<PAGE>
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) April 12, 1996
-----------------------------
INNOVO GROUP INC.
-----------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 0-18926 11-2928178
- --------------------------------------------------------------------------------
State or other jurisdiction (Commission (IRS Employer
of Incorporation File Number) Identification No.)
27 North Main Street, Springfield, Tennessee 37172
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 384-0100
-------------------
Not Applicable
---------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Contents
--------
Page
----
Item 2: Acquisition or Disposition of Assets. . . . . . 3
Item 7: Financial Statements and Exhibits. . . . . . . 3
Signatures. . . . . . . . . . . . . . . . . . . . . 10
2
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On April 12, 1996, Innovo Group Inc. ("the Company") acquired 100% of
the outstanding common stock of Thimble Square, Inc. ("Thimble Square") for an
aggregate of $1.1 million, paid by the issuance of shares of the restricted
common stock of the Company. In a concurrent transaction, Thimble Square
acquired from its stockholders a plant it had previously leased from them in
exchange for (a) $300,000 paid by the issuance of shares of the restricted
common stock of Innovo Group, and (b) the issuance by Thimble Square of $200,000
of unsecured notes payable, without interest, on August 31, 1996 (with certain
prepayments required in the event of certain refinancings or asset sales by
Thimble Square). The purchase prices are subject to downward adjustment based on
the results of an audit of Thimble Square's December 31, 1995 financial
statements, and the appraisal of its property and equipment, which are to be
completed by June 15, 1996.
A total of 2,745,098 shares of the Company's common stock were
issued to effect the acquisition. However, at the time of the acquisition
Thimble Square owned 1,080,000 shares of the Company's common stock as a result
of the January, 1996 manufacturing agreement between the companies (see Note 5
of Notes to Condensed Consolidated Financial Statements included in the
Company's Quarterly Report on Form 10-Q for the quarter ended February 29,
1996). As a result of the acquisition, Innovo Group reacquired, and retired,
those shares, and the net increase in the number of shares of Innovo Group
common stock outstanding was 1,665,098 shares.
Thimble Square manufactures and markets ladies' ready-to-wear
at-home, sleep and lounge wear from plants in Pembroke and Baxley, Georgia. Its
products are sold to mail order companies, retailers and through mail order
distribution. Thimble Square also provides "sew-only" manufacturing for other
distributors of private-label sleep and lounge wear; in those instances, the
customer provides the raw materials, and Thimble Square manufactures the
products to the distributor's specifications. Thimble Square's sales for its
fiscal year ended December 31, 1995 were approximately $3 million.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements for Business Acquired.
It is not practicable to file the audited, pre-acquisition financial
statements of Thimble Square at the date this report is being filed. The
required financial statements of Thimble Square will be filed, by an amendment
to this report, when the audit thereof has been completed, but not later than 60
days from the date of the filing of this report.
3
<PAGE>
(b) Pro forma financial information
Introduction
The accompanying unaudited pro forma condensed consolidated financial
statements are presented to illustrate the effect on the Company's historical
financial position and results of operations of the consummation of the
acquisition of Thimble Square. The unaudited pro forma condensed consolidated
balance sheet has been prepared as if the acquisition had been consummated on
February 29, 1996. The unaudited pro forma condensed consolidated statement of
operations has been prepared as if the acquisition had been consummated on
November 1, 1994. The following pro forma financial information has been
prepared using Thimble Square's unaudited financial statements as of and for the
year ended December 31, 1995, and reflects management's current estimate of the
allocation of the purchase price, the actual allocation of which may differ
based on the results of the audit and appraisals discussed above. The Company
intends to include pro forma financial information, revised to the extent
necessary, at such time as this report is amended to include the historical
pre-acquisition financial statements of Thimble Square.
The accompanying unaudited pro forma condensed consolidated financial
statements have been prepared for illustrative purposes only and are not
necessarily indicative of the Company's future financial position or results of
operations. Among other things, the unaudited pro forma condensed consolidated
statement of operations reflects adjustments only for (i) the effects of certain
employment contracts with certain key employees of Thimble Square and (ii) the
increase in depreciation and amortization resulting from recording Thimble
Square's assets at fair value. Not reflected in the pro forma results of
continuing operations are additional cost savings that the Company believes can
be achieved through changes to Thimble Square's manufacturing operations, and
through the use of Thimble Square's facilities to manufacture Innovo's products
during periods of peak production. Additionally, the Company plans to use
Innovo's existing marketing and sales functions to market Thimble Square's
products through the Company's existing network of marketing organizations and
sales representatives, and to the mass merchant customers with which the Company
has existing relationships. Thimble Square previously has not made significant
use of outside sales representatives, or had significant sales to Innovo's
customers, and has instead relied principally on the marketing and sales efforts
of its own personnel. While there can be no assurance, the Company believes that
these new marketing and sales efforts could, over time, generate increases in
Thimble Square's sales.
4
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<TABLE>
<CAPTION>
Innovo Group Inc.
Pro Forma Condensed Consolidated Balance Sheet
February 29, 1996
(unaudited)
(000's)
Innovo Thimble Pro Forma Pro
Group Square Adjustments Forma
----- ------ ----------- -----
ASSETS
- ------
<S> <C> <C> <C> <C>
Current
Cash and cash equivalents $ 38 $ - $ 38
Accounts receivable 1,354 27 1,381
Inventories 1,242 420 1,662
Prepaid expenses 482 40 (40) [B] 482
------ ------ ------
Total current assets 3,116 487 3,563
Property and equipment, net 3,556 515 1,385 [B] 5,456
Other Assets 830 424 (400) [A] 774
471 [B]
(551) [C]
------ ------ ------
$ 7,502 $ 1,426 $ 9,793
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities
Notes payable $ 1,410 $ 94 200 [B] $ 1,704
Subordinated notes payable 185 - 185
Current maturities of long-term debt 168 65 233
Accounts payable 853 175 1,028
Accrued expenses 1,258 138 135 [B] 1,531
Deferred revenue - 400 (400) [A] -
-------- ------ --------
Total current liabilities 3,874 872 4,681
Long-term debt 2,154 571 2,725
Other - 64 64
-------- ------ ------
Total liabilities 6,028 1,507 7,470
------ ------ ------
Class 3 Trust 236 - 236
------ ------- ------
Stockholders' equity
Common stock 85 - 27 [B] 101
(11) [C]
Stock subscription 118 - 118
Additional paid in capital 21,174 - 1,373 [B] 22,007
(540) [C]
Deficit (17,713) - (17,713)
Treasury stock (2,426) - (2,426)
Net assets of Thimble Square - (81) 81 [B] -
-------- ------ -------
Total stockholders' equity 1,238 (81) 2,087
------ ------ ------
$ 7,502 $ 1,426 $ 9,793
====== ====== ======
</TABLE>
See notes to pro forma condensed consolidated financial statements
5
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<TABLE>
<CAPTION>
Innovo Group Inc.
Pro Forma Condensed Consolidated
Statement of Continuing Operations
Year Ended October 31, 1995
(unaudited)
(000's except for per share information)
Innovo Thimble Pro Forma Pro
Group Square Adjustments Forma
----- ------ ----------- -----
<S> <C> <C> <C> <C>
Net sales $ 5,276 $ 3,051 $ 8,327
Cost of sales 3,808 2,567 (82) [D] 6,293
------ ------ ------
Gross profit 1,468 484 2,034
Operating expenses
Selling, general and administrative 2,728 597 (75) [D] 3,250
Depreciation and amortization 406 23 97 [E] 526
------ ------ ------
Income (loss) from operations (1,666) (136) (1,742)
Interest expense (511) (133) (644)
Other income 2,110 9 2,119
------ ------- ------
Income (loss) from continuing operations $ (67) $ (260) $ (267)
====== ====== ======
Income (loss) from
continuing operations per share $ (.03) $ (.05)
====== ======
Weighted average shares outstanding 2,616 5,361
====== ======
</TABLE>
See notes to pro forma condensed consolidated financial statements
6
<PAGE>
Innovo Group Inc.
Notes to Pro Forma Condensed
Consolidated Financial Statements
(unaudited)
Note 1 - Basis of Presentation
Reference is made to the "Introduction" at page 4.
The Thimble Square financial statements as of and for the year ended
December 31, 1995 include the effect of adjustments recorded to reflect (i)
Thimble Square's January, 1996 receipt of 1.2 million shares of Innovo Group
common stock upon the execution of a manufacturing agreement between the
companies and (ii) the settlement, subsequent to December 31, 1995, of certain
amounts due from stockholders.
Note 2 - Pro Forma Adjustments
The pro forma adjustments to the condensed consolidated balance sheet
are as follows:
[A] To eliminate the intercompany balances (a prepaid asset of
Innovo Group, and deferred revenue of Thimble Square)
resulting from the January, 1996 manufacturing agreement.
[B] To reflect the acquisition of Thimble Square and the
allocation of the purchase price on the basis of the fair
values of the assets acquired and the liabilities assumed. The
components of the purchase price and its allocation to the
assets and liabilities of Thimble Square are as follows:
(000's)
-------
Components of purchase price
Innovo Group common stock $ 1,400
Thimble Square notes payable 200
Acquisition costs 135
------
$ 1,735
======
Allocation of purchase price
Net assets of Thimble Square $ (81)
Decrease prepaid expenses to fair value (40)
Increase in property and equipment to
fair value 1,385
Increase (decrease) in other assets to
fair value
Innovo Group common stock 227
Other assets (40)
Goodwill 284
-----
471 471
------
$ 1,735
=======
7
<PAGE>
Notes to Pro Forma Condensed
Consolidated Financial Statements - concluded
(unaudited)
Note 2 - Pro Forma Adjustments (concluded)
[C] To reflect the Innovo Group common stock owned by Thimble
Square as a reduction of consolidated stockholders' equity
(reflected as a reduction of common stock and paid in capital
because the shares will be transferred to Innovo Group and
retired).
The pro forma adjustments to the condensed consolidated statement of
continuing operations are as follows:
[D] To adjust costs and expenses to reflect certain compensation
and fringe benefit arrangements that will become effective
upon the completion of the acquisition.
[E] To adjust depreciation and amortization to reflect the
adjusted bases of Thimble Square's assets.
8
<PAGE>
(c) Exhibits.
The following exhibits are filed herewith:
Exhibit
Number Description
------ --------------------------------------------------------------------
10.1 Merger Agreement dated April 12, 1996 by and among Innovo Group
Inc. and TS Acquisition, Inc. and Thimble Square, Inc. and the Stock-
holders of Thimble Square, Inc.
10.2 Property Acquisition Agreement dated April 12, 1996 by and
among Innovo Group Inc., TS Acquisition, Inc. and Philip Schwartz
and Lee Schwartz
21 Subsidiaries of the registrant
9
<PAGE>
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 thereunto duly authorized.
INNOVO GROUP INC.
(Registrant)
Date: April 29, 1996 By:/s/ Patricia Anderson-Lasko
---------------------------
Patricia Anderson-Lasko
Chairman/President/CEO
10
<PAGE>
Exhibit 10.1
================================================================================
MERGER AGREEMENT
by and among
Innovo Group Inc. and TS Acquisition, Inc.
and
Thimble Square, Inc. and the Stockholders
of Thimble Square, Inc.
April 12, 1996
================================================================================
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
to
Merger Agreement
Page
<S> <C>
Introduction and Recitals.........................................................................................1
Section 1 - The Merger
1(a) Merger of Acquisition and Thimble Square........................................................1
1(b) Conversion of Shares............................................................................2
1(c) Surrender and Exchange of Shares; Fractional Shares;
Rights of Thimble Square Stockholders...........................................................2
1(d) No Registration of Innovo Merger Shares.........................................................3
1(e) Registration of Innovo Merger Shares............................................................3
1(f) Voting Agreement................................................................................5
1(g) Representations Concerning Stockholders' Equity and Net Income
of Thimble Square, and Appraised Value of Certain Thimble Square
Assets; Adjustments to Number of Innovo Merger Shares Issued....................................5
1(h) Employment Contracts............................................................................6
1(i) Rescission of Stockholders' Agreement...........................................................6
Section 2 - Closing...............................................................................................6
Section 3 - Governance
3(a) Charter and Bylaws..............................................................................6
3(b) Resignation of Directors; Election of New Directors.............................................6
3(c) Innovo Directors................................................................................7
3(d) Further Actions by Acquisition..................................................................7
Section 4 - Representations of Thimble Square and the Thimble
Square Stockholders
4(a) Representations Concerning Thimble Square
(i) Corporate Organization.................................................................7
(ii) Authority..............................................................................7
(iii) Consents; Approvals....................................................................8
(iv) Capital Stock..........................................................................8
(v) Financial Statements...................................................................8
(vi) Claims; Litigation; Investigations.....................................................8
(vii) Changes; Adverse Developments..........................................................9
(viii) Liabilities............................................................................9
(ix) Title to Assets........................................................................9
<PAGE>
Page
(x) Taxes..................................................................................9
(xi) Unlawful or Sensitive Payments.........................................................9
(xii) Rescission of Transaction with BestSellers, Inc.......................................10
(xiii) Contracts; Agreements.................................................................10
4(b). Representations Concerning Thimble Square Stockholders
(i) Authority.............................................................................10
(ii) Consents; Approvals...................................................................10
(iii) Sophisticated Investor................................................................10
(iv) Innovo Merger Shares Acquired for Investment..........................................11
(v) No Review.............................................................................11
(vi) Innovo Information....................................................................11
(vii) No Representations....................................................................12
(viii) No Registration; Reliance on Representations..........................................12
(ix) Covenant Not to Compete...............................................................12
(x) Waiver of Compensation................................................................15
4(c) Importance of Representations..................................................................15
4(d) No Finders Fees................................................................................15
4(e) Survival of Representations and Warranties.....................................................15
Section 5 - Representations of Innovo and Acquisitions
5(a) Corporate Organization.........................................................................15
5(b) Authority......................................................................................15
5(c) Consents; Approvals............................................................................16
5(d) Innovo Information.............................................................................16
5(e) Capital Stock..................................................................................16
5(f) No Finders Fees................................................................................16
5(g) Survival of Representations....................................................................16
Section 6 - Indemnification......................................................................................17
Section 7 - Conditions to Innovo's and Acquisition's Obligations
7(a) Thimble Square Stockholder Approval and Disclosures............................................17
7(b) No Appraisal Demand............................................................................17
7(c) Property Acquisition...........................................................................18
7(d) Representations................................................................................18
Section 8 - Conditions to the Obligations of Thimble Square and the Principal
Thimble Square Stockholders........................................................................18
Section 9 - Arbitration..........................................................................................18
Section 10 - Termination.........................................................................................19
<PAGE>
Page
Section 11 - Miscellaneous
11(a) Modification; Complete Agreement...............................................................20
11(b) Waiver.........................................................................................20
11(c) Governing Law..................................................................................20
11(d) Fees and Expenses..............................................................................20
11(e) Transfers and Assignments......................................................................20
11(f) Gender.........................................................................................20
11(g) Headings.......................................................................................20
11(h) Severability...................................................................................20
11(i) Notices........................................................................................20
11(j) Consultation with Counsel......................................................................21
Signatures.......................................................................................................22
</TABLE>
<TABLE>
<CAPTION>
Merger Agreement
Schedules to the Merger Agreement Section
- --------------------------------- ----------
<S> <C> <C>
A - Thimble Square Stockholders Recitals
B - Outstanding Options, Warrants, Rights, Conversion Privileges,
Commitments and Call Options with Respect to Thimble
Square Common Stock 4(a)(iv)
C- Financial Statements 4(a)(v)
D - Material Adverse Changes, Losses or Damages 4(a)(v)
E - Actions at Law, Equity, Proceedings, Governmental
Proceedings, Etc. 4(a)(vi)
F - Adverse Facts, Developments or Circumstances 4(a)(vii)
G - Liabilities 4(a)(vii)
H- Liens, Encumbrances, Security Interests and Claims 4(a)(ix)
I - Tax Matters 4(a)(x)
J - Contracts 4(a)(xiii)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendices to the Merger Agreement
- ----------------------------------
<S> <C> <C>
A - Form of the Eleanor Schwartz Employment Agreement
with Thimble Square, Inc. 1(h)
B - Form of the Philip Schwartz Employment Agreement
with Thimble Square, Inc. 1(h)
C - Form of the Lee Schwartz Employment Agreement
with Thimble Square, Inc. 1(h)
D - Form of the Jane Silk Employment Agreement
with Thimble Square, Inc. 1(h)
E - Form of the Ron Silk Employment Agreement
with Thimble Square, Inc. 1(h)
F - Innovo Group Inc. Statement of Risk Factors 4(b)(vi)
</TABLE>
<PAGE>
MERGER AGREEMENT
This Merger Agreement (the "Agreement") is made this 12th day of April,
1996 by and between Innovo Group Inc. ("Innovo"), TS Acquisition, Inc.
("Acquisition"), a wholly-owned subsidiary of Innovo, Thimble Square, Inc.
("Thimble Square"), and Eleanor V. Schwartz and Lee Schwartz, individuals who
are stockholders of Thimble Square (collectively, the "Thimble Square
Stockholders").
Recitals
--------
Whereas, Innovo wishes to acquire the ownership of 100% of the common
stock, $100.00 per share par value, of Thimble Square ("Thimble Square Common
Stock") on the terms and conditions set forth below, and to achieve this
objective has caused Acquisition to be formed for the purpose of merging into
Thimble Square (the "Merger"); and
Whereas, the individuals and entities listed on Schedule A to this
Agreement (individually a "Thimble Square Stockholder" and collectively the
"Thimble Square Stockholders") are collectively the owners of all of the issued
and outstanding Thimble Square Common Stock; and
Whereas, the Thimble Square Stockholders own all of the issued and
outstanding Thimble Square Common Stock and have indicated their intention to
vote for and approve the Merger on the terms and conditions set forth herein;
Therefore, Innovo, Acquisition, Thimble Square and the Thimble Square
Stockholders hereby agree as follows:
Agreement
---------
1. The Merger
(a) Merger of Acquisition and Thimble Square. On the Effective Date, as
hereinafter defined, Acquisition shall be merged with and into Thimble Square,
and Thimble Square shall be the surviving corporation. The corporate existence
of Thimble Square with all of its purposes, powers and objects shall continue
unaffected and unimpaired by the Merger, and as the surviving company Thimble
Square shall be governed by the laws of the State of Georgia. The separate
existence of Acquisition shall cease upon the Effective Date, and Thimble Square
shall continue as the surviving corporation and as a wholly-owned subsidiary of
Innovo.
Merger Agreement Page 1
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(b) Conversion of Shares.
(i) Conversion of Thimble Square Shares into Innovo Shares and
Notes Payable. Subject to the terms and conditions set forth
herein, executed Articles of Merger containing a Plan of
Merger will be delivered, together with such other
certificates or documents as may be required to be filed under
the laws of the State of Georgia to effect the Merger
(collectively "the Merger Documents") to the Secretary of
State of the States of Delaware as soon as possible following
the time when the last of the conditions set forth in this
Agreement shall have been satisfied or waived, or on such
earlier or later date as may be mutually agreeable to Innovo
and Thimble Square. Upon the date of such delivery (the"
Effective Date"), each outstanding share of Thimble Square
Common Stock shall be converted into such number of shares of
the common stock, par value $.01 per share, of Innovo ("Innovo
Common Stock") (such shares of Innovo Common Stock referred to
herein as the "Innovo Merger Shares") as results from dividing
$.51 into the result of adding to $1,100,000 the amount of
principal unpaid and outstanding, as of the date of the
Closing, under the mortgages encumbering the Pembroke Property
(as such terms are used in the Property Acquisition Agreement,
dated as of the same date as this Agreement, by and among
Innovo, TS Acquisition, Inc. and Philip Schwartz, and Lee
Schwartz), divided by the number of shares of Thimble Square
Common Stock outstanding as of the Closing Date and subject to
adjustment pursuant to Section 1(g).
(ii) Conversion of Acquisition Shares into Thimble Square
Shares. Upon the Effective Date, each outstanding share of
common stock of Acquisition shall be converted into one share
of Thimble Square Common Stock.
(c) Surrender and Exchange of Shares; Fractional Shares; Rights of
Thimble Square Stockholders.
(i) Surrender and Exchange of Shares. On or after the
Effective Date, each Thimble Square Stockholder may surrender
his certificate or certificates evidencing shares of Thimble
Square Common Stock to Innovo. Upon the proper surrender of a
certificate or certificates evidencing shares of Thimble
Square Common Stock, such Thimble Square Stockholder shall be
entitled to receive a certificate or certificates for the
number of Innovo Merger Shares provided for herein. Each
Thimble Square Stockholder who is a party to this Agreement
hereby waives their right to dissent from the Merger and to
seek the appraised fair value of their shares of Thimble
Square Common Stock payable in cash under Sections 14-2-1301,
et seq., of the Georgia Business Corporation Act.
Merger Agreement Page 2
<PAGE>
(ii) No Fractional Shares. No fractional shares of Innovo
Common Stock shall be issued, and Thimble Square Stockholders
will receive the nearest whole number of Innovo Merger Shares.
(iii) Rights as to Thimble Square Shares. Each Thimble Square
Stockholder who is a party to this Agreement shall cease to
have any rights with respect to shares of Thimble Square
Common Stock after the Effective Date except the right to
exchange their shares of Thimble Square Common Stock in
exchange for Innovo Merger Shares and Merger Notes as provided
in Section 1(c)(iii) of this Agreement.
(d) No Registration of Innovo Merger Shares. The issuance of the Innovo
Merger Shares will not have been the subject of a registration statement filed
under the Securities Act of 1933, as amended (the "Securities Act"), and as a
result the Innovo Merger Shares will be "restricted securities" as that term is
defined under the Securities Act. Accordingly, the Innovo Merger Shares may not
be resold, in whole or in part, unless they are the subject of registration
under the Securities Act and any applicable state securities laws, or there is
available an exemption from such registration. A legend, as follows, will be
placed on any certificate or certificates representing Innovo Merger Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN THE SUBJECT OF
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
UNDER ANY STATE SECURITIES LAWS, IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS THEREOF, AND IN PARTICULAR ON THE EXEMPTION PROVIDED BY O.C.G.A.
SECTION 10-5-9(13). THE SECURITIES HAVE BEEN TAKEN BY THE REGISTERED OWNER FOR
INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TOWARD THE RESALE OR DISTRIBUTION
THEREOF. SUCH SECURITIES MAY NOT BE TRANSFERRED OR DISPOSED OF IN THE ABSENCE OF
REGISTRATION WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH
TRANSFER OR DISPOSITION DOES NOT VIOLATE THE 1933 ACT, THE RULES AND REGULATIONS
THEREUNDER, OR ANY APPLICABLE STATE SECURITIES LAWS. IN CONNECTION WITH
COMPLIANCE WITH THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS, NO
TRANSFER OF THESE SECURITIES SHALL BE MADE UNLESS THE CONDITIONS SPECIFIED
HEREIN ARE SATISFIED."
(e) Registration of Innovo Merger Shares. Innovo hereby grants to each
of the Thimble Square Stockholders the right to have included in any
registration statement filed by Innovo under the Securities Act (except for
registration statements on Form S-4 or on Form S-8, or on such forms as may at
the time be in use to register transactions of the type currently registered on
Form S-4 or Form S-8), the offer and sale of the Innovo Merger Shares by them.
Additionally, Innovo hereby undertakes to file, on a one time basis, a
registration statement for the offer and sale of the Innovo Merger Shares, to
use its best efforts to file such registration
Merger Agreement Page 3
<PAGE>
statement by August 31, 1996, and to use its best efforts to have such
registration statement declared effective by the Securities and Exchange
Commission as soon thereafter as is practicable.
In connection with the filing of any such registration statement, Innovo and the
Thimble Square Stockholders hereby agree that:
(i) the Thimble Square Stockholders understand and acknowledge
that Innovo shall be permitted to include the offering and
sale of other shares or units of its securities in such
registration statement, either for its own account, the
account of other selling stockholders, or both;
(ii) Innovo will use its best efforts to maintain the
effectiveness of such registration statement for up to nine
months following the effectiveness thereof, and from time to
time will amend or supplement such registration statement
during such nine month period to the extent necessary to
comply with the Securities Act;
(iii) as and when Innovo files a registration statement with
respect to the offer and sale of any of the Innovo Merger
Shares under the Securities Act, the Thimble Square
Stockholders and Innovo will execute an agreement to indemnify
one another, and will agree to contribute to the aggregate
losses, claims, damages and liabilities to which they may
become subject, on terms and conditions standard in the
industry and negotiated by them in good faith, including,
without limitation, standard limitations on the
indemnification of selling stockholders in a secondary
offering;
(iv) whenever Innovo is registering the offer and sale of the
Thimble Square Stockholders' Innovo Merger Shares, the Thimble
Square Stockholders agree to provide to Innovo, promptly upon
its request, such information and materials regarding the
Thimble Square Stockholders as Innovo shall reasonably request
in order to effect the registration of the offer and sale of
the shares;
(v) Innovo shall bear all reasonable costs and expenses to be
incurred in connection with such registration statement,
including printing costs, the fees of the registrant's counsel
and accountants, and SEC and NASD filing fees; however, Innovo
shall not be responsible for the fees and expenses of any
counsel engaged by any of the Thimble Square Stockholders, or
any underwriter engaged by the Thimble Square Stockholders,
and shall not be responsible for the underwriters', brokers'
or dealers' commissions, fees, expenses, discounts or other
compensation attributable to the offer or sale of any of the
shares;
(f) Voting Agreement.
(i) Concurrent with the Closing (as hereinafter defined), the
Thimble Square Stockholders shall execute among and between
themselves, in a form reasonably
Merger Agreement Page 4
<PAGE>
acceptable to Innovo, a voting agreement which shall provide
that for so long as Eleanor Schwartz remains a member of the
board of directors of Innovo, any of the Innovo Merger Shares
owned by any of them shall be voted by Eleanor Schwartz at any
annual or special meeting of the stockholders of Innovo, or in
connection with any solicitation of the consent of the
stockholders of Innovo.
(ii) The Thimble Square Stockholders hereby agree that, except
for sales on the NASDAQ SmallCap market in "broker
transactions" as that term is defined under Rule 144 under the
Securities Act, they will not sell, assign or otherwise
transfer any of the Innovo Merger Shares unless and until the
transferring Thimble Square Stockholder first obtains from any
person, entity, group of affiliated persons or group of
affiliated entities that, in the aggregate, proposes to
purchase or otherwise receive ten percent (10%) or more of the
that Thimble Square Stockholder's Innovo Merger Shares, an
agreement whereby such person, persons, entity or entities
agree to be bound by the provisions of the voting agreement
executed pursuant to Section 1(f)(i) above.
(g) Representations Concerning Stockholders' Equity and Net Income
of Thimble Square, and Appraised Value of Certain Thimble Square Assets;
Adjustment to Number of Innovo Merger Shares Issued.
(i) Thimble Square and the Thimble Square Stockholders
hereby represent that:
(A) the stockholders' equity of Thimble Square, minus
the net book value of property and equipment, as
reflected in the audited financial statements of
Thimble Square as of and for the year ended December
31, 1995 (which audited financial statements shall
have been prepared in accordance with generally
accepted accounting principles) shall be no less than
negative $700,000; and
(B) the appraisals prepared by independent appraisers
acceptable to Innovo shall reflect an aggregate fair
value for the Baxley plant building and land, the
Pembroke plant building and land (which Innovo is
acquiring from the Thimble Square Stockholders
pursuant to a separate Property Acquisition Agreement
dated even date herewith) and Thimble Square's
manufacturing equipment, of at least $1,550,000.
(ii) If, upon the delivery to Innovo of the financial
statements and appraisals described in Section 1(g)(i), which
shall be delivered no later than May 15, 1996, the
stockholders' equity or market values indicated therein are
less than the amounts set forth in Section 1(g)(i) above, then
the number of Innovo Merger Shares issued pursuant to Section
1(b) shall be adjusted, by the return to Innovo by the Thimble
Square Stockholders on a pro rata basis, of a number of Innovo
Merger Shares computed as follows:
Merger Agreement Page 5
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(A) the per share dollar value of each share to be
returned shall be $.51; and
(B) the aggregate dollar value of the shares returned
to Innovo shall equal the sum of (1) 100% of the
amount by which actual stockholders' equity, reduced
by the net book value of property and equipment, is
less than negative $700,000, and (2) 100% of the
amount by which the aggregate market values of the
Baxley plant, the Pembroke plant and the equipment is
less than $1,550,000.
(h) Employment Contracts. Concurrent with the Closing, as hereinafter
defined, Thimble Square shall enter into employment contracts with Eleanor
Schwartz, Philip Schwartz, Lee Schwartz, Jane Silk and Ron Silk in the form set
forth in Appendices A, B, C, D and E hereto, respectively.
(i) Rescission of Stockholders' Agreement. Concurrent with the Closing
and immediately prior to the Merger, the Thimble Square Stockholders shall
rescind that certain Purchase and Sale Agreement between them dated November 12,
1993.
2. Closing. The closing of the transaction contemplated by this agreement (the
"Closing") shall take place at 10:00 eastern time on Monday, April 8, 1996, at
the offices of Innovo, or at such other time and place as Innovo, Acquisition
and Thimble Square may agree to by written amendment to this Agreement. At the
Closing, Innovo, Acquisition and Thimble Square shall execute the Merger
Documents.
3. Governance
----------
(a) Charter and Bylaws. As of the Effective Date, the Charter of
Thimble Square shall remain the Charter of Thimble Square, and the Bylaws of
Thimble Square shall remain the Bylaws of Thimble Square.
(b) Resignation of Thimble Square Directors; Election of New
Directors.
(i) Prior to the Effective Date, Thimble Square shall obtain
from each of the directors of Thimble Square except Eleanor
Schwartz, their resignation from the board of directors of
Thimble Square, such resignations to be effective concurrent
with the Effective Date.
(ii) Upon the completion of the Closing, Eleanor Schwartz, as
the sole remaining director of Thimble Square, shall nominate
and elect to Thimble Square's board of directors Patricia
Anderson-Lasko ("Anderson") and Terrance J. Bond ("Bond"),
such that Thimble Square's board of directors shall be
comprised of Anderson, as chairman, Eleanor Schwartz, and
Bond.
Merger Agreement Page 6
<PAGE>
(c) Innovo Directors. On the Effective Date, the board of directors of
Innovo shall be increased by one, and Eleanor Schwartz shall be elected to such
newly created seat, to serve as a director of Innovo in accordance with Innovo's
Charter and Bylaws.
(d) Further Actions by Acquisition. If at any time after the Effective
Date the surviving company shall consider or be advised that any further
assignments or assurances in law or any other things are necessary or desirable
to vest, perfect, record, confirm or otherwise, in the name of Thimble Square,
the title to any right or property of Acquisition, the officer or officers of
Acquisition holding office prior to the Effective Date shall have the power and
authority to, in the name of Acquisition, execute and deliver all such proper
deeds, assignments and assurances in law and do all other things necessary and
proper to carry out the purpose of this Agreement.
4. Representations of Thimble Square and the Thimble Square Stockholders.
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(a) Representations Concerning Thimble Square. Each of Thimble
Square and the Thimble Square Stockholders hereby represent and warrant that:
(i) Corporate Organization. Thimble Square is a corporation
duly organized, validly existing, and in good standing under
the laws of the State of Georgia, and it has full power and
authority to enter into this Agreement and to carry out the
transactions contemplated hereby. Thimble Square has full
power and authority to carry on its business as it is now
being conducted and to own its assets. Thimble Square is duly
qualified to transact business in each jurisdiction where the
nature of its business or assets requires it to be so
qualified and where the failure so to qualify would have a
material adverse affect on the business of Thimble Square. The
execution and delivery of this Agreement by Thimble Square
does not, and the consummation of the transactions
contemplated hereby will not violate, or result in a breach of
any provisions of, Thimble Square's Charter or Bylaws.
(ii) Authority. Thimble Square has full power and authority to
enter into this Agreement and has taken all action, corporate
and otherwise, necessary to authorize the execution, delivery
and performance of this Agreement, the completion of the
transactions contemplated hereby and the execution and
delivery on behalf of Thimble Square of any and all
instruments necessary or appropriate in order to effectuate
fully the terms and conditions of this Agreement.
(iii) Consents; Approvals. Thimble Square and the Thimble
Square Stockholders have obtained the consent or approval of
any court, governmental agency or other public authority, or
of any other person, corporation or entity required as a
condition to (i) the validity or enforceability of this
Agreement or any other instruments to be executed by Thimble
Square to effectuate this Agreement, or (ii) the completion or
validity of any of the transactions contemplated by this
Merger Agreement Page 7
<PAGE>
Agreement. This Agreement has been properly executed and
delivered by a duly authorized officer of Thimble Square, and
constitutes the valid and legally binding agreement of Thimble
Square enforceable against Thimble Square in accordance with
its terms.
(iv) Capital Stock. The authorized capital stock of Thimble
Square is 10,000 shares, $100.00 par value, of which 600
shares are issued and outstanding as of the date hereof and
will be issued and outstanding as of the Closing Date and the
Effective Date. The list set forth on Schedule A hereto is, as
reflected in the stock transfer books of Thimble Square, an
accurate list of the stockholders of Thimble Square. Except as
set forth on Schedule B hereto, there are no outstanding
options, warrants, rights, conversion privileges, contracts or
commitments relating to the issuance or sale of shares of
Thimble Square Common Stock.
(v) Financial Statements Attached to this Agreement as
Schedule C are the financial statements (comprised of a
balance sheet, statements of operations and stockholder's
equity, statement of cash flows, and notes thereto) of Thimble
Square as of December 31, 1994 and 1995 and for the years
ended December 31, 1994 and 1995 (the "Financial Statements").
The Financial Statements have been prepared by Thimble Square
in accordance with generally accepted accounting principles
("GAAP"). Except as disclosed in the Financial Statements or
in Schedule D to this Agreement, there have been no material
adverse changes in, material loss or destruction of, or
material amount of damage to the financial condition, business
or operations of Thimble Square since December 31, 1995,
whether or not arising from transactions in the ordinary
course of business. The regular books of account of Thimble
Square fairly and accurately reflect all transactions,
maintained and kept in accordance with GAAP consistently
applied. Thimble Square has no liabilities or obligations,
whether accrued, absolute, contingent or otherwise, which
would adversely affect the financial condition of Thimble
Square except and to the extent recorded or disclosed in the
Financial Statements. No dividends are due or unpaid by
Thimble Square.
(vi) Claims; Litigation; Investigations. Except as set forth
in Schedule E to this Agreement, there are no actions at law
or in equity, proceedings, governmental proceedings or
investigations, either pending or threatened against Thimble
Square or against or with respect to the business or assets of
Thimble Square, and Thimble Square is not in material default
with respect to any decree, injunction or other order of any
court or government authority. Thimble Square is in
substantial compliance with all (and has not received any
notice of any claimed violation of any) material provisions of
all contracts to which it is a party, and with all applicable
federal, state, county or municipal laws, ordinances, and
regulations. There is no action at law or in equity,
arbitration proceeding, governmental proceeding or
investigation, or motion or request to any court, pending or
Merger Agreement Page 8
<PAGE>
threatened, against or with respect to Thimble Square with
respect to this Agreement or the transaction contemplated
hereby.
(vii) Changes; Adverse Developments. Except as set forth in
Schedule F to this Agreement, there are no facts, developments
or circumstances, existing or threatened, of a special or
unusual nature that is materially adverse to the assets,
business, financial condition or future prospects of Thimble
Square.
(viii) Liabilities. Except as set forth in Schedule G to this
Agreement, Thimble Square has no material liabilities of any
nature, whether accrued, absolute, contingent or otherwise,
existing, or which may hereafter arise out of any transaction
entered into prior to the date of its execution of this
Agreement or out of any act or failure to act on the part of
Thimble Square or any of its employees prior to the Closing.
(ix) Title to Assets. Except as set forth in Schedule H to
this Agreement, Thimble Square has good, clear and fair title
to all of its assets, and there are no liens, encumbrances,
security interests or claims against or with respect to
Thimble Square's assets.
(x) Taxes. Except as set forth in Schedule I to this
Agreement, Thimble Square has filed all tax returns, including
returns for sales, use, property, employment and income taxes,
required to be filed in or by such jurisdictions in which
Thimble Square conducts business, has paid in full all taxes
due, and Thimble Square has not received from any taxing
authority any notice of assessment, proposed adjustment, or
examination. Adequate provision for all sales, use, property,
employment and income taxes has been made in the Financial
Statements.
(xi) Unlawful or Sensitive Payments. Neither Thimble Square,
any of the officers, directors, employees, agents or
representative of Thimble Square, or any of the Thimble Square
Stockholders, have made, directly or indirectly, any bribe or
kickback, illegal political contribution, payment from
corporate funds which was incorrectly recorded in the books or
records of Thimble Square , unlawful payment from corporate
funds to government or municipal officials in their individual
capacities for the purpose of affecting their action or the
actions of the jurisdiction which they represent to obtain
favorable treatment in securing business or licenses or to
obtain special concessions of any kind whatsoever, or illegal
payments from corporate funds to obtain or retain any
business.
(xii) Rescission of Transaction with BestSellers, Inc. The
agreement between Thimble Square and the Thimble Square
Stockholders on the one hand, and BestSellers, Inc. on the
other hand, in which BestSellers, Inc. was to acquire 100% of
the outstanding common stock of Thimble Square, has been
rescinded and voided, and this Agreement does not interfere
with any valid, existing agreement
Merger Agreement Page 9
<PAGE>
between Thimble Square or the Thimble Square Stockholders on
the one hand, and BestSellers, Inc. on the other hand.
(xiii) Contracts; Agreements. Except as set forth in Schedule
J to this Agreement, there are no contracts or agreements,
whether written or oral, for employment, services, sales
representation, or other matters, which would constitute a
claim against, or become payable as the result of, the future
revenues or earnings of Thimble Square.
(b) Representations Concerning Thimble Square Stockholders. Each
of the Thimble Square Stockholders hereby represents and warrants that:
(i) Authority. Each Thimble Square Stockholder has full power
and authority to enter into this Agreement and has taken all
action necessary to authorize the execution, delivery and
performance of this Agreement, and the completion of the
transactions contemplated hereby.
(ii) Consents; Approvals. They have obtained the consent or
approval of any court, governmental agency or other public
authority, or of any other person, corporation or entity
required as a condition to (i) the validity or enforceability
of this Agreement or any other instruments to be executed by
each Principal Thimble Square Stockholder to effectuate this
Agreement, or (ii) the completion or validity of any of the
transactions contemplated by this Agreement. This Agreement
has been properly executed and delivered , and constitutes the
valid and legally binding agreement of each Principal Thimble
Square Stockholder enforceable against each Principal Thimble
Square Stockholder in accordance with its terms.
(iii) Sophisticated Investor. Each Thimble Square Stockholder
has, either alone or together with a Purchaser Representative
(as that term is defined in Regulation D under the Securities
Act), such knowledge and experience in financial and business
matters that the Thimble Square Stockholder is capable of
evaluating the merits and risks of the Merger. Each Thimble
Square Stockholder is familiar with the nature and extent of
the risks inherent in investments in unregistered securities
and in the business in which Innovo engages, and has
determined, either personally or in consultation with his or
her Purchaser Representative, that the Merger is consistent
with the his investment objectives and income prospects.
(iv) Innovo Merger Shares Acquired for Investment. Each
Thimble Square Stockholder (a) is acquiring the Innovo Merger
Shares and Merger Notes solely for his or her own account, for
investment purposes only and not with a view toward the resale
or distribution thereof, either in whole or in part, (b) has
no contract, undertaking, agreement or other arrangement, in
existence or contemplated, to sell, pledge, assign or
otherwise transfer the Innovo Merger Shares or Merger Notes,
and (c) agrees not to sell or otherwise transfer the Innovo
Merger Shares or Merger
Merger Agreement Page 10
<PAGE>
Notes for a period of at least one year unless and until the
Innovo Merger Shares or Merger Notes, as applicable, are
subsequently registered, or the resale or transfer thereof is
exempt from the registration requirements under the Securities
Act and any applicable state securities laws.
(v) No Review. Each Thimble Square Stockholder understands
that the Merger and the issuance of the Innovo Merger Shares
and Merger Notes pursuant to the Merger have not been reviewed
by any federal or state governmental body or agency.
(vi) Innovo Information.
(A) Each Thimble Square Stockholder has received and
carefully reviewed Innovo's Annual Report on Form
10-K for the year ended October 31, 1995 (the "Form
10-K"), Current Report on Form 8-K for the event
dated January 29, 1996 (the "Form 8-K"), and the
Innovo Group Inc. statement of Risk Factors (a copy
of which is appended hereto as Appendix F)
(collectively, the "Innovo Information"), and except
for the Innovo Information, the Thimble Square
Stockholder has not relied upon any other materials,
information or literature relating to Innovo, the
Innovo Merger Shares or Merger Notes.
(B) Each Thimble Square Stockholder has had a
reasonable opportunity to ask questions of and
receive answers from Innovo concerning Innovo, the
Innovo Merger Shares, and the terms and conditions
under which the Innovo Merger Shares will be issued
in the Merger, all such questions, if any, have been
answered to the full satisfaction of the Thimble
Square Stockholder, and none of such answers to any
such questions was inconsistent with information
contained in the Innovo Information.
(C) Each Thimble Square Stockholder understands that
the Innovo Common Stock has recently traded at prices
less than $.51 per share, and that there can be no
assurance that the market price of the Innovo Common
Stock will again equal or exceed $.51 per share.
(vii) No Representations. Except as set forth herein and in
the Innovo Information, no representations or warranties have
been made to a Thimble Square Stockholder by Innovo or any
agent, employee or affiliate of Innovo, and the Thimble Square
Stockholder is not relying upon any information about Innovo,
other than that contained in the Innovo Information and the
results of independent investigation by the Thimble Square
Stockholder in connection with making a decision concerning
the acceptance of the Innovo Merger Shares.
Merger Agreement Page 11
<PAGE>
(viii) No Registration; Reliance on Representations. Each
Principal Thimble Square Stockholder understands that the
Innovo Merger Shares are being issued in the Merger in
reliance on specific exemptions from the registration
requirements of federal and state securities laws and that
Innovo is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgements and
understandings set forth herein in order to determine the
availability of such exemptions.
(ix) Covenant Not to Compete. Each Thimble Square Stockholder
acknowledges that (A) the knowledge and experience that such
Thimble Square Stockholder has acquired while a principal
shareholder of Thimble Square and his services rendered to
Thimble Square are of special, unique and extraordinary
character and that his position with Thimble Square has placed
him in a position of confidence and trust with the customers,
Prospective Customers (as defined below), and employees of
Thimble Square and has allowed him access to Confidential
Information (as defined below), (B) the consideration paid to
such Thimble Square Stockholder pursuant to this Agreement in
exchange for his covenants and agreements in this subsection
(ix) constitutes full, fair and adequate consideration for
such covenants and agreements, (C) the nature and period of
the restrictions imposed by the covenants contained in this
subsection (ix) are fair, reasonable, and necessary to protect
Thimble Square and Innovo from the material adverse
consequences that they would suffer if such Thimble Square
Stockholder were to breach any of such covenants and
agreements, (D) Thimble Square and Innovo would sustain great
and irreparable loss and damage if such Thimble Square
Stockholder were in any manner to breach any of such covenants
and agreements, (E) Thimble Square conducts its business
actively in and throughout the entire United States (the
"Territory") and that other persons are engaged in like and
similar business in the Territory, (F) the Business of the
Corporation (as defined below) is of a limited and unusual
nature, is scattered over a wide geographical area, and
accordingly, in order to protect Thimble Square and Innovo, it
is fair, reasonable and necessary for such Thimble Square
Stockholder to agree not to solicit for the period set forth
below the business of any person who was a customer or
Prospective Customer of the Corporation for the periods set
forth in this subsection (ix), (G) the covenants and
agreements made by such Thimble Square Stockholder in this
subsection (ix) are fair and reasonable, and the prohibitions
and the time limitations are adequate and necessary in order
to protect the Business of the Corporation, it being
acknowledged by such Thimble Square Stockholder that such
covenants and agreements shall be construed as incidental to
the sale of a business.
Having acknowledged the foregoing, each Thimble
Square Stockholder covenants and agrees with Thimble Square
and Innovo as follows:
Merger Agreement Page 12
<PAGE>
1) He will not, directly or indirectly, for a period
of five years from the date hereof, disclose to any person or
entity or use or otherwise exploit for his own benefit or for
the benefit of any other person or entity any Confidential
Information; provided, however, that this subsection (ix)
shall not limit in any manner the protection of Thimble
Square's trade secrets otherwise afforded by law.
2) He will not, directly or indirectly, for a period
of five years from the date hereof, within the Territory,
solicit, divert, or appropriate to himself or to any other
person or entity in competition with the Business of the
Corporation, or attempt so to solicit, divert, or appropriate,
the business of any customer or Prospective Customer of
Thimble Square.
3) He will not, directly or indirectly, for a period
of five years from the date hereof, within the Territory,
solicit, recruit, or hire, directly or by assisting any other
person or entity, or attempt so to solicit, recruit or hire,
any employee of Thimble Square to work for any person or
entity who is in competition with the Business of the
Corporation.
4) He will not, directly or indirectly, for a period
of five years from the date hereof, within the Territory,
engage in a business in competition with the Business of the
Corporation (whether as an officer, director, shareholder,
partner, member, proprietor, employee, agent, consultant,
independent contractor, or in any other capacity), or accept
employment or be employed (in any capacity) by any person or
entity who is, directly or indirectly, in competition with the
Business of the Corporation; provided, however, that such
Thimble Square Stockholder may purchase, hold or sell publicly
traded securities of a company that engages in a business in
competition with the Business of the Corporation, provided
that (i) such securities are freely tradable on a national
securities exchange (as defined in the Securities Exchange Act
of 1934, as amended) and (ii) all Thimble Square Stockholders
do not hold, at any time, in excess of one percent of the
amount of such securities outstanding.
5) Any and all articles and processes invented or
discovered by or with the participation of such Thimble Square
Stockholder (whether or not patented or patentable),
trademarks, patents, designs, and theories of production,
management, operations, and marketing, and, in general,
anything of value received or created by such Thimble Square
Stockholder relating to Thimble Square during the period such
Thimble Square Stockholder has been a principal shareholder of
the Corporation and all rights of every kind and nature
whatsoever thereunder are and shall immediately be and become
the property of Thimble Square and not of the Thimble Square
Stockholder.
Each Thimble Square Stockholder acknowledges that his
breach of any covenant contained in this subsection (ix) will
result in irreparable injury to
Merger Agreement Page 13
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Thimble Square and Innovo and that Thimble Square's and
Innovo's remedy at law for such a breach will be inadequate.
Accordingly, each Thimble Square Stockholder agrees and
consents that Thimble Square or Innovo, in addition to all
other remedies available at law and in equity, shall be
entitled to both preliminary and permanent injunctions to
prevent and/or halt a breach or threatened breach by such
Thimble Square Stockholder of any covenant contained herein.
Each covenant contained in this subsection (ix) shall
be construed as separate and independent of any other covenant
or provision of this Agreement, and the existence or assertion
of any claim, demand, action, or cause of action against any
Thimble Square Stockholder, whether predicated upon this
Agreement or otherwise, shall not constitute a defense to the
enforcement by Thimble Square or Innovo of any of the
covenants contained in this subsection (ix). In the event that
the provisions of this subsection (ix) should ever be deemed
to exceed the time, scope, or geographic limitations permitted
by applicable law, then such provisions shall be reformed to
the maximum time, scope, and geographic limitations permitted
by such law.
For purposes of this subsection (ix):
(a) "Business of the Corporation" shall mean the
design, manufacture and marketing of ready-to-wear
ladies lounge and sleep wear.
(b) "Confidential Information" shall mean information
(in any form or media) regarding Thimble Square's customers,
Prospective Customers (including lists of customers and
Prospective Customers), methods of operation, billing rates,
billing procedures, suppliers, business methods, finances,
management, or any other business information relating to
Thimble Square (whether constituting a trade secret or
proprietary or otherwise) which has value to Thimble Square
and is treated by Thimble Square as being confidential;
provided, however, that Confidential Information shall not
include any information that has been voluntarily disclosed to
the public by Thimble Square (except where such public
disclosure has been made by a Thimble Square Stockholder
without authorization) or that has been independently
developed and disclosed by others, or that otherwise enters
the public domain through lawful means.
(c) "Prospective Customer" shall mean any person or
entity to whom Thimble Square has sent or delivered a written
sales or servicing proposal or contract in connection with the
Business of the Corporation.
(x) Waiver of Compensation. Each Thimble Square Stockholder
hereby waives payment of, and releases Thimble Square,
Acquisition, Innovo and each of their successors and assigns
from the payment of, any and all compensation (in the
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form of salary, bonuses or otherwise) owed by Thimble Square
to such Thimble Square Stockholder as of the date hereof and
through and including the Closing.
(c) Importance of Representations. Thimble Square, and each of the
Thimble Square Stockholders understand that the representations included in
subsections(a) (iii) through (a) (xiii ) above are of particular importance to
Innovo, and constitute an essential inducement to Innovo's execution of this
Agreement, and that any breach, failure or omission with respect to such
representations would constitute a material breach of this Agreement curable
only, in the discretion of Innovo, by the rescission of this Agreement.
(d) No Finders Fees. No brokerage or finders fees or commissions are
payable by Thimble Square by virtue or in connection with the transaction
contemplated by this Agreement.
(e) Survival of Representations and Warranties. Each of the
representations made in this Section 4 shall be deemed to be repeated as of the
Closing and as of the Effective Date.
5. Representations of Innovo and Acquisition.
------------------------------------------
(a) Corporate Organization. Innovo and Acquisition are corporations
duly organized, validly existing, and in good standing under the laws of the
States of Delaware and Georgia, respectively, and have full power and authority
to enter into this Agreement and to carry out the transactions contemplated
hereby. The execution and delivery of this Agreement by Innovo and Acquisition
do not, and the consummation of the transactions contemplated hereby will not
violate, or result in a breach of any provisions of, Innovo's or Acquisition's
Charter or Bylaws.
(b) Authority. Innovo and Acquisition have full power and authority to
enter into this Agreement and have taken all action, corporate and otherwise,
necessary to authorize the execution, delivery and performance of this
Agreement, the completion of the transactions contemplated hereby and the
execution and delivery on behalf of Innovo and Acquisition of any and all
instruments necessary or appropriate in order to effectuate fully the terms and
conditions of this Agreement.
(c) Consents; Approvals. No consent or approval of any court,
governmental agency or other public authority, or of any other person,
corporation or entity is required as a condition to (i) the validity or
enforceability of this Agreement or any other instruments to be executed by
Innovo to effectuate this Agreement, or (ii) the completion or validity of any
of the transactions contemplated by this Agreement. This Agreement has been
properly executed and delivered by the duly authorized officers of Innovo and
Acquisition, and constitutes the valid and legally binding agreement of Innovo
and Acquisition enforceable against Innovo and Acquisition in accordance with
its terms.
(d) Innovo Information. Innovo has furnished, or made available to
Thimble Square, and the Thimble Square Stockholders the Innovo Information. The
Innovo Information fairly sets
Merger Agreement Page 15
<PAGE>
forth, in all material respects, the information contained therein, and does not
omit or fail to disclose any material fact the disclosure of which would be
necessary to make the information contained in the Innovo Information not
misleading in light of the circumstances in which it is disclosed therein and
the omission of which is likely to have a material adverse effect on the Thimble
Square Stockholders.
(e) Capital Stock.
(i) Innovo. The authorized capital stock of Innovo is
30,000,000 shares, par value $.01 per share, of which
approximately 9,363,180 shares are issued and outstanding as
of the date hereof, exclusive of (A) 152,728 shares held by
the Class 3 Trust established under the plan of reorganization
of Spirco, Inc., (B) 97,531 shares issuable pursuant to a
stock subscription agreement, (C) 200,000 shares pledged to
secure Innovo's appeal of the Tedesco judgment, and (D)
approximately 2,561,290 shares issuable upon the exercise of
currently outstanding common stock purchase warrants or
purchase rights. The Innovo Merger Shares to be issued to the
Thimble Square Stockholders pursuant to Section 1(b)(i)
hereof, at the time issued, shall have been duly authorized
and validly issued, and will be fully paid and nonassessable.
(ii) Acquisition. The authorized capital stock of Acquisition
is 10,000 shares, par value $.01, of which 100 shares are
issued and outstanding, and are owned by Innovo.
(f) No Finders Fees. No brokerage or finders fees or commissions are
payable by Innovo by virtue or in connection with the transaction contemplated
by this Agreement.
(g) Survival of Representations. Each of the representations made in
this Section 5 shall be deemed to be repeated as of the Closing and as of the
Effective Date.
(h) Section 338 Liability. Innovo has informed the Thimble Square
Stockholders that Innovo does not intend to "step-up" the basis of the assets
for tax purposes under the provision of IRS Code 338. Furthermore, Innovo has
informed the Thimble Square Stockholders that it understands that should it
elect to "step-up" the basis tax purposes, an alternative minimum tax, payable
by Thimble Square may be triggered. Innovo acknowledges and agrees that the
Thimble Square Stockholders shall have no responsibility or liability for any
such alternative minimum tax that may be triggered with respect to such action,
and Innovo agrees to indemnify and hold harmless the Thimble Square Stockholders
for any such alternative minimum tax.
6. Indemnification.
(a) Each of Innovo, Acquisition, Thimble Square, and the Thimble Square
Stockholders agrees to indemnify each of the other, and their agents and
affiliates, and hold each of the other,
Merger Agreement Page 16
<PAGE>
and their agents and affiliates, harmless from and against any and all losses,
damages, liabilities, costs and expenses which it or any of them may sustain or
incur in connection with the breach by the indemnifying party of, or any
misrepresentation or inaccuracy contained in, any representation, warranty or
covenant made by that party herein.
(b) The Thimble Square Stockholders agree to indemnify Innovo, and its
agents and affiliates, and hold Innovo, and its agents and affiliates, harmless
from and against any and all losses, damages, liabilities, costs and expenses
which it or any of them may sustain or incur in connection with any
distribution, sale or transfer of any of the Innovo Merger Shares by the Thimble
Square Stockholders in violation of any provision, rule or regulation of the
Securities Act, the Securities Exchange Act of 1934, or any other applicable
federal or state securities law.
(c) Thimble Square and the Thimble Square Stockholders understand that
Innovo may undertake a private placement (the "Placement") of shares of its
common stock ("Innovo Common Stock"), and that in connection with such
Placement, Thimble Square may provide potential purchasers of Innovo Common
Stock with information about the business, operations, assets, and financial
condition of Thimble Square. Thimble Square and the Thimble Square Stockholders
agree to indemnify Innovo from and against any and all losses, damages,
liabilities, costs and expenses which it may sustain or incur in connection with
the Placement as the result of any omission, misrepresentation or inaccuracy
contained in any information provided by Thimble Square to the purchasers of the
Innovo Common Stock in the Placement.
7. Conditions to Innovo's and Acquisition's Obligations. Thimble Square, and
each Thimble Square Stockholder, understands that Innovo's and Acquisition's
obligations hereunder are conditioned, subject to waiver in Innovo's discretion,
upon:
(a) Thimble Square Stockholder Approval and Disclosures. In accordance
with the provisions of the Georgia Business Corporations Act, the Thimble Square
Stockholders shall have approved the Merger and the execution of this Agreement
by their unanimous written consent, preceded by the delivery to each Thimble
Square Stockholder of copies of (i) this Agreement, (ii) the Innovo Information,
(iii) the Financial Statements, and (iv) a copy of each employment and
consulting contract to be entered into between Innovo, Thimble Square or and any
employee, officer, director or stockholder of Thimble Square. A certificate of
each Thimble Square Stockholder with respect to their receipt and understanding
of the foregoing materials shall be executed by such stockholder and delivered
at Closing.
(b) No Appraisal Demand. Thimble Square shall not have received any
notice or demand relating to the exercise of dissenters' rights pursuant to the
Georgia Business Corporation Act and Innovo and Acquisition shall have received
a certificate from the Secretary of Thimble Square to that effect.
(c) Property Acquisition. The concurrent closing of the transactions
contemplated by that certain Property Acquisition Agreement dated into as of
April 5, 1996 between Innovo and Philip Schwartz, Eleanor V. Schwartz and Lee
Schwartz.
Merger Agreement Page 17
<PAGE>
(d) Representations. The representations and warranties made by Thimble
Square and the Thimble Square Stockholders shall be true and correct in all
material respects when made and at and as of the Closing and the Effective Date
as though such warranties were made at and as of such dates, except for changes
expressly permitted or contemplated by the terms of this Agreement, or changes
waived, in writing, by Innovo.
8. Conditions to the Obligations of Thimble Square and the Thimble Square
Stockholders. Innovo and Acquisition each understand that the obligations of
Thimble Square and the Thimble Square Stockholders hereunder are conditioned,
subject to their waiver, upon:
(a) Representations. The representations and warranties made by Innovo
and Acquisition shall be true and correct in all material respects when made and
at and as of the Closing and the Effective Date as though such warranties were
made at and as of such dates, except for changes expressly permitted or
contemplated by the terms of this Agreement, or changes waived, in writing, by
Thimble Square, and the Thimble Square Stockholders.
(b) NASD Letter. Innovo shall have received from the National
Association of Securities Dealers ("NASD") a letter setting forth its decision
concerning Innovo's compliance with the minimum bid price requirement of the
NASDAQ SmallCap Market, which decision shall be substantially similar to that
described in Innovo's April 5, 1996 letter to Philip, Eleanor and Lee Schwartz.
9. Arbitration. Each of the undersigned represents, warrants, covenants and
agrees that any controversy or claim brought directly, derivatively or in a
representative capacity by him in his capacity as a present or former
securityholder, whether against Innovo, Acquisition, Thimble Square, or a
Principal Thimble Square Stockholder (each being a "Party"), brought by a Party
or in the name of a Party, or any shareholders, officers, directors, agents,
affiliates, associates, employees or controlling persons a Party, including
without limitation any controversy or claim relating to a purchase or sale of
securities of Innovo or the Merger, shall be settled by arbitration under the
Federal Arbitration Act in accordance with the commercial arbitration rules of
the American Arbitration Association ("AAA") and judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. In arbitration proceedings under this Section 9, the parties shall be
entitled to any and all remedies that would be available in the absence of this
Section 9 and the arbitrators, in rendering their decision, shall follow the
substantive laws of the State of Georgia. This Section 9 shall apply, without
limitation, to actions arising in connection with the Merger or the offer and
sale of Innovo Common Stock contemplated by this Agreement under any Federal or
State securities laws. The arbitration of any dispute pursuant to this Section 9
shall be held in Atlanta, Georgia.
Notwithstanding the foregoing in order to preserve the status quo
pending the resolution by arbitration of a claim seeking relief of an injunctive
or equitable nature, any party, upon submitting a matter to arbitration as
required by this Section 9, may simultaneously or thereafter
Merger Agreement Page 18
<PAGE>
seek a temporary restraining order or preliminary injunction from a court of
competent jurisdiction pending the outcome of the arbitration.
This Section 9 is intended to benefit the shareholders, agents,
affiliates, associates, employees and controlling persons of each Party, each of
whom shall be deemed to be a third party beneficiary of this Section 9, and each
of whom may enforce this Section 9 to the full extent that the Party could do so
if a controversy or claim were brought against it.
10. Termination. This Agreement may be terminated and abandoned at any time
prior to Closing:
(a) by the mutual consent of Innovo, Thimble Square and the
Thimble Square Stockholders;
(b) by Innovo:
(i) in the event that Closing has not occurred prior to April
25, 1996; or
(ii) in the event that, prior to Closing, Innovo's review of
the books, records and documents of Thimble Square, or other
reviews conducted by Innovo, discloses to Innovo any
information that is materially inconsistent with the
representations and warranties made by Thimble Square or the
Thimble Square Stockholders herein.
(c) by either Innovo or Thimble Square in the event that:
(i) any court of competent jurisdiction in the United States
or any other Federal, state or local government body shall
have issued an order, decree, or ruling, or shall have taken
any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby and such
order, decree or ruling or other action shall have become
final and nonappealable;
(ii) prior to Closing, the National Association of Securities
Dealers, Inc. shall have informed Innovo that Innovo must
undertake a reverse split of the authorized, issued and
outstanding shares of Innovo Common Stock in order to maintain
the listing of the Innovo Common Stock on the NASDAQ Small Cap
Market, or if the Innovo Common Stock is otherwise delisted
from such trading; or
(iii) Patricia Anderson-Lasko is no longer serving as the
Chief Executive Officer of Innovo.
(d) in the event of any termination of this Agreement, no Party shall
have any liability to any other Party, except for any breach of any provisions
of this Agreement.
Merger Agreement Page 19
<PAGE>
11. Miscellaneous.
--------------
(a) Modification; Complete Agreement. This Agreement (i) may only be
modified by a written instrument executed by Innovo, Acquisition, Thimble Square
and the Thimble Square Stockholders, (ii) sets forth the entire agreement of
Innovo, Acquisition, Thimble Square and the Thimble Square Stockholders with
respect to the subject matter hereof; and (iii) shall inure to the benefit of,
and be binding upon Innovo, Acquisition, Thimble Square and the Thimble Square
Stockholders and their respective heirs, legal representatives and successors.
(b) Waiver. Any of the terms and conditions of this Agreement which may
be lawfully waived may be waived in writing at any time by the Party that is
entitled to the benefit thereof. Any waiver of any provision of this Agreement
shall be binding only is set forth in an instrument in writing signed on behalf
of such Party. No failure to enforce any provision of this Agreement shall be
deemed to or shall constitute a waiver of such provision of this Agreement, and
no waiver of a provision shall be deemed or constitute a waiver of any other
provision of this Agreement, whether or not similar, nor shall such waiver
constitute a continuing waiver.
(c) Governing Law. This Agreement shall be governed by the laws of the
State of Georgia applicable to contracts made and to be wholly performed
therein.
(d) Fees and Expenses. Each Party shall bear their own respective
expenses in connection with the negotiation and consummation of the transactions
contemplated by this Agreement; provided, however, that Thimble Square shall
bear the reasonable expenses of the Sellers with respect to their retention of
Stuart Sutta and Company and the Law Office of Fay Matsukage.
(e) Transfers and Assignments. Neither this Agreement nor any of the
rights hereunder may be transferred or assigned.
(f) Gender. Unless the context otherwise requires, all personal
pronouns used in this Subscription Agreement, whether in the masculine, feminine
or neuter gender, shall include all other genders.
(g) Headings. The headings contained in this Agreement are for
reference only and shall not affect in any way the meaning of interpretation of
this Agreement.
(h) Severability. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
Merger Agreement Page 20
<PAGE>
(i) Notices. All notices or other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
sent by express mail or such other similar service (i.e., Federal Express), or
mailed by certified or registered mail, return receipt requested, postage
prepaid, as follows:
if to Innovo or Acquisition: Innovo Group Inc.
27 North Main Street
Springfield, Tennessee 37172
Attn: Patricia Anderson-Lasko, President
with a copy to: Holland & Knight
Fifteenth Floor
Two Midtown Plaza
1360 Peachtree Street, N.E.
Atlanta, Georgia, 30309
Attn: Jerry L. Sims, Esq.
if to Thimble Square: Thimble Square, Inc.
Pembroke Industrial Park
Pembroke, Georgia 31321
Attn: Philip Schwartz,
Chief Executive Officer
if to a Thimble Square
Stockholder: Eleanor and Philip Schwartz
23362 Water Circle
Boca Raton, Florida 33486
Lee Schwartz
206 Early Street
Savannah, Georgia 31405
with a copy to: Fay M. Matsukage, Esq.
Stanford Place III, Suite 201
4582 South Vister Street Parkway
Denver, Colorado 80237-2633
or to such other address as a Party shall have designated to the other by like
notice.
(j) Consultation with Counsel. EACH OF INNOVO, THIMBLE SQUARE AND EACH
THIMBLE SQUARE STOCKHOLDER HAS READ THIS AGREEMENT, AND EACH THIMBLE SQUARE
STOCKHOLDER HAS READ THE INNOVO INFORMATION AND HAS, TO THE EXTENT THEY BELIEVE
NECESSARY, HAD THIS AGREEMENT REVIEWED BY COUNSEL, AND HAS HAD THE TERMS AND
CONSEQUENCES OF THIS
Merger Agreement Page 21
<PAGE>
AGREEMENT EXPLAINED TO THEM BY COUNSEL OR ANOTHER FINANCIAL ADVISOR.
IN WITNESS WHEREOF, Innovo, Acquisition, Thimble Square and the Thimble
Square Stockholders have executed this Merger Agreement on the date first
written above.
Innovo Group Inc.
By: /s/ Patricia Anderson-Lasko
-----------------------------------
Patricia Anderson-Lasko
President
TS Acquisition, Inc.
By: /s/ Patricia Anderson-Lasko
-----------------------------------
Patricia Anderson-Lasko
President
Thimble Square, Inc.
By: /s/ Philip Schwartz
-----------------------------------
Philip Schwartz
Chief Executive Officer
Thimble Square Stockholders:
/s/ Eleanor Schwartz
-----------------------------------
Eleanor Schwartz
/s/ Lee Schwartz
-----------------------------------
Lee Schwartz
Merger Agreement Page 22
<PAGE>
Exhibit 10.2
================================================================================
PROPERTY ACQUISITION AGREEMENT
by and among
Innovo Group Inc.
TS Acquisition, Inc.
and
Philip Schwartz and Lee Schwartz
April 12, 1996
================================================================================
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
to
Property Acquisition Agreement
Page
<S> <C>
Introduction......................................................................................................1
Recitals..........................................................................................................1
Section 1 - Basic Transaction
1.A The Exchange....................................................................................1
1.B Allocation of Innovo Purchase Shares Among Individual Sellers...................................3
1.C Closing.........................................................................................3
1.D Deliveries at Closing...........................................................................3
Section 2 - Representations and Warranties of the Sellers
2.A Representations and Warranties with Respect to the Property
2.A.i Title..................................................................................3
2.A.ii Condition..............................................................................3
2.A.iii Notices of Violations, Defaults, Etc...................................................3
2.A.iv Environmental..........................................................................4
2.A.v Bills; Taxes; Mortgage Payments........................................................4
2.A.vi No Broker..............................................................................4
2.A.vii Other..................................................................................5
2.B Representations Concerning the Acquisition of the
Innovo Purchase Shares
2.B.i Sophisticated Investor.................................................................5
2.B.ii Innovo Purchase Shares and Purchase Notes
Acquired for Investment................................................................6
2.B.iii No Review..............................................................................6
2.B.iv Innovo Information.....................................................................6
2.B.v No Representations............................................................7
2.B.vi No Registration; Reliance on Representations...........................................7
2.B.vii Voting Agreement.......................................................................8
2.C Other
2.C.i Authority..............................................................................8
2.C.ii Consents...............................................................................8
<PAGE>
Page
Section 3 - Representations of the Company
3.A Corporate Organization..........................................................................8
3.B Authority.......................................................................................9
3.C Consents; Approvals.............................................................................9
3.D Innovo Information..............................................................................9
3.E Capital Stock...................................................................................9
3.F Registration of Innovo Purchase Shares..........................................................9
3.G Limited Increase in Guaranteed Amounts.........................................................10
Section 4 - Indemnification......................................................................................11
Section 5 - Arbitration..........................................................................................11
Section 6 - Conditions to the Obligation of Innovo Group.........................................................12
Section 7 - Termination..........................................................................................12
Section 8 - Miscellaneous
8.A Modification; Complete Agreement...............................................................12
8.B Waiver.........................................................................................12
8.C Governing Law..................................................................................13
8.D Fees and Expenses..............................................................................13
8.E Transfers and Assignments......................................................................13
8.F Gender.........................................................................................13
8.G Headings.......................................................................................13
8.H Severability...................................................................................13
8.I Notices........................................................................................13
8.J Consultation with Counsel......................................................................14
Signatures....................................................................................................14-15
Property Acquisition
Schedules Agreement Section
- --------- -----------------
Schedule A - Description of Property Recitals
Schedule B - Description of Liens, Security Interests
and Encumbrances Recitals
Appendices
- ----------
Appendix A - Innovo Group Inc. Statement of Risk Factors 2.B.iv
</TABLE>
<PAGE>
PROPERTY ACQUISITION AGREEMENT
This property acquisition agreement (the "Agreement") is entered into
as of April 12, 1996 among Innovo Group Inc. (the "Company" or "Innovo"), TS
Acquisition, Inc., a wholly owned subsidiary of Innovo ("Thimble Square"), and
Philip Schwartz and Lee Schwartz (collectively the "Sellers"), who at times do
business with respect to the Property (as hereinafter defined) as PEL's Realty.
Recitals
--------
Whereas, the Sellers are the owner of that certain real property
located at 101 South Industrial Boulevard, Pembroke Industrial Park, Pembroke
Georgia, more specifically described in Schedule A hereto (the "Property"); and
Whereas, the Company intends to acquire Thimble Square, Inc., a Georgia
corporation ("Thimble Square I"), pursuant to the merger (the "Merger") with and
into Thimble Square I of Thimble Square pursuant to that certain Merger
Agreement of even date herewith (the "Merger Agreement") by and among Innovo,
Thimble Square I and the Sellers; and
Whereas, the Property is subject to liens and security interests
granted to the Pembroke State Bank under the loan agreement dated May 26, 1993
(the original lien being dated April 20, 1988) (the "PSB Lien") and to the
Business Development Corporation of Georgia, Inc. under a deed to secure
guarantee of debt dated November 12, 1993 (the "SBA Lien"), each of which are
more specifically described in Schedule B hereto; and
Whereas, Thimble Square desires to acquire the Property immediately
following the Merger, and is willing to acquire the Property subject to the PSB
Lien and the SBA Lien, and the Sellers are willing to sell the Property to
Thimble Square in exchange for assumption of the PSB Lien, the SBA Lien, shares
of the common stock, par value $.01 per share of the Company ("Innovo Common
Stock"), and promissory notes as specified herein;
Therefore, the Company, Thimble Square and the Sellers hereby agree as
follows:
Agreement
---------
1. Basic Transaction
-----------------
A. The Exchange. At the Closing (as hereinafter defined), Thimble
Square shall acquire the Property in exchange for:
i. Assumption by Thimble Square of the PSB Lien and the
SBA Lien;
Property Acquisition Agreement Page 1
<PAGE>
ii. The issuance to the Sellers of such number of shares of
Innovo Common Stock (the "Innovo Purchase Shares") as equals
the result of dividing $300,000, less the principal balances
unpaid and outstanding, as of the Closing, under the mortgage
loans on the Pembroke Property secured by the PSB Lien and the
SBA Lien, by $.51; and
iii. A promissory note in the principal amount of $100,000
payable to Lee Schwartz and a promissory note in the principal
amount of $100,000 payable to Philip and Eleanor Schwartz (the
"Purchase Notes"), such Purchase Notes to be unsecured
obligations of Thimble Square due, without interest, on August
31, 1996. Thimble Square shall be required to prepay pro rata
part or all of the principal balance upon and from (a) the
proceeds to Thimble Square, after the deduction of any costs
incurred in disposal, from the sale of the items of equipment
(the "Identified Equipment") or inventory (the "Identified
Inventory") to be identified and agreed upon by the parties to
this Agreement and (b) up to $100,000, from the net proceeds
to Thimble Square of a "Refinancing."
(1) For the purposes of this Section
1(b)(i)(B), "Refinancing" shall be defined
as the receipt of a new loan by Thimble
Square in the total amount of at least
$480,000 and having the following terms:
(A) The Refinancing shall include a
revolving credit component, having
a maturity of at least one year, of
at least $240,000. The remaining
$240,000 of the Refinancing may be
in the form of either (i) a
revolving credit component, having
a maturity of at least one year, or
a term amortizing loan having
monthly principal reductions of no
more that $4,000 and a term of at
least 3 years.
(B) The Refinancing may be
collateralized by any or all of (i)
all equipment and inventory of
Thimble Square, except for the
Identified Inventory, the
Identified Equipment, and equipment
already pledged to secure existing
indebtedness, and (ii) a second
lien on the Pembroke Property.
(C) The proceeds of the Refinancing
would be utilized (i) to repay all
amounts remaining outstanding under
the note payable to the Business
Development Corporation of Georgia,
Inc., (ii) to pay $100,000 of the
note issued pursuant to paragraph
1(b)(i)(B), (iii) to repay up to
$80,000 of other outstanding notes
payable of Thimble
Property Acquisition Agreement Page 2
<PAGE>
Square, and (iv) as to any proceeds
remaining, for general working
capital.
B. Allocation of Innovo Purchase Shares Among Individual Sellers. Fifty
percent (50%) of the Innovo Purchase Shares shall be issued to Philip and
Eleanor Schwartz and fifty percent (50%) of the Innovo Purchase Shares shall be
issued to Lee Schwartz.
C. Closing. The closing of the transaction contemplated hereby shall
take place at the offices of the Company, at 10:00 am on Monday, April 8, 1996,
unless changed by written agreement of the Company and the Sellers.
D. Deliveries at Closing. At the Closing, Thimble Square will deliver
to the Sellers certificates representing the Innovo Purchase Shares, and the
Sellers will deliver to Thimble Square a Warranty Deed to the Property.
2. Representations and Warranties of Sellers. In order to induce the Company and
Thimble Square to enter into this Agreement, Sellers hereby represent and
warrant to, and covenant with, the Company and Thimble Square as follows:
A. Representations and Warranties with Respect to the Property.
i. Title. Sellers have good and clear title to the Property,
and except as set forth in Schedule B hereto there are no
liens, encumbrances, security interests or claims with respect
to the Property. Upon delivery of the Warranty Deed to Thimble
Square, title will pass to Thimble Square free of any and all
liens, encumbrances, claims and security interests, except for
those set forth in Schedule B hereto.
ii. Condition. The Property is in good condition and is free
of any and all material defects.
iii. Notices of Violations, Defaults, Etc.
(a) The Sellers have received no written notice from
any city, county, state or other governmental
authority of, and Sellers have no knowledge of, any
violation of any statute, ordinance, regulation,
zoning, building, subdivision, electrical, plumbing,
fire, life safety or other code, permit, certificate
of occupancy or administrative or judicial order or
holding, whether or not appearing in the public
records, with respect to the Property, which
violation has not been corrected, or which violation
was waived but would be required to be corrected upon
the sale of the Property.
(b) The Sellers have received no notice from any
city, county, state or other governmental authority
of any order or directive requiring any work,
Property Acquisition Agreement Page 3
<PAGE>
repair, maintenance or improvement be performed on
the Property, relating to defects in the improvements
or noncompliance with applicable zoning, building,
subdivision, electrical, plumbing, fire and life
safety or other code, restriction or permit that has
not been corrected, or relating to any threat of
impending condemnation.
(c) Sellers are not aware of any notice or proceeding
involving the condemnation or special assessment
affecting the Property.
(d) Sellers have received no notice from any
insurance company which has issued a policy with
respect to the Property or from any board of fire
underwriters claiming any defects or deficiencies in
the Property or suggesting, requesting or requiring
of any repairs to, alterations to or other work on
the Property.
(e) To the best of the Sellers' knowledge there exist
no defaults on the part of any party under any
covenant, condition, restriction, easement, right of
way, deed of trust, mortgage, lien or other matter
affecting the Property.
iv. Environmental. The Sellers have received no notice
that, and are not aware that
(a) the Property is or has been in violation of any
federal, state, county or city laws, ordinances or
regulations applicable to the Property with respect
to the presence at, on or under the Property, or the
release from the Property, of any hazardous or toxic
substances or industrial waste, including without
limitation laws relating to asbestos, lead in water,
radon gas, polychlorinated biphenyls, petroleum or
petrochemical products, underground storage tanks and
fluorocarbons.
(b) the Sellers, or any past or current tenants of
any or all of the Property, have not, from or onto
the Property, owned, used, generated, manufactured,
stored, handled, released, or disposed of any such
hazardous or toxic substances.
v. Bills; Taxes; Mortgage Payments.
(a) All property, ad valorem, real estate and other
such taxes with respect to the Property for calendar
1995 have been paid.
(b) All bills and claims for labor performed or
material supplied to or for the benefit or the
Property have been paid in full.
Property Acquisition Agreement Page 4
<PAGE>
(c) As of the Closing, the Sellers will have paid all
installments due and payable, including the
installment due and payable on March 1, 1996, under
the May 26, 1995 loan agreement between the Sellers
and the Pembroke State Bank.
vi. No Broker. The Sellers have not employed any broker
or agent in connection with this transaction.
vii. Other. To the best of the Sellers' knowledge;
(a) there is no action at law or in equity,
arbitration proceeding, governmental proceeding or
investigation, or motion or request to any court,
pending or threatened, against or with respect to
Sellers with respect to the Property, this Agreement
or the transaction contemplated hereby.
(b) there are no facts, developments or
circumstances, existing or threatened, of a special
or unusual nature that are materially adverse to the
Property.
(c) there are with respect to the Property no
material liabilities or contractual obligations of
any nature, whether accrued, absolute, contingent or
otherwise, existing, or which may hereafter arise out
of any transaction entered into prior to the date of
the of this Agreement or out of any act or failure to
act on the part of Sellers or any of its employees or
agents prior to the date hereof.
(d) each of the Sellers has or will have properly
reported on their personal U.S. federal income tax
returns, Form 1040, the rents received, interest paid
and depreciation recorded with respect to the
Property through and including the Closing.
B. Representations Concerning the Acquisition of the Innovo
--------------------------------------------------------------
Purchase Shares.
----------------
i. Sophisticated Investor. Each of the Sellers has, either
alone or together with a Purchaser Representative (as that
term is defined in Regulation D under the Securities Act),
such knowledge and experience in financial and business
matters that the Seller is capable of evaluating the merits
and risks of the transactions contemplated by this Agreement
and investment in the Innovo Purchase Shares and Purchase
Notes. Each of the Sellers is familiar with the nature and
extent of the risks inherent in investments in unregistered
securities and in the business in which Innovo engages, and
has determined, either personally or in consultation with his
or her Purchaser Representative, that the acceptance of the
Innovo Purchase Shares and Purchase Notes is consistent with
his or her investment objectives and income prospects.
Property Acquisition Agreement Page 5
<PAGE>
ii. Innovo Purchase Shares and Purchase Notes Acquired for
Investment. Each of the Sellers (a) is acquiring the Innovo
Purchase Shares and Purchase Notes solely for his or her own
account, for investment purposes only and not with a view
toward the resale or distribution thereof, either in whole or
in part, (b) has no contract, undertaking, agreement or other
arrangement, in existence or contemplated, to sell, pledge,
assign or otherwise transfer the Innovo Purchase Shares or
Purchase Notes, and (c) agrees not to sell or otherwise
transfer the Innovo Purchase Shares or Purchase Notes unless
(I) the Innovo Purchase Shares or Purchase Notes are
subsequently registered, or (II) the resale or transfer
thereof is exempt from the registration requirements under the
Securities Act of 1933, as amended (the "Securities Act"), and
any applicable state securities laws.
iii. No Review. Each Seller understands that the issuance of
the Innovo Purchase Shares and Purchase Notes pursuant hereto
has not been reviewed by any federal or state governmental
body or agency.
iv. Innovo Information.
------------------
(a) Each of the Sellers has received and carefully
reviewed the Innovo's Annual Report on Form 10-K for
the year ended October 31, 1995 (the "Form 10-K"),
Current Report on Form 8-K for the event dated
January 29, 1996 (the "Form 8-K"), and the Innovo
Group Inc. Statement of Risk Factors (a copy of which
is appended hereto as Appendix A) (collectively, the
"Innovo Information"), and except for the Innovo
Information, the Sellers have not relied upon any
other materials, information or literature relating
to Innovo, the Innovo Purchase Shares or Purchase
Notes.
(b) Each of the Sellers has had a reasonable
opportunity to ask questions of and receive answers
from Innovo concerning Innovo, the Innovo Purchase
Shares, the Purchase Notes and the terms and
conditions under which the Innovo Purchase Shares
will be issued, all such questions, if any, have been
answered to the full satisfaction of the Sellers, and
none of such answers to any such questions was
inconsistent with information contained in the Innovo
Information.
(c) Each of the Sellers understands that the Innovo
Common Stock has recently traded at prices less than
$.51 per share, and that there can be no assurance
that the market price of the Innovo Common Stock will
again equal or exceed $.51 per share.
v. No Representations. Except as set forth herein and
in the Innovo Information, no representations or warranties
have been made to the Sellers by the Innovo or any agent,
employee or affiliate of Innovo, and the Sellers are not
Property Acquisition Agreement Page 6
<PAGE>
relying upon any information about Innovo, other than that
contained in the Innovo Information and the results of
independent investigation by the Sellers in connection with
making a decision concerning the acceptance of the Innovo
Purchase Shares and Purchase Notes.
vi. No Registration; Reliance on Representations. Each of the
Sellers understands that the Innovo Purchase Shares and
Purchase Notes are being issued pursuant to this Agreement in
reliance on specific exemptions from the registration
requirements of federal and state securities laws and that
Innovo is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgements and
understandings set forth herein in order to determine the
availability of such exemptions. The issuance of the Innovo
Purchase Shares and Purchase Notes will not have been the
subject of a registration statement filed under the Securities
Act , and as a result will be "restricted securities" as that
term is defined under the Securities Act. Accordingly, the
Innovo Purchase Shares and Purchase Notes may not be resold,
in whole or in part, unless they are the subject of
registration under the Securities Act and any applicable state
securities laws, or there is available an exemption from such
registration. A legend, as follows, will be placed on any
certificate or certificates representing Innovo Purchase
Shares and Purchase Notes:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN THE SUBJECT OF
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR
UNDER ANY STATE SECURITIES LAWS, IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS THEREOF, AND IN PARTICULAR ON THE EXEMPTION PROVIDED BY O.C.G.A.
SECTION 10-5-9(13). THE SECURITIES HAVE BEEN TAKEN BY THE REGISTERED OWNER FOR
INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TOWARD THE RESALE OR DISTRIBUTION
THEREOF. SUCH SECURITIES MAY NOT BE TRANSFERRED OR DISPOSED OF IN THE ABSENCE OF
REGISTRATION WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH
TRANSFER OR DISPOSITION DOES NOT VIOLATE THE 1933 ACT, THE RULES AND REGULATIONS
THEREUNDER, OR ANY APPLICABLE STATE SECURITIES LAWS. IN CONNECTION WITH
COMPLIANCE WITH THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS, NO
TRANSFER OF THESE SECURITIES SHALL BE MADE UNLESS THE CONDITIONS SPECIFIED
HEREIN ARE SATISFIED."
vii. Voting Agreement.
-----------------
(a) Concurrent with the Closing, the Sellers shall
execute among and between themselves, in a form
reasonably acceptable to Innovo, a voting agreement
which shall provide that for so long as Eleanor
Schwartz remains a member of the board of directors
of Innovo, any of the Innovo
Property Acquisition Agreement Page 7
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Merger Shares and Innovo Purchase Shares owned by any
of them shall be voted by Eleanor Schwartz.
(b) The Sellers hereby agree that, except for sales
on the NASDAQ SmallCap market in "broker
transactions" as that term is defined under Rule 144
under the Securities Act, they will not sell, assign
or otherwise transfer any of the Innovo Purchase
Shares unless and until the transferring Seller first
obtains from any person, entity, group of affiliated
persons or group of affiliated entities that, in the
aggregate, proposes to purchase or otherwise receive
ten percent (10%) or more of that Seller's Innovo
Purchase Shares, an agreement whereby such person,
persons, entity or entities agree to be bound by the
provisions of the agreement executed pursuant to
Section 2.B.vii.a above.
C. Other.
-----
i. Authority. The Sellers have full power and authority
to enter into this Agreement and has taken all action,
corporate and otherwise, necessary to authorize the execution,
delivery and performance of this Agreement, the completion of
the transactions contemplated hereby and the execution and
delivery on behalf of the Company of any and all instruments
necessary or appropriate in order to effectuate fully the
terms and conditions of this Agreement.
ii. Consents. The Sellers have obtained all consents or
approvals of any court, governmental agency or other public
authority, or of any other person, corporation or entity
required as a condition to (a) the validity or enforceability
of this Agreement or any other instruments to be executed by
the Sellers to effectuate this Agreement, or (b) the
completion or validity of any of the transactions contemplated
by this Agreement. The Agreement constitutes the valid and
legally binding agreement of the Sellers enforceable against
the Sellers in accordance with its terms.
3. Representations of the Company
A. Corporate Organization. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware,
and has full power and authority to enter into this Agreement and to carry out
the transactions contemplated hereby. The execution and delivery of this
Agreement by the Company does not, and the consummation of the transactions
contemplated hereby will not violate, or result in a breach of any provisions
of, the Company's Charter or By-Laws.
B. Authority. The Company has full power and authority to enter into
this Agreement and has taken all action, corporate and otherwise, necessary to
authorize the execution, delivery and performance of this Agreement, the
completion of the transactions contemplated hereby and
Property Acquisition Agreement Page 8
<PAGE>
the execution and delivery on behalf of the Company of any and all instruments
necessary or appropriate in order to effectuate fully the terms and conditions
of this Agreement.
C. Consents; Approvals. No consent or approval of any court,
governmental agency or other public authority, or of any other person,
corporation or entity is required as a condition to (i) the validity or
enforceability of this Agreement or any other instruments to be executed by the
Company to effectuate this Agreement, or (ii) the completion or validity of any
of the transactions contemplated by this Agreement. This Agreement has been
properly executed and delivered by the a duly authorized officer of the Company,
and constitutes the valid and legally binding agreement of the Company
enforceable against the Company in accordance with its terms.
D. Innovo Information. The Company has furnished, or made available to
the Sellers, the Innovo Information. The Innovo Information fairly sets forth,
in all material respects, the information contained therein, and does not omit
or fail to disclose any material fact the disclosure of which would be necessary
to make the information contained in the Innovo Information not misleading in
light of the circumstances in which it is disclosed therein and the omission of
which is likely to have a material adverse effect on the Sellers.
E. Capital Stock. The authorized capital stock of the Company is
30,000,000 shares, par value $.01 per share, of which approximately 9,363,180
shares are issued and outstanding as of the date hereof, exclusive of (A)
152,728 shares held by the Class 3 Trust established under the plan of
reorganization of Spirco, Inc., (B) 97,531 shares issuable pursuant to a stock
subscription agreement, (C) 200,000 shares pledged to secure the Company's
appeal of the Tedesco judgment, and (D) approximately 2,561,290 shares issuable
upon the exercise of currently outstanding common stock purchase warrants or
purchase rights. The Innovo Purchase Shares to be issued to the Sellers pursuant
to Section 1.a hereof, at the time issued, shall have been duly authorized and
validly issued, and will be fully paid and nonassessable.
F. Registration of Innovo Purchase Shares. The Company hereby grants to
each of the Sellers the right to have included in any registration statement
filed by the Company under the Securities Act (except for registration
statements on Form S-4 or on Form S-8, or on such forms as may at the time be in
use to register transactions of the type currently registered on Form S-4 or
Form S-8), the offer and sale of the Innovo Purchase Shares by them.
Additionally, the Company hereby undertakes to file, on a one time basis, a
registration statement for the offer and sale of the Innovo Purchase Shares, to
use its best efforts to file such registration statement by August 31, 1996, and
to use its best efforts to have such registration statement declared effective
by the Securities and Exchange Commission as soon thereafter as is practicable.
In connection with the filing of any such registration statement, Innovo and the
Sellers hereby agree that:
i. the Sellers understand and acknowledge that the
Company shall be permitted to include the offering and sale of
other shares or units of its securities
Property Acquisition Agreement Page 9
<PAGE>
in such registration statement, either for its own account,
the account of other selling stockholders, or both;
ii. the Company will use its best efforts to maintain the
effectiveness of such registration statement for up to nine
months following the effectiveness thereof, and from time to
time will amend or supplement such registration statement
during such nine month period to the extent necessary to
comply with the Securities Act;
iii. as and when the Company files a registration statement
with respect to the offer and sale of any of the Innovo
Purchase Shares under the Securities Act, the Sellers and the
Company will execute an agreement to indemnify one another,
and will agree to contribute to the aggregate losses, claims,
damages and liabilities to which they may become subject, on
terms and conditions standard in the industry and negotiated
by them in good faith, including, without limitation, standard
limitations on the indemnification of selling stockholders in
a secondary offering;
iv. whenever the Company is registering the offer and sale of
the Sellers' Innovo Purchase Shares, the Sellers agree to
provide to the Company, promptly upon its request, such
information and materials regarding the Sellers as Innovo
shall reasonably request in order to effect the registration
of the offer and sale of the shares;
v. Innovo shall bear all reasonable costs and expenses to be
incurred in connection with such registration statement,
including printing costs, the fees of the registrant's counsel
and accountants, and SEC and NASD filing fees; however, Innovo
shall not be responsible for the fees and expenses of any
counsel engaged by any of the Sellers, or any underwriter
engaged by the Sellers, and shall not be responsible for the
underwriters', brokers' or dealers' commissions, fees,
expenses, discounts or other compensation attributable to the
offer or sale of any of the shares.
G. Limited Increase in Guaranteed Amounts. So long as the Sellers
remain guarantors of amounts owed pursuant to any of the following notes or
mortgages, Thimble Square agrees not to permit the amounts owed under such
indebtedness to exceed the aggregate of $560,000: (1) PSB Lien, (2) SBA Lien,
(3) notes to First Bank of Coastal Georgia and (4) note to Peoples State Bank.
Sellers shall be under no obligation to renew such guarantees upon expiration or
maturity.
4. Indemnification.
----------------
A. The Sellers agrees to indemnify the Company, and its agents and
affiliates, and hold the Company, and its agents and affiliates, harmless from
and against any and all losses, damages, liabilities, costs and expenses which
it or any of them may sustain or incur in connection with: (i) any
misrepresentation or inaccuracy contained in any representation, warranty or
covenant made
Property Acquisition Agreement Page 10
<PAGE>
by the Sellers herein, or (ii) any distribution, sale or transfer of any of the
Innovo Purchase Shares by the Sellers in violation of any provision, rule or
regulation of the Securities Act, the Securities Exchange Act of 1934, or any
other applicable federal or state securities law.
B. The Company agrees to indemnify the Sellers and its agents and
affiliates and hold the Purchaser and its agents and affiliates harmless from
and against any and all losses, damages, liabilities, costs and expenses which
it or any of them may sustain or incur in connection with the breach by the
Company of any representation, warranty or covenant made by the Company herein.
5. Arbitration. The undersigned represents, warrants, covenants and agrees that
any controversy or claim brought directly, derivatively or in a representative
capacity by him in his capacity as a present or former securityholder, whether
against the Company or Thimble Square or in the name of the Company or Thimble
Square (and arising out of or relating to any acts or omissions of the Company
or Thimble Square or any placement agent), or any shareholders, officers,
directors, agents, affiliates, associates, employees or controlling persons of
the Company or Thimble Square (including without limitation any controversy or
claim relating to a purchase or sale of securities of the Company or Thimble
Square ) shall be settled by arbitration under the Federal Arbitration Act in
accordance with the commercial arbitration rules of the American Arbitration
Association ("AAA") and judgment upon the award rendered by the arbitrators may
be entered in any court having jurisdiction thereof. Any controversy or claim
brought by the Company or Thimble Square against the Sellers, whether in its
capacity as present or former securityholder of the Company in or against any of
the Sellers, the Sellers's officers, directors, agents, affiliates, associates,
employees or controlling persons shall also be settled by arbitration under the
Federal Arbitration Act in accordance with the commercial arbitration rules of
the AAA and judgment rendered by the arbitrators may be entered in any court
having jurisdiction thereof. In arbitration proceedings under this Section 5,
the parties shall be entitled to any and all remedies that would be available in
the absence of this Section 5 and the arbitrators, in rendering their decision,
shall follow the substantive laws of the State of Georgia. This Section 5 apply,
without limitation, to actions arising in connection with the offer and sale of
the Securities contemplated by this Agreement under any Federal or State
securities laws. The arbitration of any dispute pursuant to this Section 5 shall
be held in Atlanta, Georgia.
Notwithstanding the foregoing in order to preserve the status quo
pending the resolution by arbitration of a claim seeking relief of an injunctive
or equitable nature, any party, upon submitting a matter to arbitration as
required by this Section 5, may simultaneously or thereafter seek a temporary
restraining order or preliminary injunction from a court of competent
jurisdiction pending the outcome of the arbitration.
This Section 5 is intended to benefit the shareholders, agents,
affiliates, associates, employees and controlling persons of the Company and
Thimble Square, each of whom shall be deemed to be a third party beneficiary of
this Section 5, and each of whom may enforce this Section 5 to the full extent
that the Company or Thimble Square could do so if a controversy or claim were
brought against it.
Property Acquisition Agreement Page 11
<PAGE>
6. Conditions to the Obligation of Innovo Group. The Sellers each understand
that the obligations of the Company and Thimble Square hereunder are conditioned
upon the prior execution and closing of the Merger Agreement by and among the
Company, Thimble Square and the Stockholders of Thimble Square (the "Merger
Agreement").
7. Termination. This Agreement may be terminated and abandoned at any time prior
to Closing:
A. by the mutual consent of the Company and the Sellers;
B. by any party upon termination of the Merger Agreement
according to its terms; or
C. by either the Company or the Sellers in the event any court of
competent jurisdiction in the United States or any other Federal, state or local
government body shall have issued an order, decree, or ruling, or shall have
taken any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated hereby and such order, decree or ruling or other
action shall have become final and nonappealable.
8. Miscellaneous.
--------------
A. Modification; Complete Agreement. This Agreement (i) may only be
modified by a written instrument executed by the Company and the Sellers, (ii)
sets forth the entire agreement of the Company and the Sellers with respect to
the subject matter hereof; and (iii) shall inure to the benefit of, and be
binding upon the Company and the Sellers and their respective heirs, legal
representatives and successors.
B. Waiver. Any of the terms and conditions of this Agreement which may
be lawfully waived may be waived in writing at any time by the Party that is
entitled to the benefit thereof. Any waiver of any provision of this Agreement
shall be binding only is set forth in an instrument in writing signed on behalf
of such Party. No failure to enforce any provision of this Agreement shall be
deemed to or shall constitute a waiver of such provision of this Agreement, and
no waiver of a provision shall be deemed or constitute a waiver of any other
provision of this Agreement, whether or not similar, nor shall such waiver
constitute a continuing waiver.
C. Governing Law. This Agreement shall be governed by the laws of the
State of Georgia applicable to contracts made and to be wholly performed
therein.
D. Fees and Expenses. Each Party shall bear their own respective
expenses in connection with the negotiation and consummation of the transactions
contemplated by this Agreement; provided, however, that Thimble Square shall
bear the reasonable expenses of the Sellers with respect to their retention of
Stuart Sutta and Company.
Property Acquisition Agreement Page 12
<PAGE>
E. Transfers and Assignments. Neither this Agreement nor any of the
rights of hereunder may be transferred or assigned.
F. Gender. Unless the context otherwise requires, all personal pronouns
used in this Agreement, whether in the masculine, feminine or neuter gender,
shall include all other genders.
G. Headings. The headings contained in this Agreement are for reference
only and shall not affect in any way the meaning of interpretation of this
Agreement.
H. Severability. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
I. Notices. All notices or other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
sent by express mail or such other similar service (i.e., Federal Express), or
mailed by certified or registered mail, return receipt requested, postage
prepaid, as follows:
if to the Company: Innovo Group Inc.
27 North Main Street
Springfield, Tennessee 37172
Attn: Patricia Anderson-Lasko, President
Property Acquisition Agreement Page 13
<PAGE>
with a copy to: Holland & Knight
Two Midtown Plaza, Fifteenth Floor
1360 Peachtree Street, N.E.
Atlanta, Georgia, 30309
Attn: Jerry L. Sims, Esq.
if to the Sellers: Lee Schwartz
206 Early Street
Savannah, Georgia 31405
Philip Schwartz
23362 Water Circle
Boca Raton, Florida 33486
or to such other address as a Party shall have designated to the other by like
notice.
J. Consultation With Counsel. EACH OF THE COMPANY AND THE SELLERS HAS
READ THIS AGREEMENT, HAVE, TO THE EXTENT THEY BELIEVE NECESSARY, HAD THIS
AGREEMENT REVIEWED BY COUNSEL, AND HAVE HAD THE TERMS AND CONSEQUENCES OF THIS
AGREEMENT EXPLAINED TO THEM BY COUNSEL OR ANOTHER FINANCIAL ADVISOR.
IN WITNESS WHEREOF, the Company and the Sellers have executed this
Property Acquisition Agreement on the date first written above.
Innovo Group Inc.
By:/s/ Patricia Anderson-Lasko
------------------------------
Patricia Anderson-Lasko
President
TS Acquisition, Inc.
By:/s/ Patricia Anderson-Lasko
------------------------------
Patricia Anderson-Lasko
President
Property Acquisition Agreement Page 14
<PAGE>
Sellers:
/s/ Philip Schwartz
-----------------------------
Philip Schwartz, Individually
/s/ Lee Schwartz
------------------------------
Lee Schwartz, Individually
Property Acquisition Agreement Page 15
<PAGE>
Exhibit 21
Subsidiaries of the Registrant
Name of Subsidiary State of Incorporation Percent Owned
- ------------------ ---------------------- -------------
Innovo Inc. Texas 100%
NASCO Products, Inc. Texas 100%
Leaseall Management, Inc. Tennessee 100%
Group Services, Inc. Tennessee 100%
NPI International, Inc. Tennessee 100%
ANG Sport, Inc. Tennessee 100%
Thimble Square, Inc. Georgia 100%
<PAGE>
