Exhibit 10.6

 
ASSIGNMENT AND ASSUMPTION AGREEMENT
 
This Assignment and Assumption Agreement (this “Agreement”), dated as of the
21st day of March, 2008, by and among Zoots Corporation, a Delaware corporation
(“Zoots”), Zoots Holding Corporation, a Delaware corporation (“Holding”),
Delivery LLC, a Delaware limited liability company (“Delivery” and together with
Zoots and Holding, the “Companies,” each of which may be referred to from time
to time herein individually as a “Company”), USDC Portsmouth, Inc., a California
corporation (“Purchaser”) and U.S. Dry Cleaning Corporation, a Delaware
corporation (“Parent”).
 
W I T N E S S E T H:
 
WHEREAS, NewStar Financial, Inc. (“Seller”), as administrative agent and
successor lender under the Credit Agreement (as hereinafter defined) has a valid
and duly perfected security interest in and lien on substantially all of the
assets of the Companies, to secure all liabilities, obligations and indebtedness
owing to Seller under that certain Credit and Security Agreement, dated as of
April 1, 2005, among Zoots as borrower, Holding, Delivery and Widmer’s, LLC as
guarantors, and Seller (as successor lender thereunder) (as amended from time to
time, the “Credit Agreement”), and the other agreements, documents and
instruments entered into in connection therewith (collectively, the “Credit
Documents”);
 
WHEREAS, simultaneously with the execution and delivery of this Agreement,
Seller and Purchaser are entering into a Secured Party Sale Agreement, dated of
even date herewith (the “Sale Agreement”), providing for the purchase by
Purchaser of certain assets of the Companies pursuant to a private sale in
accordance with Section 9-610 of the UCC (the “Secured Party Sale”);
 
WHEREAS, the Companies have consented to the Secured Party Sale;
 
WHEREAS, Seller and Purchaser desire that the transactions contemplated by the
Sale Agreement be consummated as promptly as possible, and, in such regard, have
requested the cooperation and assistance of the Companies in order to consummate
those such transactions; and
 
WHEREAS, in partial consideration for Purchaser agreeing to execute and deliver
the Sale Agreement, and to consummate the transactions contemplated therein, and
for other good and valuable consideration, as set forth herein, the Companies
desire to execute and deliver this Agreement;
 
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants set
forth in this Agreement, and to induce Purchaser and Seller to execute and
deliver the Sale Agreement, and to consummate the transactions contemplated
therein, the parties hereto hereby agree as follows:
 

 
 

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1.     DEFINITIONS.
 
Capitalized terms used but not otherwise defined in this Agreement are used with
the meanings given those terms in the Sale Agreement.  In addition, as used in
this Agreement (including in the preamble and recitals above), the following
terms have the following definitions:
 
“Action” means any suit, order, litigation, arbitration, mediation, action or
other proceeding before any Governmental Authority, arbitrator or mediator.
 
“Affiliate” means, with respect to any specified Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such specified Person.
 
“Business” means the retail dry cleaning and laundry business engaged in by the
Companies using the “Portsmouth Network” (and related assets) and the locations
covered by the leases listed on Schedule 4(a) hereto during the one (1) year
period immediately prior to the date hereof.

“Business Day” means any day (other than a Saturday or Sunday) on which banks
are not required or authorized to close in The City of New York, New York.
 
“Code” means the Internal Revenue Code of 1986, as amended, and any rules or
regulations promulgated thereunder
 
“Company Material Adverse Effect” shall mean a material adverse effect on the
assets, properties, financial condition and/or prospects of the Business, taken
as a whole, other than as disclosed on Schedule 1 hereto; provided, however,
that in no event shall any of the following be or be taken into account in the
determination of whether a Company Material Adverse Effect has occurred: (i) any
change resulting from conditions affecting the retail dry cleaning and laundry
industries or from changes in general business, financial, political, capital
market or economic conditions (including any resulting from any hostilities, war
or military or terrorist attack anywhere in the world); (ii) any change
resulting from the announcement or pendency of the transactions contemplated by
this Agreement or attributable to the fact that Purchaser and its Affiliates are
the prospective owners of the Companies’ assets; (iii) any change resulting from
the compliance by any Company with the terms of, or the taking of any action by
any Company contemplated or permitted by, this Agreement; or (iv) any condition
described in any Schedule to this Agreement; (v) any change in applicable law.
 
“Company Transaction Documents” means, collectively, this Agreement and the
agreements, instruments and documents contemplated herein contemplated therein,
or otherwise incidental hereto, to be executed by any Company.
 
“Consent” means any consent, approval, authorization, qualification, waiver or
notification of or to a Governmental Authority or any other person or entity.
 
“Contract” means any written or oral contract, agreement, license, commitment,
undertaking or arrangement, whether express or implied, and includes purchase
and sale orders.
 

 
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“Conveyed Assets” means, collectively, the Assigned Contracts the Purchased
Assets (as defined in and to be acquired pursuant to the Sale Agreement) and the
Company Purchased Assets (as defined below in Section 4(c).
 
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.
 
“ERISA Affiliate” shall mean any entity which is a member of (1) a controlled
group of corporations (as defined in Section 414(b) of the Code), (2) a group of
trades or businesses under common control (as defined in Section 414(c) of the
Code), or (3) an affiliated service group (as defined under Section 414(m) of
the Code or the regulations under Section 414(o) of the Code), any of which
includes or within the six years preceding the date of this Agreement.
 
“Governmental Authority” means any government or any agency, bureau, commission,
court, department, official, political subdivision, tribunal or other
instrumentality of any government, whether federal, state or local, domestic or
foreign.
 
“Law” means any law (including, without limitation, principles of common law),
statute, code, regulation, treaty, permit, license, certificate, judgment,
order, writ, decree, award or other decision or requirement of any arbitrator or
Governmental Authority.
 
“License Agreement” means a license agreement by and between one or more of the
Companies and the Purchaser, in form and substance satisfactory to the Companies
and the Purchaser, pursuant to which the Companies will grant to the Purchaser
those rights described in Section 9(f) hereof.
 
“Lien” means any security interest, mortgage, lien, pledge, adverse claim,
interest, charge, option, pledge, right of first option, right of first refusal,
obligation or other restriction or encumbrance of any kind on title or transfer
of any nature whatsoever.
 
“Permit” means any Consent, license, registration, permit, franchise or
authorization issued, granted, given or otherwise made available by or under the
authority of any Governmental Authority or pursuant to any Law.
 
“Person” means an individual, a corporation, a partnership, a limited liability
company, a trust, an unincorporated association, a governmental entity or any
agency, instrumentality or political subdivision of a governmental entity, or
any other entity or body.
 
“Required Consents” means, collectively, written consents from the
counterparties to the contracts listed on Schedule 4(b), in form and substance
reasonably satisfactory to Purchaser.
 
“Tax Returns” means returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of any Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
 

 
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“Taxes” shall mean any and all taxes, fees, levies, duties, tariffs, imposts and
other similar charges of any kind imposed by any governmental authority,
including, without limitation: taxes or other charges on or with respect to
income, property, sales, use, payroll, employment, social security, workers’
compensation, unemployment compensation or net worth; taxes or other charges in
the nature of excise, withholding, ad valorem, stamp, transfer, value-added or
gains taxes; license, registration and documentation fees; and customs’ duties,
tariffs and similar charges.
 
“Transaction Documents” means, collectively, the Sale Agreement, the agreements,
instruments and documents contemplated therein or otherwise incidental thereto,
and the Company Transaction Documents.
 
“Transactions” means, collectively, the transactions contemplated in the
Transaction Documents.
 
“Virginia Property Taxes” has the meaning set forth in Section 2(m).
 
“Virginia Property Tax Liability” has the meaning set forth in Section 2(m).
 
2.     REPRESENTATIONS AND WARRANTIES OF THE COMPANIES.
 
The Companies hereby represent and warrant, jointly and severally, as of the
date hereof and as of the Closing Date, to Purchaser as follows:
 
(a)     The Obligations.  Pursuant to the Credit Agreement, and certain other
documents, instruments and agreements executed pursuant thereto or in connection
therewith, Seller has made loans to, and made other financial accommodations to
or for the benefit of, the Companies.  The repayment of the liabilities,
obligations and indebtedness owing to Seller are secured by valid, enforceable
and fully perfected Liens in favor of Seller against substantially all of the
Companies’ assets, including, without limitation, all of the Purchased Assets
(the “Seller Liens”).
 
(b)     Defaults; Right to Assign.  As a result of continuing defaults by the
Companies in the performance of their obligations and in repayment and
performance of the other liabilities under the Credit Agreement, Seller has the
right under Section 9-610 of the UCC, and under the Credit Documents, to sell
and transfer to any person or entity for value in a private sale all of the
Companies’ rights in and to any or all of the personal property and other assets
subject to the Seller Liens.
 
(c)     Organization; Authorization.  Each of the Companies is a corporation or
limited liability company, as the case may be, duly organized or formed, as the
case may be, validly existing and in good standing under the laws of the State
of Delaware, and has the requisite corporate or limited liability company power
and authority, as the case may be, to execute and deliver this Agreement and
each other Company Transaction Document to which it is a party and to perform
its obligations hereunder and thereunder.  The execution, delivery and
performance of this Agreement and each other Company Transaction Document have
been duly authorized by all necessary corporate or limited liability company
action, as the case may be, on the part of each relevant Company.  This
Agreement is, and each of the other Company Transaction Document shall be when
executed and delivered by each relevant Company, the valid and binding
obligations of such Company enforceable in accordance with its terms.
 

 
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(d)     No Conflict.  Neither the execution and delivery of this Agreement and
the other Company Transaction Documents, nor the consummation of any or all of
the Transactions, will violate the certificate or articles of incorporation,
by-laws, certificate of formation, operating agreement or other governing
documents of any of the Companies; (i) violate, be in conflict with, or
constitute a default under, or other than the Key Landlord Consents or as set
forth on Schedule 4(b), require the consent of any third party to, any material
contract or other agreement to which any of the Companies is a party; (ii)
violate any Law applicable to any of the Companies; or (iii) result in the
creation or imposition of any further Lien on any assets of any Company.
 
(e)     Brokers; Agents.  The Companies have retained the services of
Drycleaning Plus, National Commercial Brokers, and/or Matrix Capital Markets
Group, Inc. (collectively, the “Brokers”).  Fees or commissions owed to the
Brokers, if any, will be paid by the Companies.  The Companies have not dealt
with any agent, finder, broker or other representative in any manner which could
result in Purchaser being liable for any fee or commission in the nature of a
finder’s fee or originator’s fee in connection with the subject matter of this
Agreement.
 
(f)     Sufficiency of Assets; Title; Condition. Except as set forth on Schedule
2(f), the Purchased Assets constitute all of the assets, tangible and
intangible, of any nature whatsoever, necessary to operate the Business in the
manner currently and historically operated by the Companies. The Companies’
liabilities to Seller under the Credit Agreement are secured by valid and
perfected Liens in favor of Seller against all of the Purchased Assets.  Except
as set forth on Schedule 2(f), to the knowledge of the Companies, each item of
tangible personal property included in the Purchased Assets and reasonably
required for the continued operation of the Business on a basis consistent with
the past practices of the Business immediately prior to the Closing is in good
operating condition or repair adequate for its present use, reasonable wear and
tear and routine or scheduled maintenance excepted.  Upon transfer of the
Company Purchased Assets, if any, to Purchaser as contemplated herein, Purchaser
will acquire good and marketable title thereto, free and clear of the Liens.
 
(g)     Assumed Contracts.  To the knowledge of the Companies, each Assumed
Contract is in full force and effect and is valid, binding and enforceable
against the parties thereto in accordance with its terms. Each Company has
performed in all material respects all obligations required to be performed by
it under each Assumed Contract to which it is a party, and to the knowledge of
each Company, no condition exists or event has occurred that, with or without
notice or lapse of time, would constitute a default or a basis for delay or
non-performance by any Company or by any other party thereto.
 
(h)     Financial Data Files; Other Records.  To the knowledge of the Companies,
the Companies have provided to Purchaser full and complete copies of all (x)
historical data files and other document relating to the financial information
of the Business and/or the point-of sale system and data files and (y) records
and other documents relating to all motor vehicles forming part of the Purchased
Assets (including, without limitation, maintenance records).
 

 
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(i)     Accounts Receivable.  Schedule 2(i) sets forth a true and complete list
of all accounts receivable of each Company arising from the Business and the
aging thereof as of two (2) Business Days prior to the date hereof.  Two (2)
Business Days prior to the Closing Date the Companies shall provide an updated
Schedule 2(i) to Purchaser, which shall set forth a true and complete list of
all accounts receivable of each Company arising from the Business and the aging
thereof as of such delivery date.  All such accounts receivable of the Companies
(i) represent sales actually made in the ordinary course of the Business, (ii)
do not represent obligations for goods sold on consignment and (iii) are not the
subject of any claims brought by or on behalf of any Company or any other party,
or to knowledge of any Company, are not disputed in any material respect.
 
(j)     Litigation.  Except as set forth on Schedule 2(j), there is no Action
pending or threatened seeking to enjoin, restrain or prohibit any of the
Transactions or that relates to (x) any Conveyed Asset or (y) to the knowledge
of the Companies, the retaining or employment of any consultant or employee in
connection with the Business.  Except as set forth on Schedule 2(j), there is no
Action pending or threatened that might call into question the validity of any
Transaction Document, or any action taken or to be taken pursuant hereto or
thereto.
 
(k)     Environmental Matters.  Except for any matter that would not reasonably
be expected to have a Company Material Adverse Effect, to the knowledge of the
Companies, the ownership and use by the Companies of the Conveyed Assets and the
conduct of the Business are in compliance with all applicable Legal Requirements
relating to pollution, environmental protection, hazardous substances and
related matters.  As used herein, “Legal Requirements” means all foreign,
federal, state and local statutes, laws, ordinances, judgments, decrees, orders,
rules, regulations, policies and guidelines applicable to the Companies’
businesses.  To the knowledge of the Companies, the Companies have not received
any notice from any Governmental Authority or any other Person of any alleged
violation or noncompliance.  For purposes of this Section, “hazardous substance”
shall mean oil or any other substance which is included within the definition of
a “hazardous substance,” “pollutant,” “toxic substance,” “toxic waste,”
“hazardous waste,” “contaminant” or other words of similar import in any
federal, state or local environmental law, statute, ordinance, rule or
regulation applicable to the Companies’ businesses.
 
(l)     Permits.  To the knowledge of the Companies, Schedule 2(l) lists all
Permits possessed by each Company relating to the Conveyed Assets and/or the
Business. To the knowledge of the Companies, each Company currently has, and at
all times since January 1, 2006 had, all Permits necessary or required under
applicable Law for the conduct of the Business except where the failure to have
such Permits did not and would not have a Company Material Adverse
Effect.  Except as set forth in Schedule 2(l), to the knowledge of the
Companies, all such Permits are in full force and effect, are transferable to
Purchaser by virtue of the transactions contemplated by this Agreement and the
Sale Agreement, and, to the knowledge of each Company, no suspension or
cancellation of any of them is being threatened.
 

 
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(m)     Tax Matters.  Other than as set forth on Schedule 2(m), the Companies
have properly prepared and timely filed, or will file on a timely basis, all Tax
Returns required to be filed by or on behalf of or with respect to the Companies
for any period and such Tax Returns are true, correct and complete in all
material respects.  Other than the property taxes owed by the Companies with
respect to the Processing Plant (the “Virginia Property Taxes”) or as otherwise
set forth on Schedule 2(m), all Taxes due and owing by any Company (whether or
not shown or required to be shown on any Tax Return) have been paid.  The
aggregate amount of the Companies’ liabilities with respect to the Virginia
Property Taxes (including, without limitation, all fees and penalties relating
thereto, if any), do not exceed $62,575.90 (such amount, the “Virginia Property
Tax Liability”).  To the knowledge of the Companies, none of the Purchased
Assets is subject to any Lien in favor of the United States pursuant to Section
6321 of the Code for nonpayment of taxes, or any lien in favor of any state or
locality pursuant to any comparable provision of state or local Law, under which
transferee liability might be imposed upon Purchaser as a buyer of such
Purchased Assets pursuant to Section 6323 of the Code or any comparable
provision of state or local Law.
 
(n)     Intellectual Property.  The Companies own or hold valid licenses to use
such Intellectual Property, without any infringement or misappropriation of the
rights of other Persons.  As used herein “Intellectual Property” means (a) the
trademarks “Zoots” and “The Cleaner Cleaner,” (b) the domain name zoots.com, and
(c) the 1-800 telephone number used in connection with the Business.
 
(o)     Employees.  Schedule 2(o) lists: (i) the names and titles of all current
employees of each Company employed in connection with the Business (the
“Relevant Employees”), whether such employees are full or part time employees or
temporary employees with each of their hourly rates or target salaries
(including amounts subject to performance criteria) and the current annual
salary payable to each such Relevant Employee as of the date hereof, and (ii)
the aggregate amount of such remuneration for each such Relevant Employee for
the calendar year 2007.  Except as set forth on Schedule 2(o), (A) no Company
has agreed (whether orally or in writing) to any increase in the compensation or
benefits payable to, or otherwise materially modified the terms of employment
of, any Relevant Employee from those in effect as of September 30, 2007, (y) all
Relevant Employees are “at will” under oral agreement and (B) there are no
employment agreements, arrangements or understandings with respect to such
Relevant Employees, other than customary 3% annual raises granted to employees
on the anniversary of their start date. No Company is bound by any union or
collective bargaining agreement or other agreement, written or oral, with any
trade or labor union, employees’ association or similar organization relating to
any Relevant Employee, nor is any Company subject to any pending or, to the
knowledge of any Company, threatened labor dispute or organization activity
relating to any Relevant Employee. Except as set forth on Schedule 2(o), there
are no pending claims or actions that have been asserted or instituted with
respect to workers compensation or asserting employment discrimination,
disability, wage and hour, wrongful discharge, harassment, breach of contract,
defamation, invasion of privacy, unemployment compensation, employee safety or
other similar claims relating to any Relevant Employee under which any Company
may have liability, contingent or otherwise. There are no present or, to any
Company’s knowledge,  threatened actions, work stoppages or other labor
difficulties relating to any Relevant Employee. Except as set forth on Schedule
2(o), no unfair labor practice, wrongful termination, or race, sex, age,
disability or other discrimination, complaint or other Action is pending with
respect to any Relevant Employee, nor, to any Company’s knowledge, is any such
complaint or other Action threatened, against any Company before the National
Labor Relations Board, Equal Employment Opportunity Commission or any other
Governmental Authority, and no grievance is pending, nor, to any Company’s
knowledge, is any grievance threatened against any Company.  The Companies have
provided to Purchaser full and complete copies of all contracts, reports and
other documentation in possession of any Company relating to each Relevant
Employee.
 

 
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(p)     Employee Benefit Plans.  Schedule 2(p) lists each of the Companies’
employee pension, profit sharing, deferred compensation, severance, cafeteria,
stock option, stock purchase, incentive, golden parachute, bonus, group or
individual medical and health benefits, welfare, insurance or other employee
benefit plan, program or arrangement (collectively, the “Company Plans”), which
is maintained or contributed to by any Company on behalf of any Relevant
Employee. Complete and correct copies of all such Company Plans have been made
available to Purchaser.  There is no Company Plan, nor has any Company at any
time maintained, administered, contributed or been required to contribute to any
“employee pension benefit plan” as defined in Section 3(2) of ERISA, which is
subject to the minimum funding requirements of Section 412 of the Code or
Section 302 of ERISA, or the provisions of Title IV of ERISA.  None of the
Company Plans is a “multiemployer pension plan” within the meaning of Section
3(37) of ERISA. Each Company Plan and any related trust agreement that is
intended to be qualified under the provisions of Section 401(a) of the Code has
received a favorable determination from the IRS to that effect, and, to the
knowledge of each Company, no circumstance exists that will or could reasonably
be expected to result in revocation of any such favorable determination letter.
Each Company Plan and any related trust agreement complies in all material
respects and has been maintained in material compliance with its terms and, both
as to form and in operation, with the requirements prescribed by any and all
Laws that are applicable to such plans, including but not limited to ERISA and
the Code.  No Company has any obligation to make any payment to or with respect
to any current or former employee pursuant to any severance agreement or retiree
medical benefit or other Company Plan, or would have any obligation to make any
severance or other payments to any employee if such employee was terminated
prior to, at or after the Closing.  No benefit, payment or other entitlement
under any Company Plan, or under any agreement relating to the employment of the
Relevant Employees, will be established or become accelerated, vested, payable
or funded by reason of the execution and delivery of this Agreement or the
consummation of the Transactions, and there are no claims pending, or to the
knowledge of any Company, threatened with respect to any Company Plan, other
than claims for the payment of benefits in the ordinary course of operation of
such Company Plan.
 
(q)     Purchased Assets.  The Companies have good, valid and marketable title
to the following assets (collectively, the “Purchased Assets”):
 
(i)       all of the tangible assets and all of the Companies’ rights in and to
the vehicle and personal property leases listed on Schedule 2(q)(i) hereto;
 
(ii)      all customer and prospective customer lists used in connection with
the operation of the Business;
 
(iii)     all customer goodwill generated in the operation of the Business;
 

 
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(iv)    all inventories of the Companies in connection with the Business,
including, without limitation, all purchased parts, materials and supplies, as
set forth on Schedule 2(q)(iv) hereto;
 
(v)     all accounts receivable of the Companies in connection with the
Business, including, without limitation, all accounts receivable set forth on
Schedule 2(i) hereto;
 
(vi)    all personal property, machinery, furniture, fixtures, leasehold
improvements, and equipment situated at the Companies’ retail dry cleaning and
laundry stores and processing facilities, and used in connection with the
operation of the Business;
 
(vii)   all real property leases and other contracts listed on Schedule 4(a);
 
(viii)  all prepaid items or accounts of the Companies relating solely to the
Business and described on Schedule 2(q)(vii) hereto;
 
(ix)     all of the deposits may by any Company under any lease or other
contract relating to the Business listed on Schedule 2(q)(x) hereto;
 
(x)     all computer equipment located at any of the premises located at the
locations covered by the leases listed on Schedule 4(a);
 
(xi)     all rights in the Intellectual Property described in Section 9(f)
below;
 
(xii)    cash of not less than $15,000;
 
(xiii)   all physical plans and designs of the Business’ labs and stores
(including, without limitation, blueprints and layouts); and
 
(xiv)   all books and records relating solely to the Business (if any).
 
(r)     Other Trademarks.  The Companies have good, valid and marketable title
to the trademarks “Zoots” and “The Cleaner Cleaner”.
 
b
 
3.     SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
 
(a)     The representations and warranties of the Companies contained in this
Agreement, or in any certificate or other instrument delivered in connection
herewith, shall survive the Closing and shall expire six (6) months after the
Closing Date, provided that if any party hereto, before expiration of a
representation or warranty given by another party hereto, delivers to such other
party a written notice alleging a breach of such representation or warranty, the
applicable representation or warranty shall survive until, but only for purposes
of, the resolution of the matter covered by such notice.
 

 
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(b)     From and after the date hereof, each Company shall, jointly and
severally, defend, indemnify and hold harmless Purchaser, Parent and their
respective Affiliates (each a “Purchaser Indemnified Party”) from, against and
in respect of any and all claims, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies (including, without
limitation, interest, penalties and reasonable attorneys’ fees) (“Losses”), that
such Purchaser Indemnified Party may incur, sustain or suffer resulting from or
arising out of (directly or indirectly) or in connection with (i) any breach of
or any inaccuracy in any representation or warranty of any Company contained in
this Agreement, or any other certificate or other document delivered by Seller
pursuant to this Agreement, or in any Schedule or Exhibit hereto or thereto,
and/or (ii) any breach or failure to perform any covenant or agreement of any
Company contained in this Agreement.
 
(c)     In the event that any Purchaser Indemnified Party shall have incurred,
sustained or suffered any Loss with respect to which it is entitled to be
indemnified under Section 4(b) above resulting from or arising out of (directly
or indirectly) or in connection with any breach of or any inaccuracy in any
representation or warranty of any Company contained in [Section 2(m) (other than
any income or franchise Taxes),] Section 2(q) or Section 2(r) above, Parent
shall, in addition to any other rights Purchaser or Parent  may have against the
Companies, have the right to set-off the full amount of such Loss against the
payments due under the Note, in which event the Note shall be deemed to be
automatically amended accordingly.  In addition, Parent shall have the right to
set-off against the payments due under the Note the full amount of the Losses
contemplated in Section 9(f)(iv) below, in which event the Note shall be deemed
to be automatically amended accordingly.
 
4.     ASSIGNMENT AND ASSUMPTION.
 
(a)     Assigned Contracts and Intellectual Property.  At the Closing, the
Companies shall assign to Purchaser all of their right, title and interest in
and to the following Contracts (collectively, the “Assigned Contracts”):
 
(i)     the real property leases and other contracts listed on Schedule 4(a);
and
 
(ii)     the vehicle, equipment and other personal property leases and loan
agreements listed on Schedule 2(q)(i) (representing outstanding payment
liabilities (including, without limitation, residual payments) of approximately
$156,000 in the aggregate).
 
(b)     Consents.  This Section 4 does not constitute an agreement to assign any
of the Assigned Contracts that are not capable of being validly assigned without
the Consent of any third party that has not been obtained on or prior to the
Closing Date (a “Nonassignable Contract”).  Schedule 4(b) sets forth a list of
each such Nonassignable Contract and all of the consent or other fee or
consideration payable to the counterparty to each such Nonassignable Contract in
connection with the obtaining of such Consent.  The Companies will use their
best efforts to obtain any Consent required to assign the Assigned Contracts to
Purchaser, and Purchaser will cooperate in any commercially reasonable manner
that the Companies request; provided that Purchaser will not be obligated to pay
any consent fee of other consideration required in order to obtain any such
Consent.  The relevant Company shall pay all consent fees and other
considerations required in order to obtain such Consents.  In the event that the
parties are unsuccessful in obtaining necessary Consents for the transfer of any
of the Assigned Contracts prior to the Closing, the Companies shall hold such
Assigned Contracts and take such action as may be reasonably requested by
Purchaser in order to place Purchaser, to the extent possible and consistent
with the appropriate documents relating to such Assigned Contracts, in the same
position as would have existed had such Consent been obtained prior to the
Closing and such portion of the Assigned Contracts transferred to Purchaser as
contemplated hereby.  As and when such Assigned Contracts become transferable,
the Companies will transfer such Assigned Contracts forthwith to Purchaser and
the assignment to Purchaser by the Companies of any such Assigned Contracts
shall be deemed effective at the time such Consent is obtained.  Nothing in this
Section 4(b) shall affect the rights of Purchaser under Section 1.6 of the Sale
Agreement.
 

 
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(c)     Company Purchased Assets.  It is the intention of the parties hereto
that the transactions contemplated by the Sale Agreement be consummated.  For
the avoidance of doubt, to the extent that any Purchased Assets described in the
Sale Agreement are not subject to perfected first priority liens in favor of
Seller, the Companies hereby transfer and assign to Purchaser all their right
and title in and to such Purchased Assets (the “Company Purchased Assets”).  The
Company Purchased Assets shall include, without limitation, all of those assets
described in clauses (i), (vi) (to the extent that any fixtures are deemed to be
real estate requiring a filing with local land records), (xii) and (xiii) on
Schedule 2(q), those assigned contracts relating to the assets described on
Schedule 2(n) and those assets described on Schedule 4(a).  Notwithstanding
anything to the contrary set forth herein, the Company Purchased Assets shall
not include any of the Companies’ rights under any agreement by and between one
or more of the Companies and the purchaser of any of the assets of one or more
of the Companies.
 
5.     ASSUMPTION OF LIABILITIES; COMPANY PURCHASE PRICE.
 
(a)     Assumed Liabilities.  At the Closing, Purchaser shall assume from the
Companies and thereafter pay, perform or otherwise discharge or satisfy when due
(except while contested in good faith by appropriate proceedings) all
liabilities (i) arising under any Assigned Contracts, but only to the extent
such liabilities accrue from and after the Closing Date and do not arise from,
and not attributable to, any breach, default or failure of performance
thereunder by any Company occurring on or prior to the Closing Date, and (ii)
with respect to Hired Employees expressly assumed pursuant to Section 5(d) below
(collectively, the “Assumed Liabilities”).  Except for the Assumed Liabilities,
the Companies shall remain responsible for, and Purchaser shall not directly or
indirectly, assume, or in any way become liable or responsible for, any
liability, obligation, debt or contingency of any Company, any Affiliate of any
Company, or the Business of any type or nature, whether liquidated or
unliquidated, known or unknown, actual or inchoate, accrued, contingent or
otherwise, and whether arising from facts existing or events occurring prior to,
on or after the date of this Agreement or the Closing.
 
(b)     Company Purchase Price.  At the Closing, the Companies shall sell to the
Purchaser, and Purchaser shall purchase from the Companies, pursuant to a Bill
of Sale in substantially the form attached hereto as Exhibit A, all  of the
Companies right, title and interest in the Company Purchased Assets.  The
purchase price for the Company Purchased Assets shall be $187,471.00 (the
“Company Purchase Price”).  In the event that the cash located in the stores
purchased by Purchaser pursuant to this Agreement and the Sale Agreement (the
“Cash On Hand”) is less than $15,000 at Closing, then the Company Purchase Price
shall be reduced by an amount equal to the difference between $15,000 and the
Cash On Hand.  The Company Purchase Price shall be paid as follows:  (a)
$99,895.10 shall be paid to the Companies, or their designee, at the Closing via
wire transfer in immediately available funds in accordance with wire
instructions to be provided by the Companies prior to Closing, (b) $25,000 shall
be paid to Commercial Bldg Assoc. LLC, the owner of the Portsmouth Plant (as
defined below), via wire transfer in immediately available funds in accordance
with wire instructions to be provided by the Companies prior to Closing; and (c)
an amount equal to the Virginia Property Tax Liability shall be paid by the
Purchaser to the Commonwealth of Virginia, in satisfaction of the Companies’
Virginia Property Taxes, at the Closing via wire transfer in immediately
available funds in accordance with wire instructions to be provided by the
Companies prior to Closing.
 

 
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(c)     Bill of Sale.  In consideration for the consummation by Purchaser of the
applicable Transactions (including, without limitation, the payment of the
Purchase Price), at the Closing, the Companies shall deliver to Purchaser, and
Purchaser shall accept from the Companies, pursuant to a Bill of Sale in
substantially the form attached hereto as Exhibit A, transferring Purchaser all
of the Companies’ rights, title and interest in and to the Purchased Assets.
 
(d)     Employees.
 
(i)       Not later than five (5) Business Days prior to the Closing, Schedule
2(o) shall be updated by the Companies to reflect any additional individuals who
become Relevant Employees in the ordinary course of the conduct of the Business
after the date of this Agreement and prior to the Closing and to otherwise
update the information set forth thereon (including, without limitation, a
description of all accrued but unpaid salaries, unpaid benefits and unused
vacation pay for all such Relevant Employees, up to and including the Closing
Date). The Companies shall provide Purchaser with all other information
reasonably requested by Purchaser pertaining to the Relevant Employees.
 
(ii)      Not earlier than twenty (20) nor later than two (2) days prior to the
Closing, Purchaser shall offer all Relevant Employees then actively employed by
the Companies employment with Purchaser, conditioned upon the Closing, on terms
of employment that are substantially similar to the terms of their employment in
effect as of Closing, provided that such Relevant Employees shall, if they
accept such offer of employment, be eligible to participate in employee benefit
plans, programs, arrangements and policies of the Purchaser (“Purchaser Employee
Benefit Plans”).  All Relevant Employees who elect to become employees of
Purchaser are hereinafter referred to collectively as “Hired Employees” and
individually as a “Hired Employee”.  The Hired Employees who accept Purchaser’s
offer of employment shall become employees of Purchaser immediately following
the Closing.  Purchaser shall, from and after the Closing Date, assume the
Companies’ obligations to the Hired Employees with respect to all unused
paid-time-accrued as listed on Schedule 2(o) hereto.
 
(iii)     From and after the Closing Date, the Company shall remain solely
responsible for any and all liabilities in respect of continued coverage under
COBRA, Section 4980B of the Code and Part 6 of Subtitle of Title I of ERISA and
the regulations thereunder, and any similar state law, for all Relevant
Employees who do not become Hired Employees who are covered under any Purchaser
Employee Benefit Plan that is a group health plan.
 

 
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(iv)     From and after the Closing Date, the Company shall remain solely
responsible for any and all liabilities in respect of the Relevant Employees,
including the Hired Employees, related to the Company Plans.  Purchaser and its
Affiliates are not assuming any obligation or liability of any Company or any of
its ERISA Affiliates, including any Company Plan, or any liability thereunder,
to any Hired Employee or other Person except to the extent such liability or
obligation is specifically assumed pursuant to this Section 5(c)  or any other
provision of the Agreement.
 
(v)      Except as expressly set forth in this Section 5(c), after the Closing
Date the Companies shall remain solely responsible for any and all liabilities
in respect of all Relevant Employees (including, without limitation, all Hired
Employee) under or related to the Company Plans or otherwise in connection with
their employment with any such Company.
 
6.     CONDITIONS TO PURCHASER’S OBLIGATION TO EFFECT CLOSING.
 
Purchaser shall not be obligated to effectuate the Closing unless each of the
following conditions, any one or more of which may be waived by Purchaser, is
satisfied as of the Closing Date:
 
(a)      Representations and Warranties and Covenants.  (i)    The
representations and warranties of the Companies set forth in this Agreement
shall be true and correct in all material respects as of the Closing Date, (ii)
the Companies shall have performed and complied in all material respects with
the agreements contained in the Company Transaction Documents required to be
performed and complied with by the Companies on or before the Closing, and (iii)
the Companies shall have delivered to Purchaser at the Closing certificates,
dated the Closing Date, signed by a senior officer of the Companies certifying
as to compliance with clauses (i) and (ii) above.
 
(b)      No Litigation.  There shall not be any Action pending seeking to
enjoin, restrain or prohibit any of the Transactions or that may (or be
reasonably expected to) adversely affect the ability of Purchaser to own,
operate or otherwise enjoy the Conveyed Assets. Additionally, Purchaser shall
not have received any notice of any Action relating in any manner to the sale or
transfer of the Conveyed Assets hereunder, including any such Action which
questions the validity of any of the Transactions or the commercial
reasonableness of the sales contemplated by the Transaction Documents.
 
(c)      New Employment Agreement.  William Wall shall have entered into a
written employment agreement with Purchaser in form and substance reasonably
satisfactory to Purchaser; provided that Purchaser shall have offered William
Wall employment on terms that are substantially similar to or better than the
terms of his employment with the Companies.
 
(d)      Driver Non-Compete Agreements.  Any written non-competition agreement
between one or more of the Companies and a vehicle driver that was formerly
employed by any Company and who will, in connection with the Closing, be
employed as a vehicle driver by Purchaser shall have shall have been assigned to
Purchaser.
 

 

 
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(e)      Required Lease Assignment.  Purchaser shall have received an executed
lease assignment, in form and substance reasonably satisfactory to Purchaser,
from Commercial Bldg Assoc. LLC, with respect to the Companies lease of 3303
Airline Boulevard, Building 2A-H, Portsmouth, Virginia (the “Processing Plant”).
 
(f)      Vehicle and Personal Property Leases. All of the Companies’ rights in
and to the vehicle and personal property leases listed on Schedule 2(q)(i)
hereto shall have been transferred to Purchaser on the Closing Date.
 
(g)      Tax Returns and Financial Information. Purchaser shall have received
are true and complete copies of (x) the Companies’ Tax Returns filed by  the
Companies for the tax years ended December 31, 2004, December 31, 2005, December
31, 2006, and, if available, December 31, 2007, and (y) audited, unaudited, and
reviewed financial information of the Companies for the years ended December 31,
2004, December 31, 2005, December 31, 2006 and December 31, 2007 and for the
each quarterly period thereof.
 
(h)      Release of Liens.  Purchaser shall have received evidence reasonably
satisfactory to it that all Liens on the Purchased Assets have been released on
the Closing Date (including, without limitation, by filing the applicable UCC
termination statements and a discharge of leasehold mortgages), other than Liens
securing any of the obligations assumed by Purchaser pursuant to Section
4(a)(ii) above.
 
(i)      License Agreement.  Purchaser shall have received the executed License
Agreement.
 
(j)      Hazardous Substances.  Purchaser shall have received evidence
reasonably satisfactory to it that all hazardous substances consisting of
by-products from processing have been removed from the Processing Plant.
 
(k)      Other Transaction Documents.  All conditions to the closing of the
Transactions contemplated by the other Transaction Documents shall have been
waived or satisfied, and the Transactions contemplated by the other Transaction
Documents shall be consummated simultaneously with the transactions contemplated
hereby.
 
7.     CONDITIONS TO THE COMPANIES’ OBLIGATION TO EFFECT CLOSING.
 
The Companies shall not be obligated to effectuate the Closing unless each of
the following conditions, any one or more of which may be waived by the Company,
is satisfied as of the Closing Date:
 
(a)      Representations and Warranties and Covenants.  (i) The representations
and warranties of Purchaser set forth in this Agreement shall be true and
correct in all material respects as of the Closing Date, (ii) Purchaser shall
have performed and complied in all material respects with the agreements
contained in this Agreement required to be performed and complied with by
Purchaser on or before the Closing, and (iii) Purchaser shall have delivered to
the Companies at the Closing certificates, dated the Closing Date, signed by a
senior officer of Purchaser certifying as to compliance with clauses (i) and
(ii) above.
 

 
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(b)      No Litigation.  There shall not be any Action pending seeking to
enjoin, restrain or prohibit the transactions contemplated hereby.
 
8.     TERMINATION; EFFECT OF TERMINATION.
 
(a)     Termination.  This Agreement may be terminated before the Closing occurs
only as follows:
 
(i)       by mutual written consent of Purchaser and the Companies; or
 
(ii)      by Purchaser, if the Companies shall have breached or failed to
perform in any material respect any of its obligations, covenants or agreements
under this Agreement, or if any of the representations and warranties of the
Companies set forth in this Agreement shall not be true and correct to the
extent set forth in Article 2, and such breach, failure or misrepresentation is
not cured to Purchaser’s reasonable satisfaction within 10 days after Purchaser
gives the Companies written notice identifying such breach, failure or
misrepresentation;
 
(iii)      by the Companies, if Purchaser shall have breached or failed to
perform in any material respect any of its obligations, covenants or agreements
under this Agreement, or if any of the representations and warranties of
Purchaser set forth in this Agreement shall not be true and correct, and such
breach, failure or misrepresentation is not cured to the Companies’ reasonable
satisfaction within 10 days after the Companies give Purchaser written notice
identifying such breach, failure or misrepresentation;
 
(iv)      by Purchaser, if the conditions set forth in Section 6 hereof become
incapable of satisfaction; or
 
(v)      by the Companies, if the conditions set forth in Section 7 hereof
become incapable of satisfaction;
 
except that this Agreement may not be terminated under this Section by or on
behalf of any party that is in breach of any representation or warranty or in
violation of any covenant or agreement contained herein.
 
(b)     Automatic Termination. This Agreement shall automatically terminate upon
the termination of the Sale Agreement.
 
(c)     No Further Liability.  If this Agreement is terminated pursuant to this
Section 8, neither party shall have any further obligation or liability under
this Agreement, except that (i) the termination of this Agreement for any reason
will not relieve any party from any liability that at the time of termination
had already accrued to the other party or that thereafter accrues in respect of
any act or omission of such party prior to such termination; (ii) the provisions
of Section 9(e) shall survive any termination of this Agreement for a period of
one (1) year; (iii) the provisions of Section 3 shall survive any termination of
this Agreement and (iv) in the event that this agreement is terminated pursuant
to Sections 8(a) hereof (other than pursuant to clause 8(a)(iii), or the Sale
Agreement is terminated pursuant to Sections 6.1 thereof (other than pursuant to
clause 6.1(c)), the Companies shall promptly reimburse Purchaser for $15,000 of
Purchaser’s costs and expenses incurred in acquiring certain computer hardware
in connection with the contemplated closing.
 

 
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9.     COVENANTS.
 
(a)     Commercially Reasonable Efforts. From and after the date hereof, the
parties shall 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 and the Sale
Agreement.  Without limiting the generality of the foregoing, the Companies will
use all commercially reasonable efforts to timely obtain any Consent required
for the consummation of the transactions contemplated by this Agreement as soon
as practicable.
 
(b)     Interim Operations.  From the date of this Agreement through the Closing
Date, the Companies shall use their best efforts to (A) operate in the ordinary
course, including with respect to their cash flow management, and (B) operate in
a manner that prevents any impairment of their ability to fully and timely
perform in all material respects under the Assigned Contracts.  The Companies
shall use all commercially reasonable efforts to keep the Business substantially
intact, including the present operations, physical facilities, working
conditions and relationships with suppliers, customers, employees and parties to
Contracts relating to the Business.
 
(c)     Notification of Certain Matters.  From and after the date of this
Agreement, the Companies shall give notice to Purchaser of (i) the occurrence or
nonoccurrence of any event that would be reasonably likely to cause either (A)
any representation or warranty of the Companies contained in this Agreement to
be untrue or inaccurate in any material respect at the Closing or (B) a Company
Material Adverse Effect, and (ii) any material failure of any Company to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement.
 
(d)     Power of Attorney.  Without limiting any provisions hereof, effective as
of the Closing Date, and each of the Companies by appropriate instrument shall
constitute and appoint Purchaser and its successors and assigns the true and
lawful attorney-in-fact of such Company with full power of substitution in the
name of Purchaser or in the name of any Company but for the benefit and at the
expense of Purchaser (i) to collect for the account of Purchaser all receivables
and any other items to be sold and transferred or intended to be sold and
transferred to Purchaser as provided in this Agreement or under the Purchase
Agreement, (ii) to institute and prosecute all proceedings that Purchaser may
deem proper in order to collect, assert or enforce any right or title of any
kind in or to the Conveyed Assets, to defend or compromise any and all actions,
suits or proceedings in respect of any of the Conveyed Assets and to do all such
acts and things in relation thereto as Purchaser shall deem advisable, and (iii)
to take all reasonable actions that Purchaser may deem proper in order to
provide for Purchaser the benefits under any Assigned Contract under which any
required Consent of another party to the assignment thereof to Purchaser
pursuant to this Agreement shall not have been obtained.  Such instrument shall
provide that, unless a Company has dissolved or otherwise ceased to exist,
Purchaser will first ask the Company to take such action before exercising
Purchaser’s authority under the instrument.  Each Company shall acknowledge that
the foregoing powers are coupled with an interest and shall be irrevocable by
such Company or by its subsequent dissolution or in any manner or for any
reason.  Purchaser shall be entitled to retain for its own account any amounts
collected pursuant to the foregoing powers, including any amounts payable as
interest in respect thereof.  Any amounts collected that are due the Companies
pursuant to the terms hereof or otherwise shall be promptly paid over to the
Companies.
 

 
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(e)     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 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 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 the Companies, as applicable, all materials obtained by
Purchaser from or on behalf of 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 the Companies that does not solely relate to the Conveyed Assets,
including information of others that the Companies have agreed to keep
confidential.  Nothing in this Agreement, including, without limitation, this
Section 9(e), shall prevent Purchaser from making any public announcement and/or
filings that it may be required to make under applicable Law.
 
(f)     License Agreement and Assignment.
 
(i)     On or prior to the Closing Date, Purchaser and the Companies shall enter
into the License Agreement, pursuant to which:
 
(x)     Purchaser shall, at no cost to Purchaser, be granted an exclusive
license, in perpetuity, to:
 
(1)     use the trademarks “Zoots” and “The Cleaner Cleaner” in the Commonwealth
of Virginia and in the States of Georgia, Maryland North Carolina and South
Carolina, provided that the Companies shall retain the right to use the Zoots
trademark in such jurisdictions for a period of thirty (30) days following the
Closing in connection with the transaction of their businesses; and

 
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(2)     use the domain name zootsva.com, and to replicate the information
relating to the Business, the look, feel and the layout of the Website (as
defined below) on the zootsva.com website; and

(y)     the Companies shall agree, for a period of six (6) months after the
Closing Date, with respect to the website zoots.com and the related domain name
(the “Website”), to:
 
(1) maintain the Website, or cause the Website to be maintain, in accordance
with historical practice; and

(2) maintain, or cause to be maintained, a prominent link on the Website to the
zootsva.com website (in connection with which Purchaser shall pay such
transferee’s direct, reasonable and documents costs relating to the maintenance
of such link).

 
(ii)     The Companies hereby agree, for a period of ninety (90) days after the
Closing Date, to provide (or to cause their successor to provide) call
forwarding services with respect to the 1-800 telephone number used in the
Business (to such number as may be designated by Purchaser).
 
(iii)     On the effective date of any transfer of each of the “Zoots” and/or
“The Cleaner Cleaner” trademarks, the Website and the 1-800 telephone number
used in the Business, the Companies shall cause the relevant transferee (the
“Transferee”) to enter in an assignment and assumption agreement, in form and
substance satisfactory to Purchaser (the “License Assignment Agreement”) with
the Companies and Purchaser with respect to the License Agreement (or, if
applicable, the rights under the License Agreement relating to the relevant
transferred assets).
 
(iv)     In the event that Purchaser is unable to transition the Business onto
the Westgate hosting system (with respect to point-of-sale functions) by the
Closing Date,  the Companies shall permit Purchaser to use the existing
point-of-sale system for a two (2) week period after the Closing Date.  In the
event that Purchaser is unable to transition the merchant services system (with
respect to credit card transactions) to Purchaser’s bank by the Closing Date,
any credit card payments received by the Companies in connection with the
Business after the Closing Date shall promptly (and in any event within two (2)
Business Days of such receipt) be  transferred by the Companies to the bank
account specified by Purchaser (less customary expenses).  In the event that
Purchaser is unable to transition the internet portals used at each location
used in the Business to its own service provider by the Closing Date,  for a
period of thirty (30) days after the Closing Date, the Companies shall maintain,
and allow Purchaser to use, or cause the Transferee to maintain and allow the
Purchaser to use, the internet portals at each location used in the Business,
provided that the Purchaser shall reimburse the Companies (or the Transferee, if
applicable) for all direct costs associated with the Purchaser’s use of such
internet portals within five (5) days after receipt of an invoice for the same.
 

 
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(v)     In the event that (x) any Company fails to comply with its obligations
under this Section 9(f) (including, without limitation, failing to cause the
Transferee to enter into the License Assignment Agreement), (y) any Company
fails to comply with its obligations under the License Agreement (prior to the
assignment thereof as contemplated in Section 9(f)(ii) above), or (z) the
Transferee fails to comply with its obligations under the License Agreement
(after the assignment thereof as contemplated in Section 9(f)(ii) above), Parent
shall, in addition to any other rights Purchaser or Parent  may have against the
Companies, have the right to set-off the full amount of the Losses that
Purchaser may incur, sustain or suffer resulting from or arising out of
(directly or indirectly) or in connection with any such breach (in an aggregate
amount not to exceed $100,000) against the payments due under the Note, in which
event the Note shall be deemed to be automatically amended accordingly;
provided, however, that (1) the Companies shall have the right, but not the
obligation, to transfer to the Purchaser all of the Companies’ rights in the
Website and the 1-800 number used in connection with the Business, in which case
the Purchaser shall no longer have any right to setoff in connection with the
Website and the 1-800 number used in connection with the Business; and (2) in
the event that the Companies have not the caused the Transferee to enter into
the License Assignment Agreement on or before April 30, 2008, then the Companies
shall transfer to the Purchaser all of the Companies’ rights in the Website and
the 1-800 number used in connection with the Business, in which case the
Purchaser shall no longer have any right to setoff in connection with the
Website and the 1-800 number used in connection with the Business.
 
(g)     Accounts Receivable Data Transfer.  Following the close of business on
Saturday, March 22, 2008 and prior to 11:59 P.M. (Eastern time) on Sunday, March
23, 2008, the Companies shall deliver to the Purchaser, via electronic mail, a
schedule setting forth the Companies’ accounts receivable arising from the
Business as of the close of business on March 22, 2008.  Further, within two (2)
business days after Closing, the Companies will deliver to the Purchaser a hard
copy of a schedule setting forth the Companies’ accounts receivable arising from
the Business as of the close of business on March 22, 2008.
 
(h)     POS Data Transfer.  Following the close of business on Saturday, March
22, 2008 and prior to 11:59 P.M. (Eastern time) on Sunday, March 23, 2008, the
Companies shall deliver to the Purchaser or to Purchaser’s designee the
Companies’ point of sale data for the seven (7) calendar days preceding March
22, 2008.
 
(i)     Financial Data.  Within thirty (30) days after the Closing Date, the
Companies shall deliver to the Purchaser (1) financial schedules relating to the
Business for the 2006 and 2007 fiscal years and the year to date ending on the
Closing Date; (2) a list of Companies’ fixed assets relating to the Business;
(3) a trial balance relating to the Business; and (4) the general ledger as it
relates to the Business.
 
(j)     Receivables Received Post-Closing.  In the event that, after the Closing
Date, any one of the Companies or a successor to one or more of the Companies
receives (1) a payment with respect to the accounts receivable of the Companies
arising from the Business or (2) an invoice relating to the Business arising for
a period beginning on or after the Closing Date, then the Companies shall
deliver such payment or invoice, or shall cause their successor to deliver such
payment or invoice, within five (5) days after receipt of same by the Companies
(or the Companies’ successor, as applicable), to the Purchaser at the following
address:  3303 Airline Drive, Suite 2A, Portsmouth, Virginia  23701.
 

 
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10.     MISCELLANEOUS.
 
(a)     Notices.  All notices, requests, demands, consents and other
communications required or permitted under this Agreement shall be in writing
and shall be considered to have been duly given when (i) delivered by hand, (ii)
sent by telecopier or facsimile (with receipt confirmed), provided that a copy
is mailed (on the same date) by certified or registered mail, return receipt
requested, postage prepaid, or (iii) received by the addressee, if sent by
Express Mail, Federal Express or other express delivery service (receipt
requested), in each case to the appropriate addresses and telecopier numbers set
forth below (or to such other addresses and telecopier numbers as a party may
from time to time designate as to itself by notice similarly given to the other
party in accordance herewith).  A notice of change of address shall not be
deemed given until received by the addressee.
 
If to any Company, to it at:
     
Todd Krasnow
ZOOTS Corporation
153 Needham Street, Building 1
Newton, Massachusetts 02464
Telecopier:  617)558-9667
     
With copies to:
     
Michael Nowlan
FTI Consulting
125 High Street, Suite 1402
Boston, Massachusetts 02110
Telecopier:  617-897-1510
     
and
     
Robert V. Jahrling, III
Choate Hall & Stewart, LLP
Two International Place
Boston, Massachusetts 02110
Telecopier:  617-248-4000
     
If to Purchaser, to it at:
     
U.S. Dry Cleaning Corp.
4040 MacArthur Blvd., Suite 305
Newport Beach, California 92660
Telecopier:  (949) 863-9657
Attn:  Mr. Robert Y. (Robbie) Lee, Chief Executive Officer

 
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With copies (which shall not constitute notice) to:
     
Levene, Neale, Bender, Rankin & Brill L.L.P.
10250 Constellation, Suite 1700
Los Angeles, CA 90067
Telecopier:  (310) 229-1244
Attn.:  Mr. Martin Brill
     
and
     
Greenberg Traurig, LLP
The Met Life Building
200 Park Avenue, 15th Floor
New York, New York 10166
Telecopier:  (212) 801-6400
Attn:  Spencer G. Feldman, Esq.

 
(b)     Entire Agreement.  This Agreement and the instruments, agreements,
exhibits and other documents contemplated hereby (including, without limitation,
the Sale Agreement) supersede all prior discussions and agreements between the
parties with respect to the matters contained herein and this Agreement and the
instruments, agreements and other documents contemplated hereby (including,
without limitation, the Sale Agreement) contain the entire agreement between the
parties hereto with respect to the transactions contemplated hereby.
 
(c)     Further Assurances and Transitional Services.
 
(i)     After the Closing, each of the parties hereto shall hereafter, at the
reasonable request of the other party hereto, execute and deliver such other
instruments of transfer and assumption and further documents and agreements, and
do such further acts and things as may be necessary to carry out the provisions
of this Agreement.
 
(ii)     After the Closing, Purchaser will permit the Companies or their
respective successors-in-interests and/or assigns access to the books and
records acquired by Purchaser on reasonable notice.
 
(iii)     If any Company receives any cash, checks or other property
constituting Conveyed Assets after the Closing, such Company will promptly
forward the same to Purchaser.  If Purchaser receives any cash, checks or other
property of the Companies that does not constitute Conveyed Assets hereunder
after the Closing, Purchaser will promptly forward the same to the Companies.
 
(d)     Post-Closing Obligations of Companies.  Nothing in this Agreement shall
require the Companies to retain personnel after Closing or continue business
operations after Closing, and, whether or not expressly set forth elsewhere in
this Agreement, the Companies’ obligations to perform hereunder after Closing
shall only require the Company to use commercially reasonable efforts to perform
such obligations, taking into account the Companies’ staffing and financial
capabilities at the time post-Closing performance is requested or
required.  Purchaser acknowledges that, after Closing, the Companies may not
have any employees or material resources and may only be able to provide minimal
assistance to Purchaser.
 

 
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(e)     Non-Solicitation By Purchaser.  Purchaser shall not knowingly solicit
any current customers of the Companies or any purchaser of the Companies’ assets
in the areas that comprise the Companies’ former Philadelphia and New Jersey
networks (as defined by the geographical areas corresponding to the postal codes
identified on Schedule 10(e) hereto) for a period of two (2) years after
Closing.
 
(f)     Waiver.  Any term or condition of this Agreement may be waived at any
time by the party thereto which is entitled to the benefit thereof, but such
waiver shall only be effective if evidenced by a writing signed by such
party.  A waiver on one occasion shall not be deemed to be a waiver of the same
of any other breach on a future occasion.
 
(g)     Amendment. Except as otherwise expressly provided herein, this Agreement
may be amended only by a writing signed by all the parties hereto.
 
(h)     Counterparts.  This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.  Each party hereto may
deliver its signature page by facsimile transmission, and any such facsimile of
a signature page to this Agreement shall be treated as an original signature
page for all purposes under this Agreement.
 
(i)     Binding Agreement; Assignment; No Third Party Beneficiaries.  This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.  This Agreement
may not be assigned by any party hereto, without the prior written consent of
the other party.  Any purported assignment without such consent shall be void.
 
(j)     Headings.  The headings in this Agreement are for convenience of
reference only and should not be deemed a part of this Agreement.
 
(k)     Fees and Expenses.  Each party shall bear the costs and expenses
incurred by it in connection with the preparation, execution and performance of
this Agreement.
 
11.     CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER.
 

 
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THE VALIDITY OF THIS AGREEMENT, THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED
UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.  THE PARTIES AGREE THAT
ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE
TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE CITY OF
NEW YORK, NEW YORK, AND EACH PARTY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
SUCH COURTS.  EACH PARTY HEREBY WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR
TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
THIS SECTION.  EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.  EACH PARTY
REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  IN THE
EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.
 
12.     WAIVER AND CONSENT
 
Each Company hereby irrevocable waives, to the fullest extent permitted by Law,
any right it may have (including, without limitation, under the UCC) to (a)
object or challenge any of the Transactions, including, without limitation, the
Secured Party Sale, and (b) to notice or consultation with respect to the
consummation of the Transactions, including, without limitation, the Secured
Party Sale.  Each Company hereby irrevocable consents to the consummation of
each of the Transactions, including, without limitation, the Secured Party Sale.
 
[Signatures on Next Page]
 

 
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IN WITNESS WHEREOF, each of the undersigned has executed and delivered this
Assignment and Assumption Agreement as of the date first above written.
 

 
Zoots Corporation
         
By:                                                                 
Name:                                                            
Title:                                                              
         
Zoots Holding Corporation
         
By:                                                                 
Name:                                                            
Title:                                                              
     
Delivery LLC
     
By:                                                                 
Name:                                                            
Title:                                                              
     
USDC Portsmouth, Inc.
     
By:                                                                 
Name:                                                            
Title:                                                              
     
U.S. Dry Cleaning Corporation
     
By:                                                                 
Name:                                                            
Title:                                                              

 

 
 

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List of Schedules:

Schedule 1
Company Material Adverse Effect
   
Schedule 2(f)
Exceptions to Sufficiency of Assets
   
Schedule 2(i)
Accounts Receivable
   
Schedule 2(j)
Litigation
   
Schedule 2(l)
Permits
   
Schedule 2(m)
Taxes
   
Schedule 2(o)
Employees
   
Schedule 2(p)
Employee Benefit Plans
   
Schedule 2(q)(i)
Tangible Assets/Vehicle and Personal Property Leases
   
Schedule 2(q)(iv)
Inventories
   
Schedule 2(q)(vii)
Prepaid Items/Accounts
   
Schedule 2(q)(x)
Deposits
   
Schedule 4(a)
Assigned Contracts
   
Schedule 4(b)
Nonassignable Contracts
   
Schedule 10(e)
Philadelphia and New Jersey Networks