AMENDMENT NO. 1 TO SHARE PURCHASE AND SHAREHOLDERS' RIGHTS AGREEMENT

Exhibit 10.1

AMENDMENT NO. 1

TO

SHARE PURCHASE AND SHAREHOLDERS’ RIGHTS AGREEMENT

This Amendment No. 1 (this “ Amendment ”) to that certain Share Purchase and Shareholders’ Rights Agreement dated as of May 16, 2008 (the “ Agreement ”) by and among ARFI, a simplified joint stock company ( société par actions simplifieé ) of France, with a registered office situated at 220, route de Grenoble, 69800 Saint-Priest, registered with the registre du commerce et des sociétés of Lyon under number 504 379 009 (the “ Company ”), Christophe Mortemousque, born on March 11, 1970, residing at 54, route de Collonges, 69450 Saint-Cyr au Mont d’Or, married to Mrs. Christelle Dubosc, under the régime de la séparation de biens , under a notarized agreement entered into on August 16, 1996 made in Blaye, before Maître Monroux (the “ Seller ”), Palladium, a simplified joint stock company ( société par actions simplifieé ) of France, with a registered office situated at 220, route de Grenoble, 69800 Saint-Priest, registered with the registre du commerce et des sociétés of Lyon under number 352 779 862 (“ Palladium ”), and K•Swiss Inc., a Delaware corporation (the “ Buyer ”), is entered into as of this 2 ^nd day of June, 2009. Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings ascribed to them in the Agreement.

WHEREAS , pursuant to the Agreement, the Buyer previously purchased 57% of the Equity Interests of the Company from the Seller;

WHEREAS , the Seller wishes to sell to the Buyer, and the Buyer wishes to purchase from the Seller, the Other Shares in advance of the timing originally contemplated by the Agreement; and

WHEREAS , the Company, the Seller, Palladium and the Buyer wish to amend certain provisions of the Agreement as set forth herein to allow the Buyer to purchase the Other Shares from the Seller in advance of the timing contemplated by the Agreement, upon the terms, subject to the conditions and in reliance upon the agreements set forth in this Amendment.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and obligations hereinafter set forth, the parties hereto hereby agree as follows:

1. In the opening paragraph of the Agreement, the words “as amended by an Amendment No. 1 to Share Purchase Agreement and Shareholders’ Rights Agreement entered into on [June 2], 2009,” are inserted before the words “this Agreement ”)

2. Paragraph (C) of the Recitals of the Agreement is hereby amended and restated to read in full as follows:

“C. The Seller wishes to sell to the Buyer, and the Buyer wishes to purchase from the Seller, the remaining 43% of the Equity Interests of the Company (the “ Other Shares ”) on or before June 30, 2009.”

3. Section 1.2 of the Agreement is hereby amended to delete the following terms:

to update the “Location” cross reference for the following terms:

 

and to insert the following new terms in alphabetical order:

 

4. Reference to “Future Purchase Price” in Section 3.4 of the Agreement is hereby replaced by “Fixed Future Purchase Price”.

5. Section 5.12(b) of the Agreement is hereby amended and restated to read in full as follows:

“(b) Except as otherwise provided in Section 8.1 , on or before June 30, 2009, the Seller shall sell, assign, transfer, convey and deliver the Other Shares (the “ Future Purchase ”) to the Buyer, free and clear of all Encumbrances, and the Buyer shall purchase the Other Shares from the Seller, for an aggregate purchase price (the “ Future Purchase Price ”) equal to:

(i) €5,000,000 (the “ Fixed Future Purchase Price ”); plus

(ii) an amount (the “ Variable Future Purchase Price ”) equal to:

a. 0.43 multiplied by the product of (A) eight (8)  times (B) Palladium’s EBITDA for the twelve month period ended December 31, 2012, plus

b. to the extent the Buyer causes the transfer of any Palladium Brands to an Affiliate of the Buyer after the Closing Date and

 

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prior to December 31, 2012 (each, a “ Brand Transferee ”), with respect to each country of registration (or other demarcation) of such Palladium Brands (each, a “ Country ”), 0.43 multiplied by the greater of:

 

(A)

the product of (1) eight (8)  times (2) each Brand Transferee’s EBITDA in such Country for the twelve month period ended December 31, 2012; or

 

(B)

five percent (5%) of Turnover in such Country for the twelve month period ended December 31, 2012;

provided , that in the event that prior to December 31, 2012, a Brand Transferee subsequently grants a license on any of the Palladium Brands to:

 

(A)

a Third Party Transferee, then such license shall affect the calculation provided by this Section 5.12(b)(ii)b. as set forth in Sections 5.13(b) and (c) ; or

 

(B)

an Affiliate of the Buyer, then (x) the calculation provided by this Section 5.12(b)(ii)b. shall be based on such Affiliate’s EBITDA or Turnover, as the case may be, and (y) the amount of any royalties paid by such Affiliate to the Brand Transferee under the license agreement shall be excluded from the computation of such Affiliate’s EBITDA.

less

c. €3,300,000

provided , that the amount of the Variable Future Purchase Price shall in any event be capped at €6,700,000.

The Buyer shall send a written notice to the Seller, specifying a place and date not later than June 30, 2009, of the closing of such purchase of the Other Shares; provided, that the actual closing date may be extended as necessary to fulfill the conditions set forth in Article VI (the “ Future Closing Date ”), but in no event shall the Future Closing Date occur later than June 30, 2009 without the prior written consent of the Buyer.”

6. Section 5.12(f) of the Agreement is hereby amended and restated in full to read as follows:

 

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“(f) Except as otherwise provided in Section 8.1 , on or prior to June 30, 2013, the Buyer shall send a written notice to the Seller (the “ Notice ”), including the Buyer’s calculation of the Variable Future Purchase Price (excluding the adjustments set forth in Sections 5.12(d)(ii)-(v) ). In the event that the Seller disagrees with the computation of the Variable Future Purchase Price as reflected on the Notice, the Seller shall give written notice of his objections thereto (a “ Future Dispute Notice ”) within fifteen (15) days of the Buyer’s delivery of the Notice to the Seller. If the Seller does not timely deliver a Future Dispute Notice, the Variable Future Purchase Price as set forth on the Notice will be final and binding on the parties (subject only to the provisions of Section 5.12(h) below). If the Seller timely delivers a Future Dispute Notice, then during the 30-day period following such delivery, the Buyer, on the one hand, and the Seller, on the other hand, shall attempt to resolve any differences which they may have with respect to any matters specified in the Future Dispute Notice (which resolution, if any, shall be final and binding on all parties). If, at the end of such 30-day period the parties shall have failed to reach written agreement with respect to all such matters, then all such matters specified in the Future Dispute Notice with respect to which an agreement has not been reached (the “ Disputed Matters ”) shall be submitted to and arbitrated by an independent accounting firm mutually acceptable to the Buyer and the Seller among Deloitte, KPMG or PricewaterhouseCoopers (the “ Independent Accounting Firm ”), it being provided that if the parties fail to agree on the Independent Accounting Firm within ten (10) days following the expiration of the above-mentioned 30-day period, the Independent Accounting Firm shall be appointed by the President of the Commercial Court of Paris at the request of either party. The Independent Accounting Firm shall act as an independent arbitrator in accordance with the provisions of Article 1592 of the French Civil Code. Following such selection, the Independent Accounting Firm will be provided each of the Buyer’s and the Seller’s computation of the Variable Future Purchase Price and shall promptly determine the amount of the Variable Future Purchase Price (the “ Final Variable Purchase Price ”) in accordance with this Agreement and the definition of “EBITDA” herein (excluding the adjustments set forth in Sections 5.12(d)(ii)-(v)  except to the extent the Disputed Matter(s) relate(s) to a dispute pursuant to Section 5.12(h) ), it being provided that in its determination of the Final Variable Purchase Price, the Independent Accounting Firm shall determine only those issues that are Disputed Matters. The Independent Accounting Firm shall act promptly, and the Final Variable Purchase Price shall be final and binding upon the parties hereto (subject only to the provisions of Section 5.12(h) below). The fees and expenses of the Independent Accounting Firm shall be borne equally by the Seller, on the one hand, and the Buyer, on the other hand. On such date that is ten (10) Business Days following the date that the Final Variable Purchase Price is finally determined (the “ Final Variable Purchase Price Payment Date ”), the Buyer shall deliver to the Seller, by wire transfer to the bank account that shall have been designated in writing by the Seller to the Buyer at least five (5) Business Days prior to the Final Variable Purchase Price Payment Date, an amount equal to eighty-five percent (85%) of the Final Variable Purchase Price (the “ Delivered Variable Purchase Price ”) in immediately available funds.”

 

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7. Section 5.12(g) of the Agreement is hereby amended and restated in full to read as follows:

“(g) The obligations of the Buyer and the Seller to consummate the Future Purchase shall be subject to the fulfillment, at or prior to the Future Closing Date, of the conditions set forth in Article VI . Additionally, at least five (5) Business Days prior to the Future Closing Date, the Seller shall deliver an executed stock transfer form ( ordre de mouvement ) to be held in escrow pending delivery by the Buyer of the Fixed Future Purchase Price. If the Seller fails to deliver such stock transfer form ( ordre de mouvement ) within such time period, the Seller hereby irrevocably appoints and empowers the then Président of the Company to execute and deliver in the Seller’s name and on the Seller’s behalf the share transfer form and take such actions as the then Président of the Company may deem necessary or appropriate to effect the Future Purchase. In such event, the Future Purchase Price shall be held in a special account opened on behalf of and in the name of the Seller. Except as provided in the previous sentence, on the Future Closing Date, (i) the Buyer shall deliver to the Seller, by wire transfer to a bank account designated in writing by the Seller to the Buyer at least five (5) Business Days prior to the Future Closing Date, an amount equal to the Fixed Future Purchase Price in immediately available funds and (ii) the Seller shall deliver or cause to be delivered to the Buyer a duly executed stock transfer form ( ordre de mouvement ) transferring ownership of the Other Shares to the Buyer.

8. Section 5.12(h) of the Agreement is hereby amended and restated in full to read as follows:

“(h) As soon as reasonably practicable after June 30, 2013, but in no event later than August 15, 2013, the Buyer shall send a written notice to the Seller (the “ Second Notice ”), which Second Notice shall include the Buyer’s re-calculation of the Variable Future Purchase Price, as adjusted to account for the exclusions from EBITDA listed in Sections 5.12(d)(ii)-(v)  (the “ Adjusted Variable Future Purchase Price ”), which exclusions were not determinable on the Final Variable Purchase Price Payment Date. In the event that the Seller disagrees with the Adjusted Variable Future Purchase Price as reflected on the Second Notice, the Buyer and the Seller shall resolve such dispute in accordance with the procedures set forth in Section 5.12(f) . Upon determination of the Adjusted Variable Purchase Price, the Buyer shall deliver to the Seller, by wire transfer to the bank account designated in writing by the Seller to the Buyer pursuant to Section 5.12(g) , an amount equal to the difference between (i) the Adjusted Variable Purchase Price and (ii) the Delivered Variable Purchase Price; provided , that in the event that the Adjusted Variable Purchase Price is less than the Delivered Variable Purchase Price, the Seller shall be liable for such amount and shall deliver such amount to the Buyer, by wire transfer to a bank account designated in writing by the Buyer to the Seller.”

9. Section 5.13 of the Agreement is hereby amended and restated in full to read as follows:

 

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“(a) The Seller covenants and agrees to promptly and fully cooperate with the Buyer, including by executing any necessary documents and taking any other necessary or desirable actions, to validly transfer all of Palladium’s Marks and other Intellectual Property rights worldwide, except for rights in Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, Spain, Sweden, Switzerland and Turkey (such Intellectual Property to be transferred, the “ Palladium Intellectual Property ”), for the then fair market value of the Palladium Intellectual Property, pursuant to Section 8.4 . The then fair market value shall be an amount mutually agreed upon by the Buyer and the Seller, or if such parties cannot agree, as determined by an independent appraiser to be appointed by the Buyer.

(b) In the event a Brand Transferee decides to transfer any of the Palladium Brands to a third party (which is not an Affiliate of the Buyer) (the “ Third Party Transferee ”) or grant a license to use any of the Palladium Brands in connection with footwear products to a Third Party Transferee, in each case prior to December 31, 2012, (i) the Buyer and the Seller agree that the Variable Future Purchase Price shall be calculated in accordance with the provisions of Section 5.12(b)(ii)b. as if the Third Party Transferee were a Brand Transferee and (ii) to that effect, the Buyer covenants to (x) promptly inform the Seller of the main terms of such transfer or license (including the name of the Third Party Transferee, the consideration paid by it and the other relevant conditions of the transaction), (y) cause the Third Party Transferee to provide the EBITDA and Turnover achieved in relation to the Palladium Brands in the relevant Country(ies) within sixty (60) days after the end of each calendar year. The Buyer shall deliver the information received from the Third Party Transferee on its EBITDA and Turnover to the Seller within eight (8) days after the above-mentioned sixty- (60-) day period.

(c) In the event a Brand Transferee decides to grant a license to use any of the Palladium Brands in connection with any products other than footwear (including apparel or accessories) to a Third Party Transferee prior to December 31, 2012, the net revenues received by such Brand Transferee under such license agreement shall be taken into account for purposes of calculating the Brand Transferee’s EBITDA or its Turnover in the relevant Country(ies) in accordance with the provisions of Section 5.12(b)(ii)b. ”

10. In Section 7.1(b) of the Agreement, the words “, the Amendment No. 1 to the Agreement entered into on June 2, 2009” are inserted after the words “this Agreement”.

11. In Section 7.2(a) of the Agreement, the following sentence:

“ provided , that this increased cap amount shall only apply if the aggregate amount of the Purchase Price and the Future Purchase Price is equal to or greater than Three Million Six Hundred Thousand (€3,600,000) (otherwise such limit shall remain at €1,500,000)”

is hereby deleted.

 

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12. Section 8.1 of the Agreement is hereby amended and restated to read in full as follows:

“(a) For the period between the Closing Date and the Final Variable Purchase Price Payment Date:

(i) Intentionally Omitted

(ii) the Seller shall be Président of the Company unless and until (A) the Seller is removed from his functions as Président of the Company with or without cause, in accordance with the by-laws of the Company, or (B) the Seller resigns as the Président of the Company voluntarily;

(iii) the compensation of the Seller as Président of the Company shall be €200,000 per annum plus use of a company car substantially similar to the company car used by the Seller on the date hereof as described on Schedule 8.l(a)(iii) and reasonably acceptable to the Buyer, unless and until the Buyer and the Seller decide otherwise; and

(iv) unless otherwise agreed in writing by the Buyer, the Company shall be at all times the sole Président or the sole Gérant of each of the Company’s Subsidiaries.

(b) In the event the Seller is removed as Président of the Company with or without cause, or the Seller resigns voluntarily, in either case prior to the Final Variable Purchase Price Payment Date, the Seller shall be entitled to the payments contemplated by Section 5.17 , and the Seller shall have the option to elect whether the Variable Future Purchase Price shall be calculated based on (A) the twelve month period ended December 31 of the year preceding his termination or resignation; provided , that, for any resignation or termination in 2009, the twelve month period shall end on September 30, 2008, or (B) the twelve month period ended December 31, 2012. The Seller shall deliver written notice of such election to the Buyer within fifteen (15) days of such removal or resignation. In the event the Seller elects to calculate the Variable Future Purchase Price based on the twelve month period ended December 31 of the year preceding his removal or resignation (or September 30, 2008), the provisions of Section 5.12 shall be adjusted appropriately to account for such previous year and the notice sent by the Buyer shall include the Buyer’s calculation of the Variable Future Purchase Price (or the Adjusted Variable Future Purchase Price in the event the removal of the Seller as Président of the Company occurs after June 30 of such year).”

13. Section 8.2 of the Agreement is hereby deleted.

14. Section 8.6(b) of the Agreement is hereby amended and restated to read in full as follows and a Section 8.6(c) reading as follows is inserted thereafter:

“(b) In the event the Seller is no longer Président of the Company and for so long as the Seller is not fully paid the Final Variable Future Purchase Price

 

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(or the Adjusted Variable Future Purchase Price, as the case may be), the Buyer shall cause the Company and its Subsidiaries (or their respective successors) to prepare and deliver to the Seller (a) audited financial statements (without notes thereto) within sixty (60) days after the end of each fiscal year; (b) unaudited quarterly financial statements (without notes thereto) within ten (10) days of the end of each fiscal quarter and (c) audited financial statements (with notes thereto) within ninety (90) days after the end of each fiscal year. For purposes of clarification, the financial statements referred to herein shall be included in the consolidated financial statements of the Buyer.

(c) In the event the Buyer causes the transfer of any Palladium Brands and for so long as the Seller is not fully paid the Final Variable Future Purchase Price (or the Adjusted Variable Future Purchase Price, as the case may be), the Buyer shall and shall cause any Brand Transferee to prepare and deliver to the Seller with respect to each Country (a) audited financial statements (without notes thereto) within sixty (60) days after the end of each fiscal year figuring the EBITDA and the Turnover and (b) unaudited quarterly financial statements (without notes thereto) within thirty (30) days of the end of each fiscal quarter figuring the EBITDA and the Turnover. For purposes of clarification, the financial statements referred to herein shall be included in the consolidated financial statements of the Buyer. Notes will be included only in the consolidated financial statements.”

15. Section 8.8 of the Agreement is amended and restated to read in full as follows:

“Section 8.8 Term . The covenants set forth in this Article VIII shall be deemed to be continuing and shall have a term expiring on the earliest to occur of the termination of this Agreement pursuant to Section 9.1 , the Final Variable Purchase Price Payment Date, or December 31, 2013, if the Final Variable Purchase Price Payment Date does not occur prior thereto.”

16. Except as modified hereby, the Agreement shall remain in full force and effect and unmodified.

An amended and restated version of the Agreement reflecting the amendments provided for in this Amendment is attached hereto as Exhibit A .

17. 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. This Amendment may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

18. This Amendment and all disputes, controversies, differences or claims arising out of or relating to this Amendment or the transactions contemplated hereby shall be

 

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governed by, and construed in accordance with, the laws of France, with the exception of its conflict of law rules.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date first above written.

 

 

 

 

 

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Exhibit A

Amended and Restated Copy

SHARE PURCHASE AND SHAREHOLDERS’ RIGHTS AGREEMENT

dated as of May 16, 2008

as amended on June 2, 2009

by and among

CHRISTOPHE MORTEMOUSQUE

(on behalf of himself and ARFI)

PALLADIUM

and

K•SWISS INC.

TABLE OF CONTENTS

 

 

i

TABLE OF CONTENTS

(Continued)

 

 

ii

TABLE OF CONTENTS

(Continued)

 

 

iii

Schedules

 

 

iv

SHARE PURCHASE AND SHAREHOLDERS’ RIGHTS AGREEMENT

SHARE PURCHASE AND SHAREHOLDERS’ RIGHTS AGREEMENT, dated as of May 16, 2008 (as amended by an Amendment No. 1 to Share Purchase Agreement and Shareholders’ Rights Agreement entered into on [June 2], 2009, this “ Agreement ”), by and among Christophe Mortemousque, acting as founder, and in the name and on behalf of, ARFI, a simplified joint stock company ( société par actions simplifieé ) of France, with a registered office situated at 220, route de Grenoble, 69800 Saint-Priest, whose registration with the registre du commerce et des sociétés of Lyon is underway (the “ Company ”), Christophe Mortemousque, on behalf of himself, born on March 11, 1970, residing at 54, route de Collonges, 69450 Saint-Cyr au Mont d’Or, married to Mrs. Christelle Dubosc, under the régime de la separation de biens , under a notarized agreement entered into on August 16, 1996 made in Blaye, before Maître Monroux (the “ Seller ”), Palladium, a simplified joint stock company ( societé par actions simplifieé ) of France, with a registered office situated at 220, route de Grenoble, 69800 Saint-Priest, registered with the registre du commerce et des sociétés of Lyon under number 352 779 862 (“ Palladium ”), and K•Swiss Inc., a Delaware corporation (the “ Buyer ”).

RECITALS

A. The Seller owns 100% of the issued and outstanding shares, par value €10.00 per share (the “ Equity Interests ”), of the Company.

B. The Seller wishes to sell to the Buyer, and the Buyer wishes to purchase from the Seller, 57% of the Equity Interests (the “ Shares ”) of the Company.

C. The Seller wishes to sell to the Buyer, and the Buyer wishes to purchase from the Seller, the remaining 43% of the Equity Interests of the Company (the “ Other Shares ”) on or before June 30, 2009.

AGREEMENT

In consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Certain Defined Terms . For purposes of this Agreement:

“ Action ” means any claim, action, suit, inquiry, proceeding, audit or investigation by or before any Governmental Authority, or any other arbitration, mediation or similar proceeding.

“ Affiliate ” means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person.

“ Ancillary Agreements ” means the Loan Agreement and all other agreements, documents and instruments required to be delivered by any party pursuant to this Agreement, and any other agreements, documents or instruments entered into at or prior to Closing in connection with this Agreement or the transactions contemplated hereby.

“ Business Day ” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in either France or the City of Los Angeles.

“ Contract ” means any contract, agreement, arrangement or understanding, whether written or oral and whether express or implied.

“ control ,” including the terms “ controlled by ” and “ under common control with ,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, as trustee or executor, as general partner or managing member, by Contract or otherwise, including the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person.

“ Distributable Annual Profits ” means, in respect of the Company or any of its Subsidiaries, for any given fiscal year, the after tax profit for such fiscal year, minus the sum of (i) the losses brought forward ( pertes antérieures ), (ii) any after tax profit derived from the sale of the Palladium Intellectual Property and (iii) the sums to be allocated to reserves pursuant to applicable Law and the by-laws of the company concerned.

“ Encumbrance ” means any charge, claim, limitation, condition, equitable interest, mortgage, lien, option, pledge, security interest, easement, encroachment, right of first refusal, adverse claim or restriction of any kind, including any restriction on or transfer or other assignment, as security or otherwise, of or relating to use, quiet enjoyment, voting, transfer, receipt of income or exercise of any other attribute of ownership.

“ French Tax Consolidated Group ” means a group of companies subject to a French specific tax regime provided for by Sections 223A et seq. of the French Tax Code which allows for consolidation of taxable income at the level of a parent company which is solely liable for corporate income tax computed on a tax consolidated basis and which includes the parent company and its French affiliates controlled at 95% or more.

“ GAAP ” means French generally accepted accounting principles and practices as in effect on the date hereof.

“ Governmental Authority ” means any (i) national, multinational, supranational, provincial, municipal, local or similar government, governmental, regulatory or administrative authority, branch, agency or commission or any court, tribunal, arbitral or judicial body (including any grand jury), central bank, commission, board, bureau or instrumentality (including any authority responsible for assessing or collecting any Taxes, social security, customs, parafiscal contribution or any other Tax) and (ii) any subdivision or authority of any of the foregoing.

 

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“ IFRS ” means the International Financial Reporting Standards as in effect on the date hereof.

“ Immediate Family ,” with respect to any specified Person, means such Person’s spouse, parents, children and siblings, including adoptive relationships and relationships through marriage, or any other relative of such Person that shares such Person’s home.

“ Intellectual Property ” means all intellectual property rights arising from or associated with the following, whether protected, created or arising under the laws of the United States or any other jurisdiction: (i) trade names, trademarks and service marks (registered and unregistered), domain names and other Internet addresses or identifiers, trade dress and similar rights, and applications (including intent to use applications) to register any of the foregoing (collectively, “ Marks ”); (ii) patents, patent applications and registered industrial designs (collectively, “ Patents ”); (iii) copyrights (registered and unregistered) and applications for registration (collectively, “ Copyrights ”); (iv) know-how, inventions, methods, processes, technical data, specifications, research and development information, technology, product roadmaps, customer lists and any other information, in each case to the extent any of the foregoing derives economic value (actual or potential) from not being generally known to other persons who can obtain economic value from its disclosure or use (collectively, “ Trade Secrets ”); and (v) moral rights, publicity rights, data base rights and any other proprietary or intellectual property rights of any kind or nature that do not comprise or are not protected by Marks, Patents, Copyrights or Trade Secrets.

“ knowledge ,” with respect to a party, means the knowledge of such individual or of any officer or director of such party and such knowledge as would be imputed to such Persons upon due inquiry.

“ Law ” means any statute, law, treaty, ordinance, administrative guideline and regulation, other regulation, rule, code, executive order, injunction, judgment, decree or order of any Governmental Authority.

“ Leased Real Property ” means all real property leased, subleased or licensed to the Company or any of its Subsidiaries or which the Company or any of its Subsidiaries otherwise has a right or option to use or occupy, together with all structures, facilities, fixtures, systems, improvements and items of property previously or hereafter located thereon, or attached or appurtenant thereto, and all easements, rights and appurtenances relating to the foregoing.

“ Liability ” or “ Liabilities ” means, with respect to any Person, any liability or obligation of any kind, character or description, whether known or unknown, absolute or contingent, accrued or not accrued or paid and, unless otherwise indicated, liquidated or unliquidated, secured or unsecured, joint or several, fixed or otherwise, due or to become due, vested or unvested, executory, determined, determinable or otherwise and whether or not the same is required to be accrued on the financial statements of that Person or is disclosed on any schedule hereto.

“ Material Adverse Effect ” means any event, change, circumstance, occurrence, effect or state of facts that (i) is or would reasonably be expected to be materially adverse to the

 

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business, assets, liabilities, condition (financial or otherwise), results of operations or prospects of the Company and its Subsidiaries, taken as a whole or (ii) materially impairs the ability of the Seller or the Company and its Subsidiaries to consummate, or prevents or materially delays, any of the transactions contemplated by this Agreement or the Ancillary Agreements or would reasonably be expected to do so.

“ Owned Real Property ” means all real property owned by the Company or any of its Subsidiaries, together with all structures, facilities, fixtures, systems, improvements and items of property previously or hereafter located thereon, or attached or appurtenant thereto, and all easements, rights and appurtenances relating to the foregoing.

“ Palladium Brands ” means the Marks and other Intellectual Property rights set forth in Schedule 3.16 registered (or demarcated) in the following countries: Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, Spain, Sweden, Switzerland, Turkey and the United Kingdom.

“ Person ” means an individual, corporation, partnership, limited liability company, limited liability partnership, syndicate, person, trust, association, organization or other entity, including any Governmental Authority, and including any successor, by merger or otherwise, of any of the foregoing.

“ Related Party ,” with respect to any specified Person, means: (i) any Affiliate of such specified Person, or any director, executive officer, general partner or managing member of such Affiliate; (ii) any Person who serves or within the past five years has served as a director, executive officer, partner, member or in a similar capacity of such specified Person; (iii) any Immediate Family member of a Person described in clause (ii); or (iv) any other Person who holds, individually or together with any Affiliate of such other Person and any member(s) of such Person’s Immediate Family, more than 5% of the outstanding equity or ownership interests of such specified Person.

“ Social Contributions ” means all contributions, including but not limited to, payroll contributions, unemployment insurance, retirement, social security or other social benefits or labor related payments or contributions which any of the Company or its Subsidiaries is required to pay, withhold or collect.

“ Subsidiary ” means, with respect to the Company, each of SC Spitfire Finance, Pallinvest SAS, Vantage Finance SAS and Palladium, and, when relevant, any company merged into Palladium at any time prior to the date hereof, and, with respect to any Person, any other Person controlled by such first Person, directly or indirectly, through one or more intermediaries.

“ Tax Regulations ” means the Laws concerning Taxes or customs as well as any decrees, decisions, circulars or other texts on the application or interpretation of the said Law applicable in any country whatsoever as well as any international treaty (including any derived law of such treaty – directive, regulation or other).

“ Tax Return ” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto,

 

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required to be supplied to any Tax authority (foreign or domestic) in connection with the determination, assessment, collection or payment of any Taxes.

“ Taxes ” means: (i) any and all taxes, including local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, Social Contributions, as well as any other charge or tax, and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, registration, license, lease, service, service use, withholding, payroll, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, any penalties and fines, additions to tax or additional amounts with respect thereto; (ii) any liability for payment of amounts described in clause (i) whether as a result of transferee liability, of being a member of an affiliated, consolidated, combined or unitary group for any period or otherwise through operation of law; and (iii) any liability for the payment of amounts described in clauses (i) or (ii) as a result of any tax sharing, tax indemnity or tax allocation agreement or any other express or implied agreement to indemnify any other Person.

“ Turnover ” means, for any date of determination, the total revenue of any Brand Transferee derived from the Palladium Brands, as shown on the Brand Transferee’s audited financial statements (such financial statements to be included in the audited consolidated financial statements of the Buyer) prepared in accordance with generally accepted accounting principles and practices of the United States as in effect on the date hereof, as at the end of the relevant accounting period and broken down by Country.

Section 1.2 Table of Definitions . The following terms have the meanings set forth in the Sections referenced below:

 

 

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ARTICLE II

PURCHASE AND SALE

Section 2.1 Purchase and Sale of the Shares; Funding .

(a) Upon the terms and subject to the conditions of this Agreement, at the Closing, the Seller shall sell, assign, transfer, convey and deliver the Shares to the Buyer, free and clear of all Encumbrances, and the Buyer, in reliance on the representations, warranties and covenants of the Seller contained herein shall purchase the Shares from the Seller, and in consideration for the Shares the Buyer will pay to Seller in cash €1,700,000 (the “ Purchase Price ”).

(b) Upon the terms and subject to the conditions of this Agreement, prior to the Closing and on or before June 13, 2008 (the “ Funding Date ”), the Buyer (or an Affiliate of Buyer designated by the Buyer at least five (5) Business Days prior to the Funding Date (the “ Designated Lender ”)) shall make a loan to the Company in the amount of €3,650,000 (the “ Loan Amount ”) subject to the terms and conditions set forth in a loan agreement in the form attached hereto as Exhibit A (the “ Loan Agreement ”). Notwithstanding the foregoing, the Loan Agreement shall be executed and registered with French Tax authorities at least one (1) Business Day prior to the Funding Date by the Buyer at its cost.

Section 2.2 Closing; Funding Date .

(a) On the Funding Date, the transactions contemplated by Section 2.1(b) shall take place at a closing to be held at the offices of Gibson, Dunn & Crutcher LLP, 166 rue du faubourg Saint-Honoré, 75008 Paris, France. The sale and purchase of the Shares shall take place (the “ Closing ”) at such time to be agreed upon by the Buyer and the Seller on the later to occur of (i) the fifth (5th) Business Day after satisfaction or, if permissible, waiver of the conditions required to be satisfied prior to the Closing, as set forth in Section 6.1(a) and Section 6.3(r) , or (ii) July 1, 2008, or at such later date as the Seller and the Buyer mutually may agree in writing. The day on which the Closing takes place is referred to as the “ Closing Date .”

 

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(b) At the Closing, (i) the Buyer shall deliver to the Seller, by irrevocable wire transfer to a bank account designated in writing by the Seller to the Buyer at least five (5) Business Days prior to the Closing Date, an amount equal to €1,700,000 in immediately available funds, representing the Purchase Price together with evidence of confirmed wire instructions accompanied by a service confirmation number to Buyer’s counsel, (ii) the documentation required to have been delivered into Escrow pursuant to Section 6.3(k) shall be automatically released and (iii) the Buyer shall (A) annotate the transfer of the Shares to the Buyer in the share transfer registry ( registre des mouvements de titres ) of the Company and (B) annotate the Shares in the Buyer’s shareholder account ( compte d’actionnaire ) with the Company.

(c) On the Funding Date and subject to the satisfaction or, if permissible, waiver of the conditions set forth in the Loan Agreement and the conditions required to be satisfied prior to the Funding Date, as set forth in Article VI , the Buyer (or the Designated Lender) shall deliver to the Company, by wire transfer to a bank account designated in writing by the Company to the Buyer at least five (5) Business Days prior to the Funding Date, an amount equal to €3,650,000 in immediately available funds, representing the Loan Amount.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

OF THE SELLER, THE COMPANY AND PALLADIUM

As an inducement to the Buyer to enter into this Agreement and to consummate the transactions contemplated herein, the Seller, the Company and Palladium, severally and not jointly, represent and warrant to the Buyer that, except as set forth in the Schedules hereto (which Schedules make explicit reference to a particular representation or warranty as to which exception is taken, which in each case shall constitute the sole representation and warranty as to which such exception shall apply), and except that, with respect to the Company and Palladium, their representations and warranties are limited to those matters set forth in Sections 3.2 and 3.3 , as of the date hereof and as of the Funding Date and the Closing Date, and, in respect of the representations and warranties referred to in Section 6.3(a) , as of the Future Closing Date (in each case, as though made on such dates):

Section 3.1 Organization and Qualification .

(a) Each of the Company and its Subsidiaries (i) is (or, with respect to the Company, shall be on the Funding Date and the Closing Date) a corporation duly organized, validly existing and in good standing under the laws of France as set forth in Schedule 3.1(a) , (ii) is (or, with respect to the Company, shall be on the Funding Date and the Closing Date) duly qualified or licensed to do business, and is (or, with respect to the Company, shall be on the Funding Date and the Closing Date) in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except for any such failures to be so qualified or licensed and in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect and (iii) has full corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted.

 

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(b) The Seller has heretofore furnished to the Buyer a complete and correct copy of the certificate of incorporation ( extrait K-Bis) and bylaws, each as amended to date, of each of the Company’s Subsidiaries. Such certificates of incorporation and bylaws are in full force and effect. Neither the Company nor any of its Subsidiaries is in violation of any of the provisions of its certificate of incorporation or bylaws. The transfer books ( registre des mouvements de titres and comptes d’actionnaires ) and minute books of each of the Subsidiaries, copies of which have been made available for inspection by the Buyer prior to the date hereof, are true and complete. The transfer books ( registre des mouvements de titres and comptes d’actionnaires ) and minute books of the Company shall be true and complete on the Funding Date and the Closing Date.

(c) All decisions taken and undertakings given by the corporate bodies within the Company and each of its Subsidiaries and/or their directors or managers (including, without limitation, in respect of the conversion of Palladium into a société par actions simplifiée ) were validly taken, duly authorized or ratified by the competent corporate bodies in accordance with applicable Laws and with the by-laws of the company concerned and, where necessary, were validly recorded in the company registers. All restructuring transactions made by the Company or any of its Subsidiaries prior to the date hereof (including, without limitation, any merger, contribution or conversion) have been validly made in accordance with all applicable Laws and have not resulted and will not result in any Liabilities for the Company or any of its Subsidiaries other than as recorded in the Financial Statements.

Section 3.2 Authority . The Seller has the capacity to enter into this Agreement and each of the Ancillary Agreements to which he will be a party, to consummate the transactions contemplated hereby and thereby and to comply with the terms, conditions and provisions hereof and thereof. Each of the Company and Palladium has full corporate power and authority to execute and deliver this Agreement and each of the Ancillary Agreements to which it will be a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by each of the Company and Palladium of this Agreement and each of the Ancillary Agreements to which it will be a party and the consummation by each of the Company and Palladium of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action. This Agreement has been, and upon their execution each of the Ancillary Agreements will have been, duly executed and delivered by the Seller, the Company and Palladium, as applicable. This Agreement constitutes, and upon their execution each of the Ancillary Agreements will constitute, the legal, valid and binding obligations of the Seller, the Company and Palladium, as applicable, enforceable against the Seller, the Company and Palladium in accordance with their respective terms.

Section 3.3 No Conflict; Required Filings and Consents .

(a) The execution, delivery and performance by each of the Seller, the Company and Palladium of this Agreement and each of the Ancillary Agreements, and the consummation of the transactions contemplated hereby and thereby, do not and will not:

(i) conflict with or violate the certificate of incorporation or bylaws of the Company or any of its Subsidiaries;

 

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(ii) conflict with or violate any Law applicable to the Seller or the Company or any of its Subsidiaries or by which any property or asset of the Seller or the Company or any of its Subsidiaries is bound or affected; or

(iii) result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, would become a default) under, require any consent of or notice to any Person pursuant to, give to others any right of termination, amendment, modification, acceleration or cancellation of, allow the imposition of any fees or penalties, require the offering or making of any payment or redemption, give rise to any increased, guaranteed, accelerated or additional rights or entitlements of any Person or otherwise adversely affect any rights of the Company or any of its Subsidiaries under, or result in the creation of any Encumbrance on any property, asset or right of the Company or any of its Subsidiaries pursuant to, any note, bond, mortgage, indenture, agreement, lease, license, permit, franchise, instrument, obligation or other Contract to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties, assets or rights are bound or affected.

(b) None of the Seller or the Company or any of its Subsidiaries is required to file, seek or obtain any notice, authorization, approval, order, permit or consent of or with any Governmental Authority in connection with the execution, delivery and performance by the Seller, the Company and Palladium of this Agreement and each of the Ancillary Agreements to which the Seller, the Company or Palladium will be a party or the consummation of the transactions contemplated hereby or thereby or in order to prevent the termination of any right, privilege, license or qualification of the Company or any of its Subsidiaries.

Section 3.4 Shares . As of the Funding Date, the Closing Date and the Future Closing Date, the Seller is the owner of the Shares and the Other Shares, as applicable, free and clear of any Encumbrance. The Seller has the right, authority and power to sell, assign and transfer the Equity Interests to the Buyer. Upon delivery or release to the Buyer of (i) a duly executed stock transfer form ( ordre de mouvement ) transferring the ownership of the Shares or the Other Shares, as applicable, to the Buyer and (ii) evidence of (A) the annotation of the transfer of the Shares or the Other Shares, as applicable, to the Buyer in the share transfer registry ( registre des mouvements de titres ) of the Company and (B) the annotation of the Shares or the Other Shares, as applicable, in the Buyer’s shareholder account ( compte d’actionnaire ) with the Company at the Closing or the Future Closing, as applicable, and the Buyer’s payment of the Purchase Price or the Fixed Future Purchase Price, as applicable, the Buyer shall acquire good, valid and marketable title to the Shares or the Other Shares, as applicable, free and clear of any Encumbrance other than Encumbrances created by the Buyer. The Shares represent 57% of the capital stock of, and entitle the holder thereof to 57% of the voting rights in, the Company. The Other Shares represent 43% of the capital stock of, and entitle the holder thereof to 43% of the voting rights in, the Company.

Section 3.5 Capitalization . On each of the Funding Date and the Closing Date, the capital stock of the Company shall consist of 219,750 shares, all of which shall have been validly issued and fully paid. Schedule 3.5 sets forth, for each Subsidiary of the Company, the amount of its capital stock and the owners thereof. In this respect, JB Martin does not hold any share of Palladium nor any right as a shareholder of that company of any nature whatsoever. He has no right, claim or action of any kind against Palladium and/or any of its shareholders. Except for

 

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the Shares, the Other Shares and except as set forth in Schedule 3.5 , neither the Company nor any of its Subsidiaries has issued or agreed to issue any: (i) share of capital stock or other equity or ownership interest; (ii) option, warrant, security or interest convertible into or exchangeable or exercisable for the purchase of shares of capital stock or other equity or ownership interests or otherwise giving access to their capital stock; (iii) interest in the ownership or earnings of the Company or any of its Subsidiaries or other equity equivalent or equity-based award or right; or (iv) bond, debenture or other indebtedness or instrument having the right to vote or convertible or exchangeable for securities having the right to vote. Each share of capital stock or other equity or ownership interest of the Company and each of its Subsidiaries is duly authorized, validly issued, fully paid and nonassessable, and in the case of its Subsidiaries, except as set forth in Schedule 3.5 , each such share or other equity or ownership interest is owned by the Company or another Subsidiary, free and clear of any Encumbrance. All of the aforesaid shares or other equity or ownership interests have been offered, sold and delivered by the Company or a Subsidiary in compliance with all applicable Laws. Except as set forth in Schedule 3.5 and except as expressly contemplated by this Agreement, there are no outstanding obligations of the Company or any of its Subsidiaries to issue, sell or transfer or repurchase, redeem or otherwise acquire, or that relate to the holding, voting or disposition of or that restrict the transfer of, the issued or unissued capital stock or other equity or ownership interests of the Company or any of its Subsidiaries. No shares of capital stock or other equity or ownership interests of the Company or any of its Subsidiaries have been issued in violation of any rights, agreements, arrangements or commitments under any provision of applicable Law, the certificate of incorporation or bylaws of the Company or any of its Subsidiaries or any Contract to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound.

Section 3.6 Equity Interests . Except for the Subsidiaries listed in Schedule 3.5 , neither the Company nor any of its Subsidiaries directly or indirectly owns (or has ever been the owner of) any equity, partnership, membership or similar interest in, or any interest convertible into, exercisable for the purchase of or exchangeable for any such equity, partnership, membership or similar interest, or is under any current or prospective obligation to form or participate in, provide funds to, make any loan, capital contribution or other investment in or assume any Liability or obligation of, any Person. Except for the interest to be acquired by the Company in SC Spitfire Finance, neither the Company nor any of its Subsidiaries directly or indirectly owns (or has ever been the owner of) any interest in any unlimited liability company or entity.

Section 3.7 Minority Shareholders and Subsidiaries .

(a) The Seller has timely and validly exercised, or caused to be exercised, his option under the agreements entered into between the Seller, on the one hand, and Didier Jacquard and Didier Coussin (collectively, the “ Minority Shareholders ”), on the other hand, on January 23, 2008 as amended on April 29, 2008 (together, the “ Options ”), to cause the Company to acquire, the equity interests held by the Minority Shareholders in SC Spitfire Finance, Pallinvest SAS and Vantage Finance SAS (the “ Restructure Subs ”). The contribution by the Seller to the Company of his shares in each of SC Spitfire Finance and Vantage Finance SAS, each of the acquisitions by the Company of the equity or ownership interests held by the Minority Shareholders of the Restructure Subs, and the repayment of the shareholders’ loan granted by Didier Jacquard to Vantage Finance SAS (collectively, the “ Restructuring ”), all as

 

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contemplated by Section 5.10 , will be (and, as of the Closing Date, has been) (i) effected in compliance with all applicable Laws and (ii) duly authorized, executed, delivered and performed by all parties thereto.

(b) Except as set forth in Schedule 3.7(b) , the execution, delivery and performance by the Seller, the Company and its Subsidiaries and the Minority Shareholders thereof of the respective contribution and acquisition agreements will not (and, as of the Closing Date, has not) result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, would become a default) under, require any consent of or notice to any Person pursuant to, give to others any right of termination, amendment, modification, acceleration or cancellation of, allow the imposition of any fees or penalties, result in any costs or Taxes (and will be Tax neutral) or create any deferred Liability, require the offering or making of any payment or redemption, give rise to any increased, guaranteed, accelerated or additional rights or entitlements of any Person or otherwise adversely affect any rights of the Company or any of its Subsidiaries under, or result in the creation of any Encumbrance on any property, asset or right of the Company or any of its Subsidiaries pursuant to, any note, bond, mortgage, indenture, agreement, lease, license, permit, franchise, instrument, obligation or other Contract to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties, assets or rights are bound or affected.

(c) The Company and its Subsidiaries and the Minority Shareholders thereof will (and, as of the Closing Date, have) timely file, seek or obtain any required notice, authorization, approval, order, permit or consent of or with any Person or Governmental Authority in connection with the execution, delivery and performance by such parties of the contribution and acquisition agreements or in order to prevent the termination of any right, privilege, license or qualification of the Company or any of its Subsidiaries. Upon completion of the Restructuring and as of the Closing Date, the amount of capital stock and the owners thereof for the Company and its Subsidiaries will be as set forth in Schedule 3.7(c) .

(d) The Minority Shareholders have no Actions, causes of Action, liabilities, obligations, agreements, controversies, judgments or demands arising out of, relating to or any way connected with the Company and its Subsidiaries or the Buyer, including in connection with the acquisition by the Company of their equity or ownership interests in the Restructure Subs as contemplated in this Section 3.7 .

Section 3.8 Financial Statements; No Undisclosed Liabilities .

(a) True and complete copies of the (i) audited financial statements (including balance sheet and related statement of income and notes thereto), shareholders’ equity and cash flows of Palladium for the fiscal year ended September 30, 2007, (ii) audited financial statements (including balance sheet and related statement of income and notes thereto), shareholders’ equity and cash flows of Pallinvest SAS for the fiscal year ended March 31, 2007, (iii) financial statements (including balance sheet and related statement of income), shareholders’ equity and cash flows of SC Spitfire Finance for the fiscal year ended December 31, 2007 and (iv) unaudited accounts for Vantage Finance SAS covering the period beginning as at the date of creation of the company and ending on December 31, 2007 (together with the financial statements delivered pursuant to Section 5.19 , the “ Financial Statements ”), are attached hereto as

 

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Schedule 3.8(a) . Each of the Financial Statements (i) gives a true and fair view ( sont réguliers et sincères et donnent une image fidèle ) of the financial position of the relevant company, (ii) has been prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto) and (iii) fairly presents, in all material respects, the financial position, results of operations and cash flows of the relevant company, as at the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein.

(b) Except as and to the extent adequately accrued or reserved against in the respective balance sheets included in the Financial Statements (such balance sheets, together with all related notes and schedules thereto, the “ Balance Sheets ”), none of the Company’s Subsidiaries has any Liability or obligation of any nature, whether accrued, absolute, contingent or otherwise, whether known or unknown and whether or not required by GAAP to be reflected in a balance sheet of such Subsidiary or disclosed in the notes thereto, except for Liabilities and obligations, incurred in the ordinary course of business consistent with past practice since the date of the respective Balance Sheets, that are not, individually or in the aggregate, material to such Subsidiary.

(c) Except as set forth in Schedule 3.8(c) , the Company does not have any Liability or obligation of any nature, whether accrued, absolute, contingent or otherwise, whether known or unknown.

(d) The books of account and financial records of the Company’s Subsidiaries are true and correct and have been prepared and are maintained in accordance with sound accounting practice.

Section 3.9 Absence of Certain Changes or Events . Since the respective dates of the Balances Sheets: (a) the Company and its Subsidiaries have conducted their businesses only in the ordinary course consistent with past practice; (b) there has not been any change, event or development or prospective change, event or development that, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect; (c) neither the Company nor any of its Subsidiaries has suffered any loss, damage, destruction or other casualty affecting any of its material properties or assets, whether or not covered by insurance; (d) except as set forth in Schedule 3.9 , neither the Company nor any of its Subsidiaries has made or committed to make any distribution of profits or reserves; and (e) none of the Company or any of its Subsidiaries has taken any action that, if taken after the date of this Agreement, would constitute a breach of any of the covenants set forth in Section 5.1 .

Section 3.10 Indebtedness . Neither the Company nor any of its Subsidiaries has any outstanding indebtedness for borrowed money except (a) as reflected in the Financial Statements and (b) as set forth in Schedule 3.10 . Except as set forth in Schedule 3.10 , none of the Company or any of its Subsidiaries is a guarantor or indemnitor or bound by any off-balance sheet undertaking or otherwise contingently liable for any such indebtedness. There exists no default under the provisions of any instrument evidencing any such indebtedness or of any agreement relating thereto.

 

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Section 3.11 Compliance with Law; Permits .

(a) Each of the Company and its Subsidiaries is and has been in compliance in all material respects with all Laws applicable to it. Except as set forth in Schedule 3.11(a) , none of the Company, any of its Subsidiaries or any of its or their executive officers has received during the past five years, nor is there any basis for, any notice, order, complaint or other communication from any Governmental Authority or any other Person that the Company or any of its Subsidiaries is not in compliance in any material respect with any Law applicable to it.

(b) Each of the Company and its Subsidiaries is in possession of all permits, licenses, franchises, approvals, certificates, consents, waivers, concessions, exemptions, orders, registrations, notices or other authorizations of any Governmental Authority necessary for each of the Company and its Subsidiaries to own, lease and operate its properties and to carry on its business in all material respects as currently conducted (the “ Permits ”). Each of the Company and its Subsidiaries is and has been in compliance in all material respects with all such Permits. No suspension, cancellation, modification, revocation or nonrenewal of any Permit is pending or, to the knowledge of the Seller, threatened. The Company and its Subsidiaries will continue to have the use and benefit of all Permits following consummation of the transactions contemplated hereby. No Permit is held in the name of any employee, officer, director, stockholder, agent or otherwise on behalf of the Company or any of its Subsidiaries.

Section 3.12 Litigation . Except as set forth in Schedule 3.12 , there is no Action pending or, to the knowledge of the Seller, threatened against the Company or any of its Subsidiaries, or any material property or asset of the Company or any of its Subsidiaries, or any of the officers or directors of the Company or any of its Subsidiaries in regards to their actions as such, nor is there any basis for any such Action. There is no Action pending or, to the knowledge of the Seller, threatened seeking to prevent, hinder, modify, delay or challenge the transactions contemplated by this Agreement (including the transactions contemplated by Section 5.10 ) or the Ancillary Agreements. There is no outstanding order, writ, judgment, injunction, decree, determination or award of, or pending or, to the knowledge of the Seller, threatened investigation by, any Governmental Authority relating to the Company, any of its Subsidiaries, any of their respective officers or directors, any of their respective properties or assets or the transactions contemplated by this Agreement or the Ancillary Agreements. There is no Action by the Company or any of its Subsidiaries pending, or which the Company or any of its Subsidiaries has commenced preparations to initiate, against any other Person.

Section 3.13 Labor and Employment Matters .

(a) Except as set forth on Schedule 3.13 , (i) neither the Company nor any of its Subsidiaries is, or during the five years preceding the date hereof was, a party to any labor or collective bargaining agreement or other company collective agreement that pertains to employees of the Company or any of its Subsidiaries, and (ii) there is, and during the past three years there has been, no labor dispute, strike, controversy, slowdown, collective dismissal, work stoppage or lockout pending or, to the knowledge of the Seller, threatened against or affecting the Company or any of its Subsidiaries, nor is there any basis for any of the foregoing.

 

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(b) Except as set forth on Schedule 3.13 , there are no current employment contracts or consulting agreements by which the Company or any of its Subsidiaries is bound, and no deferred compensation, bonus, incentive compensation, stock option, severance or termination pay agreement or plan, profit sharing agreements, savings agreements, retirement programs or any other employee benefit plan, agreement, arrangement or commitment, whether formal or informal, maintained, entered into or contributed to, or which is required to be maintained, entered into or contributed to, by the Company or any of its Subsidiaries for the benefit of any current or former employee, officer or director of the Company or any of its Subsidiaries, or with respect to which the Company or any of its Subsidiaries has any liability, contingent or otherwise (collectively, the “ Plans ”). With respect to each Plan, (i) all employer and employee contributions to each Plan required by Law or by the terms of such Plan have been made, or, if applicable, accrued in accordance with normal accounting practices, and a pro rata contribution for the period prior to and including the date of this Agreement has been made or accrued and (ii) each Plan has been maintained in good standing with applicable regulatory authorities and is now and always has been operated in full compliance with all applicable Laws.

(c) Neither the Company nor any of its Subsidiaries has engaged or is engaging in any unfair labor practice. No unfair labor practice or labor charge or complaint is pending or, to the knowledge of the Seller, threatened with respect to the Company or any of its Subsidiaries before the Labor Inspection or any other Governmental Authority. Except as set forth in Schedule 3.13 , any Laws relating to work councils (“ comités d’entreprise ”), workers’ representatives (“ délégués du personnel ”) and similar bodies have been complied with by the Company and its Subsidiaries.

(d) The Company and each of its Subsidiaries have withheld and paid to the appropriate Governmental Authority or are holding for payment not yet due to such Governmental Authority all amounts required to be withheld from employees of the Company or any of its Subsidiaries and are not liable for any arrears of wages, Taxes, penalties or other sums for failure to comply with any applicable Laws relating to the employment of labor. The Company and each of its Subsidiaries have paid in full to all their respective employees or adequately accrued in accordance with GAAP for all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such employees.

(e) None of the Company, any of its Subsidiaries or any of its or their executive officers has received within the past five years any notice of intent by the Labor Inspection or any other Governmental Authority responsible for the enforcement of labor or employment laws to conduct an investigation relating to the Company or any of its Subsidiaries and, to the knowledge of the Seller, no such investigation is in progress. To the knowledge of the Seller, no current employee or officer of the Company or any of its Subsidiaries intends, or is expected, to terminate his employment relationship with such entity following the consummation of the transactions contemplated hereby.

Section 3.14 Title to, Sufficiency and Condition of Assets .

(a) The Company and its Subsidiaries have good and valid title to or a valid leasehold interest in all of their assets, including their business ( fonds de commerce ) and all of the assets reflected on the Balance Sheets or acquired in the ordinary course of business since the

 

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date of the Balance Sheet, except those sold or otherwise disposed of for fair value since the respective dates of the Balance Sheets in the ordinary course of business consistent with past practice. The assets owned or leased by the Company and its Subsidiaries constitute all of the assets necessary for the Company and its Subsidiaries to carry on their respective businesses as currently conducted. None of the assets owned or leased by the Company or any of its Subsidiaries is subject to any Encumbrance, other than (i) liens for current Taxes and assessments not yet past due, (ii) mechanics’, workmen’s, repairmen’s, warehousemen’s and carriers’ liens arising in the ordinary course of business of the Company or such Subsidiary consistent with past practice and (iii) any such matters of record, Encumbrances and other imperfections of title that do not, individually or in the aggregate, materially impair the continued ownership, use and operation of the assets to which they relate in the business of the Company and its Subsidiaries as currently conducted (collectively, “ Permitted Encumbrances ”).

(b) Except as set forth in Schedule 3.14(b) , all tangible assets owned or leased by the Company or its Subsidiaries have been maintained in all material respects in accordance with generally accepted industry practice, are in all material respects in good operating condition and repair, ordinary wear and tear excepted, and are adequate for the uses to which they are being put.

This Section 3.14 does not relate to real property or interests in real property, such items being the subject of Section 3.15 , or to Intellectual Property, such items being the subject of Section 3.16 .

Section 3.15 Real Property .

(a) Neither the Company nor any of its Subsidiaries own any Owned Real Property. Schedule 3.15(a) sets forth a true and complete list of all Leased Real Property. Each of the Company and its Subsidiaries has good and marketable leasehold title to all Leased Real Property, free and clear of all Encumbrances except Permitted Encumbrances. No parcel of Leased Real Property is subject to any governmental decree or order to be sold or is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefore, nor, to the knowledge of the Seller, has any such condemnation, expropriation or taking been proposed. All leases of Leased Real Property and all amendments and modifications thereto are valid, enforceable and in full force and effect, and there exists no default under any such lease by the Company, any of its Subsidiaries or any other party thereto, nor any event which, with notice or lapse of time or both, would constitute a default thereunder by the Company, any of its Subsidiaries or any other party thereto. All leases of Leased Real Property shall remain valid and binding in accordance with their terms following the Closing and following the transactions contemplated by Section 5.10 .

(b) There are no contractual or legal restrictions that preclude or restrict the ability to use any Leased Real Property by the Company or any of its Subsidiaries for the current or contemplated use of such real property. All plants, warehouses, distribution centers, structures and other buildings on the Leased Real Property are adequately maintained and are in good operating condition and repair for the requirements of the business of the Company and its Subsidiaries as currently conducted.

 

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Section 3.16 Intellectual Property .

(a) Schedule 3.16 sets forth a true and complete list of all (i) registered and material unregistered Marks, (ii) Patents and (iii) registered Copyrights, including any pending applications to register any of the foregoing, and (iv) all other Intellectual Property used in the Company’s and its Subsidiaries’ businesses, owned (in whole or in part) by or licensed to the Company or any of its Subsidiaries, identifying for each (x) whether it is owned by or licensed to the Company or the relevant Subsidiary, (y) the country of registration (or other demarcation by country, as applicable) and (z) the owner or licensor.

(b) No Mark owned by or exclusively licensed to the Company or any of its Subsidiaries that is or ever was registered or the subject of an application for registration has been or is now involved in any opposition, invalidation or cancellation proceeding and, to the knowledge of the Seller, no such proceeding is or has been threatened with respect to any of such Marks. No Patent identified on Schedule 3.16 has been or is now involved in any interference, reissue or reexamination proceeding, and, to the knowledge of the Seller, no such proceeding is or has been threatened with respect to any of such Patents.

(c) The Company and its Subsidiaries (i) exclusively own, or hold a valid license from a third party pursuant to a written license agreement that remains in effect, free and clear of any and all Encumbrances (other than those identified on Schedule 3.16(c) ), or (ii) have prepared and delivered in draft form to the Buyer (or will prepare and deliver in draft form to the Buyer at least five (5) Business Days prior to the Funding Date) all documentation necessary to record exclusive public-record ownership in Palladium of all Intellectual Property identified on Schedule 3.16 . Neither the Company nor any of its Subsidiaries has received any notice or claim challenging the Company’s or any such Subsidiary’s sole ownership, free and clear of any Encumbrances, of any of the Intellectual Property owned (in whole or in part) by the Company or any of its Subsidiaries, nor to the knowledge of the Seller is there a reasonable basis for any claim that the Company or the applicable Subsidiary does not so own any of such Intellectual Property.

(d) Each of the Company and its Subsidiaries has taken all reasonable steps in accordance with standard industry practices to protect its rights in and maintain its Intellectual Property and at all times has maintained the confidentiality of all information that constitutes or constituted a Trade Secret of the Company or any of its Subsidiaries. Without limiting the generality of the foregoing, each of the Marks identified on Schedule 3.16 is registered in the name of Palladium on all relevant public registers existing in any countries where Palladium is the owner of such Mark as shown on Schedule 3.16 , except with respect to Mark 141336 which is registered in Turkey for which filing requirements in respect of the merger between Financiere Palladium and Palladium have not been fulfilled. All current and former employees, consultants and contractors of the Company or any of its Subsidiaries have executed and delivered proprietary information, confidentiality and assignment agreements reasonably necessary to transfer to the Company and its Subsidiaries all rights they may have on the Intellectual Property used by the Company and its Subsidiaries in their businesses.

(e) All registered Marks, issued Patents and registered Copyrights identified on Schedule 3.16(e) (“ Company Registered IP ”) are valid and subsisting and enforceable, and

 

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neither the Company nor any of its Subsidiaries has received any notice or claim challenging the validity or enforceability of any Intellectual Property owned by or licensed to the Company or any Subsidiary thereof (the “ Company IP ”) or alleging any misuse of any Company IP. Neither the Company nor any of its Subsidiaries has taken any action that could reasonably be expected to result in (or failed to take any action if such failure could reasonably be expected to result in) the abandonment, cancellation, forfeiture, relinquishment, invalidation or unenforceability of any of the Company Registered IP (including the failure to make any registration, pay any filing, examination, issuance, post registration and maintenance fees, annuities and the like).

(f) The development, manufacture, sale, marketing, advertising, distribution or other commercial exploitation of products, and the provision of any services, by or on behalf of the Company or any of its Subsidiaries, and all of the other activities or operations of the Company or any of its Subsidiaries, have not infringed upon, misappropriated, violated, diluted or constituted the unauthorized use of, any Intellectual Property of any third party, and neither the Company nor any of its Subsidiaries has received any notice or claim asserting or suggesting that any such infringement, misappropriation, violation, dilution or unauthorized use is or may be occurring or has or may have occurred, nor to the knowledge of the Seller, is there a reasonable basis therefor. No Intellectual Property owned by or licensed to the Company or any of its Subsidiaries is subject to any outstanding order, judgment, decree, stipulation or agreement restricting the use or licensing thereof by the Company or its Subsidiaries. To the knowledge of the Seller, no third party is misappropriating, infringing, diluting or violating any Intellectual Property owned by or exclusively licensed to the Company or any of its Subsidiaries.

(g) Except as set forth in Schedule 3.16(g) , neither the Company nor any of its Subsidiaries has transferred ownership of, or granted any license with respect to, any Company IP, nor has the Company or any of its Subsidiaries licensed any Intellectual Property from a third party. The Company and its Subsidiaries, as applicable, may transfer the Company IP, and the Company IP is freely transferable, to any Person, free and clear of any and all Encumbrances (other than those identified on Schedule 3.16(c) ). No loss or expiration of any Company IP used or in any way exploited by the Company or any of its Subsidiaries in the conduct of its business is threatened, pending or reasonably foreseeable, including, without limitation, in connection with the transactions contemplated in this Agreement.

(h) Each of the Company and its Subsidiaries is the rightful owner of its corporate name, and the use of such name by them shall not give rise to any claim or action by any third party.

(i) The representations and warranties set forth in Section 3.16(a) through (h) are made with respect to the Marks and the domain names set forth on Schedule 3.16(i).

(j) The following representations and warranties are made with respect to all other Marks and domain names (other than the Marks and domain names set forth on Schedule 3.16(i) ): (A) all of the Company Registered IP registered in each of Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, Spain, Sweden, Switzerland, Turkey and the United Kingdom is validly registered in the relevant jurisdiction and is freely transferable by Palladium to any Person, free and clear of any and all Encumbrances (other than those identified on Schedule

 

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3.16(c) ), (B) all of the validly registered Company Registered IP is freely transferable by Palladium to any Person, free and clear of any and all Encumbrances (other than those identified on Schedule 3.16(c) ), (C) the Company and its Subsidiaries have prepared and delivered in draft form to the Buyer (or will prepare and deliver in draft form to the Buyer at least five (5) Business Days prior to the Funding Date) all documentation necessary to record exclusive public-record ownership in Palladium of all Intellectual Property identified on Schedule 3.16 and (D) except as set forth in Schedule 3.16(g) , neither the Company nor any of its Subsidiaries has transferred ownership of, or granted any license with respect to, any Company IP, nor has the Company or any of its Subsidiaries licensed any Intellectual Property from a third party.

(k) Notwithstanding the foregoing provisions of this Section 3.16, the Seller makes no representations and warranties with respect to the Intellectual Property purchased by Palladium from Consolidated Shoe Company pursuant to that certain Agreement, dated as of March 28, 2008, by and between Consolidated Shoe Company and Palladium, and the subsequent transfer of such Intellectual Property to the Buyer.

Section 3.17 Taxes .

(a) The Company and its Subsidiaries have in accordance with Law accurately and timely prepared as well as timely filed all Tax Returns, and provided all information required to be provided by them in connection with such Tax Returns on or prior to the Funding Date and the Closing Date, as applicable. Such Tax Returns are accurate, complete and correct, do not contain a disclosure statement as to the Tax treatment of any item for purposes of avoiding a penalty and are not liable to be recti