Warning Management Services (WNMI) Inactive
Filed: 15 Apr 02, 12:00am
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. _ )
Check the appropriate box:
/ / Preliminary Information Statement
/ / Confidential, For Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
/X/ Definitive Information Statement
FAMOUS FIXINS, INC.
(Name of Registrant As Specified In Charter)
Not Applicable
(Name of Person(s) Filing the Information Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
FAMOUS FIXINS, INC.
2500 W. 57th Street, Suite 1112
New York, New York 10107
NOTICE OF WRITTEN CONSENT OF SHAREHOLDERS
April 2, 2002
To Shareholders of Famous Fixins, Inc.:
NOTICE IS HEREBY GIVEN that the following actions will be taken pursuant to
the written consent of a majority of our shareholders, dated March 29, 2002, in
lieu of a special meeting of the shareholders. The following actions will be
effective on or about May 6, 2002:
1. sale by us of substantially all of our assets to a limited liability
company, Starbrand, LLC, in exchange for the assumption by Starbrand
of certain of our liabilities; and
2. amendment of our Certificate of Incorporation to increase the
authorized number of shares of our common stock from 25,000,000 to
200,000,000.
This Notice and the attached Information Statement are being circulated to
advise the shareholders of certain actions already approved by written consent
of the shareholders who collectively hold a majority of the voting power of our
common stock. Pursuant to Rule 14c-2 under the Securities Exchange Act of 1934,
as amended, the proposals will not be effective until 20 days after the date
this Information Statement is mailed to the shareholders. Therefore, this Notice
and the attached Information Statement are being sent to you for informational
purposes only.
By Order of the Board of Directors,
/s/ JASON BAUER, SECRETARY
Jason Bauer, Secretary
April 2, 2002
New York, New York
FAMOUS FIXINS, INC.
INFORMATION STATEMENT
WRITTEN CONSENT OF SHAREHOLDERS
This Information Statement is furnished in accordance with the requirements of
Regulation 14C promulgated under the Securities Exchange Act of 1934, as
amended, by Famous Fixins, Inc., a New York corporation, in connection with
certain actions to be taken by the written consent by the majority shareholders
of Famous Fixins, dated March 29, 2002.
Pursuant to Rule 14c-2 under the Securities Exchange Act of 1934, as amended,
the actions will not be effective until 20 days after the date of this
Information Statement is mailed to the shareholders.
THE APPROXIMATE DATE OF MAILING OF THIS INFORMATION STATEMENT IS APRIL 15, 2002.
We anticipate that the actions contemplated by this Information Statement will
be effected on or about the close of business on May 6, 2002.
The actions to be effective twenty days after the mailing of this Information
Statement are as follows:
1. sale by us of substantially all of our assets to a limited liability
company, Starbrand, LLC, in exchange for the assumption by Starbrand,
LLC of certain of our liabilities; and
2. amendment of our Certificate of Incorporation to increase the
authorized number of shares of our common stock from 25,000,000 to
200,000,000.
Shareholders of record at the close of business on March 28, 2002 are entitled
to notice of the action to be effective on or about May 6, 2002. As of the
record date, our authorized capitalization consisted of 25,000,000 shares of
common stock, par value $0.001 per share, of which 20,360,179 were issued and
outstanding. Each share of our common stock entitles its holder to one vote on
each matter submitted to the shareholders. However, because the shareholders
holding at least a majority of the voting rights of all outstanding shares of
capital stock as of the record date have voted in favor of the foregoing actions
by resolution dated March 29, 2002; and having sufficient voting power to
approve such proposals through their ownership of the capital stock, no other
consents will be solicited in connection with this Information Statement.
This Information Statement will serve as written notice to shareholders pursuant
to Section 615(c) of the New York Business Corporation Law.
TABLE OF CONTENTS
Page
About Famous Fixins 3
Stock Ownership 4
Action For Settlement Of Debts and Sale Of Assets 5
Selected Financial Data 12
Action for Increasing Number of Authorized Shares 17
Additional Information 17
Information Incorporated by Reference 18
Distribution of Information Statement 18
Exhibit 1. Settlement of Debts and Asset Purchase Agreement
Exhibit 2. Shareholder Dissenter's Rights
FORWARD-LOOKING STATEMENTS
This Information Statement includes forward-looking statements. Such statements
are identified by the use of forward-looking words or phrases including, but not
limited to, "intended," "expects," "expected," "plans," "anticipates," and
"anticipated." These forward-looking statements are based on our current
expectations. All statements other than statements of historical facts included
in this Information Statement are forward-looking statements. Although we
believe that these expectations are reasonable, there can be no assurance that
such expectations will prove to have been correct. Since forward-looking
statements involve risks and uncertainties, the actual results could differ
materially. These forward-looking statements represent our judgment as of the
date of this Information Statement. All subsequent written or oral
forward-looking statements attributable to us, or persons acting on behalf of
either party, are expressly qualified in their entirety. We disclaim any intent
or obligation to update their forward-looking statements.
ABOUT FAMOUS FIXINS
We are a promoter and marketer of celebrity endorsed consumer products for sale
in supermarkets, mass merchandisers, drug chains, specialty stores and over the
Internet. Our plan has been to develop, market and sell licensed consumer
products based on the diverse professional, cultural and ethnic backgrounds of
various celebrities. We have created consumer products which includes salad
dressings, candy products, bubble gum, and lip balm. We promoted and marketed
our products directly to supermarket chain stores, mass merchandisers, drugstore
chains, and specialty stores. We also operated an electronic commerce site from
which our products may be purchased. We utilized a nationwide network of
consumer brokers to distribute our products in supermarket chains,
mass-merchandisers, drug stores, restaurants and specialty retail stores
throughout the United States. We enlisted third party manufacturers to produce
our consumer products. After consummation of the actions described in this
Information Statement, we will be seeking a new business.
STOCK OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below sets forth, as of March 28, 2002, when we had 20,360,179 shares
of our common stock issued and outstanding, the shares beneficially owned by
each person, excluding management, known to us to be the beneficial owner of
more than 5% of the outstanding shares of common stock.
All persons named in the table have the sole voting and dispositive power,
unless otherwise indicated, with respect to common stock beneficially owned.
Beneficial ownership of shares of common stock that are acquirable within 60
days upon the exercise or conversion of convertible securities are listed
separately, and for each person named in the table, the calculation of percent
of class gives effect to those acquirable shares.
The following factors about certain shareholders should also be considered in
reviewing the table:
o Each of Roseworth Group, Austost Anstalt Schaan, Balmore Funds, AMRO
International, and Folkinburg Investments may not own more than 9.9% of
our common stock at any time. That 9.9% limit on ownership is given
effect to for purposes of computing beneficial ownership in the table
below. The conversion rate of the debentures varies with the market
price of our common stock, so the debentures could be converted into a
substantially larger number of shares as the market price of our common
stock drops. Each of the named shareholders could acquire a substantial
additional number of shares upon the conversion of convertible
debentures if the 9.9% limit does not apply.
o Roseworth Group is deemed a beneficial owner of 693,042 shares
underlying convertible securities, although it could acquire a greater
number of shares if the 9.9% limit did not apply, upon the exercise of
1,108,333 common stock purchase warrants and upon the conversion of a
portion of 4% convertible debentures with a principal amount of
$634,459.
o Balmore Funds is deemed a beneficial owner of 693,042 shares underlying
convertible securities, although it could acquire a greater number of
shares if the 9.9% limit did not apply, upon the exercise of 973,142
common stock purchase warrants and upon the conversion of a portion of
4% convertible debentures with a principal amount of $459,459.
o Austost Anstalt Schaan is deemed a beneficial owner of 693,042 shares
underlying convertible securities, although it could acquire a greater
number of shares if the 9.9% limit did not apply, upon the exercise of
706,475 common stock purchase warrants and upon the conversion of a
portion of 4% convertible debentures with a principal amount of
$359,459.
o AMRO International is deemed a beneficial owner of 2,237,134 shares
underlying convertible securities, although it could acquire a greater
number of shares if the 9.9% limit did not apply, upon the exercise of
101,202 common stock purchase warrants and upon the conversion of a
portion of 5% convertible debentures with a principal amount of $33,975.
- ----------------------------------- ------------------- ------------------------- --------
Name and Address Amount and Nature Additional Shares Percent
of Beneficial Owner of Beneficial Owner Acquirable Within 60 days of Class
- ----------------------------------- ------------------- ------------------------- --------
- ----------------------------------- ------------------- ------------------------- --------
Roseworth Group Limited 1,544,092 693,042 9.9%
c/o Beacon Capital Management
Harbour House
2nd Floor
Waterfront Drive
Road Town, Tortola
BVI
Balmore Funds, S.A. 1,544,092 693,042 9.9%
Trident Chambers
Road Town, Tortola
BVI
Austost Anstalt Schaan 1,544,092 693,042 9.9%
Landstrasse 163
9494 Furstenweg
Vaduz, Liechtenstein
AMRO International, S.A. 0 2,237,134 9.9%
Grossmuensterplatz 6
Zurich, CH-8022, Switzerland
Peter Zorich 2,409,747 0 11.8%
418 Valley Rd.
Montclair, NJ
- ----------------------------------- ------------------- ------------------------- --------
SECURITY OWNERSHIP OF MANAGEMENT
The table below sets forth, as of March 28, 2002, the shares of our common stock
beneficially owned by each officer, by each director, and by all of our officers
and directors as a group.
All persons named in the table have the sole voting and dispositive power,
unless otherwise indicated, with respect to common stock beneficially owned.
Beneficial ownership of shares of common stock that are acquirable within 60
days upon the exercise or conversion of convertible securities are listed
separately, and for each person named in the table, the calculation of percent
of class gives effect to those acquirable shares.
- ----------------------------------- ------------------- ------------------------- --------
Name and Address Amount and Nature Additional Shares Percent
of Beneficial Owner of Beneficial Owner Acquirable Within 60 days of Class
- ----------------------------------- ------------------- ------------------------- --------
- ----------------------------------- ------------------- ------------------------- --------
Jason Bauer 3,889,747 1,500,000 24.7%
Victor Bauer 200 0 *
All present officers and directors 3,889,947 1,500,000 24.7%
as a group (2 persons)
- ----------------------------------- ------------------- ------------------------- --------
* Represents less than 1%.
The address of each of the persons named in the table above is Famous Fixins,
Inc., 250 West 57th Street, Suite 1112, New York, New York 10701.
CHANGES IN CONTROL
We do not have any arrangements that may result in a change in control, except
as described in this Information Statement pursuant to the Settlement of debts
and Asset Purchase Agreement.
ACTION FOR SETTLEMENT OF DEBTS AND SALE OF ASSETS
SUMMARY OF TRANSACTION
Purpose To reduce our debt load by selling
substantially all of our asset and
certain liabilities.
Structure of Transaction: In exchange for the
assumption of certain of our liabilities
amounting to approximately $938,000 as
of December 31, 2001, we will sell
substantially all of our assets
amounting to approximately $725,000 as
of December 31, 2001.
Your securities You keep your securities. No
exchange of securities is required.
There is no cash or other consideration
offered to security holders.
Our Charter and Bylaws Remains the same.
Possible Negative Consequences We may incur additional costs associated with
tax consequences and with filings with state and
regulatory agencies. We will have discontinued
our present business and will need to acquire
a new business.
Accounting Treatment Purchase method of accounting.
Federal Income Tax You, as a shareholder, will
not encounter income tax as a result of
the transaction, but the transaction is
taxable to the corporation.
Regulatory Approval Not required.
Appraisal Rights You have the right of appraisal.
This Information Statement contains a brief summary of the material aspects of
the proposed sale of assets and business and of the related Settlement of Debts
and Asset Purchase Agreement. This summary is qualified in all respects by the
full text of the Settlement of Debts and Asset Purchase Agreement. A copy is
attached as Exhibit 1. You are strongly encouraged to read the entire Settlement
of Debts and Asset Purchase Agreement.
PURPOSE OF TRANSACTION
Despite the best efforts of management to increase revenues and to reduce costs
by significantly altering the product lines and by decreasing certain operating
expenses during the fiscal year ended December 31, 2001, we sustained losses
from operations during the year of $(1,020,966). We have been unable to raise
the required additional capital to finance our operations in their present form,
in part due to our debt burdens.
We believe that in order to maximize the value of our common stock and
ultimately maximize shareholder value, we should divest all of our present
operations, sell substantially all of our assets in exchange for the assumption
of a significant portion of our liabilities, and seek to acquire a new business.
STRUCTURE OF TRANSACTION
On March 29, 2002, we entered into a Settlement of Debts and Asset Purchase
Agreement with Starbrand, LLC, pursuant to which Starbrand agreed to acquire
substantially all of our assets, properties and business in exchange for the
assumption of certain of our liabilities. The assets to be transferred and the
liabilities to be assumed had an approximate value of $725,000, and $938,000,
respectively, at December 31, 2001.
The Settlement of Debts and Asset Purchase Agreement specifically provides that
we shall retain "all claims for tax refunds, tax loss carry forwards or
carrybacks or tax credits of any kind" applicable to our business prior to the
closing of the asset purchase agreement. As of December 31, 2001, we had net
operating loss carry forwards of approximately $2,426,000, all of which expire
by 2021. Without future profits, such tax losses are of limited or no value. The
liabilities that will not be assumed by Starbrand consist primarily of:
o principal amount of $1,050,000 of our 4% convertible debentures, in the
aggregate, owned by Roseworth Group Limited, Balmore Funds, S.A. and
Austost Anstalt Schaan, including accrued interest on $1,500,000 of the
debentures;
o principal amount of $33,975 of our 5% convertible debentures owed by
AMRO International, S.A.,including accrued interest;
o $22,900, in the aggregate, in notes owed to Alpha Capital AG and
Roseworth Group Limited.
The financial statements in our Form 10-KSB for the year ended December 31, 2001
indicate that we had negative working capital of approximately $(1,447,000) as
of year end 2001 and cash flow from operations of approximately $106,000 for
fiscal year 2001. Based upon the structure of the Settlement of Debts and Asset
Purchase Agreement, immediately following the closing of the transfer, we will
retain assets with an estimated value of $33 and no business and will retain
liabilities estimated to be approximately $1,163,000, consisting mostly of
certain outstanding debentures, plus possible liabilities with respect to
certain unasserted claims against us.
Because, subsequent to the closing, we will not have any business or tangible
assets with which to generate revenue, we will not have any means to satisfy our
liabilities or obligations unless and until we are able to raise additional
capital or acquire a business. Although the sale of assets provides for the
assumption by Starbrand of significant operating liabilities of Famous Fixins,
we will remain contingently responsible for the satisfaction of such liabilities
and there can be no assurance that such liabilities will be satisfied. Starbrand
is a newly formed entity with no current operations. Starbrand intends to
acquire our assets and operate the business on a different scale of operations.
Certain members of Starbrand will include certain shareholders of Famous Fixins.
We do not presently have any such plans and there can be no assurance that
raising such capital or acquiring a new business will be possible. If new
capital should become available or we acquire a new business, the acquisition is
likely to result in immediate and substantial dilution to our presently existing
shareholders.
YOUR SECURITIES
You keep your securities. No exchange of securities is required. There is no
cash or other consideration offered to security holders.
OUR CHARTER AND BYLAWS
This transaction will not result in a change in our charter or bylaws.
POSSIBLE NEGATIVE CONSEQUENCES
Although we will reduce a significant amount of our liabilities by this
transaction, we may also incur some negative consequences. For instance, we may
incur additional costs associated tax consequences and with filings with state
and regulatory agencies. We will have discontinued our present business and will
need to acquire a new business.
ACCOUNTING TREATMENT OF THE SALE
The transaction will be accounted for under the purchase method of accounting.
The sale of assets will be reflected on our financial statements as a sale of
assets and assumption of certain liabilities for accounting purposes, with a
gain or loss recognized in the year in which the sale is consummated, in the
amount of the difference between the sale price and the aggregate net book value
of the assets sold to and liabilities assumed by Starbrand.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a general summary of the Federal income tax
consequences to us that may result from the proposed sale of our assets to
Starbrand. This summary is based on the current provisions of the Internal
Revenue Code, which is subject to retroactive change. This summary does not
discuss any aspects of Federal income taxation that may be relevant to a
particular shareholder or to certain types of persons subject to special
treatment under Federal income tax laws. Accordingly, this summary is not
intended to constitute legal advice to any shareholder, nor is it binding on the
Internal Revenue Service. WE RECOMMEND THAT EACH SHAREHOLDER CONSULT HIS OR HER
PERSONAL TAX ADVISOR REGARDING THE SPECIFIC APPLICABLE TAX CONSEQUENCES, WHICH
MAY ARISE FROM CONSUMMATION OF OUR PROPOSED SALE OF ASSETS TO STARBRAND, LLC.
We will recognize gain or loss from the sale of our assets to Starbrand in an
amount equal to the difference between the amount we realize from the sale and
our adjusted tax basis in the assets sold and liabilities assumed. The amount we
realize from the sale will be equal to the sum of (a) the amount of our
liabilities assumed by Starbrand and (b) the aggregate amount of any liabilities
to which the assets sold to Starbrand are subject. We will be subject to Federal
income tax on any gain recognized from the sale of our business and assets to
Starbrand. However, because we have significant net operating loss carryforwards
available to us to offset any gain from the sale, we do not expect to incur
substantial Federal, state or local tax liability, if any.
You, as a shareholder, will not encounter income tax as a result of the
transaction.
ACTION BY WRITTEN CONSENT AND INTERESTS OF CERTAIN PERSONS
Under applicable New York law, approval of the asset transfer requires the
affirmative vote of a majority of the outstanding stock of the corporation
entitled to vote thereon. The transfer was approved in writing by the holders of
a majority of the shares of our then outstanding common stock in accordance with
the provisions of Section 615 of the New York Business Corporation Law. The
names of these shareholders and the number of shares owned by them were as
follows:
o Jason Bauer, 3,889,747 shares or 19.1% of the issued and outstanding
shares;
o Peter Zorich, 2,409,747 shares or 11.8% of the issued and outstanding
shares;
o Roseworth Group Ltd., 1,544,092 shares or 7.6% of the issued and
outstanding shares;
o Austost Anstalt Schaan, 1,544,092 shares or 7.6% of the issued and
outstanding shares; and
o Balmore Funds, S.A., 1,544,092 shares or 7.6% of the issued and
outstanding shares.
At the time of the approval, the aggregate of these shares constituted 53.7% of
the then outstanding shares of common stock.
Starbrand, LLC is a newly formed Delaware entity with no current operations.
Starbrand agreed to acquire substantially all of our assets, properties and
business in exchange for the assumption of certain of our liabilities. The
assets to be transferred and the liabilities to be assumed had an approximate
value of $725,000, and $938,000, respectively, as at December 31, 2001. The
liabilities assumed by Starbrand includes the principal amount of $450,000 of 4%
convertible debentures issued by Famous Fixins. Jason Bauer, our current officer
and director, intends to resign upon the closing of the transaction, and will
initially manage Starbrand. Certain persons who voted in favor of this
transaction have a beneficial or equity interest in Starbrand, including Bauer,
Roseworth Group Ltd., Austost Anstalt Schaan, and Balmore Funds, S.A. Starbrand
is seeking funding in order to continue the assumed business.
On October 19, 1999, we entered into agreements with AMRO International, S.A., Austost Anstalt Schaan and Balmore Funds, S.A. for the sale of a total of $550,000 five percent convertible debentures and warrants to purchase 139,152 shares of common stock in transactions deemed to be exempt under Section 4(2) of the Securities Act of 1933. We received gross proceeds of $450,000 in October 1999, and an additional $100,000 in February 2000. The interest on the convertible debentures is payable quarterly and accrues from the date of issuance on the principal amount of the convertible debentures. The convertible debentures are due October 30, 2002. At our option, we may pay the interest on the convertible debentures in cash or in registered shares of common stock. The holders of the convertible debentures are entitled to convert the debentures into shares of common stock at a conversion price equal to the lower of 80% of the market price of the common stock or $0.55. If the conversion price of the common stock is less than $0.20 per share on any conversion date, we may elect to redeem the debentures in their entirety or to deliver to the holders either cash or common stock or a combination of cash and common stock. The amount of cash to be delivered upon such redemption or conversion shall equal the closing ask price on the conversion date or the date we give notice of redemption multiplied by the number of shares of common stock that would have been issued at the conversion price upon such conversion or redemption. The warrants are exercisable before October 30, 2004 at a purchase price of $.494 per share, which is 125% of the market price of the common stock on the closing date. At our expense, we filed a registration statement, which was declared effective on February 8, 2000, under the Securities Act of 1933 for the resale of the shares of common stock issuable upon the conversion of the debentures and the exercise of the warrants, which registration statement is no longer current. Although we may so in the future, we are not presently in the process of preparing and seeking effectiveness of a current registration statement for the resale of shares underlying the debentures. Debentures with a principal of $33,975 remain outstanding. None of the warrants have been exercised. We entered into an agreement, dated as of March 7, 2000, with Roseworth Group, Ltd., Austost Anstalt Schaan and Balmore Funds, S.A. for the sale of a total of 0% convertible debentures, convertible at $0.40 per share, with a principal amount of $1,000,000 due March 13, 2005 and warrants to purchase 2,500,000 shares of common stock in transactions deemed to be exempt under Section 4(2) of the Securities Act of 1933. We received gross proceeds of $1,000,000 from the sales. The warrants are exercisable before March 13, 2005 at a purchase price of $.75 per share. In October 2000, we entered into an agreement for the sale of $1,500,000 principal amount of 4% convertible debentures pursuant to which the outstanding principal amount of the 0% convertible debentures were surrendered. We entered into agreements, dated as of October 27, 2000, for the sale of 4% convertible debentures with a principal amount of $1,500,000 and warrants to purchase 250,000 shares of common stock with Roseworth Group Ltd., Austost Anstalt Schaan and Balmore S.A., in transactions deemed to be exempt under Section 4(2) of the Securities Act of 1933. The transaction closed on November 7, 2000. We made a determination that the three investors were sophisticated investors with enough knowledge and experience in business to evaluate the risks and merits of the investment. The principal amount of the 4% convertible debentures was $1,500,000, consisting of: principal in the amount of $500,000, of which $250,000 was provided by Roseworth Group, $125,000 was provided by Austost Anstalt Schaan, and $125,000 was provided by Balmore Funds; and the surrender of outstanding 0% convertible debentures with a principal amount of $1,000,000, issued pursuant to the Convertible Debenture and Warrants Purchase Agreement, dated March 7, 2000, of which a principal amount of $400,000 was held by Roseworth Group Ltd., a principal amount of $250,000 was held by Austost Anstalt Schaan, and a principal amount of $350,000 washeld by Balmore Funds. The 4% convertible debentures were due on August 7, 2001 with a 5% premium on the principal and the accrued unpaid interest. We have not yet paid the principal or interest. Semi-annual interest payments are due and payable on December 1 and June 1 of each year, commencing with December 1, 2000. We entered into an equity line of credit transaction on October 31, 2000, for which the shares issuable upon drawdowns on the equity line are the subject of this registration statement. If we are unable to pay the amounts due on the maturity date but we can draw down on the equity line of credit, we are to draw down the maximum amount each draw down period to pay the investors the full amount due. On or after the maturity date, the investors may convert the 4% convertible debentures into shares of common stock if a registration statement covering the shares underlying the debentures is not effective on the maturity date or if we do not draw down the maximum amount permitted each drawdown period under the equity line after this registration statement is effective. The conversion price shall equal the lesser of $0.054 or 85% of the average of the 5 lowest closing bid prices during the 22 trading days preceding the applicable conversion date. The maximum number of shares of common stock that may be received upon the conversion of the debentures by any one holder is 9.9% of our then-outstanding common stock after the conversion, including any other shares of common stock held by the holder. The warrants to purchase 250,000 shares of
common stock are exercisable before November 7, 2003 at a purchase price of per share of $0.0588. Of these warrants, Roseworth Group owns warrants to purchase 108,333 shares, Austost Anstalt Schaan owns warrants to purchase 62,500 shares, and Balmore Funds owns warrants to purchase 79,167 shares. At the closing of the transaction, we received gross proceeds of $500,000, less payment to the escrow agent, Epstein Becker & Green P.C., of $10,000 for the investors' legal, administrative and escrow costs, and less payment of a 10% placement agent fee to Union Atlantic, L.C., which placement agent fee is net of payment to the escrow agent, Epstein Becker & Green P.C., of $5,000 for the investors' legal, administrative and escrow costs. We also issued to Union Atlantic, L.C. 75,000 shares of restricted common stock and a warrant to purchase 100,000 shares of common stock as part of the placement agent fee. The warrants are exercisable before November 7, 2003 at a purchase price per share of $0.0588. We agreed to include such securities to the placement agent in the registration statement for the resale of the common stock underlying the 4% convertible debentures and warrants. Under the agreements, we agreed to prepare and file a registration statement under the Securities Act for shares of common stock issuable upon the conversion of the convertible debentures and the warrants within 45 days of the closing date of the transaction. We agreed to use our best efforts to cause the registration statement to become effective within 90 days of the closing date or 5 days of SEC clearance to request acceleration of effectiveness. Although we submitted a registration statement in a timely matter, the registration statement was not declared effective. Although we may so in the future, we are not presently in the process of preparing and seeking effectiveness of a current registration statement for the resale of shares underlying the debentures and warrants. In March 2002, the debenture holders converted an aggregate amount of $46,623 of accrued interest into 4,662,276 shares. The maturity date has been extended. We signed a common stock purchase agreement with Folkinburg Investments Limited, dated as of October 31, 2000, for the future issuance and purchase of shares of our common stock in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933. We made a determination that Folkinburg Investments was a sophisticated investor with enough knowledge and experience in business to evaluate the risks and merits of the investment. The common stock purchase agreement establishes what is sometimes termed an equity line of credit or an equity drawdown facility. In general, the drawdown facility operates as follows: the investor, Folkinburg Investments, has committed to provide us with up to $5 million as we request it over a 24 month period, in return for shares of common stock we issue to Folkinburg Investments. Subject to a maximum of 16 draws, once every 29 trading days, we may request a draw of up to $5 million of that money, however, no single draw can exceed $5 million. We must wait at least 7 trading days after each 22 trading day drawdown period before requesting another drawdown. The maximum amount we actually can draw down upon each request will be determined by 4.5% of the volume-weighted average daily price of our common stock for the 3 month period prior to our request and the total trading volume for the 3 months prior to our request. Each draw down must be for at least $100,000. At the end of a 22-day trading period following the drawdown request, the final drawdown amount is determined based on the volume-weighted average stock price during that 22-day period. We then use the formulas contained in the common stock purchase agreement to determine the number of shares we will issue to Folkinburg Investments in return for that money. The per share dollar amount Folkinburg Investments pays for our common stock for each drawdown includes a 17.5% discount to the average daily market price of our common stock for the 22-day period after our drawdown request, weighted by trading volume. Under the credlit line, we could receive the amount of the drawdown less an escrow agent fee equal to $1,500 per drawdown and less a 10% placement fee payable to the placement agent, Union Atlantic, L.C., which introduced Folkinburg Investments to us. In lieu of making a commitment to Folkinburg Investments to draw a minimum aggregate amount, on October 31, 2000, we issued to Folkinburg Investments a stock purchase warrant to purchase up to 500,000 shares of our common stock and we also agreed to issue additional warrants to purchase a number of shares equal to 50% of the shares purchased by Folkinburg Investments on the settlement date of each drawdown. The warrants to purchase 500,000 shares of common stock have an exercise price per share of $0.0636, which equals 110% of the volume-weighted average share price for the trading day prior to the date the warrants were issued, and expire on October 31, 2003. The additional warrants issuable at each settlement date will be exercisable for 35 calendar days and have an exercise price equal to the weighted average of the purchase prices of the common stock during the applicable settlement period. We agreed to file a registration statement under the Securities Act for shares of common stock issuable under the equity line of credit, including shares underlying warrants issued in connection with the equity line of credit, within 45 days of the closing date of the transaction. We agreed to use our best efforts to cause the registration statement to become effective within 90 days of the closing date or 5 days of SEC clearance to request acceleration of effectiveness. Although we submitted a registration statement in a timely matter, the registration statement was not declared effective. Although we may so in the future, we are not presently in the process of preparing and
seeking effectiveness of a current registration statement for the resale of shares underlying the credit line agreement. At the closing of the transaction, we paid the escrow agent, Epstein Becker & Green P.C., $10,000 for Folkinburg Investments' legal, administrative and escrow costs. On March 2001, we granted Jason Bauer, pursuant to an amended employment agreement, effective April 12, 2001, to serve as President and Chief Executive Officer, 5-year options to purchase up to 1,500,000 shares of our common stock, proportioned to vest only after we achieve certain corporate milestones. The options are exercisable at $.03 per share. These options are cumulative and are subject to anti-dilution rights. If any milestones are achieved in the same year, all such options shall vest at the time such milestone is achieved. Bauer exercised his options on March 27, 2002. NO NEED FOR REGULATORY APPROVAL No federal or state regulatory requirements or approvals are required to be complied with or obtained in connection with the proposed sale to Starbrand, other than compliance with applicable New York corporate law and Federal and state securities laws. APPRAISAL RIGHTS THIS INFORMATION STATEMENT CONSTITUTES NOTICE OF APPRAISAL RIGHTS TO THE HOLDERS OF FAMOUS FIXINS COMMON STOCK. IN ORDER TO EXERCISE YOUR RIGHTS TO DISSENT AND APPRAISAL, YOU MUST FOLLOW EACH AND EVERY INSTRUCTION HEREIN. Sections 623 and 910 of the New York Business Corporation Law give to any holder of common stock of Famous Fixins who wishes to object to sale of assets of Famous Fixins, otherwise known as an objecting shareholder, the right to receive from Famous Fixins in cash, the fair value of his or her shares, provided that the consummation of the asset sale is not abandoned, and provided, further, that the following procedure is carefully followed. The objecting shareholder must not have consented in favor of the sale of assets and, must file with Famous Fixins, within 20 days after notice is given to the objecting shareholder, written objection thereto stating his or her intention to demand payment for his or her shares. The written objection should be sent to: Famous Fixins, Inc., 250 W. 57th St., Suite 1112, New York, New York 10107, Attn.: Secretary. Registered Mail, Return Receipt Requested is recommended. The objection must include (i) a notice of election to dissent, (ii) the shareholder's name and residence address, (iii) the number of shares as to which the shareholder dissents, and (iv) a demand for payment of the fair value of the shareholder's shares if the asset sale is consummated. A shareholder may not dissent as to less than all of the shares as to which he has a right to dissent, held by him of record that he owns beneficially. A nominee or fiduciary may not dissent on behalf of any beneficial owner as to less than all of the shares of such owner, as to which such nominee or fiduciary has a right to dissent, held of record by such nominee or fiduciary. Together with the written demand or within one month thereafter, the objecting shareholder must submit certificates representing all of his shares of our common stock to Famous Fixins or its transfer agent for the purpose of affixing a notation indicating that a demand for payment has been made. Otherwise, at the option of Famous Fixins, exercised by written notice given within 45 days from the date of filing of the notice to dissent, he or she will lose his objector's rights, unless a court, for good cause shown, otherwise directs.
Within 15 days after the later of the consummation of the asset sale or the last day of the period during which written demand by the objecting shareholder must be made (but in no case later than 90 days from the date of the written consents), Famous Fixins shall make a written offer by registered mail to each objecting shareholder to pay for his or her shares at a specified price which Famous Fixins considers to be their fair value. Such offer shall be accompanied by a statement setting forth the aggregate number of shares with respect to which notices of election to dissent have been received and the aggregate number of holders of such shares. If the asset sale has been consummated at the time of such offer, the offer shall also be accompanied by (i) the advance payment to each objecting shareholder who has submitted to us his or her stock certificates of an amount equal to 80% of the amount of such offer, or (ii) as to each objecting shareholder who has not yet submitted his or her stock certificates, a statement that we will make an advance payment to him or her of an amount equal to 80% of the amount of such offer promptly upon submission of his or her stock certificates. Every advance payment or statement as to advance payment shall include advice to the objecting shareholder to the effect that acceptance of such payment does not constitute a waiver of any dissenters' rights. Any offer shall be made at the same price per share to all objecting shareholders. If, within 30 days after making such offer, the objecting shareholder and Famous Fixins agree upon the price to be paid for his or her shares, payment must be made by us within 60 days of the date of the making of such offer upon the surrender of the certificates representing his or her shares. If we fail to make such offer as provided above or if the objecting shareholder and we fail to agree upon the price to be paid within 30 days of the date of our offer, we shall, within 20 days after the expiration of the applicable time period, institute a special proceeding in the Supreme Court of the State of New York, County of New York to determine the rights of the objecting shareholder and to fix the fair value of his or her shares. If we fail to institute such special proceeding the objecting shareholder may do so within 30 days after the expiration of such 20 day period. Failure of the objecting shareholder to institute such proceedings will result in the loss of his or her objector's rights unless the court, for good cause shown, otherwise directs. Within 60 days after the final determination of the special proceeding, we shall pay to each objecting shareholder the amount found to be due him or her, upon surrender of the certificates representing his or her shares. The foregoing summary of the rights of objecting shareholders does not purport to be complete and is qualified in its entirety by reference to Sections 623 and 910 of the New York Business Corporation Law, a copy of which appears as Exhibit 2 to this Information Statement. TIMING OF ACTION As described below, the finalization of the transactions relating to the transfer of substantially all of our assets to Starbrand, LLC is conditioned upon the filing with the Securities and Exchange Commission of this Information Statement. Therefore, the transactions relating to our asset transfer to Starbrand, LLC are expected to be finalized 20 days after the mailing of this Information Statement to our shareholder.
SELECTED FINANCIAL DATA
Our financial statements for the year ended December 31, 2001 are included in
the Annual Report on Form 10-KSB that accompanies this Information Statement.
PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma balance sheet of Famous Fixins gives effect to
the Settlement of Debts and Asset Purchase Agreement between Famous Fixins and
Starbrand, LLC, a limited liability company, dated March 29, 2002, as if it had
occurred on December 31, 2001; and the unaudited pro forma statement of
operations of Famous Fixins gives effect to the divestiture of substantially all
of its operations as if it had occurred January 1, 2001.
This pro forma financial information is based on the estimates and assumptions
set forth herein and in the notes thereto, and has been prepared utilizing the
financial statements and notes thereto appearing in Famous Fixins' annual filing
of Form 10-KSB containing, among other information, Famous Fixins' 2001 audited
financial statements.
The following unaudited pro forma financial information is presented for
informational purposes only and is not necessarily indicative of (i) the results
of operations of Famous Fixins that actually would have occurred had the
Settlement of Debts and Asset Purchase Agreement been consummated on the dates
indicated or (ii) the results of operations of Famous Fixins that may occur or
be obtained in the future. The following information is qualified in its
entirety by reference to and should be read in conjunction with Action for
Settlement of Debts and Sale of Assets contained elsewhere herein, Famous
Fixins' 2001 audited financial statements in Form 10-KSB, including the notes
thereto, and other historical information appearing elsewhere herein.
FAMOUS FIXINS, INC.
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 2001
PRO FORMA
ADJUSTMENTS - 1(a)
---------------------
HISTORICAL DEBIT CREDIT PRO FORMA
---------- ------- -------- ---------
A S S E T S
-----------
CURRENT ASSETS
- --------------
Cash and cash equivalents $ 233,906 $ -- $233,906 $ --
Accounts receivable, less $5,000 allowance
for doubtful accounts 70,122 -- 70,122 --
Merchandise inventory 145,255 -- 145,255 --
Unused barter credits - current portion 124,960 -- 124,960 --
Prepaid expenses 55,551 -- 55,551 --
Due from officer/stockholder 21,570 -- 21,570 --
---------- ---------
TOTAL CURRENT ASSETS 651,364 -- -- --
---------- ---------
PLANT AND EQUIPMENT
- -------------------
Furniture and fixtures 15,804 -- 15,804 --
Machinery and equipment 28,777 -- 28,777
---------- ---------
44,581 -- -- --
Less: Accumulated depreciation 21,329 21,329 -- --
---------- ---------
NET PLANT AND EQUIPMENT 23,252 -- -- --
---------- ---------
OTHER ASSETS
- ------------
Deferred debenture issuance costs, net of
accumulated amortization of $3,365 33 -- -- 33
Unused barter credits - noncurrent portion 20,226 -- 20,226 --
Security deposits 6,482 -- 6,482 --
---------- ---------
TOTAL OTHER ASSETS 26,741 -- -- 33
---------- ---------
$ 701,357 -- -- $ 33
========== =========
See the accompanying notes to pro forma financial statements.
PRO FORMA
ADJUSTMENTS - 1(b)
---------------------
HISTORICAL DEBIT CREDIT PRO FORMA
---------- -------- -------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
- -------------------
4% convertible debentures $1,500,000 $450,000 $ -- $1,050,000
4% convertible debentures - premium payable 75,000 75,000 (2) -- --
5% convertible debentures, due October,
2002 (principal amount - $33,975) 33,850 -- -- 33,850
Accounts payable 226,473 226,473 -- --
Accrued expenses 112,501 33,679 -- 78,822
Due to customers 30,772 30,772 -- --
Deferred officer's compensation payable 118,861 118,861 -- --
Franchise taxes payable 580 -- -- 580
---------- ----------
TOTAL CURRENT LIABILITIES 2,098,037 -- -- 1,163,252
---------- ----------
LONG-TERM LIABILITIES - Deferred rent 3,160 3,160 -- --
- --------------------- ---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT)
- ------------------------------
Common stock, $.001 par value per share:
Authorized 25,000,000 shares
Issued and outstanding 14,197,903 shares 14,197 -- -- 14,197
Additional paid-in capital 4,116,803 -- -- 4,116,803
Accumulated deficit (5,506,840) -- 212,621 (5,294,219)
---------- ----------
(1,375,840) -- -- (1,163,219)
Less: Unused advertising barter credits
issued in exchange for common
stock (24,000) -- 24,000 --
---------- ----------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT) (1,399,840) -- -- (1,163,219)
---------- ----------
$ 701,357 -- -- $ 33
========== ==========
See the accompanying notes to pro forma financial statements.
FAMOUS FIXINS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001
PRO FORMA
ADJUSTMENTS -1(c)
-------------------------
HISTORICAL DEBIT CREDIT PRO FORMA
----------- ---------- ----------- -----------
NET SALES $ 1,451,465 $ 1,451,465 $ -- $ --
----------- -----------
COST OF GOODS SOLD
Merchandise inventory at beginning of year 321,116 -- 321,116 --
Purchases 666,602 -- 666,602 --
Other direct costs 76,813 -- 76,813 --
----------- -----------
1,064,531 -- -- --
Less: Merchandise inventory at end of year 145,255 145,255 -- --
----------- -----------
TOTAL COST OF GOODS SOLD 919,276 -- -- --
----------- -----------
GROSS PROFIT 532,189 -- -- --
----------- -----------
OPERATING EXPENSES
Selling expenses 314,512 -- 314,512 --
General and administrative expenses 1,057,025 -- 1,012,025 45,000
Impairment charge - unused barter credits 180,735 -- 180,735 --
Loss on disposal of plant and equipment 883 -- 883 --
----------- -----------
TOTAL OPERATING EXPENSES 1,553,155 -- -- 45,000
----------- -----------
OPERATING LOSS (1,020,966) -- -- (45,000)
----------- -----------
OTHER INCOME (EXPENSE)
Gain on sale of net assets -- -- 137,621 137,621
Waiver of premium on 4% convertible
debentures -- -- 75,000 75,000
Interest income 4,023 4,023 --
Interest expense and financing costs (69,973) -- 25,211 (44,762)
Realized and unrealized loss on investments
in marketable equity trading securities (13,134) -- 13,134 --
----------- -----------
TOTAL OTHER INCOME (EXPENSE) (79,084) -- -- 167,859
----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR
FRANCHISE TAXES (1,100,050) -- -- 122,859
PROVISION FOR FRANCHISE TAXES 580 -- -- 580
----------- -----------
NET INCOME (LOSS) $(1,100,630) -- -- $ 122,279
=========== ===========
BASIC NET INCOME (LOSS) PER COMMON
SHARE $ (.078) -- -- $ .009
=========== ===========
See the accompanying notes to pro forma financial statements.
FAMOUS FIXINS, INC.
SELECTED FINANCIAL DATA
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS:
Note 1. On March 29, 2002 Famous Fixins, Inc. (the "Company") entered into a
"Settlement of Debts and Asset Purchase Agreement" pursuant to which
the Company agreed to divest all of its operations and sell
substantially all of its assets and certain specified liabilities to
Starbrand in exchange for cancellation of $450,000 of its 4%
convertible debentures.
The Company's unaudited pro forma balance sheet as at December 31,
2001 presented herein has been prepared as if the "Settlement of
Debts and Asset Purchase Agreement" had been consummated on December
31, 2001.
The unaudited pro forma statement of operations of the Company gives
effect to the divestiture of substantially all of its operations as
if it had occurred on January 1, 2001.
Pro forma adjustments have been made for the following:
a. To record the sale of all of the assets of the Company, except
for those assets ($33) specifically associated with the $33,850
5% convertible debenture.
b. To record the assignment to Starbrand of the liabilities of the
Company, exclusive of $1,050,000 4% convertible debentures,
$33,850 5% convertible debenture, accrued and unpaid interest on
all debentures, and taxes specifically attributable to the
Company.
c. To remove the operating results of the Company except for
expenses which relate to assets and liabilities retained by the
Company and to record the gain resulting from the sale
transaction. Expenses includable in operating results are
interest expense on $1,050,000 4% convertible debentures and
$33,850 5% convertible debenture, continuing general and
administrative expenses, and corporation tax expense.
Note 2. Bond premium payable in the amount of $75,000 on the 4% $1,500,000
convertible debentures has been waived as a result of the extension
of the maturity date by the bondholders.
Note 3. The historical unaudited pro forma balance sheet and statement of
operations were obtained from Form 10-KSB for the year ended
December 31, 2001.
Note 4. Net loss per common share was calculated under SFAS No. 128,
"Earnings per Share". Basic net loss per share is computed by
dividing the net loss by the weighted average outstanding shares of
14,098,970 for the year ended December 31, 2001. No effect has been
given to the conversion of warrants and debentures to common stock
inasmuch as such conversions would be anti-dilutive.
Note 5. The Company has maintained a full valuation allowance for possible
tax credits, based on its net operating loss carryforward of
approximately $2,426,000 incurred on historical operations.
Consequently, no provision for income taxes is reflected in the pro
forma statement of operations.
Note 6. The unaudited pro-forma financial statements do not present the
effect of any change which may occur in the authorized, issued and
outstanding shares of the Company after December 31, 2001 from (i)
the amendment of the Company's certificate of incorporation to
increase the authorized capital shares; (ii) the exercise of
outstanding stock options or; (iii) the conversion of outstanding
convertible debentures.
ACTION FOR INCREASING NUMBER OF AUTHORIZED SHARES
The holders of a majority of the shares of our outstanding common stock approved
in writing an amendment to our Certificate of Incorporation to increase our
authorized capital from 25, 000,000 shares to 200,000,000 shares.
The increase in authorized capital was approved by shareholders who deemed it
advisable and in the company's best interests for reasons including the
following
o to have available additional authorized shares of our common stock in an
amount adequate to provide for our future needs.
o we may have future opportunities to engage in a private offering of our
securities in order to raise additional capital and carry out our
business objectives, however, our existing Certificate of Incorporation
does not authorize a sufficient number of shares of common stock to
close any such offering.
o we do not currently have a sufficient reserve of shares of common stock
issuable to holders of options, warrants and other convertible
securities, including upon conversion of our 4% convertible debentures.
The increase in authorized shares will enable us to have a sufficient
number of authorized shares of common stock to satisfy the conversion
rights of the holders of our 6% convertible debentures.
In addition to any proposed private offering, we may from time to time consider
acquisitions or other transactions which may require further issuance of shares
of our common stock. Currently, there are no definitive agreements respecting
any merger or consolidation with or acquisition of another business, or the sale
or liquidation of Famous Fixins. However, a majority in interest of the
shareholders believes that the increase in the number of authorized shares of
common stock is in our best interest and that of our shareholders because
additional shares of common stock will provide us with the ability to raise
additional capital through a private offering.
Because of the Board of Directors' discretion in connection with an issuance of
additional shares of our common stock, the Board of Directors may, under certain
circumstances, possess timing and other advantages in responding to a tender
offer or other attempt to gain control of us, which may make such attempts more
difficult and less attractive. Any additional shares of common stock issued
would have the same rights and privileges as the currently outstanding shares of
common stock. For example, issuance of additional shares would increase the
number of shares outstanding and could necessitate the acquisition of a greater
number of shares by a person making a tender offer and could make such
acquisition more difficult since the recipient of such additional shares may
favor the incumbent management. Moreover, these advantages give the Board of
Directors the ability to provide any such holders with a veto power over actions
proposed to be taken by the holders of our common stock. This could have the
effect of insulating existing management from removal, even if it is in the best
interest of the common shareholders. Our management is not aware of any existing
or threatened efforts to obtain control of Famous Fixins.
The issuance of any additional shares of our common stock would also have the
effect of diluting the equity interests of existing shareholders and the
earnings per share of existing shares of common stock. Such dilution may be
substantial, depending upon the number of shares issued.
The increase in the authorized capital shall be effective on or about May 6,
2002, twenty days after the mailing of this Information Statement, and the
amendment to our Certificate of Incorporation will thereupon be filed.
ADDITIONAL INFORMATION
We are subject to the informational requirements of the Securities Exchange Act
of 1934 and in accordance with the requirements thereof, file reports, proxy
statements and other information with the Securities and Exchange Commission
("SEC"). Copies of these reports, proxy statements and other information can be
obtained at the SEC's public reference facilities at Judiciary Plaza, Room 1024,
450 Fifth Street, N.W., Washington, D.C., 20549. Additionally, these filings may
be viewed at the SEC's website at http://www.sec.gov.
We filed our annual report for the fiscal year ended December 31, 2001 on Form
10-KSB with the SEC. A copy of the annual report on Form 10-KSB, except for
certain exhibits thereto, may be obtained, free of charge, upon written request
by any shareholder to Famous Fixins, Inc., 250 W. 57th St., Suite 1112, New
York, New York 10107, Attention: Secretary. Copies of all exhibits to the annual
report on Form 10-KSB are available upon a similar request, subject to payment
of a $.50 per page charge to reimburse us for expenses in supplying any exhibit.
If you have any questions about the actions described in this Information
Statement, you may contact Mr. Bauer, our Secretary, at 250 W. 57th St., Suite
1112, New York, New York 10107.
INFORMATION INCORPORATED BY REFERENCE
The following documents are incorporated herein by reference and to be a part
hereof from the date of filing of such documents:
o Annual Report on Form 10-KSB for the fiscal year ended December 31,
2001, a copy of which is enclosed herewith.
o All documents filed by Famous Fixins with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Information Statement and prior to the effective date of the action
taken described herein.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Information Statement to the extent that a statement contained herein or in
any other subsequently filed document that also is, or is deemed to be,
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Information Statement.
This Information Statement incorporates, by reference, certain documents that
are not presented herein or delivered herewith. Copies of any such documents,
other than exhibits to such documents which are not specifically incorporated by
reference herein, are available without charge to any person, including any
shareholder, to whom this Information Statement is delivered, upon written or
oral request to our Secretary at our address and telephone number set forth
herein.
DISTRIBUTION OF INFORMATION STATEMENT
The cost of distributing this Information Statement has been borne by us and
certain shareholders that consented to the action taken herein. The distribution
will be made by mail.
Pursuant to the requirements of the Exchange Act of 1934, as amended, the
Registrant has duly caused this Information Statement to be signed on its behalf
by the undersigned hereunto authorized.
By Order of the Board of Directors
/s/ JASON BAUER, SECRETARY
Jason Bauer, Secretary
April 2, 2002
New York, New York
EXHIBIT 1
[FORM OF SETTLEMENT OF DEBTS AND ASSET PURCHASE AGREEMENT]
SETTLEMENT OF DEBTS AND ASSET PURCHASE AGREEMENT (this "Agreement"), entered
into as of the ___ day of March, 2002, by and among FAMOUS FIXINS, INC., a New
York corporation (hereinafter, the "Seller"), STARBRAND, LLC, a limited
liability company organized under the laws of the State of Delaware
(hereinafter, the "Buyer"), and the Investors signatory hereto under the heading
"Investors", (each an "Investor" and together the "Investors").
WITNESSETH:
WHEREAS, the Seller has been unable to raise the required capital to
continue its business in its present form and desires to divest all of its
operations and sell substantially all of its assets;
WHEREAS, the Seller desires to retire a substantial portion of the debt it
has incurred which has hindered its operations;
WHEREAS, the Buyer desires to purchase substantially all of the assets of
the Seller and the Seller desires to sell such assets to the Buyer upon the
terms and conditions hereinafter set forth;
WHEREAS, the Investors desire to exchange the Exchanged Debentures for a
Class B Membership Interest in the Buyer; and
WHEREAS, as additional consideration for the purchase of the Net Assets, the
Buyer shall surrender to the Seller for cancellation the Exchanged Debentures
that the Buyer receives from the Investors.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
and agreements herein set forth, the parties hereby covenant and agree as
follows;
1. DEFINITIONS
1.1 "Assets" shall mean all of the assets and properties, real, personal and
mixed, including, without limitation, all licenses, copyrights,
trademarks, tradenames, accounts receivable, equipment, inventory,
barter credits and cash, marketable securities and other cash
equivalents of the Seller as at the Closing Date.
1.2 "Assignment and Assumption Agreement" shall mean the assignment and
assumption agreement entered into between the Seller and the Buyer on or
before the Closing in the form of Exhibit A hereto.
1.3 "Bankruptcy Event" shall have the meaning ascribed to such term in
Section 7.7.
1.4 "Bill of Sale" shall have the meaning ascribed to such term in Section
2.3, in the form of Exhibit B hereto.
1.5 "Business" shall mean the business of the Seller as presently conducted
as a going concern.
1.6 "Class B Membership Interest" shall mean a membership interest in Buyer
with such rights and privileges as set forth in the Operating Agreement.
1.7 "Closing" shall have meaning ascribed to such term in Section 10.
1.8 "Closing Date" shall have the meaning ascribed to such term in Section
10.
1.9 "Common Stock" shall have the meaning ascribed to such term in Section
5.9.
1.10 "Commission Documents" shall have the meaning ascribed to such term in
Section 5.7.
1.11 "Convertible Debentures" shall mean the 4% convertible debentures of
the Seller issued to the Investors on November 7, 2000, pursuant to the
Purchase Agreement.
1.12 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
1.13 "Exchanged Debentures" shall have the meaning ascribed to such term in
Section 3.1.
1.14 "Excluded Assets" shall mean the Assets set forth on Schedule X
attached hereto.
1.15 "Excluded Liabilities" shall mean the Liabilities set forth on Schedule
Y attached hereto.
1.16 "GAAP" shall mean U.S. generally accepted accounting principles.
1.17 "Information Statement" shall have the meaning ascribed to such term in
Section 7.7.
1.18 "Liabilities" shall mean all debts, accrued liabilities, accrued
expenses, accounts payable, obligations, costs, expenses and
contingencies of the Seller which exist or have been accrued as at the
Closing Date.
1.19 "Net Assets" shall mean all Assets other than the Excluded Assets.
1.20 "Net Liabilities" shall mean all Liabilities other than the Excluded
Liabilities.
1.21 "Operating Agreement" shall mean the Buyer's Operating Agreement,
substantially in the form of Exhibit C attached hereto.
1.22 "Purchase Agreement" shall mean that certain Convertible Debenture and
Warrants Purchase Agreement, dated October 27, 2000 among the Seller and
the Investors.
1.23 "SEC" shall mean the Securities and Exchange Commission.
1.24 "Shareholders' Consents" shall have the meaning ascribed to such term
in Section 5.10.
2. ACQUISITION OF THE ASSETS AND ASSUMPTION OF LIABILITIES
2.1 Transfer of Assets. Subject to the terms and conditions set forth in
this Agreement and in reliance upon the representations and warranties
herein set forth, at the Closing, the Seller shall sell, assign,
transfer, convey and deliver all of the Seller's right, title and
interest in the Net Assets and the Business to the Buyer.
2.2 Assumption of Liabilities. Pursuant to an Assignment and Assumption
Agreement, substantially in the form attached hereto as Exhibit A, and
as further consideration for the purchase and sale of the Net Assets,
the Buyer shall, from and after the Closing Date, assume all Net
Liabilities.
2.3 Bill of Sale. On the Closing Date, Seller shall deliver to the Buyer a
bill of sale, deed and such other documents and instruments of
conveyance ("Bill of Sale") which shall be necessary to vest in the
Buyer good and marketable title to the Net Assets.
2.4 Books and Records. From and after the Closing Date, the Buyer shall
provide the Seller and their representatives such information as the
Seller reasonably requires for its reporting obligations under the
securities laws pursuant to Section 7.6.
2.5 Excise Taxes. All sales and documentary and transfer taxes arising out
of the sale of the Net Assets hereunder and all charges for or in
connection with the recording of any document or instrument herein
provided shall be paid by the Buyer.
3. EXCHANGE AND CANCELLATION OF CONVERTIBLE DEBENTURES
3.1 Exchange of Convertible Debentures. At the Closing, the Investors,
severally and not jointly, agree to exchange with the Buyer, in the
aggregate, US$450,000 principal amount of the Convertible Debentures
(the "Exchanged Debentures") for, in the aggregate, all of the Buyer's
Class B Membership Interests in the manner set forth in the Operating
Agreement. At the Closing, each Investor shall deliver to the Buyer the
principal amount of Exchanged Debentures set forth on the signature
pages hereto, the Buyer and the Investors shall deliver the fully
executed Operating Agreement and the Investors shall each receive a
receipt evidencing each such Investor's Class B Membership Interest.
3.2 Cancellation of Buyer's Interest in Convertible Debentures. At the
Closing, as additional consideration for the purchase of the Net Assets,
the Buyer shall surrender the Exchanged Debentures to the Seller for
immediate cancellation. The Buyer acknowledges and agrees that,
effective upon surrender of the Exchanged Debentures, the Seller shall
be released and discharged from any and all actions, causes of actions,
suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, extents, executions, claims,
and demands whatsoever, in law or equity relating to the Exchanged
Debentures.
4. FURTHER ASSURANCES
From time to time from and after the Closing, the parties hereto shall
execute and deliver, or cause to be executed and delivered, any and all such
further agreements, certificates and other instruments, and shall take or cause
to be taken any and all such further action, as any of the parties may
reasonably deem necessary or desirable in order to carry out the intent and
purposes of this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller, by its execution of this Agreement, does hereby acknowledge and
agree that Buyer is intimately familiar with the Business and financial
condition of the Seller. Accordingly, except as otherwise expressly set forth in
this Section 5, neither the Seller nor any other officer, director, stockholder
or affiliate of the Seller shall make any representation or warranty to the
Buyer or any other person firm or corporation, pursuant to this Agreement.
Subject to the foregoing and except as set forth on the disclosure schedules
attached hereto, the Seller hereby represents and warrants as follows:
5.1 Valid and Binding Agreement. The Seller has full legal right, power and
authority to execute and deliver this Agreement and has the full legal
right, power and authority to consummate the transactions contemplated
hereby. This Agreement is enforceable against the Seller in accordance
with its terms, except to the extent limited by bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally, and
except that the remedy of specific performance or similar equitable
relief is available only at the discretion of the court before which
enforcement is sought.
5.2 Organization, Good Standing and Qualification. The Seller: (a) is a
corporation duly organized, validly existing and in good standing under
the laws of the State of New York; and (b) has all necessary corporate
power and authority to carry on its respective business and to own,
lease and operate its properties.
5.3 Subsidiaries. The Seller does not own, directly or indirectly, any stock
or other equity securities of any corporation or entity, or have any
direct or indirect equity or ownership interest in any person, firm,
partnership, corporation, venture or business.
5.4 Compliance with Laws.
a) To the best of Seller's knowledge, the Seller is, and has been at
all times during the three (3) year period prior to the date hereof,
in compliance with all domestic, foreign, federal, state, local and
municipal laws and ordinances and governmental rules and regulations
and all requirements of insurance carriers, applicable to its
business, affairs, properties or assets.
b) To the best of Seller's knowledge, neither the Seller nor any of its
directors, officers or employees, has received any written notice of
default or violation, nor, to the best of Seller's knowledge, is the
Seller or any of its directors, officers or employees in default or
violation, with respect to any judgment, order, writ, injunction,
decree, demand or assessment issued by any court or any federal,
state, local, municipal or other governmental agency, board,
commission, bureau, instrumentality or department, domestic or
foreign, relating to any aspect of the Seller's Business, affairs,
properties or assets. Neither Seller, nor, to the best of Seller's
knowledge, any of its directors, officers or employees, has received
written notice of, been charged with, or is under investigation with
respect to, any violation of any provision of any federal, state,
local, municipal or other law or administrative rule or regulation,
domestic or foreign, relating to any aspect of the Seller's
Business, affairs, properties or the Assets, which violation would
have a material adverse effect on the Seller, the Business or any
material portion of the Assets.
5.5 Litigation. Except as disclosed in the Commission Documents, there is no
suit, action, arbitration, or legal, administrative or other proceeding
or governmental investigation (including, without limitation, any claim
alleging the invalidity, infringement or interference of any patent,
patent application, or rights thereunder owned or licensed by the
Seller) pending, or to the best knowledge of the Seller, threatened, by
or against the Seller or any of its assets or properties. The Seller is
not aware of any state of facts, events, conditions or occurrences which
might properly constitute grounds for or the basis of any suit, action,
arbitration, proceeding or investigation against or with respect to the
Seller.
5.6 Transactions with Affiliates. No asset employed or used in any of the
Business of the Seller is owned by, leased from or leased to Seller, or
any other partnership, corporation or trust formed, owned or operated
for Seller's benefit, or any officer, director or employee of the Seller
or any affiliate of the Seller.
5.7 Commission Documents, Financial Statements. The common stock of the
Seller (the "Common Stock") is registered pursuant to Section 12(g) of
the Exchange Act, and the Seller has filed all reports, schedules,
forms, statements and other documents required to be filed by it with
the Commission pursuant to the reporting requirements of the Exchange
Act, including material filed pursuant to Section 13(a) or 15(d) of the
Exchange Act (the "SEC Documents"), and the Seller has filed with the
SEC its Form 10-KSB for the year ended December 31, 2001 (the Seller's
SEC Documents, including filings incorporated by reference therein,
herein referred to as the "Commission Documents"). The Commission
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and do not contain any material untrue statement of a
material fact or omit to state a material fact materially required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not materially
misleading. The financial statements of the Seller included in the
Commission Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC applicable thereto or other applicable rules and
regulations with respect thereto. Such financial statements have been
prepared in accordance with GAAP applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of
unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present
in all material respects the financial position of the Seller as of the
dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments).
5.8 Consent of Seller's Shareholders. By written consents in lieu of a
meeting dated March __, 2002, the Seller's shareholders holding at least
a majority of the voting rights of all outstanding shares of capital
stock as of such date have duly voted in favor of the following actions:
a) sale by the Seller of the Net Assets to the Buyer, in exchange for
the assumption by the Buyer of the Net Liabilities; and
b) amendment of Seller's Certificate of Incorporation to increase the
authorized number of shares of Common Stock that the Seller may
issue from 25,000,000 to 200,000,000.
c) Having sufficient voting power to approve such proposals through
such shareholders' ownership of the capital stock, no other consents
will be solicited in connection with the aforementioned actions.
Pursuant to Rule 14c-2 under the Securities Exchange Act of 1934, as
amended, the actions will not be effective until 20 days after the
date the Information Statement is mailed to the Seller's
shareholders. An executed copy of all such written consents, duly
certified by an officer of the Seller, is attached hereto as Exhibit
D ("Shareholders' Consents").
5.9 Liabilities. Set forth on the disclosure schedules is a true, correct
and complete list of all of the material Liabilities and the names and
addresses of the creditors of the Seller.
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER
Except as set forth on the disclosure schedules attached hereto, the Buyer
represents and warrants to the Seller and the Investors as follows:
6.1 Valid and Binding Agreement. The Buyer has full legal right, power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement constitutes the legal,
valid and binding obligations of the Buyer, enforceable against the
Buyer in accordance with their respective terms, except to the extent
limited by bankruptcy, insolvency, reorganization and other laws
affecting creditors' rights generally, and except that the remedy of
specific performance or similar equitable relief is available only at
the discretion of the court before which enforcement is sought.
6.2 Organization, Good Standing and Qualification. The Buyer: (a) is a
limited liability company validly existing under the laws of the State
of Delaware, (b) is not required, by the nature of its properties or
business, to be qualified to do business as a foreign entity or
corporation in any foreign jurisdiction except New York upon the
Closing.
6.3 Issuance of Class B Membership Interest. The Class B Membership
Interests to be issued under this Agreement and the Operating Agreement
have been duly authorized by all necessary action required under
applicable law, when paid for and issued in accordance with the terms
hereof, the Class B Membership Interests shall be validly issued and
outstanding, fully paid and non-assessable, and the Investors shall be
entitled to all rights accorded to a holder of the Class B Membership
Interest under the Operating Agreement and applicable law. The Class B
Membership Interest issued hereunder shall be free from restrictions on
transfer other than restrictions on transfer under this Agreement, the
Operating Agreement and applicable federal, state, local and foreign
securities laws.
6.4 Litigation. No litigation or administrative proceeding of or before any
court, tribunal or government entity is presently pending, or, to the
knowledge of the Buyer, threatened against the Buyer or any properties
of the Buyer or with respect to this Agreement, which, if adversely
determined, could have a material adverse effect on the Buyer or which
would draw into question the validity of this Agreement.
7. ADDITIONAL AGREEMENTS OF THE PARTIES
7.1 Confidentiality. Notwithstanding anything to the contrary contained in
this Agreement, and subject only to any disclosure requirements which
may be imposed upon the parties hereto under applicable state or federal
securities laws, it is expressly understood and agreed by the parties
that (i) this Agreement and the conversations, negotiations and
transactions relating hereto and/or contemplated hereby, and (ii) all
financial information, business records and other non-public information
concerning the Seller and the Buyer which the Buyer, Seller or their
representatives has received or may hereafter receive, shall be
maintained in the strictest confidence by the parties hereto, and shall
not be disclosed to any person that is not associated or affiliated with
the Buyer or the Seller and involved in the transactions contemplated
hereby, without the prior written approval of the parties hereto, except
to the extent required by law or regulation, or the extent such
information becomes generally available to the public. Subject to the
foregoing, the parties hereto shall use their best efforts to avoid
disclosure of any of the foregoing or undue disruption of any of the
business operations or personnel of the other parties hereto.
7.2 Additional Agreements and Instruments. On or before the Closing Date,
the parties shall execute, deliver and file all exhibits, agreements,
certificates instruments and other documents, not inconsistent with the
provisions of this Agreement, which, in the opinion of counsel to the
parties hereto, shall reasonably be required to be executed, delivered
and filed in order to consummate the transactions contemplated by this
Agreement.
7.3 Non-Interference. The parties hereto shall not cause to occur any act,
event or condition which would cause any of their respective
representations and warranties made in this Agreement to be or become
untrue or incorrect in any material respect as of the Closing Date, or
would interfere with, frustrate or render unreasonably expensive the
satisfaction by the other party or parties of any of the conditions
precedent set forth in this Agreement.
7.4 Reporting and Compliance with the Law. From the date hereof through the
Closing Date, the Seller shall duly and timely file all tax returns
required to be filed with the proper authorities and duly observe and
conform, in all material respects, to all applicable laws and orders.
The Seller has applied for an extension of time in connection with its
2001 year end tax returns, and in the event that the Seller has not
completed such prior to the Closing Date, the Buyer shall cooperate with
the Seller to file such tax returns as soon as practicable thereafter.
7.5 No Bankruptcy Filing or Pending Acquisition. The Buyer hereby covenants
and agrees that as at the date hereof and on the Closing Date: (a) the
Buyer has no present intention to effect any assignment for the benefit
of creditors or filing under the federal Bankruptcy Act or any state law
affecting creditors and debtors, whether voluntary or involuntary (a
"Bankruptcy Event"); and (b) there is not pending or contemplated by the
Buyer, the acquisition of the securities or assets of any person, firm
or corporation, or any joint venture or other material transaction with
any such person, firm or corporation which has not been fully disclosed
in writing to the other parties.
7.6 Preparation of Financial and SEC Documents. After the Closing Date,
Buyer agrees to use reasonable efforts to cooperate with the Seller in
the preparation of the Seller's SEC Documents for a reasonable period of
time hereafter.
7.7 Information Statement. Within three business days following the date
hereof, the Seller shall file a preliminary Information Statement
relating to the transactions contemplated by this Agreement with the SEC
(the "Information Statement") and upon clearance from the SEC, the
Seller shall, within five business days of such clearance, distribute
the definitive Information Statement to the Seller's shareholders in
compliance with Rule 14c-2 under the Exchange Act. The Information
Statement and the delivery thereof will comply in all material respects
with the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder.
7.8 Corporate Action. Prior to the Closing, the Seller shall file such
certificates or other documents in order to effectuate the matters
contemplated by the Shareholders' Consents.
8. CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE
In addition to the fulfillment of the parties' agreements in Section 7
above, the obligations of Buyer to consummate the transactions contemplated by
this Agreement are further subject to the satisfaction, on or before the Closing
Date, of all the following conditions, any one or more of which may be waived in
writing by the Buyer:
8.1 Accuracy of Representations and Warranties All representations and
warranties made by Seller in this Agreement, in any schedule(s) hereto,
and/or in any written statement delivered to the Buyer under this
Agreement shall be true and correct in all material respects on and as
of the Closing Date as though such representations and warranties were
made on and as of such dates.
8.2 Performance. The Seller and the Investors shall have performed,
satisfied and complied with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with
by them on or before the Closing Date.
8.3 Certification. The Buyer shall have received a certificate, dated as of
the Closing Date, signed by the Seller, certifying, in such detail as
the Buyer and its counsel may reasonably request, that the conditions
specified in Sections 8.1 and 8.2 above have been fulfilled.
8.4 Resolutions. The Buyer shall have received certified consents of the
Board and shareholders of the Seller in form reasonably satisfactory to
counsel for the Buyer, authorizing the execution, delivery and
performance of this Agreement, and all actions to be taken by the Seller
hereunder.
8.5 Absence of Litigation. No action, suit or proceeding by or before any
court or any governmental body or authority, against the Seller or
pertaining to the transactions contemplated by this Agreement or their
consummation, not disclosed in the Commission Documents, shall have been
instituted on or before the Closing Date, which action, suit or
proceeding would, if determined adversely, (a) have a material adverse
effect on the Seller, its Business or any material portion of its
assets, (b) impair the ability of the Seller to deliver all of the
Assets to the Buyer in accordance with the terms of this Agreement, or
(c) impair the ability of the Buyer to consummate its acquisition of the
Assets.
8.6 Consents. All necessary disclosures to and agreements and consents of
(a) any parties to any material contracts and/or licensing authorities
which are material to the Seller's Business, and (b) any governmental
authorities or agencies to the extent required in connection with the
transactions contemplated by this Agreement, shall have been obtained
and true and complete copies thereof delivered to the Buyer.
8.7 Proceedings and Instruments Satisfactory. All proceedings, corporate or
other, to be taken in connection with the transactions contemplated by
this Agreement, and all documents incidental thereto, shall be
reasonably satisfactory in form and substance to the Buyer and its
counsel.
8.8 Satisfaction of Agreements. All of the obligations and agreements of
Seller specified in Section 7 shall have been satisfied by Seller to the
reasonable satisfaction of the Buyer.
9. CONDITIONS PRECEDENT TO SELLER'S AND INVESTORS' PERFORMANCE
In addition to the fulfillment of the parties' agreements in Section 7
above, the obligations of Seller and the Investors to consummate the
transactions contemplated by this Agreement are further subject to the
satisfaction, at or before the Closing Date of all of the following conditions,
any one or more of which may be waived in writing by the Seller and the
Investors:
9.1 Accuracy of Representations and Warranties. All representations and
warranties made by the Buyer in this Agreement and/or in the written
statement delivered by the Buyer under this Agreement shall be true and
correct in all material respects on and as of the Closing Date as though
such representations and warranties were made on and as of such dates.
9.2 Performance. The Buyer shall have performed, satisfied and complied with
all covenants, agreements and conditions required by this Agreement to
be performed, satisfied or complied with by the Buyer on or before each
of the Closing Date.
9.3 Certification. The Seller shall have received a certificate, dated the
each of the Closing Date, signed by the Buyer certifying, in such detail
as the Seller and its counsel may reasonably request, that the
conditions specified in Sections 9.1 and 9.2 above have been fulfilled.
9.4 Resolutions. The Seller shall have received certified resolutions of the
managing member of the Buyer, in form reasonably satisfactory to counsel
for the Seller, authorizing the execution, delivery and performance of
this Agreement and all actions to be taken by the Buyer hereunder.
9.5 Proceedings and Instruments Satisfactory. All proceedings to be taken in
connection with the transactions contemplated by this Agreement, and all
documents incidental thereto, shall be reasonably satisfactory in form
and substance to the Seller and its counsel.
9.6 Satisfaction of Agreements. All of the obligations and agreements of the
Buyer specified in Section 7 shall have been satisfied by the Buyer to
the reasonable satisfaction of Seller.
9.7 Approval of Seller's Stockholders. This Agreement and all of the
transactions contemplated hereby and pursuant to the Information
Statement shall have been duly approved, adopted and ratified by a
sufficient number of the votes of the shareholders of the Seller.
9.8 Representations. At or prior to the Closing, the Investors shall have
received documents as the Investors or its counsel shall reasonably
require incident to the Closing to confirm the representations and
warranties of the other parties.
9.9 Consent of Creditors. At or prior to the Closing, the Seller shall have
obtained the written consent of substantially all of the creditors set
forth on Schedule 5.9 attached hereto, in a form reasonably satisfactory
to the Investors, to the terms of the Assignment and Assumption
Agreement.
10. CLOSING
10.1 Closing Date. Unless this Agreement shall be terminated pursuant to
Section 11 below, the delivery of all consideration, documents and
instruments required pursuant to this Agreement and set forth below to
be executed and delivered (the "Closing"), shall take place at the
offices of Feldman Weinstein LLP, 36 West 44th Street, New York, New
York 10036, or such other location in New York, New York or elsewhere as
agreed to between the parties, on such date as shall be more than 23
calendar days from the date the Information Statement shall have been
mailed to the Seller's shareholders in compliance with Rule 14c-2 under
the Exchange Act; provided, however, that in no event shall the Closing
Date be later than 60 calendar days from the date hereof without the
written consent of all parties hereto (the date of the Closing being
referred to in this Agreement as the "Closing Date").
10.2 Closing Deliveries. At the Closing, the following documents shall be
delivered by the respective parties, unless waived by all of the parties
hereto:
a) Fully executed original of this Agreement and the disclosures
attached hereto;
b) Fully executed original Operating Agreement;
c) Receipt of all Class B Membership Interests issued to the Investors
from the Buyer;
d) Exchanged Debentures duly assigned to the Buyer;
e) Duly executed notice to the Buyer surrendering the Exchanged
Debentures for cancellation upon receipt thereof;
f) Duly executed Assignment and Assumption Agreement;
g) Duly executed Bill of Sale;
h) President's Certificate of Seller substantially in the form of
Exhibit E attached hereto;
i) Managing Member's Certificate of Buyer substantially in the form of
Exhibit E attached hereto;
j) Documents as required pursuant to Section 9.8; and
k) Copies of the executed written consents of the Seller's creditors as
required pursuant to Section 9.9.
11. TERMINATION OF AGREEMENT
11.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing
Date:
a) by the mutual written consent of all of the parties hereto;
b) by any party, if: (i) a material breach shall exist with respect to
the written representations and warranties made by another party or
parties, as the case may be, (ii) another party shall fail to
perform any covenant or agreement on their part to be performed
hereunder, or shall take any action prohibited by this Agreement, if
such actions shall or may have a material adverse effect on the
Seller and/or the transactions contemplated hereby, (iii) another
party shall not have furnished, upon reasonable notice therefor,
such certificates and documents required in connection with the
transactions contemplated hereby and matters incidental thereto as
it or they shall have agreed to and matters incidental thereto as it
or they shall have agreed to furnish, and it is reasonably unlikely
that the other party will be able to furnish such item(s) prior to
May 31, 2002, or (iv) any consent of any third party to the
transactions contemplated hereby (whether or not the necessity of
which is disclosed herein or in any Schedule hereto) is reasonably
necessary to prevent a default under any outstanding material
obligation of Seller or the Buyer, and such consent is not
obtainable without material cost or penalty (unless the party or
parties not seeking to terminate this Agreement agree or agrees to
pay such cost or penalty); or
c) by any party, at any time on or after May 31, 2002, if the
transactions contemplated to be consummated at the Closing shall not
have been consummated prior thereto, and the party or parties
directing termination shall not then be in breach or default of any
obligations imposed upon such party by this Agreement.
11.2 Effect of Termination of Agreement. In the event of termination of
this Agreement pursuant to Section 11.1(a), no party to this
Agreement shall have any liability to the other for the termination
of this Agreement. In the event of termination by any party as
provided in this Section 11.1(b), prompt written notice shall be
given to the other party.
12. INDEMNIFICATION
12.1 General.
a) SELLER. The Seller hereby agrees to defend, indemnify and hold
harmless the Buyer from, against and in respect of any and all
claims, losses, costs, expenses, obligations, liabilities, damages,
recoveries and deficiencies, including interest, penalties and
reasonable attorneys' fees (collectively "Losses"), that the Buyer
may incur, sustain or suffer as a result of the failure of the
Seller to perform any of the covenants and agreements of the Seller
contained in this Agreement on the Closing Date or thereafter except
to the extent such failure results from the actions or omissions of
the Buyer or its nominees or representatives (hereinafter referred
to as "Seller Covenant Losses").
b) THE BUYER. The Buyer does hereby agree to defend, indemnify and hold
harmless the Seller and the Investors from, against and in respect
of any and all Losses that the Seller or the Investors many incur,
sustain or suffer as a result of:
(i) a breach of any of the representations, and warranties of the
Buyer which are contained in Article 6 of this Agreement
(hereinafter referred to as "Buyer Breach of Warranty Losses");
or
(ii) the failure of the Buyer to perform any of the covenants and
agreements of Buyer contained in this Agreement on the Closing
Date or thereafter (hereinafter referred to as "Buyer Covenant
Losses").
12.2 Limitations on Breach of Warranty Losses.
a) Anything elsewhere contained in this Agreement to the contrary
notwithstanding, except for any Losses involving a finding by any
court of competent jurisdiction (from which no appeal can or has
been taken) that statutory or common law fraud has been committed by
the Buyer, any affiliate of the Buyer, the Buyer shall not be liable
with respect to any Buyer Breach of Warranty Losses unless and until
the aggregate amount of all such Buyer Breach of Warranty Losses
incurred by the Seller or the Investors shall exceed the sum of
$5,000 (the "Basket").
b) The provisions of Section 12.2(a) shall apply only to a Buyer Breach
of Warranty Losses. In the event that any Seller Covenant Losses or
Buyer Covenant Losses shall occur and shall be continuing at any
time from and after the Closing Date, the injured party or parties
shall have all applicable remedies at law or in equity available to
it, as are provided in this Agreement, without regard to any Basket.
12.3 Claims for Indemnity. Whenever a claim shall arise for which any
party shall be entitled to indemnification hereunder, the
indemnified party shall notify the indemnifying party in writing
within sixty (60) days of the indemnified party's first receipt of
notice of, or the indemnified party's obtaining actual knowledge of,
such claim, and in any event within such shorter period as may be
necessary for the indemnifying party or parties to take appropriate
action to resist such claim. Such notice shall specify all facts
known to the indemnified party giving rise to such indemnity rights
and shall estimate (to the extent reasonably possible) the amount of
potential liability arising therefrom. If the indemnifying party
shall be duly notified of such dispute, the parties shall attempt to
settle and compromise the same or may agree to submit the same to
arbitration or, if unable or unwilling to do any of the foregoing,
such dispute shall be settled by appropriate litigation, and any
rights of indemnification established by reason of such settlement
compromise, arbitration or litigation shall promptly thereafter be
paid and satisfied by the indemnifying party or parties obligated to
make indemnification hereunder.
12.4 Right to Defend. If the facts giving rise to any claim for
indemnification shall involve any actual or threatened action or
demand by any third party against the indemnified party or any of
its affiliates, the indemnifying party or parties shall be entitled
(without prejudice to the indemnified party's right to participate
at its own expense through counsel of its own choosing), at its
expense and through a single counsel of its own choosing, to defend
or prosecute such claim in the name of the indemnifying party or
parties, or any of them, or if necessary, in the name of the
indemnified party. In any event, the indemnified party shall give
the indemnifying party advance written notice of any proposed
compromise or settlement of any such claim. If the remedy sought in
any such action or demand is solely money damages, the indemnifying
party shall have fifteen (15) days after receipt of such notice of
settlement to object to the proposed compromise or settlement, and
if the indemnifying party does so object, the indemnifying party
shall be required to undertake, conduct and control, through counsel
of its own choosing and at its sole expense, the settlement or
defense thereof, and the indemnified party shall cooperate with the
indemnifying party in connection therewith.
12.5 Resolution of Disputes.
a) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made in
New York by persons domiciled in New York City and without regard to
its principles of conflicts of laws. Each party hereto agrees to
submit themselves to the IN PERSONAM jurisdiction of the state and
federal courts situated within the Southern District of the State of
New York with regard to any controversy arising out of or relating
to this Agreement. The non-prevailing party to any dispute hereunder
shall pay the expenses of the prevailing party, including reasonable
attorneys' fees, in connection with any such dispute.
b) Notwithstanding Section 12.5(a) above, in the event that any actual
or anticipatory breach of any covenant and agreement contained
herein by any one or more party may cause irreparable damage to any
other parties hereto for such actually or potentially damaged party
would have no adequate remedy at law, the aggrieved party or parties
may immediately apply to any court of competent jurisdiction for a
temporary restraining order or such other preliminary or permanent
injunctive or interim relief as may be deemed appropriate by such
court.
13. COSTS
13.1 Finder's or Broker's Fees. Each of the Buyer and the Seller represents
and warrants that neither it nor any of its respective affiliates has
dealt with any broker or finder in connection with any of the
transactions contemplated by this Agreement, and no broker or other
person is entitled to any commission or finder's fee in connection with
any of these transactions.
13.2 Expenses. The parties shall each pay all costs and expenses incurred or
to be incurred by them, respectively, in negotiating and preparing this
Agreement and in closing and carrying out the transactions contemplated
by this Agreement, except to the extent set forth in Schedule Y.
14. FORM OF AGREEMENT
14.1 Effect of Headings. The Section headings used in this Agreement and the
titles of the Schedules hereto are included for purposes of convenience
only, and shall not affect the construction or interpretation of any of
the provisions hereof or of the information set forth in the disclosure
schedules.
14.2 Entire Agreement; Waivers. This Agreement constitutes the entire
agreement between the parties pertaining to the subject matter hereof,
and supersedes all prior agreements or understandings as to such subject
matter. No party hereto has made any representation or warranty or given
any covenant to the other except as set forth in this Agreement. No
waiver of any of the provisions of this Agreement shall be deemed, or
shall constitute, a waiver of any other provisions, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party making the
waiver.
14.3 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts; each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
Except as otherwise stated herein, in lieu of the original documents, a
facsimile transmission or copy of the original documents shall be as
effective and enforceable as the original.
15. PARTIES
15.1 Parties in Interest. Nothing in this Agreement, whether expressed or
implied, is intended to confer any rights or remedies under or by reason
of this Agreement on any persons other than the parties to it and their
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns, nor is anything in this Agreement
intended to relieve or discharge the obligations or liability of any
third persons to any party to this Agreement.
15.2 Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly
given (i) on the date of service if served personally on the party to
whom notice is to be given, or if given by facsimile transmission to the
number indicated below, or (ii) on the third day after mailing if mailed
to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, and properly addressed as
follows:
If to the Buyer:
STARBRAND, LLC
[ADDRESS]
If to Seller:
Famous Fixins, Inc.
2500 W. 57th Street, Suite 1112
New York, NY 10107
Attention: Jason Bauer, President
If to the Investors:
As set forth on the signature page hereto.
or to such other address as either party shall have specified by notice
in writing given to the other party.
16. MISCELLANEOUS
16.1 Amendments and Modifications. No amendment or modification of this
Agreement shall be valid unless made in writing and signed by the party
to be charged therewith.
16.2 Binding Effect. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted
assigns.
16.3 Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under
applicable Law, but if any provision of this Agreement should be
prohibited or invalid under applicable Law, such provision shall be
ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions
of this Agreement.
*******************
IN WITNESS WHEREOF, the parties have executed this Agreement on and as of
the date first set forth above.
FAMOUS FIXINS, INC.
By:_____________________________
Name:
Title:
STARBRAND, LLC
By:_____________________________
Name:
Title:
INVESTORS:
Address: ROSEWORTH GROUP, LTD
- ---------
C/o Beacon Capital Management
Harbour House, 2nd Floor
Waterfront Drive By:_____________________________
Road Town, Tortola, BVI Name:
Principal Amount of Exchanged Debentures: Title:
$195,000
Address: AUSTOST ANSTALT SCHAAN
- ---------
Landstrasse 163
9494 Furstenweg
Vaduz, Liechtenstein By:_____________________________
Principal Amount of Exchanged Debentures: Name:
$112,000 Title:
Address: BALMORE FUNDS, S.A
- --------
Trident Chambers
Road Town, Tortola, BVI
Principal Amount of Exchanged Debentures By:_____________________________
$143,000 Name:
Title:
SCHEDULE X
1. any claims for tax refunds, tax loss carryforwards or carrybacks or tax
credits of any kind applicable to the Business, income (loss) or Assets of
the Seller prior to the Closing Date.
2. the stock book, minute book, stock records, transfer sheets and other
corporate records of the Seller.
SCHEDULE Y
1. Outstanding principal and interest of the Convertible Debentures, excluding
$450,000 Exchanged Debentures; and
2. Outstanding principal and interest of the Seller's non-convertible
promissory notes issued to Roseworth Group Limited and Alpha Capital AG.
3. Outstanding principal and interest of Seller's 4% convertible debentures
issued to AMRO International, S.A.
4. Notwithstanding Section 13.2 of the Agreement, the reasonable legal,
accounting and SEC disclosure related fees, including filing fees, mailing
costs, or other expenses which were and will reasonably be incurred in
connection with this transaction, including Commission Documents less
$20,000 to be paid by the Buyer; provided the Investors have given their
prior written consent to the payment by the Seller of such fees.
DISCLOSURE SCHEDULES
[to be provided]
EXHIBIT 2
SHAREHOLDER DISSENTER'S RIGHTS
Section 910. Right of shareholder to receive payment for shares upon merger or
consolidation, or sale, lease, exchange or other disposition of assets, or share
exchange
(a) A shareholder of a domestic corporation shall, subject to and by complying
with section 623 (Procedure to enforce shareholder's right to receive payment
for shares), have the right to receive payment of the fair value of his shares
and the other rights and benefits provided by such section, in the following
cases:
(1) Any shareholder entitled to vote who does not assent to the taking of an
action specified in clauses (A), (B) and (C).
(A) Any plan of merger or consolidation to which the corporation is a
party; except that the right to receive payment of the fair value of his
shares shall not be available:
(i) To a shareholder of the parent corporation in a merger
authorized by section 905 (Merger of parent and subsidiary
corporations), or paragraph (c) of section 907 (Merger or consolidation
of domestic and foreign corporations); or
(ii) To a shareholder of the surviving corporation in a merger
authorized by this article, other than a merger specified in subclause
(i), unless such merger effects one or more of the changes specified in
subparagraph (b) (6) of section 806 (Provisions as to certain
proceedings) in the rights of the shares held by such shareholder;
(iii) Notwithstanding subclause (ii) of this clause, to a
shareholder for the shares of any class or series of stock, which shares
or depository receipts in respect thereof, at the record date fixed to
determine the shareholders entitled to receive notice of the meeting of
shareholders to vote upon the plan of merger or consolidation, were
listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc.
(B) Any sale, lease, exchange or other disposition of all or
substantially all of the assets of a corporation which requires
shareholder approval under section 909 (Sale, lease, exchange or other
disposition of assets) other than a transaction wholly for cash where
the shareholders' approval thereof is conditioned upon the dissolution
of the corporation and the distribution of substantially all of its net
assets to the shareholders in accordance with their respective
interests within one year after the date of such transaction.
(C) Any share exchange authorized by section 913 in which the
corporation is participating as a subject corporation; except that the
right to receive payment of the fair value of his shares shall not be
available to a shareholder whose shares have not been acquired in the
exchange or to a shareholder for the shares of any class or series of
stock, which shares or depository receipt in respect thereof, at the
record date fixed to determine the shareholders entitled to receive
notice of the meeting of shareholders to vote upon the plan of
exchange, were listed on a national securities exchange or designated
as a national market system security on an interdealer quotation system
by the National Association of Securities Dealers, Inc.
(2) Any shareholder of the subsidiary corporation in a merger authorized
by section 905 or paragraph (c) of section 907, or in a share exchange
authorized by paragraph (g) of section 913, who files with the corporation a
written notice of election to dissent as provided in paragraph (c) of
section 623.
(3) Any shareholder, not entitled to vote with respect to a plan of
merger or consolidation to which the corporation is a party, whose shares
will be canceled or exchanged in the merger or consolidation for cash or
other consideration other than shares of the surviving or consolidated
corporation or another corporation.
SECTION 623. PROCEDURE TO ENFORCE SHAREHOLDER'S RIGHT TO RECEIVE PAYMENT FOR
SHARES
(a) A shareholder intending to enforce his right under a section of this
chapter to receive payment for his shares if the proposed corporate action
referred to therein is taken shall file with the corporation, before the meeting
of shareholders at which the action is submitted to a vote, or at such meeting
but before the vote, written objection to the action. The objection shall
include a notice of his election to dissent, his name and residence address, the
number and classes of shares as to which he dissents and a demand for payment of
the fair value of his shares if the action is taken. Such objection is not
required from any shareholder to whom the corporation did not give notice of
such meeting in accordance with this chapter or where the proposed action is
authorized by written consent of shareholders without a meeting.
(b) Within ten days after the shareholders' authorization date, which term
as used in this section means the date on which the shareholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite shareholders, the corporation shall give
written notice of such authorization or consent by registered mail to each
shareholder who filed written objection or from whom written objection was not
required, excepting any shareholder who voted for or consented in writing to the
proposed action and who thereby is deemed to have elected not to enforce his
right to receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any shareholder
from whom written objection was not required and who elects to dissent shall
file with the corporation a written notice of such election, stating his name
and residence address, the number and classes of shares as to which he dissents
and a demand for payment of the fair value of his shares. Any shareholder who
elects to dissent from a merger under section 905 (Merger of subsidiary
corporation) or paragraph (c) of section 907 (Merger or consolidation of
domestic and foreign corporations) or from a share exchange under paragraph (g)
of section 913 (Share exchanges) shall file a written notice of such election to
dissent within twenty days after the giving to him of a copy of the plan of
merger or exchange or an outline of the material features thereof under section
905 or 913.
(d) A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any beneficial
owner as to less than all of the shares of such owner, as to which such nominee
or fiduciary has a right to dissent, held of record by such nominee or
fiduciary.
(e) Upon consummation of the corporate action, the shareholder shall cease
to have any of the rights of a shareholder except the right to be paid the fair
value of his shares and any other rights under this section. A notice of
election may be withdrawn by the shareholder at any time prior to his acceptance
in writing of an offer made by the corporation, as provided in paragraph (g),
but in no case later than sixty days from the date of consummation of the
corporate action except that if the corporation fails to make a timely offer, as
provided in paragraph (g), the time for withdrawing a notice of election shall
be extended until sixty days from the date an offer is made. Upon expiration of
such time, withdrawal of a notice of election shall require the written consent
of the corporation. In order to be effective, withdrawal of a notice of election
must be accompanied by the return to the corporation of any advance payment made
to the shareholder as provided in paragraph (g). If a notice of election is
withdrawn, or the corporate action is rescinded, or a court shall determine that
the shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenters' rights, he shall not have the
right to receive payment for his shares and he shall be reinstated to all his
rights as a shareholder as of the consummation of the corporate action,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim.
(f) At the time of filing the notice of election to dissent or within one
month thereafter the shareholder of shares represented by certificates shall
submit the certificates representing his shares to the corporation, or to its
transfer agent, which shall forthwith note conspicuously thereon that a notice
of election has been filed and shall return the certificates to the shareholder
or other person who submitted them on his behalf. Any shareholder of shares
represented by certificates who fails to submit his certificates for such
notation as herein specified shall, at the option of the corporation exercised
by written notice to him within forty-five days from the date of filing of such
notice of election to dissent, lose his dissenter's rights unless a court, for
good cause shown, shall otherwise direct. Upon transfer of a certificate bearing
such notation, each new certificate issued therefor shall bear a similar
notation together with the name of the original dissenting holder of the shares
and a transferee shall acquire no rights in the corporation except those which
the original dissenting shareholder had at the time of transfer.
(g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen
days after the proposed corporate action is consummated, whichever is later (but
in no case later than ninety days from the shareholders' authorization date),
the corporation or, in the case of a merger or consolidation, the surviving or
new corporation, shall make a written offer by registered mail to each
shareholder who has filed such notice of election to pay for his shares at a
specified price which the corporation considers to be their fair value. Such
offer shall be accompanied by a statement setting forth the aggregate number of
shares with respect to which notices of election to dissent have been received
and the aggregate number of holders of such shares. If the corporate action has
been consummated, such offer shall also be accompanied by (1) advance payment to
each such shareholder who has submitted the certificates representing his shares
to the corporation, as provided in paragraph (f), of an amount equal to eighty
percent of the amount of such offer, or (2) as to each shareholder who has not
yet submitted his certificates a statement that advance payment to him of an
amount equal to eighty percent of the amount of such offer will be made by the
corporation promptly upon submission of his certificates. If the corporate
action has not been consummated at the time of the making of the offer, such
advance payment or statement as to advance payment shall be sent to each
shareholder entitled thereto forthwith upon consummation of the corporate
action. Every advance payment or statement as to advance payment shall include
advice to the shareholder to the effect that acceptance of such payment does not
constitute a waiver of any dissenters' rights. If the corporate action has not
been consummated upon the expiration of the ninety day period after the
shareholders' authorization date, the offer may be conditioned upon the
consummation of such action. Such offer shall be made at the same price per
share to all dissenting shareholders of the same class, or if divided into
series, of the same series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting shareholder holds as of the latest
available date, which shall not be earlier than twelve months before the making
of such offer, and a profit and loss statement or statements for not less than a
twelve month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such twelve month period, for the
portion thereof during which it was in existence. Notwithstanding the foregoing,
the corporation shall not be required to furnish a balance sheet or profit and
loss statement or statements to any shareholder to whom such balance sheet or
profit and loss statement or statements were previously furnished, nor if in
connection with obtaining the shareholders' authorization for or consent to the
proposed corporate action the shareholders were furnished with a proxy or
information statement, which included financial statements, pursuant to
Regulation 14A or Regulation 14C of the United States Securities and Exchange
Commission. If within thirty days after the making of such offer, the
corporation making the offer and any shareholder agree upon the price to be paid
for his shares, payment therefor shall be made within sixty days after the
making of such offer or the consummation of the proposed corporate action,
whichever is later, upon the surrender of the certificates for any such shares
represented by certificates.
(h) The following procedure shall apply if the corporation fails to make
such offer within such period of fifteen days, or if it makes the offer and any
dissenting shareholder or shareholders fail to agree with it within the period
of thirty days thereafter upon the price to be paid for their shares:
(1) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a
special proceeding in the supreme court in the judicial district in which
the office of the corporation is located to determine the rights of
dissenting shareholders and to fix the fair value of their shares. If, in
the case of merger or consolidation, the surviving or new corporation is a
foreign corporation without an office in this state, such proceeding shall
be brought in the county where the office of the domestic corporation, whose
shares are to be valued, was located.
(2) If the corporation fails to institute such proceeding within such
period of twenty days, any dissenting shareholder may institute such
proceeding for the same purpose not later than thirty days after the
expiration of such twenty day period. If such proceeding is not instituted
within such thirty day period, all dissenter's rights shall be lost unless
the supreme court, for good cause shown, shall otherwise direct.
(3) All dissenting shareholders, excepting those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be paid
for their shares, shall be made parties to such proceeding, which shall have
the effect of an action quasi in rem against their shares. The corporation
shall serve a copy of the petition in such proceeding upon each dissenting
shareholder who is a resident of this state in the manner provided by law
for the service of a summons, and upon each nonresident dissenting
shareholder either by registered mail and publication, or in such other
manner as is permitted by law. The jurisdiction of the court shall be
plenary and exclusive.
(4) The court shall determine whether each dissenting shareholder, as to
whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation does not
request any such determination or if the court finds that any dissenting
shareholder is so entitled, it shall proceed to fix the value of the shares,
which, for the purposes of this section, shall be the fair value as of the
close of business on the day prior to the shareholders' authorization date.
In fixing the fair value of the shares, the court shall consider the nature
of the transaction giving rise to the shareholder's right to receive payment
for shares and its effects on the corporation and its shareholders, the
concepts and methods then customary in the relevant securities and financial
markets for determining fair value of shares of a corporation engaging in a
similar transaction under comparable circumstances and all other relevant
factors. The court shall determine the fair value of the shares without a
jury and without referral to an appraiser or referee. Upon application by
the corporation or by any shareholder who is a party to the proceeding, the
court may, in its discretion, permit pretrial disclosure, including, but not
limited to, disclosure of any expert's reports relating to the fair value of
the shares whether or not intended for use at the trial in the proceeding
and notwithstanding subdivision (d) of section 3101 of the civil practice
law and rules.
(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to the
proceeding and is entitled thereto for the value of his shares so
determined.
(6) The final order shall include an allowance for interest at such rate
as the court finds to be equitable, from the date the corporate action was
consummated to the date of payment. In determining the rate of interest, the
court shall consider all relevant factors, including the rate of interest
which the corporation would have had to pay to borrow money during the
pendency of the proceeding. If the court finds that the refusal of any
shareholder to accept the corporate offer of payment for his shares was
arbitrary, vexatious or otherwise not in good faith, no interest shall be
allowed to him.
(7) Each party to such proceeding shall bear its own costs and expenses,
including the fees and expenses of its counsel and of any experts employed
by it. Notwithstanding the foregoing, the court may, in its discretion,
apportion and assess all or any part of the costs, expenses and fees
incurred by the corporation against any or all of the dissenting
shareholders who are parties to the proceeding, including any who have
withdrawn their notices of election as provided in paragraph (e), if the
court finds that their refusal to accept the corporate offer was arbitrary,
vexatious or otherwise not in good faith. The court may, in its discretion,
apportion and assess all or any part of the costs, expenses and fees
incurred by any or all of the dissenting shareholders who are parties to the
proceeding against the corporation if the court finds any of the following:
(A) that the fair value of the shares as determined materially exceeds the
amount which the corporation offered to pay; (B) that no offer or required
advance payment was made by the corporation; (C) that the corporation failed
to institute the special proceeding within the period specified therefor; or
(D) that the action of the corporation in complying with its obligations as
provided in this section was arbitrary, vexatious or otherwise not in good
faith. In making any determination as provided in clause (A), the court may
consider the dollar amount or the percentage, or both, by which the fair
value of the shares as determined exceeds the corporate offer.
(8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to be
due him, upon surrender of the certificates for any such shares represented
by certificates.
(i) Shares acquired by the corporation upon the payment of the agreed value
therefor or of the amount due under the final order, as provided in this
section, shall become treasury shares or be canceled as provided in section 515
(Reacquired shares), except that, in the case of a merger or consolidation, they
may be held and disposed of as the plan of merger or consolidation may otherwise
provide.
(j) No payment shall be made to a dissenting shareholder under this section
at a time when the corporation is insolvent or when such payment would make it
insolvent. In such event, the dissenting shareholder shall, at his option:
(1) Withdraw his notice of election, which shall in such event be deemed
withdrawn with the written consent of the corporation; or
(2) Retain his status as a claimant against the corporation and, if it
is liquidated, be subordinated to the rights of creditors of the
corporation, but have rights superior to the non-dissenting shareholders,
and if it is not liquidated, retain his right to be paid for his shares,
which right the corporation shall be obliged to satisfy when the
restrictions of this paragraph do not apply.
(3) The dissenting shareholder shall exercise such option under
subparagraph (1) or (2) by written notice filed with the corporation within
thirty days after the corporation has given him written notice that payment
for his shares cannot be made because of the restrictions of this paragraph.
If the dissenting shareholder fails to exercise such option as provided, the
corporation shall exercise the option by written notice given to him within
twenty days after the expiration of such period of thirty days.
(k) The enforcement by a shareholder of his right to receive payment for his
shares in the manner provided herein shall exclude the enforcement by such
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in paragraph (e), and except that this
section shall not exclude the right of such shareholder to bring or maintain an
appropriate action to obtain relief on the ground that such corporate action
will be or is unlawful or fraudulent as to him.
(l) Except as otherwise expressly provided in this section, any notice to be
given by a corporation to a shareholder under this section shall be given in the
manner provided in section 605 (Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations except as provided
in subparagraph (e)(2) of section 907 (Merger or consolidation of domestic and
foreign corporations).