EXCHANGE AND OPTION AGREEMENT
THIS EXCHANGE AND OPTION AGREEMENT, made as of this 31st day of
March, 2001 (this "AGREEMENT"), by and among LVMH MOET XXXXXXXX XXXXX
VUITTON INC., a Delaware corporation ("LVMH"), DKI ACQUISITION, INC., a
Delaware corporation and a subsidiary of LVMH ("ACQUISITION SUB"), KARMA
ACQUISITION, INC., a Delaware corporation and a subsidiary of LVMH
("KARMA"), and the undersigned stockholders (the "STOCKHOLDERS") of Xxxxx
Karan International Inc., a Delaware corporation ("DKI"),
WITNESSETH: THAT
WHEREAS, as of the date of this Agreement, the Stockholders are the
respective owners (either beneficially or of record) of the number of
shares of (i) common stock of DKI, par value $0.01 per share ("DKI COMMON
STOCK") and (ii) Class A Common Stock of DKI, par value $0.01 per share
(collectively with the DKI Common Stock and the Class B Common Stock of the
Company, par value $0.01 per share, of which the Stockholders do not hold
any shares, the "DKI STOCK"), as is set forth below such Stockholders' name
on EXHIBIT A to this Agreement, and
WHEREAS, pursuant to that certain Agreement (the "GS AGREEMENT")
dated as of December 15, 2000 by and among LVMH and certain of the
Stockholders, Karma (as assignee of LVMH) acquired from certain of the
Stockholders one hundred percent (100%) of the issued and outstanding
capital stock of Gabrielle Studio, Inc., a New York corporation ("GS"), and
WHEREAS, pursuant to the GS Agreement, LVMH and certain of the
Stockholders agreed that, in the event DKI and LVMH entered into, and the
Board of Directors of DKI approved, a definitive agreement contemplating a
merger transaction whereby LVMH would acquire a majority interest in DKI,
then DKI, LVMH, a subsidiary of LVMH created for the purpose of such merger
(the "ACQUISITION VEHICLE") and the Stockholders would enter into an
agreement or agreements whereby the Stockholders would exchange certain
shares of DKI Common Stock owned by them for shares of common stock of the
Acquisition Vehicle, and
WHEREAS, LVMH has caused the formation of Acquisition Sub in order to
serve as the Acquisition Vehicle, and
WHEREAS, concurrently with the execution and delivery of this
Agreement, LVMH, Acquisition Sub and DKI are entering into an Agreement and
Plan of Merger (as amended from time to time, the "MERGER AGREEMENT"),
providing for, among other things, a merger of Acquisition Sub with and
into DKI (the "DKI MERGER"), with DKI continuing as the surviving
corporation and a subsidiary of LVMH under the name "Xxxxx Karan
International Inc." (as such surviving corporation, "NEW DKI"), and
WHEREAS, the Merger Agreement and the DKI Merger have been approved
by the Board of Directors of DKI, and
WHEREAS, prior to the consummation of the Exchange (as hereafter
defined), the Certificate of Incorporation of Acquisition Sub will be
restated in the form attached hereto as EXHIBIT B to this Agreement, such
that Acquisition Sub's authorized capital stock will consist of 60,000,000
shares of common stock, par value $0.01 per share ("ACQUISITION SUB COMMON
STOCK"), and 1,000 shares of Series A Preferred Stock, par value $0.01 per
share (the "ACQUISITION SUB PREFERRED STOCK"), and
WHEREAS, prior to the consummation of the DKI Merger, LVMH will
contribute to Acquisition Sub an amount at least equal to the sum of (i)
the product of (a) $10.75 (the "DKI MERGER PRICE"), multiplied by (b) the
number of shares of DKI Stock issued and outstanding immediately prior to
the consummation of the DKI Merger (excluding shares of DKI Stock canceled
pursuant to the Merger Agreement), plus (ii) the product of (a) the
difference between the DKI Merger Price and the per share exercise price of
each outstanding option to purchase or acquire shares of DKI Stock,
multiplied by (b) the number of shares of stock subject to such option,
(such amount, in the aggregate, the "AGGREGATE DKI MERGER CONSIDERATION")
in exchange for (I) 1,000 shares of Acquisition Sub Preferred Stock and
(II) that number of shares of Acquisition Sub Common Stock equal to the
quotient of (A) the Aggregate DKI Merger Consideration less $130,000,000,
divided by (B) the DKI Merger Price (such number of shares, in the
aggregate, the "LVMH INITIAL COMMON SHARES"), and, with respect to any
shares for which stockholders have properly demanded appraisal pursuant to
Section 262 of the DGCL (as hereafter defined), (x) if the appraised value
per share of such shares (the "APPRAISAL PRICE") is greater than the DKI
Merger Price, LVMH will contribute to Acquisition Sub (or its successor) an
amount equal to the product of (i) the excess of the Appraisal Price over
the DKI Merger Price, multiplied by (ii) the number of shares with respect
to which appraisal rights were properly demanded, or (b) if the Appraisal
Price is less than the DKI Merger Price, Acquisition Sub (or its successor)
will return to LVMH an amount equal to the product of (i) the excess of the
DKI Merger Price over the Appraisal Price, multiplied by (ii) the number of
shares with respect to which appraisal rights were properly demanded, and
WHEREAS, as provided in the GS Agreement, the Stockholders desire to
exchange (the "EXCHANGE"), immediately prior to the consummation of the DKI
Merger, 3,115,456 shares (the "DKI EXCHANGE SHARES") of DKI Common Stock,
representing 14.0 percent of the outstanding shares of DKI Stock as of
March 28, 2000, for 3,115,456 shares (the "ACQUISITION SUB EXCHANGE
SHARES") of Acquisition Sub Common Stock, and
WHEREAS, immediately after giving effect to the Exchange, the
Stockholders will be the owners (either beneficially or of record) of the
number of shares of DKI Stock as is set forth on EXHIBIT C to this
Agreement, and
WHEREAS, each share of DKI Stock owned by the Stockholders, other
than the DKI Exchange Shares, will be converted in the DKI Merger into the
right to receive the Merger Consideration, as defined in the Merger
Agreement (such amount, in the aggregate, the "AGGREGATE STOCKHOLDER MERGER
CONSIDERATION"), which amount shall be equal to $22,871,597 and
WHEREAS, at the effective time of the closing of the DKI Merger (the
"DKI EFFECTIVE TIME") and by virtue of the DKI Merger, the Amended and
Restated Certificate of Incorporation of DKI as filed with the Secretary of
State of the State of Delaware, as amended, shall be further amended and
restated in the form attached as EXHIBIT D to this Agreement, such that,
among other things, New DKI's authorized capital stock will consist of (i)
60,000,000 shares of common stock, par value $0.01 per share ("NEW DKI
COMMON STOCK"), of which that number of shares equal to the sum of (a) the
number of LVMH Initial Common Shares, plus (b) 3,115,456 will be issued and
outstanding as of the closing of the DKI Merger, and (ii) 1,000 shares of
Series A Preferred Stock, par value $0.01 per share ("NEW DKI PREFERRED
STOCK"), all of which will be outstanding as of the closing of the DKI
Merger, and
WHEREAS, immediately following the effectiveness of the DKI Merger,
Karma will be merged with and into New DKI (the "KARMA MERGER"), with New
DKI continuing as a subsidiary of LVMH under the name "Xxxxx Karan
International Inc." (as such surviving corporation, "SUPERKARMA"), and
WHEREAS, also pursuant to the GS Agreement, LVMH and certain of the
Stockholders agreed that, in the event DKI and LVMH entered into, and the
Board of Directors of DKI approved, a definitive agreement contemplating a
merger transaction whereby LVMH would acquire a majority interest in DKI,
then the Stockholders would be granted options to purchase, immediately
following the consummation of the DKI Merger, (i) the LVMH Option Shares
(as hereafter defined) and (ii) the SuperKarma Option Shares (as hereafter
defined), such that, if both of such options are exercised in full, the
Stockholders shall own in the aggregate shares of the common stock of
SuperKarma, par value $0.01 per share ("SUPERKARMA COMMON STOCK"),
representing 14.3 percent of the shares of SuperKarma Common Stock then
outstanding,
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties
hereto agree as follows:
1. EXCHANGE OF SHARES.
1.1. OBLIGATION TO EXCHANGE SHARES. At the Exchange Closing (as
defined below), subject to the terms and conditions of this Agreement, each
of the Stockholders will sell, transfer and exchange each of the DKI
Exchange Shares owned by him for one (1) Acquisition Sub Exchange Share as
set forth herein. Each Stockholder will deliver to Xxxxx xxxx title to the
DKI Exchange Shares owned by him, free and clear of all claims, liens,
charges and encumbrances of any kind whatsoever ("LIENS"), and Acquisition
Sub will issue the Acquisition Sub Exchange Shares to the Stockholders free
and clear of all Liens.
1.2. MECHANICS OF EXCHANGE. At the Exchange Closing, each Stockholder
shall surrender his certificate or certificates for the DKI Exchange
Shares, duly endorsed or accompanied by duly executed stock powers, at the
offices of LVMH, unless another place is agreed to in writing by the
parties hereto, all in such form as to permit title to the DKI Exchange
Shares to be transferred to Acquisition Sub on the stock transfer records
of DKI. Upon such surrender, Acquisition Sub shall issue and deliver to
each Stockholder a certificate or certificates representing the Acquisition
Sub Exchange Shares to be issued, conveyed and delivered to the
Stockholders pursuant to SECTION 1.1.
1.3. EXCHANGE CLOSING. The closing of the Exchange (the "EXCHANGE
CLOSING") shall occur immediately prior to the closing of the DKI Merger,
subject to the satisfaction or waiver of the conditions set forth in
SECTION 5. The date on which the Exchange Closing occurs is referred to
herein as the "EXCHANGE CLOSING DATE". The Stockholders shall be treated as
the record holders of the Acquisition Sub Exchange Shares as of the close
of business on the Exchange Closing Date and Acquisition Sub shall be
treated as the record holder of the DKI Exchange Shares as of the close of
business on the Exchange Closing Date.
1.4. CERTIFICATE OF INCORPORATION AND BYLAWS. Immediately prior to
the consummation of the Exchange, the certificate of incorporation of
Acquisition Sub will be restated in the form attached hereto as EXHIBIT B
and the bylaws of Acquisition Sub will be restated in the form provided to
the Stockholders and attached as Exhibit B to the Merger Agreement.
2. KARMA MERGER
2.1. CONSUMMATION OF KARMA MERGER. Immediately following the
consummation of the DKI Merger, LVMH, as the sole stockholder of Karma, and
LVMH and the Stockholders, as the sole stockholders of New DKI, shall cause
the Karma Merger to be consummated by the filing of a certificate of merger
with the Secretary of State of the State of Delaware (the "KARMA
CERTIFICATE OF MERGER"), as provided in the General Corporation Law of the
State of Delaware (the "DGCL"), and shall make all other filings or
recordings required in connection therewith under the DGCL. The Karma
merger shall become effective upon such filing (the "KARMA EFFECTIVE
TIME").
2.2. EFFECTS OF THE KARMA MERGER.
2.2.1. DGCL; CERTIFICATE OF INCORPORATION AND BYLAWS. At and
after the Karma Effective Time, the separate corporate existence of Karma
shall cease, and New DKI shall continue as the surviving corporation under
the name "Xxxxx Karan International Inc." The Karma Merger shall have the
effects as set forth in the applicable provisions of the DGCL and the Karma
Certificate of Merger filed with the Secretary of State of the State of
Delaware. From and after the Karma Effective Time, SuperKarma shall possess
all of the rights, powers, privileges and franchises and be subject to all
of the obligations, liabilities, restrictions and disabilities of Karma and
New DKI, all as provided under the DGCL and the Karma Certificate of
Merger. At the Karma Effective Time, the certificate of incorporation and
bylaws of New DKI, as in effect immediately prior to the Karma Effective
Time and in the form provided to the Stockholders (and, in the case of the
certificate of incorporation, the form attached hereto as EXHIBIT D, and,
in the case of the bylaws, in the form attached to the Merger Agreement as
Exhibit B), shall be the certificate of incorporation and bylaws of
SuperKarma, each until duly amended in accordance with the terms thereof
and the DGCL.
2.2.2. EFFECT ON CAPITAL STOCK. At the Karma Effective Time, by
virtue of the Karma Merger and without any action on the part of LVMH, the
Stockholders, Karma or New DKI, (i) all of the shares of common stock of
Karma issued and outstanding immediately prior to the Karma Effective Time,
in the aggregate, shall be converted into and become 37,209,302 fully paid
and non-assessable shares of SuperKarma Common Stock (such number of
shares, in the aggregate, the "LVMH KARMA COMMON SHARES") and (ii) each
share of New DKI Common Stock and of New DKI Preferred Stock issued and
outstanding immediately prior to the Karma Effective Time shall remain in
existence as outstanding shares of common stock and preferred stock of
SuperKarma as the surviving company, in each case with the same rights,
powers and privileges as such shares held prior to consummation of the
Karma Merger.
2.2.3. POST-KARMA MERGER OWNERSHIP OF SUPERKARMA STOCK.
Immediately after and as a result of the Karma Merger, LVMH will own that
number of shares of the issued and outstanding SuperKarma Common Stock
equal to the sum of the LVMH Initial Common Shares plus the LVMH Karma
Common Shares (such number of shares, in the aggregate, the "LVMH INITIAL
SUPERKARMA COMMON SHARES") and 1,000 shares of Series A Preferred Stock,
and the Stockholders will collectively own 3,115,456 shares of the issued
and outstanding SuperKarma Common Stock (collectively with the LVMH Initial
SuperKarma Common Shares, the "INITIAL SUPERKARMA COMMON SHARES").
3. GRANT OF OPTIONS.
3.1. GRANT OF AND PAYMENT FOR LVMH OPTION. Subject to the other terms
and conditions set forth herein, LVMH hereby grants to the Stockholders an
irrevocable option (the "LVMH OPTION") to purchase, following the Karma
Merger, for an aggregate purchase price equal to the Aggregate Stockholder
Merger Consideration (which amount shall be equal to $22,871,597),
1,895,581 shares of SuperKarma Common Stock (the "LVMH OPTION SHARES").
3.2. GRANT OF AND PAYMENT FOR SUPERKARMA OPTION. Subject to the other
terms and conditions set forth herein, and in the event the LVMH Option is
exercised, Acquisition Sub hereby grants to the Stockholders an irrevocable
option (the "SUPERKARMA OPTION" and together with the LVMH Option, the
"OPTIONS") to purchase from SuperKarma, for an aggregate purchase price
equal to U.S.$25 million, that number of newly issued shares (the
"SUPERKARMA OPTION SHARES") of SuperKarma Common Stock equal to the excess
of (a) 14.30 percent of the sum of (i) the number of Initial SuperKarma
Common Shares, plus (ii) the number of SuperKarma Option Shares, over (b)
5,011,037. For illustrative purposes only, if the number of shares of DKI
Stock issued and outstanding immediately prior to the DKI Merger is the
same as the number of shares of DKI Stock issued and outstanding as of
March 28, 2001, then the ownership of the SuperKarma Common Stock and
SuperKarma Preferred Stock (A) immediately following the SuperKarma Merger,
(B) immediately following the purchase of the LVMH Option Shares by the
Stockholders and (C) immediately following the purchase of the SuperKarma
Option Shares by the Stockholders will be as set forth on EXHIBIT E hereto.
3.3. EXERCISE OF OPTIONS. If and on the conditions that (i) the
Exchange is consummated, (ii) the DKI Merger is consummated, (iii) the
Karma Merger is consummated and (iv) the conditions set forth in SECTION 5
have been satisfied or waived, then the Stockholders may exercise the LVMH
Option, in whole but not in part, at any time during the period of time
beginning at the Karma Effective Time and ending at 5:00 p.m. on the
following day. If (i) the Exchange is consummated, (ii) the DKI Merger is
consummated, (iii) the Karma Merger is consummated, (iv) the Stockholders
exercise the LVMH Option, and (v) the conditions set forth in SECTION 5
have been satisfied or waived, then the Stockholders may exercise the
SuperKarma Option, in whole but not in part, at any time during the period
of time beginning at the Karma Effective Time and ending at 5:00 p.m. on
the following day. In the event the Stockholders wish to exercise the LVMH
Option or the SuperKarma Option, the Stockholders shall deliver to LVMH and
Acquisition Sub a written notice (an "EXERCISE NOTICE") of such election(s)
no later than 5:00 p.m. on the day after the Karma Effective Time.
3.4. OPTION CLOSING. On the terms and subject to the conditions
contained in this Agreement, as soon as practicable on or after, but in no
event later than five (5) days after, the date that the conditions
contained in SECTION 3.5 and/or 3.6 (as applicable) and SECTION 5 below
have been satisfied or waived (the "OPTION CLOSING DATE"), the Stockholders
shall purchase from LVMH, and LVMH shall sell to the Stockholders, the LVMH
Option Shares, and if the SuperKarma Option is exercised, the Stockholders
shall purchase from SuperKarma, and LVMH and the Stockholders shall cause
SuperKarma to sell to the Stockholders, the SuperKarma Option Shares, in
each case free and clear of all Liens. The closing of such purchase and
sale pursuant to either of the Options duly exercised (the "OPTION
CLOSING") shall occur at 10:00 a.m., New York time, on the Option Closing
Date at the offices of LVMH or at such other place as the parties mutually
agree and shall be deemed to be effective as of 11:59 p.m., New York time,
on the Option Closing Date.
3.5. LVMH OPTION CLOSING DELIVERIES. At the Option Closing of a
purchase and sale pursuant to the due exercise of the LVMH Option only, and
not of the SuperKarma Option, (i) LVMH shall deliver to the Stockholders
certificates evidencing, in aggregate, all of the LVMH Option Shares,
properly endorsed by LVMH, accompanied by such stock powers and other
documents as may be necessary (or reasonably requested by the Stockholders)
to transfer record ownership of such LVMH Option Shares into the name or
names of the Stockholders designated by the Stockholders (the "DESIGNATED
STOCKHOLDERS") on the stock transfer records of SuperKarma and (ii) the
Designated Stockholders shall deliver to LVMH an aggregate amount equal to
the Aggregate Stockholder Merger Consideration (which amount shall be equal
to $22,871,597) (and payable by each Designated Stockholder in proportion
to the LVMH Option Shares received by such Designated Stockholder) by wire
transfer of immediately available funds to the account directed by LVMH.
3.6. LVMH OPTION AND SUPERKARMA OPTION CLOSING DELIVERIES. At the
Option Closing of a purchase and sale pursuant to the due exercise of both
Options, (i) LVMH and the Designated Stockholders shall make the deliveries
to each other set forth in clauses (i) and (ii) of SECTION 3.5, (ii) LVMH
and the Stockholders shall cause SuperKarma to deliver to the Stockholders
certificates evidencing, in aggregate, all of the SuperKarma Option Shares
and to register the Option Shares in the name or names of the Stockholders
designated by the Stockholders (also the "DESIGNATED STOCKHOLDERS") on the
stock transfer records of SuperKarma, and (iii) the Designated Stockholders
shall deliver to SuperKarma an aggregate amount equal to U.S.$25 million
(and payable by each Designated Stockholder in proportion to the SuperKarma
Option Shares received by such Designated Stockholder) by wire transfer of
immediately available funds to the account directed by SuperKarma.
4. REPRESENTATIONS AND WARRANTIES.
4.1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each
Stockholder jointly and severally represents and warrants to LVMH,
Acquisition Sub and Karma as follows:
4.1.1. ORGANIZATION AND AUTHORITY OF THE TRUST. Trust FBO Xxxx
Xxxxx Xxxxx, Xxxxx Xxxxx and Xxxxxxxxx Xxxxx U/A/D 2/2/96 (the "LCG Trust")
is an irrevocable trust, duly created, validly existing and in good
standing under the laws of the State of New York. The Xxxxxxx Xxxxx and
Xxxxx Karan Alaska Community Property Trust (the "ALASKA TRUST") is an
Alaska Community Property Trust, duly created, validly existing and in good
standing under the laws of the State of Alaska. The 2000 Xxxxxx Xxxxx
Revocable Trust (collectively with the LCG Trust and the Alaska Trust, the
"TRUSTS"), is a revocable trust, duly created, validly existing and in good
standing under the laws of the State of New York.
4.1.2. AUTHORITY OF STOCKHOLDERS. Each of the Stockholders has
full legal capacity, and, in the case of the Trusts, trust power, to enter
into, execute and perform this Agreement. The execution and delivery by the
Trusts of this Agreement and the performance by the Trusts of their
obligations hereunder and the consummation of the transactions contemplated
hereby have been duly authorized and approved by all requisite trust
action. This Agreement has been duly executed and delivered by a duly
authorized trustee of each Trust. This Agreement constitutes a valid and
legally binding obligation of each of the Stockholders, enforceable against
each of the Stockholders in accordance with its terms (except to the extent
that enforcement may be affected by laws relating to bankruptcy,
reorganization, insolvency and creditors' rights and by the availability of
injunctive relief, specific performance and other equitable remedies).
4.1.3. CONSENTS. No consent, waiver, authorization, order or
approval of, or filing or registration with, any court or agency,
commission, department or body of any local, state, federal or foreign
governmental, regulatory, administrative or judicial governmental entity or
authority ("GOVERNMENTAL AUTHORITY") or other person or entity, or under or
with respect to any permit, license, contract, agreement or other
instrument to which any of the Stockholders is a party or by which any of
the Stockholders is, or their respective assets are, bound or affected, is
required for or in connection with the execution and delivery by any of the
Stockholders of this Agreement and the consummation by any of the
Stockholders of the transactions contemplated hereby, except for the same
as may be required pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR ACT"), the Securities Act of 1933, as
amended (the "SECURITIES ACT"), the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), and any comparable laws in non-U.S.
jurisdictions.
4.1.4. NO CONFLICTS. Neither the execution and delivery of this
Agreement by any of the Stockholders, nor the consummation by any of the
Stockholders of the transactions contemplated hereby, will (i) violate,
conflict with or result in a breach of any of the terms, conditions or
provisions of DKI's Amended and Restated Certificate of Incorporation or
Amended and Restated Bylaws, (ii) violate, conflict with or result in a
breach of any of the terms, conditions or provisions of any Trust's trust
agreement or other constituent documents, (iii) violate, conflict with or
result in a breach of any law or order, ruling, injunction, judgment or
determination of any court or other Governmental Authority ("GOVERNMENTAL
ORDER") to which any of the Stockholders is a party or by which any of the
Stockholders is, or their respective assets are, bound or affected, or (iv)
violate, conflict with or result in a breach of or constitute a default (or
event which, with the giving of notice or the passage of time, or both,
would become a default) under, require a consent under, or give to others
any rights of termination, amendment, acceleration, suspension, revocation
or cancellation of, or result in the creation of any Liens on any of the
assets or properties of any of the Stockholders pursuant to, or result in
any payment or charge under, any permit, license, contract or agreement to
which any Stockholder is a party or by which any Stockholder, or any of
such Stockholder's assets or properties, is bound or affected, and no such
permit, license, contract or agreement shall prohibit or delay the timely
performance by the Stockholders of their respective obligations under this
Agreement. 4.1.5. NO LITIGATION. Except for the Actions (as hereafter
defined) listed on SCHEDULE 4.1.5 and any other Actions that may hereafter
be filed involving the facts, transactions and occurrences alleged in such
Actions, there is no claim, action, suit, inquiry, proceeding or
investigation before any Governmental Authority or other dispute resolution
proceeding ("ACTION") pending or, to the best knowledge of the
Stockholders, threatened, against any Stockholder that could reasonably be
expected to impair the ability of such Stockholder to perform its
obligations hereunder.
4.1.6. OWNERSHIP. With respect to the Exchange Closing, each
Stockholder owns beneficially and of record the DKI Stock as shown on
EXHIBIT A, and such shares constitute all the shares of DKI Stock owned
beneficially and of record by such Stockholder. Each Trust has full trust
power and authority to own the DKI Stock owned by it. Each of the
Stockholders has good, valid and marketable title to the DKI Stock, free
and clear of all Liens, options, proxies, voting trusts or voting
agreements, other than as set forth in the Shareholders Agreement dated as
of June 10, 1996 among DKI, certain of the Stockholders, and certain other
parties thereto (which agreement has not been amended or modified as of the
date hereof) (the "DKI SHAREHOLDERS AGREEMENT") and the Voting Agreement
dated as of the date hereof among DKI, Acquisition Sub, LVMH and the
Stockholders (the "DK VOTING AGREEMENT"). Other than the DKI Shareholders
Agreement and the DK Voting Agreement, there are no outstanding
subscriptions, options, warrants, rights (including preemptive rights),
calls, or other agreements or commitments of any character relating to the
DKI Stock owned by the Stockholders or to any corporate governance matters.
When delivered by such Stockholder to Acquisition Sub in accordance with
this Agreement, good, marketable and valid title in and to the DKI Exchange
Shares will be transferred to Acquisition Sub, free and clear of all Liens.
4.2. REPRESENTATIONS AND WARRANTIES OF LVMH AND KARMA. Each of LVMH,
Acquisition Sub and Karma (collectively referred to herein as the
"LVMH/KARMA COMPANIES") jointly and severally represents to each
Stockholder as follows:
4.2.1. ORGANIZATION AND AUTHORITY. Each of the LVMH/Karma
Companies is a corporation duly organized, validly existing and in good
standing, under the laws of the State of Delaware. Each of the LVMH/Karma
Companies has full corporate power and authority to enter into and perform
this Agreement. The execution and delivery by each of the LVMH/Karma
Companies of this Agreement and the performance by each of the LVMH/Karma
Companies of its respective obligations hereunder and the consummation of
the transactions contemplated hereby have been duly authorized and approved
by all requisite corporate action. This Agreement has been duly executed
and delivered by a duly authorized officer of each of the LVMH/Karma
Companies, and constitutes a valid and legally binding obligation of each
of the LVMH/Karma Companies, enforceable against each in accordance with
its terms (except to the extent that enforcement may be affected by laws
relating to bankruptcy, reorganization, insolvency and creditors' rights
and by the availability of injunctive relief, specific performance and
other equitable remedies).
4.2.2. CONSENTS. No consent, waiver, authorization, order or
approval of, or filing or registration with, any Governmental Authority or
other person or entity, or under or with respect to any permit, license,
contract, agreement or other instrument to which any of the LVMH/Karma
Companies is a party or by which any of the LVMH/Karma Companies is, or
their respective assets are, bound or affected, is required for or in
connection with the execution and delivery by any of the LVMH/Karma
Companies of this Agreement, and the consummation by any of the LVMH/Karma
Companies of the transactions contemplated hereby, except for the same as
may be required pursuant to the HSR Act, the Securities Act, the Exchange
Act, and any comparable laws in non-U.S. jurisdictions.
4.2.3. NO CONFLICTS. Neither the execution and delivery of this
Agreement by any of the LVMH/Karma Companies, nor the consummation by any
of the LVMH/Karma Companies of the transactions contemplated hereby, will
(i) violate, conflict with or result in a breach of any of the terms,
conditions or provisions of their respective Certificates of Incorporation
or Bylaws, (ii) violate, conflict with or result in a breach of any law or
Governmental Order to which any of the LVMH/Karma Companies is a party or
by which any of the LVMH/Karma Companies is, or its respective assets are,
bound or affected, or (iii) violate, conflict with or result in a breach of
or constitute a default (or event which, with the giving of notice or the
passage of time, or both, would become a default) under, require a consent
under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Liens on any of the assets or properties of any of the
LVMH/Karma Companies pursuant to, or result in any payment or charge under,
any permit, license, contract or agreement to which any of the LVMH/Karma
Companies is a party or by which any of the LVMH/Karma Companies, or any of
their respective assets or properties, is bound or affected, and no such
permit, license, contract or agreement shall prohibit or delay the timely
performance by any of the LVMH/Karma Companies of its respective
obligations under this Agreement.
4.2.4. LITIGATION. Except for the Actions listed on SCHEDULE
4.1.5 and any other Actions that may hereafter be filed involving the
facts, transactions and occurrences alleged in such Actions, there is no
Action pending or, to the best knowledge of the LVMH/Karma Companies,
threatened, against any of the LVMH/Karma Companies that could reasonably
be expected to impair the ability of any of the LVMH/Karma Companies to
perform its respective obligations hereunder.
4.2.5. ACQUISITION SUB COMMON STOCK. As of the date hereof,
LVMH owns all of the issued and outstanding shares of Acquisition Sub
Common Stock. Except as contemplated hereby, there are no outstanding
subscriptions, options, warrants, rights (including preemptive rights),
calls, or other agreements or commitments of any character relating to any
shares of Acquisition Sub Common Stock or other equity interests in
Acquisition Sub, except as contemplated by the GS Agreement (including the
Shareholders Agreement (as hereafter defined)). Other than the Merger
Agreement, the GS Agreement, the DK Voting Agreement and this Agreement,
there are no agreements or understandings to which any of the LVMH/Karma
Companies is a party with respect to the shares of Acquisition Sub Common
Stock or to any corporate governance matters. Upon the Exchange Closing,
the Stockholders will obtain good, valid and marketable title to the
Acquisition Sub Exchange Shares, free and clear of all Liens, and the
Acquisition Sub Exchange Shares shall be validly issued, fully paid and
non-assessable. Upon the Option Closing, the Stockholders will obtain good,
valid and marketable title to the LVMH Option Shares (at the Option Closing
of a purchase and sale pursuant to the due exercise of the LVMH Option
only) or the LVMH Option Shares and the SuperKarma Option Shares (at the
Option Closing of a purchase and sale pursuant to the due exercise of both
Options), free and clear of all Liens, and the Karma Option Shares shall be
validly issued, fully paid and non-assessable.
4.2.6. ASSETS AND LIABILITIES OF ACQUISITION SUB. Immediately
prior to the consummation of the DKI Merger, Acquisition Sub will not have
any assets other than cash sufficient to pay the Merger Consideration and
the Option Consideration (each as defined in the Merger Agreement) to each
stockholder of DKI in accordance with Sections 3.2.1 and 3.5.1 of the
Merger Agreement. Immediately prior to the consummation of the DKI Merger,
Acquisition Sub will not have any liabilities, whether absolute or
contingent, other than pursuant to or in connection with this Agreement,
the GS Agreement (including Annex A attached thereto), the Merger Agreement
and the undertaking of the transactions contemplated hereby and thereby.
Since the formation of Acquisition Sub, there has occurred no event which
has resulted in, or which could reasonably be expected to result in, a
material adverse effect on the operations, business, assets or condition
(financial or otherwise) of Acquisition Sub, other than in connection with
this Agreement, the Merger Agreement, the GS Agreement (including Annex A
attached thereto), and the DK Voting Agreement and the undertaking of the
transactions contemplated hereby and thereby.
5. CONDITIONS PRECEDENT TO THE EXCHANGE CLOSING AND THE OPTION CLOSING.
5.1. CONDITIONS TO THE STOCKHOLDERS' OBLIGATIONS. In addition to the
satisfaction of the conditions otherwise set forth in this Agreement, the
obligation of each of Stockholders to consummate and close the transactions
contemplated hereby is subject to the fulfillment of all of the following
conditions on or prior to the Exchange Closing Date (with respect to the
Exchange) and the Option Closing Date (with respect to the Options) (unless
satisfaction of any such condition is expressly waived in writing by all of
the Stockholders, or unless any of the Stockholders causes such condition
not to be satisfied).
5.1.1. REPRESENTATIONS AND WARRANTIES CORRECT. Each and every
representation and warranty made by the LVMH/Karma Companies shall have
been true and correct when made and shall be true and correct as if
originally made on and as of the Exchange Closing Date or the Option
Closing Date, as applicable, except where the failure of such
representations and warranties to be so true and correct does not have and
is not reasonably likely to have an effect (other than a de minimus effect)
on the ability of any of the LVMH/Karma Companies to consummate the
transactions contemplated hereby.
5.1.2. COMPLIANCE WITH COVENANTS. All obligations of the
LVMH/Karma Companies to be performed hereunder prior to the Exchange
Closing Date or the Option Closing Date, as applicable, including those set
forth in SECTION 1.2, SECTION 3.5 and/or SECTION 3.6, as applicable, shall
have been performed in all material respects.
5.1.3. NO ACTION. No Action shall have been instituted or
pending by any Governmental Authority on any grounds to restrain, enjoin or
hinder, or to seek a material amount of damages on account of, the
consummation of the transactions contemplated hereby.
5.1.4. EXPIRATION OF WAITING PERIOD. The waiting period (and
any extension thereof) applicable to the transactions contemplated by this
Agreement under the HSR Act, if applicable, shall have expired or been
terminated.
5.1.5. CLOSING DELIVERIES. Acquisition Sub or SuperKarma, as
applicable, shall have delivered to the Stockholders all of the following:
(i) a copy of the Restated Certificate of Incorporation
of Acquisition Sub, as in effect immediately prior to the Exchange Closing
and/or the Option Closing, as applicable, and a copy of the Certificate of
Good Standing of Acquisition Sub, each certified as of a recent date by the
Secretary of State of the State of Delaware;
(ii) a certificate of the Chief Executive Officer or the
President of Acquisition Sub, dated the Exchange Closing Date or the Option
Closing Date, as applicable, to the effect that the conditions specified in
this SECTION 5.1 have been satisfied fully;
(iii) a certificate of the Secretary or an Assistant
Secretary of Acquisition Sub, dated the Exchange Closing Date or the Option
Closing Date, as applicable, as to (A) no amendments to the Restated
Certificate of Incorporation of Acquisition Sub since the date of
certification referenced in subparagraph (i) above; (B) its By-Laws; (C)
the resolutions duly adopted by its Board of Directors authorizing and
approving, as appropriate, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby; and
(D) with respect to the Exchange Closing only, resolutions of LVMH, as the
sole stockholder of Acquisition Sub, approving the Restated Certificate of
Incorporation of Acquisition Sub;
(iv) a definitive copy of the Shareholders Agreement by
and among Acquisition Sub, LVMH and the Stockholders, which shall be in the
form attached hereto as EXHIBIT F (the "SHAREHOLDERS AGREEMENT"), duly
executed by Acquisition Sub and LVMH; and
(v) a definitive copy of the Tax Sharing Agreement by and
among LVMH, Karma, Acquisition Sub and GS, which shall be in the form
attached hereto as EXHIBIT G, duly executed by each of the parties thereto.
5.1.6. CLOSING OF MERGER. All of the conditions to the
consummation of the DKI Merger, as set forth in the Merger Agreement, shall
have been satisfied or waived as provided therein.
5.2. CONDITIONS TO THE LVMH/KARMA COMPANIES' OBLIGATIONS. In addition
to the satisfaction of the conditions otherwise set forth in this
Agreement, the obligation of each of the LVMH/Karma Companies to close the
transactions contemplated hereby is subject to the fulfillment of all of
the following conditions on or prior to the Exchange Closing Date (with
respect to the Exchange) and the Option Closing Date (with respect to the
Options) (unless satisfaction of any such condition is expressly waived in
writing by the LVMH/Karma Companies or unless the LVMH/Karma Companies
cause such condition not to be satisfied).
5.2.1. REPRESENTATIONS AND WARRANTIES CORRECT. Each and every
representation and warranty made by the Stockholders shall have been true
and correct when made and shall be true and correct as if originally made
on and as of the Exchange Closing Date or the Option Closing Date, as
applicable, except where the failure of such representations and warranties
to be so true and correct does not have and is not reasonably likely to
have an effect (other than a de minimus effect) on the ability of any
Stockholder to consummate the transactions contemplated hereby.
5.2.2. COMPLIANCE WITH COVENANTS. All obligations of each of
the Stockholders to be performed hereunder prior to the Exchange Closing
Date or the Option Closing Date, as applicable, including those set forth
in SECTION 1.2, SECTION 3.5 and/or SECTION 3.6, as applicable, shall have
been performed in all material respects.
5.2.3 NO ACTION. No Action shall have been instituted or
pending by any Governmental Authority on any grounds to restrain, enjoin or
hinder, or to seek a material amount of damages on account of, the
consummation of the transactions contemplated hereby.
5.2.4. EXPIRATION OF WAITING PERIOD. The waiting period (and
any extension thereof) applicable to the transactions contemplated by this
Agreement under the HSR Act, if applicable, shall have expired or been
terminated.
5.2.5. CLOSING DELIVERIES. The Stockholders shall deliver to
the LVMH/Karma Companies each of the following:
(i) a certificate, duly executed by each of the Stockholders,
dated the Exchange Closing Date or the Option Closing Date, as applicable,
to the effect that the conditions specified in this SECTION 5.2 have been
satisfied fully; and
(ii) a definitive copy of the Shareholders Agreement, duly
executed by each of the Stockholders.
5.2.6. CLOSING OF DKI MERGER. All of the conditions to the
consummation of the DKI Merger, as set forth in the Merger Agreement, shall
have been satisfied or waived as provided therein.
6. OTHER AGREEMENTS.
6.1. SHAREHOLDERS AGREEMENT. Simultaneously with the Exchange
Closing, Acquisition Sub, LVMH and the Stockholders shall enter into the
Shareholders Agreement.
6.2. GS PURCHASE PRICE.
6.2.1. RETURN OF PORTION OF GS PURCHASE PRICE. The Stockholders
acknowledge that, pursuant to the GS Agreement, certain of the Stockholders
agreed that, in the event that LVMH (i) entered into a definitive agreement
with DKI for the merger of LVMH (or any of its affiliates) with DKI on or
before June 15, 2001, and (ii) subsequently consummates such merger
substantially in accordance with the terms of such definitive agreement,
then the purchase price for the shares of GS would be reduced by $50
million, and the Stockholders would, concurrently with the consummation of
such merger, return to LVMH $50 million, net of that certain amount set
forth on Schedule 2.2 to the GS Agreement (the "NET TAX Adjustment"). The
Stockholders further acknowledge the consummation of the DKI Merger will
fulfill the foregoing conditions, and therefore affirm that, upon the
consummation of the DKI Merger, LVMH shall be entitled to receive from the
Stockholders, and the Stockholders shall pay to LVMH concurrently with the
closing of the DKI Merger, by wire transfer of immediately available funds,
$50 million, net of the Net Tax Adjustment (as so adjusted, the "REFUND
AMOUNT").
6.2.2. TAX ADJUSTMENT CALCULATION. No later than May 15, 2001,
the Stockholders shall deliver to LVMH their calculation of the Net Tax
Adjustment (such amount, the "STOCKHOLDERS' CALCULATION OF THE NET TAX
ADJUSTMENT"), calculated in accordance with Schedule 2.2 to the GS
Agreement (the "TAX ADJUSTMENT NOTICE"). If LVMH disputes the Stockholders'
Calculation of the Net Tax Adjustment set forth in the Tax Adjustment
Notice, it shall so advise the Stockholders in writing and shall deliver to
the Stockholders its calculation of the Net Tax Adjustment (the "LVMH
DISPUTE NOTICE") no later than two (2) weeks after its receipt of the Tax
Adjustment Notice, and the parties shall attempt in good faith to resolve
the dispute prior to the Exchange Closing Date. If LVMH does not dispute
the Stockholders' Calculation of the Net Tax Adjustment, then the
Stockholders shall return and pay to LVMH an amount equal to $50 million
less the Stockholders' Calculation of the Net Tax Adjustment concurrently
with the closing of the DKI Merger, by wire transfer of immediately
available funds. If LVMH disputes the Stockholders' Calculation of the Net
Tax Adjustment, and the parties are able to resolve such dispute, then the
stockholders shall return and pay to LVMH an amount equal to $50 million
less the amount of the Net Tax Adjustment as agreed to by the parties
concurrently with the closing of the DKI Merger, by wire transfer of
immediately available funds. If LVMH disputes the Stockholders' Calculation
of the Net Tax Adjustment and the parties are unable to resolve the dispute
prior to the Exchange Closing Date, then (i) the Stockholders shall return
and pay to LVMH an amount equal $50 million less the Stockholders'
Calculation of the Net Tax Adjustment concurrently with the closing of the
DKI Merger, by wire transfer of immediately available funds, (ii) the
calculation of the Net Tax Adjustment shall be subject to the special
dispute resolution procedures set forth in SECTION 6.2.3 below and (iii)
upon the determination of the amount of the Net Tax Adjustment by the
Independent Accountants (as defined in SECTION 6.2.3) (such amount, the
"INDEPENDENT ACCOUNTANTS CALCULATION OF THE NET TAX ADJUSTMENT"), any
difference between the Stockholders' Calculation of the Net Tax Adjustment
and the Independent Accountants' Calculation of the Net Tax Adjustment
shall be paid or refunded as follows: (x) if the Independent Accountants'
Calculation of the Net Tax Adjustment is less than the Stockholders'
Calculation of the Net Tax Adjustment, then the Stockholders shall promptly
pay to LVMH the amount of such difference by wire transfer of immediately
available funds or (y) if the Independent Accountants' Calculation of the
Net Tax Adjustment exceeds the amount of the Net Tax Adjustment as
calculated by the Stockholders, then LVMH shall promptly refund and pay to
the Stockholders the amount of such difference by wire transfer of
immediately available funds. In the event that, following the date of
determination of the Net Tax Adjustment in accordance with the provisions
of this SECTION 6 there is a change in any federal, state or local tax law,
ordinance, rule, code, order or regulation that would have an effect on the
amount of the Net Tax Adjustment, LVMH and the Stockholders shall endeavor
in good faith to re-calculate the amount of the Net Tax Adjustment, and any
dispute regarding such re-calculation shall be subject to the special
dispute resolution procedures set forth in SECTION 6.2.3.
6.2.3. SPECIAL DISPUTE RESOLUTION PROCEDURES. In the event LVMH
and the Stockholders are unable to resolve any dispute regarding the amount
of the Net Tax Adjustment prior to the Exchange Closing Date, LVMH and the
Stockholders shall jointly appoint, for the purpose of calculating the
amount of the Net Tax Adjustment, a mutually acceptable nationally
recognized independent certified public accounting firm which has not been
engaged by the LVMH/Karma Companies or any of the Stockholders (the
"INDEPENDENT ACCOUNTANTS") or, if they cannot agree on a mutually
acceptable firm, they shall cause the accounting firms of LVMH and the
Stockholders to select such firm; provided, however, that, if both have
engaged the same firm, such firm shall select another firm to serve as the
Independent Accountants within two (2) weeks after LVMH delivers the LVMH
Dispute Notice. The cost of the Independent Accountants shall be borne
equally by LVMH and the Stockholders. LVMH and the Stockholders shall use
commercially reasonable efforts to cooperate fully with the Independent
Accountants. The Independent Accountants shall be instructed to reach their
conclusion regarding the calculation of the Net Tax Adjustment, and to
advise LVMH and the Stockholders of such calculation, within twenty (20)
days of their appointment. Any resolution by the Independent Accountants of
the Net Tax Adjustment shall be conclusive and binding on LVMH and the
Stockholders.
6.3. WAIVERS.
6.3.1. STOCKHOLDERS' WAIVER. In light of the DKI Merger and in
connection with becoming shareholders of Acquisition Sub, the Stockholders
agree that, as of the Exchange Closing Date, they waive and release any and
all claims, suits, damages, actions, causes of action, liabilities,
obligations, penalties, judgments, decrees, costs and expenses
(collectively, "CLAIMS") they have or may have as of the Exchange Closing
Date (i) against, and any and all obligations of or liabilities from, any
of Acquisition Sub, Karma, GS and/or DKI or any of their respective
subsidiaries, (ii) for the reimbursement of expenses for purchases of
apparel, samples and other items relating to the inspirational, design,
advertising and public relations materials and items maintained and
archived by DKI (collectively, the "INSPIRATION LIBRARY"), and/or (iii) in
connection with, by reference to or arising under that certain License
Agreement dated as of July 3, 1996 between GS and The Xxxxx Karan Studio,
as the same may have been amended (the "LICENSE AGREEMENT") (including any
Claims relating to the calculation and/or payment of Sales Royalty (as
defined in the GS Agreement) and the conduct of Licensor Audits (as defined
in the GS Agreement)), and any and all Claims against and/or obligations of
LVMH or Karma to pay, or to allow the Stockholders to conduct Licensor
Audits with respect to, the amounts set forth in Section 2.3 of the GS
Agreement with respect to any period or periods prior to January 1, 2001;
provided, however, that the foregoing waiver in this clause (iii) shall not
in any way limit or diminish (x) the Stockholders' right to receive
payments in respect of accrued Sales Royalty in accordance with Section
2.3.2 of the GS Agreement in an amount equal to the pro-rated portion
applicable to the period from January 1, 2001 through January 17, 2001 (the
"JANUARY PERIOD") of the Sales Royalty for the quarter including the
January Period (the Sales Royalty applicable to such quarter, the "FIRST
QUARTER 2001 ROYALTY") or (y) the Stockholders' right to conduct a Licensor
Audit of the First Quarter 2001 Royalty, except that the Stockholders shall
waive any Claims relating to the conduct of a Licensor Audit of the First
Quarter 2001 Royalty if DKI calculates and pays the amount of the First
Quarter 2001 Royalty in substantially the same manner as the manner in
which DKI calculated and paid the Sales Royalties in the year 2000
(notwithstanding that such manner of calculation and payment may differ
from the manner of calculation set forth in the License Agreement); other
than (A) Claims by Xxxxx Karan ("KARAN") for salary then due in the
ordinary course or by Karan or Xxxxxxx Xxxxx for business expense
reimbursements incurred in the ordinary course (other than those expenses
for purchases of items relating to the Inspiration Library referred to in
clause (ii) of this SECTION 6.3.1) and employee benefits, all in accordance
with that certain employment agreement dated as of July 3, 1996 between DKI
and Karan, that certain employment agreement dated as of July 3, 1996
between DKI and Xxxxxxx Xxxxx, respectively, and as either of the same may
have been amended, (B) Claims against DKI for indemnification, exculpation
and advancement of expenses for directors of DKI pursuant to the terms of
the Restated Certificate of Incorporation and By-Laws of DKI or otherwise
heretofore granted or provided to the Stockholders, (C) Claims in
connection with, by reference to or arising under this Agreement, the DK
Voting Agreement, the GS Agreement, as assigned to Karma pursuant to that
certain Assignment dated January 11, 2001 (other than Claims referred to in
clause (iii) of this SECTION 6.3.1), the Shareholders Agreement, the
Employment Agreement to be entered into as of the closing of the DKI Merger
between New DKI and Karan, the License Agreement dated February 20, 2001,
between XX XX, LLC and GS (the "XX XX LICENSE AGREEMENT"), any and all
documents reasonably necessary to be executed to effectuate the
transactions contemplated by the side letter dated December 15, 2000
between GS, Urban Zen, LLC and LVMH in connection with the store at 000
Xxxxxxx Xxxxxx, any and all documents reasonably necessary to effectuate
the transactions and relationships contemplated by that section of Annex A
to the GS Agreement entitled "Urban Zen", and any other documents to be
entered into between the Stockholders and any or all of the LVMH/Karma
Companies reasonably necessary to effectuate the purpose and intent of the
GS Agreement, (the agreements referred to in this clause (C) collectively,
the "NEW AGREEMENTS"), and (D) counterclaims or cross claims properly
brought by the Stockholders after the date hereof ("COUNTERCLAIMS") in
response to lawsuits filed against any of the Stockholders after the date
hereof and prior to the Exchange Closing Date (any such lawsuit, a "DKI
LAWSUIT"); provided, however, that no such Counterclaim may relate to or
seek damages with respect to the payment or calculation of Sales Royalties
for which Claims have been waived pursuant to clause (iii) of this SECTION
6.3.1, and provided, further, that any such Counterclaim shall be
withdrawn, dismissed and released in the event that the applicable DKI
Lawsuit is withdrawn, abandoned, released or dismissed (and is not subject
to further appeal) for any reason.
6.3.2. DKI WAIVER. In light of the DKI Merger and in connection
with the Stockholders becoming shareholders of Acquisition Sub and New DKI
(as the successor of Acquisition Sub), LVMH agrees that, at the DKI
Effective Time, it shall cause Acquisition Sub, Karma, GS and New DKI to
waive and release any and all Claims they had or may have had as of the
Exchange Closing Date against, and any and all obligations of or
liabilities from, any of the Stockholders, other than (A) Claims in
connection with, by reference to or arising under the New Agreements, (B)
the rights of GS to use those trademarks and other intellectual property
(w) granted to GS pursuant to that certain agreement (as revised, amended
and restated) dated as of December 21, 1984 by and between Karan and GS,
(x) conveyed and to be conveyed by Karan to GS pursuant to that certain
Trademark Assignment dated July 3, 1996 between Karan and GS, (y) used by
GS pursuant to that certain Irrevocable Consent Agreement dated July 3,
1996 by and between Karan and GS and (z) otherwise granted, licensed or
conveyed in writing by Karan to GS prior to the date hereof, in each case,
to the extent that such rights are still in effect pursuant to the terms of
such agreements or otherwise and are not in conflict with or contradictory
to the XX XX License Agreement, and (C) Claims with respect to any loans or
advances made by DKI, GS or any of their respective subsidiaries to any of
the Stockholders and not repaid in full prior to the Exchange Closing Date
or other monies owed by the Stockholders to DKI, GS or any of their
respective subsidiaries, other than Claims for money owed to DKI, GS or any
of their respective subsidiaries in respect of purchases by the
Stockholders of apparel, samples and other fashion items.
6.4. GS MERGER. The parties hereto acknowledge that, following the
consummation of the DKI Merger and the Karma Merger, GS will be a
wholly-owned subsidiary of SuperKarma, and that GS shall be merged with and
into SuperKarma, with SuperKarma continuing as the surviving corporation,
as soon as reasonably practicable after December 31, 2001.
7. MISCELLANEOUS.
7.1. NOTICES. Any notice, demand or request which may be permitted,
required or desired to be given in connection therewith shall be given in
writing and directed to the parties hereto as follows:
If to any of the Stockholders: Urban Zen, LLC
000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx and
Xxxxx X. Bressmann
Fax: (000) 000-0000
and with a copy to: Skadden, Arps, Slate, Xxxxxxx &
Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000, XXX
Attention: Xxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
If to the LVMH/Karma Companies: LVMH Moet Xxxxxxxx Xxxxx Vuitton
Inc.
00 Xxxx 00xx Xxxxxx, Fifth Floor
New York, New York 10022, USA
Attention: General Counsel
Fax: (000) 000-0000
and with a copy to: LVMH Moet Xxxxxxxx Xxxxx Vuitton
00, xxxxxx Xxxxx
Xxxxx, XXXXXX
Attention: Xxxx Xxxxxxxx,
President of the
Fashion Group
Fax: 011-33-1-55-80-32-80
and with a copy to: Barack Xxxxxxxxxx Xxxxxxxxxx
Xxxxxxx & Xxxxxxxxx
000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000, XXX
Attention: Xxxxx X. Barack, Esq.
Fax: (000) 000-0000
Notices shall be deemed properly delivered and received when (i) if
personally delivered, upon receipt or refusal to accept delivery, (ii) if
sent via facsimile, upon mechanical confirmation of successful transmission
thereof generated by the sending telecopy machine, (iii) if sent by a
commercial overnight courier for delivery on the next business day, on the
first business day after deposit with such courier service, or (iv) if sent
by registered or certified mail, five days after deposit thereof in the
U.S. mail. Any party may change its address for delivery of notices by
properly notifying the others pursuant to this SECTION 7.1.
7.2. AMENDMENT AND MODIFICATION. This Agreement may only be amended,
modified or supplemented by a written instrument signed by the Stockholders
and the LVMH/Karma Companies.
7.3. ENTIRE AGREEMENT. Except for the Merger Agreement, this
Agreement evidences the entire agreement between the parties hereto with
respect to the matters provided for herein and there are no agreements,
representations or warranties with respect to the matters provided for
herein other than those set forth in this Agreement. This Agreement
supersedes the GS Agreement with respect to (and only with respect to) the
matters set forth in the first two full paragraphs under the heading
"Capital Structure of Karma" on page two of Annex A to the GS Agreement,
and any other prior agreements or understandings between them relating to
the subject matter hereof, and it may not be modified or amended in any
manner other than as set forth herein.
7.4. SEVERABILITY. The parties agree that if any provision of this
Agreement shall under any circumstances be deemed invalid or inoperative,
this Agreement shall be construed with the invalid or inoperative
provisions deleted and the rights and obligations of the parties shall be
construed and enforced accordingly.
7.5. GOVERNING LAW; JURISDICTION AND VENUE. This Agreement shall be
construed in accordance with and governed by the laws of the State of
Delaware regardless of the laws that might otherwise govern under
applicable principles of conflicts of law. The parties hereto hereby
irrevocably and unconditionally consent to and submit to the exclusive
jurisdiction of the courts of the State of Delaware for any actions, suit
or proceedings arising out of or relating to this Agreement and the
transactions contemplated hereby (and the parties agree not to commence any
action, suit or proceeding related thereto, except in such courts), and
further agree that service of any process, summons, notice or document by
U.S. registered mail to the respective addresses set forth on the signature
pages hereto shall be effective service of process for any such action,
suit or proceeding brought against any party in any such court. The parties
irrevocably and unconditionally waive any objection to the laying of venue
of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby, in the courts of the State of Delaware or
the United States of America located in the State of Delaware, and hereby
further irrevocably and unconditionally waive and agree not to plead or
claim in any such court that any such action, suit or proceeding brought in
any such court has been brought in any inconvenient forum.
7.6. CAPTIONS, COUNTERPARTS AND CONSTRUCTION. The captions in this
Agreement are for convenience only and shall not be considered a part of or
affect the construction or interpretation of any provision of this
Agreement. This Agreement may be executed in counterparts, each of which
shall constitute one and the same instrument. Whenever used in this
Agreement, the singular shall include the plural and vice versa (where
applicable), the use of the masculine, feminine or neuter gender shall
include the other genders (unless the context otherwise requires), the
words "hereof," "herein," "hereto," "hereby," "hereunder" and other words
of similar import refer to this Agreement as a whole (including all
schedules and exhibits), the words "include," "includes" and "including"
shall mean "include, without limitation," "includes, without limitation"
and "including, without limitation," respectively. Each party has been
represented by its own counsel in connection with the negotiation and
preparation of this Agreement and, consequently, each party hereby waives
the application of any rule of law to the effect that any provision of this
Agreement shall be interpreted or construed against the party whose counsel
drafted that provision.
7.7. EXHIBITS. The exhibits attached hereto are part of this
Agreement and are fully set forth herein.
7.8. ASSIGNMENT; PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their
respective successors and assigns, but shall not be assigned by the parties
hereto, by operation of law or otherwise, without the prior written consent
of the other parties, except that a Stockholder may assign his or her
rights and obligations hereunder to the Xxxxx-Xxxxx Foundation and any
present or former spouse, ancestor or descendant or sibling of any
Stockholder or any trust or other similar entity established for the
benefit of such individuals or their descendants, provided that any such
Stockholder shall remain fully liable under this Agreement. Except as
otherwise expressly provided herein, nothing in this Agreement, expressed
or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
7.9. TERMINATION. This Agreement shall terminate only upon the
earlier of: (a) the date of termination of the Merger Agreement; or (b)
December 31, 2001, but only if by such date the Merger Agreement has not
been consummated.
7.10. SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges
that a breach by it of any agreement contained in this Agreement will cause
the other party to sustain damage for which it would not have an adequate
remedy at law for money damages, and therefore each of the parties hereto
agrees that in the event of any such breach the aggrieved party shall be
entitled to the remedy of specific performance of such agreement and
injunctive and other equitable relief in addition to any other remedy to
which it may be entitled, at law or in equity.
7.11. REMEDIES CUMULATIVE. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise
of any other right, power or remedy by such party.
7.12. NO WAIVER. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon strict compliance
by any other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not
constitute a waiver by such party of its rights to exercise any such or
other right, power or remedy or to demand such compliance. Any waiver,
permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement or any waiver on the
part of any party of any provisions or conditions of this Agreement must be
made in writing and shall be effective only to the extent specifically set
forth in such writing.
7.13. FURTHER ASSURANCES. All actions required to be taken pursuant
to this Agreement to effectuate the transactions contemplated herein shall
be taken promptly and in good faith by the LVMH/Karma Companies or the
Stockholders, as the case may be. Each of the LVMH/Karma Companies and the
Stockholders shall use their best efforts to consummate the transactions
contemplated hereby, including causing the conditions to closing set forth
in SECTION 5 to be satisfied (and, in connection therewith, including, as
may be reasonably required with respect to the satisfaction of the
conditions to consummation of the DKI Merger, by supplying any and all
information relating to any of the Stockholders reasonably required for
inclusion or incorporation by reference in the Rule 13E-3 Transaction
Statement on Schedule 13E-3 and any amendments or supplements thereto (as
so amended or supplemented, the "SCHEDULE 13E-3") and by executing the
Schedule 13E-3, provided that the Stockholders reasonably believe that the
information contained in such Schedule 13E-3 is true, complete and
correct), and, without limiting the generality of the foregoing, shall
cooperate with and assist the other in its efforts to obtain or cause to be
obtained any and all consents and approvals of third parties (including
Governmental Authorities) that may be necessary in connection with the
transactions contemplated hereby, including all filings pursuant to the HSR
Act. The LVMH/Karma Companies and the Stockholders agree to (i) furnish
with, or cause to be furnished to, the other party such documents or
further assurances, and (ii) perform, or cause to be performed, such
undertakings as the other party may reasonably request at any time in
connection with (x) the transactions contemplated hereby, and (y) the
respective obligations of the LVMH/Karma Companies and each of the
Stockholders, as the case may be, set forth in this Agreement.
7.14. COSTS, EXPENSES AND TAXES. All fees and duties, if any,
relating to the issuance of the Acquisition Sub Exchange Shares and the
SuperKarma Option Shares shall be borne by Acquisition Sub or SuperKarma,
as applicable. Acquisition Sub or SuperKarma, as applicable, shall pay any
and all stamp, transfer and other similar taxes payable or determined to be
payable in connection with the execution or delivery of this Agreement or
the original issuance of the Acquisition Sub Exchange Shares and the
SuperKarma Option Shares to the Stockholders as contemplated hereunder, and
shall save and hold each of the Stockholders harmless from and against any
liabilities with respect to or resulting from any delay in paying or
omission to pay, such taxes. Acquisition Sub or SuperKarma, as applicable,
shall also bear all expenses of shipping certificates evidencing the
Acquisition Sub Exchange Shares and the SuperKarma Option Shares (including
insurance expenses) from the location of the Exchange Closing and the
Option Closing to such other place within the United States as such
Stockholder shall specify.
7.15. ATTORNEYS' FEES. If any legal action or other legal proceeding
relating to this Agreement or the enforcement of any provision of this
Agreement is brought against any of the Stockholders or any of the
LVMH/Karma Companies, and the party bringing such action or proceeding does
not fully prevail, the party or parties against whom such action or
proceeding was brought shall be entitled to recover reasonable attorneys'
fees, costs and disbursements (in addition to any other relief to which the
Stockholders or the LVMH/Karma Companies, as applicable, may be entitled).
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the day and year first above written.
LVMH:
LVMH MOET XXXXXXXX XXXXX VUITTON INC., a
Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President
ACQUISITION SUB:
DKI ACQUISITION, INC., a Delaware
corporation
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
KARMA:
KARMA ACQUISITION, INC., a Delaware
corporation
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
STOCKHOLDERS:
/s/ Xxxxx Karan
----------------------------------------
Xxxxx Karan
/s/ Xxxxxxx Xxxxx
----------------------------------------
Xxxxxxx Xxxxx
TRUST FBO XXXX XXXXX XXXXX, XXXXX XXXXX
AND XXXXXXXXX XXXXX U/A/D 2/2/96
By: /s/ Xxxxxxx Xxxxx
-------------------------------------
Xxxxxxx Xxxxx
Trustee
THE XXXXXXX XXXXX AND XXXXX KARAN ALASKA
COMMUNITY PROPERTY TRUST
By: /s/ Xxxxxxx Xxxxx
-------------------------------------
Xxxxxxx Xxxxx
Investment Trustee
By: /s/ Xxxxx Karan
-------------------------------------
Xxxxx Karan
Investment Trustee
THE XXXXXXX XXXXX 2000 REVOCABLE TRUST
By: /s/ Xxxxxxx Xxxxx
-------------------------------------
Xxxxxxx Xxxxx
Trustee
