-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SQZkpvAeqAtk2L++r6y+LqYC0ysKL+R40h3xPjHgQSp/bHlQM8A6dtpdpwp5eWN9 NlHHeb6GEPrTBU3gCdwjYQ== 0001047469-98-036407.txt : 19981006 0001047469-98-036407.hdr.sgml : 19981006 ACCESSION NUMBER: 0001047469-98-036407 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19981005 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CANDIES INC CENTRAL INDEX KEY: 0000857737 STANDARD INDUSTRIAL CLASSIFICATION: FOOTWEAR, (NO RUBBER) [3140] IRS NUMBER: 112481930 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-41257 FILM NUMBER: 98720689 BUSINESS ADDRESS: STREET 1: 2975 WESTCHESTER AVE CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 9146948600 MAIL ADDRESS: STREET 1: 2975 WESTCHESTER AVE CITY: PURCHASE STATE: NY ZIP: 10577 FORMER COMPANY: FORMER CONFORMED NAME: MILLFELD TRADING CO INC DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CARUSO MICHAEL CENTRAL INDEX KEY: 0001071490 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 2925 MOUNTAIN MAPLE LANE CITY: JACKSON STATE: WY ZIP: 83001 MAIL ADDRESS: STREET 1: 2925 MOUNTAIN MAPLE LANE CITY: JACKSON STATE: WY ZIP: 83001 SC 13D/A 1 SCHEDULE 13D/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )* CANDIE'S, INC. -------------- (Name of Issuer) COMMON STOCK, $.001 PAR VALUE ----------------------------- (Title of Class of Securities) 137409 10 8 ----------- (CUSIP Number) Robert Steinberg Esq., c/o Jeffer, Mangels, Butler & Marmaro LLP, 2121 Avenue of the Stars, 10th Floor, Los Angeles, California 90067, (310) 203-8080 --------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) September 24, 1998 ------------------ (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), (f) or (g), check the following box / /. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that Section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 1 SCHEDULE 13D - -------------------------------- CUSIP No. 137409 10 8 - -------------------------------- - ------------------------------------------------------------------------------ 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY) MICHAEL CARUSO - ------------------------------------------------------------------------------ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/ (b) / / - ------------------------------------------------------------------------------ 3 SEC USE ONLY - ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS* OO - ------------------------------------------------------------------------------ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / / - ------------------------------------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. - ------------------------------------------------------------------------------ 7 SOLE VOTING POWER 1,475,806 NUMBER OF -------------------------------------------------------------- 8 SHARED VOTING POWER SHARES -0- BENEFICIALLY -------------------------------------------------------------- OWNED BY EACH 9 SOLE DISPOSITIVE POWER REPORTING 1,475,806 PERSON -------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER WITH -0- - ------------------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,475,806 - ------------------------------------------------------------------------------ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / - ------------------------------------------------------------------------------ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 8.56% - ------------------------------------------------------------------------------ 14 TYPE OF REPORTING PERSON* IN - ------------------------------------------------------------------------------ *SEE INSTRUCTIONS BEFORE FILLING OUT 2 SCHEDULE 13D - -------------------------------- CUSIP No. 137409 10 8 - -------------------------------- - ------------------------------------------------------------------------------ 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY) CLAUDIO TRUST DATED FEBRUARY 2, 1990 - ------------------------------------------------------------------------------ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/ (b) / / - ------------------------------------------------------------------------------ 3 SEC USE ONLY - ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS* OO - ------------------------------------------------------------------------------ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) - ------------------------------------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. - ------------------------------------------------------------------------------ 7 SOLE VOTING POWER 1,475,806 NUMBER OF -------------------------------------------------------------- 8 SHARED VOTING POWER SHARES -0- BENEFICIALLY -------------------------------------------------------------- OWNED BY EACH 9 SOLE DISPOSITIVE POWER REPORTING 1,475,806 PERSON -------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER WITH -0- - ------------------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,475,806 - ------------------------------------------------------------------------------ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* - ------------------------------------------------------------------------------ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 8.56% - ------------------------------------------------------------------------------ 14 TYPE OF REPORTING PERSON* OO - ------------------------------------------------------------------------------ *SEE INSTRUCTIONS BEFORE FILLING OUT 3 ITEM 1. SECURITY AND ISSUER This statement relates to the 1,475,806 shares of Common Stock, par value $.001 per share ("Common Stock"), of Candie's, Inc. a Delaware corporation (the "Company"), issued to Michael Caruso, as Trustee of the Claudio Trust Dated February 2, 1990 (the "Trust"), in connection with the sale of Michael Caruso & Co., Inc., a California corporation ("Caruso Inc."), to the Company pursuant to the terms of a Stock Purchase Agreement (the "Stock Purchase Agreement"), dated September 24, 1998, among the Company, Licensing Acquisition Corp., a wholly-owned subsidiary of the Company, Caruso Inc., the Trust and Gene Montesano. All of such shares of Common Stock in question are held of record by the Trust, a revocable trust of which Michael Caruso is the trustees. The Company's principal executive offices are located at 2975 Westchester Avenue, Purchase, New York 10577. ITEM 2. IDENTITY AND BACKGROUND a. This statement is being filed by Michael Caruso and the Trust (collectively, the "Reporting Persons"). b. 2925 Mountain Maple Lane, Jackson, Wyoming 83001. c. Mr. Caruso is the founder and former owner of Caruso Inc., an apparel company ("Caruso Inc."), whose address is c/o Mr. Caruso, 2925 Mountain Maple Lane, Jackson, Wyoming 83001. d. Neither of the Reporting Persons has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). e. Neither of the Reporting Persons has been, during the last five years, a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. f. U.S.A. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION Pursuant to the terms of the Stock Purchase Agreement, a copy of which is filed as Exhibit 99.1 hereto, the Trust acquired 1,475,806 shares of Common Stock in exchange for the Trust's entire ownership interest in Caruso Inc. ITEM 4. PURPOSE OF THE TRANSACTION The Reporting Persons acquired the Common Stock in connection with the sale of Caruso Inc. to the Company. The Trust was a 75% owner of Caruso Inc. and Gene Montesano was the owner of the remaining 25% interest. The Reporting persons currently intend to hold the shares of Common Stock for investment purposes. Based on the Reporting Persons' ongoing evaluation of the business, prospects, and financial condition of the Company, the market for and price of the Common Stock, other opportunities available to the Reporting Persons, and 4 other future developments, the Reporting Persons reserve the right to change their plans and intentions at any time, as they deem appropriate. In particular, subject to the lock-up restrictions of the Lock-Up Agreement which is filed as Exhibit 99.2 hereto (the "Lock-Up Agreement"), the Reporting Persons may decide to sell or seek the sale of all or part of their present or future beneficial holdings of Common Stock, either in the open market, in private transactions or by any other permissible means. The Lock-Up Agreement provides that, for the one year period ending September 24, 1999, the Trust and Gene Montesano may not directly or indirectly sell, offer for sale, assign, transfer, hypothecate, or otherwise dispose of any of the shares of Common Stock acquired by them Pursuant to the terms of Section 2.2 of the Stock Purchase Agreement, in the event that the closing sale price of a share of the Company's Common Stock (as reported on the Nasdaq Stock market) does not reach $7.75 at any time from September 24, 1998 to March 24, 1999 (the "Valuation Period"), then the Company shall be required to pay issued and deliver to the Reporting Person and Gene Montesano an aggregate number of additional shares (the "Additional Shares") of Common Stock equal to (i) $15,250,000 minus the value of 1,967,742 shares of Common Stock calculated at a price per share equal to the "Post Closing Valuation Price Per Share (as defined below), divided by (ii) the Post Closing Valuation Price Per Share. For purposes of the Stock Purchase Agreement, the Post Closing Valuation Price Per Share equals the greater of (i) $6.0625, and (ii) the highest reported closing sale price of a share of Common Stock during the Valuation Period. As a result, the maximum number of Additional Shares that could be issued pursuant to Section 2.2. of the Stock Purchase Agreement is 547,722 shares of Common Stock, of which the Reporting Person would receive 75% (approximately 410,792 shares). Notwithstanding anything to the contrary contained in the immediately preceding paragraph, the Stock Purchase Agreement grants the Company the right to pay cash to the Trust and Gene Montesano rather than issuing the Additional Shares. Such cash payment would equal the number of Additional Shares multiplied by the Post Closing Valuation Price Per Share. Pursuant to the terms of Section 2.3 of the Stock Purchase Agreement, the Trust and Gene Montesano were required to pledge to the Company an aggregate of 329,897 shares of the Common Stock otherwise issuable to them pursuant to the Stock Purchase Agreement as security for the payment of certain indemnification obligations pursuant to Paragraph 8 of the Stock Purchase Agreement. As a result, 247,423 shares of Common Stock owned by the Trust have been pledged to the Company pursuant to the terms of an Escrow Agreement, a copy of which is filed as Exhibit 99.3 hereto. To the extent no claims are made against such shares, one half of the pledged shares will be released on September 24, 1999 and the remaining pledged shares will be released on September 24, 2000. Pursuant to the terms of Section 4.13 of the Stock Purchase Agreement, the Trust and Gene Montesano each agreed that at any time following the expiration of the one year lock-up period provided for in the Lock-Up Agreement, the Company has the right of first refusal to purchase back any or all of the shares of Common Stock owned by the Trust or Gene Montesano prior any sale thereof by the Trust or Gene Montesano. 5 Pursuant to the terms of a Registration Rights Agreement, a copy of which is filed herewith as Exhibit 99.4, and subject to the provisions of the Lock-Up Agreement and the right of first refusal provisions of the Stock Purchase Agreement, the Trust has been granted certain demand and piggy back registration rights. ITEM 5. INTEREST IN SECURITIES OF THE COMPANY a. Michael Caruso, as trustee of the Claudio Trust dated February 2, 1990, a revocable trust of which Mr. Caruso is the trustee and trustor, beneficially owns an aggregate of 1,475,806 shares of Company Common Stock. Such shares of Common Stock constitute 8.56% of the outstanding shares of Common Stock (assuming (i) 17,244,583 shares of Common Stock outstanding as of the date of this report). b. Michael Caruso, as trustee of the Trust, has power to vote and dispose of the shares of Common Stock of the Company beneficially owned by the Reporting Persons. c. Pursuant to the terms of the Stock Purchase Agreement, Michael Caruso, as Trustee of the Trust, acquired an aggregate of 1,475,806 shares of Common Stock in exchange for all of his ownership interest in Caruso Inc. d. Not applicable. e. Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. See the information disclosed in Item 4 of this Form 13D which is incorporated herein by this reference. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit 99.1 Stock Purchase Agreement Exhibit 99.2 Lock-Up Agreement Exhibit 99.3 Escrow Agreement Exhibit 99.4 Registration Rights Agreement 6 SIGNATURES After reasonable inquiry and to the best of our knowledge and belief, we certify that the information set forth in this statement is true, complete and correct. October 2, 1998 /s/ Michael Caruso ----------------------------------- Michael Caruso, individually and as Trustee of the Claudio Trust dated February 2, 1990 EX-99.1 2 EXHIBIT 99.1 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT, dated as of the 24th day of September, 1998, is made by and among Licensing Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Candie's, Inc. ("Buyer"); Candie's Inc., a Delaware corporation ("Candie's"), Michael Caruso & Co., Inc., a California corporation (the "Company"); and each of Michael Caruso, as Trustee of the Claudio Trust, dated February 2, 1990 ("Caruso"), and Gene Montesano (said individuals being hereinafter collectively called the "Selling Shareholders" and severally, a "Selling Shareholder"). W I T N E S S E T H : WHEREAS, the Selling Shareholders are the owners of all of the issued and outstanding shares of common stock of the Company (the "Company Shares"); and WHEREAS, the Company is engaged in the manufacture, distribution and design of apparel and certain licensing activities (the "Business"); and WHEREAS, Buyer wishes to purchase all of the Company Shares from the Selling Shareholders and thereby acquire the Business upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of and in reliance upon the covenants, conditions, representations and warranties herein contained, the parties hereto hereby agree as follows: 1. PURCHASE AND SALE OF COMPANY SHARES. Subject to the terms and conditions set forth in this Agreement and in reliance upon the representations, warranties, covenants and conditions herein contained, on the Closing Date (as defined in section 3.1 hereof), the Selling Shareholders, hereby sell, convey, assign, transfer and deliver to Buyer, the Company Shares, free and clear of any and all liens or encumbrances of any nature whatsoever. 2. PURCHASE PRICE. 2 2.1. PURCHASE PRICE. The purchase price (the "Purchase Price") for the Company Shares shall be payable by Buyer in the form of (i) 1,967,742 shares of common stock, par value of $.001 per share, (the "Candie's Common Stock") of Candie's (the "Initial Candie's Shares"), (ii) $100,000 in cash or immediately available funds, and (iii) the additional amount, if any, required to be paid pursuant to section 2.2 below (the "Additional Candie's Shares"). The Initial Candie's Shares and the Additional Candie's Shares are sometimes collectively referred to herein as the "Candie's Shares." 3 2.2. ADDITIONAL PURCHASE PRICE. (a) In the event that the closing sale price of a share of Candie's Common Stock, as reported on The Nasdaq Stock Market, is less than $7.75 on the Closing Date, or does not reach $7.75 at any time within the six (6) month period immediately following the Closing Date (the "Valuation Period"), then Buyer shall, within five (5) business days following termination of the Valuation Period, pay issue and deliver to the Selling Shareholders an additional number of shares of Candie's Common Stock in an amount equal to (i) $15,250,000 minus the value of 1,967,742 shares of Candie's Common Stock calculated at a price per share equal to the Post Closing Valuation Price Per Share (as defined below); divided by (ii) the Post Closing Valuation Price Per Share. The term "Post Closing Valuation Price Per Share" shall mean the greater of (a) the highest closing sale price of a share of Candie's Common Stock, as reported on the Nasdaq Stock Market, during the Valuation Period, and (b) $6.0625. (b) In the event that the closing sale price of a share of Candie's Common Stock, as reported on The Nasdaq Stock Market, equals or exceeds $7.75 at any time during the Valuation Period, the Valuation Period shall immediately terminate and no 4 Additional Candie's Shares shall be issued to the Selling Shareholders. (c) Anything contained herein to the contrary notwithstanding, in lieu of issuing the Additional Candie's Shares, Candie's shall have the option, exercisable in its sole discretion, to pay cash to the Selling Shareholders in an amount equal to (i) the number of Additional Candie's Shares determined in accordance with section 2.2. multiplied by (ii) the Post Closing Valuation Price Per Share ( the "Additional Cash"). The Additional Candie's Shares, or if Candie's exercises its option, the Additional Cash shall be allocated among the Selling Shareholders pro rata in accordance with their relative ownership percentages of the Company Shares on the Closing Date. 2.3. PLEDGED CANDIE'S SHARES. (a) As collateral security for the payment of the indemnification obligations of the Selling Shareholders pursuant to Paragraph 8 hereof, the Selling Shareholders shall, and by execution hereof, do hereby grant a security interest in and pledge for the benefit of Candie's, the number of Candie's Shares equal to $2,000,000 divided by the greater of (i) the closing sale price of 5 a share of Candie's Common Stock on the trading day immediately preceding the Closing Date, or (ii) $6.0625 (collectively, the "Pledged Candie's Shares"). The Pledged Candie's Shares shall be pledged by the Selling Shareholders pro rata in accordance with their relative ownership percentages of the Company Shares on the Closing Date. (b) The Pledged Candie's Shares shall be issued to and held of record by the appropriate Selling Shareholder but shall be delivered directly by Candie's transfer agent to Tenzer, Greenblatt LLP as escrow holder (the "Escrow Holder") promptly after the Closing Date. At the Closing, each Selling Shareholder shall deliver to the Escrow Holder a stock assignment separate from certificate executed in blank in a customary form for each certificate representing the Pledged Candie's Shares owned by him. (c) The Selling Shareholders shall be entitled to vote the Pledged Candie's Shares and receive any dividends and distributions made with respect to such Pledged Candie's Shares for so long as they are the registered holders thereof. 6 (d) The Pledged Candie's Shares shall be held by Escrow Holder as security for the indemnification obligations of the Selling Shareholders as set forth in Paragraph 8 of this Agreement in accordance with the Escrow Agreement attached hereto as Exhibit A. The Escrow Agreement shall indicate that (i) promptly after the date which is one (1) year from the Closing Date, Escrow Holder shall release to the Selling Shareholders one half of the originally Pledged Candie's Shares less the number of Pledged Candie's Shares having an aggregate value equal to the amount of any outstanding indemnification obligations which have been claimed by Candie's or Buyer in accordance with Paragraph 8 of this Agreement (the "Indemnification Shares"), and (ii) promptly after the date which is two (2) years from the Closing Date, Escrow Holder shall release to the Selling Shareholders the remaining Pledged Candie's Shares, less the number of Indemnification Shares, if any, necessary, at such date, to satisfy outstanding indemnification obligations claimed by Candie's. For purposes of determining the number of Pledged Candie's Shares under the previous two sentences, the value of each share of Candie's Common Stock shall be deemed to be the greater of (i) the closing sale price of a share of Candie's Common Stock on the Closing Date, or (ii) the closing sale price of a share of Candie's Common Stock on the date on which the Pledged Candie's 7 Shares are released by the Escrow Holder or applied in payment of the indemnification obligations in question. 2.4. ALLOCATION OF THE PURCHASE PRICE. The Purchase Price shall be allocated as set forth in Schedule 2.4 attached hereto. In this regard, the parties hereto agree that (i) the Initial Candie's Shares shall be valued at a price per share equal to the closing price of a share of Candie's Common Stock on the Closing Date, and (ii) the Additional Candie's Shares, if any, shall be valued at the Post Closing Valuation Price Per Share. Neither Candie's nor the Selling Shareholders shall take any position inconsistent with such allocation and in the event any Additional Candie's Shares are issued, the allocation of the Purchase Price shall be adjusted on a pro rata basis in accordance with the allocation set forth on Schedule 2.4. Candie's and the Selling Shareholders shall take all steps necessary to make a timely election under Sections 338(g) and 338(h)(10) of the Internal Revenue Code of 1986, as amended (the "Code") and any comparable election under state, local or foreign tax law, except California (collectively, the "Section 338(h)(10) Election") with respect to the transaction contemplated in this Agreement. The Selling Shareholders shall pay all taxes attributable to the making of the Section 338(h)(10) Election. In 8 particular and not by way of limitation, in order to effect the Section 338(h)(10) Election, Candie's and the Selling Shareholders shall jointly execute all necessary copies of Internal Revenue Service Form 8023 and all attachments required to be filed therewith pursuant to applicable Treasury Regulations. 3. CLOSING. 3.1. CLOSING DATE. The closing of the purchase and sale provided for herein (the "Closing") shall take place at 12:00 P.M., New York time, on September 24, 1998 at the offices of Tenzer Greenblatt LLP, or at such other place, time and date as may hereafter be mutually agreed upon by the parties (such time and date of Closing being hereinafter called the "Closing Date"). 3.2. ACTION BY BUYER. Subject to the terms and conditions herein contained, on the Closing Date, Buyer and Candie's shall deliver to the Selling Shareholders (in addition to the documents and instruments to be delivered by it pursuant to paragraph 4 hereof), in payment of the Purchase Price for the Company Shares (subject to delivery of the Pledged Candie's Shares to the Escrow Holder as provided in section 2.3), stock certificates, representing 9 in the aggregate the Initial Candie's Shares, registered in the name of each of the Selling Shareholders, which certificates shall be issued to each Selling Shareholder pro rata in accordance with their respective share ownership of the Company as of the Closing Date. 3.3. ACTION BY THE COMPANY AND SELLING SHAREHOLDERS. Subject to the terms and conditions herein contained, on the Closing Date, the Company and/or the Selling Shareholders, as the case may be, shall deliver to Buyer (in addition to the documents and instruments to be delivered by it or them pursuant to paragraphs 2 and 4 hereof) (i) stock certificates, representing all the Company Shares issued and outstanding, which certificates shall be endorsed in blank or accompanied by stock powers endorsed in blank and accompanied by the requisite stock transfer stamps; and (ii) the third party consents and governmental and administrative approvals set forth on Schedule 5.5. 4. COVENANTS OF THE PARTIES. 4.1. FURTHER ASSURANCES. Subject to the terms and conditions provided herein, each of the parties agrees to use its best efforts to take, or cause to be taken, all actions and to do, 10 or cause to be done, all things necessary, proper or advisable under applicable law or regulation to consummate and make effective the transactions contemplated under this Agreement in accordance with the terms hereof. Each party shall execute and deliver both before and after the Closing such further certificates, agreements and other documents and take such other actions as may be necessary or appropriate to consummate or implement the transactions contemplated hereby or to evidence such events or matters. 4.2. FINANCIAL AUDIT. Promptly after execution of this Agreement, the Company shall retain Stonefield Josephson, Inc. an accounting corporation ("Stonefield") to conduct an audit of the Company's financial statements for each of the three years ended December 31, 1995, 1996 and 1997 (the "Audit") and a review of the Company's financial statements for the six month periods ended June 30, 1998 and June 30, 1997 (the "Review"). The audited financial statements shall be accompanied by an unqualified audit report of Stonefield and the reviewed financial statements shall be accompanied by a review report of Stonefield. The Audit and the Review shall be completed within seventy (70) days of the Closing Date, and the results thereof shall be delivered to Buyer and Candie's in a format suitable for Candie's to incorporate such 11 financial statements in its required securities filings under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Buyer, Candie's, the Company and the Selling Shareholders shall each use their best efforts to cooperate with Stonefield in completing such Audit and Review. Failure by the Selling Shareholders to deliver an unqualified opinion of Stonefield on the audited and reviewed financial statements, respectively, within seventy (70) days following the Closing Date, shall constitute a material breach of this Agreement, for which the exclusive remedy shall be as set forth in this paragraph. In the event of such a breach, the Selling Shareholders shall pay to the Buyer and Candie's an amount equal to the total cost incurred by Candie's (including reasonable legal fees and expenses) in connection with one (1) long form registration statement filed by Candie's with the Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933, as amended (the "Securities Act"), which Candie's is required to file as a result of its failure to satisfy its Form 8-K financial statement filing requirements under the Exchange Act. The cost of the Audit and the Review shall be shared equally between the Selling Shareholders, on the one hand, and Candie's and the Buyer, on the other hand. Payment to Stonefield 12 for the Audit and Review shall the responsibility of the Selling Shareholders. Upon request by the Selling Shareholders, the Buyer and Candie's shall promptly pay the Selling Shareholders their portion of the costs of the Audit and Review in cash or if the parties hereto mutually agree as an offset to amounts due hereunder. 4.3. CONSUMMATION OF TRANSACTION. Each of the parties hereto shall use commercially reasonable efforts to cause all conditions precedent to his or its obligations and to the obligations of the other parties hereto to consummate the transactions contemplated hereby to be satisfied, including, but not limited to, using commercially reasonable efforts to obtain all required consents, waivers, amendments, modifications, approvals, authorizations, novations and licenses; PROVIDED, HOWEVER, that nothing herein contained shall be deemed to modify any of the obligations imposed upon any of the parties hereto under this Agreement or any agreement executed and delivered pursuant hereto. 4.4. COOPERATION. Each of the parties hereto shall fully cooperate with the other parties hereto in preparing and filing any notices, applications, reports and other instruments and documents which are required by, or which are desirable in the opinion of any 13 of the parties hereto in respect of, any statute, rule, regulation or order of any governmental or administrative body in connection with the transactions contemplated hereby. 4.5. ACCURACY OF REPRESENTATIONS. Prior to the Closing Date, neither party hereto shall enter into any transaction or take any action, and shall use commercial reasonable efforts to prevent the occurrence of any event, which would result in any of his or its representations, warranties or covenants contained in this Agreement or in any other agreement, document or instrument delivered pursuant hereto not to be true and correct, or not to be performed as contemplated, at and as of the time immediately after the occurrence of such transaction or event. 14 4.6. NOTICE OF MATERIAL CHANGE. (a) The Company or one of the Selling Shareholders shall give Candie's and Buyer, prompt notice of (i) any material change in any of the information contained in the representations and warranties of the Company contained in paragraph 5 or in the schedules or exhibits thereto, which occurs prior to the Closing and (ii) any governmental or other complaints, investigations or hearings relating to the Company's business operations or assets prior to the Closing (or communications indicating that the same may be contemplated) or the receipt of any notice with respect to any requirement or obligation arising out of any applicable laws relating to its business operations prior to the Closing, or the institution of any litigation, action, claim, proceeding or threats relating to such business operations prior to the Closing, as well as keep Candie's and Buyer fully informed of material developments concerning such events. (b) Buyer and Candie's shall give the Selling Shareholders and the Company prompt notice of (i) any material change in any of the information contained in the representations and warranties of Buyer and Candie's contained in paragraph 6 or in 15 the schedules or exhibits thereto, which occurs prior to the Closing and (ii) any governmental or other complaints, investigations or hearings relating to their respective business operations or assets prior to the Closing (or communications indicating that the same may be contemplated) or the receipt of any notice with respect to any requirement or obligation arising out of any applicable laws relating to its business operations prior to the Closing, or the institution of any litigation, action, claim, proceeding or threats relating to such business operations prior to the Closing, as well as keep the Selling Shareholders and the Company fully informed of material developments concerning such events. 4.7. LIABILITIES, INVENTORY AND OUTSTANDING RECEIVABLES. (a) As of September 23, 1998, the Company has distributed to the Selling Shareholders, who in turn have contributed to Michael Caruso & Co. Partnership (the "Assignee"), the assets of the Company (other than those being retained by the Company as set forth on Schedule 4.7), subject to any and all liabilities of the Company as of September 23, 1998 other than those liabilities specified on Schedule 4.7. The liabilities transferred to Assignee shall be paid in full or assumed by Assignee. Candie's 16 and Buyer hereby expressly acknowledge and consent to the transfers. (b) After the Closing Date, neither the Buyer, Candie's nor the Company shall be responsible for the collection of any outstanding account receivables and for the ultimate disposition of the transferred inventory subject to the mutual agreement of the parties hereto. 4.8. UNEARNED ADVANCES OF COMPANY'S LICENSE AGREEMENTS. As of the Closing Date, the Company shall have available in immediately available funds the sum of $337,500 representing all unearned advances and other payments received under its existing license agreements with Jenna Lane, Inc. and M. Fine & Sons Manufacturing Company. 4.9. PAYMENT OF TAXES UPON TRANSFER OF COMPANY SHARES. The Selling Shareholders shall be responsible for, and shall pay, any and all income, sales, use, purchase, transfer and similar taxes, and any and all filing, recording, and similar fees, arising out of the transactions contemplated by this Agreement. 17 4.10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made by or on behalf of each of the parties hereto in this Agreement or in any document or instrument delivered pursuant hereto shall, unless expressly provided otherwise herein, survive the Closing Date and the consummation of the transactions contemplated hereby for a period of two (2) years, except that those representations and warranties made by the Company and the Selling Shareholders in Sections 5.12, 5.14 and 5.18 with respect to taxes, ERISA and environmental matters, respectively, shall survive until the expiration of their respective statute of limitations under applicable law. 4.11. DISCHARGE OF LIENS. The Company shall cause all liens or encumbrances of any nature whatsoever upon any of the Company Shares and the Company's assets (the "Company Assets") to be terminated or otherwise discharged at or prior to the Closing other than those liens or encumbrances identified in Schedule 4.11 attached hereto. 4.12. REGISTRATION RIGHTS. Each of the Selling Shareholders and Candie's shall enter into a Registration Rights Agreement in substantially the form of Exhibit B attached hereto 18 (the "Registration Rights Agreement") pursuant to which the Selling Shareholders, after the first anniversary of the Closing Date, but subject to the delivery of the financial statements and the provisions regarding payment of offering expenses required by Section 4.2, shall be entitled to make one written request for registration under the Securities Act of all of the Candie's Shares subject to applicable Nasdaq, SEC and other regulatory restrictions (the "Demand Registration"); PROVIDED, HOWEVER, that Candie's shall have the right, in its sole and absolute discretion, to register the Candie's Shares prior to the first anniversary of the Closing Date. In addition, the Registration Rights Agreement shall provide that if at any time after the first anniversary of the date hereof, the Selling Shareholders are obligated to pay for a Candie's long form registration statement pursuant to Section 4.2 hereof, the Selling Shareholders shall be given "piggy back" registration rights with respect to such registration statement, subject to the limitation and approval of any underwriter of such registration statement. 4.13. LOCK-UP; RIGHT OF FIRST REFUSAL. Candie's and the Selling Shareholders shall enter into a Lock-Up Agreement in substantially the form of Exhibit C attached hereto (the "Lock-Up Agreement") pursuant to which the Selling Shareholders shall not for 19 a period of one (1) year after the Closing Date, transfer, assign, sell or otherwise dispose of the Candie's Shares. At any time following the expiration of the Lock-Up Agreement, Candie's shall have the right to purchase back from the Selling Shareholders any or all of the Candie's Shares prior to any public or private sale proposed by the Selling Shareholders of any of such Candie's Shares to a third party. The purchase price for the such buyback shall equal the closing sales price of the Candie's Common Stock as reported on the Nasdaq Stock Market on the date of such proposed sale or if sold pursuant to Rule 144 on the date the Form 144 is filed with the SEC. The Selling Shareholders shall give Candie's twenty-four (24) hours prior written notice of their intent to sell the Candie's Shares to any third party, and Candie's shall have an additional twenty-four (24) hour period from receipt of such notice to deliver written notice of its election to purchase any or all of such Candie's Shares from the Selling Shareholders. In the event that the Selling Shareholders (i) elect to sell any of the Candie's Shares pursuant to Rule 144, and (ii) have filed the required notification of such proposed sale on Form 144 with the SEC and provided Candie's with notice and a copy thereof, then the Selling Shareholders shall be deemed to have given Candie's the requisite notice provided for in this Section 4.13 with respect to all such 20 Candie's Shares covered by the applicable Form 144. In the event that Candie's decides to purchase any of such Candie's Shares, it shall have a period of three (3) business days from receipt by the Selling Shareholders of Candie's election to tender payment for such purchase. Notwithstanding anything to the contrary contained herein, Candie's shall not have the right to exercise its buyback right in the event that applicable corporate or securities law or any loan covenants made by Candie's to any of its lenders would prohibit such buyback. 5. REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY. The Selling Shareholders hereby jointly and severally represent and warrant to Buyer as follows: 5.1. ORGANIZATION, STANDING AND POWER. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of California, with full corporate power and authority to own, lease and operate its properties and to carry on its business as presently conducted by it and has qualified to do business as a foreign corporation in the State of New York. There are no other states or jurisdictions in which the character and location of any of the properties owned or leased by the Company, or 21 the conduct of its business, makes it necessary for it to qualify to do business as a foreign corporation. Copies of the Articles of Incorporation of the Company and all amendments thereto, and of the By-laws of the Company, as amended to date, have been furnished to Buyer and are complete and correct. The Company's minute books heretofore exhibited to Buyer contain in all material respects complete and accurate records of all meetings and other corporate actions of the Company's shareholders and Board of Directors (including committees of its Board of Directors). 5.2. CAPITALIZATION. The authorized capital stock of the Company consists of 1,000 shares of Common Stock, no par value per share (the "Company Stock"), of which 400 shares are issued and outstanding, no shares are issued but not outstanding, and 600 shares are authorized and unissued. All issued shares of the Company Stock have been duly and validly issued and are fully paid and nonassessable. There are no outstanding options, warrants, rights, puts, calls, commitments, conversion rights, plans or other agreements of any character to which the Company is a party or otherwise bound which provide for the acquisition, disposition or issuance of any issued but not outstanding, outstanding, or authorized and unissued shares of Company Stock. There is no 22 personal liability, and there are no preemptive or similar rights, attached to the Company Stock. Set forth on Schedule 5.2, is a complete and correct list of the names, addresses and record and beneficial stock ownership of all of the shareholders of the Company. No holder of any of the Company's securities has any rights, "demand," "piggy-back" or otherwise, to have such securities registered under the Act. 5.3. INTERESTS IN OTHER ENTITIES. Except as set forth on Schedule 5.3, the Company does not (A) own, directly or indirectly, of record or beneficially, any shares of voting stock or other equity securities of any other corporation, (B) have any ownership interest, direct or indirect, of record or beneficially, in any unincorporated entity, or (C) have any obligation, direct or indirect, present or contingent, (1) to purchase or subscribe for any interest in, advance or loan monies to, or in any way make investments in, any person or entity, or (2) to share any profits or capital investments or both with any person or entity. 5.4. AUTHORITY. The execution and delivery by the Company of this Agreement and of all of the agreements to be executed and delivered by it pursuant hereto, the performance by it of its 23 obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary corporate action on the part of the Company (including, but not limited to, the unanimous consent of its shareholders and Board of Directors), and the Company has all necessary power with respect thereto. This Agreement is, and when executed and delivered by the Company and the Selling Shareholders each of the other agreements to be delivered by any or all of them pursuant hereto will be, the valid and binding obligation of the Company in accordance with its terms; except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and general equitable principles regardless of whether such enforceability is considered in a proceeding at law or in equity. 5.5. NONCONTRAVENTION. Except as set forth on Schedule 5.5, neither the execution and delivery by the Company of this Agreement or of any agreement to be executed and delivered by it pursuant hereto, nor the consummation of any of the transactions contemplated hereby or thereby, nor the performance by the Company of any of its obligations hereunder or thereunder, shall (nor with 24 the giving of notice or the lapse of time or both would) (A) conflict with or result in a breach of any provision of the Certificate of Incorporation or By-laws of the Company, or (B) give rise to a default, or any right of termination, cancellation or acceleration, or otherwise be in conflict with or result in a loss of material contractual benefits to the Company, under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, or material license, agreement or other instrument or obligation to which it is a party or by which the Company or any of the assets of the Company (the "Company Assets") may be bound, or require any consent, approval or notice under the terms of any such document or instrument, or (C) violate any order, writ, injunction, decree, law, statute, rule or regulation of any court or governmental or administrative authority which is applicable to the Company or any of the Company Assets, or (D) result in the creation or imposition of any lien, security interest, pledge, mortgage, easement, leasehold, assessment, covenant restriction, reservation, conditional sales, prior assignment, or other encumbrance of any nature whatsoever upon any of the Company Assets, or (E) interfere with or otherwise have an adverse effect on the Business after the Closing Date. 25 5.6. FINANCIAL STATEMENTS. The Company has delivered to the Buyer and Candie's its unaudited balance sheets for the years ended, December 31, 1995, December 31, 1996 and December 31, 1997 (the "Unaudited Balance Sheets"), together with the related statements of income, changes in financial position and changes in stockholders' equity for the years ended on such dates, (the "Unaudited Financial Statements"). To the best knowledge of the Selling Shareholders, the Unaudited Financial Statements have been prepared in accordance with generally accepted accounting principles consistently applied, and in all material respects fairly present the financial position of the Company as at the dates thereof and its results of operations for the periods indicated, except that they are subject to normal recurring adjustments which might be required as a result of a year-end audit. The books and records of the Company are in all material respects complete and correct, have been maintained in accordance with good business practices, and accurately reflect the basis for the financial condition of the Company as set forth in the aforementioned Unaudited Financial Statements. The Unaudited Financial Statements do not account for adjustments in connection with the transfer of certain of the Company's Assets set forth in Sections 4.7 and 5.16 hereof. 26 5.7. ABSENCE OF LIABILITIES. Except as set forth on Schedule 5.7, the Company has no liabilities or obligations of any nature whatsoever, whether accrued, absolute, contingent or otherwise. 5.8. PROPERTIES. The Company has good, valid and marketable fee title to all of the real property and fixtures, and good and marketable title to all of the other properties and assets, reflected on the Unaudited Balance Sheets, or thereafter acquired, except properties or assets sold or otherwise disposed of in the ordinary course of business, and pursuant to Section 4.7 hereof, free and clear of any and all liens, liens for current taxes not yet due and payable or being contested in good faith by appropriate proceedings. All plants, structures and equipment which are utilized in the Business, or are material to the operations or condition (financial or otherwise) of the Company are owned or leased by the Company and are in good operating condition and repair (ordinary wear and tear excepted), and are adequate and suitable for purposes for which they are used. Schedule 5.8 sets forth all (A) real property which is owned, leased (whether as lessor or lessee) or subject to contract or commitment of purchase or sale or lease (whether as lessor or lessee) by the Company or which is subject to 27 a title retention or conditional sales agreement or other security device, and (B) tangible personal property which is owned, leased (whether as lessor or lessee) or subject to contract or commitment of purchase or sale or lease (whether as lessor or lessee) by the Company. 5.9. LITIGATION. Except as set forth on Schedule 5.9, there are no claims, suits, actions, arbitration, investigations, inquiry or other proceeding before any governmental agency, court or tribunal, domestic or foreign, or before any private arbitration tribunal, pending or, to the best of the knowledge of the Selling Shareholders, threatened, against or relating to the Company, the Business or any of the Company Assets; nor, is there any basis for any such claim, suit, action, arbitration, investigation, inquiry or other proceeding. There are no judgments, orders, stipulations, injunctions, decrees or awards in effect which relate to the Company, the Business or any of the Company Assets, the effect of which is to limit, restrict, regulate, enjoin or prohibit any business practice in any area, or the acquisition of any properties, assets or businesses. 28 5.10. NO VIOLATION OF LAW. The Company is not engaging in any activity or omitting to take any action as a result of which it is in violation of any law, rule, regulation, zoning or other ordinance, statute, order, injunction or decree, or any other requirement of any court or governmental or administrative body or agency, applicable to the Company, the Business or any of the Company Assets, including, but not limited to, those relating to: occupational safety and health; environmental and ecological protection (e.g., the use, storage, handling, transport or disposal of pollutants, contaminants or hazardous or toxic materials or wastes, and the exposure of persons thereto); business practices and operations; labor practices; employee benefits; and zoning and other land use. 5.11. INTELLECTUAL PROPERTY. (a) Schedule 5.11 contains a complete and accurate list of: (1) United States and foreign trademarks, service marks, marks, brand names, applications, and registrations therefor used or owned by the Company (hereinafter MARKS); 29 (2) U.S. copyright applications, and registrations (hereinafter COPYRIGHTS) used or owned by the Company; and (3) Licenses and other agreements to which the Company is a party or otherwise bound which relate to the MARKS and/or COPYRIGHTS. (b) The Company owns all right, title and interest in the applications and the registrations for the MARKS and the COPYRIGHTS. (c) To the best of the Selling Shareholders' knowledge, except as set forth in Schedules 5.9 and 5.11: (1) no proceedings have been instituted, are pending, or are threatened which challenge the rights of the Company in the MARKS and/or COPYRIGHTS; 30 (2) the Company's use of the MARKS and/or COPYRIGHTS does not violate any laws, statutes, ordinances, or regulations, or presently infringes upon or violates any rights of others; (3) the Company's MARKS and/or COPYRIGHTS are not presently being infringed by others; and (4) the Company's use of its MARKS and/or COPYRIGHTS are not the subject of any outstanding order, decree, judgment, stipulation, or agreement which limit or restrict their use. 5.12. TAX MATTERS. The Company has filed with the appropriate governmental agencies all tax returns and reports required to be filed by it for the past five (5) taxable years, and has paid in full all taxes, interest, penalties, assessments and deficiencies shown to be due or claimed to be due on such tax returns and reports. The Company has currently and upon the Closing 31 will have in effect a valid election qualifying the Company as an S Corporation for United States Federal Income Tax purposes and similar elections under corresponding state, local and foreign income tax laws. The provision for income and other taxes which is set forth on the Unaudited Balance Sheets is adequate for all accrued and unpaid taxes of the Company as of such respective dates of such Balance Sheets, whether (A) incurred in respect of or measured by income of the Company for any periods prior to the close of business on that date, or (B) arising out of transactions entered into, or any state of facts existing, on or prior to that date. The provision for income and other taxes which is set forth on the books of account of the Company is adequate for all income and other taxes which accrued after January 1, 1998 and prior to the Closing. The Company has not executed or filed with any taxing authority any agreement extending the period for the assessment or collection of any income or other taxes, and is not a party to any pending or, to the best of the knowledge of the Company, threatened, action or proceeding by any governmental authority for the assessment or collection of income or other taxes. The United States federal income tax returns of the Company have not been examined by the Internal Revenue Service ("the IRS") within the last ten (10) years. 32 5.13. EMPLOYEE ARRANGEMENTS. As of the Closing Date, the Company will have no employees and will not be subject to any union, collective bargaining, employment, management, termination or consulting agreements or any compensation plans and arrangements; bonus and incentive plans and arrangements; deferred compensation plans and arrangements; pension and retirement plans and arrangements; profit-sharing and thrift plans and arrangements; stock purchase and stock option plans and arrangements; hospitalization and other life, health or disability insurance or reimbursement programs; holiday, sick leave, severance, vacation, tuition reimbursement, personal loan and product purchase discount policies and arrangements; and other plans or arrangements providing for benefits for employees. 5.14. ERISA. The Company has no "employee pension benefit plan", as such term is defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and no "employee welfare benefit plan" as such term is defined in Section 3(1) of ERISA, which is maintained by the Company or to which it contributes or is obligated or required to contribute. 33 5.15. CERTAIN BUSINESS MATTERS. There are no pending, or to the best of the knowledge of the Company threatened, labor disputes or other labor related claims and, to the best of the knowledge of the Company, no union representation questions exist, and there are no organizing activities, in respect of any of the former employees of the Company, (A) the product and service warranties given by the Company or by which it is bound entail no greater obligations than are customary in the business of the Company and (B) the Company is not a party to or bound by any agreement which limits its freedom to compete in any line of business or with any person, or which is otherwise materially burdensome to it. 5.16. ASSUMED CONTRACTS. In accordance with Section 4.7, the Assignee has assumed all of the Company's contracts other than those set forth on Schedule 5.16 of this Agreement or in any other agreement of the parties with respect hereto. Schedule 5.16 is a complete and correct list of all contracts, commitments, indentures, mortgages, obligations, agreements and undertaking to which the Company is currently a party or otherwise bound and which the Buyer has assumed. Complete and correct copies of all such assumed contracts, commitments, indentures, mortgages, obligations, 34 agreements and undertakings set forth on Schedule 5.16 delivered pursuant to this Agreement have been furnished by the Selling Shareholders to Buyer, and except as expressly stated on such Schedule, to the best of the knowledge of the Selling Shareholders (A) each of them is in full force and effect, no person or entity which is a party thereto or otherwise bound thereby is in default thereunder, and, to the best of the knowledge of the Selling Shareholders, no event, occurrence, condition or act exists which does (or which with the giving of notice or the lapse of time or both would) give rise to a default or right of cancellation, acceleration or loss of contractual benefits thereunder; (B) there has been no threatened cancellations thereof, and there are no outstanding disputes thereunder; and (C) none of them is materially burdensome to the Company. None of the provisions of such contracts, instruments or agreements violates any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court having jurisdiction over the Company, the Business or the Company's Assets. 5.17. APPROVALS. Schedule 5.17 is a complete and correct list of all governmental and administrative consents, permits, appointments, approvals, licenses, certificates, franchises 35 and other authorizations which are necessary for the operation of the Business or to own or operate the Company's Assets, all of which have been obtained by the Company and are in full force and effect. There are no proceedings pending or threatened, or any basis therefor, seeking to cancel, terminate or limit such consents, permits, appointments, approvals, licenses, certificates, franchises or other authorizations. 5.18 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.18, (i) the properties and facilities of the Company are not being and for the past five years, have not been used to make, store, handle, treat, dispose, generate, or transport hazardous substances in violation of any Environmental Law (as defined herein); (ii) for the past five years, hazardous substances have not been made, stored, handled, treated, disposed of, generated, or transported on or from the properties and facilities of the Company, except in accordance with applicable Environmental Law then in effect; (iii) the properties, facilities and operations of the Company comply in all material respects with all applicable Environmental Laws; (iv) none of the properties, facilities or operations of the Company is subject to any currently pending judicial or administrative proceedings alleging the violation of any 36 Environmental Law; (v) to the best of the Selling Shareholders' knowledge, none of the properties, facilities or operations of the Company is the subject of Federal, state or local investigation evaluating whether any remedial action is needed to respond to a release of any hazardous or toxic waste, substance or constituent, any petroleum or petroleum product, or any other hazardous, illegal or unlawful substance into the environment; (vi) for the past five years, the Company has not filed nor is presently required to file any notice under any Federal, state, or local law indicating past or present treatment or disposal of a hazardous waste, hazardous substance or any petroleum or petroleum product, or reporting a spill or release of a hazardous or toxic waste, substance or constituent, any petroleum or petroleum product, or any other substance into the environment; and (vii) during the past five years, the Company has not received notice nor is aware of any contingent liability in connection with any release of any hazardous or toxic waste, substance or constituent, any petroleum or petroleum product, or any other substance into the environment. For purposes hereof, "Environmental Laws" means all Federal, state and local laws, rules, regulations, permits, orders, judgments, injunctions and decrees relating to hazardous substances and environmental matters applicable to the Business and the 37 facilities of the Company (whether or not owned by it). Such laws and regulations include, without limitation, the Resource Conservation and Recovery Act of 1976 ("RCRA"); the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"); the Toxic Substance Control Act; the Clean Water Act; and the Clean Air Act, all as amended from time to time; state and Federal superlien and environmental cleanup programs; and U.S. Department of Transportation hazardous materials transportation regulations. The terms "hazardous substance" and "release" shall have the meanings specified in CERCLA and the terms "solid waste" and "disposed," the meaning specified in RCRA as of the Closing Date; provided, further, however, that to the extent a parcel of real property is situated in a state or other jurisdiction in which as of the Closing Date, the applicable Environmental Laws may establish a meaning for "hazardous substance," "release," "solid waste," or "disposal" which is broader than that specified in either CERCLA or RCRA, such broader meaning shall apply. 5.19. INFORMATION AS TO THE COMPANY. None of the representations or warranties made by the Company or any of the Selling Shareholders in this Agreement or in any agreement executed and delivered by or on behalf of any of them pursuant hereto are 38 false or misleading in any material respect with respect to any fact, or omit to state any material fact necessary in order to make the statements therein contained not misleading. 5.20. TAX ELECTION. The Selling Shareholders and the Company are eligible to make an election under Sections 338(g) and 338(h)(10) of the Code, and any corresponding election available under state or local tax law provisions of each state in which the Selling Shareholders file an income or franchise tax return, with respect to the sale and purchase of the Company Shares. 6. REPRESENTATIONS AND WARRANTIES AS TO THE SELLING SHAREHOLDERS. The Selling Shareholders hereby jointly and severally represent and warrant to Buyer as follows: 6.1. STANDING AND AUTHORITY. Each Selling Shareholder has the right, power, legal capacity and authority to enter into this Agreement and to carry out its respective obligations hereunder, including without limitation the execution and delivery of the Lock Up Agreement. This Agreement constitutes, and each agreement to be executed and delivered by any Selling Shareholder pursuant hereto will be the valid and binding obligation of the Selling Shareholder 39 enforceable against each of them in accordance with their respective terms ; except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and general equitable principles regardless of whether such enforceability is considered in a proceeding at law or in equity. 6.2. OWNERSHIP OF THE COMPANY SHARES. Each of the Selling Shareholders is the record and beneficial owner of that number of Company Shares set forth opposite such Selling Shareholders' name in the chart annexed hereto as Schedule 6.2. Each Selling Shareholder has good and marketable title to such Company Shares, free and clear of any liens or other claims, security interests, pledges, or encumbrances of any nature whatsoever. All such Company Shares are duly authorized, validly issued, fully paid and nonassessable and each Selling Shareholder has complete and unrestricted power and the unqualified right to sell, assign, transfer and deliver its Company Shares to Buyer, and upon delivery to Buyer of the certificates representing such Company Shares, either endorsed in blank for transfer or together with appropriately executed stock powers with respect thereto, Buyer shall acquire good and marketable title to 40 such Company Shares, free and clear of any liens or encumbrances of any nature whatsoever. 6.3. NONCONTRAVENTION. Neither the execution and delivery by the Selling Shareholders of this Agreement or of any agreement to be executed and delivered pursuant hereto, nor the consummation of any of the transactions contemplated hereby or thereby, nor the performance by the Selling Shareholders of any of their respective obligations hereunder or thereunder, will (nor with the giving of notice or the lapse of time or both would) (A) conflict with or result in a breach of any provision of the Certificate of Incorporation or Bylaws of the Company, or (B) give rise to a material default, or any right of termination, cancellation or acceleration, or otherwise be in conflict with or result in a loss of material contractual benefits to the Company under the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which the Company is a party or by which it may be bound, or require any consent, approval or notice under the terms of any such document or instrument, or (C) violate any order, writ, injunction, decree, law, statute, rule or regulation of any court or governmental authority which is applicable to the Company or any of them, or (D) result in 41 the creation or imposition of any Liens upon any of the Company Shares or the Company Assets. 6.4. NON-REGISTRATION OF SECURITIES. Each Selling Shareholder understands that the Candie's Shares received by him pursuant to this Agreement are not registered under the Act, or under applicable state securities laws, in reliance upon exemption contained in the Act and such laws and any applicable regulations promulgated thereunder or interpretations thereof, and cannot be offered for sale, sold or otherwise transferred unless the Candie's Shares are subsequently so registered pursuant to the terms of this Agreement or qualify for exemption from registration under the Act and such applicable state securities laws; and the certificates of such Candie's Shares shall bear an appropriate legend to that effect. 6.5. INFORMATION AS TO THE SELLING SHAREHOLDERS. None of the representations or warranties made by any Selling Shareholder in this Agreement or in any agreement executed and delivered by or on behalf of any of them pursuant hereto are false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements therein contained, in 42 light of the circumstances, under which they were made, not misleading. 7. REPRESENTATIONS AND WARRANTIES AS TO BUYER AND CANDIE'S. Candie's and Buyer hereby jointly and severally represents and warrants to the Company and the Selling Stockholders as follows: 7.1. ORGANIZATION, STANDING AND POWER. Each of Candie's and Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to own, lease and operate its properties and to carry on its business as presently conducted by it. 7.2. AUTHORITY. The execution and delivery by Candie's and Buyer of this Agreement and of each agreement to be executed and delivered by each of them pursuant hereto, the compliance by Candie's and Buyer with the provisions hereof and thereof, and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary corporate action on the part of each of them and Candie's and Buyer have all necessary corporate power with respect thereto. This Agreement is, 43 and when executed and delivered by Candie's and Buyer, each other agreement to be executed and delivered by each of them pursuant hereto will be, the valid and binding obligation of each of them in accordance with its terms. Neither the execution and delivery by Candie's and Buyer of this Agreement or of any of the aforementioned other agreements, nor the consummation of the transactions contemplated hereby or thereby, nor the compliance by Candie's and Buyer with the provisions hereof and thereof, will (nor with the giving of notice or the lapse of time or both, would) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws of either of them, or in the breach of any material agreement to which either of them is a party or otherwise bound or violates any order, writ, injunction, decree, law statute, rule or regulation of any court or governmental or administrative authority which is applicable to Candie's and the Buyer. 7.3. CANDIE'S SHARES. The Candie's Shares, when issued to the Selling Shareholders, will be duly authorized and validly issued, fully paid and non-assessable, will be delivered hereunder free and clear of any lien, claim, security interest, pledge or other encumbrance of any nature whatsoever, except (i) that the Candie's Shares will be "restricted securities" as such term is 44 defined in the rules and regulations of the SEC and will be subject to restrictions on transfers pursuant to such rules and regulations and State laws, (ii) Candie's Shares shall be subject to the Lock-Up Agreement and (iii) the Pledged Candie's Shares shall be subject to the provisions of Section 2.3 hereof. 7.4 CANDIE'S SEC FILINGS; FINANCIAL STATEMENTS. As of the date hereof, Candie's has filed all forms, reports and documents required to be filed by Candie's with the SEC (collectively, the "Candie's SEC Reports"). The Candie's SEC Reports (i) at the time filed, complied in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by a subsequent filing, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Candie's SEC Reports or necessary in order to make the statements in such Candie's SEC Reports, in the light of the circumstances under which they were made, not misleading. To the best of the knowledge of Candie's, there is no material adverse information with respect to Candie's which a reasonable investor 45 would consider material in making an investment decision in a similar situation. (b) Each of the consolidated financial statements (including, in each case, any related notes) contained in the Candie's SEC Reports, (the "Candie's Financial Statements"), complied as to form in all material respects with the applicable published rules and regulations of the SEC with respect thereto, was or will be prepared in accordance with U.S. generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q or 8-K promulgated by the SEC), and fairly presented or will fairly present the consolidated financial position of Candie's as at the respective dates and the consolidated results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount. 7.5 NONCONTRAVENTION. Neither the execution and delivery by the Buyer and Candie's of this Agreement or of any agreement to 46 be executed and delivered by either of them pursuant hereto, nor the consummation of any of the transactions contemplated hereby or thereby, nor the performance by the Buyer and Candie's of any of their respective obligations hereunder or thereunder, shall (nor with the giving of notice or the lapse of time or both would) give rise to a default, or any right of termination, cancellation or acceleration, or otherwise be in conflict with or result in a loss of material contractual benefits to the Buyer and Candie's, under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, or material license, agreement or other instrument or obligation to which it is a party or by which the Buyer and Candie's or any of the assets of the Buyer and Candie's may be bound, or require any consent, approval or notice under the terms of any such document or instrument. 8. INDEMNIFICATION 8.1. INDEMNIFICATION BY THE SELLING SHAREHOLDERS. The Selling Shareholders hereby jointly and severally agree to indemnify and hold Buyer and Candie's harmless from and against any and all losses, obligations, deficiencies, liabilities, claims, damages, costs and expenses (including, without limitation, the amount of any 47 settlement entered into pursuant hereto, and all reasonable legal and other expenses incurred in connection with the investigation, prosecution or defense of any matter indemnified pursuant hereto) which Buyer or Candie's may sustain, suffer or incur (including reasonable legal fees) and which arise out of, are caused by, relate to, or result or occur from or in connection with (i) the breach by the Company or any of the Selling Shareholders of any representation, warranty or covenant made by him or it in this Agreement or in any agreement or instrument executed and delivered pursuant hereto and (ii) the operation of the business of the Company prior to the Closing Date. The aggregate amount of the Selling Shareholders' liability under this Paragraph 8 shall not exceed the Purchase Price. The Selling Shareholders shall not have any immediate indemnification obligation under this Paragraph 8 for any losses suffered by the Buyer and/or Candie's which aggregate less than Twenty-Five Thousand ($25,000) Dollars. Candie's, the Buyer and the Selling Shareholders shall in good faith negotiate a resolution as to which party shall be responsible for satisfaction of those losses aggregating less than Twenty-Five Thousand Dollars ($25,000). All losses and liabilities which are, individually or in the aggregate, 48 in excess of Twenty-Five Thousand Dollars ($25,000) shall be the immediate obligation of the Selling Shareholders. This indemnification obligation shall also apply to claims directly by Buyer or Candie's against any Selling Shareholder as well as to third party claims. Subject to compliance with provisions of the Escrow Agreement, all indemnification obligations due to the Buyer and/or Candie's under this Agreement, shall first be satisfied from the Pledged Candie's Shares, and to the extent unsatisfied from the Pledged Candie's Shares, shall be promptly paid to Buyer and/or Candie's. 8.2. INDEMNIFICATION BY BUYER AND CANDIE'S. Buyer and Candie's hereby jointly and severally agree to indemnify and hold the Selling Shareholders harmless from and against any and all losses, obligations, deficiencies, liabilities, claims, damages, costs and expenses (including, without limitation, the amount of any settlement entered into pursuant hereto, and all reasonable legal and other expenses incurred in connection with the investigation, prosecution or defense of any matter indemnified pursuant hereto), which either of them may sustain, suffer or incur and which arise out of, are caused by, relate to, or result or occur from or in connection with (i) the breach by Buyer or Candie's of any 49 representation, warranty or covenant made by it in this Agreement or in any agreement or instrument executed and delivered pursuant hereto; (ii) the maintenance of the Trademarks and License Agreements; (iii) the Bongo's Cuban Cafe and Skechers litigation; (iv) the improper use by third parties as it relates solely to the unauthorized use and/or distribution of certain labels, from an intellectual property perspective, listed on Schedule 8.2 in connection with these goods which have been previously manufactured by such third parties without any commitment to do so by the Company, and for which no obligation exists as of the date hereof for the Company or the Selling Shareholders to purchase such goods, and for which the Buyer shall have no obligation to purchase such goods and (v) the operation of the business of the Company subsequent to the Closing Date. The aggregate amount of Buyer's and/or Candie's liability under this paragraph 8 shall not exceed the Purchase Price. The Buyer and Candie's shall not have any immediate indemnification obligation under this Paragraph 8 for any losses suffered by the Selling Shareholders which aggregate less than Twenty-Five Thousand ($25,000) Dollars. The Selling Shareholders and the Buyer and/or Candie's shall in good faith negotiate a resolution as to which 50 party shall be responsible for satisfaction of those losses aggregating less than Twenty-Five Thousand Dollars ($25,000). All losses and liabilities which are, individually or in the aggregate, in excess of Twenty-Five Thousand Dollars ($25,000) shall be the immediate obligation of Buyer and/or Candie's. This indemnification obligation shall also apply to claims directly by the Selling Stockholders against Buyer and Candie's as well as to third party claims. 8.3. THIRD PARTY CLAIMS. If a claim by a third party is made against any party or parties hereto and the party or parties against whom said claim is made intends to seek indemnification with respect thereto under this paragraph 8, the party or parties seeking such indemnification shall promptly notify the indemnifying party or parties, in writing, of such claim; PROVIDED, HOWEVER, that the failure to give such notice shall not affect the rights of the indemnified party or parties hereunder unless such failure materially and adversely affects the indemnifying party or parties. The indemnifying party or parties shall have ten (10) days after said notice is given to elect, by written notice given to the indemnified party or parties, to undertake, conduct and control, through counsel of their own choosing (subject to the consent of the 51 indemnified party or parties, such consent not to be unreasonably withheld) and at their sole risk and expense, the good faith settlement or defense of such claim, and the indemnified party or parties shall cooperate with the indemnifying parties in connection therewith; provided: (i) in the case of the Selling Shareholders as the indemnifying party or parties, they shall not thereby permit to exist any lien, encumbrance or other adverse change upon any of the Company's assets, properties or the Business, and (ii) the indemnified party or parties shall be entitled to participate in such settlement or defense through counsel chosen by the indemnified party or parties, provided that the fees and expenses of such counsel shall be borne by the indemnified party or parties. So long as the indemnifying party or parties are contesting any such claim in good faith, the indemnified party or parties shall not pay or settle any such claim; provided, however, that notwithstanding the foregoing, the indemnified party or parties shall have the right to pay or settle any such claim at any time, provided that in such event they shall waive any right of indemnification therefor by the indemnifying party or parties. If the indemnifying parties do not make a timely election to undertake the good faith defense or settlement of the claim as aforesaid, or if the indemnifying parties fail to proceed with the good faith defense or settlement of the 52 matter after making such election, then, in either such event, the indemnified party or parties shall have the right to contest, settle or compromise the claim at their exclusive discretion, at the risk and expense of the indemnifying parties to the full extent set forth in subparagraph 8.1 or 8.2 hereof, as the case may be. The provisions of this Section 8.3 shall also apply to claims made directly by any of the parties hereto against each other. 8.4. EXCLUSIVE REMEDY. Except as specifically provided in Section 4.2 of this Agreement, the provisions of this paragraph 8 shall be the sole and exclusive remedy of the parties hereto with respect to any and all claims relating to or arising out of a breach of any representation, warranty, covenant or agreement made by any other party hereto in this Agreement; PROVIDED, HOWEVER, nothing shall be deemed to prohibit or limit the right of any of the parties hereto to at any time seek injunctive or other equitable relief based upon the failure of any of the other parties hereto to perform any covenant or agreement contained herein or any other agreement executed by the parties hereto with respect to the subject matter hereof. Each of the parties hereto shall make any indemnification claims pursuant to this paragraph 8 on or prior to the date which the relevant representation or warranty shall expire. The failure 53 to make a claim within the time period prescribed herein shall constitute a bar against any party making such claim. 9. NONDISCLOSURE. 9.1. "CONFIDENTIAL INFORMATION" DEFINED. As used in this paragraph 9, the term "Confidential Information" shall mean any and all information (oral and written) relating to the Business or the Company Assets of the Company, on the one hand and relating to the business of Candie's, on the other hand, other than such information which can be shown to be in the public domain (such information not being deemed to be in the public domain merely because it is embraced by more general information which is in the public domain) other than as the result of a breach of the provisions of subparagraph 9.2 below, including, but not limited to, information relating to: identity and description of goods and services used; purchasing; costs; pricing; machinery and equipment; manufacturing processes; technology; research; test procedures and results; customers and prospects; marketing; and selling and servicing. Between the date hereof and the Closing Date, each of the Company and Buyer may, directly and/or through its representatives, make such investigation of the other party and as such party deems 54 necessary or advisable, but such investigation shall not affect any of the representations and warranties of either party contained herein or in any other instrument or document delivered pursuant hereto. Each of the Buyer, Candie's, the Company and Selling Shareholders shall not disclose or use any Confidential Information, it obtains in connection with the foregoing, other than in connection with the transactions contemplated hereby. In the event that the purchase and sale transaction provided for herein is not consummated for any reason whatsoever, each of the parties shall return to the other all documents, workpapers and other written materials which were obtained by it during the course of such investigation which constitute Confidential Information. 9.2. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The parties shall not at any time, directly or indirectly, use, communicate, disclose or disseminate any Confidential Information in any manner whatsoever. 10. LEGAL OPINIONS. 10.1. OPINION OF COUNSEL FOR THE COMPANY AND THE SELLING SHAREHOLDERS. Simultaneously with the execution and delivery of 55 this Agreement, the Company and the Selling Shareholders shall cause Jeffer, Mangels, Butler & Marmaro LLP to deliver an opinion to the Buyer and Candie's, dated the Closing Date, in substantially the form of Exhibit D attached hereto. 10.2. OPINION OF COUNSEL FOR CANDIE'S AND THE BUYER. Simultaneously with the execution and delivery of this Agreement, Candie's and the Buyer shall cause Tenzer Greenblatt LLP to deliver an opinion to the Selling Shareholders, dated the Closing Date, in substantially the form of Exhibit E attached hereto. 11. BROKERS. Each of Candie's, Buyer, the Company and the Selling Shareholders represents and warrants to the other that other than Salomon Smith Barney, Inc. with respect to Candie's and Buyer and The Westheimer Company with respect to the Selling Shareholders and the Company, it has not engaged or dealt with any broker or finder in connection with any of the transactions contemplated by this Agreement, and each of the parties shall indemnify and hold the other harmless from and against any and all claims or liabilities 56 asserted by or on behalf of any alleged broker or finder for finder's fees, commissions, brokerage fees or like payment. 12. MISCELLANEOUS PROVISIONS. 12.1. EXPENSES. Except as otherwise provided in this Agreement, each of the parties hereto shall pay his or its own costs and expenses in connection with this Agreement and the transactions contemplated hereby. For purpose of this Agreement, the expenses of the Company shall be the expenses of the Selling Shareholders. 12.2. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. 12.3. NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given or made as of the earlier of the date delivered 57 or mailed if delivered personally by overnight courier or mailed by express, registered or certified mail, (postage prepaid, return receipt requested), or by facsimile transmittal, confirmed by express, certified or registered mail, as follows: IF TO BUYER, TO: Candie's Inc. 2975 Westchester Avenue Purchase, NY 10577 Attn: Neil Cole, Chairman of the Board COPY TO: Tenzer Greenblatt LLP 405 Lexington Avenue New York, New York 10174 Attn: Michael S. Mullman, Esq. IF TO THE COMPANY, TO: Michael Caruso & Co., Inc. 2925 Mountain Maple Lane Jackson, Wyoming 83001 Attn: Michael Caruso, President COPY TO: Jeffer, Mangels, Butler & Marmaro, LLP 2121 Avenue of the Stars Los Angeles, CA 90067 Attn: Joel Berman, Esq. IF TO ANY OR ALL OF THE SELLING SHAREHOLDERS, TO: Michael Caruso 2925 Mountain Maple Lane Jackson, Wyoming 83001 Gene Montesano 2501 Sycamore Canyon Drive Montecito, CA 93108 COPY TO: Jeffer, Mangels, 58 Butler & Marmaro LLP 2121 Avenue of the Stars Los Angeles, CA 90067 Attn: Joel Berman, Esq. or to such other address as any party shall have designated by like notice to the other parties hereto (except that a notice of change of address shall only be effective upon receipt). 12.4. AMENDMENT. This Agreement may only be amended by a written instrument executed by each of the parties hereto. 12.5. ENTIRE AGREEMENT. This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with this Agreement) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. 12.6. HEADINGS. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement. 59 12.7. ASSIGNMENT AND BENEFITS. Prior to the Closing Date, neither this Agreement nor any rights, interests or obligations hereunder may be assigned (by operation of law or otherwise) by any party hereto without the prior written consent of all of the parties hereto. This Agreement shall inure to the benefit of and bind the respective parties's successors or permitted assigns. 12.8. BINDING EFFECT; BENEFITS. This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective heirs, legal representatives, successors and permitted assigns. Nothing herein contained, express or implied, is intended to confer upon any person other than the parties hereto and their respective heirs, legal representatives, successors and permitted assigns, any rights or remedies under or by reason of this Agreement. 12.9. WAIVER, ETC. The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Agreement or any provision hereof or the right of any of the parties 60 hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach shall be construed or deemed to be a waiver of any other or subsequent breach. 12.10. SEVERABILITY. Any provision of this Agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. 12.11. ANNOUNCEMENTS. No party hereto shall issue any press release or otherwise divulge the existence of this Agreement or the transactions contemplated hereby without the prior approval of the other parties hereto, except as may be required by applicable law or the applicable rules or regulations of any stock exchange. 61 12.12. SCHEDULES. The Schedules delivered pursuant to this Agreement are an integral part hereof. Each such Schedule shall be in writing, shall indicate the subparagraph pursuant to which it is being delivered, and shall be initialled by the delivering party. 12.13. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of law thereof. 62 IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the date first above written. LICENSING ACQUISITION CORP. By: /s/ Neil Cole ---------------------------------- Neil Cole, President CANDIE'S, INC. By: /s/ Neil Cole ---------------------------------- Neil Cole, President MICHAEL CARUSO & CO., INC. By: /s/ Michael Caruso ---------------------------------- Michael Caruso, President /s/ Michael Caruso ------------------------------------------ Michael Caruso, Trustee of the Claudio Trust dated February 2, 1990 /s/Gene Montesano ------------------------------------------ Gene Montesano 63 EX-99.2 3 EXHIBIT 99.2 Exhibit C September 24, 1998 Candie's, Inc. Attn: Neil Cole, Chairman 2975 Westchester Avenue Purchase, NY 10577 Re: LOCK-UP AGREEMENT Gentlemen: In connection with the acquisition of all of the outstanding capital stock (the "Transaction") of Caruso & Co., Inc. ("Caruso & Co.") by a wholly-owned subsidiary of Candie's, Inc. (the "Company") pursuant to the stock purchase agreement of even date herewith (the "Purchase Agreement") among the Company, its subsidiary, Caruso & Co. and the undersigned former stockholders of Caruso & Co. (the "Undersigned"), and as a condition of the Transaction, each of the Undersigned, in consideration for the issuance to them of shares of the Company's Common Stock in accordance with the terms of the Purchase Agreement, hereby covenants and agrees: 1. From the date hereof (the "Effective Date") until the first anniversary of the Effective Date, not to, directly or indirectly, sell, offer for sale, assign, transfer, hypothecate, encumber, pledge, contract to sell, grant an option to purchase or otherwise dispose of any of the shares of common stock of the Company acquired in connection with the Purchase, all as more particularly set forth in the Schedule annexed hereto (the "Company Securities"), in any manner whatsoever, pursuant to Rule 144 of the rules and regulations promulgated under the Securities Act of 1933, as amended, or otherwise. 2. Each of the undersigned hereby consents to the Company giving the transfer agent for its Common Stock written stop-transfer instructions consistent with the provisions of paragraph 1 hereof. 3. It is intended by the parties to the Transaction that this Agreement, shall be a valid and binding restriction on transfer of securities within the meaning of Section 202 of the Delaware General Corporation Law ("DGCL") (or any successor provisions). Accordingly, each of the undersigned consents to the placement of an appropriate legend upon any certificates Candies, Inc. September 24, 1998 Page 2 evidencing its Company Securities, as contemplated by Section 202(a) of the DGCL (or any related or successor provisions) and, upon request by the Company, the undersigned will submit the certificates representing its Company Securities for legending in accordance with this Agreement. 4. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York, without regard to its choice of law principles. 5. This Agreement constitutes the entire agreement, and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. 6. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. Very truly yours, Dated: September 24, 1998 /s/ Michael Caruso --------------------- ------------------------------------- Michael Caruso, as trustee of the Claudio Trust dated February 2, 1990, stockholder Dated: September 24, 1998 /s/ Gene Montesano --------------------- ------------------------------------- Gene Montesano, stockholder Candies, Inc. September 24, 1998 Page 3 SCHEDULE OF COMPANY SECURITIES BEING LOCKED UP
Stockholder Number of Company Securities ----------- ---------------------------- Michael Caruso, as Trustee 1,475,806 shares of the Claudio Trust dated February 2, 1990 Gene Montesano 491,936 shares
EX-99.3 4 EXHIBIT 99.3 ESCROW AGREEMENT ESCROW AGREEMENT made this day of September 24, 1998 between CANDIE'S, INC., a Delaware corporation with its principal place of business at 2975 Westchester Avenue, Purchase, New York 10577 (the "Corporation") Michael Caruso, as Trustee of the Claudio Trust dated February 2, 1990 residing at 2925 Mountain Maple Lane, Jackson, Wyoming 83001, Gene Montesano, residing 2501 Sycamore Canyon Drive, Montecito, CA 93108 (each a "Shareholder" and collectively the "Shareholders") and Tenzer Greenblatt LLP, as escrow agent (the "Escrow Agent"). WHEREAS, the Corporation, Michael Caruso & Co., Inc., and the Shareholders have entered into a stock purchase agreement dated the date hereof (the "Stock Purchase Agreement") pursuant to which the Corporation, through its wholly owned subsidiary, will purchase all of the outstanding capital stock of Michael Caruso & Co., Inc. in consideration for a certain number of shares of the Corporation's common stock; and WHEREAS, it is a condition of the Stock Purchase Agreement that the Shareholders pledge a certain number of shares of the Corporation's Common Stock received by them in the Acquisition by depositing such shares into escrow with Escrow Agent; NOW, THEREFORE, in consideration of the mutual covenants contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed: 1. DEPOSIT - Simultaneously with the execution of this Escrow Agreement, the Shareholders shall place into escrow the stock certificate(s) of the Shareholders representing the number of Shares set forth in Schedule A together with endorsed stock powers attached thereto (the "Pledged Candie's Shares"). 2. DISTRIBUTION OF ESCROWED SHARES - The Pledged Candie's Shares shall be held by Escrow Agent as security for the indemnification obligations of the Shareholders as set forth in Paragraph 8 of the Stock Purchase Agreement. Promptly after the date which is one (1) year from the date hereof, Escrow Agent shall release to the Shareholders one half of the originally Pledged Candie's Shares less the number of Pledged Candie's Shares having an aggregate value equal to the amount of any outstanding indemnification obligations which have been claimed by Candie's or Buyer in accordance with Paragraph 8 of the Stock Purchase Agreement (the "Indemnification Shares"), and (ii) promptly after the date which is two (2) years from the date hereof, Escrow Agent shall release to the Shareholders the remaining Pledged Candie's Shares, less the number of Indemnification Shares, if any, necessary, at such date, to satisfy outstanding indemnification obligations claimed by Candie's. For purposes of determining the number of Pledged Candie's Shares released or applied under the previous sentence, the value of each share of Candie's Common Stock shall be deemed to be the greater of (i) the closing sale price of a share of Candie's Common Stock on the Closing Date, or (ii) the closing sale price of a share of Candie's Common Stock on the date on which the Pledged Candie's Shares are released or applied by Escrow Agent in payment of the indemnification obligations in question. 3. DUTIES OF THE ESCROW AGENT a. The Escrow Agent, by executing this Escrow Agreement, signifies its agreement to hold the Pledged Candie's Shares for the purposes as provided in this Escrow Agreement. In the event of any dispute or conflict between the Corporation and Shareholders as to the release of the Pledged Candie's Shares, such dispute or conflict shall be determined by appropriate court action. During the pendency of any disputes and until the final adjudication of such dispute (including expiration of time for appeal and petition for rehearing), the Escrow Agent shall be entitled to retain possession of the Pledged Candie's Shares. b. The Corporation and the Shareholders shall indemnify defend and hold Escrow Agent harmless from and against any and all loss, damage, tax, liability and expense that may be incurred arising out of this Agreement (including reasonable legal fees and expenses) except Escrow Agent's gross negligence or willful misconduct, notwithstanding that Escrow Agent has acted as counsel for the Corporation under the Stock Purchase Agreement. In all questions arising under this Escrow Agreement, the Escrow Agent may rely on the advice of counsel, and for anything done, omitted or suffered in good faith by the Escrow Agent based on such advice, the Escrow Agent shall not be liable to anyone. The Escrow Agent shall not be required to take any action hereunder involving any expenses unless the payment of such expense shall be made or provided for in a manner satisfactory to it. 4. TERM - This Escrow Agreement shall remain in full force and effect for a term of two years or until all of the Pledged Candie's Shares have been distributed in accordance with the provisions hereof. 5. NOTICES - All notices hereunder by any party to another shall be sent by telecopy, certified mail, return receipt requested, by overnight courier, or by personal delivery, addressed as set forth on the first page of this Escrow Agreement. Notices shall be deemed served (i) if sent by overnight courier, on the date of delivery of the notice by such overnight courier, and (ii) if sent by personal delivery, or by telecopy on the date of delivery if delivered or received prior to 5:00 P.M., and on the next business day if delivered or received after 5:00 P.M., or, if sent by certified mail, when received. A copy of all notices under this Escrow Agreement shall be given to Escrow Agent, 405 Lexington Avenue, New York, New York 10174. 6. ENTIRE AGREEMENT MODIFICATION; BINDING EFFECT - This Escrow Agreement, together with the Stock Purchase Agreement dated the date hereof between the Corporation and the Shareholders, constitutes the entire agreement between the parties with respect to the subject matter hereof, and may not be assigned by either party or changed or modified except in a writing executed by the Corporation and the Shareholders. 7. GOVERNING LAW - This Escrow Agreement shall be governed by the laws of the State of New York. The Corporation and Shareholder agree that, should there be any litigation relating to this Escrow Agreement, they shall bring such litigation in New York County, New York. IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of the day and year first above written. CANDIE'S, INC. By: /s/ Neil Cole ------------------------------------ Neil Cole TENZER GREENBLATT LLP, as Escrow Agent By: /s/ TENZER GREENBLATT LLP ------------------------------------ SHAREHOLDERS: /s/ Michael Caruso --------------------------------------- Michael Caruso, Trustee of the Claudio Trust dated February 2, 1990 /s/ Gene Montesano --------------------------------------- Gene Montesano EX-99.4 5 EXHIBIT 99.4 REGISTRATION RIGHTS AGREEMENT Registration Rights Agreement dated as of September 24, 1998, by and between Candie's, Inc., a Delaware corporation (the "Company"), and the persons whose names and addresses appear on the signature page attached hereto (each a "Holder" and collectively, the "Holders"). WHEREAS, the Company issued to the Holders, pursuant to the purchase of all of the capital stock of Michael Caruso & Co., Inc. ("Caruso & Co.") by a wholly-owned subsidiary of the Company, an aggregate of 1,967,742 shares (the "Shares") of the Company's common stock, par value $.001 per share (the "Common Stock"), as described in the stock purchase agreement, of even date herewith, by and among the Company and its subsidiary, Caruso & Co. and each of the Holders (the "Purchase Agreement"); and WHEREAS, pursuant to the Purchase Agreement, the Company has agreed to grant to the Holder registration rights set forth herein with respect to the Shares. NOW, THEREFORE, the parties do hereby agree as follows: As used herein the term "Registrable Security" means each of the Shares, and any shares of Common Stock issued upon any stock split or stock dividend in respect of such Shares; PROVIDED, HOWEVER, that with respect to any particular Registrable Security, such security shall cease to be a Registrable Security when, as of the date of determination, (i) it has been effectively registered under the Securities Act of 1933, as amended (the "Securities Act") and disposed of pursuant thereto, (ii) it may be sold pursuant to Rule 144(k) or (iii) it has ceased to be outstanding. In the event of any merger, reorganization, consolidation, recapitalization or other change in corporate structure affecting the Common Stock, such adjustment shall be made in the definition of "Registrable Security" as is appropriate in order to prevent any dilution or enlargement of the rights granted pursuant to this Agreement. The term "Majority Holder" as used in this Agreement shall mean any holder or any combination of holders of Registrable Securities, if included in such holders' Registrable Securities are that aggregate number of Shares as would constitute a majority of the aggregate number of Shares included in all of the Registrable Securities. -1- 1. DEMAND REGISTRATION. (a) Subject to receipt by the Company of the audited financial statements of Michael Caruso & Co., Inc. for the periods set forth in Section 4.2 of the Stock Purchase Agreement, together with the unqualified opinion of Stonefield Josephson, Inc. (the "Audited Financial Statements"), at any time during the two (2) year period after the first year anniversary of the date of this Agreement, the Majority Holder shall have the right, on one (1) occasion only, exercisable by written notice to the Company (a "Demand Registration Request"), to have the Company promptly prepare and file with the Securities and Exchange Commission, in respect of the Registrable Securities held by the Holders, a registration statement (the "Demand Registration Statement") so as to permit a public offering and sale of the Registrable Securities; provided however, that the Company is then eligible to register the Registrable Securities. (b) The Company and other stockholders may, at the Company's discretion, have other shares of Common Stock included in the Demand Registration Statement, provided that in the event that an underwriter for the Registrable Securities determines that the inclusion of the additional shares of Common Stock in the Demand Registration Statement would adversely affect its ability to sell the Registrable Securities, then the shares of Common Stock proposed to be offered by the Company and such other stockholders shall be cut-back as requested in writing by such underwriter. (c) The Company will use reasonable efforts to file the Demand Registration Statement as expeditiously as reasonably possible, provided that nothing herein shall require the Company to undergo an audit, other than in the ordinary course of business. (d) Notwithstanding any provision of this Section 1 to the contrary, if, at the time a Demand Registration Request is given to the Company under this Section 1, the Company is negotiating a merger, consolidation, acquisition or sale of all or substantially all of its assets or a similar transaction and if in the opinion of counsel to the Company, the Demand Registration Statement would be required to include information concerning such transactions or the parties thereto which is not reasonably available at the time, the Company shall promptly inform the Holder by written notice of such circumstances (a "Postponement Notice") and, at the Company's election to be set forth in the Postponement Notice, the filing of the Demand Registration Statement may be postponed for one (and not more than one) period not to exceed 90 days from the date on which the Demand Registration Request is given to the Company under this Section 1 (notwithstanding any provisions herein to the contrary). -2- 2. PIGGYBACK REGISTRATION. (a) Subject to receipt by the Company of the Audited Financial Statements, if at any time during the three (3) year period after the date of this Agreement, the Company proposes to prepare and file with the Securities and Exchange Commission a registration statement covering equity or debt securities of the Company, or any such securities of the Company held by its stockholders, other than in connection with a merger, acquisition or pursuant to a registration statement on Form S-4 or Form S-8 or any successor form (for purposes of this Section 2, collectively, a "Piggyback Registration Statement") and the Holders are required pursuant to the terms of Section 4.2 of the Purchase Agreement to pay for the costs of such Piggyback Registration Statement, the Company will give written notice of its intention to do so by registered or certified mail to Holders. If the Company elects to file a Piggyback Registration Statement prior to the first anniversary of the date hereof, those Shares registered on behalf of the Holders shall remain subject to the Lock-Up Agreement dated the date hereof between the parties. Upon the written request of Holders, made within 5 days after receipt of such notice, that the Company include the Registrable Securities in the Piggyback Registration Statement, the Company shall, as to Holders, use its reasonable efforts to effect the registration under the Securities Act of the Registrable Securities which it has been so requested to register ("Piggyback Registration"), at the Holder's sole cost and expense and at no cost or expense to the Company; PROVIDED, HOWEVER, that if, the Piggyback Registration is in connection with an underwritten public offering and in the written opinion of the Company's underwriter or managing underwriter of the underwriting group, if any, for such offering, the inclusion of all or a portion of the Registrable Securities requested to be registered, when added to the securities being registered by the Company or the selling stockholder(s), if any, will exceed the maximum amount of the Company's securities which can be marketed (i) at a price reasonably related to their then current market value, or (ii) without otherwise having a material adverse effect on the entire offering, then the Company may, subject to the allocation priority set forth in the next paragraph, exclude from such offering all or a portion of the Registrable Securities which it has been requested to register. Without limiting the generality of the foregoing, such underwriter or managing underwriter may condition its consent to the inclusion of all or a portion of the Registrable Securities requested to be registered upon the participation by Holders in the underwritten public offering on the terms and conditions thereof. (b) If securities are proposed to be offered for sale pursuant to such Piggyback Registration Statement by other security holders of the Company and the total number of the Registrable Securities to be offered by Holder and such other selling security holders is required to be reduced pursuant to a -3- request from the underwriter or managing underwriter (which request shall be made only for the reasons and in the manner set forth above), the aggregate number of Registrable Securities to be offered by Holders pursuant to such Piggyback Registration Statement shall equal the number which bears the same ratio to the maximum number of securities that the underwriter or managing underwriter believes may be included for all the selling security holders (including Holders) as the original number of securities proposed to be sold by Holders bears to the total original number of securities proposed to be offered by Holders and the other selling security holders. (c) Notwithstanding the preceding provisions of this Section 2, the Company shall have the right at any time after it shall have given written notice pursuant to this Section 2 (irrespective of whether any written request for inclusion of such securities shall have already been made) to elect not to file any proposed Piggyback Registration Statement filed pursuant to this Section 2, or to withdraw the same after the filing but prior to the effective date thereof. In the event that the Company elects to withdraw, the Company shall pay for the cost of such withdrawn Piggyback Registration Statement; provided, however, that the Company shall not be liable for the costs (including but not limited to legal fees and expenses) of the Holders in connection with the Piggyback Registration Statement, and, furthermore, such withdrawal shall not affect Holders'obligation to pay for any subsequent Piggyback Registration Statement filed by the Company. (d) In the event Holders exercise the rights granted under this paragraph 2, such Holder shall no longer be entitled to the Demand Registration rights set forth in paragraph 1 of this Agreement. 3. COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. The Company hereby covenants and agrees as follows: (a) Following the effective date of the Demand Registration Statement, the Company shall, upon the request of the Majority Holder, forthwith supply such reasonable number of copies of the Demand Registration Statement and prospectus as shall be reasonably requested by the Holders to permit the Holders to make a public distribution of the Registrable Securities. The obligations of the Company hereunder with respect to the registrable Securities are expressly conditioned on the Holders' furnishing to the Company such appropriate information concerning the Holders, the Registrable Securities and the terms of the Holders' offering of such Registrable Securities as the Company may request. -4- (b) Subject to the provisions of the Purchase Agreement, the Company will pay all costs, fees and expenses in connection with any Demand Registration Statement filed, provided however, that the Holders shall be solely responsible for the fees of any counsel or advisor or underwriter retained by the Holders in connection with such registration and any transfer taxes, selling commissions or selling fees applicable to the Registrable Securities sold by the Holders pursuant thereto. (c) The Company will use reasonable efforts to qualify or register the Registrable Securities included in the Demand Registration Statement for offering and sale under the securities or blue sky laws of such states as are reasonably requested by the Holders, provided that the Company shall not be obligated to execute or file any general consent to service of process (unless the Company is already then subject to service in such jurisdiction) or to qualify as a foreign corporation to do business under the laws of any such jurisdiction, except as may be required by the Securities Act and its rules and regulations. (d) The Company shall cause any successor corporation to assume the obligations set forth under this Agreement in connection with any merger, consolidation or acquisition in which the Company is not the surviving entity. 4. COVENANT OF THE HOLDERS. The Holders, upon receipt of notice from the Company that an event has occurred which requires a post-effective amendment to a registration statement or a supplement to the prospectus included therein, shall promptly discontinue the sale of Registrable Securities until the Holders receive a copy of a supplemented or amended prospectus from the Company, which the Company shall provide as soon as reasonably practicable after such notice. 5. INDEMNIFICATION. The Company agrees to indemnify, defend and hold harmless the Holders from and against any and all losses, claims, damages and liabilities caused by or arising out of any untrue statement of a material fact contained in the Demand Registration Statement, the Piggyback Registration Statement or any prospectus included therein or caused by or arising out of any omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of circumstances which they are made, not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission based upon information furnished or required to be furnished in writing to the Company by the Holders expressly for use therein; provided, however, that the indemnification in this Section shall not inure to the benefit of the Holders on account of any such loss, claim, damage or liability arising from the sale of Registrable Securities by the Holders, if a copy of a subsequent prospectus correcting the untrue statement or omission in such -5- earlier prospectus was provided to the Holders by the Company prior to the sale and the subsequent prospectus was not delivered or sent by the Holders to the purchaser prior to such sale. The Holders agree to indemnify the Company, its directors, each officer signing a registration statement, each person who controls the Company within the meaning of the Securities Act, any underwriter and any person who controls any underwriter within the meaning of the Securities Act from and against any and all losses, claims, damages and liabilities caused by or arising out of any untrue statement of a material fact contained in the Demand Registration Statement, Piggyback Registration Statement, or any prospectus included therein, or caused by or arising out of any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case, only insofar as such losses, claims, damages or liabilities are caused by any untrue statement or omissions based upon information furnished in writing to the Company by the Holders expressly for use therein. 6. GOVERNING LAW. (a) This Agreement shall be governed as to validity, interpretation, construction, effect and in all other respects by the internal substantive laws of the State of New York, without giving effect to the choice of law rules thereof. (b) Each of the Company and each of the Holders hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of New York and of the United States located in the County of New York, State of New York (the "New York Courts") for any litigation arising out of or relating to this Agreement and the transactions contemplated hereby (and agrees not to commence any litigation relating thereto except in such courts), waives any objection to the laying of venue of any such litigation in the New York Courts and agrees not to plead or claim that such litigation brought in any New York Courts has been brought in an inconvenient forum. 7. NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by express, registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Company, at: Candie's, Inc. 2975 Westchester Avenue Purchase, New York 10577 Attn: Neil Cole with a copy of the same to: -6- Tenzer Greenblatt LLP 405 Lexington Avenue 23rd Floor New York, New York 10174 Attn: Michael S. Mullman, Esq. If to the Holder(s), at that address set forth under their name on the signature page. with a copy of the same to: Jeffer, Mangels, Butler & Marmaro, LLP 2121 Avenue of the Stars Los Angeles, CA 90067 Attn: Joel Berman, Esq. Or such other address as has been indicated by either party in accordance with a notice duly given in accordance with the provisions of this Section. 8. AMENDMENT. This Agreement may only be amended by a written instrument executed by the Company and the Holders. 9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. 10. ASSIGNMENT; BENEFITS. This Agreement and the rights granted hereunder may not be assigned by any Holder and any purported assignment shall be void ab initio. Nothing herein contained, express or implied, is intended to confer upon any person other than the parties hereto any rights or remedies under or by reason of this Agreement. This Agreement shall inure to the benefit of and bind the respective parties' successors or permitted assigns. 11. The prevailing party to any action brought under this Agreement shall be entitled to recover reasonable attorneys' fees and expenses in connection therewith from the non-prevailing party. 12. HEADINGS. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement. 13. SEVERABILITY. Any provision of this Agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent of such -7- prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. 14. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. -8- IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the date first above written. Company: CANDIE'S, INC. By: /s/ Neil Cole ------------------------------ Name: Neil Cole Title: Chairman of the Board Holders: /s/ Michael Caruso ------------------------------ Michael Caruso, Trustee of the Claudio Trust dated February 2, 1990 Address: --------------------- --------------------- --------------------- Number of Shares: -------------- /s/ Gene Montesano ------------------------------ Gene Montesano Address: --------------------- --------------------- --------------------- Number of Shares: -------------- -9- -----END PRIVACY-ENHANCED MESSAGE-----