ASSIGNMENT AND ASSUMPTION AGREEMENTAssignment and Assumption Agreement |
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Exhibit 10.6
ASSIGNMENT AND
ASSUMPTION AGREEMENT
This
Assignment and Assumption Agreement (this “ Agreement
”), dated as of the 21 st
day of March, 2008, by and among Zoots Corporation, a Delaware
corporation (“ Zoots
”), Zoots Holding Corporation, a Delaware corporation
(“ Holding
”), Delivery LLC, a Delaware limited liability company
(“ Delivery
” and together with Zoots and Holding, the “
Companies
,” each of which may be referred to from time to time
herein individually as a “ Company
”), USDC Portsmouth, Inc., a California corporation
(“ Purchaser
”) and U.S. Dry Cleaning Corporation, a Delaware
corporation (“ Parent
”).
W I T N E
S S E T H:
WHEREAS , NewStar Financial, Inc. (“ Seller
”), as administrative agent and successor lender under the
Credit Agreement (as hereinafter defined) has a valid and duly
perfected security interest in and lien on substantially all of the
assets of the Companies, to secure all liabilities, obligations and
indebtedness owing to Seller under that certain Credit and Security
Agreement, dated as of April 1, 2005, among Zoots as borrower,
Holding, Delivery and Widmer’s, LLC as guarantors, and Seller
(as successor lender thereunder) (as amended from time to time, the
“ Credit
Agreement ”), and the other agreements, documents and
instruments entered into in connection therewith (collectively, the
“ Credit
Documents ”);
WHEREAS , simultaneously with the execution and delivery of
this Agreement, Seller and Purchaser are entering into a Secured
Party Sale Agreement, dated of even date herewith (the “
Sale
Agreement ”), providing for the purchase by Purchaser
of certain assets of the Companies pursuant to a private sale in
accordance with Section 9-610 of the UCC (the “ Secured Party
Sale ”);
WHEREAS , the Companies have consented to the Secured Party
Sale;
WHEREAS , Seller and Purchaser desire that the transactions
contemplated by the Sale Agreement be consummated as promptly as
possible, and, in such regard, have requested the cooperation and
assistance of the Companies in order to consummate those such
transactions; and
WHEREAS , in partial consideration for Purchaser agreeing to
execute and deliver the Sale Agreement, and to consummate the
transactions contemplated therein, and for other good and valuable
consideration, as set forth herein, the Companies desire to execute
and deliver this Agreement;
NOW , THEREFORE , in
consideration of the foregoing and the mutual covenants set forth
in this Agreement, and to induce Purchaser and Seller to execute
and deliver the Sale Agreement, and to consummate the transactions
contemplated therein, the parties hereto hereby agree as
follows:
1. DEFINITIONS.
Capitalized
terms used but not otherwise defined in this Agreement are
used with the meanings given those terms in the Sale
Agreement. In addition, as used in this Agreement
(including in the preamble and recitals above), the following
terms have the following definitions:
“
Action
” means any suit, order, litigation, arbitration,
mediation, action or other proceeding before any Governmental
Authority, arbitrator or mediator.
“
Affiliate
” means, with respect to any specified Person, any other
Person directly or indirectly controlling, controlled by or
under common control with such specified Person.
“
Business
” means the retail dry cleaning and laundry business
engaged in by the Companies using the “Portsmouth
Network” (and related assets) and the locations covered
by the leases listed on Schedule
4(a) hereto during the one (1) year period immediately
prior to the date hereof.
“ Business Day
”
means any day (other than a Saturday or Sunday) on which banks are
not required or authorized to close in The City of New York, New
York.
“
Code
” means the Internal Revenue Code of 1986, as amended,
and any rules or regulations promulgated
thereunder
“
Company Material
Adverse Effect ” shall mean a material adverse
effect on the assets, properties, financial condition and/or
prospects of the Business, taken as a whole, other than as
disclosed on Schedule
1 hereto; provided
, however ,
that in no event shall any of the following be or be taken
into account in the determination of whether a Company
Material Adverse Effect has occurred: (i) any change resulting
from conditions affecting the retail dry cleaning and laundry
industries or from changes in general business, financial,
political, capital market or economic conditions (including
any resulting from any hostilities, war or military or
terrorist attack anywhere in the world); (ii) any change
resulting from the announcement or pendency of the
transactions contemplated by this Agreement or attributable to
the fact that Purchaser and its Affiliates are the prospective
owners of the Companies’ assets; (iii) any change
resulting from the compliance by any Company with the terms
of, or the taking of any action by any Company contemplated or
permitted by, this Agreement; or (iv) any condition described
in any Schedule to this Agreement; (v) any change in
applicable law.
“
Company
Transaction Documents ” means, collectively, this
Agreement and the agreements, instruments and documents
contemplated herein contemplated therein, or otherwise
incidental hereto, to be executed by any Company.
“
Consent
” means any consent, approval, authorization,
qualification, waiver or notification of or to a Governmental
Authority or any other person or entity.
“
Contract
” means any written or oral contract, agreement,
license, commitment, undertaking or arrangement, whether
express or implied, and includes purchase and sale
orders.
2
“
Conveyed
Assets ” means, collectively, the Assigned
Contracts the Purchased Assets (as defined in and to be
acquired pursuant to the Sale Agreement) and the Company
Purchased Assets (as defined below in
Section 4(c).
“
ERISA
” shall mean the Employee Retirement Income Security Act
of 1974, as amended.
“
ERISA
Affiliate ” shall mean any entity which is a
member of (1) a controlled group of corporations (as defined
in Section 414(b) of the Code), (2) a group of trades or
businesses under common control (as defined in Section 414(c)
of the Code), or (3) an affiliated service group (as defined
under Section 414(m) of the Code or the regulations under
Section 414(o) of the Code), any of which includes or within
the six years preceding the date of this
Agreement.
“
Governmental
Authority ” means any government or any agency,
bureau, commission, court, department, official, political
subdivision, tribunal or other instrumentality of any
government, whether federal, state or local, domestic or
foreign.
“
Law
” means any law (including, without limitation,
principles of common law), statute, code, regulation, treaty,
permit, license, certificate, judgment, order, writ, decree,
award or other decision or requirement of any arbitrator or
Governmental Authority.
“
License
Agreement ” means a license agreement by and
between one or more of the Companies and the Purchaser, in
form and substance satisfactory to the Companies and the
Purchaser, pursuant to which the Companies will grant to the
Purchaser those rights described in Section 9(f)
hereof.
“
Lien
” means any security interest, mortgage, lien, pledge,
adverse claim, interest, charge, option, pledge, right of
first option, right of first refusal, obligation or other
restriction or encumbrance of any kind on title or transfer of
any nature whatsoever.
“
Permit
” means any Consent, license, registration, permit,
franchise or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental
Authority or pursuant to any Law.
“
Person
” means an individual, a corporation, a partnership, a
limited liability company, a trust, an unincorporated
association, a governmental entity or any agency,
instrumentality or political subdivision of a governmental
entity, or any other entity or body.
“
Required
Consents ” means, collectively, written consents
from the counterparties to the contracts listed on Schedule
4(b) , in form and substance reasonably satisfactory to
Purchaser.
“
Tax
Returns ” means returns, declarations, reports,
claims for refund, information returns or other documents
(including any related or supporting schedules, statements or
information) filed or required to be filed in connection with
the determination, assessment or collection of any Taxes of
any party or the administration of any laws, regulations or
administrative requirements relating to any
Taxes.
3
“
Taxes
” shall mean any and all taxes, fees, levies, duties,
tariffs, imposts and other similar charges of any kind imposed
by any governmental authority, including, without limitation:
taxes or other charges on or with respect to income, property,
sales, use, payroll, employment, social security,
workers’ compensation, unemployment compensation or net
worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value-added or gains
taxes; license, registration and documentation fees; and
customs’ duties, tariffs and similar
charges.
“
Transaction
Documents ” means, collectively, the Sale
Agreement, the agreements, instruments and documents
contemplated therein or otherwise incidental thereto, and the
Company Transaction Documents.
“
Transactions
” means, collectively, the transactions contemplated in
the Transaction Documents.
“
Virginia
Property Taxes ” has the meaning set forth in
Section 2(m).
“
Virginia
Property Tax Liability ” has the meaning set
forth in Section 2(m).
2. REPRESENTATIONS AND WARRANTIES OF
THE COMPANIES.
The
Companies hereby represent and warrant, jointly and severally,
as of the date hereof and as of the Closing Date, to Purchaser
as follows:
(a)
The
Obligations . Pursuant to the Credit
Agreement, and certain other documents, instruments and
agreements executed pursuant thereto or in connection
therewith, Seller has made loans to, and made other financial
accommodations to or for the benefit of, the
Companies. The repayment of the liabilities,
obligations and indebtedness owing to Seller are secured by
valid, enforceable and fully perfected Liens in favor of
Seller against substantially all of the Companies’
assets, including, without limitation, all of the Purchased
Assets (the “ Seller
Liens ”).
(b)
Defaults; Right
to Assign . As a result of continuing
defaults by the Companies in the performance of their
obligations and in repayment and performance of the other
liabilities under the Credit Agreement, Seller has the right
under Section 9-610 of the UCC, and under the Credit
Documents, to sell and transfer to any person or entity for
value in a private sale all of the Companies’ rights in
and to any or all of the personal property and other assets
subject to the Seller Liens.
(c)
Organization;
Authorization . Each of the Companies is a
corporation or limited liability company, as the case may be,
duly organized or formed, as the case may be, validly existing
and in good standing under the laws of the State of Delaware,
and has the requisite corporate or limited liability company
power and authority, as the case may be, to execute and
deliver this Agreement and each other Company Transaction
Document to which it is a party and to perform its obligations
hereunder and thereunder. The execution, delivery
and performance of this Agreement and each other Company
Transaction Document have been duly authorized by all
necessary corporate or limited liability company action, as
the case may be, on the part of each relevant
Company. This Agreement is, and each of the other
Company Transaction Document shall be when executed and
delivered by each relevant Company, the valid and binding
obligations of such Company enforceable in accordance with its
terms.
4
(d)
No
Conflict . Neither the execution and
delivery of this Agreement and the other Company Transaction
Documents, nor the consummation of any or all of the
Transactions, will violate the certificate or articles of
incorporation, by-laws, certificate of formation, operating
agreement or other governing documents of any of the
Companies; (i) violate, be in conflict with, or constitute a
default under, or other than the Key Landlord Consents or as
set forth on Schedule
4(b ), require the consent of any third party to, any
material contract or other agreement to which any of the
Companies is a party; (ii) violate any Law applicable to any
of the Companies; or (iii) result in the creation or
imposition of any further Lien on any assets of any
Company.
(e)
Brokers;
Agents . The Companies have retained the
services of Drycleaning Plus, National Commercial Brokers,
and/or Matrix Capital Markets Group, Inc. (collectively, the
“ Brokers
”). Fees or commissions owed to the Brokers,
if any, will be paid by the Companies. The
Companies have not dealt with any agent, finder, broker or
other representative in any manner which could result in
Purchaser being liable for any fee or commission in the nature
of a finder’s fee or originator’s fee in
connection with the subject matter of this
Agreement.
(f)
Sufficiency of
Assets; Title; Condition . Except as set forth on
Schedule
2(f) , the Purchased Assets constitute all of the
assets, tangible and intangible, of any nature whatsoever,
necessary to operate the Business in the manner currently and
historically operated by the Companies. The Companies’
liabilities to Seller under the Credit Agreement are secured
by valid and perfected Liens in favor of Seller against all of
the Purchased Assets. Except as set forth on
Schedule
2(f ), to the knowledge of the Companies, each item of
tangible personal property included in the Purchased Assets
and reasonably required for the continued operation of the
Business on a basis consistent with the past practices of the
Business immediately prior to the Closing is in good operating
condition or repair adequate for its present use, reasonable
wear and tear and routine or scheduled maintenance
excepted. Upon transfer of the Company Purchased
Assets, if any, to Purchaser as contemplated herein, Purchaser
will acquire good and marketable title thereto, free and clear
of the Liens.
(g)
Assumed
Contracts . To the knowledge of the
Companies, each Assumed Contract is in full force and effect
and is valid, binding and enforceable against the parties
thereto in accordance with its terms. Each Company has
performed in all material respects all obligations required to
be performed by it under each Assumed Contract to which it is
a party, and to the knowledge of each Company, no condition
exists or event has occurred that, with or without notice or
lapse of time, would constitute a default or a basis for delay
or non-performance by any Company or by any other party
thereto.
(h)
Financial Data
Files; Other Records . To the knowledge of
the Companies, the Companies have provided to Purchaser full
and complete copies of all (x) historical data files and other
document relating to the financial information of the Business
and/or the point-of sale system and data files and (y) records
and other documents relating to all motor vehicles forming
part of the Purchased Assets (including, without limitation,
maintenance records).
5
(i)
Accounts
Receivable . Schedule
2(i) sets forth a true and complete list of all
accounts receivable of each Company arising from the Business
and the aging thereof as of two (2) Business Days prior to the
date hereof. Two (2) Business Days prior to the
Closing Date the Companies shall provide an updated
Schedule
2(i) to Purchaser, which shall set forth a true and
complete list of all accounts receivable of each Company
arising from the Business and the aging thereof as of such
delivery date. All such accounts receivable of the
Companies (i) represent sales actually made in the ordinary
course of the Business, (ii) do not represent obligations for
goods sold on consignment and (iii) are not the subject of any
claims brought by or on behalf of any Company or any other
party, or to knowledge of any Company, are not disputed in any
material respect.
(j)
Litigation
. Except as set forth on Schedule
2(j) , there is no Action pending or threatened seeking
to enjoin, restrain or prohibit any of the Transactions or
that relates to (x) any Conveyed Asset or (y) to the knowledge
of the Companies, the retaining or employment of any
consultant or employee in connection with the
Business. Except as set forth on Schedule
2(j) , there is no
Action pending or threatened that might call into question the
validity of any Transaction Document, or any action taken or
to be taken pursuant hereto or thereto.
(k)
Environmental
Matters . Except for any matter that would
not reasonably be expected to have a Company Material Adverse
Effect, to the knowledge of the Companies, the ownership and
use by the Companies of the Conveyed Assets and the conduct of
the Business are in compliance with all applicable Legal
Requirements relating to pollution, environmental protection,
hazardous substances and related matters. As used
herein, “ Legal
Requirements ” means all foreign, federal, state
and local statutes, laws, ordinances, judgments, decrees,
orders, rules, regulations, policies and guidelines applicable
to the Companies’ businesses. To the
knowledge of the Companies, the Companies have not received
any notice from any Governmental Authority or any other Person
of any alleged violation or noncompliance. For
purposes of this Section, “ hazardous
substance ” shall mean oil or any other substance
which is included within the definition of a “hazardous
substance,” “pollutant,” “toxic
substance,” “toxic waste,” “hazardous
waste,” “contaminant” or other words of
similar import in any federal, state or local environmental
law, statute, ordinance, rule or regulation applicable to the
Companies’ businesses.
(l)
Permits
. To the knowledge of the Companies, Schedule
2(l) lists all Permits possessed by each Company
relating to the Conveyed Assets and/or the Business. To the
knowledge of the Companies, each Company currently has, and at
all times since January 1, 2006 had, all Permits necessary or
required under applicable Law for the conduct of the Business
except where the failure to have such Permits did not and
would not have a Company Material Adverse
Effect. Except as set forth in Schedule
2(l) , to the knowledge of the Companies, all such
Permits are in full force and effect, are transferable to
Purchaser by virtue of the transactions contemplated by this
Agreement and the Sale Agreement, and, to the knowledge of
each Company, no suspension or cancellation of any of them is
being threatened.
6
(m)
Tax
Matters . Other than as set forth on
Schedule 2(m), the Companies have properly prepared and timely
filed, or will file on a timely basis, all Tax Returns
required to be filed by or on behalf of or with respect
to the Companies for any period and such Tax Returns are
true, correct and complete in all material
respects. Other than the property taxes owed by the
Companies with respect to the Processing Plant (the “
Virginia
Property Taxes ”) or as otherwise set forth on
Schedule 2(m), all Taxes due and owing by any Company
(whether or not shown or required to be shown on any Tax
Return) have been paid. The aggregate amount of the
Companies’ liabilities with respect to the Virginia
Property Taxes (including, without limitation, all fees and
penalties relating thereto, if any), do not exceed $62,575.90
(such amount, the “ Virginia
Property Tax Liability ”). To the
knowledge of the Companies, none of the Purchased Assets is
subject to any Lien in favor of the United States pursuant to
Section 6321 of the Code for nonpayment of taxes, or any lien
in favor of any state or locality pursuant to any comparable
provision of state or local Law, under which transferee
liability might be imposed upon Purchaser as a buyer of such
Purchased Assets pursuant to Section 6323 of the Code or any
comparable provision of state or local Law.
(n)
Intellectual
Property . The Companies own or hold valid
licenses to use such Intellectual Property, without any
infringement or misappropriation of the rights of other
Persons. As used herein “ Intellectual
Property ” means (a) the trademarks
“Zoots” and “The Cleaner Cleaner,” (b)
the domain name zoots.com , and
(c) the 1-800 telephone number used in connection with the
Business.
(o)
Employees
. Schedule
2(o) lists: (i) the names and titles of all current
employees of each Company employed in connection with the
Business (the “ Relevant
Employees ”), whether such employees are full or
part time employees or temporary employees with each of their
hourly rates or target salaries (including amounts subject to
performance criteria) and the current annual salary payable to
each such Relevant Employee as of the date hereof, and (ii)
the aggregate amount of such remuneration for each such
Relevant Employee for the calendar year
2007. Except as set forth on Schedule
2(o) , (A) no Company has agreed (whether orally or in
writing) to any increase in the compensation or benefits
payable to, or otherwise materially modified the terms of
employment of, any Relevant Employee from those in effect as
of September 30, 2007, (y) all Relevant Employees are
“at will” under oral agreement and (B) there are
no employment agreements, arrangements or understandings with
respect to such Relevant Employees, other than customary 3%
annual raises granted to employees on the anniversary of their
start date. No Company is bound by any union or collective
bargaining agreement or other agreement, written or oral, with
any trade or labor union, employees’ association or
similar organization relating to any Relevant Employee, nor is
any Company subject to any pending or, to the knowledge of any
Company, threatened labor dispute or organization activity
relating to any Relevant Employee. Except as set forth on
Schedule
2(o) , there are no pending claims or actions that have
been asserted or instituted with respect to workers
compensation or asserting employment discrimination,
disability, wage and hour, wrongful discharge, harassment,
breach of contract, defamation, invasion of privacy,
unemployment compensation, employee safety or other similar
claims relating to any Relevant Employee under which any
Company may have liability, contingent or otherwise. There are
no present or, to any Company’s
knowledge, threatened actions, work stoppages or
other labor difficulties relating to any Relevant Employee.
Except as set forth on Schedule
2(o) , no unfair labor practice, wrongful termination,
or race, sex, age, disability or other discrimination,
complaint or other Action is pending with respect to any
Relevant Employee, nor, to any Company’s knowledge, is
any such complaint or other Action threatened, against any
Company before the National Labor Relations Board, Equal
Employment Opportunity Commission or any other Governmental
Authority, and no grievance is pending, nor, to any
Company’s knowledge, is any grievance threatened against
any Company. The Companies have provided to
Purchaser full and complete copies of all contracts, reports
and other documentation in possession of any Company relating
to each Relevant Employee.
7
(p)
Employee Benefit
Plans . Schedule
2(p) lists each of the Companies’ employee
pension, profit sharing, deferred compensation, severance,
cafeteria, stock option, stock purchase, incentive, golden
parachute, bonus, group or individual medical and health
benefits, welfare, insurance or other employee benefit plan,
program or arrangement (collectively, the “ Company
Plans ”), which is maintained or contributed to
by any Company on behalf of any Relevant Employee. Complete
and correct copies of all such Company Plans have been made
available to Purchaser. There is no Company Plan,
nor has any Company at any time maintained, administered,
contributed or been required to contribute to any
“employee pension benefit plan” as defined in
Section 3(2) of ERISA, which is subject to the minimum funding
requirements of Section 412 of the Code or Section 302 of
ERISA, or the provisions of Title IV of ERISA. None
of the Company Plans is a “multiemployer pension
plan” within the meaning of Section 3(37) of ERISA. Each
Company Plan and any related trust agreement that is intended
to be qualified under the provisions of Section 401(a) of the
Code has received a favorable determination from the IRS to
that effect, and, to the knowledge of each Company, no
circumstance exists that will or could reasonably be expected
to result in revocation of any such favorable determination
letter. Each Company Plan and any related trust agreement
complies in all material respects and has been maintained in
material compliance with its terms and, both as to form and in
operation, with the requirements prescribed by any and all
Laws that are applicable to such plans, including but not
limited to ERISA and the Code. No Company has any
obligation to make any payment to or with respect to any
current or former employee pursuant to any severance agreement
or retiree medical benefit or other Company Plan, or would
have any obligation to make any severance or other payments to
any employee if such employee was terminated prior to, at or
after the Closing. No benefit, payment or other
entitlement under any Company Plan, or under any agreement
relating to the employment of the Relevant Employees, will be
established or become accelerated, vested, payable or funded
by reason of the execution and delivery of this Agreement or
the consummation of the Transactions, and there are no claims
pending, or to the knowledge of any Company, threatened
with respect to any Company Plan, other than
claims for the payment of benefits in the ordinary course of
operation of such Company Plan.
(q)
Purchased
Assets . The Companies have good, valid and
marketable title to the following assets (collectively, the
“ Purchased
Assets ”):
(i)
all of the tangible assets and all of the Companies’
rights in and to the vehicle and personal property leases
listed on Schedule
2(q)(i) hereto;
(ii)
all customer and prospective customer lists used in connection
with the operation of the Business;
(iii) all
customer goodwill generated in the operation of the
Business;
8
(iv) all
inventories of the Companies in connection with the Business,
including, without limitation, all purchased parts, materials
and supplies, as set forth on Schedule
2(q)(iv) hereto;
(v)
all accounts receivable of the Companies in connection with
the Business, including, without limitation, all accounts
receivable set forth on Schedule
2(i) hereto;
(vi) all
personal property, machinery, furniture, fixtures, leasehold
improvements, and equipment situated at the Companies’
retail dry cleaning and laundry stores and processing
facilities, and used in connection with the operation of the
Business;
(vii) all
real property leases and other contracts listed on Schedule
4(a);
(viii) all
prepaid items or accounts of the Companies relating solely to
the Business and described on Schedule
2(q)(vii) hereto;
(ix) all
of the deposits may by any Company under any lease or other
contract relating to the Business listed on Schedule
2(q)(x) hereto;
(x) all
computer equipment located at any of the premises located at
the locations covered by the leases listed on Schedule
4(a);
(xi) all
rights in the Intellectual Property described in Section 9(f)
below;
(xii) cash
of not less than $15,000;
(xiii) all
physical plans and designs of the Business’ labs and
stores (including, without limitation, blueprints and
layouts); and
(xiv) all
books and records relating solely to the Business (if
any).
(r)
Other Trademarks
.
The
Companies have good, valid and marketable title to the trademarks
“ Zoots ” and
“ The
Cleaner Cleaner ”.
3. SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION.
(a) The
representations and warranties of the Companies contained in
this Agreement
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