<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): September 3, 1999
MARISA CHRISTINA, INCORPORATED
(Exact Name of Registrant as Specified in Charter)
Delaware 0-24176 11-3216809
(State or Other (Commission file number) (IRS Employer
Jurisdiction of Identification No.)
Incorporation)
8101 Tonnelle Avenue, North Bergen, New Jersey 07047-4601
(Address of Principal Executive Offices) (Zip code)
Registrant's telephone number, including area code: (201) 758-9800
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 2, 1999, Marisa Christina, Incorporated (the "Company")
completed the sale of substantially all the assets, properties and
rights of its Adrienne Vittadini Division ("AVE") to de V & P, Inc.
for $9.5 million in cash and the assignment of certain liabilities of
AVE. Proceeds to the Company of $8.1 million net of transaction and
related costs were used by the Company to pay down borrowings under
its bank credit facilities. The Company estimates that it will
recognize a pre-tax gain of approximately $800,000 on the sale.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Pro Forma Financial Information:
(i) Pro Forma Consolidated Balance Sheet at June 30, 1999.
(ii) Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1998.
(iii) Pro Forma Consolidated Statement of Operations for the six
months ended June 30, 1999.
(iv) Notes to Pro Forma Consolidated Financial Statements
(c) Exhibits. The following exhibits are filed with this report, and
the foregoing description is modified by reference to such
exhibits:
(1) Marisa Christina, Incorporated Press Release dated
September 3, 1999.
(2) Asset Purchase Agreement between Adrienne Vittadini
Enterprise, Inc., Marisa Christina, Incorporated and V & P,
Inc. dated as of September 2, 1999.
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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 hereunto duly authorized.
Marisa Christina, Incorporated
/s/ S. E. Melvin Hecht
-----------------------
S. E. Melvin Hecht
Vice Chairman, Chief Financial Officer
and Treasurer
Date: September 16, 1999
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MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
The pro forma financial information should be read in conjunction with the
consolidated financial statements and related notes of Marisa Christina,
Incorporated and subsidiaries ( the "Company"), not included elsewhere herein.
On September 2, 1999, the Company completed the sale of substantially all the
assets, properties and rights of its Adrienne Vittadini Division ("AVE") to de V
& P, Inc. (the "Buyer") for $9.5 million in cash and the assignment of certain
liabilities of AVE. Proceeds to the Company of $8.1 million net of transaction
and related costs were used by the Company to pay down borrowings under its bank
credit facilities. The Company estimates that it will recognize a pre-tax gain
of approximately $800,000 on the sale.
PRO FORMA CONSOLIDATED BALANCE SHEET
The pro forma consolidated balance sheet reflects the accounts of the Company as
of June 30, 1999 giving effect to the disposition of assets, as if it had
occurred on such date. The pro forma consolidated balance sheet reflects the
assets and liabilities of the Company following the disposition.
The aggregate sale price for the AVE assets sold is as follows:
<TABLE>
<S> <C>
Cash received $ 9,500,000
Liabilities assigned to the Buyer 784,000
Transaction and related costs (1,400,000)
---------------
Net proceeds $ 8,884,000
===============
</TABLE>
The estimated pre-tax gain to be recognized by the Company based on asset values
at June 30, 1999 is as follows:
<TABLE>
<S> <C>
Net proceeds $ 8,884,000
Less:
Accounts receivable (686,381)
Inventories (145,000)
Prepaid expenses and other current assets (247,127)
Equipment and leasehold improvements (431,120)
Goodwill (6,217,391)
Estimated increase in net assets to date of closing (356,981)
--------------
Estimated pre-tax gain $ 800,000
==============
</TABLE>
The Company has not finalized the accounting for the asset disposition and,
accordingly, the gain to be recognized has not been finalized.
The pro forma consolidated balance sheet also reflects the pay down of
borrowings under the Company's bank credit facilities and adjustment of deferred
income taxes.
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<PAGE> 5
MARISA CHRISTINA,INCORPORATED AND SUBSIDIARIES
PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The pro forma consolidated statements of operations for the year ended December
31, 1998 and the six months ended June 30, 1999 giving the effect to the
disposition of the assets of AVE as if such had occurred on January 1, 1998.
Results for the six months ended June 30, 1999 are not necessarily indicative
of results expected for the full year. Pro forma results are not necessarily
indicative of results expected for the remainder of 1999 or future years.
The pro forma adjustments include the following:
(1) The elimination of the operating results of AVE for the
year ended December 31, 1998 and the six months ended June 30,
1999.
(2) The adjustment of interest expense to reflect (i) the
pay down of borrowings under the Company's bank credit facilities
with proceeds of the sale and (ii) the elimination of the impact
of AVE seasonal borrowings under the bank credit facilities.
(3) The adjustment of the income tax benefit as the result
of the reduction in the Company's losses from the elimination of
AVE's operations as well as the lower interest expense.
5
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MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
Pro Forma Consolidated Balance Sheet
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
ASSETS HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- -----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 495,271 $ 93,019 (2) $ 588,290
Accounts receivable, less allowance for
doubtful accounts of $288,335 historical
and $267,781 pro forma 5,571,056 (686,381) (1) 4,884,675
Inventories 7,696,943 (145,000) (1) 7,551,943
Income taxes recoverable 1,866,454 -- 1,866,454
Prepaid expenses and other current assets 1,748,977 (247,127) (1) 1,501,850
------------ ----------- -------------
Total current assets 17,378,701 (985,489) 16,393,212
Property and equipment, net 2,592,706 (431,120) (1) 2,161,586
Goodwill, less accumulated amortization of
$5,143,884 historical and $2,690,586 pro forma 12,740,876 (6,217,391) (1) 6,523,485
Other assets 508,073 -- (1) 508,073
Deferred tax assets 4,859,392 (272,000) (3) 4,587,392
------------ ----------- -------------
Total assets $ 38,079,748 $(7,906,000) $ 30,173,748
============ =========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loans payable to banks $ 7,650,000 $(7,650,000) (2) $ --
Accounts payable 2,788,164 (597,935) (1) 2,190,229
Accrued expenses and other current liabilities 707,161 (186,065) (1) 521,096
------------ ----------- --------------
Total current liabilities 11,145,325 (8,434,000) 2,711,325
------------ ----------- --------------
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized, none issued -- -- --
Common stock, $.01 par value; 15,000,000 shares
authorized, 8,586,769 shares issued 1999 85,868 -- 85,868
Additional paid-in capital 31,653,186 -- 31,653,186
Retained earnings (accumulated deficit) (1,120,496) 528,000 (4) (592,496)
Accumulated other comprehensive loss (51,700) -- (51,700)
Treasury stock, 821,000 common shares in 1999
at cost (3,632,435) -- (3,632,435)
------------ ----------- --------------
Total stockholders' equity 26,934,423 528,000 27,462,423
------------ ----------- --------------
Total liabilities and
stockholders' equity $ 38,079,748 $(7,906,000) $ 30,173,748
============ =========== ==============
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
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MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
Year ended December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------------- ---------------------- ---------------
<S> <C> <C> <C>
Net sales $ 74,607,115 $ (19,690,389) (1) $ 54,916,726
Cost of goods sold 55,377,000 (15,381,636) (1) 39,995,364
---------------- ---------------- ---------------
Gross profit 19,230,115 (4,308,753) 14,921,362
Selling, general and administrative expenses 24,952,758 (9,109,193) (1) 15,843,565
Restructuring charges 3,750,000 (3,750,000) (1) --
Asset impairment charge 16,525,306 (16,525,306) (1) --
---------------- ---------------- ---------------
Operating loss (25,997,949) 25,075,746 (922,203)
Other income, net 2,145,481 (1,923,399) (1) 222,082
Interest expense, net (682,558) 582,558 (2) (100,000)
---------------- ---------------- ---------------
Loss before income tax benefit (24,535,026) 23,734,905 (800,121)
Income tax benefit (8,226,807) 8,000,000 (3) (226,807)
---------------- ---------------- ---------------
Net loss $ (16,308,219) $ 15,734,905 $ (573,314)
================ ================ ===============
Net loss per share:
Basic $ (2.03) $ (0.07)
Diluted $ (2.03) $ (0.07)
================ ===============
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
7
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MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
Six Months ended June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ------------
<S> <C> <C> <C>
Net sales $ 24,990,359 $ (4,961,464) (1) $ 20,028,895
Cost of goods sold 20,274,167 (4,711,402) (1) 15,562,765
------------ ------------ ------------
Gross profit 4,716,192 (250,062) 4,466,130
Selling, general and administrative expense 9,998,068 (2,403,542) (1) 7,594,526
------------ ----------- ------------
Operating loss (5,281,876) 2,153,480 (3,128,396)
Other income, net 850,972 (750,888) (1) 100,084
Interest expense, net (430,820) 360,820 (2) (70,000)
------------ ----------- ------------
Loss before income tax benefit (4,861,724) 1,763,412 (3,098,312)
Income tax benefit (1,628,000) 600,000 (3) (1,028,000)
------------ ----------- ------------
Net loss $ (3,233,724) $ 1,163,412 $(2,070,312)
============ =========== ============
Net loss per share:
Basic $ (0.42) $ (0.27)
Diluted $ (0.42) $ (0.27)
============ ============
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
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MARISA CHRISTINA, INCORPORATED AND SUBSIDIARIES
Notes to Pro Forma Consolidated Financial Statements
As of June 30, 1999, the six months then ended and
the year ended December 31, 1998
(Unaudited)
PRO FORMA CONSOLIDATED BALANCE SHEET
(1) Eliminate asset sold and liabilities assigned to de V & P, Inc.
(2) Record pay down of borrowings under the Company's bank credit facilities
with the balance being added to cash reserves.
(3) Adjust deferred tax assets as a result of the sale.
(4) Recognize after-tax gain sale.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Eliminate operating results of AVE.
(2) Adjust interest expense to reflect (i) the pay down of borrowings under
the Company's bank credit facilities with proceeds of the sale and (ii)
the elimination of the impact of AVE seasonal borrowings under the bank
credit facilities.
(3) Adjust income tax expense as a result of elimination of operating expenses
and the adjustment of interest expense.
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EXHIBIT INDEX
Exhibit Description
(c) (1) Marisa Christina, Incorporated Press release dated September 3, 1999
(c) (2) Asset Purchse Agreement between Adrienne Vittdini Enterprises, Inc.,
Marisa Christina, Inc. and V&P, Inc. dated September 2, 1999
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FOR: Marisa Christina, Inc.
APPROVED BY: Michael Lerner
Chairman and Chief Executive Officer
Melvin Hecht
Chief Financial Officer
(212) 221-5770
For Immediate Release
CONTACT: Investor Relations:
Gordon McCoun, Eric Boyriven
Morgen-Walke Associates
(212) 850-5600
MARISA CHRISTINA, INC. IN AGREEMENT TO SELL
ADRIENNE VITTADINI ENTERPRISES, INC.
New York, New York, September 3, 1999 -- Marisa Christina, Incorporated
(Nasdaq:MRSA) announced today that it has entered into a definitive agreement
with de V & P to sell substantially all the assets, properties and rights, and
to assign certain liabilities of Adrienne Vittadini Enterprises, Inc. for $9.5
million in cash.
Michael H. Lerner, Chairman of Marisa Christina, Inc., commented, "We
feel this is a classic win/win situation. Marisa Christina will be able to focus
on its core businesses and explore new opportunities, while we are confident
that Adrienne Vittadini will flourish under the leadership of Maura de Visscher
and Kim Perrone."
Marisa Christina, Inc. designs, manufactures, sources and markets a
broad line of high quality "better" and "bridge" clothing for women and
children. The Marisa Christina label includes sweaters characterized by classic,
timeless styling and unique details. Flapdoodles apparel consists of casual
children's and infant's sportswear, swimwear, and outerwear featuring vibrant
colors, all-natural fabrics and unique patterns. The Adrienne Vittadini line
includes women's knit-oriented casual coordinates and licensed products
characterized by distinctive and elegant designer styling.
-More-
<PAGE> 2
MRSA IN AGREEMENT TO SELL ADRIENNE VITTADINI PAGE 2
Except for historical information contained herein, the statements in
this release are forward-looking statements that are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties
which may cause the Company's actual results in future periods to differ
materially from forecasted results. Those risks include, among others, risks
associated with the success of future advertising and marketing programs, the
receipt and timing of future customer orders, price pressures and other
competitive factors and a softening of retailer or consumer acceptance of the
Company's products leading to a decrease in anticipated revenues and gross
profit margins. Those and other risks are described in the Company's filings
with the Securities and Exchange Commission (SEC), copies of which are available
from the SEC or may be obtained upon request from the Company.
# # #
<PAGE> 1
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of September 2, 1999 (the
"Closing Date"), by and among Adrienne Vittadini Enterprises, Inc., a Delaware
corporation ("AVE"), Marisa Christina Incorporated, a Delaware corporation
("Marisa Christina"), and de V & P, Inc., a Delaware corporation ("Purchaser").
AVE is engaged in, among other things, the business of
designing, sourcing, marketing, selling and distributing apparel and other
consumer goods (such businesses, and all other business currently conducted by
AVE, being the "Business").
Purchaser desires to purchase substantially all of the assets,
properties and rights of AVE, and AVE desires to sell, and to cause the sale of,
such assets, properties and rights, and AVE desires to assign certain
liabilities of AVE, and Purchaser desires to assume such liabilities, all on the
terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties, covenants and agreements contained herein and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
GENERAL
1.1 Definitions. Certain capitalized terms used in this Agreement have the
meanings specified in Annex A hereof.
1.2 Terms Generally. (a) Words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include the other
genders as the context requires, (b) the terms "hereof," "herein," "hereto" and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole (including the Annex and all of
the Schedules and Exhibits hereto) and not to any particular provision of this
Agreement, and Annex, Article, Section, paragraph, Exhibit and Schedule
references are to the Annex, Articles, Sections, paragraphs, Exhibits and
Schedules to this Agreement unless otherwise specified, (c) the word "including"
and words of similar import when used in this Agreement shall mean "including,
without limitation," unless otherwise specified, (d) the word "or" shall not be
exclusive, (e) provisions shall apply, when appropriate, to successive events
and transactions and (f) terms not found in Annex A are defined elsewhere in
this Agreement.
ARTICLE II
THE TRANSACTION
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2.1 Sale and Purchase of Assets. Subject to the terms and
conditions of this Agreement, AVE hereby sells, assigns, transfers, delivers and
conveys to Purchaser, and Purchaser hereby purchases, the Acquired Assets, free
and clear of all Liens other than Permitted Liens, for the Purchase Price
specified in Section 2.2.
2.2 Purchase Price. Subject to the terms and conditions of
this Agreement, the aggregate purchase price to be paid by Purchaser for the
purchase of the Acquired Assets (the "Purchase Price") shall be (i) the Final
Purchase Price (as defined in Section 2.3(d) below), and (ii) the Assumed
Liabilities. Subject to the terms and conditions of this Agreement at the
Closing, the Base Purchase Payment, subject to adjustment in accordance with
Section 2.3, shall be paid by Purchaser to AVE by wire transfer of immediately
available funds to an account designated by AVE in writing.
2.3 Closing Working Capital Adjustment. (a) AVE has delivered
to Purchaser its good faith written estimate of the Closing Working Capital
(with any adjustment thereto proposed by Purchaser and agreed to by AVE prior to
the Closing Date (the "Estimated Closing Working Capital")). AVE has made
available to Purchaser all workpapers and other books and records utilized in
preparing the Estimated Closing Working Capital. The Estimated Closing Working
Capital is set forth on Schedule 2.3.
(b) As promptly as practicable, but in no event later
than 90 days, after the Closing Date, Purchaser shall notify AVE in writing of
its determination of Closing Working Capital ("Purchaser's Closing Schedule")
which determination shall set forth in reasonable detail Purchaser's calculation
of Closing Working Capital. Purchaser's Closing Schedule shall also set forth,
and explain, in reasonable detail, any differences between Purchaser's
calculation of Closing Working Capital and the Estimated Closing Working
Capital. A copy of all workpapers and other books and records utilized in the
preparation of Purchaser's Closing Schedule shall be made available to AVE at
such time. AVE will notify Purchaser in writing ("AVE's Dispute Notice") within
30 days after receiving Purchaser's Closing Schedule if AVE disagrees with
Purchaser's calculation of the Closing Working Capital as set forth in
Purchaser's Closing Schedule, which notice shall set forth in reasonable detail
the basis for such disagreement, the dollar amounts involved and AVE's
calculation of the Closing Working Capital. Purchaser will give AVE and its
representatives reasonable access during the normal business hours of Purchaser
to the personnel, books and records of the Business to assist AVE in the
preparation of AVE's Dispute Notice. If no AVE's Dispute Notice is received by
Purchaser within such 30-day period, Purchaser's calculation of Closing Working
Capital as set forth in Purchaser's Closing Schedule shall be final and binding
upon the parties hereto.
(c) Upon receipt by Purchaser of AVE's Dispute Notice,
AVE and Purchaser shall negotiate in good faith to resolve any disagreement with
respect to Closing Working Capital set forth in AVE's Dispute Notice. To the
extent Purchaser and AVE are unable to agree with respect to Closing Working
Capital within 30 days after receipt by Purchaser of AVE's Dispute Notice,
Purchaser and AVE shall promptly select a mutually acceptable nationally
recognized accounting firm with no material relationship to Purchaser, AVE or
Marisa Christina
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<PAGE> 3
or their affiliates and submit their dispute to such accounting firm for a
binding resolution. Closing Working Capital as agreed upon by AVE and Purchaser,
as deemed agreed upon pursuant to the last sentence of Section 2.3(b) or as
determined by such accounting firm, in accordance herewith, shall be termed the
"Final Closing Working Capital". The fees and expenses of such accounting firm
shall be paid by the party hereto whose determination of Closing Working Capital
as initially submitted to such accounting firm is furthest away from the Final
Closing Working Capital.
(d) Following Closing and upon the determination of
the Final Closing Working Capital pursuant to Section 2.3(c), the "Final
Purchase Price" shall be determined by reducing or increasing the Base Purchase
Payment dollar for dollar as follows: (i) if the Final Closing Working Capital
is greater than $900,000 then Purchaser shall pay to AVE such excess, or (ii) if
the Final Closing Working Capital is less than $800,000 then AVE shall pay to
Purchaser such deficiency, plus, in either case, interest on such deficiency or
excess, as the case may be, for the period from the Closing Date through (but
excluding) the date of such payment at the Prime Rate.
(e) The payment to be made pursuant to Section 2.3(d)
shall be made by wire transfer of immediately available funds to a bank account
designated by AVE or Purchaser, as the case may be, to the other party within
five business days Business Days after the Final Closing Working Capital becomes
final and binding on the parties hereto.
2.4 Assumption of Assumed Liabilities.
(a) Subject to the terms and conditions of this
Agreement, Purchaser hereby assumes the Assumed Liabilities.
(b) Notwithstanding anything to the contrary contained
herein, Purchaser shall not assume or be bound by or be obligated or responsible
for any duties, responsibilities, commitments, expenses, obligations or
liabilities of AVE or relating to the Acquired Assets or the Business (or which
may be asserted against or imposed upon Purchaser as a successor or transferee
of AVE as an acquiror of the Acquired Assets or the Business or otherwise as a
matter of law) of any kind or nature (fixed or contingent, known or unknown,
warranties, employee benefit plan obligations or claims), other than the Assumed
Liabilities, (all such duties, responsibilities, commitments, expenses,
obligations or liabilities other than the Assumed Liabilities are collectively
referred to as the "Non-Assumed Liabilities").
(c) AVE hereby irrevocably waives and releases, and has
caused its Affiliates to waive and release, Purchaser from all Non-Assumed
Liabilities, including any liabilities or obligations created or which arise by
statute or common law.
2.5 Closing. Subject to the terms and conditions of this
Agreement, the closing of the sale and purchase of the Acquired Assets (the
"Closing") shall take place at 2:00 p.m., New York City time, at the offices of
Pryor Cashman Sherman & Flynn, LLP, 410 Park Avenue, New York, New York
10022-4441, on September 2, 1999, concurrent with the execution of this
Agreement.
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2.6 Deliveries and Proceedings at the Closing. Subject to
the terms and conditions of this Agreement, at the Closing:
(a) Deliveries to Purchaser. AVE shall deliver to Purchaser:
(i) bills of sale and instruments of assignment, in
forms reasonably satisfactory to Purchaser, to evidence the transfer to
Purchaser of the Acquired Assets in accordance herewith, duly executed by AVE;
(ii) consents to transfer of all transferable or
assignable Contracts and Permits;
(iii) title certificates to any motor vehicles included
in the Acquired Assets, duly executed by AVE (together with any other transfer
forms necessary to transfer title to such vehicles);
(iv) U.C.C. termination statements in recordable form
and other appropriate releases, in form and substance reasonably satisfactory to
Purchaser, with respect to all recorded Liens in the Acquired Assets;
(v) a receipt for the payment of the Base Purchase
Payment duly executed by AVE;
(vi) the certificates and other documents required to be
delivered by AVE and Marisa Christina pursuant to Section 6.1 hereof, certified
Board and stockholder resolutions evidencing the authority of AVE and Marisa
Christina as set forth in Section 6.2 hereof;
(vii) the Transition Services Agreement;
(viii) a fully executed copy of the Second Amendment
Agreement dated August 20, 1999 among Adrienne Vittadini, Gianluigi Vittadini,
Vittadini, Ltd., Marisa Christina, AVE and Purchaser (the "Vittadini
Agreement");
(ix) the certificate of certificates referred to in
Section 3.12(c); and
(x) all such other documents and instruments of
conveyance as shall, in the reasonable opinion of Purchaser, be necessary to
transfer to Purchaser the Acquired Assets in accordance herewith and, where
necessary or desirable, in recordable form.
(b) Deliveries By Purchaser to AVE. Purchaser will deliver
to AVE:
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(i) wire transfer of immediately available funds in an
amount equal to the Base Purchase Payment;
(ii) an assumption agreement, in form reasonably
satisfactory to AVE, to evidence the assumption by Purchaser of the Assumed
Liabilities in accordance herewith, duly executed by Purchaser;
(iii) the certificates and other documents required to
be delivered by Purchaser pursuant to Section 6.2 hereof and certified
resolutions evidencing the authority of Purchaser as set forth in Section 4.2
hereof;
(iv) a fully executed copy of the Vittadini Agreement;
(v) Purchaser will reimburse AVE $152,458.48 for the
Lechar Realty Corp. security deposit; and
(vi) all such other documents and instruments of
assumption as shall, in the reasonable opinion of AVE, be necessary for
Purchaser to assume the Assumed Liabilities in accordance herewith.
2.7 Consent of Third Parties. Anything in this Agreement to
the contrary notwithstanding, this Agreement shall not constitute an agreement
to assign any of the Contracts or Permits or any claim or right or any benefit
arising thereunder or resulting therefrom if an attempted assignment thereof,
without the consent of a third Person thereto, would constitute a breach or
other contravention thereof or in any way adversely affect the rights of
Purchaser thereunder. AVE has used reasonable efforts to obtain the consent of
the other parties to any such Contract or Permit for the assignment thereof to
Purchaser. If such consent has not been obtained prior to the Closing, or if an
attempted assignment thereof would be ineffective or would adversely affect the
rights of AVE thereunder so that Purchaser would not in fact receive all such
rights, AVE and Purchaser will cooperate in a mutually agreeable arrangement
under which Purchaser would obtain the benefits and assume the obligations
thereunder (but only to the extent such obligations would have constituted
Assumed Liabilities if such assignment occurred at the Closing Date) from and
after the Closing Date in accordance with this Agreement, including
subcontracting, sublicensing or subleasing to Purchaser, or under which AVE
would enforce for the benefit of Purchaser, with Purchaser assuming AVE's
obligations to the same extent as if it would have constituted an Assumed
Liability and any and all rights of AVE against a third Person thereto. AVE will
pay promptly to Purchaser when received all monies received by AVE after the
Closing Date under any of the Contracts or any claim or right or any benefit
arising thereunder to the extent that Purchaser would be entitled thereto
pursuant hereto. The provisions of this Section 2.7 shall in no way limit the
Closing condition set forth in Section 6.1(b).
2.8 Allocation of Consideration. Each of the parties hereto
shall use their best efforts to agree on an allocation of the Purchase Price
among the Acquired Assets. If the parties hereto fail to agree to such
allocation within 30 days after the Closing, the allocation shall be determined
by an appraisal firm selected by Purchaser and reasonably acceptable to AVE; the
fees
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<PAGE> 6
and expenses of such appraisal firm shall be shared equally by the parties. The
parties hereto covenant and agree that the allocation of purchase price as
agreed upon by the parties or determined by the appraisal firm (the
"Allocation") shall be conclusive and final for all purposes of this Agreement.
In such case, Purchaser and AVE shall each report the federal, state and local
income and other tax consequences of the transactions contemplated by this
Agreement (which for purposes of this Agreement includes the Transaction
Documents as defined below) in a manner consistent with the Allocation
including, but not limited to, the preparation and filing of Form 8594 under
Section 1060 of the Code (or any successor form or successor provision of any
future tax law, or any comparable provisions of state, or local tax law) with
their respective federal, state and local income tax returns for the taxable
year that includes the Closing Date.
2.9 Prorations. The parties hereto agree that the following
expenses shall be calculated and pro rated as of the Closing Date, with AVE
responsible for such expenses for the period up to the Closing Date, and
Purchaser to be responsible for the period on and after the Closing Date
(provided, however, that to the extent that any of the following expense
categories are included in the Final Closing Working Capital, such expense shall
not be pro rated pursuant to this Section 2.9):
(a) all personal or real property taxes (on the basis on which
the same were assessed and paid) to the extent relating to the Business and
except as otherwise provided in Section 7.1;
(b) electric, fuel, gas, telephone, sewer and utility charges,
in each case to the extent relating to the Business;
(c) rentals and other charges under Contracts to be assumed by
Purchaser pursuant hereto; and
(d) charges under maintenance and service contracts and other
Contracts, and fees under Permits to be transferred to Purchaser as part of the
Acquired Assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF AVE AND SELLER
AVE and Seller hereby jointly and severally represent and
warrant to Purchaser as follows:
3.1 Qualification; Interests in Other Entities. (a) Each of
AVE and Marisa Christina is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation and has all
requisite corporate power and authority to own, lease and operate the Acquired
Assets and the Business as presently being conducted. AVE is duly licensed or
qualified to do business and is in good standing as a foreign corporation in all
jurisdictions
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wherein the nature of the Business or AVE's ownership or use of the Acquired
Assets make such licensing or qualification necessary except for such failures
to be licensed or qualified or to be in good standing, if any, which when taken
together with all such other failures of AVE do not have a Material Adverse
Effect or a material adverse effect on the ability of AVE or Marisa Christina to
perform its obligations under this Agreement and all other agreements and
instruments to be executed in connection herewith (this Agreement and such other
agreements and instruments being hereinafter referred to collectively as the
"Transaction Documents").
(b) No shares of any corporation or any ownership or other
investment interest, either of record, beneficially or equitably, in any Person
are included in the Acquired Assets.
3.2 Authorization and Enforceability. Each of Marisa Christina
and AVE has full corporate power and authority to execute, deliver and perform
this Agreement and the other Transaction Documents to which Marisa Christina or
AVE is a party. The execution, delivery and performance by AVE and Marisa
Christina of this Agreement and the Transaction Documents to which AVE and
Marisa Christina is a party have been duly authorized by all necessary corporate
action on the part of AVE and Marisa Christina and their respective
stockholders. This Agreement has been duly executed and delivered by AVE and
Marisa Christina, and the other Transaction Documents to which AVE and Marisa
Christina is a party have been duly executed and delivered by AVE and Marisa
Christina. This Agreement is a legal, valid and binding obligation of AVE and
Marisa Christina, enforceable against AVE and Marisa Christina in accordance
with its terms, except as such enforceability may be limited by applicable laws
relating to bankruptcy, insolvency, fraudulent conveyance, reorganization or
affecting creditors' rights generally and except to the extent that injunctive
or other equitable relief is within the discretion of a court. Each of the other
Transaction Documents to which AVE and Marisa Christina is a party has been duly
executed and delivered by AVE and Marisa Christina and constitutes the legal,
valid and binding obligation of AVE and Marisa Christina, enforceable against
AVE and Marisa Christina in accordance with its terms, except as such
enforceability may be limited by applicable laws relating to bankruptcy,
insolvency, fraudulent conveyance, reorganization or affecting creditors' rights
generally and except to the extent that injunctive or other equitable relief is
within the discretion of a court.
3.3 No Violation of Laws or Agreements. The execution,
delivery, and performance by AVE and Marisa Christina of this Agreement and the
Transaction Documents to which AVE and Marisa Christina is a party do not, and
the consummation by AVE and Marisa Christina of the transactions contemplated
hereby and thereby, will not, (a) violate, conflict with or result in the breach
of any provision of the Certificate of Incorporation or By-Laws (or similar
organizational documents) of AVE or Marisa Christina or (b) except as set forth
on Schedule 3.3, violate, conflict with, result in a breach of, or constitute a
default (or an event which would, with the passage of time or the giving of
notice or both, constitute a default) under, require any consent under, or
result in or permit the termination, amendment, modification, acceleration,
suspensions, revocation or cancellation of, or result in the creation or
imposition of any Lien of any nature whatsoever upon any of the Acquired Assets
or give to others any interests or rights therein under (i) any indenture,
mortgage, loan or credit agreement, license, instrument, lease, contract, plan,
permit or other agreement or commitment, oral or written, to which AVE or Marisa
Christina is
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a party, or by which the Business or any of the Acquired Assets may be bound or
affected, except for such violations, conflicts, breaches, terminations,
modifications, amendments, accelerations, suspensions, revocations,
cancellations, Liens, interests or rights which, individually and in the
aggregate, do not have a Material Adverse Effect or a material adverse effect on
the ability of AVE or Marisa Christina to perform its obligations under this
Agreement and the other Transaction Documents, or (ii) any judgment, injunction,
writ, award, decree, restriction, ruling, or order of any court, arbitrator or
Governmental Entity or any applicable constitutions or Law, to which AVE or
Marisa Christina is subject or which is applicable to the Business or any of the
Acquired Assets other than those violations, conflicts, breaches or defaults
which individually and in the aggregate would not have a Material Adverse Effect
or have a material adverse effect on the ability of AVE or Marisa Christina to
perform its obligations under this Agreement and the other Transaction
Documents.
3.4 Financial Statements. (a) True, correct and complete
copies of the unaudited balance sheets of AVE as of December 31, 1996, 1997 and
1998 and the related unaudited statements of income for the twelve-month periods
then ended are attached hereto as Part A of Schedule 3.4 and true, correct and
complete copies of the unaudited balance sheet of the Business AVE
(collectively, the "Interim Balance Sheet") as at June 30, 1999 and the related
unaudited statement of income for the six month period then ended are attached
hereto as Part B of Schedule 3.4 (all such financial statements are referred to
herein collectively as the "Financial Statements"). The Financial Statements
were prepared in accordance with the books and records of AVE and fairly
present, in all material respects, the financial condition and results of
operations of AVE as of the dates and for the periods indicated, in each case in
conformity with GAAP throughout the periods specified, except as expressly set
forth therein and except that the Interim Balance Sheet may omit footnotes and
is subject to normal year-end adjustments which are not, in the aggregate,
material. All Acquired Assets are disclosed on the Interim Balance Sheet as at
June 30, 1999 except (a) the Excluded Assets and (b) as disposed of or
transferred between June 30, 1999 and the Closing Date in the ordinary course of
business consistent with past practices of AVE and in accordance with this
Agreement.
3.5 No Changes. Except as set forth on Schedule, since June
30, 1999, AVE has conducted the Business only in the ordinary course of business
consistent with past practices and there has not been:
(i) any Material Adverse Effect;
(ii) any change in the salaries or other compensation payable
or to become payable to, or any advance (excluding advances for ordinary
business expenses) or loan to, any Business Employee, or material change or
material addition to, or material modification of, other benefits (including any
bonus, profit-sharing, pension or other plan in which any of the Business
Employees participate) to which any of the Business Employees may be entitled,
or any payments to any pension, retirement, profit-sharing, bonus or similar
plan;
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(iii) any change or modification in any manner of AVE's
existing inventory management and collection and payment policies, procedures
and practices with respect to inventories and accounts receivable and accounts
payable, including acceleration of collections of receivables, failure to make
or delay in making collections of receivables (whether or not past due),
acceleration of payment of payables or failure to pay or delay in payment of
payables and any material change in AVE's existing policies, procedures and
practices, with respect to the provision of discounts, rebates or allowances;
(iv) any change or, to the best of AVE's and Marisa
Christina's knowledge, any threat of any change in any of its relations with, or
any loss or, to the best of AVE's and Marisa Christina's knowledge, threat of
loss of, any of the suppliers, clients, distributors, customers or employees of
AVE or the Business which, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect;
(v) any cancellation or waiver of any right material to the
Business or any cancellation or waiver of any debts of or claims of the Business
against any Affiliate of AVE;
(vi) any disposition of or failure to keep in effect any
rights in, to or for the use of any Permit which individually or in the
aggregate would have a Material Adverse Effect;
(vii) any damage, destruction or loss affecting AVE or the
Business which individually or in the aggregate would have a Material Adverse
Effect whether or not covered by insurance;
(viii) any change by AVE in its method of accounting or
keeping its books of account or accounting practices except as required by GAAP;
or
(ix) any sale, transfer or other disposition of any material
assets, properties or rights of AVE or the Business.
(b) Except as included in the Final Working Capital, AVE has
not made any payments to Marisa Christina or any of its subsidiaries.
3.6 Contracts.
(a) As of the date of this Agreement, Schedule 3.6 contains a
list of all Contracts (other than with respect to which the Business' total
annual liability or expense is less than (a) $50,000 per such non-listed
Contract and (b) $200,000 in the aggregate for all such non-listed Contracts).
AVE has delivered to Purchaser a correct and complete copy of each written
agreement and a written description of each oral agreement listed on Schedule
3.6. With respect to each Contract, neither AVE nor, to the best of AVE's and
Marisa Christina's knowledge, any other party thereto, is in breach or default
and no event has occurred with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under such
Contract, except for such breaches, terminations, modifications, accelerations
or defaults
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which, individually and in the aggregate, are not reasonably likely to have a
Material Adverse Effect. There are no disputes pending or, to the best of AVE's
and Marisa Christina's knowledge, threatened, under or in respect of any of the
Contracts other than those that, individually and in the aggregate, are not
reasonably likely to have a Material Adverse Effect.
(b) Each of the Contracts is in full force and effect and
constitutes the legal, valid and binding obligation of, and is legally
enforceable against, AVE, and, to the best of AVE's and Marisa Christina's
knowledge, any other party thereto, in accordance with its terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
other than such failures to be legal, valid and binding obligations and
enforceable as are not reasonably likely to, individually or in the aggregate,
have a Material Adverse Effect.
(c) Except as identified with an asterisk on Schedule 3.6,
each of the Contracts listed thereon is fully assignable to Purchaser without
the consent, approval or waiver of any other Person.
3.7 Permits and Compliance With Laws Generally. (a) AVE
possesses and is in compliance with all Permits required to operate the Business
as presently operated and to own, lease or otherwise hold the Acquired Assets
under all applicable Laws, including Environmental Laws, except to the extent
that any failure to possess, or to comply with, any Permits or Laws would not,
individually or in the aggregate, have a Material Adverse Effect. The Business
is conducted by AVE in compliance with all applicable Laws (including the
Occupational Safety and Health Act and the rules and regulations thereunder
("OSHA"), zoning, building and similar laws and Environmental Laws), except for
such failures to comply which do not individually or in the aggregate have a
Material Adverse Effect. All Permits of AVE are in full force and effect, other
than those the failure of which to be in full force and effect would not
individually or in the aggregate have a Material Adverse Effect. There are no
proceedings pending or, to the best of AVE's and Marisa Christina's knowledge,
threatened that seek the revocation, cancellation, suspension or any adverse
modification of any such Permits presently possessed by AVE other than those
revocations, cancellations, suspensions or modifications which do not
individually or in the aggregate have a Material Adverse Effect.
(b) No outstanding notice, citation, summons or order has been
issued, no outstanding complaint has been filed, no outstanding penalty has been
assessed and no investigation or review is pending or, to the best of AVE's and
Marisa Christina's knowledge, threatened, by any Governmental Entity or other
Person with respect to any alleged (i) violation by AVE or any Affiliate of AVE
relating to the Business of any law, ordinance, rule, regulation, code or order
of any Governmental Entity or (ii) failure by AVE or any Affiliate thereof to
have any Permit required in connection with the conduct of the Business or
otherwise applicable to the Business (including the Acquired Assets), except, in
each case, where such violations or failures, individually or in the aggregate,
would not have a Material Adverse Effect.
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3.8 Environmental Matters.
(a) AVE has not disposed of or arranged for the disposal of or
Released any Hazardous Substances at any facility currently or formerly owned,
leased, operated or otherwise used or occupied by AVE ("Business Real
Property").
(b) AVE has not received any notice or request for information
with respect to, and has not been designated a responsible or potentially
responsible party for Remedial Action, response costs, or investigation, in
connection with any Business Real Property pursuant to any Environmental Law.
(c) No Business Real Property has been used for the storage,
treatment, generation, processing, production or disposal of any Hazardous
Substances.
(d) To the best of Marisa Christina's and AVE's knowledge, no
underground or aboveground storage tanks are or have been located on or under
the Business Real Property.
(e) To the best of Marisa Christina's and AVE's knowledge,
there are no pending, threatened or unresolved claims against AVE for costs of
Remedial Actions or investigation, cleanup, removal, or response actions, or
natural resource damages, arising out of any Release or threat of Release of any
Hazardous Substances at any Business Real Property.
(f) To the best of Marisa Christina's and AVE's knowledge, no
polychlorinated biphenyls or asbestos-containing materials are located at, in or
upon any Business Real Property or improvements thereon.
(g) To the best of Marisa Christina's and AVE's knowledge, AVE
is not subject to liability, existing or inchoate, actual or contingent, under
any Environmental Law.
3.9 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by AVE or Marisa
Christina of this Agreement, the other Transaction Documents to which AVE or
Marisa Christina is a party, or the consummation by AVE or Marisa Christina of
the transactions contemplated hereby or thereby, including without limitation in
connection with the assignment of the Contracts and Permits contemplated hereby,
except (i) as set forth on Schedule 3.9, (ii) filings under the New York State
Real Property Transfer Tax Law and New York City Real Estate Transfer Tax Law,
and (iii) for such other consents, approvals, authorizations, registrations or
filings the failure of which to obtain or make would not individually or in the
aggregate have a Material Adverse Effect or a material adverse effect on the
ability of AVE or Marisa Christina to perform its obligations under this
Agreement or the other Transaction Documents.
3.10 Title. AVE has good, valid and marketable title to all of
the Acquired Assets other than the Leased Real Property and good and valid
leasehold title to all of the Leased
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Real Property, in each case, free and clear of Liens other than Permitted Liens.
Marisa Christina owns all of the outstanding shares of the capital stock of AVE
free and clear of all Liens except for Permitted Liens.
3.11 Real Property; Customers; Suppliers. AVE does not own any
real property nor any fixtures, fittings, buildings, structures or other
improvements erected thereon nor any easements, rights of way, water lines,
rights of use, licenses, hereditaments, tenements, privileges or other
appurtenances (such as appurtenant rights in and to public streets) ("Real
Property"). Except as set forth on Part A of Schedule 3.11, there is no customer
of AVE which accounted for more than 5% of the net sales of AVE in any of the
calendar years 1996, 1997 or 1998. Part B of Schedule 3.11 lists the top
twenty-five (25) suppliers and vendors of goods to AVE during 1998 (based on
invoice price) and the value of goods supplied to AVE in such period (based on
invoice price).
3.12 Taxes.
(a) AVE and any consolidated, combined or unitary group of
which AVE is or was a member have (i) timely filed all material returns and
reports for Taxes, including information returns, that are required to have been
filed in connection with or relating to the Business, which returns and reports
were true, correct and complete in all material respects, (ii) paid all Taxes
that are shown as due pursuant to such returns or reports and (iii) paid all
other material Taxes not required to be reported on returns in connection with,
relating to, or imposed on the property of the Business for which a notice of
assessment or demand for payment has been received or which have' otherwise
become due. All such returns or reports have been prepared in accordance with
all applicable Laws and requirements in all material respects. Except as set
forth on Schedule 3.12, there are in effect no agreements, waivers or other
arrangements providing for an extension of time or the statute of limitations
with regard to the assessment of any Tax, or any deficiency with respect
thereto, in connection with or relating to the Business. Except as set forth on
Schedule 3.12, there are no material actions, suits, proceedings, investigations
or claims now pending, nor, to the best of AVE's and Marisa Christina's
knowledge, proposed against AVE, nor are there any material matters under
discussion with, or pending audits by, the Internal Revenue Service or other
Governmental Entity relating to any Taxes or assessments, or any claims or
deficiencies asserted with respect thereto.
(b) None of the Acquired Assets (i) is property that is
required to be treated as owned by another Person pursuant to the "safe harbor
lease" provisions of former Section 168(0(8) of the Code, (ii) is "tax-exempt
use property" within the meaning of Section 168(h) of the Code, (iii) directly
or indirectly secures any debt the interest on which is tax-exempt under Section
103(a) of the Code; or (iv) is property that is "tax-exempt bond financed
property" under Section 168(g)(5) of the Code.
(c) Neither AVE nor Marisa Christina is a foreign person
subject to withholding under Section 1445 of the Code and, AVE and Marisa
Christina have delivered to Buyer a certificate or certificates to that effect.
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3.13 Patents and Intellectual Property Rights. (a) Schedule 3.13(a)
contains a true, correct and complete list of all Intellectual Property.
(b) Part A of Schedule 3.13(b) contains a true, correct and
complete list of all Intellectual Property which has been registered in, filed
in or issued by the PTO, the United States Copyright Office, any state trademark
offices and the patent, trademark, copyright and other corresponding offices of
foreign jurisdictions. Except as set forth on Part B of Schedule 3.13(b), such
applications and registrations have been duly filed, and those registered and
issued are valid and in full force and effect.
(c) Section 8 and 15 declarations with respect to all U.S.
registered trademarks and service marks listed in Schedule 3.13(b) were timely
filed in and accepted by the PTO. No trademarks or service marks listed in
Schedule 3.13(b) have been abandoned except as set forth on Schedule 3.13(c).
(d) Except as set forth on Schedule 3.13(d), there are no
licenses or other agreements from or with third parties under which AVE uses,
has the right to use or exercises any rights with respect to any of the
Intellectual Property, Technology or the Library.
(e) Neither AVE nor any Affiliate of AVE has received (and AVE
and Marisa Christina have no knowledge of) any notice from any other Person
pertaining to or challenging the right of AVE (or any of its Affiliates or any
other Person) to use any of the Intellectual Property or any Technology, and
there is no interference, opposition, cancellation, reexamination or other
contest, proceeding, action, lien, dispute or claim of infringement, or
misappropriation, administrative or judicial, pending or threatened with respect
to any Intellectual Property, Technology or the Library.
(f) Except as set forth on Schedule 3.13(f) no licenses have
been granted and AVE has no obligation to grant licenses with respect to any
Intellectual Property, Technology or the Library. No claims have been made by or
against AVE or any of its Affiliates of any violation or infringement by others
of rights with respect to any Intellectual Property, Technology or the Library,
and neither AVE nor any of its Affiliates knows of any basis for the making of
any such claim. To the best of Marisa Christina's and AVE's knowledge, the use
by AVE and its Affiliates of the Intellectual Property, Technology and the
Library (past and present) has not violated or infringed any rights of other
Persons, or constituted a breach of any Contract (or other agreement or
commitment).
(g) The Intellectual Property and Technology includes all such
rights necessary to conduct the Business as now conducted, and such rights will
not be adversely affected by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
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(h) All statements and representations made by AVE or any of
its Affiliates in any pending patent, copyright and trademark applications with
respect to the Intellectual Property were true in all material respects as of
the time they were made.
3.14 Employees; Labor Relations. (a) Set forth on Schedule
3.14(a) is a true, complete and correct list (as of a date not more than two
Business Days prior to the date hereof) of the Business Employees showing the
name, job title, full-time or part-time status, base salary or wage rate, and
bonus entitlement of each Business Employee.
(b) Set forth on Schedule 3.14(b) is a true, complete and
correct list (as of a date not more than two Business Days prior to the date
hereof) of any individuals who perform services for the Business as independent
contractors or who are leased to the Business.
(c) No Business Employee is covered by a collective bargaining
agreement or represented by a union or other labor organization. There have been
no union organizing efforts with respect to the Business conducted within the
last three (3) years and there are none now being conducted with respect to the
Business. AVE has not at any time during the three (3) years prior to the date
of this Agreement had, nor, to the best of AVE's and Marisa Christina's'
knowledge, is there now threatened, a strike, work stoppage, work slowdown or
other material labor dispute with respect to or affecting the Business.
3.15 Employee Benefit Plans.
(a) Set forth on Schedule 3.15(a) hereto is a true, complete
and correct list of (i) each "employee benefit plan" within the meaning of
Section 3(3) of ERISA, (ii) any other employee benefit plan, arrangement or
policy, including without limitation, any stock option, stock purchase, deferred
compensation, retirement, profit-sharing, health, life insurance, flexible
spending, dependent care, fringe benefit, vacation pay, holiday pay, disability,
sick pay, workers compensation, unemployment, severance pay, employee loan,
educational assistance, incentive or bonus plan, policy or arrangement and (iii)
any employment, indemnification, consulting or severance agreement, whether
written or oral, which is sponsored or maintained by AVE or any of its
Affiliates, or to which AVE or any of its Affiliates contributes or is required
to contribute, on behalf of current or former employees, consultants or
directors of AVE or their beneficiaries or dependents ("Business Benefit
Plans").
(b) AVE has delivered to Purchaser true, complete and correct
copies of each Business Benefit Plan, or written summaries of any unwritten
Business Benefit Plan, any summary plan description with respect to a Business
Benefit Plan, and any employee handbook applicable to Business Employees.
(c) Each Business Benefit Plan is and has been operated in
accordance with its terms and all applicable laws. No Business Benefit Plan is a
"group health plan", within the meaning of Section 5000(b) of the Code; a
defined benefit plan, within the meaning of Section 3(35) of ERISA; a
single-employer plan, within the meaning of Section 4001(a)(15) of ERISA;
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a multiemployer plan, within the meaning of Section 3(37) or 400 1(a)(3) of
ERISA; or a plan subject to Section 412 of the Code; and AVE has no outstanding
liability with respect to any such plan (including any such plan maintained by
an Affiliate of AVE or any such plan previously maintained or contributed to by
AVE) and, to the best of Marisa Christina's and AVE's knowledge, no event has
occurred and no circumstance exists which could give rise to any such liability.
(d) Except as set forth on Schedule 3.15(d), there are no
actions, suits, or claims (other than routine claims for benefits in the
ordinary course) with respect to any Business Benefit Plan pending which could
give rise to a material liability, or to the best of AVE's and Marisa
Christina's knowledge, threatened, and neither AVE nor Marisa Christina has
knowledge of any facts which could give rise to any such actions, suits or
claims (other than routine claims for benefits in the ordinary course).
(e) Neither AVE nor any of its ERISA Affiliates nor, to the
best of AVE's and Marisa Christina's knowledge, any other Person, has taken any
action or failed to take any action with respect to any Business Benefit Plan
that may subject Purchaser or any Business Benefit Plan under which liabilities
are to be assumed by Purchaser under Article IX hereof to any tax, penalty, fine
or other liability under the Code or ERISA.
3.16 No Pending Litigation or Proceedings. Except as set forth
on Schedule 3.16, there are no claims, actions, suits, arbitrations, inquiries,
investigations or proceedings pending against or affecting, or, to the best of
AVE's and Marisa Christina's knowledge, threatened against, AVE or Marisa
Christina, the Business or affecting any of the Acquired Assets before any court
or arbitrator or Governmental Entity (including the United States Environmental
Protection Agency, the United States Equal Employment Opportunity Commission or
any similar Governmental Entity) except where such claims, actions, suits,
arbitrations, inquiries, investigations or proceedings, individually and in the
aggregate, would not have a Material Adverse Effect. There are no outstanding
judgments, decrees, writs, injunctions or orders of any court or arbitrator or
Governmental Entity against AVE (nor, to the best of AVE's and Marisa
Christina's knowledge, threatened to be imposed against AVE), which individually
or in the aggregate could have a Material Adverse Effect.
3.17 Insurance. Schedule 3.17 lists AVE's policies and
contracts in effect as of the date hereof for insurance (including policies
providing property, casualty, liability, workers' compensation, and bond and
surety arrangements) covering the Acquired Assets or Assumed Liabilities and the
operation of the facilities constituting the Business owned or held by AVE,
together with the risks insured against, coverage limits and deductible amounts.
3.18 WARN Act. Within six months prior to the date hereof, (i)
AVE has not effectuated (a) a "plant closing" (as defined in the WARN Act)
affecting any site of employment or one or more facilities or operating units
within any site of employment or facility of the Business or (b) a "mass layoff"
(as defined in the WARN Act) affecting any site of employment or one or more
facilities or operating units within any site of employment or facility of the
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Business, (ii) AVE has not been affected by any transaction or engaged in
layoffs or employment terminations with respect to the Business sufficient in
number to trigger application of any similar state or local law, and (iii) none
of AVE's employees who are employed in connection with the Business has suffered
an "employment loss" (as defined in the WARN Act).
3.19 Condition of Assets. Except as set forth on Schedule
3.19, the tangible assets of AVE (a) included in the Acquired Assets or (b)
subject to any Contract included in the Acquired Assets are in good operating
condition and repair, reasonable wear and tear excepted.
3.20 Brokerage. Neither AVE, Marisa Christina nor any of their
Affiliates have made any agreement or taken any other action which might cause
any Person to become entitled to a broker's or finder's fee or commission or
other fee as a result of or in connection with the transactions contemplated
hereunder.
3.21 All Assets. Except for the Excluded Assets, the Acquired
Assets (including any assets, properties and rights subject to any Contract
included in the Acquired Assets) constitute all the assets, properties and
rights currently owned, used, or held for use in connection with, or that are
otherwise related to the conduct of, the Business as presently conducted by AVE
on the date of this Agreement. Except as set forth on Schedule 3.21, none of the
Acquired Assets are owned, in whole or in part, by any Person other than AVE.
3.22 Transactions with Affiliates. Except as set forth on
Schedule 3.22, there are no Contracts to which AVE or any of its Related Persons
other than Marisa Christina (the "Insiders"), on the one hand, and Marisa
Christina or any of its Related Persons (other than AVE), on the other hand, is
a party nor any transactions of any kind (the "Insider Transactions") between
Marisa Christina or its Related Persons (other than AVE), on one hand, and any
Insider, on the other hand, that have occurred since December 31, 1997. For
purposes of this Agreement, a "Related Persons" of a specified person is (i) an
Affiliate of the person specified, (ii) a director of any of the foregoing
referred to in this sentence, (iii) a spouse, parent, sibling, child, mother-or
father-in-law, son- or daughter-in-law, or brother- or sister-in-law of any of
the foregoing referred to in this sentence, and (iv) any trust or other estate
in which any of the foregoing referred to in this sentence has a substantial
beneficial interest or as to which any of the foregoing referred to in this
sentence serves as trustee or in a similar fiduciary capacity.
3.23 Accounts Receivable. All accounts receivable of AVE
(including factored accounts) whether reflected in the Interim Balance Sheet or
otherwise, reflected in the Final Closing Working Capital are bona fide and
valid obligations and arose in the ordinary course of business in a manner
consistent with past practices for goods or services delivered or rendered, and
to the best of AVE's and Marisa Christina's knowledge, are not subject to
counterclaims or set offs.
3.24 Inventory. (i) All of the inventories of AVE whether
reflected on the Interim Balance Sheet or otherwise consist of a quality and
quantity usable and salable in the ordinary and usual course of business, except
for items of obsolete materials and materials of
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below-standard quality and shrinkage, all of which have been written off or
written down to fair market value; (ii) all inventories not written off have
been properly priced at the lower of cost or market in accordance with GAAP; and
(iii) to the best of AVE's and Marisa Christina's knowledge, all work in process
and finished goods inventory are free of any material defect, except for non
first-quality work in progress and finished goods inventory arising in the
ordinary course of business.
3.25 Orders, Commitments and Returns.
(a) Schedule 3.25(a) sets forth the aggregate amounts of all
accepted and unfulfilled orders of AVE for the sale of merchandise entered into
as of June 30, 1998 and June 30, 1999.
(b) Schedule 3.25(b) sets forth, as of June 30, 1999, each
known claim against AVE to return merchandise in excess of $10,000 by reason of
alleged overshipments, defective merchandise or otherwise, or the merchandise in
the hands of customers under an understanding that such merchandise would be
returnable or would give rise to a discount on future purchases or other
allowance of any type.
(c) Schedule 3.25(c) sets forth the aggregate chargebacks and
allowances (whether claimed or allowed) of AVE for the year ended December 31,
1998.
3.26 Year 2000. AVE may use in its business, products or
services created or provided by third-parties, which incorporate date-related
information and functionality and which is material to the business of AVE
("Date Sensitive Third Party Technology"). Schedule 3.26 contains a list of all
Date Sensitive Third Party Technology which, to the best of AVE's and Marisa
Christina's knowledge, does not have Year 2000 Functionality (as defined below).
AVE takes and has taken reasonable measures in accordance with current practice
for comparable companies in AVE's industry to be Year 2000 Compliant, including
without limitation requiring all Date Sensitive Third Party Technology to
contain Year 2000 Functionality. "Year 2000 Functionality" means (i) accurate
processing of date-related information before, during and after January 1, 2000,
including accepting date input, providing date output and performing
calculations on dates or portions of dates, (ii) accurate functioning without
material interruption before, during and after January 1, 2000, and without any
materially adverse change in operation associated with the advent of the new
century, (iii) the ability to respond to two-digit year field date input in a
way that resolves any ambiguity as to century in a disclosed, defined and
predetermined manner and (iv) the ability to store and provide output of date
information in ways that are unambiguous as to century. "Year 2000 Compliant"
means that the software used by AVE provide Year 2000 Functionality.
3.27 Letters of Credit. Except as set forth on Schedule 3.27
(the "Existing Letters of Credit"), there are no outstanding letters of credit
which AVE or Marisa Christina has issued in favor of the Business.
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3.28 1996 Agreements. All amounts due and owing to Adrienne
Vittadini, Inc. ("AVI"), and Gianluigi Vittadini ("GV") and their successors and
assigns pursuant to that certain Asset Purchase Agreement (the "1996 Purchase
Agreement") dated as of January 1, 1996 among AVI, Marisa Christina and AVE,
that certain Agreement (the "1998 Amendment") dated as of September 30, 1998
among AV, GV, Vittadini, Ltd. ("VLTD") AV Hong Kong Ltd ("AVHK"), Marisa
Christina, AVE, Flapdoodles, Inc., International Apparel Marketing, Ltd. and
Marissa Christina Apparel, Inc., that certain Trademark Collateral Agreement
(the "1996 Security Agreement") dated as of January 1, 1996 among AVI, Marisa
Christina and AVE and that certain Trademark Assignment Agreement dated as of
January 1, 1996 among VLTD, Marisa Christina and AVE (the "1996 Trademark
Agreement" and together with the 1996 Security Agreement, the 1998 Amendment and
the 1996 Purchase Agreement, the "1996 Agreements") have been indefeasibly paid
in full and AVE and Marisa Christina are not in breach or violation of any of
the provisions of any of the 1996 Agreements. No claim for indemnification or
breach of contract has been made by AV, GV, AVI or their successors and assigns
under the 1996 Agreements. AVE has caused all required recordations of
assignments of trademarks pursuant to Section 7 of the 1998 Amendment other than
with respect to abandoned trademarks as set forth in Schedule 3.13(c).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Purchaser represents and warrants to AVE and Marisa Christina
as follows:
4.1 Organization and Good Standing. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Purchaser is duly qualified to do business and in good
standing as a foreign corporation in New York.
4.2 Authorization and Enforceability. Purchaser has full
corporate power and authority to execute, deliver and perform this Agreement and
all other Transaction Documents to which Purchaser is a party. The execution,
delivery and performance by Purchaser of this Agreement and the other
Transaction Documents to which Purchaser is a party have been duly authorized by
all necessary corporate action on the part of Purchaser. This Agreement has been
duly executed and delivered by Purchaser, and the other Transaction Documents to
which Purchaser is a party have been duly executed and delivered by Purchaser.
This Agreement is a legal, valid and binding obligation of Purchaser,
enforceable against Purchaser, in accordance with its terms, except as such
enforceability may be limited by applicable laws relating to bankruptcy,
insolvency, fraudulent conveyance, reorganization or affecting creditors' rights
generally and except to the extent that injunctive or other equitable relief is
within the discretion of a court. Each of the other Transaction Documents to
which Purchaser is a party has been duly executed and delivered by Purchaser and
constitutes the legal, valid and binding obligation of Purchaser,
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enforceable against Purchaser, in accordance with its terms, except as such
enforceability may be limited by applicable laws relating to bankruptcy,
insolvency, fraudulent conveyance, reorganization or affecting creditors' rights
generally and except to the extent that injunctive or other equitable relief is
within the discretion of a court.
4.3 No Violation of Laws or Agreements. The execution,
delivery and performance by Purchaser of this Agreement and the Transaction
Documents to which Purchaser is a party do not, and the consummation by
Purchaser of the transactions contemplated hereby and thereby, will not, (a)
violate, conflict with or result in the breach of any provision of the
Certificate of Incorporation or Bylaws of Purchaser or (b) violate, conflict
with, result in a breach of, or constitute a default (or an event which would,
with the passage of time or the giving of notice or both, constitute a default)
under, require any consent under or result in or permit the termination,
amendment, modification, suspension, revocation, acceleration or cancellation
of, (i) any indenture, mortgage, loan or credit agreement, license, instrument,
lease, contract, plan, permit or other agreement or commitment, oral or written,
to which Purchaser is a party, or by which any of its assets or properties may
be bound or affected, except for such violations, conflicts, breaches,
terminations, amendments, modifications, suspensions, revocations,
accelerations, cancellations, interests or rights which, individually and in the
aggregate, do not have a material adverse effect on its ability to perform its
obligations under this Agreement and the other Transaction Documents to which it
is a party, or (ii) any judgment, injunction, writ, award, decree, restriction,
ruling, or order of any court, arbitrator or Governmental Entity or any
applicable constitution or law, to which Purchaser is subject other than those
violations and conflicts which individually and in the aggregate would not have
a material adverse effect on its ability to perform its obligations under this
Agreement and the other Transaction Documents to which Purchaser is a party.
4.4 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by Purchaser of this
Agreement, the other Transaction Documents to which Purchaser is a party, or the
consummation by Purchaser of the transactions contemplated hereby or thereby
except for such consents, approvals, authorizations, registrations or filings
the failure of which to obtain or make would not individually and in the
aggregate have a material adverse effect on its ability to perform its
obligations under this Agreement and the other Transaction Documents to which
Purchaser is a party.
4.5 Brokerage. Except for De Visscher, Olson & Allen, L.L.C.,
neither Purchaser nor any of its Affiliates has made any agreement or taken any
other action which might cause any Person to become entitled to a broker's or
finder's fee or commission or other fee as a result of or in connection with the
transactions contemplated hereunder.
ARTICLE V
ADDITIONAL COVENANTS
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5.1 [Reserved]
5.2 [Reserved]
5.3 Consents and Filings. Each of the parties hereto shall
(and shall cause its Affiliates to) use all reasonable efforts to obtain or
make, as the case may be, as soon as possible, all filings with the applicable
Government Entities as may be required to be obtained or made, as the case may
be, by it (and/or any of its Affiliates) in order to enable such party (and/or
any of its Affiliates) to perform its obligations under this Agreement.
5.4 Public Announcement. No party hereto shall make or issue,
or cause to be made or issued, any public announcement or written statement
concerning this Agreement or the transactions contemplated hereby without the
prior written consent of the other parties hereto (which will not be
unreasonably withheld or delayed), except if counsel to any party advises that
such announcement or statement is required by law (in which case such party
shall make reasonable efforts to consult with AVE prior to such required
announcement).
5.5 Columbia Litigation. Purchaser and AVE shall each
consent to any settlement, dismissal, resolution or similar disposition of the
litigation entitled Confecciones Vittadini, Confecciones Tico and Mr. Camila
Duque vs. Vittadini, Ltd. described on Schedule 3.16 (the "Confecciones
Litigation") which consent shall not be unreasonably withheld.
5.6 Taxes. AVE or Marisa Christina and Purchaser shall (a)
each provide the other with such assistance as may reasonably be requested by
either of them in connection with the preparation of any Tax return, any audit
or other examination by any taxing Governmental Entity or any judicial or
administrative proceeding with respect to Taxes as it relates to the Business
(or any portion thereof), (b) each retain and provide the other with any records
or other information which may be relevant to such return, audit, examination or
proceeding, and (c) each provide the other with any final determination of any
such audit or examination, proceeding or determination that affects any amount
required to be shown on any Tax return of the other for any period (which shall
be maintained confidentially). Without limiting the generality of the foregoing,
Purchaser, AVE and Marisa Christina shall retain, until the applicable statutes
of limitations (including all extensions) have expired, copies of all Tax
returns, supporting workpapers, and other books and records or information which
may be relevant to such returns for all Tax periods or portions thereof ending
before or including the Closing Date, and shall not destroy or dispose of such
records or information without first providing the other party with a reasonable
opportunity to review and copy the same. With respect to Taxes incurred in
connection with, relating to or arising out of the Business prior to the Closing
that are not yet due or owing as of the Closing Date, AVE will (i) timely file
when due all returns and reports for such Taxes, including information returns,
that are required to be filed, (ii) timely pay when due the Taxes that are shown
to be due pursuant to such Tax returns unless such Tax returns are being
contested in good faith, and (iii) timely pay when due all other Taxes not
required to be reported on returns unless such Tax returns are being contested
in good faith.
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5.7 Consents. Each of the parties hereto will use its
reasonable best efforts and will cooperate with the other parties hereto to
obtain all consents required from third Persons, whose consent or approval is
required pursuant to any Contract or Permit to consummate the transactions
contemplated hereby.
5.8 Confidentiality. Each of AVE and Marisa Christina agree
to, and shall cause their agents, representatives, Affiliates, employees,
officers and directors to: (i) treat and hold as confidential (and not disclose
or provide access to any Person to) all information relating to trade secrets,
processes, patent and trademark applications, product development, price,
customer and supplier lists, pricing and marketing plans, policies and
strategies, details of client and consultant contracts, operations methods,
product development techniques, business acquisition plans, new personnel
acquisition plans and all other confidential information with respect to the
Business, (ii) in the event that AVE, Marisa Christina or any such agent,
representative, Affiliate, employee, officer or director becomes legally
compelled to disclose any such information, provide Purchaser with prompt
written notice of such requirement so that Purchaser may seek a protective'
order or other remedy or waive compliance with this Section 5.8, (iii) in the
event that such protective order or other remedy is not obtained, or Purchaser
waives compliance with this Section 5.8, furnish only that portion of such
confidential information which is legally required to be provided and exercise
its commercially reasonable efforts to obtain assurances that confidential
treatment will be accorded such information; provided, however, that this
sentence shall not apply to any information that, at the time of disclosure, is
available publicly and was not disclosed in breach of this Agreement by AVE,
Marisa Christina or any of their affiliates, agents, representatives,
Affiliates, employees, officers or directors. Each of AVE and Marisa Christina
agrees and acknowledges that remedies at law for any breach of its obligations
under this Section 5.8 are inadequate and that in addition thereto Purchaser
shall be entitled to seek equitable relief, including injunction and specific
performance, in the event of any such breach.
5.9 Commercially Reasonable Efforts. Without limiting the
specific obligations of any party hereto under any covenant or agreement
hereunder, each party hereto shall use commercially reasonable efforts to take
all action and do all things necessary in order to promptly consummate the
transactions contemplated hereby.
5.10 Negotiations. From the date hereof until the termination
of this Agreement in accordance with its terms, each of AVE and Marisa Christina
agree that AVE, Marisa Christina and their Affiliates will negotiate exclusively
and in good faith with Purchaser with respect to any transaction involving the
sale, transfer or other disposition of the Acquired Assets or the Business; and
none of AVE, Marisa Christina nor any of their Affiliates nor any of their
respective officers, directors, employees, lenders, investment banking firms,
advisors or other agents, or any Person acting on their behalf will solicit any
inquiries or proposals by, or engage in any discussions or negotiations with, or
furnish any nonpublic information to or enter into any agreement with any Person
other than Purchaser and its stockholders concerning the sale or other
disposition of the Acquired Assets or the Business or the merger, consolidation,
sale of securities or other transaction involving AVE or Marisa Christina.
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5.11 Corporate Name. AVE shall cause the certificate of
amendment described in Section 6.1(f) to be duly and effectively filed with the
applicable Delaware authorities as set forth in Section 6.1(f) below.
5.12 Indemnification under the 1996 Agreements. The parties
agree that AVE and Marisa Christina shall be liable for all obligations under
the 1996 Agreements, including, without limitation, any indemnification
obligations, arising from facts and circumstances in existence on or prior to
the Closing Date.
5.13 Payment of Existing Letters of Credit. So long as any
Existing Letters of Credit remain outstanding, Purchaser shall ensure that an
amount equal to no less than the aggregate amount payable under the then
outstanding Existing Letters of Credit shall remain available for use by
Purchaser under the Purchaser's financing agreements with Finova Capital
Corporation (the "Existing Letters of Credit Reserve"). In the event that any
Existing Letter of Credit is drawn upon, upon written notice of such draw by
Marisa Christina to Purchaser, Marisa Christina shall be reimbursed by Purchaser
within one business day after receipt of such written notice by Purchaser from
Marisa Christina. Purchaser shall not be entitled to offset any amounts owed to
Marisa Christina by Purchaser against the Existing Letters of Credit Reserve.
5.14 Intellectual Property. Except as set forth on Schedule
5.14, AVE hereby transfers to Purchaser all Intellectual Property, Technology
and the Library without payment of royalties, free and clear of any Liens except
for Permitted Liens.
ARTICLE VI
THE CLOSING
6.1 Obligations of AVE and Marisa Christina. AVE and
Marisa Christina are hereby delivering to Purchaser the following:
(a) Representations, Warranties and Covenants. Each of AVE and
Marisa Christina shall furnish Purchaser with a certificate dated the Closing
Date and signed by a senior executive officer of AVE or Marisa Christina, as the
case may be, to the effect that the representations and warranties of Marisa
Christina and AVE contained in this Agreement are true, correct and complete in
all material respects and that AVE and Marisa Christina have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by such party on or prior to the
Closing Date.
(b) Required Consents. AVE and Marisa Christina shall have
obtained, each in form and substance reasonably satisfactory to Purchaser all
statutory and regulatory consents and approvals which are required under any
applicable Laws and all consents and approvals required from third parties
including under Contracts in order to consummate the transactions
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contemplated hereby and to permit Purchaser to conduct the Business as conducted
as of the date of this Agreement.
(c) [Reserved]
(d) Documents. AVE shall have delivered to Purchaser
such other documents and instruments as shall be reasonably necessary to
transfer to Purchaser the Acquired Assets as contemplated by this Agreement.
Marisa Christina and AVE shall have delivered all the certificates, instruments,
contracts and other documents specified to be delivered by each such person
hereunder, including pursuant to Section 2.6 hereof.
(e) Employment Agreements. Maura de Visscher and
Kimberly Perrone shall have entered into Employment Agreements with Purchaser in
form and substance satisfactory to such person.
(f) Corporate Name. AVE shall have delivered to
Purchaser a certified copy of a certificate of amendment duly filed with the
applicable state authorities pursuant to which AVE changes its name from
Adrienne Vittadini Enterprises, Inc. to another name not utilizing "Adrienne
Vittadini" or any derivation thereof.
(g) Transition Services Agreement. Marisa Christina and
Purchaser shall have entered into the Transition Services Agreement.
6.2 Obligations of Purchaser. Purchaser is hereby
delivering to AVE and Marisa Christina the following:
(a) Representations, Warranties and Covenants. Purchaser
shall furnish AVE and Marisa Christina with a certificate dated the Closing Date
and signed by a senior executive officer of Purchaser to the effect that the
representations and warranties of Purchaser contained in this Agreement are
true, correct and complete and that Purchaser has performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed and complied with by it on or prior to the Closing Date.
(b) [Reserved]
(c) Documents. Purchaser shall have delivered to AVE
such other documents and instruments as shall be reasonably necessary for the
assumption by Purchaser of the Assumed Liabilities as contemplated by this
Agreement. Purchaser shall have delivered all the certificates, instruments,
contracts and other documents specified to be delivered by it hereunder,
including pursuant to Section 2.6 hereof.
(d) Transition Services Agreement. Marisa Christina and
Purchaser shall have entered into the Transition Services Agreement.
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ARTICLE VII
CERTAIN ADDITIONAL COVENANTS
7.1 Certain Taxes and Expenses. (a) AVE and Purchaser shall
each be responsible for one-half of all state and local sales, use, transfer,
real property transfer, documentary stamp, recording and other similar taxes
arising from and with respect to the sale and purchase of the Acquired Assets.
Except as otherwise expressly provided in this Agreement, each of the parties
hereto shall bear its respective accounting, legal and other expenses incurred
in connection with the transactions contemplated by this Agreement.
(b) Purchaser shall be responsible for all costs of the filing
of registrations for the transfer and maintenance of the Intellectual Property,
Technology and the Library to it.
7.2 Maintenance of Books and Records. AVE and Marisa Christina
on the one hand, and, Purchaser, on the other hand, shall cooperate fully with
each other after the Closing so that (subject to any limitations that are
reasonably required to preserve any applicable attorney-client privilege) each
party hereto has access to the business records, contracts and other information
existing at the Closing Date and relating in any manner to the Acquired Assets,
the Assumed Liabilities or the conduct of the Business with respect to the
period prior to the Closing (whether in the possession of AVE, Marisa Christina
or Purchaser). No files, books or records existing at the Closing Date and
relating in any manner to the Acquired Assets or the conduct of the Business
prior to the Closing Date shall be destroyed by any party hereto for a period of
three years after the Closing Date without giving the other party at least 30
days prior written notice, during which time such other party shall have the
right (subject to the provisions hereof) to examine and to remove any such
files, books and records prior to their destruction. The access to files, books
and records contemplated by this Section 7.2 shall be during normal business
hours and upon not less than two (2) business days prior written request, shall
be subject to such reasonable limitations as the party having custody or control
thereof may impose to preserve the confidentiality of information contained
therein, and shall not extend to material subject to a claim of privilege unless
expressly waived by the party entitled to claim the same.
7.3 Non-Solicitation.
(a) Each of AVE and Marisa Christina covenants and agrees
that, for a period of one year after the Closing Date, it will not, and will
cause its subsidiaries and Related Persons not to, directly or indirectly,
solicit for employment any employee of Purchaser and any of its Affiliates who
is engaged in the Business and was an employee of AVE as of the Closing Date to
become an employee or consultant or otherwise provide services to Marisa
Christina or any of its Subsidiaries or Related Persons, except for Carol Getty,
Kisha Ocasio and Stacey Lerea.
(b) Purchaser covenants and agrees that, for a period of one
year after the Closing Date or one year after the termination of the Transition
Services Agreement in the case
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of employees of Marisa Christina who provide services to Purchaser under the
Transition Services Agreement, it will not, and will cause its subsidiaries and
Related Persons not to, directly or indirectly, solicit for employment any
employee of Marisa Christina or any of its Subsidiaries immediately after the
consummation of the Closing.
(c) The parties acknowledge and agree that the restrictions
contained in Sections 7.3(a) and (b) are a reasonable and necessary protection
of the immediate interests of each of Purchaser, Marisa Christina and AVE, and
any violation of these restrictions would cause substantial injury to Purchaser,
Marisa Christina or AVE, as the case may be, and that each of Purchaser, Marisa
Christina and AVE would not have entered into this Agreement without receiving
the additional consideration offered by the other parties in binding themselves
to these restrictions. In the event of a breach or a threatened breach by
Purchaser, AVE or Marisa Christina, or any of their subsidiaries or Related
Persons, of these restrictions, any other party, shall be entitled to apply to
any court of competent jurisdiction for an injunction restraining such Person
from such breach or threatened breach (without the necessity of proving the
inadequacy of money damages as a remedy); provided, however, that the right to
apply for injunctive relief shall not be construed as prohibiting such other
party from pursuing any other available remedies for such breach or threatened
breach.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
8.1 Survival. All representations, warranties, covenants and
agreements contained in this Agreement or the other Transaction Documents shall
survive (and not be affected in any respect by) the Closing indefinitely and any
investigation conducted by any party hereto. Notwithstanding the foregoing, the
representations and warranties contained in or made pursuant to this Agreement
and the related indemnity obligations set forth in Sections 8.2(a)(i) and
8.3(a)(i) shall terminate on, and no claim or action with respect thereto may be
brought after, the date two years after the Closing Date, except that (i) the
representations and warranties contained in Section 3.10 and the related
indemnity obligations contained in Section 8.2(a)(i) shall survive indefinitely
and (ii) the representations and warranties contained in Sections 3.12 and 3.15
and the related indemnity obligations contained in Section 8.2(a)(i) shall
survive until 30 days after the expiration of the applicable statute of
limitations (or extensions or waivers thereof). The representations and
warranties which terminate on the date two years after the Closing Date and the
representations and warranties referred to in the foregoing clauses (i) and
(ii), and the liability of any party hereto with respect thereto pursuant to
this Article VIII, shall not terminate with respect to any claim, whether or not
fixed as to liability or liquidated as to amount, with respect to which the
Indemnifying Party has been given written notice setting forth the facts upon
which the claim for indemnification is based and, if possible, a reasonable
estimate of the amount of the claims prior to the date two years after the
Closing Date or 30 days after the expiration of the applicable statute of
limitations (or extensions or waivers thereof), as the case may be.
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8.2 Indemnification by AVE and Marisa Christina. (a) Subject
to Section 8.1 hereof, AVE and Marisa Christina shall jointly and severally
indemnify and hold Purchaser and its employees, officers, directors,
stockholders and agents (collectively, the "Purchaser Indemnified Parties")
harmless from and against, and agree promptly to defend any Purchaser
Indemnified Party from and reimburse any Purchaser Indemnified Party for, any
and all Losses which any Purchaser Indemnified Party may at any time suffer or
incur, or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by AVE or Marisa Christina in or pursuant to this Agreement, or
in any instrument or certificate delivered by AVE or Marisa Christina at the
Closing in accordance herewith (it being understood and agreed that,
notwithstanding anything to the contrary contained in this Agreement, to
determine if there had been an inaccuracy or breach of a representation or
warranty of AVE or Marisa Christina and the Losses arising from such inaccuracy
or breach, such representation and warranty shall be read as if it were not
qualified by materiality, including, without limitation, qualifications
indicating accuracy in all material respects, or accuracy except to the extent
the inaccuracy will not have a Material Adverse Effect or have a material
adverse effect on the ability of AVE or Marisa Christina to perform its
obligations under this Agreement);
(ii) any failure by AVE or Marisa Christina to carry out,
perform, satisfy and discharge any of its covenants, agreements, undertakings,
liabilities or obligations under this Agreement or under any of the other
Transaction Documents delivered by AVE or Marisa Christina pursuant to this
Agreement;
(iii) the Non-Assumed Liabilities;
(iv) any failure by AVE to comply with the WARN Act; and
(v) as a result of non-compliance with the applicable bulk
sales laws.
(b) Notwithstanding any other provision herein to the
contrary, (i) neither AVE nor Marisa Christina shall be required to indemnify
and hold harmless any Purchaser Indemnified Party pursuant to Section 8.2(a)(i),
unless the applicable Purchaser Indemnified Party has asserted a claim with
respect to such matters within the applicable survival period set forth in
Section 8.1 hereof, (ii) neither AVE nor Marisa Christina shall be required,
pursuant to Section 8.2(a)(i), to indemnify and hold harmless any Purchaser
Indemnified Party until the aggregate amount of Purchaser Indemnified Parties'
Losses under Section 8.2(a)(i) exceeds $75,000 (the "Basket Amount") after which
AVE and Marisa Christina shall be jointly and severally obligated for all Losses
of Purchaser Indemnified Parties in excess of the Basket Amount, (iii) the
cumulative indemnification obligation of AVE and Marisa Christina under Section
8.2(a)(i) shall in no event exceed 75% of the Final Purchase Price and (iv)
neither AVE nor Marisa Christina shall be required to indemnify and hold
harmless any Purchaser Indemnified Party for any Loss pursuant to Section 8.2(a)
to the extent such Loss is reflected as a liability in the Final Closing Working
Capital or otherwise has been given effect in determining the Final Closing
Working Capital.
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(c) Notwithstanding the foregoing, to the extent that, any
Purchaser Indemnified Party has received indemnification payments in full with
respect to any Loss from AVE or Marisa Christina, and such Purchaser Indemnified
Party receives a payment under an insurance policy with respect to such Loss (an
"Insurance Payment"), such Purchaser Indemnified Party will reimburse AVE or
Marisa Christina, as the case may be, in an amount equal to the insurance
proceeds received with respect to such Loss (such amount not to exceed the
amount of the Insurance Payment minus an amount equal to (i) Purchaser's good
faith estimate of its increase in insurance premiums as a result of the payment
of such insurance claim (ii) any reasonable costs incurred by Purchaser in
connection with obtaining such recovery). It is agreed that no Purchaser
Indemnified Party shall be required to make any claim under any insurance policy
in order to seek insurance with respect to any indemnified Loss.
8.3 Indemnification by Purchaser. (a) Subject to Section 8.1
hereof, Purchaser shall indemnify and hold AVE and Marisa Christina and their
respective employees, officers, directors and agents (collectively, the "AVE
Indemnified Parties") harmless from and against, and agree promptly to defend
any AVE Indemnified Party from and reimburse any AVE Indemnified Party for, any
and all Losses which any AVE Indemnified Party may at any time suffer or incur,
or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Purchaser in or pursuant to this Agreement, or in any
instrument or certificate delivered by Purchaser at the Closing in accordance
herewith (it being understood and agreed that, notwithstanding anything to the
contrary contained in this Agreement, to determine if there had been an
inaccuracy or breach of a representation or warranty of Purchaser and the Losses
arising from such inaccuracy or breach, such representation and warranty shall
be read as if it were not qualified by materiality, including, without
limitation, qualifications indicating accuracy in all material respects, or
accuracy except to the extent the inaccuracy will not have a material adverse
effect on the ability of Purchaser to perform its obligations under this
Agreement and the other Transaction Documents to which it is a party);
(ii) any failure by Purchaser to carry out, perform, satisfy
and discharge any of its covenants, agreements, undertakings, liabilities or
obligations under this Agreement or under any of the other Transaction Documents
delivered by Purchaser pursuant to this Agreement; or
(iii) the Assumed Liabilities.
(b) Notwithstanding any other provision herein to the
contrary, Purchaser shall not be required to indemnify and hold harmless any AVE
Indemnified Party pursuant to Section 8.3(a)(i), unless the applicable AVE
Indemnified Party has asserted a claim with respect to such matters within the
applicable survival period set forth in Section 8.1 hereof.
8.4 Notification of Claims. (a) If any Purchaser Indemnified
Party, on the one hand, or AVE Indemnified Party, on the other hand (an
"Indemnified Party"), has a claim or
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potential claim or receives notice of any claim, potential claim or the
commencement of any action or proceeding which could give rise to an obligation
on the part of AVE, Marisa Christina or Purchaser, as the case may be, to
provide indemnification (the "Indemnifying Party") pursuant to Section 8.2 or
8.3, respectively, the Indemnified Party shall promptly give the Indemnifying
Party notice thereof (an "Indemnification Claim"); provided, however, that the
failure to give such prompt notice shall not prevent any Indemnified Party from
being indemnified hereunder for any Losses, except to the extent that the
failure to so promptly notify the Indemnifying Party actually damages the
Indemnifying Party.
(b) In the event of a claim, a potential claim or the
commencement of any action or proceeding by a third party which could give rise
to an obligation to provide indemnification pursuant to Sections 8.2 or 8.3, the
Indemnified Party will give the Indemnifying Party prompt written notice thereof
(the "Third Party Indemnification Claim"); provided, however, that the failure
of the Indemnified Party to so promptly notify the Indemnifying Party shall not
prevent any Indemnified Party from being indemnified for any Losses, except to
the extent that the failure to so promptly notify actually damages the
Indemnifying Party.
(c) Any Indemnification Claim or Third Party Indemnification
Claim will describe the claim in reasonable detail, will include copies of all
material written evidence thereof and will indicate the estimated amount if
reasonably practicable, of the Loss, that has been or may be sustained by the
Indemnified Party. If the Indemnifying Party confirms in writing to the
Indemnified Party within 15 days after receipt of the Third Party
Indemnification Claim the Indemnifying Party's responsibility to indemnify and
hold harmless the Indemnified Party therefor in accordance herewith and within
such 15-day period demonstrates to the Indemnified Party's reasonable
satisfaction that, as of such time the Indemnifying Party has sufficient
financial resources in order to indemnify for the full amount of any potential
liability in connection with such claim, the Indemnifying Party may elect to
compromise or defend, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, which counsel shall be reasonably satisfactory
to the Indemnified Party, any such matter involving the asserted liability of
the Indemnified Party. If the Indemnifying Party elects to compromise or defend
any such asserted liability, it shall within 15 days (or sooner, if the nature
of the asserted liability so requires) notify the Indemnified Party of its
intent to do so, and the Indemnified Party shall cooperate, at the expense of
the Indemnifying Party, in the compromise of, or defense against, any such
asserted liability; provided that (i) the Indemnified Party may, if it so
desires, employ counsel at its own expense to assist in the handling of any such
third party claim, (ii) the Indemnifying Party shall keep the Indemnified Party
advised of all material events with respect to any such third party claim, (iii)
the Indemnifying Party shall obtain the prior written approval of the
Indemnified Party (which approval may not be unreasonably withheld) before
ceasing to defend against such third party claim or entering into any
settlement, adjustment or compromise of such third party claim involving
injunctive or similar equitable relief being asserted against any Indemnified
Party or any of their Affiliates and (iv) no Indemnifying Party will, without
the prior written consent of each Indemnified Party, settle or compromise or
consent to the entry of any judgment in any pending or threatened demand, claim,
action or cause of action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not any such Indemnified
Party is a
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party to such demand, claim, action or cause of action, suit or proceeding),
unless such settlement, compromise or consent includes an unconditional release
of all such Indemnified Parties from all liability arising out of such claim,
action, suit or proceeding. Notwithstanding anything contained herein to the
contrary, the Indemnifying Party shall not be entitled to have sole control over
the defense, settlement, adjustment or compromise of any third party
non-monetary claim that seeks an order, injunction or other equitable relief
against any Indemnified Party or its Affiliates which, if successful, could
materially interfere with the business, assets, liabilities, obligations,
financial condition or results of operations of the Indemnified Party or any of
its Affiliates. If the Indemnifying Party elects not to compromise or defend
against the asserted liability, or fails to notify the Indemnified Party of its
election as herein provided, the Indemnified Party may, at the Indemnifying
Party's expense, pay, compromise or defend against such asserted liability.
8.5 Exclusive Remedy. Notwithstanding any other provisions of
this Article 8 to the contrary, the rights and remedies of Purchaser, AVE,
Marisa Christina and any Purchaser Indemnified Party or AVE Indemnified Party
under this Article 8 are exclusive and in lieu of any and all other rights and
remedies which Purchaser, AVE, Marisa Christina or any Purchaser Indemnified
Party or AVE Indemnified Party may have under this Agreement or otherwise with
respect to (x) the inaccuracy of any representation, warranty, certification or
other statement made or deemed made by Purchaser, AVE or Marisa Christina in or
pursuant to this Agreement or (y) any breach or failure to perform any covenant
or agreement set forth in this Agreement; it being understood by the parties
that this Section 8.5 shall not affect the rights or remedies of any party under
the Transaction Documents.
ARTICLE IX
EMPLOYEES AND EMPLOYEE BENEFITS
9.1 Employees. Purchaser may offer employment, effective as of
the Closing Date, to Business Employees who are employed as of the Closing on
such terms and conditions as Purchaser may, in its discretion, establish. Each
such Business Employee who accepts Purchaser's offer of employment effective as
of the Closing Date shall be referred to herein as a "Transferred Employee".
Nothing herein shall, or shall be construed to, limit Purchaser's right at any
time to terminate the employment of any employee or to amend or terminate any
employee benefit plan or otherwise change terms and conditions of employment of
any employee.
9.2 Employee Benefits. (a) The parties agree that, to the
extent permissible under applicable law, Purchaser shall be a successor employer
for purposes of the Federal Insurance Contributions Act, as codified at 26
U.S.C. Sections 3101-3128, the Federal Unemployment Tax Act, as codified at 26
U.S.C. Sections 3301-3311, and, if Purchaser so elects, under any applicable
state workers compensation and unemployment compensation laws. AVE agrees to
provide Purchaser with such wage, tax and other information with respect to
Transferred Employees as Purchaser may reasonably require for such purposes.
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(b) Purchaser shall not assume or be bound by or be obligated
or responsible for any duties, responsibilities, commitments, expenses,
obligations or liabilities of AVE or relating to the Acquired Assets or the
Business (or which may be asserted against or imposed upon Purchaser as a
successor or transferee of AVE as an acquiror of the Acquired Assets or the
Business or otherwise as a matter of law) which arise from, or relate to, any
Business Benefit Plan or the employment or termination of employment of any
current or former Business Employee by AVE or any of its Affiliates, including,
but not limited to, liabilities for salaries, wages, bonuses, sick pay,
severance pay or benefits under any other employee benefit plan or arrangement,
workers compensation or unemployment insurance premiums, tax withholding,
occupational injury, illness or disability, or claims arising under any
employment, labor or discrimination laws.
(c) The parties agree to furnish each other with such
information concerning employees and employee benefit plans, and to take all
such other action, as is necessary and appropriate to effect the transactions
contemplated by this Article IX.
9.3 Transition Period. (a) Marisa Christina and AVE will
continue to provide coverage under the Business Benefit Plans set forth in
Schedule 9.3(a) hereto ("Transition Benefit Plans") to Transferred Employees and
their eligible dependents for the period from the Closing until the earlier of
(i) the last day of the month that includes the date that is 180 days after the
Closing or (ii) with respect to all or one or more of the Transition Benefit
Plans, any earlier date that is specified by Purchaser in a written notice to
Marisa Christina and delivered to Marisa Christina at least 10 days prior to
such specified date (the "Transition Period"). Marisa Christina and AVE will
also provide coverage under the Transition Benefit Plans to employees hired by
Purchaser during the Transition Period to work in the Business, subject to the
eligibility provisions of such plans, and their eligible dependents. (Such new
hires and the Transferred Employees shall be referred to herein as "Purchaser
Employees"). Any benefit that is payable under a Transition Benefit Plan only in
Marisa Christina's or AVE's discretion shall not be payable without the consent
of Purchaser.
(b) Marisa Christina and AVE will operate the Transition
Benefit Plans in accordance with all applicable laws during the Transition
Period. Marisa Christina and AVE will not change the terms of any Transition
Benefit Plan during the Transition Period except for any change which is
applicable to employees of Marisa Christina generally.
(c) If Purchaser terminates the employment of any Transferred
Employee within 6 months following the Closing, then (i) Marisa Christina shall
pay severance to any such Transferred Employee in an amount equal to the amount
such Transferred Employee would be entitled to under AVE's severance policy (a
copy of which is attached hereto in Schedule 9.3(c)), taking into account
service with Purchaser after the Closing.
(d) If Purchaser terminates the employment of any Transferred
Employee within 6 months following the Closing but before the end of the
Transition Period. then Marisa Christina and AVE shall be responsible for any
continuation of group health coverage required
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under COBRA with respect to any such Transferred Employee as a result of such
termination of employment.
(e) Marisa Christina and AVE shall be responsible for any
continuation of group health coverage required under COBRA with respect to any
Business Employee or any "qualified beneficiary" of any Business Employee who
incurs a "qualifying event" (as defined in Section 4980B of the Code) on or
prior to the Closing. Except as provided in Section 9.3(d) above, Purchaser
shall be responsible for any continuation of group health coverage required
under COBRA with respect to any Transferred Employee or any "qualified
beneficiary" (as defined in Section 4980B of the Code) of any Transferred
Employee who incurs a "qualifying event" (as defined in Section 4980B of the
Code) after the Closing.
(f) If Purchaser establishes a 401(k) plan after the
Transition Period and the parties so agree, Transferred Employers shall be
afforded the opportunity to transfer their accounts to such Purchaser 401(k)
plan.
(g) Purchaser shall reimburse Marisa Christina for the actual
out of pocket costs of all benefit claims, insurance premiums, third party
administrative expenses and associated taxes incurred by Marisa Christina or AVE
as a result of the coverage of Purchaser Employees under the Transition Benefit
Plans during the Transition Period; provided, however, that Purchaser shall have
no obligation to reimburse Marisa Christina or AVE for any costs associated with
severance benefits or COBRA coverage with respect to any Transferred Employee
who is terminated within 6 months after the Closing. Such reimbursement shall be
made within 10 days after receipt of a written request from Marisa Christina for
reimbursement with reasonable supporting information, which requests shall be
made not more frequently than monthly.
(h) Notwithstanding the foregoing, it is understood and agreed
to by the parties that Purchaser shall not be responsible for any obligation or
liability arising under any Business Benefit Plan, except for Purchaser's
reimbursement obligation under Section 9.3(g) above, or as a result of the
employment or termination of employment of any employee with AVE or any of its
Affiliates.
ARTICLE X
MISCELLANEOUS
10.1 [Reserved]
10.2 Further Assurances. From time to time after the Closing
Date, Purchaser, Marisa Christina and AVE shall execute and deliver or cause to
be executed and delivered such further documents, certificates, instruments of
conveyance, assignment and transfer and take such further action as Purchaser or
AVE may reasonably request (including, without limitation and subject to Section
7.1(b) hereof, the preparation and execution of any foreign trademark
assignments) in order more effectively to sell, assign, convey, transfer, reduce
to possession and
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record title to any of the Acquired Assets to Purchaser or to better enable
Purchaser to complete, perform and discharge any of the Assumed Liabilities.
Purchaser, Marisa Christina and AVE agree to cooperate with each other in all
reasonable respects to assure to Purchaser the continued title to and possession
of the Acquired Assets in the condition and manner contemplated by this
Agreement. Each party hereto shall cooperate and deliver such instruments and
take such action as may be reasonably requested by any other parties hereto in
order to carry out the provisions and purposes of this Agreement and the
transactions contemplated hereby. Purchaser, AVE and Marisa Christina shall
cooperate and shall cause their respective Affiliates, officers, employees,
agents and representatives to cooperate to ensure the orderly transition of the
Business from AVE to Purchaser and to minimize the disruption to the Business
resulting from the transactions contemplated hereby.
10.3 Entire Agreement. This Agreement and the documents and
agreements referred to herein and to be delivered pursuant hereto constitute the
entire agreement between the parties hereto pertaining to the subject matter
hereof, and supersede all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties, whether oral or written including
the Letter of Intent dated February 24, 1999 among AVE, Marisa Christina,
Grumman Hill Investments III, L.P., Nautica Enterprises, Inc., Maura de Visscher
and Kimberly Perrone.
10.4 Benefit; Assignment. This Agreement shall be binding upon
and inure to the benefit of and shall be enforceable by the parties hereto and
their respective successors and permitted assigns. This Agreement shall not be
assigned by any party hereto without the prior written consent of the other
parties hereto; provided, however, that Purchaser may assign any or all of its
rights hereunder to one or more Affiliates of Purchaser without the consent of
AVE and Marisa Christina. Any assignment in violation of this Agreement shall be
null and void ab initio.
10.5 No Presumption. Purchaser, AVE and Marisa Christina have
participated jointly in the negotiation and drafting of this Agreement. In the
event any ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by Purchaser, AVE and Marisa
Christina and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.
10.6 Notices. All notices, requests, claims, demands and other
communications provided for herein shall be in writing and shall be deemed given
only if delivered to the party personally or sent to the party by telecopy, by
registered or certified mail (return receipt requested) with postage and
registration or certification fees thereon prepaid, or by any nationally
recognized overnight courier, addressed to the party at its address set forth
below:
If to AVE or Marisa Christina: Marisa Christina Incorporated
1410 Broadway, 20th Floor
New York, New York 10018
Attention: Michael Lerner, CEO
Telecopy No.: (212) 921-7632
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With a copy to: Mayer Brown & Platt
1675 Broadway
New York, New York 10019
Attention: James B. Carison
Telecopy No.: (212) 262-1910
and
Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Blake Hornick
Telecopy No.: (212) 326-0806
If to Purchaser: de V & P, Inc.
234 West 39th Street, 5th floor
New York, New York 10018
Attention: Co-Chief Executive Officers
With a copy to: Riordan & McKinzie
695 Town Center Drive, Suite 1500
Costa Mesa, California 92626
Attention: Michael P. Whalen
Telecopy No.: (714) 549-3244
or to such other address as a party may from time to time designate in writing
in a notice given in accordance with this Section 10.6. All notices, requests,
claims, demands and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt.
10.7 Counterparts; Headings. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed an original, but all
of which taken together shall constitute one and the same Agreement. The Article
and Section headings in this Agreement are inserted for convenience of reference
only and shall not constitute a part hereof or affect in any way the meaning or
interpretation of this Agreement.
10.8 Severability. If any term, provision, clause or part of
this Agreement or the application thereof under certain circumstances is held
invalid, illegal or incapable of being enforced by any Law or public policy, all
other terms, provisions and parts of this Agreement shall nevertheless remain in
full force and effect so long as the economic and legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term, provision or part
of this Agreement is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable
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manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
10.9 No Reliance. Except for any assignees permitted by
Section 10.4 of this Agreement and the indemnified persons pursuant to Sections
8.2 and 8.3:
(a) no third party is entitled to rely on any of the
representations, warranties or agreements of the parties hereto contained in
this Agreement; and
(b) the parties hereto assume no liability to any third
party because of any reliance on the representations, warranties or agreements
of such parties contained in this Agreement.
10.10 Governing Law. All issues and questions concerning the
construction, validity, interpretation and enforcement of this Agreement and the
exhibits and schedules hereto shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to any choice of
law or conflict of law rules or provisions (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
10.11 Submission to Jurisdiction; Waivers. The parties hereto
hereby irrevocably and unconditionally agree that:
(a) All suits, actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in any New York state
or Federal court sitting in the City of New York and any appellate court from
any thereof, and each of the parties hereto hereby irrevocably submits to the
non-exclusive jurisdiction of such courts in any such suit, action or proceeding
and irrevocably waives, to the fullest extent it may effectively do so, the
defense of an inconvenient forum to the maintenance of any such suit, action or
proceedings and any objection to any such suit action or proceeding whether on
the grounds of venue, residence or domicile. A final judgment in any such suit,
action, or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or any other manner provided by law.
(b) Service of process in any such suit, action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to such party
at its address as provided in Section 10.6.
10.12 Bulk Transfer. The parties hereto hereby waive
compliance with the provisions of any applicable bulk sales law of any
jurisdiction in connection with the transactions contemplated hereby and no
representation, warranty or covenant contained in this Agreement shall be deemed
to have been breached as a result of such non-compliance.
10.13 Waiver. Any party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies
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in the representations and warranties of the other parties contained herein or
in any document delivered by the other parties pursuant hereto or (c) waive
compliance with any of the agreements or conditions of the other parties
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party to be bound thereby. Any waiver
of any term or condition shall not be construed as a waiver of any subsequent
breach or a subsequent waiver of the same term or condition, or a waiver of any
other term or condition, of this Agreement. The failure of any party to assert
any of its rights hereunder shall not constitute a waiver of any such rights.
10.14 Amendment. This Agreement may not be amended, modified
or supplemented except (a) by an instrument in writing signed by, or on behalf
of, each of the parties hereto or (b) by a waiver in accordance with Section
10.13.
10.15 Delivery by Facsimile. This Agreement, the agreements
referred to herein, and each other agreement or instrument entered into in
connection herewith or therewith or contemplated hereby or thereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person. At
the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall reexecute original forms thereof and deliver
them to all other parties. No party hereto or to any such agreement or
instrument shall raise the use of a facsimile machine to deliver a signature or
the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine as a defense to the
formation or enforceability of a contract and each such party forever waives any
such defense.
10.16 Information Disclosed on Exhibits and Schedules.
Disclosure of any fact or item in any Schedule referenced by a particular
section or subsection of this Agreement shall, if it is obvious on the face of
such disclosure that the fact or item or its contents is reasonably related on
its face to any other paragraph or section or subsection of this Agreement, be
deemed to be disclosed with respect to that other section or subsection.
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IN WITNESS WHEREOF, the parties have executed this Asset
Purchase Agreement as of the day and year first above written.
Adrienne Vittadini Enterprises, Inc. Marisa Christina Incorporated
By:/s/ S.E. Melvin Hecht By: /s/ Marc A. Ham
Name: S.E. Melvin Hecht Name: Marc A. Ham
Title: Chief Financial Officer Title: Vice Chairman of the Board of
Directors
de V & P. Inc.
By: /s/ Kimberly Perrone By: /s/ Maura de Visscher
Name: Kimberly Perrone Name: Maura de Visscher
Title: Co-Chief Executive Officer Title: Co-Chief Executive Officer
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ANNEX A
Definitions
1. For purposes of this Agreement, the following terms shall
have the following meanings:
"Acquired Assets" means all of the assets, properties
and rights owned, used or held for use by AVE in connection with, or that are
otherwise related to or required for the conduct of, the Business of every kind,
nature and description (other than the Excluded Assets), wherever such assets,
properties and rights are located and whether such assets, properties and rights
are real, personal or mixed, tangible or intangible, and whether or not any of
such assets, properties and rights have any value for accounting purposes or are
carried or reflected on or specifically referred to in AVE's books or financial
statements, including without limitation all of the assets, properties and
rights owned, used or held for use by AVE in connection with, or that are
otherwise related to for the conduct of, the Business set forth below:
(a) all tangible assets and properties owned, used or
held for use by AVE, including cars, trucks and other transportation equipment,
machinery and equipment, tools, spare parts, furniture, office equipment,
furnishings and fixtures and machinery and equipment under order or construction
(the "Equipment");
(b) all inventories, including finished goods,
work-in-progress, raw materials, accessories, packaging, manufacturing,
administrative and other supplies on hand, goods held for sale or to be
furnished under the Contracts and other inventories owned, used or held for use
by AVE (the "Inventories");
(c) all billed and unbilled accounts receivable, prepaid
assets and all notes receivable of AVE ("Accounts Receivable");
(d) all credits, prepaid expenses, deferred charges,
advance payments, security deposits and deposits owned, used or held for use by
AVE;
(e) all intellectual property rights, statutory, common
law or otherwise, including, without limitation, patents (including all
reissues, divisions, continuations and extensions thereof), patent rights,
service marks, trademarks and tradenames, all brand and product names, all
assumed or fictitious names and all logos, copyrights, licenses and other
contractual rights and all assignments and applications relating to the
foregoing and other such property and intangible rights owned, used or held for
use by AVE (including any and all names and marks of any type whatsoever using
the name Adrienne Vittadini or any derivative thereof), together with the
goodwill of the business in connection with all of the foregoing ("Intellectual
Property");
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(f) all completed and developing formulae, processes,
procedures, designs, ideas, strategic and other business plans, research
records, inventions, records of inventions, test information, technical
information, engineering data, know-how, proprietary information, and trade
secrets (and all related manuals, books, files, journals, models, instructions,
patterns, drawings, blueprints, plans, designs specifications, equipment lists,
parts lists, descriptions, data, art work, computer software, computer programs
and processes and source code data related thereto including all current and
historical data bases) owned, used or held for use by AVE ("Technology");
(g) the library, as such term is commonly used in
relation to businesses similar to the Business, inclusive of samples purchased
or produced, design reference books and textile samples (antique or design
swatches) (the "Library");
(h) all customer and supplier lists;
(i) all licensing rights, to the extent assignable;
(j) subject to Section 2.7 hereof and except for
Excluded Assets, (i) all contracts, licenses, commitments, agreements and
instruments, including all customer contracts, operating contracts and
distribution contracts of AVE relating to the Business, (ii) all sales and
purchase orders and supply agreements and other agreements of AVE relating to
the Business, (iii) all leases of Equipment of AVE relating to the Business,
(iv) all restrictive covenants accruing to the benefit of AVE, including,
without limitation, noncompetition and nonsolicitation covenants, (v) the leases
of Real Property listed on Schedule A-I to this Agreement (such leased Real
Property being hereafter referred to as the "Leased Real Property"), and (vi)
all other contracts, licenses, agreements and instruments of AVE relating to the
Business ((i) through (vi) above are collectively referred to as the
"Contracts");
(k) subject to Section 2.7 hereof, all franchises,
approvals, permits, authorizations, licenses, orders, registrations,
certificates, variances, and other similar permits or rights obtained from any
Governmental Entity issued to AVE and all pending applications therefor (the
"Permits");
(l) copies of all books, records, ledgers, files,
documents (including originally executed copies of written Contracts), customer
and supplier lists (past, present or future), correspondence, memoranda, forms,
lists, plats, architectural plans, drawings and specifications, copies of
documents evidencing Intellectual Property, Technology or the Library, new
product development materials, creative materials, advertising and promotional
materials, studies, reports, sales and purchase correspondence, books of account
and records relating to the Transferred Employees, photographs, quality control
records and procedures, equipment maintenance records, manuals and warranty
information, research and development files, in each case, whether in hard copy
or magnetic format, in each instance, of AVE;
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(m) all rights or choses in action arising out of
occurrences before or after the Closing Date and related to any portion of the
Business, including third party warranties and guarantees and all related
claims, credits, rights of recovery and set-off contractual rights, as to third
parties held by or in favor of AVE;
(n) all right, title and interest in and to the
adriennevittadini.com website or any other website using Adrienne Vittadini as
its identifier; and
(o) all rights to insurance and condemnation proceeds
relating to damage, destruction, taking or other impairment of the Acquired
Assets which damage, destruction, taking or other impairment occurs on or prior
to the Closing Date.
"Affiliate" means, with respect to any specified Person,
any other Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such specified Person.
"Agreement" means this Asset Purchase Agreement,
together with the Annex, Schedules and Exhibits attached hereto, as the same may
be amended from time to time in accordance with the terms hereof.
"Assumed Liabilities" shall mean (a) all accounts
payable and current liabilities of AVE to the extent included in the Final
Closing Working Capital, (b) the obligations under the Contracts, other than
Excluded Assets, arising exclusively from, and accruing exclusively with respect
to, the operation of the Business after the Closing Date, provided, however,
that Assumed Liabilities shall not include: (i) subject to Section 2.7, any
liability or obligation arising out of any Contract that was not capable of
being assigned to Purchaser as of the Closing until such time that such Contract
has effectively been assigned to Purchaser; (ii) any liability or obligation
under or with respect to any Contract required by the terms thereof to be
discharged on or prior to the Closing Date; (iii) any liability for Taxes of
Seller or AVE except as specifically provided herein; or (iv) any liability or
obligation arising out of the pending litigation entitled Adrienne Vittadini
Footwear, Inc. v. Adrienne Vittadini Enterprises, Inc. and/or the Confecciones
Litigation; provided, however, that Assumed Liabilities shall include fifty
percent (50%) of all legal fees incurred in the Confecciones Litigation after
the Closing Date above the first $50,000.
"Base Purchase Payment" means $9,500,000.
"Business Day" means any day other than a Saturday,
Sunday, or a day on which banking institutions in the City of New York are
authorized or obligated by law or executive order to close.
"Business Employees" means the officers, employees,
agents and consultants of AVE employed primarily in connection with the
Business.
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<PAGE> 40
"Claim" means any claim of any nature whatsoever,
including any demand, liability, obligation, debt, cause of action, suit,
proceeding, judgment, award, or assessment.
"Closing Working Capital" shall mean, as of the Closing
Date, (i) the current assets of AVE included in Acquired Assets minus (ii) the
current liabilities of AVE included in the Assumed Liabilities, in each case
determined using the same accounting methods and policies utilized in the
Interim Balance Sheet.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Contamination" means the uncontained presence of any
Hazardous Substance, including but not limited to the degradation of naturally
occurring water, air or soil quality which is either the direct or indirect
result of human activity.
"Dealing" means using, generating, manufacturing,
refining, treating, transporting, storing, handling, labeling, documenting,
recycling, disposing of, depositing, transferring, producing or processing any
substance, or contracting to do any of the foregoing.
"Environmental Laws" means all applicable Laws now or
hereafter enacted concerning (i) on-site or off-site Contamination, (ii)
occupational health and safety, (iii) use, treatment, storage, handling, or
disposal of any substances or products, (iv) Releases of Hazardous Substances
into the environment, (v) the Dealing in Hazardous Substances, and (vi) Laws
governing reclamation and restoration of real property.
"Environmental Permits" means permits, certificates,
approvals, variances, exemptions, registrations and licenses issued or issuable
by any Governmental Entity pursuant to any Environmental Law.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA Affiliate" means (a) any corporation included
with AVE in a controlled group of corporations within the meaning of Section
414(b) of the Code, (b) any trade or business (whether or not incorporated)
which is under common control with AVE within the meaning of Section 414(c) of
the Code, (c) any member of an affiliated service group of which AVE is a member
within the meaning of Section 414(m) of the Code or (d) any other person or
entity treated as an affiliate of AVE under Section 4 14(o) of the Code.
"Excluded Assets" means:
(i) except as otherwise set forth herein, assets
attributable or related to any Benefit Plan;
(ii) all rights of AVE under this Agreement and other
Transaction Documents;
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(iii) duplicate copies of all books and records
transferred to Purchaser, subject to the restrictions contained herein;
(iv) all of AVE's cash and cash equivalents existing at
the Closing Date;
(v) the designs listed on Schedule A-2;
(vi) the motor vehicles listed on Schedule A-2;
(vii) the severance agreements listed on Schedule A-2;
(viii) the sub-sublease on the New Jersey office
(ix) the office equipment that will be provided for use
by Company pursuant to the Transition Services Agreement listed on Schedule A-2;
(x) any Business Benefit Plan; and
(xi) any other Contract or item listed on Schedule A-2.
"GAAP" means United States generally accepted accounting
principles.
"Governmental Entity" means (i) any multinational,
federal, provincial, state, municipal, local or other governmental or public
department, court, commission, board, bureau, agency or instrumentality,
domestic or foreign; (ii) any subdivision, agent, commission, board, or
Governmental Entity of any of the foregoing; or (iii) any quasi-governmental or
private body exercising any regulatory, expropriation or taxing governmental
authority under or for the account of any of the foregoing.
"Hazardous Substance" means any substance which is or is
deemed to be, alone or in any combination, hazardous, hazardous waste, toxic,
radioactive, a pollutant, a deleterious substance, a contaminant or a source of
pollution or contamination under any Environmental Law, whether or not such
substance is defined as hazardous under the Environmental Law.
"Laws" means all statutes, codes, ordinances, decrees,
rules, regulations, municipal by-laws, judicial or arbitral or administrative or
ministerial or departmental or regulatory judgments, orders, decisions, rulings
or awards, policies, voluntary restraints, guidelines, or any provisions or
interpretations of the foregoing, including general principles of common and
civil law and equity, binding on or affecting the Person referred to in the
context in which such word is used.
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<PAGE> 42
"Lien" means any lien, (including, without limitation,
environmental and tax liens) charge, claim, pledge, security interest,
conditional sale agreement or other title retention agreement, lease, mortgage,
security agreement, right of first refusal, option, restriction, tenancy,
license, covenant, right of way, easement or other encumbrance (including the
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or statute or law of any jurisdiction) preferential arrangement
or restriction of any kind (including, without limitation, any restriction on
the use, voting, transfer, receipt of income or other exercise of any
attributes).
"Losses" means any losses, costs, expenses, damages
including compensatory, exemplary, or punitive damages, Taxes, penalties, fines,
charges, demands, liabilities, obligations and claims of any kind (including
interest, penalties and reasonable attorneys' and consultants' fees, expenses
and disbursements).
"Material Adverse Effect" means a circumstance, change
or effect (or series of related circumstances changes or effects) which has or
is reasonably likely to have a material adverse change in or effect upon the
business, assets, liabilities, condition (financial or otherwise), or results of
operations of AVE, the Business or the Acquired Assets, taken as a whole or
which could materially adversely affect the ability of Purchaser to operate or
conduct the Business in the manner in which it is currently operated or
conducted by AVE.
"Permitted Liens" means (a) Liens securing Taxes,
assessments, governmental charges or levies, all of which are not yet due and
payable, (b) the Liens listed on Schedule 3.10 or (c) such other Liens which,
individually and in the aggregate, do not and would not detract from the value
of or impair the use of any Acquired Asset; it being understood that to the
extent a Permitted Lien relates to or arises from a Non-Assumed Liability, AVE
shall still be liable for such Non-Assumed Liability to the extent set forth
herein.
"Person" means any individual, corporation, partnership,
joint venture, limited liability company, association, firm, Governmental
Entity, a trust unincorporated organization or other entity or organization.
"Prime Rate" means the rate per annum announced from
time to time during the reference period by The Chase Manhattan Bank as its
United States prime, reference or base rate for commercial loans.
"PTO" means the United States Patent and Trademark
Office.
"Release" means to pump, pour, empty, eject, spill,
leak, emit, deposit, discharge, leach, migrate, dispose, dump, inject or place
into the environment, or to allow any of the foregoing.
"Remedial Action" means any action undertaken to (i)
clean up, remove, treat or in any other way respond to any presence, Release or
threat of Release of any Hazardous
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<PAGE> 43
Substances; (ii) prevent any Release of Hazardous Substances where such Release
would violate any Environmental Laws or would endanger or threaten to endanger
public health or welfare or the environment; or (iii) perform studies,
investigations or monitoring to investigate the foregoing.
"Taxes" means any and all federal, state, local and
foreign taxes, fees, levies, duties, tariffs, imposts, and other charges of any
kind whatsoever, including, without limitation, income, payroll, withholding,
excise, sales, use, lease, personal and other property, use and occupancy,
business and occupation, mercantile, real estate, gross receipts, license,
employment, severance, stamp, premium, windfall profits, social security (or
similar unemployment), disability, transfer, registration, value added,
alternative or add-on minimum, estimated, or capital stock and franchise and
other tax of any kind whatsoever, including any interest, penalty or addition
thereto, or additional amounts imposed with respect thereto, whether disputed or
not.
"Transition Services Agreement" means a transition
services agreement in the form attached hereto as Exhibit B.
"WARN Act" means the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. Section 2102 - 2109, as amended.
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<PAGE> 44
2. The following terms shall have the meanings ascribed
to them in the section of this Agreement indicated below:
<TABLE>
<CAPTION>
DEFINED TERM SECTION
<S> <C>
"Allocation" 2.8
"AVE's Dispute Notice" 2.3(b)
"AVE Indemnified Parties" 8.3(a)
"Basket Amount" 8.2(b)
"Business Benefit Plans" 3.15(a)
"Business" Recitals
"Closing" 2.5
"Closing Date" 2.5
"COBRA" 9.3
"Date Sensitive Third Party Technology" 3.26
"Estimated Closing Working Capital" 2.3(a)
"Final Closing Working Capital" 2.3(c)
"Final Purchase Price" 2.3(d)
"Financial Statements" 3.4(a)
"Indemnification Claim" 8.4(a)
"Indemnified Party" 8.4(a)
"Insider Transactions" 3.22
"Insiders" 3.22
"Interim Balance Sheet" 3.4(a)
"Non-Assumed Liabilities" 2.4(b)
"OSHA" 3.7(a)
"Purchase Price" 2.2
"Purchaser's Closing Schedule" 2.3(b)
"Purchaser Indemnified Parties" 8.2(a)
"Real Property" 3.11
"Third Party Indemnification Claim" 8.4(b)
"Transaction Documents" 3.1(a)
"Transferred Employee" 9.1
</TABLE>
A-8
