Seems to me there is merit to the thinking that TURF will no longer be under the thumb of DLIA much longer. There is a stipulation in the 8K released 5/2/00 that provides for a sale of the TURF shares. There will be no distribution of the shares to the DLIA's holders as stated by the terms of the note. There is a significant portion of the TURF float that is sold short in the arbitrage of the DLIA position. The TURF shares should move up in relation to the DLIA shares because the shorts will be covering their positions. Today already you see that TURF is up while DLIA is down. This would indicate that the unwinding of these positions is actually occuring.
FROM THE 8K:
"7.7. TRANSFER OF ASSETS; MERGERS; LIQUIDATION. (a) Merge into or with or consolidate with any other Person or permit any other Person to merge into or with or consolidate with it, except, that, any Borrower may merge with and into or consolidate with any other corporation organized under the laws of a State of the United States of America and with substantially all of its assets in the United States of America, PROVIDED, THAT, as to any such merger or consolidation, each of the following conditions is satisfied as determined by Lender in good faith: (i) Lender shall have received not less than twenty (20) Business Days prior written notice of the intention of such Borrower to so merge or consolidate and such information with respect thereto as Lender may request, (ii) as of the effective date of the merger or consolidation and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (iii) promptly upon Lender's request, such Borrower shall furnish, or cause to be furnished to Lender, true, correct and complete copies 47 of all agreements, documents and instruments relating to such merger or consolidation, including, but not limited to, the certificate or certificates of merger or consolidation as filed with each appropriate Secretary of State, (iv) promptly upon Lender's request, the surviving entity shall immediately upon the effectiveness of the merger or consolidation expressly confirm in writing pursuant to an agreement, in form and substance reasonably satisfactory to Lender, its continuing liability in respect of the Obligations and Financing Agreements and execute and deliver such other agreements, documents and instruments as Lender may reasonably request in connection therewith, (v) any Obligor shall, promptly upon Lender's request, ratify and confirm, in form and substance reasonably satisfactory to Lender, that its obligations with respect to the Obligations shall apply to the Obligations as assumed by such surviving entity, (vi) the Person with whom such Borrower is merging or consolidating shall be engaged in the same or a similar business as such Borrower, (vii) the assets acquired by such Borrower pursuant to such merger or consolidation shall not constitute Eligible Inventory, except as Lender may otherwise agree in writing, (viii) the assets acquired by such Borrower pursuant to such merger or consolidation shall be free and clear of any security interest, mortgage, pledge, lien, charge or other encumbrance except as Lender may otherwise specifically agree in writing, (ix) at its option, Lender shall have conducted a field examination with respect to the Person with whom such Borrower is merging or consolidating its assets and its business and so long as the results thereof are reasonably satisfactory to Lender, Inventory acquired by such Borrower pursuant to such merger or consolidation may be considered Eligible Inventory, subject to the terms and conditions contained herein (including such additional criteria as Lender may establish with respect thereto), (x) in no event shall the total amount of all payments by such Borrower in connection with all such mergers and consolidations (whether as consideration for the merger or consolidation or otherwise), together with capital contributions, loans or other payments by such Borrower in connection therewith, exceed in the aggregate $5,000,000, (xi) as of the date of any such capital contribution, loan or other payment in connection with any merger or consolidation, the daily average of the Excess Availability for the immediately preceding thirty (30) consecutive day period shall be not less than $7,500,000, and as of the date of any such capital contribution, loan or other payment and after giving effect thereto, the Excess Availability shall be not less than $7,500,000, (xii) such Borrower shall be the surviving entity, (xiii) the Person with whom such Borrower is merging or consolidating shall have had positive Consolidated Pre-Tax Income for each of the four (4) consecutive fiscal quarters of such Person immediately preceding the date of the merger or consolidation, (xiv) not less than fifteen (15) days prior to the date of any such merger or consolidation, Lender shall have received, in form and substance satisfactory to Lender projected financial statements reflecting the projected effect of such merger or consolidation on Borrowers for the remaining portion of the then current year and for the succeeding years after giving effect to the merger or consolidation (including forecasted income statements, cash flow statements and balance sheets) prepared on a monthly basis as to the current year and the immediately succeeding year, in each case, all in reasonable detail, together with such supporting information as Lender may reasonably request, which projections shall represent Borrowers' reasonable best estimate of the future financial performance of Borrowers for the periods set forth therein and shall have been prepared on the basis of the assumptions set forth therein which Borrowers believe are fair and reasonable in light of current and reasonably foreseeable business conditions, (xv) the surviving entity shall, immediately before and immediately after giving effect to such transaction or series of transactions have an Adjusted Net Worth (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or 48 in respect of such transaction or series of transactions) equal to or greater than the Adjusted gNet Worth of the entities involved in such merger or consolidation immediately prior to such transaction or series of transactions (as reduced by any reasonable costs and expenses directly related to such merger), (xvi) such merger or consolidation shall not violate any law or any order or decree of any court or other Governmental Authority in any material respect and shall not conflict with or result in the breach of, or constitute a default under, any indenture, mortgage, deed of trust, or any other agreement or instrument to which any Borrower is a party or may be bound, (xvii) such merger or consolidation shall be done in accordance with the requirements of all applicable laws and regulations, and (xviii) Lender shall have received such deeds, assignments or other agreements as Lender may request to evidence and confirm the transfer of such assets to the surviving entity of such merger or consolidation; (b) Sell, assign, lease, transfer, abandon or otherwise dispose of any Capital Stock or Indebtedness to any other Person or any of its assets to any other Person, EXCEPT FOR: (i) sales of Inventory in the ordinary course of business, (ii)the disposition of worn-out or obsolete equipment and fixtures so long as (A) any proceeds are paid to Lender and (B) such sales do not involve equipment and fixtures having an aggregate fair market value in excess of $250,000 in any one case or $750,000 in the aggregate for all such equipment and fixtures disposed of in any fiscal year of Borrower, (iii) sales or other dispositions by Borrowers of assets in connection with the closing or sale of a retail store location of any Borrower in the ordinary course of such Borrower's business which consist of leasehold interests in the premises of such store, the equipment and fixtures located at such premises and the books and records relating exclusively and directly to the operations of such store; PROVIDED, THAT, as to each and all such sales, (A) Lender shall have received not less than ten (10) Business Days prior written notice of such sale, which notice shall set forth in reasonable detail satisfactory to Lender, the parties to such sale or other disposition, the assets to be sold or otherwise disposed of, the purchase price and the manner of payment thereof and such other information with respect thereto as Lender may request, (B) as of the date of such sale or other disposition and after giving effect thereto, no Default or Event of Default shall exist or have occurred, (C) such sale shall be on commercially reasonable prices and terms in a BONA FIDE arm's length transaction, and (D) any and all net proceeds payable or delivered to any Borrower in respect of such sale or other disposition shall be deposited into a Blocked Account (except to the extent such proceeds reflect payment in respect of Indebtedness secured by a properly perfected first priority security interest in the assets sold, in which case, such proceeds shall be applied to such Indebtedness secured thereby), (iv)transfers or sales of assets by one Borrower to another Borrower, PROVIDED, THAT, (A) there shall be a UCC-1 financing statement between the Borrower receiving such assets, as debtor and Lender, as secured party, filed of record in all appropriate offices for the jurisdiction where such assets are located or as is otherwise required in order to perfect the security interest of Lender in such assets of the Borrower receiving the same, (B) each month, by no later than the fifteenth (15th) day of each month, Lender shall receive a report from dELiA*s describing the assets so transferred in the immediately preceding month, including the parties to 49 such transfer and the location of such assets, (C) nothing contained herein shall be construed to constitute the authorization of Lender to such sale or transfer for purposes of the release of the security interest and lien of Lender therein, (D) the Borrower to whom such assets are sold or otherwise transferred shall acquire such assets subject to the security interests and liens of Lender which shall continue in full force and effect with respect to the same and promptly upon Lender's request such Borrower shall promptly confirm the same to Lender in writing in form and substance satisfactory to Lender, (v) the grant by any Borrower to any other person of the right to use the customer lists of such Borrower, PROVIDED, THAT, as to each and all of such grants, each of the following conditions is satisfied, (A) at the time of the grant and after giving effect thereto, no Default or Event of Default shall exist or have occurred, (B) the terms of the arrangements with the person receiving such grant shall not include any limitations or restrictions on the use of such customer lists by any Borrower or any provisions which would limit or restrict the ability of Lender to use such customer lists pursuant to its rights hereunder or under any of the other Financing Agreements or to sell or otherwise realize on such customer lists, (C) Lender shall have received true, correct and complete copies of the executed agreements related to such arrangements, promptly after the execution thereof, and (D) any and all net proceeds payable or delivered to any Borrower in respect of such grant shall be paid or delivered, or caused to be paid or delivered, to a Blocked Account, (vi)the grant by dELiA*s after the date hereof of a non-exclusive license to any Person for the use of any Intellectual Property owned by dELiA*s, PROVIDED, THAT, as to each and all of such licenses, each of the following conditions is satisfied, (A) at the time of the grant of the license and after giving effect thereto, no Default or Event of Default shall exist or have occurred, (B) the rights of the licensee in the Intellectual Property subject to such license shall be subject and subordinate in all respects to the rights therein of Lender and the licensee shall have so agreed in writing in form and substance satisfactory to Lender, (C) such licenses shall not include any limitations or restrictions on the use of such Intellectual Property by any Borrower or which would limit or restrict the ability of Lender to use Intellectual Property pursuant to its rights hereunder or under any of the other Financing Agreements or to sell or otherwise realize on such Intellectual Property, (D) Lender shall have received true, correct and complete copies of the executed license agreement, promptly after the execution thereof, and (E) any and all net proceeds delivered to any Borrower in respect of such license shall be paid or delivered, or caused to be paid or delivered, to a Blocked Account, (vii) the issuance of Capital Stock of dELiA*s consisting of common stock pursuant to any stock option plan for the benefit of its employees, directors and consultants, PROVIDED, THAT, (A) in no event shall dELiA*s be required to issue, or shall dELiA*s issue, Capital Stock pursuant to such stock option plan if it would result in a Change of Control or other Event of Default and (B) Borrowers shall give Lender prior written notice of the terms of such stock option plan and such other information with respect thereto as Lender may from time to time reasonably request; (viii) the issuance and sale by any Borrower of Capital Stock of such Borrower after the date hereof; PROVIDED, THAT, (A) Lender shall have received not less than ten 50 (10) Business Days prior written notice of such issuance and sale by such Borrower, which notice shall specify the parties to whom such shares are to be sold, the terms of such sale, the total amount which it is anticipated will be realized from the issuance and sale of such stock and the net cash proceeds which it is anticipated will be received by such Borrower from such sale, (B) Borrowers shall not be required to pay any cash dividends or repurchase or redeem such Capital Stock or make any other payments in respect thereof, (C) the terms of such Capital Stock, and the terms and conditions of the purchase and sale thereof, shall not include any terms that include any limitation on the right of Borrowers to request or receive Loans or Letter of Credit Accommodations or the right of Borrowers to amend or modify any of the terms and conditions of this Agreement or any of the other Financing Agreements or otherwise in any way relate to or affect the arrangements of Borrowers with Lender or are more restrictive or burdensome to any Borrower than the terms of any Capital Stock in effect on the date hereof, (D) all proceeds from such issuance and sale (net of reasonable and customary costs and expenses directly related to the issuance and sale thereof, including reasonable underwriters' fees and commissions) shall be paid to Lender for application to the Obligations or to be held by Lender as cash collateral for the Obligations on such terms and conditions as Lender may require; and (E) as of the date of such issuance and sale and after giving effect thereto, no Default or Event of Default shall exist or have occurred, (ix) the distribution by dELiA*s of certain of the Capital Stock of iTurf owned by dELiA*s to its shareholders pursuant to the terms of the letter agreement, dated of even date herewith, by and among Borrowers and Lender with respect thereto, (x) the sale of the shares of the Capital Stock of iTurf owned by dELiA*s as of the date hereof consisting of Class A common stock or Class B common stock (which will be converted to Class A common stock upon sale); PROVIDED, THAT, as to any such sale, each of the following conditions shall be satisfied: (A) such sale shall be in a bona fide arms' length transaction with a person that is not an Affiliate, (B) the amount of the price per share (after giving effect to any underwriting discounts or fees or any other discounts or commissions or similar items) to be sold shall not be less than seventy-five percent (75%) of the Fair Market Value with respect thereto as of the date thereof, (C) the purchase price for such sale shall be pain in cash or other immediately available funds on or about the date of the sale thereof (but in any event within five (5) Business Days), (D)Lender shall be notified of such sale as soon as practical thereafter (but in any event on the earlier of the filing of any documents with the Securities and Exchange Commission or one (1) Business Day thereafter), (E) the terms and conditions of the purchase and sale thereof shall not include any terms that include any limitation on the right of Borrowers to request or receive Loans or Letter of Credit Accommodations or the right of Borrowers to amend or modify any of the terms and conditions of this Agreement or any of the other Financing Agreements or otherwise in any way relate to or affect the arrangements of Borrowers with Lender, (F) the net proceeds from such sale up to the amount of the then outstanding Loans shall be paid to Lender for application to the Obligations and (G) as of the date of such sale and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing; (c) Discontinue, wind up, liquidate, dissolve, or change in any material respect any substantial part of its operations or business(es), except as otherwise permitted hereunder. 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