As filed with the Securities and Exchange Commission on December 24, 1997
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 10, 1997
dELiA*s Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-21869 13-3914035
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
435 Hudson Street
New York, New York 10014
(Address of principal executive offices) (Zip Code)
(212) 807-9060
(Registrant's telephone number, including area code)
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Certain statements contained herein are forward-looking statements
(within the meaning of Section 27A of the Securities Act of 1933, as amended
(the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")). Forward-looking statements involve a number of
risks and uncertainties including, but not limited to, general economic
conditions, increases in materials, printing, paper, postage, shipping and labor
costs, timing of catalog mailings, customer response rates, levels of
competition, difficulties in integrating acquisitions and other factors outside
the control of the Company. These factors, and other factors that appear with
the forward-looking statements, or in the Company's other Securities and
Exchange Commission filings, including its Registration Statement on Form S-1
filed on May 20, 1997, could affect the Company's actual results and could cause
the Company's actual results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company herein.
Item 2. Acquisition or Disposition of Assets.
On December 10, 1997, dELiA*s Inc. (the "Company") acquired TSI Soccer
Corporation ("TSI"). Pursuant to an Agreement and Plan of Merger dated December
10, 1997, a wholly-owned subsidiary of the Company was merged with and into TSI
(the "TSI Merger"). As a result of the TSI Merger, TSI became a wholly-owned
subsidiary of the Company. In connection with the TSI Merger, the Company issued
an aggregate of 308,687 shares of common stock, par value $.01 per share
("Common Stock") to certain stockholders of TSI, including 10,760 shares of
Common Stock to employees of TSI pursuant to a "change of control" provision in
TSI's stock appreciation rights plan. The Company also expects to make cash
payments of approximately $730,000 to former shareholders of TSI who exercise
statutory dissenters' rights. The TSI Merger was structured as a tax-free
exchange and the Company expects the TSI Merger to be accounted for as a
pooling-of-interests.
TSI is a leading direct marketer of specialty soccer merchandise and
operates 13 retail stores located in Georgia, Maryland, North Carolina and
Virgina. TSI offers a wide range of soccer shoes, apparel and equipment through
its TSI Soccer catalog, retail stores and team sales force. Approximately
two-thirds of TSI's sales are made through its catalog and team sales force, and
the remainder of TSI's sales are made through TSI's retail stores. The Company
expects TSI to record net sales of approximately $27 million in TSI's fiscal
year ended December 31, 1997. The Company's acquisition of TSI will add in
excess of 1.0 million names of catalog buyers and requestors, of whom
approximately 250,000 have made purchases from TSI within the preceding 36
months, to the Company's proprietary database. TSI was incorporated in North
Carolina in 1994 and carries on a business conducted by predecessors since 1989.
Item 7. Financial Statements, Pro Forma Financial Information andExhibits.
(a) Financial Statements of Business Acquired.
In accordance with Instruction 4 of this Item 7, financial statements
required by this item will be filed on a Form 8-K/A as soon as practicable, but
in no event later than 60 days after the date this Form 8-K is required to be
filed.
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(b) Pro Forma Financial Information.
In accordance with Instruction 4 of this Item 7, pro forma financial
information required by this item will be filed on a Form 8-K/A as soon as
practicable, but in no event later than 60 days after the date this Form 8-K is
required to be filed.
(c) Exhibits.
Exhibit 2.1 Agreement and Plan of Merger dated December 10, 1997 by and
among the Company, dELiA*s Woodstock Company, TSI Soccer
Corporation ("TSI"), certain stockholders of TSI and Evan
L. Jones (the "Merger Agreement").*
* The table of contents to the Merger Agreement lists the exhibits and
schedules to the Merger Agreement. In accordance with Item 601(b)(2) of
Regulation S-K, the exhibits and schedules to the Merger Agreement have been
excluded; such exhibits and/or schedules will be furnished supplementally upon
request by the Securities and Exchange Commission.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
dELiA*s Inc.
(Registrant)
Date: December 24, 1997
By: /s/ Stephen I. Kahn
--------------------
Stephen I. Kahn
Chairman of the Board, President and
Chief Executive Officer
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Exhibit Index
2.1 Agreement and Plan of Merger dated December 10, 1997 by and among
the Company, dELiA*s Woodstock Company, TSI Soccer Corporation
("TSI"), certain stockholders of TSI and Evan L. Jones.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
dELiA*s Inc.,
dELiA*s WOODSTOCK COMPANY,
TSI SOCCER CORPORATION,
EVAN L. JONES
AND
CERTAIN STOCKHOLDERS OF TSI SOCCER CORPORATION
December 10, 1997
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
1. Definitions.....................................................................................1
2. Basic Transaction...............................................................................8
(a) The Merger.............................................................................8
(b) Effectiveness..........................................................................8
(c) Articles of Incorporation and Bylaws...................................................8
(d) Directors and Officers of Target.......................................................8
(e) Effective Date and Effective Time......................................................8
(f) Conversion of Target Shares............................................................8
(g) Conversion of Common Stock of Acquisition Sub..........................................9
(h) Transfer Restrictions..................................................................9
(i) The Closing...........................................................................10
(j) Delivery of Share Certificates; Payment for Fractional Shares.........................10
(k) Lost Certificates.....................................................................11
3. Representations and Warranties Concerning the Transaction......................................11
(a) Representations and Warranties of the Sellers.........................................11
(b) Representations and Warranties of the Buyer...........................................14
4. Representations and Warranties Concerning the Target...........................................16
(a) Organization, Authorization, Qualification, and Corporate Power.......................16
(b) Capitalization........................................................................17
(c) Noncontravention......................................................................17
(d) Brokers' Fees.........................................................................18
(e) Title to Assets.......................................................................18
(f) Subsidiaries..........................................................................18
(g) Financial Statements..................................................................18
(h) Events Subsequent to Most Recent Fiscal Month End.....................................18
(i) Undisclosed Liabilities...............................................................21
(j) Legal Compliance......................................................................21
(k) Tax Matters...........................................................................21
(l) Real Property.........................................................................23
(m) Intellectual Property.................................................................24
(n) Tangible Assets.......................................................................26
(o) Inventory.............................................................................27
(p) Contracts.............................................................................27
(q) Notes and Accounts Receivable.........................................................28
(r) Powers of Attorney....................................................................29
(s) Insurance.............................................................................29
(t) Litigation............................................................................29
(u) Product Warranty......................................................................30
(v) Employees.............................................................................30
(w) Employee Benefits.....................................................................30
(x) Guaranties............................................................................32
(y) Environment, Health, and Safety Matters...............................................32
(z) Certain Business Relationships with the Target........................................34
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(aa) Disclosure............................................................................34
(bb) Employees.............................................................................34
(cc) Circulation Information...............................................................34
(dd) Pooling...............................................................................34
(ee) Target SAR Plan; Target Transaction Costs.............................................35
(ff) Pooling Affiliates....................................................................35
(gg) Events Subsequent to Most Recent Fiscal Year End......................................35
5. Pre-Closing Covenants..........................................................................35
(a) General...............................................................................36
(b) Notices and Consents..................................................................36
(c) Operation of Business.................................................................36
(d) Preservation of Business..............................................................36
(e) Full Access...........................................................................36
(f) Notice of Developments................................................................37
(g) Exclusivity...........................................................................37
(h) Landlord's Estoppel Certificate.......................................................38
(i) Discharge of Certain Guarantees.......................................................38
(j) Certain Actions.......................................................................38
(k) Leases................................................................................38
(l) Compliance With SEC and Nasdaq Requirements...........................................38
(m) Pooling of Interests..................................................................38
(n) Nasdaq Listing........................................................................39
(o) Shareholder and Director Vote.........................................................39
6. Post-Closing Covenants.........................................................................39
(a) General...............................................................................39
(b) Litigation Support....................................................................39
(c) Transition............................................................................39
(d) Confidentiality.......................................................................39
(e) Covenant Not to Compete...............................................................40
(f) Dissenters' Rights....................................................................40
(g) Issuance of Combined Financial Results................................................40
(h) Target Obligations....................................................................41
(i) Indemnification of Target's Directors and Officers....................................41
7. Conditions to Obligation to Close..............................................................41
(a) Conditions to Obligation of the Buyer and Acquisition Sub.............................41
(b) Conditions to Obligation of the Sellers and the Target................................43
8. Remedies for Breaches of This Agreement........................................................45
(a) Survival of Representations and Warranties............................................45
(b) Indemnification Provisions for Benefit of the Buyer...................................45
(c) Indemnification Provisions for Benefit of the Sellers.................................46
(d) Matters Involving Third Parties.......................................................46
(e) Determination of Adverse Consequences.................................................48
(f) Other Indemnification Provisions......................................................48
(g) Vendor Disputes.......................................................................48
(h) Sole and Exclusive Remedy.............................................................48
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(i) Limitations...........................................................................48
9. Tax Matters....................................................................................49
(a) Tax Periods Ending on or Before the Closing Date......................................49
(b) Tax Periods Beginning Before and Ending After the Closing Date........................50
(c) Cooperation on Tax Matters............................................................50
10. Termination....................................................................................50
(a) Termination of Agreement..............................................................51
(b) Effect of Termination.................................................................52
11. Registration Rights...........................................................................53
(a) Filing of Registration Statement......................................................53
(b) Expenses of Registration..............................................................53
(c) Furnishing of Documents...............................................................53
(d) Amendments and Supplements............................................................54
(e) Duration..............................................................................54
(f) Further Information and Cooperation...................................................54
(g) Indemnification.......................................................................54
12. Miscellaneous..................................................................................56
(a) Nature of Certain Obligations.........................................................56
(b) Press Releases and Public Announcements...............................................56
(c) No Third-Party Beneficiaries..........................................................57
(d) Entire Agreement......................................................................57
(e) Succession and Assignment.............................................................57
(f) Counterparts..........................................................................57
(g) Headings..............................................................................57
(h) Notices...............................................................................57
(i) Governing Law.........................................................................58
(j) Amendments and Waivers................................................................58
(k) Severability..........................................................................58
(l) Expenses..............................................................................58
(m) Construction..........................................................................59
(n) Incorporation of Exhibits, Annexes, and Schedules.....................................59
(o) Specific Performance..................................................................59
(p) Submission to Jurisdiction............................................................59
13. Representation of Sellers by Sellers' Agent...................................................60
(a) Appointment of Sellers' Agent.........................................................60
(b) Successor Agent.......................................................................60
(c) Sellers' Actions......................................................................61
</TABLE>
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Exhibit A Form of Escrow Agreement
Exhibit B Form of Affiliate Letter
Exhibit C Form of Employment Agreement
Exhibit D Form of Stock Option Agreement
Exhibit E Form of Landlord's Estoppel Certificate
Schedule 3a5 Ownership of Target Shares
Schedule 3b3 Buyer's Noncontravention
Schedule 4a Organization, Authorization, Qualification and Corporate Power
Schedule 4b Capitalization
Schedule 4c Noncontravention
Schedule 4e Title to Assets
Schedule 4g Financial Statements
Schedule 4h Events Subsequent to Most Recent Fiscal Month End
Schedule 4i Certain Liabilities
Schedule 4k Tax Matters
Schedule 4l Real Property Leases
Schedule 4m Intellectual Property
Schedule 4p Contracts
Schedule 4s Insurance
Schedule 4t Litigation
Schedule 4u Product Warranties
Schedule 4w Employee Benefits
Schedule 4aa Certain Business Relationships with the Target
Schedule 4cc Circulation Information
Schedule 4ff Pooling Affiliates
Schedule 4gg Events Subsequent to Most Recent Fiscal Year End
Schedule 5b Notices and Consents
Schedule 5i Guarantees
Schedule 7b Management Option Grants
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AGREEMENT AND PLAN OF MERGER
Agreement (this "Agreement") entered into as of December 10, 1997, by
and among dELiA*s Inc., a Delaware corporation (the "Buyer"), dELiA*s Woodstock
Company, a North Carolina corporation ("Acquisition Sub"), Evan L. Jones, a
natural person residing at 5910 Treetop Ridge, Durham, North Carolina 27705, TSI
Soccer Corporation, a North Carolina corporation (the "Target"), and those
stockholders of the Target who are signatories hereto (each, an "Initial
Seller," and collectively, the "Initial Sellers"). The Buyer, Acquisition Sub,
the Target, Evan L. Jones and the Sellers are referred to collectively herein as
the "Parties."
This Agreement contemplates a transaction in which the Buyer will
acquire all of the outstanding capital stock of the Target for shares of common
stock, par value $.01 per share, of Buyer ("Buyer Common Stock"), through a
reverse subsidiary merger of the Acquisition Sub with and into the Target (the
"Merger").
For federal income tax purposes, it is intended that the Merger will
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and that this Agreement
constitute a plan of reorganization within the meaning of Section 1.368-2(g) of
the income tax regulations promulgated under the Code.
For accounting purposes, it is intended that the Acquisition will be
accounted for as a pooling-of-interests business combination.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable legal and paralegal fees, expenses
and disbursements.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code ss.1504(a) or any similar group defined under a similar provision of state,
local or foreign law.
"Aggregate Merger Consideration" means the aggregate number of shares
of Buyer Common Stock equal to the product of (a) the Exchange Ratio and (b) the
number of Target Shares outstanding on the Closing Date.
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"Allocable Portion" means, with respect to the share of any Seller in a
particular amount, that fraction equal to (A) the number of Target Shares such
Seller owns as of the Closing Date as set forth in Schedule 3a5 annexed hereto
over (B) the total number of outstanding Target Shares.
"Alternative Transaction" has the meaning set forth in Section 10(b)
hereof.
"Applicable Rate" means the corporate base rate of interest publicly
announced from time to time by Chase.
"Audit Publication Date" has the meaning set forth in Section 6(g)
hereof.
"Average Closing Price" means the average closing price per share of
Buyer Common Stock as quoted on Nasdaq over the five consecutive trading days
ending on the third business day immediately preceding the Closing Date.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Buyer" has the meaning set forth in the preface to this Agreement..
"Buyer Common Stock" has the meaning set forth in the preface to this
Agreement.
"Buyer Termination Fee" has the meaning set forth in Section 10(b)
hereof.
"CERCLA" has the meaning set forth in Section 4(y)(v) hereof.
"Chase" means Chase Manhattan Bank.
"Closing" has the meaning set forth in Section 2(i) hereof.
"Closing Date" has the meaning set forth in Section 2(i) hereof.
"Code" has the meaning set forth in the preface to this Agreement.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code ss.4980B.
"Confidential Information" means any information concerning the
businesses and affairs of the Target that is not already generally available to
the public.
"Controlled Group" has the meaning set forth in Code ss.1563.
"dELiA*s SEC Documents" has the meaning set forth in Section 3(b)(vi)
hereof.
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"Dissenting Share" means any Target Share which any stockholder who or
which has exercised his or its rights under and in accordance with Article 13 of
the NCBCA with respect to the Merger.
"Effective Date" has the meaning set forth in Section 2(e) hereof.
"Effective Time" has the meaning set forth in Section 2(e) hereof.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), (d) Employee
Welfare Benefit Plan or material fringe benefit or other retirement, bonus, or
incentive plan or program or (e) .any plan or arrangement of the kind described
in Section 5(p)(vii) hereof
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
ss.3(1).
"Employment Agreement" means the Employment Agreement between the
Target and Evan L. Jones dated the Closing Date in the form annexed hereto as
Exhibit C.
"Environmental, Health, and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, each as amended and as
now or hereafter in effect.
"Environmental Report" means any report, study, assessment, audit or
similar document that addresses any issue of actual or potential noncompliance
with, or actual or potential liability under or cost arising out of, any
Environmental Law that may in any way affect the Target.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each entity which is treated as a single
employer with Seller for purposes of Code ss.414.
"Escrow Agent" means Chase and any successor thereto pursuant to the
Escrow Agreement.
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"Escrow Agreement" means the Escrow Agreement dated the Closing Date by
and among the Parties and Chase in the form annexed hereto as Exhibit A.
"Exchange Ratio" means that fraction, the numerator of which is (A) the
greater of (i) 345,000 less the number of SAR Conversion Shares or (ii) the
quotient obtained by dividing Minimum Aggregate Share Value by the Average
Closing Price less (B) the quotient obtained by dividing the Target Transaction
Costs by $21.00, and the denominator of which is the number of Target Shares
outstanding on the Closing Date.
"Fiduciary" has the meaning set forth in ERISA ss.3(21).
"Financial Statements" has the meaning set forth in Section 4(g)
hereof.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Hazardous Materials" means petroleum, petroleum products,
petroleum-derived substances, flammable explosives, radioactive materials,
hazardous wastes, polychlorinated biphenyls, lead-based paint, urea
formaldehyde, asbestos or any materials containing asbestos and any materials or
substances regulated or defined as "hazardous wastes," "hazardous substances,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "pollutants," "toxic pollutants," "contaminants" or
any similar denomination intended to classify substances by reason of toxicity,
carcinogenicity, ignitability, corrosovity or reactivity under any
Environmental, Health and Safety Requirement.
"Indemnifiable Vendor Claims" has the meaning set forth in Section 8(g)
hereof.
"Indemnified Party" has the meaning set forth in Section 8(d) hereof.
"Indemnifying Party" has the meaning set forth in Section 8(d) hereof.
"Indemnity Ceiling" has the meaning given to that term in the Escrow
Agreement.
"Initial Seller" and "Initial Sellers" have the respective meanings set
forth in the preface to this Agreement.
"Intellectual Property" means all U.S. and foreign intellectual
property, including, without limitation, (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (b) all trademarks, service marks, trade
dress, logos, trade names, and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith, (c) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith, (d) all mask
works and all applications, registrations, and
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renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
databases, pricing and cost information, and business and marketing plans and
proposals), (f) all computer software (including data and related documentation)
and (g) all copies and tangible embodiments thereof (in whatever form or
medium).
"Knowledge" means, with respect to any person (if such person is not a
natural person, the officers and other senior managers of such person), (i) the
actual knowledge of such person and (ii) that knowledge which a prudent
businessperson would have obtained in management of his or her business affairs
after making such reasonable investigation, if any, as a prudent businessperson
would make or exercise under the same or similar circumstances.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Merger" has the meaning set forth in the preface to this Agreement.
"Merger Consideration" has the meaning set forth in Section 2(f)
hereof.
"Minimum Aggregate Share Value" means the product of (A) 345,000 less
the number of SAR Conversion Shares and (B) $15.00.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Balance Sheet Date" means the date of the Most Recent
Balance Sheet.
"Most Recent Financial Statements" has the meaning set forth in Section
4(g) hereof.
"Most Recent Fiscal Month End" has the meaning set forth in Section
4(g) hereof.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(g)
hereof.
"Multiemployer Plan" has the meaning set forth in ERISA ss.3(37).
"Nasdaq" means The Nasdaq Stock Market, Inc. or such other national
securities exchange on which the Buyer Common Stock is listed.
"NCBCA" means the North Carolina Business Corporation Act, as amended.
"North Carolina Secretary" has the meaning set forth in Section 2(b)
hereof.
"Ordinary Course of Business" means the ordinary course of business
consistent in nature
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and amount (including both quantity and frequency) with past custom and
practice.
"Outside Date" means January 2, 1998.
"Party" has the meaning set forth in the preface to this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Pooling Affiliate" has the meaning set forth in Section 4(ff) hereof.
"Prohibited Transaction" has the meaning set forth in ERISA ss.406 and
Code ss.4975.
"Reportable Event" has the meaning set forth in ERISA ss.4043.
"Requisite Stockholder Approval" means the affirmative vote of the
holders of 90% of the Target Shares in favor of this Agreement and the Merger.
"SAR Conversion Shares" means those shares of Buyer Common Stock
issuable pursuant to the Target SAR Plan as a result of the consummation of the
Merger.
"SEC" has the meaning set forth in Section 3(b) hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"Seller" means each Initial Seller and any other holder of Target
Shares who becomes a party hereto subsequent to the execution hereof.
"Sellers' Agent" has the meaning set forth in Section 13 hereof.
"Stock Option Agreement" means the Stock Option Agreement between the
Buyer and Evan L. Jones dated the Closing Date in the form annexed hereto as
Exhibit D.
"Subsidiary" means any corporation with respect to which a specified
Person (or a
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Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Surviving Corporation" has the meaning set forth in Section 2(a)
hereof.
"SWDA" has the meaning set forth in Section 4(y)(v) hereof.
"Target" has the meaning set forth in the preface to this Agreement.
"Target Bank Debt" means all obligations of the Target in connection
with: (i) the $1,200,000 line of credit from Centura Bank pursuant to Master
Commercial Note (secured) dated June 9, 1997; (ii) the $500,000 term loan from
Centura Bank pursuant to a Commercial Note (secured) dated June 9, 1997; and
(iii) the $75,000 term loan from NationsBank, N.A. pursuant to a Promissory Note
dated April 28, 1997.
"Target Preferred Stock" has the meaning set forth in Section 4(b)
hereof.
"Target SAR Plan" means the 1995 Stock Appreciation Rights Plan of
Target.
"Target Share" means any share of the Common Stock, par value $.01 per
share, of the Target.
"Target Share Certificates" has the meaning set forth in Section 2(j)
hereof.
"Target Termination Fee" has the meaning set forth in Section 10(b)
hereof.
"Target Transaction Costs" means the sum of (A) all legal fees and
expenses of the Target associated with the transactions contemplated hereby and
(B) all accounting fees and expenses of the Target associated with the
transactions contemplated hereby and with the restatement of the Target's
financial statements for 1995 and 1996 and BDO Seidman, LLP's "review" (as that
term is used in the accounting profession) of the Target's financial statements
as of and for the period ended September 30, 1997; provided, however, that if
such sum is in excess of $150,000, Target Transaction Costs means $150,000.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
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"Third Party Claim" has the meaning set forth in Section 8(d) hereof.
2. Basic Transaction.
(a) The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time, the Acquisition Sub will merge with and into
the Target, the separate corporate existence of Acquisition Sub shall cease and
Target shall survive and continue to exist as a North Carolina corporation
(Target, as the surviving corporation in the Merger, sometimes being referred to
herein as the "Surviving Corporation").
(b) Effectiveness. Subject to the satisfaction or waiver of the
conditions set forth in Article 7, the Merger shall become effective upon the
occurrence of the filing in the Office of the Secretary of State of the State of
North Carolina (the "North Carolina Secretary") of articles of merger in
accordance with Section 55-11-05 of the NCBCA or such later date and time as may
be set forth in such articles and the issuance of a certificate of merger by the
North Carolina Secretary under the NCBCA. The Merger shall have the effects
prescribed in the NCBCA.
(c) Articles of Incorporation and Bylaws. The articles of incorporation
and by-laws of the Target immediately before the Merger shall become those of
the Surviving Corporation at and as of the Effective Time.
(d) Directors and Officers of Target. The directors and officers of
Acquisition Sub immediately before the Merger shall become the directors and
officers of the Target at and as of the Effective Time (retaining their
respective positions and offices), until such time as their successors shall be
duly elected and qualified.
(e) Effective Date and Effective Time. Subject to the satisfaction or
waiver of the conditions set forth in Article 7, the parties shall cause the
effective date of the Merger (the "Effective Date") to occur on (i) the Closing
Date or (ii) such other date to which the Parties may agree in writing. The time
on the Effective Date when the Merger shall become effective is referred to as
the "Effective Time."
(f) Conversion of Target Shares. At and as of the Effective Time, (A)
each Target Share (other than any Dissenting Share) shall be converted into the
right to receive the number of shares of Buyer Common Stock (or fraction
thereof) equal to the Exchange Ratio (the "Merger Consideration") and (B) each
Dissenting Share shall be converted into the right to receive payment from the
Surviving Corporation with respect thereto in accordance with the provisions of
the NCBCA in an amount equal to the product of (i) the Exchange Ratio and (ii)
the Average Closing Price; provided, however, that the Merger Consideration
shall be subject to equitable adjustment in the event, between the date of this
Agreement and the Closing Date, the outstanding shares of Target Shares or Buyer
Common Stock shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision, reclassification,
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recapitalization, split, combination, exchange of shares or similar transaction.
Nothing stated in the immediately preceding sentence shall be construed as
providing the holders of Target Shares any preemptive or antidilutive rights
other than in the case of a stock dividend, subdivision, reclassification,
recapitalization, split, combination, exchange of shares or similar transaction,
and, except in such case, there shall be no adjustment to the Merger
Consideration, as the case may be, in the event that Buyer issues or agrees to
issue any shares of Buyer Common Stock between the date hereof and the Closing
Date, whether for cash, through option grants, option or warrant exercises, in
acquisitions or in other transactions. The shares of Buyer Common Stock issued
upon the surrender of Target Shares in accordance with the terms hereof
(including any cash paid in lieu of fractional shares of Buyer Common Stock)
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Target Shares. After the Effective Time, no Target Share
shall be deemed to be outstanding or to have any rights other than those set
forth above in this Section 2(f).
(g) Conversion of Common Stock of the Acquisition Sub. At and as of the
Effective Time, each share of common stock, $.01 par value per share, of the
Acquisition Sub shall be converted into one share of common stock, $.01 par
value per share, of the Surviving Corporation.
(h) Transfer Restrictions.
(i) The shares of Buyer Common Stock to be issued
pursuant to Section 2(f) hereof will not be
registered under the Securities Act on the Closing
Date and may not be transferred, sold or otherwise
disposed of by any Seller except pursuant to an
effective registration statement under the Securities
Act or in accordance with an exemption from the
registration requirements of the Securities Act.
(ii) Each Seller that is a Pooling Affiliate covenants
that he, she or it will not transfer, sell or
otherwise dispose of any of the shares of Buyer
Common Stock received in accordance with Section 2(f)
hereof or reduce his, her or its interest in or
relating to such shares of Buyer Common Stock until
the Audit Publication Date.
(iii) Each certificate representing shares of Buyer Common
Stock issued by Buyer to a Seller that is not a
Pooling Affiliate in accordance with Section 2(f)
shall bear the following legend:
THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF
ANY STATE WITH RESPECT THERETO OR IN ACCORDANCE WITH AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
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Buyer agrees to remove such legend (or any relevant portion thereof), by prompt
delivery of substitute certificates upon the request of the holder if at such
time such legend (or portion thereof) is no longer required for purposes of, or
applicable pursuant to, the prior provisions of this Section 2(h).
(iv) Each certificate representing shares of Buyer Common
Stock issued by Buyer to a Pooling Affiliate in
accordance with Section 2(f) shall bear the following
legend:
THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF
ANY STATE WITH RESPECT THERETO OR IN ACCORDANCE WITH AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. AND ALSO MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER WITHOUT
COMPLIANCE WITH THE SECURITIES AND EXCHANGE COMMISSION'S ACCOUNTING
SERIES RELEASES 130 AND 135.
Buyer agrees to remove such legend (or any relevant portion thereof), by prompt
delivery of substitute certificates upon the request of the holder if at such
time such legend (or portion thereof) is no longer required for purposes of, or
applicable pursuant to, the prior provisions of this Section 2(h).
(i) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York, New York 10017, commencing at 9:00
a.m. local time on the second business day following the satisfaction or waiver
of all conditions to the obligations of the parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself) or such other date as
the Buyer and the Company may mutually determine (the "Closing Date"). At the
Closing, (i) the Sellers and the Target will deliver to the Buyer and
Acquisition Sub the various certificates, instruments, and documents referred to
in Section 7(a) hereof, (ii) the Buyer and Acquisition Sub will deliver to the
Sellers the various certificates, instruments, and documents referred to in
Section 7(b) below, (iii) each of the Sellers will deliver to the Buyer the
Target Share Certificates described in Section 2(j) hereof, (iv) the Buyer will
deliver to the Sellers the consideration specified in Section 2(j) hereof and
(v) the Buyer will deliver to Chase as Escrow Agent the consideration specified
in Section 2(j) hereof.
(j) Delivery of Share Certificates; Payment for Fractional Shares. At
the Effective Time, each Seller shall deliver the certificates representing all
issued and outstanding shares of Target
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Shares (the "Target Share Certificates") owned by such Seller to Buyer for
cancellation; and Buyer shall issue to each Seller the number of shares (rounded
down to the nearest whole share) of Buyer Common Stock issuable to such Seller
pursuant to Section 2(f) and shall deliver such shares in the following manner:
(i) Buyer will deposit in escrow pursuant to the Escrow Agreement certificates
for ten percent (10%) of the Aggregate Merger Consideration and (ii) Buyer will
deliver to each Seller one or more certificates representing the balance of the
shares of Buyer Common Stock issuable to such Seller pursuant to Section 2(f)
thereof. No certificate or scrip representing fractional shares of Buyer Common
Stock shall be issued upon the delivery for exchange of Target Share
Certificates, and such fractional share interests shall not entitle the owner
thereof to vote or to any rights as a stockholder of Buyer. In lieu of any such
fractional shares, each holder of Target Shares who would otherwise have been
entitled to a fraction of a share of Buyer Common Stock upon delivery of Target
Share Certificates for exchange shall be entitled to receive a cash payment in
lieu of such fractional share in an amount equal to such fraction multiplied by
the Average Closing Price (subject to any adjustment required by Section 2(f)
hereof).
(k) Lost Certificates. In the event that any Target Share Certificate
has been lost, stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming such Target Share Certificate to be lost, stolen or
destroyed and, if required by Buyer, the posting by such person of a bond in
such reasonable amount as Buyer may direct as indemnity against any claim that
may be made against it with respect to such Target Share Certificate, Buyer
shall, in respect of such lost, stolen or destroyed Target Share Certificate,
issue or cause to be issued the number of shares of Buyer Common Stock and pay
or cause to be paid any cash in lieu of fractional shares deliverable in respect
thereof pursuant to this Agreement.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Sellers. Each of the Sellers
represents and warrants to the Buyer that the statements contained in this
Section 3(a) are correct and complete with respect to himself, herself or itself
as of the date of this Agreement and will be correct and complete with respect
to himself, herself or itself as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(a)).
(i) Organization of Certain Sellers. If the Seller is a
corporation, the Seller is duly organized, validly existing,
and in good standing under the laws of the jurisdiction of
its incorporation.
(ii) Authorization of Transaction. The Seller has full power and
authority (including, if the Seller is a corporation or a
limited partnership, full corporate or partnership, as the
case may be, power and authority) to execute and deliver
this Agreement and the other documents and instruments
required to be delivered by such Seller at the Closing
(collectively, such Seller's "Seller Transaction Documents")
and to perform his, her or its obligations hereunder and
thereunder. With respect to each Seller that is a
corporation, the execution and delivery of this Agreement
and such Seller's
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Seller Transaction Documents, the performance of its
obligations hereunder and thereunder and the consummation by
such Seller of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all
necessary corporate action of such Seller. This Agreement
constitutes, and when executed and delivered by the Seller
at the Closing each of such Seller's Seller Transaction
Documents will constitute, the valid and legally binding
obligation of the Seller, enforceable against such Seller in
accordance with their respective terms and conditions. The
Seller need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any
government or governmental agency or any party to any
contract in order to consummate the transactions
contemplated by this Agreement or such Seller's Seller
Transaction Documents.
(iii) Noncontravention. Except as set forth on Schedule 4c,
neither the execution and the delivery of this Agreement or
Seller's Seller Transaction Documents, nor the consummation
of the transactions contemplated hereby or thereby, will (A)
violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or
other restriction of any government, governmental agency, or
court to which the Seller is subject or, if the Seller is a
corporation, any provision of its charter or bylaws, (B)
conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or
require any notice or consent under any agreement, contract,
lease, license, instrument, or other arrangement to which
the Seller is a party or by which he, she or it is bound or
to which any of his, her or its assets is subject or (C)
result in the creation of any Security Interest on any of
the assets of Target or the loss of any license or
contractual right with respect thereto.
(iv) Brokers' Fees. The Seller has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this
Agreement for which the Buyer could become liable or
obligated.
(v) Target Shares. The Seller holds of record and owns
beneficially the number of Target Shares set forth next to
his, her or its name in Schedule 3a5, free and clear of any
restrictions on transfer (other than any restrictions under
the Securities Act, state securities laws and the
Shareholders' Agreement dated January 1, 1995 among the
Target, the Sellers and certain other holders of Target
Shares), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims,
and demands. The Seller is not a party to any option,
warrant, purchase right, or other contract or commitment
that could require the Seller to sell, transfer, or
otherwise dispose of any capital stock of the Target (other
than this Agreement). The Seller is not a party to any
voting trust, proxy, or other agreement or
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<PAGE>
understanding with respect to the voting of any capital
stock of the Target.
(vi) Investment Intention. The Seller is acquiring the shares of
Buyer Common Stock issuable to such Seller pursuant to the
terms of this Agreement for investment solely for such
Seller's own account and not with a view to distribution.
(vii) Restrictions on Transfer. The Seller has been advised that
(a) neither the sale nor the offer of the shares of Buyer
Common Stock issuable pursuant to the terms of this
Agreement has been registered under the Securities Act, (b)
such shares must be held and the Seller must continue to
bear the economic risk of the investment in the shares of
Buyer Common Stock issuable to such Seller pursuant to the
terms of this Agreement until such shares are subsequently
registered under the Securities Act or an exemption from
registration is available, (c) a restrictive legend to that
effect in the form set forth in Section 2(h) hereof shall be
placed on the certificates representing the shares of Buyer
Common Stock issuable pursuant to the terms of this
Agreement and (d) appropriate stop-transfer instructions to
that effect shall be issued by the Target to its stock
transfer agent with respect to such shares; provided that
such legend shall be removed and such stop-transfer
instructions lifted when and as contemplated by Section 2(h)
hereof.
(viii) Ability to Bear Risk. The Seller is an "accredited investor"
as such term is defined in Regulation D promulgated under
the Securities Act; (b) the financial situation of such
Seller is such that such Seller can afford to bear the
economic risk of holding the shares of Buyer Common Stock
issuable to him, her or it pursuant to the terms of this
Agreement for an indefinite period; and (c) such Seller can
afford to suffer the complete loss of such Seller's
investment in such shares of Buyer Common Stock.
(ix) Access to Information. The Seller understands and is aware
of all the risk factors related to an investment in the
shares of Buyer Common Stock issuable pursuant to the terms
of this Agreement, (b) such Seller has carefully reviewed
this Agreement and has been granted the opportunity to ask
questions of, and receive answers from, representatives of
Buyer concerning the terms and conditions of the investment
in the shares of Buyer Common Stock issuable pursuant to the
terms of this Agreement and to obtain any additional
information which such Seller deems necessary, (c) such
Seller's knowledge and experience in financial and business
matters is such that each Seller is capable of evaluating
the risks of the investment in the shares of Buyer Common
Stock issuable pursuant to the terms of this Agreement and
(d) in making the decision to approve the transactions
contemplated hereby and to exchange the Target Shares held
by such Seller for shares of Buyer Common Stock pursuant to
this Agreement, such Seller has relied upon the independent
investigation made by such Seller and, to
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<PAGE>
the extent believed by such Seller to be appropriate, such
Seller's representatives, including such Seller's own
professional, tax and other advisors.
(b) Representations and Warranties of the Buyer and Acquisition Sub.
Each of the Buyer and Acquisition Sub represents and warrants to the Target and
Sellers that the statements contained in this Section 3(b) are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3(b)).
(i) Organization of the Buyer and Acquisition Sub. Each of the
Buyer and Acquisition Sub is a corporation duly organized,
validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. Each of the Buyer and
Acquisition Sub is duly authorized to conduct business and
is in good standing under the laws of each jurisdiction
where such qualification is required. Each of the Buyer and
Acquisition Sub has full corporate power and authority and
all material licenses, permits and authorizations necessary
to carry on the business in which it is engaged and to own
and use the properties owned and used by it.
(ii) Authorization of Transaction. Each of the Buyer and
Acquisition Sub has full power and authority (including full
corporate power and authority) to execute and deliver this
Agreement and the other documents and instruments required
to be delivered by the Buyer and Acquisition Sub at the
Closing (collectively, "Buyer's Transaction Documents") and
to perform their respective obligations hereunder and
thereunder. The execution and delivery of this Agreement and
Buyer's Transaction Documents by the Buyer and Acquisition
Sub, the performance of their respective obligations
hereunder and thereunder and the consummation by the Buyer
and Acquisition Sub of the transactions contemplated hereby
and thereby have been duly and validly authorized by all
necessary corporate action of Buyer and Acquisition Sub.
This Agreement constitutes, and when executed and delivered
by Buyer and Acquisition Sub at the Closing each of Buyer's
Transaction Documents will constitute, the valid and legally
binding obligation of the Buyer and Acquisition Sub,
enforceable against Buyer and Acquisition Sub in accordance
with their respective terms and conditions. Except for the
filing of articles of merger pursuant to the NCBCA, neither
the Buyer nor Acquisition Sub need give any notice to, make
any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order
to consummate the transactions contemplated by this
Agreement or the Buyer's Transaction Documents. Neither the
Buyer nor Acquisition Sub is in default under or in
violation of any provision of its charter or bylaws.
(iii) Noncontravention. Except as set forth on Schedule 3b3,
neither the execution and the delivery of this Agreement or
the Buyer's Transaction
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Documents, nor the consummation of the transactions
contemplated hereby or thereby, will (A) violate any
constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court
to which the Buyer or Acquisition Sub is subject or any
provision of their respective charter or bylaws or (B)
conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or
require any notice or consent under any agreement, contract,
lease, license, instrument, or other arrangement to which
the Buyer or Acquisition Sub is a party or by which either
is bound or to which any of their respective assets is
subject.
(iv) Brokers' Fees. Neither the Buyer nor Acquisition Sub has any
Liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any
Seller could become liable or obligated.
(v) Investment. The Buyer is acquiring the Target Shares for its
own account, for investment and not with a view to or for
sale in connection with any distribution thereof within the
meaning of the Securities Act.
(vi) SEC Reports; Absence of Material Adverse Changes. Buyer has
filed with the Securities and Exchange Commission (the
"SEC"), and has heretofore delivered to the Target true and
complete copies of, all forms, reports and other documents
required to be filed by it since January 1, 1997 under the
Exchange Act and Buyer's final prospectus dated June 4, 1997
filed with the SEC pursuant to Rule 424(b) under the
Securities Act (as such documents have been amended since
the time of their filing, collectively, the "dELiA*s SEC
Documents"). The dELiA*s SEC Documents, at the time filed,
(a) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated
therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading and (b) complied in all material
respects with the applicable requirements of the Securities
Act or the Securities Exchange Act, as applicable. Except as
disclosed in the Buyer's Quarterly Report on Form 10-Q for
the quarter ended October 31, 1997, there has been no
material adverse change to the business, assets, financial
condition, operations or results of operations of the Buyer
since October 31, 1997.
(vii) Disclosure. The representations and warranties contained in
this Section 3(b) do not contain any untrue statement of a
material fact or omit to state any material fact necessary
in order to make the statements and information contained in
this Section 3(b) not misleading.
(viii) Capitalization; Issuance of Shares. As of the date hereof,
the entire
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authorized capital stock of Buyer consists of: (a)
50,000,000 shares of Buyer Common Stock of which, 13,007,977
shares are issued and outstanding and (b) 1,000,000 shares
of preferred stock, par value $.01 per share, of which no
shares are issued and outstanding. All the outstanding
shares of Buyer Common Stock are, and all shares of Buyer
Common Stock which are to be issued pursuant to the terms of
this Agreement shall be, when issued in accordance with the
terms of this Agreement, duly authorized, validly issued,
fully paid and nonassessable and free of any preemptive
rights in respect thereto.
(ix) Pooling. There are no facts, circumstances or conditions not
disclosed herein which would prevent the transactions
contemplated by this Agreement from qualifying for treatment
under all relevant accounting principles, opinions and
rulings as a pooling-of-interests combination.
(x) Registration Statement. There are no financings,
acquisitions or other transactions pending or contemplated
to be initiated by Buyer or any other event or condition,
that would allow Buyer to delay filing the Registration
Statement pursuant to Section 11 hereof or to withhold its
efforts to cause the Registration Statement to become and
remain effective.
4. Representations and Warranties Concerning the Target. The Sellers
represent and warrant to the Buyer and Acquisition Sub that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 4).
(a) Organization, Authorization, Qualification, and Corporate Power.
The Target is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. The Target is
duly authorized to conduct business and is in good standing under the laws of
each jurisdiction where such qualification is required. The Target has full
corporate power and authority and all material licenses, permits, and
authorizations necessary to carry on the businesses in which it is engaged and
to own and use the properties owned and used by it. The Target has full
corporate power and authority to execute and deliver this Agreement and the
other documents and instruments required to be delivered by the Target at the
Closing (collectively, the "Target's Transaction Documents") and to perform its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the Target's Transaction Documents by Target, the performance of
its obligations hereunder and thereunder and the consummation by the Target of
the transactions contemplated hereby and thereby have been duly and validly
authorized by the board of directors of the Target. This Agreement constitutes,
and when executed and delivered by the Target at the Closing, each of the
Target's Transaction Documents will constitute, the valid and legally binding
obligation of the Target, enforceable against the Target in accordance with
their respective terms and conditions. Schedule 4a annexed hereto lists the
directors and officers of the Target. The Sellers have delivered to the Buyer
correct and complete copies of the articles of incorporation and bylaws of the
Target (each as amended to date). The minute books (containing
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the records of meetings of the stockholders, the board of directors, and any
committees of the board of directors), the stock certificate books, and the
stock record books of the Target are correct and complete. The Target is not in
default under or in violation of any provision of its articles of incorporation
or bylaws (each as amended to date).
(b) Capitalization. The entire authorized capital stock of the Target
consists of 50,000,000 Target Shares and 10,000,000 shares of preferred stock,
par value $.01 per share ("Target Preferred Stock"), of which 1,134,411 Target
Shares are issued and outstanding and no Target Shares are held in treasury. No
shares of Target Preferred Stock are issued or outstanding. All of the issued
and outstanding Target Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record as set forth in Schedule
3a5. There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require the Target to issue, sell, or otherwise cause to
become outstanding any of its capital stock. Except as set forth on Schedule 4b,
there are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Target. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of the Target. The Target Shares held by the Sellers
constitute at least ninety percent (90%) of the number of outstanding Target
Shares.
(c) Noncontravention. Except as set forth on Schedule 4c, neither the
execution and the delivery of this Agreement or the Target's Transaction
Documents, nor the consummation of the transactions contemplated hereby or
thereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Target is subject or any
provision of the articles of incorporation or bylaws of the Target (each as
amended to date), (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or consent under
any agreement, contract, lease, license, instrument, or other arrangement to
which the Target is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Security Interest upon any
of its assets or the loss of any license or contractual right with respect
thereto). Except for filings in accordance with the NCBCA and as set forth on
Schedule 4c, the Target does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency or any party to any contract in order for the Parties to
consummate the transactions contemplated by this Agreement or the Target's
Transaction Documents.
(d) Brokers' Fees. The Target does not have any Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
(e) Title to Assets. Except as set forth on Schedule 4e, the Target has
good and marketable title to, or a valid leasehold interest in, the properties
and assets used by it, located on its premises, or shown on the Most Recent
Balance Sheet or acquired after the date thereof, free and clear of all Security
Interests, except for properties and assets disposed of in the Ordinary Course
of Business since the date of the Most Recent Balance Sheet.
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(f) Subsidiaries. The Target does not have any Subsidiaries. The Target
does not control directly or indirectly or have any direct or indirect equity
participation in any corporation, partnership, trust, or other business
association which is not a Subsidiary of the Target.
(g) Financial Statements. Attached hereto as Schedule 4g are the
following financial statements (collectively the "Financial Statements"): (i)
audited balance sheets and statements of income and retained earnings and cash
flows as of and for the fiscal years ended December 31, 1995 and December 31,
1996 (the "Most Recent Fiscal Year End") for the Target; and (ii) unaudited
balance sheet and statement of income and retained earnings (the "Most Recent
Financial Statements") as of and for the nine months ended September 30, 1997
(the "Most Recent Fiscal Month End") for the Target. The Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby, present fairly the
financial condition of the Target as of such dates and the results of operations
of the Target for such periods, are correct and complete in all material
respects, and are consistent with the books and records of the Target (which
books and records are correct and complete), subject, in the case of the Most
Recent Financial Statements, to normal year-end adjustments (which will not be
material individually or in the aggregate) and the absence of footnotes. The
Most Recent Financial Statements have been reviewed (as such term is used in the
practice of financial accounting) by BDO Seidman, LLP.
(h) Events Subsequent to Most Recent Fiscal Month End. Except as
disclosed in Schedule 4h annexed hereto, since the Most Recent Fiscal Month End,
there has not been any material adverse change in the business, assets,
financial condition, operations, results of operations, or future prospects of
the Target (other than general competitive and economic conditions affecting the
retail and mail order industries generally). Without limiting the generality of
the foregoing, since the Most Recent Fiscal Month End, except as disclosed in
Schedule 4h:
(i) the Target has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible,
other than for a fair consideration in the Ordinary
Course of Business;
(ii) the Target has not entered into a purchase order
outside the Ordinary Course of Business or entered
into any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and
licenses) either involving more than $25,000 or
outside the Ordinary Course of Business;
(iii) no party (including the Target) has accelerated,
terminated, modified, or cancelled any purchase
order, agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and
licenses) involving more than $25,000 to which the
Target is a party or by which it is bound;
(iv) the Target has not disposed of any of its properties
or assets, other than sales of inventory and
collections of receivables or other actions in the
Ordinary Course of Business;
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(v) no Security Interest in any of Target's properties or
assets, tangible or intangible, has been created;
(vi) the Target has not made any capital expenditure (or
series of related capital expenditures) either
involving more than $25,000 or outside the Ordinary
Course of Business;
(vii) the Target has not made any capital investment in,
any loan to, or any acquisition of the securities or
assets of, any other Person (or series of related
capital investments, loans, and acquisitions) either
involving more than $1,000 or outside the Ordinary
Course of Business;
(viii) the Target has not issued any note, bond, or other
debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or
capitalized lease obligation either involving more
than $5,000 singly or $25,000 in the aggregate;
(ix) the Target has not delayed or postponed the payment
of accounts payable and other Liabilities outside the
Ordinary Course of Business;
(x) the Target has not cancelled, compromised, waived, or
released any right or claim (or series of related
rights and claims) either involving more than $5,000
or outside the Ordinary Course of Business;
(xi) the Target has not granted any license or sublicense
of any rights under or with respect to any
Intellectual Property;
(xii) there has been no change made or authorized in the
articles of incorporation or bylaws of the Target;
(xiii) the Target has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any
options, warrants, stock appreciation rights or other
rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital
stock;
(xiv) the Target has not declared, set aside, or paid any
dividend or made any distribution with respect to its
capital stock (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its
capital stock;
(xv) the Target has not experienced any damage,
destruction, or loss (whether or not covered by
insurance) to its property;
(xvi) the Target has not made any loan to, or entered into
any other transaction with, any of its directors,
officers, and employees outside the Ordinary Course
of Business;
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(xvii) the Target has not entered into any employment
contract or collective bargaining agreement, written
or oral, or modified the terms of any existing such
contract or agreement;
(xviii) the Target has not granted any increase in the base
compensation of any of its directors, officers, and
employees outside the Ordinary Course of Business;
(xix) the Target has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for
the benefit of any of its directors, officers, and
employees (or taken any such action with respect to
any other Employee Benefit Plan);
(xx) the Target has not made any other change in
employment terms for any of its directors, officers,
and employees outside the Ordinary Course of
Business;
(xxi) the Target has not made or pledged to make any
charitable or other capital contribution outside the
Ordinary Course of Business;
(xxii) there has not been any other occurrence, event,
incident, action, failure to act, or transaction
outside the Ordinary Course of Business involving the
Target; and
(xxiii) the Target has not formed a partnership, joint
venture or similar arrangement with any person, firm
or entity;
(xxiv) the Target has not amended, modified or terminated
any of the leases referred to in Section 4(l)(ii)
hereof or entered into any new leases or subleases of
real property;
(xxv) the Target has not made any change in the financial
or accounting practices or policies customarily
followed by it or made any changes in the application
of tax principles, practices or methods or made any
material election with respect to Taxes; and
(xxvi) the Target has not committed to any of the foregoing.
(i) Undisclosed Liabilities. The Target does not have any Liability
(and to the Knowledge of the Target and the Sellers, there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against the Target giving rise to any Liability),
including without limitation Liability arising out of any injury to individuals
or property as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by the Target, except for (i)
Liabilities set forth on the face of the Most Recent Balance
20
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Sheet (rather than in any notes thereto), (ii) Liabilities which have arisen
after the Most Recent Fiscal Month End in the Ordinary Course of Business (none
of which results from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law) and (iii) Liabilities disclosed on Schedule 4i.
(j) Legal Compliance. The Target and its predecessors and Affiliates
have complied in all material respects with all applicable laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and, except as disclosed on Schedule 4i,
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
failure so to comply.
(k) Tax Matters.
(i) The Target has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all
material respects. All Taxes due and payable by the Target
(whether or not shown on any Tax Return) have been paid. The
Target currently is not the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever
been made by an authority in a jurisdiction where the Target
does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security
Interests on any of the assets of the Target that arose in
connection with any failure (or alleged failure) to pay any
Tax.
(ii) The Target has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) Except as set forth on Schedule 4k, no Seller or director or
officer (or employee responsible for Tax matters) of the
Target expects any authority to assess any additional Taxes
for any period for which Tax Returns have been filed and
there is no dispute or claim concerning any Tax Liability of
the Target either (A) claimed or raised by any authority in
writing or (B) as to which any of the Sellers and the
directors and officers (and employees responsible for Tax
matters) of the Target has Knowledge based upon personal
contact with any agent of such authority. Schedule 4k
annexed hereto lists all federal, state, local, and foreign
income Tax Returns filed with respect to the Target for
taxable periods ended on or after December 31, 1994,
indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject
of audit. The Sellers have delivered to the Buyer correct
and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed
against or agreed to by the Target since December 31, 1994.
(iv) The Target has not waived any statute of limitations in
respect of Taxes or
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agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) The Target has not filed a consent under Code ss.341(f)
concerning collapsible corporations. The Target has not made
any payments, is not obligated to make any payments, and is
not a party to any agreement that under certain
circumstances could obligate it to make any payments that
will not be deductible under Codess.280G. The Target has not
been a United States real property holding corporation
within the meaning of Code ss.897(c)(2) during the
applicable period specified in Code ss.897(c)(1)(A)(ii).
None of the assets or properties of the Target is an asset
or property that is or will be required to be treated as
being (A) owned by any other person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended and in effect immediately before the
enactment of the Tax Reform Act of 1986, or (B) tax-exempt
use property within the meaning of Codess.168(h)(1). The
Target is not required to include in income any adjustment
pursuant to Codess.481(a) by reason of a voluntary change in
accounting method initiated by the Target, and the Internal
Revenue Service has not proposed any such adjustment or
change in accounting method. No indebtedness of the Target
is subject to any limitation on the deductibility of
interest payments with respect thereto. The Target has
disclosed on its federal income Tax Returns all positions
taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of
Codess.6662. The Target is not a party to any Tax allocation
or sharing agreement. The Target (A) has not been a member
of an Affiliated Group filing a consolidated federal income
Tax Return (other than a group the common parent of which
was the Target) and (B) does not have any Liability for the
Taxes of any Person (other than the Target) under Reg.
ss.1.1502-6 promulgated under the Code (or any similar
provision of state, local, or foreign law), as a transferee
or successor, by contract, or otherwise.
(vi) Schedule 4k sets forth the following information with
respect to the Target as of the most recent practicable
date: (A) the basis of the Target in its assets; and (B) the
amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax, or excess
charitable contribution allocable to the Target.
(vii) The unpaid Taxes of the Target (A) did not, as of the Most
Recent Fiscal Month End, exceed the reserve for Tax
Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and
Tax income) set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) and (B) do not
exceed that reserve for Tax Liability as adjusted for the
passage of time through the Closing Date in accordance with
the past custom and practice of the Target in filing its Tax
Returns.
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(l) Real Property.
(a) The Target does not own any real property.
(b) Schedule 4l annexed hereto lists and describes briefly all real
property leased or subleased to the Target. The Sellers have delivered to the
Buyer correct and complete copies of the leases and subleases (and any
agreements between Target and the owner of any subleased property) listed in
Schedule 4l (as amended to date). Except as disclosed in Schedule 4l, with
respect to each lease and sublease listed in Schedule 4l:
(A) the lease or sublease is legal, valid, binding
and enforceable as to the Target and (to the
Knowledge of Target and each Seller) each other
party thereto, and is in full force and effect;
(B) subject to the receipt of the consents set forth
on Schedule 4c, the lease or sublease will
continue to be legal, valid, binding, and
enforceable as to the Target and (to the
Knowledge of the Target and each Seller) each
other party thereto, and will continue to be in
full force and effect on identical terms
following the consummation of the transactions
contemplated hereby;
(C) neither the Target nor, to the Knowledge of
Sellers and the Target, any other party to the
lease or sublease is in breach or default, and
no event has occurred which, with notice or
lapse of time, would constitute a breach or
default or permit termination, modification, or
acceleration thereunder;
(D) neither the Target nor, to the Knowledge of each
Seller and the Target, any other party to the
lease or sublease has repudiated any provision
thereof;
(E) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease
or sublease;
(F) with respect to each sublease, to the Knowledge
of Target and each Seller, the representations
and warranties set forth in subsections (A)
through (E) above are true and correct with
respect to the underlying lease;
(G) the Target has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or
subleasehold;
(H) all facilities leased or subleased thereunder
have received all approvals of governmental
authorities (including licenses and permits)
required in
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connection with the operation by the
Target thereof and have been operated and
maintained by the Target in material accordance
with applicable laws, rules, and regulations;
(I) all facilities leased or subleased thereunder
are supplied with utilities and other services
necessary for the operation of said facilities;
and
(J) to the Knowledge of Target and each Seller, the
owner of the facility leased or subleased has
good and marketable title to the parcel of real
property, free and clear of any Security
Interest, easement, covenant, or other
restriction, except for installments of special
easements not yet delinquent and recorded
easements, covenants, and other restrictions
which do not impair the current use, occupancy,
or value, or the marketability of title, of the
property subject thereto.
(m) Intellectual Property.
(i) The Target owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual
Property necessary or advisable for the operation of the
businesses of the Target as presently conducted and as
presently proposed to be conducted, free of all Security
Interests except as set forth on Schedule 4e. Each item of
Intellectual Property owned or used by the Target
immediately prior to the Closing hereunder will be owned or
available for use by the Target on identical terms and
conditions immediately subsequent to the Closing hereunder.
The Target has taken all necessary and desirable action to
maintain and protect each item of Intellectual Property that
it owns or uses and that is material to its business,
including those items for which unauthorized disclosure
would jeopardize or impair their validity or value and has
executed all necessary and desirable agreements with
employees and other third parties regarding such items.
(ii) Except as set forth on Schedule 4m, the Target has not
interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property
rights of third parties, and none of the Sellers and the
directors and officers (and employees with responsibility
for Intellectual Property matters) of the Target has ever
received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement,
misappropriation, or violation (including any claim that the
Target must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of any
of the Sellers and the directors and officers (and employees
with responsibility for Intellectual Property matters) of
the Target, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with
any Intellectual Property rights of the Target.
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(iii) To the Knowledge of any of the Sellers and the directors
and officers (and employees with responsibility for
Intellectual Property matters) of the Target, the Target
will not interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property
rights of third parties as a result of the continued
operation of its businesses as presently conducted and as
presently proposed to be conducted.
(iv) Schedule 4m identifies each item of Intellectual Property
that the Target or any third party owns and that the Target
uses pursuant to license, sublicense, agreement, or
permission. The Sellers have delivered to the Buyer correct
and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With
respect to each item of Intellectual Property required to be
identified in Schedule 4m:
(A) the license, sublicense, agreement, or
permission covering the item is legal,
valid, binding and enforceable as to the
Target and (to the Knowledge of the Target
and each of the Sellers) each other party
thereto, and is in full force and effect;
(B) Subject to receipt of the consents set forth
on Schedule 4c, the license, sublicense,
agreement, or permission will continue to be
legal, valid, binding and enforceable as to
the Target and (to the Knowledge of the
Target and each of the Sellers) each other
party thereto, and will continue to be in
full force and effect on identical terms
following the consummation of the
transactions contemplated hereby;
(C) neither the Target nor, to the Knowledge of
the Target or any of the Sellers, any other
party to the license, sublicense, agreement,
or permission is in breach or default, and
no event has occurred which with notice or
lapse of time would constitute a breach or
default or permit termination, modification,
or acceleration thereunder;
(D) neither the Target nor, to the Knowledge of
the Target or any of the Sellers, any other
party to the license, sublicense, agreement,
or permission has repudiated any provision
thereof;
(E) with respect to each sublicense, to the
Knowledge of the Target and each of the
Sellers, the representations and warranties
set forth in subsections (A) through (D)
above are true and correct with respect to
the underlying license;
(F) the underlying item of Intellectual Property
is not subject to any outstanding
injunction, judgment, order, decree, ruling,
or charge;
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<PAGE>
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or
demand is pending or, to the Knowledge of
any of the Sellers and the directors and
officers (and employees with responsibility
for Intellectual Property matters) of the
Target, is threatened which challenges the
legality, validity, or enforceability of the
underlying item of Intellectual Property;
and
(H) the Target has not granted any sublicense or
similar right with respect to such item.
(v) Schedule 4m annexed hereto identifies each trade name or
unregistered trademark used by the Target in connection with
any of its businesses. Except as disclosed in Schedule 4m,
with respect to each item of Intellectual Property required
to be identified in Schedule 4m:
(A) the Target owns all right, title, and
interest in and to the item, free and clear
of any Security Interest, license, or other
restriction;
(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling,
or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or
demand is pending or, to the Knowledge of
any of the Sellers and the directors and
officers (and employees with responsibility
for Intellectual Property matters) of the
Target, is threatened which challenges the
legality, validity, enforceability, use, or
ownership of the item; and
(D) the Target has never agreed to indemnify any
Person for or against any interference,
infringement, misappropriation, or other
conflict with respect to the item.
(n) Tangible Assets. The Target exclusively owns or leases all
buildings, machinery, equipment, and other tangible assets necessary for the
conduct of its business as presently conducted. Each such tangible asset is free
from defects (patent and latent), has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear), and is suitable for the purposes for which it presently is used
and presently is proposed to be used.
(o) Inventory. The inventory of the Target reflected on the Most Recent
Balance Sheet ("Inventory") consists only of goods useable and saleable in the
Ordinary Course of Business of the Target in accordance with past practices, and
fit for the purpose for which it was procured or manufactured, and none of which
is damaged or defective, subject only to the reserve for inventory writedown set
forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) and as adjusted for the passage of time through the Closing Date in
accordance with the past
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custom and practice of the Target. Items of Inventory which were, as of the Most
Recent Balance Sheet Date, soiled, damaged or otherwise physically defective
were written down on the Most Recent Balance Sheet to the lower of cost or
market value. From the Most Recent Balance Sheet Date to the date hereof, the
inventory of the Target has increased or decreased in a manner consistent with
the seasonal nature of the business of the Target and its historic business
practices and, at all times during such period, has consisted of goods useable
and saleable in the Ordinary Course of Business of the Target in accordance with
past practices. The present quality, quantity and mix of all inventory of the
Target is reasonable and warranted by the present circumstances of the business
of the Target as construed in accordance with past practices.
(p) Contracts. Schedule 4p lists the following contracts and other
agreements to which the Target is a party or is otherwise bound:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for
lease payments in excess of $25,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing
or receipt of services, the performance of which will extend
over a period of more than one year, result in a material
loss to the Target, or involve consideration in excess of
$25,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease
obligation, in excess of $25,000 or under which it has
imposed a Security Interest on any of its assets, tangible
or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with any of the Sellers and their Affiliates;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other
material plan or arrangement for the benefit of its current
or former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing
annual compensation in excess of $60,000 or providing
severance benefits;
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(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xi) any agreement under which the consequences of a default or
termination could reasonably be expected to have a material
adverse effect on the business, assets financial condition,
operations, results of operations, or future prospects of
the Target;
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of
$25,000; or
(xiii) any agreement including a change of control provision.
The Sellers have delivered to the Buyer a correct and complete copy of any
written agreement listed in Schedule 4p (as amended to date) and a written
summary setting forth the terms and conditions of each oral agreement referred
to in Schedule 4p. With respect to each such agreement: (A) the agreement is
legal, valid, binding and enforceable as to the Target and (to the Knowledge of
the Target and each Seller) each other party thereto, and is in full force and
effect; (B) subject to the receipt of the consents set forth on Schedule 4c, the
agreement will continue to be legal, valid, binding and enforceable as to the
Target and (to the Knowledge of the Target and each Seller) each other party
thereto, and will continue to be in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C) neither
the Target nor, to the Knowledge of the Target or any of the Sellers, any other
party to such agreement is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and (D) neither
the Target nor, to the Knowledge of the Target or any of the Sellers, any other
party to such agreement has repudiated any provision of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts receivable of
the Target are reflected properly on its books and records, arise from bona fide
transactions in the ordinary course of business, are valid receivables subject
to no setoffs or counterclaims, are current and collectible, and will be
collected in accordance with their terms at their recorded amounts, subject only
to the reserve for bad debts set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) and as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of the
Target and returns of merchandise in the Ordinary Course of Business.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Target.
(s) Insurance. Schedule 4s sets forth the following information with
respect to each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) to which the Target has been a party, a named insured, or
otherwise the beneficiary of coverage at any time since December 31, 1993:
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(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other
basis) and amount (including a description of how
deductibles and ceilings are calculated and operate)
of coverage; and
(v) a description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding and enforceable as to the Target (to the Knowledge of the Target and
each of the Sellers) any other party to the policy, and is in full force and
effect; (B) the policy will continue to be legal, valid, binding and enforceable
as to the Target and (to the Knowledge of the Target and each of the Sellers)
any other party to the policy, and will continue to be in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (C) neither the Target nor, to the Knowledge of the Target and each
Seller, any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification, or acceleration, under the
policy; and (D) no party to the policy has repudiated any provision thereof. The
Target has been covered since December 31, 1994 by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during the
aforementioned period. Schedule 4s describes any self-insurance arrangements
affecting the Target.
(t) Litigation. Schedule 4t annexed hereto sets forth each instance in
which the Target (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is a party or, to the Knowledge of any of the
Sellers and the directors and officers (and employees with responsibility for
litigation matters) of the Target, is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any court,
arbitrator or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any other arbitrator. Except as set
forth in Schedule 4t, none of the Sellers and the directors and officers (and
employees with responsibility for litigation matters) of the Target has any
reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against the Target.
(u) Product Warranty. Except as set forth in Schedule 4u, each product
manufactured, sold, leased, or delivered by the Target has been in conformity
with all applicable contractual commitments and all express and implied
warranties, and the Target does not have any Liability (and there is no Basis
for any present or future action, suit, proceeding, hearing, investigation,
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charge, complaint, claim, or demand against any of them giving rise to any
Liability) for replacement or repair thereof or other damages in connection
therewith, subject only to the reserve for product warranty claims set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto) and
as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Target. No product manufactured, sold,
leased, or delivered by the Target is subject to any guaranty, warranty, or
other indemnity except as set forth in Schedule 4u.
(v) Employees. To the Knowledge of any of the Sellers and the directors
and officers (and employees with responsibility for employment matters) of the
Target, no executive, key employee, or group of employees has any plans to
terminate employment with the Target. The Target is not a party to or bound by
any contract or collective bargaining agreement with any labor union or similar
organization, nor has it experienced any strikes, grievances, claims of unfair
labor practices, or other collective bargaining disputes since January 1, 1994.
The Target has not committed any unfair labor practice. None of the Sellers and
the directors and officers (and employees with responsibility for employment
matters) of the Target has any Knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union or similar
organization with respect to employees of the Target.
(w) Employee Benefits.
(i) Schedule 4w lists each Employee Benefit Plan that the Target
maintains or to which the Target contributes or has any
obligation to contribute.
(A) Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund)
complies in form and in operation in all
material respects with the applicable
requirements of ERISA, the Code, and other
applicable laws.
(B) All required reports and descriptions
(including, without limitation, Form 5500 Annual
Reports, summary annual reports, and summary
plan descriptions) have been timely filed and
distributed appropriately with respect to each
such Employee Benefit Plan. The requirements of
COBRA have been met in all material respects
with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction
contributions) which are due have been paid to
each such Employee Benefit Plan which is an
Employee Pension Benefit Plan and all
contributions for any period ending on or before
the Closing Date which are not yet due have been
paid to each such Employee Pension Benefit Plan
or accrued in accordance with the past custom
and practice of the Target. All premiums or
other payments for all periods ending on or
before the Closing Date have been paid with
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respect to each such Employee Benefit Plan which
is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the
requirements of a "qualified plan" under Code
ss.401(a), has received, within the last two
years, a favorable determination letter from the
Internal Revenue Service that it is a "qualified
plan," and Seller is not aware of any facts or
circumstances that could result in the
revocation of such determination letter.
(E) The Sellers have delivered to the Buyer correct
and complete copies of the plan documents and
summary plan descriptions, the most recent
determination letter received from the Internal
Revenue Service, the most recent Form 5500
Annual Report, and all related trust agreements,
insurance contracts, and other funding
agreements which implement each such Employee
Benefit Plan.
(F) Except as provided in Schedule 4w, the execution
of, and performance of the transactions
contemplated by, this Agreement will not (either
alone or upon the occurrence of any additional
or subsequent events) constitute an event under
any contract, agreement, plan, commitment,
understanding, policy or other arrangement that
will or may reasonably be expected to result in
any payment (whether of severance pay or
otherwise), acceleration, vesting or increase in
benefits with respect to any employee or
director of the Target, whether or not any such
payment would be an "excess purchase payment"
(within the meaning of Section 280G of the Code.
(ii) With respect to each Employee Benefit Plan that the Target
and any ERISA Affiliate maintains or ever has maintained or
to which any of them contributes, ever has contributed, or
ever has been required to contribute: there have been no
Prohibited Transactions with respect to any such Employee
Benefit Plan and no Fiduciary has any Liability for breach
of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the
assets of any such Employee Benefit Plan. no action, suit,
proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for
benefits) is pending or threatened; and none of the Sellers
and the directors and officers (and employees with
responsibility for employee benefits matters) of the Target
has any Knowledge of any Basis for any such action, suit,
proceeding, hearing, or investigation.
(iii) The Target, and, if the Target is a member of a Controlled
Group, the other members of the Controlled Group that
includes the Target, does not
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contribute to, has never contributed to, and has never been
required to contribute to any Multiemployer Plan and does
not have any Liability (including withdrawal liability as
defined in ERISA ss.4201) under any Multiemployer Plan.
(iv) The Target does not maintain and has never maintained or
contributed, never contributed, and never has been required
to contribute to any Employee Welfare Benefit Plan providing
medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in
accordance with COBRA).
(v) None of the Target or its ERISA affiliates maintains, ever
has maintained, contributes to, ever has contributed to, or
ever has been required to contribute to any Employee Pension
benefit Plan that is a defined benefit plan or has any
Liability under any Employee Pension benefit Plan that is a
defined benefit plan.
(x) Guaranties. The Target is not a guarantor or otherwise liable for
any Liability or obligation (including indebtedness) of any other Person.
(y) Environmental, Health, and Safety Matters.
(i) The Target and its respective predecessors and Affiliates
has complied in all material respects and is in compliance
in all material respects with all Environmental, Health, and
Safety Requirements.
(ii) Each of the Target and its respective Affiliates has
obtained and complied in all material respects with, and is
in compliance in all material respects with, all permits,
licenses or other authorizations that are required pursuant
to Environmental, Health, and Safety Requirements for the
occupation of its facilities and the operation of the
Target's business.
(iii) Neither the Target nor its predecessors or Affiliates has
received any written or oral notice, report or other
information regarding any actual or alleged violation of
Environmental, Health, and Safety Requirements, or any
liabilities or potential liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise), including
any investigatory, remedial or corrective obligations,
relating to any of them or its facilities arising under
Environmental, Health, and Safety Requirements.
(iv) To the Knowledge of the Target and each of the Sellers, none
of the following exists at any property or facility owned or
operated by the Target: (1) underground storage tanks, (2)
asbestos-containing material in any form or condition, (3)
materials or equipment containing polychlorinated
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biphenyls, or (4) Hazardous Materials landfills, surface
impoundments, or Hazardous Materials disposal areas.
(v) None of the Target or its predecessors or Affiliates has
treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled, or released any
substance, including without limitation any Hazardous
Materials, or owned or operated any property or facility
(and, to the Knowledge of the Target and each of the
Sellers, no such property or facility is contaminated by any
Hazardous Materials) in a manner that has given or would
give rise to liabilities, including any liability for
response costs, corrective action costs, personal injury,
property damage, natural resources damages or attorney fees,
pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended
("CERCLA"), the Solid Waste Disposal Act, as amended
("SWDA") or any other Environmental, Health, and Safety
Requirements.
(vi) Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will
result in any obligations for site investigation or cleanup,
or notification to or consent of government agencies or
third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer"
Environmental, Health, and Safety Requirements.
(vii) Neither the Target nor any of its predecessors or Affiliates
has, either expressly or by operation of law, assumed or
undertaken any liability, including without limitation any
obligation for corrective or remedial action, of any other
Person relating to Environmental, Health, and Safety
Requirements.
(viii) No facts, events or conditions relating to (A) the past or
present facilities and properties owned by Target or
operations of the Target or (B) to the Knowledge of Target
or any Seller, the past or present facilities and properties
leased by Target or (C) to the Knowledge of Target or any
Seller, the past or present facilities (whether owned or
leased), properties (whether owned or leased) or operations
of Target's predecessors or Affiliates will prevent, hinder
or limit continued compliance by Target with Environmental,
Health, and Safety Requirements, give rise to any
investigatory, remedial or corrective obligations of Target
pursuant to Environmental, Health, and Safety Requirements,
or give rise to any other liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) of Target
pursuant to Environmental, Health, and Safety Requirements,
including without limitation any relating to onsite or
offsite releases or threatened releases (as such term is
defined in any Environmental, Health and Safety Requirement)
of hazardous materials, substances or wastes, personal
injury, property damage or natural resources damage.
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(ix) The Sellers have provided to Buyer true and complete copies
of all Environmental Reports in the possession or control of
any Seller or the Target.
(z) Certain Business Relationships with the Target. Except as disclosed
on Schedule 4z annexed hereto, none of the Sellers and their Affiliates has been
involved in any business arrangement or relationship with the Target within the
past 12 months, and none of the Sellers and their Affiliates owns any asset,
tangible or intangible, which is used in the business of the Target.
(aa) Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
(bb) Employees. The Target has provided to the Buyer a true and
complete schedule of all employees who earned (including base pay and any
bonuses) in the fiscal year ended December 31, 1996 or have the right to earn in
the fiscal year ending December 31, 1997, more than $50,000 per annum. For each
such employee, the aforementioned schedule shall have included true, correct and
complete information as to the following: (i) current annual base pay; (ii)
current bonus eligibility; (iii) total compensation during the last fiscal year;
(iv) date of last base pay increase and prior base pay; and (v) date of hire.
(cc) Circulation Information. Schedule 4cc sets forth the following
information: (i) the number of catalogs mailed by the Target during each of the
Target's two most recently completed fiscal years and during the nine month
period ended the Most Recent Balance Sheet Date; (ii) the number of distinct
persons who have made purchases from the Target as of December 31, 1995,
December 31, 1996 and September 30, 1997 within the 36 months preceding such
dates; and (iii) the number of distinct persons contained in the databases of
the Target for purposes of catalog mailing (other than names of persons which
the Target or its Subsidiaries have limited rights to use pursuant to list
rental agreements).
(dd) Pooling. There are no facts, circumstances or conditions not
disclosed herein or in the Financial Statements or the schedules hereto which
would prevent the transactions contemplated by this Agreement from qualifying
for treatment under all relevant accounting principles, opinions and rulings as
a pooling-of-interests combination.
(ee) Target SAR Plan; Target Transaction Costs. The issuance by Buyer
of 10,762 shares of Buyer Common Stock on the Closing Date to participants in
the Target's SAR Plan in accordance with the Target SAR Plan shall fully satisfy
and discharge all obligations, duties and liabilities of the Target and the
Buyer pursuant to the Target SAR Plan. The payment by the Target of the Target
Transaction Costs shall fully satisfy and discharge all obligations, duties and
liabilities of the Target to any legal, accounting or auditing firm engaged by
or on behalf of Target.
(ff) Pooling Affiliates. Schedule 4(ff) hereto sets forth the names and
addresses of each stockholder who, in the Target's reasonable judgment, is an
affiliate of the Target within the meaning of Rule 144 of the rules and
regulations promulgated under the Securities Act or otherwise
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applicable SEC accounting releases with respect to pooling-of-interests
accounting treatment (each such person, a "Pooling Affiliate").
(gg) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, except as disclosed in Schedule 4gg:
(i) the Target has not made any capital investment in,
any loan to, or any acquisition of the securities or
assets of, any other Person (or series of related
capital investments, loans, and acquisitions) either
involving more than $1,000 or outside the Ordinary
Course of Business;
(ii) the Target has not granted any license or sublicense
of any rights under or with respect to any
Intellectual Property;
(iii) there has been no change made or authorized in the
articles of incorporation or bylaws of the Target;
(iv) the Target has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any
options, warrants or other rights to purchase or
obtain (including upon conversion, exchange, or
exercise) any of its capital stock;
(v) the Target has not formed a partnership, joint
venture or similar arrangement with any person, firm
or entity;
(vi) the Target has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for
the benefit of any of its directors, officers, and
employees (or taken any such action with respect to
any other Employee Benefit Plan);
(vii) the Target has not made or pledged to make any
charitable or other capital contribution outside the
Ordinary Course of Business; and
(viii) the Target has not committed to any of the foregoing.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his, her or its reasonable
best efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper, or advisable, and will execute and deliver
such documents and other papers as may be reasonably required, in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 7 hereof).
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(b) Notices and Consents. The Sellers will cause the Target to give any
notices to third parties, and will cause the Target to use its reasonable best
efforts to obtain the third party consents in connection with the matters
referred to in Section 4(c) hereof except for those consents listed on Schedule
5b. Each of the Parties will (and the Sellers will cause the Target to) give any
notices to, make any filings with, and use its reasonable best efforts to obtain
any authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in Section 3(a)(ii), Section
3(b)(ii), and Section 4(c) hereof. This Section 5(b) shall not require Sellers
to pay money to any person in exchange for such person's consent other than
reimbursements for reasonable legal fees and expenses of such party in
processing such consent. Buyer shall cooperate with Sellers and Target in
obtaining such consents and approvals.
(c) Operation of Business. The Target will not, and the Sellers will
not cause or permit the Target to, engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of Business without the
prior written consent of Buyer. Without limiting the generality of the
foregoing, without the prior written consent of Buyer, the Sellers will not
cause or permit the Target to (i) declare, set aside, or pay any dividend or
make any distribution with respect to its capital stock or redeem, purchase, or
otherwise acquire any of its capital stock or (ii) otherwise engage in any
practice, take any action, or enter into any transaction of the sort described
in Section 4(h) hereof.
(d) Preservation of Business. The Target will, and the Sellers will
cause Target to, keep its business and properties substantially intact,
including its present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, and employees.
(e) Full Access.
The Target will, and each of the Sellers will permit and the Sellers
will cause the Target and its representatives to permit, representatives of the
Buyer to, have full access during normal business hours to all premises,
properties, personnel, books, records (including Tax records), contracts, and
documents of or pertaining to the Target.
The Buyer will permit representatives of the Target to have reasonable
access during normal business hours to premises, properties, personnel, books,
records (including Tax records), contracts, and documents of or pertaining to
the Buyer.
In the event of the termination of this Agreement prior to Closing, the
Buyer, on the one hand, and the Target on the other will, upon written request
of the other party, deliver to the requesting party all documents, workpapers
and other materials provided by such party (and copies thereof) relating to such
party or the transactions contemplated hereby, whether so provided before or
after the execution hereof, and, except as required by law or judicial process,
each party will use its reasonable best efforts to keep confidential all such
information, except that such restriction shall not apply to any information (1)
which is in or comes into the public domain other than through such party, (2)
which was in the possession of the such party before the commencement of
negotiations contemplated hereby, or (3) which at any time lawfully comes into
the possession of such party from third parties who have a right to disclose
such information otherwise than in
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connection with this Agreement.
(f) Notice of Developments.
The Target will give prompt written notice to the Buyer of any event,
circumstance or fact which could reasonably be expected to result in a breach of
any of the representations and warranties in Section 4 hereof. Each Party will
give prompt written notice to the others of any event, circumstance or fact
which could reasonably be expected to result in a breach of any of his, her or
its own representations and warranties in Section 3 hereof. No disclosure by any
Party pursuant to this Section 5(f), however, shall be deemed to amend or
supplement any Schedule referred to in this Agreement or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant or otherwise affect
the remedies available hereunder.
In the event the Target or the Sellers discover any matter which would
cause any of the representations and warranties made in Section 4 herein to
become inaccurate or untrue in any material respect, or in the event any
developments should occur between the date hereof and the Closing Date which
cause any such representation or warranty to be come untrue or inaccurate in any
material respect, then the Target shall supplement such representations and
warranties (and related Schedules) to disclose such discovery or development,
and shall notify the Buyer of the proposed change to the representations and
warranties (and related Schedules) in accordance with the notice provisions of
Section 12(h) hereof. If requested in writing by the Buyer within ten days of
notice of the proposed change, the Sellers' Agent shall meet and discuss any
such proposed change with representatives of the Buyer. If the Buyer and
Sellers' Agent cannot resolve any differences regarding the proposed change
within a reasonable period of time (not to exceed ten (10) days), and the
discovery or development described in the Target's notice would not result in a
material adverse effect on the Target, then the discovery or development
described in such notice shall be deemed to be incorporated into and become a
part of this Agreement as of the date hereof. If the parties cannot resolve any
differences regarding the proposed change within a reasonable period of time
(not to exceed ten (10) days), and the discovery or development described in the
Target's notice would result in a material adverse effect on the Target, this
Agreement shall continue in full force and effect without incorporation of
disclosure of such discovery or development.
(g) Exclusivity. The Target will not, and none of the Sellers will (and
the Sellers will not cause or permit the Target to), (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets, of the Target (including any acquisition
structured as a merger, consolidation, share exchange, reorganization or similar
transaction) or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any Person to do or seek any of the
foregoing. None of the Sellers will vote their Target Shares in favor of any
such acquisition structured as a merger, consolidation, share exchange,
reorganization or similar exchange. The Sellers will notify the Buyer
immediately if any Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing. The covenants set forth in this Section 5(g)
shall continue until the earlier of (i) the Closing Date or (ii) the Outside
Date.
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(h) Landlord's Estoppel Certificate. The Target shall obtain an
estoppel certificate on which Buyer can rely from the landlord of Target's
Durham, North Carolina leased warehouse and executive offices in the form
attached hereto as Exhibit E.
(i) Discharge of Certain Guarantees. The Buyer shall use best
commercial efforts to cause each guarantee of, and security for, a Liability of
the Target listed on Schedule 5i annexed hereto to be discharged, released or
replaced by the Buyer or its Affiliates on or before the Closing Date. The
covenants set forth in this Section 5(i) shall continue indefinitely beyond the
Closing Date.
(j) Certain Actions. Each of the Parties will not violate, breach or
take any action in conflict with representations and warranties made by such
Party herein.
(k) Leases. The Target will not, and the Sellers will not cause or
permit the Target to, (i) amend, modify or terminate any of the leases referred
to in Section 4(l)(ii) hereof or (ii) enter into any new leases of real
property.
(l) Compliance With Nasdaq and SEC Requirements. From the date hereof
to the Closing Date, Buyer shall comply in all material respects with all
applicable requirements of Nasdaq and the SEC with respect to the filing of
information and reports. From the date hereof through the Closing Date, Buyer
shall promptly furnish or make available to the Sellers, a copy of each report,
schedule, registration statement and other documents filed by it with the SEC
during such period pursuant to the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act, which filings shall satisfy all of the representations
set forth in Section 3(b)(vi) as to dELiA*s SEC Documents as fully as if such
filings were deemed to be "dELiA*s SEC Documents."
(m) Pooling-of-Interests. Each of the parties hereto shall not take,
and shall use its reasonable efforts to cause its affiliates not to take, any
action that would prevent the Merger from qualifying for, and shall use its
reasonable efforts to cause the Merger to qualify for, pooling-of-interests
accounting treatment for financial reporting purposes. The Target shall, and the
Sellers shall cause the Target, and the Target shall cause its independent
certified public accountants to provide all information, documents and
representations reasonably requested by Buyer or its independent certified
public accountants in order that the transactions contemplated by this Agreement
can be treated under all relevant accounting principles, opinions and rulings,
including Accounting Principles Board Opinion No. 16, as a pooling-of-interests
combination.
(n) Nasdaq Listing. Buyer shall use commercially reasonable efforts to
cause the shares of Buyer Common Stock to be issued hereunder to be listed on
Nasdaq on or prior to the Closing Date.
(o) Shareholder and Director Vote. Each of the Sellers, in executing
this Agreement, consents as a shareholder of the Target, and each of the Sellers
that is a director of the Target, in executing this Agreement, consents as a
director of the Target, to the Merger and the transactions contemplated hereby,
waives notice of any meeting in connection therewith, agrees that the
Stockholders' Agreement dated as of January 16, 1995 by and among the Target and
the
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stockholders of the Target shall be terminated as of the Closing Date and
hereby releases and waives all rights he, she or it may have under Article 13 of
the NCBCA in connection with the Merger.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 8
hereof). The Sellers acknowledge and agree that from and after the Closing the
Buyer will be entitled to possession of all documents, books, records (including
Tax records), agreements, and financial data of any sort relating to the Target.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
arbitration, hearing, investigation, charge, complaint, claim, or demand in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Target, each of the other Parties will
cooperate with him, her or it and his, her or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to indemnification
therefor under Section 8 hereof).
(c) Transition. Neither the Sellers nor the Target will take any action
that is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of the Target from
maintaining the same business relationships with the Target after the Closing as
it maintained with the Target prior to the Closing. Each of the Sellers will
refer all customer inquiries relating to the businesses of the Target to the
Buyer from and after the Closing.
(d) Confidentiality. Each of the Sellers will treat and hold as such
all of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
the Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in his,
her or its possession. In the event that any of the Sellers is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, that Seller will notify the
Buyer promptly in writing of the request or requirement so that the Buyer may
seek an appropriate protective order or waive compliance with the provisions of
this Section 6(d). If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the Sellers is, on the advice of counsel, compelled to
disclose any Confidential
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Information to any tribunal or else stand liable for contempt or other
sanctions, that Seller may disclose the Confidential Information to the
tribunal; provided, however, that the disclosing Seller shall use his, her or
its reasonable best efforts to obtain, at the reasonable request of the Buyer,
an order or other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as the Buyer
shall designate. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to the
time of disclosure.
(e) Covenant Not to Compete. For a period of three years from and after
the Closing Date, Evan L. Jones will not engage directly or indirectly in any
retail, mail order or team sales business that the Target conducts as of the
Closing Date except to the extent Evan L. Jones is obligated or permitted to do
so pursuant to the Employment Agreement; provided, however, that no owner of
less than 1% of the outstanding stock of any publicly-traded corporation shall
be deemed to engage solely by reason thereof in any of its businesses. If the
final judgment of a court of competent jurisdiction declares that any term or
provision of this Section 6(e) is invalid or unenforceable, the Parties agree
that the court making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration, or area of the term or provision,
to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
(f) Dissenters' Rights. The Buyer would cause the Target to pay
holders of Dissenting Shares, within two days of receipt by the Target of a
written demand for payment in accordance with the NCBCA, an amount in cash equal
to the fair market value of their Dissenting Shares, which for each Dissenting
Share will be deemed to be the product of (x) the Exchange Ratio and (y) the
Average Closing Price.
(g) Issuance of Combined Financial Results. Buyer shall use reasonable
best efforts to publicly issue, by March 20, 1998, financial results covering at
least 30 days of combined (Buyer and Target) operations following the Closing
Date through the filing of a Current Report on Form 8-K with respect to the
Company's consolidated operating results for either (i) the fiscal year ending
January 31, 1998 or (ii) any 30-day period ending on or before February 28,
1998. The date of such public issuance is sometimes referred to herein as the
"Audit Publication Date."
(h) Target Obligations. The Buyer shall cause the Target to pay its
obligations after the Closing Date in the Target's ordinary course of business,
except to the extent such obligations are disputed in good faith. Without
limiting the foregoing: (i) the Buyer shall cause the Target to pay the Target
Transaction Costs on the Closing Date; and (ii) on the Closing Date, the Buyer
shall issue the SAR Conversion Shares to participants in the Target SAR Plan in
accordance with the terms of the Target SAR Plan, in satisfaction of the
Target's obligations pursuant to the Target SAR Plan.
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(i) Indemnification of the Target's Directors and Officers. Except to
the extent provided in Section 8(f) hereof, for a period of at least six (6)
years after the Closing Date, Buyer will indemnify the directors and officers of
the Target who serve as such immediately prior to the Closing to the same extent
as such persons presently are indemnified by the Target pursuant to the Target's
articles of incorporation or bylaws or the provisions NCBCA (as in effect on the
Closing Date and notwithstanding any subsequent change thereto), including
without limitation with respect to any Adverse Consequences resulting from,
arising out of, relating to or otherwise in respect of any suit, claim or
proceeding brought by or on behalf of Sports Endeavors, Incorporated or any of
its Affiliates, provided, however, that under no circumstances will Buyer be
liable for such indemnification with respect to matters which (A) constitute
breach of any duty owed by the person seeking indemnification to the Target or
the Buyer or (B) (i) were required to be disclosed in accordance with a
representation or warranty contained in Section 3(a) or Section 4 of this
Agreement (without regard for any material threshold contained in such
representation or warranty), (ii) were not so disclosed and (iii) the person
seeking indemnification had Knowledge of on the Closing Date.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer and Acquisition Sub. The
obligation of the Buyer and Acquisition Sub to consummate the transactions to be
performed by them in connection with the Closing is subject to satisfaction of
the following conditions:
(i) the representations and warranties set forth in Section 3(a)
and Section 4 hereof shall be true and correct in all
material respects (ignoring for purposes of this Section
7(a)(i) any materiality qualifications in such
representations and warranties) as of the Closing Date as
though made at and as of the Closing Date, except to the
extent that any representation or warranty is made as of a
specified date, in which case such representation or
warranty shall be true as of such date;
(ii) the Sellers shall have performed and complied with all of
their covenants hereunder in all material respects prior to
or at the Closing;
(iii) the Target shall have procured all of the third party
consents specified in Section 5(b) hereof and the estoppel
certificate referred to in Section 5(h) hereof;
(iv) there shall not be any law, regulation, injunction,
judgment, order, decree, ruling or charge in effect
preventing consummation of any of the transactions
contemplated by this Agreement;
(v) each of the Target and the Sellers' Agent (on behalf of
itself and each of the other Sellers) shall have delivered
to the Buyer a certificate to the effect that each of the
conditions specified in Sections 7(a)(i)-(iv) hereof is
satisfied in all respects;
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(vi) the Parties shall have received all authorizations,
consents, and approvals of governments and governmental
agencies referred to in Section 3(a)(ii), Section 3(b)(ii),
and Section 3(c) hereof;
(vii) the relevant parties shall have entered into the Employment
Agreement, the Stock Option Agreement and the Escrow
Agreement and the same shall be in full force and effect;
(viii) the Buyer shall have received from Drinker Biddle & Reath
LLP, counsel to the Sellers and the Target, an opinion in
form and substance reasonably satisfactory to Buyer,
addressed to the Buyer, and dated as of the Closing Date;
(ix) the Buyer shall have received the written resignations,
effective as of the Closing, of each director and officer of
the Target;
(x) all actions to be taken by the Sellers and the Target in
connection with consummation of the transactions
contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in
form and substance to the Buyer;
(xi) the Target and Ten-Soc International, Inc. ("Ten-Soc") shall
have executed a writing in form and substance reasonably
satisfactory to Buyer terminating the management agreement
dated January 16, 1995 by and between the Target and
Ten-Soc;
(xii) the Buyer shall have received written evidence in form and
substance reasonably satisfactory to it that the
Stockholders' Agreement dated January 1, 1995 by and among
the stockholders of the Target has been terminated;
(xiii) Buyer shall have received from BDO Seidman LLP, in its
capacity as the Target's independent accountants, a letter,
dated the Closing Date, in form and substance reasonably
acceptable to Buyer, confirming that, to their knowledge
after due inquiry of management of the Target, there have
been no transactions or events with respect to the Target
which would, and the ownership structure and attributes of
the Target and its stockholders would not, proscribe the
transactions contemplated hereby, if consummated, from
qualifying for treatment as a pooling-of-interests business
combination under all relevant accounting principles,
opinions and rulings. Buyer shall have received from
Deloitte & Touche LLP, in its capacity as dELiA*s
independent accountants, a letter, dated the Closing Date,
confirming that the transactions contemplated hereby, if
consummated, can properly be
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accounted for as a pooling-of-interests business combination
in accordance with GAAP and the criteria of Accounting
Principles Board Opinion No. 16 and the regulations of the
SEC;
(xiv) The Target shall have delivered to Buyer on or before the
Closing Date, an affiliate letter in the form attached
hereto as Exhibit B, executed by each of the Pooling
Affiliates. Buyer shall be entitled to place legends as
specified in such affiliate letters on the certificates
evidencing any of the Buyer Common Stock to be received by
such Pooling Affiliates pursuant to the terms of this
Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for the Buyer Common
Stock, consistent with the terms of the affiliate letters;
(xv) the Buyer shall have received a copy of the Target's
articles of incorporation, by-laws and resolutions of the
board of directors and stockholders of the Target
authorizing the execution, delivery and performance of this
Agreement and the Target's Transaction Documents by the
Target , and a certificate of the secretary or assistant
secretary of the Target, dated the Closing Date, which
states that such resolutions were duly adopted, and,
together with such bylaws and the articles of incorporation,
are in full force and effect and have not been amended or
modified, together with a certificate of incumbency dated
the Closing Date and signed by a duly appointed officer of
the Target and attested to by the secretary or assistant
secretary of the Target; and
(xvi) this Agreement and the Merger shall have received the
Requisite Stockholder Approval.
The Buyer may waive any condition specified in this Section 7(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Target and the Sellers. The
obligation of the Target and the Sellers to consummate the transactions to be
performed by them in connection with the Closing is subject to satisfaction of
the following conditions:
(i) the representations and warranties set forth in Section 3(b)
hereof shall be true and correct in all material respects as
of the Closing Date as though made at and as of the Closing
Date (ignoring for purposes of this Section 7(b)(i) any
materiality qualifications in such representations and
warranties), except to the extent that any representation or
warranty is made as of a specified date, in which case such
representation or warranty shall be true as of such date;
(ii) the Buyer and Acquisition Sub shall have performed and
complied with all of their respective covenants hereunder in
all material respects prior to or at
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the Closing;
(iii) there shall not be any law, regulation, injunction,
judgment, order, decree, ruling or charge in effect
preventing consummation of any of the transactions
contemplated by this Agreement;
(iv) the Buyer and Acquisition Sub shall have delivered to the
Sellers a certificate to the effect that each of the
conditions specified above in Section 7(b)(i)-(iii) is
satisfied in all respects;
(v) the Parties shall have received all authorizations,
consents, and approvals of governments and governmental
agencies referred to in Section 3(a)(ii), Section 3(b)(ii),
and Section 4(c) hereof;
(vi) the relevant parties shall have entered into the Employment
Agreement, the Stock Option Agreement and the Escrow
Agreement and the same shall be in full force and effect;
(vii) the Sellers' Agent shall have received from Simpson Thacher
& Bartlett, counsel to the Buyer, an opinion in form and
substance reasonably satisfactory to the Sellers' Agent,
addressed to the Sellers, and dated as of the Closing Date;
(viii) this Agreement and the Merger shall have received the
Requisite Stockholder Approval;
(ix) Buyer shall have granted to certain participants in the
Target SAR Plan options to purchase Buyer Common Stock at an
exercise price equal to the closing price of such common
stock on the Closing Date, in the amounts set forth on
Schedule 7b, subject to the terms and conditions on which
Buyer customarily grants options pursuant to its 1996 Stock
Incentive Plan;
(x) all actions to be taken by the Buyer and Acquisition Sub in
connection with consummation of the transactions
contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Sellers' Agent;
(xi) the Sellers shall have received a copy of the Buyer's and
Acquisition Sub's certificate or articles of incorporation,
as the case may be, and by-laws and resolutions of the board
of directors of the Buyer and the board of directors and
stockholder of Acquisition Sub authorizing the execution,
delivery and performance of this Agreement and the Buyer's
Transaction Documents by the Buyer and Acquisition Sub, and
a certificate of the secretary or assistant secretary of the
Buyer and Acquisition Sub, dated the
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Closing Date, which states that such resolutions were duly
adopted, and, together with such bylaws and certificate and
articles of incorporation, are in full force and effect and
have not been amended or modified, together with a
certificate of incumbency dated the Closing Date and signed
by a duly appointed officer of the Buyer and Acquisition Sub
and attested to by the secretary or assistant secretary of
the Buyer and Acquisition Sub;
(xii) Buyer shall, concurrently with the Closing, cause the Target
Bank Debt to be discharged and terminated, and Sellers'
Agent shall receive at Closing, in form and substance
reasonably satisfactory to Sellers' Agent, a copy of a
satisfaction statement from each lender of Target Bank Debt
and a release from each such lender of all Security
Interests in connection therewith;
(xiii) Buyer shall, concurrently with the Closing, have issued the
SAR Conversion Shares to participants in the Target SAR Plan
in accordance with the Target SAR Plan; and
(xiv) Buyer shall have caused the Target to pay, concurrently with
the Closing, the Target Transaction Costs.
The Target may waive any condition specified in this Section 7(b) if it executes
a writing so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing and continue in full force and effect thereafter until the
first anniversary of the Closing Date.
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event any of the Sellers breaches any of their
representations, warranties, and covenants contained herein
(other than the covenants in Section 2(a) hereof and the
representations and warranties in Section 3(a) hereof),
provided that the Buyer makes a written claim for
indemnification against the Sellers pursuant to Section
12(h) hereof within the survival period under Section 8(a)
hereof, then the Sellers agree to indemnify the Buyer from
and against the entirety of any Adverse Consequences the
Buyer may suffer through and after the date of the claim for
indemnification, including any Adverse Consequences the
Buyer may suffer after the end of any applicable survival
period, in each case resulting from, arising out of,
relating to, in the nature of, or caused by the breach,
provided, however, that notwithstanding anything herein to
the contrary the Sellers shall not have any obligation to
indemnify the Buyer pursuant to this Section 8(b) from and
against any Adverse Consequences caused by the breach of any
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representation or warranty or covenant of the Sellers
contained in Section 4 hereof (A) until the Buyer has
suffered Adverse Consequences by reason of all such breaches
in excess of a $25,000 aggregate deductible (after which
point the Sellers will be obligated only to indemnify the
Buyer from and against further such Adverse Consequences)
(provided, however, that no such deductible shall apply with
respect to breaches of the representation set forth in the
first sentence of Section 4(ee) hereof) or (B) to the extent
the Adverse Consequences the Buyer has suffered by reason of
breaches of the representations and warranties contained in
Sections 4 (a)-(j), Sections 4(l)-(x), and Sections
4(z)-(gg) (other than such breaches which constitute fraud)
exceeds the Indemnity Ceiling (after which point the Sellers
will have no obligation hereunder to indemnify the Buyer
from and against any other Adverse Consequences).
(ii) In the event any of the Sellers breaches any of his, her or
its covenants in Section 2(a) hereof or any of his, her or
its representations and warranties in Section 3(a) hereof,
and, if there is an applicable survival period pursuant to
Section 8(a) hereof, provided that the Buyer makes a written
claim for indemnification against such Seller pursuant to
Section 12(h) hereof within such survival period, then such
Seller agrees to indemnify the Buyer from and against the
entirety of any Adverse Consequences the Buyer may suffer
through and after the date of the claim for indemnification,
including any Adverse Consequences the Buyer may suffer
after the end of any applicable survival period, in each
case resulting from, arising out of, relating to, in the
nature of, or caused by the breach.
(c) Indemnification Provisions for Benefit of the Sellers.
(i) In the event the Buyer breaches any of its representations,
warranties, and covenants contained herein, the Buyer agrees
to indemnify each of the Sellers from and against the
entirety of any Adverse Consequences the Seller may suffer
through and after the date of the claim for indemnification,
including any Adverse Consequences the Seller may suffer
after the end of any applicable survival period, in each
case resulting from, arising out of, relating to, in the
nature of, or caused by the breach.
(ii) The Buyer agrees to indemnify each of the Sellers from and
against the entirety of any Adverse Consequences the Seller
may suffer through and after the date of the claim for
indemnification resulting from, arising out of, relating to,
or otherwise in respect of any suit, claim or proceeding
brought by or on behalf of Sports Endeavors, Incorporated or
any of its Affiliates.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with
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respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against any other Party
(the "Indemnifying Party") under this Section 8, then the
Indemnified Party shall promptly notify each Indemnifying
Party thereof in writing; provided, however, that no delay
on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel
of its choice reasonably satisfactory to the Indemnified
Party so long as (A) the Indemnifying Party notifies the
Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim
that the Indemnifying Party will indemnify the Indemnified
Party in accordance with this Agreement from and against the
entirety of any Adverse Consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in
the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that
the Indemnifying Party will have the financial resources to
defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, and (C) the
Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 8(d)(ii)
hereof, (A) the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in
the defense of the Third Party Claim, (B) the Indemnified
Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party
(not to be withheld unreasonably), and (C) the Indemnifying
Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party
(not to be withheld unreasonably).
(iv) In the event any of the conditions in Section 8(d)(ii)
hereof is or becomes unsatisfied, however, (A) the
Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it may deem
appropriate (and the Indemnified Party need not consult
with, or obtain any consent from, any Indemnifying Party in
connection therewith), (B) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically
for the costs of defending against the Third Party Claim
(including reasonable legal and paralegal fees, expenses and
disbursements), and (C) the Indemnifying Parties will remain
responsible for any Adverse
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Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent
provided in this Section 8.
(e) Determination of Adverse Consequences. The Parties shall take into
account the time cost of money (using the Applicable Rate as the discount rate)
in determining Adverse Consequences for purposes of this Section 8. All
indemnification payments under this Section 8 shall be deemed adjustments to the
purchase price for accounting purposes.
(f) No Director, Officer or Employee Indemnification. Each of the
Sellers hereby agrees that he, she or it will not make any claim for
indemnification against the Target by reason of the fact that he, she or it was
a director, officer, employee, or agent of Target or was serving at the request
of Target as a partner, trustee, director, officer, employee or agent of another
entity (whether such claim is for judgments, damages, penalties, fines, costs,
amounts paid in settlement, losses, expenses or otherwise and whether such claim
is pursuant to any statute, charter document, bylaw, agreement, or otherwise)
with respect to any action, suit, proceeding, complaint, claim or demand brought
by the Buyer against such Seller in such Seller's capacity as a director,
officer or stockholder of the Target (whether such action, suit, proceeding,
complaint, claim, or demand is pursuant to this Agreement, applicable law or
otherwise) provided that Buyer is determined to be the prevailing party by a
court of competent jurisdiction with respect to such action, suit, proceeding,
complaint, claim or demand.
(g) Vendor Disputes. The Sellers agree to indemnify the Buyer from and
against Adverse Consequences (other than legal and paralegal fees, expenses and
disbursements) that exceed $40,000 in the aggregate (and then only to the extent
of such excess over $40,000) resulting from, arising out of or relating to
disputes with vendors regarding the Target's purchases from such vendors prior
to the Closing identified on Schedule 4i attached hereto ("Indemnifiable Vendor
Claims") the Buyer may suffer through and after the date of the claim for
indemnification, including any Adverse Consequences the Buyer may suffer after
the first anniversary of the Closing Date and shall reimburse the Target for any
reasonable legal fees and expenses paid or incurred by the Company or by the
Company on behalf of the Sellers relating to Indemnifiable Vendor Claims,
provided that the Sellers' Agent shall have the right, but not the obligation,
to conduct the defense of the Target in connection with any such dispute but may
not settle any claim without the consent of the Buyer, which consent shall not
be unreasonably withheld. Notwithstanding anything to the contrary in this
Section 8(g): (i) in no event shall the Sellers be liable to the Target for an
amount in excess of $150,000 pursuant to the indemnification and reimbursement
obligations described in this Section 8(g); and (ii) in no event shall the
Sellers have any indemnification or reimbursement obligation pursuant to this
Section 8(g) with respect to any Indemnifiable Vendor Claim as to which the
Buyer does not give notice to the Sellers prior to the first anniversary of the
Closing Date.
(h) Sole and Exclusive Remedy. Notwithstanding anything herein to the
contrary, the remedies provided in this Section 8 and in Sections 10 and 12(o)
hereof are the sole and exclusive remedies that the Parties shall have, under
this Agreement, at law, in equity or otherwise, for breach by the other of any
representations and warranties of the other or breach or default by the other in
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the performance of the other's covenants, agreements or obligations under this
Agreement.
(i) Limitations. Notwithstanding any provision of this Section 8 to the
contrary, the obligations of the Parties under this Section 8 are subject to the
following limitations:
(i) an indemnified Party shall not be entitled to more
than one recovery for any single Adverse Consequence
solely as a result of such Adverse Consequence
resulting from the breach or inaccuracy of more than
one representation, warranty, covenant or agreement
made by the indemnifying Party pursuant hereto;
(ii) the liability of each Seller with respect to breaches
which constitute fraud by such Seller and breaches of
the representations and warranties of the Sellers
contained in Sections 4(k) and 4(y) shall not exceed
the product of (A) the number of shares of Buyer
Common Stock issued to such Seller pursuant to this
Agreement and (B) the closing price of the Buyer
Common Stock as quoted on Nasdaq on the Closing Date;
(iii) the amounts for which an indemnifying Party shall be
liable under this Section 8 shall be: (A) net of any
tax benefit realized or to be realized by the
indemnified Party by reason of the facts and
circumstances giving rise to the indemnifying Party's
liability, but after giving effect to any tax which
shall be required to be paid on such indemnification
payment by the indemnified Party; and (B) net of any
insurance proceeds received by the indemnified Party
in connection with the facts giving rise to the right
of indemnification;
(iv) an indemnified Party shall be entitled to
reimbursement for the expenses incurred by such Party
in bringing a claim under this Section 8 or
prosecuting its rights of indemnity in respect of
such claim only if it determined, whether by
judgment, settlement or other agreement, that such
Party is entitled to recovery of all or a portion of
the Adverse Consequence in respect of which such
claim was brought;
(v) all amounts payable to the Buyer pursuant to this
Section 8 (other than pursuant to Section 8(b)(ii))
shall be paid first out of the shares of Buyer Common
Stock then held in escrow pursuant to the Escrow
Agreement, determined by dividing the amount of the
Adverse Consequences so incurred by the closing price
of a share of Buyer Common Stock as reported by
Nasdaq on the Closing Date; and
(vi) the liability of each Seller shall also be limited in
accordance with Section 12(a) hereof.
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9. Tax Matters. The following provisions shall govern the allocation of
responsibility as between Buyer and Sellers for certain tax matters following
the Closing Date:
(a) Tax Returns. Buyer shall prepare or cause to be prepared and file
or cause to be filed, at Buyer's expense, all Tax Returns for the Target for all
periods ending on, prior to or after the Closing Date which are filed after the
Closing Date. Buyer shall permit Sellers' Agent to review and comment on each
such Tax Return for periods ending on or prior to the Closing Date.
(b) Cooperation on Tax Matters.
(i) Buyer, the Target and Sellers' Agent shall cooperate fully,
as and to the extent reasonably requested by any other party
to this Agreement, in connection with the filing of Tax
Returns pursuant to this Section and any audit, litigation
or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's
request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually
convenient basis to provide additional information and
explanation of any material provided hereunder. The Buyer
and Sellers' Agent agree (A) to retain all books and records
with respect to Tax matters pertinent to the Target relating
to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to
the extent notified by Buyer or Sellers' Agent, any
extensions thereof) of the respective taxable periods, and
to abide by all record retention agreements entered into
with any taxing authority, and (B) to give the Sellers'
Agent or Buyer, as the case may be, reasonable written
notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests,
the Buyer or the Sellers' Agent, as the case may be, shall
allow the other party to take possession of such books and
records.
(ii) Buyer and Sellers further agree, upon request, to use their
reasonable best efforts to obtain any certificate or other
document from any governmental authority or any other Person
as may be necessary to mitigate, reduce or eliminate any Tax
that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
(iii) Buyer and Sellers further agree, upon request, to provide
the other party with all information that either party may
be required to report pursuant to Section 6043 of the Code
and all Treasury Department Regulations promulgated
thereunder.
(c) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by Sellers
when due, and Sellers will, at their own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp,
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registration and other Taxes and fees, and, if required by applicable law, Buyer
will, and will cause its affiliates to, join in the execution of any such Tax
Returns and other documentation.
10. Termination; Effect of Termination.
(a) Termination of Agreement. The Buyer or the Target may terminate
this Agreement as provided below:
(i) the Buyer and the Target may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Target at any time prior to the Closing (A) in
the event the Target or any of the Sellers has materially
breached any representation, warranty, or covenant contained
in this Agreement in any material respect, the Buyer has
notified the Target of the breach, and the breach has
continued without cure for a period of 30 days after the
notice of breach or (B) if the Closing shall not have
occurred by the Outside Date, by reason of the failure of
any condition precedent under Section 7(a) hereof (unless
the failure results primarily from the Buyer or Acquisition
Sub breaching any representation, warranty, or covenant
contained in this Agreement);
(iii) the Buyer may terminate this Agreement if the Closing has
not occurred by the Outside Date due to any intentional bad
faith action or intentional bad faith omission by or on
behalf of the Target or the Sellers that is not beyond the
reasonable control of the Target or the Sellers;
(iv) the Target may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (A) in
the event the Buyer or Acquisition Sub has materially
breached any representation, warranty, or covenant contained
in this Agreement in any material respect, the Target has
notified the Buyer of the breach, and the breach has
continued without cure for a period of 30 days after the
notice of breach or (B) if the Closing shall not have
occurred by the Outside Date, by reason of the failure of
any condition precedent under Section 7(b) hereof (unless
the failure results primarily from any of the Sellers
themselves breaching any representation, warranty, or
covenant contained in this Agreement);
(v) the Target may terminate this Agreement if the Closing has
not occurred by the Outside Date due to any intentional bad
faith action or intentional bad faith omission by or on
behalf of the Buyer or Acquisition Sub that is not beyond
the reasonable control of the Buyer or Acquisition Sub;
(vi) either the Buyer or the Target may terminate this Agreement
if the Closing has not occurred within five business days
after the satisfaction of all
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conditions to such party's obligations set forth in Article
7 hereof; and
(vii) the Target may terminate this Agreement if the Average
Closing Price of Buyer Common Stock is less than $15.00 per
share.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10(a) above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
(except for any Liability of any Party then in breach and any Liability
described in this Section 10(b)).
(i) If this Agreement is terminated by Buyer pursuant to Section
10(a)(ii) and the Target (or the Target's stockholders)
accepts an offer from a third party to purchase all or
substantially of the assets (other than inventory in the
Ordinary Course of Business) or the Target Shares or to
merge, reorganize or to engage in a similar transaction with
the Target's stockholders (an "Alternative Transaction")
prior to the Outside Date, and such transaction is
ultimately consummated, then the Target shall pay to Buyer a
fee, in cash, of the lesser of (A) $300,000 or (B) five
percent (5%) of the Aggregate Merger Consideration valued at
the closing price per share quoted on Nasdaq of Buyer Common
Stock on the date of such termination (such fee, a "Target
Termination Fee"); provided, however, the Target will not be
liable for such Target Termination Fee if the Target
terminates this Agreement pursuant to Section 10(a)(iv),
10(a)(v), 10(a)(vi) or 10(a)(vii) hereof.
(ii) If this Agreement is terminated by Buyer pursuant to Section
10(a)(iii), the Target shall pay to Buyer a fee, in cash, of
the lesser of (A) $300,000 or (B) five percent (5%) of the
Aggregate Merger Consideration valued at the closing price
per share quoted on Nasdaq of Buyer Common Stock on the date
of such termination (such fee, also a "Target Termination
Fee"), provided, however, the Target will not be liable for
such Target Termination Fee if the Target terminates this
Agreement pursuant to Section 10(a)(iv), 10(a)(v), 10(a)(vi)
or 10(a)(vii) hereof.
(iii) If this Agreement is terminated by the Target pursuant to
Section 10(a)(iv), the Buyer shall pay to the Target a fee,
in cash, of the lesser of (A) $300,000 or (B) five percent
(5%) of the Aggregate Merger Consideration valued at the
closing price per share quoted on Nasdaq of Buyer Common
Stock on the date of such termination (the "Buyer
Termination Fee"), provided, however, that Buyer will not be
liable for such Buyer Termination Fee if Buyer terminates
this Agreement pursuant to Section 10(a)(ii) or 10(a)(iii).
(iv) The Sellers hereby, severally and not jointly, guarantee the
obligations of the Target to pay Buyer any Target
Termination Fee in accordance with
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terms of this Section 10(b).
(v) Notwithstanding anything in this Agreement to the contrary,
in the event of the termination of this Agreement pursuant
to Section 10(a) above and the receipt by Buyer of the
Target Termination Fee, the receipt by Buyer of the Target
Termination Fee shall be Buyer's sole and exclusive remedy,
under this Agreement, at law, in equity or otherwise.
Notwithstanding anything in this Agreement to the contrary,
in the event of the termination of this Agreement pursuant
to Section 10(a) above and the receipt by Target of the
Buyer Termination Fee, the receipt by Target of the Buyer
Termination Fee shall be Target's and each of the Sellers'
sole and exclusive remedy, under this Agreement, at law, in
equity or otherwise.
11. Registration Rights.
(a) Filing of Registration Statement. dELiA*s shall use reasonable best
efforts to file with the SEC within five business days of the Closing Date (but
in no circumstances earlier than January 2, 1998), a registration statement on
Form S-3 under the Securities Act (the "Registration Statement") for the purpose
of registering for resale all the shares of Buyer Common Stock (i) delivered
hereunder to the Sellers (including shares released from escrow in accordance
with the Escrow Agreement) and (ii) delivered in accordance with the Target SAR
Plan (the "Registrable Shares"). Buyer shall use reasonable best efforts to have
such Registration Statement become effective and cause the Registrable Shares to
be registered under the Securities Act and registered, qualified or exempted
under the state securities laws of such jurisdictions as any Seller reasonably
requests, and to do any and all other acts and things which may be reasonably
necessary or desirable to enable the Sellers and the holders of SAR Conversion
Shares to consummate the disposition of the shares of Buyer Common Stock issued
hereunder in such jurisdictions (provided, however, that Buyer shall not be
required to qualify to do business or to file a general consent to service of
process in any such jurisdiction). Notwithstanding the foregoing, Buyer may
delay filing the Registration Statement, and may withhold efforts to cause the
Registration Statement to become effective, if Buyer determines in good faith
that such registration would materially interfere with or adversely affect the
negotiation or completion of any financing, acquisition or other transaction
that is then being pursued by Buyer, or would require premature disclosure
thereby, at the time the right to delay is exercised; provided, however, that
the Buyer may not exercise its rights to delay the filing of the Registration
Statement or withhold efforts to cause the Registration Statement to become
effective more than one time in any 365-day period, and no such delay or
withholding may last longer than 90 days.
(b) Expenses of Registration. Except for fees, expenses and disbursements
of legal counsel to the Sellers, Buyer shall pay all expenses incurred in
connection with the registration, qualification and/or exemption pursuant to
Section 11(a) of the shares of Buyer Common Stock issued hereunder, provided,
however, that Buyer shall not be responsible for any sales, broker's or
underwriting commissions upon sale by any Seller of any shares of Buyer Common
Stock issued pursuant to the terms of this Agreement.
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(c) Furnishing of Documents. Buyer shall furnish to the Sellers such
reasonable number of copies of the Registration Statement, each amendment or
supplement thereto, such prospectuses as are contained in the Registration
Statements and such other documents as the Sellers may reasonably request in
order to facilitate the offering of the shares pursuant to a registration made
pursuant to Section 11(a) hereof of Buyer Common Stock issued hereunder.
(d) Amendments and Supplements. Buyer shall prepare and promptly file with
the SEC and promptly notify the Sellers of the filing of such amendments or
supplements to the Registration Statement or prospectuses contained therein as
may be necessary to correct any statements or omissions, if, at the time when a
prospectus relating to the Registrable Shares issued hereunder is required to be
delivered under the Securities Act, any event shall have occurred as a result of
which any such prospectus or any other prospectus as then in effect would
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. Buyer shall also advise the Sellers
promptly after it shall receive notice or obtain knowledge thereof of the
issuance of any stop order by the SEC suspending the effectiveness of the
Registration Statement or the initiation or threatening of any proceeding for
that purpose and promptly use its commercially reasonable efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order should
be issued. If, after the Registration Statement becomes effective, Buyer advises
the Sellers that Buyer considers it appropriate that such registration statement
be amended, the Sellers shall suspend any further sales of the Registrable
Shares held by them until Buyer advises the Sellers that such registration
statement has been amended.
(e) Duration. Buyer shall maintain the effectiveness of the Registration
Statement, in each case, until the earlier of (i) the sale or other disposition
pursuant to such registration statement of all the Registrable Shares of Buyer
Common Stock and (ii) the second anniversary of the Closing Date.
(f) Further Information and Cooperation. If shares of Buyer Common Stock
issued hereunder and owned by a Seller are included in a Registration Statement,
such Seller shall promptly furnish Buyer such information regarding itself as
Buyer may reasonably request and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement. Such
Seller shall also cooperate with Buyer and each underwriter or agent
participating in the disposition of Buyer Common Stock pursuant to Section 11(a)
and their respective counsel in connection with any filings required to be made
or any other actions required to facilitate the registrations made pursuant to
Section 11(a).
(g) Indemnification
(i) Buyer shall indemnify and hold harmless each Seller from and
against any and all losses, damages, liabilities, costs and
expenses to which such Sellers may become subject under the
Securities Act or otherwise, insofar as such losses, claims,
damages, liabilities, costs or expenses arise out of or are
based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration
Statement, any prospectus contained
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therein or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to
state therein 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;
provided, however, that (i) Buyer shall not be liable in any
such case to the extent that any such loss, claim, damage,
liability, cost or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information
furnished by or on behalf of any Seller in writing
specifically for use in the preparation thereof and (ii)
Buyer's indemnity obligations contained herein shall not
apply to amounts paid in settlement of any loss, claim,
damage, liability, cost, expense or action if such
settlement is effected without the consent of Buyer.
(ii) Each of the Sellers, severally but not jointly, shall
indemnify and hold harmless Buyer and each person, if any,
who controls Buyer within the meaning of the Securities Act,
from and against any and all losses, damages, liabilities,
costs and expenses to which Buyer or any such controlling
person may become subject under the Securities Act or
otherwise, insofar as such losses, damages, liabilities,
costs or expenses arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the Registration Statement, any prospectus
contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged
omission to state therein 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, to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was
so made in reliance upon and in conformity with written
information furnished by or on behalf of such Seller
specifically for use in the preparation thereof; provided,
however, that the indemnity obligation of any Seller will be
limited to the net amount of proceeds received by such
Seller from the sale of shares of Buyer Common Stock issued
hereunder pursuant to the Registration Statement.
(iii) Promptly after receipt by an indemnified party pursuant to
the provisions of this Section 11(g) of notice of the
commencement of any action involving the subject matter of
the foregoing indemnity provisions, such indemnified party
shall, if a claim for indemnification is to be made against
the indemnifying party pursuant to the provisions of this
Section 11(g), promptly notify the indemnifying party of the
commencement of such action; but the failure to so notify
the indemnifying party shall not relieve it from any
liability which it may have hereunder unless the
indemnifying party has been materially prejudiced thereby
nor will such failure to so notify the indemnifying party
relieve it from any liability which it may have to any
indemnified party otherwise than hereunder. In case such
action is
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brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in,
and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably acceptable to such
indemnified party; provided, however, if the defendants in
any action include both the indemnified party and the
indemnifying party and there is a conflict of interest which
would prevent counsel for the indemnifying party from also
representing the indemnified party, the indemnified party or
parties shall have the right to select one separate counsel
for all such indemnified parties to participate in the
defense of such action on behalf of such indemnified party
or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such
indemnified party pursuant to the provisions of this Section
11(g) for any legal or other expense subsequently incurred
by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have
employed counsel in accordance with the provisions of the
preceding sentence, (ii) the indemnifying party shall not
have employed counsel reasonably acceptable to the
indemnified party to represent the indemnified party within
a reasonable time after the notice of the commencement of
the action or (iii) the indemnifying party has authorized
the employment of counsel for the indemnified party at the
expense of the indemnifying party.
(iv) If the indemnification provided for in this Section 11(g) is
not available for any reason, then each indemnifying party
shall contribute in such proportion as is appropriate to
reflect the benefit received by the indemnified party and
the indemnifying party, or in the case when no benefit has
been received, each indemnifying party shall contribute as
appropriate to reflect the relative fault of the indemnified
party and indemnifying party.
12. Miscellaneous.
(a) Nature of Certain Obligations.
(i) With respect to the representations and warranties of each
of the Sellers in Section 3(a) above, the particular Seller
making the representation, warranty, or covenant will be
solely responsible to the extent provided in Section 8 above
for any Adverse Consequences the Buyer may suffer as a
result of any breach thereof by such Seller.
(ii) With respect to the remainder of the representations,
warranties, and covenants in this Agreement, each Seller
will be responsible to the extent provided in Section 8
above for his, her or its Allocable Portion of any Adverse
Consequences the Buyer may suffer as a result of any breach
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thereof.
(b) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
Buyer and the Sellers' Agent; provided, however, that any Party may make any
public disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its reasonable best efforts to advise the
other Parties prior to making the disclosure).
(c) No Third-Party Beneficiaries. This Agreement shall not confer any
rights, remedies, obligations or liabilities upon any Person other than the
Parties and their respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof. Without limiting the foregoing, the parties hereto agree that this
Agreement supersedes the Letters of Intent dated August 29, 1997 and November
18, 1997, as amended on December 5, 1997, and the letter agreements dated
September 16, 1997 and November 18, 1997, as amended on December 5, 1997, each
by and among Buyer, Evan L. Jones and the Target.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his,
her or its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Sellers' Agent; provided, however, that the Buyer
may (i) assign any or all of its rights and interests hereunder to one or more
of its Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases the Buyer nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice or other communication
under this Agreement shall be in writing and shall be considered given when
delivered personally or sent by facsimile (receipt confirmed), one day after
delivery by a reputable overnight courier, or four days after the postmark date
if mailed by registered mail, return receipt requested, to the parties at the
addresses set forth below (or at such other address as a party may specify by
notice to the other)
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If to the Sellers, Evan L.
Jones or Sellers' Agent: Copy to:
C/o Evan L. Jones Drinker Biddle & Reath LLP
5910 Treetop Ridge 1345 Chestnut Street
Durham, NC 27705 Philadelphia, PA 19107-3496
Attn: Morgan R. Jones, Esq.
Fax: 215-569-1867
If to the Target: Copy to:
TSI Soccer Corporation Drinker Biddle & Reath LLP
4324 South Alston Avenue 1345 Chestnut Street
Durham, NC 27713 Philadelphia, PA 19107-3496
Attn: President Attn: Morgan R. Jones, Esq.
Fax: 919-484-0126 Fax: 215-569-1867
If to the Buyer or
Acquisition Sub: Copy to:
dELiA*s Inc. Simpson Thacher & Bartlett
435 Hudson Street 425 Lexington Avenue
New York, New York 10014 New York, New York 10017
Attn: President Attn: Gary I. Horowitz, Esq.
Fax: 212-807-9069 Fax: 212-455-2502
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including messenger service, telex, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of North Carolina.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing, signed and
delivered by the Buyer and the Sellers' Agent. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
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(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Except as expressly provided herein (including, without
limitation, Section 6(h) with respect to the payment of Target Transaction
Costs), each Party hereto will bear its own costs and expenses (including legal
fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby. The Sellers agree that the Target has not
borne and, except as provided herein, will not bear any of the Sellers' costs
and expenses (including any of their legal fees and expenses) in connection with
this Agreement or any of the transactions contemplated hereby.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(o) Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably and could not be made whole
by monetary damages in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the Parties and the matter (subject
to the provisions set forth in Section 12(p) hereof), in addition to any other
remedy to which they may be entitled, at law or in equity.
(p) Submission to Jurisdiction. By execution and delivery of this
Agreement, each of the Parties unconditionally submits to the jurisdiction of
any state or federal court sitting in New York County, New York or Durham
County, North Carolina, in any action or proceeding arising out of or relating
to this Agreement and agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court. Each Party also agrees
not to bring any action or
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proceeding arising out of or relating to this Agreement in any other court. Each
of the Parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto. Any
Party may make service on any other Party by sending or delivering a copy of the
process to the Party to be served at the address and in the manner provided for
the giving of notices in Section 12(h) hereof. Nothing in this Section 12(p),
however, shall affect the right of any Party to serve legal process in any other
manner permitted by law or at equity. Each Party agrees that a final judgment in
any action or proceeding so brought shall be conclusive and may be enforced by
suit on the judgment or in any other manner provided by law or at equity.
13. Representation of Sellers by Sellers' Agent.
(a) Appointment of Sellers' Agent.
(i) Each of the Sellers hereby irrevocably appoints Evan L.
Jones (herein called the "Sellers' Agent") as such Seller's
agent and attorney-in-fact to take any action required or
permitted to be taken by such Seller under the terms of this
Agreement, including, without limiting the generality of the
foregoing, the execution, delivery and receipt of any funds,
notices, certificates or other documents (including without
limitation the Escrow Agreement) to be executed, delivered
or received by or on behalf of any or all of the Sellers,
the payment of any fees and expenses relating to the
transactions contemplated by this Agreement, the
representation of the Sellers in the resolution of any
disputed matters hereunder or under the Escrow Agreement and
in indemnification proceedings hereunder and the rights to
waive, modify or amend the terms of this Agreement. The
Sellers severally agree to indemnify the Sellers' Agent from
and against and in respect of any and all liabilities,
damages, claims, costs and expenses, including but not
limited to attorneys' fees, arising out of or due to any
action as the Sellers' Agent and any and all actions
proceedings, demands, assessments, judgments, costs and
expenses incidental thereto, except to the extent that the
same result from bad faith or gross negligence on the part
of the Sellers' Agent.
(ii) The Buyer and the Escrow Agent shall be entitled to rely
exclusively upon any communications given by the Sellers'
Agent on behalf of any Seller and shall not be liable in any
manner whatsoever for any action taken or not taken in
reliance upon the actions taken or not taken or
communications made by the Sellers' Agent. The Buyer and the
Escrow Agent shall be entitled to disregard any notices or
communications given or made by the Sellers' Agent.
Notwithstanding anything to the contrary contain herein, the
Buyer and the Escrow Agent shall be entitled to disregard
any notices or communications given or made by Sellers
unless given or made through the Sellers' Agent, except as
provided in Section 13(b) below.
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(b) Successor Agent. In the event of the death or resignation of the
Sellers' Agent or his inability to perform his functions hereunder, the Sellers
shall promptly appoint a new agent as attorney-in-fact, and such appointment
shall e deemed to have made when communicated to Buyer in writing signed by the
holders, or if after the Closing, the former holders (or the personal
representatives thereof) of at least 51% of the Target Shares owned by the
Sellers immediately prior to the date of such decision, or if after the Closing,
the Closing Date. If the Sellers do not within fifteen (15) days appoint a new
agent, then the Seller then living who previously owned the greatest number of
Target Shares outstanding to the date of such decision, or if after the Closing,
the Closing Date shall serve as Sellers' Agent if he or she is able and willing
to do so, until a successor agent shall have been appointed in accordance with
the provisions hereof.
(c) Sellers' Actions. The manner and form by which the Sellers shall
decide upon any new agent and attorney-in-fact shall be decided solely by the
holders, or if after the Closing, the former holders (or the personal
representatives thereof) of at least 51% of the Target Shares owned by the
Sellers immediately prior to the date of such decision, or if after the Closing,
the Closing Date. The Sellers recognize, and hereby acknowledge, that the
Sellers' Agent has an interest in the subject matter of this Agreement and that
the appoint of such Agent (which shall include any person who becomes the
Sellers' Agent pursuant to the provisions of Section 13(b) above) as the
Sellers' Agent constitutes an irrevocable power-of-attorney coupled with an
interest,
[SIGNATURE PAGES FOLLOW]
<PAGE>
[FIRST SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
dELiA*s Inc.
By:/s/ Alex Navarro
-------------------------
Alex S. Navarro
Senior Vice President--
Development & Legal Affairs
TSI SOCCER CORPORATION
By:/s/ Evan L. Jones
-------------------------
Evan L. Jones
President
EVAN L. JONES
/s/ Evan L. Jones
-------------------------
TEN-SOC INTERNATIONAL, INC.
By:/s/ Evan L. Jones
-------------------------
Evan L. Jones
President
HELEN L. CHRISTY
/s/ Helen L. Christy
-------------------------
JOHN GILRAY CHRISTY
/s/ John Gilray Christy
-------------------------
<PAGE>
[SECOND SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
BRUCE H. HOOPER
/s/ Bruce H. Hooper
-------------------------
THORNTON D. HOOPER II
/s/ Thornton D. Hooper II
-------------------------
MORGAN R. JONES
/s/ Morgan R. Jones
-------------------------
CAROL W. JONES
/s/ Carol W. Jones
-------------------------
M.R. JONES FINANCIAL CONSULTANT
PROFIT SHARING PLAN
By:/s/ Morgan R. Jones
-------------------------
<PAGE>
[THIRD SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
M.R. JONES FINANCIAL CONSULTANT
MONEY PURCHASE PLAN
By: Morgan R. Jones
-------------------------
JOSEPH L. PONCE
/s/ Joseph L. Ponce
-------------------------
