This
MEMBERSHIP INTEREST PURCHASE
AGREEMENT
dated as of March 9, 2010 (this “
Agreement
”)
by and between Iconix Brand Group, Inc., a Delaware corporation (the “
Buyer
”),
and Purim LLC (the “
Seller
”),
a Delaware limited liability company, all of the equity interests of which are
owned by Madonna Ciccone (“
M
”),
and Guy Oseary
(
“
G/O
”).
WITNESSETH
:
WHEREAS
, the Seller is the
owner of all of the issued and outstanding membership interests of MG Icon LLC,
a Delaware limited liability company (the “
Company
”);
WHEREAS
, pursuant to that
certain License and Services Agreement, entered into by and between the Company
and the Seller immediately prior to the Closing (as hereinafter defined in
Section
2
)
(the “
License
Agreement
”),
the Seller has, among
other things, granted to the Company certain name, likeness and other publicity
rights associated with Madonna Ciccone, p/k/a Madonna (collectively, the “
Licensed
Rights
”);
WHEREAS
, in order to induce
the Buyer to enter into this Agreement and the other Transaction Documents
(as hereinafter defined in
Section
4.1
)
to which it is a party, M has entered into a personal inducement letter
agreement as of the date hereof
(the
“
Inducement
Agreement
”
);
and
WHEREAS
, the Buyer has agreed
to purchase a fifty percent (50%) membership interest in the Company from the
Seller, upon the terms and subject to the conditions set forth herein and in the
Amended and Restated Operating Agreement of the Company dated as of the date
hereof (the
“
Operating
Agreement
”).
NOW, THEREFORE
, in
consideration of the foregoing and the mutual covenants and agreements herein
contained, and intending to be legally bound hereby, the parties hereto do
hereby agree as follows:
1.
Certain
Defined Terms
. Capitalized defined terms used herein and not
otherwise defined have the meanings ascribed to them in the Operating
Agreement.
2.
Purchase
and Sale of Purchased Interest
. Subject to the terms and
conditions set forth in this Agreement and simultaneously with the execution and
delivery of this Agreement (the “
Closing
”),
the Seller is hereby selling, conveying, assigning, transferring and delivering
to the Buyer, and the Buyer is hereby purchasing, units representing
membership interests
comprising, immediately following the Closing, fifty percent (50%) of the
aggregate outstanding membership interests in the Company (collectively, the
“
Purchased
Interest
”), free and clear of any and all liens, adverse claims, options,
security interests, restrictions, pledges, mortgages, charges, encumbrances and
third party rights of any kind or nature whatsoever, whether arising by Contract
(as hereinafter defined in
Section
4.2
), operation of law or otherwise (collectively, “
Liens
”),
other than Liens created by the Operating Agreement.
3.
Payment
of Purchase Price
.
3.1.
Purchase
Price
. In consideration of the sale, transfer, conveyance and
delivery of the Purchased Interest, the Buyer shall, in full payment thereof,
pay to the Seller aggregate consideration of Twenty Million Dollars
($20,000,000) (the “
Purchase
Price
”), in five (5) equal installments (each, an “
Annual
Payment”
) of Four Million Dollars ($4,000,000) payable to the Seller at
the Closing and on each subsequent annual anniversary date thereof;
provided
,
however
, that (i) the
Purchase Price, and each Annual Payment, shall be subject to increase pursuant
to
Section
3.2
below, (ii) the payment of the unpaid Purchase Price, and the unpaid Annual
Payments, shall be accelerated as provided in
Section
3.3
below, and (iii) the Purchase Price and unpaid Annual Payments, as applicable,
shall be subject to decrease pursuant to
Section
3.2(e)
and
Section
3.2(f)
below. The Buyer’s obligations to make the Annual Payments hereunder
shall be secured by a pledge of the Purchased Interest in favor of the Seller
pursuant to the Pledge Agreement (as hereinafter defined in
Section
4.1
). All
payments of the Purchase Price made hereunder shall be made in cash or by wire
transfer of immediately available funds to an account designated in writing by
the Seller.
3.2.
Earn-Out
Consideration
.
(a) Following
the Closing, the Seller shall be entitled to additional consideration
(collectively, the “
Earn-Out
Consideration
”) earned hereunder contingent upon the occurrence of a
Sublicense Event (as hereinafter defined) or a Fragrance Event (as hereinafter
defined);
provided,
however
, that Earn-Out Consideration shall only be payable in connection
with up to two Sublicense Events and one Fragrance Event (each, an “
Earn-Out
Event
”). For purposes of this Agreement, (A) “
Sublicense
Event
” shall mean, if Seller approves a Designated Mark other than
“Material Girl,” and such Designated Mark is approved for exploitation under any
Sublicense by the parties thereto (as such terms are defined in the License
Agreement); and (B) “
Fragrance
Event
”
shall mean, if Seller approves a scent for a women’s fragrance (as listed on
Schedule B to the License Agreement) and such women’s fragrance is approved for
exploitation under any Sublicense by the parties thereto.
(b) If
an Earn-Out Event shall occur, then Earn-Out Consideration shall be earned in
respect thereof, and each of the Annual Payment amounts shall be increased by an
applicable “
Incremental
Annual Amount
”, in the amount(s) determined by reference to the following
table:
|
|
|
|
|
|
Incremental
Annual Amount
|
|
|
First
Sublicense Event:
|
|
$
|
5,000,000
|
|
|
$
|
1,000,000
|
|
|
Second
Sublicense Event:
|
|
$
|
2,000,000
|
|
|
$
|
400,000
|
|
|
Fragrance
Event:
|
|
$
|
3,000,000
|
|
|
$
|
600,000
|
|
(c) If
one or more Annual Payments have theretofore been made the Buyer shall, within
thirty (30) days after the date of the applicable Earn-Out Event, make an
additional payment to the Seller in an aggregate amount equal to the appropriate
Incremental Annual Amount(s) for each Annual Payment theretofore
made. In addition, any future Annual
Payment
shall be increased by the appropriate Incremental Annual Amount in respect
thereof at the time of payment.
(d)
Additional
Payments
. If the Seller (or any of its members) is required to pay an
interest charge on any amounts payable hereunder in accordance with Section 453A
of the Internal Revenue Code of 1986, as amended (the “
Code
”)
or similar rule or regulation, then within ten (10) days after receipt of
written notice from the Seller that any such payment is due, the Buyer shall pay
to the Seller an amount equal to such interest charge plus such additional
amount which, after income taxes, leaves an amount equal to the interest charge
payable (the “
Additional
Payment
”). Except as otherwise provided below, for purposes of
calculating any such Additional Payments: (i) the highest combined marginal
federal, state and local effective income tax rate applicable with respect to
any payments required under this
Section
3.2(d)
shall be utilized, and (ii) the assumed interest charge required under Section
453A of the Code shall be equal to the “underpayment rate” described in Section
453A(c)(2)(B) of the Code applicable with respect
thereto. Notwithstanding the foregoing, (i) as a prerequisite to
receiving any Additional Payments, Seller shall cause the tax preparers for the
members of Seller to deliver to Buyer schedules detailing the computations of
the Additional Payment amounts, and (ii) the federal income tax rate utilized
for purposes of calculating any Additional Payments shall not exceed the federal
income tax rates applicable to the members of Seller as reported, or as will be
reported, on their federal income tax returns with respect to payments received
by Seller under the terms of this Agreement. For the avoidance of
doubt, if the payment of any Annual Payments and Earn-Out Consideration (to the
extent payable) is accelerated as provided in
Section
3.3
below, Seller shall also be entitled to any Additional Payment due in respect of
the acceleration of such payments.
(e)
Macy’s
Purchase Price Adjustment
. If pursuant to Section 9.5 of the
License Agreement by and between the Company and Macy’s Retail Holdings, Inc.
dated as of even date herewith (the “
Macy’s
Agreement
”), Licensee (as defined in the Macy’s Agreement) exercises its
right to reduce the Minimum Royalty (as defined in the Macy’s Agreement)
payments (the “
Macy’s
Adjustment
”) with respect to any Annual Period (as defined in the Macy’s
Agreement) occurring during the Initial Term (as defined in the Macy’s
Agreement), and the Macy’s Adjustment results in the Company receiving royalty
payments in respect of such Annual Period that are less than the Minimum Royalty
payments for such Annual Period in effect prior to the Macy’s Adjustment (such
difference being referred to as the “
Macy’s
Shortfall
”), then the Annual Payments thereafter due and payable
hereunder shall be reduced dollar for dollar until the total cumulative
reduction in such Annual Payments is equal to the aggregate Macy’s
Shortfall. Notwithstanding anything to the contrary contained herein
or in any of the other Transaction Documents, the reduction of the Purchase
Price pursuant to this
Section
3.2(e)
shall be the sole and exclusive remedy of the Buyer hereunder and under the
other Transaction Documents in the event of a Macy’s Adjustment.
(f)
D&G
Purchase Price Adjustment
. The second Annual Payment due to
the Seller shall be reduced, dollar-for-dollar, by any non-refundable advances
and royalties paid to the Seller or its Affiliates (without duplication) on or
prior to the date hereof pursuant to the eyewear license previously granted
Dolce & Gabanna in December 2009 (the “
D&G
Agreement
”). Unless and until such time as the D&G
Agreement (or royalty payments thereunder) are assigned or otherwise contributed
to the Company, any additional non-refundable
advances
and royalties paid to Seller or its Affiliates (without duplication) after the
date hereof under the D&G Agreement shall reduce dollar-for-dollar the
Annual Payment to be made on the second anniversary of the Closing (i.e., the
third Annual Payment).
3.3.
Acceleration
of Payments
.
Upon the
occurrence of an Event of Default (as defined below), then, subject to the
Buyer’s offset rights set forth in this Agreement, the entire amount of the
unpaid Purchase Price (
i.e.,
any unpaid Annual
Payments and Earn-Out Consideration earned hereunder) shall be due and payable
to Seller, and the Buyer shall pay all unpaid Annual Payments, Earn-Out
Consideration (to the extent payable), and any accrued and unpaid Additional
Payments earned hereunder to the Seller if such Event of Default is not cured or
waived. As used herein, “
Event
of Default
” shall mean: (i) the failure of the Buyer to make any of the
following payments when due and payable (x) Annual Payment, (y) Earn-Out
Consideration payment or (z) Additional Payment to the Seller, in the case of
each of clauses (x), (y) and (z) not later than five (5) days after receipt of
notice in respect of any such failure; or (ii) the occurrence of an Iconix
Default Event (as such term is defined in, and pursuant to, the Operating
Agreement);
provided
,
however
, that if the
Buyer asserts a right to offset all or any portion of any such payment on or
prior to the date when due pursuant to
Section
6.7
of this Agreement and the Seller disputes Buyer’s exercise of such offset
rights, the obligation to make such payment shall be deemed to be satisfied upon
the payment of such disputed amount into escrow in accordance with the terms of
Section
6.7
of this Agreement. For the avoidance of doubt, it is understood and
agreed that Buyer’s obligations to pay Annual Payments, Earn-Out Consideration
(to the extent payable) and Additional Payments (to the extent payable) shall
continue notwithstanding the occurrence of any Required Sale pursuant to the
Operating Agreement or other change of ownership of the Company, provided that,
the payment of these amounts remains subject to Buyer's right to offset in
accordance with the terms of
Section 6.
7
of this Agreement.
3.4.
Certain Additional
Provisions Regarding Annual Payments, etc.
(a) The
Buyer shall have the right to offset the amount of any Damages for which it
seeks indemnification in accordance with the terms of
Section
6.7
. Any
such offset in respect of payments under this
Section
3
shall be treated as a Purchase Price adjustment for income tax
purposes.
(b) In
addition, in the event that, prior to the payment in full of the aggregate
Purchase Price (as the same may be adjusted herein) and Additional Payments, the
Buyer shall have any distributions due and payable from the Company pursuant to
the Operating Agreement, the Buyer shall have the right (but not the obligation)
to cause a portion of such distribution, up to the amount of the then
outstanding aggregate Purchase Price (as the same may be adjusted herein) and
any Additional Payments to be paid to the Seller, each such payment to be
applied to the prepayment of the remaining installments of the aggregate
Purchase Price (as the same may be adjusted herein) and any Additional Payments
in order of maturity. Any such amounts paid over to the Seller shall
be deemed to have been distributed to the Iconix Member and then paid to the MG
Member as an Iconix Payment in accordance with Section 3.07 of the Operating
Agreement.
4.
Representations
and Warranties of the Seller
. The Seller represents and
warrants to the Buyer as follows:
4.1.
Organization,
Standing and Power
. Each of the Seller and the Company is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Seller has the full
limited liability company power and authority to own and operate its properties,
and to own the outstanding membership interests in the Company. Each
of the Seller and the Company has the full limited liability company power and
authority to execute, deliver and perform its obligations under the Transaction
Documents to which the Seller or the Company, as the case may be, is a
party. There is no action or proceeding pending or contemplated to
dissolve the Seller or the Company. For purposes of this Agreement,
“
Transaction
Documents
” shall mean this Agreement, the License Agreement, the
Inducement Agreement, the Operating Agreement, the G/O Letter Agreement and the
Membership Interest Pledge Agreement between the Buyer and the Seller as of the
date hereof (the “
Pledge
Agreement
”) and all other documents, instruments and certificates
delivered pursuant hereto or thereto or in connection herewith or
therewith.
4.2.
Membership
Interests
. The Seller is the sole member of the Company, and
is the sole legal and beneficial owner of all of the membership interests of the
Company, free and clear of all Liens, except for any Liens created by the
Operating Agreement, and has the right to transfer legal and beneficial title to
the Purchased Interest. Immediately following the Closing, the
Purchased Interest will constitute a fifty percent (50%) membership interest in
the Company. Except for the transactions contemplated by this
Agreement, there are no options, warrants or other rights (including conversion
or preemptive rights) or Contracts of any character relating to the issued or
unissued membership interests of the Company or obligating the Company to issue
or sell any membership interests of or other equity interests in the
Company. Except for the transactions contemplated by this Agreement,
there are no outstanding Contracts of the Company to (a) repurchase, redeem or
otherwise reacquire any membership interest of or other equity interests in the
Company (or any interest therein), (b) provide funds to or make any investment
(in the form of a loan, capital contribution or otherwise) in any other entity,
(c) issue or distribute to any Person (as defined below) any membership interest
of or other equity interests in the Company, or (d) issue or distribute to
holders of any of the membership interests of the Company or any other Person
any evidences of indebtedness, cash or other assets of the Company or to create
any Liens on the assets of the Company. Other than the Operating
Agreement (and the operating agreement of Purim LLC), none of the Seller, the
Company, M or G/O (or any of their respective Affiliates (as defined in the
Operating Agreement)) is a party to or subject to any agreements or
understandings of any kind, and there are no agreements or understandings of any
kind between any Persons, which affect or relate to the acquisition, disposition
or voting or giving of written consents with respect to any membership interest
of or other equity interests in the Company. For purposes of this
Agreement, (i) “
Contracts
”,
when described as being those of or applicable to any Person, shall mean any and
all written contracts or agreements, including any amendment and other
modifications thereto, to which such Person is a party or by which such Person
or its properties or assets is subject or bound, and (ii) “
Person
”
shall mean any individual, sole proprietorship, joint venture, partnership,
corporation, limited liability company, association, joint stock company,
unincorporated organization, cooperative, trust, estate, government entity or
authority (including any branch, subdivision or agency thereof), administrative
or regulatory authority, or any other entity of any kind or nature
whatsoever.
4.3.
Interests
in Other Entities
. The Company does not own or control,
directly or indirectly, any interest in any other Person. The Company
has no obligation, agreement, understanding or arrangement to invest in any
entity.
4.4.
Authority;
Binding Agreement
. The execution and delivery by the Seller of
this Agreement and the execution and delivery by the Seller, the Company, M and
G/O of each of the other Transaction Documents to which the Seller, the Company,
M and G/O, as applicable, is a party, the performance by the Seller, the
Company, M and G/O of their respective obligations hereunder and thereunder, as
applicable, and the consummation of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary action on the
part of the Seller, the Company, M and G/O, as applicable, and the Seller, the
Company, M and G/O, as the case may be, have all necessary power and authority
with respect thereto. Each of the Transaction Documents to which the
Seller, the Company, M and G/O are a party are the legal, valid and binding
obligations of such Persons
,
as applicable, enforceable
against such Persons, as applicable, in accordance with their respective terms,
except as the same may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the rights of creditors generally and subject
to the rules of law governing (and all limitations on) specific performance,
injunctive relief, and other equitable remedies (collectively,
“
Enforceability
Exceptions
”
).
4.5.
Non-contravention
. None
of the execution and delivery by the Seller of this Agreement, the execution and
delivery by the Seller, the Company, M and G/O of any of the other Transaction
Documents to which such Person is a party, the consummation by the Seller, the
Company, M and G/O of any of the transactions contemplated hereby or thereby, or
the performance by the Seller, the Company, M and G/O of their respective
obligations hereunder or thereunder will (or with the giving of notice or the
lapse of time or both would) (a) conflict with or result in a breach of any
provision of (x) any Contract (including any Contract affecting the Licensed
Rights) to which the Seller, the Company, M or G/O is a party or bound or any
other obligation of the Seller, the Company, M or G/O to any Person that would
have a material adverse effect on the ability of any of such parties to execute,
deliver and perform its obligations under the Transaction Documents, or (y) the
certificate of formation and limited liability company agreement of the Company
or the Seller, each as amended to date, (b) obligate the Seller, the Company, M
or G/O, or any of their respective Affiliates, to pay any royalty or other
compensation to any Person, (c) result in the creation or imposition, or permit
the enforcement, of any Lien upon the Purchased Interest (except for any Liens
created by the Operating Agreement or the Pledge Agreement) or any of the
Licensed Rights or any other assets of the Seller, the Company, M or G/O, or (d)
constitute a violation of any Legal Requirement (as defined below) applicable to
the Seller, the Company, M or G/O, or any of their respective Affiliates, that
would have a material adverse effect on the ability of any of such parties to
execute, deliver and perform their obligations under the Transaction
Documents. For purposes of this Agreement, “
Legal
Requirements
” shall mean any and all laws (statutory, judicial or
otherwise), ordinances, regulations, judgments, orders, directives, injunctions,
writs, decrees or awards of, and any Contracts with, any Governmental Authority
(as hereinafter defined in
Section
4.6
).
4.6.
Consents
. No
consent, approval, waiver, notice, order, or authorization of, or registration,
qualification, designation, declaration, recording or filing with, any federal,
state,
local, municipal or foreign governmental authority, quasi-governmental authority
(including any trademark registry or office or other governmental agency,
commission, public authority, branch, department or official, and any court or
other tribunal) or body exercising, or entitled to exercise, any governmentally
derived administrative, executive, judicial, legislative, police, regulatory or
taxing authority, or any self-regulatory organization, administrative or
regulatory agency, commission, tribunal or authority (each, a “
Governmental
Authority
”) or any other Person is required in connection with the
execution and delivery by the Seller, the Company, M or G/O of this Agreement or
any of the other Transaction Documents to which the Seller, the Company, M and
G/O, as applicable, is a party, the performance by the Seller, the Company, M
and G/O of their respective obligations hereunder and thereunder, or
consummation by the Seller, the Company, M and G/O of the transactions
contemplated hereby (including the sale by the Seller of the Purchased Interest)
or thereby, that would have a material adverse effect on the ability of any of
such parties to execute, deliver and perform their obligations under the
Transaction Documents.
4.7.
No
Actions
. No claim, action, suit, arbitration, inquiry,
litigation or investigation or other proceeding (a
“
Proceeding
”
) is
pending or, to the knowledge of the Seller, threatened against the Seller, the
Company, M or G/O (or any of their respective Affiliates) (i) which questions
the validity of the Transaction Documents to which such Person is bound or is a
party or the right of the Seller or the Company (or any of their respective
Affiliates) to enter into any Transaction Document to which such Person is bound
or is a party or to perform such Person’s obligations thereunder, or which
questions the validity of the License Agreement or the right of the Seller, the
Company or M to enter into the License Agreement or the Inducement Agreement, as
applicable, or to perform such Person’s obligations thereunder, or (ii) which
would, either individually or in the aggregate, reasonably be expected to have a
material adverse effect on any of the Seller, the Company, M or G/O (or any of
their respective Affiliates) or have a material adverse effect on the ability of
the Seller, the Company, M or G/O (or any of their respective Affiliates) to
perform such Person’s obligations under any of the Transaction Documents to
which such Person is bound or is a party. None of the Seller, the
Company, M or G/O
is a party to or subject
to any writ, order, decree, injunction or judgment of any Governmental Authority
that would materially adversely affect such Person or the performance by such
Person of such Person’s obligations under any of the Transaction Documents to
which such Person is a party. There is no Proceeding pending or
contemplated to dissolve the Seller or the Company. Neither the
Seller nor the Company is insolvent or otherwise unable to pay its debts as they
fall due and no proceedings against the Seller or the Company are pending or, to
the knowledge of the Seller, contemplated under applicable bankruptcy,
insolvency, reorganization and moratorium laws and principles of equity,
affecting enforcement of creditors’ rights generally.
4.8.
Absence
of Undisclosed Liabilities
. Except as provided on
Schedule
4.8
, the Company does not have any Liabilities (as defined below), and
the Company is not a guarantor or otherwise responsible for any Liabilities of
any other Person. For purposes of this Agreement,
“
Liabilities
”
shall mean any and all
indebtedness, liabilities and obligations of any nature whatsoever, whether
accrued, absolute, fixed, contingent, determined, determinable, known, unknown,
matured or unmatured or otherwise, and whether or not of a nature required to be
reflected or reserved against in a balance sheet in accordance with U.S.
generally accepted accounting principles.
4.9.
No
Business Operations
.
(a) Except
as provided on
Schedule
4.8
, the Company has not engaged in any activities since its formation
other than those incidental to its organization.
(b) The
Company does not have any employees.
(c) The
Company does not own any real property.
4.10.
Brokerage
. No
investment banker, broker, finder or other intermediary was engaged by or dealt
with the Company, the Seller, M or G/O or any of their respective Affiliates in
connection with any of the transactions contemplated by this
Agreement.
4.11.
Constitutional
Documents
.
The Operating
Agreement will, at Closing, be the only constitutional document in force in
relation to the Company and there are no other documents or agreements that will
bind the Buyer in its capacity as member of the Company or which contain rights,
restrictions or obligations with respect to the equity or debt capital of the
Company
.
5.
Representations
and Warranties of the Buyer
. The Buyer represents and warrants to the
Seller as follows:
5.1.
Organization,
Standing and Power
. The Buyer is a Delaware corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Buyer has the full corporate power and authority to own
and operate its properties, and the Buyer has the full corporate power and
authority to execute, deliver, and perform its obligations under, this Agreement
and each of the other Transaction Documents to which the Buyer is a
party.
5.2.
Authority;
Binding Agreement
. The execution and delivery by the Buyer of
this Agreement and each of the other Transaction Documents to which the Buyer is
a party, the performance by the Buyer of its obligations hereunder and
thereunder, and the consummation of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary action on the
part of the Buyer, and the Buyer has all necessary power and authority with
respect thereto. This Agreement is, and each of the other Transaction
Documents to which the Buyer is a party will be, when executed and delivered by
the Buyer, the legal, valid and binding obligation of the Buyer, enforceable
against the Buyer in accordance with its respective terms, except as the same
may be limited by the Enforceability Exceptions.
5.3.
Non-contravention
. Neither
the execution and delivery by the Buyer of this Agreement or any of the other
Transaction Documents to which the Buyer is a party, the consummation by the
Buyer of any of the transactions contemplated hereby or thereby, nor the
performance by the Buyer of any of its obligations hereunder or thereunder, will
(nor with the giving of notice or the lapse of time or both would) (a) conflict
with or result in a breach of any provision of any Contract to which the Buyer
is a party or the certificate of incorporation or by-laws of the Buyer, each as
amended to date, (b) obligate the Company or the Seller to pay any royalty or
other compensation to any Person, (c) result in the creation or imposition, or
permit
the
enforcement of any Lien (except for any Liens created by the Operating Agreement
or the Pledge Agreement) upon the Purchased Interest, or (d) constitute a
violation of any Legal Requirement applicable to the Buyer.
5.4.
Consents
. No
consent, approval, waiver, notice, order, or authorization of, or registration,
qualification, designation, declaration, recording or filing with, any
Governmental Authority on the part of the Buyer is required (other than the
filing of a UCC-1 financing statement in respect of the Pledged Collateral (as
defined in the Pledge Agreement) with the Secretary of State of the State of
Delaware), and no other consents or waivers of any other Person are necessary to
be obtained by the Buyer, in connection with the execution and delivery by the
Buyer of this Agreement and each of the other Transaction Documents to which the
Buyer is a party, the performance by the Buyer of its obligations hereunder and
thereunder or consummation by the Buyer of the transactions contemplated hereby
(including the acquisition by the Buyer of the Purchased Interest) or
thereby.
5.5.
No
Actions
. No claim, action, suit, arbitration, inquiry,
litigation or investigation or other proceeding is pending or, to the Buyer’s
knowledge, threatened against the Buyer (i) which questions the validity of the
Transaction Documents to which the Buyer is a party, or the right of the Buyer
to enter into any such Transaction Document, or to perform its obligations
thereunder, or (ii) which would, either individually or in the aggregate,
reasonably be expected to have a material adverse effect on the Buyer or impair
the ability of the Buyer to perform its obligations under any such Transaction
Documents. The Buyer is not a party to or subject to any writ, order,
decree, injunction or judgment of any Governmental Authority which would
materially adversely affect the Buyer or the performance of its obligations
hereunder.
5.6.
Investment
Intent
. The Buyer understands that the Purchased Interest has
not been registered under the Securities Act of 1933, as amended (the “
Act
”),
and that the Purchased Interest may not be sold, transferred or otherwise
disposed of, without registration under the Act and any other applicable state
securities laws (“
Other
Securities
Laws
”), or pursuant to an exemption therefrom. The Buyer is an
“accredited investor” within the meaning of Rule 501(a) of Regulation D
promulgated under the Act. The Buyer has substantial experience in
evaluating investments such as the Purchased Interest and is capable of
evaluating the merits and risks of an investment in the Purchased
Interest. The Buyer is acquiring the Purchased Interest for its own
account for investment and not with a view to the resale or distribution of any
part thereof within the meaning of the Act or any Other Securities
Laws.
5.7.
Brokerage
. No
investment banker, broker, finder or other intermediary was engaged by or dealt
with the Buyer in connection with any of the transactions contemplated by this
Agreement.
6.
Indemnification
Provisions
.
6.2.
Indemnification
by Buyer
. Subject to the provisions set forth in this
Section
6
,
the Buyer shall indemnify, defend and hold harmless the MG Parties and their
respective Representatives as indemnitees (collectively, the “
Seller
Indemnified Parties
”) from and against any and all Damages, whether or
not involving a Third Party Claim (as hereinafter defined), including reasonable
attorneys’ fees, to the extent resulting from:
(a) any
breach of or inaccuracy in a representation or warranty of an Iconix Party
contained in this Agreement or in any other Transaction Document;
(b) any
breach of or default in the performance of a covenant or an agreement contained
in this Agreement or in any other Transaction Document by an Iconix Party or by
the Company caused by an Iconix Party; or
(c) any
Extraordinary Iconix Parties Matter.
6.3.
Indemnification
by the Seller
. Subject to the provisions set forth in this
Section
6
,
the Seller shall indemnify, defend and hold harmless the Iconix Parties and
their respective Representatives as indemnitees (collectively, the “
Buyer
Indemnified Parties
”) from and against any and all Damages, whether or
not involving a Third Party Claim, including reasonable attorneys’ fees, to the
extent resulting from:
(a) any
breach of or inaccuracy in a representation or warranty of an MG Party contained
in this Agreement or any other Transaction Document;
(b) any
breach of or default in the performance of a covenant or an agreement contained
in this Agreement or in any other Transaction Document by an MG Party or by the
Company caused by an MG Party;
provided
,
however
,
that the Seller shall not be required to indemnify, defend and hold harmless the
Buyer Indemnified Parties for an Ordinary Purim Parties Matter in respect of a
Claim arising under the License Agreement, which Claim relates to any actions or
omissions by the MG Manager in its capacity as Creative Manager which does not
arise out of the willful misconduct, bad faith or gross negligence of any of the
MG Parties);
(c) any
(i) Extraordinary Purim Parties Matters, and (ii) Ordinary Purim Parties Matters
to the extent such matter arises out of the willful misconduct, bad faith or
gross negligence of any of the MG Parties.
6.4.
Notice of Claim; Right to
Participate in and Defend Third Party Claim.
(a)
Notice
. If
any indemnified party receives notice of the assertion of any claim,
the commencement of any suit, action or proceeding, or the imposition of any
penalty or assessment by a Third Party in respect of which indemnity may be
sought under this
Section
6
(a “
Third
Party Claim
”), and the indemnified party intends to seek indemnity
hereunder, then the indemnified party shall promptly provide the indemnifying
party with written notice of the Third Party Claim, but in any event not later
than thirty (30) calendar days after receipt of such notice of Third Party
Claim. The failure by an indemnified party to notify an indemnifying
party of a Third Party Claim shall not relieve the indemnifying party of any
indemnification responsibility under this Agreement, unless such failure
materially prejudices the ability of the indemnifying party to timely defend
such Third Party Claim.
(b)
Procedures
. The
indemnifying party shall have the right to assume and control the defense,
compromise or settlement of the Third Party Claim with its own counsel
(reasonably
satisfactory to the indemnified party) if the indemnifying party delivers
written notice to the indemnified party within thirty (30) days following the
indemnifying party’s receipt of notice of the Third Party Claim from the
indemnified party acknowledging its obligations to indemnify the indemnified
party with respect to such Third Party Claim in accordance with this
Section
6
;
provided
,
however
, that the
indemnifying party shall not enter into any settlement of any Third Party Claim
unless such settlement (1) involves only the payment of money damages by the
indemnifying party, (2) does not require the indemnified party to pay any monies
in connection therewith, (3) does not involve any admission of liability on the
part of the indemnified party, and (4) provides for a full release in favor of
the indemnified party with respect to the matter or claim at
issue. In its defense, compromise or settlement of any Third Party
Claim, the indemnifying party shall timely provide the indemnified party with
such information with respect to such defense, compromise or settlement as the
indemnified party shall request, and shall not assume any position or take any
action that would impose an obligation of any kind on, or restrict the actions
of, the indemnified party. The indemnified party shall retain the
right to employ its own counsel and to participate in the defense of any Third
Party Claim, the defense of which has been assumed by the indemnifying party
pursuant hereto, but the indemnified party shall bear and shall be solely
responsible for its own costs and expenses in connection with such
participation, unless (1) the indemnified party has been advised by counsel that
representation of the indemnified party and the indemnifying party by the same
counsel presents a conflict of interest under applicable standards of
professional conduct, (2) the indemnified party has been advised by counsel that
there may be legal defenses available to it which are different from or in
addition to the defenses available to the indemnifying party and in the
reasonable judgment of such counsel it is advisable for the indemnified party to
employ separate counsel or (3) the indemnifying party shall have failed to
prosecute such defense actively, diligently and in good faith.
(c)
Failure
to Defend
. In the event that the indemnifying party does not
undertake the good faith defense, compromise or settlement of a Third Party
Claim in accordance with
Section
6.4(b)
,
the indemnified party shall have the right to control the defense or settlement
of such Third Party Claim with counsel of its choosing;
provided
,
however
, that the
indemnified party shall not settle or compromise any Third Party Claim without
the indemnifying party’s prior written consent, which shall not be unreasonably
withheld. The indemnifying party shall be entitled (at the
indemnifying party’s expense) to participate in the defense of any Third Party
Claim with its own counsel.
(d)
Non Third
Party Claims
. Any indemnifiable claim hereunder that is not a
Third Party Claim shall be asserted by the indemnified party by promptly
delivering notice thereof to the indemnifying party. If the
indemnifying party does not respond to such notice within sixty (60) days after
its receipt, it shall have no further rights to contest the validity of such
claim.
6.5.
Limitations
on Indemnification
. Notwithstanding anything to the contrary
in this
Section
6
:
(a) Any
Damages for which indemnification is provided to an indemnified party under this
Agreement shall be reduced to give effect to any insurance proceeds, indemnity,
contribution or other payments or recoveries of a like nature received by such
indemnified party
in
connection with such Damages, net of any reasonable costs of collection with
respect to such amounts (e.g. attorneys’ fees) and the costs associated with the
net present value of any increase in the premiums with respect to such insurance
if directly caused by such recovery of insurance proceeds.
(b) In
determining the amount of indemnification due under this
Section
6
,
all payments shall be net of any net tax credit, deduction, reduction or other
comparable benefit actually realized by the Company or the indemnified party in
connection with or related to Damages or the circumstances giving rise to
Damages.
(c) An
indemnified party shall not be entitled to multiple recoveries for the same
Damages which are the subject of indemnification under this Agreement and under
any other Transaction Document.
(d) For
the avoidance of doubt, with respect to any Damages hereunder or under any of
the other Transaction Documents, Section 14.08 of the Operating Agreement is
incorporated herein by reference,
mutatis
mutandis
.
6.6.
Exclusive
Remedy
.
The parties
hereto acknowledge and agree that the sole and exclusive remedy of the
indemnified parties and the Company in respect of any and all claims relating
to, in connection with, or arising out of this Agreement, the other Transaction
Documents and the transactions contemplated hereby and thereby, including,
without limitation, any claims for Damages under this
Section
6
,
shall be satisfied solely through (i) the indemnification provisions set forth
in this
Section
6
and the corresponding indemnification provisions set forth in the other
Transaction Documents, as applicable, and (ii) the Inducement
Agreement.
6.7.
Offset
.
(a) In
the event that the Buyer (or any other Buyer Indemnified Party) asserts an
indemnification claim for Damages pursuant to this
Section
6
,
then, prior to the Buyer (or any such Buyer Indemnified Party) exercising any of
its other rights and remedies with respect to such Damages (whether under this
Agreement or any of the other Transaction Documents), the Buyer shall seek to
recover an amount equal to such Damages (the “
Offset
Amount
”): (i) first, from any unpaid Annual Payment, Earn-Out
Consideration payments earned (whether in each case, then payable or payable in
the future) or Additional Payment payable in the future until all of such
payments have been offset in full; and (ii) second, from any distributions to
the MG Member under the Operating Agreement which are reasonably expected by
both Managers to be due and payable within the then current fiscal quarter or
the next succeeding fiscal quarter of the Company, an amount equal to such
Damages. In connection with the exercise of any offset right, Buyer
shall deliver to Seller a notice of Buyer’s intent to offset (an “
Offset
Notice
”). Each Offset Notice shall (x) allege the
circumstances under which indemnification under
Section
6
of the Buyer or other Buyer Indemnified Party is appropriate and (y) state the
Offset Amount. The exercise of the right of offset by the Buyer in
good faith, in connection with a good faith claim for indemnification
(regardless of the outcome of such claim) shall not constitute a breach of this
Agreement or any other Transaction Document. Such right
of offset
shall be exercisable by the Buyer without regard to any assignment, transfer or
disposition of any membership interests in the Company by the Seller (or any
Permitted Transferee).
(b) Upon
Seller’s receipt of the Offset Notice, (i) if the Seller and Buyer have agreed
in writing to the Buyer’s or other Buyer Indemnified Party’s entitlement to the
Offset Amount or the Buyer’s or other Buyer Indemnified Party’s entitlement to
the Offset Amount has otherwise been determined in accordance herewith, such
amounts shall be applied to the payment to the respective Buyer Indemnified
Party of any such indemnification obligation, and/or (ii) if the Seller and the
Buyer have not agreed in writing to the Buyer Indemnified Party’s entitlement to
the Offset Amount or the Buyer Indemnified Party’s entitlement to the Offset
Amount has not otherwise been determined in accordance with this Agreement, the
Offset Amount shall be paid to an escrow agent reasonably acceptable to both the
Seller and the Buyer, with such amounts to be held by such escrow
agent. If Seller and Buyer do not agree on an escrow agent within
five Business Days, Buyer shall be entitled to deposit such amount in escrow
with a bank, trust company or savings and loan association which is organized
under the laws of the United States or any state thereof having combined capital
and surplus aggregating in excess of $50 million. Any escrow
agreement shall provide for the disposition of funds in a manner consistent with
the terms of this Agreement, so that upon resolution of the indemnification
claim, the escrowed funds shall be disbursed to the appropriate
party.
7.
Certain
Covenants
.
7.1.
Cooperation/Further
Assurances
. From and after the date hereof, each of the
parties hereto hereby agrees: (a) to fully cooperate with the other parties
hereto in preparing and filing any notices, applications, reports and other
instruments and documents and (b) to execute, acknowledge, deliver, file and/or
record, or cause such other parties to the extent permitted by law to execute,
acknowledge, deliver, file and/or record such other documents, which may be
required by this Agreement, or which are necessary in the reasonable opinion of
any of the parties hereto or their respective legal counsel, to consummate the
transactions contemplated by this Agreement.
8.
General
Provisions
.
8.1.
Fees and
Expenses
. Except as set forth in this Agreement, each of the
parties hereto shall bear its own expenses in connection with the transactions
contemplated hereby. Notwithstanding anything to the contrary
contained herein, the Company shall not bear any transaction costs, including
attorneys’ fees, relating to the negotiation and execution of the Transaction
Documents other than filing fees, registration fees, and other similar
out-of-pocket costs relating to limited liability company and intellectual
property matters.
8.2.
Confidentiality
.
Each of the
Seller and the Buyer shall maintain the terms and conditions of this Agreement
in confidence and except in accordance with the immediately succeeding sentence,
shall not disclose any such information to a third party, other than (i) to its
officers, directors, employees, advisors, attorneys or accountants who need to
know and who agree to keep such information confidential, (ii) any rating
agency, (iii) to its actual or proposed lenders or other financing sources
having been made aware of the restrictions set forth in this
Section
8.2
and who agree to keep such information confidential, (iv) to the extent
disclosure
is required by law, statute, rule, regulation or judicial process (including,
but not limited to, applicable securities laws) or (v) upon the lawful demand of
any court or agency or regulator having jurisdiction over such Person
(including, but not limited to, any securities regulatory authority, including
rating agencies and national securities exchanges, to which the disclosing
Member is subject) or make any unauthorized use thereof. If any party
breaches, or threatens to commit a breach of, any of the provisions of this
Section
8.2
,
the other party shall have all rights and remedies available to such Persons at
law or in equity under this Agreement or otherwise, including, without
limitation, the right and remedy of injunctive relief (without the necessity of
posting any bond or security) and to have each and every one of the restrictive
covenants in this
Section
8.2
specifically enforced by any court of competent jurisdiction, it being agreed
that any breach or threatened breach of these restrictive covenants would cause
irreparable injury and that money damages would not provide an adequate
remedy. Notwithstanding the foregoing, Buyer may disclose this
Agreement in its reports, registration statements and other documents required
to be filed with the Securities and Exchange Commission and may file this
Agreement as an exhibit to such applicable regulatory agencies or any national
securities exchange in connection therewith.
8.3.
Publicity
. The
parties shall consult with each other before issuing any press release with
respect to this Agreement or the transactions contemplated hereby and shall not
issue any such press release or make any such public statement without the prior
consent of the other parties, which shall not be unreasonably withheld,
conditioned or delayed;
provided,
however
, that any party may, without the prior consent of the other
parties (but after prior consultation, to the extent practicable in the
circumstances) issue such press release or make such public statement as may
upon the advice of outside counsel be required by law or the rules and
regulations of the NASDAQ or the rules of any other applicable exchange, or
applicable law.
8.4.
Legal
Fees in Event of Dispute
. In the event of any dispute between
the parties to enforce or interpret any provision or right hereunder, the
unsuccessful party to such dispute covenants and agrees to pay to the successful
party all costs and expenses reasonably incurred, including, without limitation,
reasonable attorneys’ fees and disbursements, it being understood and agreed
that the determination of the “successful party” shall be included in the
matters which are the subject of such dispute.
8.5.
Notices
. All
notices and other communications (collectively, “
Communications
”)
given or made pursuant hereto shall be in writing and shall be deemed to have
been duly given or made as of the date of receipt or failure to accept receipt
if delivered personally, by overnight courier or mailed by registered or
certified mail (postage prepaid, return receipt requested) or by facsimile
transmittal, confirmed by certified or registered mail, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
|
If
to the Buyer:
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Iconix
Brand Group, Inc.
1450
Broadway, 4
th
Floor
New
York, New York 10018
Attn:
Neil Cole, CEO
Fax:
(212) 391-0127
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with
copies to:
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Blank
Rome LLP
405
Lexington Avenue
New
York, New York 10174
Attn:
Robert J. Mittman, Esq.
Fax:
(212) 885-5001
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If
to the Seller:
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Purim
LLC
c/o
Nigro Karlin Segal & Feldstein, LLP
810
Seventh Ave, Suite 1701
New
York, NY 10019
Attn: Richard
Feldstein
Fax: (212)
765-3299
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with
copies to:
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Grubman
Indursky & Shire, PC
152
West 57th Street
New
York, New York 10019
Attn: David
R. Toraya, Esq. and
Michael
K. Goldsmith, Esq.
Facsimile: (212)
554-0444
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All
Communications required or permitted hereunder shall be deemed effectively
given: (a) upon personal delivery to the party to be notified, (b) when sent by
confirmed facsimile if sent during normal business hours of the recipient, or if
not during such hours, then on the next Business Day, (c) five (5) Business Days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) three (3) Business Days after deposit with
FedEx or other overnight courier, specifying delivery by such date, with written
verification of receipt. The designation of the Person to receive
such Communications on behalf of a party or the address of any such Person for
the purposes of such Communications may be changed from time to time by written
notice given to the other party pursuant hereto.
8.6.
Knowledge
. For
purposes of this Agreement, “
knowledge
”
and any other words or phrases bearing on the knowledge or awareness as to any
specified matters of: (a) the Buyer, shall mean the actual knowledge of any of
Neil Cole, Andrew Tarshis, and Warren Clamen as to the existence or absence of
facts or circumstances that are the subject of such representations and
warranties without any additional inquiry required or presumed, whether
individually or collectively, and (b) the Seller, shall mean the actual
knowledge of any of M or G/O as to the existence or absence of facts or
circumstances that are the subject of such representations and warranties
without any additional inquiry required or presumed, whether individually or
collectively;
provided
,
that
, with respect to
any existing agreements to which any MG Party or Iconix Party, as the case may
be, is a party, “actual knowledge” shall mean the actual knowledge of the
applicable Persons listed above, after reasonable inquiry.
8.7.
Dollar
Amounts
. All dollar amounts in this Agreement are stated, and
shall be interpreted to be, in United States dollars.
8.8.
Amendment
. This
Agreement may not be amended except by an instrument in writing signed by each
of the parties hereto.
8.9.
Severability
. If
any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced by any rule of law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the greatest extent possible.
8.10.
Entire
Agreement
. This Agreement (together with the Exhibits and
Schedules annexed hereto and incorporated herewith) and the Transaction
Documents constitute the entire agreement, and supersede all prior agreements
and undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and thereof.
8.11.
No
Assignment
. This Agreement and each and every provision hereof
shall be binding and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement
(including any right to receive, or obligation to make, any Annual
Payments, Earn-Out Consideration and Additional Payments) shall not be assigned
by any party hereto, and any such assignment shall be null and void, unless the
non-assigning party consents to such assignment in writing, except that (i) the
Buyer may assign its rights, interests and obligations hereunder to a Controlled
Affiliate or other Permitted Transferee thereof without prior written consent
(A) so long as such Controlled Affiliate or other Permitted Transferee agrees in
writing with the Seller that it is bound by the obligations of the Buyer
hereunder and (B) provided that no such assignment shall discharge Buyer from
its liabilities and obligations under
Section 3
hereunder, as to which Buyer shall remain primarily liable, and (ii) the Seller
may assign its rights, interests and obligations hereunder to a Controlled
Affiliate or other Permitted Transferee thereof without prior written consent so
long as such long as such Controlled Affiliate or Permitted Transferee agrees in
writing with the Buyer that it is bound by the obligations of the Seller
hereunder.
8.12.
Headings
. Headings
in this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other
purpose.
8.13.
Schedules
. All
references in this Agreement to Schedules shall mean the schedules identified in
this Agreement, which are incorporated into this Agreement and shall be deemed a
part of the representations and warranties to which they relate. For
purposes of this Agreement, information which is necessary to make a given
Schedule complete and accurate, but is omitted therefrom, shall nevertheless be
deemed to be contained therein if it is contained on any other Schedule attached
hereto; but only if such information appears on such other Schedule in such form
and detail that it is responsive to the requirements of such given
Schedule.
8.14.
Governing
Law
. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York applicable to agreements made
and performed wholly therein, without regard to its choice of law
principles. Each party hereby irrevocably and unconditionally
consents to submit to the jurisdiction of the courts of the State of New York
and of the United States located in the County of New York, State of New York
for any litigation arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any litigation
relating thereto except in such courts), waives any objection to the laying of
venue of any such litigation in such courts and agrees not to plead or claim
that such litigation brought in any such courts has been brought in an
inconvenient forum. Each party hereby waives any right it may have to
a trial by jury with respect to any action or proceeding arising out of or
relating to this Agreement.
8.15.
Gender
and Number
. Where appropriate, the masculine gender shall be
deemed to include the feminine, the feminine gender shall be deemed to include
the masculine, the singular number shall be deemed to include the plural, and
the plural number shall be deemed to include the singular.
8.16.
Counterparts
. This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original, but all of which taken together shall constitute one
and the same agreement. Telefacsimile transmissions of any executed
original document and/or retransmission of any executed telefacsimile
transmission shall be deemed to be the same as the delivery of an executed
original. At the request of any party hereto, the other parties
hereto shall confirm telefacsimile transmissions by executing duplicate original
documents and delivering the same to the requesting party or
parties.
8.17.
Waivers
and Amendment
. All rights and remedies hereunder and under the
other Transaction Documents are cumulative and not alternative. No
failure or delay on the part of the Buyer or the Seller in the exercise of any
power, right or privilege hereunder or thereunder shall impair such power, right
or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. Each amendment, modification or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given.
-Signature
Page Follows-
IN WITNESS WHEREOF
, the
parties have caused this Agreement to be executed as of the date first written
above.
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BUYER:
ICONIX
BRAND GROUP, INC.
|
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By:
|
/s/ Neil Cole
|
|
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|
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Name:
Neil Cole
|
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Title:
President and Chief Executive Officer
|
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|
SELLER:
PURIM
LLC
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By:
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/s/ Madonna
Ciccone
|
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Name:
Madonna Ciccone
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Title:
Managing Member
|
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[
Signature Page To Membership
Interest Purchase Agreement
]
Schedule
4.8
Liabilities and Business
Operations
Liabilities
The
Company has incurred liabilities in the ordinary course of business in
connection with its formation, and certain registrations of intellectual
property. At or about the time of the execution and delivery of this
Agreement, the Company will be entering into the Transaction Documents to which
it is a party and the Macy’s Agreement.
Business
Operations
The
Company has engaged in negotiations relating to the Transaction Documents and,
in connection therewith, is entering into the License Agreement and the Macy’s
Agreement.