SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 6, 1999
UTOPIA MARKETING, INC.
(Exact name of registrant as specified in its charter)
Florida 000-19616 94-3060101
- --------------- ----------- --------------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification
incorporation) No.)
312 Clematis Street
Suite 500
West Palm Beach, Florida 33401
(Address of principal executive offices)
561-835-9998
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On October 6, 1999, the Registrant completed the purchase of
certain assets, including certain trademarks, of Ipanema Shoe
Corporation, a New York corporation ("Ipanema"), pursuant to the
terms of an Asset Purchase Agreement dated as of October 5, 1999.
The purchase price for the assets was satisfied by the delivery of
a stock certificate representing 1,000,000 shares of common stock
of the Registrant and a subordinated convertible promissory note in
the principal amount of $500,000 due on October 5, 2002, which
bears interest at an annual rate equal to the prime rate of
interest announced from time to time by Chase Manhattan Bank, N.A.
plus 1% accruing from October 5, 2000 until maturity. In
connection with the acquisition, the Registrant entered into a
Collection Services Agreement with Ipanema and its parent company,
Sumitomo Corporation of America, pursuant to which the Registrant
will provide services for the collection of certain accounts
receivable owned by Ipanema. As compensation for the collection
services to be provided by the Registrant under the Collection
Services Agreement, the Registrant will be entitled to receive an
amount equal to 30% of all accounts receivables collected under the
Collection Services Agreement.
The purchase price was arrived at through arm's length
negotiations between the parties.
The Registrant currently intends to continue to operate the
business formerly conducted by Ipanema with the purchased assets
for the foreseeable future. The foregoing statement of the
Registrant's intention is a forward looking statement within the
meaning of Section 21E of the Securities Exchange Act of 1934, and
is based on certain assumptions, including among others, general
economic conditions, management's expectations regarding the
operating results of the Registrant, the capital requirements of
continuing Ipanema's current business, and others. Should these
assumptions change, or prove to be inaccurate, the Registrant's
actual future conduct of Ipanema's business could differ materially
from the intention stated.
The above descriptions of the Asset Purchase Agreement and the
related promissory note do not purport to be complete and are
qualified in their entirety by the full text of such documents
which are attached as Exhibits hereto.
<PAGE> 2
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
It is not practicable to provide the financial statements
required to be filed on account of the acquisition of assets
described in Item 2 hereof (the "Financial Statements") on the date
that this report is being filed with the Securities and Exchange
Commission. The Company expects to file the Financial Statements
by an amendment to this Form 8-K no later than December 16, 1999.
(b) Exhibits.
2.1 Asset Purchase Agreement, dated as of October
5, 1999, by and among Utopia Marketing, Inc.,
Ipanema Shoe Corporation and Sumitomo
Corporation of America
10.1 Subordinated Convertible Promissory Note,
dated October 5, 1999, issued by Utopia
Marketing, Inc. to Ipanema Shoe Corporation
10.2 Collection Services Agreement, dated as of
October 5, 1999 between Utopia Marketing,
Inc., Ipanema Shoe Corporation and Sumitomo
Corporation of America
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
UTOPIA MARKETING, INC.
By:/s/Samuel L. Edelman
Samuel L. Edelman
Chairman and
Chief Executive Officer
Dated: October 18, 1999
<PAGE> 4
EXHIBIT INDEX
2.1 Asset Purchase Agreement, dated as of October 5, 1999, by and
among Utopia Marketing, Inc., Ipanema Shoe Corporation and
Sumitomo Corporation of America
10.1 Subordinated Convertible Promissory Note, dated October 5,
1999, issued by Utopia Marketing, Inc. to Ipanema Shoe
Corporation
10.2 Collection Services Agreement, dated as of October 5, 1999
between Utopia Marketing, Inc., Ipanema Shoe Corporation and
Sumitomo Corporation of America
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of October 5, 1999, is
entered into by and among Ipanema Shoe Corporation, a New York corporation
("Seller"), Sumitomo Corporation of America, a New York corporation ("SCOA"),
and Utopia Marketing, Inc., a Florida corporation ("Purchaser").
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires
to purchase from Seller, the Transferred Assets (as hereinafter defined), on
the terms and subject to the conditions set forth herein; and
WHEREAS, the parties hereto are entering into a Collection Services
Agreement contemporaneously with the execution and delivery of this Agreement
(the "Collection Services Agreement");
NOW, THEREFORE, in consideration of the premises and mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following
defined terms shall have the meanings indicated below:
"Affiliate" means any Person that directly, or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control
of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise and, in any event and without limitation of the previous sentence,
any Person owning more than 50% of the voting securities of a second Person
shall be deemed to control that second Person.
"Agreement" means this Asset Purchase Agreement and the Exhibits,
and the Schedules and attachments annexed hereto and the certificates
delivered in connection herewith, as the same may be amended from time to time
in accordance with the terms hereof.
"Ancillary Agreements" means the Assignment and Assumption
Agreement, the Bill of Sale, the Note, the Collection Services Agreement and
the Trademark Assignment.
<PAGE> 1
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), operated, owned or
leased by or in the possession of such Person.
"Contract" means any agreement, lease, evidence of Indebtedness,
mortgage, indenture, security agreement or other contract (whether written or
oral).
"Customer Liabilities" means any liabilities relating to
chargebacks, Markdowns and other allowances, reductions, returns, credits and
warranty and other liabilities to customers of Seller arising out of or in
connection with (i) Seller's product sales on or before the date hereof, or
(ii) the disposition of Back Orders, Inventory and Receivables pursuant to
the Collection Services Agreement.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality
of the United States or any foreign country, or any domestic or foreign state,
county, city or other political subdivision.
"Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the
obligations described in clauses (i) through (iv) above of any other Person.
"Knowledge of Seller" or any correlative term means the actual
knowledge of the President or Executive Vice President of Seller.
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision or of any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention Contract or other Contract to
give any of the foregoing.
"Losses" means any and all claims, liabilities, damages, losses,
costs and expenses (including without limitation settlements, judgements,
court costs and reasonable attorneys' fees).
"Markdown" means any Customer Liability in the nature of an
allowance or other incentive payment given to a customer to assist such
customer in realizing the resale of shoes acquired or to be acquired from
Seller in connection with landed business.
<PAGE> 2
"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Person" means any natural person, corporation, limited liability
company, general partnership, limited partnership, proprietorship, other
business organization, trust, union, association or Governmental or Regulatory
Authority.
"SEC" means the Securities and Exchange Commission or any other
governmental body or agency succeeding to the functions thereof.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor Federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect from time to time.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, bank shares, withholding, payroll, employment, excise,
sales, use, property, alternative or add-on minimum, environmental or other
taxes, assessments, duties, fees, levies or other governmental charges of any
nature whatever, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
"U.S. Dollars"or the symbol "$" means United States Dollars.
"Y2K Compatibility" means the ability of a computer system,
software, hardware or other equipment to correctly perform, process, provide,
receive, display, exchange and handle date-related data for any dates within
and between the twentieth and twenty-first centuries, and other centuries.
1.2 Rules of Construction. The following rules of construction
shall be applicable for all purposes of this Agreement, unless the context
otherwise requires.
(a) the terms "hereby", "herein", "hereof", "hereto",
"hereunder" and any similar terms shall refer to this Agreement, and the term
"hereafter" shall mean after, and the term "heretofore" shall mean before, the
date of this Agreement;
(b) words importing the singular number shall mean and include
the plural number and vice versa;
(c) the terms "include", "including" and similar terms shall be
construed as if followed by the phrase "without being limited to", and the
term "or" shall be construed in the inclusive sense; and
<PAGE> 3
(d) all references in this Agreement to numbered Articles,
Sections, Schedules and Exhibits are references to the Articles and Sections
of this Agreement and the Schedules and Exhibits to this Agreement.
ARTICLE 2
PURCHASE OF ASSETS
2.1 Sale and Purchase of Transferred Assets. (a) Assets
Transferred. Subject to and upon the terms and conditions set forth in this
Agreement, Seller shall, concurrently with the execution hereof, sell,
transfer, convey, assign and deliver to Purchaser, and Purchaser shall
purchase and accept delivery of, all of Seller's right, title and interest,
free and clear of all Liens, in and to the following assets owned by Seller
(such assets being sometimes collectively referred to as the "Transferred
Assets"):
(i) the corporate name "Ipanema Shoe Corporation" and telephone
and facsimile numbers of Seller as set forth on Schedule 2.1(a)(i)
(collectively, the "Corporate Identity");
(ii) the trade names, trademarks and branded names set forth in
Schedule 2.1(a)(ii) and all governmental registrations therefor and the
goodwill associated therewith and all applications, registrations and renewals
in connection therewith in all jurisdictions ("Trademarks");
(iii) all customer lists, supplier lists and all related
database information and proprietary computer programs, if any (collectively,
"Business Information");
(iv) all other proprietary information and intellectual property
rights including, but not limited to, (i) all inventions and designs (whether
patentable or unpatentable and whether or not reduced to practice), together
with all improvements thereto (ii) all Trademarks, service marks, trade
dress, logos, trade names, domain names, active or inactive web-sites, brand
names and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith, (iii) all copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (iv) all shoe designs,
fabrications, shoe patterns, sales samples for Fall 1999 and Spring 2000,
product configurations and copyrights therein and other proprietary rights
thereto, (v) all trade secrets and confidential secrets (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supply lists, pricing and cost information,
business and marketing plans and proposals) and all other proprietary rights
and (vi) all copies and tangible embodiments thereof (in whatever form or
medium);
<PAGE> 4
(v) all orders (including first cost and landed), and
receivables from such orders, from Seller's customers as of the date hereof
having a starting scheduled delivery date to the customer of November 1, 1999
or later, as set forth in Schedule 2.1(a)(v) (the "Transferred Orders"),
provided that Purchaser acknowledges that (A) Seller makes no representations,
warranties or assurances that (i) the Transferred Orders will not be canceled
by customers, (ii) that product can be delivered to fill such Transferred
Orders in a timely manner, (iii) that Seller's suppliers are willing or able
to supply product to Purchaser for the purpose of filling such Transferred
Orders, (B) Seller believes it is highly likely that most Transferred Orders
for delivery on or before January 31, 2000 cannot be filled and that certain
Transferred Orders will be canceled by customers; and (C) Seller has begun
notifying its customers that it is unable to fulfill certain Transferred
Orders (although Seller agrees to provide commercially reasonable assistance
to Purchaser until October 31, 1999, provided that all reasonable
out-of-pocket expenses incurred by Seller in connection with such assistance
are advanced or reimbursed (as shall be mutually agreed upon) by Purchaser, in
endeavoring to cause the Transferred Orders not to be canceled by customers,
product to be delivered to fill such Transferred Orders in a timely manner and
Seller's suppliers to supply product to Purchaser for the purpose of filling
such Transferred Orders); and
(vi) covenants not to compete as provided in Article 7 hereof.
(b) Assets Retained. Notwithstanding anything in this Agreement
to the contrary, Purchaser shall not receive the following assets:
(i) all cash and cash equivalents, and all bank and other
accounts in which any of the foregoing is held;
(ii) all orders booked by Seller as of the date hereof, other
than the Transferred Orders ("Back Orders");
(iii) all inventory of Seller as of the date hereof and
thereafter, including without limitation any inventory for filling Back Orders
and inventory in transit ("Inventory");
(iv) all accounts receivable of Seller as of, and resulting from
sales under Back Orders or of Inventory following, the date hereof
("Receivables");
(v) refundable income taxes of Seller;
(vi) insurance policies relating to the business or operations
of Seller and all monies owing from insurance carriers including claims based
upon the failure of Seller's former computer system;
<PAGE> 5
(vii) minute books, stock transfer books and corporate seal of
Seller;
(viii) the leases with respect to Seller's offices, including
but not limited to 666 Fifth Avenue, New York, New York and Seller's warehouse
space, wherever located;
(ix) any telephone and fax numbers of Seller other than those
set forth in Schedule 2.1(a)(i); and
(x) the "SUMI" trademark and all governmental registrations
therefor and the goodwill associated therewith; and
(xi) all other assets of Seller not specifically described in
this Agreement as being sold to Purchaser.
(c) Third Party Consents (Transferred Orders). To the extent
that any Transferred Orders are not assignable without the consent of another
party, this Agreement shall not constitute an assignment or an attempted
assignment thereof if such assignment or attempted assignment would constitute
a breach thereof. Seller and Purchaser shall use their best efforts to obtain
the consent of such other party to the assignment of any such Transferred
Orders to Purchaser in all cases in which such consent is or may be required
for such assignment. If any such consent shall not be obtained, Seller shall
cooperate with Purchaser in any reasonable arrangement designed to provide for
Purchaser the benefits intended to be assigned to Purchaser under the relevant
Transferred Order, including enforcement at the cost and for the account of
Purchaser of any and all rights of Seller against the other party thereto
arising out of the breach or cancellation thereof by such other party or
otherwise. If and to the extent that such arrangement cannot be made,
Purchaser shall have no obligation pursuant to Section 2.2(a) and Seller shall
have no obligation pursuant to Section 2.1(a)(v) or otherwise with respect to
such Transferred Orders.
(d) Computer Equipment. (i) Seller hereby grants Purchaser an
option to purchase all or a portion of the computer equipment set forth in
Schedule 2.1(d) (the "Computer Equipment") at fair market value, provided that
(i) Purchaser acknowledges and agrees that Seller has no title or transferable
license to any software contained on or used in connection with the Computer
Equipment and Purchaser will obtain all necessary consents to use such
software prior to utilizing or accepting transfer of any portion of the
Computer Equipment, and (ii) such purchase shall be subject to Purchaser's
assumption of certain maintenance contract obligations of Seller in connection
with the Computer Equipment as shall be mutually agreed upon by the parties.
Such option must be exercised by Purchaser on or prior to March 31, 2000.
(ii) Notwithstanding any provision of this Agreement to the contrary, Seller
shall have no obligation to deliver or transfer title to the Computer
Equipment until the date Purchaser delivers to Seller all necessary consents
(in a form reasonably acceptable to Seller) by vendors of any software
<PAGE> 6
contained on any part of the Computer Equipment. Furthermore, Seller and
Purchaser shall mutually agree on the timing for physically transferring the
Computer Equipment to Purchaser. Such transfer shall take place after
November 30, 1999 and shall not interfere with the disposition of the Retained
Assets.
(e) DISCLAIMER. NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT
TO THE CONTRARY, SELLER HEREBY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES
(INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY, WARRANTY OF
MERCHANTABILITY, WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, AND ANY
WARRANTY OF Y2K COMPLIANCE) WITH RESPECT TO THE COMPUTER EQUIPMENT. PURCHASER
ACCEPTS THE COMPUTER EQUIPMENT WITH ALL FAULTS AND DEFECTS ON AN AS IS WHERE
IS BASIS.
2.2 Liabilities. (a) Assumed Liabilities. In connection with
the sale, transfer, conveyance, assignment and delivery of the Transferred
Assets pursuant to this Agreement, on the terms and subject to the conditions
set forth in this Agreement, Purchaser hereby agrees to perform when due all
obligations of Seller under the Transferred Orders (the "Assumed
Liabilities").
(b) Retained Liabilities. Purchaser shall not assume by virtue
of this Agreement or the transactions contemplated hereby, and shall have no
liability for, any liabilities or Indebtedness of Seller or its Affiliates of
any kind, character or description whatsoever except for the Assumed
Liabilities (the "Retained Liabilities"). Seller will discharge all of the
Retained Liabilities on a timely basis.
2.3 Further Assurances; Post-Closing Cooperation.
(a) At any time or from time to time after the date hereof,
Seller shall execute and deliver to Purchaser such other instruments, and take
such other actions as Purchaser may reasonably deem necessary in order more
effectively to transfer, convey and assign to Purchaser all of the Transferred
Assets, and to put Purchaser in actual possession of the Transferred Assets.
At any time after the date hereof upon five (5) business days' written notice
of Purchaser to Seller stating the need therefor for litigation, Tax,
accounting or other appropriate purposes, Seller shall make available to
Purchaser the books and records relating to the Transferred Assets and the
Assumed Liabilities, provided that if the parties are in an adversarial
relationship in litigation or arbitration, the furnishing of information,
documents or records shall be subject to applicable rules relating to
discovery. Without limiting the generality of the foregoing, Seller shall
provide commercially reasonable assistance to Purchaser in (i) obtaining the
return of any samples of Seller's shoes that may be in the possession of
former sales employees of Seller, (ii) demanding that any sales efforts by
former sales employees of Seller cease immediately and (iii) securing any
sales orders for Seller's shoes obtained by former sales employees of Seller
that were not for the account of Seller. Such assistance shall include
notifying and demanding such employees to turn over any property in their
<PAGE> 7
possession that constitute Transferred Assets or that were secured through the
use of Transferred Assets (provided that Seller shall retain sole discretion
over whether to initiate and pursue legal action).
(b) The costs and expenses of Seller: (i) related to the orderly
exit of Seller from the shoe business and the transition of Seller's business
to Purchaser shall be the sole responsibility of Seller; and (ii) incurred at
the request of Purchaser in relation to the prospective business of Purchaser
shall be the sole responsibility of Purchaser.
2.4 Grant-Back License. (a) Purchaser hereby grants to Seller
and SCOA a limited, non-exclusive, non-transferable, non-sublicensable,
paid-up, royalty-free license solely to use those among the Transferred Assets
as are reasonably necessary to dispose of the Back Orders, Inventory and
Receivables (the "Licensed Transferred Assets") during the term of the
Collection Services Agreement and thereafter.
(b) The quality of all products manufactured, promoted or sold
by Seller and SCOA pursuant to the license rights granted under Section 2.4(a)
shall be of a standard consistent with the reputation associated with the
Licensed Transferred Assets and Seller's past use of such Licensed Transferred
Assets, which the parties acknowledge shall conform to Purchaser's quality
control standards. All use of the Trademarks during the term of the license
granted under Section 2.4(a) shall inure to the benefit of Purchaser. Seller
and SCOA shall maintain such standards with respect to the Licensed
Transferred Assets and all related products in all advertising, packaging and
promotion of such products and shall exercise reasonable commercial efforts to
safeguard the established goodwill symbolized by the Licensed Transferred
Assets at the same level of prestige and goodwill as heretofore maintained.
All such products shall be manufactured, sold, labeled, packaged and
advertised in all material respects in accordance with all applicable laws and
regulations. Purchaser shall have the right, without unnecessary interference
in the normal operations of Seller's or SCOA's respective businesses, to have
a member of its management inspect Seller's and SCOA's respective facilities
at any time during normal business hours, subject to reasonable prior written
notice to Seller or SCOA (as the case may be) by Purchaser, for the purpose of
ensuring Seller's and SCOA's compliance with the terms of this Section 2.4.
2.5 Discontinuance of Corporate Name/Trademark Use. Subject to
Section 2.4, Seller shall immediately discontinue use of the Trademarks in
connection with any business operated by Seller or any shareholders of
Seller. As soon as practicable after the date hereof, SCOA will abandon its
use of the "Ipanema" trademark in Belgium, The Netherlands and Luxembourg.
Within three (3) business days following the date hereof, Seller shall cause
to be filed a certificate of amendment of its articles of incorporation and
make such other governmental filings as are required to evidence Seller's
discontinuance of use of "Ipanema Shoe Corporation" as its corporate name.
2.6 Goods-in-Transit. Seller represents and warrants as
follows: (i) Seller has pending orders for product with its sources of supply
which it has received or anticipates receiving on or before October 31, 1999
<PAGE> 8
(the "Goods-in-Transit"), a summary description of which are set forth in
Schedule 2.6; (ii) all such "Goods-in-Transit" are intended to fill
Transferred Orders, as itemized by reference to the corresponding Transferred
Orders in Schedule 2.6; and (iii) Seller's cost with respect to such
Goods-in-Transit is set forth on an itemized basis in Schedule 2.6 ("Cost of
Goods"). Based on the foregoing, Seller shall sell to Purchaser, and
Purchaser shall purchase from Seller, each shipment of Goods-in-Transit within
10 business days following the date of shipment thereof to the relevant
customer(s), in connection with which Purchaser shall reimburse Seller for its
Cost of Goods; provided that Purchaser shall be under no obligation to
purchase any shipment of Goods-in-Transit if, by the time it is otherwise
obliged to purchase same, the Transferred Order(s) which such Goods-in-Transit
are intended to fill have been canceled by the relevant customer.
ARTICLE 3
CONSIDERATION
3.1 Purchase Price. As consideration for the sale of the
Transferred Assets, concurrently with the execution of this agreement,
Purchaser shall (i) issue to Seller 1,000,000 shares of Purchaser's common
stock (the "Shares"), and (ii) execute and deliver to Seller a convertible
subordinated note in the principal amount of $500,000, in the form of Exhibit
A (the "Note," and, together with the Shares, the "Purchase Price"). With
respect to the Shares, Seller and its permitted transferees will be entitled
to customary anti-dilution rights, as reflected in Sections 6.3 and 6.4 of the
Note.
3.2 Allocation. Seller and Purchaser agree that the Purchase
Price be allocated to the various categories of Transferred Assets in
accordance with Schedule 3.2. Seller and Purchaser agree that the values
assigned to the various categories of the Transferred Assets as set forth in
Schedule 3.2 and the covenants not to compete as set forth in Article 7 are
fair and reasonable values for such assets purchased. The parties agree that
such allocation: (a) reflects and constitutes arms-length negotiations
between Seller and Purchaser; (b) is reasonable based on the parties'
estimates of the fair market value as of the closing date of each class of
Transferred Assets; and (c) shall be binding on the parties for all purposes
and shall be consistently reflected by each party on its United States and
state income tax returns. The parties acknowledge and confirm that the
Purchase Price constitutes the consideration in full for the Transferred
Assets and covenants of Seller.
ARTICLE 4
CLOSING DELIVERIES
4.1 Seller's Obligations. (a) Seller shall execute and
deliver to Purchaser concurrently herewith: (i) the Collection Services
Agreement; (ii) a Bill of Sale in the form of Exhibit B; (iii) a Trademark
Assignment in the form of Exhibit C; (iv) an Assignment and Assumption
<PAGE> 9
Agreement in the form of Exhibit D (the "Assignment and Assumption
Agreement"); (v) resolutions adopted by the Board of Directors of Seller
authorizing and approving the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, certified by Seller's
corporate secretary, in the form of Exhibit E; and (vi) such other good and
sufficient instruments of conveyance, assignment and transfer, in form and
substance reasonably acceptable to Purchaser's counsel, as shall be effective
to vest in Purchaser good title to the Transferred Assets.
4.2 Purchaser's Obligations. (a) Purchaser shall execute and
deliver to Seller concurrently herewith: (i) the Shares; (ii) the Collection
Services Agreement; (iii) the Note; (iv) the Assignment and Assumption
Agreement; and (v) resolutions adopted by the Board of Directors of Purchaser
authorizing and approving the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, certified by Purchaser's
secretary, in the form of Exhibit F.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Seller. Seller hereby
represents and warrants to Purchaser as follows:
5.1.1 Organization of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the Laws of the State
of New York.
5.1.2 Authority Relative to Agreement. Seller has the full
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by Seller of this Agreement
and the Ancillary Agreements to which it is a party and the performance by
Seller of its obligations hereunder and thereunder have been duly and validly
authorized by all necessary corporate action of Seller. This Agreement and
the Ancillary Agreements to which Seller is a party have been duly and validly
executed and delivered by Seller and constitute legal, valid and binding
obligations of Seller, enforceable against it in accordance with their
respective terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws from time to time in
effect and affecting creditors' rights generally and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
5.1.3 No Conflicts. The execution and delivery by Seller of
this Agreement and the Ancillary Agreements to which it is a party do not, the
performance by Seller of its obligations hereunder and thereunder and the
consummation of the transactions contemplated hereby and thereby did not, do
not and will not:
<PAGE> 10
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of its certificate of incorporation or
by-laws;
(b) to the Knowledge of Seller, conflict with or result in a
violation or breach of any term or provision of any Law or Order applicable to
Seller or any of the Transferred Assets; or
(c) (i) conflict with or result in a violation or breach of,
(ii) constitute (with or without notice or lapse of time or both) a default
under, (iii) require Seller to obtain any consent, approval or action of, make
any filing with or give any notice to any Person as a result or under the
terms of, or (iv) result in the creation or imposition of any Lien upon Seller
or any of its Assets and Properties under, any Contract to which Seller is a
party or by which any of its Assets and Properties is bound.
5.1.4 Governmental Approvals and Filings. No consent, approval
or action of, filing with or notice to any Governmental or Regulatory
Authority on the part of Seller is required in connection with the execution,
delivery and performance of this Agreement or any of the Ancillary Agreement
to which it is a party or the consummation of the transactions contemplated
hereby or thereby.
5.1.5 Litigation. Except as set forth in Schedule 5.1.5, there
are no claims, actions, proceedings or investigations pending or, to the
Knowledge of Seller, threatened, against or relating to Seller, before any
court or Governmental or Regulatory Authority or body which, if adjudicated
adversely to Seller, could have a material adverse effect on Seller or would
affect Seller's obligations under this Agreement or the ability of Seller to
consummate the transactions contemplated hereby.
5.1.6 Title to Properties; Encumbrances. Seller has good and
marketable title to the Transferred Assets free and clear of any and all
Liens.
5.1.7 Intellectual Property Infringement. (i) To the Knowledge
of Seller, the Intellectual Property Rights do not infringe upon any
intellectual property rights or other rights of any other Person, (ii) Seller
owns or has the right to use all Intellectual Property Rights used in or
necessary to conduct its business as currently conducted without the payment
of any royalties, (iii) Seller is the sole and exclusive owner of the
Intellectual Property Rights, free and clear of all Liens, and (iv) except as
set forth in Schedule 5.1.7, to the Knowledge of Seller, no third party is
infringing the Intellectual Property Rights of Seller. Schedule 5.1.7(a) sets
forth a true, correct and complete list (together with description,
registration number and registration date) of each Trademark registered with
the U.S. Patent and Trademark Office, the U.S. Copyright Office or any similar
state of foreign governmental authority. Schedule 5.1.7(b) discloses a
trademark registration in New Zealand owned by Footwear and Imports Limited, a
New Zealand company; such registration is not included among the Transferred
Assets hereunder. Neither Seller, SCOA nor any Affiliate thereof holds any
<PAGE> 11
direct or indirect ownership interest in Footwear and Imports Limited. There
are no actual asserted or threatened claims of infringement of the
Intellectual Property Rights of third parties arising out of the business of
Seller and, to the Knowledge of Seller, there is no basis for any such claims.
5.1.8 Financial Statements. Seller has delivered to Purchaser
audited financial statements for the years 1997 and 1998, all of which have
been prepared in accordance with GAAP: and an unaudited balance sheet of
Seller as at June 30, 1999 (the "Interim Balance Sheet") and the related
consolidated statements of income for the six months then ended. All such
financial statements fairly present the financial condition and results of
operations of Seller as of the respective dates thereof and for the respective
periods covered thereby except for normal year adjustments which an audit
would reveal.
5.1.9 No Material Change. Except as set forth in Schedule
5.1.9, since the date of the Interim Balance Sheet, Seller has conducted its
business only in the ordinary course of business and there has not been (other
than sales in the ordinary course of business) any sale, lease, or other
disposition of any asset or property of Seller or mortgage, pledge, or
imposition of any Lien or on any material asset or property of Seller
(including the Transferred Assets).
5.1.10 Liabilities. Except for the Retained Liabilities or as
disclosed in Schedule 5.1.10, Seller has no outstanding claims, liabilities or
Indebtedness, contingent or otherwise, of the Seller or relating to the
Transferred Assets.
5.1.11 Brokers and Finders. Except as disclosed in Schedule
5.1.11, neither Seller nor any Person acting on its behalf has employed any
broker, agent or finder or incurred any liability for any brokerage fees,
agents' commissions or finders' fees in connection with the transactions
contemplated herein.
5.1.12 Accounts Receivable. Schedule 5.1.12 contains a true,
complete and correct list of all accounts receivable of Seller separated into
two categories: (i) Receivables as of the date hereof ("Actual Receivables")
and (ii) to the Knowledge of Seller, the anticipated accounts receivable based
upon Seller's Back Orders ("Anticipated Receivables"), exclusive of Customer
Liabilities applicable thereto, indicating (1) the name of the customer, and
(2) an aging history of all Actual Receivables. The total amount of accounts
receivable of Seller as of September 30, 1999, net of all Customer Liabilities
granted or incurred by Seller as of September 30, 1999 (the actual net amount
of such receivables as of such date, the "Net Receivables Amount"), is not
less than $2,000,000. To the Knowledge of Seller, Schedule 5.1.12 lists all
chargebacks, Markdowns or other allowances, concessions, discounts, product
guarantees, reductions, credits, returns and warranties given by or on behalf
of Seller to any customer of Seller relating to any future sales by Seller.
To the Knowledge of Seller, none of the Receivables as of the date hereof: (i)
is owed by an account debtor that is also a creditor or supplier of Seller;
(ii) is subject to any right of setoff by the account debtor thereof (except
as disclosed in Schedule 5.1.12); and (iii) is subject to the account debtor's
having commenced a voluntary case under the bankruptcy or insolvency laws of
<PAGE> 12
any jurisdiction or has made an assignment for the benefit of creditors, or
has had entered against it a decree or order for relief by a court in an
involuntary case under the bankruptcy or insolvency Laws of any jurisdiction,
or had filed against it any other petition or other application for relief
under the bankruptcy or insolvency Laws of any jurisdiction or has suspended
business or consented to or suffered a receiver, trustee, liquidator or
custodian to be appointed for it or for all or a significant portion of its
assets or affairs, unless so indicated.
5.1.13 Labor Matters. Except as set forth in Schedule 5.1.13,
during the past two (2) years, there has not been (i) any strike, picketing or
organized work stoppage by any of the employees of Seller, (ii) any
Proceedings pending against or, to the Knowledge of Seller, threatened
against, Seller relating to the alleged material violation of any Law
pertaining to labor relations or other employment matters, including any
charge or complaint filed by an employee or union with any governmental or
regulatory authority, (iii) any application for certification of a collective
bargaining representative or other effort to organize any of its respective
employees for the purpose of forming or joining a union, or (iv) any lockout
of any employees by Seller.
5.1.14 Investment Representations. Each of Seller and SCOA
represents and warrants to the Purchaser that:
(a) it is an "accredited investor" within the meaning of Rule
501 of Regulation D under the Securities Act and, either (i) it was not
organized for the specific purpose of acquiring the Shares, or (ii) each
person who has invested in Purchaser is an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Securities Act;
(b) it has sufficient knowledge and experience in investing in
companies similar to the Purchaser in terms of Purchaser's stage of
development so as to be able to evaluate the risks and merits of its
investment in Purchaser and it is able financially to bear the risks thereof;
(c) it and its advisors have been afforded (a) full access to
all books, records, financial statements, appraisals, agreements and other
documents with respect to or of Purchaser and its assets, liabilities,
agreements and business plans and (b) the opportunity to (i) ask questions of
representatives of Purchaser and obtain answers to any questions it may have
had with respect to such assets, liabilities, agreements and business plans,
and (ii) obtain any additional information to the extent Purchaser possesses
such information or could acquire it without unreasonable effort or expense
(i) relative to Purchaser and its assets, liabilities, agreements and business
plans and (ii) necessary to verify the accuracy of any books, records,
financial statements, appraisals, agreements, documents, securities filings
and other information of Purchaser;
(d) it is the present intention that the Shares being purchased
by Seller are being acquired for Seller's own account for the purpose of
investment and not with a present view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act that would be in
violation of the securities laws of the United States of America or any state
thereof, without prejudice, however, to Seller's right at all times to sell or
otherwise dispose of any part of the Shares pursuant to a registration under
<PAGE> 13
the Securities Act or pursuant to an exemption from such registration
available under such Act. and subject nevertheless to the disposition of
Seller's property being at all times within its control; and
(e) it understands that (i) the Shares have not been registered
under the Securities Act by reason of their issuance in a transaction exempt
from the registration requirements of the Securities Act pursuant to Section
4(2) thereof or Rule 505 or 506 promulgated under the Securities Act, (ii) the
Shares must be held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration, (iii)
the Shares will bear a legend to such effect, and (iv) Purchaser will make a
notation on its transfer books to such effect.
5.1.15 Disclosure. As of the date of this Agreement, Seller's
representations and warranties in this Agreement, when read together with the
Schedules to this Agreement, do not contain any material misstatement of fact
or omit to state a material fact necessary to make the statements contained
herein, when read together with the Schedules hereto, not misleading.
5.1.16 No Other Representations. Notwithstanding anything to the
contrary contained in this Agreement, it is the explicit intent of each party
hereto that Seller and SCOA are making no representations or warranty,
expressed or implied, except those representations and warranties contained in
this Section 5.1 and in Section 5.2.
5.2 Representations and Warranties of SCOA. SCOA hereby
represents and warrants to Purchaser as follows:
5.2.1 Organization of SCOA. SCOA is a corporation duly
organized, validly existing and in good standing under the Laws of the State
of New York.
5.2.2 Authority Relative to Agreement. SCOA has the full
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by SCOA of this Agreement and
the Ancillary Agreements to which it is a party and the performance by SCOA of
its obligations hereunder and thereunder have been duly and validly authorized
by all necessary corporate action of SCOA. This Agreement and the Ancillary
Agreements to which SCOA is a party have been duly and validly executed and
delivered by SCOA and constitute legal, valid and binding obligations of SCOA,
enforceable against SCOA, in accordance with their respective terms, subject
to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws from time to time in effect and affecting
creditors' rights generally and subject, as to enforceability, to the effect
of general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
<PAGE> 14
5.2.3 No Conflicts. The execution and delivery by SCOA of this
Agreement and the Ancillary Agreements to which it is a party do not, the
performance by SCOA of its obligations hereunder and thereunder and the
consummation of the transactions contemplated hereby and thereby did not, do
not and will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of its certificate of incorporation or
by-laws;
(b) to the knowledge of SCOA, conflict with or result in a
violation or breach of any term or provision of any Law or Order applicable to
SCOA or any of the Transferred Assets; or
(c) (i) conflict with or result in a violation or breach of,
(ii) constitute (with or without notice or lapse of time or both) a default
under, (iii) require SCOA to obtain any consent, approval or action of, make
any filing with or give any notice to any Person as a result or under the
terms of, any Contract to which SCOA is a party or by which any of its Assets
and Properties is bound.
5.2.4 Governmental Approvals and Filings. No consent, approval
or action of, filing with or notice to any Governmental or Regulatory
Authority on the part of SCOA is required in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
5.3 Representations and Warranties of Purchaser. Purchaser
hereby represents and warrants to Seller and SCOA as follows:
5.3.1 Organization of Purchaser. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Florida.
5.3.2 Authority Relative to Agreement. Purchaser has the full
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by Purchaser of this Agreement
and the Ancillary Agreements to which it is a party, and the performance by
Purchaser of its obligations hereunder and thereunder have been duly and
validly authorized by all necessary corporate action of Purchaser. This
Agreement and the Ancillary Agreements to which it is a party, have been duly
and validly executed and delivered by Purchaser and constitute legal, valid
and binding obligations of Purchaser, enforceable against Purchaser in
accordance with their respective terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
from time to time in effect and affecting creditors' rights generally and
subject, as to enforceability, to the effect of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
<PAGE> 15
5.3.3 Capitalization; Stock Ownership. The authorized capital
stock of Purchaser consists solely of 45,000,000 shares of Common Stock, par
value of $.001 per share, of which 14,216,367 shares are issued and
outstanding (prior to giving effect to the issuance of the Shares). All of
such issued shares have been duly authorized and validly issued and are fully
paid and non-assessable and none of them was issued in violation of any
preemptive or other right. Except as set forth in Schedule 5.3.3, Purchaser is
not a party to or bound by any contract, agreement or arrangement to issue,
sell or otherwise dispose of or redeem, purchase or otherwise acquire any
capital stock or any other security of Purchaser or any other security
exercisable or exchangeable for or convertible into any capital stock or any
other security of Purchaser, and, except for this Agreement, there is no
outstanding option, warrant or other right to subscribe for or purchase, or
contract, agreement or arrangement with respect to, any capital stock or any
other security of Purchaser or any other security exercisable or convertible
into any capital stock or any other security of Purchaser ("Option"). The
execution, delivery and performance by Purchaser of this Agreement will not
give rise to or result in (with or without the lapse of time or both) any
antidilution adjustment, acceleration or vesting or other change under or to
any Option. Upon delivery of the Shares pursuant to the terms hereof, Seller
will receive good title to the Shares, free and clear of all Liens.
5.3.4 No Conflicts. The execution and delivery by Purchaser of
this Agreement and the Ancillary Agreements to which it is a party do not, the
performance by Purchaser of its obligations under this Agreement and the
Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby did not, do not and will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the certificate of incorporation or
by-laws of Purchaser;
(b) to the best knowledge of Purchaser, conflict with or result
in a violation or breach of any term or provision of any Law or Order
applicable to Purchaser or any of the Transferred Assets; or
(c) (i) conflict with or result in a violation or breach of,
(ii) constitute (with or without notice or lapse of time or both) a default
under, (iii) require Purchaser to obtain any consent, approval or action of,
make any filing with or give any notice to any Person as a result or under the
terms of, or (iv) result in the creation or imposition of any Lien upon
Purchaser or any of its Assets and Properties under, any Contract to which
Purchaser is a party or by which any of its Assets and Properties is bound.
5.3.5 Governmental Approvals and Filings. No consent, approval
or action of, filing with or notice to any Governmental or Regulatory
Authority on the part of Purchaser is required in connection with the
execution, delivery and performance of this Agreement and the Ancillary
Agreements to which it is a party or the consummation of the transactions
contemplated hereby or thereby.
<PAGE> 16
5.3.6 Litigation. There are no claims, actions, proceedings or
investigations pending or, to its knowledge, threatened, against or relating
to Purchaser, before any court or Governmental or Regulatory Authority or body
which, if adjudicated adversely to Purchaser, would affect Purchaser's
obligations under this Agreement and the Ancillary Agreements to which it is a
party or the ability of Purchaser to consummate the transactions contemplated
hereby or thereby.
5.3.7 Brokers and Finders . Neither Purchaser nor any Person
acting on its behalf has employed any broker, agent or finder or incurred any
liability for any brokerage fees, agents' commissions or finders' fees in
connection with the transactions contemplated herein.
5.3.8. Future Business Conduct.
(a) Purchaser intends to utilize the Transferred Assets to
continue operating an on-going business for the resale of shoes under the
brand name "Ipanema" (the "Future Business");
(b) Purchaser maintains relations with available suppliers that
Purchaser reasonably anticipates will be willing and able to supply Purchaser
with a sufficient quantity of products for the Future Business on 44 or more
days open payment terms; and
(c) Purchaser anticipates that it can secure and maintain
adequate financing and staff to operate the Future Business on an on-going
basis.
ARTICLE 6
SURVIVAL OF REPRESENTATIONS; INDEMNITY
6.1 Survival of Representations. The respective representations
and warranties of Seller, SCOA and Purchaser contained in this Agreement shall
survive the consummation of the transactions contemplated hereby for a period
of one year from the date hereof.
6.2 Indemnifications. (a) Seller and SCOA shall jointly and
severally indemnify and hold harmless Purchaser from, against and in respect
of all Losses assessed, incurred or sustained by or against Purchaser arising
out of or relating to:
(i) any misrepresentation or breach of any warranty of Seller or
SCOA contained in this Agreement or in any Schedule of Seller or any
certificate delivered by or on behalf of Seller or SCOA pursuant hereto;
provided that any claim for indemnification by Purchaser under this subsection
(i) may be made no later than a date one year from and after the date hereof;
<PAGE> 17
(ii) any breach of any covenant or agreement of Seller and/or
SCOA contained in this Agreement;
(iii) any debt, liability or obligation of Seller other than the
Assumed Liabilities, including, without limitation, the pending litigation
referred to in Schedule 5.1.5, arising out of its conduct of its business
prior to the date hereof; and
(iv) any and all claims, suits, demands, liabilities, losses,
damages or expenses of any kind whatever (including attorneys' fees) with
respect to or arising in any way from the employment, compensation or benefits
(including without limitation payroll benefits, accrued vacation and sick pay)
of any employee relating to periods of employment or engagement by Seller, or
the termination thereof by Seller.
(b) Purchaser shall indemnify and hold harmless Seller and SCOA
from, against and in respect of all Losses assessed, incurred or sustained by
or against Seller and/or SCOA arising out of or relating to:
(i) any misrepresentation or breach of warranty of Purchaser
contained in this Agreement or in any Schedule of Purchaser or in any
certificate delivered by Buyer pursuant hereto; provided that any claim for
indemnification by Seller and/or SCOA under this subsection (i) may be made no
later than a date one year from and after the date hereof;
(ii) any breach of any covenant of Purchaser contained in this
Agreement;
(iii) any of the Assumed Liabilities;
(iv) the conduct by Purchaser of its business utilizing any of
the Transferred Assets following the date hereof;
(v) any claims by employees of Purchaser against Seller arising
from events occurring after the date hereof; and
(vi) any sales, use or transfer taxes levied on the sale of the
Transferred Assets to Purchaser.
(c) Notwithstanding anything to the contrary contained in this
Agreement, no amount of indemnity shall be payable under this Section 6.2:
(i) with respect to any Losses incurred or sustained by or
against Purchaser arising out of or relating to (x) any Customer Liabilities
or (y) a misrepresentation, breach of a representation or warranty that was
actually known to Purchaser on or prior to the date hereof, if Purchaser
<PAGE> 18
nevertheless elects to close (regardless of whether Purchaser waives such
breach in writing or otherwise);
(ii) by Seller and/or SCOA as a result of any claim arising
under Section 6.2(a) unless, until and then only to the extent that Purchaser
has incurred or sustained Losses in excess of $20,000 in the aggregate;
(iii) by Seller and/or SCOA, to the extent that as a result of
such payment, the cumulative aggregate Losses payable by Seller and SCOA
pursuant to Section 6.2(a)(i) would be in excess of $900,000;
(iv) with respect to any Loss incurred or sustained by Purchaser
to the comparative extent it arises from or was caused by actions taken by
Purchaser or any of its Affiliates after the date hereof;
(v) with respect to any Losses incurred or sustained by
Purchaser arising from any breach of any representation or warranty set forth
in either of the first two sentences of Section 5.1.12 to the extent such
Losses exceed the amount to be paid to Purchaser pursuant to Section 6.4;
(vi) by Purchaser as a result of any claim arising under Section
6.2(b) unless, until and then only to the extent that Seller and SCOA have
incurred or sustained Losses in excess of $20,000 in the aggregate; and
(vii) by Purchaser, to the extent that as a result of such
payment, the cumulative aggregate Losses payable by Purchaser pursuant to
Section 6.2(b)(i) would be in excess of $900,000.
6.3 Procedure for Indemnification Claims. The respective
indemnification obligations of Seller and SCOA pursuant to Section 6.2(a) and
Purchaser pursuant to Section 6.2(b) shall be conditioned upon compliance with
the following procedures for indemnification claims based upon or arising out
of any claim, action or proceeding by any Person not a party to this
Agreement.
(a) If at any time a claim shall be made or threatened, or an
action or proceeding shall be commenced or threatened, against a party hereto
(the "Aggrieved Party") which could result in liability of another party
hereto (the "Indemnifying Party") under its indemnification obligations
hereunder, the Aggrieved Party shall give to the Indemnifying Party prompt
notice of such claim, action or proceeding. Such notice shall state the basis
for the claim, action or proceeding and the amount thereof (to the extent such
amount is determinable at the time when such notice is given) and shall permit
the Indemnifying Party to assume the defense of any such claim, action or
proceeding (including any action or proceeding resulting from any such
claim). Failure by the Indemnifying Party to notify the Aggrieved Party of
<PAGE> 19
its election to defend any such claim, action or proceeding within a
reasonable time, but in no event more than 15 days after notice thereof shall
have been given to the Indemnifying Party, shall be deemed a waiver by the
Indemnifying Party of its right to defend such claim, action or proceeding;
provided that the Indemnifying Party shall not be deemed to have waived its
right to contest and defend against any claim of the Aggrieved Party for
indemnification hereunder based upon or arising out of such claim, action or
proceeding.
(b) If the Indemnifying Party assumes the defense of any such
claim, action or proceeding, the obligation of the Indemnifying Party as to
such claim, action or proceeding shall be limited to taking all steps
necessary in the defense or settlement thereof and, provided the Indemnifying
Party is held to be liable for indemnification hereunder, to holding the
Aggrieved Party harmless from and against any and all losses, damages and
liabilities caused by or arising out of any settlement approved by the
Indemnifying Party or any judgment or award rendered in connection with such
claim, action or proceeding. The Aggrieved Party may participate in the
defense of such claim, action or proceeding provided that the Indemnifying
Party shall direct and control the defense of such claim, action or
proceeding. The Aggrieved Party agrees to cooperate and make available to the
Indemnifying Party all books and records and such officers, employees and
agents as are reasonably necessary and useful in connection with the defense.
The Indemnifying Party shall not, in the defense of such claim, action or
proceeding, consent to the entry of any judgment or award, or enter into any
settlement, except in either event with the prior consent of the Aggrieved
Party, which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Aggrieved Party of a release from all
liability in respect of such claim, action or proceeding.
(c) If the Indemnifying Party does not assume the defense of any
such claim, action or proceeding, the Aggrieved Party may defend against such
claim, action or proceeding in such manner as it may deem appropriate. The
Indemnifying Party agrees to cooperate and make available to the Aggrieved
Party all books and records and such officers, employees and agents as are
reasonably necessary and useful in connection with the defense. If the
Indemnifying Party, within 20 days after notice shall have been given to it by
the Aggrieved Party of the latter's intention to effect a settlement of any
such claim, action or proceeding, which notice shall describe with
particularity the terms of any such proposed settlement, shall not deposit
with an escrowee mutually satisfactory to the Aggrieved Party and the
Indemnifying Party a sum equivalent to the total amount demanded in such
claim, action or proceeding or deliver to the Aggrieved Party a surety bond or
an irrevocable letter of credit for such sum in form and substance reasonably
satisfactory to the Aggrieved Party, then the Aggrieved Party may settle such
claim, action or proceeding on the terms detailed in its notice to the
Indemnifying Party, and the Indemnifying Party shall be deemed to have agreed
to the terms of such settlement and shall not thereafter in any proceeding by
the Aggrieved Party for indemnification question the propriety of such
settlement. If the Indemnifying Party makes an escrow deposit or delivers a
surety bond or letter of credit as aforesaid and thereafter the Aggrieved
Party settles such claim, action or proceeding, then in any proceeding by the
Aggrieved Party for indemnification in the event the Indemnifying Party is
held liable for indemnification hereunder, the Aggrieved Party shall have the
<PAGE> 20
burden of proving the amount of such liability of the Indemnifying Party, and
the amount of the payments made in settlement of any claim, action or
proceeding shall not be determinative as between the Aggrieved Party and the
Indemnifying Party of the amount of such indemnification liability, except
that the amount of the settlement payments shall constitute the maximum amount
of the indemnification liability of the Indemnifying Party. Such escrow
deposit, surety bond or letter of credit shall by its respective terms be
payable to the Aggrieved Party in an amount determined in accordance with the
last sentence of this clause (c) and in the event the Indemnifying Party is
held liable for indemnification hereunder. If the Indemnifying Party neither
makes an escrow deposit nor delivers a surety bond or letter of credit as
aforesaid, so that no settlement of such claim, action or proceeding is
effected, in any proceeding by the Aggrieved Party for indemnification in the
event the Indemnifying Party is held liable for indemnification hereunder,
such liability shall be for the amount of any judgment or award rendered with
respect to such claim or in such action or proceeding and of all expenses,
legal and otherwise, incurred by the Aggrieved Party in the defense against
such claim, action or proceeding.
(d) In the event an Aggrieved Party or Indemnifying Party shall
cooperate in the defense or make available books, records, officers, employees
or agents, as required by the terms of clauses (b) and (c), respectively, of
this Section 6.3 the party to which such cooperation is provided shall pay the
out-of-pocket costs and expenses (including legal fees and disbursements) of
the party providing such cooperation and of its officers, employees and agents
reasonably incurred in connection with providing such cooperation, but shall
not be responsible to reimburse the party providing such cooperation for such
party's time or the salaries or costs of fringe benefits or other similar
expenses paid by the party providing such cooperation to its officers and
employees in connection therewith.
6.4 Receivables Indemnity Obligation. In full satisfaction of
the indemnity obligation of Seller and SCOA to Purchaser arising from any
breach of any representation or warranty set forth in either of the first two
sentences of Section 5.1.12, the parties hereto agree as follows:
(a) the Net Receivables Amount shall be mutually determined by
the parties hereto on or before October 8, 1999; and
(b) in the event the Net Receivables Amount, as determined
pursuant to clause (a) above, is less than $2,000,000 (the amount by which the
Net Receivables Amount, as so determined, is less than $2,000,000 being
hereinafter referred to as the "Shortfall Amount"), together with Seller's
payment to Purchaser on October 15, 1999 otherwise required pursuant to
Section 2(c) of the Collection Services Agreement Seller shall pay to
Purchaser an amount equal to 30% of the Shortfall Amount.
6.5 Sole and Exclusive Remedy. Except with respect to fraud,
the respective indemnification obligations of Seller, SCOA and Purchaser under
this Article 6 shall constitute the sole and exclusive remedies of Purchaser,
Seller and SCOA with respect to the matters described in Sections 6.2(a) and
<PAGE> 21
6.2(b), respectively, and the parties shall not be entitled to a rescission of
this Agreement or to any further indemnification rights or claims of any
nature whatsoever in respect thereof, all of which the parties hereto hereby
waive.
ARTICLE 7
NON-COMPETITION
Seller and SCOA jointly and severally covenant and agree that,
during the period commencing on the date hereof and continuing for the three
(3) year period thereafter, neither Seller nor SCOA shall directly or
indirectly compete with the business of Seller as the same existed immediately
prior to the date hereof. Nothing in this Article shall be construed to
prevent Seller and/or SCOA from disposing of Back Orders, Inventory and
Receivables during the term of the Collection Services Agreement in accordance
with the terms thereof and thereafter.
ARTICLE 8
REGISTRATION RIGHTS
8.1 Registration. Purchaser shall with reasonable promptness,
and in any event not later than December 31, 1999, file a registration
statement on Form S-3 or such other applicable forms with the SEC with respect
to the Shares. Purchaser shall use all reasonable efforts to make such
registration statement become effective and to qualify the same under the Blue
Sky laws of such states as may be requested by the holder of the Shares.
Purchaser shall not be deemed to have complied with its obligations under this
Section 8.1 to effect a registration of the Shares unless and until the
applicable registration statement has been declared effective by the SEC under
the Securities Act and, in the event such registration statement is not so
declared effective, Purchaser shall promptly file a subsequent registration
statement pursuant to this Section 8.1 upon receipt of written notice from the
holder of the Shares.
8.2 Expenses. Except as otherwise specifically provided in this
Article 8, the costs and expenses of any registration and qualification
pursuant to this Article 8 shall be borne by Purchaser. Such costs and
expenses shall include the fees and expenses of counsel for Purchaser and of
its accountants, all other costs, reasonable fees and expenses of Purchaser
incident to the preparation, printing and filing under the Securities Act of
the registration statement and all amendments and supplements thereto, the
cost of furnishing copies of each final prospectus and each amendment or
supplement thereto to underwriters, dealers and other purchasers and the costs
and expenses (including fees and disbursements of counsel) incurred in
connection with the qualification under the Blue Sky laws of various
jurisdictions.
<PAGE> 22
(a) Procedures.
(i) In the case of each registration or qualification pursuant to
this Article 8, Purchaser will keep the holder of the Shares advised in
writing as to the initiation of proceedings for such registration and
qualification and as to the completion thereof, and will advise the holder of
the Shares, upon request, of the progress of such proceeding.
(ii) At Purchaser's expense, Purchaser will keep each registration
and qualification under this Article 8 effective (and in compliance with the
Securities Act) by such action as may be necessary or appropriate for a period
of one year after the effective date of such registration statement,
including, without limitation, the filing of post-effective amendments and
supplements to any registration statement or prospectus necessary to keep the
registration statement current and the further qualification under any
applicable Blue Sky or other state securities laws to permit such sale or
distribution, all as requested by the holder of the Shares, provided that such
one year period shall be extended until the Shares become freely tradable
under Rule 144(k) of the Securities Act if, as a result of an issuance of
shares of common stock of Purchaser upon conversion of the Note, the period
during which the Shares constitute restricted stock should be extended beyond
one year. Purchaser will immediately notify the holder of the Shares at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.
(iii) In connection with any registration under this Article 8,
Purchaser will provide a transfer agent and registrar and shall cause the
securities being registered to be listed on such securities exchange or
eligible for trading on such over-the-counter market as other securities of
Purchaser of the same class are traded, in each case not later than the
effective date of such registration statement.
(iv) If Purchaser at any time proposes to register any of its
securities under the Securities Act, whether or not for sale for its own
account, and such securities are to be distributed by or through one or more
underwriters, then Purchaser will make reasonable efforts if requested by the
holder of the Shares, to arrange for such underwriters to include such
Securities as requested by the holder of the Shares among the securities to be
distributed by or through such underwriters.
(v) In connection with the preparation and filing of each
registration statement under this Article 8, Purchaser will give the holder of
the Shares and its underwriters, if any, and their respective counsel and
accountants (at their sole expense), the opportunity to participate in the
preparation of such registration statement, each prospectus included therein
or filed with the SEC, and each amendment thereof or supplement thereto, and
will give each of them such access to its books and records and such
opportunities to discuss the business of Purchaser with its officers, its
counsel and the independent public accountants who have certified its
<PAGE> 23
financial statements, as shall be necessary, in the opinion of the holder of
the Shares or such underwriters or their respective counsel, in order to
conduct a reasonable and diligent investigation within the meaning of the
Securities Act. Without limiting the foregoing, each registration statement,
prospectus, amendment, supplement or any other document filed with respect to
a registration under this Article 8 shall be subject to review and reasonable
approval by the holder of the Shares and by its counsel.
8.4 Provision of Documents. Purchaser will, at the expense of
Purchaser, furnish to the holder of the Shares such number of registration
statements, prospectuses, and other documents incident to any registration or
qualification referred to in this Article 8 as may be reasonably requested.
8.5 Indemnification. (a) Purchaser will indemnify and hold
harmless the holder of the Shares and any underwriters (as defined in the
Securities Act) for the holder of the Shares and each person, if any, who
controls the holder of the Shares or such underwriters within the meaning of
the Securities Act against any losses, claims, damages or liabilities, joint
or several, and expenses (including reasonable attorneys' fees and expenses
and reasonable costs of investigation) to which the holder of the Shares or
such underwriters or such controlling person may be subject, under the
Securities Act or otherwise, insofar as any thereof arise out of or are based
upon (a) any untrue statement of a material fact contained in any registration
statement under which the Shares were registered under the Securities Act
pursuant to this Article 8, any prospectus contained therein, or any amendment
or supplement thereto, or (b) the omission to state in any item referred to in
the preceding clause (a) a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of or are based upon any untrue
statement or alleged untrue statement or omission or alleged omission based
upon information furnished to Purchaser by the holder of the Shares or by any
underwriter for the holder of the Shares in writing specifically for use
therein (with respect to which information the holder of the Shares shall so
indemnify and hold harmless Purchaser, any underwriters for Purchaser and each
person, if any, who controls Purchaser or such underwriters within the meaning
of the Securities Act; provided, that the maximum liability of the holder of
the Shares or such underwriter under this indemnity shall be limited to the
amount of the proceeds received by the holder of the Shares or such
underwriter from the sale of such Shares to which such indemnification
relates). The indemnity contained in this Section 8.5(a) shall not inure to
the benefit of an indemnified party to the extent that the loss, claim,
damage, liability or expense results from an untrue statement in or omission
from a preliminary prospectus and (i) such untrue statement in or omission
from the preliminary prospectus was corrected in the final prospectus and (ii)
the indemnified party failed to cause a copy of such final prospectus to be
delivered to the person asserting such claim at or prior to the written
confirmation of the sale of securities to such person.
<PAGE> 24
(b) Promptly upon receipt by a party indemnified under this
Section 8.5 of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this Section 8.5, such indemnified party
shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not relieve
it of any liability which it may have to any indemnified party otherwise than
under this Section 8.5 unless such failure materially adversely affects the
defense of such action. In case notice of commencement of any such action
shall be given to the indemnifying party as above provided, the indemnifying
party shall be entitled to participate in and, to the extent it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense of such action at its own expense, with counsel chosen by it. The
indemnified party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of
such counsel shall be paid by the indemnified party unless (a) the
indemnifying party fails to assume the defense of such action or (b) any
indemnified party to any such action (including any impleaded parties) has
been advised in writing by counsel that representation of such indemnified
party and the indemnifying party by the same counsel would be inappropriate
under applicable standards of professional conduct (in which case the
indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party). In the foregoing circumstances,
the indemnified parties shall be entitled to engage, and the indemnifying
party shall pay the reasonable costs and expenses of, one counsel (plus any
necessary local counsel) for all indemnified parties. No indemnifying party
shall be liable for any settlement entered into without its prior written
consent.
(c) If the indemnification provided for in this Section 8.5 is
unavailable or insufficient to hold harmless an indemnified party in respect
of any losses, claims, damages, liabilities, expenses or actions in respect
thereof referred to in this Section 8.5, then each indemnifying party shall in
lieu of indemnifying such indemnified party contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities, expenses or actions in such proportion as is appropriate to
reflect the relative fault of Purchaser, on the one hand, and the holder of
the Shares (and its underwriters) on the other, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities, expenses or actions as well as any other relevant equitable
considerations, including the failure to give the notice required hereunder.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact relates to
information supplied by Purchaser, on the one hand, or the holder of the
Shares (and its underwriters), on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. Purchaser and Seller agree that it would not be
just and equitable if contribution pursuant to this Section 8.5 were
determined by pro rata allocation or by any other method of allocation which
did not take account of the equitable considerations referred to above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or actions in respect thereof referred to above
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentations (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
<PAGE> 25
contribution from any person who is not guilty of such fraudulent
misrepresentation.
ARTICLE 9
MISCELLANEOUS
9.1 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by overnight courier service, by cable, by facsimile, by telegram, by
telex or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or to such
other persons with respect to specific provisions hereof or at such other
address for a party, in each case, as shall be specified in a notice given in
accordance with this Section 9.1):
If to Seller and/or SCOA:
Sumitomo Corporation of America
600 Third Avenue
New York, New York 10116-2001
Attention: General Manager, Investment Division
Telecopier: (212) 207-0821
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention: Michael A. Doherty, Esq.
Telecopier: (212) 309-6273
If to Purchaser:
Utopia Marketing, Inc.
312 Clematis Street
Suite 500
West Palm Beach, Florida 33401
Attention: Joseph Wascura
Telecopier: (561) 659-5271
<PAGE> 26
with a copy to:
Holland & Knight LLP
701 Brickell Avenue, Suite 3000
Miami, Florida 33131
Attention: Steven Sonberg, Esq.
Telecopier: (305) 789-7799
9.2 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the greatest extent possible.
9.3 Entire Agreement. This Agreement, together with that
certain confidentiality agreement previously entered into between Seller and
Purchaser (the "Confidentiality Agreement") and the Ancillary Agreements,
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and undertakings,
both written and oral, among the parties with respect to the subject matter
hereof. Notwithstanding any provision of this Agreement, the Confidentiality
Agreement or any Ancillary Agreement to the contrary, Seller shall have the
right to notify all relevant customers that the Transferred Orders have been
transferred to Purchaser and that, if applicable, Seller has not placed any
corresponding orders with its sources of supply.
9.4 Binding Effect; Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. This Agreement may not be assigned or
otherwise transferred, nor may any rights or obligations hereunder be
assigned, delegated, subcontracted or otherwise transferred, by any party
hereto, whether voluntarily or by operation of law, without the prior written
consent of the other parties. Any such attempted assignment, delegation,
subcontract or other transfer without such prior written consent of the other
party shall be void and of no legal force or effect.
9.5 No Third Party Beneficiaries. This Agreement is for the
sole benefit of the parties hereto and their permitted assigns and nothing
herein, express or implied, is intended to or shall confer upon any other
Person or entity any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
9.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York
without giving effect to any choice or conflict of law provision or rule
<PAGE> 27
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York.
9.7 Recovery of Litigation Expenses. In connection with any
suit, action or proceeding between or among any parties hereto arising out of
or related to this Agreement, the prevailing party or parties in such suit,
action or proceeding shall be entitled to recover all of its and their costs
and expenses in connection with such suit, action or proceeding, including,
without limitation, all costs and expenses in investigating and prosecuting or
defending such suit, action or proceeding, including, without limitation,
reasonable fees and expenses of counsel, auditors and other consultants.
9.8 Amendment. This Agreement may not be amended or modified
except by an instrument in writing signed by the parties hereto.
9.9 Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but
no such waiver shall be effective unless set forth in a written instrument
duly executed by or on behalf of the party waiving such term or condition. No
waiver by any party of any term or condition of this Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion. All
remedies, either under this Agreement or by Law or otherwise afforded, will be
cumulative and not alternative.
9.10 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart
of this Agreement.
9.11 No Presumption. This Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.
9.12 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.13 Schedules, Exhibits and Attachments. The Schedules,
Exhibits and Attachments to this Agreement are deemed a part of this Agreement
and are subject to all of the provisions herein. All statements contained in
Schedules, Exhibits, certificates and other instruments attached hereto or
delivered or furnished on behalf of Seller pursuant hereto or in connection
with the transactions contemplated hereby, shall be deemed representations and
warranties by Seller or Purchaser, as applicable. Any fact or item which is
clearly disclosed on any Schedule or Exhibit to this Agreement or in the
financial statements referred to in Section 5.1.8 in such a way as to make its
relevance to a representation or representations made elsewhere in this
Agreement or to the information called for by another Schedule or Schedules
<PAGE> 28
(or Exhibit or Exhibits) to this Agreement readily apparent shall be deemed to
be an exception to such representation or representations or to be disclosed
on such other Schedule or Schedules (or Exhibit or Exhibits), as the case may
be, notwithstanding the omission of a reference or cross reference thereto.
Any fact or item disclosed on any Schedule or Exhibit hereto shall not by
reason only of such inclusion be deemed to be material and shall not be
employed as a point of reference in determining any standard of materiality
under this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Asset
Purchase Agreement as of the date first written above by their respective
officers thereunto duly authorized.
IPANEMA SHOE CORPORATION
By_________________________________
Name: Kotaro Nakata
Title: Chief Executive Officer
SUMITOMO CORPORATION OF AMERICA
By________________________________
Name: Kotaro Nakata
Title: Vice President
UTOPIA MARKETING, INC.
By________________________________
Name: Samuel L. Edelman
Title: Chief Executive Officer
[Signature Page to Asset Purchase Agreement]
SUBORDINATED CONVERTIBLE PROMISSORY NOTE
$500,000 October 5, 1999
FOR VALUE RECEIVED, Utopia Marketing, Inc., a Florida corporation
(the "Maker"), hereby promises to pay to the order of Ipanema Shoe
Corporation, a New York corporation, or its registered assigns (the "Holder"),
the principal sum of Five Hundred Thousand Dollars ($500,000) on October 5,
2002, (the "Maturity Date"), and to pay interest in arrears on said principal
sum quarterly (or applicable portion thereof) on March 31, June 30, September
30, and December 31, of each year commencing on December 31, 2000, at an
interest rate equal to the prime rate of interest announced by Chase Manhattan
Bank, N.A. plus 1% accruing from October 5, 2000 until the Maturity Date.
Any accrued and unpaid interest outstanding as of the Maturity Date shall be
payable on such date. The interest shall be compounded daily and computed on
a 365-day (or 366-day) basis, and charged for the actual number of days
elapsed. This Note is issued in connection with the transactions described in
that certain Asset Purchase Agreement among the Maker, Sumitomo Corporation of
America, a New York corporation ("SCOA"), and Ipanema Shoe Corporation, a New
York corporation, dated as of October 5, 1999, as the same may from time to
time be amended, modified or supplemented (the "Asset Purchase Agreement").
The principal and interest on this Note is payable in lawful money of the
United States of America, to the Holder at 666 Fifth Avenue, New York, New
York 10103 or at such other place in the United States of which the Holder of
this Note may notify the Maker in writing.
1. Prepayment; Application of Payments. This Note may be
prepaid in whole or in part at any time without penalty. Any payments with
respect to this Note shall be applied first to the payment of accrued interest
and then to the payment of principal.
2. Overdue Amounts. The Maker further promises to pay interest
at the rate of twelve percent (12%) per annum or the highest rate permitted by
applicable law, whichever is less, on any overdue amount of principal unpaid
after the Maturity Date, until the date such principal amount is paid.
3. No Waiver. The failure of the Holder to exercise its rights
to make demand at any one time will not constitute a waiver of such right at
any subsequent time. Acceptance by the Holder of any payment hereunder that
is less than payment in full of all amounts due and payable at the time of
such payments shall not constitute a waiver of the right to demand payment in
full at that time or any subsequent time. Time is of the essence for this
Note.
4. Remedies of the Holder. The Maker, for itself and its
successors and assigns, hereby waives diligence, presentment, protest and
demand and notice of protest, demand, dishonor and non-payment of this Note,
and agrees that, upon the occurrence of an Event of Default (as hereinafter
defined), the Holder may exercise any remedies available at law, in equity or
under this Note either concurrently or in any order that the Holder may
choose.
<PAGE> 1
5. Collection Costs. If any payment of principal or interest on
this Note is not paid when due, the Maker shall pay on demand all costs of
collection, including, but not limited to, reasonable attorneys' fees.
6. Conversion of Note.
6.1 Right of Conversion. At any time and from time to time on
or prior to the Maturity Date (the "Conversion Period"), the Holder or the
Maker may, at their option, convert all or any portion (in multiples of
$100,000) of this Note into fully paid and nonassessable shares of Maker's
common stock (the "Common Stock") at the rate of one share of Common Stock for
each $1.00 in principal amount outstanding (the "Conversion Rate"); provided
that the Maker may exercise its right to require conversion only if: (i) the
shares of Common Stock into which this Note is to be converted are registered
on terms and conditions no less favorable to the Holder than those applicable
to the holder of the Shares (as defined in the Asset Purchase Agreement)
pursuant to Article 8 of the Asset Purchase Agreement; and (ii) the closing
bid price of the Common Stock as reported by the exchange upon which the
Common Stock is listed or admitted to trading or, if the Common Stock is not
so listed or admitted to trading, as reported in the over the counter market
as furnished by any New York Stock Exchange or NASD member firm, shall have
been equal to or greater than $1.25 per share for sixty (60) consecutive
trading days (a "Triggering Event"). Upon conversion of this Note, all
accrued and unpaid interest on the portion of this Note being converted shall
be paid in cash to the Holder.
6.2 Conversion Procedure.
6.2.1 Before the Holder shall be entitled to convert this Note
into shares of Common Stock, it shall give written notice (the "Conversion
Notice") to the Maker at its principal corporate office, of the election to
convert the same pursuant to Section 6.1 above and the Holder shall indicate
therein (i) the portion of this Note to be converted into shares of Common
Stock; and (ii) the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. Before the Maker shall be entitled
to convert this Note into shares of Common Stock, it shall give a Conversion
Notice to the Holder at its principal corporate office within five business
days after a Triggering Event, indicating the portion of this Note to be
converted into shares of Common Stock and the Holder shall indicate by written
notice to the Maker the name or names in which the certificate or certificates
for shares of Common Stock are to be issued.
6.2.2 As soon as practicable after the conversion of this Note
pursuant to Section 6.1 above, the Maker shall, within three business days of
the deposit of this Note accompanied by the Conversion Notice, deliver at such
address to the Holder certificates for the number of full shares of Common
Stock to which Holder shall be entitled pursuant to Section 6.1, together with
an amount in cash equal to the accrued and unpaid interest on that portion of
this Note which is being converted as of the date of the deposit of this Note
with the Maker, in addition to a cash adjustment to reflect the elimination of
any fractional interest in Common Stock pursuant to Section 6.8 hereof, if
<PAGE> 2
this Note is not evenly convertible into Common Stock. Unless the entire
principal amount of this Note has been converted or this Note has been paid in
full, the Maker shall prepare a new Note, substantially identical hereto,
representing the remaining principal amount of this Note and shall, within
three business days, deliver such new Note to the Holder.
6.2.3 Upon conversion of all of this Note and delivery of the
certificate(s) evidencing the conversion shares of Common Stock, the Maker
shall be forever released from all its obligations and liabilities under this
Note.
6.3 Adjustments for Stock Splits and Subdivisions. In the event
that the Maker should at any time or from time to time after the date of
issuance of this Note fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination of
holders of shares of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities
or rights convertible into, or entitling the holder thereof to receive,
directly or indirectly, additional shares of Common Stock (the "Share
Equivalents") without payment of any consideration by such holder for the
additional shares of Common Stock or the Share Equivalents (including
additional shares of Common Stock issuable upon conversion or exercise
thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed) the number of
shares of Common Stock issuable upon conversion of this Note shall be
increased in proportion to such increase of outstanding shares of Common
Stock. Notwithstanding the foregoing, there shall be no increase in the
number of shares issuable upon conversion as a result of any share of Common
Stock issuable for stock options issued to employees of the Maker or pursuant
to the Maker's 1999 Stock Option Plan. If the number of shares of Common
Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the number of shares issuable on conversion
hereof shall be decreased in proportion to such decrease in outstanding
shares.
6.4 Reorganization, Reclassification, Consolidation, Merger or
Sale. Prior to the consummation of any Company Sale (as defined below), the
Maker shall make appropriate provision (in form and substance satisfactory to
the Holder) to insure that the Holder shall thereafter have the right to
acquire and receive in lieu of or addition to (as the case may be) the shares
of Common Stock immediately theretofore acquirable and receivable upon the
conversion of this Note, such shares of stock, securities or assets as may be
issuable or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon conversion
of this Note had such Company Sale not taken place. For the purpose of this
Section 6, "Company Sale" means any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of
the Maker's assets to another Person or other transaction which is effected in
such a way that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for Common Stock.
<PAGE> 3
6.5 Adjustment of Conversion Rate. In the case of any Company
Sale, the Maker shall make appropriate provision (in form and substance
satisfactory to the Holder) with respect to the Holder's rights and interests
to insure that the provisions of this Section 6 shall thereafter be applicable
to this Note (including, in the case of any such consolidation, merger or sale
in which the successor entity or purchasing entity is other than the Maker, an
immediate adjustment of the Conversion Rate to reflect the value for the
Common Stock reflected by the terms of such consolidation, merger or sale, if
the value so reflected would cause an increase to the Conversion Rate in
effect immediately prior to such consolidation, merger or sale). The Maker
shall not effect any such consolidation, merger or sale, unless prior to the
consummation thereof, the successor entity (if other than the Maker) resulting
from consolidation or merger or the corporation purchasing such assets assumes
by written instrument (in form and substance satisfactory to the Holder), the
obligation to deliver to the Holder such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such Holder may be entitled
to acquire.
6.6 Certain Other Events. If any event occurs of the type
contemplated by the provisions of this Section 6 but not expressly provided
for by such provisions (excluding the granting of employee stock options,
stock appreciation rights, phantom stock rights or other rights with equity
features), then the Maker's board of directors shall make an appropriate
adjustment in the Conversion Rate so as to protect the rights of the Holder.
6.7 Shares to be Reserved. The Maker shall at all times reserve
and keep available, out of its authorized and unissued stock, solely for the
purpose of effecting the conversion of this Note, the full number of shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of the entire amount of this Note from time to time outstanding. The Maker
shall from time to time, in accordance with the laws of the State of Florida,
increase the authorized number of shares Common Stock if at any time the
number of shares of Common Stock authorized and not then outstanding shall be
insufficient to permit the conversion of the entire amount of this Note then
outstanding.
6.8 No Fractional Interests. No fractional interests in Common
Stock shall be issued upon the conversion of this Note. Instead of any
fractional shares of Common Stock which would otherwise be issuable upon
conversion of this Note, the Maker shall pay cash in respect of such
fractional interest in an amount equal to the same fraction of the Market
Price per share of Common Stock at the close of business on the day of
conversion into which such fractional share of Common Stock would be
convertible on such date. For the purposes of this Section, "Market Price"
means as to any security as of a particular date, the average of the closing
prices of such security on the New York Stock Exchange, Inc. on each of the 30
trading days next preceding such date or, if such security is not then listed
or admitted to trading on such exchange, on the principal national securities
exchange on which such security is listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the
Nasdaq National Market, or if such security is not then listed or admitted to
trading on a national securities exchange or quoted on the Nasdaq National
Market, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock Exchange member
<PAGE> 4
firm selected by the Holder or if no such prices are available, the "Market
Price" shall be the fair value thereof as determined in good faith by the
board of directors of the Maker (determined without giving effect to any
discount for minority interest, any restrictions on transferability or any
lack of liquidity of the Common Stock or to the fact that the Maker has no
class of equity registered under the Securities Exchange Act of 1934), such
fair value to be determined by reference to the cash price that would be paid
between a fully informed buyer and seller under no compulsion to buy or sell;
provided that if such fair value is being determined in connection with an
issuance of shares of Common Stock, options or convertible securities solely
to one or more Affiliates of the Maker, then in each such case if so required
by the Holder, such fair value shall be determined by an independent
nationally recognized investment bank jointly selected by the Maker and the
Holder. The determination of such investment bank shall be final and binding
on the Maker and the Holder, and the fees and expenses of such investment bank
shall be paid equally by the Maker and the Holder.
6.9 Common Stock Issued Upon Conversion. All shares of Common
Stock which are issuable upon conversion of this Note shall, when issued, be
duly and validly issued, fully paid and nonassessable and free from all taxes,
liens and charges. The Maker shall take all such actions as may be necessary
to assure that all such shares of Common Stock may be so issued without
violation of any applicable law or governmental regulation or any requirements
of any domestic securities exchange or quotation system upon which shares of
Common Stock may be listed (except for official notice of issuance which shall
be immediately delivered by the Maker upon each such issuance). The Maker
will use its best efforts to cause the shares of Common Stock issued upon
conversion to be listed on any domestic securities exchange upon which shares
of such class of Common Stock are listed at the time of issuance. With
respect to the shares of Common Stock issuable upon conversion of this Note,
the Holder will be entitled to customary anti-dilution rights upon terms no
less favorable than those applicable to any other holders of Common Stock.
7. Subordination.
7.1 The indebtedness evidenced by this Note is subordinate and
junior in right of payment to all Senior Debt (as defined in Section 7.5) to
the extent provided in this Section 7. The Holder, by acceptance hereof,
agrees to the subordination herein provided and shall be bound by the
provisions hereof.
7.2 Upon the happening of an event of default with respect to
any Senior Debt as defined in the instrument under which the same is
outstanding, permitting the holders thereof to accelerate the maturity
thereof, then, unless and until such event of default shall have been cured or
waived or shall have ceased to exist, no direct or indirect payment (in cash,
property, securities, by set-off or otherwise) shall be made or agreed to be
made on account of the principal of or interest on this Note, provided that
the amount of any such indebtedness as to which an event of default shall
occur exceeds $750,000.
<PAGE> 5
7.3 In the event of:
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to the Maker, its creditors or its property,
(b) any proceeding for the liquidation, dissolution or other
winding-up of the Maker, voluntary or involuntary, whether or not involving
insolvency or bankruptcy proceedings,
(c) any assignment by the Maker for the benefit of creditors, or
(d) any other marshaling of the assets of the Maker,
all Senior Debt (including any interest and premium, if any, thereon accruing
after the commencement of any such proceeding) shall first be paid in full
before any payment or distribution, whether in cash, securities or other
property, shall be made to the Holder with respect to this Note. Any payment
or distribution, whether in cash, securities or other property, which would
otherwise (but for provisions of this Section 7) be payable or deliverable in
respect of this Note shall be paid or delivered directly to the holders of
Senior Debt in accordance with the priorities then existing among such holders
until all Senior Debt (including any interest thereon accruing after the
commencement of any such proceeding) has been paid in full, and in furtherance
thereof the Holder irrevocably authorizes and empowers (without imposing any
obligation on) each holder of Senior Debt at the time outstanding as such
holder's representatives to demand, sue for, collect and receive such holder's
ratable share of all such payments and distributions and to receipt therefor,
and to file and prove all claims therefor and take all such other action
(including the right to vote such Senior Debt in the name of the Holder or
otherwise), as such Senior Debt may determine to be necessary or appropriate.
7.4 If any payment or distribution of any character or any
security, whether in cash, securities or other property, shall be received by
the Holder in contravention of any of the terms of this Section 7 and before
all the Senior Debt shall have been paid in full, such payment or distribution
or security shall be received in trust for the benefit of, and shall be paid
over or delivered and transferred to, the holders of the Senior Debt at the
time outstanding in accordance with the priorities then existing among such
holders for application to the payment of all Senior Debt remaining unpaid, to
the extent necessary to pay all such Senior Debt in full.
7.5 The term "Senior Debt" shall mean (i) all indebtedness of
the Maker for money borrowed as of the date hereof, and future indebtedness
which is not expressly stated to be subordinated indebtedness to this Note and
(ii) all liabilities of the Maker to trade creditors; provided that this Note
shall rank pari passu to any future indebtedness to any present or future
shareholder of the Maker.
<PAGE> 6
8. Events of Default. If any of the following events (each, an
"Event of Default") shall occur and be continuing for any reason whatsoever
(and whether such occurrence shall be voluntary or involuntary or come about
or be effected by operation of law or otherwise):
(i) the Maker defaults in the payment of any principal on this
Note when the same shall become due; or
(ii) the Maker defaults in the payment of any interest on
this Note for more than 15 days after the same shall have become due; or
(iii) the Maker or any of its subsidiaries defaults in any
payment of principal of or interest on any obligation for money borrowed (or
any capital lease obligation, any obligation under a conditional sale or other
title retention agreement, any obligation issued or assumed as full or partial
payment for property whether or not secured by a purchase money mortgage or
any obligation under notes payable or drafts accepted representing extensions
of credit) beyond any period of grace provided with respect thereto, or the
Maker or any of its subsidiaries fails to perform or observe any other
agreement, term or condition contained in any agreement or instrument under
which any such obligation is created (or if any other event thereunder or
under any such agreement or instrument shall occur and be continuing) and the
effect of such failure or other event is to cause, or to permit the holder or
holders of such obligation (or a trustee on behalf of such holder or holders)
to cause, such obligation to become due prior to any stated maturity, provided
that the aggregate principal amount of all such obligations as to which such
payment default shall occur and be continuing or such failure or other event
causing or permitting acceleration shall occur and be continuing exceeds
$500,000; or
(iv) the Maker or any of its subsidiaries (x) makes an
assignment for the benefit of creditors or (y) is generally not paying its
debts as such debts become due; or
(v) any order, judgment or decree for relief in respect of the
Maker or any of its subsidiaries is entered under any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law, whether now or hereafter in effect
(herein called a "Bankruptcy Law") of any jurisdiction; or
(vi) the Maker or any of its subsidiaries petitions or applies
to any tribunal for, or consents to, the appointment of, or taking possession
by, a trustee, receiver, custodian, liquidator or similar official of the
Maker or any of its subsidiaries, or of any substantial part of the assets of
the Maker or any of its subsidiaries, or commences a voluntary case under any
Bankruptcy Law of the United States or any proceedings (other than proceedings
for the voluntary liquidation and dissolution of a subsidiary) relating to the
Maker or any of its subsidiaries under the Bankruptcy Law of any other
jurisdiction; or
<PAGE> 7
(vii) any such petition or application is filed, or any such
proceedings are commenced, against the Maker or any of its subsidiaries and is
not dismissed within 45 days after the filing or commencement thereof, or any
order, judgment or decree is entered appointing any such trustee, receiver,
custodian, liquidator or similar official, or approving the petition in any
such proceedings, and such order, judgment or decree remains unstayed and in
effect for more than 30 days; or
(viii) any order, judgment or decree is entered in any
proceedings against the Maker or any of its subsidiaries decreeing the
dissolution of the Maker or such subsidiary and such order, judgment or decree
remains unstayed and in effect for more than 30 days; or
(ix) any order, judgment or decree is entered in any proceedings
against the Maker or any of its subsidiaries decreeing a split-up of the Maker
or such subsidiary which requires the divestiture of any assets and such
order, judgment or decree remains unstayed and in effect for more than 30
days; or
(x) a final judgment or judgments are rendered against the Maker
or any of its subsidiaries for the payment of money in excess of $500,000 and,
within 30 days after entry thereof, such judgment or judgments are not
discharged or execution thereof stayed pending appeal, or within 30 days after
the expiration of such stay, such judgment or judgments are not discharged; or
(xi) the Maker fails to perform or observe any agreement
contained in Section 9 and such failure shall not be remedied within the
earlier to occur of (a) 15 days after any officer of the Maker obtains actual
knowledge thereof, or (b) 15 days after the end of the Maker's fiscal quarter
during which such failure occurs;
then, upon the occurrence of any Event of Default, the unpaid principal amount
of and accrued interest on this Note shall automatically become due and
payable, in any such case without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Maker.
9. Covenants. The Maker covenants and agrees that from the date
of this Note until all the principal and interest due hereon have been paid in
full the Maker will comply with the following covenants:
9.1 Corporate Existence. The Maker will do or cause to be done
all things necessary to preserve and keep in full force and effect its
corporate existence and the corporate existence of each of its subsidiaries in
accordance with the respective organizational documents of each such
subsidiary and the corporate rights (charter and statutory), licenses and
franchises of the Maker and its subsidiaries except where the Maker reasonably
determines that the preservation of the corporate existence and such other
corporate rights, licenses and franchises is no longer necessary and that the
<PAGE> 8
termination or suspension thereof will not be materially adverse to the
Holder.
9.2 Payment of Taxes and Other Claims. The Maker will pay or
discharge or cause to be paid or discharged, before any penalty accrues from
the failure to so pay or discharge, (i) all material taxes, assessments and
governmental charges levied or imposed upon the Maker or any of its
subsidiaries or upon the income, profits or property of either, and (ii) all
material lawful claims for labor, materials and supplies which, if unpaid,
would by law create a Lien upon the property of the Maker or any subsidiary;
provided that the Maker shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim the amount,
applicability or validity of which is being contested in good faith by
appropriate proceedings and for which adequate provision has been made or
where the failure to effect such payment or discharge is not adverse in any
material respect to the Holder.
10. Remedies. The remedies of the Holder as provided herein
shall be cumulative and may be pursued singly, successively or together, at
the sole discretion of the Holder, and may be exercised as often as occasion
therefor shall occur, and the failure to exercise any such right or remedy
shall in no event be construed as a waiver or release thereof. No delay in
the exercise of or failure to exercise, any right, remedy, or power accruing
upon any default or failure of the Maker in the performance of any obligation
under this Note shall impair any such right, remedy or power or shall be
construed to be a waiver thereof, but any such right, remedy, or power may be
exercised from time to time and as often as may be deemed by the Holder
expedient. If the Maker should default in the performance of any obligation
under this Note, and such default should thereafter be waived by the Holder,
such waiver shall be limited to the particular default so waived.
11. Governing Law. This Note and the rights and obligations of
the parties hereunder shall be governed by and construed in accordance with
the internal laws of the State of New York, without regard to principles of
conflicts of laws. Venue for any action hereunder or related hereto shall be
in the State or Federal courts located in New York, New York and the Maker
hereby submits to the jurisdiction of such courts.
12. Amendment; waiver. No modification or waiver of any
provision of this Note, nor any departure therefrom, shall in any event be
effective unless the same shall be in a written instrument signed by the
Holder and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose given.
13. Beneficiaries. The terms and provisions hereof shall inure
to the benefit of the Holder and its endorsees, successors and assigns, and
shall be binding upon the Maker and its successors.
14. Non-negotiable. This Note shall be non-negotiable, provided
that the Holder shall have the right to assign and transfer this Note, and its
rights and obligations hereunder, to SCOA or any Affiliate of SCOA. For
<PAGE> 9
purposes hereof, the term "Affiliate" shall mean any corporation or other
entity that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with SCOA. For
purposes of this definition, control of an entity means the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such person, whether by contract or otherwise and, in any event and without
limitation of the previous sentence, any entity owning more than 50% of the
voting securities of a second entity shall be deemed to control that second
entity.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed by
its duly authorized officer on the day and year first above written.
UTOPIA MARKETING, INC.
By:________________________________
Name: Samuel L. Edelman
Title: Chief Executive Officer
<PAGE> 10
COLLECTION SERVICES AGREEMENT
This Collection Services Agreement (the "Agreement"), dated as of
October 5, 1999, is entered into by and among Utopia Marketing, Inc., a
Florida corporation ("Utopia"), Sumitomo Corporation of America, a New York
corporation ("SCOA"), and Ipanema Shoe Corporation, a New York corporation
("Ipanema").
WHEREAS, pursuant to an Asset Purchase Agreement dated as of the
date hereof among Utopia, Ipanema and SCOA (the "Asset Purchase Agreement"),
Utopia is purchasing certain assets of Ipanema as specified in the Asset
Purchase Agreement, and Ipanema is retaining its other assets, including
without limitation the Back Orders, Inventory and Receivables and the Retained
Liabilities;
WHEREAS, as a material inducement for each party hereto to enter
into the Asset Purchase Agreement, Ipanema and SCOA desire that Ipanema grant
to Utopia, and Utopia desires to assume, the exclusive right and
responsibility, acting as Ipanema's agent, to manage the process of collecting
amounts payable to Ipanema under the Receivables, on the terms and subject to
the conditions set forth herein; and
WHEREAS, all capitalized terms used but not defined in this
Agreement shall have the meaning ascribed to them in the Asset Purchase
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
1. Services Provided. Subject to the terms and conditions set
forth in this Agreement, Ipanema hereby retains and appoints Utopia as its
exclusive agent for the purpose of managing the process of collecting amounts
payable to Ipanema in respect of any and all Receivables. Commencing on the
date hereof and during the term of this Agreement, Utopia, at no cost or
expense to Ipanema or SCOA (other than as provided in this Agreement), shall
provide such collection management and other services as may be commercially
reasonable to maximize the collection of Receivables on behalf of Ipanema
(individually, a "Service", and collectively, the "Services"). Utopia shall
maintain adequate sources of funding to support its operations and perform the
Services with no less commitment with respect to resources and quality than it
would in engaging in the Services for its own account, and in any event shall
perform the Services in good faith and in a commercially reasonable manner in
accordance with the terms of this Agreement. Ipanema and SCOA recognize and
agree that, during the term of this Agreement and subject to the terms and
conditions hereof, Utopia shall have the exclusive right (to the exclusion of
Ipanema and SCOA) and responsibility to manage the process of collecting
amounts payable to Ipanema in respect of any and all Receivables, provided
that each party hereto also recognizes that it will be necessary for Utopia to
receive the assistance of Ipanema personnel who effectively may be performing
<PAGE> 1
certain of the Services on a day-to-day basis until October 31, 1999.
Notwithstanding the foregoing, each party hereto further understands that all
rights and responsibilities with respect to ultimate decision making with
respect to the collection management of all Receivables will be retained by
Utopia exclusively, subject to the rights of Ipanema and SCOA hereunder in
respect of outsourcing/subcontracting and the arbitration of disputes pursuant
to Section 5. Utopia shall grant Markdowns and settle other Customer
Liabilities of Ipanema in a commercially reasonable manner. In performing the
Services hereunder Utopia shall be permitted to outsource or subcontract with
qualified third parties, subject to Ipanema's consent, which shall not be
unreasonably withheld, including with Atlas and ACI (parties with whom
Ipanema has contracted for similar services in the past).
2. Collection of Receivables Proceeds; Fees and Payment.
(a) All customers and other third parties making payment with
respect to the Receivables have been and shall continue to be instructed to
make payment solely to Ipanema's lock box account, account number 323-031-331
at Chase Manhattan Bank, NYC, ABA (Routing Number) 021000021 (the "Lock Box
Account"). Except as provided in Section 2(b) below, neither Utopia nor any
of its Representatives or any other party acting with their authority, shall
have any right to receive or retain any payments from customers or other
third parties with respect to the Receivables (collectively, the "Customer
Payments") or with respect to any other Retained Assets. Utopia shall cause
any Customer Payment received by any of such Persons to be remitted to the
Lock Box Account within three (3) business days following their receipt
thereof. No part of any Customer Payments received by any of such Persons may
be reduced due to any counterclaim, setoff, adjustment or other right which
Utopia or any other Person may have against Ipanema, SCOA or any other Person.
(b) In consideration of the Services, Ipanema shall pay to
Utopia 30% of each Customer Payment received hereunder. Such payment shall be
made in accordance with Section 2(c) below.
(c) Ipanema shall deliver to Utopia, on each Friday during the
term of this Agreement for the week ending the previous Friday (each a
"Payment Period"), beginning with the first Payment Period, a written report
describing, for the applicable Payment Period: (x) the total Customer Payments
remitted to the Lock Box Account; and (y) the amount of the payment owing to
Utopia pursuant to Section 2(b). Each such report shall be in sufficient
detail for the accuracy of the calculation of the resulting payment owing to
Utopia pursuant to Section 2(b) to be verified. Simultaneously with each such
report with respect to a Payment Period, Ipanema or SCOA, on Ipanema's behalf,
shall make full payment to Utopia of the amount payable to Utopia pursuant to
Section 2(b) by wire transfer of immediately available funds to such U.S. bank
account as Utopia may designate in writing from time to time.
(d) On not less than three (3) business days' prior written
notice to Ipanema, Utopia's independent auditor (who shall not be Ipanema's
independent auditor) shall have full access to the books and records of
<PAGE> 2
Ipanema pertaining to Customer Payments and shall have the right to make
copies therefrom at Utopia's expense. Utopia's independent auditor shall have
such access at all reasonable times and from time to time during normal
business hours during the term of this Agreement and for a period of one year
thereafter. Prompt adjustment shall be made by the proper party to compensate
for any errors or omissions disclosed by such audit, with interest accruing on
such adjustment amount at a rate equal to 10% from the date as of which the
payee originally had the right to receive the adjustment amount. All reports
and payments not disputed as to correctness by Utopia within one year after
receipt thereof shall thereafter conclusively be deemed correct for all
purposes of this Agreement.
3. Personnel.
(a) Utopia shall maintain such staff and facilities as may be
reasonably necessary to perform the Services. Until October 31, 1999, Ipanema
shall use commercially reasonable efforts to retain a skeleton staff of
Ipanema employees identified in Annex A to assist Utopia in the performance of
the Services, it being acknowledged by Utopia that Ipanema cannot guaranty
that such personnel shall not leave its employ, nor shall Ipanema be under any
obligation to replace any such personnel who leave its employ notwithstanding
its commercially reasonable efforts to retain them through October 31, 1999.
(b) Utopia shall permit SCOA and Ipanema and their respective
employees and agents access during regular business hours (or otherwise upon
reasonable prior notice) to individuals responsible for the Services and to
any Computer Equipment purchased by Utopia pursuant to Section 2.1(d) of the
Asset Purchase Agreement, and shall provide SCOA with such data and records as
SCOA may reasonably request for the purposes of allowing SCOA to monitor the
performance of the Services. Without limiting the generality of the
foregoing, SCOA shall have the right to second at least one Representative
(collectively, "Seconded Employees") at the facilities of Utopia where the
Services are to be provided, in order to monitor and have full access to and
participate in the Services (including, without limitation, the granting of
Markdowns and settlement of other Customer Liabilities of Ipanema); provided
that (i) SCOA shall be responsible for all amounts payable in relation to the
Seconded Employees (including wages, salaries and other benefits, and social
security or similar taxes); and (ii) all Seconded Employees, while at the
facilities of Utopia, shall comply with all reasonable rules and regulations
established by Utopia, and shall abide by appropriate confidentiality
restrictions.
(c) Utopia shall make available any of its employees whose
assistance, testimony or presence is necessary to assist SCOA and/or Ipanema
in evaluating or defending any claims, including the presence of such persons
as witnesses in hearings or trials for such purpose; provided that SCOA shall
reimburse Utopia or the employee, for any direct out-of-pocket costs in
connection with such employee's assistance, testimony or presence, promptly
following receipt of appropriate documentation of such out-of-pocket costs.
<PAGE> 3
(d) Each party shall designate a relationship manager to report
and discuss issues with respect to the provision of Services under this
Agreement. Utopia hereby designates Joseph Wascura and SCOA hereby
designates Beth Donalds as their respective initial relationship managers.
The relationship managers shall meet to discuss the performance of the
Services (including without limitation a detailed report of any and all
Markdowns granted or being considered since the last meeting) as often as
reasonably necessary to ensure the orderly provision of the Services, and in
any event at least weekly, and shall have authority to address and remedy
problems related to the provision of Services to the extent consistent with
this Agreement. Each party shall designate successor relationship managers in
the event that a designated individual is not available to perform such role
hereunder.
4. Term. This Agreement shall commence as of the date hereof
and continue in effect thereafter until March 31, 2000, provided that Ipanema
(or SCOA, as its successor) shall have diligently pursued its remedies under
its credit insurance policies during the term hereof with respect to the
Designated Receivables (as hereinafter defined), and, if as of March 31, 2000
Utopia shall not have been compensated hereunder with respect to the
Designated Receivables, the parties shall enter into good faith discussions to
amicably resolve such matter. For purposes hereof, "Designated Receivables"
means Ipanema's accounts receivable from the following customers for the
following accounts: (i) Filene's Basement for $20,706.84; (ii) Loehmann's for
$64,629.00; and (iii) MTB for $1,579.87. The term of this Agreement may be
reduced or extended by written agreement of the parties. Upon termination of
this Agreement, or upon expiration of the term hereof: (i) Ipanema shall
deliver to Utopia by wire transfer an amount equal to 30% of the outstanding
balance of the Lock Box on the date of termination or expiry of this
Agreement; and (ii) Utopia shall retain all books and records, or copies
thereof, pertaining to the disposition of the Receivables used or generated in
the course of the provision of Services hereunder. Thereafter Utopia shall
have the right to dispose of such books and records, but will not do so unless
it has given SCOA at least 90 days' prior notice of such disposition and the
reasonable opportunity, to the extent practicable, to have such books and
records copied or delivered to SCOA at SCOA's expense. If requested by SCOA,
Utopia will afford SCOA reasonable access to such books and records during
normal business hours at SCOA's expense and shall permit SCOA at its expense
to copy or to take original copies of such books and records to the extent
such books and records pertain solely to the disposition of the Receivables
and to copy such books and records to the extent such books and records
pertain to the disposition of the Receivables only in part.
5. Dispute Resolution. In the event any dispute arises under
this Agreement, the parties hereto agree to negotiate in good faith to resolve
such dispute prior to seeking relief in a court of law in accordance with
Section 15. Either Utopia on one hand, or SCOA and/or Ipanema on the other
hand, may at any time deliver a notice to the other that it (they) wishes to
refer a dispute to senior executives of SCOA and Utopia, respectively.
Following receipt of such notice, each of Utopia and SCOA shall designate one
of its senior executives to negotiate in good faith to resolve such dispute
within 5 days (or such longer period of time as such executives may agree
upon). If at the end of such 5-day (or longer if properly extended) period
<PAGE> 4
the designated executives have not fully resolved the dispute to their mutual
satisfaction, any party may thereafter seek relief in a court of law in
accordance with Section 15, provided that any dispute arising from the
granting or settlement of Markdowns or other Customer Liabilities of Ipanema
shall be referred to binding arbitration before Arthur Samuels or, if he is
unavailable, such other individual as the parties mutually agree upon,
pursuant to procedures to be mutually determined by the parties; provided
further that any such Markdowns or other Customer Liabilities not disputed by
SCOA and/or Ipanema in writing within 10 business days following notice
thereof from Utopia pursuant to Section 3(d) shall be deemed accepted by
Ipanema and SCOA.
6. Confidentiality; Data.
(a) The materials, data and/or information of Utopia that may be
provided to SCOA and/or Ipanema concerning the business, operations or results
of Utopia (including any such information learned during an audit), and
Ipanema's materials, data and/or information provided to Utopia or generated
in connection with the Services concerning the disposition of the Receivables,
are proprietary trade secrets and confidential information ("Confidential
Information") of Utopia and Ipanema, respectively, and no party shall possess
any interest, title, lien or right in any Confidential Information of any
other. Utopia on one hand, and SCOA and Ipanema on the other hand, agree not
to (i) disclose the Confidential Information of the other to any third party
or (ii) use the Confidential Information of the other except as necessary to
perform its obligations under this Agreement, in either case without the
express prior written consent of the other, and each party shall be
responsible for any breaches of this Section 6 by its affiliates, directors,
officers, employees, representatives (including financial advisors, attorneys
and accountants) or agents (the "Representatives").
(b) The term Confidential Information will not, however, include
information which (i) is or becomes publicly available other than as a result
of a disclosure by any party receiving the Confidential Information
("Receiving Party") or its Representatives or (ii) is or becomes available to
the Receiving Party on a nonconfidential basis from a source (other than the
party providing, directly or indirectly, its Confidential Information
("Providing Party") or its Representatives) which, to the best of the
Receiving Party's knowledge after due inquiry, is not prohibited from
disclosing such information to it by a legal, contractual or fiduciary
obligation to the Providing Party.
(c) Upon the earliest to occur of expiration or termination of
this Agreement or at such time as any Confidential Information ceases to be
required by the Receiving Party to perform or receive Services hereunder, or
at the request of a Providing Party, a Receiving Party shall promptly return,
and cause to be returned, all or any requested portion of such Confidential
Information and shall destroy, or cause to be destroyed, all copies (including
electronic versions) of any compilations, analyses, studies or other documents
prepared by the Receiving Party or its Representatives containing or
reflecting any such Confidential Information.
<PAGE> 5
(d) Notwithstanding the other provisions of this Section 6,
either party may disclose any Confidential Information of the other party to
the minimum extent required by applicable law, regulation or legal process;
provided that either party that is requested pursuant to, or required by,
applicable law, regulation or legal process to disclose any Confidential
Information shall provide the Providing Party with prompt prior written notice
of such request or requirement, and shall cooperate with the Providing Party
to seek an appropriate protective order or other remedy, to take steps to
resist or narrow the scope of such request or legal process.
7. Good Faith. The parties hereto agree that all negotiations
and consultations provided for in this Agreement shall be undertaken in good
faith in order to achieve mutually agreeable understandings.
8. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by overnight courier service, by cable, by facsimile, by telegram, by
telex or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or to such
other persons with respect to specific provisions hereof or at such other
address for a party, in each case, as shall be specified in a notice given in
accordance with this Section 8):
If to SCOA and/or Ipanema:
Sumitomo Corporation of America
600 Third Avenue
New York, New York 10116-2001
Attention: General Manager, Investment Division
Telecopier: (212) 207-0821
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention: Michael A. Doherty, Esq.
Telecopier: (212) 309-6273
If to Utopia:
Utopia Marketing, Inc.
312 Clematis Street, Suite 500
West Palm Beach, Florida 33401
Attention: Joseph Wascura
Telecopier: (561) 659-5271
<PAGE> 6
with a copy to:
Holland & Knight LLP
701 Brickell Avenue
Miami, FL 33131
Attention: Steven Sonberg, Esq.
Telecopier: (305) 789-7799
9. Public Announcements. Subject to the express terms of
Section 9.3 of the Asset Purchase Agreement, except as may be required by law
or stock exchange rules, no party to this Agreement shall make any public
announcements in respect of this Agreement or the transactions contemplated
hereby or otherwise communicate with any news media without the consent of to
the other parties (such consent not to be unreasonably withheld). With
respect to the public announcement concerning the transactions contemplated by
this Agreement and the Asset Purchase Agreement, the parties shall cooperate
as to the timing and contents of any such announcement.
10. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the greatest extent possible.
11. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, among
the parties with respect to the subject matter hereof.
12. Binding Effect; Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement may not be
assigned or otherwise transferred, by any party hereto, whether voluntarily or
by operation of law, without the prior written consent of the other parties,
provided that such consent shall not be required if: (i) the rights of Utopia
hereunder are encumbered by and/or assigned to a financial institution which
is providing financing to Utopia; or (ii) the right and obligations of
Ipanema hereunder are assigned to SCOA. Any attempted assignment, delegation
or other transfer without the prior written consent of the other parties, if
required pursuant hereto, shall be void and of no legal force or effect.
<PAGE> 7
13. No Third Party Beneficiaries. This Agreement is for the
sole benefit of the parties hereto and their permitted assigns and nothing
herein, express or implied, is intended to or shall confer upon any other
person or entity any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
14. Relationship of the Parties. The parties hereto are
independent contractors. This Agreement shall not be construed as
constituting either Utopia on one hand, or SCOA and Ipanema on the other hand,
as partners or joint venturers, or as creating any other form of legal
association or arrangement which would impose liability on one for the act or
omission of the other(s).
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York.
16. Recovery of Litigation Expenses. In connection with any
suit, action or proceeding between or among any parties hereto arising out of
or related to this Agreement, the prevailing party or parties in such suit,
action or proceeding shall be entitled to recover all of its and their costs
and expenses in connection with such suit, action or proceeding, including,
without limitation, all costs and expenses in investigating and prosecuting or
defending such suit, action or proceeding, including, without limitation,
reasonable fees and expenses of counsel, auditors and other consultants.
17. Amendment. This Agreement may not be amended or modified
except by an instrument in writing signed by the parties hereto.
18. Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but
no such waiver shall be effective unless set forth in a written instrument
duly executed by or on behalf of the party waiving such term or condition. No
waiver by any party of any term or condition of this Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion. All
remedies, either under this Agreement or by law or otherwise afforded, will be
cumulative and not alternative.
19. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by telecopier shall
be effective as delivery of a manually executed counterpart of this Agreement.
<PAGE> 8
20. No Presumption. This Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.
21. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
22. Force Majeure. Any failure or omission by a party in the
performance of any obligation under this Agreement shall not be deemed a
breach of this Agreement or create any liability, if the same arises from any
cause or causes beyond the control of such party, including, but not limited
to, the following, which, for purposes of this Agreement shall be regarded as
beyond the control of each of the parties hereto: acts of God, fire, storm,
flood, earthquake, governmental regulation or direction, acts of the public
enemy, war, rebellion, insurrection riot, invasion, strike or lockout;
provided that such party shall resume the performance whenever such causes are
removed. Notwithstanding the foregoing, if such party cannot perform any
obligation under this Agreement for a period of 45 days due to such cause or
causes, the parties shall in good faith negotiate an interim arrangement for
the performance of services hereunder.
23. Specific Performance. To the extent permitted by applicable
law, the parties hereto agree that irreparable damage will occur if any
provision of this Agreement is not performed in accordance with the terms
hereof and that the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or equity; provided that
each of the parties agrees to provide the others with written notice at least
two (2) business days prior to filing any motion or other pleading seeking a
temporary restraining order, a temporary or permanent injunction, specific
performance, or any other equitable remedy and to give the others and their
respective counsel a reasonable opportunity to attend and participate in any
judicial or administrative hearing or other proceeding held to adjudicate or
rule upon any such motion or pleading.
24. Annexes. Any Annexes to this Agreement are deemed a part of
this Agreement and are subject to all of the provisions herein.
25. Authority. Each party hereto represents and warrants to the
other parties hereto as follows: (i) it has the full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby; (ii) the
execution and delivery by it of this Agreement and the performance by it of
its obligations hereunder have been duly and validly authorized by all
necessary corporate action; (iii) this Agreement has been duly and validly
executed and delivered by it and constitutes its legal, valid and binding
obligations, enforceable against it in accordance with its terms, subject to
the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws from time to time in effect and affecting
creditors' rights generally and subject, as to enforceability, to the effect
of general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written by their respective officers
thereunto duly authorized.
UTOPIA MARKETING, INC.
By________________________________
Name: Samuel L. Edelman
Title: Chief Executive Officer
SUMITOMO CORPORATION OF AMERICA
By________________________________
Name: Kotaro Nakata
Title: Vice President
IPANEMA SHOE CORPORATION
By________________________________
Name: Kotaro Nakata
Title: Chief Executive Officer
[Signature Page to Collection Services Agreement]
<PAGE> 10
ANNEX A
IPANEMA PERSONNEL
Remaining Ipanema Employees
(as of September 30, 1999)
Name Title
Executive Staff
Pat Flaminio President and Chief Operating Officer
Beth Donalds Vice President of Finance
Auriel Gonzalez Vice President of MIS and Logistics
Support Staff
Armita Arbolante Supervisor, Accounts Payable
Ava Stewart Accountant
Daniel J.Rodriguez Samples
Edelita DeGracia Senior Corporate Accountant
Gwendolyn Churney Senior Customer Service Representative
Imelda Felciano Manager, Order Entry
Maggie So EDI and Billing
Maria Curto Acevedo General Manager, Customer Service
Shen W. Chen Supervisor, EDI and Billing
Steve Brady Supervisor, Traffic and Inventory
