Innovo Tweaks Merger Agreement
Innovo Group Inc., the maker of Joe’s Jeans, is modifying its merger agreement with Joe Dahan, the designer of Joe’s Jeans.
Under the merger agreement, Dahan’s annual salary will be reduced from $950,000 to $300,000 in a revised employment agreement that will last five years instead of 10. However, Dahan will be eligible for a certain percentage of the gross profits for 10 years.
“The revision not only better aligns the seller’s interest in the company’s overall profitability but also provides the company with downside protection over the course of the earn-out period,” said Marc Crossman, Innovo’s president and chief executive.
No earn-out will be given if the gross profits are under $11.25 million a year. An 11.33 percent earn-out will be given for anything over $11.25 million and adjusting upward.
In fiscal 2006, Innovo lost $9.3 million on $46.6 million in revenues.
The merger must be approved at the annual stockholders meeting on Aug. 14.
In February, Innovo, based in Commerce, Calif., announced it planned to merge with JD Holdings, owned by Dahan, who licenses the Joe’s Jeans name to Innovo. The merger was originally scheduled to take place by June 30 but has been extended to Dec. 31.
As part of the merger agreement, Dahan will receive 14 million shares of common stock, $300,000 in cash and the employment agreement. Once the merger takes place, Innovo will own all the rights and titles to the Joe’s brand.
Over the years, Innovo has gone through a number of transitions as it has changed its products from craft and accessories products to blue jeans.
At one time, it made private-label blue jeans for American Eagle Outfitters and Target Corp., but the company sold that venture last year. —Deborah Belgum
