EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
dated as of July _, 1999
by and among
ARIS INDUSTRIES, INC.
XOXO ACQUISITION CORP.
and
LOLA, INC.
and
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
and ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
This AGREEMENT AND PLAN OF MERGER, dated as of July __, 1999, is made
and entered into by and among Aris Industries, Inc., a New York corporation
("Parent"), XOXO Acquisition Corp., a California corporation wholly owned by
Parent ("Sub"), Lola, Inc., a California corporation (the "Company" and,
collectively with Sub, the "Constituent Corporations") wholly owned by ▇▇▇▇▇
▇▇▇▇▇, ("▇▇▇▇▇"), an individual residing in California, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
("Bohbot"), an individual residing in California and ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
("▇▇▇▇▇▇"), an individual residing in California (collectively, the
"Shareholders", and together with the Company, the "Company Group"). Terms not
otherwise defined have the meanings set forth in Section 12.1.
R E C I T A L S:
A. The Boards of Directors of Parent, Sub and the Company have each
determined that it is advisable and in the best interests of their respective
stockholders to consummate, and have approved, the business combination
transaction provided for herein in which the Company would merge with and into
the Sub (the "Merger").
B. Parent, Sub, the Company and the Shareholders desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger.
In consideration of the mutual covenants and agreements set forth in
this Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I.
THE MERGER
1.1 The Merger. At the Effective Time, upon the terms and subject to
the conditions of this Agreement, the Company shall be merged with and into Sub
in accordance with the General Corporation Law of the State of California (the
"GCL"). The Sub shall be the surviving corporation in the Merger (the "Surviving
Corporation") and the separate existence of the Company shall cease. As a result
of the Merger, the outstanding shares of capital stock of the Constituent
Corporations shall be converted or canceled in the manner provided in Article
II.
1.2 Effective Time. On the Closing Date, a certificate of merger (the
"Certificate of Merger") shall be duly prepared and executed by the Surviving
Corporation and thereafter delivered to the Secretary of State of the State of
California (the "Secretary of State") for filing, as provided in Section 1103 of
the GCL. The Merger shall become effective at the time the filing of the
Certificate of Merger with the Secretary of State (the date and time of such
filing being referred to herein as the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
California law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Sub shall vest in the Surviving Corporation, and
all debts, liabilities and duties of the Company shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Closing. The closing of the Merger (the "Closing") will take place
at the offices of Troop ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP or, if required by
Parent's lenders at the offices of its lawyers in New York, at 10:00 a.m., local
time, three business days after Parent shall have given notice to the Company
that all of the conditions to consummation of the Merger shall have been
satisfied or waived by Parent but in no event later than August 15, 1999. At the
Closing (a) the Shareholders shall deliver for cancellation certificates
representing all issued and outstanding shares of Company Common Stock, (b)
Parent shall deliver to the Shareholders their pro rata share (as set forth on
Schedule 1.4) of $10,000,000 and certificates representing their pro rata share
(as set forth in Schedule 1.4) of 6,500,000 shares of the common stock, par
value $.01 per share of Parent ("Parent Common Stock"); and (c) the parties
shall execute and deliver to each other the certificates and other documents and
instruments required to be delivered under Article VIII.
1.5 Certificate of Incorporation and Bylaws of the Surviving
Corporation. At the Effective Time, (a) the Certificate of Incorporation of the
Sub as in effect immediately prior to the Effective Time shall be amended to
change its name to XOXO, Inc. and, as so amended, such Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation, and (b) the Bylaws of the Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation.
1.6 Directors and Officers of the Surviving Corporation. The directors
of the Sub, and the officers of the Company, immediately prior to the Effective
Time shall, from and after the Effective Time, be the directors and officers of
the Surviving Corporation until their successors shall have been duly elected or
appointed and qualified, provided, however, Parent shall cause ▇▇▇▇▇ to be added
as a director of the Surviving Corporation and of Parent concurrent with the
Effective Time.
1.7 Further Assurances. Each party hereto will execute such further
documents and instruments and take such further actions as may reasonably be
requested by one or more of the others to consummate the Merger, to vest the
Surviving Corporation with full title to all assets, properties, rights,
approvals, immunities and franchises of either of the Constituent Corporations
or to effect the other purposes of this Agreement.
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ARTICLE II.
CONVERSION OF SHARES; ADJUSTMENTS; ADDITIONAL PARENT SHARES
2.1 Conversion of Capital Stock. Subject to the terms and conditions of
this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Sub, the Company or the holders of any of the following
securities, the following shall occur:
(a) Capital Stock of Sub. Each issued and outstanding share of the
common stock, par value $.01 per share, of Sub ("Sub Common Stock") shall be
converted into and become one fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation ("Surviving
Corporation Common Stock"). Each certificate evidencing ownership of shares of
Sub Common Stock shall evidence ownership of shares of capital stock of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Stock Owned by Parent and
Subsidiaries. All shares of common stock, no par value, of the Company ("Company
Common Stock") that are owned by the Company as treasury stock shall be canceled
and retired and shall cease to exist and no stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) Exchange Ratio for Company Common Stock. Each share of Company
Common Stock issued and outstanding at the Effective Time, other than shares to
be canceled in accordance with Section 2.1(b), shall be canceled and
extinguished and automatically converted subject to Section 2.1(d) into the
right to receive (A) $10,000,000 divided by the number of shares of Company
Common Stock outstanding at the Effective Time, and (B) such number (the
"Conversion Number") of shares of Parent Common Stock equal to the quotient of
(i) 6,500,000 (the "Aggregate Conversion Amount) divided by (ii) the number of
shares of Company Common Stock outstanding at the Effective Time, subject to
adjustment in accordance with the next sentence. If, prior to the Effective
Time, Parent shall pay a dividend in, subdivide, combine into a smaller number
of shares or issue by reclassification, reorganization, reclassification or the
like of its shares, any shares of Parent Common Stock, the Conversion Number
shall be multiplied by a fraction, the numerator of which shall be the number of
shares of Parent Common Stock outstanding immediately after, and the denominator
of which shall be the number of shares of Parent Common Stock outstanding
immediately before, the occurrence of such event, and the resulting product
shall from and after the date of such event be the Conversion Number. The
parties agree that a fair value of the Parent Company Stock being issued
hereunder is $1.50 per share.
(d) Fractional Shares. No fraction of a share of Parent Common Stock
will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock that otherwise would be
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received by such holder) shall, upon surrender of such holder's certificate(s),
receive from Parent an amount of cash (rounded to the nearest whole cent),
without interest, equal to the product of (i) such fraction, multiplied by (ii)
the average closing price of one share of Parent Common Stock for the ten (10)
most recent days that Parent Common Stock has traded ending on the trading day
ending one day prior to the Closing Date, as reported on the OTC BB.
(e) Lost, Stolen or Destroyed Certificates. In the event any
certificates representing shares of Company Common Stock shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such certificate to be lost, stolen or destroyed and an agreement to
indemnify the Parent against any claim that may be made against it with respect
to such certificate, the Parent will issue in exchange for such lost, stolen or
destroyed certificate the aggregate merger consideration into which the shares
of Company Common Stock represented by such certificate would have been
converted and any fractional payment due in connection therewith.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Each member of the Company Group (except for ▇▇▇▇▇▇, who only makes the
representations and warranties contained in Sections 3.2(b) (but only that the
shares of Common Stock owned by ▇▇▇▇▇▇ are free and clear of any liens, claims,
mortgages, encumbrances, pledges, security interest, equities and charges of any
kind), 3.27 and 3.28), jointly and severally, represents and warrants to Parent
and Sub as follows:
3.1 Organization; Good Standing.
(a) The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has full corporate power and authority to
conduct its business as and to the extent now conducted and to own, use and
lease its assets and properties. The Company is qualified to do business and is
in good standing in the jurisdictions listed on Schedule 3.1(a). Other than as
listed in Schedule 3.1(a) the Company is qualified to do business as a foreign
corporation, and is in good standing, under the laws of all jurisdictions where
the nature of its business requires such qualification and where the failure to
do so qualify would have a Material Adverse Effect on the Company.
(b) Except as set forth on Schedule 3.1(b), the Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity. Any references to the "Company" in Sections 3.6 through
3.24 and Section 5.1 shall include the Company's subsidiaries identified on
Schedule 3.1(b).
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3.2 Capital Stock. (a) The authorized capital stock of the Company
consists solely of 100,000 shares of Company Common Stock, of which 10,000 are
issued and outstanding, and none of which are reserved for issuance under any
Contract. There are no outstanding subscriptions, options, warrants, rights,
preemptive rights or other contracts, commitments, understandings or
arrangements, including any right of conversion or exchange under any
outstanding security, instrument or agreement (together, "Options"), obligating
the Company to issue or sell any shares of capital stock of the Company or to
grant, extend or enter into any Option with respect thereto.
(b) Other than as set forth on Schedule 3.2(b), all outstanding shares
of the Company Common Stock are duly authorized, validly issued, fully paid and
nonassessable and are owned, beneficially and of record, by the Shareholders,
free and clear of any liens, claims, mortgages, encumbrances, pledges, security
interests, equities and charges of any kind (each, a "Lien"). The number of
shares of Company Common Stock owned by each Shareholder is set forth on
Schedule 3.2(b).
(c) There are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any person.
3.3 Authority Relative to this Agreement. The Company has full
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly approved by the Board of Directors and Shareholders of the
Company, and no other corporate proceedings on the part of the Company or its
stockholders are necessary to authorize the execution, delivery and performance
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.4 Officers; Directors; Corporate Documents. Section 3.4 of the
Disclosure Schedule lists the name of each director and officer of the Company
on the date hereof, and the position with the Company each holds. Prior to the
date hereof, the Company has delivered to Purchaser true and complete copies of
the Certificate of Incorporation and By-Laws of the Company as in effect on the
date hereof.
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3.5 Financial Statements; Absence of Undisclosed Liabilities.
(a) Prior to the execution of this Agreement, the Company has delivered
to Purchaser true and complete copies of the Financial Statements.
(b) The Financial Statements (i) were prepared in accordance with the
Books and Records of the Company, (ii) fairly and accurately present the
financial condition of the Company as of the date thereof and (iii) were
prepared in accordance with GAAP.
(c) The Company does not have any liabilities (whether absolute,
accrued or contingent) except: (a) liabilities, obligations or contingencies
that are accrued and reserved against in the balance sheet of the Company or
reflected in the notes thereto as of ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇) liabilities incurred
since April 30, 1999 in the ordinary course of business, (c) liabilities
disclosed in Schedule 3.5(c), or (d) liabilities under executory contracts
disclosed (or contracts in the ordinary course of business not required to be
disclosed) in the Schedules to this Agreement.
3.6 Real Property. Section 3.6 of the Disclosure Schedule lists each
parcel of real property leased by the Company, as lessor or lessee ("Real
Property"), and identifies the document pursuant to which each such parcel is
leased (the "Real Property Leases"). Each Real Property Lease is valid, binding
and in full force and effect without any default thereunder by the Company. No
real property other than that covered by the Real Property Leases is used by the
Company Group in connection with the Business. Prior to the execution of this
Agreement, the Company has delivered to Purchaser true and correct copies of the
Real Property Leases.
3.7 Tangible Personal Property; Investment Assets. The Company has good
title to, all tangible personal property used in the conduct of the Business,
including all tangible personal property reflected on the January Balance Sheet
and tangible personal property acquired since January 31, 1999, other than
property disposed of since such date in the ordinary course of business
consistent with past practice. All such tangible personal property is free and
clear of all Liens, other than Liens disclosed in Section 3.7 of the Disclosure
Schedule, and is in good working order and condition, ordinary wear and tear
excepted.
3.8 Intellectual Property Rights. The Company has an interest in or
uses only the Intellectual Property disclosed in Section 3.8 of the Disclosure
Schedule, each of which the Company has all right, title and interest in. No
other Intellectual Property is used or necessary in the conduct of the business
of the Company. Except as disclosed in Section 3.8 of the Disclosure Schedule,
(i) the Company has the exclusive right to use the Intellectual Property
disclosed in Section 3.8 of the Disclosure Schedule, (ii) all registrations with
and applications to governmental agencies in respect of such Intellectual
Property are valid and in full force and effect and are not subject to the
payment of any Taxes, (iii) there are no restrictions on the direct or indirect
transfer of any Contract, or any interest therein, held by the Company or any
Subsidiary in respect of such Intellectual Property other than those imposed by
applicable law,
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(iv) the Company is not, nor has it received any notice that it is, in default
(or with the giving of notice or lapse of time or both, would be in default)
under any Contract to use such Intellectual Property and (v) to the Knowledge of
the Company, no such Intellectual Property is being infringed by any other
Person. The Company is not infringing any Intellectual Property of any other
Person, no claim is pending or, to the Knowledge of the Company, has been made
to such effect that has not been resolved in the Company's favor.
3.9 Litigation. Except as set forth in Section 3.9 of the Disclosure
Schedule (with paragraph references corresponding to those set forth below):
(a) there is no Legal Proceeding pending or, to the Knowledge of the
Company, threatened against the Company relating to or affecting the Company or
the Business, or any of its assets and properties, and there has been no Legal
Proceeding previously resolved against the Company which remains unsatisfied;
(b) there are no facts or circumstances Known to the Company that could
reasonably be expected to give rise to any Legal Proceeding that would be
required to be disclosed pursuant to clause (a) above; and
(c) there are no Orders outstanding against the Company.
Prior to the execution of this Agreement, the Company has delivered to Parent
all responses of counsel for the Company to auditors' requests for information
delivered in the past five years in connection with the Financial Statements
(together with any updates provided by such counsel) regarding Legal Proceedings
pending or threatened against, relating or affecting the Company.
3.10 Compliance with Laws. The Company is not, nor at any time within
the last five years has been, nor has it received any notice that it is or has
at any time within the last five years been, in violation of or in default under
any Law or Order applicable to the Company or any of its assets or properties,
except to the extent such violation would not have a material adverse effect on
the Company.
3.11 Contracts.
(a) Except as set forth in Section 3.11 of the Disclosure Schedule, the
Company is not a party to any:
(1) Contract for the employment of any officer, director, employee or
consultant, or with any labor union or association that is not terminable at
will without cost, liability or expense to the Company;
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(2) Contract pursuant to which any Person who is or was an officer,
director, employee, consultant, or an Affiliate or Associate of any such Person
has a material interest;
(3) Contract relating to the borrowing or lending of money, the
factoring of accounts receivable or the guarantee of any obligations for
borrowed money, excluding trade payables or endorsements made for purposes of
collection in the ordinary course of business;
(4) Contract having an unexpired term of more than six months after the
Closing or involving payments after the Closing in excess of $25,000 in any
year;
(5) Contract for the production or supply by it of goods or services
having unexpired terms (including any periods covered by options to renew
exercisable by other parties) of more than 90 days after the Closing;
(6) Contract for capital expenditures or the purchase by it of
materials, supplies, equipment or services which requires payments by the
Company in excess of $25,000 after the Closing;
(7) licenses (whether as licensor or licensee of any Intellectual
Property) or royalty agreements;
(8) distributor, dealer, manufacturer's representative, sales agency,
franchise or advertising Contracts;
(9) Contract relating to (A) the future disposition or acquisition of
any Assets and Properties, other than dispositions or acquisitions in the
ordinary course of business consistent with past practice, and (B) any merger or
other business combination;
(10) Contract containing covenants not to compete in any business or
geographical area or restricting it from the use or disclosure of any
information in its possession; or
(b) Except as set forth in Section 3.11 of the Disclosure Schedule:
(1) each Contract required to be disclosed in Section 3.11(a) of the
Disclosure Schedule (each, a "Material Contract") is in all material respects
valid and in full force and effect;
(2) the Company has performed in all material respects all material
obligations required to be performed by it and is not in default (and with the
giving of notice or the lapse of time will not be in default), and will not be
in default entitling the other party thereto
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to terminate such Contract as a result of the consummation of the transactions
contemplated by this Agreement, under any Material Contract;
(3) the Company Group has not received notice that any party to any
Material Contract intends or may intend to cancel or terminate any Material
Contract or to exer cise or not exercise options or rights under any such
Material Contract;
(4) all liabilities and obligations of the Company required to be paid
or performed by the Company on or before the Closing under all Material
Contracts have been, or will have been on the Closing, duly paid in full,
performed or accrued by the Company in all material respects consistent with
past practices; and
(5) the consummation of the transactions contemplated by this Agreement
(1) does not require any consent under any Material Contract, and (2) will not
result in the rightful termination of any material right or privilege now
enjoyed by the Company under any Material Contract.
3.12 Absence of Certain Changes. Since April 30, 1999, other than as
disclosed in Section 3.12 of the Disclosure Schedule, the Company has operated
the Business in the ordinary course consistent with past practices, and has not:
(a) entered into any transaction or incurred any liability or
obligation other than in the ordinary course of business, or which was in an
amount in excess of $50,000 (other than purchases and sales of inventory in
accordance with past practices);
(b) had any material change in the Condition of the Business; and
(c) granted or agreed to grant any increase in compensation to any of
its employees or to any agent, or paid or agreed to pay any bonus to any
employee in excess of 5% of such employee's or agent's current salary.
3.13 Permits. The Company has all Permits required by Law for the
operation of the Business and the use of the Assets, the absence of which would
have a material adverse effect on the Company. Section 3.13 of the Disclosure
Schedule contains a materially complete and correct description of all such
Permits. All such Permits are valid and in full force and effect. To the
knowledge of the Company, there are no pending or threatened Legal Proceedings
that could result in the termination or impairment of any Permit.
3.14 Payments. No member of the Company Group, in connection with the
Business or the Assets, has directly or indirectly: made any unlawful domestic
or foreign political contribution; made or received any payment, or provided or
received any service which were not legal to make, receive or provide; or had
any transactions or payments which are not
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recorded in its accounting books and records or disclosed in its financial
statements, which act or omission would have a material adverse effect on the
Company.
3.15 Insurance. Section 3.15 of the Disclosure Schedule contains a true
and complete list (including the names and addresses of the insurers, the names
of the Persons to whom such insurance policies have been issued, the expiration
dates thereof, the annual premiums and payment terms thereof, whether it is a
"claims made" or an "occurrence" policy and a brief description of the interests
insured thereby) of all liability, property, workers' compensation and other
insurance policies currently in effect that insure the Business, the Employees
or the Assets. Each such insurance policy is valid and binding and in full force
and effect, no premiums due thereunder have not been paid and the Company has
not received any notice of cancellation or termination in respect of any such
policy or is in default thereunder. In light of the nature of the Business and
the Assets, the insurance policies are in amounts and have coverages that are
reasonable and customary for Persons engaged in such business and having such
Assets and Properties. Neither the Company nor the Person to whom such policy
has been issued has received notice that any insurer under any policy referred
to in this Section is denying liability with respect to a claim thereunder or
defending under a reservation of rights clause.
3.16 Inventories. Schedule 3.16 is a list of all inventory of the
Company as of May 31, 1999 (the "Inventory"), broken down by raw materials, work
in progress and finished goods (which are further broken down by ageing
thereof). The value attributed to each item of Inventory on Schedule 3.16 is
recorded at the lower of its cost or market price on a first-in-first-out basis.
Except as set forth on Schedule 3.16, all Inventory (net of reserves) consists
of current and marketable Products, raw materials and work-in-process related to
the Business which are usable, and, in the case of finished products, saleable
at the Company's regular prices, in the ordinary course of the Business
consistent with past practices.
3.17 Business Books and Records. Except with respect to the minute
books of the Company and its subsidiaries, none of the books and records of the
Company (the "Books and Records") is recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which are not under the exclusive ownership and direct control of the Company.
All Books and Records have been made available to the Parent, and they
accurately record all the transactions and assets of the Company in all material
aspects.
3.18 Accounts Receivable; Accounts and Other Liabilities Payable.
(a) Section 3.18(a) of the Disclosure Schedule is a summary Accounts
Receivable aging report (the "Summary") as of June 15, 1999 which accurately
reflects as of such date the dollar amount of the 30, 60, 90 and 120 day
accounts receivable in each of the following three categories by customer:
dresses, sportswear, denim. On or about July 15, 1999, the Company will deliver
to Parent the Capital Factors Aging Report as of July 15, 1999.
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(b) Other than as set forth on Schedule 3.18(b), the Accounts
Receivable reflected on Schedule 3.18(a), and those that will be reflected on
the Accounts Receivable Schedule, arose from bona fide sales transactions in the
ordinary course of business and are payable on ordinary trade terms, (ii) are
legal, valid and binding obligations of the respective debtors enforceable in
accordance with their terms, (iii) are not subject to any valid set-off or
counterclaim by any customer, (iv) do not represent obligations for goods sold
on consignment, on approval or on a sale-or-return basis or subject to any other
repurchase or return arrangement, (v) are collectible in the ordinary course of
business consistent with past practice in the aggregate recorded amounts
thereof, net of any applicable reserve reflected in the balance sheet included
in the Financial Statements, and (vi) are not the subject of any Legal
Proceedings brought by or on behalf of the Company.
(c) Section 3.18(c) of the Disclosure Schedule lists all the creditors
of the Company as of May 31, 1999 and such Schedule will be updated to
accurately describe the amounts, nature, and payment due dates of all the
Company's Liabilities as of the close of business on a day withing five (5) days
of the Closing. The updated Schedule (the "Payables Schedule") shall be
delivered to Parent at the Closing.
3.19 Taxes. Other than as disclosed in Section 3.19 the Company has
filed all Tax returns and reports required to be filed by it with respect to the
Business and the Assets, all such returns and reports were accurate in all
material respects, and all Taxes owed by the Company and reflected on tax
returns have been paid.
3.20 Affiliate Transactions. Except with respect to wages paid to
Employees in the ordinary course of business, payments made by the Company for
vehicles used by employees of the Company, payments that otherwise are not in
excess of $50,000 per year per Shareholder or as disclosed in Section 3.20 of
the Disclosure Schedule, (i) no officer, director, Affiliate or Associate of the
Company or any Associate of any such officer, director or Affiliate provides or
causes to be provided any assets, services or facilities used or held for use in
connection with the Business, (ii) the Business does not provide or cause to be
provided any assets, services or facilities to any such officer, director,
Affiliate or Associate, and (iii) the Company has not engaged in any transaction
or entered into any agreement with, or guaranteed any obligation of any
Affiliate or Associate of a member of the Company Group. Except as disclosed in
Section 3.20 of the Disclosure Schedule, each of the transactions listed in
Section 3.20 of the Disclosure Schedule is engaged in on an arm's-length basis.
3.21 Employees; Labor Relations; Benefits.
(a) Section 3.21(a) of the Disclosure Schedule contains a list of the
name of each employee of the Company as at the date hereof, together with such
Employee's position or function, annual base salary or wages and any incentive
or bonus arrangement with respect to such Employee in effect on such date. To
the knowledge of the Company, a material
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number of Employees will not cease to be Employees, or will not refuse offers of
employment from Parent, because of the consummation of the transaction
contemplated by this Agreement.
(b) (i) No Employee is presently a member of a collective bargaining
unit and, to the Knowledge of the Company, there are no threatened or
contemplated attempts to organize for collective bargaining purposes any of the
Employees, and (ii) no unfair labor practice complaint or gender, age, race or
other discrimination claim has been brought during the last three years against
the Company with respect to the conduct of the Business before the National
Labor Relations Board, the Equal Employment Opportunity Commission or any other
governmental or regulatory Authority. Since January 1, 1996, there has been no
work stoppage, strike or other concerted action by employees of the Company as
against the Company. During that period, the Company has complied in all
material respects with all applicable Laws relating to the employment of labor,
including, without limitation those relating to wages, hours and collective
bargaining.
(c) The Company has received no notices of claims or findings of
violations under OSHA.
(d) Schedule 3.21(d) of the Disclosure Schedule contains a true and
complete list of each employee benefit plan within the meaning of Section 3(3)
of ERISA and any other pension, retirement, profit-sharing, deferred
compensation, option, bonus, welfare, medical, disability, insurance, severance,
incentive or other benefit plan) maintained by the Company, or to which the
Company contributes, for any of the Company's employees (each a "Plan" and,
collectively, the "Plans"), setting forth the name and address of the Plans and
the trustees, and the basis of the Company's contributions. True and complete
copies of each of the Plans and related trusts have been furnished to Parent.
With respect to each of the Plans on Schedule 3.21(d):
(1) With respect to each Plan intended to be qualified under Section
401(a) of the Code, a determination letter from the Service has been received to
the effect that the Plan is qualified under Section 401 of the Code and any
trust maintained pursuant thereto is exempt from federal income taxation under
Section 501 of the Code, and the Company knows of no event which will occur
through the Closing Date (including without limitation the transactions
contemplated by this Agreement) which would cause the loss of such qualification
or exemption or the imposition of any penalty or tax liability;
(2) all contributions required by the Plan or by law with respect to
all periods through the Closing Date shall have been made by such date (or
provided for by the Company by adequate reserves on its financial statements);
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(3) no "reportable event" as described in Section 4043(c) of ERISA and
with respect to which the thirty (30) day notice requirement has not been waived
has occurred and is continuing with respect to the Plan;
(4) except as disclosed on Section 3.21(c) of the Disclosure Schedule,
no claim, lawsuit, arbitration or other action has been threatened in writing,
asserted or instituted against the Plan, any trustee or fiduciaries thereof, the
Company, other than routine claims for benefits;
(5) all amendments required to bring the Plan into conformity with any
of the applicable provisions of ERISA has been obtained and is in full force and
effect;
(6) any bonding required with respect to the Plan in accordance with
applicable provisions of ERISA has been obtained and is in full force and
effect;
(7) the Plan has been maintained in all material respects in accordance
with its terms and the terms and the provisions of ERISA (including rules and
regulations thereunder) applicable thereto;
(8) The Company has not engaged in a "prohibited transaction," as such
term is defined in Section 4975 of the Code and Section 406 of ERISA, with
respect to the Plan (and the transactions contemplated by this Agreement will
not constitute or directly or indirectly result in such a "prohibited
transaction"); and
(9) The Company has not been notified of an audit of any Plan by the
Service or the Department of Labor.
3.22 Substantial Customers and Suppliers. Section 3.22(a) of the
Disclosure Schedule lists the ten largest customers of the Company, on the basis
of revenues for goods sold for the most recently-completed fiscal year. Section
3.22(b) of the Disclosure Schedule lists the ten largest suppliers of the
Business, on the basis of cost of goods or services purchased for the most
recently-completed fiscal year. Except as disclosed in Section 3.29(c) of the
Disclosure Schedule, no such customer or supplier has ceased or materially
reduced its purchases from, or sales to the Business since December 31, 1998 or,
to the Knowledge of the Company, has threatened to cease or materially reduce
such purchases, use, sales or provision of services after the date hereof.
Except as disclosed in Section 3.22(d) of the Disclosure Schedule, to the
Knowledge of the Company, no such customer or supplier is threatened with
bankruptcy or insolvency.
3.23 No Guarantees. Except as set forth on Schedule 3.23, none of the
Liabilities of the Company is guaranteed by or subject to a similar contingent
obligation of any other Person, nor has the Company guaranteed or become subject
to a similar contingent obligation in respect of the Liabilities of any
customer, supplier or other Person to whom the
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Company sells goods or provides services in the conduct of the Business or with
whom the Company otherwise has significant business relationships in the conduct
of the Business.
3.24 Entire Business. The Merger will effectively convey to Parent the
entire Business and all of the tangible and intangible property used by the
Company (whether owned, leased or held under license by the Company, by any of
the Company's Affiliates or Associates or by others) in connection with the
conduct of the Business as heretofore conducted by the Company.
3.25 Brokers. No Person has a valid claim against Parent, the Company
or the Shareholders for a finder's fee, brokerage commission or similar payment
in connection with the execution of this Agreement or the consummation of the
transactions contemplated hereby as a result of any contract, arrangement,
understanding or relationship between such Person and any member of the Company
Group.
3.26 Disclosure. No representation or warranty contained in this
Agreement, and no statement contained in the Disclosure Schedule or in any other
schedule, certificate, list or other writing furnished to Parent pursuant to any
provision of this Agreement (including the Financial Statements), contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that no representation or warranty is made by the Company as to any financial
forecasts or projections previously furnished to Parent or its agents by the
Company or its representatives, if any, except that such financial forecast or
projection has been prepared in good faith based on assumptions that are
believed by the Company to have been reasonable at the time or times made; and
provided, further, that no party shall be deemed to be in breach of this Section
3.26, if any misstatement or omission, when considered in the context of all of
the information contained in this Agreement and the Exhibits and Schedules
attached hereto, is not material to the valuation of the Company.
3.27 Shareholder Approval; No Appraisal Rights. Each Shareholder has
voted all of his or her shares in favor of the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby. No
Shareholder shall exercise any appraisal rights or similar rights to receive any
consideration from the Company, other than as set forth in Section 2.1(c), for
their shares of Company Common Stock, and no Shareholder has any claim of any
kind or nature against the Company other than as set forth on Schedule 3.27, all
of which shall be released as of Closing.
3.28 Investment Intent.
(a) The shares of Parent Common Stock ("Parent Shares") being issued to
the Shareholders are being acquired by the Shareholders for investment for its
own account, not as a nominee or agent for any other person. No member of the
Company Group has
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any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to sell or any interest
therein to any third person any of the Parent Shares.
(b) Each Shareholder has received all information it considers
necessary or appropriate to decide whether to exchange the Company Shares for
the Parent Shares. Each Shareholder has received a copy of Parent's Form 10-K
for the fiscal year ended December 31, 1998, its Form 10-Q for the quarter ended
March 31, 1999, its Form 8-K filed with the Securities and Exchange Commission
on or about March 1, 1999 and its Proxy Statement for its 1999 Annual Meeting of
Shareholders.
(c) The certificates representing the Parent Shares, and the
certificates for any securities issued in respect thereof or exchange therefor,
shall bear the following legends:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. IT MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITY UNDER SUCH ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO
RULE 144 OF THE ACT."
ARTICLE IV.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT AND SUB
Each of Parent and Sub, jointly and severally, represents and warrants
to, and covenants with, the Company Group as follows:
4.1 Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the States of
Delaware and California, respectively.
4.2 Authority.
(a) Parent and Sub each have full corporate power and authority to
conduct its business as and to the extent now conducted and to own, use and
lease its Assets and Properties and to execute and deliver this Agreement and
the other agreements and instruments to be executed and delivered by it pursuant
hereto and to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. All corporate
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acts and other proceedings required to be taken by or on the part of Parent, Sub
and their respective stockholders to authorize such execution, delivery and
consummation have been duly and properly taken.
(b) This Agreement has been duly executed by each of Parent and Sub and
constitutes, and such other agreements and instruments to which each of Parent
or Sub is a party, when duly executed and delivered by Parent or Sub, as
applicable, will constitute, legal, valid and binding obligations of Parent or
Sub, as applicable, enforceable in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) The execution and delivery by Parent and Sub of this Agreement and
such other agreements and instruments and the consummation of the transactions
contem plated hereby and thereby will not conflict with or constitute a breach,
violation or default under their respective charter documents and bylaws, any
law, statute, or administrative regulation, or under any judgment, decree,
order, writ, governmental permit or license or any indenture, ▇▇▇▇ ▇▇▇▇, lease,
agreement or other instrument to which it is a party or by which it or its
assets or properties is bound.
(d) No approval, authorization, consent or other order or action of or
filing with any court, administrative agency or other governmental authority
(other than the HSR filing) and no action on the part of the shareholders of
Parent is required for the execution and delivery by Parent or Sub of this
Agreement and the execution and delivery by Parent or Sub of the other
agreements and instruments referred to herein or the consummation by Parent of
the transactions contemplated hereby or thereby.
4.3 Parent Shares. The Parent Shares to be issued pursuant to the terms
of this Agreement will be duly authorized, validly issued, fully paid and
nonassessable, and will vest in the Shareholders good and valid title, free and
clear of all liens, claims, encumbrances and restrictions.
4.4 Parent SEC Reports. Parent has delivered or made available to the
Company Group for its inspection each registration statement, report, proxy
statement or information statement prepared by it since December 31, 1998,
including (i) its Annual Report on Form 10-K for the year ended December 31,
1998, (ii) its Quarterly Report on Form 10-Q for the quarter ended ▇▇▇▇▇ ▇▇,
▇▇▇▇, (▇▇▇) its Current Reports on Form 8-K, and (iv) its Proxy Statements for
its Annual Meetings of Stockholders, each in the form (including exhibits and
amendments thereto) filed with the Securities and Exchange Commission (the
"SEC") (collectively, the "Parent Reports"). As of their respective dates, the
Parent Reports (x) were prepared in all material respects in accordance with
applicable requirements of the Securities Act, the Exchange Act, and the rules
and regulations promulgated thereunder and (y) did not
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contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
the consolidated balance sheets of Parent included in or incorporated by
reference into the Parent Reports (including the related notes and schedules)
fairly presents the consolidated financial position of Parent as of its date and
each of the consolidated statements of income, retained earnings and cash flows
of Parent included in or incorporated by reference into the Parent Reports
(including the related notes and schedules) fairly presents the results of
operations, retained earnings or cash flows, as the case may be, of Parent for
the periods set forth therein, in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein. There have been no material adverse changes in
the condition of Parent since the date of its most recent Quarterly Report on
Form 10-Q.
4.5 Disclosure. No representation or warranty of Parent or Sub in this
Agreement and no statement in any other schedule, certificate or other list
delivered to the Company Group pursuant to this Agreement (including the Parent
Reports) contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the state ments contained herein or
therein not misleading.
4.6 Compliance with Applicable Law. The businesses of Parent, its
subsidiaries and Sub are not being conducted in violation of any applicable law,
ordinance, regulation, decree or order of any governmental entity, except for
violations which either singly or in the aggregate do not and are not expected
to have a material adverse effect on Parent, its subsidiaries or Sub. Neither
Parent, its subsidiaries or Sub is a party to or subject to any judgment,
decree, or order entered in any suit or proceeding brought by any governmental
agency or by any other person, enjoining Parent, its subsidiaries or Sub with
respect to any business practice, the acquisition of any property or the conduct
of business in any area.
4.7 No Registration. The Shares of Parent Common to be issued to
Shareholders are exempt from registration under the Securities Act of 1933, as
amended.
4.8 Finders Fee. Parent has agreed to pay a finders fee to Humane, Inc.
in connection with the transaction contemplated hereby and agrees that neither
the Company nor any of the Shareholders shall have any obligation with respect
to the payment owing to Humane, Inc..
ARTICLE V.
FURTHER COVENANTS AND AGREEMENTS
5.1 Conduct of Business. Except as otherwise expressly provided herein,
from the date hereof until the Closing, the Company Group shall:
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(a) conduct the Business only in its ordinary course consistent with
the Company's past practices and in compliance with this Agreement;
(b) preserve intact the business organization and reputation of the
Business, keep available the services of the Company's management and employees
of the Busi ness, and use its commercially reasonable efforts to preserve for
Parent the goodwill of suppliers, customers and others having business relations
with the Business;
(c) continue the Company's existing practices relating to maintaining
and keeping its Assets in good repair and working order;
(d) promptly notify Parent of any material adverse change subsequent to
January 31, 1999 in the financial condition, results of operations, condition or
prospects of the Business;
(e) not take any action or engage in any transaction which would render
any representation and warranty of the Company inaccurate in any material
respect as of the date hereof or as of the Closing;
(f) not, except in the ordinary course of business and consistent with
past practice, modify, amend or waive any material provisions of, or terminate
or decline to enforce, any Material Contract without the prior written consent
of Parent, which consent shall not be unreasonably withheld;
(g) not sell, lease, transfer, or otherwise dispose of, or subject to
any Lien, any of its properties or assets, or cancel, release or assign any
material indebtedness owed to it or any material claim held by it, except (i) in
the ordinary course of business consistent with past practice, (ii) as required
under any agreement relating to indebtedness for borrowed money to which the
Company is a party or (iii) pursuant to contracts or agreements in force as of
the date of this Agreement and listed in Schedule 5.1 hereto;
(h) except (i) in the ordinary course consistent with past practice, or
(ii) pursuant to any agreement relating to indebtedness for borrowed money in
effect on the date of this Agreement and disclosed on Schedule 5.1 hereto, not
incur or assume any liabilities or incur any indebtedness for borrowed money,
assume, guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other individual, corporation or entity (other than a
Subsidiary of the Company);
(i) other than inventory purchased in the ordinary course of business
consistent with past practices, not make any material acquisition or investment
either by purchase of stock or securities, merger or consolidation,
contributions to capital, property transfers, or purchases of any property or
assets of any other individual, corporation or other entity other than a wholly
owned Subsidiary thereof;
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(j) except for purchases and sales of inventory and merchandise in the
ordinary course of business, not make any material change in any of its
licenses, leases or contracts or enter into, renew or terminate any contract or
agreement that calls for aggregate annual payments by the Company of $50,000 or
more and which either (i) is not terminable at will on 60 days or less notice
without cost, liability or expense to the Company or (ii) has a term of more
than one year, provided however, the Company may extend the lease for ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ for an additional five year period on terms
substantially similar to those contained in the current proposed lease extension
attached hereto as Schedule 5.1(j);
(k) not increase in any material respect the compensation or fringe
benefits of any of its employees or pay any bonus, pension or retirement
allowance not required by any existing plan, program or agreement to any such
employees or become a party to, amend or commit itself to any pension,
retirement, profit-sharing or welfare benefit plan or agreement or employment
agreement with or for the benefit of any employee or accelerate the vesting of
stock options or other stock-based compensation;
(l) except as provided in the existing budgets and business plans of
the Company dated April 13, 1999 delivered to Parent, not make any capital
expenditures in excess of (A) $50,000 individually or (B) $150,000 in the
aggregate, other than expenditures necessary to maintain existing assets in good
repair;
(m) not enter into any line of business other than the importation,
manufacturing, distribution, and merchandising of apparel, the licensing of
trademarks relating thereto, and the licensing of the Company's owned
trademarks;
(n) not enter into any new license agreement as licensor or licensee;
or
(o) agree to, or make any commitment to, take any of the actions
prohibited by this Section 5.1.
5.2 Consents; Permits. Each of Parent and the Company will cooperate to
obtain promptly all consents, governmental authorizations, estoppel certificates
and filings required to be obtained or made by it or which may be reasonably
necessary to consummate the transactions contemplated by this Agreement or which
are reasonably requested by the other party, including without limitation,
promptly making all filings required by each of Parent and the Company under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act (the "Act") and the Company shall
take all steps reasonably necessary to transfer all Permits to Parent if
permissible under applicable law. The Company shall make its HSR
Pre-Notification filing within two business days after the execution hereof and
shall request early termination of any applicable waiting period.
5.3 Access; Information. Through the Closing, the Company Group shall:
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(a) afford to the authorized representatives of Parent reasonable
access, during normal business hours, to the employees, offices, plants,
properties, books and records of the members of the Company Group as the same
relate to the business and assets in order that Parent may have full opportunity
to make such engineering, environmental, legal, financial, accounting and other
reviews or investigations of the Business and the Assets as Parent shall desire
to make;
(b) instruct and use their best efforts to cause the Company Group's
independent public accountants to permit Parent's independent public accountants
to inspect the accounting work papers and other records relating to the Business
and the Assets;
(c) furnish to Parent and its authorized representatives such
additional financial and operating data and other information regarding the
Assets and Business as Parent shall reasonably request; and
(d) permit a representative of Parent's accountants to observe the
physical inventory of the Business as of the Closing Date.
5.4 No Shopping. No member of the Company Group shall, directly or
indirectly, contact, initiate, solicit, enter into or conduct any discussions or
negotiations, or enter into any agreement with any person with respect to the
direct or indirect sale of all or any part of the Assets (except in the ordinary
course of business consistent with past practice) or the Business.
5.5 Best Efforts. Each member of the Company Group and Parent shall use
its best efforts to fulfill the conditions to its obligations hereunder and to
cause its representations and warranties to remain true and correct in all
material respects as of the Closing.
5.6 Tax Matters.
(a) Parent and the Company shall treat and report the transactions
contemplated by this Agreement in all respects consistently for purposes of any
Federal, state or local tax, including the calculation of gain, loss and basis
with reference to the Purchase Price allocation made pursuant to Section 1.5(f)
and the reporting of such allocation pursuant to the requirements of Section
1060(b) of the Code and Form 8594. The parties hereto shall not take any actions
or positions inconsistent with the obligations set forth in this Section 5.6.
(b) Parent shall make available to the Company, and the Company shall
make available to Parent, (i) such records as either party may require for the
preparation of any Federal, state, local or other tax returns required to be
filed by the Company or Parent and (ii) such records as the Company or Parent
may require for the defense of any audit, examination,
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assessment, administrative appeal, or litigation of any such tax return in which
the Company or Parent was included.
(c) Parent and the Company shall be bound by the standard procedure
described in Section 4 of IRS Rev. Proc. 84-77 for reporting wages and other
compensation to the IRS, the various states and to the Employees.
5.7 Auditable Financial Statements for 8-K. Shares of Parent's common
stock are registered under the Securities Exchange Act of 1934, and, after
Closing, it may be required to file a current report on Form 8-K to report the
consummation of the transaction contemplated by this Agreement. In such Form
8-K, Parent will be required to include an audited balance sheet of the Company
for the fiscal year ended January 31, 1999 and 1998, and the Company's
statements of income, cash flow and changes in stockholders' equity for the
three fiscal years preceding the 1999 balance sheet, and certain interim
financial statements (the "Required Financial Statements"). From and after the
Closing Date, the Company Group shall cooperate, and cause its independent
accountants to cooperate, with Parent and its accountants in the preparation and
audit (if necessary) of the Required Financial Statements and shall provide
Parent and its accountants with full access to the Business Books and Records,
and the Company Group shall cause its independent accountants to give it and
Parent's accountants full access to its records and staff, for the purpose of
preparing and auditing the Required Financial Statements.
5.8 Employment Agreements. At Closing, Parent and each of ▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇ shall enter into employment agreements, substantially in the forms
attached as Exhibits A and B (the "▇▇▇▇▇ Employment Agreement" and "▇▇▇▇▇▇
Employment Agreement", respectively, and collectively, the "Employment
Agreements").
5.9 Shareholder Vote. Each Shareholder hereby agrees that he or she has
voted in favor of consummating the transaction contemplated hereby, will not
change such vote, and will not vote in favor of any other transaction relating
to the merger, consolidation, sale or exchange or similar extraordinary
transaction involving the Company or its assets prior to the termination of this
Agreement pursuant to Article XI hereof.
ARTICLE VI.
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT
All obligations of Parent to effect the Closing hereunder are, at the
option of Parent, subject to the conditions precedent that, at the Closing:
6.1 Opinion of Counsel. Parent shall have received an opinion of
counsel for the Company Group, addressed to Parent and dated as of the Closing,
substantially in the form of Exhibit C.
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6.2 Performance by the Company Group. All the terms, covenants,
agreements and conditions of this Agreement to be complied with and performed by
a member of the Company Group on or before the Closing shall have been complied
with and performed in all material respects.
6.3 Representation and Warranties. The representations and warranties
made by members of the Company Group in this Agreement shall be true and correct
in all material respects when made and as of the Closing.
6.4 No Actions or Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Order which is in effect and makes illegal or prohibits
the consummation of the transactions contemplated by this Agreement; provided
that Parent shall have used reasonable efforts to obtain the removal of any
Order if such Order is against Parent.
6.5 No Certain Material Adverse Change. There shall have been no
material adverse change in Condition of the Business since April 30, 1999.
6.6 Satisfaction of Counsel. All corporate and other actions and
proceedings in connection with the transactions contemplated hereby, all
resolutions, documents and instruments incidental thereto, and all other related
legal matters, shall be reasonably satisfactory in form and substance to counsel
for Parent.
6.7 Third Party Consents; Permits and Approvals. The Company shall have
delivered to Parent consents from all third parties required to transfer the
Business and the Assets ("Required Consents"). All Permits and Approvals used,
or required by Law to be used, in connection with the Business and the Assets,
or required in connection with the consummation by the Company Group of the
transactions contemplated by this Agreement (collectively, "Required Permits and
Approvals") shall have been obtained by the Company Group on or prior to the
Closing. Without limiting the generality of the foregoing, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Act pre- merger notification waiting period applicable to the transactions
contemplated hereby shall have expired or have been terminated.
6.8 CIT Approval. The CIT Group/Commercial Services, Inc. shall have
approved the transaction contemplated by the Agreement and shall have agreed to
provide financing for the Company following the Closing on terms substantially
similar to those terms on which it currently provides working capital financing
to Parent's other subsidiaries.
6.9 XOXO Outlets, Inc. The Company shall be the sole owner of all
shares of XOXO Outlets, Inc. ("Outlets").
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6.10 Termination of Affiliate Transactions. All agreements or
obligations between the Company and any Shareholder or Director of the Company
shall have been terminated other than for any accrued compensation to the extent
consistent with past practices.
6.11 Release of Liens. All liens on the Company Common Stock shall be
released.
ARTICLE VII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
All obligations of the Company Group to effect the Closing hereunder
are, at its option, subject to the conditions precedent that, at the Closing:
7.1 Performance by Parent. All the terms, covenants, agreements and
conditions of this Agreement to be complied with and performed by Parent on or
before the Closing shall have been complied with and performed in all material
respects.
7.2 Representations and Warranties. The representations and warranties
made by Parent in this Agreement shall be true and correct in all material
respects as of the Closing.
7.3 No Actions or Proceedings. No Legal Proceeding shall have been
instituted or threatened to restrain, prohibit or invalidate the transactions
contemplated by this Agreement.
7.4 Satisfaction of Counsel. All corporate and other actions and
proceedings in connection with the transactions contemplated hereby, all
resolutions, documents and instruments incidental thereto, and all other related
legal matters, shall be reasonably satisfactory in form and substance to counsel
for the Company.
7.5 Opinion of Counsel to Parent. The Shareholders shall have received
an opinion of counsel for Parent, addressed to the Company Group and dated as of
the Closing, substantially in the form of Exhibit D.
7.6 Shareholders Agreement. The Simon Group LLC and the Company shall
have executed and deliver to the Shareholders the Shareholders Agreement in the
form of Exhibit E.
7.7 No Certain Material Adverse Change. There shall have been no
material adverse change in the financial condition of Parent since March 31,
1999.
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7.8 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. The ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act pre-merger
notification waiting period applicable to the transactions contemplated hereby
shall have expired or have been terminated.
7.9 Consents. Parent shall have delivered to the Company consents from
all third parties whose consent to the transaction contemplated hereby is
required.
ARTICLE VIII.
DOCUMENTS TO BE DELIVERED AT THE CLOSING
8.1 The Company Group Closing Documents and Actions.
(a) At the Closing, the Company Group shall deliver, or cause to be
delivered, to Parent the following, executed by all parties thereto other than
Parent:
(1) a certificate of officer of the Company, substantially in the form
attached as Exhibit F;
(2) a certificate of the Company's Secretary, substantially in the form
attached as Exhibit G;
(3) a manually signed report of the Company's independent public
accountants for the Company's fiscal years ended January 31, 1998 and 1999;
(4) a certificate of good standing of the Company of recent date from
the Secretary of State of California;
(5) evidence that the Company has requested a "Certificate of Release
of Buyer" (Form DE2220) from the Employment Development Department of the State
of California (certifying either no amounts are due and owing from the Company
or releasing Parent from any liability therefrom);
(6) the Inventory Schedule;
(7) the Accounts Receivable Schedule;
(8) the Payables Schedule;
(9) the opinion of counsel referred to in Section 5.1;
(10) Required Consents and Required Permits and Approvals;
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(11) the Employment Agreements, executed by ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇;
(12) such other endorsements, instruments or documents as may be
necessary or appropriate to carry out the transactions contemplated by this
Agreement.
8.2 Documents to be Delivered by Parent. At the Closing, Parent shall
deliver, or cause to be delivered, the following:
(a) to each of the Shareholders, the Purchase Price, in the manner and
form required in Section 1.2;
(b) to each of the Shareholders, a certificate of officer of Parent,
substantially in the form attached as Exhibit H;
(c) to each of the Shareholders, a certificate of Parent's Secretary,
substantially in the form attached as Exhibit I;
(d) to each of ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇, the Employment Agreements,
executed by Parent;
(e) to each of the Shareholders, the Shareholders Agreement;
(f) to each option holder, his or her option agreement under the
Parent's stock option plan for such number of options as are set forth on
Schedule 8.2(f); and
(g) to the appropriate parties, such other instruments or documents as
may be necessary or appropriate to carry out the transactions contemplated
hereby.
ARTICLE IX.
SURVIVAL AND INDEMNIFICATIONS
9.1 Survival of Representations. The representations, warranties,
covenants and agreements contained in this Agreement, and in any agreements,
certificates or other instruments delivered pursuant to this Agreement, shall
survive the Closing and shall remain in full force and effect, subject to all
limitations and other provisions contained in this Agreement.
9.2 Indemnification by the Company Group. Each member of the Company
Group hereby agrees, jointly and severally, to indemnify and hold harmless
Parent and its successors, assigns and affiliates (and its and their respective
directors, officers, employees, agents and Representatives) from and against any
and all claims, damages, liabilities, fines, liens, losses or other obligations
whatsoever, together with costs and expenses, including fees and dis bursements
of counsel and expenses of investigation, incurred in connection therewith or in
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connection with the enforcement of the indemnifying party's indemnification
obligations hereunder (collectively, "Losses") arising out of, based upon or
caused by the inaccuracy of any representation or the breach of any warranty or
covenant of any member of the Company Group contained in this Agreement or in
any agreement, certificate or other instrument delivered by any member of the
Company Group pursuant to this Agreement. Notwithstanding the foregoing, ▇▇▇▇▇▇
shall only be liable with respect to losses resulting from the breach by her of
Sections 3.2(b) (but only to the extent of losses resulting from the
circumstance that the shares of Common Stock owned by ▇▇▇▇▇▇ are not free and
clear of any liens, claims, mortgages, encumbrances, pledges, security interest,
equities and charges of any kind), 3.27 and 3.28.
9.3 Indemnification by Parent.
(a) Parent hereby agrees to indemnify and hold harmless the Company and
each Shareholder and their Affiliates (and their respective directors, officers,
employees, agents and representatives) from and against any and all Losses
arising out of, based upon or caused by the inaccuracy of any representation or
the breach of any warranty, covenant or agreement of Parent contained in this
Agreement or in any agreement, certificate or other instru ment delivered by
Parent pursuant to this Agreement.
(b) Parent will indemnify and hold ▇▇▇▇▇ harmless from and against any
liability which arises under the guaranty of any liability of the Company made
by ▇▇▇▇▇ prior to Closing under the Company's factoring agreement with Capital
Factors and any of its Affiliates or other related parties and the lease for
premises located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇.▇.
9.4 Notices, etc. Each indemnified party agrees to give the
indemnifying party prompt written notice of any action, claim, demand, discovery
of fact, proceeding or suit (collectively, "Claims") for which such indemnified
party intends to assert a right to indemnification under this Agreement,
identify all provisions of this Agreement under which the Claims arise, and set
forth the Claim in reasonable detail. The indemnifying party shall have the
right to participate jointly with the indemnified party in the indemnified
party's defense, settlement or other disposition of any Claim by a third party
which gives rise to Indemnification. With respect to such Claim relating solely
to the payment of money damages and which will not result in the indemnified
party's becoming subject to injunctive or other relief or otherwise adversely
affect the business of the indemnified party in any manner, and as to which the
indem nifying party shall have acknowledged in writing the obligation to
indemnify the indemnified party hereunder, the indemnifying party shall have the
sole right to defend, settle or otherwise dispose of such Claim, on such terms
as the indemnifying party, in its sole discretion, shall deem appropriate. The
indemnifying party shall obtain the written consent of the indemnified party,
which shall not be unreasonably withheld, delayed or conditioned, prior to
ceasing to defend, settling or otherwise disposing of any Claim if as a result
thereof the indemnified party would become subject to injunctive or other
equitable relief or the business of the indemnified party would be adversely
affected in any manner.
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9.5 Reimbursement of Costs. The costs and expenses, including fees and
disbursements of counsel and expenses of investigation, incurred by any
indemnified party in connection with any Claim shall be reimbursed on a
quarterly basis by the indemnifying party, without prejudice to the indemnifying
party's right to contest the indemnified party's right to indemnification and
subject to refund in the event the indemnifying party is ultimately held not to
be obligated to indemnify the indemnified party.
9.6 Limitations.
(a) Notwithstanding anything to the contrary contained herein and
notwithstanding any statute of limitations, the obligation of the Company Group
to indemnify Parent, their Affiliates and their respective directors, officers,
employees, agents and representatives for any Loss (other than a Loss resulting
from a breach of the representations contained in Sections 3.2 or 3.19, which
shall survive indefinitely) with respect to a Claim arising out of the breach of
any representation, warranty or covenant (other than those contained in Article
10) made by the Company Group in this Agreement, shall terminate one year after
the Closing, if no notice of Claim is given prior to that time. Claims pending
on, or asserted prior to, the expiration of the time period specified above may
continue to be asserted and shall be indemnified against.
(b) Notwithstanding anything to the contrary contained herein, neither
party shall be required to indemnify the other for Losses arising from a breach
of a representation until such losses aggregate (x) $50,000 or (y) in the case
of indemnification by a Shareholder, in excess of the consideration payable to
such Shareholder under Section 2.1(c) hereof.
9.7 Manner of Payment. All amounts payable by any member of the Company
Group pursuant to this Article IX shall be payable in cash, but no amount shall
be required to be actually paid until 15 months from the date hereof, although
Parent may commence an action and obtain a judgment prior to that time; provided
however, if any member of the Company Group has not been provided with the
opportunity to sell all or a sufficient number of shares of Common Stock of
Parent under Rule 144 of the Rules and Regulations promulgated under the
Securities Act of 1933, as amended, or otherwise, to fully satisfy his or her
indemnification obligation(s) hereunder, then the time period provided for
herein to make such payment shall be extended until 90 days following the date
upon which such Shareholder has been able to sell all or a sufficient number of
shares of Common Stock of Parent to satisfy his or her indemnification
obligation hereunder.
ARTICLE X.
POST CLOSING AGREEMENTS
10.1 Business Covenant.
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(a) ▇▇▇▇▇ ▇▇▇▇▇ (but not the other Shareholders) agrees that, for a
period of 18 months following the termination of the ▇▇▇▇▇ Employment Agreement
neither he nor any of his Affiliates will in any way, directly or indirectly,
take away or interfere or attempt to interfere with any custom, trade, business
or patronage of Parent and its Affiliates relating to the Business, and will
not, without Parent's prior written consent, (x) engage in any business,
directly or indirectly, that competes with the Business, (y) hire any employee
of Parent unless Parent first terminates the employment of such employee, or (z)
disclose or use, in any manner, any confidential information related to the
Business or the Assets or use any Intellectual Property used in connection with
the Business other than in connection with his employment obligations; provided,
however, that if the ▇▇▇▇▇ Employment Agreement is terminated without Cause or
if ▇▇▇▇▇ ▇▇▇▇▇ terminates the ▇▇▇▇▇ Employment Agreement for Good Reason (each
as defined in the ▇▇▇▇▇ Employment Agreement), and Parent fails to pay him
amounts due thereunder within the time period set forth therein, the
restrictions set forth in this Section 10.1(a) shall not apply; provided
further, that nothing contained in this Section 10.1(a) shall release Parent
from its obligations timely to make all payments owing under the ▇▇▇▇▇
Employment Agreement.
(b) ▇▇▇▇▇ ▇▇▇▇▇ acknowledges that his failure to comply with the
provisions of Section 10.1(a) will result in irreparable and continuing damage
for which there will be no adequate remedy at law and that, in the event of a
failure to comply, the aggrieved party and their successors, legal
representatives and assigns may be entitled to injunctive relief and to such
other and further relief as may be proper and necessary to ensure compliance
with the provisions of Section 10.1(a).
10.2 Mail. Effective from consummation of the Closing, Parent shall
have the right to receive and open all mail, packages and other communications
addressed to the Company, and the Company Group agrees promptly to deliver to
Parent any such mail, packages or other communications received by any member of
the Company Group.
10.3 Further Assurances. From and after the Closing, upon the
reasonable request of Parent the members of the Company Group shall execute,
acknowledge and deliver all such further documents as may be reasonably
requested to evidence or effect the transactions contemplated hereby.
10.4 Use of Names. After the Closing, no member of the Company Group
nor any of its affiliates, successors or assigns shall adopt or otherwise
commercially use the name "Lola" or "XOXO" or any variation thereof or any trade
name, trademark or service ▇▇▇▇ used in connection with the Business.
10.5 Financial Records.
(a) Each party hereby agrees that, after Closing, it shall make
available to the other all work papers, records and notes of any kind, at all
reasonable times, for the
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purpose of allowing the appropriate party to complete tax returns, respond to
audits, obtain refunds, make any determination required under this Agreement,
verify issues and negotiate settlements with tax authorities or defend or
prosecute tax claims.
(b) After the Closing, Parent shall (i) afford to the Company, its
counsel and accountants, during normal business hours, reasonable access to the
books, records and data relating to the Business or the Assets with respect to
the period through the Closing Date, and (ii) cooperate with the Company, at the
Company's expense, in connection with any fact-finding by or on behalf of the
Company in connection with any claims made against the Company.
ARTICLE XI.
TERMINATION
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time:
11.1 Material Breach. By a non-breaching party, in the event of a
material breach of any representation, warranty, condition or agreement
contained in this Agreement that is not cured within 30 days of the time that
written notice of such breach is received by such other party from the party
giving notice.
11.2 Consummation of Merger. If the Merger shall not have been
consummated on or before August 15, 1999; provided, in the case of a termination
pursuant to this Section 11.2, the terminating party shall not have materially
breached its obligations hereunder in any manner that shall have contributed to
the failure to consummate the Merger by such date.
11.3 Mutual Consent. By mutual written consent of Parent and the
Company authorized by their respective Boards of Directors.
11.4 Effect of Termination. In the event of termination of this
Agreement and abandonment of the Merger pursuant to this Article 11, no party
hereto (or any of its Affiliates) shall have any liability to any other party to
this Agreement, except that if termination of this Agreement shall be judicially
determined to have been caused by a breach of this Agreement, then, in addition
to other remedies at law or equity for breach of this Agreement, the party so
found to have breached this Agreement shall indemnify the other parties for
their respective costs, fees and expenses of their counsel, accountants and
other experts and advisors as well as fees and expenses incident to negotiation,
preparation and execution of this Agreement and the related documentation and
the enforcement of this Agreement.
ARTICLE XII.
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DEFINITIONS
12.1 Defined Terms. As used in this Agreement, the following terms have
the meanings indicated below:
"Affiliate" means any Person that directly, or indirectly through one
of more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person whether by Contract or otherwise and, in
any event and without limitation of the previous sentence, any Person owning ten
percent (10%) or more of the voting securities of another Person shall be deemed
to control that Person.
"Approvals" shall mean authorizations, consents or other orders or
actions of or filings with any Body or third party including landlords, lessors
and lienors required to be obtained or made by a member of the Company Group in
connection with the execution, delivery and performance of this Agreement or the
consummation by the members of the Company Group of the transactions
contemplated hereby.
"April Balance Sheet" means the Company's balance sheet as of April 30,
1999.
"April Financial Statements" means the April Balance Sheet and
statement of income and changes in financial position for the four months ended
April 30, 1999.
"Associate," in reference to any Person, means (i) any corporation,
partnership or other entity of which any such Person is an officer or partner or
is, directly or indirectly, a beneficial owner (including shares held by any
parent, child, sibling or spouse) of 10% or more of any class of equity
securities; (ii) any trust or estate in which any Person has a substantial
beneficial interest or as to which any such Person serves as trustee or in a
similar fiduciary capacity; and (iii) any parent, child, sibling or spouse of
any such Person, or parent, child or sibling of such spouse.
"Benefit Plans" means all "employee pension benefit plans" (as defined
in Section 3(2) of ERISA) "employee welfare benefit plans" (as defined in
Section 3(1) of ERISA), bonus, deferred compensation, incentive or other
compensation plans or arrangements, and other employee fringe benefit plans at
any time maintained, or contributed to, by the Company for the benefit of any
employees, officers or directors.
"Body" means any court, arbitration agency or panel, or any
governmental department, commission, bureau, board or instrumentality.
"Business" means the design, manufacture, sale or licensing of apparel
as currently conducted by the Company.
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"Compliance Matters" means any Law including OSHA, Environmental Laws,
and ERISA to which the Company, the Business or the Assets may be subject prior
to the Closing.
"Condition of the Business" means the business, conditions (financial
or otherwise), results of operations, Assets and Properties of the Business.
"Contracts" means all agreements, leases, rental agreements, insurance
policies, collective bargaining agreements, union contracts, licenses, employee
plans, purchase orders, sales orders, commitments, confidentiality non-use or
non-disclosure agreements, and all other binding arrangements, whether written
or oral, express or implied, of the Company or relating to the Business or an
Asset.
"Disclosure Schedule" means the record delivered to Parent by the
Company Group herewith and dated as of the date hereof, containing all lists,
descriptions, exceptions and other information and material as are required to
be included therein by the Company Group pursuant to this Agreement.
"ERISA Affiliate" means any Person who is in the same controlled group
of corporations or who is under common control with the Company (within the
meaning of Section 414 of the Code).
"Financial Statements" means the (i) balance sheets of the Company as
of January 31, 1999 and 1998, and (ii) statements of income and changes in
financial position of the Company for the years then ended together with a true
and correct copy of the report on such information by the Company's Auditors,
and all letters from such accountants with respect to the results of such audit;
and (b) April Financial Statements.
"GAAP" means generally accepted accounting principles, consistently
applied throughout the specified period and in the immediately prior comparable
period.
"Income Taxes" means (i) all Federal, state, local or foreign income or
franchise taxes of the Company or other taxes or charges imposed on or with
respect to the Company's net income or capital, together with any interest or
penalties or additions to tax imposed with respect thereto and (ii) any
obligations under any agreements with respect to any Income Taxes.
"Intellectual Property" means all Patents and patent rights, Trademarks
and trademark rights, Trade names and trade name rights, service marks and
service ▇▇▇▇ rights, service names and service name rights, brand names,
inventions, processes, formulae, copyrights and copyright rights, trade dress,
business and product names, logos, slogans, trade secrets, industrial models,
processes, designs, methodologies, computer programs (including all source
codes) and related documentation, technical information, manufacturing,
engineering and technical drawings,
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Know-how and all pending applications for and registrations of patents,
trademarks, service marks and copyrights.
"Inventory" means all Products, work in process, finished goods, raw
materials, supplies and packaging materials of the Company, whether current,
excess or obsolete.
"Knowledge of the Company" or "Known to the Company" means the actual
knowledge of any officer or director of the Company.
"Know-how" means all laboratory journals, trade secrets (including,
without limitation, proprietary or confidential information and use and
application know-how), formulas, processes, product designs, manufacturing,
engineering and other drawings, computer databases and software, technology,
technical information, safety information, engineering and technical data and
design and engineering specifications, research records, market surveys and all
promotional literature, customer and supplier lists and information and similar
data of the Company.
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States of America,
any foreign country or any domestic or foreign state, county, city or other
political subdivision, or of any Body.
"Legal Proceeding" means any suit, action, arbitration, governmental
investigation, or legal, administrative or other proceeding.
"Liabilities" means all Indebtedness, obligations and other liabilities
of a Person (whether absolute, accrued, contingent, fixed or otherwise, or
whether due or to become due).
"Licenses" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Body.
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention Contract or other Contract to
give any of the foregoing.
"Order" means any judgment, order, writ, injunction or decree of any
Body.
"Patents" means United States and foreign patents (including all
reissues, divisions, continuations, continuations in part and extensions
thereof), patent applications and patent disclosures, and all other patent and
ancillary rights of the Company (including those as licensee or licensor or of
the Company pertaining to the Business).
"Pension Benefit Plan" means each Benefit Plan which is a pension
benefit plan within the meaning of Section 3(2) of ERISA.
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"Permits" means the franchises, licenses, permits and governmental and
regulatory authorizations and approvals used, or which are required by Law to be
used, by the Company in connection with the Assets and the Business.
"Person" means any natural person, corporation, association,
partnership, joint venture or other entity.
"Products" means all products and services designed, developed,
manufactured, produced, serviced, imported, marketed, dealt in, sold or
distributed by the Company as of the date hereof together with any additions and
deletions made in the ordinary course of business.
"Product Liability Claims" means all claims and actions arising from
the use prior to the consummation of the Closing by the Company of any Product,
for injuries alleged to have been caused by such Product.
"Qualified Plan" means each Benefit Plan which is intended to qualify
under Section 401 of the Code.
"Representatives" means with respect to any Person, such Person's
officers, directors, employees, agents, counsel, accountants, financial
advisors, consultants and other representatives.
"Taxes" means all taxes, customs duties or similar fees, assessments or
charges of any kind whatsoever required to be paid or collected and remitted by
a member of the Company Group, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority, domestic
or foreign with respect to such Taxes and any obligations under any agreements
with respect thereto.
"Trademarks" means trademarks, registrations thereof, pending
applications therefor, and such unregistered rights as are used in the Business.
"Trade Names" means the trade names, brand marks, service marks, trade
dress, brand names, logos and all other names and slogans embodying Business or
Product goodwill of the Company.
12.2 Accounting Terms. Any accounting terms used in this Agreement,
unless otherwise specifically provided, shall have the meanings customarily
given them in accordance with GAAP, and all financial computations, statements
and reports hereunder, unless otherwise specifically provided, shall be in
accordance with GAAP. An "audited" financial statement means one with an
independent auditor's report of audit thereon containing no qualification or
exception.
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12.3 Other Rules of Construction. Unless the context of this Agreement
requires otherwise (a) references in this Agreement to Articles, schedules and
exhibits are to sections of, and schedules and exhibits to, this Agreement; (b)
words in the singular include the plural and in the plural include the singular;
(c) the word "or" connotes both the disjunctive and conjunctive of the terms
affected, unless otherwise expressly stated; (d) the terms "hereof," "herein,"
"hereby" and derivative or similar words refer to this entire agreement; (e) the
terms "include," "includes," "including" and derivative or similar words shall
be deemed to include the phrase "without limitation"; (f) the phrase "ordinary
course of business" and "ordinary course of business consistent with past
practice" refer to the business and practice of the Company Group in connection
with the Business; and (g) words of any gender including each other gender.
Whenever this Agreement refers to a number of days, such number shall refer to
calendar days unless Business Days are specified.
ARTICLE XIII.
MISCELLANEOUS
13.1 Amendments and Waivers. This Agreement may be modified or amended
only by written instrument signed by the parties hereto.
13.2 Transferability.
(a) The respective rights and obligations of each party hereto shall
not be assignable by such party without the written consent of the other parties
hereto.
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assignees.
Nothing herein expressed or implied is intended to confer upon any person, other
than the parties hereto and their respective successors and permitted assignees,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
13.3 Notices. Any notice, request or other document to be given
hereunder to a party hereto shall be in writing and delivered in person or sent
by registered or certified mail, postage prepaid, or by Federal Express
(priority service), and by telephone facsimile transmission ("fax") confirmed by
telephone, as follows:
If to Parent, to:
Aris Industries, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
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Facsimile Transmission No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to any member of the Company Group, to:
Lola, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
with copies to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Troop ▇▇▇▇▇▇▇ Pasich Reddick & ▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & Leeds, LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Any party hereto may change its address for receiving notices, requests and
other documents by giving written notice of such change to the other parties.
13.4 Remedies. Each party acknowledges and agrees that the other party
would be irreparably damaged in the event any of the provisions of this
Agreement were not performed by it in accordance with its specific terms or were
otherwise breached. It is accordingly agreed that each party hereto shall be
entitled to an injunction to prevent breaches of such provisions and to
specifically enforce such provisions, in addition to any other remedy to which
such party may be entitled, at law or in equity. If the transaction contemplated
by this Agreement fails to close because of the nonfulfillment of any condition
to Parent's obligation, or as a result of any breach by the Company Group under
this Agreement, in addition to any other remedies available to it, Parent shall
be entitled to receive from the Company Group all costs and expenses incurred by
it in connection with this Agreement and the transactions contemplated hereby
including, all legal fees and disbursements, all accounting fees and
disbursements, all
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environmental audit fees and disbursements, and all other costs and expenses
associated with Parent's "due diligence" investigation of the Company, the
Assets and the Business.
13.5 Partial Invalidity. If any provision of this Agreement shall be
held invalid or unenforceable by any court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any other provision hereof.
13.6 Expenses. Except as otherwise expressly provided in this Agreement
whether or not the transactions contemplated hereby are consummated, each party
will pay its own costs and expenses incurred in connection with the negotiation,
execution and closing of this Agreement and the transactions contemplated
hereby. In the event this Agreement is terminated other than as a result of a
breach by Parent, and the Company or Stockholder enter into an agreement to sell
substantially all of the Business or Assets or a majority of the capital stock
of the Company (a "Subsequent Transaction"), the Company Group shall pay Parent
a Termination Fee, consisting of (x) a "reimbursement amount" equal to Parent's
actual expenses in connection with the transactions contemplated hereby (i.e.,
the actual out-of-pocket expenses incurred in connection with negotiating,
preparing and presenting the Letter of Intent, this Agreement and related
documents, conducting due diligence, preparing for the Closing, and resolving
issues relating to same), plus a "topping payment", equal to the sum of 25% of
the excess of any consideration payable to members of the Company Group in the
Subsequent Transaction over the sum of the consideration to be paid by Parent
hereunder. Payment of any Termination Fee shall be made promptly, but in no
event later than the closing of the Subsequent Transaction.
13.7 Confidentiality. Unless (a) compelled to disclose by judicial or
administrative process (including without limitation in connection with
obtaining the necessary approvals of this Agreement and the transactions
contemplated hereby of Body) or by other requirements of Law or (b) disclosed in
a Legal Proceeding brought by a party hereto in pursuit of its rights or in the
exercise of its remedies hereunder, each party hereto will hold, and will use
its best efforts to cause its Affiliates, and their respective Representatives
to hold, in strict confidence from any Person (other than any such Affiliate or
Representative), all documents and information concerning the other party or any
of its Affiliates furnished to it by the other party or such other party's
Representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (i) previously known by the party receiving such documents
or information, (ii) in the public domain (either before or after the furnishing
of such documents or information hereunder) through no fault of such receiving
party, or (iii) later acquired by the receiving party from another source if the
receiving party is not aware that such source is under an obligation to another
party hereto to keep such documents and information confidential; provided,
however, that following the Closing the foregoing restrictions will not apply to
Parent's use of documents and information concerning the Company. If the
transactions contemplated hereby are not con summated, upon the request of the
other party, each party hereto will, and will cause its Affiliates and their
respective Representatives to, promptly redeliver or cause to be redelivered all
copies of documents and information furnished by the other party in connection
with this Agreement or the
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transactions contemplated hereby and destroy or cause to be destroyed all notes,
memoranda, summaries, analyses, compilations and other writings related thereto
or based thereon prepared by the party furnished such documents and information
or its Representatives.
13.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
13.9 Section Headings. The section headings and table of contents
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
13.10 Entire Agreement. This Agreement, together with the Schedules and
Exhibits and the agreements and instruments delivered pursuant hereto, contains
the entire agreement between the parties, and supersede all prior agreements and
understanding between them relating to the subject matter hereof.
13.11 Publicity. No member of the Company Group shall issue any press
release or make any other public announcement with respect to this Agreement or
the transactions contemplated hereby without obtaining the prior approval of the
Parent (which shall not be unreasonably withheld or delayed), except as may be
required by law or the regulations of any securities exchange.
13.12 Joint and Several Obligations. Each member of the Company Group
is jointly and severally responsible for the agreements, covenants,
representations, warranties and obligations of any member of the Company Group
contained in this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on and as of the day and year first above written.
ARIS INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------
XOXO ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------
LOLA, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------
SHAREHOLDERS:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
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SCHEDULES AND EXHIBITS
----------------------
Schedules
---------
1.4 List of all issued and outstanding Company Common Stock.
3.1(a) List of all jurisdictions in which the Company is in good standing or qualified to
do business.
3.1(b) List of all entities in which the Company has an interest or equity.
3.2(b) List of all shareholders owning Company Common Stock and the number of
shares owned by each.
3.4 List of all current directors and officers including positions held as of the Closing
Date.
3.5(c) Certain of the Company's liabilities.
3.6 List of all Real Property Leases.
3.7 List of all tangible personal property owned by the Company including any liens
thereon.
3.8 List of Intellectual Property Rights.
3.9 List of all pending, threatened or unresolved litigation.
3.11 List of all Contracts.
3.13 List of all Permits.
3.15 List of all Insurance Policies.
3.16 List of all Inventory as of May 31, 1999.
3.18(a) Accounts Receivable Aging Report as of June 15, 1999.
3.18(c) All creditors of the Company as of May 31, 1999.
3.20 Affiliate Transactions.
3.21(a) List of all employees, salary, incentive bonus or any bonus arrangements.
3.21(d) Employee Benefit Plans.
3.22 List of 10 largest customers and 10 largest suppliers.
3.23 List of all Guarantees.
3.27 Shareholder Claims against the Company.
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Exhibits
--------
A Form of ▇▇▇▇▇ Employment Agreement
B Form of ▇▇▇▇▇ Employment Agreement
C Form of Opinion of Counsel to Company Group
D Form of Opinion of Counsel to Parent
E Form of Shareholders Agreement between ▇▇▇▇▇, the Simon Group and the
Company
F Company's Officers' Certificate
G Company's Secretary's Certificate
H Parent's Officer's Certificate
I Parent's Secretary's Certificate
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