-----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, DDjeAFKHg6UyKPdRPsTqRmtRGc5G1VrhIyV33tqYENR4EWRof+3EEGCdyejDTTIF hFTlokT2wTN3NMAITB9HCQ== 0001047469-98-009638.txt : 19980313 0001047469-98-009638.hdr.sgml : 19980313 ACCESSION NUMBER: 0001047469-98-009638 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19980312 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ARISTOTLE CORP CENTRAL INDEX KEY: 0000790071 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', CHILDREN'S & INFANTS' UNDERGARMENTS [2340] IRS NUMBER: 061165854 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-37772 FILM NUMBER: 98564526 BUSINESS ADDRESS: STREET 1: 78 OLIVE ST CITY: NEW HAVEN STATE: CT ZIP: 06511 BUSINESS PHONE: 2038674090 MAIL ADDRESS: STREET 1: SCHATZ & SCHATZ RIBICOFF & KOTKIN STREET 2: 78 OLIVE ST CITY: NEW HAVEN STATE: CT ZIP: 06511 FORMER COMPANY: FORMER CONFORMED NAME: FIRST CONSTITUTION FINANCIAL CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FFB CORP DATE OF NAME CHANGE: 19880523 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LEE SARA CORP CENTRAL INDEX KEY: 0000023666 STANDARD INDUSTRIAL CLASSIFICATION: FOOD & KINDRED PRODUCTS [2000] IRS NUMBER: 362089049 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: THREE FIRST NATIONAL PLZ STREET 2: STE 4600 CITY: CHICAGO STATE: IL ZIP: 60602 BUSINESS PHONE: 3127262600 MAIL ADDRESS: STREET 1: THREE FIRST NATL PLZ STREET 2: SUITE 4600 CITY: CHICAGO STATE: IL ZIP: 60602 FORMER COMPANY: FORMER CONFORMED NAME: CONSOLIDATED FOODS CORP DATE OF NAME CHANGE: 19850402 FORMER COMPANY: FORMER CONFORMED NAME: CONSOLIDATED GROCERD CORP DATE OF NAME CHANGE: 19731220 SC 13D 1 SC 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 The Aristotle Corporation ----------------------------------------------------- (Name of Issuer) Common Stock, $.01 par value ---------------------------- (Title of Class of Securities) ----------------------------------------------------- (CUSIP Number) Janet Langford Kelly Senior Vice President, Secretary and General Counsel Sara Lee Corporation Three First National Plaza Chicago, Illinois 60602 (312) 726-2600 (Name, Address and Telephone Number of Persons ----------------------------------------------------- Authorized to Receive Notices and Communications) March 3, 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(b)(3) or (4), check the following box / /. 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. (Continued on following page) Page 1 of 14 Pages Exhibit Index at Page 14 CUSIP No. 13D Page 2 of 14 Pages 1 NAME OF REPORTING PERSON. . . . . . . . . . . . . SARA LEE CORPORATION I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 36-2089049 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS*. . . . . . . . . . . . . . . . . . . . . OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) . . . . . . . . . . . . . . / / 6 CITIZENSHIP OR PLACE OF ORGANIZATION . . . . . . . Maryland corporation 7 SOLE VOTING POWER. . . . . . . . . . . . . 670,411 NUMBER OF SHARES 8 SHARED VOTING POWER . . . . . . . . . . . -0- BENEFICIALLY OWNED BY EACH 9 SOLE DISPOSITIVE POWER . . . . . . . . . . -0- REPORTING PERSON WITH 10 SHARED DISPOSITIVE POWER . . . . . . . . . -0- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON . . . . . . . . . . . . . . . . . . 670,411 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) . . . . . 36.7% 14 TYPE OF REPORTING PERSON*. . . . . . . . . . . . . . . . . . CO *SEE INSTRUCTIONS BEFORE FILLING OUT! SEC 1746 (9-88) CUSIP No. 13D Page 3 of 14 Pages ITEM 1. SECURITY AND ISSUER This statement relates to the Common Stock, $.01 par value ("Common Stock"), and the Series E Convertible Preferred Stock, $.01 par value ("Series E Preferred Stock") (the Common Stock and Series E Preferred Stock being collectively called "Shares") of The Aristotle Corporation, a Delaware corporation ("Company"). The Company's principal executive offices are located at 78 Olive Street, New Haven, Connecticut 06511. ITEM 2. IDENTITY AND BACKGROUND This statement is filed by Sara Lee Corporation, a Maryland corporation ("Sara Lee"). Sara Lee is a global manufacturer and marketer of high-quality, brand-name products for consumers throughout the world. The address of the principal business and principal office of Sara Lee is Three First National Plaza, Chicago, Illinois 60602-4260. Information responsive to Items 2(a), 2(b), 2(c) and 2(f) of Schedule 13D in respect of each of the executive officers and directors of Sara Lee is set forth in Annex I to this Schedule 13D and is incorporated herein by reference. During the last five years, neither Sara Lee nor, to its knowledge, any of its executive officers or directors (i) has been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) has been a party to any 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. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION The Stockholders' Agreement described in Item 6 of this statement was entered into by Sara Lee and certain stockholders of the Company as an inducement to Sara Lee to enter into the Asset Purchase Agreement described in Item 6. Except as set forth in the preceding sentence, Sara Lee has paid no consideration in connection with entering into the Stockholders' Agreement. ITEM 4. PURPOSE OF TRANSACTION On March 3, 1998, Sara Lee, the Company, and The Strouse, Adler Company ("Strouse Adler"), a wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement described in Item 6 of this statement. Pursuant to the terms of the Asset Purchase Agreement and subject to the conditions therein, Sara Lee has agreed to acquire substantially all of the assets and assume certain specified liabilities of Strouse Adler. Strouse Adler represents the sole operating assets of the Company. In order to induce Sara Lee to enter into the Asset Purchase agreement, Sara Lee and certain stockholders of the Company entered into a CUSIP No. 13D Page 4 of 14 Pages Stockholders' Agreement concurrently with the execution of the Asset Purchase Agreement. The Stockholders' Agreement is described in Item 6 of this statement. Except as set forth in this Item 4, neither Sara Lee nor, to its knowledge, any of its executive officers or directors has any present plans or proposals that relate to or that would result in any of the actions specified in clauses (a) through (j) of Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) As of the date hereof and as represented to Sara Lee by the Company, Sara Lee beneficially owns 181,280 shares of Common Stock and 489,131 shares of Preferred Stock representing, in the aggregate, as of March 3, 1998, approximately 36.7% of the 1,824,424 outstanding shares of capital stock of the Company having voting power with respect to the matters subject to the Stockholders' Agreement described in Item 6. To Sara Lee's knowledge, none of its executive officers or directors beneficially owns any Shares. (b) Sara Lee has the power to vote, or to direct the vote of, all 670,411 Shares reported herein for purposes of voting on those matters described in Item 6 and for the time periods specified therein. To Sara Lee's knowledge, none of its executive officers or directors has any sole or shared power to vote, or to direct the vote, or to dispose, or direct the disposition, of any Shares. Sara Lee has no power (sole or shared) to dispose or direct the disposition of any Shares. (c) Except as set forth above, neither Sara Lee nor, to its knowledge, any of its executive officers or directors has effected any transactions in the class of securities being reported on during the past 60 days. (d) A list of Stockholders of the Company, together with the number of Shares owned by such Stockholders, from whom Sara Lee obtained the right to vote or direct the vote of Shares for the purposes described in the Stockholders' Agreement (as described in Item 6) is provided in Annex II. For all purposes of this Schedule 13D, Sara Lee has relied on the representations of the Company and the Stockholders regarding numbers of Shares which are set forth in this document and the voting rights thereof which are described herein. (e) Sara Lee will cease to have the power to vote the Shares pursuant to proxies obtained from the Stockholders of the Company (as described in Item 6) upon the termination of the Asset Purchase Agreement described in Item 6. Sara Lee will cease to have the power to direct the vote of the Shares in accordance with the Stockholders' Agreement described in Item 6 upon the earlier of (i) September 15, 1998 (the date upon which any party to the Asset Purchase Agreement described in Item 6 may elect to terminate the Asset Purchase Agreement if the transactions contemplated thereby have not been consummated by that date) or (ii) the consummation of the transactions contemplated by the Asset Purchase Agreement described in Item 6. CUSIP No. 13D Page 5 of 14 Pages ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER ASSET PURCHASE AGREEMENT Pursuant to an Asset Purchase Agreement ("Asset Purchase Agreement"), dated March 3, 1998, by and among Sara Lee, The Company, and Strouse Adler, (the Company and Strouse Adler sometimes being individually and collectively called "Sellers") and subject to the terms and conditions therein, Sara Lee has agreed to acquire substantially all of the assets and assume certain specified liabilities of Strouse Adler (the "Acquisition"). A copy of the Asset Purchase Agreement is included as Exhibit 1 hereto and the description of the Asset Purchase Agreement contained herein is qualified in its entirety by reference to such Exhibit, which is incorporated herein by reference. STOCKHOLDERS' AGREEMENT As a condition of Sara Lee's execution and delivery of the Asset Purchase Agreement, certain stockholders of the Company ("Stockholders") and Sara Lee entered into a Stockholders' Agreement dated as of March 3, 1998 ("Stockholders' Agreement"). The Stockholders who entered into the Stockholders' Agreement and their ownership of Shares are set forth in Annex II of this statement. The Stockholders' Agreement provides, among other things, that each Stockholder is obligated to vote (i) in favor of the Acquisition and against any action that would result in a breach of any representation, warranty or covenant under the Asset Purchase Agreement, and (ii) against the following: (a) any merger, consolidation, share exchange, business combination or other similar transaction with Strouse Adler or, except for certain Permitted Company Transactions (as defined below), with the Company; (b) any transaction in which any person (whether by itself or as a member of any "group" (as the term is defined in the Securities Exchange Act of 1934)) would acquire beneficial ownership (as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of, or the right to acquire beneficial ownership of, 5% or more of the outstanding voting capital stock of either of the Sellers; (c) any sale, lease, transfer or other disposition, directly or indirectly, of all or a substantial portion of the consolidated assets or the capital stock of Sellers; (d) any reorganization, recapitalization, dissolution or liquidation of Sellers; (e) any change in the board of directors of the Company; (f) any change in the present capitalization of the Company or any matter which could in any way dilute, reduce or adversely affect the aggregate voting power or rights of the Shares; or (g) any other action, including, without limitation, any amendment of the charter or by-laws of the Company which is intended, or could reasonably be expected to impede, interfere with, delay, discourage or adversely affect the Acquisition or the transactions contemplated by the Purchase Agreement or Stockholders' Agreement or the consummation or contemplated economic benefits of any of the foregoing. The Stockholders also appointed David Schreibman and Henry Kleeman, or any other employee of Sara Lee designated by either of them, to act for Stockholders as their proxy for purposes of voting the Shares as set forth above. CUSIP No. 13D Page 6 of 14 Pages As defined in the Asset Purchase Agreement, "Permitted Company Transactions" means any merger, consolidation, business combination or similar transaction to which the Company is a party on or prior to September 15, 1998, and pursuant to which the Company acquires any other entity or business, so long as, following such transaction all of the following terms are met: (i) the Company is the survivor of such transaction or has accomplished such transaction through a subsidiary of the Company, (ii) such transaction does not dilute, reduce or adversely affect the aggregate voting power of the Shares of capital stock held of record or owned beneficially by the Stockholders, (iii) any shares of capital stock of the Company issued or delivered in connection with such transaction have no voting rights (individually, as a class or otherwise) prior to the day following (a) the consummation of the transactions contemplated by the Asset Purchase Agreement or (b) September 15, 1998, whichever is earlier, and (iv) such transaction will not, and could not reasonably be expected to, impede, interfere with, delay, postpone, discourage or adversely affect the Asset Purchase Agreement, any additional agreements and documents executed or delivered by any party in connection with the Asset Purchase Agreement, or the consummation or contemplated economic benefits of the transactions contemplated thereby. Sara Lee will cease to have the power to vote the Shares pursuant to proxies obtained from the Stockholders of the Company upon the termination of the Asset Purchase Agreement. Sara Lee will cease to have the power to direct the vote of the Shares in accordance with the Stockholders' Agreement upon the earlier of (i) September 15, 1998 (the date upon which any party may elect to terminate the Asset Purchase Agreement if the transactions contemplated thereby have not been consummated by that date) or (ii) the consummation of the transactions contemplated by the Asset Purchase Agreement. A copy of the Stockholders' Agreement is included as Exhibit 2 hereto and the description of the Stockholders' Agreement contained herein is qualified in its entirety by reference to such Exhibit, which is incorporated herein by reference. * * * * Except as summarized above, to Sara Lee's knowledge, there exist no contracts, arrangements, understandings or relationship (legal or otherwise) among Sara Lee and its executive officers or directors or between such persons and any person with respect to any securities of the Company, including but not limited to transfer or voting of any Shares, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. CUSIP No. 13D Page 7 of 14 Pages ITEM 7. MATERIAL TO BE FILED AS EXHIBITS 1. Asset Purchase Agreement, dated March 3, 1998, by and among Sara Lee Corporation, a Maryland corporation, The Aristotle Corporation, a Delaware corporation, and The Strouse, Adler Company, a Delaware corporation. 2. Stockholders' Agreement, dated March 3, 1998, by and between Sara Lee Corporation, a Maryland corporation, and the other parties signatory thereto. CUSIP No. 13D Page 8 of 14 Pages SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Date: March 12, 1998 SARA LEE CORPORATION By: /s/ Janet Langford Kelly ------------------------------------ Janet Langford Kelly Senior Vice President, Secretary and General Counsel CUSIP No. 13D Page 9 of 14 Pages ANNEX I Set forth below are the name, business address and present principal occupation of each of the directors and executive officers of Sara Lee. Except as otherwise noted, each person is a citizen of the United States and the business address of each person is c/o Sara Lee Corporation, Three First National Plaza, Chicago, Illinois 60602-4260 and persons residing outside the United States are citizens of the countries in which they reside. PRESENT PRINCIPAL OCCUPATION, CITIZENSHIP AND BUSINESS ADDRESS NAME (IF OTHER THAN AS INDICATED ABOVE) ---- ------------------------------------ DIRECTORS --------- Paul A. Allaire . . . . . . Chairman and Chief Executive Officer Xerox Corporation 800 Long Ridge Road Stamford, CT 06904 Frans H.J.J. Andriessen . . Special Advisor KPMG European Headquarters 54 Avenue Louise B-1050 Brussels BELGIUM John H. Bryan . . . . . . . Chairman and Chief Executive Officer Sara Lee Corporation Duane L. Burham . . . . . . Chairman and Chief Executive Officer Abbott Laboratories 100 Abbott Park Road Abbott Park, IL 60064 Charles W. Coker . . . . . Chairman of the Board and Chief Executive Officer Sonoco Products North 2nd Street Hartsville, SC 29550 James S. Crown . . . . . . General Partner Henry Crown & Company 222 North LaSalle Street Chicago, IL 60601 Willie D. Davis . . . . . . President All-Pro Broadcasting, Inc. 161 North La Brea Avenue Inglewood, CA 90301 CUSIP No. 13D Page 10 of 14 Pages PRESENT PRINCIPAL OCCUPATION, CITIZENSHIP AND BUSINESS ADDRESS NAME (IF OTHER THAN AS INDICATED ABOVE) ---- ------------------------------------ Allen F. Jacobson . . . . . Chairman and Chief Executive Officer (Retired) 3M 3050 Minnesota World Trade Center 30 Seventh Street East St. Paul, MN 55101 Vernon E. Jordan, Jr. . . . Senior Executive Partner Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, N.W., Ste. 400 Washington, DC 20036 James L. Ketelsen. . . . . Retired Chairman Tenneco Inc. 1100 Louisiana Street, Ste. 450 Houston, TX 77002 Hans B. van Liemt . . . . . Retired Chairman Board of Management DSM N.V. Het Overloon 1 6401 HJ Heerlen THE NETHERLANDS Joan D. Manley . . . . . . Group Vice President (Retired) Time Incorporated P.O. Box 1353 Dillon, CO 80435 C. Steven McMillan . . . . President and Chief Operating Officer Sara Lee Corporation Frank L. Meysman . . . . . Chairman, Board of Management Sara Lee/DE Vleutensevaart 100 3532 AD Utrecht THE NETHERLANDS Newton N. Minow . . . . . . Counsel Sidley & Austin One First National Plaza Chicago, IL 60603 CUSIP No. 13D Page 11 of 14 Pages PRESENT PRINCIPAL OCCUPATION, CITIZENSHIP AND BUSINESS ADDRESS NAME (IF OTHER THAN AS INDICATED ABOVE) ---- ------------------------------------ Sir Arvi H. Parbo, AC . . . Chairman WMC Limited Level 16, IBM Centre 60 City Road Southbank, Victoria 3006 AUSTRALIA Rozanne L. Ridgway . . . . Chair Baltic-American Enterprise Fund 1625 K Street NW Washington, DC 20006 Richard L. Thomas . . . . . Retired Chairman First Chicago NBD Corporation One First National Plaza, Ste. 3950 Chicago, IL 60670 EXECUTIVE OFFICERS ------------------ John H. Bryan . . . . . . . Chairman and Chief Executive Officer C. Steven McMillan. . . . . President and Chief Operating Officer Frank L. Meysman. . . . . . Executive Vice President Vleutensevaart 100 3532 AD Utrecht THE NETHERLANDS James R. Carlson. . . . . . Senior Vice President CUSIP No. 13D Page 12 of 14 Pages PRESENT PRINCIPAL OCCUPATION, CITIZENSHIP AND BUSINESS ADDRESS NAME (IF OTHER THAN AS INDICATED ABOVE) ---- ------------------------------------ Gary C. Grom . . . . . . . Senior Vice President-Human Resources Janet L. Kelly . . . . . . Senior Vice President, Secretary and General Counsel Mark J. McCarville . . . . Senior Vice President-Corporate Development Judith A. Sprieser . . . . Senior Vice President and Chief Financial Officer CUSIP No. 13D Page 13 of 14 Pages ANNEX II SERIES E CONVERTIBLE TOTAL PREFERRED SHARES COMMON STOCK, STOCK, $.01 PAR NAME OF STOCKHOLDER OUTSTANDING $.01 PAR VALUE VALUE (1) ------------------- ----------- -------------- --------------- Chaparral International Re (2) 568,131 79,000 489,131 John Crawford 38,827 38,827 Betsy Henley-Cohn 29,226 29,226 Sharon Oster 8,327 8,327 Raymond C. Fair 25,900 25,900 - ------------------------------ (1) The Company has advised Sara Lee that the Series E Convertible Preferred Stock, $.01 par value per share, has one vote per share, and votes together with Common Stock of the Company on all matters with respect to which Sara Lee has the power to vote or direct voting under the Stockholders' Agreement. (2) Geneve Corporation, the parent of Chaparral International Re, claims beneficial ownership of these shares. CUSIP No. 13D Page 14 of 14 Pages INDEX TO EXHIBITS Sequentially Numbered Exhibit Description Page ------- --------------- ------ 1. Asset Purchase Agreement, dated March 3, 1998, by and among Sara Lee Corporation, a Maryland corporation, The Aristotle Corporation, a Delaware corporation, and The Strouse, Adler Company, a Delaware corporation. 2. Stockholders' Agreement, dated March 3, 1998, by and between Sara Lee Corporation, a Maryland corporation, and the other parties signatory thereto. ---------- ---------- EX-1 2 EXHIBIT 1 ASSET PURCHASE AGREEMENT ---------------------- ASSET PURCHASE AGREEMENT By and Among SARA LEE CORPORATION, a Maryland corporation THE ARISTOTLE CORPORATION, a Delaware corporation AND THE STROUSE, ADLER COMPANY, a Delaware corporation Dated March 3, 1998 ---------------------- TABLE OF CONTENTS PAGE Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . i ARTICLE I PURCHASE AND SALE OF ASSETS. . . . . . . . . . . . . . . . . . . 1 1.1 Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1.1 Cash and Investments. . . . . . . . . . . . . . . . . . . . 2 1.1.2 Accounts Receivable . . . . . . . . . . . . . . . . . . . . 2 1.1.3 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.1.4 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.1.5 Records . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.1.6 Intellectual Property . . . . . . . . . . . . . . . . . . . 2 1.1.7 Personal Property Leases. . . . . . . . . . . . . . . . . . 2 1.1.8 Real Property Leases. . . . . . . . . . . . . . . . . . . . 2 1.1.9 Sale and Purchase Contracts . . . . . . . . . . . . . . . . 2 1.1.10 Licenses . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.1.11 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . 3 1.1.12 Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.1.13 Telephone Numbers. . . . . . . . . . . . . . . . . . . . . 3 1.1.14 Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . 3 1.1.15 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.2 Limitations on Assignability . . . . . . . . . . . . . . . . . . . . 3 1.3 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.3.1 Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.3.2 Receivables . . . . . . . . . . . . . . . . . . . . . . . . 4 1.3.3 Agreement Rights. . . . . . . . . . . . . . . . . . . . . . 4 1.3.4 Corporate Records . . . . . . . . . . . . . . . . . . . . . 4 1.3.5 Tax Refunds . . . . . . . . . . . . . . . . . . . . . . . . 4 1.3.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.3.7 Plan Assets . . . . . . . . . . . . . . . . . . . . . . . . 4 1.3.8 Tax Sharing Agreement; Tax Records. . . . . . . . . . . . . 4 1.3.9 Other Excluded Assets . . . . . . . . . . . . . . . . . . . 4 ARTICLE II LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.1 Assumption of Liabilities. . . . . . . . . . . . . . . . . . . . . . 5 2.1.1 Balance Sheet Liabilities . . . . . . . . . . . . . . . . . 5 2.1.2 Ordinary Course Liabilities . . . . . . . . . . . . . . . . 5 2.1.3 Executory Liabilities . . . . . . . . . . . . . . . . . . . 5 2.2 Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 5 2.2.1 Transaction Expenses. . . . . . . . . . . . . . . . . . . . 5 2.2.2 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.2.3 Breach of This Agreement. . . . . . . . . . . . . . . . . . 6 -i- TABLE OF CONTENTS (continued) PAGE 2.2.4 Liability Claims. . . . . . . . . . . . . . . . . . . . . . 6 2.2.5 Breach of Contract. . . . . . . . . . . . . . . . . . . . . 6 2.2.6 Employee Plans and Obligations. . . . . . . . . . . . . . . 6 2.2.7 Environmental Claims. . . . . . . . . . . . . . . . . . . . 7 2.2.8 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.2.9 Performance . . . . . . . . . . . . . . . . . . . . . . . . 7 2.2.10 Unassumed Executory Liabilities. . . . . . . . . . . . . . 7 2.2.11 Related Party Obligations. . . . . . . . . . . . . . . . . 7 2.2.12 General Provision. . . . . . . . . . . . . . . . . . . . . 7 2.3 No Expansion of Third Party Rights . . . . . . . . . . . . . . . . . 7 ARTICLE III PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . 8 3.1 Consideration; Payment at Closing. . . . . . . . . . . . . . . . . . 8 3.2 Closing Date Balance Sheet; Closing Statement; Bonus Adjustment. . . 8 3.2.1 Closing Reports. . . . . . . . . . . . . . . . . . . . . 8 3.2.2 Accrued Management Bonus . . . . . . . . . . . . . . . . 9 3.3 Closing Net Book Value . . . . . . . . . . . . . . . . . . . . . . . 9 3.4 Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 ARTICLE IV CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.1 The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.2 Sellers' Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . 10 4.2.1 Corporate Resolutions . . . . . . . . . . . . . . . . . . . 10 4.2.2 Closing Certificate . . . . . . . . . . . . . . . . . . . . 10 4.2.3 Instruments of Transfer . . . . . . . . . . . . . . . . . . 11 4.2.4 UCC Releases. . . . . . . . . . . . . . . . . . . . . . . . 11 4.2.5 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.2.6 Cash; Negotiable Instruments. . . . . . . . . . . . . . . . 11 4.2.7 Name Change . . . . . . . . . . . . . . . . . . . . . . . . 11 4.2.8 Payoff Letters. . . . . . . . . . . . . . . . . . . . . . . 11 4.2.9 Tax Compliance. . . . . . . . . . . . . . . . . . . . . . . 11 4.2.10 Additional Agreements. . . . . . . . . . . . . . . . . . . 11 4.3 Purchaser's Deliveries . . . . . . . . . . . . . . . . . . . . . . . 11 4.3.1 Corporate Resolutions . . . . . . . . . . . . . . . . . . . 12 4.3.2 Closing Certificate . . . . . . . . . . . . . . . . . . . . 12 4.3.3 Closing Payment . . . . . . . . . . . . . . . . . . . . . . 12 4.3.4 Assumption Agreement. . . . . . . . . . . . . . . . . . . . 12 4.3.5 Additional Agreements . . . . . . . . . . . . . . . . . . . 12 -ii- TABLE OF CONTENTS (continued) PAGE ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . . . . . 12 5.1 Corporate Organization and Authority . . . . . . . . . . . . . . . . 12 5.2 Capitalization and Subsidiaries. . . . . . . . . . . . . . . . . . . 12 5.3 Authority Relative to Agreement. . . . . . . . . . . . . . . . . . . 13 5.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . 13 5.5 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . 14 5.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 14 5.7 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . 14 5.8 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . 15 5.8.1 Material Adverse Changes. . . . . . . . . . . . . . . . . . 15 5.8.2 Certain Events. . . . . . . . . . . . . . . . . . . . . . . 15 5.9 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . 18 5.9.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . 18 5.9.2 Hazardous Substances. . . . . . . . . . . . . . . . . . . . 18 5.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 5.11 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . 20 5.12 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 20 5.13 Leased Real Property. . . . . . . . . . . . . . . . . . . . . . . . 20 5.14 Structural Defects. . . . . . . . . . . . . . . . . . . . . . . . . 21 5.15 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 5.16 Personal Property Leases. . . . . . . . . . . . . . . . . . . . . . 21 5.17 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 5.18 Reserve for Returns . . . . . . . . . . . . . . . . . . . . . . . . 22 5.19 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . 22 5.20 Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 5.21 Sale and Purchase Contracts . . . . . . . . . . . . . . . . . . . . 23 5.22 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 5.23 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 5.24 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 5.25 Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . 24 5.25.1 Identification . . . . . . . . . . . . . . . . . . . . . . 24 5.25.2 Documentation. . . . . . . . . . . . . . . . . . . . . . . 25 5.25.3 Code and ERISA . . . . . . . . . . . . . . . . . . . . . . 25 5.25.4 Contributions and Accrual. . . . . . . . . . . . . . . . . 25 5.25.5 Reportable Events. . . . . . . . . . . . . . . . . . . . . 25 5.25.6 Termination Benefits . . . . . . . . . . . . . . . . . . . 26 5.25.7 Withdrawal Liability . . . . . . . . . . . . . . . . . . . 26 5.25.8 Employee Plan Grievances . . . . . . . . . . . . . . . . . 26 -iii- TABLE OF CONTENTS (continued) PAGE 5.26 Labor and Employee Matters. . . . . . . . . . . . . . . . . . . . . 27 5.26.1 Labor Agreements . . . . . . . . . . . . . . . . . . . . . 27 5.26.2 Labor/Employment Controversies . . . . . . . . . . . . . . 27 5.26.3 Employee Matters . . . . . . . . . . . . . . . . . . . . . 27 5.27 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . 28 5.28 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 5.29 Effect of Transaction . . . . . . . . . . . . . . . . . . . . . . . 28 5.30 Transactions with Related Parties . . . . . . . . . . . . . . . . . 28 5.31 Bank Accounts, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 29 5.32 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 5.33 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 5.34 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 5.35 Information Supplied. . . . . . . . . . . . . . . . . . . . . . . . 29 5.36 Opinion of Financial Advisor. . . . . . . . . . . . . . . . . . . . 30 5.37 Company Board Recommendation. . . . . . . . . . . . . . . . . . . . 30 5.38 Required Company Vote . . . . . . . . . . . . . . . . . . . . . . . 30 5.39 Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 30 5.40 Year 2000 Compliance. . . . . . . . . . . . . . . . . . . . . . . . 30 5.41 Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER.. . . . . . . . . . 31 6.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . 31 6.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 6.3 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . 31 6.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 6.5 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 6.6 Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 6.7 Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE VII COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 32 7.1 Conduct of Business of Strouse Adler Prior to the Closing Date . . . 32 7.2 Preparation of Proxy Statement; Stockholders Meeting . . . . . . . . 33 7.2.1 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . 33 7.2.2 Comments. . . . . . . . . . . . . . . . . . . . . . . . . . 34 7.2.3 Stockholders Meeting. . . . . . . . . . . . . . . . . . . . 34 7.3 Non-Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . 34 7.4 Confidentiality; Public Announcements. . . . . . . . . . . . . . . . 37 7.5 Hart-Scott-Rodino Filings. . . . . . . . . . . . . . . . . . . . . . 37 -iv- TABLE OF CONTENTS (continued) PAGE 7.6 Bulk Sales Compliance. . . . . . . . . . . . . . . . . . . . . . . . 37 7.7 Employees; 401(k) Plan . . . . . . . . . . . . . . . . . . . . . . . 37 7.8 Access to Information. . . . . . . . . . . . . . . . . . . . . . . . 38 7.9 All Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . 38 7.10 Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . 39 7.11 Supplements to Schedules. . . . . . . . . . . . . . . . . . . . . . 39 7.12 Attorney-in-Fact. . . . . . . . . . . . . . . . . . . . . . . . . . 39 7.13 Potential Successor Taxes . . . . . . . . . . . . . . . . . . . . . 39 7.14 5500 Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ARTICLE VIII RESTRICTIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 40 8.1 Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 8.2 Non-competition. . . . . . . . . . . . . . . . . . . . . . . . . . . 40 8.3 Non Interference with Business Relations . . . . . . . . . . . . . . 41 8.4 Solicitation of Customers and Employees. . . . . . . . . . . . . . . 41 8.5 Confidential Information . . . . . . . . . . . . . . . . . . . . . . 41 8.6 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 8.7 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 8.8 Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 ARTICLE IX INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 42 9.1 Survival of Representations, Warranties and Covenants. . . . . . . . 42 9.2 Sellers' Indemnification . . . . . . . . . . . . . . . . . . . . . . 43 9.3 Purchaser's Indemnification. . . . . . . . . . . . . . . . . . . . . 44 9.4 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 9.5 Indemnification Procedure for Third Party Claims Against Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . 44 9.6 Nature of Other Liabilities. . . . . . . . . . . . . . . . . . . . . 46 9.7 Basket; Cap. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 ARTICLE X CONDITIONS TO CLOSING. . . . . . . . . . . . . . . . . . . . . . 47 10.1 Conditions to Obligations of Purchaser. . . . . . . . . . . . . . . 47 10.1.1 Representations and Warranties of Sellers. . . . . . . . . 47 10.1.2 Performance of Sellers' and Stockholders' Obligations. . . 47 10.1.3 Consents and Approvals . . . . . . . . . . . . . . . . . . 47 10.1.4 Pending Proceedings. . . . . . . . . . . . . . . . . . . . 47 10.1.5 Board Approval . . . . . . . . . . . . . . . . . . . . . . 47 10.1.6 Expiration of Waiting Period . . . . . . . . . . . . . . . 47 -v- TABLE OF CONTENTS (continued) PAGE 10.1.7 No Material Adverse Change . . . . . . . . . . . . . . . . 47 10.1.8 Other Closing Documents. . . . . . . . . . . . . . . . . . 48 10.2 Conditions to Obligations of Sellers. . . . . . . . . . . . . . . . 48 10.2.1 Representations and Warranties of Purchaser. . . . . . . . 48 10.2.2 Performance of Purchaser's Obligations . . . . . . . . . . 48 10.2.3 Consents and Approvals . . . . . . . . . . . . . . . . . . 48 10.2.4 Pending Proceedings. . . . . . . . . . . . . . . . . . . . 48 10.2.5 Expiration of Waiting Period . . . . . . . . . . . . . . . 48 10.2.6 Other Closing Documents. . . . . . . . . . . . . . . . . . 49 ARTICLE XI POST-CLOSING OBLIGATIONS. . . . . . . . . . . . . . . . . . . . 49 11.1 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 11.2 Use of Marks. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 11.3 Collection of Accounts . . . . . . . . . . . . . . . . . . . 49 11.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . 49 ARTICLE XII TERMINATION AND ABANDONMENT. . . . . . . . . . . . . . . . . . 49 12.1 Methods of Termination. . . . . . . . . . . . . . . . . . . . . . . 49 12.2 INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . . 50 12.3 Procedure Upon Termination. . . . . . . . . . . . . . . . . . . . . 50 12.4 Termination Expenses and Fees . . . . . . . . . . . . . . . . . . . 51 ARTICLE XIII MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . 52 13.1 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . 52 13.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 13.3 Title; Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . 52 13.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 13.5 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 53 13.6 Waivers, Amendments and Remedies. . . . . . . . . . . . . . . . . . 53 13.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 13.8 Section Headings. . . . . . . . . . . . . . . . . . . . . . . . . . 54 13.9 Counterparts; Terms . . . . . . . . . . . . . . . . . . . . . . . . 54 13.10 Governing Law; Consent to Jurisdiction; Venue. . . . . . . . . . . 54 13.11 Documentation. . . . . . . . . . . . . . . . . . . . . . . . . . . 55 13.12 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . 55 13.13 Waivers of Trial by Jury . . . . . . . . . . . . . . . . . . . . . 55 EXHIBIT A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 -vi- SCHEDULES AND EXHIBITS SCHEDULES DESCRIPTION - --------- ----------- 1.1 Permitted Liens 1.3.9 Other Excluded Assets 2.1.3 Executory Liabilities 3.3 Closing Net Book Value 5.1 Qualifications 5.2(a) Securities 5.2(b) Equity Owners 5.4 Violations 5.5 Variations from GAAP re: Books and Records 5.7 Liens on Accounts Receivable 5.8.1 Material Adverse Changes Since June 30, 1997 5.8.2 Certain Events Since June 30, 1997 5.9.1 Compliance With Laws 5.9.2 Hazardous Substances 5.12 Liens 5.13 Real Property Leases 5.14 Structural Defects 5.15 Condition and Ownership of Equipment 5.16 Personal Property Leases 5.18 Reserves for Returns 5.19 Intellectual Property 5.20 Licenses 5.21 Sale and Purchase Contracts 5.22 Contracts 5.23 Litigation 5.24 Consents 5.25 Employee Plans 5.26 Labor Agreements and Employee Matters 5.27 Customers and Suppliers 5.28 Insurance 5.30 Transactions with Related Parties 5.31 Bank Accounts 5.40 Year 2000 Compliance EXHIBITS DESCRIPTION - -------- ----------- A Definitions ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT (the "AGREEMENT"), dated March 3, 1998, by and among SARA LEE CORPORATION, a Maryland corporation ("SARA LEE"), The Aristotle Corporation, a Delaware corporation (the "COMPANY"), and The Strouse, Adler Company, a Delaware corporation ("STROUSE ADLER") (the Company and Strouse Adler sometimes being individually and collectively called "SELLER" or "SELLERS"). R E C I T A L S: - - - - - - - - A. The Company owns 100% of the outstanding capital stock of Strouse Adler. Strouse Adler is engaged in the manufacture, marketing, distribution and sale of certain lines of women's intimate apparel (the "BUSINESS"). Sellers desire that Strouse Adler sell to Sara Lee or its designee ("PURCHASER"), and Sara Lee desires to purchase from Strouse Adler, substantially all of Strouse Adler's assets, and assume certain specified liabilities of Strouse Adler, all on the terms and subject to the conditions hereinafter set forth. B. Concurrent with the execution hereof, certain stockholders of the Company (the "STOCKHOLDERS") are entering into a Stockholders' Agreement with Purchaser (the "STOCKHOLDERS' AGREEMENT") as a condition to Purchaser's execution, delivery and performance of this Agreement. Accordingly, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties intending to be legally bound, hereby agree as follows. Capitalized terms used herein have the definitions referred to, or set forth in, EXHIBIT A hereto. ARTICLE I PURCHASE AND SALE OF ASSETS. 1.1 PURCHASED ASSETS. At the Closing and in reliance upon the representations, warranties and agreements and subject to the conditions set forth in this Agreement, Strouse Adler shall sell, assign, transfer, convey and deliver to Purchaser, free and clear of all liens, claims, options, charges, security interests, pledges, mortgages or other encumbrances whatsoever (collectively "LIENS"), other than Liens listed on SCHEDULE 1.1 (collectively "PERMITTED LIENS"), and Purchaser shall purchase from Strouse Adler, for the purchase price set forth in Article III hereof, all of the assets and properties of every kind and nature, real and personal, tangible and intangible, wherever situated, whether or not carried or reflected on the books and records of Strouse Adler, which are owned by Strouse Adler or in which Strouse Adler has any right, title or interest as of the Closing Date, except for the Excluded Assets (all of the assets, properties, rights and interests being acquired hereby are collectively called the "PURCHASED ASSETS"). The Purchased Assets shall include, without limitation, the following items, including all proceeds therefrom, but shall not include any Excluded Assets: 1.1.1 CASH AND INVESTMENTS. All cash on hand and in banks, cash equivalents, marketable securities, bonds and investments of every kind and nature (collectively, "CASH AND CASH EQUIVALENTS"); 1.1.2 ACCOUNTS RECEIVABLE. All accounts receivable and other receivables, billed and unbilled, and all negotiable instruments, or other instruments and chattel paper, as are payable to Strouse Adler ("ACCOUNTS RECEIVABLE"); 1.1.3 EQUIPMENT. All machinery, equipment, tools, motor vehicles, rolling stock, furniture, supplies, office equipment, improvements, parts and other tangible personal property other than Inventory (collectively, the "EQUIPMENT"); 1.1.4 INVENTORY. All inventory, including, without limitation, raw materials, work-in-process, finished goods and packing supplies (collectively, the "INVENTORY"); 1.1.5 RECORDS. All books and records, customer files, customer lists and records, vendor files, vendor lists and records, cost files and records, credit information, distribution records, business records and plans, Tax returns and other Tax records (except that with respect to income Tax returns and other Tax records, only copies thereof shall be included as Purchased Assets), studies, surveys, reports, correspondence, sales and promotional literature and materials, advertising and advertising copy, and other similar materials, microfilm, microfiche, computer and other records, and all computer software, and all similar data, documents and items, wherever located (collectively, the "BOOKS AND RECORDS"); 1.1.6 INTELLECTUAL PROPERTY. All (i) Patents, (ii) Trademarks, (iii) Trade Names, (iv) Know-how, (v) proprietary rights in trade dress and packaging, and (vi) shop rights, copyrights, inventions, trade secrets, service marks and all other intellectual property rights, in each case whether registered or not and in each case wherever such rights exist throughout the world, and including the right to recover for any past infringement (collectively, the "INTELLECTUAL PROPERTY"); 1.1.7 PERSONAL PROPERTY LEASES. All rights and benefits under leases of personal property (collectively, the "PERSONAL PROPERTY LEASES"); 1.1.8 REAL PROPERTY LEASES. All rights and benefits under Real Property Leases; -2- 1.1.9 SALE AND PURCHASE CONTRACTS. All rights and benefits under sale contracts, purchase or supply contracts, dealer arrangements and distributorship arrangements, whether oral or written (collectively, the "SALE AND PURCHASE CONTRACTS"); 1.1.10 LICENSES. All rights and benefits under licenses, permits, quotas, authorizations, franchises, registrations and other approvals from any Governmental Authority or from any private party (collectively, the "LICENSES"); 1.1.11 CONTRACTS. All rights and benefits under contracts, agreements, commitments of whatever nature or description, whether oral or written (including, without limitation, confidentiality agreements executed in connection with the possible sale of the Business or Strouse Adler (regardless of form) (except that copies of confidentiality agreements, including the identity of the parties thereto, will not be delivered or otherwise disclosed to Purchaser prior to Closing if doing so would violate or breach such agreements), Personal Property Leases, Sale and Purchase Contracts, Real Property Leases and Licenses) (collectively, the "CONTRACTS"); 1.1.12 CLAIMS. All claims, causes of action, chooses in action, rights of recovery, rights of set-off and other rights of every nature and description (including, without limitation, all rights arising under warranties, representations and guarantees made to Strouse Adler) and all benefits arising therefrom (collectively, the "CLAIMS"); 1.1.13 TELEPHONE NUMBERS. All telephone numbers and white and yellow-page listings; 1.1.14 PREPAID EXPENSES. All prepaid expenses, advance payments, deposits and claims for refund (other than refunds pertaining to liabilities which are not being assumed by Purchaser), credit and the like, other than any prepaid insurance; and 1.1.15 GOODWILL. All goodwill associated with Strouse Adler and its business. 1.2 LIMITATIONS ON ASSIGNABILITY. Notwithstanding anything in this Agreement to the contrary, to the extent that any of the Purchased Assets are not assignable without the consent of a third party, neither this Agreement, nor any of the instruments or documents executed and delivered in connection herewith or contemplated hereby, shall constitute an assignment or assumption thereof, or attempted assignment or attempted assumption thereof, if such assignment or attempted assignment, or assumption or attempted assumption, would constitute a breach thereof. If, prior to the Closing, Strouse Adler has not obtained a consent or approval necessary for the assignment and assumption of any of the Purchased Assets, then it shall use its best efforts where requested by Purchaser to obtain such consents and approvals after the Closing, or, at Purchaser's request, shall cooperate in any reasonable arrangement requested by Purchaser to provide to Purchaser the benefits thereof subject to the performance by Purchaser of Strouse Adler's obligations arising or to be performed after -3- the Closing thereunder. Nothing contained in this Section 1.2 shall require Purchaser to enter into, or to accept as a substitute for performance by Strouse Adler hereunder, any arrangement that would impose any additional cost, expense or liability on Purchaser, or that would deprive Purchaser of any benefits contemplated by this Agreement; provided, however, that nothing herein shall require Purchaser to close the transactions contemplated hereby in the event the failure to deliver any of the Purchased Assets would constitute a failure to satisfy any of the conditions contained in Section 10.1. 1.3 EXCLUDED ASSETS. The Excluded Assets shall consist solely of the following: 1.3.1 CLAIMS. Any claims (including benefits arising therefrom) which are related solely to liabilities of Strouse Adler which are not Assumed Liabilities or which are related solely to Excluded Assets; 1.3.2 RECEIVABLES. All accounts, notes and other receivables due from any Affiliate of Strouse Adler or of the Company or from any stockholders, directors, employees or any other Related Party of either of them; 1.3.3 AGREEMENT RIGHTS. Sellers' rights under this Agreement and any Additional Documents; 1.3.4 CORPORATE RECORDS. The corporate charter, minute and stock record books and corporate seal of Strouse Adler; 1.3.5 TAX REFUNDS. Strouse Adler's rights to claims for refunds of Taxes; 1.3.6 INSURANCE. Subject to Section 11.1, all insurance policies (including the proceeds thereof) owned by Strouse Adler, except that, at Purchaser's election, Strouse Adler shall assign to Purchaser (subject to the assignability provisions therein) health and medical insurance policies owned by Strouse Adler covering its employees; 1.3.7 PLAN ASSETS. Any assets held in trust by or for the benefit of any current or former employees of Strouse Adler under any Employee Plan, other than assets of The Strouse, Adler Company Cash or Deferred Profit Sharing Plan ("401(K) PLAN") in the event such 401(k) Plan is assumed by Purchaser at Purchaser's election in accordance with Section 7.7.2 or in the event Purchaser establishes a similar plan and elects to have the assets of the 401(k) Plan transferred to Purchaser's new plan for such employees; 1.3.8 TAX SHARING AGREEMENT; TAX RECORDS. Any rights or benefits under any tax sharing agreements between Sellers and the original income tax returns and other original income tax records of Strouse Adler; and -4- 1.3.9 OTHER EXCLUDED ASSETS. All underground storage tanks owned or used by Strouse Adler and all such other assets as are listed in SCHEDULE 1.3.9. ARTICLE II LIABILITIES. 2.1 ASSUMPTION OF LIABILITIES. At the Closing, Purchaser shall assume and agree to discharge and perform when due only the following liabilities and obligations of Strouse Adler as the same shall exist on the Closing Date (collectively, the "ASSUMED LIABILITIES"): 2.1.1 BALANCE SHEET LIABILITIES. The following liabilities of Strouse Adler which are reflected on the Balance Sheet, and which have not been paid or otherwise discharged prior to the Closing Date, but only to the extent said liabilities are fully reflected or reserved against therein: (a) accounts payable, (b) obligations under the capital lease described in item 1 of SCHEDULE 2.1.3, and (c) accrued vacation and, subject to Section 3.2.2, accrued management bonuses for periods prior to July 1, 1998, in each case, for those employees of Strouse Adler who Purchaser hires immediately following the Closing; 2.1.2 ORDINARY COURSE LIABILITIES. Liabilities and obligations of Strouse Adler of the type set forth in the Balance Sheet and assumed pursuant to Section 2.1.1 above which are incurred between December 31, 1997 and the Closing Date in the usual and ordinary course of business of Strouse Adler and consistent with its past practice (other than management bonuses accrued for any period after June 30, 1998), provided and only to the extent that said liabilities and obligations are fully reflected or reserved against in the Closing Statement; and 2.1.3 EXECUTORY LIABILITIES. Liabilities and obligations of Strouse Adler, after the Closing Date, under the executory portion of each of the Contracts listed in SCHEDULE 2.1.3 to the extent Strouse Adler has provided to Purchaser true and complete copies thereof and is bound thereunder on the Closing Date and provided each such Contract is part of the Purchased Assets assigned to Purchaser pursuant to this Agreement; provided, however, that Purchaser shall not assume any liability or obligation under any such Contract described in Section 2.2.5; and further, provided that for purposes of this Agreement, the executory portion of any Contract which is an Assumed Liability shall not include any obligation, regardless of the fact that payment may be due after the Closing, for taxes, expenses, or any other matter which relates to any period prior to the Closing Date. 2.2 EXCLUDED LIABILITIES. Notwithstanding Section 2.1 (and without implication that Purchaser is assuming any liability not expressly excluded in this Section 2.2 and, where applicable, without implication that any of the following would constitute Assumed Liabilities but for the provisions of this Section 2.2), the following liabilities of Strouse Adler are excluded and shall not be assumed or discharged by Purchaser: -5- 2.2.1 TRANSACTION EXPENSES. Any liabilities for legal, accounting and investment banking fees and other expenses incurred in connection with the preparation of and performance under this Agreement and the sale of the Purchased Assets to Purchaser, as described in Section 13.2 ("TRANSACTION EXPENSES"); 2.2.2 TAXES. Any liabilities for Taxes, including, without limitation, liabilities arising as a result of the transfer of the Purchased Assets or otherwise by virtue of the consummation of the transactions contemplated hereby; 2.2.3 BREACH OF THIS AGREEMENT. Any liabilities of Strouse Adler to the extent that their existence or magnitude constitutes or results in a breach of a representation, warranty or covenant made by either Seller herein or in any agreement, instrument or document executed and/or delivered by either Seller in connection herewith or contemplated hereby, including, without limitation, the Stockholders' Agreement, or makes information contained in any representations, warranties, Exhibit or Schedule hereto or thereto substantively incorrect or incomplete (all such additional agreements, instruments and documents executed or delivered by any party in connection with this Agreement being called the "ADDITIONAL DOCUMENTS"); 2.2.4 LIABILITY CLAIMS. Any liabilities relating to the operation of the Business prior to the Closing, whether for injury to or death of persons or damage to or destruction of property (including, without limitation, any worker's compensation claim), for violation of any Rules, for any matter relating to any past or present Employee Plan, including any annuity contract or guarantee relating thereto or for any other matter regardless of when said claim or liability is asserted, including, without limitation, any claim for consequential damages in connection with the foregoing; it being understood and agreed that any claim or liability asserted after the Closing Date which arises out of or by virtue of the conduct of the Business prior to the Closing (and does not result principally from Purchaser's conduct following the Closing) shall be considered to be a claim against or a liability of Strouse Adler (whether for injury to or death of persons or damage to or destruction of property or otherwise) and, therefore, not assumed hereunder by Purchaser; 2.2.5 BREACH OF CONTRACT. Any liabilities (whether asserted before or after Closing) for any breach of a representation, warranty or covenant, or for any claim for indemnification, contained in any Contract which is an Assumed Liability which Purchaser has agreed to perform to the extent that such breach or claim arose out of or by virtue of performance (or omission) thereunder by Strouse Adler or any agent of Strouse Adler prior to the Closing, it being understood that, as between Strouse Adler and Purchaser, this Section 2.2.5 shall apply notwithstanding any provisions which may be contained in any form of consent to the assignment of any such Purchased Asset which, by its terms, imposes such liabilities upon Purchaser and which assignment is accepted by Purchaser notwithstanding the presence of such a provision, and that Strouse Adler's failure to discharge any such liability shall entitle Purchaser to indemnification in accordance with the provisions of Article IX; -6- 2.2.6 EMPLOYEE PLANS AND OBLIGATIONS. Except for accrued vacation and bonus described in Section 2.1.1, and, in the event Purchaser elects to assume the 401(k) Plan pursuant to Section 7.7.2, except for contributions arising and relating to periods after the Closing Date under the 401(k) Plan, any liabilities arising out of or in connection with any employment agreement, executive compensation agreement, or any bonus, pension, benefit, welfare, retirement, disability, insurance, collective bargaining, deferred compensation or other Employee Plan or Labor Agreement, relating to Strouse Adler's employees, whether oral or written, or any liabilities arising out of or in connection with the termination of employment of any employee by Strouse Adler, or any liabilities for medical disability or similar benefits (both long term and short term), whether insured or self-insured, which arise by virtue of or in connection with an employment relationship at any time with Strouse Adler, regardless of when a claim for such benefits is asserted, or any other obligation relating to Strouse Adler's employees; 2.2.7 ENVIRONMENTAL CLAIMS. Any claim, action, suit or proceeding arising from or related to the presence, generation, emission, storage, treatment, transport or disposal of any Hazardous Substance from, to, at, in, on or under any facility owned or used by Strouse Adler on or before the Closing Date and liabilities arising from violations of Environmental Laws; 2.2.8 INSURANCE. Any liabilities for retrospective or similar insurance premium adjustments; 2.2.9 PERFORMANCE. Any liabilities or obligations of Strouse Adler arising out of or relating to its performance under this Agreement (regardless of whether such performance is required prior to or after the Closing Date), including, without limitation, any liability or obligation arising under Sellers' indemnification obligations under Article IX; 2.2.10 UNASSUMED EXECUTORY LIABILITIES. Any liabilities under or associated with Contracts or other properties which are not listed in SCHEDULE 2.1.3 or, if listed, which were not properly assigned to Purchaser as contemplated by Section 1.2 above unless Purchaser notifies Strouse Adler of its election to retain the rights and benefits under such Contracts notwithstanding any such improper assignment; 2.2.11 RELATED PARTY OBLIGATIONS. Any obligations of either Seller under any promissory note payable to a Related Party or any guaranty or surety obligation or agreement for the benefit of a Related Party; and 2.2.12 GENERAL PROVISION. Without limitation by the specific enumeration of the foregoing, any debt, liability or other obligation of Strouse Adler or the Company, whether now or hereafter existing, known or unknown, accrued or contingent, not expressly assumed by Purchaser pursuant to the provisions of Section 2.1, including, without -7- limitation, all liabilities of the type set forth on the Balance Sheet except as expressly set forth in Section 2.1.1. 2.3 NO EXPANSION OF THIRD PARTY RIGHTS. The assumption by Purchaser of the Assumed Liabilities shall in no way expand the rights or remedies of any third party against Purchaser or Strouse Adler as compared to the rights and remedies, which such third party would have had against Strouse Adler had Purchaser not assumed such liabilities. Without limiting the foregoing, the assumption by Purchaser of the Assumed Liabilities shall not create any third party beneficiary rights. Strouse Adler shall pay and discharge when due (unless payment is subject to a bona fide dispute) or, as contemplated by Section 9.2, reimburse Purchaser for, all liabilities of Strouse Adler which Purchaser has not specifically agreed to assume under this Article II. ARTICLE III PURCHASE PRICE. 3.1 CONSIDERATION; PAYMENT AT CLOSING. The aggregate consideration to be paid by Purchaser for the Purchased Assets shall be the Purchase Price plus the assumption of the Assumed Liabilities. The purchase price (the "PURCHASE PRICE") shall be $16,500,000.00 minus the sum of the Accrued Bonus Amount and any Potential Successor Taxes (the "CLOSING PAYMENT"), reduced by the amount, if any, by which the Closing Net Book Value is less than $15,250,000.00 and increased by the amount, if any, by which the Closing Net Book Value exceeds $15,250,000.00. The Closing Payment shall be payable in full at the Closing by means of a wire transfer of immediately available funds. 3.2 CLOSING DATE BALANCE SHEET; CLOSING STATEMENT; BONUS ADJUSTMENT. 3.2.1 CLOSING REPORTS. No later than 90 days after the Closing, Sara Lee, at its cost and expense, shall prepare and close the financial books and records of the Business as of the close of business, Connecticut time, on the Closing Date, and, based on the Books and Records, shall prepare and deliver, or cause to be prepared and delivered, to the Company, a balance sheet, dated as of the effective date of the Closing (the "CLOSING DATE BALANCE SHEET"). Subject to SCHEDULE 3.3, the Closing Date Balance Sheet shall be prepared in accordance with generally accepted accounting principles, consistently applied in accordance with past practices of Strouse Adler ("GAAP"), shall present fairly the financial condition of the Business as of the effective date of the Closing. In order that Purchaser may cause the preparation of the Closing Date Balance Sheet and Closing Statement, Purchaser and Sellers shall cause a physical count of Strouse Adler's Inventory on hand as of the Closing Date and Strouse Adler shall cooperate and provide Purchaser, its representatives and agents with access to the Inventory for this purpose. Representatives of Strouse Adler and its agents, including auditors, may be present during the Inventory count. As used herein, the term "CLOSING STATEMENT" shall mean the Closing Date Balance Sheet of the Business, adjusted to delete any items which are not included in the calculation of Closing Net Book Value. -8- Purchaser shall deliver to the Company the Closing Date Balance Sheet and the Closing Statement, and if the Company objects to either, then within 30 calendar days of its receipt of the Closing Date Balance Sheet and Closing Statement, the Company shall give written notice (the "NOTICE") of its objections to Purchaser. During such 30-day period, Purchaser and Purchaser's accountants shall give the Company and its accountants access, upon reasonable notice and during normal business hours, to all books, records and work papers of Purchaser and its accountants related to the preparation or review audit of the Closing Date Balance Sheet and Closing Statement. If Purchaser has not received the Notice within such 30-day period, Sellers shall be deemed to have no objection to the Closing Statement and the Closing Statement shall become final and binding on the parties hereto for all purposes of this Agreement. The parties shall negotiate in good faith to resolve any disputes as promptly as practicable. If the parties are unable to resolve all disputes within twenty calendar days of receipt by Purchaser of the Notice, then only the unresolved disputes shall be submitted to the New York office of Coopers & Lybrand or if that firm declines such engagement, another independent certified public accounting firm mutually agreed to by the parties (the "INDEPENDENT ACCOUNTANT"). The parties shall be entitled to provide the Independent Accountant with supporting documentation in connection with resolution of such disputes. The Independent Accountant shall, within 30 calendar days of its engagement, provide a final and conclusive resolution of all unresolved disputes and shall conform the Closing Statement accordingly. All references in this Agreement to the Closing Statement shall mean the Closing Statement as modified pursuant to this resolution procedure, as the case may be, and the resolution of the Independent Accountant shall be binding on the parties hereto. The fees and expenses of the Independent Accountant shall be borne equally by Purchaser and the Company. If the Closing Payment exceeds the Purchase Price based on the Closing Statement as finally determined pursuant to this Section 3.2, then Sellers shall be jointly and severally liable to promptly pay the amount of such excess to Purchaser; if the Purchase Price as so determined exceeds the Closing Payment, Purchaser shall promptly pay the amount of such excess to Strouse Adler. All sums payable under this Section 3.2.1 and 3.2.2 below shall be paid by wire transfer of immediately available funds on the first business day following such final determination. 3.2.2 ACCRUED MANAGEMENT BONUS. As promptly as practicable following June 30, 1998 or the Closing Date, whichever is later, Purchaser shall calculate the bonuses owed in accordance with the terms of The Strouse, Adler Bonus Program ("BONUS PLAN") to management employees of Strouse Adler who were hired by Purchaser immediately following the Closing and who are employed by Purchaser on June 30, 1998 ("BONUS RECIPIENTS"). If Strouse Adler's Pro Rata Share of the Actual Bonus Amount exceeds the Accrued Bonus Amount, then Sellers shall be jointly and severally liable to and shall promptly pay such excess to Purchaser; and if the Accrued Bonus Amount exceeds Strouse Adler's Pro Rata Share of the Actual Bonus Amount, Purchaser shall promptly pay such excess amount to Strouse Adler. As used herein, the term "STROUSE ADLER'S PRO RATA SHARE OF THE ACTUAL BONUS AMOUNT" means the amount of bonus payments due Bonus Recipients for the twelve-month period ending June 30, 1998 (calculated in accordance with the Bonus Plan) multiplied by a fraction, the numerator of which is the number of days from July 1, -9- 1997 through the Closing Date and the denominator of which is 365. Bonuses owed pursuant to the Bonus Plan shall be paid by Purchaser in the ordinary course of business consistent with Strouse Adler's past practice. 3.3 CLOSING NET BOOK VALUE. As used herein, the term "CLOSING NET BOOK VALUE" shall mean an amount, calculated, as of the close of business, Connecticut time, on the Closing Date, in the manner set forth in SCHEDULE 3.3, by which the assets of Strouse Adler exceed the liabilities of Strouse Adler, as reflected on the Closing Statement; provided, however, that to the extent the Closing Date Balance Sheet reflects accrued vacation for employees of Strouse Adler who are not hired by Purchaser ("INAPPLICABLE ACCRUED VACATION"), the Closing Net Book Value shall be increased by the amount of the Inapplicable Accrued Vacation. 3.4 ALLOCATION. Within 30 days of the final determination of the Closing Net Book Value, Purchaser shall provide Sellers with an allocation of the Purchase Price among the Purchased Assets which allocation shall be mutually agreeable to the parties hereto. The parties shall file a Form 8594 with the Internal Revenue Service ("IRS") reflecting such allocation in accordance with Section 1060 of the Internal Revenue Code, as amended (the "CODE"). ARTICLE IV CLOSING. 4.1 THE CLOSING. Subject to Article XII, the closing of the transactions contemplated hereby (the "CLOSING") shall take place at 10:00 A.M., Chicago time, on May 30, 1998 (or if the conditions to the Closing shall not have been satisfied or waived by such date then as soon as practicable thereafter, but in no event later than September 15, 1998 (the "CLOSING DATE")), at the offices of Sonnenschein Nath & Rosenthal, 8000 Sears Tower, Chicago, Illinois, or at such other time or place as the parties hereto shall agree in writing. The Closing shall be deemed effective at the start of business on the date of the Closing. 4.2 SELLERS' DELIVERIES. Subject to the conditions set forth in this Agreement, at the Closing, simultaneous with Purchaser's deliveries hereunder, Sellers shall deliver to Purchaser all of the following documents and instruments, all in form and substance reasonably satisfactory to Purchaser and its counsel: 4.2.1 CORPORATE RESOLUTIONS. A copy of directors' and stockholders' resolutions for each Seller, all certified as of the Closing Date by such Seller's corporate secretary or assistant secretary as having been duly and validly adopted and as being in full force and effect on the Closing Date, authorizing the execution and delivery by such Seller of this Agreement, the Additional Documents and the performance by such Seller of the transactions contemplated hereby and thereby; -10- 4.2.2 CLOSING CERTIFICATE. A certificate executed on behalf of each Seller by its chief executive officer, to the effect that (i) the representations and warranties of Sellers contained herein were true on the date hereof, and are true on the Closing Date with the same effect as though made on and as of the Closing Date; and (ii) Sellers have performed and complied with all of the agreements and covenants to be performed or complied with by each of them under this Agreement prior to and as of the Closing Date; 4.2.3 INSTRUMENTS OF TRANSFER. Duly-executed Warranty Bills of Sale, Warranty Deeds, Assignments of Trademarks and Patents and all such other instruments of sale, assignment and transfer as are necessary or appropriate to sell, assign and transfer to Purchaser and to vest in Purchaser good and marketable title to the Purchased Assets (in recordable form, where appropriate), including, without limitation, certificates of title or origin (or like documents) with respect to all vehicles and other Equipment included in the Purchased Assets for which a certificate of title or origin is required in order for title thereto to be transferred to Purchaser; 4.2.4 UCC RELEASES. UCC termination statements releasing each of the Liens upon the Purchased Assets other than Permitted Liens; 4.2.5 PERMITS. All special permits or licenses issued by the municipality in which each parcel of Leased Real Property is located which are required in connection with the operation of the Business (including any and all environmental protection permits); 4.2.6 CASH; NEGOTIABLE INSTRUMENTS. All Cash and Cash Equivalents and notes, checks, drafts, chattel paper, and other instruments included in the Purchased Assets of which Strouse Adler is the payee, holder or assignee, all duly endorsed by Strouse Adler, to the order of Purchaser; 4.2.7 NAME CHANGE. Evidence that Strouse Adler shall have changed its corporate name to a name bearing no resemblance to its present corporate name effective as of the Closing Date; and 4.2.8 PAYOFF LETTERS. Letter from Bank Boston, if applicable, setting forth, as of the Closing Date, the amount of principal and interest necessary to pay in full all indebtedness of each Seller to such person or entity. 4.2.9 TAX COMPLIANCE. Evidence of compliance with Section 7.13 and all certificates, clearances, correspondence and the like relating to Sellers' notices and request pursuant to such Section. 4.2.10 ADDITIONAL AGREEMENTS. All such other documents and instruments as Purchaser or its counsel shall reasonably request in connection with the consummation of the transactions contemplated by this Agreement. -11- 4.3 PURCHASER'S DELIVERIES. Subject to the conditions set forth in this Agreement, at the Closing, simultaneous with the deliveries of Sellers hereunder, Purchaser shall deliver all of the following documents and instruments, all in form and substance reasonably satisfactory to Sellers and their counsel: 4.3.1 CORPORATE RESOLUTIONS. A copy of directors' resolutions for Purchaser, certified as of the Closing Date by Purchaser's corporate secretary or assistant secretary as having been duly and validly adopted and as being in full force and effect on the Closing Date, authorizing the execution and delivery by Purchaser of this Agreement, the Additional Documents and the performance by Purchaser of the transactions contemplated hereby and thereby; 4.3.2 CLOSING CERTIFICATE. A certificate executed on behalf of Purchaser by an officer, dated the Closing Date, to the effect that (i) the representations and warranties of Purchaser contained herein were true when made on the date hereof, and are true on the Closing Date with the same effect as though made on and as of the Closing Date; and (ii) Purchaser has performed and complied with all of the agreements and covenants to be performed or complied with by it under this Agreement prior to and as of the Closing Date; 4.3.3 CLOSING PAYMENT. The Closing Payment as provided in Article III; and 4.3.4 ASSUMPTION AGREEMENT. A duly-executed assumption agreement pursuant to which Purchaser assumes the Assumed Liabilities in accordance with Section 2.1. 4.3.5 ADDITIONAL AGREEMENTS. All such other documents and instruments as Sellers or their counsel shall reasonably request in connection with the consummation of the transactions contemplated by this Agreement. ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers hereby jointly and severally represent, warrant and covenant to Purchaser as follows: 5.1 CORPORATE ORGANIZATION AND AUTHORITY. Each Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite power and authority (corporate and other) to own, lease and operate its properties and assets and to conduct its business as now being conducted. Each Seller has qualified as a foreign corporation and is in good standing under the laws of all jurisdictions where the nature of the Business or the nature and location of its assets requires such qualification, all as set forth in SCHEDULE 5.1, except in those jurisdictions where the failure to qualify would not have a Material Adverse Effect. -12- 5.2 CAPITALIZATION AND SUBSIDIARIES. (a) All of the issued and outstanding capital stock of Strouse Adler is owned beneficially and of record by the Company. The Company owns no subsidiary other than Strouse Adler and Strouse Adler owns no subsidiaries. SCHEDULE 5.2(a) sets forth all of the securities (marketable or otherwise) and other instruments, if any (as those terms are defined in the Uniform Commercial Code as enacted in the State of Connecticut), owned by Strouse Adler. (b) The Stockholders own, of record and beneficially, the shares of capital stock of the Company set forth in SCHEDULE 5.2(b), which shares represent 36.7% of the Company's outstanding voting securities as of the date hereof and the percentage of the Company's voting securities on a Fully-Diluted Basis as of the date hereof, as of June 30, 1998 and as of September 15, 1998, all as set forth in SCHEDULE 5.2(b). Further, the Stockholders own, of record and beneficially, the rights to acquire capital stock of the Company, whether pursuant to the exercise of warrants, conversion of securities, exercise of stock options or otherwise (collectively, "COMMON STOCK EQUIVALENTS") as set forth in SCHEDULE 5.2(b), which Schedule identifies the terms of such Common Stock Equivalents, including, without limitation, (i) the time and price at which the Common Stock Equivalents may be exercised, converted or exchanged to acquire capital stock of the Company and (ii) the voting rights and powers of all capital stock issuable upon such exercise, conversion or exchange. Assuming that no Stockholder acquires capital stock of the Company after the date hereof pursuant to the exercise, conversion or exchange of Common Stock Equivalents or otherwise, the Stockholders own, of record and beneficially, on a Fully-Diluted Basis, 34.88% of the Company's outstanding voting securities as of the date hereof and would own as of June 30, 1998 and as of September 15, 1998 the percentage of the Company's outstanding voting securities set forth in SCHEDULE 5.2(b). Schedule 5.2(b) further sets forth all outstanding capital stock and Common Stock Equivalents of the Company (and the terms of such Common Stock Equivalents) as of the date hereof. No voting securities of the Company are entitled to vote by class or have any voting right or preference different, on a per share basis, than shares of the Company's common stock, par value $0.1 per share, with respect to the matters described in the last sentence of this Section 5.2(b). There are no voting trusts or other agreements (other than the Stockholders' Agreement) or understandings to which either Seller is a party or of which either Seller has knowledge with respect to the capital stock of either Seller. No Seller is required to redeem, repurchase or otherwise acquire shares of capital stock of either Seller at any time prior to September 16, 1998. For purposes of this SECTION 5.2(b), all references to voting securities means shares of capital stock of the Company having the voting power and rights with respect to Significant Transactions, including, without limitation, matters described in Section 271 of the Delaware General Corporation Law, as amended (the "DGCL"). 5.3 AUTHORITY RELATIVE TO AGREEMENT. Each Seller has the corporate power and authority to enter into this Agreement and the Additional Documents, and to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and the -13- Additional Documents and the performance by each Seller of its respective obligations hereunder and thereunder have been duly authorized by its Board of Directors and, in the case of Strouse Adler, its sole stockholder, and no other corporate proceedings on the part of either Seller are necessary to authorize such execution, delivery and performance other than the approval of the stockholders of the Company. This Agreement and the Additional Documents have been duly executed by each Seller and to Sellers' knowledge, the Stockholders' Agreement has been duly executed by each Stockholder, and, assuming the due authorization, execution and delivery by Sara Lee, are the valid and legally binding obligations of each of them (limited, in the case of the Stockholders, to the Stockholders' Agreement), and are enforceable against each of them in accordance with their terms. 5.4 ABSENCE OF CONFLICTS. Except as disclosed in SCHEDULE 5.4, the execution, delivery and performance by each Seller of this Agreement and the Additional Documents, and, to Sellers' knowledge, the execution, delivery and performance by the Stockholders of the Stockholders' Agreement, and the transactions contemplated hereby and thereby, do not and will not conflict with or result in any violation of or constitute a breach or default under any term of the charter documents or by-laws of either Seller, of any agreement, permit or other instrument to which either Seller or, to Seller's knowledge, any Stockholder is a party, or by which either Seller or, to Seller's knowledge, any Stockholder is bound or to which any of the Purchased Assets or the Business is subject, or any order, judgment or decree of any court or other Governmental Authority to which either Seller, the Purchased Assets or the Business is bound or subject, or any law, statute or regulation of any Governmental Authority, and will not result in the creation of any Lien upon any of the Purchased Assets. 5.5 BOOKS AND RECORDS. Except as set forth in SCHEDULE 5.5, the Books and Records are true and complete, and have been maintained in each Seller's usual, regular and ordinary manner, in accordance with GAAP, and all transactions of Strouse Adler are properly reflected therein. All Books and Records are (and at the Closing will be) located at 78 Olive Street, New Haven, Connecticut. 5.6 FINANCIAL STATEMENTS. Sellers have delivered to Purchaser true and complete (i) copies of the audited consolidated balance sheets of the Company and its subsidiaries as of the last day of each of the three fiscal years of the Company for the periods ended June 30, 1997, 1996 and 1995, respectively, together with the related audited consolidated statements of income, stockholders' equity and changes in cash flows for such fiscal years, and the notes thereto, accompanied by the reports thereon of the Company's independent public accountants ("AUDITED STATEMENTS"), and (ii) copies of the unaudited balance sheet of Strouse Adler as of December 31, 1997 (the "BALANCE SHEET"), together with the related unaudited consolidated statements of income, stockholders' equity and changes in cash flows for the six-month period ended on such date, certified by the President of Strouse Adler ("UNAUDITED STATEMENTS"). The Audited Statements, including the notes thereto, (a) were prepared in accordance with GAAP, (b) present fairly the financial position, results of operations and changes in cash flows of the Company and its subsidiaries as of such dates and for the periods then ended, (c) are accurate, correct and complete and in accordance with -14- the books and records of the Company and its subsidiaries, and (d) can be reconciled with the financial statements and the financial records maintained and the accounting methods applied by the Company and its subsidiaries for federal income tax purposes. The Unaudited Statements, (w) were prepared in accordance with GAAP (except for immaterial year-end adjustments and the absence of notes thereto), (x) present fairly the financial position, results of operations and changes in cash flows of Strouse Adler as of such date and for the period then ended, (y) are accurate, correct and complete and in accordance with the books and records of Strouse Adler, and (z) can be reconciled with the books and records, financial statements and the financial records maintained and the accounting methods applied by the Company and its subsidiaries for federal income tax purposes. 5.7 ACCOUNTS RECEIVABLE. All outstanding Accounts Receivable reflected on the Balance Sheet (and which will be reflected on the Closing Date Balance Sheet) (i) have arisen (and will arise) in bona fide transactions, (ii) are (and will be) valid claims against account debtors for goods or services delivered or rendered, subject to no defenses, offsets or counterclaims, except as reserved against on the applicable Balance Sheet in accordance with GAAP (the "RESERVES"), and (iii) are collectible in the ordinary course of Strouse Adler's business. All receivables arose (and will have arisen prior to the Closing Date) in the ordinary course of business and none of the obligors of such receivables have refused or given notice that it refuses to pay the full amount thereof. No receivables are subject to prior assignment, claim or other Lien, other than as described in SCHEDULE 5.7. Strouse Adler has no liability for any refunds, allowances, returns or discounts in respect of products manufactured, processed, distributed, shipped or sold by it or for its account except to the extent of the reserves and liabilities therefor reflected on the applicable Balance Sheet in accordance with GAAP and except as otherwise incurred in the ordinary course of business. Where receivables arose out of secured transactions, all financing statements and other instruments required to be filed or recorded to perfect the title or security interest of Strouse Adler have been properly filed and recorded. After the Closing Date, Purchaser will not have any obligation (whether in bankruptcy or insolvency proceedings or otherwise) to repay any receivables collected by Strouse Adler prior to the Closing Date or any receivables reflected on the Closing Date Balance Sheet which Purchaser collects after the Closing Date. 5.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. 5.8.1 MATERIAL ADVERSE CHANGES. Except as set forth in SCHEDULE 5.8.1, since June 30, 1997, there has not been, nor does either Seller have reason to know of, any development (including, without limitation, consummation of the transactions contemplated hereby) or threatened development (other than general economic conditions) of a nature which may cause any material adverse change in the financial condition, net worth, assets, liabilities, personnel, prospects or operations (including, without limitation, Strouse Adler's relationship with suppliers, employees, customers and others) of the Business or the ability of either Seller to perform this Agreement and the Additional -15- Documents or, to Sellers' knowledge, the ability of any Stockholder to perform the Additional Documents (collectively, "MATERIAL ADVERSE EFFECT"). 5.8.2 CERTAIN EVENTS. Except as set forth in SCHEDULE 5.8.2, since June 30, 1997, Strouse Adler has conducted (and from the date hereof through the Closing, will conduct) the Business only in the ordinary course using its best efforts to maintain and enhance the Business and, without limiting the foregoing, neither Seller has (and from the date hereof through the Closing, neither Seller will have): (a) created or suffered to exist any Liens or restrictions with respect to any of the Purchased Assets; (b) sold, leased to others, licensed to others, disposed of, or otherwise transferred any of Strouse Adler's assets or properties which, but for such sale, lease, license, disposal or transfer, would constitute a Purchased Asset, except for sales of Inventory in the usual and ordinary course of the Business; (c) suffered any material loss, or material interruption in use, of any material asset or property of the Business (whether or not covered by insurance) on account of fire, flood, riot, strike or other hazard or Act of God; (d) purchased, called, redeemed or otherwise acquired, or declared or paid any dividends or other distributions on or with respect to, any shares of capital stock or other securities of either Seller, except that the foregoing shall not apply to (i) payments made by Strouse Adler to the Company pursuant to that certain tax sharing agreement between them, (ii) payments of interest or principal made by Strouse Adler to the Company (which principal and interest payments will not exceed $500,000.00 from March 3, 1998 to Closing, or (iii) payments by the Company of dividends on preferred stock of the Company in accordance with the terms of such preferred stock; (e) increased, other than in the ordinary course of business consistent with past practices of Strouse Adler, the compensation, commission, bonus, or other direct or indirect remuneration (or the rate thereof) payable or to become payable to any officers, employees, directors or agents of the Business or adopted any Employee Plan or Labor Agreement or amended any Employee Plan or Labor Agreement to increase remuneration or other benefits payable thereunder; (f) made any material change in the conduct or nature of any aspect of the Business whether made in the ordinary course of business or not and whether or not the change had a Material Adverse Effect; (g) waived any material rights relating to the Business or arising under or in connection with any of the Purchased Assets; -16- (h) acquired any assets or properties other than in the ordinary course of the Business; (i) entered into any merger, consolidation, recapitalization, or other business combination or reorganization, except, in the case of the Company, the merger of ASI Sub, Inc. into the Company or a Permitted Company Transaction; (j) made any loans, advances or capital contributions to or investments in any person or entity, except that the foregoing shall not prohibit the Company from doing any of the foregoing so long as the Company is in full compliance with the other provisions of this Section 5.8.2 and of this Agreement before and after such action; (k) induced any key employee of Strouse Adler to leave his or her employment, or acted to otherwise adversely affect the relations of Strouse Adler with any key employee; (l) accelerated collection of receivables, prepaid or accelerated payment of Indebtedness for Borrowed Funds, delayed payment of payables in a manner inconsistent with past practices, changed credit practices or done anything to materially and adversely affect the relationship of Strouse Adler to any of its customers or suppliers; (m) failed to replenish its inventories and supplies in a normal and customary manner consistent with its prior practice and any prudent business practices prevailing in the industry, or made any purchase commitment in excess of the normal ordinary and usual requirements of the Business or at any price in excess of the then- current market price or upon terms and conditions more onerous than those usual and customary in the industry or made any change in its selling, pricing, advertising or personnel practices inconsistent with its prior practice and prudent business practices prevailing in the industry; (n) made any change in any method of accounting or accounting practice, except as may be required by law and after written notice to Purchaser; (o) discharged or satisfied any Lien other than those then required to be discharged or satisfied, or paid any obligation or liability, absolute, accrued, contingent or otherwise, whether due or to become due, other than current liabilities for trade or business obligations shown on the Balance Sheet and current liabilities for trade or business obligations incurred since the date of the Balance Sheet in the ordinary course of the Business and consistent with prior practices; (p) entered into any transaction, agreement, contract or understanding with any Related Party affecting the Business other than in the ordinary course of business -17- or altered the terms of any transaction, agreement, contract or understanding with any Related Party; (q) taken any action or omitted to take any action which action or omission could dilute, reduce or adversely affect the aggregate voting power or rights, on a Fully-Diluted Basis, of the shares of capital stock held of record or owned beneficially by the Stockholders as of the date hereof; (r) without limiting the foregoing, entered into any material transaction (except as contemplated by this Agreement) affecting any of the Purchased Assets or the Business, operations, prospects or financial condition of either Seller, other than in the usual and ordinary course of business; or (s) except for this Agreement, entered into any oral or written agreement, contract, commitment, arrangement or understanding with respect to any of the matters described in clauses (a) through (r) above. 5.9 COMPLIANCE WITH LAWS. 5.9.1 GENERAL. Except as set forth in SCHEDULE 5.9.1, Strouse Adler is not and has not been in violation of, and the Business has been and is being conducted in accordance with, all federal, state, municipal, foreign and other laws, regulations, orders and other legal requirements applicable thereto (including, without limitation, laws and regulations relating to occupational health and safety, equal employment opportunities, fair employment practices and the environment) (collectively, "RULES"), the failure to comply with which could have a Material Adverse Effect, and neither Seller has knowledge or reason to know of, nor has either Seller received notice of, any violation or alleged violation by either Seller of any Rule or that either Seller is in default with respect to any order, judgment, award, injunction or decree of any court or Governmental Authority or arbitrator, applicable, in any such case, to either Seller, the Business or any of the Purchased Assets. 5.9.2 HAZARDOUS SUBSTANCES. Without limiting Section 5.9.1, and notwithstanding any matters disclosed in SCHEDULE 5.9.2: (a) Strouse Adler has been at all times and is in compliance with the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorizing Act of 1986, the Federal Water Pollution Control Act, the Clean Air Act, as amended, and all other applicable federal, state and local laws relating to pollution or protection of public health, welfare and the environment, including, without limitation, laws relating to emissions, discharges, releases or threatened releases of toxic or hazardous substances or hazardous wastes or other pollutants, contaminants, petroleum products or chemicals (collectively, "HAZARDOUS SUBSTANCES") into the environment (including, without limitation, ambient air, surface -18- water, ground water, land surface or sub-surface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances (collectively the "ENVIRONMENTAL LAWS"). (b) Strouse Adler has obtained and is in compliance with all permits, licenses and other authorizations which it is required to obtain and maintain with respect to the operation of the Business under the Environmental Laws, all of which are listed in SCHEDULE 5.9.2, including, without limitation, those which are required of Strouse Adler (i) to operate or install any equipment or facilities operated or installed by Strouse Adler, and (ii) to generate, store, handle, transport, discharge, emit or dispose of Hazardous Substances used or generated by the Business and its assets (the "ENVIRONMENTAL PERMITS"), and a true and complete list of such Environmental Permits is set forth in SCHEDULE 5.9.2 hereto. (c) There are no polychlorinated biphenyls or asbestos generated, treated, stored, disposed of, or otherwise deposited in or located on any of the Leased Real Property and there are no above ground or underground storage tanks located on any of the Leased Real Property, except as shown on SCHEDULE 5.9.2 hereto. (d) There has been no "release" pursuant to the Environmental Laws, including but not limited to 42 U.S.C. Section 9603(a) or 40 C.F.R. Section 264, Subpart F or, from or under any of the Leased Real Property or any other property from which the Business has been or is being conducted. (e) Neither Seller has received any notice or other information that it has any potential liability with respect to the cleanup of any site at which Hazardous Substances have been generated, treated, stored, discharged, emitted or disposed of, and there are no past or present events, conditions or circumstances which may interfere with or prevent compliance or continued compliance by Strouse Adler, or by Purchaser conducting, after the Closing, the Business in a manner similar to that of Strouse Adler in accordance with applicable current Environmental Laws or with any order, decree, judgment, injunction, notice or demand issued, entered, promulgated or approved thereunder, or which may give rise to any common law or other legal liability, including, without limitation, liability under any current Environmental Laws or which otherwise form the basis under the current law of any meritorious claim, action, demand, suit, proceeding, hearing, notice of violation or investigation, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment, of Hazardous Substances by either Seller or as a result of any act or omission of either Seller. (f) Strouse Adler has made available, and Purchaser has had access to, a materially correct summary of all available information on Hazardous Substances used by Strouse Adler in the conduct of the Business. -19- (g) Strouse Adler's current and past disposal practices are in compliance with all applicable Environmental Laws. (h) All environmental assessment or impact reports on the Leased Real Property done for or on behalf of or received by Strouse Adler within the last five years of the date of this Agreement are listed on SCHEDULE 5.9.2 hereto. 5.10 TAXES. Each Seller has properly completed and filed on a timely basis and in correct form all tax returns (federal, provincial, state, county, local and other) relating to all excise, payroll, real estate, capital stock, intangible, value-added, income, sales, use, service, employment, property and, without limitation of the foregoing, all other taxes of every kind and nature which such Seller has been required to file. No claim with respect to the Business or the Purchased Assets has ever been made by an authority in a jurisdiction where Sellers do not file Tax returns that either Seller is or may be subject to taxation by that jurisdiction. All taxes of the type herein referred to (whether or not requiring the filing of returns), including all deficiency assessments, additions to tax, penalties and interest (collectively, "TAXES"), have been paid to the extent due or are being contested in the manner permitted by applicable law, and to the extent not due or not paid because of such contest, have been properly accrued on such Seller's books and records and segregated to the extent required by sound accounting practice. No federal, provincial, state, county, local or other Tax return of either Seller is being audited. Neither Seller has received any notice of and neither Seller has any knowledge or reason to know of any tax deficiency proposed or threatened against either Seller. No Tax Liens exist (or at any time could exist) on or as to any of the Purchased Assets on account of any Taxes due or to become due at any time from either Seller. 5.11 UNDISCLOSED LIABILITIES. Strouse Adler has no obligation or liability, absolute or contingent, known or unknown, liquidated or unliquidated, whether due or to become due and regardless of when or by whom asserted, not shown or provided for in the Balance Sheet, except for (i) liabilities which are immaterial (individually and in the aggregate) to the Business, its financial condition, net worth, assets, liabilities, personnel, prospects or operations, and arose in the ordinary course of business, (ii) the Transaction Expenses, (iii) current liabilities incurred in the usual and ordinary course of business subsequent to December 31, 1997, and (iv) liabilities comprising Assumed Liabilities. As of the Closing Date, Strouse Adler shall have no obligation or liability, absolute or contingent, known or unknown, not shown or provided for in the Closing Date Balance Sheet, except for the Transaction Expenses, and except for liabilities under the executory portion of any Contract by which Strouse Adler is bound on the Closing Date and (a) which was made in the usual and ordinary course of business of Strouse Adler, (b) which is part of the Purchased Assets assigned to Purchaser pursuant to this Agreement, (c) which, if required by this Agreement, is disclosed in a Schedule hereto, and (d) the existence of which does not otherwise constitute or result from a breach of any representation, warranty or covenant of this Agreement. -20- 5.12 TITLE TO ASSETS. Strouse Adler has good and marketable title to all of the Purchased Assets, in each case free and clear of all Liens except Liens set forth in SCHEDULE 5.12. Upon transfer of the Purchased Assets to Purchaser at Closing, Purchaser will have good and marketable title to all of the Purchased Assets, free and clear of all Liens other than Permitted Liens. 5.13 LEASED REAL PROPERTY. Strouse Adler owns no real property. SCHEDULE 5.13 sets forth a true and complete list of all real property leased or subleased by Strouse Adler (the "LEASED REAL PROPERTY"), including identification of the lease or sublease, street address and list of contracts, agreements, leases, subleases, options and commitments, oral or written, affecting such real estate or any interest therein to which Strouse Adler is a party or by which any of its interests in real property is bound (the "REAL PROPERTY LEASES"). Strouse Adler is in peaceable possession of the Leased Real Property and has performed all obligations required to be performed by it under each Real Property Lease which is a Purchased Asset and has performed in all material respects all obligations required to be performed by it under any other Real Property Leases. Except as disclosed on SCHEDULE 5.13, neither the Real Property Leases nor the leasehold interest of Strouse Adler with respect to the Leased Real Property is subject to any Liens which have arisen out of any action or omission taken by Strouse Adler; and none of such Leased Real Property is subject to any easements, rights of way, licenses, grants, building or use restrictions, exceptions, reservations, limitations or other impediments which materially and adversely affect the value to Strouse Adler of the leasehold interest therein or which materially interfere with or impair the present and continued use thereof in the usual and normal conduct of the Business as presently conducted. 5.14 STRUCTURAL DEFECTS. To the best knowledge of Sellers, except as set forth in SCHEDULE 5.14, there are no structural or other material physical defects or deficiencies in the condition of any Leased Real Property or improvements thereon, or in any portion of any of the foregoing, which have not been corrected. 5.15 EQUIPMENT. Except for Equipment which has been fully depreciated on the Balance Sheet, the Equipment is (and will be as of the Closing) in working condition and repair, ordinary wear, tear and maintenance excepted. Other than property subject to the Personal Property Leases, Strouse Adler does not hold or use any machinery, equipment, inventory, motor vehicles, furniture, fixtures, or other tangible personal property in the Business which is owned by any person or entity, other than Strouse Adler. All Equipment comprising part of the Purchased Assets is (and will be as of the Closing) physically located as set forth on SCHEDULE 5.15. No Equipment (other than a motor vehicle) has been removed from the Leased Real Property since December 31, 1997. Strouse Adler owns no motor vehicles or other Equipment for which a certificate of title or origin is required in order to transfer title to Purchaser. 5.16 PERSONAL PROPERTY LEASES. Set forth in SCHEDULE 5.16 is a true and complete list of all Personal Property Leases. Strouse Adler is not in default with respect to -21- any Personal Property Lease, and no event has occurred which constitutes, or with due notice or lapse of time or both may constitute, a default by Strouse Adler under any such Personal Property Lease. SCHEDULE 5.16 sets forth all of the accrued and unpaid obligations and other liabilities of Strouse Adler on or with respect to any of such Personal Property Leases through the date hereof. 5.17 INVENTORY. All items of Inventory reflected on the Balance Sheet, or acquired by Strouse Adler after the date thereof and prior to the Closing, (i) are (and will be) of a quality and quantity useable or saleable in the ordinary course of business and are (and will be) of a quantity sufficient to enable Purchaser to carry on the Business as currently conducted, (ii) are (and will be) carried at amounts which reflect valuations pursuant to Strouse Adler's normal inventory valuation policy of stating the inventory at the lower of cost or market on a first-in-first-out basis, all in accordance with GAAP, and (iii) do not include any obsolete or defective materials or any inventory items which should be written-off or written-down by Strouse Adler for which there is not (and will not be) an adequate reserve calculated in accordance with GAAP. 5.18 RESERVE FOR RETURNS. Except as set forth in SCHEDULE 5.18, the reserve for returns of Inventory reflected on the Balance Sheet (and to be reflected on the Closing Date Balance Sheet) is (and will be) adequate and in accordance with GAAP. 5.19 INTELLECTUAL PROPERTY. Set forth in SCHEDULE 5.19 is a true and complete list of all Intellectual Property, which list includes a summary description of each item and specifies, where applicable, the date granted or applied for, the expiration date and the correct status thereof. There is no restriction affecting the use of any of the Intellectual Property by Strouse Adler, and no license has been granted with respect thereto. Each item of Intellectual Property is valid and in good standing, is not subject to any Liens, is not currently being challenged or infringed, is not involved in any pending or threatened administrative or judicial proceeding, and does not conflict with any rights of any other person or entity. Each item of Intellectual Property is freely transferable by Strouse Adler to Purchaser without the consent of any third party, and the Intellectual Property is sufficient in all respects to permit the continued lawful conduct by Purchaser of the Business in the manner now conducted by Strouse Adler, and Strouse Adler has not violated and is not now violating any of the terms or conditions under which any Intellectual Property was acquired, obtained or granted. Strouse Adler is not in default or in violation with respect to any of the Intellectual Property or the terms or conditions by which such Intellectual Property was acquired or obtained, and no event has occurred which constitutes, or with due notice or lapse of time or both may constitute, a default by Strouse Adler under or a violation of any item of Intellectual Property. None of the products or operations of Strouse Adler in the conduct of the Business involves any infringement of any proprietary right of any other person or entity. Neither Seller has any knowledge or any reason to know of any fact which could give rise to a claim of infringement by any person or entity relating to the ownership, licensing or use of the Intellectual Property by Strouse Adler. -22- 5.20 LICENSES. Set forth in SCHEDULE 5.20 is a true and complete list of all Licenses, which list includes a summary description of each item and, where applicable, specifies the date issued, granted or applied for, the expiration date and current status thereof. Each of the Licenses has been duly obtained, is valid and in full force and effect, and is not subject to any Liens or any pending or threatened administrative or judicial proceeding to revoke, cancel or declare such License invalid in any respect. Each of the Licenses is freely transferable by Strouse Adler to Purchaser without the consent of any third party, and is sufficient in all respects to permit the continued lawful conduct by Purchaser of the Business in the manner now conducted by Strouse Adler. Strouse Adler is not conducting the Business in a manner which violates any of the terms or conditions under which any License was granted. Strouse Adler is not in default or in violation with respect to any of the Licenses, and no event has occurred which constitutes, or with due notice or lapse of time or both may constitute, a default by Strouse Adler under or violation of any License. Strouse Adler does not possess and is not subject to any quotas relating to the export of its products. 5.21 SALE AND PURCHASE CONTRACTS. Set forth in SCHEDULE 5.21 is a description of all Sale and Purchase Contracts between Strouse Adler and any party relating to the sale or purchase by Strouse Adler of any product purchased, sold or distributed by Strouse Adler pursuant to which Strouse Adler incurs liabilities or obligations to purchase or sell (whether by payment or delivery of goods or services), individually or in the aggregate, of more than $50,000.00 in any year. Since December 31, 1997, except for "close outs" and participation in customers' sales promotions which occur in the ordinary course of business, Strouse Adler has not offered to any person or entity and Sellers have no knowledge (or reason to know) of any person or entity entitled to claim any cash discount, profit participation, stock adjustment, or other rebate or premium in excess of $25,000.00, individually or in the aggregate for any one or more persons or entities, in connection with or on account of the purchase or sale of products of Strouse Adler. 5.22 CONTRACTS. Set forth in SCHEDULE 5.22 is a description of each Contract to which Strouse Adler is a party or bound thereby, other than those contracts set forth in another Schedule to this Agreement, (i) which involves aggregate payments or expenditures by Strouse Adler of in excess of $25,000, but excluding Sale and Purchase Contracts, Personal Property Leases, Real Property Leases and Licenses; (ii) which cannot be terminated by Strouse Adler at any time on 30 days' written notice or less without liability to Strouse Adler; (iii) for the purchase, sale, lease (as lessee or lessor), or mortgage (as mortgagee or mortgagor), of any Purchased Assets, except with respect to sales of Inventory made in the ordinary course of business; (iv) with any Related Party; (v) which limits or restrains Strouse Adler from engaging or competing in any business or with any person or entity; (vi) which involves any arrangement relating to the borrowing or loaning of money, including, without limitation, letters of credit, warranties, guarantees, indemnification and surety agreements; (vii) which is not made in the ordinary course of the Business; (viii) for the purchase of property which, if acquired as of the Closing Date, would be a Purchased Asset and, contracts for the sale of property which, if consummated prior to the Closing -23- Date, would be a Purchased Asset (other than Inventory sold in the ordinary course); (ix) the benefits of which are contingent or accelerated, or the terms of which are materially altered, by the occurrence of the transactions contemplated by this Agreement or the Additional Documents; and (x) pursuant to which services (other than routine professional services) are rendered by or to Strouse Adler. SCHEDULE 5.22 also set forth all other material Contracts to which Strouse Adler is a party or bound. All Contracts are valid and binding upon Strouse Adler and enforceable against the other parties thereto in accordance with their respective terms. Strouse Adler has performed all obligations required to be performed by it under all Contracts which are Purchased Assets and has performed in all material respect all obligations required to be performed by it under all other Contracts. Strouse Adler is not in default under any of such Contracts, nor to the best knowledge of Sellers is any other party to any such Contract in default thereunder, nor does any condition exist which, with notice or lapse of time or both, would constitute a default by Strouse Adler, or, to the best knowledge of Sellers, by any other party thereunder. Without limiting the foregoing, Strouse Adler is not a party or subject to any Contract which materially and adversely affects or, so far as Sellers can now foresee, may in the future materially and adversely affect Strouse Adler, its Business, the Purchased Assets or the prospects or financial condition of Strouse Adler's Business. SCHEDULE 5.22 further sets forth all such Contracts currently in negotiation or proposed by Strouse Adler, of a type which, if entered into by Strouse Adler, would be required to be listed in SCHEDULE 5.22 or in any other Schedule. 5.23 LITIGATION. Except as set forth in SCHEDULE 5.23, which contains a list and summary description of certain pending actions, suits, proceedings and investigations, there are no claims, actions, suits, proceedings, labor disputes or investigations pending or, to the best knowledge of each Seller, threatened, before any court or Governmental Authority, or before any arbitrator of any nature, brought by or against either Seller, or any of its officers, directors, employees or agents involving, affecting or relating to any of the Purchased Assets, the Business, or the transactions contemplated by this Agreement or the Additional Documents, nor to the best knowledge of each Seller, is there any basis for any such action, suit, proceeding or investigation. Neither Sellers, the Business nor any Purchased Asset is subject to any order, writ, judgment, award, injunction or decree of any court or Governmental Authority or arbitrator, which affects or which, to the best knowledge of each Seller, might affect either Seller, any of the Purchased Assets or the Business, or which would or might interfere with the transactions contemplated by this Agreement or the Additional Documents. 5.24 CONSENTS. Except for consents and approvals of, or filings or registrations with the Federal Trade Commission ("FTC") and Department of Justice pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"), the Securities and Exchange Commission ("COMMISSION") pursuant to the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the parties listed on SCHEDULE 5.24, no notice to and no permit, authorization, consent or approval of any federal, state, local, -24- foreign or other governmental or regulatory authority ("GOVERNMENTAL AUTHORITY") or of any third party is necessary for the consummation by either Seller of the transactions contemplated by this Agreement or the Additional Documents. 5.25 EMPLOYEE PLANS. 5.25.1 IDENTIFICATION. Set forth in SCHEDULE 5.25 is a true and complete list and summary description of all bonus, pension, stock option, stock purchase, benefit, welfare, profit sharing, retirement, disability, vacation, severance, hospitalization, insurance, incentive, deferred compensation and other similar fringe or employee benefit plans, funds, programs or arrangements, and all employment contracts or executive compensation agreements, written or oral, in each of the foregoing cases which cover, are maintained for the benefit of, or relate to any or all employees of Strouse Adler or any member of its controlled group (the "CONTROLLED ENTITIES") as described in Sections 414(b), (c), (m), and (o) of the Code (the "EMPLOYEE PLANS"). Set forth in SCHEDULE 5.25 is a true and complete list of all manuals, brochures or publications or similar documents of Strouse Adler and each Controlled Entity regarding office administration, personnel matters and hiring, evaluation, supervision, training, termination and promotion of employees of Strouse Adler or any Controlled Entity, including but not limited to Strouse Adler's or any Controlled Entity's affirmative action plan, if any, and all communications to employees concerning such matters (the "PERSONNEL DOCUMENTS"). 5.25.2 DOCUMENTATION. With respect to each Employee Plan, Sellers have made available to Purchaser true and complete copies of (i) all plan documents, (ii) the most recent determination letters received from the IRS, (iii) the most recent application for determination filed with the IRS, (iv) the latest actuarial valuations, (v) the latest financial statements, (vi) the latest Form 5500 Annual Report and Schedule A and Schedule B thereto, (vii) all related trust agreements, insurance contracts or other funding arrangements which implement any of such Employee Plans, and (viii) all Summary Plan Descriptions and summaries of material modifications and all modifications thereto communicated to employees. Strouse Adler has no stock options or stock appreciation rights issued under any Employee Plan. With respect to each Personnel Document, Sellers have furnished to Purchaser true and complete copies of all the documents listed in SCHEDULE 5.25. 5.25.3 CODE AND ERISA. Each of the Employee Plans and, with respect to each Employee Plan, Strouse Adler and each Controlled Entity is in material compliance, in form and operation, with the requirements provided by any and all statutes, orders or governmental rules or regulations currently in effect, including, but not limited to, ERISA and the Code, and applicable to such Employee Plans. 5.25.4 CONTRIBUTIONS AND ACCRUAL. With respect to the Employee Plans, all applicable contributions for all periods ending prior to Closing have been made in full. Subject only to normal retrospective adjustments in the ordinary course, all insurance premiums, including premiums to the Pension Benefit Guaranty Corporation (the "PBGC"), -25- have been paid in full with regard to such Employee Plan for policy years or other applicable policy periods ending on or before Closing. As of Closing, none of the Employee Plans has unfunded benefit liabilities, as defined in Section 4001(a)(16) of ERISA. No accumulated funding deficiency within the meaning of Section 302 of ERISA or Section 412 of the Code has been incurred with respect to any Employee Plan, whether or not waived. 5.25.5 REPORTABLE EVENTS. None of the Employee Plans which are subject to Title IV of ERISA has been completely or partially terminated and none has been the subject of a "REPORTABLE EVENT" as that term is defined in Section 4043 of ERISA as to which a notice would be required to be filed with the PBGC. No proceeding by the PBGC to terminate any Employee Plan pursuant to Subtitle 1 of Title IV of ERISA has been instituted or threatened, there is no pending or threatened legal action, proceeding or investigation against or involving any Employee Plan and there is no basis for any such legal action, proceeding or investigation. Neither Strouse Adler nor any Controlled Entity has any liability (i) for the termination of any single-employer plan under Section 4062 of ERISA, (ii) for any lien imposed under Section 302(f) of ERISA or Section 412(n) of the Code, (iii) for any interest payments required under Section 302(e) of ERISA or Section 412(m) of the Code, (iv) for any excise tax imposed by Section 4971 of the Code, (v) for any minimum funding contributions under Section 302(c)(11) of ERISA or Section 412(c)(11) of the Code, or (vi) to provide security pursuant to Section 307 of ERISA or Section 401(a)(29) of the Code. None of the Employee Plans provides for any unpredictable contingent event benefit (as that term is defined in Section 302(d)(7)(B) of ERISA or Section 412(l)(7)(B) of the Code). 5.25.6 TERMINATION BENEFITS. Neither Strouse Adler nor any Controlled Entity maintains, contributes to, or has any liability (fixed, contingent or otherwise) for medical, health, life, or other welfare benefits for present or future terminated employees (other than any welfare benefits provided in compliance with the Consolidated Omnibus Budget Reconciliation Act of 1985 or other similar law). Strouse Adler and each Controlled Entity are in compliance with Section 4980B of the Code (or Section 162 of the Code, as in effect prior to the effective date of Section 4980B of the Code). 5.25.7 WITHDRAWAL LIABILITY. Except as set forth in SCHEDULE 5.25, none of the Employee Plans is a multiemployer plan as defined in Section 3(37) or Section 4001(a)(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 414(f) of the Code (a "MULTIEMPLOYER PLAN"). Neither Strouse Adler nor any Controlled Entity has incurred or expects to incur any withdrawal liability (either as a contributing employer or as part of a controlled group which includes a contributing employer) to any Multiemployer Plan in connection with any complete or partial withdrawal from such plan occurring on or before the Closing, except as set forth in SCHEDULE 5.25. Sellers have provided Purchaser with all necessary documents for Purchaser to determine Strouse Adler's withdrawal liability, including but not limited to any guidelines established by the trustees of such plans. -26- 5.25.8 EMPLOYEE PLAN GRIEVANCES. With respect to each Employee Plan that is not a Multiemployer Plan and to the best knowledge of the Sellers, with respect to each Employee Plan that is a Multiemployer Plan (i) no prohibited transactions as defined in Section 406 of ERISA or Section 4975 of the Code have occurred, (ii) no action, suit, grievance, arbitration or other manner of litigation, or claim with respect to the assets thereof (other than routine claims for benefits made in the ordinary course of plan administration for which plan administrative review procedures have not been exhausted) are pending, threatened or imminent against or with respect to any of the Employee Plans, Strouse Adler, any Controlled Entity, or any fiduciary, as such term is defined in Section 3(21) of ERISA ("FIDUCIARY"), of any Employee Plan, including but not limited to any action, suit, grievance, arbitration or other manner of litigation, or claim regarding conduct which allegedly interferes with the attainment of rights under any Employee Plan, and (iii) none of Strouse Adler, the Controlled Entities, or the Fiduciaries has any knowledge of any facts which would give rise to or could give rise to any such actions, suits, grievances, arbitration or other manner of litigation, or claims with respect to each Employee Plan. None of Strouse Adler, the Controlled Entities, or their directors, officers, or employees, or the Fiduciaries has any liability for failure to comply with ERISA or the Code for any action or failure to act in connection with the administration or investment of such plans. 5.26 LABOR AND EMPLOYEE MATTERS. 5.26.1 LABOR AGREEMENTS. Strouse Adler is not a party to any collective bargaining agreement or any other agreement with any labor organization applicable to employees of or persons or entities providing services to Strouse Adler (a "LABOR AGREEMENT"). Except as set forth in SCHEDULE 5.23 or 5.26, no unfair labor practice charges or complaints are pending or, to Sellers' knowledge, threatened against Strouse Adler before the National Labor Relations Board, no similar claims are pending or threatened before any similar foreign agency and no current union representation questions involving employees of or persons or entities providing services to Strouse Adler are outstanding. To Sellers' knowledge, no activity or proceeding of any labor organization (or representative thereof) to organize any unorganized employees of or persons or entities providing services to Strouse Adler, and no strike, slowdown, work stoppage, lockout or other collective labor action by or with respect to any employees of or persons or entities providing services to Strouse Adler is in progress, is pending or has been threatened. 5.26.2 LABOR/EMPLOYMENT CONTROVERSIES. Except as set forth in SCHEDULE 5.23 or SCHEDULE 5.26, no present or former employee of Strouse Adler has a pending claim or charge which has been asserted or threatened against Strouse Adler (whether under any foreign, federal, state or common law, through a government agency, private arbitral body, or otherwise) for (i) overtime pay, other than overtime pay for the current period; (ii) wages, salaries or profit sharing (excluding wages, salaries or profit sharing for the current payroll period); (iii) any material violation of any statute, ordinance, contract or regulation relating to minimum wages or maximum hours or work; (iv) discrimination against employees on any basis; (v) unlawful or wrongful employment or -27- termination practices; (vi) unlawful retirement, termination or labor relations practices, breach of contract or other claim arising under a Labor Agreement or individual contract; or (vii) any violation of occupational safety or health standards. 5.26.3 EMPLOYEE MATTERS. (a) Except as set forth in SCHEDULE 5.26, there are no agreements, arrangements or understandings that would restrict the ability of Strouse Adler to terminate the employment of any or all of Strouse Adler's employees at any time, for any lawful reason or for no reason, without penalty or liability. (b) Set forth in SCHEDULE 5.26 is the name, past twelve months' salary and most recent bonus of each salaried and hourly employee of Strouse Adler. (c) Except as set forth on the Closing Date Balance Sheet, no employee of Strouse Adler is, or will be as of the Closing Date, entitled to accrued vacation. 5.27 CUSTOMERS AND SUPPLIERS. Set forth in SCHEDULE 5.27 is a list of (a) all of the current customers of Strouse Adler, (b) customers of Strouse Adler from 1996 or 1997 who are no longer customers, and (c) current suppliers of Strouse Adler which have sold $10,000 or more of goods or services to Strouse Adler during the past twelve months and a designation as to which suppliers supply Strouse Adler with the textiles used in the manufacture of products in the Business. Except as set forth on SCHEDULE 5.27, (i) no material customer or supplier of Strouse Adler has threatened within the last twelve months to cancel or otherwise terminate, or to the knowledge of Sellers, intends to cancel or otherwise terminate, the relationship of such person or entity with Strouse Adler, (ii) no such person or entity has during the last twelve months decreased materially or threatened in writing to decrease or limit materially, or to the knowledge of Sellers, intends to modify materially its relationship with Strouse Adler or intends to decrease or limit materially its services or supplies to Strouse Adler or its usage or purchase of services or products of Strouse Adler, and (iii) to the knowledge of Sellers, the purchase of the Business by Purchaser will not materially and adversely affect the relationship of the Business with any material supplier or customer. 5.28 INSURANCE. Strouse Adler owns insurance sufficient for compliance with all requirements of law and all agreements to which Strouse Alder is a party or otherwise bound, and which provides insurance coverage for Strouse Adler, the Business, and the Purchased Assets which is consistent with that of other companies with similar assets and operations and engaged in similar businesses. Strouse Adler has not received any notice of cancellation or non-renewal of any such policy. Except as set forth in SCHEDULE 5.28, Strouse Adler has not received any notice from any of its insurance carriers that any insurance premiums will be materially increased in the future or that any insurance coverage listed in SCHEDULE 5.28 will not be available to Strouse Adler in the future on substantially the same terms as now in effect. Strouse Adler has delivered to Purchaser true and complete -28- copies of the most recent reports prepared by any property and casualty insurer with respect to Strouse Adler or any of the Purchased Assets. 5.29 EFFECT OF TRANSACTION. The Purchased Assets constitute all of the assets and properties, tangible and intangible (other than Excluded Assets), which are used (whether or not owned) by Strouse Adler in the operation of the Business or which are necessary for the operation of the Business in the ordinary course and at the sales levels at which the Business is operating and has operated during Strouse Adler's 1997 and 1998 fiscal years. 5.30 TRANSACTIONS WITH RELATED PARTIES. For purposes of this Agreement, the term "RELATED PARTY" shall mean (i) any past or present director, officer, executive or management level employee, Stockholder or Affiliate of either Seller, or (ii) spouse of any such director, officer, executive or management level employee, Stockholder or Affiliate (such persons in (i) or (ii) referred to herein as a "RELATED PARTY" or collectively as the "RELATED PARTIES"). Except as set forth in SCHEDULE 5.30, during the past three years no Related Party has been a director or officer of, or has had any direct or indirect interest in, any person or entity, which during such period has been a supplier or customer of products or services or sales agent of Strouse Adler or otherwise done business with Strouse Alder, or has competed with or been engaged in any business similar to the Business. Except as set forth in SCHEDULE 5.30 or in the footnotes to the Audited Financial Statements, no Related Party owns, directly or indirectly, in whole or in part, any tangible or intangible property of Strouse Adler, or that Strouse Adler uses in the conduct of the Business. Except as set forth in SCHEDULE 5.30, no Related Party owes any money or other amounts to, nor is any Related Party owed any money or other amounts by, Strouse Adler other than salaries owed by Strouse Adler as described in the following sentence. All Indebtedness for Borrowed Funds of Strouse Adler to any Related Party is set forth on the Balance Sheet, and since December 31, 1997, Strouse Adler has not directly or indirectly (i) created, incurred, assumed or guaranteed any Indebtedness for Borrowed Funds or otherwise to or for any Related Party, or (ii) made any loans, payments or transfers of its assets to any Related Party other than for salaries paid for services actually performed in amounts in keeping with past practice and in the ordinary course of business and not in violation of any other provision of this Agreement, other than as permitted by Section 5.8.2(d), and other than as set forth on SCHEDULE 5.30. 5.31 BANK ACCOUNTS, ETC. SCHEDULE 5.31 sets forth a true and complete list of each bank in or with which Strouse Adler has an account, credit line or safety deposit box, and a brief description thereof including amounts and the names of all persons currently authorized to draw thereon or having access thereto. 5.32 NAME. Strouse Adler has never operated during the past five years under any corporate name other than "Strouse Adler" and "The Strouse, Adler Company". 5.33 REPORTS. The Company has filed all forms, reports and documents required under Section 13(a) under the Exchange Act with the Commission since June 30, -29- 1996, and none of such forms, reports or documents, including without limitation any financial statements or schedules included therein, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading. 5.34 BROKERS. No agent, broker, investment banker, financial advisor or other person or entity is or will be entitled to any brokerage commission, finder's fee or like payment in connection with any of the transactions contemplated by this Agreement based upon such arrangements made by or on behalf of either Seller, except Peter J. Solomon Company Limited whose compensation shall be the sole responsibility of Sellers. 5.35 INFORMATION SUPPLIED. None of the information supplied or to be supplied by the Company for inclusion or incorporation by reference in the Proxy Statement will, at the date it is first mailed to the Company's stockholders or at the time of the Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder, except that no representation is made by the Company with respect to statements made or incorporated by reference therein based on information supplied in writing by or on behalf of Purchaser specifically for inclusion therein. 5.36 OPINION OF FINANCIAL ADVISOR. The Company has received the opinion of Peter J. Solomon Company Limited to the effect that, as of such date, the Purchase Price and other terms of this Agreement are fair to Strouse Adler and the Company from a financial point of view. 5.37 COMPANY BOARD RECOMMENDATION. The Board of Directors of the Company, and in the case of clause (i), the Board of Directors of Strouse Adler, at a meeting duly called and held, has duly (i) determined that this Agreement, the Additional Documents and the transactions contemplated hereby and thereby, including the Purchase Price, are fair to and in the best interests of the stockholders of the Company, (ii) resolved to recommend that the holders of the Company's outstanding capital stock approve this Agreement and the transactions contemplated herein, and (iii) resolved to approve this Agreement and the transactions contemplated hereby in its capacity as the sole stockholder of Strouse Adler. No "fair price," "moratorium," "control share acquisition" or other similar antitakeover statute or regulation enacted under state or federal laws in the United States applicable to the Company is applicable to the transactions contemplated hereby, the Additional Documents or the transactions contemplated thereby. The Board of Directors of the Company has taken all appropriate action to render the restrictions on business combinations contained in Section 203 of the DGCL inapplicable to this Agreement, the Additional Documents and the consummation of the transactions contemplated hereunder and thereunder. -30- 5.38 REQUIRED COMPANY VOTE. The affirmative vote of at least 50% plus one share of the outstanding shares of the Company's capital stock, voting as a single class, is the only vote of the holders of any class or series of the Company's securities necessary to approve this Agreement, the Additional Documents and the other transactions contemplated hereby and thereby. 5.39 RIGHTS AGREEMENT. The Company has no "Rights Agreement" or similar instruments or plans which will be triggered on account of the execution of this Agreement by Sellers or the Additional Documents. 5.40 YEAR 2000 COMPLIANCE. Except as set forth on SCHEDULE 5.40, all of Sellers' computer systems are fully "Year 2000 Compliant," i.e., no hardware or software on such systems will have to be modified, implemented or enhanced in order for such system to function as correctly and efficiently for periods after December 31, 1999 as they have functioned to date. 5.41 ACCURACY OF INFORMATION. None of the representations, warranties or statements contained in this Agreement, in the Schedules or Exhibits hereto, or in any of the Additional Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make any of such representations, warranties or statements, in the context in which made, not false or misleading. Copies of all documents furnished by or on behalf of Sellers to Purchaser or its representatives in connection with or pursuant to the terms of this Agreement and the Additional Documents are complete and accurate. All documents (or copies thereof) referred to in the Schedules or Exhibits hereto have been delivered to Purchaser. All financial projections provided by Sellers to Sara Lee were prepared by Sellers in good faith based upon reasonable assumptions; and although Sellers do not guarantee the results of these projections, all such projections are reasonable and reflect Sellers' best estimate of the financial results reflected therein. All facts set forth in the Recitals are true and correct. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby represents, warrants and covenants to Sellers as follows: 6.1 CORPORATE ORGANIZATION. Sara Lee is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland, and has all requisite power and authority (corporate and other) to own, lease and operate its properties and assets and to conduct its business as now being conducted. Sara Lee has qualified as a foreign corporation and is in good standing under the laws of all jurisdictions where the nature of its business or the nature and location of its assets require such qualification, except in those jurisdictions where the failure to qualify would not have a material adverse effect on the financial condition, business, assets or operations of Sara Lee and its consolidated subsidiaries, taken as a whole. -31- 6.2 AUTHORITY. Sara Lee has the corporate power and authority to enter into this Agreement and the Additional Documents and to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and the Additional Documents and the performance by Sara Lee of its obligations hereunder and thereunder require authorization by the Board of Directors of Sara Lee, and no other corporate proceedings on the part of Sara Lee are necessary to authorize such execution, delivery and performance. Subject to obtaining such Board approval, this Agreement and the Additional Documents will be duly executed by Sara Lee and, assuming the due authorization, execution and delivery by the Sellers and Stockholders, will be the valid and legally binding obligations of Sara Lee, enforceable against Sara Lee in accordance with their terms. 6.3 ABSENCE OF CONFLICTS. Subject to the required authorization by Sara Lee's Board of Directors, the execution, delivery and performance by Sara Lee of this Agreement and the Additional Documents, and the transactions contemplated hereby and thereby, do not and will not, conflict with or result in any violation of, or constitute a breach or default under any term of the charter documents or by-laws of Sara Lee. 6.4 CONSENTS. Except for consents and approvals of, or filings or registrations with the FTC and DOJ pursuant to HSR, no notice to and no permit, authorization, consent or approval of any Governmental Authority or any third party is necessary for the consummation by Sara Lee of the transactions contemplated by this Agreement or the Additional Documents. 6.5 BROKERS. Sara Lee has not employed any investment banker, broker or finder in connection with the transactions contemplated hereby. 6.6 RECOMMENDATION. If Sara Lee does not have any knowledge, at the time of the meeting of its Board of Directors, of the existence of (i) any inaccuracy in any material respect of any representation and warranty of Sellers in this Agreement or of Sellers or the Stockholders in the Additional Documents, or (ii) any failure to comply by Sellers with their covenants in this Agreement or by Sellers or the Stockholders in the Additional Documents, then (a) Sara Lee will cause the transactions contemplated hereby to be placed on the agenda for consideration at Sara Lee's next regularly scheduled meeting of its Board of Directors (or if a special meeting of the Board of Directors is called prior to such regularly scheduled meeting, then at such special meeting) and (b) the management of Sara Lee's intimate apparel division will recommend the approval by Sara Lee's Board of Directors of the transactions contemplated hereby at such meeting; provided, however, that nothing in this Section 6.6 constitutes a representation, warranty or covenant regarding the vote to be taken by the Board of Directors of Sara Lee regarding the transactions contemplated by this Agreement. 6.7 INFORMATION SUPPLIED. None of the information supplied or to be supplied by Sara Lee for inclusion or incorporation by reference in the Proxy Statement will, at the date it is first mailed to the Company's stockholders or at the time of the Stockholders -32- Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. ARTICLE VII COVENANTS. 7.1 CONDUCT OF BUSINESS OF STROUSE ADLER PRIOR TO THE CLOSING DATE. During the period from the date of this Agreement and continuing through the Closing Date, Sellers agree that except as expressly contemplated or permitted by this Agreement or to the extent that Sara Lee shall otherwise consent, Sellers shall use their best efforts to carry on the Business and their respective affairs in such a manner so that the representations, warranties and covenants contained in Article V shall continue to be true and correct throughout such period, and on and as of the Closing Date as if made by Sellers on the Closing Date, and throughout such period Strouse Adler shall, except in response to matters which neither it nor the Company can reasonably control, carry on the Business in the ordinary course in substantially the same manner as heretofore conducted and use reasonable best efforts (i) to preserve intact its present business organization, (ii) keep available the services of its present officers and employees, (iii) preserve its relationships with customers, suppliers and others having business dealings with it, and (iv) not do or permit to be done any of the actions described in Section 5.8.2. Without limiting the generality of the foregoing, prior to the Closing Date, and except as expressly contemplated or permitted by Section 7.3 of this Agreement, or required by applicable law, neither Seller will, without the prior written consent of Sara Lee: (i) except to the extent expressly permitted by Section 7.3 amend, modify or repeal the resolutions of the Board of Directors of the Company, the resolutions of the Company as sole stockholder of Strouse Adler, or the recommendation of the Board of Directors of the Company to the Company stockholders that the stockholders adopt resolutions of stockholders of the Company approving the execution and delivery of this Agreement and the Additional Documents, the consummation of the transactions contemplated hereby and thereby and the performance by Sellers of their respective obligations hereunder and thereunder; (ii) change its capital structure, pursuant to a reclassification, exchange, combination, split or otherwise, or issue capital stock, or redeem or repurchase stock, or take any other action, the effect of which could be to dilute the aggregate voting power of the Stockholders to a percentage level less than that which exists on the date of this Agreement; (iii) cause or declare any dividends or distributions to holders of capital stock of Strouse Adler other than as permitted by Section 5.8.2(d); (iv) (a) adopt or amend any Employee Plan, other than to comply with applicable law or in the ordinary course consistent with past practice, (b) grant, -33- or become obligated to grant, any increase in the compensation of officers or employees of Strouse Adler, including any such increase pursuant to any Employee Plan (except for increases in compensation in the ordinary course of business consistent with past practice), or (c) enter into any employment or similar agreement or arrangement with any employee of Strouse Adler or other person or entity; or (v) enter into any transaction not in the ordinary course of business, except with respect to the transactions contemplated hereby. 7.2 PREPARATION OF PROXY STATEMENT; STOCKHOLDERS MEETING. 7.2.1 PROXY STATEMENT. Promptly following the date of this Agreement, the Company shall prepare a proxy statement relating to a meeting of the holders of the Company's common stock and any other securities having voting rights for the purpose of obtaining stockholder approval of this Agreement, the Additional Documents and the transactions contemplated hereby and thereby ("STOCKHOLDERS MEETING") pursuant to the DGCL (the "PROXY STATEMENT"), and the Company shall prepare and file with the Commission the Proxy Statement. Sara Lee will cooperate with the Company in connection with the preparation of the Proxy Statement including, but not limited to furnishing to the Company any and all information regarding Sara Lee and its Affiliates as may be required to be disclosed therein. The information provided and to be provided by Sara Lee and the Company, respectively, for use in the Proxy Statement shall, at the date it is first mailed to the Company's stockholders and on the date of the Stockholders Meeting referred to below, be true and correct in all material respects and shall not omit to state any material fact required to be stated therein or necessary in order to make such information not misleading, and the Company and Sara Lee each agree to correct any information provided by it for use in the Proxy Statement which shall have become false or misleading. 7.2.2 COMMENTS. The Company will as promptly as practicable notify Sara Lee of (i) the receipt of any comments from the Commission, and (ii) any request by the Commission for any amendment to the Proxy Statement or for additional information. All filings by the Company with the Commission, including the Proxy Statement and any amendment thereto, and all mailings to the Company's stockholders in connection with the transactions contemplated by this Agreement and the Additional Documents, including the Proxy Statement, shall be subject to the prior review, comment and approval of Sara Lee (such approval not to be unreasonably withheld or delayed). Sara Lee will furnish to the Company the information relating to it and its Affiliates required by the Exchange Act and the rules and regulations promulgated thereunder to be set forth in the Proxy Statement. 7.2.3 STOCKHOLDERS MEETING. The Company will: (i) as promptly as practicable following the date of this Agreement, duly call, give notice of, convene and hold a Stockholders Meeting for the purpose of approving this Agreement and the transactions contemplated hereby to the extent required by the DGCL and the Company's Certificate of Incorporation; (ii) through its Board of Directors, and subject to the other provisions hereof, -34- recommend to its stockholders approval of the foregoing matters; and (iii) use its reasonable best efforts to obtain the necessary approval of this Agreement and the transactions contemplated hereby by its stockholders; provided, however, that, subject to Section 12.4, and, without limiting the Company's obligations set forth in subclause (i) above (which the Company agrees to fulfill notwithstanding any other term of this Article 7), the Company may fail to make or may withdraw or modify such recommendation and shall not be obligated to use its reasonable best efforts or take any action pursuant to clause (ii) or (iii) of this Section 7.2.3 if the Company shall have concluded in good faith, after review of advice provided in writing by outside legal counsel to the Company, that such actions would be in breach of the Company's Board of Directors' fiduciary duties under applicable law. Any such recommendation shall be included in the Proxy Statement. 7.3 NON-SOLICITATION. (a) Neither Seller nor its Affiliates will, and each Seller and its Affiliates will advise their respective directors, officers, employees, representatives, investment bankers, attorneys, accountants, advisors and agents (the foregoing being collectively called "REPRESENTATIVES") to not, directly or indirectly, encourage, solicit or initiate inquiries or proposals from, or provide any confidential information to, or participate in any discussions or negotiations with, any person or entity (other than Sara Lee and its Affiliates and their respective directors, officers, employees, representatives and agents) concerning any proposed (i) merger, consolidation, share exchange, business combination or other similar transaction with Strouse Adler or, except for Permitted Company Transactions, with the Company, (ii) sale, lease, exchange, transfer, or other disposition, directly or indirectly, of all or a substantial portion of the consolidated assets of either or both Sellers, or (iii) transaction in which any person (whether by itself or as a member of any "group" (as such term is defined in the Exchange Act)) would acquire beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange Act) of, or the right to acquire beneficial ownership, of 5% or more of the outstanding voting capital stock of either of the Sellers (all such inquiries and proposals being referred to herein as "ACQUISITION PROPOSALS" and any such transaction being called a "SIGNIFICANT TRANSACTION"), provided, however, that nothing contained in this Section 7.3 shall prohibit the Company or its Board of Directors from (A) subject to Section 7.4 below, issuing a press release or otherwise publicly disclosing the terms of this Agreement; (B) proceeding with the transactions contemplated by this Agreement; (C) communicating to the Company's stockholders a position as required by Rule 14e-2 promulgated under the Exchange Act and any other applicable laws; or (D) disclosing the terms of this Section 7.3 to the extent required by law; and, PROVIDED, FURTHER, that the Board of Directors of the Company may, on behalf of the Company, furnish or cause to be furnished information and may direct the Company and its Representatives to furnish information, in each case pursuant to appropriate confidentiality agreements (which do not limit the Company's disclosure of any information to Sara Lee), and to participate in discussions or negotiations with any person or entity concerning any Acquisition Proposal which was not encouraged, solicited or initiated by either Seller or any of its Affiliates or any of their respective Representatives, or which did not otherwise result from a breach of -35- this Section 7.3, if (x) the Board of Directors of the Company shall conclude in good faith, only after receipt of written advice from its financial advisor, that such person or entity has made a bona fide Acquisition Proposal for a transaction more favorable to the Company's stockholders from a financial point of view than the transactions contemplated hereby provided such transaction is not subject to any financing contingency and is otherwise reasonably probable to be consummated, and (y) in the opinion of the Board of Directors of the Company, only after receipt of written advice of outside legal counsel to the Company, the failure to provide such information or access or to engage in such discussions or negotiations would cause the Board of Directors of the Company to violate its fiduciary duties to the Company's stockholders under applicable law (an Acquisition Proposal which satisfies clauses (x) and (y) being referred to herein as a "SUPERIOR PROPOSAL") (the furnishing of information and/or participation in discussions or negotiations as permitted by this proviso being collectively called "PERMITTED FIDUCIARY CONDUCT"). The Company will immediately notify Sara Lee of the terms of any proposal, discussion, negotiation or inquiry (and will disclose to Sara Lee any written materials received by either Seller in connection with such proposal, discussion, negotiation, or inquiry) and the identity of the party making such proposal or inquiry which it may receive in respect of any such transaction and will keep Sara Lee apprised of the status of any such proposals, discussions, negotiations or inquiries. Each Seller agrees not to release any person or entity from, or waive any provision of, any standstill agreement to which either Seller is a party or any confidentiality agreement between either Seller and another person or entity. Each Seller shall immediately cease and cause to be terminated any existing activities, discussions or negotiations by either Seller or any Representative of either Seller with parties conducted heretofore with respect to any of the foregoing and shall use all reasonable efforts to enforce the terms of all standstill and confidentiality agreements, including, without limitation, obtaining the return or the destruction of any proprietary information provided to any such parties. (b) Neither the Board of Directors of either Seller nor any committee thereof shall, directly or indirectly, (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Sara Lee, the approval or recommendation by such Board of Directors or any such committee of this Agreement, (ii) approve or recommend, or propose to approve or recommend, any Acquisition Proposal, or (iii) enter into, or resolve, or agree to enter into, any agreement with respect to any Acquisition Proposal. Notwithstanding the foregoing, the Board of Directors of the Company may withdraw or modify its approval or recommendation of this Agreement to approve or recommend a Superior Proposal if and only if (x) the Company shall have furnished Sara Lee with written notice specifying the material terms and conditions of such Superior Proposal and identifying the person or entity making such Superior Proposal (and including a written copy of such proposal) not later than noon (Chicago time) seven business days in advance of any date that the Board of Directors intends to take any such action ("DESIGNATED PERIOD"), and (y) the Company and its Representatives have complied in all respects with the terms of the following sentence. During the Designated Period, the Company shall, and shall cause its financial and legal advisors, to negotiate in good faith with Sara Lee to make such amendments to the terms and conditions of this Agreement as would make this Agreement as -36- so amended, in the view of its financial advisors, at least as favorable to the Company's stockholders from a financial point of view as the Superior Proposal, and if Sara Lee makes a proposal to enter into an agreement at least as favorable to the Company's stockholders from a financial point of view as the Superior Proposal, then the Company's Board of Directors shall be prohibited from withdrawing or modifying its approval or recommendation of this Agreement, or from approving or recommending such Superior Proposal. The taking of any Permitted Fiduciary Conduct by the Board of Directors of the Company or the taking of any conduct or action described in clause (i) or (ii) of this Section 7.3(b) by either Seller or either Seller's Board of Directors shall not constitute a breach of this Agreement by such party so long as such conduct or action is taken in strict compliance with the terms of this Section 7.3, but this Section 7.3 shall not give any Seller the right to terminate this Agreement, or engage in any conduct or action described in clause (iii) of this subsection (b), or otherwise cease performance of its obligations under this Agreement except pursuant to Article XII. 7.4 CONFIDENTIALITY; PUBLIC ANNOUNCEMENTS. This Agreement and the terms hereof are confidential and no party or signatory hereto shall disclose any of the terms of this Agreement, the transaction contemplated hereby or the fact that the parties are engaged in negotiations, without the prior approval of the other parties. Sara Lee and Sellers shall consult with each other on the desirability, timing and substance of any press release or public announcement, publicity statement or other public disclosure relating to the transaction contemplated hereby or the fact that negotiations among the parties are being held. Sara Lee and Sellers each agree not to make any such public disclosures without the prior consent of the other as to the content and timing of such disclosure; provided, however, that either party may make such disclosures as required to comply with applicable law, regulations or stock exchange requirements provided the other party is afforded prior notice thereof; it being agreed that, subject to the terms of this Section 7.4, and in all cases subject to prior consultation with Sara Lee, Strouse Adler shall notify its employees of the transactions contemplated hereby, and the Company shall issue one or more press releases, file forms 8-K and form 10-Q under the Exchange Act and describe the transactions contemplated hereby in the Proxy Statement and attach a copy of this Agreement and Additional Documents if required. 7.5 HART-SCOTT-RODINO FILINGS. (i) Each of Sara Lee, on the one hand, and Sellers, on the other hand, shall within ten business days after the date hereof, prepare and make all filings required pursuant to the notification and reporting obligations of HSR, and (ii) Sara Lee will pay two-thirds and Sellers will pay one-third of the filing fee under HSR. 7.6 BULK SALES COMPLIANCE. Except with respect to each Seller's obligations which comprise the Assumed Liabilities, each Seller shall pay in full from the proceeds of the Closing all sums due and owing its creditors. Purchaser and Sellers hereby waive compliance with any bulk sales law under any applicable uniform commercial code. Sellers shall jointly and severally indemnify and hold the S.L. Indemnified Parties harmless as provided in Article IX for any claim, liability or expense arising from or in connection with -37- non-compliance with any applicable bulk sales law as it pertains to the transactions contemplated hereby. 7.7 EMPLOYEES; 401(k) PLAN. 7.7.1 Each Seller shall use its best efforts to aid Purchaser in engaging such of Strouse Adler's employees at the Closing whom Purchaser desires to engage after the Closing. Purchaser agrees to offer employment (and to provide service credit for years of employment by Strouse Adler for purposes of eligibility or satisfaction of waiting periods for any benefits offered to such employees by Purchaser) to all those persons employed by Strouse Adler on the date hereof and at the time of Closing on a full-time basis, at levels of salary and benefits which, in the aggregate, are substantially comparable to the salary and benefits paid or provided to such persons by Strouse Adler at Closing (but excluding those benefits marked with an asterisk on SCHEDULE 5.25) so long as Strouse Adler is in compliance with the terms of this Agreement; provided, however that this Section 7.7 shall not obligate Purchaser with respect to any salary, severance or benefits payable or provided to Alfred Kniberg, Joyce Baran or Paul McDonald, it being agreed that Purchaser shall not assume any employment agreement between any such person and Strouse Adler, and shall use reasonable efforts to negotiate employment terms with each such individual (other than Paul McDonald who Sellers desire to retain in the employ of Strouse Adler or the Company). It is further agreed that Purchaser shall have no obligation under this Agreement to employ any person other than on an "at will" basis and that Purchaser shall offer former Strouse Adler employees hired by Purchaser severance upon termination of employment by Purchaser without cause in accordance with SCHEDULE 7.7 in the event such termination occurs within the first year of employment and subject to the condition that such persons deliver duly executed and effective general releases to Purchaser prior to payment of any such severance, including, without limitation, release of claims relating to discrimination on the basis of age, sex, race or any other matter. 7.7.2 Purchaser may, in its discretion, elect to assume the 401(k) Plan, in which event the parties will do all things necessary or appropriate as requested by Purchaser to accomplish Purchaser's adoption of the Plan; PROVIDED, HOWEVER, that in no event shall Purchaser be responsible for any liabilities or contributions relating to such 401(k) Plan which result from, arise in connection with or pertain to any act or omission of Strouse Adler on or prior to the Closing Date or any contributions relating to any period on or prior to the Closing Date (collectively "401(k) LIABILITIES"). If Purchaser elects to form a new plan, then at Purchaser's request, Strouse Adler shall cause the assets of the 401(k) Plan relating to those employees hired by Purchaser to be transferred to Purchaser's new plan. 7.8 ACCESS TO INFORMATION. Between the date of this Agreement and the Closing Date, upon reasonable notice and at reasonable times without significant disruption to the Business, Strouse Adler will give Sara Lee and its authorized representatives full access to all personnel, offices and other facilities, and to all Books and Records of Strouse Adler (including tax returns and accounting work papers) and will permit Sara Lee to make -38- copies thereof and will fully cooperate with regard to such inspections (in order to conduct, among other things, interviews of individuals, visual inspections of facilities, Phase I and, if necessary, with two business days' advance notice in consultation with Sellers, Phase II environmental assessments of the facilities) as it may reasonably request for any purpose, including, without limitation, verification that the representations and warranties were true when made and continue to be true through and including the Closing Date and will cause its officers to furnish Sara Lee such financial and operating data and other information with respect to the business and properties of Strouse Adler which Sara Lee may from time to time reasonably request. The representations and warranties of Sellers contained herein and in any Additional Documents shall not be deemed waived or otherwise affected by any such investigation made by Sara Lee or any of its representatives. 7.9 ALL REASONABLE EFFORTS. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done as promptly as practicable, all things necessary, proper and advisable under applicable laws and regulations to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement; PROVIDED, HOWEVER, that in no event shall Sara Lee be obligated to consider, or consummate, any sale, disposition, segregation or other arrangement affecting any assets or properties owned by Sara Lee, on the one hand, or by Strouse Adler, on the other hand, on account of the transactions contemplated by this Agreement, or any other action which would limit the freedom of Sara Lee and its Affiliates to own and operate their businesses, assets and properties as they see fit. 7.10 CONSENTS AND APPROVALS. Each party hereto shall (a) use reasonable efforts to obtain all necessary permits, consents, waivers, approvals, orders and authorizations of all Governmental Authorities and other persons or entities required to be obtained by such party hereto in connection with the execution, delivery and performance of this Agreement, the Additional Documents and the consummation of the transactions contemplated hereby or thereby by such party, (b) diligently assist and cooperate with the other parties hereto in preparing and filing all documents required to be submitted by the other parties hereto to any Governmental Authority in connection with the execution, delivery and performance of this Agreement, the Additional Documents and the consummation of the transactions contemplated hereby and thereby (which assistance and cooperation in the case of Sara Lee shall include timely furnishing to the Company all information concerning Sara Lee, which, in the opinion of counsel to the Company, is required to be included in such documents), and in obtaining any permits, consents, waivers, approvals, orders and authorizations which may be required to be obtained by Sara Lee in connection therewith, and (c) keep the other parties hereto apprised of the status of any inquiries made by any Governmental Authority with respect to this Agreement, the Additional Documents or the transactions contemplated hereby or thereby. 7.11 SUPPLEMENTS TO SCHEDULES. From time to time prior to the Closing, Sellers will promptly supplement or amend the Schedules to this Agreement with respect to -39- any matter which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such Schedules or which is necessary to correct any information in such Schedules which has been rendered inaccurate thereby. No supplement or amendment shall have any effect for the purpose of determining (i) satisfaction of the conditions to Closing set forth in Section 10.1.1 hereof, (ii) the compliance by Sellers with the covenants of Sellers set forth herein, or (iii) whether Sellers shall have breached any representation or warranty of Sellers contained herein. 7.12 ATTORNEY-IN-FACT. Effective as of the Closing, Strouse Adler hereby appoints Purchaser as its agent and attorney-in-fact to endorse any checks received by Purchaser in payment of Accounts Receivable comprising part of the Purchased Assets, and agrees to remit to Purchaser, promptly upon receipt thereof and in a form duly endorsed to Purchaser, all checks received by Strouse Adler in payment of any such Accounts Receivable. 7.13 POTENTIAL SUCCESSOR TAXES. Unless otherwise directed by Purchaser, Sellers shall give all required notices and make all required filings, on behalf of Purchaser when required, of the transactions contemplated hereby, including, without limitation, pursuant to Title 12, Chapter 219 of the Connecticut General Statutes. If Sellers do not provide to Purchaser at Closing all appropriate tax clearances and certificates, then Purchaser shall deduct from the Purchase Price, as provided in Section 3.1, the amount of the Potential Successor Taxes, and Purchaser shall thereafter cause such Taxes to be paid, to the extent of such deduction, on Strouse Adler's behalf. 7.14 5500 FILINGS. Seller shall cause to be timely filed prior to the Closing, in accordance with applicable laws and following review by Purchaser, Form 5500 filings applicable to the 401(k) Plan (for Plan years ended September 30, 1997 and December 31, 1997) and to the Strouse Adler Company Employee Welfare Benefit Plan. ARTICLE VIII RESTRICTIVE COVENANTS. In consideration of the Purchase Price and $5,000,000.00 payable in full by Purchaser to the Company at the Closing by wire transfer of immediately available funds, Sellers covenant with Purchaser as follows: 8.1 RESTRICTIONS. Sellers acknowledge that Purchaser has paid valuable consideration for the assets of Strouse Adler, particularly customer and supplier lists, distribution records, know-how, goodwill and other proprietary business information and trade secrets of Strouse Adler. The use by either Seller of these relationships and such confidential information in a business or activity which competes with Purchaser or a Related Affiliate would provide the competing business with an unfair advantage over Purchaser or such Related Affiliate. Accordingly, Purchaser wishes to restrict Sellers' use of such information and their ability to compete with Purchaser and its Related Affiliates. Sellers agree, for the Purchase Price described in Article III, to comply with the terms of this Agreement, all of which are reasonable and necessary to protect the confidential business information and trade secrets being acquired by Purchaser and to prevent any unfair -40- advantage from being conferred upon a competing business of Purchaser or a Related Affiliate, as set forth below. 8.2 NON-COMPETITION. For a period of five years from the date hereof, neither Seller shall, directly or indirectly, either by itself, or as a stockholder, partner, associate, consultant, owner, agent, creditor, coventurer of any other person or entity, or in any other capacity, directly or indirectly, engage in the business of manufacturing, marketing, distributing and/or selling, on a wholesale basis, women's intimate apparel and any other product serviced, distributed or sold or similar to products serviced, distributed or sold by Strouse Adler on the Closing Date or within a two-year period prior to the Closing Date (each a "PROHIBITED BUSINESS") within the Prohibited Area; provided that nothing herein shall prohibit either Seller from being an owner of not more than 1% of the outstanding stock of any class of a corporation which is publicly traded, so long as neither Seller actively participates in the business of such corporation. The term "PROHIBITED AREA" shall mean North America and the Caribbean. The term "RELATED AFFILIATE" means any Affiliate of Purchaser which engages in a Prohibited Business. Sellers further agree that neither of them shall directly or indirectly engage in any business at any time under a trademark or trade name that is confusingly similar to or may connote an association with "STROUSE ADLER", or any other trademark, trade name or logo of Strouse Adler acquired by Purchaser pursuant to this Agreement. 8.3 NON INTERFERENCE WITH BUSINESS RELATIONS. For a period of five years after the Closing Date, neither Seller shall, directly or indirectly, without the written consent of Purchaser, solicit, induce or attempt to solicit or induce any supplier, licensee or other business relation of Purchaser or its Affiliates to cease doing business with Purchaser or its Affiliates, or in any way interfere with the relationship between any customer or business relation of Purchaser or its Affiliates. 8.4 SOLICITATION OF CUSTOMERS AND EMPLOYEES. For a period of five years after the Closing Date, neither Seller shall, directly or indirectly, on behalf of itself, or as a stockholder, partner, consultant, adviser, owner, associate, agent, creditor, coventurer of any other person or entity, or in any other capacity, (i) sell to or solicit sales of Products from any customer or account which was a customer or account of Strouse Adler as of the Closing Date or within one year prior thereto, or (ii) solicit, hire, attempt to solicit or hire, or participate in any attempt to solicit or hire any person who was an employee of Strouse Adler or any of their respective Affiliates as of the Closing Date or within the six-month period prior thereto, except for such employees which Purchaser does not offer to hire or hired by Purchaser and whose employment Purchaser has terminated at its election. As used herein, "PRODUCTS" shall mean women's intimate apparel and any other product distributed, serviced or sold by Strouse Adler at the time, or within two years prior to, the Closing Date. 8.5 CONFIDENTIAL INFORMATION. Each Seller recognizes that Purchaser's business interests require the fullest practical protection and confidential treatment of all information not generally known within the relevant trade group or by the public, including -41- all documents, writings, memoranda, business plans, illustrations, designs, plans, processes, programs, inventions, computer software, reports, sources of supply, customer lists, supplier lists, trade secrets, and all other valuable or unique information and techniques acquired, developed or used by Strouse Adler relating to its businesses, operations, employees and customers (hereinafter collectively termed "PROTECTED INFORMATION"). Each Seller expressly acknowledges and agrees that Protected Information constitutes trade secrets, confidential and proprietary business information of Purchaser. Protected Information shall not include information which is or becomes part of the public domain through no breach of this Agreement by either Seller. Each Seller acknowledges that Protected Information is essential to the success of business, and it is the policy of Purchaser to maintain as secret and confidential Protected Information, which gives Purchaser a competitive advantage over those who do not know the Protected Information and is expressly and implicitly protected by Purchaser from unauthorized disclosure. Accordingly, each Seller agrees to hold such Protected Information in a fiduciary capacity, to keep secret and to treat confidentially and not to, and not to permit any other person or entity to, directly or indirectly, appropriate, divulge, disclose or otherwise disseminate to any other person or entity nor use in any manner for either Seller's or any other person's or entity's purposes or benefit any Protected Information, and not to use or aid others in using any such Protected Information in competition with Purchaser or a Related Affiliate except to the extent that disclosure is required by law; provided, however, that Sellers shall provide Sara Lee with notice as far in advance of any required disclosure as is practicable in order for Sara Lee to obtain an order or other assurance that any information required to be disclosed will be treated as Protected Information and Sellers shall use all reasonable efforts to cooperate with Sara Lee in connection therewith and in furtherance thereof. This obligation of non-disclosure of information shall continue to exist for so long as such information remains Protected Information. For purposes of this Agreement, trade secrets are subject to the protection of the Illinois Trade Secret Act. 8.6 SCOPE. If, at the time of enforcement of this Section 8, a court shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area. 8.7 REMEDIES. Each Seller agrees that if it shall commit or threaten to commit a breach of any of the covenants and agreements contained in this Section 8, then Purchaser shall have the right to seek and obtain all appropriate injunctive and other equitable remedies therefor, in addition to any other rights and remedies that may be available at law, it being acknowledged and agreed that any such breach would cause irreparable injury to Purchaser and that money damages would not provide an adequate remedy therefor. 8.8 DISSOLUTION. The Company shall not voluntarily dissolve, liquidate, or otherwise terminate its corporate existence, or distribute more than 20% of the net proceeds -42- from the sale contemplated by this Agreement to its respective stockholders, prior to the end of the Indemnification Period. ARTICLE IX INDEMNIFICATION. 9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The respective representations, warranties and covenants of each of the parties to this Agreement, including all statements contained in any Schedule delivered pursuant hereto, shall be deemed to be material and to have been relied upon by the parties hereto, and shall survive the Closing, and the consummation of the transactions contemplated hereby, regardless of any investigation made by or on behalf of, or disclosure to, any party to whom such representations, warranties or covenants have been made. No party or other person or entity entitled to indemnification under this Article IX shall commence any suit or proceeding alleging a Third Party Claim due to a breach of any representation or warranty in Article IV or V of this Agreement after the period ending September 1, 1999, subject to extension as provided below, except insofar as (i) any party or other person or entity entitled to indemnification under this Article shall have asserted in writing a specific Third Party Claim prior to the expiration of such eighteen-month period, in which event the representations and warranties shall continue in effect and remain a basis for indemnity with respect to each such asserted Third Party Claim until such Claim is finally resolved (pursuant to a non-appealable order by a court of competent jurisdiction or agreement of Sellers and Purchaser) (said period ending September 1, 1999 as extended hereby being called the "INDEMNIFICATION PERIOD"), or (ii) any Third Party Claim relating to Sections 5.1, 5.2, 5.3, 5.12, 6.1 and 6.2, it being agreed that the representations and warranties of those Sections shall continue indefinitely beyond the eighteen-month anniversary of the Closing Date (regardless of whether the facts giving rise to such claim are also the subject of any expired representation and warranty). The rights and remedies of any person or entity based upon, arising out of or otherwise in respect of any inaccuracy in or breach of any representation, warranty, covenant or agreement contained in this Agreement, including, without limitation, the right of S.L. Indemnified Parties to be indemnified for Excluded Liabilities, shall in no way be limited by the fact that the act, omission, occurrence or other state of facts upon which any claim of any such inaccuracy, breach or indemnity is based may also be the subject matter of any representation, warranty, covenant or agreement contained in this Agreement or any Additional Document as to which there is no inaccuracy or breach or as to which the Basket or Cap applies, or as to which the Indemnification Period has expired. 9.2 SELLERS' INDEMNIFICATION. Sellers, acting jointly and severally, shall indemnify and hold harmless Purchaser and its Affiliates and their respective officers, directors, stockholders, agents, successors and assigns (collectively, "S.L. INDEMNIFIED PARTIES"), from and against and in respect of any and all demands, claims, causes of action, administrative orders and notices, losses, costs, fines, liabilities, penalties, damages (direct or indirect) and expenses (including, without limitation, reasonable legal, paralegal, accounting and consultant fees and other expenses incurred in the investigation and defense -43- of claims and actions) (hereinafter collectively called "LOSSES") resulting from, in connection with or arising out of: (a) any incorrect representation or warranty made by Sellers in Article V of this Agreement or in any Additional Document delivered by Sellers in connection herewith or therewith; (b) the failure of either Seller to comply with, or the breach by either Seller or any of the Stockholders of, any of the covenants of this Agreement or any Additional Document; (c) any Excluded Liabilities; (d) any failure to comply with any so-called "BULK SALES" laws applicable to the transactions contemplated hereby; (e) any claim, action, suit or proceeding initiated by or on behalf of any stockholder of the Company (in his, her or its capacity as a stockholder) against Purchaser in connection with any communication to, or failure to communicate to, any stockholder of the Company by the Company or any of its Representatives; (f) any claim, action, suit or proceeding arising from or related to the presence, generation, emission, storage, treatment, transport or disposal of any Hazardous Substance from, to, at, in, on or under any facility owned or used by Strouse Adler on or before the Closing Date and liabilities arising from violations of Environmental Laws; and (g) any claim, action, suit or proceeding relating to any of the foregoing. 9.3 PURCHASER'S INDEMNIFICATION. Purchaser shall indemnify and hold harmless each Seller and its Affiliates and their respective officers, directors, stockholders, agents, successors and assigns, from and against and in respect of any and all Losses resulting from, in connection with or arising out of: (a) any incorrect representation or warranty made by Purchaser in Article VI of this Agreement or in any Additional Document delivered by Purchaser in connection herewith or therewith; (b) the failure of Purchaser to comply with, or the breach by Purchaser of, any of the covenants of this Agreement or any Additional Document; and (c) any claim, action, suit or proceeding relating to any of the foregoing. -44- 9.4 COOPERATION. Subject to the provisions of Section 9.5, a party or parties against whom a claim for indemnification has been asserted (individually and collectively "INDEMNIFYING PARTY") shall have the right, at its own expense, to participate in the defense of any action or proceeding brought by a third party which resulted in said claim for indemnification, and if said right is exercised, the party or parties entitled to indemnification (individually and collectively "INDEMNIFIED PARTY") and the Indemnifying Party shall cooperate in the defense of said action or proceeding. 9.5 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS AGAINST INDEMNIFIED PARTIES. 9.5.1 In the event that subsequent to the Closing Date any Indemnified Party asserts a claim for indemnification under this Article IX, on account of or in connection with any claim or the commencement of any action or proceeding against such Indemnified Party by any person or entity who is not a party to this Agreement (including any Governmental Authority) (a "THIRD PARTY CLAIM"), the Indemnified Party shall promptly give written notice thereof together with a statement of any available information regarding such claim (the "NOTICE OF CLAIM") to the Indemnifying Party promptly after learning of such Third Party Claim. If the Indemnifying Party is one or both Sellers and the potential aggregate amount of such Third Party Claim, together with all other pending Third Party Claims for which indemnity is being sought against one or more of them, is or is reasonably expected to be $100,000.00 or less, and such Claim does not seek injunctive or other equitable relief involving Sara Lee or its Affiliates, or if Sara Lee's insurance carrier does not require, as a condition to Sara Lee's eligibility to recover insurance proceeds on account of such Third Party Claim, that such carrier control the defense of any such Claim, or if the Indemnifying Party is Sara Lee, then in any such case, the Indemnifying Party shall have the right, upon written notice to the Indemnified Party (the "DEFENSE NOTICE") within fifteen days of its receipt from the Indemnified Party of the Notice of Claim, to conduct at its expense the defense against such Claim in its own name, or, if necessary, in the name of the Indemnified Party; provided, however, that the Indemnified Party shall have the right to approve the defense counsel representing the Indemnifying Party in such defense, which approval shall not be unreasonably withheld or delayed, and in the event the Indemnifying Party and the Indemnified Party cannot agree upon such counsel within ten days after the Defense Notice is provided, then the Indemnifying Party shall propose an alternate defense counsel, which shall be subject again to the Indemnified Party's approval, which approval shall not be unreasonably withheld or delayed. 9.5.2 In the event that the Indemnifying Party shall fail to give the Defense Notice within the time and as prescribed by Section 9.5.1, or if the Indemnifying Party does not have the right to defend such Third Party Claim pursuant to Section 9.5.1, then in either such event the Indemnified Party shall have the right to conduct such defense in good faith with counsel reasonably acceptable to the Indemnifying Party, but the Indemnified Party (or any insurance carrier defending such Third Party Claim on the Indemnified Party's behalf) shall be prohibited from compromising or settling the claim -45- without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. 9.5.3 In the event that the Indemnifying Party does deliver a Defense Notice and thereby elects to conduct the defense of such Third Party Claim in accordance with Section 9.5.1, the Indemnified Party will cooperate with and make available to the Indemnifying Party such assistance and materials as it may reasonably request, all at the expense of the Indemnifying Party. Regardless of which party defends such Third Party Claim, the other party shall have the right at its expense to participate in the defense assisted by counsel of its own choosing. Without the prior written consent of the Indemnified Party, the Indemnifying Party (and any insurance carrier defending such Third Party Claim on the Indemnified Party's behalf) will not enter into any settlement of any Third Party Claim if pursuant to or as a result of such settlement, such settlement would lead to liability or create any financial or other obligation on the part of the Indemnified Party for which the Indemnified Party is not entitled to indemnification hereunder. If a firm offer is made to settle a Third Party Claim, which offer the Indemnifying Party is permitted to settle under this Section 9.5, and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party will give written notice to the Indemnified Party to that effect. If the Indemnified Party objects to such firm offer within ten days after its receipt of such notice, the Indemnified Party may continue to contest or defend such Third Party Claim and, in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim will not exceed the amount of such settlement offer, plus costs and expenses paid or incurred by the Indemnified Party up to the point such notice had been delivered. Failure at any time of the Indemnifying Party to diligently defend a Third Party Claim as required herein shall entitle the Indemnified Party to assume the defense and settlement of said Third Party Claim as if the Indemnifying Party had never elected to do so as provided in this Section. Failure by an Indemnified Party to provide notice on a timely basis of a Third Party Claim shall not relieve the Indemnifying Party of its obligations hereunder, except that the foregoing shall not constitute a waiver by the Indemnifying Party of any claim for direct damages caused by such delay. 9.5.4 Any judgment entered or settlement agreed upon in the manner provided herein shall be binding upon the Indemnifying Party, and shall be conclusively deemed to be an obligation with respect to which the Indemnified Party is entitled to prompt indemnification hereunder, subject to the Indemnifying Party's right to appeal an appealable judgment or order. 9.5.5 For purposes of this Section 9.5 and the actions and decisions to be made by Sellers, the Company shall be deemed to be the representative of Sellers and the S.L. Indemnified Parties shall be entitled to rely exclusively on the acts and omissions of the Company with respect to actions to be taken by, or inferences from omissions of, either Seller, in their capacity, collectively or individually, as the Indemnifying Party. -46- 9.6 NATURE OF OTHER LIABILITIES. In the event any Indemnified Party should have a claim against any Indemnifying Party hereunder which does not involve a Third Party Claim, the Indemnified Party shall transmit to the Indemnifying Party a written notice (the "INDEMNITY NOTICE") describing in detail the nature of the claim, and the basis of the Indemnified Party's request for indemnification under this Agreement. If the Indemnifying Party does not notify the Indemnified Party within 30 days from its receipt of the Indemnity Notice that the Indemnifying Party disputes such claim, the claim specified by the Indemnified Party in the Indemnity Notice shall be deemed a liability of the Indemnifying Party hereunder. 9.7 BASKET; CAP. Sellers shall not be obligated to indemnify S.L. Indemnified Parties pursuant to Section 9.2(a) of this Agreement on account of any breach of representations or warranties under this Agreement (i) unless claims for indemnification against Sellers on account of any such breach of representations or warranties exceed in the aggregate $400,000.00 (the "BASKET"), at which point Purchaser shall be entitled to indemnification for all Losses relating to any breach of representations or warranties beginning with the first dollar of Losses, or (ii) for Losses in excess of the Purchase Price ("CAP"). No adjustments to the Purchase Price to be made under Section 3.2 hereof and no payment payable under any other provision of Section 9.2, other than Section 9.2(a), as the case may be, shall be counted in calculating the Basket. ARTICLE X CONDITIONS TO CLOSING. 10.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. All obligations of Purchaser under this Agreement are subject to the fulfillment, at or prior to the Closing, of the following conditions, any one or more of which may be waived by Purchaser: 10.1.1 REPRESENTATIONS AND WARRANTIES OF SELLERS. All representations and warranties made by Sellers in this Agreement and the Stockholders in the Additional Documents shall be true and correct in all material respects on and as of the Closing Date and as of the time of the Closing, as if again made by each Seller on and as of such dates. 10.1.2 PERFORMANCE OF SELLERS' AND STOCKHOLDERS' OBLIGATIONS. Each Seller and Stockholder shall have delivered all documents and agreements to which it is a party or signatory described in Section 4.2 and each Seller and the Stockholders shall have otherwise performed in all respects all obligations required under this Agreement and the Additional Documents to be performed by it or them on or prior to the Closing Date. 10.1.3 CONSENTS AND APPROVALS. All consents, waivers, authorizations and approvals required in connection with the execution, delivery and performance of this Agreement and the transfer to Purchaser of all of the Purchased Assets and the assumption by Purchaser of the Assumed Liabilities, as contemplated hereby shall have been duly obtained, including, without limitation, the affirmative vote of the stockholders described in Section 5.38, unless waived in writing by Purchaser. -47- 10.1.4 PENDING PROCEEDINGS. No action or proceeding shall be pending before any court or Governmental Authority seeking to restrain or prohibit or obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby (including, without limitation, the Additional Documents) or the proposed operation of the Business by Purchaser. 10.1.5 BOARD APPROVAL. The Board of Directors of Sara Lee shall have approved this transaction by March 31, 1998. 10.1.6 EXPIRATION OF WAITING PERIOD. The statutory waiting period required under HSR shall have expired and neither the DOJ nor the FTC shall have taken any action to enjoin or delay the consummation of the transactions contemplated hereby or require the sale or divestiture of any of the Purchased Assets. 10.1.7 NO MATERIAL ADVERSE CHANGE. During the period from the date hereof to the Closing, there shall have been no Material Adverse Effect. 10.1.8 OTHER CLOSING DOCUMENTS. Purchaser shall have received such other certificates, instruments and documents, reasonably satisfactory in form and substance to Purchaser, in confirmation of the representations and warranties of each Seller or in furtherance of the transactions contemplated by this Agreement and the Additional Agreements as Purchaser or its counsel may reasonably request, including, without limitation, agreements duly signed by each employee of Strouse Adler who has an employment agreement with Strouse Adler and who is hired by Purchaser at Closing (it being understood, however, that such hiring is not a condition to Closing) to the effect that such employee has no claims against Purchaser or its Affiliates on account of any liability owed to such employee by Strouse Adler, except for accrued vacation to the extent reflected on the Closing Statement and accrued management bonus to the extent provided in Section 3.2.2. 10.2 CONDITIONS TO OBLIGATIONS OF SELLERS. All obligations of Sellers under this Agreement are subject to the fulfillment, at or prior to the Closing, of the following conditions, any one or more of which may be waived by Sellers: 10.2.1 REPRESENTATIONS AND WARRANTIES OF PURCHASER. All representations and warranties made by Purchaser in this Agreement and the Additional Documents shall be true and correct in all material respects on and as of the Closing Date and as of the time of Closing, as if again made by Purchaser on and as of such dates. 10.2.2 PERFORMANCE OF PURCHASER'S OBLIGATIONS. Purchaser shall have delivered all documents and agreements described in Section 4.3 and otherwise performed in all respects all obligations required under this Agreement and the Additional Documents to be performed by it on or prior to the Closing Date. -48- 10.2.3 CONSENTS AND APPROVALS. The affirmative vote as set forth in Section 5.38 shall have been duly obtained. 10.2.4 PENDING PROCEEDINGS. No action or proceeding against either Seller shall be pending before any court or Governmental Authority seeking to restrain or prohibit, or obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby (including, without limitation, the Additional Documents); PROVIDED, HOWEVER, that each Seller shall be obligated to perform hereunder, notwithstanding this Section 10.2.4 if, in the event of such an action or proceeding, Purchaser agrees to indemnify Sellers in accordance with Article IX hereof for all costs, expenses and damages incurred by either of them in connection with or as a result of such action or proceeding. 10.2.5 EXPIRATION OF WAITING PERIOD. The statutory waiting period required under HSR shall have expired and neither the DOJ nor the FTC shall have taken any action to enjoin or delay the consummation of the transactions contemplated hereby or require the sale or divestiture of any of the Purchased Assets. 10.2.6 OTHER CLOSING DOCUMENTS. Sellers shall have received such other certificates, instruments and documents, reasonably satisfactory in form and substance to Sellers, in confirmation of the representations and warranties of Purchaser or in furtherance of the transactions contemplated by this Agreement as Sellers or their counsel may reasonably request. ARTICLE XI POST-CLOSING OBLIGATIONS. 11.1 SUBROGATION. In the event that Purchaser shall suffer any damage with respect to any matter which was covered by insurance maintained by Strouse Adler at or prior to the Closing, Sellers agree that Purchaser shall be and hereby is subrogated to any rights of Strouse Adler under such insurance coverage, and, in addition, Sellers agree promptly to remit to Purchaser any insurance proceeds which Strouse Adler may receive on account of any such damage, but not to exceed the amount of all costs and damages incurred by Purchaser in connection with such matter; it being agreed, however, that to the extent Purchaser receives such insurance proceeds as part of the Purchased Assets (in lieu of any Purchased Asset), the Closing Date Balance Sheet shall reflect such proceeds. 11.2 USE OF MARKS. As of the Closing, each Seller shall cease to use any of the Purchased Assets, including, without limitation, logos, marks and other Intellectual Property comprising a part thereof. 11.3 COLLECTION OF ACCOUNTS. If after the date hereof either Seller shall receive any payment on any Accounts Receivable acquired by Purchaser hereunder, such Seller shall forward such payment to Purchaser within five business days after such Seller's -49- receipt thereof, together with any endorsement required so as to permit Purchaser to collect on such Accounts Receivable. 11.4 FURTHER ASSURANCES. (a) Upon the request of Purchaser at any time after the Closing, each Seller will forthwith execute and deliver such instruments of assignment, transfer, conveyance, endorsement, direction or authorization and other documents as Purchaser or its counsel may request in order to perfect title of Purchaser and its successors and assigns to the Purchased Assets or otherwise to effectuate the purposes of this Agreement. (b) Upon the request of either Seller at any time after the Closing, Purchaser will forthwith execute such instruments of assumption and other documents as Sellers or their counsel may request to effectuate the purposes of this Agreement. ARTICLE XII TERMINATION AND ABANDONMENT. 12.1 METHODS OF TERMINATION. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing: (a) by the mutual written consent of Purchaser and Sellers; or (b) by Purchaser, if all of the conditions set forth in Section 10.1 of this Agreement shall not have been satisfied or waived on or prior to September 15, 1998; provided, however, that Purchaser shall not have the right to terminate this Agreement pursuant to this subsection if such conditions have not been satisfied due to Purchaser's breach of this Agreement; or (c) INTENTIONALLY OMITTED; (d) by Sellers, if all of the conditions set forth in Section 10.2 of this Agreement shall not have been satisfied or waived on or prior to September 15, 1998; provided, however, that Sellers shall not have the right to terminate this Agreement pursuant to this subsection if such conditions have not been satisfied due to either Seller's breach of this Agreement; or (e) by either Purchaser or the Company if Sara Lee's Board of Directors has not approved this Agreement on or before March 31, 1998; or (f) by Purchaser if either Seller or either Seller's Board of Directors or any Representative of either Seller breaches this Agreement, including, without limitation, by engaging in any conduct or act described in clause (iii) of Section 7.3(b); or -50- (g) by Purchaser if the condition specified in Section 10.2.3 requiring the stockholder approval described in Section 5.38 is not satisfied at the time of the Stockholders Meeting; or (h) subject to Sellers' compliance with Section 7.3, by Sellers no sooner than 14 days after the Stockholders Meeting if the condition specified in Section 10.2.3 requiring the stockholder approval described in Section 5.38 is not satisfied at such Meeting; or (i) by Purchaser if either Seller or the Board of Directors of either Seller engages in any conduct or act described in clause (i) or (ii) of Section 7.3(b). 12.2 INTENTIONALLY OMITTED. 12.3 PROCEDURE UPON TERMINATION. In the event of termination of this Agreement by Sellers or Purchaser pursuant to this Article XII, written notice thereof shall forthwith be given to the other parties and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned, without further action by any party to this Agreement. If this Agreement is so terminated, no party to this Agreement shall have any right or claim against another party on account of such termination unless this Agreement is terminated by a party on account of the breach of any representation, warranty, term or covenant herein by the other party or parties (including, without limitation, the respective Representatives and Boards of Directors of Sellers) or on account of circumstances which give rise to payment obligations under Section 12.4, in which case the terminating party or parties shall be entitled to all of its rights and remedies at law or in equity. The agreements set forth in this Section 12.3, Section 12.4, Article IX and Article XIII shall survive the termination of this Agreement. 12.4 TERMINATION EXPENSES AND FEES. Sara Lee shall be entitled to receive a fee in cash in an amount equal to $995,000.00 (the "TERMINATION FEE") and reimbursement of the Termination Expenses, if: (i) this Agreement is terminated pursuant to Section 12.1(i); or (ii) at any time after the receipt of an Acquisition Proposal which the Company's Board of Directors entertains or which, directly or indirectly, is communicated to the Stockholders of the Company or in any other manner becomes public, this Agreement is terminated pursuant to Section 12.1(g) or 12.1(h); or (iii) this Agreement is terminated pursuant to Section 12.1(f); or (iv) at any time during the twelve-month period following the termination of this Agreement pursuant to Section 12.1(b) (other than on account of a failure of a condition described in Section 10.1.5 or 10.1.6 to have been satisfied) or pursuant to Section 12.1(d) (other than on account of a failure of the condition described in Section 10.2.5 to have been satisfied), either Seller enters into any agreement involving a Significant Transaction. As used in this Agreement, the term "TERMINATION EXPENSES" means Sara Lee's and its Affiliates' out-of-pocket fees and expenses, not to exceed $500,000.00, (including, without limitation, legal and investment banking and commercial banking fees and -51- expenses) actually incurred in connection with (x) this Agreement and the transactions contemplated hereby, (y) due diligence investigation, and (z) the negotiation and execution of this Agreement and all Additional Documents contemplated hereby. Sellers shall be jointly and severally liable for payment of the Termination Fee and the Termination Expenses. The Termination Fee shall be payable to Sara Lee within two business days after the occurrence of any of the events set forth in subclauses (i) through (iv) of this Section 12.4 and the Termination Expenses shall be paid promptly but in no event later than two business days after Purchaser furnishes the Company with documentation supporting such Expenses. ARTICLE XIII MISCELLANEOUS PROVISIONS. 13.1 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors, heirs, representatives and assigns, as the case may be; provided, however, that no party shall assign or delegate this Agreement or any of the rights or obligations created hereunder without the prior written consent of the other party. Notwithstanding the foregoing, Purchaser shall have the unrestricted right to assign this Agreement and all or any part of its rights hereunder and to delegate all or any part of its obligations hereunder to any transferee, lender, subsidiary or Affiliate of Purchaser, but in such event Purchaser shall remain fully liable for the performance of all of such obligations in the manner prescribed in this Agreement. Nothing in this Agreement shall confer upon any person or entity not a party to this Agreement, or the legal representatives of such person or entity, any rights (including, without limitation, rights as a third party beneficiary) or remedies of any nature or kind whatsoever under or by reason of this Agreement. 13.2 EXPENSES. Except as otherwise provided in this Agreement, including Section 12.4, and except with respect to HSR filing fees which shall be paid in accordance with Section 7.5, Sellers shall bear all expenses incurred on their behalf in connection with the preparation, execution and performance of this Agreement, the Additional Documents and the transactions contemplated hereby and thereby, and Purchaser shall bear all expenses of such nature incurred on its own behalf. 13.3 TITLE; RISK OF LOSS. Legal title, equitable title and risk of loss with respect to the Purchased Assets shall not pass to Purchaser until the Purchased Assets are transferred at the Closing. 13.4 NOTICES. All notices, requests and other communications to any party hereunder shall be in writing (including telecopier or facsimile or similar writing), shall be given to such party at its address or facsimile number set forth below or at such other addresses as shall be furnished by any party by like notice to the others. Except as otherwise expressly provided herein, each such notice, request or other communication shall be effective upon the earlier of (i) actual receipt, and (ii) receipt of confirmation of delivery, in each case at the address specified in this Section. Any notice, request or communication -52- delivered by telecopier, facsimile or similar means shall be confirmed by hard copy delivered as soon as practicable. (a) if to Purchaser, to: Sara Lee Corporation Three First National Plaza Chicago, Illinois 60622 Attention: Janet Langford Kelly Senior Vice President, Secretary and General Counsel Fax No. 312-419-3187 (b) if to Sellers, to: The Aristotle Corporation c/o Mintz Levin Cohn Ferris Glovsky and Popeo PC One Financial Center Boston, Massachusetts 02111 Attention: Stanford N. Goldman, Jr. Fax No. 617-542-2241 or such other address or persons as the parties may from time to time designate in writing in the manner provided in this Section 13.4. 13.5 ENTIRE AGREEMENT. This Agreement, together with the Exhibits attached hereto and the Schedules, represent the entire agreement and understanding of the parties hereto with reference to the transactions contemplated herein and therein, and no representations, warranties or covenants have been made in connection with this Agreement other than those expressly set forth herein. This Agreement supersedes all prior negotiations, discussions, correspondence, communications, understandings and agreements among the parties relating to the subject matter of this Agreement and all prior drafts thereof, all of which are merged into this Agreement or such other agreements, as the case may be, except for the Confidentiality Agreement dated December 22, 1997, the terms of which shall continue notwithstanding execution of this Agreement. 13.6 WAIVERS, AMENDMENTS AND REMEDIES. This Agreement may be amended, superseded, cancelled, renewed or extended, and the terms hereof may be waived, and consents may be provided, only by a written instrument signed by Purchaser and Sellers or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any waiver on the part of any party of any such right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege. The rights and remedies -53- herein provided are cumulative and are not exclusive of any rights or remedies that any party may otherwise have at law or in equity. The rights and remedies of any party based upon, arising out of or otherwise in respect of any inaccuracy in or breach of any representation, warranty, covenant or agreement contained in this Agreement or any Additional Document shall in no way be limited by the fact that the act, omission, occurrence or other statement of facts upon which any claim of any such inaccuracy or breach is based may also be the subject matter of any other representation, warranty, covenant or agreement contained in this Agreement (or in any other agreement among the parties) as to which there is no inaccuracy or breach. Notwithstanding anything herein to the contrary, if either Seller has dissolved or liquidated, then the consent, waiver or the like of such Seller shall be deemed properly given if such consent, waiver or the like has been given by the other Seller. Also, the consent, approval or waiver of the Company shall constitute consent, approval or waiver of Strouse Adler. 13.7 SEVERABILITY. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. 13.8 SECTION HEADINGS. The section headings contained in this Agreement are solely for convenience of reference and shall not affect the meaning or interpretation of this Agreement or of any term or provision hereof. 13.9 COUNTERPARTS; TERMS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement. All references herein to Articles, Sections, Subsections, clauses, Exhibits and Schedules shall be deemed references to such parts of this Agreement, unless the context shall otherwise require. All references to singular or plural or masculine or feminine shall include the other as the context may require. 13.10 GOVERNING LAW; CONSENT TO JURISDICTION; VENUE. This Agreement shall be governed by, and construed in accordance with the internal laws (as opposed to conflicts of law provisions) of the State of Delaware; provided, however, that any interpretation or application of Section 8.5 shall be governed by the Illinois Trade Secret Act. As a further inducement to Purchaser to enter into this Agreement and the Additional Documents, and in consideration thereof, Sellers agree (i) that any state or federal court within New Castle County, Delaware shall have exclusive jurisdiction of any action or proceeding relating to, or arising under or in connection with this Agreement and the Additional Documents and Sellers consent to personal jurisdiction of such courts and waive any objection to such courts' jurisdiction, (ii) that service of any summons and complaint or other process in any such action or proceeding may be made by registered or certified mail directed to Sellers at the address set forth in Section 13.4 above, and service so made shall be deemed to be completed upon the earlier of actual receipt or three days after the same shall have been posted as aforesaid, Sellers hereby waiving personal service thereof. The parties hereto agree that any claim or suit between or among any of the parties hereto relating to or arising -54- under or in connection with this Agreement or any of the Additional Documents may only be brought in and decided by the state or federal courts located in the County of New Castle, State of Delaware, such courts being a proper forum in which to adjudicate such claim or suit, and each party hereby waives any objection to each such venue and waives any claim that such claim or suit has been brought in an inconvenient forum. 13.11 DOCUMENTATION. This Agreement and the Additional Documents were initially prepared by Purchaser's legal counsel as a matter of convenience only, and such documents have been thoroughly reviewed by Sellers and their respective legal counsel and the input of Sellers and their legal counsel was properly considered, and, therefore, no interpretation will be made in favor of any of the parties or signatories or any of their Affiliates with respect to this Agreement and the Additional Documents for the reason that such documents were prepared by Purchaser's legal counsel. 13.12 EXHIBITS AND SCHEDULES. The Exhibits attached hereto are a part of this Agreement as if fully set forth herein. The Schedules referred to herein mean the schedules set forth in that certain letter agreement, of even date herewith, being furnished to Purchaser by Sellers. 13.13 WAIVERS OF TRIAL BY JURY. SELLERS AND PURCHASER HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE ADDITIONAL DOCUMENTS, AND CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. -55- IN WITNESS WHEREOF, Purchaser and Sellers have caused this Agreement to be signed as of the date first written above. SARA LEE CORPORATION, a Maryland corporation By: /s/ Mark McCarville -------------------------------- Name: Mark McCarville Title: Senior Vice President THE ARISTOTLE CORPORATION, a Delaware corporation By: /s/ John Crawford -------------------------------- Name: John Crawford Title: Chairman THE STROUSE, ADLER COMPANY, a Delaware corporation By: /s/ John Crawford -------------------------------- Name: John Crawford Title: Chairman -56- EXHIBIT A DEFINED TERMS The following terms shall have the meanings as ascribed to them or referenced below: ACCOUNTS RECEIVABLE shall have the meaning set forth in Section 1.1.2 ACCRUED BONUS AMOUNT shall mean the amount of management bonus accrued for any period up to and including June 30, 1998 and reflected on Strouse Adler's most recent monthly balance sheet prior to the Closing. ACQUISITION PROPOSALS shall have the meaning set forth in Section 7.3(a) ADDITIONAL DOCUMENTS shall have the meaning set forth in Section 2.2.3 AFFILIATES shall mean a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, another person or entity. AGREEMENT shall have the meaning set forth in the Preamble ASSUMED LIABILITIES shall have the meaning set forth in Section 2.1 AUDITED STATEMENTS shall have the meaning set forth in Section 5.6 BALANCE SHEET shall have the meaning set forth in Section 5.6 BASKET shall have the meaning set forth in Section 9.7 BONUS PLAN shall have the meaning set forth in Section 3.2.2. BONUS RECIPIENTS shall have the meaning set forth in Section 3.2.2. BOOKS AND RECORDS shall have the meaning set forth in Section 1.1.5 BUSINESS shall have the meaning set forth in the Recitals CAP shall have the meaning set forth in Section 9.7. CASH AND CASH EQUIVALENTS shall have the meaning set forth in Section 1.1.1 CLAIMS shall have the meaning set forth in Section 1.1.12 -57- CLOSING shall have the meaning set forth in Section 4.1 CLOSING DATE shall have the meaning set forth in Section 4.1 CLOSING DATE BALANCE SHEET shall have the meaning set forth in Section 3.2 CLOSING NET BOOK VALUE shall have the meaning set forth in Section 3.3 CLOSING PAYMENT shall have the meaning set forth in Section 3.1 CLOSING STATEMENT shall have the meaning set forth in Section 3.2 CODE shall have the meaning set forth in Section 3.4 COMMISSION shall have the meaning set forth in Section 5.24 COMMON STOCK EQUIVALENTS shall have the meaning set forth in Section 5.2(b) COMPANY shall have the meaning set forth in the Preamble CONTRACTS shall have the meaning set forth in Section 1.1.11 CONTROLLED ENTITIES shall have the meaning set forth in Section 5.25.1 DEFENSE NOTICE shall have the meaning set forth in Section 9.5.1 DESIGNATED PERIOD shall have the meaning set forth in Section 7.3 DGCL shall have the meaning set forth in Section 5.2(b) EMPLOYEE PLANS shall have the meaning set forth in Section 5.25.1 EMPLOYMENT AGREEMENTS shall have the meaning set forth in Section 4.2.4 ENVIRONMENTAL LAWS shall have the meaning set forth in Section 5.9.2(a) ENVIRONMENTAL PERMITS shall have the meaning set forth in Section 5.9.2(b) EQUIPMENT shall have the meaning set forth in Section 1.1.3 ERISA shall have the meaning set forth in Section 5.25.7 EXCHANGE ACT shall have the meaning set forth in Section 5.24 -58- 401(K) LIABILITIES shall have the meaning set forth in Section 7.7.2 401(K) PLAN shall have the meaning set forth in Section 1.3.7. FIDUCIARY shall have the meaning set forth in Section 5.25.8 FIXED ASSETS shall have the meaning set forth in Section 3.3 FTC shall have the meaning set forth in Section 5.24 FULLY-DILUTED BASIS shall mean taking into account the number of shares of outstanding shares issuable upon exercise of outstanding warrants, options or other rights to acquire shares (and regardless of whether such rights are vested) and conversion or issuance of all securities which may be converted into or exchanged for shares. GAAP shall have the meaning set forth in Section 3.2 GOVERNMENTAL AUTHORITY shall have the meaning set forth in Section 5.24 HAZARDOUS SUBSTANCES shall have the meaning set forth in Section 5.9.2(a) HSR shall have the meaning set forth in Section 5.24 INAPPLICABLE ACCRUED VACATION shall have the meaning set forth in Section 3.3 INDEBTEDNESS FOR BORROWED FUNDS shall mean, as to any person or entity, without duplication, (i) all obligations (whether interest, principal, fees, penalties or otherwise) of such person or entity for borrowed money, (ii) all obligations of such person or entity evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such person or entity to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such person or entity as lessee under equipment leases and (v) any of the foregoing guaranteed by such person or entity. INDEMNIFICATION PERIOD shall have the meaning set forth in Section 9.1 INDEMNIFIED PARTY shall have the meaning set forth in Section 9.4 INDEMNIFYING PARTY shall have the meaning set forth in Section 9.4 INDEMNITY NOTICE shall have the meaning set forth in Section 9.6 INDEPENDENT ACCOUNTANT shall have the meaning set forth in Section 3.2 -59- INTELLECTUAL PROPERTY shall have the meaning set forth in Section 1.1.6. INVENTORY shall have the meaning set forth in Section 1.1.4 IRS shall have the meaning set forth in Section 3.4 KNOW-HOW shall mean specialized knowledge which is proprietary to Strouse Adler (including product knowledge and use and application knowledge), formulae, product formulations, processes, product designs, specifications, quality control, procedures, manufacturing, engineering and other drawings, computer data bases and software, technology, other intangibles, technical information, safety information, engineering data and design and engineering specifications, research records, market surveys and all promotional literature, customer and supplier lists and similar data. LABOR AGREEMENT shall have the meaning set forth in Section 5.26.1 LEASED REAL PROPERTY shall have the meaning set forth in Section 5.13. LICENSES shall have the meaning set forth in Section 1.1.10 LIENS shall have the meaning set forth in Section 1.1 LOSSES shall have the meaning set forth in Section 9.2 MATERIAL ADVERSE EFFECT shall have the meaning set forth in Section 5.8.1 MULTIEMPLOYER PLAN shall have the meaning set forth in Section 5.25.7 NOTICE shall have the meaning set forth in Section 3.2 NOTICE OF CLAIM shall have the meaning set forth in Section 9.5.1 PBGC shall have the meaning set forth in Section 5.25.4 PATENTS shall mean patents (including all reissues, reexaminations, divisions, continuations in part and extensions thereof), utility models, patent applications and disclosures docketed; patent continuations. PERMITTED COMPANY TRANSACTIONS shall mean any merger, consolidation, business combination or similar transaction to which the Company is a party on or prior to September 15, 1998, and pursuant to which the Company acquires any other entity or business, so long as, following such transaction all of the following terms are met: (i) the Company is the survivor of such transaction or has accomplished such transaction through a subsidiary of the Company, (ii) such transaction does not dilute, reduce or adversely affect -60- the aggregate voting power or rights, on a Fully-Diluted Basis, of the shares of capital stock held of record or owned beneficially by the Stockholders, (iii) any shares of capital stock of the Company issued or delivered in connection with such transaction have no voting rights (individually, as a class or otherwise) prior to the day following (a) the Closing Date or (b) September 15, 1998, whichever is earlier, and (iv) such transaction will not, and could not reasonably be expected to, impede, interfere with, delay, postpone, discourage or adversely affect this Agreement, the Additional Documents or the consummation or contemplated economic benefits of the transactions contemplated hereby or thereby. PERMITTED LIENS shall have the meaning set forth in Section 1.1 PERSONAL PROPERTY LEASES shall have the meaning set forth in Section 1.1.7 PERSONNEL DOCUMENTS shall have the meaning set forth in Section 5.25.1 POTENTIAL SUCCESSOR TAXES means any Taxes owed by Strouse Adler as of the Closing Date with respect to which Purchaser may have successor liability, including, without limitation, pursuant to Title 12, Chapter 219 of the Connecticut General Statutes. PRODUCTS shall have the meaning set forth in Section 8.4 PROHIBITED AREA shall have the meaning set forth in Section 8.2 PROHIBITED BUSINESS shall have the meaning set forth in Section 8.2 PROTECTED INFORMATION shall have the meaning set forth in Section 8.5 PROXY STATEMENT shall have the meaning set forth in Section 7.2.1 PURCHASE PRICE shall have the meaning set forth in Section 3.1 PURCHASED ASSETS shall have the meaning set forth in Section 1.1 PURCHASER shall have the meaning set forth in the Recitals REAL PROPERTY LEASES shall have the meaning set forth in Section 1.1.8 RELATED PARTY shall have the meaning set forth in Section 5.30 RELATED PARTIES shall have the meaning set forth in Section 5.30 RELATED AFFILIATE shall have the meaning set forth in Section 8.2 REPORTABLE EVENT shall have the meaning set forth in Section 5.25.5 -61- REPRESENTATIVE shall have the meaning set forth in Section 7.3 RESERVES shall have the meaning set forth in Section 5.7 RIGHTS AGREEMENT shall have the meaning set forth in Section 5.39 RULES shall have the meaning set forth in Section 5.9.1 SALE AND PURCHASE CONTRACTS shall have the meaning set forth in Section 1.1.9 SARA LEE shall have the meaning set forth in the Preamble SCHEDULES shall have the meaning set forth in Section 13.12 SELLERS shall have the meaning set forth in the Preamble SIGNIFICANT TRANSACTION shall have the meaning set forth in Section 7.3 S.L. INDEMNIFIED PARTIES shall have the meaning set forth in Section 9.2 STOCKHOLDERS shall have the meaning set forth in the Recitals STOCKHOLDERS' AGREEMENT shall have the meaning set forth in the Recitals STOCKHOLDERS MEETING shall have the meaning set forth in Section 7.2.1 STROUSE ADLER'S PRO RATA SHARE OF THE ACTUAL BONUS AMOUNT shall have the meaning set forth in Section 3.2.2. STROUSE ADLER shall have the meaning set forth in the Preamble SUPERIOR PROPOSAL shall have the meaning set forth in Section 7.3(a) TAXES shall have the meaning set forth in Section 5.10 TERMINATION EXPENSES shall have the meaning set forth in Section 12.4 TERMINATION FEE shall have the meaning set forth in Section 12.4 THIRD PARTY CLAIM shall have the meaning set forth in Section 9.5 TRADE NAMES shall mean (i) trade names, (ii) brand names, and (iii) logos and all other names and slogans used in the Business -62- TRADEMARKS shall mean trademarks, service marks, brand marks, registrations thereof, pending applications for registration thereof, and such unregistered rights which are used in the Business TRANSACTION EXPENSES shall have the meaning set forth in Section 2.2.1. UNAUDITED STATEMENTS shall have the meaning set forth in Section 5.6 WORKING CAPITAL shall have the meaning set forth in Section 3.3 -63- EX-2 3 EXHIBIT 2 STOCKHOLDERS AGREEMENT STOCKHOLDERS' AGREEMENT STOCKHOLDERS' AGREEMENT ("Agreement"), dated March 3, 1998, by and between Sara Lee Corporation, a Maryland corporation ("Sara Lee"), and the other parties signatory hereto (each a "Stockholder"). RECITALS Sara Lee, The Aristotle Corporation, a Delaware corporation (the "Company"), and Strouse, Adler Company, a Delaware corporation (the "Strouse Adler") (Strouse Adler and Company are sometimes individually and collectively called "Sellers"), are entering into an Asset Purchase Agreement of even date herewith (as such agreement may be amended from time to time, the "Purchase Agreement") pursuant to which (and subject to the terms and conditions specified therein) Sara Lee or its designee ("Purchaser") will acquire substantially all of the assets of Strouse Adler and assume certain specified liabilities (the "Acquisition"). Capitalized terms used but not defined herein shall have the meanings set forth in the Purchase Agreement. In consideration of and as a condition to Sara Lee's entering into the Purchase Agreement, Sara Lee requires that each Stockholder enter into, and each such Stockholder has agreed to enter into, this Agreement with Purchaser. AGREEMENT To implement the foregoing and in consideration of the mutual agreements contained herein, the parties hereby agree as follows: 1. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS. Each Stockholder hereby severally and not jointly represents and warrants to Purchaser as follows: 1.1 OWNERSHIP OF SHARES. (a) Such Stockholder is the record holder and beneficial owner of the number of shares of common stock of the Company, par value $.01 per share (the "Common Stock"), and the number of shares of capital stock (other than Common Stock) of the Company as is set forth opposite such Stockholder's name on Schedule I hereto (all such shares shall constitute the "Existing Shares", and together with any and all shares of capital stock of the Company acquired of record or beneficially by such Stockholder in any capacity after the date hereof and prior to the termination hereof, whether upon exercise of options, conversion of convertible securities, purchase, exchange or otherwise, shall constitute the "Shares"). (b) On the date hereof, the Existing Shares set forth opposite such Stockholder's name on Schedule I hereto constitute all of the outstanding shares of Company capital stock owned of record or beneficially by such Stockholder. Such Stockholder does not have record or beneficial ownership of any shares of capital stock or rights to acquire shares of capital stock, whether upon exercise of options, conversion of convertible securities, purchase, exchange or otherwise not set forth on Schedule I hereto. (c) Such Stockholder has sole power of disposition with respect to all of the Existing Shares set forth opposite such Stockholder's name on Schedule I and sole voting power with respect to the matters set forth in Section 2 hereof and sole power to demand dissenter's or appraisal rights, in each case with respect to all of the Existing Shares set forth opposite such Stockholder's name on Schedule I, with no restrictions on such rights. (d) Such Stockholder will have sole power of disposition with respect to Shares other than Existing Shares, if any, which become beneficially owned by such Stockholder and will have sole voting power with respect to the matters set forth in Section 2 hereof and sole power to demand dissenter's or appraisal rights, in each case with respect to all Shares other than Existing Shares, if any, which become beneficially owned by such Stockholder, with no restrictions on such rights, subject to applicable federal securities laws and the terms of this Agreement. 1.2 POWER; BINDING AGREEMENT. Each such Stockholder which is an entity has the power and authority to enter into and perform all of such Stockholder's obligations under this Agreement; the execution, delivery and performance of this Agreement by such Stockholder has been duly authorized by its governing body; and no other proceedings on the part of such Stockholder are necessary to authorize such execution, delivery and performance. Each such Stockholder which is an individual has the legal capacity, power and authority to enter into and perform all of such Stockholder's obligations under this Agreement. The execution, delivery and performance of this Agreement by such Stockholder will not violate any other agreement to which such Stockholder is a party or by which such Stockholder is bound including, without limitation, any trust agreement, voting agreement, stockholders' agreement, voting trust, purchase agreement, partnership or other agreement. This Agreement has been duly and validly executed and delivered by such Stockholder and constitutes a valid and binding agreement of such Stockholder, enforceable against such Stockholder in accordance with its terms. There is no beneficiary of or holder of interest in any trust of which a Stockholder is Trustee whose consent is required for the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. If such Stockholder is married and such Stockholder's Shares constitute community property, this Agreement has been duly authorized, executed and delivered by, and constitutes a valid and binding agreement of, such Stockholder's spouse, enforceable against such person in accordance with its terms. 1.3 CONSENT AND APPROVALS; NO CONFLICTS. No filing with, and no permit, authorization, consent or approval of, any state or federal public body or authority is necessary for the execution of this Agreement by such Stockholder and the performance by such Stockholder of the obligations of such Stockholder hereunder. Neither the execution and delivery of this Agreement by such Stockholder nor the performance by such Stockholder of the obligations of such Stockholder hereunder nor compliance by such Stockholder with -2- any of the provisions hereof shall (i) conflict with or result in any breach of any applicable trust, partnership agreement or other agreement or organizational document applicable to such Stockholder, (ii) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, modification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which such Stockholder is a party or by which such Stockholder or any of such Stockholder's properties or assets may be bound, or (iii) violate any order, writ, injunction, decree, judgment, statute, rule or regulation applicable to such Stockholder or any of such Stockholder's properties or assets. 1.4 NO LIENS. Such Stockholder's Shares and the certificates representing such Shares are now and at all times during the term hereof will be held by such Stockholder, or by a nominee or custodian for the benefit of such Stockholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising under this Agreement. 1.5 RELIANCE BY PURCHASER. Such Stockholder understands and acknowledges that (i) Purchaser is entering into the Purchase Agreement in reliance upon such Stockholder's execution, delivery and performance of this Agreement, and (ii) the irrevocable proxy is granted in Section 2.2 in consideration of the execution and delivery of the Purchase Agreement, and in recognition of Sara Lee's potential role in attracting the interest of other persons or entities in the acquisition of Strouse Adler. 1.6 REVIEW OF PURCHASE AGREEMENT. Such Stockholder has reviewed, in consultation with counsel, and understands the terms of this Agreement and the Purchase Agreement. 1.7 BROKERS. No agent, broker, investment banker, financial advisor or other person or entity is or will be entitled to any brokerage commission, finder's fee or like payment in connection with any of the transactions contemplated by this Agreement or the Purchase Agreement based upon such arrangements made by or on behalf of such Stockholder. 2. AGREEMENT TO VOTE; PROXY. 2.1 VOTING. Each Stockholder hereby agrees that, until the Termination Date (as defined in Section 6), at any meeting of the stockholders of the Company and at any adjournment thereof, however called, or in connection with any written consent of the stockholders of the Company, such Stockholder shall vote (or cause to be voted) the Shares held of record or beneficially by such Stockholder (i) in favor of the Acquisition, the execution and delivery by the Company of the Purchase Agreement and the approval of the -3- terms thereof and each of the other actions contemplated by the Purchase Agreement and this Agreement and any actions required in furtherance hereof and thereof; and (ii) against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Purchase Agreement or of such Stockholder under this Agreement; and (iii) against the following actions (other than the Acquisition and the transactions with Purchaser contemplated by the Purchase Agreement): (a) any Acquisition Proposal or any other extraordinary corporate transaction, such as an acquisition, consolidation or other business combination involving the Company or Strouse Adler; (b) a sale, lease, exchange, transfer or other disposition, directly or indirectly, of all or a substantial portion of the consolidated assets of Strouse Adler and the Company, a sale of capital stock of the Company or Strouse Adler or a reorganization, recapitalization, dissolution or liquidation of the Company or Strouse Adler; (c) any change in the board of directors of the Company; (d) any change in the present capitalization of the Company or any other matter which could in any way dilute, reduce or adversely affect the aggregate voting power or rights, on a Fully-Diluted Basis of the Shares; or (e) any other action, including, without limitation, any amendment of the charter or by-laws of the Company which is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, discourage or adversely affect the Acquisition or the transactions contemplated by the Purchase Agreement or this Agreement or the consummation or contemplated economic benefits of any of the foregoing; provided, however, that notwithstanding the terms of subclause (iii) of this Section 2.1, the Company shall be permitted to engage in any Permitted Company Transaction. Such Stockholder shall not enter into any agreement or understanding with any person or entity prior to the Termination Date to vote or give instructions after the Termination Date in any manner inconsistent with clauses (i), (ii) or (iii) of this Section 2.1 or the provisions of the preceding sentence. It is expressly understood and agreed by each of the Stockholders that this Agreement is intended to, and does hereby, create and constitute a voting agreement within the meaning of Section 218(c) of the DGCL, and not a voting trust agreement under Section 218(a) thereof. 2.2 PROXY. EACH STOCKHOLDER HEREBY CONSTITUTES AND APPOINTS DAVID SCHREIBMAN, R. HENRY KLEEMAN OR ANY OTHER EMPLOYEE OF SARA LEE DESIGNATED BY EITHER OF THEM TO ACT FOR SUCH STOCKHOLDER AS HIS, HER OR ITS PROXY, WITH FULL POWER OF SUBSTITUTION IN EACH, TO REPRESENT SUCH STOCKHOLDER FOR PURPOSES OF VOTING THE SHARES AS EXPRESSLY PROVIDED IN SECTION 2.1. EACH STOCKHOLDER AGREES THAT THIS PROXY SHALL CONSTITUTE A DULY-EXECUTED AND DELIVERED PROXY PURSUANT TO SECTION 212 OF DGCL, THAT THE PROXY SHALL BE IRREVOCABLE, GIVEN THAT IT IS COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO SUPPORT AN IRREVOCABLE POWER. EACH STOCKHOLDER HEREBY REVOKES, EFFECTIVE UPON THE EXECUTION AND DELIVERY HEREOF, ALL OTHER PROXIES THAT SUCH STOCKHOLDER MAY HAVE HERETOFORE APPOINTED OR GRANTED, AND NO SUBSEQUENT PROXY SHALL BE GIVEN OR WRITTEN CONSENT EXECUTED (OR IF GIVEN OR -4- EXECUTED, SHALL NOT BE EFFECTIVE) BY SUCH STOCKHOLDER WITH RESPECT THERETO FROM THE DATE HEREOF UNTIL THE TERMINATION DATE. THIS PROXY SHALL REMAIN IN FULL FORCE AND EFFECT AND BE ENFORCEABLE AGAINST ANY DONEE, TRANSFEREE OR ASSIGNEE OF THE SHARES. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST AND IS EXECUTED AND INTENDED TO BE IRREVOCABLE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 212(e) OF THE DGCL. 3. CERTAIN COVENANTS OF STOCKHOLDERS. Except in accordance with the terms of this Agreement, each Stockholder hereby severally covenants and agrees as follows: 3.1 NO SOLICITATION. No Stockholder shall (or shall permit any of its Affiliates or Representatives to), directly or indirectly, encourage, solicit or initiate inquiries or proposals from, or provide any confidential information to, or participate in any discussions or negotiations with, any person or entity (other than Sara Lee and its Affiliates and their respective directors, officers, employees, representatives and agents) concerning any Acquisition Proposal. Each Stockholder will immediately notify Sara Lee of the terms of any proposal, discussion, negotiation or inquiry (and will disclose to Sara Lee any written materials received by such Stockholder in connection with such proposal, discussion, negotiation, or inquiry) and the identity of the party making such proposal or inquiry which it may receive in respect of any such transaction and will keep Sara Lee apprised of the status of any such proposals, discussions, negotiations or inquiries. 3.2 RESTRICTION ON TRANSFER, PROXIES AND NONINTERFERENCE. Prior to the Termination Date, no Stockholder shall, directly or indirectly: (i) offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, enforce or permit the execution of the provisions of any redemption agreement with the Company or enter into any contract, option or other arrangement or understanding with respect to or consent to the offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or other disposition of, or exercise any discretionary powers to distribute, any or all of such Stockholder's Shares or any interest therein, including any trust income or principal, except in each case to a Permitted Transferee who is or agrees to become bound by this Agreement in a writing executed by Sara Lee; (ii) except as contemplated by this Agreement, grant any proxies or powers of attorney with respect to any Shares, deposit any Shares into a voting trust or enter into a voting agreement with respect to any Shares; or (iii) take any action that would make any representation or warranty of such Stockholder contained herein to be untrue or incorrect or have the effect of preventing or disabling such Stockholder from performing such Stockholder's obligations under this Agreement. -5- 3.3 RESTRICTIVE COVENANTS. (a) Each Stockholder recognizes that Purchaser's business interests require the fullest practical protection and confidential treatment of all information not generally known within the relevant trade group or by the public, including all documents, writings, memoranda, business plans, illustrations, designs, plans, processes, programs, inventions, computer software, reports, sources of supply, customer lists, supplier lists, trade secrets, and all other valuable or unique information and techniques acquired, developed or used by Strouse Adler relating to its businesses, operations, employees and customers (hereinafter collectively termed "Protected Information"). Each Stockholder expressly acknowledges and agrees that Protected Information constitutes trade secrets, confidential and proprietary business information of Purchaser. Protected Information shall not include information which is or becomes part of the public domain through no breach of this Agreement by either Seller. Each Stockholder acknowledges that Protected Information is essential to the success of business, and it is the policy of Purchaser to maintain as secret and confidential Protected Information, which gives Purchaser a competitive advantage over those who do not know the Protected Information and is expressly and implicitly protected by Purchaser from unauthorized disclosure. Accordingly, each Stockholder agrees to hold such Protected Information in a fiduciary capacity, to keep secret and to treat confidentially and not to, and not to permit any other person or entity to, directly or indirectly, appropriate, divulge, disclose or otherwise disseminate to any other person or entity nor use in any manner for either Seller's or any other person's or entity's purposes or benefit any Protected Information, and not to use or aid others in using any such Protected Information in competition with Purchaser or a Related Affiliate except to the extent that disclosure is required by law. This obligation of non-disclosure of information shall continue to exist for so long as such information remains Protected Information. (b) If, at the time of enforcement of this Section 3.3, a court shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area. 4. CERTAIN EVENTS. Each Stockholder agrees that this Agreement and the obligations hereunder shall attach to such Stockholder's Shares and shall be binding upon any person or entity to which legal or beneficial ownership of such Shares shall pass, whether by operation of law or otherwise, including, without limitation, such Stockholder's heirs, guardians, administrators or successors or as a result of any divorce. 5. STOP TRANSFER. Each Stockholder agrees with, and covenants to, Purchaser that such Stockholder shall not transfer, and shall not request that the Company register the transfer (book-entry or otherwise) of, any certificate or uncertificated interest representing any of such Stockholder's Shares, unless such transfer is made in compliance with this Agreement. -6- 6. TERMINATION. The obligations of the Stockholders under Section 2.2 shall terminate concurrently with termination of the Purchase Agreement in accordance with Section 12.1 thereof and the obligations of the Stockholders under Sections 2.1, 3.1, 3.2 and 5 shall terminate upon the first to occur of (i) September 15, 1998, and (ii) the Closing. The "Termination Date" for purposes of this Agreement with respect to the termination of the Stockholders' obligations pursuant to any Section hereof shall mean the date on which the Stockholders' obligations under such Section terminate pursuant to the foregoing. The obligations of the Stockholders under Section 3.3 shall terminate in the event that the Purchase Agreement is terminated in accordance with Section 12.1 thereof. Except as set forth in this Section 6, all other agreements and obligations of the parties hereto shall survive the Closing and/or the Termination Date, as applicable. 7. MISCELLANEOUS. 7.1 ENTIRE AGREEMENT; ASSIGNMENT. (a) This Agreement, together with the Schedules attached hereto and the definitions in the Purchase Agreement, represent the entire agreement and understanding of the parties hereto with reference to the transactions contemplated herein and therein, and no representations, warranties or covenants have been made in connection with this Agreement other than those expressly set forth herein. This Agreement supersedes all prior negotiations, discussions, correspondence, communications, understandings and agreements among the parties relating to the subject matter of this Agreement and all prior drafts thereof, all of which are merged into this Agreement. (b) This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors, heirs, representatives and assigns, as the case may be; provided, however, that no party shall assign or delegate this Agreement or any of the rights or obligations created hereunder without the prior written consent of the other party. Notwithstanding the foregoing, Purchaser shall have the unrestricted right to assign this Agreement and all or any part of its rights hereunder to any Affiliate of Purchaser, but in such event Purchaser shall remain fully liable for the performance of all of such obligations in the manner prescribed in this Agreement. Nothing in this Agreement shall confer upon any person or entity not a party to this Agreement, or the legal representatives of such person or entity, any rights (including, without limitation, rights as a third party beneficiary) or remedies of any nature or kind whatsoever under or by reason of this Agreement. 7.2 AMENDMENTS. This Agreement may be amended, superseded, cancelled, renewed or extended, and the terms hereof may be waived, and consents may be provided, only by a written instrument signed by Purchaser and Stockholders or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any waiver on the part of any party of any such right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that any party -7- may otherwise have at law or in equity. Notwithstanding the foregoing, Schedule I may be supplemented by Purchaser by adding the name and other relevant information concerning any stockholder of the Company who is or agrees to be bound by the terms of this Agreement without the agreement of any other party hereto, and thereafter such added stockholder shall be treated as a "Stockholder" for all purposes of this Agreement. 7.3 NOTICES. All notices, requests and other communications to any party hereunder shall be in writing (including telecopier or facsimile or similar writing), shall be given to such party at its address or facsimile number set forth below or at such other addresses as shall be furnished by any party by like notice to the others. Except as otherwise expressly provided herein, each such notice, request or other communication shall be effective upon the earlier of (i) actual receipt, and (ii) receipt of confirmation of delivery, in each case at the address specified in this Section. Any notice, request or communication delivered by telecopier, facsimile or similar means shall be confirmed by hard copy delivered as soon as practicable. (a) if to Purchaser, to: Sara Lee Corporation Three First National Plaza Chicago, Illinois 60622 Attention: Janet Langford Kelly Senior Vice President, Secretary and General Counsel Fax No. 312-419-3187 (b) if to any Stockholder, to: The Aristotle Corporation c/o Mintz Levin Cohn Ferris Glovsky and Popeo PC One Financial Center Boston, Massachusetts 02111 Attention: Stanford N. Goldman, Jr. Fax No. 617-542-2241 or such other address or persons as the parties may from time to time designate in writing in the manner provided in this Section. 7.4 GOVERNING LAW; CONSENT TO JURISDICTION; VENUE. This Agreement shall be governed by, and construed in accordance with the internal laws (as opposed to conflicts of law provisions) of the State of Delaware; provided, however, that any interpretation or application of Section 3.3(d) shall be governed by the Illinois Trade Secret Act. As a further inducement to Purchaser to enter into this Agreement and the Additional Documents, and in consideration thereof, Stockholders covenant and agree (i) that any state -8- or federal court within New Castle County, Delaware shall have exclusive jurisdiction of any action or proceeding relating to, or arising under or in connection with this Agreement and the Additional Documents and the Stockholders consent to personal jurisdiction of such courts and waive any objection to such courts' jurisdiction, (ii) that service of any summons and complaint or other process in any such action or proceeding may be made by registered or certified mail directed to each Stockholder, as the case may be, at their respective addresses set forth in Section 6.3 above, and service so made shall be deemed to be completed upon the earlier of actual receipt or three days after the same shall have been posted as aforesaid, the Stockholders hereby waiving personal service thereof. The parties hereto agree that any claim or suit between or among any of the parties hereto relating to or arising under or in connection with this Agreement or any of the Additional Documents may only be brought in and decided by the state or federal courts located in the County of New Castle, State of Delaware, such courts being a proper forum in which to adjudicate such claim or suit, and each party hereby waives any objection to each such venue and waives any claim that such claim or suit has been brought in an inconvenient forum. 7.5 ENFORCEMENT. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that in addition to any other remedy at law or in equity, the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement. 7.6 COUNTERPARTS; TERMS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement. All references herein to Sections, Exhibits and Schedules shall be deemed references to such parts of this Agreement, unless the context shall otherwise require. All references to singular or plural or masculine or feminine shall include the other as the context may require. 7.7 DESCRIPTIVE HEADINGS. The section headings contained in this Agreement are solely for convenience of reference and shall not affect the meaning or interpretation of this Agreement or of any term or provision hereof. 7.8 SEVERABILITY. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. 7.9 DEFINITIONS; CONSTRUCTION. For purposes of this Agreement: (a) "beneficially own" or "beneficial ownership" with respect to any securities shall mean having "beneficial ownership" of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of -9- the same securities by the same holder, securities beneficially owned by a person shall include securities beneficially owned by all other persons with whom such person would constitute a "group" as described in Section 13(d)(3) of the Exchange Act. (b) "Permitted Transferees" means, with respect to a Stockholder, any of the following persons: (i) the spouse of such Stockholder, provided that at all relevant times of determination such Stockholder is not separated or divorced from, or is not involved in separation or divorce proceedings with, such spouse; (ii) the issue of such Stockholder; (iii) any charitable foundation or similar organization founded by such Stockholder; (iv) a trust of which there are no principal beneficiaries other than (A) such Stockholder, (B) such Stockholder's spouse (provided that at all relevant times of determination such Stockholder is not separated or divorced from, or is not involved in separation or divorce proceedings with, such spouse), (C) the issue of such Stockholder, or (D) any charitable foundation or similar organization founded by such Stockholder; (v) the legal representative of such Stockholder in the event such Stockholder becomes mentally incompetent; and (vi) the beneficiaries under (A) the will of such Stockholder or the will of such Stockholder's spouse, or (B) a trust described in clause (iv) above. (c) "person" shall mean an individual, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity. (d) In the event of a stock dividend or distribution, or any change in the Company Common Stock by reason of any stock dividend, split-up, recapitalization, combination, exchange of shares or the like, the term "Shares" shall be deemed to refer to and include the Shares as well as all such stock dividends and distributions and any shares into which or for which any or all of the Shares may be changed or exchanged. 7.10 STOCKHOLDER CAPACITY. Notwithstanding anything herein to the contrary, no person executing this Agreement who is, or becomes during the term hereof, a director of the Company makes any agreement or understanding herein in his or her capacity as such director, and the agreements set forth herein shall in no way restrict any director in the exercise of his or her fiduciary duties as a director of the Company. Each Stockholder has executed this Agreement solely in his or her capacity as the record or beneficial holder of such Stockholder's Shares. 7.11 EXPENSES. Except as otherwise provided herein, all costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such expenses. 7.12 FURTHER ASSURANCES. Each Stockholder and Purchaser shall execute and deliver all such further documents and instruments and take all such further action as may be necessary in order to consummate the transactions contemplated hereby. 7.13 DOCUMENTATION. This Agreement was initially prepared by Purchaser's legal counsel as a matter of convenience only, and such documents have been thoroughly reviewed by Stockholders and their respective legal counsel and the input of -10- Stockholders and their legal counsel was properly considered, and, therefore, no interpretation will be made in favor of any of the parties or signatories or any of their Affiliates with respect to this Agreement for the reason that such documents were prepared by Purchaser's legal counsel. 7.14 WAIVERS OF TRIAL BY JURY. STOCKHOLDERS AND PURCHASER HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE ADDITIONAL DOCUMENTS, AND CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. -11- IN WITNESS WHEREOF, Purchaser and each Stockholder have caused this Agreement to be duly executed as of the day and year first above written. SARA LEE CORPORATION, a Maryland corporation By: /s/ Mark McCarville ------------------------------------- Name: Mark McCarville Title: Senior Vice President STOCKHOLDERS: CHAPARRAL INTERNATIONAL Re, a Turks and Caicos Islands Co. By: /s/ Steven B. Lapin ------------------------------------- Name: Steven B. Lapin Title: Chairman /s/ John Crawford ---------------------------------------- John Crawford /s/ Betsy Henley-Cohn ---------------------------------------- Betsy Henley-Cohn /s/ Sharon Oster ---------------------------------------- Sharon Oster /s/ Raymond Fair ---------------------------------------- Raymond Fair -12- GENEVE CORPORATION, as parent of Chaparral International Re, By: /s/ Steven B. Lapin ------------------------------------- Name: Steven B. Lapin Title: President The undersigned hereby acknowledges the terms of this Agreement and covenants not to permit the registration of any transfer in violation of Section 5 hereof. THE ARISTOTLE CORPORATION By: /s/ John Crawford ------------------------------------- Name: John Crawford Title: Chairman -13- SCHEDULE I Name Shares - ---- ------ Chaparral International Re* 568,131* John Crawford 38,827 Common Stock Betsy Henley-Cohn 29,226 Common Stock Sharon Oster 8,327 Common Stock Raymond Fair 25,900 Common Stock * Geneve Corporation, the parent of Chaparral International Re, claims beneficial ownership of these shares, 489,131 of which are Series E Convertible Preferred Stock, $.01 par value per share, and 79,000 of which are Common Stock. -14- -----END PRIVACY-ENHANCED MESSAGE-----