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Exhibit 10.1
SECURED PARTY SALE AGREEMENT
This Secured Party Sale
Agreement (the “ Agreement
”) is entered into as of March 21, 2008, by and between
NewStar Financial, Inc., a Delaware corporation (“
Seller ”),
as administrative agent and lender under the
Credit Agreement (as hereinafter defined), USDC Portsmouth,
Inc., a California corporation (“ Purchaser
”), and U.S. Dry Cleaning Corporation, a Delaware
corporation (“ Parent
”).
WITNESSETH
WHEREAS, Seller has a duly perfected security interest in
and lien on substantially all of the assets of 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 ”), and
Widmer’s, LLC, a Delaware limited liability company (“
Widmer’s
”), 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 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, Events of Default (as defined in the Credit
Agreement) have occurred and are continuing;
WHEREAS, as a result of such Events of Default and
contemporaneously with the execution and delivery hereof, Seller is
conducting a private sale to Purchaser pursuant to Section 9-610 of
the UCC (as defined below) of certain of the assets of the
Companies;
WHEREAS , the Companies have consented to the sale provided
for in this Agreement and have entered into an Assignment and
Assumption Agreement with Purchaser of even date herewith (the
“ Assignment
Agreement ”), which, among other things, provides for
the assignment to Purchaser at Closing of certain contracts to
which the Companies are party; and
WHEREAS, the parties desire to memorialize the terms and
conditions under which Seller will sell to Purchaser, and Purchaser
will purchase from Seller, certain of the assets of the
Companies.
NOW THEREFORE ,
in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as
follows:
ARTICLE 1
THE TRANSACTIONS; CLOSING
1.1.
Purchase and Sale
of Purchased Assets . Subject to the terms and
conditions of this Agreement, at the Closing (as hereinafter
defined), Seller, in its capacity as a secured creditor conducting
a private foreclosure sale pursuant to Section 9-610 of the UCC,
shall sell, transfer, assign and deliver to Purchaser, and
Purchaser shall purchase from Seller, all of the Companies’
rights in and to the assets of the Companies’ assets
described on Schedule
1.1 hereof (all of such assets being referred to herein as
the “ Purchased Assets
”).
1.2.
Excluded
Assets. Notwithstanding anything to the contrary contained
in this Agreement, the Purchased Assets do not
include: (a) those assets described in clauses (i), (vi)
(to the extent that any fixtures are deemed are to be real estate
requiring a filing with local records), (xii) and (xiii) of Section
2(q) to the Assignment Agreement (to the extent Seller
does not have a perfected security interest under applicable law),
and those assets described on Schedule 3(a)
of the Assignment Agreement (to the extent Seller does
not have a perfected security interest under applicable law), (b)
except $15,000 of the Companies cash on hand in Virginia and
$52,400 of deposits currently in possession of landlords under real
estate leases being assigned to the Purchaser under the Assignment
Agreement, the Companies’ cash, including deposits and
escrows held by others, (c) all amounts due to any Company from any
other Company or Widmer’s, (d) any equity interests owned or
held by any Company, (e) any deposit or investment account of any
Company at any financial institution, (f) any real estate assets,
including, without limitation, any rights under any leases and
fixtures (to the extent perfection of the security interest in such
fixtures requires a filing with land records), (g) motor vehicles,
(h) any other assets in which Seller does not have a perfected
security interest, and (i) rights of the Companies in its
trademarks and trade names and the rights of third parties to use
such trademarks and tradenames in any jurisdictions other than
Georgia, Maryland, North Carolina, South Carolina and
Virginia.
1.3.
Certain
Definitions. Capitalized terms not defined
herein shall have the meaning set forth in the Assignment
Agreement. For purposes of this Agreement, the following
terms shall have the meanings indicated below:
(a)
“
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.
(b)
“
Key Landlord
Consents ” means, collectively, written estoppels and
consents from the Companies’ landlords with respect to the
following stores: Store No. 76, in form and
substance reasonably satisfactory to Purchaser.
(c)
“
Lien
” means any security interest, mortgage, lien, pledge,
adverse claim, interest, charge, option, conditional sale or other
title retention agreement, or other similar
encumbrance.
(d)
“
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.
(e)
“
UCC ”
means the Uniform Commercial Code as in effect from time to time in
the Commonwealth of Massachusetts. Section references
herein with respect to the UCC are to Article 9 of the Uniform
Commercial Code as in effect from time to time in the Commonwealth
of Massachusetts.
1.4.
Consideration
. The consideration (the “ Consideration ”)
to be given by Purchaser for the Purchased Assets shall consist of
the following:
(a)
$764,929
which shall be paid in cash to Seller on the Closing Date (less the
deposit amount paid by Purchaser pursuant to Section 1.4(c) below
and the amount paid to the Seller in escrow pursuant to Section 1.7
below) in immediately available funds via wire transfer, in
accordance with wire instructions to be provided by Seller at or
prior to the Closing; and
(b)
Purchaser’s
10% Senior Secured Note in the initial principal amount of $975,000
made to the order of Seller (the “ Note ”), as
described in Section 1.5 below (the sum of Sections 1.4(a) and
1.4(b) are the “ Purchase Price
”), the payment of which Note shall be unconditionally
guaranteed by the Parent pursuant to a guaranty substantially in
the form of Exhibit A (the “ Guaranty
”).
(c)
Upon
execution of this Agreement, Purchaser shall have paid to Seller a
deposit in the amount of $100,000 (the “ Deposit
”), to be credited against the Purchase Price for the
Purchased Assets conveyed pursuant to the Sale
Agreement. The Deposit shall be held in escrow until
Closing, and shall be refunded unless (i) the Assignment Agreement
is terminated in accordance with Section 8(a)(iii) thereof, (ii)
this Agreement is terminated pursuant to Section 6.1(c) hereof, or
(iii) the transactions contemplated by this Agreement and the
Assignment Agreement has closed on the Closing Date. If
the deposit is to be refunded, the Seller shall promptly cause the
Deposit to be returned to Purchaser on March 25, 2008 unless
otherwise agreed by the parties hereto in writing.
1.5.
Note, Security
Agreement and Pledge . The Note to be delivered
by Purchaser to Seller pursuant to Section 1.4(b) above shall be in
substantially the form of Exhibit B hereto. The Note
shall mature six (6) months after the Closing Date, with interest
payable on a bi-monthly basis. The Note will be secured
by (i) a second priority security interest in all tangible and
intangible property, whether now existing or hereafter acquired or
created, of Purchaser, and (ii) a second priority pledge of the
shares of the Purchaser by the Parent ((i) and (ii) are
collectively, the “ Collateral ”)
pursuant to a security agreement substantially in the form of
Exhibit C (the “ Security Agreement
”), and a pledge agreement substantially in the form of
Exhibit D (the “ Pledge Agreement
”). Purchaser would be prohibited from pledging
the Collateral to secure any other indebtedness, liability or
obligation, provided that nothing herein, or in the Security
Agreement, shall prohibit Purchaser from granting purchase money
security interests solely in assets financed by unrelated third
parties.
1.6.
Closing.
The transactions contemplated hereby (the “
Transactions ”)
shall take place at a closing (the “ Closing ”) to be
held on (a) the earlier of March 24, 2008, and five (5) business
days after the satisfaction or waiver of the conditions at Closing
specified in Article 5 hereof (other than those conditions which
are normally performed at the Closing, but subject to the
satisfaction or waiver of such conditions), or (b) such other date
as agreed to in writing by Seller and Purchaser (the “
Closing
Date ”). The Closing may be conducted
remotely by exchanging signatures via electronic transmission, with
original signatures to be exchanged via overnight
mail.
1.7.
Retention in
Connection with Key Landlord Consents . If the
Companies fail to deliver the Key Landlord Consent on or prior to
the Closing Date, Purchaser shall pay in escrow to Seller on the
Closing Date $38,744, less 50% of each Retained Amount (as
hereinafter defined) with respect to which a Key Landlord Consent
has been obtained on or before the Closing Date and the related
security deposit. The Consideration may be reduced by
the following amounts (collectively, the “ Retained Amounts
”): (i) with respect to Store No. 76, $70,000, and
(ii) the amount of the security deposit under the foregoing lease,
as hereinafter provided. On May 1, 2008, with respect to
lease above for which a Key Landlord Consent has not been timely
obtained, Purchaser shall promptly instruct the Seller, in writing,
to transfer 50% of the Retained Amount (together with the related
security deposit) to Purchaser from the escrow, and 50% shall be
set-off by Purchaser against the payments due under the Note (in
which event the Note shall be deemed to be automatically amended
accordingly)(effective May 1, 2008) in accordance with the terms
hereinafter set forth. In the event that the Companies
or the Seller subsequently deliver any such Key Landlord Consent to
Purchaser on or prior to April 30, 2008, Purchaser shall promptly
instruct Seller, in writing, to transfer to Seller the cash
component of the Retained Amount, together with the related
security deposit, with respect to such Key Landlord
Consent.. In the event that the Companies fail to
deliver the Key Landlord Consent to Purchaser on or prior to April
30, 2008, the Consideration shall automatically be reduced by an
amount equal to the relevant Retained Amount and the amount of the
related security deposit, and (x) Purchaser shall promptly instruct
Seller, in writing, to transfer to Purchaser from the escrow the
cash component of such Retained Amount and the related security
deposit and (y) Purchaser shall set-off the remaining 50% of the
relevant Retained Amount against the payments due under the Note,
in which event the Note shall be deemed to be automatically amended
accordingly (effective May 1, 2008). If the principal
amount of Note is deemed to be automatically amended in accordance
with this Section 1.7, Purchaser shall promptly deliver to Seller a
replacement Note (identical in all regards to the previous Note
other than with respect to the reduced principal amount) which
Seller shall exchange for such previous Note.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents
and warrants to Purchaser that each of the statements
contained in this Article 2 is true and correct on the date
hereof, and as of the Closing Date:
2.1.
Organization,
Power and Standing . Seller and Lender is duly
organized, validly existing and in good standing under the laws of
the state of its organization, and in the case of Seller, has all
requisite power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. Seller is the
duly appointed and acting agent of the Lender, with full power and
authority to act on its behalf in the manner set forth in, or as
contemplated by, this Agreement.
2.2.
Due
Authorization. Seller has full power and
authority and has taken all required action on its part necessary
to permit it to execute and deliver and to carry out the terms of
this Agreement and the other agreements, instruments and documents
contemplated hereby.
2.3.
Seller Liens; Sale
Process. The Companies’ liabilities to
Seller (as agent for the Lenders) are secured by valid, duly
perfected liens on and security interests in favor of Seller
against all of the Purchased Assets. The Companies are
in default under the Credit Documents and, as a result, Seller is
entitled to conduct the private foreclosure sale provided for in
this Agreement and exercise all available remedies under the UCC
and to sell, transfer and convey all of the Companies’ rights
in and to the Purchased Assets to Purchaser pursuant to this
Agreement. Neither Seller nor any Lender has transferred
or otherwise assigned or conveyed any right, title or interest of
any Company in and to the Purchased Assets pursuant to Section
9-610 of the UCC or otherwise to any Person or entered into any
agreement, other than this Agreement, providing
therefor. Seller has or at Closing will have appropriate
access to the Purchased Assets to allow for a sale to be completed
pursuant to the Credit Documents and Section 9-610 of the
UCC. Seller has taken, or will take at or prior to
Closing, all actions necessary under the UCC and the Credit
Documents to conduct a commercially reasonable sale of the
Purchased Assets under the UCC pursuant to a private foreclosure
sale under Section 9-610 thereof, and to transfer the rights of the
Companies in and to the Purchased Assets in accordance with the
provisions of the UCC and this Agreement. The conveyance
contemplated in this Agreement complies with the requirements of
Article 9 of the UCC with respect to the Purchased
Assets.
2.4.
Validity and
Enforceability. This Agreement is, and each of
the other agreements, documents and instruments contemplated hereby
to which Seller or any Lender is a party shall be when executed and
delivered by Seller or such Lender, the valid and binding
obligations of Seller or such Lender enforceable in accordance with
its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, and by
laws related to the availability of specific performance,
injunctive relief or other equitable remedies.
2.5.
No Conflict
. Neither the execution and delivery of this Agreement
nor the consummation of the Transactions will (i) violate the
organizational documents or governing instruments of Seller or any
Lender; (ii) violate, be in conflict with, or constitute a default
under, or require the consent of any third party to, any contract
or other agreement to which Seller or any Lender is a party
(including but not limited to the Credit Agreement, any forbearance
or other agreement any Company and Seller), or any contract or
other agreement included in the Purchased Assets or to be assigned
to Purchaser pursuant to the Assignment Agreement; or (iii) violate
any statute, law, regulation, judgment, order or decree of any
Governmental Authority applicable to Seller or any
Lender.
2.6.
Brokers;
Agents . Seller has 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
connection with the subject matter of this Agreement or the
Transactions.
2.7.
Litigation
. To the knowledge of Seller, there is no order,
litigation, action or proceeding pending or threatened against
Seller to be brought before any Governmental Authority seeking to
enjoin, restrain or prohibit the Transactions or that may (or be
reasonably expected to) adversely effect the ability of Purchaser
to own or operate the Purchased Assets. To the knowledge
of Seller, there is no litigation or action pending or threatened
against Seller that might call into question the validity of this
Agreement or the other documents evidencing the Transactions, or
any action taken or to be taken pursuant hereto or
thereto.
2.8.
Companies’
Obligations to Seller. Seller is the sole holder
of all promissory notes evidencing the Companies’ obligations
under the Credit Agreement, and is currently the sole lender
thereunder.
2.9.
No Other
Representations or Warranties. Seller
acknowledges that neither Purchaser nor any of its managers,
officers, members, subsidiaries, employees, consultants, agents or
advisors makes or has made any representation or warranty to
Seller, any Lender, or their Affiliates, except for the
representations and warranties made by Purchaser and expressly set
forth in Article 3 of this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT
Purchaser and Parent each
represents and warrants to Seller that each of the statements
contained in this Article 3 is true and correct as of the
date hereof and as of the Closing Date:
3.1.
Organization,
Power and Standing . Purchaser is duly organized,
validly existing and in good standing under the laws of the State
of California, and has all requisite power and authority to execute
and deliver this Agreement, the Note, and the Security Agreement
and to perform its obligations hereunder and
thereunder. Parent is duly organized, validly existing
and in good standing under the laws of the State of Delaware, and
has all requisite power and authority to execute and deliver this
Agreement and the Pledge Agreement and to perform its obligations
hereunder and thereunder.
3.2.
Authority.
Purchaser and Parent each has full power and authority
and has taken all required action on its part (including board and
stockholder approval, as applicable) necessary to permit it to
execute and deliver and to carry out the terms of this Agreement
and the other agreements, instruments and documents of Purchaser
and Parent contemplated hereby.
3.3.
No-Conflict.
Neither the execution and delivery of this Agreement
nor the consummation of the Transactions will (i) violate the
organizational documents or governing instruments of Purchaser or
Parent; (ii) violate, be in conflict with, or constitute a default
under, or require the consent of any third party to, any contract
or other agreement to which Purchaser or Parent is a party; or
(iii) violate any statute, law, regulation, judgment, order or
decree of any Governmental Authority applicable to Purchaser or
Parent.
3.4.
Validity and
Enforceability. This Agreement is, and each of
the other agreements, documents and instruments contemplated hereby
to which Purchaser and /or Parent is a party shall be when executed
and delivered by Purchaser and/or Parent, the valid and binding
obligations of Purchaser and Parent,
respectively, enforceable in accordance with its terms,
except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, and by
laws related to the availability of specific performance,
injunctive relief or other equitable remedies.
3.5.
Financial
Ability. Purchaser has the financial capability
to consummate the Transactions contemplated by this Agreement and
Purchaser understands that Purchaser’s obligations hereunder
are not in any way contingent or otherwise subject to (i)
Purchaser’s consummation of any financing arrangements or
Purchaser obtaining any financing or (ii) the availability of any
financing to Purchaser.
3.6.
No Other
Representations or Warranties. Purchaser and
Parent each acknowledges that neither Seller nor any of its
directors, officers, stockholders, employees, consultants, agents
or advisors makes or has made any representation or warranty to
Purchaser, Parent, its Affiliates or its financing sources and that
the Purchased Assets are being conveyed to Purchaser “as-is
and where-is,” except for the representations and warranties
made by Seller expressly set forth in Article 2 of this
Agreement.
3.7.
Existing Liens and
Creditors Rights. The Purchaser and Parent
warrant and represent that:
(a)
Other
than Seller’s security interests contemplated hereunder,
Setal 2, LLC is the sole party with security interests in (i)
tangible and intangible property of the Purchaser, and (ii) the
capital stock of the Purchaser.
(b)
There
are no existing intercreditor agreements between any parties with
respect to the assets described in Section 3.7(a)(i) and
(ii).
ARTICLE 4
COVENANTS
4.1
Efforts.
Pending the Closing, Seller and Purchaser will
use commercially reasonable efforts to take or cause to be
taken all action and do or cause to be done all things
necessary, proper or advisable to consummate the Transactions
contemplated by this Agreement.
4.2
Confidentiality.
Pending the Closing of all of the transactions contemplated
hereby, all trade secrets or other information of a business,
financial, marketing, technical or other nature pertaining to
the Companies or any Company obtained by Purchaser from or on
behalf of Seller or the Companies will be kept confidential
and will not be disclosed by Purchaser other than to its
officers, employees, advisors and financing sources;
provided
that the foregoing restriction shall not apply to information
which (a) is lawfully and independently obtained by Purchaser
from a third party without restriction as to disclosure by
Purchaser, (b) was known by Purchaser prior to its disclosure
by or on behalf of Seller or the Companies, (c) is in the
public domain or enters into the public domain through no
fault of Purchaser, or (d) Purchaser is required by law
or legal process to disclose. If this Agreement is
terminated, Purchaser will cause to be delivered to Seller,
and/or the Companies, as applicable, all materials obtained
by Purchaser from or on behalf of Seller or the Companies,
whether obtained before or after the date of this
Agreement. Following the Closing, Purchaser shall
not, directly or indirectly, disclose, divulge or make use of
any trade secrets or other information of a business,
financial, marketing, technical or other nature pertaining to
Seller or the Companies that does not solely relate to the
Purchased Assets, including information of others that Seller
and/or the Companies have agreed to keep
confidential. Nothing in this Agreement,
including, without limitation, this Section 4.2, shall
prevent Purchaser from making any public announcement and/or
filings that it may be required to make under applicable
Law.
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