
otherwise.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF SELLER
The
Seller represents and warrants to Buyer as set forth below.
3.1 Organization
and Qualification.
(a) Seller
is
a limited liability company duly organized and validly existing on the records
of the Corporation Division of the Office of the Secretary of State of the
State
of Oregon, with all requisite limited liability company power and authority
to
operate and lease the Purchased Assets, properties and Business and to carry
on
its Business as and where such Business is now being conducted.
(b) Parent
is
a corporation duly organized and validly existing on the records of the
Corporation Division of the Office of the Secretary of State of the State of
Oregon.
3.2 Authorization.
Each of
Seller and Parent has full limited liability company or corporate power and
authority and approvals, as the case may be, to enter into, execute, deliver
and
perform this Agreement (and all other Documents required to effect the
transactions contemplated herein to which it is a party) and its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by each of Seller and Parent (and all other
Documents required to effect the transactions contemplated herein to which
it is
a party), the performance by each of Seller and Parent of its obligations
hereunder, and the consummation by each of Seller and Parent of the transactions
contemplated hereby, has been duly authorized by the managing board and the
holder of all of the membership of interests of Seller and by authorized
officers of Parent. No other limited liability company action on the part of
Seller, or corporate action on the part of Parent, is necessary to authorize
the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby. This Agreement and all other Documents required to effect
the transactions contemplated herein has been duly and validly executed and
delivered by each of Seller and Parent and constitutes a valid and legally
binding obligation of Seller and Parent, enforceable against each of them in
accordance with their respective terms, except to the extent that such
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
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3.3 Capitalization.
Schedule 3.3 sets forth the capital structure of Seller, including the numbers
and types of membership interests authorized and the number of each type of
membership interests issued and outstanding. NIKE
USA,
Inc. directly or indirectly
owns all of the membership interests in Seller. Except for NIKE USA, Inc.,
there
are no other record or beneficial owner of any membership interests of Buyer
or
any other securities of Buyer. Except for the membership interests listed on
Schedule 3.3, there have been and currently are no other issued or outstanding
equity interests. All of the issued and outstanding equity interests of Buyer
have been duly authorized and validly issued and are fully paid and
non-assessable.
3.4 Subsidiaries.
Except
as set forth on Schedule 3.4, Seller has no Subsidiaries or any equity or
ownership interest, whether direct or indirect, in, or loans to, any
corporation, partnership, limited liability company, joint venture or other
business entity.
3.5 No
Violation.
Except
as set forth in Schedule 3.5, neither the execution and delivery of this
Agreement and the Documents required to effect the transactions herein
contemplated by each of Seller and Parent, nor the performance by Seller and
Parent of their respective obligations hereunder, nor the consummation by each
of Seller and Parent of the transactions contemplated hereby do or will (a)
violate, conflict with or result in any breach of any provision of the articles
of organization, operating agreement, articles of incorporation, by-laws or
any
other organizational document of Seller or Parent, as applicable, (b) violate,
conflict with or result in a violation or breach of or default under (either
immediately or upon notice, lapse of time or both), or constitute a default
(with or without due notice or lapse of time or both) under the terms,
conditions or provisions of any note, bond, mortgage, indenture or deed of
trust, or any license, lease or agreement to which Seller or Parent is a party,
including without limitation the Assigned Contracts, or to which the Purchased
Assets are or may be bound, (c) violate any order, writ, judgment, injunction,
decree, statute, rule or regulation of any court or Governmental Authority
applicable to Seller or Parent except such defaults and violations which, in
the
aggregate if not obtained, are not reasonably likely to have a Material Adverse
Effect, (d) result in the creation or imposition of any Encumbrance on any
of
the Purchased Assets or give to any person any interest or right in any of
the
Purchased Assets, (e) accelerate the maturity of or otherwise modify any
liability or obligation of Seller or its Affiliates relating to the Purchased
Assets or the Assumed Liabilities, or (f) result in the breach of any of
the terms and conditions of, constitute a default under or otherwise cause
any
impairment of, any Assigned Contract, or permits.
3.6 Consents
and Approvals.
Except
as set forth in Schedule 3.6 and except for the filing of a Notification and
Report Form with the United States Federal Trade Commission and the United
States Department of Justice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended (the “HSR Act”) and the expiration or termination of any
applicable waiting period thereunder (the “HSR Filing”), if required, no filing
or registration with, no notice to and no permit, authorization, consent or
approval of any third party, including any Governmental Authority, is necessary
for the consummation by Seller and its Affiliates of the transactions
contemplated by this Agreement.
3.7 Financial
Statements.
Attached as Schedule 3.7 are true, complete and correct copies of
(i)
selected pro forma income statements for the Business as of May 31, 2006
and May 31, 2007 (collectively, the "Financial Statements"), (ii) a summary
of
the Starter licenses, which includes a good faith estimate of the projected
royalty revenue for the fiscal year ended May 31, 2008 and (iii) an estimated
income statement for the fiscal year ended May 31, 2008 which was prepared
by
Seller based upon its good faith estimates. The Financial Statements have been
prepared from the books and records of Seller and accurately reflect the
transactions summarized therein for the period ended on or as at such dates.
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3.8 Absence
of Certain Changes.
Except
as set forth in Schedule 3.8, and except for matters relating to the
transactions contemplated by this Agreement, since the date of the most recent
Financial Statements, there has not been any material adverse change in the
assets (including the Purchased Assets), properties, condition (financial or
otherwise), Business, operations or prospects of Seller. Except as set forth
in
Schedule 3.8, to the Knowledge of Seller, no such change is impending, nor
has
there been any damage, destruction or loss, whether or not covered by insurance
on the Purchased Assets or the Business. Since the date of the most recent
Financial Statements, Seller has conducted its business only in the ordinary
and
usual course.
3.9 Employee
Benefit Plans.
Seller
and its Affiliates have no obligation or liability, contingent or otherwise,
under any “employee benefit plan” (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (the “Employee
Benefit Plans”) related to the employees of the Business.
3.10 Contracts.
(a) Schedule
3.10 hereto sets forth a true, complete and accurate list of all material
Contracts of the Seller and its Affiliates to which the Purchased Assets are
bound or subject. True and correct copies of all material written Contracts
have
been delivered to Buyer and Schedule 3.10 includes a complete and accurate
description of all material oral Contracts. Each of the Contracts listed on
Schedule 3.10 is in full force and effect and neither the Seller nor any of
its
Affiliates have committed any material breach or default thereunder and to
the
Knowledge of Seller, no other party to any such Contract is in material default
thereunder, nor is there any condition or basis for any claim of a material
default by any party thereto or event which, with notice, lapse of time or
both,
would constitute a material default thereunder. Seller and it Affiliates have
paid in full or accrued all amounts due under each Contract listed on
Schedule 3.10 for periods on or prior to the date hereof (whether or not
currently payable) and has satisfied in full or provided in full, and will
have
satisfied in full or provided in full, for all of its liabilities and
obligations thereunder for periods on or prior to the date hereof and at the
Closing Date. All Contracts are in the name of the Seller, its Affiliates,
or
its or their predecessors and, except as set forth in Schedule 3.10, all
Assigned Contracts will be effectively transferred to Buyer at the time of
the
Closing and all rights of Seller and its Affiliates under the Assigned Contracts
extending beyond the Closing Date are assignable to Buyer and upon assignment
shall continue unimpaired and unchanged in Buyer on and after the Closing Date
without (a) the consent (except for any consent(s) which have been or will
be obtained at or before the Closing) of any Person or (b) the payment of
any penalty, the incurrence of any additional obligation or the change of any
term.
(b) Except
as
set forth on Schedule 3.10, Seller and its Affiliates have examined, monitored
or otherwise policed, to the extent deemed prudent by the Seller and its
Affiliates and in accordance with the customary practices in the industry in
which the Business operates, the activities of all of the licensee
counterparties under the Assigned Contracts (in which Seller or one of its
Affiliates grants licenses under the Marks) to verify that the products
manufactured, sold or offered for sale under the Marks licensed to such
licensees pursuant to the Assigned Contracts meet, in all material respects,
the
quality control standards and requirements for use of the Marks set forth in
such Assigned Contracts.
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3.11 Other
Activities of the Seller.
Neither
the Seller nor any officer, director or manager of the Seller owns or has any
investment, directly or indirectly, in a corporation or other entity which
does
business with the Seller, is a competitor of the Seller or has a cause of action
or other claim against the Seller, other than di minimus investments in
publicly-traded companies.
3.12 Leased
Real Property.
(a) Neither
Seller nor its Affiliates, in whole or in part, owns, nor has Seller or its
Affiliates at any time owned, any Real Property used in connection with the
Business.
(b) True
and
correct copies of all written Contracts related to the Leased Real Property
have
been delivered to Buyer. Except as set forth on Schedule 3.12, the Seller or
one
of its Affiliates has, or will have at Closing, valid leasehold interests in
all
Leased Real Property and Leasehold Improvements, free and clear of all
Encumbrances, except for the following: (i) zoning and other similar
restrictions; (ii) easements, covenants, rights of way or other
restrictions which do not materially adversely affect the use of the property
to
which they relate; (iii) mechanics', carriers', workmen’s’ repairmen’s’ or
other like liens arising or incurred in the ordinary course of business; and
(iv) liens for taxes, assessments and other governmental charges which are
not due and payable or which may thereafter be paid without penalty.
(c) Except
as
set forth in Schedule 3.12, none of the Leased Real Property or the use,
occupancy, operation or maintenance thereof, or any substance on or condition
thereon is in material violation of any restrictive covenants or laws or any
building, zoning, health, fire, safety or other ordinances, codes or regulations
in such manner as to interfere with the use and occupancy thereof in the
ordinary course of business, and no notice from any Governmental Authority
has
been served upon the Seller or its Affiliates or upon the Leased Real Property
claiming any violation of any such laws, ordinances, codes or regulations,
requiring or calling attention to the need for any work, repairs, construction,
alterations or installation, or in connection with said properties which has
not
been complied with, or materially increasing the assessments on the real
property or claiming any monies are due with respect to any Leased Real
Property. No condemnation Proceeding is pending or, to the Knowledge of Seller,
threatened, against any Leased Real Property.
3.13 Title.
Except
as set forth on Schedule 3.13, the Seller or one of its Affiliates has good,
valid and marketable title to all of the Purchased Assets free and clear of
all
Encumbrances. There are no outstanding options or commitments to which Seller
or
any of its Affiliates is a party which relate to the Purchased Assets or the
sale by them of the Purchased Assets. Since August 10, 2004, Seller has not
done
business under or been known by any name other than its present limited
liability company name, or done business at any address other than the names
and
addresses set forth in Schedule 3.13.
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3.14 Intangibles.
(a) All
Intangibles used or related to the Business for which a registration has been
applied for and/or obtained in the name of Seller or one of its Affiliates
or
Seller’s licensor(s) (other than those Intangibles listed on Schedule 2.1(b))
are listed on Schedule 3.14. Except as specifically identified and disclosed
in
Schedule 3.14, all the Seller’s or its Affiliates’ rights in and to the
Intangibles set forth in Schedule 3.14 are free and clear of any Encumbrance.
Except as set forth in Schedule 3.14, with respect to the international
Intangibles, neither Seller nor any of its Affiliates have received written
notice of any adverse claim and with respect to the United States Intangibles,
Seller has no Knowledge of, or has received written notice of, an adverse claim
(including in each case claims that the Intangibles infringe upon or violate
the
Intellectual Property Rights of any Person) of any other Person relating to
any
of the Intangibles set forth in Schedule 3.14. Except as set forth in Schedule
3.14, neither Seller nor its Affiliates have licensed any Person to use any
Intangible that is included in the Purchased Assets, nor is Seller or any of
its
Affiliates obligated to pay any royalties or licensing fees to any Person in
respect of any Intangible included in the Purchased Assets.
(b) Schedule
3.14 contains a complete and accurate list and summary description of all
registrations and pending applications for the Marks that have been registered
or applied for, respectively (as indicated on the Schedule 3.14), with the
United States Patent and Trademark Office or the trademark office of the
jurisdiction to which the registration or application pertains. Except as set
forth in Schedule 3.14, the Marks are valid, subsisting, and enforceable and
are
not subject to any maintenance fees or actions falling due within sixty (60)
days after the date hereof. Except as set forth in Schedule 3.14, (i) no ▇▇▇▇
has been (since August 10, 2004) or is now involved in any opposition,
invalidation or cancellation Proceeding or any other Proceeding relating to
the
validity or registrability thereof, and no such action has been threatened
in
writing to Seller or any of its Affiliates with respect to any of the Marks;
(ii) none of the Marks has been challenged or threatened in any way in writing
to Seller or any of its Affiliates; and (iii) where applicable, Seller or its
Affiliates have established processes and controls to ensure that Purchased
Assets bear Marks accompanied by the proper federal registration notice where
permitted by law.
3.15 Taxes.
Except
as set forth in Schedule 3.15, there are no taxes on or measured by income
or
gross receipts or franchise, real and personal property, employment, excise,
sales and use or other taxes of any kind properly attributable to periods up
to
and including the Closing for which Buyer could be held liable which have not
been or will not be paid by Seller or one of its Affiliates.
Seller
or one of its Affiliates has filed or caused to be filed on a timely basis
all
Tax Returns relating to the Business and all reports with respect to Taxes
relating to the Business that are or were required to be filed pursuant to
applicable law for all Tax periods prior to the Closing Date, and all such
Tax
Returns were true, correct and complied in all material respects with applicable
laws and regulations.
3.16 Litigation.
Except
as set forth in Schedule 3.16, there is no outstanding order,
writ, injunction, fine, citation, award, decree or any other judgment of any
kind whatsoever against
or affecting the Purchased Assets. Except as set forth in Schedule 3.16, there
is no Proceeding pending or, to the best Knowledge of the Seller, threatened
against or affecting the Purchased Assets or the Business at law or in equity,
or before any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality or any other Governmental
Authority. True and correct copies of all complaints, pleadings, petitions,
notices, motions and other papers filed in connection with any such Proceeding
listed on Schedule 3.16 have been delivered to Buyer.
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3.17 Licenses.
Except
as set forth in Schedule 3.17, the Seller or one of its Affiliates holds each
material license, permit or other governmental authorization (hereinafter
referred to as “Licenses”) which is required for the operation of its Business
or the use and operation of the Purchased Assets. A true, correct and complete
list of the Seller’s and its Affiliate’s permits is set forth in Schedule 3.17.
All material Licenses are in full force and effect, no material violations
are
or have been recorded in respect of any of such Licenses, and no Proceeding
is
pending or to the Knowledge of the Seller, threatened, to revoke, terminate
or
limit any such Licenses.
3.18 Environmental
Matters.
(a) Except
as
set forth in Schedule 3.18, to the Knowledge of the Seller, (i) the operations
at or upon any of the Leased Real Property is not and has not been in violation
of any Environmental Law and neither Seller nor its Affiliates have received
written notice that any such violation exists; (ii) neither Seller not its
Affiliates have placed, deposited or released any toxic or hazardous substances
or wastes, petroleum or petroleum products, asbestos or other pollutants, as
defined under applicable Environmental Laws (collectively “Hazardous
Substances”) upon or under any of the Leased Real Property, except in compliance
with Environmental Laws; and (iii) neither Seller nor its Affiliates have
received any written notice from any Governmental Authority (other than notices
that have been fully complied with or withdrawn) requiring the removal of any
alleged Hazardous Substances, or advising of any pending or contemplated search,
investigation of or material violation at any Leased Real Property.
(b) Seller
and its Affiliates have been issued, and will maintain until the date of
Closing, all required federal, state, and local permits, licenses, certificates
and approvals with respect to its properties included in the Purchased Assets
and/or used in the Business relating to (i) air emissions, (ii) discharges
to
surface water or groundwater, (iii) noise emissions, (iv) solid or liquid waste
disposal, (v) the use, generation, storage, transportation or disposal of
Hazardous Substances, or (vi) other environmental, health or safety
matters.
(c) For
purposes of this Section, “Environmental Law” means (i) any law, statute, code,
ordinance, rule, regulation or other requirement of any Governmental Authority,
(ii) any order, judgment, injunction, award, decree, writ or settlement or
consent agreement applicable to the Seller or its Affiliates, or (iii) a
license, certificate of occupancy, permit, order or approval of, or registration
with, any Governmental Authority applicable to the Seller or its Affiliates
which relates to pollution or protection of the environment, including, without
limitation, any of the foregoing which relate to emissions, discharges, releases
or threatened releases of Hazardous Substances in the environment (including,
without limitation, ambient air, surface water, groundwater or land), or which
otherwise relate to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances.
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3.19 Compliance
with Laws.
Except
as set forth in Schedule 3.19, each of the Seller and its Affiliates is in
compliance in all material respects with all, and has received no written notice
of any violation of any, laws or regulations having a material application
to
the Business, its operations, including, without limitation, the use of premises
occupied by it, the Purchased Assets or with respect to which compliance is
a
condition of engaging in any aspect of the Business, and each has all permits,
licenses, zoning rights, and other governmental authorizations necessary to
conduct the Business as presently conducted.
3.20 Labor
Matters.
As it
relates to the Business, neither Seller
nor any of its Affiliates is a party to any collective bargaining agreement
or
any other Contract with any labor unions or any other representatives of
Seller’s or its Affiliate’s employees. To the Knowledge of Seller, no employee
grievance which might have an adverse effect on the Purchased Assets is pending
and no written claim therefor has been asserted.
3.21 Customer.
Seller
has not received written notice from Wal-Mart Stores, Inc. (“Wal-Mart”) that it
intends to cancel or materially reduce its ongoing commercial relationship
with
the Business and Seller has no Knowledge of Wal-Mart’s intention to do
so.
3.22 Brokers'
Fees and Commissions.
Except
for ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., whose fees will be paid by the Seller, neither the
Seller, Parent nor any of their respective directors, officers, employees or
agents has employed any investment banker, broker, finder, agent or similar
intermediary in connection with this Agreement or the transactions contemplated
hereby.
3.23 Sufficiency
of Purchased Assets.
The
Purchased Assets include all of the material property and assets (tangible
and
intangible) used or held for use in the conduct of the Business (other than
with
respect to the manufacturing and wholesale businesses) as it is conducted as
of
the date hereof, except for the Excluded Assets. None of the Excluded Assets
are
required in connection with the Buyer’s operation of the Business after the
Closing.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
hereby represents and warrants to the Seller as set forth below.
4.1 Organization
and Qualification.
Buyer
is a corporation duly organized, validly existing and in good standing under
the
laws of the jurisdiction of its incorporation, with all requisite corporate
power and authority to own, lease and operate its assets and properties and
to
carry on its businesses as and where such businesses are now being
conducted.
4.2 Authorization.
Buyer
has full corporate power and authority and approvals to enter into, execute
and
deliver this Agreement (and all other Documents required to effect the
transactions contemplated herein) and to consummate the transactions
contemplated hereby. No other corporate proceeding on the part of Buyer is
necessary to authorize the execution and delivery of this Agreement or to
consummate the transactions contemplated hereby. This Agreement (and all other
Documents required to effect the transactions contemplated herein) has been
duly
and validly executed and delivered by Buyer and constitutes a valid and binding
obligation of Buyer, enforceable against it in accordance with its terms, except
to the extent that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
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4.3 No
Violation.
Neither
the execution and delivery of this Agreement, and the Documents required to
effect the transactions herein contemplated, by Buyer and the performance by
Buyer of its obligations hereunder nor the consummation by Buyer of the
transactions contemplated hereby do or will (a) violate, conflict with or result
in any breach of any provision of the Certificate or Articles of Incorporation
or Bylaws of Buyer, (b) violate, conflict with or result in a violation or
breach of, or constitute a default (with or without due notice or lapse of
time
or both) under the terms, conditions or provisions of any note, bond, mortgage,
indenture or deed of trust, or any material license, lease or agreement to
which
Buyer or any of Buyer's Subsidiaries is a party or (c) violate any order, writ,
judgment, injunction, decree, statute, rule or regulation of any court or
Governmental Authority applicable to Buyer or any of Buyer's Subsidiaries,
except such defaults and violations which, in the aggregate, are not reasonably
likely to have a Material Adverse Effect.
4.4 Litigation.
There
is no Proceeding at law or in equity, arbitration or administrative or other
proceeding by or before, or any investigation by, any Governmental Authority,
pending or to the Buyer's knowledge threatened, against or affecting the Buyer
which would materially and adversely affect the right or ability of the Buyer
to
enter into this Agreement and to perform its obligations hereunder. The Buyer
is
not subject to any judgment, order or decree entered in any Proceeding which
would materially and adversely affect the right or ability of the Buyer to
enter
into this Agreement and to perform its obligations hereunder.
4.5 Consents
and Approvals.
Except
for the HSR Filing, no filing or registration with, no notice to and no permit,
authorization, consent or approval of any third party or any Governmental
Authority is necessary for the consummation by Buyer of the transactions
contemplated by this Agreement.
4.6 Brokers'
Fees and Commissions.
No
broker, finder, agent or similar intermediary has acted for or on behalf of
Buyer nor any of its Subsidiaries, directors, officers, employees or agents
in
connection with this Agreement or the transactions contemplated hereby, and
no
broker, finder, agent or similar intermediary is entitled to any broker’s fee,
finder’s fee, or similar fee or commission in connection therewith based on any
agreement, arrangement or understanding.
4.7 Financing.
Buyer
has received and delivered to the Seller a commitment letter from ▇▇▇▇▇▇
Brothers dated as of the date hereof, addressed to Buyer, (the "Commitment
Letter"), whereby ▇▇▇▇▇▇ Brothers has committed, upon the terms and subject
to
the conditions set forth therein, which terms and conditions are satisfactory
to
Buyer, to provide financing for the transactions contemplated by this Agreement
in the aggregate amount of $60,000,000 (the amounts to be provided pursuant
to
the Commitment Letter being hereinafter referred to as the "Financing"). The
Commitment Letter is in effect on the date hereof and has not been amended
or
modified and there is no breach or default existing (or which with notice or
lapse of time or otherwise
may exist) thereunder. The proceeds of the Financing are sufficient to satisfy
the obligation to pay the Purchase Price.
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ARTICLE
V
COVENANTS
5.1 Conduct
of the Business of the Seller Prior to the Closing.
Except
as contemplated by this Agreement or with the prior written consent of Buyer
(which consent shall not be unreasonably withheld), during the period from
the
date of this Agreement to the Closing, the Seller and its Affiliates will
conduct the Business according to the Seller’s and its Affiliates’ ordinary and
usual course of business consistent with past practice and will use all
reasonable efforts consistent therewith to preserve intact the properties and
assets (including the Purchased Assets) related to the Business, to keep
available the services of the Seller's and its Affiliates’ officers and
employees and to maintain satisfactory relationships with customers, suppliers,
distributors and other Persons having commercially beneficial business
relationships with the Business, in each case in the ordinary course of
business. Without limiting the generality of the foregoing, and except as
otherwise specifically provided in this Agreement, neither Seller nor its
Affiliates will take any of the following actions, prior to the Closing, without
the prior written consent of Buyer (which consent shall not be unreasonably
withheld):
(a) amend
the
certificate of organization, operating agreement or other organizational
documents or alter through merger, liquidation, reorganization, restructuring
or
in any other fashion the structure or ownership of Seller if such amendment
or
alteration would materially adversely affect the Purchased Assets or the ability
of Seller to consummate the transactions contemplated by this
Agreement;
(b) acquire
or agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the stock or assets of, or by any other manner, any
business or corporation, partnership, joint venture, association or other
business organization or division thereof; or any assets that are material,
individually or in the aggregate, to Seller, except (i) transactions that would
not adversely impact the transactions contemplated hereby or the Business or
the
Purchased Assets or (ii) purchases in the ordinary course of business consistent
with past practice;
(c) except
in
the ordinary course of business consistent with past practice, (i) sell, lease,
license, transfer or otherwise dispose of any of the Purchased Assets or (ii)
mortgage, encumber or subject to any Encumbrance any of the Purchased
Assets;
(d) as
it
relates to Seller only, incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, issue or sell any debt securities
or
warrants or other rights to acquire any debt securities of Seller, guarantee
any
debt securities of another person, or enter into any arrangement having the
economic effect of any of the foregoing, except for borrowings or other such
actions (i) that would not adversely impact the transactions contemplated hereby
or the Business or the Purchased Assets or (ii) incurred or taken in the
ordinary course of business consistent with past practice;
(e) enter
into, amend, modify or terminate, any Assigned Contracts, except for (i)
Contracts with those customers and upon those terms listed on Schedule 5.1(e),
(ii) those Contracts entered into or renewed pursuant to Section 5.17, (iii)
Contracts that would not adversely impact the transactions contemplated hereby
or the Business or the Purchased Assets and (iv) immaterial changes made
in the
ordinary course of business;
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(f) adopt
a
plan of complete or partial liquidation of Seller or resolutions providing
for
or authorizing such a liquidation or dissolution, merger, consolidation,
restructuring, recapitalization or reorganization unless such action would
not
adversely impact the transactions contemplated hereby or the Business or the
Purchased Assets;
(g) settle
or
compromise any litigation related to the Business in which Seller or one of
its
Affiliates is a defendant (whether or not commenced prior to the date of this
Agreement) or settle, pay or compromise any claims not required to be paid,
in
any such case if doing so will materially adversely affect the Business or
the
Purchased Assets or the ability of Seller to consummate the transactions
contemplated by this Agreement;
(h) modify
or
amend any existing insurance policy with respect to the Purchased
Assets;
(i) make
any
changes in the existing distribution channels of the Business;
(j) except
in
the ordinary course of business or with respect to capital projects approved
prior to the date hereof, enter into any Contract related to the Business or
the
Purchased Assets involving an aggregate capital expenditure or commitment
exceeding $10,000;
(k) intentionally
take any action that would reasonably be likely to have a Material Adverse
Effect on the Business, including without limitation any action that would
be
reasonably likely to result in the cancellation of or material reduction of
Seller’s ongoing commercial relationship with Wal-Mart, or on the Marks;
or
(l) authorize
any of or commit to take any of the foregoing actions.
5.2 Notice
of Developments.
Seller
and Buyer will give prompt written notice to the other of any material adverse
development causing a breach of any of such party’s representations and
warranties in Articles III and IV, respectively, including with respect to
matters covered in Section 3.21 hereof. No disclosure by any party pursuant to
this Section 5.2 will be deemed to amend or supplement any schedule or to
prevent or cure any misrepresentation, breach of warranty or breach of covenant
unless such disclosure is accepted in writing by the non-disclosing parties
as
an amendment or supplement to such schedule, as the case may be, or as a waiver
of any misrepresentation or breach.
5.3 Access
to Information with Respect to the Business and the Purchased
Assets.
Between
the date of this Agreement and the Closing Date, upon reasonable notice and
at
reasonable times without material disruption to the Business, the Seller will
give Buyer and its authorized representatives reasonable access to all offices
and other facilities, and to all personnel and books and records of Seller
and
its Affiliates and will permit Buyer to make and will fully cooperate with
regard to such inspections as it may reasonably require and will cause its
officers to furnish Buyer such financial and operating data and other
information with respect to the Business and the Purchased Assets as Buyer
may
from time-to-time reasonably request.
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5.4 All
Reasonable Efforts.
Subject
to the terms and conditions herein provided, each of the parties hereto agrees
to use all commercially reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper and
advisable under applicable laws and regulations to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement.
If
at any time after the Closing any further action is necessary or desirable
to
carry out the purposes of this Agreement, including, without limitation, the
execution of additional instruments, the parties to this Agreement shall take
all such necessary action.
5.5 Consents
and Approvals.
The
parties hereto will each cooperate with one another and use all reasonable
efforts to prepare all necessary documentation, to effect promptly all necessary
filings and to obtain all necessary permits, consents, approvals, orders and
authorizations of, or any exemptions by, all third parties and Governmental
Authorities necessary to consummate the transactions contemplated by this
Agreement. Each party will keep the other parties apprised of the status of
any
inquiries made of such party by any Governmental Authority with respect to
this
Agreement or the transactions contemplated hereby.
5.6 Disclosure
Supplements.
From
time to time prior to the Closing, Seller will supplement or amend the
Disclosure Schedules delivered in connection herewith with respect to any matter
which, if existing or occurring at or prior to the date of this Agreement,
would
have been required to be set forth or described in such Disclosure Schedule
or
which is necessary to correct any information in such Disclosure Schedules
which
has been rendered inaccurate by an event occurring after the date hereof. No
such disclosure made pursuant to this Section shall be considered to constitute
or give rise to a waiver by Buyer (i) of any condition set forth herein or
(ii)
the right for Buyer to claim a breach of any representation or warranty at
the
time of execution of this Agreement.
5.7 No
Solicitation of Transactions.
From
the date hereof until the earlier of (i) the Closing or (ii) termination of
this
Agreement pursuant to Article VIII hereof, Seller shall not, directly or
indirectly, through any director, officer, employee, investment banker,
financial advisor, attorney, accountant or other agent or representative of
the
Seller solicit, initiate or encourage or knowingly facilitate (including by
furnishing non-public information) any inquiries or the submission of proposals
or offers from any person relating to any acquisition or purchase of all or
any
portion of the Purchased Assets (other than in the ordinary course of business)
or the Business, and, other than with Buyer or any of its Affiliates,
participate in any discussions or negotiations regarding, or furnish to any
other person any information with respect to, or otherwise cooperate in any
way
with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other person to do or seek any of the foregoing. Seller shall,
and shall cause any of its representatives or Affiliates to, immediately cease
and cause to be terminated or withdrawn any existing negotiations with any
parties conducted heretofore with respect to any of the foregoing (other than
in
respect of the transactions contemplated hereby). From the date hereof until
the
earlier of (i) the Closing or (ii) termination of this Agreement pursuant to
Article VIII hereof, the Seller shall, within two (2) business days, notify
Buyer if any such proposal or offer, or any inquiry or contact with any person
with respect thereto, is made and shall, in any such notice to Buyer, indicate
in reasonable detail the identity of the offeror and the terms and conditions
of
any proposal or offer.
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5.8 Pre-Closing
Tax Returns.
The
Seller shall file (or cause to be filed) all Tax Returns with respect to the
Purchased Assets for all periods ending on or prior to the Closing
Date.
5.9 Cooperation
and Filings.
The
Seller and Buyer shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax Returns
pursuant to this Agreement and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party’s request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Seller expressly
agrees and acknowledges that it shall be responsible for and shall pay any
and
all Taxes which result or arise from the sale of the Purchased
Assets.
5.10 Assistance
with Financial Statements.
Seller
shall, at Buyer’s expense, use its commercially reasonable efforts to take all
commercially reasonable actions, including the making available of the Seller’s
accountants and the granting of access to Buyer and its accountants to all
books
and records of the Seller used in connection with the Business and the Purchased
Assets, to assist Buyer in connection with Buyer’s preparation of any financial
statements which may be required by Items 2.01 and 9.01 of Form 8-K in order
for
Buyer to meet its Form 8-K obligations within the applicable time period
required by such form.
5.11 Employee
Matters.
(a) No
later
December 5, 2007 or ten (10) days prior to the Closing Date, Buyer shall provide
Seller with a schedule of employees for whom it will make an offer of
employment, effective as of the Closing Date; provided, however, any offer
of
employment shall be contingent upon the Closing actually occurring. Employees
who affirmatively accept the Buyer’s offer of employment and commence working
for the Buyer on the Closing Date are hereinafter referred to as “Transferred
Employees.” On and after the Closing Date, Buyer shall have the right, but not
any obligation, to employ any additional employees of the Seller whom it wishes
to employ and who wish to be employed by Buyer. Seller and Buyer shall cooperate
in connection with Buyer contacting such employees with respect to the desire
of
such employees to enter the employ of Buyer. Seller shall promptly deliver
to
Buyer as of the Closing Date all personnel files or other information relating
to the Transferred Employees.
(b) Seller
shall retain and be responsible for all liabilities in connection with claims
incurred prior to the Closing Date by employees and other current and former
employees of the Seller and its Affiliates associated with the Business prior
to
the Closing Date and their eligible dependents under any Employee Benefit Plans
applicable to the Seller and its Affiliates, including claims filed following
the Closing Date. Buyer shall be responsible for all liabilities in connection
with claims incurred on and after the Closing Date by any employees hired by
Buyer under any of Buyer's employee benefit plans. For purposes of this Section,
a claim shall be incurred on the date treatment or service is first
rendered.
(c) Nothing
in this Agreement is intended to confer on any entity or individual who is
not a
party to this Agreement (including employees) any rights
whatsoever.
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(d) For
purposes of clarification, Buyer shall not assume, sponsor, contribute to,
or be
obligated to contribute to the Employee Benefit Plans of Seller or its
Affiliates.
(e) Except
with respect to the employees listed on Schedule 5.11(e), Seller agrees that
neither it nor its Affiliates shall for a period of twelve (12) months from
the
Closing Date, directly or indirectly, hire, offer to hire, entice away or in
any
other manner persuade or attempt to persuade any employee to whom Buyer makes
an
offer of employment pursuant to Section 5.11(a) to discontinue or alter his
or
her relationship with Buyer.
5.12 Trademark
Use Agreement.
Seller
and the Buyer shall enter into a Trademark Use Agreement in the form of
Exhibit
B
attached
hereto (the “Trademark Use Agreement”).
5.13 Transitional
Services and License Agreement.
Seller
and the Buyer shall enter into a Transitional Services and License Agreement
in
the form of Exhibit
C
attached
hereto (the
“Transitional Services and License Agreement”).
5.14 Confidentiality.
Subject
to the requirements of applicable law and regulations, each party to this
Agreement shall maintain in confidence (a) the provisions of this Agreement
and
(b) all information received from another party as a result of any due diligence
investigation conducted relative to the execution of this Agreement and shall
use such information only in connection with evaluating the transactions
contemplated hereby, provided that the Buyer may use any such information as
it
deems appropriate after the Closing. The obligation of confidentiality and
non-use shall not apply to any information which (i) is or becomes generally
available to the public through no fault of the receiving party, (ii) is
independently developed by the receiving party or (iii) is received in good
faith from a third party who is lawfully in possession of such information
and
has the lawful right to disclose or use it. In the event of the termination
of
this Agreement, Buyer shall return to the Seller (or destroy and certify such
destruction to the Seller in writing) all documents and materials (and
reproductions thereof, electronic copies or otherwise) furnished to Buyer or
its
Affiliates or representatives in connection with this Agreement for the
transactions contemplated hereby.
5.15 Legal
Conditions to Transaction.
Seller
and Buyer shall take commercially reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on such party with
respect to the transactions contemplated by this Agreement (which actions shall
include, without limitation, filing and furnishing all information required
under the HSR Act, if required), and in connection therewith shall promptly
cooperate with and furnish information to each other in connection with any
such
requirements imposed upon either of them or any of their Subsidiaries in
connection with the transactions contemplated by this Agreement. Seller and
Buyer shall (i) take commercially reasonable actions necessary to obtain (and
shall cooperate with each other in obtaining) any consent, authorization, order
or approval of, or any exemption by, any Governmental Authority or other third
party, required to be obtained or made by the Seller for any of the conditions
set forth in Article VI to be satisfied (any of the foregoing, an “Approval”) or
the taking of any action required in furtherance thereof or otherwise
contemplated thereby or by this Agreement, (ii) diligently oppose or pursue
any
rehearing, appeal or other challenge which may be available to it of any refusal
to issue any Approval or of any order or ruling of any Governmental Authority
which may adversely affect the ability of the parties hereto to consummate
the
transactions contemplated hereby or to take any action contemplated by any
Approval until such time as such refusal to issue any Approval or any order
or
ruling has become final and non-appealable, and (iii) diligently oppose any
objections to, appeals from or petitions to reconsider or reopen any Approval
or
the taking of any action contemplated thereby or by this Agreement.
Notwithstanding the foregoing, neither Seller nor Buyer shall be required to
agree to waive any substantial rights or to accept any substantial limitation
on
its operations or to dispose of any material assets in connection with obtaining
any such consent, authorization, order, Approval or exemption.
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5.16 Public
Announcements.
Buyer
and Seller will consult with each other and will mutually agree (the agreement
of each party not to be unreasonably withheld) upon the content and timing
of
any press release or other public statement with respect to the transactions
contemplated by this Agreement and shall not issue any such press release or
make any such public statement prior to such consultation and agreement, except
as may be required by applicable law or by obligations pursuant to any listing
agreement with any securities exchange or any stock exchange regulations;
provided, however, that Buyer and Seller will give prior notice to the other
party of the content and timing of any such press release or other public
statement required by applicable law or by obligations pursuant to any listing
agreement with any securities exchange or any stock exchange
regulations.
5.17 Contract
Renewal and Execution.
Seller
hereby agrees to use its commercially reasonable efforts to negotiate and
execute or renew those Contracts set forth on Schedule 5.17 on terms and
conditions satisfactory to Buyer.
5.18 Bulk
Sales Compliance.
From
and after the Closing Date, the Seller shall comply with all laws relating
to
bulk sales and/or the sale of the Purchased Assets.
5.19 Non-Interference.
Seller
will not and shall cause its Affiliates not to interfere with the use of the
brand name Starter by a licensee of Buyer in connection with the sale in the
United States by such licensee of products co-branded with schools, colleges
or
universities, provided that such products are reasonably differentiated in
stylization and appearance from products then sold by Seller and its Affiliates
and provided further that the brand name Starter is not then owned by a
competitor of Seller or its Affiliates.
ARTICLE
VI
CLOSING
CONDITIONS
6.1 Conditions
to each Party's Obligations under this Agreement.
The
respective obligations of each party under this Agreement shall be subject
to
the fulfillment at or prior to the Closing of the condition that no law,
statute, ordinance, order,
constitution, charter, treaty, rule or regulation, or
injunction, restraining order or other ruling or order issued by any court
of
competent jurisdiction or Governmental Authority or other legal restraint or
prohibition preventing the consummation of the transactions contemplated hereby
shall be in effect nor shall any claim
have
been instituted and remain pending or have been threatened and remain so at
what
would otherwise be the Closing Date, which prohibits or restricts or would
(if
successful) prohibit or materially restrict the transactions contemplated by
this Agreement or which would not permit the Business to continue to operate
unimpaired following the Closing Date (and, without limiting the generality
of
the foregoing, the applicable waiting period under the HSR Act relating to
the
transactions contemplated hereby shall have expired or been
terminated).
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6.2 Conditions
to the Obligations of Buyer under this Agreement.
The
obligations of Buyer under this Agreement shall be further subject to the
satisfaction, at or prior to the Closing, of the condition that:
(a) (i) The
obligations of the Seller required to be performed by it or any of its
Affiliates on or prior to the Closing pursuant to this Agreement shall have
been
duly performed and complied with in all material respects, (ii) the
representations and warranties of the Seller contained in this Agreement shall
be true and correct in all material respects as of the date of this Agreement
and as of the Closing as though made at and as of the Closing (except as to
any
representation or warranty which specifically relates to an earlier date shall
only be required to be true on and as of such date), and (iii) Buyer shall
have
received a certificate to that effect signed by an officer of
Seller;
(b) Any
and
all permits, consents, waivers, clearances, approvals and authorizations of
all
third parties and Governmental Authorities which are necessary in connection
with the consummation of the transactions contemplated hereby, including under
the HSR Act, shall have been obtained;
(c) The
Seller shall have executed and delivered (or caused to be delivered) to Buyer
all of the items set forth under Section 7.1(a); and
(d) No
material adverse change shall have taken place in the Purchased Assets or the
Business (including without limitation Wal-Mart’s cancellation or material
reduction of its ongoing commercial relationship with the Business, or Seller’s
Knowledge of Wal-Mart’s intention to do so) since the date of the most recent
Financial Statements other than those, if any, that result from the changes
permitted by, and transactions contemplated by, this Agreement, and Buyer shall
have received a certificate to that effect signed by Seller.
6.3 Conditions
to the Obligations of the Seller under this Agreement.
The
obligations of the Seller under this Agreement shall be further subject to
the
satisfaction, at or prior to the Closing, of the following
conditions:
(a) (i) Each
of the obligations of Buyer required to be performed by it at or prior to the
Closing pursuant to the terms of this Agreement shall have been duly performed
and complied with in all material respects, (ii) the representations and
warranties of Buyer contained in this Agreement shall be true and correct in
all
material respects as of the date of this Agreement and as of the Closing Date
as
though made at and as of the Closing Date (except as to any representation
or
warranty which specifically relates to an earlier date shall only be required
to
be true on and as of such date), and (iii) the Seller shall have received a
certificate to that effect signed by an officer of Buyer;
(b) Any
and
all permits, consents, waivers, clearances, approvals and authorizations of
all
third parties and Governmental Authorities which are necessary in connection
with the consummation of the transactions contemplated hereby, including under
the HSR Act shall have been obtained; and
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(c) Buyer
shall have executed and delivered to the Seller all of the items set forth
under
Section 7.1(b) and (c).
ARTICLE
VII
CLOSING
7.1 Closing.
The
closing of the transactions contemplated by this Agreement (the “Closing”) shall
take place at the offices of Blank Rome LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇
▇▇▇▇ ▇▇▇▇▇, no later than two (2) business days after the satisfaction or waiver
of the conditions set forth in Article VI, or at such other time and place
and
on such other date as Buyer and the Seller shall agree (the “Closing Date”). At
the Closing:
(a) The
Seller shall deliver or cause to be delivered to Buyer the
following:
(i) the
certificates described in Sections 6.2(a) and 6.2(d);
(ii) properly
executed bills of sale, certificates of title or other instruments of conveyance
of title, in form reasonably acceptable to Buyer, sufficient to pass title
to
the Purchased Assets, free and clear of all Encumbrances, except for permitted
Encumbrances set forth on Schedule 7.1(a)(ii), including without limitation,
documents
substantially in the form of Exhibit D
(Master
United States Trademark Assignment Agreement),
Exhibit
E
(Master
Worldwide Trademark Assignment Agreement),
Exhibit
F
(Master
Patent Assignment Agreement),
Exhibit
G (Domain
Name Assignment),
a
Security Release in form and substance reasonably satisfactory to Buyer,
Exhibit H
(Assignment
and Assumption Agreement)
and
Exhibit
I
(▇▇▇▇
of Sale);
(iii) copies
of
the minutes of the meetings of the board of managers and member of Seller
authorizing the execution and performance of this Agreement, certified by a
manager or officer of Seller;
(iv) a
certificate, dated no earlier than five (5) days prior to the Closing Date,
that
Seller is active on the records of its jurisdiction of formation;
(v) copies
or
originals of all files, papers, books and records, licenses, permits, approvals,
applications, correspondence, and other documents relative to the Purchased
Assets;
(vi) the
Trademark Use Agreement, signed by Seller;
(vii) the
Transitional Services and License Agreement, signed by Seller;
(viii) the
Guaranty substantially in the form attached hereto as Exhibit
J (the
“Guaranty”) duly executed by Parent;
(ix) all
Encumbrances, except for permitted Encumbrances set forth on Schedule
7.1(a)(ix), with respect to the Purchased Assets shall be discharged prior
to the Closing and all the Purchased Assets shall be delivered at the Closing
free and clear of any Encumbrances, and all of the Contracts set forth on
Schedule 7.1(a)(ix) shall have been terminated;
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(x) certificate
of incumbency and specimen signatures of all signatory officers of Seller,
certified by a manager or officer of Seller;
(xi) permits
and consents from any Person required for consummation of the Closing in form
and substance satisfactory to Buyer including, without limitation, all
governmental and administrative consents and approvals; and
(xii) all
other
previously undelivered documents required to be delivered by Seller to Buyer
at
or prior to the Closing pursuant to the terms of this Agreement.
(b) Buyer
shall deliver or cause to be delivered to the Seller the following:
(i) the
certificate described in Section 6.3(a);
(ii) the
Trademark Use Agreement, signed by Buyer
(iii) the
Transitional Services and License Agreement, signed by Buyer;
(iv) a
patent
license agreement in a form reasonably satisfactory to Buyer and Seller, signed
by Buyer, providing Seller and its Affiliates the perpetual,
worldwide, royalty free license to use
the
following patents: (A) U.S. Patent No. 5,615,415 (Custom Fit Cap);
(B) Int.
App.
No. PCT/US1994/001465 (publication number WO/1995/001738) (Custom Fit Cap);
and
(C) Int. App. No. PCT/US1993/010894 (publication number WO/1994/010867) (Visored
Cap with Forward Facing Panel); and
(v) all
other
previously undelivered documents required to be delivered by Buyer to the Seller
at or prior to the Closing pursuant to the terms of this Agreement.
(c) Buyer
shall pay to Seller, by wire transfer of immediately available funds, the Buyer
Closing Payment and cause the Escrow Agent to deliver the Deposit to the
Seller.
ARTICLE
VIII
TERMINATION
AND ABANDONMENT
8.1 Termination.
This
Agreement may only be terminated and the transactions contemplated hereby may
only be abandoned (at any time prior to the Closing):
(a) by
mutual
consent of the Seller and Buyer; or
(b) by
either
the Seller or Buyer:
(i) if
a
court of competent jurisdiction or Governmental Authority shall have issued
an
order, decree or ruling or taken any other action (which order, decree or ruling
the parties hereto shall use their commercially reasonable efforts to lift),
in
each case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling
or
other action shall have become final and nonappealable;
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(ii) if
the
Closing shall not have occurred on or before December 31, 2007 (the “Termination
Date”); provided,
however,
that
(i) the right to terminate this Agreement shall not be available to any
party whose breach of this Agreement has been the cause of, or resulted in,
the
failure of the Closing to occur on or before such date and (ii) if
applicable, if the waiting period under the HSR Act shall not have expired
or
been terminated, then such date shall be extended for a period of thirty (30)
days.
(iii) by
Buyer,
if there has been a material misrepresentation, breach of warranty or breach
of
covenant by Seller in the representations, warranties and covenants set forth
in
this Agreement which (i) would result in a failure of a condition set forth
in
Section 6.2 and (ii) cannot be cured prior to the Termination Date; provided
that Buyer is not then in breach of this Agreement such that any of the
conditions set forth in Section 6.1 or Section 6.2 would not be satisfied;
or
cannot be cured prior to the Termination Date; and
(iv) by
the
Seller, if there has been a material misrepresentation, breach of warranty
or
breach of covenant by Buyer in the representations, warranties and covenants
set
forth in this Agreement which (i) would result in a failure of a condition
set
forth in Section 6.3 and (ii) cannot be cured prior to the Termination Date;
provided that Seller is not then in breach of this Agreement such that any
of
the conditions set forth in Section 6.1 or Section 6.3 would not be satisfied;
or cannot be cured prior to the Termination Date.
8.2 Procedure
and Effect of Termination.
(a) In
the
event of termination and abandonment of the transactions contemplated hereby
pursuant to Section 8.1, written notice thereof shall forthwith be given to
the
other party to this Agreement and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned, without further action
by
either of the parties hereto. If this Agreement is terminated as provided
herein, no party hereto shall have any liability or further obligation to any
other party to this Agreement resulting from such termination except that the
provisions of Sections 5.14, 8.1(b), 8.2 and 10.4 shall remain in full force
and
effect.
(b) Notwithstanding
the foregoing, if the Seller terminates this Agreement pursuant to Section
8.1(b)(iv) solely as a result of Buyer’s failure to deliver the Purchase Price,
then Buyer shall direct the Escrow Agent to pay the Deposit, as well as any
interest and any other income earned thereon, to the Seller.
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ARTICLE
IX
INDEMNIFICATION
9.1 Indemnity.
Subject
to the overall limitations, the minimum amounts and the time limitations set
forth in Section 9.4 and 10.8 hereto, Seller (the “Indemnifying Party”) will
indemnify and hold Buyer (“Indemnified Party”) harmless from and with respect to
any and all claims, lawsuits, liabilities, losses, damages, costs and expenses,
including without limitation the reasonable fees and disbursements of counsel
and all amounts reasonably paid in investigation, defense or settlement of
any
of the foregoing (collectively, a “Loss” or “Losses”) arising out of any
inaccuracies or misrepresentations in any representation or warranty or breach
of any covenant or agreement made by the Seller in this Agreement or in any
other Document delivered pursuant to this Agreement as of the Closing Date
and
any Retained Liability, including without limitation, Section 10.5; and
Buyer (“Indemnifying Party”) will indemnify and hold Seller (“Indemnified
Party”) harmless from and with respect to any and all Losses arising out of any
inaccuracies or misrepresentations in any representation or warranty or breach
of any covenant or agreement made by Buyer in this Agreement or in any other
Document delivered pursuant to this Agreement as of the Closing Date. For
purposes of indemnification pursuant to this Article IX, the term “Indemnified
Party” shall mean Buyer or Seller, as the case may be, and its or their
respective permitted successors and assigns, together with its or their
respective shareholders, directors, officers, employees, agents and
representatives.
9.2 Third
Party Claims.
In the
event that Indemnified Party desires to make a claim against Indemnifying Party
under Section 9.1 above in connection with any action, suit, proceeding or
demand at any time instituted against or made upon Indemnified Party by any
third party for which Indemnified Party may seek indemnification hereunder
(a
“Third Party Claim”), Indemnified Party shall promptly notify Indemnifying Party
of such Third Party Claim and of Indemnified Party's claim of indemnification
with respect thereto. Indemnifying Party shall have thirty (30) days after
receipt of such notice to notify Indemnified Party in writing if it has
elected
to undertake, conduct and control, through counsel of their own choosing
(subject to the consent of the Indemnified Party, such consent not to be
unreasonably withheld or delayed) and at their sole risk and expense, the good
faith settlement or defense of such Third Party Claim, and the Indemnified
Party
shall cooperate with the Indemnifying Party in connection therewith; provided:
(a) all settlements require the prior reasonable consultation with the
Indemnified Party and the prior written consent of the Indemnified Party, which
consent shall not be unreasonably withheld or delayed, and (b) the
Indemnified Party shall be entitled to participate in such settlement or defense
through counsel chosen by the Indemnified Party, provided that the fees and
expenses of such counsel shall be borne by the Indemnified Party. So long as
the
Indemnifying Party is contesting any such Third Party Claim in good faith,
the
indemnified party or parties shall not pay or settle any such Third Party Claim;
provided, however, that notwithstanding the foregoing, the Indemnified Party
shall have the right to pay or settle any such Third Party Claim at any time,
provided that in such event they shall waive any right of indemnification
therefor by the Indemnifying Party. If the Indemnifying Party does not make
a
timely election to undertake the good faith defense or settlement of the Third
Party Claim as aforesaid, or if the Indemnifying Party fails to proceed with
the
good faith defense or settlement of the matter after making such election,
then,
in either such event, the Indemnified Party shall have the right to contest,
settle or compromise (provided that all settlements or compromises require
the
prior reasonable consultation with the Indemnifying Party and the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed) the Third Party Claim at their exclusive discretion, at
the
risk and expense of the Indemnifying Party.
9.3 Assistance.
Regardless of which party is controlling the defense of any Third Party Claim,
each party shall act in good faith and shall provide reasonable documents and
cooperation to the party handling the defense.
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9.4 Limitations
of Liability.
(a) Indemnifying
Party shall not be required to indemnify Indemnified Party hereunder for any
Loss arising under this Article IX, except to the extent that (i) an individual
Loss exceeds $100,000 and that (ii) the aggregate amount of Losses for which
Indemnified Party is entitled to indemnification pursuant to this Article IX
hereto exceeds $600,000 (the “Basket”) (it being understood and agreed that the
Basket is intended as a deductible, and Indemnifying Party shall not be liable
for the first $600,000 of Losses for which Indemnified Party is entitled to
indemnification), provided however, if the Loss arises out of or relates to
a
breach of a representation or warranty under Section 3.14 (Intangibles)
solely
with respect to the Core Marks in the United States and Canada the Basket shall
be reduced to $300,000, and provided further that the limitations set forth
in
this Section 9.4(a) shall not apply to indemnification claims arising from
(A) any breach of any representation or warranty contained in
Sections 3.1 (Organization
and Qualification),
3.2
(Authorization),
3.13
(Title)
and
3.22
(Broker’s
Fees and Commissions),
(B) any covenants made by the Seller herein, (C) the Retained
Liabilities or (D) any acts of fraud, intentional misrepresentation or
willful misconduct of the Seller.
(b) The
aggregate amounts payable by Indemnifying Party with respect to all claims
for
indemnification shall not exceed 10% of the Purchase Price, except that claims
for indemnification arising out of or relating to a breach of any representation
or warranty set forth in 3.14
(Intangibles)
solely
with respect to the Core Marks in the United States and Canada shall not exceed
50% of the Purchase Price, and provided that the
limitations set forth in this Section 9.4(b) shall not apply to
indemnification claims arising from (A) any breach of any representation or
warranty contained in Sections 3.1 (Organization
and Qualification),
3.2
(Authorization),
3.13
(Title)
and
3.22
(Broker’s
Fees and Commissions)
(B) any
covenants of the Seller, (C) the Retained Liabilities or (D) any acts
of fraud, intentional misrepresentation or willful misconduct of the
Seller.
9.5 Scope
of the Seller’s Liability.
Buyer
acknowledges and agrees that in the absence of fraud, intentional
misrepresentation or willful misconduct, its sole remedy against the Seller
for
any matter arising out of the transactions contemplated by this Agreement is
set
forth in Section 9.1 hereto and that, except to the extent Buyer has asserted
a
claim for indemnification prior to the applicable Liability Termination Date,
Buyer shall have no remedy against the Seller for any breach of any provision
of
this Agreement. In no event shall Seller have any liability for Losses arising
from the conduct of the Business or use of the Purchased Assets after the
Closing and in no event shall Seller have any liability to Buyer with respect
to
any matter arising out of or contemplated by this Agreement in an amount in
excess of the Purchase Price.
9.6 Tax
Treatment.
For
U.S. federal and applicable state income tax purposes, the parties shall report
and treat any payments made under this Article IX as an adjustment to the
Purchase Price.
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29 -
ARTICLE
X
MISCELLANEOUS
PROVISIONS
10.1 Amendment
and Modification.
This
Agreement may be amended, modified, superseded, supplemented or cancelled by
a
written instrument signed by all of the parties hereto.
10.2 Waiver
of Compliance; Consents.
Any
failure of Buyer, on the one hand, or of Seller, on the other hand, to comply
with any obligation, covenant, agreement or condition contained herein may
be
waived in writing by Seller or Buyer, respectively, but such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement
or
condition shall not operate as a waiver of, or estoppel with respect to, any
other failure.
10.3 Validity.
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provisions of this Agreement,
which shall remain in full force and effect.
10.4 Expenses
and Obligations.
All
costs and expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement by Buyer shall be paid by Buyer,
including all fees incurred in connection with the HSR Filing, and all costs
and
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement by the Seller shall be paid by the
Seller.
10.5 Further
Assurances.
(a) From
time
to time after the Closing Date, without further consideration at Buyer’s
reasonable request upon reasonable notice and without material disruption of
Seller's business, Seller will promptly execute and deliver all such further
Documents or perform such acts as Buyer may reasonably request in order to
more
fully consummate the transactions contemplated herein and in order to more
effectively vest, transfer, confirm, protect and defend the right, title and
interest of Buyer in the Purchased Assets and to assist Buyer in exercising
its
rights and privileges with respect thereto.
(b) After
the
Closing Date, Seller shall deliver to Buyer all notices, correspondence and
other items relating to the Purchased Assets which are from time to time
received by them or are in their possession.
10.6 Parties
in Interest.
This
Agreement shall be binding upon and, except as provided below, inure solely
to
the benefit of each party hereto, and except as set forth in Article IX hereof,
nothing in this Agreement, express or implied, is intended to confer upon any
other person any rights or remedies of any nature whatsoever under or by reason
of this Agreement.
10.7 Survival
of Representations and Warranties, etc.
(a) Except
for the representations and warranties contained in 3.1
(Organization
and Qualification),
3.2
(Authorization),
3.13
(Title),
3.16
(Taxes)
and
3.22 (Broker’s
Fees and Commissions),
which
shall survive until the expiration
of the applicable statute of limitations,
and the
representations and warranties contained in 3.14
(Intangibles)
solely
with respect to the Core Marks in the United States and Canada, which shall
survive for a period of eighteen (18) months after the Closing Date,
the
representations and warranties made in this Agreement shall survive for a period
of one (1) year after the Closing Date.
-
30 -
(b) Buyer
agrees that on and after the determined date in accordance with Section 10.7(a)
hereof (the “Liability Termination Date”) (i) the Seller shall have no liability
or responsibility whatsoever to any person, including without limitation Buyer,
for, and (ii) Buyer unconditionally releases the Seller from, any liability
or
obligation of, or relating to, the Seller of whatever kind or nature, whether
contingent or absolute, whether arising prior to, on or after, and whether
determined or indeterminable on, the Liability Termination Date, and whether
or
not specifically referred to in this Agreement, including, without limitation,
liabilities and obligations (x) relating to this Agreement and the transactions
contemplated hereby, (y) arising out of or due to any inaccuracy of any
representation or warranty made by the Seller or the breach of any covenant,
undertaking or other agreement of the Seller contained in this Agreement and
(z)
relating to any violation of any present or future Environmental Law (all of
the
foregoing liabilities and obligations being collectively referred to herein
as
the “Liabilities”), except pursuant to Sections 5.14 and 10.4 hereof.
Notwithstanding the foregoing, any claim for indemnification pursuant to Article
IX for which notice is given prior to the Liability Termination Date shall
survive until such claim is fully and finally resolved.
(c) This
Section 10.7 shall not limit any covenant or agreement of the parties hereto
which by its terms contemplates performance after the Closing Date.
10.8 Notices.
All
notices and other communications hereunder shall be in writing and shall be
deemed given upon the earlier of delivery thereof if by hand or upon receipt
if
sent by mail (registered or certified, postage prepaid, return receipt
requested) or on the second next business day after deposit if sent by a
recognized overnight delivery service or upon transmission if sent by telecopy
or facsimile transmission (with request of assurance of receipt in a manner
customary for communications of such type) as follows:
| (a) |
If
to Buyer, to:
|
|
▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇ ▇▇▇▇, CEO
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
|
|
with
a copy to:
|
|
Blank
Rome LLP
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
|
| (b) |
If
to the Seller, to:
|
|
Nike,
Inc.
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
Director of Mergers and
Acquisitions
|
-
31 -
|
with
copies to:
|
|
NIKE,
Inc.
▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention:
General Counsel, Affiliates
|
|
▇▇▇▇▇▇
▇▇▇▇ LLP
1600
Pioneer Tower
▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇
|
10.9 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
agreement.
10.10 Headings.
The
article and section headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the parties and shall
not
affect in any way the meaning or interpretation of this Agreement.
10.11 Entire
Agreement.
This
Agreement and the Disclosure Schedules and exhibits attached hereto, the Escrow
Agreement and the Confidentiality Agreement, dated September 12, 2007 between
Buyer and the Seller, embody the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein or therein.
There are no agreements, representations, warranties or covenants other than
those expressly set forth herein or therein. This Agreement and the Disclosure
Schedules and exhibits attached hereto supersede all prior agreements and
understandings between the parties with respect to such subject
matter.
10.12 Assignment.
This
Agreement shall not be assigned directly or indirectly by operation of law,
change of control of a party or otherwise without the prior written consent
of
the other party;
provided that Buyer may assign its rights under this Agreement to any wholly
owned subsidiary of Buyer, but no such assignment shall relieve Buyer of its
obligations hereunder. Nothing in this Agreement, unless otherwise expressly
provided, is intended to confer upon any Person, other than the parties hereto
and their successors and permitted assigns, any rights or remedies under or
by
reason of this Agreement.
10.13 Variations
in Pronouns.
All
pronouns and any variations thereof refer to the masculine, feminine or neuter,
singular or plural, as the identity of the person or persons may
require.
10.14 Exhibits
and Schedules.
The
Exhibits and Disclosure Schedule to this Agreement are a part of this Agreement
as if set forth in full herein. Without limiting the generality of any
provisions of this Agreement, the inclusion of any Contracts, liabilities,
obligations or other matters in respect of the Seller on any Schedules to this
Agreement shall not, in any way, create a presumption that such Contracts,
liabilities, obligations and other matters constitute Assumed Liabilities
hereunder, except as expressly set forth in Section 2.2 of this
Agreement.
-
32 -
10.15 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Delaware without regard to the conflicts-of-laws rules
thereof.
10.16 Jurisdiction
and Venue.
The
parties hereto agree that any suit, action or proceeding arising out of or
relating to this Agreement shall be instituted only in a federal or state court
located in Portland, Oregon, if Seller is the defendant in such matter or in
New
York, New York, if the Buyer is the defendant in such matter. Each party waives
any objection it may have now or hereafter to the laying of the venue of any
such suit, action or proceeding, and irrevocably submits to the jurisdiction
of
any such courts in any such suit, action or proceeding.
10.17 Management
Presentation; Disclaimer of Projections.
Seller
makes no representation or warranty to Buyer except as specifically made in
this
Agreement. In particular, Seller makes no representation or warranty to Buyer
with respect to (a) the information set forth in the Management
Presentation distributed in connection with the transactions contemplated
hereby, except for the representations and warranties in Section 3.7 hereof
or
(b) any financial projection or forecast relating to Seller or the
Business, except for the representations and warranties in Section 3.7 hereof.
Except as set forth in Section 3.7, with respect to any such projection or
forecast delivered by or on behalf of Seller to Buyer, Buyer acknowledges that
(i) there are uncertainties inherent in attempting to make such projections
and forecasts, (ii) it is familiar with such uncertainties, (iii) it
is taking full responsibility for making its own evaluation of the adequacy
and
accuracy of all such projections and forecasts so furnished to it and (iv)
it
shall have no claim against the Seller with respect thereto.
10.18 Interpretation.
If
there is any discrepancy between this Agreement and any Document delivered
pursuant to this Agreement, the terms of this Agreement shall
govern.
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33 -
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first written above.
|
Exeter
Brands Group LLC
|
||||
|
By:
|
/s/
▇▇▇▇▇ ▇▇▇▇
|
By:
|
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
|
|
|
Name:
|
▇▇▇▇▇
▇▇▇▇
|
Name:
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
|
|
Title:
|
EVP
|
Title:
|
CEO
Exeter Brands Group
|
|
|
Solely
for purposes of being bound to provide the Guaranty
|
||||
|
Nike,
Inc.
|
||||
|
By:
|
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
|
|||
|
Name:
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
|||
|
Title:
|
Corp.
V.P. Nike, Inc.
|
|||
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34 -
EXHIBITS
| EXHIBIT A |
FORM
OF ESCROW AGREEMENT
|
| EXHIBIT B |
FORM
OF TRADEMARK USE AGREEMENT
|
| EXHIBIT C |
FORM
OF TRANSITIONAL SERVICES AND LICENSE
AGREEMENT
|
| EXHIBIT D |
FORM
OF MASTER UNITED STATES TRADEMARK ASSIGNMENT AGREEMENT
|
| EXHIBIT E |
FORM
OF MASTER WORLDWIDE TRADEMARK
ASSIGNMENT
|
| EXHIBIT F |
FORM
OF MASTER PATENT ASSIGNMENT
|
| EXHIBIT G |
FORM
OF DOMAIN NAME ASSIGNMENT
|
| EXHIBIT H |
FORM
OF ASSIGNMENT AND ASSUMPTION
AGREEMENT
|
| EXHIBIT I |
FORM
OF ▇▇▇▇ OF SALE
|
| EXHIBIT J |
FORM
OF GUARANTY
|
LISTOF
OMITTED EXHIBITS AND SCHEDULES
|
Exhibit
|
Description
|
|
Exhibit
A
|
Form
of Escrow Agreement
|
|
Exhibit
B
|
Form
of Trademark Use Agreement
|
|
Exhibit
C
|
Form
of Transitional Services and License Agreement
|
|
Exhibit
D
|
Form
of Master United States Trademark Assignment
|
|
Exhibit
E
|
Form
of Master Worldwide Trademark Assignment
|
|
Exhibit
F
|
Form
of Master Patent Assignment
|
|
Exhibit
G
|
Form
of Domain Name Assignment
|
|
Exhibit
H
|
Form
of Assignment and Assumption Agreement
|
|
Exhibit
I
|
Form
of ▇▇▇▇ of Sale
|
|
Exhibit
J
|
Form
of Guaranty
|
|
Schedule
|
Description
|
|
Schedule
2.1(a)(i)
|
Intangibles
|
|
Schedule
2.1(a)(ii)
|
Assigned
Contracts
|
|
Schedule
2.1(a)(iii)
|
Real
Property
|
|
Schedule
2.1(a)(v)
|
One-Time
Payments
|
|
Schedule
2.1(b)
|
Excluded
Assets
|
|
Schedule
2.2(a)
|
Additional
Assumed Liabilities
|
|
Schedule
2.7
|
Allocation
of Purchase Price
|
|
Schedule
3.3
|
Capitalization
|
|
Schedule
3.4
|
Subsidiaries
|
|
Schedule
3.5
|
No
Violation
|
|
Schedule
3.6
|
Consents
and Approvals
|
|
Schedule
3.7
|
Financial
Statements
|
|
Schedule
3.8
|
Absence
of Certain Changes
|
|
Schedule
3.10
|
Contracts
|
|
Schedule
3.12
|
Leased
Real Property
|
|
Schedule
3.13
|
Title
|
|
Schedule
3.14
|
Intangibles
|
|
Schedule
3.15
|
Taxes
|
|
Schedule
3.16
|
Litigation
|
|
Schedule
3.17
|
Licenses
|
|
Schedule
3.18
|
Environmental
Matters
|
|
Schedule
3.19
|
Compliance
with Laws
|
|
Schedule
5.1(e)
|
Modified
Assigned Contracts
|
|
Schedule
5.11(e)
|
Employees
|
|
Schedule
5.17
|
Pending
Contracts
|
|
Schedule
7.1(a)(ii)
|
Permitted
Encumbrances
|
|
Schedule
7.1(a)(ix)
|
Permitted
Encumbrances
|