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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): June 17, 1996
MOTHERS WORK, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-21196 13-3045573
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organizational) File Number) Identification No.)
456 North 5th Street, Philadelphia, PA 19123
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 215-873-2200
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Item 2. Acquisition or Disposition of Assets
On April 25, 1996, Mothers Work, Inc., a Delaware corporation (the
"Company") entered into an Asset Purchase Agreement (the "Agreement") with
Episode USA, Inc., a Delaware corporation ("Episode"), whereby it agreed to
purchase certain assets from Episode (collectively referred to as the "Assets").
The Assets include all of Episode's right, title and interest in the following:
(i) 21 leases (the "Leases"); (ii) machinery, signage, leasehold improvements,
fixtures, point of sale equipment and computer hardware and software and all
other tangible assets and properties of Episode used in the operation of its
business; (iii) all inventories of women's clothing and accessories held for
sale to customers in the stores of Episode on or before May 31, 1996 (the
"Closing Date"); (iv) all packaging materials and supplies, point of sale
supplies, brochures, printed materials and displays; (v) security deposits
relating to the Leases; and (vi) Episode's franchise, permits and licenses,
telephone numbers, customer lists, supplier lists, referral lists, advertising
materials and data, blueprints, store designs, methods and other similar
know-how or rights used at the store level in the operation of Episode's
business.
In consideration for the Assets, the Company paid to Episode an aggregate
purchase price equal to: (i) 173,913 shares of the Company's common stock, par
value $.01 (the "Common Stock"), at an agreed upon value of $23.00 per share and
(ii) $2.0 million in cash. In addition, it is anticipated that the Company will
be required to pay an additional $900,000 in Common Stock as an Inventory
Adjustment Amount (as such term is defined in the Agreement). The aggregate
consideration and other payments to be made in connection with the foregoing
transaction were arrived at pursuant to arms' length negotiations among Episode
and the Company.
Prior to the Closing Date, Episode was a debtor in possession in the
Chapter 11 case before the United States Bankruptcy Court for the Southern
District of New York, Case No. 96-B-40371(JLG) filed in January 1996.
Consequently, bankruptcy court approval was required with respect to the
Agreement and such approval was granted on May 30, 1996.
On the Closing Date, the Company also entered into a Trademark License
Agreement with Episode (the "License Agreement") whereby Episode granted an
exclusive license to the Company to use the trademark "Episode" as a name for
the Company's stores selling bridge women's apparel and accessories. Pursuant to
the License Agreement, the Company is required to pay a royalty equal to five
percent (5%) of the Company's "Net Sales"
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of bridge women's apparel and accessories up to a maximum of $4.5 million. "Net
Sales" is defined in the License Agreement to mean gross receipts from: (i)
sales of all bridge women's apparel and accessories from Episode's stores by the
Company and any affiliate of the Company to unaffiliated third parties; (ii)
catalog sales; (iii) sales by mail; and (iv) wholesale sales of merchandise
bearing the "Episode" or "Excursion" labels, minus sales taxes and net of
returns. The initial term of the License Agreement will be for five years from
the Closing Date and will automatically renew thereafter for successive one year
periods.
In addition, on April 25, 1996, the Company and Toppy International
Limited, a Hong Kong corporation and parent of Episode ("Toppy"), entered into a
Distribution Agreement (the "Distribution Agreement") pursuant to which Toppy
licensed the Company to market women's wearing apparel with one of the following
trademark names: "EPISODE", "EXCURSION" OR "EXCURSIONS" (the "Articles") and
agreed to sell to the Company such products manufactured by Toppy. Toppy also
granted the Company the right to manufacture Articles for sale in the United
States of America, provided it first receives the approval of Toppy in each
instance. The Company is required to pay a royalty to Toppy equal to two percent
(2%) of all sales of Articles manufactured by the Company pursuant to the
Distribution Agreement. The two percent (2%) royalty is to be based upon the
Company's "Retail Sales Price" in the case of retail sales, and upon the
Company's suggested "Retail Sales Price" in the case of wholesale sales. "Retail
Sales Price" is defined in the Distribution Agreement to mean the price, less
sales taxes, charged for Articles sold by the Company to its retail customers.
The term of the Distribution Agreement commenced on June 1, 1996 and will
continue until January 31, 2002, subject to automatic renewal for successive 12
month periods. The Distribution Agreement is terminable by either party for any
reason on 12 months prior notice.
The foregoing descriptions of the Agreement, the License Agreement and the
Distribution Agreement are qualified in their entirety by such agreements which
are incorporated by reference into this Form 8-K as set forth under it.
Item 5. Other Events.
On May 31, 1996, the Company consummated a private placement of an
aggregate of 200,000 shares of its common stock to a number of institutional
investors. The purchase price for the shares was $22.75 per share, and the net
proceeds to the Company, after deducting an aggregate commission of $50,000,
were
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$4.5 million. The Company is using the proceeds of the offering (i) to pay the
cash portion of the purchase price for the Episode Assets referenced above; (ii)
to finance the opening of additional stores and (iii) for general working
capital purposes.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Business Acquired.
The required financial statements are not available as of the date of
this report. The Company intends to file the required financial statements
as soon as practicable, but not later than August 16, 1996.
(b) Pro Forma Financial Information.
The required pro forma financial information is not available as of the
date of this report. The Company intends to file the required pro forma
financial information as soon as practicable, but not later than August 16,
1996.
(c) Exhibits.
2.1 Asset Purchase Agreement dated April 25,
1996 among Mothers Work, Inc., T3
Acquisition, Inc. and Episode USA, Inc. The
Schedules to the Asset Purchase Agreement
(the contents of which are described in the
Asset Purchase Agreement) are not being
filed as Exhibits to this Current Report on
Form 8-K. The Company agrees to furnish
supplementally a copy of any such Schedules
to the Securities and Exchange Commission
upon request.
10.1 Trademark License Agreement dated May 31, 1996
between Mothers Work, Inc. and Episode USA,
Inc.
10.2 Distribution Agreement dated April 25, 1996
among Toppy International Limited, T3
Acquisition, Inc. and Mothers Work, Inc.
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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.
MOTHERS WORK, INC.
Date: June 17, 1996 By: /s/ Thomas Frank
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Thomas Frank
Vice President - Finance and
Chief Accounting Officer, the
principal financial officer
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
Dated as of April 25, 1996
by and among
EPISODE USA, INC.,
MOTHERS WORK, INC.,
and
T3 ACQUISITION, INC.
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TABLE OF CONTENTS
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1. TRANSFER OF ASSETS.............................................. 2
1.1. Purchase and Sale of Assets............................... 2
1.2. Excluded Assets........................................... 3
1.3. Method of Conveyance...................................... 3
1.4. Assumed Obligations....................................... 3
2. PURCHASE PRICE; ESCROW; PURCHASE PRICE ALLOCATION............... 4
2.1. Purchase Price............................................ 4
2.2. Allocation of Purchase Price.............................. 5
2.3. Adjustments to the Inventory Adjustment Amount............ 5
3. PRORATIONS AND ADJUSTMENTS...................................... 7
4. CLOSING......................................................... 7
4.1. Closing................................................... 7
4.2. Closing Deliveries of Seller.............................. 7
4.3. Closing Deliveries of Purchaser........................... 7
5. REPRESENTATIONS AND WARRANTIES OF SELLER........................ 8
5.1. Status of Selling; Stock Ownership........................ 8
5.2. Authority; Approval; Enforceability....................... 8
5.3. No Consents Required...................................... 8
5.4. Financial and Other Information........................... 9
5.5. Environmental Matters..................................... 9
5.6. Employees................................................. 10
5.7. Title; No Liens........................................... 10
5.8. Leases.................................................... 10
5.9. Inventory................................................. 11
5.10. Absence of Certain Changes................................ 11
5.11. Insurance................................................. 11
5.12. [Reserved]................................................ 12
5.13. Permits................................................... 12
5.14. Intellectual Property..................................... 12
5.15. Securities Law Representations............................ 12
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND
MOTHERS WORK.................................................... 14
6.1. Corporate Status.......................................... 14
6.2. Authority................................................. 14
6.3. No Proceedings............................................ 14
6.4. No Conflict............................................... 15
6.5. Parent Reports; Financial Statements...................... 15
6.6. Authorization of Shares and Additional Shares............. 16
7. COVENANTS............................................................ 17
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Page
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7.1. Non-Competition........................................... 17
7.1.1. General........................................ 17
7.1.2. Nondisclosure.................................. 17
7.1.3. Reasonableness of Restrictions................. 18
7.1.4. Enforceability................................. 18
7.1.5. Injunction..................................... 18
7.2. Employees: Access to Employees........................... 18
7.3. Business Licenses......................................... 19
7.4. Assignment of Leases and Executory Contracts.............. 19
7.6. General Restrictions...................................... 20
7.7. Purchaser's Access to Information and Assets.............. 21
7.8. Notice Regarding Changes.................................. 21
7.9. Ensure Conditions Met..................................... 21
7.10. Casualty Loss............................................. 21
7.11. Notice of Motion and Sale Hearing......................... 22
7.12. Publicity................................................. 22
7.13. Bankruptcy Court Approval................................. 22
7.14. Name Changes.............................................. 25
7.15. Post-Closing Indemnities.................................. 25
7.16. Indemnification Procedures and Limitations................ 26
7.17. Transitional Cooperation.................................. 27
7.18. Further Assurances........................................ 27
7.19. Audited Statements........................................ 28
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE................. 28
9. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE.............. 29
10. TERMINATION.......................................................... 30
11. MISCELLANEOUS........................................................ 30
11.1. Entire Agreement......................................... 30
11.2. Amendment................................................ 30
11.3. No Third Party Beneficiary............................... 30
11.4. Waivers and Remedies..................................... 31
11.5. Severability............................................. 31
11.6. Descriptive Headings..................................... 31
11.7. Counterparts............................................. 31
11.8. Notices.................................................. 31
11.9. Successors and Assigns................................... 32
11.10. Applicable Law; Jurisdiction............................. 32
11.11. Brokers and Agents....................................... 32
11.12. Expenses................................................. 33
11.13. Attorneys Fees........................................... 33
11.14. Effect of Representations and Warranties................. 33
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Index to Schedules
Schedule 1.1.1 - Stores
Schedule 1.1.2 - Tangible Assets from Excluded Leases
Schedule 1.2A - Excluded Leases/Closed Stores
Schedule 5.1 - Foreign Qualification
Schedule 5.5A - Financial Statements
Schedule 5.5B - Store Financial Information
Schedule 5.6 - Collective Bargaining Agreements
Schedule 5.8 - Leases
Schedule 5.10A - Adverse Changes
Schedule 5.10B - Occurrences Outside Ordinary Course
Schedule 5.11 - Insurance
Schedule 5.14 - Intellectual Property
Schedule 8.5 - License Agreement
Schedule 8.6 - Registration Rights
Schedule 8.7 - Guarantee
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into on this
25th day of April, 1996 by and among EPISODE USA, INC., debtor and debtor in
possession, a Delaware corporation ("Seller"), MOTHERS WORK, INC., a Delaware
corporation ("Mothers Work"), and T3 ACQUISITION, INC., a Delaware corporation
and wholly-owned subsidiary of Mothers Work ("Purchaser").
R E C I T A L S
A. Seller is engaged in the business of selling women's clothing under
various trademarks, including Episode, Excursion and Episode Studio in retail
stores operated under the name "Episode" located primarily in enclosed regional
shopping malls and center city retail districts throughout the United States
(the "Business).
B. Seller owns or has certain other rights in and to the Assets (as such
term is defined in Section 1.1 hereof) and uses the Assets in the conduct of the
Business.
C. Seller is debtor in possession in bankruptcy in the Chapter 11 case
currently before the United States Bankruptcy Court for the Southern District of
New York (the "Bankruptcy Court"), Case No. 96-B-40371(JLG) (the "Chapter 11
Case").
D. Purchaser desires to purchase all of the Assets on the terms and
conditions hereinafter set forth.
E. Seller desires to sell, assign, convey, transfer and deliver all of the
Assets to Purchaser on the terms and subject to the conditions hereinafter set
forth.
F. Mothers Work is willing to guarantee payment and performance of
Purchaser's obligations under this Agreement.
AGREEMENT
In consideration of the premises and the mutual agreements, covenants,
representations, warranties and understandings hereinafter set forth and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be bound legally, hereby agree as
follows:
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1. TRANSFER OF ASSETS
1.1. Purchase and Sale of Assets. At the Closing (as such term is defined
in Section 4 hereof), Seller shall sell, transfer, convey, assign and deliver to
Purchaser, and Purchaser shall purchase and accept delivery of, all of the
following tangible and intangible assets and properties of Seller owned by
Seller on the Closing Date (as hereinafter defined) (the "Assets").
1.1.1. All of Seller's right, title and interest as lessee in and to
the 21 leases (the "Leases") for Episode retail stores (the "Stores") which
Leases and Stores are identified on Schedule 1.1.1.
1.1.2. All of the Seller's right, title and interest in and to (i) the
machinery, signage, leasehold improvements, fixtures, point of sale equipment
and computer hardware and software and all other tangible assets and properties
of Seller used in the operation of the Business at the Stores but excluding
Inventory and (ii) those assets previously utilized at the locations covered by
the Excluded Leases (as hereinafter defined) which are identified on Schedule
1.1.2 (collectively, the "Tangible Leasehold Assets").
1.1.3. All of Seller's right, title and interest in and to all
inventories of women's clothing and accessories held for sale to customers
which are currently in the Stores or which are subsequently received in the
Stores by the Closing Date and constitute new production of current
(spring/summer) season goods (the "Inventory").
1.1.4. All of Seller's right, title and interest in and to all
packaging materials and supplies, point of sale supplies, brochures,
printed materials and displays relating to the Business wherever located (the
"Supplies Inventory").
1.1.5. All of Seller's right, title and interest in and to the
security deposits relating to the Leases (collectively the "Security
Deposits").
1.1.6. All of the Seller's right, title and interest in and to
Seller's franchise, permits and licenses (to the extent the issuer of such
license or permit permits assignment), telephone numbers, customer lists,
supplier lists, referral lists, advertising materials and data, blueprints,
store designs, methods and other similar know-how or rights used at the store
level in the operation of the Business at the Stores, together with copies of
all books, records, computer software, files, papers and other data of Seller
relating to store
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operations under the Leases or in respect of the Business operated at the Stores
(the "Intangible Assets").
Subject to obtaining the approval required by Section 7.13 hereof, all of
the Assets transferred hereunder shall be transferred free and clear of all
liens, encumbrances, claims, debts, commitments, product liability claims,
warranty claims, pension claims, tort or contractual claims and any asbestos or
any other environmental claims or obligations, whether absolute or contingent,
accrued or unaccrued, asserted or unasserted, known or unknown (collectively,
the "Claims"), each of which shall remain the sole obligation of Seller.
1.2. Excluded Assets. Seller is not selling, and Purchaser is not acquiring
any assets of Seller other than the Assets (the "Excluded Assets"), which
Excluded Assets include, without limitation, (i) the leases for the real
properties set forth on Schedule 1.2A (the "Excluded Leases"), (ii) the assets
at the locations covered by those Excluded Leases identified on Schedule 1.2A as
"Closed Stores" which are not Assets, (iii) cash and cash equivalents of Seller,
(iv) all of Seller's right, title and interest in and to any and all tradenames
and trademarks, including, without limitation, the names "Episode" and
"Excursion"; (v) all assets located at the corporate headquarters, including,
without limitation, software, (vi) accounts receivable, (vii) all deposits and
prepaid expenses other than the Security Deposits, and (viii) all inventories
which do not constitute Inventory.
1.3. Method of Conveyance. The sale, transfer, conveyance, assignment and
delivery by Seller of the Assets to Purchaser hereunder shall be effected on the
Closing Date by deliveries by Seller of (i) all assignments and other
instruments of conveyance as Purchaser may reasonably request, in form
reasonably satisfactory to Purchaser and its counsel, and (ii) all other
documents and instruments required to be delivered by Seller under the terms of
this Agreement, all in such form necessary to vest in Purchaser title to the
Assets, free and clear of any and all Claims.
1.4. Assumed Obligations.
1.4.1. Purchaser shall assume, satisfy and discharge only the
following liabilities, obligations, debts and commitments of Seller
(collectively the "Assumed Obligations"): all of Seller's obligations accruing
from and after the Closing under the Leases and with respect to returns of
pre-Closing merchandise and Seller gift certificates.
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1.4.2. The parties hereto acknowledge and agree that, other than the
Assumed Obligations, Purchaser shall not assume, satisfy, discharge or otherwise
be responsible for any liability, obligation, debt or commitment of Seller of
any kind or nature whatsoever, whether absolute or contingent, accrued or
unaccrued, asserted or unasserted, known or unknown, or otherwise (collectively
the "Excluded Liabilities"), including but not limited to: (i) any liabilities,
obligations, debts or commitments of Seller arising out of or incurred with
respect to this Agreement and the transactions contemplated hereby (including
any and all sales, income or other taxes, whether measured by income or
otherwise); (ii) any liabilities or obligations in respect of any action against
the Seller pursuant to Sections 547 and/or 548 of the Bankruptcy Code, (iii)
subject to the provisions of Section 7.2.4 below, any liability of Seller to any
employee, former employee arising or accruing in connection between Seller and
any such person, or arising out of any employee benefit plan or program of any
Selling Party, including any liability of any Seller for severance or
termination arising out of or alleged to have arisen out of the transactions
contemplated by this Agreement, (iv) any other liabilities or obligations which
otherwise arise or are asserted by reason of events, acts (or failures to act)
or transactions occurring, or the operation of the Business, prior to the
Closing, or (v) the Claims. The parties hereto further agree that all of the
Excluded Liabilities shall remain the sole, exclusive obligation and
responsibility of Seller and Seller further agrees to discharge consistent with
the provisions of the Bankruptcy Code and subject to valid defenses and offsets,
all Excluded Liabilities. The Bankruptcy Court orders shall provide that, except
as expressly provided in this Section 1.4 any and all liabilities with respect
to the operation of the Business prior to the Closing, including any Claims,
shall, as between Seller and Purchaser, be the sole obligation and
responsibility of Seller, and shall not be assumed by or otherwise affect, in
any respect, Purchaser or the Assets.
2. PURCHASE PRICE; ESCROW; PURCHASE PRICE ALLOCATION
2.1. Purchase Price. As full consideration for the Assets to be sold,
transferred, conveyed and delivered by Seller to Purchaser pursuant to this
Agreement, Purchaser agrees to pay to Seller an aggregate purchase price (the
"Purchase Price") equal to: (i) 173,913 shares (the "Shares") of Mothers Work
common stock par value $.01 (as currently configured and subject to adjustments
for stock splits, stock dividends and similar transactions) (the "Common
Stock"), (ii) plus $2.0 million in cash, (iii) plus the Security Deposit Amount
(as hereinafter defined) in cash, (iv) plus or minus, as the case may be, the
Inventory Adjustment Amount (as hereinafter defined). The
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Inventory Adjustment Amount: if positive, shall be payable in additional shares
of Mothers Work common stock valued at $23.00 per share and rounded to the
nearest whole share (the "Additional Shares") and if negative, shall be deducted
from the Shares utilizing a value of $23.00 per share (as currently configured
and subject to adjustments for stock splits, stock dividends and similar
transactions) and rounded to the nearest whole share.
Purchaser shall pay the Purchase Price to Seller as follows: (i) on the
Closing Date, Purchaser shall deliver a share certificate evidencing the Shares
registered in Seller's name and shall pay the cash portion of the Purchase Price
in immediately available funds by wire transfer (to an account specified by
Seller to Purchaser in writing at least one business day prior to Closing) and
(ii) within five days after a final determination of the Inventory Adjustment
Amount, Purchaser shall deliver a share certificate evidencing any Additional
Shares registered in Seller's name. For purposes of this Agreement, the Security
Deposit Amount shall equal the sum of all Security Deposits held by landlords
under the Leases which deposits are transferred to Purchaser by Seller and for
which Security Deposits either Seller obtains a court order setting forth, or
such landlords acknowledge, Purchaser's entitlement thereto under the applicable
Leases, and the Inventory Adjustment Amount shall mean the amount by which the
value of the Inventory at Closing (determined at the lower of fair market value
or cost in a manner consistent with generally accepted accounting principles as
historically applied by Seller) exceeds or is less than $4.1 million, as the
case may be, such amount to be determined, and to be subject to adjustment, as
provided in Section 2.3 below.
2.2. Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets in accordance with Section 1060 of the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations promulgated thereunder. The
allocation of the Purchase Price shall be agreed upon by Seller and Purchaser
prior to the Closing. Seller and Purchaser agree to file timely all returns
required under Code Section 1060 and the regulations promulgated thereunder
based on the allocations so agreed upon and further agree that they will not
take any position inconsistent therewith on any return or other document of any
kind or in the course of any audit, examination or other proceeding by or before
any federal, state, local or other taxing authority (or other governmental
agency), court or tribunal.
2.3. Adjustments to the Inventory Adjustment Amount.
2.3.1. On the Closing Date, the Controller of Seller shall furnish to
Purchaser a certificate setting forth her estimate of the Inventory Adjustment
Amount (the "Estimated
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Inventory Adjustment Amount.") In conjunction with Closing, Seller and Purchaser
shall engage a mutually acceptable service organization to conduct a physical
inventory of Seller, which inventory may be observed by representatives of
Purchaser, on a mutually agreed upon basis. The cost of such physical inventory
shall be borne equally by Seller and Purchaser.
2.3.2. Within 20 days after the Closing Date, Purchaser shall notify
Seller of any proposed adjustments to the Estimated Inventory Adjustment
Amount that Purchaser may have. All adjustments proposed by Purchaser shall be
set forth in a detailed statement (the "Contested Adjustment Statement"). Seller
shall provide Purchaser and its representatives reasonable access to the book
and records of the Business prior to the Closing Date for the purpose of
verifying the Estimated Inventory Adjustment Amount.
2.3.3. Purchaser and Seller shall use reasonable efforts to resolve
any dispute over the Inventory Adjustment Amount, but if any such dispute
is not resolved within 20 days of Seller's receipt of the Contested Adjustment
Statement, Purchaser and Seller shall promptly retain a recognized independent
accounting firm acceptable to both Purchaser and Seller (the "Independent
Accountant") to resolve the dispute. Within 10 days of retention of the
Independent Accountant, Purchaser and Seller shall each submit to the
Independent Accountant their respective positions with respect to the Inventory
Adjustment Amount, together with any necessary supporting documentation and
shall direct the Independent Accountant to render its decision as to the
Inventory Adjustment Amount within 20 days after receiving such documentation.
The decision of the Independent Accountant as to the Inventory Adjustment Amount
shall be final, binding and non-appealable. The fees and expenses of the
Independent Accountant shall be paid one-half by Purchaser and one-half by
Seller.
2.3.4. Within five days after a final determination of the Inventory
Adjustment Amount (whether determined by the Independent Accountant or by
agreement of the parties hereto), Purchaser or Seller, as applicable, shall
adjust the Purchase Price to reflect the actual Inventory Adjustment Amount.
Such adjustment shall be made by Purchaser's delivery of the Additional Shares
if the Inventory Adjustment Amount is positive and by Seller's return of the
appropriate number of the Shares if the Inventory Adjustment Amount is negative.
In the latter circumstance, Seller shall surrender the share certificate
evidencing the Shares for cancellation in exchange for a new share certificate
evidencing the reduced number of Shares registered in Seller's name.
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3. PRORATIONS AND ADJUSTMENTS
Expenses such as power and utility charges, property assessments, rents, ad
valorem or personal property taxes and all other similar items of expense at the
Stores and pursuant to the Leases shall be prorated between Seller and Purchaser
as of the Closing Date. All prorations shall be made 30 days after the Closing
Date. In the event that Purchaser or Seller shall receive bills after such date
for expenses incurred prior to the Closing Date that were not prorated in
accordance with this Section 3, then Purchaser or Seller, as the case may be,
shall promptly notify the other party as to the amount of the expense subject to
proration and the responsible party shall pay its portion of such expense (or,
in the event such expense has been paid on behalf of the responsible party,
reimburse the other party for its portion of such expense).
4. CLOSING
4.1. Closing. The closing of the transactions contemplated hereby (the
"Closing") shall occur on the later of May 31, 1996 or such other date which is
one business day after the order approving the sale of the Assets to Purchaser
becomes final and non-appealable and all the conditions to Closing as set forth
in Sections 8 and 9 have been satisfied or waived at the offices of Pepper,
Hamilton & Scheetz, Philadelphia, PA 19105, at 10:00 a.m. or at such other time
and/or place as the parties mutually agree. The date upon which the Closing
occurs is referred to herein as the "Closing Date."
4.2. Closing Deliveries of Seller. At the Closing, in addition to any
document otherwise required to be delivered under this Agreement, Seller shall
deliver to Purchaser the following:
4.2.1. A certificate of an executive officer of Seller certifying that
the conditions to Closing set forth in Subsections 9.1, 9.2 and 9.3 hereof
have been fulfilled in their entirety as of the Closing Date.
4.2.2. Certified copies of the resolutions of the board of directors
(or authorized committees thereof) and shareholders, if applicable, of
Seller authorizing the sale of the Assets and the execution, delivery and
performance of this Agreement by Seller.
4.3. Closing Deliveries of Purchaser. At the Closing, in addition to any
document otherwise required to be delivered by Purchaser under this Agreement,
Purchaser shall deliver to Seller the following:
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4.3.1. The payment of the portion of the Purchase Price payable on the
Closing Date as contemplated by Section 2.2;
4.3.2. A certificate of an executive officer of Purchaser certifying
that the conditions to Closing set forth in Subsections 8.1, 8.2 and 8.3 of
this Agreement have been fulfilled in their entirety as of the Closing Date.
4.3.3. Certified copies of the resolutions of the board of directors
of Purchaser and Mothers Work authorizing the purchase of the Assets and
the execution, delivery and performance by each of them of this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF SELLER
In order to induce Purchaser to enter into this Agreement and to consummate
the transactions contemplated hereby, Seller hereby represents and warrants to
Purchaser as follows: For purposes of these representations and warranties, the
term Seller shall include any and all of the former subsidiaries of Seller which
were previously merged into Seller.
5.1. Status of Selling; Stock Ownership. Seller (i) is a corporation duly
organized and validly existing and (ii) transacts business in the jurisdictions
set forth on Schedule 5.1. Seller has the necessary corporate power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby.
5.2. Authority; Approval; Enforceability. The execution, delivery and
performance by Seller of this Agreement and of each and every agreement,
document and instrument of conveyance contemplated hereby and the consummation
of the transactions contemplated hereby and thereby have been, or by the Closing
will be, duly and validly authorized by all necessary corporate action by the
Seller. This Agreement is, and when executed and delivered all such other
agreements, documents and instruments contemplated by this Agreement will be
valid and binding upon Seller and enforceable against Seller in accordance with
their respective terms, subject to the approval of the Bankruptcy Court. All
persons who have executed this Agreement on behalf of Seller and who will
execute any other agreement, document or instrument contemplated by this
Agreement on behalf of Seller have been duly authorized to do so by all
necessary corporate action by Seller.
5.3. No Consents Required. Except for approval by the Bankruptcy Court, or
as required under Section 7.13, no approval, authorization, consent or other
order or action of, or filing by any Seller with any court, administrative
agency, governmental
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authority or any other person is required for the execution and delivery by
Seller by this Agreement or consummation by Seller of the transactions
contemplated hereby.
5.4. Financial and Other Information. Seller has delivered to Purchaser
true and complete copies of the audited consolidated financial statements of
Seller as of and for the years ended January 29, 1994 and January 28, 1995 (the
"Financial Statements"); and the Financial Statements are attached hereto as
Schedule 5.5 A. The Financial Statements were prepared in accordance with
generally accepted accounting principles and present fairly the financial
condition and results of operations of Seller for the dates or periods indicated
thereon. The Financial Statements reflect all claims against and all debts and
liabilities of the Seller, whether fixed or contingent, known or unknown, to the
extent required by generally accepted accounting principles. The store by store
financial information for the Stores attached hereto as Schedule 5.5B with
respect to the periods referenced in the Financial Statements previously
provided by Seller to the Purchaser is true and correct in all material respects
taken as a whole.
5.5. Environmental Matters. For the period of time that the Seller has
owned (directly or indirectly) the Business, there has not been and there is not
now (except insofar as the existence of any of the following would not result in
a material adverse effect on the Business); (i) to the knowledge of Seller, the
unlawful presence of any Hazardous Materials (as hereinafter defined) on any of
the property owned, controlled or occupied by Seller (the "Property"), (ii) any
unlawful generation, recycling, reuse, sale, storage, handling, transport,
disposal, discharge, injection, spilling, leaking, dumping, emitting, escaping,
emptying, seeping or placing by Seller of any Hazardous Materials at, on or from
the Property; (iii) any claims, liabilities, investigations, litigation,
administrative proceedings, whether pending or, to the knowledge of Seller,
threatened, judgments or orders relating to any Hazardous Materials asserted or,
to the knowledge of Seller, threatened against Seller or relating to any
Property. Seller has been and currently is in compliance with all applicable
federal, state, local and other environmental laws, including obtaining and
maintaining all permits required thereby except insofar as any such
non-compliance would not result in a material adverse effect on the Business. As
used herein, the term "Hazardous Materials" means any flammable explosives,
radioactive, corrosive, toxic or flammable materials, friable asbestos,
electrical transformers, batteries, and any paints, solids, chemicals, petroleum
products, or other man-made materials or wastes with hazardous, carcinogenic or
toxic characteristics, including without limitation any substance defined as or
included in the definition of "hazardous
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substances", "hazardous wastes", "hazardous materials", "toxic substances",
"contaminants", or other pollutant under any applicable federal, state or local
laws now in effect or any substance which, because of its quantity,
concentration or physical, chemical or infectious characteristics may
significantly contribute to an increase in mortality or serious irreversible, or
incapacitating reversible illness or pose a substantial present or potential
hazard to human health or the environment when improperly treated, stored,
transported, disposed of or otherwise managed.
5.6. Employees. Except as set forth on Schedule 5.6, Seller is not a party
to any collective bargaining agreement or other organized labor agreement
relating to the Business and/or Seller' employees. Seller is in compliance with
all federal, state, local and other laws respecting employment, wages and hours
with respect to its employees except to the extent noncompliance therewith would
not have a material adverse effect on the Business. No employees of Seller
employed at the Stores are members of the labor union identified on Schedule
5.6.
5.7. Title; No Liens. Assuming approval hereof by the Bankruptcy Court, at
Closing, Seller will transfer and convey to Purchaser, and Purchaser will
acquire, good, valid and marketable title to the Assets, free and clear of any
and all claims, liens, encumbrances, mortgages, security interests, pledges,
restrictions or other charges of any kind or nature whatsoever (other than the
terms of any contracts assumed), including the Claims.
5.8. Leases. Schedule 5.8 contains a true, correct and complete list of
each of the Leases to be assumed by Seller pursuant to Section 365(a) of the
Bankruptcy Code and assigned to Purchaser pursuant to Section 365(f) of the
Bankruptcy Code on the Closing Date, together with any and all amendments
thereto, have been delivered to Purchaser. Except as previously disclosed to
Purchaser in writing, there are no verbal understandings that are not evidenced
in writing in the Leases. Seller has not received any notice of noncompliance
with any applicable federal, state, local or other law, rule, regulation or
procedure relating to the Leases. All Leases permit the Seller to use the
premises to operate the Business, and such use does not violate the terms of the
Leases. The information relating to the Leases attached hereto as Exhibit 5.8
setting forth the name of the lessor, the rent and other charges payable
thereunder, including escalation or percentage rent, advertising requirements
and other lease required expenses and the expiration date thereof including any
and all renewal options is true and correct in all material respects taken as a
whole.
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5.9. Inventory. Since January 27, 1996, all acquisitions and sales by
Seller of Inventory have been made in the ordinary course of business and
consistent with past practices.
5.10. Absence of Certain Changes.
(a) Except as otherwise set forth in Schedule 5.10A attached hereto,
since January 27, 1996, there has not been:
(i) any change in circumstances (other than general economic
conditions) that had or might reasonably be expected to have a material
adverse effect on the Assets or the Business operated at the Stores; or
(ii) any damage, destruction or loss (whether or not covered by
insurance) that had or might reasonably be expected to have a material
adverse effect on the Assets or the Business operated at the Stores;
(b) Except as otherwise set forth on Schedule 5.10B, Seller has not
done any of the following, except in the ordinary course of business
consistent with past practices:
(i) sold, transferred, leased, mortgaged, encumbered or otherwise
disposed of, or agreed to sell, transfer, lease, mortgage, encumber or
otherwise dispose of, any of its assets located at the Stores;
(ii) maintained its books of account other than in the usual,
regular and ordinary manner in accordance with generally accepted
accounting principles on a basis consistent with prior periods or made any
change in any of its accounting methods or practices that would be required to
be disclosed under generally accepted accounting principles;
(iii) made any increase in (a) the rate of compensation payable
or to become payable by any Seller to its employees at the Stores, or (b)
the payment of any bonus, payment or arrangement made to, for or with respect to
any employees of Seller at the Stores.
5.11. Insurance. Schedule 5.11 attached hereto contains a complete and
correct list of all insurance policies presently in effect that relate to the
Business or the Assets, all of which have been in full force and effect from and
after the date(s) set forth on Schedule 5.11. Within two weeks of the execution
of this Agreement, Seller will deliver to Purchaser a list of all claims of
$25,000 or more during the last three
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years, whether or not insured, in respect of casualty losses or occurrences,
property damage or liability for personal injury, workmen's compensation or
otherwise, whether made by Seller against any insurer or made against Seller by
any person or entity (including any customer or employee) relating to the
Business at the Stores or Assets.
5.12. [Reserved].
5.13. Permits. Seller has all permits, licenses, certificates, variances
and approvals (collectively, "Permits") necessary for Seller's to own, operate,
use and/or maintain the Assets and to conduct the Business at the Stores as
presently conducted, except where the failure to have such Permits would not
have a material adverse effect on the Business or Seller's ability to operate
the Business as currently conducted. Within two weeks of the execution of this
Agreement, Seller will deliver to Purchaser a list setting forth all permits
held or used by Seller with respect to the conduct of the Business at the
Stores. All such Permits are in effect, no proceeding is pending, or, to the
knowledge of Seller, threatened to modify, suspend or revoke, withdraw,
terminate, or otherwise limit any such Permits, and no administrative or
governmental actions have been taken or, to the knowledge of Seller, threatened
in connection with the expiration or renewal of such Permits which would
materially adversely affect the ability of Seller to own, operate, use or
maintain any of the Assets or to conduct the Business at the Stores as presently
conducted. No violations have occurred that remain uncured, unwaived or
otherwise unresolved, or are occurring in respect of any such Permits, except to
the extent that such violations would not result in a material adverse effect on
the Business.
5.14. Intellectual Property. Schedule 5.14 sets forth a list of all trade
names, trademarks, service marks, patents and any other intellectual property
(or applications therefor) owned or used by Seller in the conduct of the
Business of the Stores (the "Intellectual Property").
5.15. Securities Law Representations. Seller hereby represents, warrants,
acknowledges and/or agrees as follows:
5.15.1. Seller is acquiring the Shares and the Additional Shares, if
any (for purposes of this Section 5.15, the term "Shares" shall include and
Additional Shares) solely for its own account for investment purposes and not
with a view to distribution of all or any part thereof. Seller has no present
arrangement, understanding or agreement for transferring or disposing of all or
any part of the Shares. Seller will not sell, transfer or otherwise dispose of
any of the Shares, in any
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manner, unless at the time of any such transfer: (a) a Registration (as
hereinafter defined) under the Securities Act of 1933 (the "Securities Act") and
under the Applicable Laws (as hereinafter defined) is in effect with respect to
the Shares to be sold, transferred or disposed of, and Seller complies with all
of the requirements of the Securities Act and the Applicable Laws with respect
to the proposed transaction; or (b) Seller has obtained and has provided to
Mothers Work an opinion from counsel satisfactory to Mothers Work (as to both
the counsel rendering such opinion and the substance of the opinion) that the
proposed sale, transfer or disposition does not require Registration under the
Securities Act or the Applicable Laws. As used herein: the term "Registration"
means registration under the Securities Act and, with respect to any of the
Applicable Laws which do not provide for registration, such compliance therewith
which is similar to registration which has then resulted in statutory or
administration authorization for the proposed transaction; and the term
"Applicable Laws" means any applicable state securities laws and any other
applicable law.
5.15.2. Seller understands that the Shares are being offered and sold
in reliance on specific exemptions from the registration requirements of
Federal and state law and that Mothers Work and Purchaser are relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgements and understandings set forth herein in order to determine the
applicability of such exemptions and the suitability of the Seller to acquire
the Shares.
5.15.3. Seller understands that the Seller must hold the Shares
indefinitely unless a subsequent Registration or exemption therefrom is
available and is obtained. No federal or state agency has approved or
disapproved the Shares for investment or any other purpose.
5.15.4. Seller is an "accredited investor", as such term is defined
in Rule 501 of Regulation D under the Securities Act.
5.15.5. The share certificate representing the Shares issued to Seller
pursuant hereto may bear the following legend:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE PLEDGED, HYPOTHECATED, SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
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<PAGE>
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS OR A
SATISFACTORY OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH PLEDGE, HYPOTHECATION, SALE OR TRANSFER IS EXEMPT
THEREFROM UNDER ANY SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MOTHERS WORK
In order to induce the Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, Purchaser and Mothers Work
hereby jointly and severally represent and warrant to Seller as follows:
6.1. Corporate Status. Each of Purchaser and Mothers Work is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Each of Purchaser and Mothers Work has all requisite
corporate power and authority to own, manage, lease and hold its properties and
to carry on its business as it is currently being conducted. Each of Purchaser
and Mothers Work has the necessary corporate power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby.
6.2. Authority. The execution, delivery and performance by Purchaser and
Mothers Work of this Agreement, and of each and every agreement, document and
instrument contemplated hereby including without limitation the Guarantees and
the License Agreement (both as defined below), and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action by Purchaser and Mothers Work and this Agreement
constitutes, and such other agreements, documents and instruments will
constitute, the legal, valid and binding agreement of Purchaser and Mothers Work
and is enforceable against Purchaser and Mothers Work in accordance with its
terms, except to the extent that enforcement thereof may be limited by
applicable, bankruptcy, reorganization, insolvency or moratorium laws, or other
laws or principles of equity affecting the enforcement of creditors' rights. All
persons who have executed this Agreement on behalf of Purchaser or Mothers Work
and who will execute any other agreement, document or instrument contemplated by
this Agreement on behalf of Purchaser or Mothers Work, have been duly authorized
to do so by all necessary corporate action.
6.3. No Proceedings. No suit, action or other proceeding is pending or, to
Purchaser's or Mothers Work's
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knowledge, threatened before any federal, state, local or other governmental
authority nor has any claim been made against Purchaser or Mothers Work the
successful assertion of which would have a material adverse effect on Purchaser
or Mothers Work.
6.4. No Conflict. Neither the execution and delivery by Purchaser or
Mothers Work of this Agreement or the other agreements, documents and
instruments contemplated hereby nor the consummation by Purchaser or Mothers
Work of the transactions contemplated hereby or thereby, nor compliance by
Purchaser or Mothers Work with any of the provisions hereof or thereof, will (i)
conflict with or result in a breach of any provision of the articles of
incorporation, bylaws or any other organizational document of Purchaser or
Mothers Work, as the case may be, (ii) breach, conflict with, constitute a
default (with or without the giving of notice or the lapse of time or both) with
respect to, or result in the cancellation, termination or acceleration of the
performance of any obligations or indebtedness under the terms and conditions of
any contract, agreement, commitment, indenture, mortgage note, bond, license or
other instrument or obligation to which such Purchaser is now a party or by
which Purchaser, Mothers Work or any other properties or assets may be bound or
affected, (iii) violate any law or any rule or regulation of any administrative
agency or governmental body, or any judgment, order, writ, injunction or decree
of any court, administrative agency or governmental body to which Purchaser or
Mothers Work, as the case may be, is or may be subject, or (iv) require any
Purchaser or Mothers Work, as the case may be, to obtain or make any waiver,
consent, approval or authorization of, or registration, declaration, notice or
filing with, any private non-governmental third party or any federal, state,
local or other governmental authority. Except for approval by the Bankruptcy
Court or as required under Section 7.13, no approval, authorization, consent or
other order or action of, or filing by Purchaser or Mothers Work with any court,
administrative agency, governmental authority or any other person is required
for the execution and delivery by Purchaser or Mothers Work of this Agreement or
consummation by Purchaser or Mothers Work of the transactions contemplated
hereby.
6.5. Parent Reports; Financial Statements. Mothers Work has filed all
required forms, reports and documents with the Securities and Exchange
Commission with respect to all periods commencing on or after March 23, 1993
(collectively, the "Parent Reports"), all of which, when filed, complied in all
material respect with all applicable requirements of the Securities Act and the
Securities and Exchange Act of 1934 and the rules and regulations thereunder. As
of their respective dates, the Parent Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or
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necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading. Each of the consolidated balance sheets
included in or incorporated by reference into the Parent Reports (including any
related notes and schedules) fairly presents the consolidated financial position
of the Parent as of its date, and each of the consolidated statements of
operations, of shareholders' equity and of cash flows included in or
incorporated by reference into the Parent Reports (including any related notes
and schedules) fairly presents the results of operations, retained earnings and
cash flows, as the case may be, of Parent for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which will not, individually or in the aggregate, have a material
adverse effect), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein.
6.6. Authorization of Shares and Additional Shares. The issuance, sale and
delivery of the Shares and the Additional Shares have been duly authorized by
all requisite corporate action by Mothers Work. Upon the issuance, sale and
delivery of the Shares and Additional Shares, the Shares and the Additional
Shares will be validly issued and outstanding, fully paid and nonassessable, not
subject to preemptive or any other similar rights of the Mothers Work or others
and will be free and clear of any and all liens and encumbrances.
At March 31, 1996, the authorized stock of Mothers Work consisted of:
(a) 10,000,000 shares of Common Stock of which:
(i) 3,127,217 shares have been validly authorized and issued and
are fully paid and nonassessable;
(ii) 925,000 shares have been duly reserved initially for
issuance in connection with Mothers Work's stock option plans and other
convertible securities;
(iii) 140,123 shares have been duly reserved initially for
issuance in connection with a warrant held by Alliance Capital.
(iv) 41,000 shares have been duly reserved initially for
issuance in connection with Mothers Work's outstanding Series A Preferred
Stock.
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No shares of capital stock of Mothers Work have been issued subsequent to
that date except pursuant to the exercise of certain of the options identified
in clause (ii) above.
(b) 2,000,000 shares of preferred stock of which:
(i) 41,000 share of Series A Preferred Stock have been
validly authorized and issued and are fully paid and nonassessable.
7. COVENANTS.
Seller and Purchaser hereby covenant and agree as follows:
7.1. Non-Competition.
7.1.1. General. In consideration of the payment of the Purchase Price,
and in order to induce the Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller hereby covenants and
agrees as follows:
(a) Seller, without the prior written consent of Purchaser, shall
not for a period of three (3) years from and after the Closing Date, employ
or attempt to employ any full-time employee of Seller or Purchaser located at
any Store until at least six months after the date such employee was not
employed by Seller or Purchaser or any of their affiliates.
(b) Other than with respect to operations at the locations
covered by the Excluded Leases, Seller shall not, without the prior written
consent of the Purchaser, for a period ending on the termination of the
Distribution Agreement (as defined below), (A) acquire or own in any manner any
interest in any person, firm, partnership, corporation, association or other
entity which is engaged in the same business as the Business anywhere in the
United States (the "Territory"), or (B) be employed by or serve as an agent, of,
or as a consultant to, any person, firm, partnership, corporation, association
or other entity regarding the same business as the Business.
7.1.2. Nondisclosure. Seller hereby agrees that it shall not at any
time, disclose, directly or indirectly, to any person, firm, corporation,
partnership, association or other entity, any confidential information relating
to the Business, including the Leases or any information concerning its
customers, sources of leads and methods of obtaining new business or the methods
generally of doing and operating its business, except (i) to its own employees,
attorneys, accountants, financial advisers
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and other professionals and (ii) to the extent that such information is a matter
of public knowledge or is required or reasonably necessary to be disclosed by
law or by judicial or administrative process or in connection with the Chapter
11 Case.
7.1.3. Reasonableness of Restrictions. In the event that any provision
relating to the time period of geographic area of any restriction set forth
in this Section 7.1 shall be declared by a court of competent jurisdiction to
exceed the maximum time period or area of restriction that the court deems
reasonable and enforceable, the time period or area of restriction which the
court finds to be reasonable and enforceable shall be deemed to become, and
thereafter shall be, the maximum time period or geographic area of such
restriction.
7.1.4. Enforceability. Any provisions of Section 7.1 which are
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, but shall be enforced to the
maximum extent permitted by law, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
7.1.5. Injunction. It is recognized and hereby acknowledged by the
parties hereto that a breach by Seller of any of the covenants contained in
Section 7.1 of this Agreement will cause irreparable harm and damage to
Purchaser, the monetary amount of which may be virtually impossible to
ascertain. As a result, Seller recognizes and hereby acknowledges that Purchaser
shall be entitled to an injunction enjoining and restraining any violation of
any or all of the covenants contained in Section 7.1 of this Agreement by Seller
either directly or indirectly, and that such right to injunction shall be
cumulative and in addition to whatever remedies at law or in equity that the
Purchaser may possess.
7.2. Employees: Access to Employees.
7.2.1. Seller shall not make any commitments to any of its employees
with respect to the continued employment of such employees by Purchaser
after the Closing Date.
7.2.2. Purchaser's current intention is to offer employment to
Seller's employees located at the Stores subject to Purchaser's due
diligence review of such employees and relevant Store operations and to
interview certain of Seller's employees located at Seller's headquarters for
possible employment at Purchaser's headquarters in Philadelphia, PA, it being
acknowledged and agreed that the making of any such offers of
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employment shall be in Purchaser's exclusive discretion and any offers so made
shall provide compensation and other terms comparable to and compatible with
Mothers Work's existing employment arrangements. Prior to the Closing, Seller
shall permit Purchaser to contact and make arrangements with one or more of
Seller's employees for the purpose of pursuing employment of such employee(s) by
Purchaser after the Closing (so long as such contact does not materially
interfere with the conduct of the Business by Seller) in the event that
Purchaser determines, in its sole and absolute discretion, that such employment
is in Purchaser's best interests. Seller shall not discourage any employees of
Seller from seeking or accepting offers of employment from Purchaser.
7.2.3. Seller agrees to use its reasonable efforts to keep available
the services of Seller's full-time employees employed at the Stores through
the Closing Date.
7.2.4. Seller shall terminate all employees, effective as of the
Closing Date, and all severance payment obligations required by law, or
otherwise as a result of such termination, and all liabilities and
responsibilities for fulfilling all federal and/or state COBRA and continuation
of coverage requirements with respect to Seller's employees (including
dependents), shall remain the responsibility of Seller; provided, however,
Purchaser agrees that it will credit each employee of Seller who actually accept
employment with Purchaser with such accrued vacation and sick days as such
employee shall be entitled to at the Closing Date pursuant to Seller's current
vacation and sick day policy, a true and correct copy of which policy has been
previously provided to Purchaser.
7.3. Business Licenses. Seller shall assign to Purchaser, to the extent
issuer of such Permits allows assignment, any and all necessary state, county,
local and other Permits for the operation of the Business of the Stores, and
shall cooperate with Purchaser and assist Purchaser in obtaining any other
Permits which are not assignable and are necessary for Purchaser to operate the
Business. Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement to assign any Permit if any
assignment thereof, without the consent of a third party thereto, would
constitute a breach or violation thereof.
7.4. Assignment of Leases and Executory Contracts. Prior to the Closing
Date, Seller shall obtain all consents, and/or a court order required for the
effective and valid assignment of the Leases to be assumed by Seller and
assigned to Purchaser hereunder. On or before the Closing Date, Seller shall
have paid or made provision for the payment of all amounts owed
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by Sellers as of the Closing Date under the terms of the Leases and otherwise
cured any and all defaults hereunder, and assumed and assigned the Leases to
Purchaser, all in accordance with Section 365 of the Bankruptcy Code.
7.5. Conduct and Transactions Prior to the Closing. From the date hereof
until the Closing Date, Seller shall (a) conduct the Business in the ordinary
course, consistent with past practices and according to the provisions of
Chapter 11 of the Bankruptcy Code and any court order, (b) use reasonable
efforts to keep available the services of present employees, (c) maintain and
operate the Assets in their current condition, reasonable wear and tear
excepted, (d) pay or cause to be paid in a timely manner all costs and expenses
(including but not limited to insurance premiums) incurred in connection with
the Business subsequent to the commencement of the Chapter 11 Case, (e) use its
best efforts to keep all Leases in full force and effect (provided that nothing
herein shall require Seller to take unreasonable actions or incur extraordinary
expenses to satisfy its obligations hereunder), (f) comply with all of the
covenants contained in the Leases and all other agreements, contracts and
commitments to which it is a party relating to the Business to the extent they
are required to do so under the Bankruptcy Code, (g) use its best efforts to
maintain in full force and effect until the Closing Date insurance policies
equivalent to those in effect on the date hereof, and (h) comply in all material
respects with all applicable legal requirements applicable to Seller, the Assets
and/or the Business (whether statutory, regulatory, judicial or administrative).
Except as otherwise contemplated in this Agreement, Seller will use reasonable
efforts to preserve the present relationships of Sellers with its customers and
suppliers and all other persons having significant business relations with
Seller.
7.6. General Restrictions. From the date hereof until the Closing Date,
except as otherwise expressly permitted in this Agreement or in the ordinary
course of business consistent with past practices, Seller shall not, without the
prior written consent of Purchaser: (a) enter into, amend or terminate any
agreement relating to the Assets or the Business; (b) sell, transfer, lease,
mortgage, encumber or otherwise dispose of, any Assets except in the ordinary
course of business; (c) maintain its books of account other than in the usual,
regular and ordinary manner in accordance with generally accepted accounting
principles and on a basis consistent with past practice or make any change in
any of its accounting methods or practices; (d) engage in any one or more
activities or transactions outside the ordinary course of business; (e) make any
increase in (i) the rate of compensation payable or to become payable to its
employees, or (ii) the payment of any bonus, payment or
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arrangement made to, for or with any of its employees; or (f) commit to do
any of the foregoing.
7.7. Purchaser's Access to Information and Assets. From the date hereof
until the Closing Date, Seller shall permit Purchaser and its authorized
employees, agents, accountants, legal counsel and other representative to have
access to the books, records, employees, counsel, accountants, engineers and
other representatives of Seller during regular business hours for the purpose of
conducting a reasonable investigation of the Business, the Assets and the
Seller's financial condition, corporate status, operations and prospects. The
Seller shall make available to Purchaser, for examination and reproduction, all
documents and data of every kind and character relating to the Business and the
Assets in possession or control of, or subject to reasonable access by, the
Seller, including, without limitation, all files, books and records, data and
information (whether stored in paper, magnetic or other storage media) and all
agreements, instruments, contracts, assignments, certificates, orders, and
amendments thereto during regular business hours. Seller shall also allow
Purchaser access to, and the right to inspect, all of the Assets. Purchaser
shall keep all information provided hereunder confidential.
7.8. Notice Regarding Changes. Each of Seller and Purchaser shall promptly
inform the other in writing of any change in facts and circumstances that could
render any of the representations and warranties made herein by the representing
party inaccurate or misleading if such representations and warranties had been
made upon the occurrence of the fact or circumstance in question.
7.9. Ensure Conditions Met. Each party shall use its reasonable efforts to
cause the conditions to its and the other party's obligations to close as set
forth in Sections 8 and 9 hereof, to be satisfied on or before the Closing Date.
7.10. Casualty Loss. If, between the date of this Agreement and the
Closing, any of the Assets shall be destroyed or damaged in whole or in part by
fire, earthquake, flood, other casualty or any other cause (the "Casualty"),
then Purchaser shall have the option to (i) acquire the Assets on an "as is"
basis and take an assignment from Seller of any insurance proceeds payable to
Seller in respect of the Casualty or (ii) in the event that the Casualty equals
or exceeds $500,000 in the aggregate, terminate this Agreement and the
transactions contemplated hereby.
7.11. Notice of Motion and Sale Hearing. The Seller shall give notice of
the Motion, Sale Hearing and Sale Order in
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accordance with Federal Rules of Bankruptcy Procedure 6004, 6005 and 9006.
7.12. Publicity. Except for Bankruptcy Court filings and solicitations of a
higher and better offer (as contemplated by Section 7.14(c) hereof), neither
Seller nor Purchaser shall issue or make, or cause to be issued or made, any
public release or announcement concerning this Agreement or the transactions
contemplated hereby, without the prior written approval of the other party,
except as required by law (in which case, so far as possible, there shall be
consultation between the parties prior to such announcement).
7.13. Bankruptcy Court Approval.
7.13.1. This Agreement and the transactions contemplated hereby,
including, without limitation, (i) the sale of the Assets, (ii) the
assignment of the Leases to Purchaser, and (iii) the quality of title conveyed
to Purchaser, shall be approved by a final, nonappealable Order of the
Bankruptcy Court, that has not been stayed or modified, and as to which the time
to appeal, stay or modify has expired, in a sale outside the ordinary course
under Bankruptcy Code ss. 363.
7.13.2. On or before the fifth (5th) day after execution of this
Agreement, the Seller shall file with the Bankruptcy Court and serve upon
such parties as the Court may direct, or which may be required under the
Bankruptcy Code or by applicable Bankruptcy rules and upon the parties which may
be required by Purchaser, a motion (the "Preliminary Motion") for a preliminary
order approving the procedures set forth in subparagraph 7.13.4 (the
"Preliminary Order"). Seller shall request expedited consideration of the
Preliminary Motion. On or before five (5) days after receipt of the Preliminary
Order, the Seller shall file with the Bankruptcy Court and serve upon such
parties as the Court may direct, or which may be required under the Bankruptcy
Code or by applicable Bankruptcy rules and upon parties which may be required by
Purchaser, a motion ("Sale Motion") for an Order approving the sale of the
Assets and the assumption and assignment of the Leases under Bankruptcy Code
ss.ss. 363 and 365 pursuant to the terms of this Agreement, subject to higher
and better offers with the hearing thereon to be scheduled as promptly as
practicable and in any event not later than June 14, 1996 (the "Sale Order").
The form and content of the Preliminary Motion and Sale Motion and request for
expedited consideration of the Preliminary Motion are subject to the approval of
the Purchaser's counsel, which approval will not be unreasonably withheld or
delayed. Seller may incorporate the Preliminary Motion and Sale Motion in a
single motion. Purchaser agrees to cooperate with Seller in such manner as
Seller may
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reasonably request in attempting to obtain the Preliminary Order
and Sale Order.
7.13.3. The Preliminary Order shall provide the following:
(a) Notice of the hearing on the Sale Motion ("Sale Motion
Hearing") shall be given to all parties who have expressed to Seller an
interest in purchasing the Assets since the filing of Seller's bankruptcy
petition and Seller shall publish notice of the Sale Motion in such manner as
the Bankruptcy Court may direct;
(b) that Seller shall provide a copy of this Agreement to any
interested party;
(c) that if any party expresses an interest in making a competing
offer to purchase the Assets ("Competing Bid"), an auction for the sale of
the Assets shall be held by the Bankruptcy Court pursuant to Bankruptcy Code
ss. 363 ("Auction");
(d) In order to qualify as a Competing Bid at the Auction, a
competing offer must:
(1) be received by the Purchaser's counsel and Seller's
counsel at least three (3) business days prior to the day on which the Sale
Motion Hearing is to be held;
(2) disclose the identity of the competing bidder;
(3) be on no more burdensome terms and conditions to the
Seller as are provided in this Agreement except: that the competing bidder
(the "Competing Bidder") will not be entitled to a Break Up Fee (defined
herein);
(4) provide for an aggregate consideration of at least Five
Hundred Thousand Dollars ($500,000.00) greater than the Purchase Price set
forth in this Agreement; and
(5) provide for the competing bidder to deposit by wire
transfer to the Escrow Agent on or prior to the date on which the Purchase
Motion Hearing is to be held, a Five Hundred Thousand Dollar ($500,000.00)
deposit to be held by Escrow Agent;
(e) That the Auction shall be an open absolute Auction with bid
increments, after the increased amount
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of the Competing Bid, of not less than One Hundred Thousand Dollars
($100,000.00); and
(f) If the Competing Bid (or any other bid received at the Sale
Motion Hearing from anyone other than Purchaser) is approved by the
Bankruptcy Court, then Seller shall pay to Purchaser a sum equal to Five Hundred
Thousand Dollars ($500,000.00) (the "Break Up Fee"). The Break Up Fee to the
Purchaser shall be paid from the Deposit received pursuant to Section 7.13.3(5)
above and shall be paid to Purchaser within twenty-four (24) hours after the
earlier to occur of: (i) closing of the Competing Bid; or (ii) forfeiture of the
Competing Bidder's Deposit, provided that if Purchaser is the next highest
bidder, or ultimately purchases the Assets, Purchaser shall not receive the
Break Up Fee.
7.13.4. The form of the Sale Order submitted to the Bankruptcy Court
shall provide the following:
(a) that the Bankruptcy Court shall retain jurisdiction to
determine any Claims, disputes or causes of action arising out of or
relating to the Agreement, the transactions contemplated hereby, the Claims and
any objection(s) to the sale of the Assets;
(b) that Seller is authorized to assume the Leases pursuant to
Section 365(a) of the Bankruptcy Code, and assign such Leases to Purchaser
pursuant to Section 365(f) of the Bankruptcy Code;
(c) that Seller is authorized to sell, assign and transfer the
Assets pursuant to Sections 363(b), (f), (h) and (m) and 365 of the
Bankruptcy Code free and clear of any liens, claims, encumbrances and interests
in accordance with the terms of this Agreement;
(d) that any defaults under the Leases that are required to be
cured by Section 365 of the Bankruptcy Code will be cured by Seller in
connection with the assumption of the same;
(e) that the order confirming any plan of reorganization or
liquidation in the Chapter 11 Case shall provide that the representations,
warranties and indemnities of the Seller shall not be discharged pursuant to
Section 1141 of the Bankruptcy Code or otherwise for a period following the
confirmation of such plan as set forth in Section 11.14 hereof; and
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(f) that the Sale Order otherwise complies with the terms of this
Agreement in all material aspects and is otherwise sufficient to permit the
consummation of the transactions contemplated by this Agreement;
(g) Seller is authorized to enter into the License Agreement;
(h) that Seller and Seller's creditors shall have no further
liens, claims, encumbrances and interests against the Purchaser or the
Assets except for any claims, disputes or causes of action that Seller may have
against Purchaser arising out of or relating to this Agreement or the
transactions contemplated hereby; and
(i) that Seller shall be prohibited from distributing the Shares
or Additional Shares unless such distribution is made in strict compliance
with Section 5.15 of the Agreement. Moreover, in the event such Shares or
Additional Shares are distributed by Seller under a Plan, Buyer shall be deemed
to be a "successor to the debtor under the plan" as defined under 11 U.S.C.
section 1145(a)(1); and
(j) that Purchaser has acted in "good faith" as defined by
Bankruptcy Code ss. 363(m) in connection with the transactions authorized
by the Sale order.
7.14. Name Changes. Seller agrees that, if requested by Purchaser, any plan
of reorganization proposed by Seller that contemplates the reorganization of
Seller, shall require Seller to deliver to Purchaser fully executed Amendments
to the Articles of Incorporation of Seller (the "Amended Articles"), in form and
substance satisfactory to Purchaser, which amendments shall change Seller's
names from Episode USA, Inc. to names dissimilar to Episode USA, Inc.
7.15. Post-Closing Indemnities.
(a) Seller hereby agrees to indemnify Purchaser and its affiliates
against, and agrees to protect, save and hold harmless Purchaser and its
affiliates from, any and all damages, liabilities, obligations, penalties,
fines, judgments, claims, deficiencies, losses, costs, expenses and assessments
(including without limitation income and other taxes, interest, penalties, and
attorneys' and accountants' fees and disbursements ("Damages")), resulting from:
(i) A breach of, or the failure to perform or satisfy any of, the
representations, warranties, covenants and agreements made by Seller in
this Agreement or in any document or
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certificate delivered by Seller at the Closing pursuant hereto; and
(ii) The existence of any liabilities or obligations of the
Seller (whether accrued, absolute, contingent, known or unknown, or otherwise,
and whether or not of a nature appropriate for inclusion in a balance sheet
in accordance with generally accepted accounting principles) relating to the
Business, other than the Assumed Obligations.
(b) Purchaser hereby agrees to indemnify each of Seller and its
affiliates against, and agrees to protect, save and hold harmless Seller
and its affiliates from, any and all Damages, resulting from:
(i) A breach of, or the failure to perform or satisfy any of, the
representations, warranties, covenants and agreements made by Purchaser in
this Agreement or in any document or certificate delivered by Purchaser at the
Closing pursuant hereto;
(ii) Any Assumed Obligation; and
(iii) The operation of the Business from and after the Closing.
7.16. Indemnification Procedures and Limitations. For purposes of this
Section 7.16, a party making a claim for indemnity is referred to as the
"Indemnified Party" and the party against whom such claim is asserted is
referred to as the "Indemnifying Party".
(a) If any claim or demand for which an Indemnifying Party would be
liable to an Indemnified Party is asserted against or sought to be
collected from such Indemnified Party by a third party, including any taxing
authority, said Indemnified Party shall with reasonable promptness notify in
writing the Indemnifying Party of such claim or demand stating with reasonable
specificity the circumstances of the Indemnified Party's claim for
Indemnification; provided, however, that any failure to give such notice will
not waive any rights of the Indemnified Party except to the extent the rights of
the Indemnifying Party are actually prejudiced as a result of such failure.
(b) After receipt by the Indemnifying Party of such notice, the
Indemnifying Party shall, at its cost and expense, defend, manage and
conduct any proceedings, negotiations or communications involving any claimant
whose claim is the subject of the Indemnified Party's notice to the Indemnifying
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Party as set forth above, and shall take all actions necessary, and the posting
of such bond or other security as may be required by any government authority,
so as to enable the claim to be defended against or resolved without expense or
other action by the Indemnified Party. In the event that the Indemnifying Party
shall fail to initiate a defense of such claim within 20 days of the date of the
notice to the Indemnifying Party, then the Indemnified Party, after 15 days
written notice to the Indemnifying Party, shall retain counsel and conduct the
defense of such claim as it may in its discretion deem proper, at the cost and
expense of the Indemnifying Party. Upon request of the Indemnifying Party, the
Indemnified Party shall:
(i) take such action as the Indemnifying Party may reasonably
request in connection with such action,
(ii) allow the Indemnifying Party to dispute such action in the
name of the Indemnified Party and to conduct a defense to such action on
behalf of the Indemnified Party, and
(iii) render to the Indemnifying Party all such assistance as the
Indemnifying Party may reasonably request in connection with such dispute
and defense; provided, the Indemnifying Party shall pay any out-of-pocket costs
the Indemnified Party incurs in connection with taking over such actions.
(c) Notwithstanding anything to the contrary contained herein, no
Indemnified Party shall be entitled to indemnification under Section
7.15(a)(i) (as to Purchaser) or Section 7.15(b)(i) (as to Seller) unless, and
only to the extent that, Damages as to such Indemnified Party thereunder exceed
$100,000. Neither Indemnifying Party's aggregate indemnification obligation
under this Section 7.15 shall exceed, in aggregate, $4.5 million. Purchaser
shall entitled to recover Damages pursuant to Section 7.15(a) solely by right of
set off against Royalties payable under the License Agreement as more
particularly provided therein. After the Closing Date, the indemnities provided
herein shall be the sole and exclusive monetary remedy of any of the Indemnified
Parties for a breach of the representations, warranties contained herein and
covenants to be performed prior to the Closing Date contained herein.
7.17. Transitional Cooperation. After the Closing Date, Seller and
Purchaser shall cooperate with one another to ensure a smooth transition of the
Business from Seller to Purchaser.
7.18. Further Assurances. Following the Closing, Seller and Purchaser shall
execute and deliver such documents,
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and take such other action, as shall be reasonably requested by any other party
or parties hereto to carry out the transactions contemplated by this Agreement.
7.19. Audited Statements. After the Closing, Seller agrees to use its best
efforts to deliver consolidated financial statements of Seller for the year
ended January 27, 1996 audited by Seller's accountants, Deloitte & Touche
("Deloitte") and to obtain Deloitte's consent to the inclusion of its reports on
such financial statements and the Financial Statements in any filings required
by Mothers Work under the Securities Act or the Securities and Exchange Act of
1934. The cost of such audit shall be borne equally by Seller and Purchaser.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE.
Seller's obligation to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, at or prior to Closing, of each
of the following conditions precedent (any or all of which may be waived in
writing, in whole or in part, by Seller):
8.1. No preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or by any federal or state governmental or
regulatory body, or any statute, rule, regulation or executive order promulgated
or enacted by any federal or state governmental authority after the date of this
Agreement, that prohibits the consummation of the transactions contemplated by
this Agreement, shall be in effect.
8.2. Purchaser shall have performed, in all material respects, all of its
obligations and complied with all of its covenants required to be performed or
to be complied with by it under this Agreement on or prior to the Closing Date.
8.3. The representations and warranties of Purchaser contained herein shall
be true and correct in all material respects at and as of the Closing Date as if
made at and as of such time except for those that relate expressly to a previous
date or changes permitted by this Agreement.
8.4. The Bankruptcy Court shall have entered the Sale Order.
8.5. Seller and Purchaser shall have executed and delivered a license
agreement in the form attached hereto as Schedule 8.5 providing for Seller's
license to Purchaser of the right to use the name "Episode," as its name for
retail stores for bridge women's apparel and accessories throughout the United
States in consideration for a royalty equal to five percent (5%)
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of Purchaser's sales of merchandise from Purchaser's Episode Stores (including
subsequently opened Stores) to a maximum royalty of $4.5 million (the "License
Agreement").
8.6. Mothers Work shall have entered into a registration rights agreement
with certain affiliates of Seller granting such affiliates certain "piggy-back"
registration rights described on Schedule 8.6.
8.7. Mothers Work shall have executed and delivered the guarantee agreement
attached hereto as Schedule 8.7 (the "Guarantees").
9. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE.
Purchaser's obligation to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, at or prior to Closing, of each
of the following conditions precedent (any or all of which may be waived in
writing, in whole or in part, by Purchaser):
9.1. No preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or by any federal or state governmental or
regulatory body, or any statute, rule, regulation or executive order promulgated
or enacted by any federal or state governmental authority after the date of this
Agreement, that prohibits the consummation of the transactions contemplated by
this Agreement, or affects in any way Seller's title to the Assets or Seller's
ability to transfer the Assets to Purchaser in accordance with the terms of this
Agreement, shall be in effect.
9.2. Seller shall have performed, in all material respects, all of its
obligations and complied with all of their covenants and agreements, required to
be performed or to be complied with by them under this Agreement on or prior to
the Closing Date.
9.3. The representations and warranties of Seller contained herein and in
any schedule attached hereto shall be true and correct in all material respects,
at and as of the Closing Date as if made at and as of such time except for those
that relate expressly to a previous date.
9.4. The Bankruptcy Court shall have entered the Sale Order (which shall
have become final and non-appealable,) reasonably satisfactory in form and
substance to Purchaser and its counsel consistent with the provisions of Section
7.13.
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9.5. Seller shall have executed and delivered any and all instruments
reasonably necessary to vest in Purchaser good, valid and marketable title to
the Assets, including, but not limited to, the Leases, free and clear of Claims.
9.6. Seller and Purchaser shall have executed and delivered the License
Agreement.
10. TERMINATION.
10.1. This Agreement may be terminated:
(a) By Purchaser or Seller if the Closing shall not have occurred
on or before June 28, 1996 (or such date after June 28, 1996 as shall be
mutually agreed upon, in writing, by Purchaser and Seller (the "Termination
Date");
(b) By Purchaser if this Agreement is not approved by the
Bankruptcy Court and the Sale Order is not final and non-appealable by June
28, 1996;
(c) By Purchaser or Seller if the Bankruptcy Court disapproves of
this Agreement;
10.2. If this Agreement is terminated pursuant to Section 10.1, all
obligations of the parties hereunder shall terminate, without liability, except
for any liability of a party for a breach of such party's obligations under this
Agreement prior to such termination.
11. MISCELLANEOUS
11.1. Entire Agreement. Upon the Closing, this Agreement (including
exhibits and schedules) and the License Agreement shall constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof and shall supersede all prior negotiations, agreements, arrangements and
understandings, both oral and written, between the parties hereto with respect
to such matter.
11.2. Amendment. This Agreement may not be amended or modified in any
respect, except by the mutual written agreement of the parties hereto (and, if
required, approval of the Bankruptcy Court).
11.3. No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person,
firm, corporation, partnership, association or other entity, including but not
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limited to any committee appointed in the Chapter 11 Case, other than the
parties hereto and their respective successors and assigns, any rights or
remedies under or by reason of this Agreement (except as provided in Section
7.13).
11.4. Waivers and Remedies. The waiver by any of the parties hereto of any
other party's prompt and complete performance, or breach or violation, of any
provision of this Agreement shall not operate nor be construed as a waiver of
any subsequent breach or violation, and the waiver by any of the parties hereto
of the right to exercise any right or remedy that it may possess hereunder shall
not operate nor be construed as a bar to the exercise of such right to remedy by
such party upon the occurrence of any subsequent breach or violation.
11.5. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses, section or subsections contained in this Agreement
shall not affect the enforceability of the remaining portion of this Agreement
or any part hereof, all of which are inserted conditionally on their being valid
in law, and, in the event that any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Agreement shall be declared
invalid by a court of competent jurisdiction, this Agreement shall be construed
as if such invalid word or words, phrase or phrases, sentence or sentences,
clause or clauses, section or sections, or subsection or subsections had not
been inserted.
11.6. Descriptive Headings. Descriptive headings contained herein are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
11.7. Counterparts. This Agreement may be executed in any numbers of
counterparts and by the separate parties hereto in separate counterparts, each
of which together shall be deemed to be one and the same instrument.
11.8. Notices. All notices, consents, requests, instructions, approvals and
other communications provided for herein and all legal process in regard hereto
shall be in writing and shall be deemed to have been duly given, when delivered
by hand, on the date of first accepted delivery (as shown by the records of the
U.S. Postal Service), if deposited in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid, or one business day
following delivery to Federal Express priority service or another reputable
overnight courier service, as follows:
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If to Seller: Episode USA, Inc.
1040 Avenue of the Americas, Inc.
New York, NY 10018
Attn: President
With copy to: Michael Rudolph, Esquire
L. Michael Rudolph, P.C.
100 Park Avenue, 16th Flr.
New York, NY 10017
If to Purchaser: Mothers Work, Inc.
456 N. 5th Street
Philadelphia, PA 19103
Attn: President
With a copy to: Elam M. Hitchner, Esquire
Pepper, Hamilton & Scheetz
3000 Two Logan Square
Philadelphia, PA 19103
or to such other address as any party hereto may from time to time designate in
writing delivered in a like manner.
11.9. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided that this Agreement may not be assigned by Seller or
Purchaser without the consent of the other party, which shall not be
unreasonably withheld, except that Seller's rights and obligations under this
Agreement may be assigned in the manner provided in a plan of reorganization of
Seller confirmed by the Bankruptcy Court. Any assignment without the required
consent shall be void.
11.10. Applicable Law; Jurisdiction. This Agreement shall be governed by
and shall be construed, interpreted and enforced in accordance with, the laws of
the State of New York. The parties hereto agree that any action brought by
Purchaser or Seller in connection with any claims arising under or relating to
this Agreement or the transactions contemplated hereby shall be brought in the
Bankruptcy Court, which the parties agree shall retain sole and exclusive
jurisdiction over any such matter. Each party hereby waives trial by jury with
respect to any such proceeding.
11.11. Brokers and Agents. Seller and Purchaser represents and warrants to
the other that it has not employed or dealt with any broker, agent or finder in
respect of the transactions provided for herein and agrees to indemnify and hold
the other party harmless from and against all fees, expenses,
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commissions and costs due and owing to any broker, agent or finder on account of
indemnifying party and such person.
11.12. Expenses. Except as set forth herein, each of the parties hereto
agrees to pay all of the respective expenses incurred by it in connection with
the negotiation, preparation, execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby. Seller
and Purchaser shall bear equally the expense of, and shall pay, any and all
sales, use and other transfer taxes arising out of this transaction.
11.13. Attorneys Fees. If any legal action is brought for the enforcement
of any of the provisions of this Agreement (but not in connection with any third
party claim), the prevailing party or parties shall be entitled to recover from
the other party or parties, upon final judgment on the merits, reasonable
attorneys' fees (including attorneys' fees at trial, during any appeal or during
negotiations) incurred in bringing such action. The prevailing party's rights
under this Section 11.13 shall not merge into any judgment and shall survive
until all such fees and costs have been paid.
11.14. Effect of Representations and Warranties. The representations and
warranties of Seller shall survive the Closing for a period of 12 months, and
shall not be otherwise discharged by the Chapter 11 Case; provided that with
respect to any claim relating to a breach of a representation of Section 5.7, a
claim of fraud or the failure by Seller to satisfy an obligation not assumed by
the Purchaser hereunder, no such time limitation shall be applicable. The
representations and warranties of the Purchaser shall survive the Closing for a
period of 24 months. Purchaser shall have no right to indemnification under
Section 7.15(a)(i) for any breach of representation or warranty of Seller if,
prior to Closing, Purchaser had actual knowledge that such representation or
warranty was breached unless Purchaser informs Seller of such breach prior to
Closing.
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IN WITNESS WHEREOF, Purchaser and the Selling Parties have executed and
delivered this Agreement on the date first above written.
PURCHASER:
T3 ACQUISITION, INC.
By: /s/ REBECCA MATTHIAS
---------------------------------
Rebecca Matthias
GUARANTOR:
MOTHERS WORK, INC.
By: /s/ REBECCA MATTHIAS
----------------------------------
Rebecca Matthias
SELLER:
EPISODE USA, INC.
By: /s/ JEFFERY FERRY
----------------------------------
Jeffery Ferry
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EXHIBIT 10.1
TRADEMARK LICENSE AGREEMENT
THIS AGREEMENT is made on this 31st day of May, 1996 by and between
EPISODE USA, INC. ("Licensor"), a Delaware corporation whose principal place of
business is 1040 Avenue of The Americas, New York, NY 10018 and MOTHERS WORK,
INC., a Delaware corporation whose principal place of business is 456 N. Fifth
Street, Philadelphia, PA 19103 ("Distributor").
WITNESSETH
WHEREAS, Licensor is the owner of the Trademark (as defined below).
WHEREAS, it is the desire and intention of the parties that Distributor
be permitted to use the Trademark in conjunction with Distributor's Stores (as
defined below), subject to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, Licensor and Distributor hereby agree
as follows:
1. The License. The Licensor grants to the Distributor an
exclusive license to use the trademark "Episode," (the "Trademark") as a name
for Distributor's retail stores (the "Stores") selling bridge women's apparel
and accessories (the "Merchandise") in the United States (the "Territory") upon
the terms and conditions set forth in this Agreement (the "License"). With prior
approval of Licensor, the Distributor may sublicense such use of the Trademarks
to any Affiliate. For the purposes of this letter, the term "Affiliate" will
mean any entity that directly or indirectly controls, is controlled by, or is
under common control with, the Distributor. This License is subject to that
certain Distribution Agreement between Toppy International Limited, T3
Acquisition, Inc. and Mothers Work, Inc. dated as of April 25, 1996 (the
"Distribution Agreement").
2. Term. The initial term of the License will be five (5)
years from the date of this Agreement. At the expiration of the initial term,
the License will automatically renew for successive one (1) year periods, unless
this Agreement shall have previously terminated as provided in Section 12.
3. Royalties. The Distributor will pay to Licensor a royalty
(the "Royalty") equal to five percent (5%) of the Distributor's Net Sales of all
the Merchandise to a maximum of $4.5 million (the "Maximum Royalty"). For the
purposes of this letter, the term "Net Sales" shall mean gross receipts from
sales of all Merchandise from the Stores by Distributor and any
<PAGE>
Distributor Affiliate to unaffiliated third parties, minus sales taxes and net
of returns. In addition to sales at Stores, net Sales shall include catalog
sales, sales by mail and wholesale sales of Merchandise bearing the "Episode" or
"Excursion" labels.
4. Reports; Payments; Audit.
(a) Within one (1) month after the end of each three month
period ending February 28, May 31, August 31, and November 30, commencing on
November 30, 1996, the Distributor will prepare and send to the Licensor a
report certified by Distributor's chief financial officer summarizing the
computation of Net Sales for such calendar quarter (or with respect to the first
such report, the first six months of the term hereof). The Distributor will
forward with such report a check payable to the Licensor in an amount equal to
the Royalty owed with respect to such period. Such check will be payable in U.S.
dollars.
(b) Licensor shall have the right to inspect the books and
records of Distributor insofar as they relate to the determination of Net Sales
once each three month period. Distributor shall promptly pay any short-fall in
Royalty previously paid identified by said inspection together with interest at
the prime rate plus 1% of CoreStates Bank, Philadelphia, Pennsylvania; provided,
if such inspection reveals a shortfall in Royalty in excess of five (5%) percent
for the applicable period, Distributor shall also be responsible to reimburse
Licensor for the cost of such inspection.
5. Ownership of Trademark. The Distributor acknowledges that
the Licensor owns the exclusive right, title and interest in and to the
Trademark in the Territory and all goodwill associated with the Trademark, and
nothing in this Agreement shall give Distributor any interest or property rights
in the Trademark except for the License. Distributor shall not, during the term
of this Agreement and thereafter, directly or indirectly, assert any interest or
property rights in the Trademark except for the License. Upon the termination of
the License, the Distributor shall cease to use the Trademark, except as
provided in the third proviso in Section 12.
Subject to the exceptions hereinafter set forth, the
Distributor shall not, during the period of this Agreement or thereafter,
directly or indirectly adopt or use as a trademark, service mark, trade name or
corporate name, the Trademark, any term of the translation meaning the same
thing as any of the Trademark or any word, symbol or picture or combination
thereof which is confusingly similar to the Trademark; and it shall not directly
or indirectly, during the period of this Agreement or thereafter, register or
attempt to register any of the foregoing in any country or territory as a
trademark, service mark, trade
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<PAGE>
name, corporate name, industrial design, design patent or otherwise.
The Trademark shall not be deemed to have been abandoned in
the Territory merely because the Licensor or its licensees are not using the
same, and/or have not filed an application to register the Trademark in the
Territory.
6. Quality Control. The Distributor will abide by the
Licensor's reasonable standards for the use of the Trademark. The Licensor will
establish such standards by sending to the Distributor written notice detailing
such standards.
7. Registration and Maintenance. During the term of the
License, the Licensor will, at its own expense, register, and maintain the
registrations of, the Trademark with the appropriate trademark authorities in
the Territory. The Licensor will take such further actions as are reasonably
necessary to protect the Licensor's interest as the owner of the Trademark and
the Distributor's interest as the licensee of the Trademark.
8. Representations and Warranties of the Licensor. The
Licensor represents and warrants that: Subject to a license of certain rights in
the Trademark to Toppy International Limited, (a) any and all previous licenses
with respect to the Trademark in the Territory have been terminated in their
entirety; (b) the Licensor exclusively owns the Trademark in the Territory for
the permitted use and has the right to grant the License; (c) the Trademark is
in continuous use; (d) the use by the Distributor of the Trademark in the
Territory in accordance with the terms and conditions of this Agreement will not
infringe the trademark rights of any third party; (e) to the Licensor's
knowledge, there are no third parties infringing the Trademark in the Territory;
and (f) the Licensor has the right to enter into this Agreement and to perform
all of its obligations under this Agreement.
9. Representations and Warranties of the Distributor. The
Distributor represents and warrants that the Distributor has the right to enter
into this Agreement and to perform all of its obligations under this Agreement.
10. Indemnification. Each party will, at its sole expense,
indemnify and hold the other party harmless against any and all claims, losses
or damages, together with all costs and expenses related thereto (including
attorneys' fees and costs), arising from, related to, or connected with the
inaccuracy or breach of any representation or warranty of the representing or
warranting party contained in this letter. Such indemnification shall extend to
any and all actions, suits or proceedings incidental to any such claims, losses
or damages. The
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<PAGE>
indemnified party shall cooperate with the indemnifying party in connection with
any such actions, suits or proceedings.
11. Infringement. In the event that either party becomes aware
of actual or threatened infringement of the Trademark in the Territory, such
party shall promptly notify the other party in writing. Within thirty (30) days
of becoming so aware or receipt of such notice, as the case may be, the
Licensor, at its sole cost and expense, shall have the obligation to initiate
actions to resolve any such infringement which in Licensor's reasonable judgment
would materially adversely affect the value of the Trademark.
12. Early Termination. This Agreement and the License shall be
terminable automatically upon and concurrently with termination of that certain
Distribution Agreement dated as of April 25, 1996 between Toppy International
Limited and Distributor (the "Distribution Agreement"); provided, however, if
such termination resulted from Distributor's election to terminate the
Distribution Agreement without cause or Toppy's election to terminate the
Distribution Agreement for cause, Distributor shall pay concurrently with such
termination the difference between the Maximum Royalty and the aggregate
Royalties paid by Distributor through such termination; provided, further, if
such termination resulted from Toppy's election to terminate the Distribution
Agreement without cause or Distributor's election to terminate the Distribution
Agreement with cause, Distributor's obligation to pay Royalties hereunder shall
continue in respect of the Stores after the date of termination until the
Maximum Royalty shall have been paid; provided, further, Distributor shall have
the right to continue to use the Trademark as the name for any Store existing on
the date hereof during the now existing terms of the lease for such Store to the
extent the consent of the lessor under the applicable lease to a name change is
required and cannot be obtained without economic or other concessions by
Distributor that would materially adversely affect or increase the cost of
operating such Store; Distributor agrees to use its commercially reasonable best
efforts to obtain all requisite consents from such lessors to permit all such
name changes.
13. Set-off. In the event that Distributor shall be entitled
to recover Damages pursuant to the indemnification provisions contained in
Section 7.15(a) of that certain Asset Purchase Agreement dated as of April 25,
1996 among Distributor, Licensor and T3 Acquisition, Inc., Distributor shall be
entitled to off-set any payments due to Licensor as Royalty pursuant to Section
3 hereof against such Damages. If at any time Distributor has asserted a claim
for Damages which has been disputed by Licensor, Distributor shall reduce the
subsequent(s) installment of Royalty in the amount equal to said disputed
Damages and deposited said amount when otherwise due hereunder in
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<PAGE>
an interest bearing escrow account with counsels for Distributor and Licensor
serving as joint escrow agent pending resolution of the dispute. Any amounts so
deposited in escrow shall be distributed to Licensor and Distributor, as the
case may be, upon resolution of the dispute, together with pro-rata portion of
any interest accrued thereon.
14. Miscellaneous.
(a) Neither party may assign this Agreement without the
prior consent of the other party, which consent will not be unreasonably
withheld or delayed. This letter will bind and inure to the benefit of both
parties and their permitted successors and assigns.
(b) All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be in writing and shall be deemed to have been duly given,
when delivered by hand, on the date of first accepted delivery (as shown by the
records of the U.S. Postal Service), if deposited in the United States mail, by
registered or certified mail, return receipt requested, postage prepaid, or one
business day following delivery to Federal Express priority service or another
reputable overnight courier service, as follows:
If to Licensor: Episode USA, Inc.
1040 Avenue of the Americas, Inc.
New York, NY 10018
Attn:
With copy to: Michael Rudolph, Esquire
L. Michael Rudolph, P.C.
100 Park Avenue, 16th Flr.
New York, NY 10017
If to Licensor: Mothers Work, Inc.
456 N. 5th Street
Philadelphia, PA 19103
Attn: President
With a copy to: Elam M. Hitchner, Esquire
Pepper, Hamilton & Scheetz
3000 Two Logan Square
Philadelphia, PA 19103
or to such other address as any party hereto may from time to time designate in
writing delivered in a like manner.
(c) This Agreement may not be amended or modified, except
in writing and will be governed by the laws of
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the State of New York, without regard to principles of conflicts of laws of any
jurisdiction. This Agreement constitutes the entire understanding between the
parties with respect to the subject matter of this Agreement and supersedes any
prior understanding, whether written or oral, between them.
(d) The obligations of Distributor under this Agreement
have been guaranteed by its parent, Mothers Work, Inc., pursuant to a Guarantee
Agreement of even date.
EPISODE USA, INC.
By: /s/ Lita Chow
-------------------------------
MOTHERS WORK, INC.
By: /s/ Rebecca Matthias
---------------------------------
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<PAGE>
EXHIBIT A
Registration Registration
Trademark Country Number Date
- - --------- ------- ------ ----
Episode USA 1,596,579 5/15/90
Episode USA 1,616,193 10/02/90
Episode USA 1,525,858 2/21/89
Episode USA 686,686 10/13/59
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EXHIBIT 10.2
DISTRIBUTION AGREEMENT
I. Date and Parties
A. The date of this Agreement is April 25, 1996.
B. The parties to this Agreement are:
1. TOPPY INTERNATIONAL LIMITED is a corporation organized and
existing under the laws of Hong Kong, having offices at 7th Floor,
Wyler Centre 2, 200 Tai Lin Pai Road, Kwai Chung, New Territories, Hong
Kong. It is referred to as the "Licensee" or "Toppy" throughout this
Agreement.
2. T3 ACQUISITION, INC. is a corporation organized and
existing under the laws of the State of Delaware, having offices at
1309 Noble Street, Philadelphia, Pennsylvania 19123. It is referred to
as the "Distributor" or "T3" throughout this Agreement.
3. MOTHERS WORK, INC. is a corporation organized and existing
under the laws of the State of Delaware, having offices at 1309 Noble
Street, Philadelphia, Pennsylvania 19123. It is referred to as the
"Guarantor" or "MWI" throughout this Agreement.
II. Recitals
A. In connection with the sale of those articles of merchandise
hereinafter set forth, the Licensee has been granted rights to use certain names
and marks on said articles by Episode USA, Inc., a corporation organized and
existing under the laws of the State of Delaware. Licensee desires to provide
for the distribution of those articles in the territory specified below.
B. The Distributor desires to sell such articles in that territory.
AGREEMENT
In consideration of the mutual covenants contained herein, and other
good and valuable consideration, receipt of which is acknowledged by each of
them, the parties hereto hereby agree as set forth below.
III. Definitions
As used in this Agreement, the following terms shall have the specified
meanings:
<PAGE>
A. "Advertising Material" shall mean all of the Distributor's
advertising and promotional material for the Articles, including but not limited
to newspaper and magazine copy, catalogs, packaging materials, tags, and any
other material picturing the Articles or using any of the Trademarks.
B. "Articles" shall mean ladies wearing apparel consisting of
sportswear, separates and related separates upon which, or in connection with
which, the "Trademarks" are used.
C. "Licensor" shall mean Episode USA, Inc. or any other owner of any
legal rights, title or interest in or to the Trademarks, except the Distributor.
D. "Territory" shall mean The United States of America.
E. "Trademarks" shall mean the trademark "EPISODE", Episode and design,
"EXCURSION", "EXCURSIONS" as set forth in Appendix A attached hereto and made a
part hereof.
F. "Affiliated Company" shall mean any entity or organization in which
Distributor, or any person owning more than a thirty-three and one-third percent
(33-1/3%) beneficial interest in Distributor, shall own more than a thirty-three
and one-third percent (33-1/3%) beneficial interest, or which is, in the opinion
of Licensee, so closely affiliated with Distributor as to prevent arms length
bargaining.
G. "Toppy Ex-Factory Price" shall mean the price for Articles paid by
Toppy to its factory including raw materials, CMT and quota.
H. "Toppy F.O.B. Price" shall mean the Toppy Ex-Factory Price plus a
mark-up of between 15% and 23%.
I. "Retail Sales Price" shall mean the price, less sales taxes, charged
for Articles sold by Distributor to its retail customers.
J. "Episode Stores" shall mean retail stores operated by Distributor
within the Territory under the name Episode.
IV. Exclusive Right To Sell The Articles
A. Upon its compliance with all of the terms of this Agreement, the
Distributor shall have the exclusive right to sell the Articles in the
Territory. Sales at retail shall only be though Episode Stores. Sales at
wholesale may only be made with the prior approval of Toppy, which approval
shall not be unreasonably withheld, and which sales shall be to upscale
department stores, boutiques or specialty stores.
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<PAGE>
B. Except as set forth below, the Licensee shall manufacture the
Articles, or cause them to be manufactured, as reasonably requested by the
Distributor by purchase order, from time to time, at prices and upon terms
agreed to by the parties. The quality shall be consistent with that offered to
wholesale customers outside the Territory.
C. The purchase price for the Articles to be purchased and sold
hereunder shall be the Toppy F.O.B. Price. Distributor shall pay all other costs
including freight, insurance and duties. The purchase price for the Articles
shall be payable by Distributor to Toppy or designee in U.S. Dollars.
Distributor agrees to obtain irrevocable and transferrable Letters of Credit
opened in favor of Toppy or designee, said Letters of Credit to be due and
payable at sight. The Letter of Credit is to be delivered to Toppy or designee
not less than sixty (60) days prior to the first scheduled production date for
the particular order.
D. Toppy agrees that the price charged Distributor for Articles shall
be the lower of (a) the Toppy F.O.B. Price or (b) the price normally charged by
Toppy for the same Articles to other affiliated wholesale customers and certain
unaffiliated customers (e.g. Canada and Singapore) outside the Territory.
E. Toppy shall have no liability to Distributor, and Distributor shall
have no claim or cause of action against Toppy for any quality defect in any
Articles except to the extent that the retail value of the defective Articles
exceeds 1.5% of the total annual retail value of Articles purchased.
F. Toppy agrees that during the first season of retail sale of an
Article by Distributor, it will not sell the same design of wearing apparel to
any other customer within the Territory.
G. If, and in the event that during the term of this agreement, Toppy
agrees to sublicense the manufacture and/or sale and/or distribution within the
Territory of merchandise using the Trademarks other than Articles manufactured
by Toppy or Distributor (e.g., perfume or accessories), it is agreed that
Distributor and Toppy shall share equally in any royalty earned thereby in the
Territory. Nothing contained herein, however, shall obligate Toppy to enter into
or grant such a sublicense, provided consent is not unreasonably withheld.
H. Except to the extent hereinafter permitted and in no greater
percentage than set forth in Appendix B, the Distributor shall not offer for
sale any merchandise in Episode Stores during the term of this Agreement except
for the Articles. To the extent of the percentage permitted in Appendix B,
Distributor may offer other merchandise for sale in Episode stores provided same
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<PAGE>
shall consist of upper scale and quality ladies apparel and accessories and
provided further that Distributor maintains a level of excellence and quality in
Episode stores equivalent to the high standard of Episode and/or Toppy stores
outside the Territory.
IV-A. Domestic Manufacture
A. Notwithstanding anything to the contrary contained in Article IV
hereinabove, Distributor shall have the right to domestically manufacture
Articles in its own factories within the Territory, provided it first receives
the approval of Toppy in each instance, which approval shall not be unreasonably
withheld. During the term of this Agreement, the Distributor shall pay to Toppy
a royalty equal to two (2%) percent of all sales of all Articles manufactured by
Distributor pursuant to this paragraph. The two (2%) percent royalty shall be
based upon the Distributor's Retail Sales Price in the case of retail sales, and
upon the Distributor's suggested Retail Sales Price in the case of wholesale
sales. All royalty payments due under this paragraph from the Distributor will
be:
(i) determined for each calendar quarter- year beginning
with the quarter ending on July 31, 1996;
(ii) paid within thirty (30) days after the end of each
such calendar quarter-year to such person or account as the Licensee may from
time to time designate;
(iii) payment shall be accompanied by a statement certified
by Distributor's Chief Financial Officer showing the number, all cost elements
and information, and the Retail Sales Price of all Articles sold by it during
that quarter and its advertising expenses related thereto;
(iv) paid in United States dollars and without deduction
for any taxes;
(v) converted into United States dollars on the date
payment is to be made to the Licensee at the commercial rate of exchange in
effect on such date.
B. All Articles manufactured domestically by the Distributor will be of
high standards, style, appearance and quality and shall bear only the Trademarks
specified by the Licensee.
C. The Distributor shall submit to the Licensee such number as the
Licensee shall request of pre-production specimens of each Article which it
desires to have manufactured. Such specimens shall be accompanied by the written
request for approval of the specimens and specifications. The Distributor
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<PAGE>
shall not manufacture any Article unless and until it has received the
Licensee's written approval. If the Licensee does not notify the Distributor of
its disapproval of any such submission within thirty (30) days after the
Licensee first received the same, it shall be deemed to have granted its
approval.
D. The production of each Article domestically manufactured by the
Distributor shall be in accordance with the pre-production specimens and
specifications for that Article which were approved by the Licensee.
E. Upon request of Licensee, the Distributor shall submit to the
Licensee samples of each Article the Distributor is then selling, for quality
examination. Upon prior reasonable notice from the Licensee, the Licensee or its
designees shall have the right to inspect Distributor's inventory of Articles
and all Articles in the process of being manufactured for it.
V. Term of Agreement
A. This Agreement shall become effective on June 1, 1996 and shall
continue until January 31, 2002, unless this Agreement is sooner terminated
pursuant to its terms. Notwithstanding the foregoing, this Agreement shall
terminate immediately upon the termination for any reason of the Licensee's
rights to use the Trademarks on the Articles in the Territory.
B. If, and in the event that Distributor has otherwise complied with
all of the terms and conditions of this Agreement, and subject to future
agreement between the parties as to the minimum sales requirements for each
period, this agreement shall be automatically renewed for successive twelve
month periods, until same is terminated in accordance with Article XVI
hereinafter set forth.
VI. Minimum Sales
A. During the term of this Agreement, the Distributor shall sell at
retail, in the Territory, not less than the minimum value of Articles specified
on Appendix B annexed hereto.
B. For any period less than an entire fiscal year of Distributor
(October 1 - September 30), the minimum value of Articles required to be sold
shall be prorated in proportion to the portion of the fiscal year which that
period equals.
C. All Articles shall be purchased by the Distributor from the Licensee
or its designee, except insofar as domestic manufacture is authorized by Toppy
pursuant to Paragraph "IV-A".
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<PAGE>
VII. Quality
A. The Distributor shall submit in writing and send by facsimile
transmission to the Licensee for the Licensee's approval, all Advertising
Material which the Distributor proposes to use or to allow others to use. The
Distributor shall not, and it shall not permit others to in any way use,
circulate or display any Advertising Material unless and until the same has been
approved in writing by the Licensee. The Distributor shall be permitted to use
Advertising Material for cooperative advertising purposes if all aspects of such
material and its usage have been previously approved by the Licensee, for a
period of six months after such approval. The Distributor shall, from time to
time, at the Licensee's request, submit to the Licensee suitable proof,
including, but not limited to, "tear sheets", that said cooperative advertising
material is being properly used. If the Licensee does not notify the Distributor
of its disapproval of any such submission within ten (10) days after the
Licensee first received the same, it shall be deemed to have granted its
approval.
B. All Advertising Material shall conform to the international image,
concept and advertising program of Toppy for Episode and/or Toppy stores
throughout the world.
C. At the request of Distributor, Toppy agrees to make its advertising
software and hardware available to Distributor. There shall be no cost to
Distributor for the software (e.g., creative elements), however, Distributor
shall pay Toppy for the hardware (e.g., printing, duplication, duplication of
color separations already made by Licensee) which cost shall consist of Toppy's
cost plus handling.
D. To the extent that Distributor prepares seasonal advertising budgets
and plans, same shall be submitted to Licensee for Licensee's approval.
E. Whenever a Trademark is used by the Distributor, there will also be
attached a notice that the Trademark is owned by the Licensor and that the
Trademark is registered. As an example thereof:
"Episode is a registered trademark of Episode
USA, Inc."
F. The Licensee shall have the right to terminate this Agreement as set
forth in Article XVI hereof if the Distributor shall breach or violate any of
the provisions of this Article VII.
VIII. Rights in Trademarks
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<PAGE>
A. The Distributor recognizes that: There is great value to the
Licensee and the Licensor in the Trademarks and in the goodwill associated
therewith; the Licensor has licensed third parties to use the Trademarks on a
wide variety of goods and services throughout the world; and that nothing
contained in this Agreement gives the Distributor any interest or property
rights in the Trademarks.
B. The Distributor shall not, during the period of this Agreement or
thereafter, directly or indirectly, assert any interest or property rights in
any of the Trademarks.
C. Subject to the exceptions hereinafter set forth, the Distributor
shall not, during the period of this Agreement or thereafter, directly or
indirectly adopt or use as a trademark, service mark, trade name or corporate
name, any of the Trademarks, any term of translation meaning the same thing as
any of the Trademarks or any word, symbol or picture or combination thereof
which is confusingly similar to any of the Trademarks; and it shall not directly
or indirectly, during the period of this Agreement or thereafter, register or
attempt to register any of the foregoing in any country or territory as a
trademark, service mark, trade name, corporate name, industrial design, design
patent or otherwise.
D. No Trademark shall be deemed to have been abandoned in the Territory
merely because the licensor or its licensees are not using the same, and/or have
not filed an application to register the Trademark in the Territory.
E. The Distributor shall not, directly or indirectly:
(1) manufacture, distribute or sell any article which
infringes on any of the Trademarks;
(2) grant the right to reproduce pictures or sketches
of the Articles in Advertising Material.
IX. No Acquiescence
The Distributor agrees that it will not directly or indirectly permit
or acquiesce in any of the activities prohibited by Article VIII to be taken by
any company or firm which it owns or controls, or in which it is a partner or
joint venturer, or the employees or agents of any of the foregoing or of the
Distributor.
X. Inspection Rights
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<PAGE>
Licensee, or its representatives shall, after prior notice to the
Distributor, have the right to inspect the books, offices and affiliates of the
Distributor, and the related companies, firms, partnerships and ventures
described in Article IX, in order to determine whether the Distributor is
complying with, and has complied with, Articles VIII and IX of this Agreement.
XI. Indemnification
A. The Distributor shall be solely responsible for, and shall indemnify
the Licensee, the Licensor, and their respective officers, directors, agents and
employees and shall hold each of them harmless from any and all demands and
claims (including, but not limited to, liabilities, judgments, penalties,
losses, costs, and damages and expenses resulting therefrom, including
reasonable attorneys' fees) in any way arising from, or in connection with, the
sale, distribution, advertising, or use of the Articles, by the Distributor,
notwithstanding any approval which may have been given by the Licensee or the
Licensor. The Licensee shall give the Distributor prompt notice of any claim or
demand as to which the Licensee or Licensor is entitled to indemnification.
B. With respect to any claims falling within the scope of the foregoing
indemnification:
(1) The Distributor shall keep the party subject to
the claim fully advised with respect to such claim and the
progress of any suits in which the party subject to the claim
or suit is not participating;
(2) If Distributor fails to defend the claim or suit
with due diligence, the Licensee and the Licensor shall each
have the right to assume the defense of said claim or suit
made or filed against it with counsel selected by it;
(3) The Licensee and the Licensor shall each have the
right to participate at their expense in any suit instituted
against it and being defended by the Distributor and to
approve any attorneys selected by the Distributor to defend
it, which approval will not be unreasonably withheld or
delayed; and
(4) The Distributor shall not settle a claim or a
suit made or filed against the Licensee or the Licensor,
without the prior written approval of the party involved,
which
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<PAGE>
approval shall not be unreasonably withheld
or delayed.
C. Distributor shall not be obligated to indemnify Toppy against third
party claims that the Episode Trademarks are infringing third party trademarks,
provided that Distributor's use of the Episode Trademarks has been authorized by
this agreement.
XII. Insurance
A. The Distributor shall, throughout the term of this Agreement and for
not less than two (2) years following its termination for any reason, purchase
and maintain comprehensive general liability insurance, including blanket
contractual liability, personal injury liability, and against other claims under
the provisions of Article XII hereof, all in an amount not less than $5,000,000
combined single limited. Such insurance shall be written on an occurrence policy
form with an insurer satisfactory to the Licensee.
B. All such insurance policies will be in full force and effect from
the effective date of this Agreement; name the Licensee and the Licensor and
their respective officers, directors, employees and agents, as additional
insureds; and contain provisions that the insurance coverage required hereunder
will not be reduced or canceled without forty-five (45) days prior written
notice having been provided to the Licensee.
C. If the Distributor fails to obtain or maintain insurance required
hereunder, the Licensee may, at its sole option, purchase such coverage at the
Distributor's expense.
D. Within fifteen (15) days from the effective date of this Agreement,
and from time to time thereafter, at the Licensee's request, the Distributor
shall furnish to the Licensee satisfactory proof of its compliance with the
provisions of this Article.
E. If the Distributor fails to comply with any of the provisions of
this Article, the Licensee at its sole election, may terminate this Agreement
without further notice.
XIII. Third Party Infringements
If the Distributor learns that a third party is, or may be, making any
unauthorized uses of the Trademarks, the Distributor agrees promptly to give the
Licensee written notice giving full information with respect to the actions by
said third party. The Distributor shall not make any demands or claims, bring
suit, effect any settlements or take any other action
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<PAGE>
without the prior written consent of the Licensee, for the infringement or
possible infringement by third parties of any of the rights granted to the
Distributor, or of any of the Trademarks. The Distributor hereby waives any
rights which may be afforded to it by the laws of the Territory to institute
suit for infringement of the Trademarks. The Distributor agrees to cooperate
with the Licensee at no out-of-pocket expense to the Distributor in connection
with any action taken by the Licensee or Licensor to terminate infringements.
Licensee shall act to terminate an infringement if, in the exercise of
Licensee's reasonable judgment, the infringement is material.
XIV. Books of Account and Other Records
A. The Distributor shall keep full and accurate books of account, and
all documents and material relating to this Agreement and the subject matter
thereof at the Distributor's principal office at all times during the
continuation of this Agreement and for three years thereafter. The Licensee or
the Licensor, or the duly authorized agent or representative of either, shall
have the right to examine such books, documents, and other material, shall have
full and free access thereto during all ordinary business hours, and shall be at
liberty to make copies of all, or any part, of such books, documents or other
materials.
B. Should the above inspection of the books, documents and other
material reveal a deficiency in the accounting, reporting or payment in excess
of five (5%) percent for the applicable period, in addition to payment of the
deficiency, all accounting and audit fees relating to such inspection shall be
paid by Distributor.
XV. Efforts to Sell the Articles
A. The Distributor shall use its best efforts to exploit and to
promote, at its own expense, the sale and the use of the Articles, and to sell
the same as widely as possible and at the best price obtainable in the
Territory. Distributor shall furthermore use its best efforts to sell the
Articles with a view towards enhancing the Trademarks and the quality and value
of the Articles.
B. In order to assist the Licensee in determining the marketing
activities of the Distributor, the Distributor agrees to furnish to the
Licensee, upon request from time to time, with complete information indicating
the efforts made by the Distributor to market the Articles.
C. Distributor shall furnish Licensee on a weekly basis with reports
indicating the sales of each Article being offered
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for sale at each retail store owned, operated or controlled by
Distributor.
D. If, and when, Distributor prepares business plans containing
information respecting Episode stores, such as projected sales, expenses and
estimated profit and loss on a per store basis, for any forthcoming period of
the term, Distributor shall furnish said business plans to Licensee. Distributor
shall also furnish Licensee with such other information as Licensee may
reasonably require.
XVI. Termination
A. The following shall constitute an event of default under this
Agreement:
If the Distributor shall:
(1) fail to pay any amount to the Licensee when due;
(2) breach the terms of Articles VI and VIII hereof;
(3) become insolvent, or if a petition in bankruptcy
or for reorganization is filed by or against it, or if any
insolvency proceedings are instituted by or against it under
any statute, regulation or laws, or if it makes an assignment
for the benefit of its creditors, or if a receiver is
appointed for any of its assets, or if it liquidates its
business in any manner whatsoever, or if any of distress,
execution, or attachment is levied on any of its equipment
used in the distribution of the Articles and the same remains
undischarged for a period of ten days, or if the Distributor
abandons the distribution of the Articles, ceases to do
business as a going concern, or transfers all, or
substantially all, of its assets;
(4) breach any of the terms of this Agreement, or of
any other agreement between the parties.
B. The Licensee shall have the right to terminate this Agreement as
follows:
(1) as set forth elsewhere in this Agreement;
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(2) if the event specified in Section XVI-A(1) hereof
remains uncured within five days after notice thereof has been
given by the Licensee;
(3) if any other event of default remains uncured
within ten days after notice thereof has been given by the
Licensee.
C. Notwithstanding anything to the contrary hereinabove set forth,
either party may terminate this agreement at any time by notice in writing. Upon
such a notice of termination, the provisions of Sub-paragraphs D, E and F of
this Article XVI shall apply as if the agreement had been terminated on the date
of the notice.
D. Upon termination of this Agreement:
(1) Except as set forth in Section XVI-E below, all
rights of the Distributor granted hereunder will immediately
terminate and all rights and goodwill appertaining thereto,
including, but not limited to the Trademarks, the Articles and
the right to distribute will revert to the Licensee without
cost to the Licensee; and
(2) The Distributor shall, at its own expense,
immediately cease using the Trademarks, remove the same from
all Advertising Material, signs, letterheads, packaging
materials, or other advertising materials used by it.
(3) Upon the failure of the Distributor to do any of
the foregoing, the Licensee may do so at the Distributor's
expense.
E. Upon termination of this Agreement, the Distributor shall
immediately discontinue advertising, selling and distributing Articles, except
that the Distributor shall be permitted to sell or otherwise distribute its
finished inventory of all Articles at the time of such termination and such
inventory as may be in the process of production for a period not to exceed
twelve (12) calendar months after termination of this Agreement; provided,
however, that the Distributor shall be liable for and shall pay all amounts and
submit all reports in connection with such sales as required under the terms of
this Agreement. During the twelve (12) month period, the Distributor shall have
the right to purchase additional Articles, but this right shall not extend or
otherwise enlarge any right to sell or dispose of same. Within thirty (30) days
after its receipt of
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notice of termination, the Distributor shall furnish the Licensee with a written
statement of all Articles in inventory and on order.
F. The termination of this Agreement shall not discharge or release the
Distributor from all liabilities and responsibilities it may have hereunder,
whether or not they will have accrued prior to such termination or by reason of
the same, including, but not limited to, the payment of all amounts required
hereunder, and the same shall not prejudice any of the Licensee's rights in
connection with the enforcement or breach of this Agreement.
XVII. Advertising
"Intentionally Deleted".
XVIII. Trademark Usage
Distributor agrees to the use of the Trademarks in connection with the
Articles so as to conform with the Trademark Laws of the country in which the
products are to be sold at retail.
XIX. Rectified Breach
"Intentionally Deleted".
XX. Miscellaneous
A. This Agreement and the rights granted hereunder, shall be personal
to the Distributor. The Distributor shall not, directly or indirectly, whether
in writing or orally, assign, transfer or encumber this Agreement or assign,
transfer, sublicense, delegate or encumber this Agreement, or assign, or permit
said Agreement, or said rights, to be transferred, assigned, sublicensed,
delegated or encumbered by operation of law or otherwise, without the prior
written consent of the Licensee. The foregoing restrictions shall also apply to
assignments, transfers, sublicenses or encumbrances to any entity owned or
controlled by, or under, common ownership or control with the Distributor. This
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Licensee.
B. No waiver or modification of any of the terms of this Agreement
shall be valid unless in writing. Failure by either party to enforce any rights
under this Agreement shall not be construed as a waiver of such rights, nor
shall a waiver by either party of a default hereunder in one or more instances
be construed as constituting a continuing waiver or as a waiver in other
instances. All specific remedies provided for in this
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Agreement shall be cumulative and shall not be exclusive of one another or of
any other remedies available in law or equity.
C. In the event any term or provision of this Agreement shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other term or
provision hereof, and this Agreement shall be interpreted and construed as if
such term or provision, to the extent the same shall have been held to be
invalid, illegal or unenforceable, had never been contained herein.
D. The headings as to the contents of particular paragraphs are
inserted only for convenience and are in no way to be construed as a part of
this Agreement.
E. This Agreement comprises the entire understanding of the parties
hereto on the subject matter herein contained. Any and all representations or
agreements by any agent or representative of either party shall be null, void
and of no effect whatsoever.
F. Nothing contained in this Agreement shall be construed to place the
parties in the relationship of legal representatives, partners, joint ventures,
or agency. Distributor shall have no power to obligate or bind Licensee in any
manner whatsoever.
G. The Distributor shall keep confidential, during the term of this
Agreement and thereafter, all information it may receive concerning the Licensee
and its operations.
H. All Trademark uses of the Trademarks by the Distributor under the
terms of this Agreement shall inure to the benefit of the Licensee and the
Licensor, as their respective interests may appear, who shall own all trademarks
and trademark rights created by such uses. The Distributor hereby assigns and
transfers to the Licensee and the Licensor, as their respective interests may
appear, all trademarks and trademark rights created by such uses, together with
the goodwill of the business in connection with which such trademarks are used.
I. The Licensee or its designees shall have the right, but not the
obligation, to file, at its sole expense, one or more trademark or design
applications in the Territory relating to the Articles in the name of the
Licensee or of its designees or parties licensed by or affiliated with the
Licensee. The Distributor shall keep records (including copies of pertinent
invoices, correspondence, and other material) of and advise, the Licensee of the
dates when each Article is first distributed by it in the Territory. If
requested by either the Licensee or its designee, the Distributor also agrees to
supply promptly to the
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<PAGE>
Licensee such samples, facsimiles, or photographs of the trademark usages in
question and any other information necessary and desirable to enable the
Licensee or its designees to complete and obtain any trademark or design
applications or registrations, or to evaluate or oppose any trademark or design
applications, registrations, or uses by third parties. If the Licensee or its
designee deems it necessary or desirable for any application to be made in the
name of the Distributor, the Distributor agrees, at the Licensee's request, to
sign promptly, or cause to be signed, any necessary application or consent
papers. However, no such registration in the name of the Distributor shall be
construed as an assignment or grant Distributor any right, title or interest in
the Trademark or design as provided in this Agreement; and upon the request of
the Licensee, the Distributor agrees to execute and deliver to the Licensee any
such assignments, instruments of cancellation, consents, or other papers as may
be requested by the Licensee for the purpose of assigning said application or
registration to the Licensee or its designees, or canceling the same, or
consenting to the registration by the Licensee or its designees, of a trademark
similar to the trademark covered by said application, or registration, and
relating to other goods and services. Upon the expiration or termination of this
Agreement, or upon the Licensee's written demand, the Distributor agrees to
assign promptly, or cause to be assigned to the Licensee, or its designees, by
good and recordable instruments of transfer, any trademark and design
registrations or applications in the name of the Distributor, together with the
underlying Trademarks and designs and the goodwill of the business in connection
with which such Trademarks and designs have been used.
J. All notices, payments and statements required or provided for
herein, shall be given to the parties at their respective addresses set forth
above. All notices, statements and reports shall be in writing and shall be
delivered in person or mailed by registered or certified mail, postage prepaid,
addressed to the party to whom such notice is to be given. All notices shall be
deemed to have been given when mailed or upon receipt of personally delivered
except as otherwise expressly set forth herein. Any party may change its address
by giving notice of the same to the other.
K. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, in the United States of America, without
giving effect to its principles of conflicts of laws.
L. The Distributor recognizes the goodwill inherent in the Trademarks,
acknowledges that the goodwill attached thereto belongs to the Licensee and the
Licensor as their respective interests may appear, and that such Trademarks have
secondary meanings in the minds of the public. The Distributor shall not,
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<PAGE>
during the term of this Agreement or thereafter, attack or contest the rights of
the Licensee and the Licensor in and to the Trademarks, or attack the validity
of this Agreement.
M. The Distributor shall not in any way register any Trademark, or any
similar name as a trade name or trademark, nor will any Trademark be used by the
Distributor in the name of any corporation, partnership or other business
entity, unless authorized by this Agreement. Distributor agrees that it will not
use the name "EPIC" as a trade name or trademark.
N. Except as expressly set forth herein, the Distributor shall have no
rights to, directly or indirectly, manufacture, import, sell, offer for sale or
to distribute Articles bearing the Trademarks in the Territory.
O. Distributor and Guarantor represent that Distributor is and shall
remain a wholly-owned subsidiary of Guarantor. Guarantor agrees to guarantee the
due and timely performance by Distributor of all of Distributor's obligations
under this agreement. Said Guaranty is made part of this agreement as Appendix
C.
P. This Agreement is subject to and conditioned upon, the approval of
Licensor and The United States Bankruptcy Court for the Southern District of New
York in the Chapter 11 proceeding of Episode USA, Inc. (96-B-40371-JLG).
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<PAGE>
To signify their agreement to all of the foregoing, the parties hereto
have caused this Agreement to be executed by their duly authorized officers as
of the date first set forth above.
Licensee:
Witness: TOPPY INTERNATIONAL LIMITED
_________________________ By: /s/ Jeffrey Fang
-------------------------
Distributor:
Witness: T3 ACQUISITION, INC.
/s/ Dan Matthias By: /s/ Rebecca Matthias
- - -------------------------- --------------------------
Guarantor:
Witness: MOTHERS WORK, INC.
/s/ Dan Matthias By: /s/ Rebecca Matthias
- - -------------------------- --------------------------
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APPENDIX A - SCHEDULE OF TRADEMARKS
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------
Registration Registration International
Trademark No. Date Class
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EXCURSION 1,821,447 02/15/94 25
- - -----------------------------------------------------------------------------------------------------------------------------
EPISODE 1,596,579 05/05/90 25
- - -----------------------------------------------------------------------------------------------------------------------------
EPISODE 1,616,193 10/02/90 42
- - -----------------------------------------------------------------------------------------------------------------------------
EXCURSIONS 1,559,971 10/10/89 25
- - -----------------------------------------------------------------------------------------------------------------------------
EPISODE 1,525,858 02/21/89 25
- - -----------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------
EPISODE 686,686 10/13/59 25
- - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
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APPENDIX B - SCHEDULE OF MINIMUMS
1. GUARANTEED MINIMUM SALES OF EPISODE ARTICLES AT RETAIL VALUE
AND PURCHASED FROM TOPPY
October 1, 1996 - September 30, 1997 $20,000,000
October 1, 1997 - September 30, 1998 25,000,000
October 1, 1998 - September 30, 1999 30,000,000
October 1, 1999 - September 30, 2000 35,000,000
October 1, 2000 - September 30, 2001 40,000,000
October 1, 2001 - September 30, 2002 45,000,000
2. GUARANTEED MINIMUM PERCENTAGE BY VALUE OF EPISODE ARTICLES
ON FLOOR OF EACH STORE SHALL BE 50 PERCENT (50%) OF VALUE OF
ALL MERCHANDISE ON FLOOR.
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APPENDIX C
GUARANTEE OF MOTHERS WORK, INC.
This Guaranty ("Guaranty") is made and entered into this 25th
day of April, 1996 by Mothers Work, Inc., a corporation organized and existing
under the laws of the State of Delaware ("Guarantor" or "MWI") in favor of Toppy
International Limited, a corporation organized under the laws of Hong Kong
("Toppy"), and Episode USA, Inc., a corporation organized under the laws of the
State of Delaware ("Episode").
Whereas, Toppy, MWI and T3 Acquisition, Inc., a corporation
organized and existing under the laws of the State of Delaware ("T3") have
entered into that certain Distribution Agreement dated April 25, 1996 (as the
same may be amended or otherwise modified from time to time, the "Distribution
Agreement"); and
Whereas, Episode, T3 and MWI have entered into that certain
Trademark License Agreement dated April 25, 1996 (as the same may be amended or
otherwise modified from time to time, the "Trademark License Agreement"); and
Whereas, the Distribution Agreement and the Trademark
License Agreement are collectively referred to herein as the
"Agreements"; and
Whereas, the Guarantor is the principal shareholder of T3 and
will derive substantial benefit from the consummation of the transactions set
forth in the Agreements; and
Whereas, as a condition of consummating the transactions set
forth in the Agreements, Toppy and Episode have required that the Guarantor
enter into this Guaranty.
NOW THEREFORE, in consideration of the premises and to induce
Toppy and Episode to enter into and perform the Agreements, the Guarantor agrees
as follows:
1. The Guarantor hereby unconditionally and irrevocably
guarantees the prompt payment and performance when due of all of the
obligations, including indemnification obligations, (the "Obligations") of T3
under the Agreements.
2. The Guarantor agrees that its obligations hereunder are an
unconditional and absolute guaranty of payment and of performance of the
Obligations, irrespective of any waiver, consent or granting of any indulgence
by Toppy or Episode or any other person to T3 with respect to any provision of
the Agreements and irrespective of whether Toppy or Episode shall have
instituted suit, action or proceeding or exhausted their respective remedies
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<PAGE>
under the Agreements or taken any steps to enforce any rights against T3 or
against any other person to compel any such performance or to collect all or
part of any Obligations.
3. The Guarantor waives diligence, presentment, demand or
payment, filing of claims with a court in the event of bankruptcy of T3,
protest, notice of default in the payment of any sum payable by T3, notice of
any other default, breach or nonperformance of any agreement, covenant or
obligation of T3 and notice and all demands whatsoever with respect to the
Obligations. The Guarantor expressly waives notice from Toppy and Episode of
their acceptance of and reliance on this Guaranty. The Guarantor agrees to pay
all costs, expenses and fees, including reasonable attorneys' fees and expenses,
which may be incurred by Toppy and/or Episode in enforcing or attempting to
enforce this Guaranty, whether same shall be enforced by suit or otherwise.
4. No amendment, release or modification of the provisions of
this Guaranty shall be established by conduct, custom or course of dealing, but
solely by an instrument in writing duly executed by Toppy and Episode. Toppy
and/or Episode shall have the full right, without any notice to or consent from
the Guarantor, from time to time and at any time, and without affecting,
impairing or discharging, in whole or in part, the liability of the Guarantor
hereunder: (a) to make any change, amendment or modification whatsoever to or of
any term or condition of the Agreements; (b) to extend, in whole or in part, by
renewal or otherwise, and on one or more occasions, any term or condition of the
Agreements; or (c) to settle, compromise, release, surrender, modify or impair,
and to enforce and exercise, or fail or refuse to enforce or exercise, any
claims, rights or remedies of any kind or nature against T3.
5. Neither Toppy or Episode shall be under any obligation to
proceed against T3 before proceeding against the Guarantor.
6. This Guaranty shall enure to the benefit of Toppy, Episode,
its successors and assigns.
7. The validity, interpretation and enforcement of this
Guaranty shall be governed by the laws of the State of New York without giving
effect to conflict of laws principles thereof. Guarantor hereby irrevocably
submits to the jurisdiction of the state courts of the State of New York and to
the jurisdiction of
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<PAGE>
the United States District Court for the Southern District of New York for the
purposes of any suit, action or other proceeding arising out of or based upon
this Guaranty or the subject matter hereof.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered on the date first written above.
Witness: MOTHERS WORK, INC.
_____________________________ By: ____________________________
