<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT to CURRENT REPORT
on Form 8-K dated October 31, 1997 and filed with the
Securities and Exchange Commission on November 12, 1997
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 31, 1997
OROAMERICA, INC.
(Exact name of Registrant as specified in its charter)
Delaware 0-21862 94-2385342
- -------- ------- ----------
State or other jurisdiction Commission File Number IRS Employer
of incorporation Identification No.
443 North Varney Street
Burbank, California 91502
----------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (818) 848-5555
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 29, 1997, OroAmerica, Inc. ("OroAmerica") entered into an Asset
Purchase-Sale Agreement ("Agreement") with Jerry Prince, Inc. ("JPI"), a
California-based jewelry manufacturer and distributor, for the purchase of
substantially all of JPI's assets and the assumption of certain liabilities,
expenses, and debts incurred by JPI. The assets that OroAmerica purchased from
JPI included all cash in bank or on hand, all accounts receivable, contract
rights, all inventories, and all JPI's intellectual property assets. The
purchase price for these assets was $4.9 million, which approximated fair value.
OroAmerica paid the purchase price from existing cash balances.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBIT.
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The following Jerry Prince, Inc. financial statements are filed
as part of this report: Page
Report of Independent Accountants.......................................F-1
Balance Sheets as of October 31, 1997 and December 31, 1996.............F-2
Statements of Operations for the ten months ended October 31, 1997 and
the year ended December 31, 1996...................................F-3
Statements of Stockholder's Equity for the ten months
ended October 31, 1997 and the year ended December 31, 1996........F-4
Statements of Cash Flows for the ten months ended October 31, 1997 and
the year ended December 31, 1996...................................F-5
Notes to Financial Statements...........................................F-6
(B) PRO FORMA FINANCIAL INFORMATION.........................................P-1
(C) EXHIBIT.
99.1 Asset Purchase-Sale Agreement between Jerry Prince, Inc. and OroAmerica,
Inc. dated October 29, 1997, with attached exhibits.
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.
Dated: January 7, 1998 OroAmerica, Inc.
By: SHIU SHAO
------------------------------
Shiu Shao
Vice President and Chief
Financial Officer
2
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of OroAmerica, Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations, of stockholder's equity and of cash flows present fairly, in
all material respects, the financial position of Jerry Prince, Inc. at October
31, 1997 and December 31, 1996, and the results of its operations and its cash
flows for the ten months ended October 31, 1997 and the year ended December 31,
1996, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Los Angeles, California
December 19, 1997
F-1
<PAGE> 4
JERRY PRINCE, INC.
Balance Sheets
<TABLE>
<CAPTION>
ASSETS October 31, December 31,
1997 1996
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 384,284 $ 95,434
Accounts receivable, net of allowance for returns and
doubtful accounts of $422,000 and $1,510,000 2,367,494 1,926,239
Inventories (Note 3) 4,424,503 6,123,735
Other assets 45,936 60,455
---------- ----------
Total current assets 7,222,217 8,205,863
---------- ----------
Property & Equipment:
Office furniture and equipment 45,856 45,856
Computer equipment 55,851 55,851
Leasehold improvements 218,164 218,164
Vehicles 104,091 104,091
---------- ----------
Total property and equipment 423,962 423,962
Less accumulated depreciation and amortization 297,472 282,274
---------- ----------
Net property and equipment 126,490 141,688
---------- ----------
$7,348,707 $8,347,551
========== ==========
LIABILITIES & STOCKHOLDER'S EQUITY
Current liabilities
Note payable to bank (Note 4) $ 375,000 $ -
Accounts payable 192,416 135,398
Accrued advertising expenses 365,878 327,186
Other accrued expenses 26,308 179,437
---------- ----------
Total current liabilities 959,602 642,021
---------- ----------
Stockholder's equity:
Common stock, stated value $1 per share; 300,000
shares authorized; 181,000 shares
issued and outstanding 181,000 181,000
Retained earnings 6,208,105 7,524,530
---------- ----------
Total stockholder's equity 6,389,105 7,705,530
---------- ----------
$7,348,707 $8,347,551
========== ==========
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE> 5
JERRY PRINCE, INC.
Statements of Operations
For the Ten Months Ended October 31, 1997 and
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Net sales $ 10,542,417 $ 23,763,808
Cost of sales 8,643,857 18,459,947
------------ ------------
Gross profit 1,898,560 5,303,861
Selling, general and administrative expenses 2,153,598 3,039,950
------------ ------------
(Loss) income from operations (255,038) 2,263,911
Other income (expense):
Interest and dividend income 6,328 -
Interest expense (47,532) (203,640)
Miscellaneous 15,482 (1,132)
------------ ------------
Total other expense (25,722) (204,772)
------------ ------------
(Loss) income before taxes (280,760) 2,059,139
Income tax expense
- 31,000
------------ ------------
Net (loss) income $ (280,760) $ 2,028,139
============ ============
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 6
JERRY PRINCE, INC.
Statements of Stockholder's Equity
For the Ten Months Ended October 31, 1997 and
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Common Stock
------------------------------- Retained
Number Amount Earnings Total
------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 181,000 $181,000 $ 6,318,931 $ 6,499,931
Net income for the period - - 2,028,139 2,028,139
Distributions to Stockholder - - (822,540) (822,540)
------- -------- ----------- -----------
Balance at December 31, 1996 181,000 181,000 7,524,530 7,705,530
Net loss for the period - - (280,760) (280,760)
Distributions to Stockholder - - (1,035,665) (1,035,665)
------- -------- ----------- -----------
Balance at October 31, 1997 181,000 $181,000 $ 6,208,105 $ 6,389,105
======= ======== =========== ===========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 7
JERRY PRINCE, INC.
Statements of Cash Flows
For the Ten Months Ended October 31, 1997 and
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Operating activities:
Net (loss) income $ (280,760) $ 2,028,139
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization 15,198 32,792
Provision for losses on accounts receivable 10,000 -
Provision for estimated returns (1,098,000) 690,000
Provision for obsolete inventory 248,167 14,451
Changes in operating assets & liabilities:
Accounts receivable 646,745 (345,154)
Inventories 1,451,065 (663,733)
Other assets 14,519 (38,054)
Accounts payable 57,018 (110,332)
Accrued advertising expenses 38,692 324,186
Other accrued expenses (153,129) 27,150
----------- -----------
Net cash provided by operating activities 949,515 1,959,445
----------- -----------
Investing activities:
Purchase of equipment and improvements - (39,169)
----------- -----------
Financing activities:
Increase in note payable to bank 375,000
Payment on note payable to bank - (835,000)
Payment on note payable to stockholder - (262,804)
Distributions paid to stockholder (1,035,665) (822,540)
----------- -----------
Net cash used in financing activities (660,665) (1,920,344)
----------- -----------
Net increase (decrease) in cash and cash equivalents 288,850 (68)
Cash and cash equivalents, beginning of year 95,434 95,502
----------- -----------
Cash and cash equivalents, end of year $ 384,284 $ 95,434
=========== ===========
Supplemental disclosure of cash flow data:
Interest paid $ 43,232 $ 210,363
Income taxes paid 7,000 46,200
</TABLE>
See Notes to Financial Statements
F-5
<PAGE> 8
JERRY PRINCE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business:
Jerry Prince, Inc. (the "Company") was incorporated under the laws of the State
of California in 1980. The Company is a wholesale distributor of gold jewelry.
Accounting estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash equivalents:
Cash equivalents are highly liquid investments with a maturity of three months
or less when acquired. The fair value of cash equivalents approximates their
carrying value.
Allowance for sales returns and doubtful accounts:
The Company reduces gross sales by the amount of discounts and returns to
determine net sales. Each month the Company estimates a reserve for returns
based on historical experience and the amount of gross sales. The reserve is
adjusted periodically to reflect the Company's actual return experience. The
Company provides allowances for doubtful accounts receivable when it determines
that such amounts are uncollectible. Actual bad debt and sales return
experience has been in line with management expectations. The allowances are as
follows at the following dates:
<TABLE>
<CAPTION>
October 31, December 31,
1997 1996
----------- ------------
<S> <C> <C>
Sales returns $402,000 $1,500,000
Doubtful accounts $ 20,000 $ 10,000
</TABLE>
The Company records sales upon shipment to customers, except for consignment
sales to customers which are recorded upon sales to third parties.
Inventories:
Inventories (consisting primarily of gold and gold jewelry) are stated at the
lower of cost or market. Cost is determined using the weighted average cost
method.
Property and equipment:
Property and equipment are stated at cost. Depreciation of equipment is
provided over the estimated useful lives of the respective assets using
accelerated methods. Leasehold improvements are amortized principally on a
straight-line basis over the shorter of the estimated useful lives or the
remaining terms (including renewal options) of the respective lease.
Estimated useful lives, by major classification, are as follows:
Office furniture and equipment 5 to 7 years
Computer equipment 5 years
Leasehold improvements 10 to 31.5 years
Vehicles 5 years
Impairment of long-lived assets:
In 1996 the Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." This statement requires that long-lived assets and certain
identifiable intangibles to be held and used or disposed of by entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable. An impairment loss
is recognized when the estimate of undiscounted future cash flows expected to be
generated by the asset is less than its carrying amount. An impairment loss is
measured as the amount by which the carrying amount of the asset exceeds its
fair value. Since adoption, no impairment losses have been recognized.
Forward commitments
The Company enters into forward contracts for the purchase of gold to hedge
outstanding customer orders for future delivery in order to mitigate the risk
of price fluctuations. The Company does not enter into forward contracts for
trading purposes. The effects of hedging transactions are recognized when
contracts are settled. The Company had no forward contracts outstanding at
December 31, 1996. The Company had $648,400 of spot deferred/forward exposure
contracts outstanding at October 31, 1997, which were terminated in November
1997. The carrying value of the spot deferred/forward exposure contracts
approximate their fair values because of the relatively short maturity of
these contracts.
F-6
<PAGE> 9
JERRY PRINCE, INC.
NOTES TO FINANCIAL STATEMENTS
Advertising:
The Company expenses advertising costs, principally the costs of cooperative
advertising programs, as incurred. Total advertising costs for the ten months
ended October 31, 1997 and for the year ended December 31, 1996, were $563,608
and $604,584, respectively.
Income taxes:
The Company elected to be treated as a Subchapter S Corporation for federal and
state income tax reporting purposes. As a result of this election, substantially
all income, losses and credits are allocated to the sole stockholder for
inclusion in his personal income tax returns. Accordingly, there is no provision
for federal income tax in the accompanying financial statements. The state of
California, however, imposes a 1.5% tax on S Corporation earnings.
NOTE 2 - CONCENTRATIONS OF CREDIT RISK AND SALES TO MAJOR CUSTOMERS:
The Company's financial instruments subject to credit risk consist primarily of
cash equivalents and accounts receivable. The Company places its cash
equivalents in high quality securities with a major bank. With respect to
accounts receivable, the Company extends credit based on an evaluation of a
customer's financial condition, generally without requiring collateral.
Exposure to losses on receivables is principally dependent on each customer's
financial condition. The Company monitors its exposure for credit losses and
maintains allowances for anticipated losses.
Sales to a national retail store chain constituted approximately 83% of net
sales for the ten months ended October 31, 1997 and 88% of net sales for the
year ended December 31, 1996. Accounts receivable at October 31, 1997, and at
December 31, 1996, substantially all of which are due from this customer, have
been reduced to reflect estimated sales returns of $402,000 and $1.5 million,
respectively.
NOTE 3 - INVENTORIES:
The Company's inventories consist of the following:
<TABLE>
<CAPTION>
October 31, 1997 December 31, 1996
---------------- ------------------
<S> <C> <C>
Raw materials $ - $ 470,588
Work in process 11,000 30,562
Finished goods 4,813,503 5,774,418
----------- -----------
4,824,503 6,275,568
Reserve for obsolescence (350,000) (101,833)
Allowance for vendor advances (50,000) (50,000)
----------- -----------
Total $ 4,424,503 $ 6,123,735
=========== ===========
Gold price per ounce $ 311.40 $ 369.15
=========== ===========
</TABLE>
The Company's inventories historically include a significant amount of gold
owned by the Company, typically in the form of finished goods and work in
process. At October 31, 1997, inventories include 8,153 fine troy ounces of gold
owned by the Company.
The Company has a consignment agreement with a gold consignor providing for a
maximum aggregate consignment of 9,000 fine troy ounces. Under the terms of the
agreement, the maximum value of consigned gold outstanding can not exceed the
value limit, as defined by the agreement. In accordance with the consignment
agreement, title remains with the gold consignor until purchased by the Company.
At October 31, 1997 and at December 31, 1996, the Company held 4,044 and 1,520
fine troy ounces of gold under the consignment agreement, respectively.
Consigned gold is not included in inventory and there is no related liability
recorded at year end.
The purchase price per ounce is based on the daily Second London Gold Fixing.
Costs included in inventory represent the cost of Company owned gold, costs
incurred to process consigned and Company owned gold into
F-7
<PAGE> 10
JERRY PRINCE, INC.
NOTES TO FINANCIAL STATEMENTS
finished jewelry products and an allocation of manufacturing overhead.
The Company pays to the gold consignor a consignment fee based on the dollar
equivalent of ounces outstanding, computed based on the Second London Gold
Fixing as defined in the agreement. As security for its obligations under the
consignment agreement, the Company has granted the consignor a security interest
in its accounts receivable and inventory. Additionally, the Company has issued a
standby letter of credit to the consignor, in an amount equal to 110% of the
value limit, as defined, of the consigned gold. (See Note 4). The agreement is
terminable on a 30 day notice by the Company or the consignor.
NOTE 4 - NOTE PAYABLE TO BANK:
The Company has a line of credit facility with a bank, which varies seasonally
from $5 million to $6.5 million. Borrowings under the credit line bear interest
at prime plus .75%. At October 31, 1997, advances outstanding under the line of
credit totaled $375,000 and bore interest at 9.25%. No advances under the line
of credit were outstanding as of December 31, 1996. Up to $3.0 million of the
line of credit may be used for the issuance of standby letters of credit,
provided that the aggregate face amount of the letters of credit outstanding
plus the aggregate of all direct advances outstanding at any one time may not
exceed the maximum amount available under the line of credit as seasonally
adjusted. Standby letters of credit outstanding at October 31, 1997 and December
31, 1996 totaled $1.5 million and $2.0 million, respectively. The line of credit
is secured by accounts receivable and inventories and is guaranteed by the
Company's sole shareholder. The line of credit agreement requires the Company to
comply with certain covenants with respect to its working capital and various
financial ratios, as defined, including tangible net worth and leverage.
Additional provisions of the agreement prohibit the Company from making
substantial changes in its executive management, limit the amount of debt the
Company may incur, prohibit the Company from engaging in mergers and
acquisitions, and limit the amount of gold provided to foreign manufacturers to
certain amounts. The line of credit agreement expires May 14, 1998. At October
31, 1997, the Company was in compliance with all of the requirements of its line
of credit agreement.
The interest rates on the note payable are tied to market rates. Accordingly,
the carrying value of the Company's debt agreement approximates its fair value.
NOTE 5 - RELATED PARTY TRANSACTIONS:
A commonly controlled company manufactures jewelry for the Company. Total
charges by the affiliate, other than for the costs of metal, were approximately
$256,279 for the ten months ended October 31, 1997 and $597,079 during the year
ended December 31, 1996. In 1996, the Company received a management fee of
$2,000 from this affiliate for performing receiving, accounting and
administrative functions.
During 1996, the Company leased its premises from the sole stockholder at a
monthly rental of $5,273 under a noncancelable agreement which expired March 31,
1997. From April 1997, this lease was continued on a month-to-month basis under
an oral agreement. Total rent expense for the ten months ended October 31, 1997
and for the year ended December 31, 1996 totaled $52,730 and $63,272,
respectively. In addition, the Company paid property taxes, insurance and
maintenance fees on the property totaling $8,459 and $10,711 during the ten
months ended October 31, 1997 and the year ended December 31, 1996,
respectively.
F-8
<PAGE> 11
JERRY PRINCE, INC.
NOTES TO FINANCIAL STATEMENTS
A note payable to the stockholder was repaid in 1996. The related interest
expense was $5,177 in 1996. In January 1997, the Company loaned the stockholder
$2.2 million. The stockholder repaid this loan in full in April 1997.
NOTE 6 - DEFERRED COMPENSATION:
The Company contributes to a performance program fund to recognize certain
employees for their services. All full-time employees are eligible for
participation upon completion of 120 months of service. Contributions to the
fund are at the discretion of management. The Company contributed $0 and
$100,000 to the program during the ten months ended October 31, 1997 and the
year ended December 31, 1996, respectively.
NOTE 7 - BUSINESS ACQUIRED
On October 29, 1997, the Company entered into an Asset Purchase-Sale Agreement
with OroAmerica, Inc., a jewelry manufacturer and distributor located in
Burbank, California, to sell substantially all of the Company's assets
(principally accounts receivable and inventories) and to transfer certain
liabilities to OroAmerica, Inc. The sales price approximated $4.9 million.
F-9
<PAGE> 12
PRO FORMA FINANCIAL INFORMATION
On October 29, 1997, OroAmerica, Inc. consummated an Asset Purchase-Sale
Agreement with Jerry Prince, Inc. ("JPI"), a jewelry manufacturer and
distributor located in San Diego, California, to purchase substantially all of
JPI's assets (principally accounts receivable and inventories) and to assume
certain liabilities incurred by JPI. The purchase price for these net assets
approximated $4.9 million and was funded from existing cash. The acquisition was
accounted for using the purchase method of accounting. The purchase price has
been preliminarily allocated to assets acquired and liabilities assumed based on
fair market value at the date of acquisition. The purchase price, as
preliminarily allocated, approximates the net book value of net assets acquired.
Accordingly, no material amount of goodwill arises from this transaction.
The following unaudited pro forma condensed statements of income give effect to
the acquisition of Jerry Prince, Inc. by OroAmerica, Inc. in a transaction to be
accounted for as a purchase. The unaudited pro forma statement of income is
based on the individual statements of income of Jerry Prince, Inc. and
OroAmerica, Inc. and combines the results of operations of Jerry Prince, Inc.
and OroAmerica, Inc. for the nine months ended October 31, 1997 and the year
ended January 31, 1997, as if the acquisition had occurred on February 3, 1996.
These unaudited pro forma condensed statements of income should be read in
conjunction with the historical financial statements and notes thereto of Jerry
Prince, Inc. included elsewhere in this Form 8-K/A, and with the January 31,
1997 audited consolidated financial statement of OroAmerica, Inc. contained in
its filing on Form 10-K. No pro forma balance sheet has been provided because
the purchase transaction was included in OroAmerica, Inc.'s filing on Form 10-Q
for the period ended October 31, 1997.
<TABLE>
<CAPTION>
Nine Months Ended October 31, 1997
(Unaudited)
-------------------------------------------------------------------
(In 000's except share and per share amounts.)
Adjustments) Pro forma
Jerry Prince, Inc. OroAmerica, Inc. (Note 1) Combined
------------------ ---------------- ------------ ---------
<S> <C>
Net sales $9,367 $106,608 $(568) (a) $115,407
Cost of sales, excluding depreciation 7,694 84,282 (568) (a) 91,408
General, selling and administrative expenses 1,947 15,250 (264) (b) 16,933
Interest expense, net 41 1,306 (41) 1,306
------------------ ---------------- ------------ ---------
(Loss) income before income taxes (315) 5,770 305 5,760
(Benefit) provision for income taxes (5) 2,597 -- (c) 2,592
------------------ ---------------- ------------ ---------
Net (loss) income $(310) $3,173 $305 $3,168
================== ================ ============ =========
Net income per share $0.51
=========
Weighted average shares outstanding 6,271,014
=========
</TABLE>
<TABLE>
<CAPTION>
Year Ended January 31, 1997
(Unaudited)
-------------------------------------------------------------------
(In 000's except share and per share amounts.)
Adjustments) Pro forma
Jerry Prince, Inc. OroAmerica, Inc. (Note 1) Combined
------------------ ---------------- ------------ ---------
<S> <C>
Net sales $23,764 $177,065 $(1,361) (a) $199,468
Cost of sales, excluding depreciation 18,460 144,398 (1,361) (a) 161,497
General, selling and administrative expenses 3,041 25,907 (614) (b) 28,334
Interest expense, net 204 2,885 -- 3,089
------------------ ---------------- ------------ ---------
Income before income taxes 2,059 3,875 614 6,548
Provision for income taxes 31 1,685 1,230 (c) 2,946
------------------ ---------------- ------------ ---------
Net income $2,028 $2,190 $(616) $3,602
================== ================ ============ =========
Net income per share $0.58
=========
Weighted average shares outstanding 6,256,075
=========
</TABLE>
Note 1 -- The above statements gives effect to the following pro forma
adjustments necessary to reflect the acquisition:
(a) Elimination of sales and cost of sales between Jerry Prince, Inc. and
OroAmerica, Inc.
(b) Reduction of certain selling, general and administrative expenses not to be
recurring as a result of the acquisition.
(c) Increase in income taxes due to the above adjustments and to the
calculation of Jerry Prince, Inc. income on a C Corporation basis.
P-1
<PAGE> 1
EXHIBIT 99.1
ASSET PURCHASE-SALE AGREEMENT
This ASSET PURCHASE-SALE AGREEMENT ("Agreement") is made and entered into
as of the 29th day of October, 1997, by and among OROAMERICA, INC., a Delaware
corporation, ("Buyer"), JERRY PRINCE, INC., a California corporation,
("Seller"), and JERREL D. PRINCE ("Shareholder"), with reference to the
following facts:
A. Buyer and Seller are each engaged in the design, manufacture,
distribution, and sale of gold and silver jewelry.
B. The parties agree that, with certain exceptions, Buyer shall
purchase from Seller and Seller shall sell to Buyer on the Closing Date (as
defined in Paragraph 13) substantially all of the operating assets of Seller and
that Buyer shall be obligated to pay certain of Seller's expenses, debts, and
liabilities, all as hereinafter set forth.
C. Shareholder is the legal and beneficial owner of all of the
outstanding capital stock of Seller and is entering into this Agreement as an
inducement to Buyer to consummate the transactions contemplated by this
Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises,
agreements, representations and warranties contained herein, Seller, Buyer, and
Shareholder hereby agree as follows:
1. Transfer of Assets.
1.1 Transfer of Specified Assets. Subject to the terms hereof and
for the consideration hereinafter provided, Seller shall sell, transfer, and
assign to Buyer at the Closing (as defined in Paragraph 13 hereof) good title,
free and clear of all liens, encumbrances, and security interests, to all of the
business, properties and assets of Seller, except only the "Excepted Assets"
specified in Paragraph 1.3 hereof. Unless otherwise stated in Paragraph 1.3, the
business and assets to be sold to Buyer hereunder (the "Transfer Assets") shall
include all assets owned by Seller at the Closing, including but not limited to:
(a) All cash in banks or on hand on the Closing Date;
(b) All accounts receivable, contract rights, and choses in
action, whether in contract or in tort, including the exclusive right to sue and
recover for past damages;
(c) All inventories (the "Inventories") including, but not
limited to, all gold, silver, obsolete inventory, memorandum sales and accounts,
raw materials, work in process, parts, components, subassemblies, finished
jewelry goods, and supplies of or related to any and all products manufactured
or sold by Seller or any Affiliate (as defined in Paragraph 19 hereof) that
Seller has on hand or on back order on the Closing Date;
1
<PAGE> 2
(d) All gold toll accounts;
(e) All of Seller's books of account, customer lists, vendor
lists, parts lists, and similar records;
(f) Seller's rights at Closing under all "Material
Contracts" (as defined in Paragraph 6.6 hereof), if any, to the extent assumed
by Buyer;
(g) The exclusive right, to the exclusion of Seller and
Shareholder and all Persons (as defined in Paragraph 19) claiming through them
or either of them, to use the name "Jerry Prince" and all similar names and
variations thereof, and all of Seller's right, title, and interests in and to
any and all trademarks, designs, patents, copyrights, know-how, and other
intellectual property, and franchises (collectively referred to as "Intangible
Assets" and identified and set forth in attached Exhibit 1.1) owned by Seller or
to which Seller has the right to license which are or have been used in
connection with Seller's jewelry business;
(h) All goodwill associated with Seller's business; and
(i) All other assets, whether tangible or intangible,
definite or contingent, and of every kind and description and wherever situated,
owned by Seller or which Seller has the right to use, which are used on or in
connection with Seller's jewelry business.
1.2 Noncompetition Agreement. At the Closing, Seller and
Shareholder will and will cause Seller's subsidiaries, if any, to join with
Buyer in executing and delivering a Noncompetition Agreement (the
"Noncompetition Agreement") in form and substance as set forth in Exhibit 1.2 or
Exhibit 1.2A attached to this Agreement.
1.3 Excepted Assets. The following assets and property (the
"Excepted Assets") shall be excepted from the Transfer Assets:
(a) The corporate franchise of Seller;
(b) The minute book and stock records of Seller;
(c) Seller's rights under this Agreement, including the
consideration to be received hereunder;
(d) All vehicles that Seller owns, leases or is renting as
of the Closing Date; (e) The Leased Assets pursuant to Paragraph 1.4 hereof;
(f) Seller's investments in existence on the date hereof,
including restricted cash equivalent and trading securities and all proceeds
thereof, but no additions to Seller's investment account after the date hereof;
and
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(g) Seller's Performance Bonus Fund (see Exhibit 1.3) and
Executive Incentive Reserve (see Exhibit 1.3A).
1.4 Lease of Assets. Seller agrees to lease to Buyer the assets
listed on the schedule attached hereto and marked as Exhibit 1.4 ("Leased
Assets") for as long as Buyer wants to use the Leased Assets. Buyer shall pay to
Seller an annual payment of $1.00 to lease the Leased Assets. The first annual
payment of $1.00 shall be made on the Closing Date and all subsequent payments,
if any, shall be made on October 15 of each subsequent year. Seller shall be
responsible for the payment of any taxes associated with Buyer's use of the
Leased Assets. Buyer shall be allowed to terminate its lease of the Leased
Assets at anytime, without advanced written notice, and without the consent of
Seller. Buyer shall also be allowed to relocate and move to Burbank, California
the Leased Assets, at Buyer's own expense, to any location without Seller's
consent or approval. In addition, Buyer shall be given the option to purchase
the Lease Assets, in whole or individually, upon termination of the lease for
consideration of $1.00.
2. Purchase Price and Payment.
2.1 The purchase price for the Transfer Assets and the
Noncompetition Agreement (the "Purchase Price"), which shall be paid to Seller
on the Closing Date by cashier's check or wire transfer, is Five Million Five
Hundred Thousand Dollars (U.S. $5,500,000), subject to each of the following
adjustments, if applicable:
(a) Buyer shall be entitled to deduct from the Purchase
Price any outstanding balance due on any of Seller's sample accounts as of
September 27, 1997, except JCPenney sample accounts, that have not been
confirmed in writing by Seller's customer(s) or returned to Seller by the
Closing Date. Such outstanding balance to be deducted from the purchase price is
Seven Thousand Five Hundred and Eighty-Five Dollars and Forty Cents ($7,585.40).
Sample accounts that have been confirmed in writing shall not be included in any
reduction of the Purchase Price.
(b) Buyer shall be entitled to deduct from the Purchase
Price the balance due on any of Seller's internal accounts that have not been
collected by or paid to Seller, or both, by the Closing Date. Such balance to be
deducted from the Purchase Price by Buyer under this Paragraph will be One
Thousand Three Hundred and Seventy-Four Dollars and Nine Cents ($1,374.09).
(c) Buyer shall be entitled to withhold from the Purchase
Price any outstanding balance due on any of Seller's national accounts
receivable as of September 27, 1997, and/or JCPenney sample accounts as of
October 25, 1997, and JCPenney accounts receivable as of October 13, 1997, (i)
that have not been confirmed in writing by Seller's customer(s) or (ii) for
which a discrepancy in what Seller's customer(s) has or have confirmed and what
Seller claims is owed to it by the customer(s). Such sample accounts and/or
account receivables that have been confirmed in writing by Seller's customer(s)
shall not be included in any withholding of any portion of the Purchase Price.
As of the Closing Date and in accordance with this Paragraph, Buyer shall be
entitled to withhold from the Purchase Price Six Hundred and One Thousand Four
Hundred and Forty-Nine Dollars and Eighty-Nine Cents ($601,449.89). Buyer will
attempt to reconcile such Seller's sample accounts and/or accounts receivables
as specified in this Paragraph
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at (i) and (ii) above, if necessary, on a weekly basis during the first month
after the Closing Date. Thereafter, Buyer will attempt to reconcile such sample
accounts and accounts receivables, if necessary, at least once a month for the
following two months, up until May 31, 1998. Buyer will pay to Seller all
accounts receivable amounts and sample accounts confirmed in writing by Seller's
customer(s), returned to Buyer by the customer(s) or paid to Buyer by the
customer(s) prior to May 31, 1998. After May 31, 1998, Buyer shall not be
required to (i) reconcile such Seller's sample accounts and/or accounts
receivable and (ii) transfer or remit to Seller any monies due from such sample
accounts and/or accounts receivable.
Seller and Buyer must agree to the price allocation for the Transfer
Assets and complete and execute an "Asset Acquisition Statement Under Section
1060" (IRS Form 8594), which is attached hereto and marked as Exhibit 2.1, by
the Closing Date.
2.2 As part of the Purchase Price, Buyer will pay to Seller an
additional cash amount of $500,000 only if Buyer's Net Sales (made under the
names OroAmerica, Inc. and Jerry Prince, Inc.) to JCPenney for Buyer's fiscal
year ending on or about January 29, 1999 ("Fiscal 99"), equal, but do not
exceed, Fourteen Million Five Hundred Thousand Dollars ($14,500,000). "Net
Sales" is hereby defined to mean gross sales minus all discounts, returns, and
allowances.
In addition, if Buyer's Net Sales to JCPenney for Fiscal 99 exceed
Fourteen Million Five Hundred Thousand Dollars ($14,500,000), Buyer shall pay to
Seller, an increase in the Purchase Price equal, in cash, to five percent (5%)
of the amount by which such Net Sales exceed $14,500,000.
Said amounts, if any, shall be paid within thirty (30) days following the
issuance of Buyer's audited financial statements for Fiscal 99.
3. Royalties.
Buyer shall pay to Shareholder a royalty of One Hundred and Fifty Thousand
Dollars ($150,000) for the sole and exclusive right to forever use the name
"Jerry Prince," or any variation thereof, on or in connection with its jewelry
business, including without limitation, on or in connection with any of its
jewelry products and any related services. Buyer shall be required to remit to
Seller such royalty payments in fifteen monthly installments of Ten Thousand
Dollars ($10,000) each, beginning with the first monthly payment on November 31,
1997 and ending with the last monthly payment on January 31, 1999.
4. No Assumption of Expenses, Debts or Liabilities.
4.1 General. Buyer will process and pay the expenses, debts, and
liabilities of Seller. A reasonable estimation of these expenses, debts, and
liabilities of Seller is set forth in Exhibit 4.1 attached to this Agreement.
Seller will provide Buyer with a true, correct, and an entirely accurate list of
Seller's expenses, debts, and liabilities as soon as possible after the Closing
Date. Notwithstanding the payment of those expenses, debts and liabilities,
Buyer will not assume or pay for any of the other past, present or future
obligations, debts, or liabilities Seller. Buyer also will not be assuming any
liabilities or claims, if any, whether known or unknown by the Seller by the
Closing Date, associated or relating to the Intangible Assets.
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4.2 Seller's Obligations to Employees. Except for the obligations
identified below in Paragraph 4.3 hereof, on or before the Closing Date, Seller
will satisfy and/or be solely responsible for all of the obligations owed to its
employees, including but not limited to bonus pay, severance pay, and retirement
benefits arising prior to the Closing Date. In addition, Seller and/or
Shareholder will satisfy and/or be solely responsible for all of the obligations
owed to its employees and executives under Seller's Employment Bonus Fund
(Exhibit 1.3) and Executive Incentive Reserve (Exhibit 1.3A), Nevertheless, such
amounts owed under Seller's Employment Bonus Fund and Executive Incentive
Reserve may be distributed by Seller or Shareholder, or both, after the Closing
Date.
4.3 Buyer's Obligation to Seller's Employees. On or after the
Closing Date, Buyer shall be solely responsible for the following obligations
owed by Seller to its employees arising prior to the Closing Date: salary,
vacation, and sick pay, only.
4.4 Indemnification by Seller and Shareholder. Seller and
Shareholder, jointly and severally, agree to defend, indemnify, and hold
harmless Buyer from and against any and all damages, losses, liabilities,
claims, costs, and expenses (including reasonable attorneys' fees) resulting
from any of the obligations and liabilities of Seller, including, but not
limited to, Seller's obligation to its employees as set forth in Paragraph 4.2
herein.
5. Employees and Salaries.
5.1 Certain Executives. Buyer agrees to employ the following
individuals for a term commencing on the Closing Date and ending January 29,
1999 (the "Employment Term"): Matthew Prince; Michael Prince; and Robert Lebby
(collectively, the "Management Personnel"). The compensation to be paid to the
Management Personnel is summarized in Exhibit 5.1 attached hereto. Adriana
Paredes, another executive of Seller, will be employed for the term, for the
compensation, and under the conditions of employment set forth in her July 16,
1996, employment contract with Seller, a copy of which is attached hereto as
Exhibit 5.1A.
5.2 Other Employees. Attached hereto as Exhibit 5.2 is a list of
all employees of Seller other than the Management Personnel and Adriana Paredes
as of the date of this Agreement. Buyer shall be given the opportunity to offer
employment to any such employees in Buyer's sole discretion, but Buyer shall be
under no obligation to offer employment to any employee of Seller.
6. Representations, Warranties, and Covenants of Seller and
Shareholder.
Except as otherwise specifically disclosed by Seller to Buyer in a
written memorandum making reference to this Agreement, Seller and Shareholder
hereby jointly and severally represent, warrant, and covenant the following (the
truth, accuracy, and performance of each of which shall constitute a condition
precedent to Buyer's obligations hereunder):
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6.1 Organization and Good Standing. Seller is a corporation duly
organized and in good standing under the laws of the State of California. It has
full corporate power and authority to sell and transfer the Transfer Assets to
Buyer. Shareholder owns all of the outstanding capital stock of Seller.
6.2 Authority. The execution of this Agreement, its delivery to
Buyer, and its performance have been authorized by the Board of Directors of
Seller and by Shareholder as the sole shareholder of Seller. No further vote or
approval by Shareholder and no further corporate action is necessary to make
this Agreement valid and binding upon Seller and Shareholder in accordance with
its terms, subject to the Bankruptcy Exception (as defined in Paragraph 19). The
execution, delivery, and performance of this Agreement by Seller and Shareholder
are not contrary to the Articles of Incorporation or By-Laws of Seller and will
not result in a violation or breach of any term or provision, or constitute a
default, or give any party a right to accelerate the due date of any
indebtedness under any indenture, mortgage, deed of trust or other contract or
agreement to which Seller is a party or by which Seller is or may be bound, or
which affects the Transfer Assets.
6.3 Financial Statements. Attached hereto as Exhibit 6.3 are
copies of unaudited balance sheets of Seller as of December 31, 1994, December
31, 1995, and December 31, 1996, and the related unaudited statements of income,
stockholders' equity, and cash flows for Seller's years ended December 31, 1994,
December 31, 1995, December 31, 1996, and the unaudited balance sheet of Seller
as of July 31, 1997, and the related statements of income, stockholders' equity
and cash flows for the seven-month period ended on said date, in each case
certified by the principal financial officer of Seller (collectively the "Seller
Financial Statements"). The Seller Financial Statements and all other financial
information and schedules previously delivered by Seller to Buyer are in
accordance with the books and records of Seller and set forth fairly the
financial condition and results of operations of Seller as at and for the
periods therein specified, all prepared in accordance with generally accepted
accounting principles applied on a basis consistent with the financial
statements of prior years.
6.4 Receivables and Inventories.
(a) The accounts receivable of Seller shown in the July 31,
1997 balance sheet included in the Seller's Financial Statements or acquired
since July 31, 1997, represent bona fide amounts due from account debtors of
Seller for merchandise sold or services rendered to the account debtor in the
usual and ordinary course of business and are fully collectible (subject to the
bad debt reserve on such balance sheet) within nine (9) months after the Closing
Date without recourse to legal proceedings.
(b) The inventories of Seller shown on the July 31, 1997
balance sheet included in the Seller Financial Statements or acquired since July
31, 1997, consist or (until sold in the ordinary course of business) consisted
of items actually on hand or in transit of a quality and quantity usable and
salable in the normal course of business. The fine gold content of the gold
included in such inventories complies, and on the Closing Date will comply, with
the following standards: all 10K gold inventory shall consist at least 41.6667%
fine gold; all 14K gold inventory shall consist at least 58.3333% fine gold; and
all 18K gold inventory shall consist at least 75% fine gold.
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6.5 Title to and Condition of Properties. Seller has, and on the
Closing Date will have, good title to the Transfer Assets, except as since sold
or otherwise disposed of in the ordinary course of business. At the Closing such
title will be free and clear of all liens, charges, security interests,
encumbrances, leases, covenants, conditions and restrictions. None of the
Transfer Assets constitute fixtures to any real property, and no lessor of any
real property to Seller has any interest in or claim to any equipment or other
personal property assets included in the Transfer Assets, whether to secure the
payment of unpaid rental or otherwise.
6.6 Liabilities. Exhibit 4.1 attached to this Agreement is a list,
signed and verified on behalf of Seller by Seller's Chief Executive Officer and
Chief Financial Officer and dated no earlier than two (2) days before the
Closing Date, of all claimants, together with the amounts claimed by them to be
owed to them by Seller, of whom or of which Seller has knowledge or is on notice
as of the date of said exhibit. Except as set forth on Exhibit 4.1, Seller is
not indebted to any Person or for any amount. Only claims listed on Exhibit 4.1
will be assumed by Buyer in accordance with Paragraph 4.1, notwithstanding the
content of any notice given by Buyer after the Closing Date in order to comply
with California law related to Bulk Sales. Notwithstanding the foregoing,
Seller, and not Buyer, shall be solely responsible for the payment of any
amounts owed by Seller to the Department of Treasury, United States Customs
Service for any claims, demands, and/or liabilities asserted against Seller
relating to activities or omissions by Seller arising prior to the Closing Date.
6.7 Contracts. Seller has furnished and/or will make immediately
available to Buyer copies of all contracts, leases, and other agreements, oral
or written, to which Seller is a party, including but not limited to purchase
orders, sales orders, and other contracts with customers, suppliers,
distributors, sales agents, and representatives (all such contracts, leases and
other agreements are hereinafter collectively referred to as "Material
Contracts"). Exhibit 6.7 attached to this Agreement is a list of such Material
Contracts. All Material Contracts are valid and binding obligations of the
parties thereto in accordance with their respective terms, subject to the
Bankruptcy Exception (as defined in Paragraph 19 hereof); there have been no
amendments to or modifications to any Material Contract (except as set forth in
the copies furnished to Buyer); no event has occurred which is, or, following
any grace period or required notice, would become a material default under the
terms of any Material Contract; Seller has no reason to believe that any party
to any Material Contract intends to terminate or curtail its course of business
with Seller; and Seller has not waived any material rights under any such
Material Contract.
6.8 No Litigation. There is no suit or action (equitable, legal or
administrative), arbitration or other proceeding pending or threatened against
Seller or any of its affiliates, if any, which materially relates to the
Transfer Assets or which would materially adversely affect Buyer's conduct of
the acquired business after the Closing Date. There is no suit or action
(equitable, legal or administrative), arbitration or other proceeding pending or
threatened by Seller or any Affiliate which relates to or affects the Transfer
Assets or Buyer's conduct of said business after the Closing Date.
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6.9 Taxes.
(a) Seller has filed all income, franchise and other tax
returns required to be filed by it by the date hereof. All taxes imposed by the
United States, the State of California, and by any other state, municipality,
subdivision, or other taxing authority, which are due and payable by Seller have
been paid in full or are adequately provided for by reserves shown on the latest
balance sheet furnished by Seller to Buyer and will be so paid or provided for
by Seller up to the Closing Date. Seller shall be solely responsible for paying
all income, franchise, sales, use, and all other taxes relating to Seller's
business operations and conduct prior to the Closing Date.
(b) All contributions due from Seller pursuant to any
unemployment insurance or workers compensation laws and all sales or use taxes
which are due or payable by Seller have been paid in full and will be so paid
through the Closing Date. Seller has withheld and paid to, or will cause to be
paid to, the appropriate taxing authorities all amounts required to be withheld
from the wages of its employees under state law and the applicable provisions of
the Internal Revenue Code, and Seller will continue to do so with respect to all
wages paid by it through the Closing Date.
6.10 Permits and Licenses. No permits or licenses are being
transferred hereunder.
6.11 Compliance with Laws. Seller is in compliance with all
applicable laws, statutes, ordinances, regulations, decrees and other legal
requirements, except where the failure to comply would not have a material
adverse effect on its business or any of the Transfer Assets.
6.12 No Labor Problems. There are no material controversies pending
or threatened between Seller and any of its employees, and Seller has
substantially complied with all laws relating to the employment of labor,
including provisions relating to wages, hours, benefits, collective bargaining,
and the payment of social security and similar taxes, and is not liable for any
arrears in wages or any taxes or penalties for failure to comply with any of the
foregoing.
6.13 Interest in Competitors, Suppliers, Etc. Neither Shareholder
nor any officer or director of Seller and no Family Member (as defined in
Paragraph 19) of any such Person, owns, directly or indirectly, individually or
collectively, any interest in any corporation, partnership, proprietorship, firm
or association which (a) is a competitor, potential competitor, customer or
supplier of Seller, or (b) has an existing contractual relationship with Seller,
including but not limited to lessors of real or personal property leased to
Seller and entities against whom rights or options are exercisable by Seller.
6.14 Consents. No authorizations, approvals or consents of any
governmental department, commission, bureau, agency or other public body or
authority are required for consummation of the transactions contemplated by this
Agreement.
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6.15 Employees, Suppliers, and Customers. Seller has no known
unsatisfactory relationships with its employees, customers, suppliers, and
contractors, and Seller and Shareholder have no reason to expect any adverse
change in such relationships.
6.16 Employee Benefit Plans. Seller does not maintain or contribute
to any "employee pension benefit plan", as such term is defined in Section 3 of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
deferred compensation, or other similar employee benefit plan. Except as set
forth in attached Exhibit 1.3 Seller does not maintain any "employee welfare
benefit plan," as such term is defined in Section 3 of ERISA, whether insured or
otherwise, and each such "employee welfare benefit plan" listed on said schedule
is in compliance with the provisions of ERISA.
6.17 Patents, Trademarks, and Other Intangible Assets. Exhibit 1.1
attached hereto contains a list the Intangible Assets and all interests therein
which are owned in whole or in part by or registered in the name of Seller.
Seller owns or has the right to use all Intangible Assets now used in the
conduct of its business, and such Intangible Assets are adequate therefor.
Seller is not obligated to pay any royalties or other fee to any licensor or
other third party with respect to any Intangible Assets. Seller has not received
or expects to receive, nor is Seller aware of, any claim or potential claim or
liability alleging any conflict between any aspect of Seller's business and any
Intangible Assets claimed to be owned by others. Neither Shareholder or any
employee or officer of Seller, and no Affiliate of any of such Persons, has any
interest in any Intangible Assets that are presently used by Seller or which
infringe upon, conflict with or relate to improvements or modifications of any
Intangible Assets presently used by Seller. Seller, at its own expense, but not
to exceed One Thousand Dollars ($1,000.00), shall be required to properly and
completely assign to Buyer and file with the necessary and/or appropriate
federal or state governmental agency all such assignments and notices thereof
for the sole and exclusive benefit of Buyer.
6.18 Absence of Certain Actions. Since July 31, 1997: (a) there
have been no changes in the results of operations, assets, liabilities,
financial condition or affairs of Seller which have in their total effect been
materially adverse to Seller; and (b) Seller has not breached any of the
covenants set forth in Paragraph 7.1, assuming for this purpose that such
covenants relate to the period from July 31, 1997, to the date of this
Agreement.
6.19 No Material Misstatements or Omissions. No representation or
warranty by Seller and Shareholder in this Agreement, and no document,
statement, certificate, exhibit or schedule furnished or to be furnished to
Buyer pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements or
facts contained therein not misleading.
7. Additional Obligations and Covenants of Seller and Shareholder.
Seller and Shareholder hereby jointly and severally covenant, warrant,
represent, and agree as follows (the fulfillment of each such covenant and
agreement is a condition precedent to Buyer's obligations hereunder):
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7.1 Conduct of Business. Between the date hereof and the Closing
Date:
(a) The business of Seller shall be conducted diligently and
only in the ordinary course, and Seller and Shareholder will use their best
efforts to preserve the organization of Seller intact, to keep available to
Seller its present key employees and to maintain Seller's relationships with its
suppliers, customers and others.
(b) Seller and Shareholder will not, without Buyer's prior
written approval, enter into any material transaction other than in the ordinary
course of business or accept orders from customers under conditions relating to
price, terms of payment, time of delivery or like matters which are materially
different from the conditions regularly and usually specified on acceptance of
orders for similar merchandise from customers similarly situated.
(c) Seller and Shareholder will not, without Buyer's prior
approval, enter into or cancel any Material Contracts.
(d) Seller and Shareholder will use due diligence to
maintain its inventories at normal levels, to collect its accounts receivable in
due course and to pay its liabilities and obligations as they become due in due
course.
(e) Seller and Shareholder will use due diligence to
maintain the Leased Assets in their condition as of the date of this Agreement,
ordinary wear and tear excepted.
(f) Seller and Shareholder will not declare, set aside or
pay any dividend or make any other distribution in respect of capital stock, or
make any direct or indirect redemption, purchase or other acquisition of its
capital stock.
(g) Seller and Shareholder will not transfer any funds to
its investment account.
7.2 Access and Information. Seller will afford to Buyer and
Buyer's counsel, accountants and other representatives reasonable access,
throughout the period from the date hereof to the Closing Date, to all of its
properties, books, contracts, commitments, and records and shall furnish Buyer
during such period with all information that Buyer reasonably may request,
including copies and/or extracts of pertinent records, documents and contracts.
7.3 Change of Seller's Name. Within thirty (30) days after the
Closing Date, Seller and Shareholder will take all corporate action (other than
filing with the California Secretary of State) that is necessary in order to
change Seller's name to a name approved by Buyer that does not include "Jerry
Prince" or any variation thereof and file with the California Secretary of State
a Certificate of Amendment of its Articles Incorporation appropriate to effect
such change of name.
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7.4 Bulk Sale Compliance. Seller will provide to Buyer all
information that is required for compliance with the California Bulk Sale Law
and will cooperate with Buyer in taking all actions required by said law. Seller
shall also be solely responsible for all taxes associated with the bulk sale of
the Transfer Assets.
7.5 Best Efforts to Satisfy Conditions. Seller and Shareholder
agree to use their best efforts to satisfy or cause to be satisfied all of the
conditions precedent to Buyer's obligations under this Agreement, to the extent
that their action or inaction can control or influence the satisfaction of such
conditions.
8. Representations and Warranties of Buyer.
Except as otherwise specifically disclosed by Buyer to Seller and
Shareholder in writing, Buyer hereby represents and warrants the following (the
truth and accuracy of each of which shall constitute a condition precedent to
Seller's and Shareholder's obligations hereunder):
8.1 Organization and Good Standing. Buyer is a corporation duly
organized and authorized to exercise its corporate powers, rights, and
privileges under the laws of the State of Delaware. It has full corporate power
to carry on the business and to own and operate the assets being purchased
hereunder.
8.2 Authority of Buyer. The execution of this Agreement, its
delivery to Seller and Shareholder, and its performance have been authorized by
the Board of Directors of Buyer, and no vote or approval by Buyer's stockholders
and no further corporate action is necessary to make this Agreement valid and
binding upon Buyer in accordance with its terms, subject to the Bankruptcy
Exception. The execution, delivery, and performance of this Agreement by Buyer
will not result in a violation or breach of any term or provision or constitute
a default or give any party a right to accelerate the due date of any
indebtedness under any indenture, mortgage, deed of trust or other contract or
agreement to which Buyer is a party.
9. Additional Obligations and Covenants of Buyer.
Buyer hereby covenants and agrees as follows (the fulfillment of
each such covenant and agreement is a condition precedent to Seller's and
Shareholder's obligations hereunder):
9.1 Best Efforts. Buyer agrees to use its best efforts to satisfy or
cause to be satisfied all of the conditions precedent to Seller's and
Shareholder's obligations under this Agreement, to the extent that Buyer's
action or inaction can control or influence the satisfaction of such conditions.
9.2 Confidentiality. Buyer and its representatives will keep
confidential and will not disclose any information disclosed to it by Seller
hereunder (other than information which is readily ascertainable from public or
trade sources or is independently developed or is obtained from third parties
without such persons' breaching any duty owed to Seller) to third parties while
this Agreement is executory and thereafter if the transaction
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fails to close for any reason (in which event Buyer will return to Seller all
such information).
10. Conditions Precedent to Obligations of Buyer.
The obligations of Buyer under this Agreement are subject to the
satisfaction of each of the additional following conditions at or prior to the
Closing, unless waived in writing by Buyer:
10.1 Accuracy of Warranties and Representations. The
representations and warranties of Seller and Shareholder herein shall be true
and correct on and as of the Closing Date, with the same force and effect,
except as to transactions permitted herein or to which Buyer may have consented
in writing and changes occurring in the ordinary course of business after the
date of this Agreement and not materially adversely affecting Seller, or its
properties, prospects, or financial condition, as though such representations
and warranties had been made on and as of the Closing Date, and Seller and
Shareholder shall have performed all covenants required by this Agreement to be
performed by them at or prior to the Closing.
10.2 No Adverse Change. There shall have been no changes after the
date of this Agreement in the results of operations, assets, liabilities,
financial condition or affairs of Seller which have in their total effect been
materially adverse to Seller.
10.3 Certain Approvals. The financial institutions that consign
precious metal and provide working capital to Buyer ("Lenders") shall have
approved the execution, delivery and performance of this Agreement.
10.4 Seller's and Shareholder's Certificate. Seller and Shareholder
shall have furnished to Buyer a certificate dated the Closing Date and signed by
Shareholder individually and as President of Seller, stating that to the best of
his knowledge, after reasonable inquiry, the conditions set forth in Paragraphs
10.1 and 10.2 above have been satisfied.
11. Conditions Precedent to Obligations of Seller and Shareholder.
The obligations of Seller and Shareholder under this Agreement are
subject to the satisfaction of each of the following additional conditions at or
before the Closing, unless waived in writing by Seller and Shareholder:
11.1 Accuracy of Warranties and Representations. The
representations and warranties of Buyer contained in this Agreement shall be
true and correct on and as of the Closing Date, with the same force and effect
as though such representations and warranties had been made on and as of the
Closing Date, and Buyer shall have performed all of the covenants required by
this Agreement to be performed by it on or before the Closing.
11.2 Officers' Certificate of Buyer. Buyer shall have delivered to
Seller and Shareholder a certificate dated the Closing, signed by the President
or and the Chief Financial Officer of Buyer and stating that, to the best of his
knowledge, after reasonable inquiry, the conditions set forth in Paragraph 11.1
have been satisfied.
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12. Survival of Representations.
All representations and warranties made by Seller, Shareholder and Buyer
under or in connection with this Agreement (including any representations and
warranties set forth in the certificates delivered pursuant to Paragraphs 10.4
and 11.2) shall survive the closing.
13. Closing.
The closing ("Closing") of the transactions covered by this Agreement
shall take place on October 29, 1997, at the offices of Seller, located at 3450
Bonita Road, Chula Vista, California. In the event that the conditions specified
in this Agreement have not been fulfilled by that date, either party may
postpone the Closing for the minimum reasonably necessary period or periods, in
any event not exceeding an aggregate of 45 days, by written notice to the other
party. The term "Closing Date" herein shall mean the last date fixed by mutual
agreement or otherwise under this paragraph.
14. Post-Closing Covenants.
14.1 Cooperation and Assistance. Upon request, each of the parties
hereto shall cooperate with the others to the extent reasonably requested, at
the requesting party's expense, in furnishing information, testimony and other
assistance in connection with any actions, proceedings, arrangements or disputes
involving the Transfer Assets or the business of Seller which are based upon
contracts, arrangements or acts of Seller which were in effect or occurred on or
prior to the Closing.
14.2 Access to Records. Seller and Shareholder shall be entitled,
after the Closing, upon reasonable notice and during the regular business hours
of Buyer, to have access to and to make copies of the business records of Seller
acquired by Buyer hereunder which relate to periods prior to the Closing. Buyer
shall retain such business records for a period of five (5) years following the
closing, after which time Buyer may destroy or otherwise dispose of such
business records without Shareholder's consent. Shareholder shall also be
entitled to have access to Buyer's business records and account relating solely
to JCPenney for the purpose of conducting its own accounting of Buyer's Net
Sales to JCPenney for Buyer's fiscal years ending 1998 and 1999.
15. Indemnifications.
15.1 General Indemnification. Buyer, as one party, and Seller and
Shareholder, as the other party, each hereby agree to indemnify, defend, protect
and hold harmless the other party against all damages, losses, liabilities,
costs and expenses (including reasonable attorneys' fees) resulting from any
breach of any warranty, representation or agreement made by such party contained
herein or made under or in connection with this Agreement.
15.2 Environmental Indemnification. Without limiting the generality
of their obligations under Paragraph 4.3, Seller and Shareholder each hereby
agree to indemnify, defend, protect and hold harmless Buyer against all
Environmental Costs and
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Liabilities (as defined in this Paragraph). As used in this Paragraph 15.2, each
of the following terms shall have the meaning set forth below:
(a) "Environmental Costs and Liabilities" means any and all
losses, liabilities, obligations, damages, fines, penalties, judgments, actions,
claims, costs and expenses (including, without limitation, fees, disbursements
and expenses of legal counsel, experts, engineers and consultants and the costs
of investigation and feasibility studies and Remedial Action) arising from or
under any (i) Environmental Law, Environmental Claim or order, injunction,
judgment, decree, ruling, assessment or arbitration award ("Order") or )ii)
contract in existence as of the Closing Date with any governmental entity or
other Person;
(b) "Environmental Claim" means any accusation, allegation,
notice of violation, action, claim, lien, demand, abatement or other Order or
direction (conditional or otherwise) by any governmental entity or any other
Person for personal injury (including sickness, disease or death), tangible or
intangible property damage, damage to the environment (including natural
resources), nuisance, pollution, contamination, trespass or other adverse
effects on the environment, or for fines, penalties or restrictions resulting
from or based upon (i) the existence, or the continuation of the existence, or a
Release (including, without limitation, the air, soil, surface water or
groundwater) in quantities or at levels that would require remediation by Seller
under the Environmental Laws at, in, by, from or related to any property owned,
operated or leased by Seller or any activities or operations thereof; (ii) the
transportation, storage, treatment or disposal of Hazardous Materials on or
prior to the Closing Date in connection with any property currently or formerly
owned, operated or leased by Seller or its operations or facilities; or (iii)
the violation, or alleged violation, of any Environmental Law, Order or
Environmental Permit of or from any governmental entity relating to
environmental matters in existence on the Closing Date with respect to any
property owned, leased or operated by Seller;
(c) "Environmental Law" means any federal, state, local, or
foreign law (including common law), statute, code, ordinance, rule regulation or
other requirement relating to the environment, natural resources, or public or
employee health and safety and includes, but is not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. Sections 9601, et seq., the Hazardous Materials Transportation Act, 49
U.S.C. Sections 1801, et seq., the Resource Conservation and Recovery Act
("RCA"), 42 U.S.C. Sections 6901, et seq., the Clean Water Act, 33 U.S.C.
Sections 1251, et seq., the Clean Air Act, 33 U.S.C. Sections 2601, et seq., the
Toxic Substances Control Act, 15 U.S.C. Sections 2601, et seq., the Toxic
Substances Control Act, 15 U.S.C. Sections 2601, et seq., the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section 136 et seq., the
Oil Pollution Act of 1990, 33 U.S.C. Sections 2701, et seq., Federal Safe
Drinking Water Act 42 U.S.C. Sections 300, et seq., and the Occupational Safety
and Health Act, 29 U.S.C. Sections 651, et. seq., as such laws have been amended
or supplemented, and the regulations promulgated pursuant thereto, and all
analogous state or local statutes as in effect on the Closing Date;
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(d) "Environmental Permit" means any permit, approval,
authorization, license, variance, registration, or permission required under any
applicable Environmental Law or Order;
(e) "Hazardous Material" means any substance, material or
waste which is regulated by any governmental entity or any national government,
including, without limitation, any material, substance or waste which is defined
as a "hazardous waste", hazardous material", Hazardous substance", extremely
hazardous substance", "restricted hazardous waste", "contaminant", "toxic waste"
or "toxic substance" under any provision of Environmental Law, which includes,
but is not limited to, petroleum, petroleum products (including crude oil and
any fraction thereof), asbestos, asbestos-containing materials, urea
formaldehyde and polychlorinated biphenyls;
(f) "Release" means any release, spill, emission, leaking,
pumping, pouring, dumping, emptying, injection, deposit, discharge, dispersal,
leaching, or migration on or into the indoor or outdoor environment or into or
out of any property; and
(g) "Remedial Action" means all actions, including, without
limitation, any capital expenditures, required or voluntarily undertaken to (i)
clean up, remove, treat, or in any other way address any Hazardous Material or
other substance; (ii) prevent the Release or threat of Release, or minimize the
further Release or threat of Release, or minimize the further Release of any
Hazardous Material or other substance so it does not migrate or endanger or
threaten to endanger public health or welfare or the indoor or outdoor
environment, (iii) perform pre-remedial studies and investigations or
post-remedial monitoring and care; or (iv) bring facilities on any property
owned, operated or leased by Seller and the facilities located and operations
conducted thereon into compliance with all Environmental Law and Environmental
permits.
15.3 Indemnification Procedures and Limitations. The following
provision shall apply to all indemnification and hold harmless provisions of
this Agreement:
(a) No party shall be required to indemnify another pursuant
hereto unless the party seeking indemnification (the "Indemnitee") shall, with
reasonable promptness, provide the other party (the "Indemnitor") with copies of
any claims or other documents received and shall otherwise make available to the
Indemnitor all material relevant information. The Indemnitor shall have the
right to defend any such claim at its expense, with counsel of its choosing, and
the Indemnitee shall have the right, at its expense, using counsel of its
choosing, to join in the defense of any such claim. The Indemnitee's failure to
give prompt notice or to provide copies of documents or to furnish relevant data
shall not constitute a defense in whole or in part to any claim by the
Indemnitee against the Indemnitor except to the extent that such failure by the
Indemnitee shall result in a material prejudice to the Indemnitor.
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(b) Except as hereinafter provided, neither party shall
settle or compromise any such claim unless it shall first obtain the written
consent of the other, which shall not be unreasonably withheld. The foregoing
notwithstanding, if suit shall have been instituted against the Indemnitee and
the Indemnitor shall have failed, after the lapse of a reasonable time after
written notice to it of such suit, to take action to defend the same, the
Indemnitee shall have the sole right to defend the claim and to charge the
Indemnitor with the reasonable cost of any such defense, including reasonable
attorneys' fees, and the Indemnitee shall have the right, after notifying but
without consulting the Indemnitor, to settle or compromise such claim on any
terms reasonably approved by the Indemnitee.
16. Destruction of Assets.
Possession of the Transfer Assets shall pass to Buyer at the Closing.
Accordingly, all risk of loss with respect to the Transfer Assets shall be borne
by Seller until the Closing. If on the Closing Date any Transfer Assets shall
have suffered loss or damage on account of fire, flood, accident, act of war,
civil commotion, or any other cause or event beyond the reasonable power and
control of Seller and Shareholder (whether or not similar to the foregoing) to
an extent which materially affects the value to Buyer of the Transfer Assets,
Buyer shall have the right at its election to complete the acquisition (in which
event all claims of Seller with respect to such loss or damage and all insurance
proceeds arising therefrom shall be included in the Transfer Assets) or, if it
does not so elect, it shall have the right, which shall be in lieu of any other
right or remedy whatsoever, to terminate this Agreement. In the latter event,
all parties shall be released from liability hereunder.
17. Termination.
Subject to the provisions of this Agreement relating to the postponement
of the Closing Date, on the Closing Date either Buyer or Seller and Shareholder
may forthwith terminate this Agreement: (a) subject to clause (b) below, without
liability to the other of them if a bona fide action or proceeding (by and at
the sole instance of a party or parties not an Affiliate or Affiliates of Buyer,
Seller or Shareholder) shall be pending against either party on the Closing Date
wherein an unfavorable judgment, decree or order would prevent or make unlawful
the carrying out of the transactions contemplated by this Agreement; or (b)
without prejudice to other rights and remedies which either party may have, if
default shall be made by the other of them in the observance or in the due and
timely performance of any of its covenants and agreements herein contained, or
if there shall have been a material breach of any of the warranties and
representations herein contained, or if any condition precedent to its
obligations has not been satisfied.
18. Notices.
Any and all notices, demands, requests or other communications hereunder
shall be in writing and shall be deemed duly given when personally delivered to
or transmitted by overnight express delivery or by facsimile to and received by
the party to whom such notice is intended, or in lieu of such personal delivery
or overnight express delivery or facsimile transmission, 48 hours after deposit
in the United States mail, first-class, certified or registered, postage
prepaid, return receipt requested, addressed to the applicable party at the
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address provided below. The parties may change their respective addresses for
the purpose of this Paragraph 18 by giving notice of such change to the other
party in the manner that is provided in this Paragraph 18.
Seller or Shareholder, or both: Jerry Prince, Inc. and Jerrel D. Prince
3450 Bonita Road
Suite 210
Chula Vista, California 91910
Attention: Jerrel D. Prince
Facsimile No.: (619) 691-0285
With a copy to:
Eli Galam, Esq.
9419 Sierra Vista Avenue
Suite 100
La Mesa, California 91941
Facsimile No.: (619) 239-1297
Buyer: OroAmerica, Inc.
455 Moss Street
Burbank, California 91502-1733
Attention: Guy Benhamou, President
Facsimile No.: (818) 848-0193
With a copy to:
Bertram K. Massing, Esq.
Ervin, Cohen & Jessup
9401 Wilshire Boulevard
Beverly Hills, California 90212
Facsimile No.: (310) 859-2325
19. Certain Definitions. As used herein, the following terms (whether
used in the singular or the plural) have the following meanings:
"Affiliate" or "affiliate" means, with respect to any Person, any
other Person directly or indirectly controlling, controlled by or under common
control with such Person and, without limiting the generality of the foregoing,
includes (a) any director or officer of such Person or of any affiliate of such
Person, (b) any such director's or officer's Family Members, (c) any group,
acting in concert, of one or more of such directors, officers or Family Members,
and (d) any Person controlled by any such director, officer, Family Member or
group which beneficially owns or holds 25% or more of any class of equity
securities or profits interest. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of an entity, whether through the ownership of voting
securities, by contract or otherwise.
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"Bankruptcy Exception" means the limitation on enforceability
imposed by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws of general application relating to or affecting the enforcement of
the rights of creditors or by equitable principles, whether enforcement is
sought in equity or at law.
"Family Member" means, in the case of a Person who is an individual,
any parent, spouse or lineal descendant (including legally adopted descendants)
of such Person or the spouse of any such descendant.
"Person" or "person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government body.
20. Assignment.
Rights hereunder shall not be assignable and duties hereunder shall
not be delegable by either Buyer or Seller and Shareholder without the prior
written consent of the other; consent will not be unreasonably withheld. Nothing
contained in or implied from this Agreement is intended to confer any rights or
remedies upon any person or entity, other than the parties hereto and their
successors in interest and permitted assignees, unless expressly stated herein
to the contrary.
21. Applicable Law; Jurisdiction.
The provisions of this Agreement and all rights and obligations
hereunder and under all documents, instruments and agreements executed under or
in connection with this Agreement shall be governed and construed in accordance
with the internal laws of the State of California applicable to contracts made
and to be wholly performed within said State.
22. Remedies Not Exclusive.
No remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law, in equity, or otherwise. The
election of any one or more remedies by either party hereto shall not constitute
a waiver of the right to pursue other available remedies.
23. Attorneys' Fees.
In any litigation relating to this Agreement, including litigation
with respect to any instrument, document or agreement made under or in
connection with this Agreement, the prevailing party shall be entitled to
recover its costs and reasonable attorneys' fees.
24. Successors and Assigns.
All covenants, representations, warranties and agreements of the
parties contained herein shall be binding upon and inure to the benefit of the
parties, their respective heirs, personal representatives and permitted
successors and assigns.
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25. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
26. Headings; Severability.
Captions and paragraph headings used herein are for convenience only
and are not a part of this Agreement and shall not be used in construing it.
27. Amendments; Waivers.
No provision or term of this Agreement or any agreement contemplated
herein between the parties hereto may be supplemented, amended, modified, waived
or terminated except in a writing duly executed by the party to be charged. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided. Failure of a party to insist on strict compliance with any of the
terms and conditions of this Agreement shall not be deemed a waiver of any such
terms and conditions.
28. Entire Agreement.
All schedules, exhibits, and financial statements provided for
herein are a part of this Agreement. This Agreement and the other agreements and
documents provided for in this Agreement comprise the entire agreement of the
parties and supersede all earlier understandings of the parties with respect to
the subject matter hereof.
29. Publicity.
Except as otherwise required by law, any press release, announcement
or other public communication with respect to the sale and purchase of the
Transfer Assets shall be subject to advance approval by both parties; each party
agrees that it will not unreasonably withhold its approval of any such release,
announcement or communication.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
SELLER:
JERRY PRINCE, INC,
a California corporation
By: /s/ JERREL D. PRINCE
--------------------------------------
Name: Jerrel D. Prince
------------------------------------
Title: President
-----------------------------------
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SHAREHOLDER
/s/ JERREL D. PRINCE
-----------------------------------------
Jerrel D. Prince
BUYER:
OROAMERICA, INC.,
a Delaware corporation
By: /s/ GUY BENHAMOU
-------------------------------------
Guy Benhamou, President
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