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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
BEC GROUP, INC.,
XXXXXX XXXXX GROUP, L.P.,
XXXXXX XXXXX HOLDINGS, INC. AND
ACCESSORIES ASSOCIATES, INC.
DATED AS OF NOVEMBER 13, 1996
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TABLE OF CONTENTS
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1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Purchase and Sale of Shares; Adjustment to Purchase Price;
Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Purchase and Sale of Shares . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Excluded Liabilities and Transfer of Dallas Property . . . . . . . . . 6
2.4 Litigation Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 7
3. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Deliveries at the Closing . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. Representations and Warranties of the Seller . . . . . . . . . . . . . . . . . 8
4.1 Organization, Qualification and Corporate Power . . . . . . . . . . . . 8
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 10
4.5 Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 Litigation and Claims . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.7 Status of Property Owned or Leased . . . . . . . . . . . . . . . . . . . 12
4.8 Contracts and Other Instruments . . . . . . . . . . . . . . . . . . . . 15
4.9 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.10 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.11 Authority to Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.13 Labor Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.14 Compliance with Laws, Permits and Licenses . . . . . . . . . . . . . . . 23
4.15 Directors, Officers and Key Employees . . . . . . . . . . . . . . . . . 23
4.16 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . 24
4.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.18 Transactions With Interested Persons . . . . . . . . . . . . . . . . . . 25
4.19 Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.20 Sales Representatives . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.21 Processes and Customer Lists . . . . . . . . . . . . . . . . . . . . . . 25
4.22 General Representation . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.23 Non-Distributive Intent . . . . . . . . . . . . . . . . . . . . . . . . 25
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5. Representations and Warranties of the Purchaser . . . . . . . . . . . . . . . . 26
5.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.2 Authorization of Transaction . . . . . . . . . . . . . . . . . . . . . . 26
5.3 Validity of Preferred Stock . . . . . . . . . . . . . . . . . . . . . . 26
5.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.5 Non-Distributive Intent . . . . . . . . . . . . . . . . . . . . . . . . 27
5.6 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.7 Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.8 Independent Investigation . . . . . . . . . . . . . . . . . . . . . . . 27
6. Conditions to the Obligations of the Purchaser and the Seller . . . . . . . . . 28
6.1 Conditions to the Obligations of the Purchaser . . . . . . . . . . . . . 28
6.2 Conditions to the Obligations of the Seller . . . . . . . . . . . . . . 32
7. Covenants and Agreements of the Purchaser and the Seller . . . . . . . . . . . . 33
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.2 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.4 Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.5 Occupation of the Dallas Property . . . . . . . . . . . . . . . . . . . 36
7.6 Payment of Certain Employee Bonuses . . . . . . . . . . . . . . . . . . 36
7.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.8 Name Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.9 Bolle(R) Brand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.10 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.11 Income Taxes and Income Tax Preparation . . . . . . . . . . . . . . . . 37
7.12 Characterization of Certain Payments . . . . . . . . . . . . . . . . . . 40
7.13 Inventory Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . 40
7.14 Certain Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . 40
7.15 Xxxx-Xxxxx Xxxxxx . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.16 Release of Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . 41
8. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1 By the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.2 By the Purchaser and AAi . . . . . . . . . . . . . . . . . . . . . . . . 42
8.3 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.4 Indemnity Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.1 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.2 Survival of Representations, Warranties and Covenants . . . . . . . . . 44
9.3 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . 45
9.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.5 Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . 45
9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.7 Headings and Recitals . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.10 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.12 Agreements, Documents and Instruments . . . . . . . . . . . . . . . . . 48
9.13 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.14 AAi Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of November 13, 1996, by and among BEC
GROUP, INC., a Delaware corporation with offices at 000 Xxxxxxxx Xxxxx Xxxxxx,
Xxx, Xxx Xxxx 00000 (the "Seller"), XXXXXX XXXXX GROUP, L.P., a Delaware
limited partnership with offices at 0000 Xxxxxx Xxxx Xxxx, Xxxxxx, Xxxxx 00000
(the "Partnership"), XXXXXX XXXXX HOLDINGS, INC., a Delaware corporation with
offices at 0000 Xxxxxx Xxxx Xxxx, Xxxxxx, Xxxxx 00000 (the "Purchaser") and
Accessories Associates, Inc., a Rhode Island corporation with offices at 000
Xxxxxx Xxxxxxxxxx Xxxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxx 00000 (the "AAi").
WHEREAS, the Seller owns all of the issued and outstanding shares of
capital stock of The Xxxxxxx Company, a corporation organized under Texas law
("Xxxxxxx"), Opti-Ray, Inc., a corporation organized under New York law ("Opti-
Ray"), and Asian Buying Source, Inc., a corporation organized under Delaware
law ("ABS");
WHEREAS, Opti-Ray owns all of the issued and outstanding shares of
capital stock of O-Ray Holdings, Inc., a corporation organized under Delaware
law ("O-Ray Holdings");
WHEREAS, Xxxxxxx owns all of the issued and outstanding shares of capital
stock of BEC Distribution, Inc., a Delaware corporation ("BEC Distribution"),
Xxxxxxx General, Inc., a Delaware corporation ("Xxxxxxx General"), Xxxxxxx
Holdings, a Delaware corporation ("Xxxxxxx Holdings") and Maximum
Merchandising, Inc., a New York corporation ("MMI");
WHEREAS, Xxxxxxx General is the sole general partner, and Xxxxxxx
Holdings and O-Ray Holdings are all of the limited partners, of the
Partnership;
WHEREAS, Xxxxxxx, Opti-Xxx and ABS, together with their respective
subsidiaries, and the Partnership (collectively, the "Xxxxxx Xxxxx Group", and
individually, a "member" of the Xxxxxx Xxxxx Group);
WHEREAS, AAi owns all of the issued and outstanding shares of capital
stock of the Purchaser;
WHEREAS, the Purchaser desires to acquire the Xxxxxx Xxxxx Group from the
Seller, and the Seller desires to sell the Xxxxxx Xxxxx Group to the Purchaser;
WHEREAS, AAi desires to facilitate such transaction and in connection
therewith desires to guarantee the performance by the Purchaser of its
obligations hereunder and to enter into the agreements set forth herein;
WHEREAS, in order to effect such purchase and sale, the Seller will sell,
and the Purchaser will purchase, all issued and outstanding shares of capital
stock owned by the Seller of Xxxxxxx (the "Xxxxxxx Shares"), Opti-Ray (the
"Opti-Ray Shares") and ABS (the "ABS Shares") (the Xxxxxxx Shares, ABS Shares
and Opti-Ray Shares are collectively referred to as the "Shares"), all in
accordance with and subject to the terms and conditions of this Agreement.
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NOW THEREFORE, the parties hereto, in consideration of the mutual
promises contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged hereby, agree as
follows:
1. Definitions. For purposes of this Agreement, the following terms shall
have the following definitions:
"AAi" has the meaning set forth in the preface, above.
"ABS Shares" has the meaning set forth in the preface, above.
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common
control with such Person and the officers, directors, and partners of
such Person and such other Persons.
"Xxxxxxx Shares" has the meaning set forth in the preface, above.
"Cash Consideration" has the meaning set forth in Section 2.2, below.
"Closing" has the meaning set forth in Section 3.1, below.
"Closing Date" is the date on which the Closing occurs.
"Code" has the meaning set forth in Section 4.9(b), below.
"Confidential Information" means all non-public information, of whatever
kind and in whatever form, concerning the businesses and affairs of the
Seller, the Xxxxxx Xxxxx Group, the Purchaser and AAi, provided such
information has been adequately identified as or can reasonably be
construed to be confidential, and excluding the exceptions set forth in
Section 7.1(b), below.
"Contaminants" means (i) any pollutant, contaminant, petroleum, crude oil
or any fraction thereof or hazardous substance (within the meaning of
such terms under the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (and any implementing
regulations) ("CERCLA") or any similar applicable state or local legal
requirements); (ii) any hazardous or toxic substance or material within
the meaning of any law applicable to the Xxxxxx Xxxxx Group; or (iii) any
hazardous waste within the meaning of the Federal Resource Conservation
and Recovery Act, as amended (and any implementing regulations) ("RCRA").
"Contract" means any contract, agreement, letter agreement or other
obligation, written or oral.
"Copyrights" has the meaning set forth in Section 4.10(a).
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"Dallas Property" means the real property described more fully in
Attachment I hereto, including the buildings located thereon, and located
at 0000 Xxxxxx Xxxx Xxxx, Xxxxxx'x Xxxxxx, Xxxxx 00000.
"Closing Date" has the meaning set forth in Section 3.1, below.
"Employee Benefit Plan" mean any (a) Employee Pension Benefit Plan
(including any Multiemployer Plan), (b) Employee Welfare Benefit Plan,
(c) other employee benefit, deferred compensation, excess benefit, stock
and incentive plans, contracts, program, funds, or arrangements (whether
written or oral, qualified or nonqualified, funded or unfunded, foreign
or domestic, currently effective), or (d) any trust, escrow or similar
agreement related thereto.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Encumbrance" has the meaning set forth in Sec. 4.7(a)(ii).
"Environmental Laws" means all federal, state and location environmental,
health and safety laws, codes and ordinances and all rules, regulations
and ecological standards promulgated thereunder, including without
limitation, laws relation to emissions, discharges, releases or
threatened releases of Contaminants, into the environment (including,
without limitation, air, surface water, ground water, land, surface or
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, generation, refining,
production, transportation or handling of Contaminants.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Liabilities" has the meaning set forth in Section 2.3, below.
"Financial Statements" has the meaning set forth in Section 4.3, below.
"Xxxxxx Xxxxx Group" has the meaning set forth in the preface.
"Income Tax" means any applicable federal, state, local, or foreign
income tax, including any interest, penalty, or addition thereto.
"Income Tax Return" means any federal, state, local, or foreign income
tax return, declaration, report, claim for refund or information return
or statement relating to Income Taxes, including any schedule or
attachment thereto.
"Indemnified Loss" has the meaning set forth in Section 8.1, below.
"Indemnified Party" has the meaning set forth in Section 8.4(a), below.
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"Indemnifying Party" has the meaning set forth in Section 8.4(a), below.
"Intellectual Property" has the meaning set forth in Section 4.10, below.
"Last Balance Sheet" has the meaning set forth in Section 4.3, below.
"Leases" has the meaning set forth in Section 4.7(a)(v).
"Litigation Costs" has the meaning set forth in Section 2.4(b), below.
"Litigation Liabilities" has the meaning set forth in Section 2.4(a),
below.
"Material Adverse Effect" means a material adverse effect upon the
business, assets, financial condition, results of operations, income,
properties or liabilities taken as a whole of either (i) the Xxxxxx Xxxxx
Group or of (ii) any member of the Xxxxxx Xxxxx Group.
"Mortgage" has the meaning set forth in Section 2.3, below.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Net Working Capital" means the positive difference, if any, between (x)
sum of (a) Net Receivables and (b) Net Inventory less (y) Accounts
Payable representing amounts due to non-Affiliates, all determined in
accordance with Generally Accepted Accounting Principles and consistent
with prior practices of Xxxxxx Xxxxx Group.
"Opti-Ray Shares" has the meaning set forth in the preface, above.
"Ordinary Course of Business" means the conduct of business consistent
with past custom and practice; provided, that Purchaser acknowledges that
Seller has actively sought to divest the Xxxxxx Xxxxx Group, and
Purchaser agrees that actions taken through the date of this Agreement
and disclosed to Purchaser and any actions permitted by this Agreement to
be taken by Seller prior to the Closing by Seller, members of the Xxxxxx
Xxxxx Group and/or the Partnership in connection with or in preparation
for such proposed transaction, together with actions expressly
contemplated by this Agreement, shall for the purposes of this Agreement
be deemed to have been taken or done in the Ordinary Course of Business.
"Partnership" has the meaning set forth in the preface.
"Patents" has the meaning set forth in Section 4.10(a).
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
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"Preferred Stock" has the meaning set forth in Section 2.2, below.
"Purchase Price" has the meaning set forth in Section 2.2, below.
"Records" has the meaning set forth in Section 7.4, below.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest other than any of the following that
has been disclosed to the Purchaser in this Agreement (a) mechanic's,
materialmen's, and similar liens, (b) liens for taxes not yet due and
payable (or for taxes that the taxpayer is contesting in good faith
through appropriate proceedings), (c) purchase money, security interests,
or liens, arising in the Ordinary Course of Business, and liens securing
rental payments under capital lease arrangements, and (d) other liens
arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Seller's Knowledge" means (i) actual knowledge of the management of the
Seller and of the senior management of the Partnership or (ii) knowledge
that any such individual should or could reasonably be expected to
discover or otherwise become aware of in the course of performing his or
her duties and/or conducting a reasonably comprehensive investigation in
connection with the negotiation of this Agreement and the transactions
contemplated hereby.
"Shares" has the meaning set forth in the preface, above.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or
has the power to vote or direct the voting of sufficient securities to
elect a majority of the directors.
"Threshold" has the meaning set forth in Section 8.3(a), below.
"Trademarks" has the meaning set forth in Section 4.10(a).
2. Purchase and Sale of Shares; Adjustment to Purchase Price; Excluded
Liabilities:
2.1 Purchase and Sale of Shares. Subject to the terms and conditions
of this Agreement, the Seller shall sell, assign, transfer, and convey to
the Purchaser at the Closing (as hereinafter defined) all of the issued
and outstanding Xxxxxxx Shares, which consist of 1,000 shares of common
stock, par value $1.00 per share; Opti-Ray Shares, which consist of 100
shares of common stock, no par value per share; and ABS Shares, which
consist of 1,000 shares of common stock, par value $.001 per share.
2.2 Consideration. (i) In consideration for the sale of the Shares, at
the Closing the Purchaser shall deliver: $29,000,000 (the "Cash
Consideration") in immediately available funds to the Seller, together
with (ii) a certificate, registered in the Seller's
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name, representing 100 shares of Purchaser's Class A Non-Dividend
Preferred Stock (the "Preferred Stock") having an aggregate face and
liquidation value and such other rights as are described in Schedule 5.3
hereto and (iii) an amount equal to all cash advances to the Xxxxxx Xxxxx
Group or any member of the Xxxxxx Xxxxx Group made by the Seller and
approved by AAi during the period from November 13, 1996 to the Closing
Date provided, however, that notwithstanding any approval by AAi of any
such advance, Purchaser shall not be obligated to make any payments under
this clause (iii) in excess of the increase, if any, in the Net Working
Capital on the Closing Date as determined by AAi's independent public
accountants over $21,931,693 being the Net Working Capital determined at
September 30, 1996 according to the Balance Sheet of such date.
Purchaser and Seller shall make an estimate of the amount due hereunder
on or prior to the Closing (the "Estimated Payment"). If the Estimated
Payment shall be greater or less than the amount determined due under
clause (iii) by Purchaser's accountant, then the party who shall have
overpaid or underpaid, as the case may be, shall pay the amount due to
the other party within ten (10) days. The Cash Consideration and the
Preferred Stock are referred to hereinafter jointly as the "Purchase
Price."
2.3 Excluded Liabilities and Transfer of Dallas Property. In
connection with the Purchaser's purchase of the Shares, the Purchaser
will assume all liabilities of the Xxxxxx Xxxxx Group (subject to the
indemnification provisions set forth in Section 8.1, below) excluding:
(a) any liabilities arising under or in connection with
that certain Contingency Agreement, dated as of June 30, 1993
between Xxxxxx Eyecare Corporation and Xxxxx Xxxxxxx;
(b) any liabilities arising under or in connection with
patent litigation previously initiated by Al-Site Corporation
against Xxxxxxx and Pennsylvania Optical Company;
(c) any liabilities arising under or in connection with
a mortgage attached to the Dallas Property dated March 31, 1995 by
and between the Partnership as mortgagor, Seller as guarantor and
First Interstate Bank of Texas, N.A. (the "Mortgage") and all
amendments to the Mortgage. In connection with this subsection
2.4(c), the Seller (or its designee) shall on or before the Closing
Date acquire from the Partnership all right, title and interest in
and to the Dallas Property, and in connection therewith shall
assume all liability in connection with such existing mortgage.
(The foregoing liabilities are hereafter referred to as the
"Excluded Liabilities").
The Seller shall be solely responsible for satisfying and
or defending against any and all claims, demands or other
liabilities with respect to the Excluded Liabilities, and shall
have sole control and direction of any defense in connection
therewith; provided, that Purchaser shall, and after the Closing
Date shall cause the Xxxxxx Xxxxx Group and/or its members to,
cooperate reasonably with the
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Seller in connection with any such defense, and the Seller shall
reimburse promptly any and all direct out- of-pocket expenses
incurred in connection with or as a result of providing such
cooperation.
2.4 Litigation Liabilities.
(a) In connection with the Purchaser's purchase of the Shares,
the Purchaser will, subject to Section 2.4(b) below, assume any and
all liabilities of the Xxxxxx Xxxxx Group and/or the Partnership
other than the Excluded Liabilities, including (without limitation)
liabilities arising out of any litigation pending, threatened or
commenced against any member of the Xxxxxx Xxxxx Group or the
Partnership or pending, threatened or commenced against the Seller
and relating to the Xxxxxx Xxxxx Group or its business and not
referred to in Section 2.3 hereinabove, including any litigation or
administrative or governmental proceeding (i) pending prior to the
Closing Date or (ii) arising out of or relating to any events
occurring prior to the Closing Date, including, without limitation,
liabilities resulting from any past or present violation of any
environmental laws (the liabilities described in this Section
2.4(a) are referred to as the "Litigation Liabilities"). No such
assumption of liability shall release Seller from any breach of any
representations or warranties made by Seller herein. Without
limiting the generality of the foregoing, Purchaser, and after the
Closing, the members of the Xxxxxx Xxxxx Group and the Partnership,
shall be solely responsible for defending against any such
Litigation Liabilities and shall have sole direction of any defense
thereof; provided, that Purchaser shall consult periodically with
Seller and its counsel regarding the status of individual claims or
cases and the Purchaser shall not enter into any settlement
agreement or otherwise compromise or settle any Litigation
Liability, claim or case without the prior written consent of
Seller, which approval shall not be withheld or delayed
unreasonably.
(b) It is understood and agreed that, as between the Purchaser
and the Seller, Purchaser shall have no liability for any direct
out-of-pocket costs or expenses relating to or arising from the
Litigation Liabilities (including, without limitation, defense
costs, attorneys fees, amounts assessed as damages and settlement
costs) ("Litigation Costs") to the extent such Litigation Costs
exceed $500,000. Purchaser shall be solely responsible for the
first $100,000 of any and all Litigation Costs, and Purchaser and
Seller shall share equally all Litigation Costs exceeding $100,000
and up to $500,000. To the extent any such Litigation Costs are
recoverable from third parties or indemnified against by applicable
insurance policies, Purchaser shall seek to recover the same and
Seller shall be entitled to receive from the proceeds of any such
recovery (reduced by the legal fees and other expenses incurred by
Purchaser) fifty percent (50%) of all recoveries in excess of
$100,000 but less than $500,000 and one hundred percent (100%) of
all recoveries in excess of $500,000.
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3. Closing.
3.1 The Closing. The closing of the purchase of the Shares
contemplated by this Agreement (the "Closing") shall take place at the
offices of Xxxxxxxx, Xxxxx & Xxxxxx, at 1500 fleet Center, Providence,
Rhode Island 02903, no more than five days after the conditions precedent
to Purchaser's obligations have been satisfied or waived.
3.2 Deliveries at the Closing. (i) The Seller shall deliver or cause
the delivery to the Purchaser of the various certificates, instruments,
and documents referred to in Section 6.1 below, including, without
limitation, one or more share certificates representing all the Shares
and registered in the name of Purchaser, or duly endorsed in blank and
accompanied by stock powers duly endorsed in blank, in each case in
proper form for transfer, and with all stock transfer and any other
required documentary stamps affixed thereto; (ii) the Purchaser shall
deliver or cause the delivery to the Seller of the various certificates,
instruments, and documents referred to in Section 6.2 below and (iii) the
Purchaser shall deliver to the Seller the Purchase Price as provided in
Section 2.2.
3.3 Generally. All proceedings to be taken and all documents to be
executed and delivered at the Closing shall be deemed to have been taken,
executed and delivered simultaneously as of the Closing Date unless
otherwise expressly stated, and no proceeding shall be deemed taken or
documents deemed executed or delivered until all have been taken,
executed and delivered.
4. Representations and Warranties of the Seller. The Seller represents and
warrants to the Purchaser with respect to the Seller and on behalf of
each member of Xxxxxx Xxxxx Group, as follows:
4.1 Organization, Qualification and Corporate Power. The Seller owns
directly all the outstanding shares of common stock of Xxxxxxx, Opti-Ray
and ABS. Xxxxxxx owns directly all the outstanding shares of common
stock of BEC Distribution, Xxxxxxx General, Xxxxxxx Holdings and MMI.
Opti-Ray owns directly all the outstanding shares of common stock of
O-Ray Holdings. Xxxxxxx General is the sole general partner, and Xxxxxxx
Holdings and O-Ray Holdings are all of the limited partners, of the
Partnership. Xxxxxxx, Opti-Xxx and ABS, together with their respective
subsidiaries, including the Partnership, comprise all of the members of
the Xxxxxx Xxxxx Group. Schedule 4.1 sets forth as to each member of the
Xxxxxx Xxxxx Group, its place of incorporation, principal place of
business, jurisdictions in which it is qualified to do business, its
authorized capitalization, its shares of common stock outstanding, and
the record and beneficial owner of those shares. Each member of the
Xxxxxx Xxxxx Group is a corporation or a partnership (in the case of the
Partnership), duly organized or formed (in the case of the Partnership),
validly existing, and in good standing under the laws of its jurisdiction
of incorporation or formation (in the case of the Partnership). Each
member of the Xxxxxx Xxxxx Group has all requisite corporate or
partnership (in the case of the Partnership) power and authority, and all
necessary material consents, authorization, approvals, orders, licenses,
certificates, and permits of and from, and declaration and filings with,
all federal, state, local, and other governmental authorities and all
courts and other tribunals, to own, lease, license, and use its
properties and assets and to carry on the business in which it is now
engaged, except where the failure to have the same would not have a
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Material Adverse Effect. Each member of the Xxxxxx Xxxxx Group is duly
qualified to transact the business in which it is engaged and is in good
standing as a foreign corporation or partnership (in the case of the
Partnership) in every jurisdiction in which its ownership, leasing,
licensing, or use of property or assets or the conduct of the Xxxxxx
Xxxxx Group makes such qualification necessary, except where the failure
to be so qualified would not have a Material Adverse Effect. No member
of the Xxxxxx Xxxxx Group is in violation or breach of, or in default
with respect to, and term of its certificate of incorporation (or other
charter document) or by-laws or in the case of the Partnership, its
partnership agreement. Complete copies of the Articles of Incorporation
and Bylaws or the Certificate and Agreement of Limited Partnership (in
the case of the Partnership) of such member of the Xxxxxx Xxxxx Group
have been previously delivered to Purchaser and AAi.
4.2 Capitalization. The authorized, issued and outstanding shares of
capital stock or other equity interest of each member of the Xxxxxx Xxxxx
Group are set forth on Schedule 4.1. None of the Shares are held in
treasury. Each of such outstanding shares of capital stock or other
equity interests is duly authorized, validly issued, fully paid, and
nonassessable, has not been issued and is not owned or held in violation
of any preemptive right of stockholders, and is owned of record and
beneficially by those Persons set forth on Schedule 4.1, in each case
free and clear of all Security Interests, stockholders' agreements, and
voting trusts, other than as set forth on Schedule 4.2. There are no
outstanding or existing options, warrants, conversion rights,
subscriptions or other rights obligating any member of the Xxxxxx Xxxxx
Group to issue, deliver or sell any stock or securities or partnership
interest (in the case of the Partnership) or any agreements,
understandings or commitments to issue the same.
4.3 Financial Statements. The Seller has delivered to the Purchaser
true and correct copies of the unaudited consolidated balance sheet of
the Xxxxxx Xxxxx Group and the unaudited consolidated statements of
income and cash flows of the Xxxxxx Xxxxx Group as of and for the fiscal
year ended December 31, 1995 (the "Last Balance Sheet"), which have been
extracted from the Seller's audited financial statements as of and for
the year ended December 31, 1995, together with the unaudited
consolidated balance sheet and statements of income and cash flows of the
Xxxxxx Xxxxx Group as of and for the nine month period ended September
30, 1996 (which have been prepared by management of the Xxxxxx Xxxxx
Group) (all of the foregoing collectively referred to as the "Financial
Statements"). The Last Balance Sheet and the September 30, 1996 Balance
Sheet are attached hereto as Exhibit A and Exhibit B, respectfully. The
Financial Statements, subject to the purchase accounting entries detailed
on the September 30, 1996 Balance Sheet,: (a) have been prepared in
accordance with the books of account and records of the Xxxxxx Xxxxx
Group; (b) fairly present, in all material respects, the Xxxxxx Xxxxx
Group's financial condition and the results of their operations at the
dates and for the periods specified in those statements; and (c) have
been prepared in accordance with generally accepted accounting principles
consistently applied with all prior periods, except for changes noted
therein.
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4.4 Absence of Undisclosed Liabilities. No member of the Xxxxxx Xxxxx
Group has any material liabilities, commitments or obligations of any
nature whatsoever, whether written, oral, absolute, accrued or
contingent, which are required to be reflected or reserved against in the
Financial Statements (or disclosed in a footnote thereto) in accordance
with generally accepted accounting principles, except for those (a)
disclosed or reflected as liabilities or reserved for on the Financial
Statements, (b) incurred or accrued since September 30, 1996 in the
Ordinary Course of Business, or (c) set forth on Schedule 4.4 or any
other Schedule hereto and, to the Seller's Knowledge, there is no basis
for assertion against any member of the Xxxxxx Xxxxx Group of any such
material liability, commitment or obligation.
4.5 Taxes.
(a) Each corporate member of the Xxxxxx Xxxxx Group is a member
of the Seller's consolidated tax group, and the Seller has paid or caused
to be paid all federal, state, local, foreign, and other taxes, including
without limitation income taxes, estimated taxes, alternative minimum
taxes, excise taxes, sales taxes, use taxes, value-added taxes, gross
receipts taxes, franchise taxes, capital stock taxes, employment and
payroll-related taxes, withholding taxes, stamp taxes, transfer taxes and
property taxes, whether or not measured in whole or in part by net
income, and all deficiencies, or other additions to tax, interest, fines
and penalties owed by it (collectively, "Taxes"), required to be paid by
it through the date hereof, whether disputed or not, except as disclosed
in Schedule 4.5 attached hereto.
(b) Except as disclosed in Schedule 4.5 attached hereto, the
Seller has in accordance with applicable law filed (or has filed for
available extensions) all federal, state, local and foreign tax returns
required to be filed by it through the date hereof, and all such returns
correctly and accurately set forth the amount of any Taxes relating to
the applicable period. Schedule 4.5 contains a description of those
returns that have been audited or currently are the subject of an audit.
Furthermore, Schedule 4.5 contains a schedule of all examination reports
and statements of deficiencies assessed against or agreed to by the
Seller or any member of the Xxxxxx Xxxxx Group. Schedule 4.5 attached
hereto sets forth all federal tax elections under the Internal Revenue
Code of 1986, as amended (the "Code"), that are in effect with respect to
each member of the Xxxxxx Xxxxx Group or for which an application by any
member of the Xxxxxx Xxxxx Group is pending.
(c) Except as disclosed in Schedule 4.5 attached hereto,
neither the Internal Revenue Service nor any other governmental authority
is now asserting or, to the best knowledge of the Seller, threatening to
assert against the Seller or any member of the Xxxxxx Xxxxx Group, any
deficiency or claim for additional Taxes. Except as disclosed in
Schedule 4.5 attached hereto, no claim has ever been made by any
authority in a jurisdiction where the Seller does not file reports and
returns that the Seller is or may be subject to taxation by that
jurisdiction. There are no material Security Interests on any of the
assets of the Seller or any member of the Xxxxxx Xxxxx Group that arose
in connection with any failure (or alleged failure) to pay any tax.
Neither the Seller nor any member of
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the Xxxxxx Xxxxx Group has entered into a closing agreement pursuant to
Section 7121 of the Code.
(d) Except as set forth in Schedule 4.5 attached hereto, there
has not been any audit of any tax return filed by the Seller or any
member of the Xxxxxx Xxxxx Group since June 30, 1992 or, to the Seller's
knowledge, prior thereto, no audit of any tax return of the Seller or any
member of the Xxxxxx Xxxxx Group is in progress, and neither the Seller
nor any member of the Xxxxxx Xxxxx Group has been notified by any tax
authority that any such audit is contemplated or pending. Except as set
forth in Schedule 4.5, no extension of time with respect to any date on
which a tax return was or is to be filed by the Seller or any member of
the Xxxxxx Xxxxx Group is in force, and no waiver or agreement by the
Seller or any member of the Xxxxxx Xxxxx Group is in force for the
extension of time for the assessment or payment of any Taxes.
(e) Neither the Seller nor any member of the Xxxxxx Xxxxx Group
have ever consented to have the provisions of Section 341(f)(2) of the
Code applied to it. Neither the Seller nor any member of the Xxxxxx
Xxxxx Group have agreed to, and neither the Seller nor any member of the
Xxxxxx Xxxxx Group have been requested by any governmental authority to,
make any adjustments under Section 281(a) of the Code by reason of a
change in accounting method or otherwise. Neither the Seller nor any
member of the Xxxxxx Xxxxx Group have ever made any payments, is
obligated to make any payments, or is a party to any agreement that under
certain circumstances would obligate it to make any payments, that will
not be deductible under Section 280G of the Code. The Seller disclosed
in its consolidated federal income tax returns all positions taken
therein that could give rise to a penalty for underpayment of federal Tax
under Section 6662 of the Code. Neither the Seller nor any member of the
Xxxxxx Xxxxx Group ever had any liability for unpaid Taxes because it was
a member of an "affiliated group" (as defined in Section 1504(a) of the
Code). Except as set forth in Schedule 4.5 attached hereto, none of the
members of the Xxxxxx Xxxxx Group are a party to any tax sharing
agreement.
(f) For purposes of this Section 4.5 all references to Sections
of the Code shall include any predecessor provision to such Sections and
any similar provisions of federal, state, local or foreign law.
4.6 Litigation and Claims. Except as set forth on Schedule 4.6: None
of the members of the Xxxxxx Xxxxx Group is involved in any pending or,
to Seller's knowledge, threatened litigation, action, suit, proceeding,
claim or investigation which, singly or in the aggregate, could have a
Material Adverse Effect upon the members of the Xxxxxx Xxxxx Group, or
which would prevent or hinder the consummation of the transactions
contemplated by this Agreement including, without limitation, the
execution, delivery and performance of any related documents; and no
member of the Xxxxxx Xxxxx Group is subject to or bound by any agreement,
judgment, decree or order which could have a Material Adverse Effect upon
the members of the Xxxxxx Xxxxx Group.
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4.7 Status of Property Owned or Leased.
(a) Real Property. The real property identified as being owned
by the members of the Xxxxxx Xxxxx Group on Schedule 4.7 is collectively
referred to herein as the "Owned Real Property"; the real property
identified as being leased by the members of the Xxxxxx Xxxxx Group on
Schedule 4.7 is collectively referred to herein as the "Leased Real
Property"; the Owned Real Property and the Leased Real Property are
collectively referred to herein as the "Real Property." The Owned Real
Property constitutes all the real property owned by the members of the
Xxxxxx Xxxxx Group and the Leased Real Property constitutes all the real
property leased by the members of the Xxxxxx Xxxxx Group.
(i) Title. Each member of the Xxxxxx Xxxxx Group has
good, clear, record, marketable and insurable fee simple title to the
Owned Real Property owned by it, in all cases free and clear of all
Encumbrances, liens, assessments, licenses, claims, rights of first offer
or refusal, options, or options to purchase, or any covenants,
conditions, restrictions, rights of way, easements, judgments or other
encumbrances or matters affecting title, except as set forth on Schedule
4.8. There are no leases, tenancies or occupancy rights of any kind
affecting any of the Owned Real Property. Each member of the Xxxxxx
Xxxxx Group has a valid leasehold interest in all of the Leased Real
Property leased by it, free and clear of all Encumbrances.
(ii) Security Interests. All of the mortgages, deeds of
trust, ground leases, security interests or similar encumbrances on the
Real Property are set forth on Schedule 4.8 (collectively, the
"Encumbrances"). All payments required under each Encumbrance to the
date hereof have been made in full or are accrued in accordance with
Section 4.3. There is not now, nor, as a result of the consummation of
the transactions contemplated hereby, will there by, any default under
the terms and provisions of any Encumbrance. No condition or fact does
or will exist, as a result of the consummation of the transactions
contemplated hereby, which, with the lapse of time or the giving of
notice or both, would constitute a material default thereunder or result
in any acceleration of the indebtedness secured thereby or any increase
in the amount of interest, premiums or penalties payable on such
indebtedness. Schedule 4.8 also specifically indicates all Encumbrances
which are, by their terms, by means of a separate guaranty or otherwise,
recourse, in whole or in part, to the members of the Xxxxxx Xxxxx Group.
(iii) Leases. All of the leases of any of the Leased Real
Property (collectively, the "Leases") are as set forth on Schedule 4.7.
The copies of the Leases delivered or furnished by the Seller to AAi
constitute all of the leases or tenancy agreements of or with respect to
the Leased Real Property, and are complete and correct copies of each of
the Leases. All Leases are currently in full force and effect. Each
party to the Leases has performed all of its obligations under each of
such Leases in all material respects and is not in default thereunder,
and the Seller is not aware of any event or condition which exists or as
a result of the passage of time or the giving of notice could result in a
default under any such Lease. Except as disclosed on Schedule 4.7, the
consummation of the transactions contemplated by this Agreement will not
result in any modification, termination, breach or default or require any
consent under any such Lease.
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(iv) Commissions. There are no brokerage or leasing fees
or commissions or other compensation due or payable on an absolute or
contingent basis to any person, firm, corporation, or other entity with
respect to or on account of any of the Leases, the Encumbrances or the
Real Property, and no such fees, commissions or other compensation shall,
by reason of any existing agreement, become due after the date hereof.
(v) Physical Condition. There is no material defect in
the physical condition of any of the Owned Real Property or the Leased
Real Property. There is no material defect in any improvements located
on or constituting a part of any of the Real Property, including, without
limitation, the structural elements thereof, the mechanical systems
(including without limitation all heating, ventilating, air conditioning,
plumbing, electrical, elevator, security, telephone, utility, and
sprinkler systems) therein, the roofs or the parking and loading areas
(collectively, the "Improvements"). All of the improvements located on
or constituting a part of any of the Real Property, including, without
limitation, the structural elements thereof, the mechanical systems
therein, the roofs and the parking and loading areas are in generally
good operating condition and repair and have been maintained in the
Ordinary Course of Business, normal wear and tear excepted.
(vi) Utilities. All water, sewer, gas, electric,
telephone, drainage and other utility equipment, facilities and services
required by law or necessary for the operation of the Real Property as it
is now being operated and as required for operation are installed and
connected pursuant to valid permits, are sufficient to service the Real
Property and as a whole are in generally good repair and operating
condition, normal wear and tear excepted. Neither the Seller nor any
member of the Xxxxxx Xxxxx Group has received any notice of and the
Seller and each member of the Xxxxxx Xxxxx Group has no knowledge of any
fact, condition or proceeding which would result in the termination or
impairment of the furnishing of, or any material increase in rates for,
services to any of the Real Property of water, sewer, gas electric,
telephone, drainage and other utility services, except ordinary and usual
rate increases applicable to all customers (or all customers of a certain
class) of a utility provider. To the best knowledge of the Seller, the
facilities servicing the Real Property are in compliance, in all material
respects, with all applicable governmental statutes, ordinances, rules
and regulations.
(vii) Compliance. Neither the Seller nor any member of
the Xxxxxx Xxxxx Group has received any notice from any municipal, state,
federal or other governmental authority with respect to, and the Seller
has no knowledge of, any violation of any zoning, building, fire, water,
use, health, environmental or other statute, ordinance, code or
regulation issued in respect of any of the Real Property that has not
been heretofore corrected, and no such violation or violations now exist
which would have a material adverse effect on the operation or
Improvements on the Real Property. The construction, installation, use
and operation of the Real Property or the Improvements thereon
(including, without limitation, the construction, installation, use and
operation of any signs located thereon) were completed and installed and
are in compliance, in all
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material respects, with all applicable municipal and governmental laws,
ordinances, regulations, licenses, permits and authorizations, including,
without limitation, applicable building, zoning, environmental and fire
safety laws and regulations, and there are presently in effect all
material certificates of occupancy, licenses, permits, authorizations and
approvals required by law or by any governmental or private authority
having jurisdiction over any of the Real Property or any portion thereof,
occupancy thereof or any present use thereof, including but not limited
to such other permits as are necessary for the operation of the Real
Property.
(viii) Government Approvals. Neither the Seller nor any
member of the Xxxxxx Xxxxx Group has received any notice of and the
Seller has no knowledge of any plan, study or effort by any governmental
agency or authority which would adversely affect the present use, zoning
or value of any of the Real Property or which would modify or realign any
adjacent street or highway. All of the Real Property has access from a
publicly dedicated roadway and all such access is at least the minimum
access required by applicable subdivision or similar law for all
Improvements constituting a part of the Real Property. All lessee
improvements are in substantial accordance with applicable Lease
requirements.
(ix) Real Property Taxes. Other than the amounts
disclosed by the copies of the tax bills for the Owned Real Property
delivered to AAi by Seller, no other taxes have been or, to the best
knowledge of the Seller, will be assessed on any of the Owned Real
Property or any portion thereof, in respect of the current tax year or
any prior year, except as set forth in Schedule 4.8.
(x) Service Contracts. A complete and correct list of
all material existing service, management, supply or maintenance and
equipment lease contracts and other contractual agreements affecting the
Real Property or any portion thereof (the "Service Contracts") as set
forth on Schedule. 4.8. Each of the Service Contracts is currently valid
and in full force and effect and, with respect to each of the Service
Contracts, no situation exists which, with the passage of time or notice
or both, would cause any member of the Xxxxxx Xxxxx Group to be in
default thereunder, except where such default would not have a Material
Adverse Effect.
(b) Personal Property. The personal property located on the
Real Property is all of the personal property necessary for the continued
operation of the business of each member of the Xxxxxx Xxxxx Group as
currently conducted. Except as specifically disclosed in Schedule 4.8,
each member of the Xxxxxx Xxxxx Group has good and marketable title to
all of the personal property owned by it. None of such personal property
or assets is subject to any Encumbrance or other charge except as
specifically disclosed in Schedule 4.8. The Financial Statements reflect
all material personal property of each member of the Xxxxxx Xxxxx Group,
subject to dispositions and additions in the ordinary course of business
consistent with this Agreement. Except as otherwise specified in
Schedule 4.8, all material leasehold improvements, furnishings, machinery
and equipment of the Xxxxxx Xxxxx Group are in generally good repair,
normal wear and
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tear excepted, have been well maintained, and conform in all material
respects with all applicable ordinances, regulations and other laws.
4.8 Contracts and Other Instruments. Except as disclosed in Schedule
4.8 hereto, neither the Partnership nor any member of the Xxxxxx Xxxxx
Group is a party to or bound by any executory oral or written:
(a) Contract or agreement for the purchase of any materials or
equipment necessary for the continued operation of the Xxxxxx Xxxxx
Group, except purchase orders in the Ordinary Course of Business;
(b) Contract or agreement providing for the purchase from a
particular supplier of all or substantially all of the Xxxxxx Xxxxx
Group's requirements of any material product or other item sold or used
by the Xxxxxx Xxxxx Group in the Ordinary Course of Business;
(c) Contract or commitment in connection with the Xxxxxx Xxxxx
Group which by its terms does not terminate or is not terminable without
penalty by any member of the Xxxxxx Xxxxx Group or any successor or
assign within thirty (30) days after notice from such party thereto;
(d) Contract or agreement related to the Xxxxxx Xxxxx Group not
made in the Ordinary Course of Business;
(e) Contract or agreement with any officer, director or
stockholder of the Xxxxxx Xxxxx Group or with any Affiliate and which
relates to the Xxxxxx Xxxxx Group;
(f) Employment, agency, consulting, or similar contract in
connection with the members of the Xxxxxx Xxxxx Group that cannot be
canceled by it without cost or penalty on less than thirty (30) days'
notice;
(g) License or secrecy agreements involving intellectual
property rights or non-competition agreements;
(h) Loan or guaranty agreement, credit agreement, note or other
agreement or instrument evidencing indebtedness of any member of the
Xxxxxx Xxxxx Group to any third party or of any third party to any member
of the Xxxxxx Xxxxx Group, and any related forbearance, waiver or after
amending agreement or any conditional sale agreement, sale-leaseback
agreement, mortgage, pledge, indenture or other agreement or instrument
evidencing a Security Interest or secured transactions;
(i) Lease, sublease or other occupancy agreement affecting the
Real Property or any option, right of first refusal or agreement for sale
affecting such property in any material respect; or
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(j) Other contracts or agreements creating any material
obligation on any member of the Xxxxxx Xxxxx Group with respect to the
Xxxxxx Xxxxx Group or the transactions contemplated by this Agreement.
The Seller has delivered to the Purchaser and AAi a correct and
complete copy of each Contract (or, in the case of similar form
Contracts, a copy of the form of such Contract together with a list of
parties having executed such form) (as amended to date) listed on or
described in Schedule 4.8. Except as specifically disclosed on Schedule
4.8, the Xxxxxx Xxxxx Group, or the relevant member thereof, has
performed all material obligations required to be performed by it to date
under all such Contracts. Except to the extent any of the same may have
been terminated or expired prior to the Closing Date, or as disclosed in
Schedule 4.8, no member of the Xxxxxx Xxxxx Group is, nor, to the
Seller's knowledge, is any other party to any such contract, agreement,
instrument, lease, or license in violation or breach of, or in default
with respect to complying with, any material provision thereof, and each
such contract, agreement, instrument, lease, or license is in full force
and is the legal, valid, and binding obligation of such member of the
Xxxxxx Xxxxx Group, as the case may be, and is enforceable as to it in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws in effect relating to
creditors rights generally, and that the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to
general principles of equity.
4.9 Employee Benefits. Except as set forth in Schedule 4.9:
(a) Neither the Partnership nor any member of the Xxxxxx Xxxxx
Group has in the period since their respective dates of acquisition by
the Seller contributed to a Multiemployer Plan, and to Seller's knowledge
no member of the Xxxxxx Xxxxx Group has contributed to any Multiemployer
Plan prior to the acquisition by Seller. No member of the Xxxxxx Xxxxx
Group currently maintains, or is a participating employer in, or
contributes to, any pension, profit-sharing, option, other incentive
plan, or any other type of Employee Benefit Plan, or has any obligation
to or customary arrangement with employees for bonuses, incentive
compensation, vacations, severance pay, insurance, or other benefits.
The Seller has furnished to the Purchaser copies of all material
documents evidencing such plans, obligations, or arrangements referred to
in Schedule 4.9 (or written summaries of such plans, obligations, or
arrangements to the extent not evidenced by documents) and copies of all
documents evidencing trusts relating to any such plans.
(b) There has been no violation of the reporting and disclosure
requirements imposed either under ERISA or the Internal Revenue Code of
1986, as amended ("Code"), for which a penalty has been or may be imposed
with respect to any such Employee Benefit Plan of the Xxxxxx Xxxxx Group.
There is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), pending and, to the knowledge of the
Seller, there is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation threatened with respect
to any such Employee Benefit Plan or related trust or with respect to any
fiduciary, administrator, or sponsor (in its capacity as such) of any
such Employee Benefit Plan. No event has
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occurred or (to the knowledge of the Seller) is threatened which would
constitute a non-exempt prohibited transaction under Section 406 of
ERISA.
(c) Each Employee Benefit Plan has been maintained, operated
and administered in accordance with its terms and any related document
and agreements and complies in all material respects with the applicable
requirements of ERISA and the Internal Revenue Code.
(d) Each Employee Benefit Plan intended to qualify under the
Internal Revenue Code Sec. 401(a) is so qualified, and each trust
maintained in connection with each such plan is tax exempt under the
Internal Revenue Code Sec. 501(a).
(e) With respect to each Employee Benefit Plan that is a group
health plan subject to Internal Revenue Code Sec. 4980B or 162(k), the
Xxxxxx Xxxxx Group has complied in all material respects with the
continuation coverage requirements of Internal Revenue Code Sec. 4980B
and 162(k), as applicable, and Part 6 of Subtitle B of Title I of ERISA.
(f) With respect to each Employee Benefit Plan that is a group
health plan subject to section 1862(b)(1) of the Social Security Act (42
U.S.C. Section 1395y(b)), the Xxxxxx Xxxxx Group has complied in all
material respects with the secondary payer requirements of section
1862(b)(1) of such Act.
(g) Any Employee Benefit Plan that provides for "parachute
payments" within the meaning of Internal Revenue Code Sec. 280G provides
that "excess parachute payments" will not be paid thereunder.
(h) No Employee Benefit Plan is funded through a "welfare
benefit fund" as defined in Internal Revenue Code Sec. 419(e).
(i) The execution and performance of this Agreement will not
constitute a stated triggering event under any Employee Benefit Plan that
will result in the payment (whether of severance pay or otherwise)
becoming due from the Xxxxxx Xxxxx Group to any officer, employee or
former employee (or dependents of such employee), or accelerate the time
of payment or vesting, or increase the amount of compensation due to any
employee, officer or trustee of the Xxxxxx Xxxxx Group.
(j) The Xxxxxx Xxxxx Group has reserved all rights necessary to
amend or terminate each of the Employee Benefit Plan, other than Employee
Benefit Plans maintained or sponsored by Seller and with respect to which
the members of the Xxxxxx Xxxxx Group are participating employers.
(k) Each "fiduciary" and every "plan official" (as defined in
ERISA Sec. 412) of each Employee Benefit Plan is bonded to the extent
required under ERISA Sec. 412.
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4.10 Intellectual Property.
(a) Intellectual Property" means:
(i) all rights and incidents of interest in and to all
trademarks, service marks, trademark registrations, service xxxx
registrations, and trade names (whether registered or arising under
common law, state law, federal law or the law of a foreign country) and
applications for registration of trademarks and service marks used in or
necessary to the conduct of the business of the Xxxxxx Xxxxx Group as of
the Closing Date (collectively, "Trademarks"), including, without
limitation, all and any rights to any variations thereof, together with
the good will of the Xxxxxx Xxxxx Group in connection with which each
Trademark is used and which is symbolized by each such Trademark;
(ii) all licenses granted by or to the Xxxxxx Xxxxx Group
and any other agreements to which the Xxxxxx Xxxxx Group is a party which
create rights in or to the Trademarks, or trade name properties described
in subsection (i), above and in effect as of the Closing Date;
(iii) all rights and incidents of interest in and to all
works of authorship, including all copyrights, copyright registrations,
certificates of copyright, copyrighted literary interests, applications
for copyrights and all literary, property and author rights related
thereto (collectively, "Copyrights") as of the Closing Date that are
embodied in or associated with the assets of the Xxxxxx Xxxxx Group or
used in or necessary to the conduct of the business of the Xxxxxx Xxxxx
Group as of the Closing Date;
(iv) all inventions, whether patentable or unpatentable
and whether or not reduced to practice, all improvements thereto and
letters patent, design patents and utility patents, all applications for
grant of any such patents pending as of the Closing Date, industrial
models, industrial designs, xxxxx patents, patents of importation,
patents of addition, utility models, certificate of invention and other
government issued or granted indicia of invention ownership, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions and reexaminations thereof, ("Patents"), that are owned by
Xxxxxx Xxxxx Group or are part of or used in or necessary to the conduct
of the business of the Xxxxxx Xxxxx Group.
(v) all renewals, modifications, and extensions of any
items referred to in subsections (i) through (iv), above;
(vi) all rights and incidents of interest in and to all
technical documentation, trade secrets (including trade secret rights
arising under common law, state law, federal law, and the law of a
foreign country), designs, plans, new product development, formulas,
know-how and show-how, that are as of the Closing Date part of, used in
or necessary to the conduct of the business of the Xxxxxx Xxxxx Group;
(vii) all marketing, export, import, and licensing
records, sales literature, supplier lists, vendor lists, customer lists,
trade lists, sales forces and distributor networks, form manuals and
forms, advertising, marketing and promotional materials and
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know-how, sales tools, and other customer or potential customer data or
marketing and service information, customer contracts (whether form or
custom-developed) that are as of the Closing Date used in or necessary
for the conduct of the business of the Xxxxxx Xxxxx Group;
(viii) all rights to develop, manufacture, use or sell
under all licenses in effect as of the Closing Date granted to the Xxxxxx
Xxxxx Group that are part of, used in or necessary to the conduct of the
business of the Xxxxxx Xxxxx Group;
(ix) all rights and incidents of interest in and to all
noncompetition confidentiality agreements in effect as of the Closing
Date that were entered into or made in connection with the business of
the Xxxxxx Xxxxx Group;
(x) all of the Xxxxxx Xxxxx Group's software and
computer programs, applicable to various environments ("Software"),
including all such software and computer programs in human readable
source code forms and in machine executable object code forms and all
related specifications (including, without limitation, all logic
architectures, algorithms and logic flows and all physical, functional,
operating and design parameters), all work in progress relating to
corrections, modifications or enhancements, current and prior versions,
operating systems and procedures (including development methodology),
designs, design revisions, related applications software in any language,
concepts, ideas, processes, techniques, software design and test tools,
third party software interfaces written by such party and all methods of
implementation and packaging, together with all associated know-how and
show-how and all related documentation, specifications, manuals and other
materials relating thereto which are used to install, operate, maintain,
correct, test, repair, enhance, modify, prepare derivative works based
upon, design, develop, reproduce and package such software and computer
programs.
(xi) all goodwill associated with any of the foregoing
and all rights to xxx and recover damages for present and past
infringement of any rights of ownership or use of any of the foregoing
items listed in subsections (i) through (xi), above.
(xii) Notwithstanding the foregoing, "Intellectual
Property" does not include the names or marks "Xxxxxx", "BEC", "Bolle",
"Optical Radiation Corporation" or "ORC" or any name or xxxx including or
incorporating such names, or any right or license therein or thereto.
(b) Except as set forth in Schedule 4.10, the members of the
Xxxxxx Xxxxx Group own or are licensed to use (as the case may be) all
rights and incidents of interest as of the Closing Date in and to all
material Intellectual Property used in or intended for use in, part of or
necessary for the operation of the business as presently conducted and as
presently proposed to be conducted by the members of the Xxxxxx Xxxxx
Group. Each item of Intellectual Property owned or used by the Xxxxxx
Xxxxx Group immediately prior to the Closing Date will be owned or
available for use by them on identical terms and conditions immediately
subsequent to the Closing Date, and except as set forth in
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Schedule 4.10, the Xxxxxx Xxxxx Group is not in default under any
agreement pursuant to which it uses or has the right to use any such
Intellectual Property right. To Seller's Knowledge, the Xxxxxx Xxxxx
Group has taken all necessary and desirable action to maintain and
protect each item of Intellectual Property that it owns. Except as set
forth in Schedule 4.10, no owned item of Intellectual Property has been
abandoned except where and to the extent such abandonment has occurred in
the ordinary course of business and does not have a Material Adverse
Effect. To Seller's Knowledge, each item of Intellectual Property used
by the Xxxxxx Xxxxx Group pursuant to license or other authorization of a
third party is used with the authorization of every other claimant
thereto and the execution, delivery and performance of this Agreement by
the Xxxxxx Xxxxx Group will not impair such use.
(c) Except as set forth in Schedule 4.10, (i) to the Seller's
Knowledge, none of the members of the Xxxxxx Xxxxx Group have interfered
with, infringed upon misappropriated or otherwise come into conflict with
any Intellectual Property rights of any third party, and (ii) no member
of the Xxxxxx Xxxxx Group has received any unresolved charge, complaint,
claim demand or notice alleging any such interference, infringement,
misappropriation or violation (including any claim that the Xxxxxx Xxxxx
Group must license or refrain from using any intellectual property rights
of any third party). Except as set forth in Schedule 4.10, to the
Seller's Knowledge, no third party has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual
Property rights of any member of the Xxxxxx Xxxxx Group.
(d) Schedule 4.10 identifies each material Patent, Trademark,
Copyright or other Intellectual Property covered by a governmental
registration or registration certificate, or application for
registration, whether from the United States or any foreign country, and
identifies each license, agreement or other permission that the Xxxxxx
Xxxxx Group has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions thereto). Except as
set forth on Schedule 4.10, with respect to each item of Intellectual
Property required to be identified therein:
(i) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge;
(ii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand is pending, or the knowledge of the
Xxxxxx Xxxxx Group, is threatened which challenges the legality,
validity, enforceability, use or ownership of the item;
(iii) the Xxxxxx Xxxxx Group has not licensed or permitted
any third party to use any such item; and
(iv) all royalties or other payments to any third party
relating to or arising out of the Xxxxxx Xxxxx Group's marketing, sale,
or use of any Intellectual Property owed by the Xxxxxx Xxxxx Group for
the period up to and including the Closing Date have been paid or accrued
consistent with Section 4.3.
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(e) The Xxxxxx Xxxxx Group has the right to use the name
"Xxxxxx Xxxxx" in connection with its business in the United States and
in such other countries where the name has been registered as a trademark
and are identified in Schedule 4.10; provided, that Eyecare Products,
plc, a United Kingdom company holds all right, title and interest in and
to the name "Xxxxxx Xxxxx" throughout the whole of Europe and the Middle
East (excluding Israel).
4.11 Authority to Sell. The Seller and the Partnership each has all
requisite corporate (or partnership, as applicable) power and authority
to execute, deliver, and perform this Agreement. This Agreement has been
duly authorized, executed, and delivered by the Seller and the
Partnership, is the legal, valid, and binding obligation of each of them,
and is enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws in effect
relating to creditors rights generally, and that the remedy relating to
creditors rights generally, and that the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to
general principles of equitable relief may be subject to general
principles of equity. No material consent, authorization, approval,
order, license, certificate, or permit of or form, or declaration or
filing with, any federal, state, local, or other governmental authority
or any court or other tribunal is required by the Seller or the
Partnership for the execution, delivery, or performance of this Agreement
by the Seller or the Partnership, other than the filings and approvals
required by the Xxxx-Xxxxx Xxxxxx Antitrust Improvements Act of 1976.
Except as set forth on Schedule 4.11, no consent of any party to any
material contract, agreement, instrument, lease, license, arrangement, or
understanding to which the Xxxxxx Xxxxx Group is a party, or to which any
of its material properties or assets are subject, is required for the
execution, delivery, or performance of this Agreement (except such
consents referred to in Schedule 4.11 as have been obtained at or prior
to the date of this Agreement, copies of which have been delivered to the
Purchaser); and the execution, delivery, and performance of this
Agreement will not violate, result in a breach of, conflict with, or
(with or without the giving of notice or the passage of time or both)
entitle any party to terminate or call a default under any such material
contract, agreement, instrument, lease, license, arrangement, or
understanding; or violate or result in a breach of any term of the
certificate of incorporation (or other charter document) or by- laws, or
partnership agreement, as applicable, of any member of the Xxxxxx Xxxxx
Group; or in any material respect, violate, result in a breach of, or
conflict with any material law, rule, regulation, order, judgment, or
decree binding on the Seller or any member of the Xxxxxx Xxxxx Group or
to which any of its material operations, business, properties, or assets
are subject.
4.12 Environmental Matters. Except as set forth on Schedule 4.12, to
the Seller's knowledge:
(a) No Contaminants have at any time been treated, recycled or
disposed of in any way by any member of the Xxxxxx Xxxxx Group in
or about any real estate owned, leased or operated by any member of
the Xxxxxx Xxxxx Group except as permitted under and in accordance
with applicable law;
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(b) There are no locations not presently owned, leased or
operated by any member of the Xxxxxx Xxxxx Group where Contaminants
from the operation of the business of any member of the Xxxxxx
Xxxxx Group have been stored, treated, recycled or disposed of
except as permitted under and in accordance with applicable law;
(c) There are no underground storage tanks located on or about
real property owned, leased or operated by any member of the Xxxxxx
Xxxxx Group;
(d) There are no past or continuing releases of Contaminants
into the environment from real property owned, leased or operated
by any member of the Xxxxxx Xxxxx Group or from other locations
where wastes from the operation of the Xxxxxx Xxxxx Group's
properties or business have been or are located;
(e) No member of the Xxxxxx Xxxxx Group has treated, stored or
disposed of any hazardous waste (within the meaning of such terms
under the federal Resource Conservation and Recovery Act, as
amended (and any implementing regulations)), or any similar state
or local legal requirements except as permitted under and in
accordance with applicable law; and
(f) Neither the Seller nor any member of the Xxxxxx Xxxxx Group
has received any notice from any Person advising the Seller or any
member of the Xxxxxx Xxxxx Group that any member of the Xxxxxx
Xxxxx Group is potentially responsible for response costs with
respect to a release or threatened release of Contaminants.
4.13 Labor Practices. To Seller's Knowledge, there are no material
claims for unfair labor practices or threatened between any member of the
Xxxxxx Xxxxx Group and any of their employees. No strikes, work
slowdowns or stoppages or other labor disputes involving any member of
the Xxxxxx Xxxxx Group's employees are pending or, to the Seller's
Knowledge, threatened. There is not pending any material grievance
procedure or arbitration proceeding under any collective bargaining
agreement covering any member of the Xxxxxx Xxxxx Group's employees or
former employees. Except as disclosed in Schedule 4.6, no charges,
audits, investigations or complaint proceedings are pending, or are to
Seller's Knowledge threatened, before the Equal Employment Opportunity
Commission or any state or local agency responsible for the prevention of
unlawful employment practices. No member of the Xxxxxx Xxxxx Group has
experienced any work stoppage or other similar labor difficulty.
4.14 Compliance with Laws, Permits and Licenses. Except as disclosed on
Schedule 4.14, each member of the Xxxxxx Xxxxx Group has complied with
all material applicable laws, rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder
(collectively "Laws") of federal, state, local, and foreign governments
(and all agencies thereof), except where the failure to comply would not
have a Material Adverse Effect. Except as disclosed on Schedule 4.14, no
material expenditures or actions are, or will be, required by any member
of the Xxxxxx Xxxxx Group to bring the
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Xxxxxx Xxxxx Group into compliance with such Laws. Except as set forth
on Schedule 4.14, to Seller's Knowledge, neither the Seller nor any
member of the Xxxxxx Xxxxx Group, nor any of their respective executive
officers, employees or agents has received any written or oral notice of
or citation for material noncompliance with any Laws including, without
limitation, Environmental Laws (as defined herein), directly in
connection with the Xxxxxx Xxxxx Group. To the Seller's Knowledge
except as set forth on Schedule 4.14, there exists no fact, condition,
situation or circumstance, which individually or in the aggregate, and
after notice or lapse of time or both, would constitute material
noncompliance with or give rise to material future liability with respect
to any such Laws. All material permits and licenses required under
applicable Laws to operate the Xxxxxx Xxxxx Group as currently operated
are listed in Schedule 4.14 hereto.
4.15 Directors, Officers and Key Employees. Schedule 4.15 sets forth a
true and complete list of the names and work addresses and total
compensation received from Xxxxxx Xxxxx Group or any member thereof of
all current directors and officers of the members of the Xxxxxx Xxxxx
Group, and each other current employee of the Xxxxxx Xxxxx Group who
received base compensation of $50,000 or more in calendar year 1995 or as
of October 31, 1996 would receive or accrue base compensation of $50,000
or more of projected remuneration for the calendar year 1996. Except as
set forth in Schedule 4.15 or in any Contract disclosed pursuant to
Section 4.8, none of the persons listed therein have received any wage or
salary increase or bonus since October 31, 1996, other than in the
Ordinary Course of Business and consistent with the Xxxxxx Xxxxx Group's
policies and procedures, and there has not been any accrual for or
commitment or agreement by any member of the Xxxxxx Xxxxx Group to pay
the same. Set forth on Schedule 4.15 is a correct and complete list of
each employee of each member of the Xxxxxx Xxxxx Group whose employment
terminated, whether voluntarily or involuntarily and whether temporarily
or permanently, within thirty (30) days prior to the Closing Date. No
member of the Xxxxxx Xxxxx Group employs any person in a manner that
violates any non-competition, non-disclosure or other similar agreement
(including without limitation those entered into in connection with any
former employment).
4.16 Absence of Certain Changes. Since September 30, 1996, there has
not been:
(a) Any change in the financial condition, properties, assets,
liabilities, or operations related to the Xxxxxx Xxxxx Group, which
change by itself or in conjunction with all other such changes,
whether or not arising in the ordinary course of business, has a
Material Adverse Effect;
(b) Any material Security Interest placed on any assets of the
Xxxxxx Xxxxx Group that remains undischarged on the Closing Date;
(c) Any obligation, liability or commitment incurred by any
member of the Xxxxxx Xxxxx Group that has a Material Adverse
Effect;
(d) Any purchase, sale or other disposition or any agreement or
other arrangement for the purchase, sale or other disposition of
any of assets of the
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Xxxxxx Xxxxx Group, other than those that are immaterial or are in
the Ordinary Course of Business, except those expressly
contemplated by this Agreement;
(e) Any lease, license or other agreement that has had a
Material Adverse Effect, other than as set forth on Schedule 4.16;
(f) Any damage, destruction or loss, whether or not fully
covered by insurance, that has a Material Adverse Effect; or
(g) Any other matter that has a Material Adverse Effect that
has not been disclosed herein or in a schedule or attachment
furnished herewith.
4.17 Insurance. Schedule 4.17 sets forth a list of all material
insurance policies providing insurance coverage of any nature to the
Xxxxxx Xxxxx Group. The Seller has previously made available to the
Purchaser a copy of all of such insurance policies, as amended to the
date hereof. Such policies are sufficient for compliance in all material
respects by the Xxxxxx Xxxxx Group with all material requirements of law
and all material agreements to which the Xxxxxx Xxxxx Group is a party or
by which any of its assets are bound. All of such policies are in full
force and effect and to the knowledge of the Seller, are valid and
enforceable in accordance with their terms, and the Xxxxxx Xxxxx Group
has complied with all material terms and conditions of such policies,
including premium payments. None of the insurance carriers has provided
written notice to the Seller an intention to cancel any such policy.
Purchaser acknowledges that all such policies are issued in the name of
Seller and will remain the property of Seller in all respects from and
after the Closing Date.
4.18 Transactions With Interested Persons. Other than as disclosed
on Schedule 4.18 no officer, supervisory employee, director or
shareholder of any member of the Xxxxxx Xxxxx Group, and no spouse or
children of any of such persons owns, directly or indirectly, on an
individual or joint basis, any interest in or serves as an officer or
director of any of the Xxxxxx Xxxxx Group's customers, competitors or
suppliers, or any organization that has a contract or arrangement with
any member of the Xxxxxx Xxxxx Group relating to the Xxxxxx Xxxxx
Group.
4.19 Brokers' Fees. No finder, broker, or similar agent has acted
on behalf of, or has been retained by the Seller or is entitled to any
fee from the Sellers as a result of any of the transactions
contemplated by this Agreement.
4.20 Sales Representatives. Attached as Schedule 4.20 is an
accurate list of all sales agents, dealers, or distributors of any
member of the Xxxxxx Xxxxx Group. Copies of all written agreements
currently or previously in effect with such representatives will be
furnished to Buyer prior to Closing. Except as disclosed in Schedule
4.20, to its knowledge, no member of the Xxxxxx Xxxxx Group has
received notice of nor does any member of the Xxxxxx Xxxxx Group have
reason to believe that any sales representative listed on Schedule
4.20 intends to terminate its relationship with such member
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(notwithstanding the expiration of any written agency agreement) or to
decline to renew any written agreement.
4.21 Processes and Customer Lists. Each member of the Xxxxxx Xxxxx
Group has the right to use, free and clear of any material claims or
rights of others, its customer lists and all material processes
required for or incident to the distribution or marketing of products
in connection with the Xxxxxx Xxxxx Group. To the Seller's Knowledge,
the Xxxxxx Xxxxx Group is not using or in any way making use of any
confidential information or trade secrets of any third party.
4.22 General Representation. None of the information contained in
this Agreement, the Financial Statements, or any of the related
documents or schedules attached or related hereto is or will be
materially false or misleading or contains any misstatement of fact or
omits any fact necessary to be stated in order to make the statements
herein or therein not misleading in any material respect. Neither the
Seller nor any officer of the Xxxxxx Xxxxx Group knows of any fact
relating to the Xxxxxx Xxxxx Group that has not been disclosed herein
or in any document or schedule attached thereto or delivered in
connection herewith and which has a Material Adverse Effect or
materially and adversely affects the ability of the Seller to perform
its obligations under this Agreement and related documents or to
consummate the transactions contemplated herein.
4.23 Non-Distributive Intent. The Seller is acquiring the
Preferred Stock for its own account (and not for the account of
others) for investment and not with a view to the distribution
thereof. The Seller will not sell or otherwise dispose of such
Preferred Stock without registration under the Securities Act of 1933,
as amended (the "Securities Act"), or an exemption therefrom, and the
certificate or certificates representing such Preferred Stock may
contain a legend to the foregoing effect. The Seller understands that
it may not sell or otherwise dispose of such Preferred Stock in the
absence of either a registration statement under the Securities Act or
an exemption from the registration provisions of the Securities Act.
Nothing contained herein shall be deemed to preclude the Seller from
disposing the Preferred Stock acquired by it under this Agreement in
accordance with applicable federal and state securities laws.
5. Representations and Warranties of the Purchaser. The Purchaser and
AAi represent and warrant to the Seller as follows:
5.1 Organization. The Purchaser and AAi are corporations duly
organized, validly existing, and in good standing under the laws of
the jurisdictions of their incorporation, with all requisite power and
authority to own, lease, license, and use their properties and assets
and to carry on the business in which they are now engaged and in
which they contemplate engaging.
5.2 Authorization of Transaction. The Purchaser and AAi have all
requisite corporate power and authority to execute, deliver, and
perform this Agreement. All necessary corporate proceedings of the
Purchaser and AAi have been duly taken to authorize the execution,
delivery, and performance of this Agreement by the Purchaser and AAi.
This
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Agreement has been duly authorized, executed, and delivered by the
Purchaser and AAi, is the legal, valid, and binding obligation of the
Purchaser and AAi, and is enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws in effect relating to creditors rights generally, and the
remedies of specific performance and injunctive and other forms of
equitable relief may be subject to general principles of equity.
5.3 Validity of Preferred Stock. Upon delivery to the Seller
pursuant to the terms hereof, the Preferred Stock will be duly
authorized, validly issued, fully paid and nonassessable, and the
Seller will own the Preferred Stock free and clear of all liens,
encumbrances, claims, charges or interests of others, subject to no
restrictions with respect to transferability, other than applicable
securities laws. At the Closing, the Purchaser's capital structure
will be as described in detail in Schedule 5.3 hereto, including
(without limitation) a description of all classes of capital stock and
their respective rights and numbers of shares authorized, issued and
outstanding of each such class. Purchaser has not authorized or issued
any other class of capital stock or any other instrument convertible
into or exchangeable for capital stock of the Purchaser. There are no
outstanding options, warrants or other rights granting any person a
right to purchase or otherwise acquire capital stock of the Purchaser.
5.4 Litigation. No action, suit, claim, arbitration, proceedings
or investigation is pending or, to the knowledge of the Purchaser or
AAi, threatened which questions or challenges the validity of this
Agreement or any other agreement identified herein or any action taken
or to be taken in connection with the transaction contemplated hereby
or thereby.
5.5 Non-Distributive Intent. The Purchaser is acquiring the
Shares for its own account (and not for the account of others) for
investment and not with a view to the distribution thereof. The
Purchaser will not sell or otherwise dispose of such Shares without
registration under the Securities Act of 1933, as amended (the
"Securities Act"), or an exemption therefrom, and the certificate or
certificates representing such Shares may contain a legend to the
foregoing effect. By virtue of its position, the Purchaser has access
to the kind of financial and other information about the Xxxxxx Xxxxx
Group as would be contained in a registration statement filed under
the Securities Act. The Purchaser understands that it may not sell or
otherwise dispose of such Shares in the absence of either a
registration statement under the Securities Act or an exemption from
the registration provisions of the Securities Act. Nothing contained
herein shall be deemed to preclude the Purchaser from disposing the
Shares acquired by it under this Agreement in accordance with
applicable federal and state securities laws.
5.6 No Conflicts. No consent, authorization, approval, order,
license, certificate, or permit of or form, or declaration or filing
with, any federal, state, local, or other governmental authority or
any court or other tribunal is required by the Purchaser or AAi for
the execution, delivery, or performance of this Agreement by the
Purchaser, other than the filings and approvals required by the
Xxxx-Xxxxx Xxxxxx Antitrust Improvements Act of 1976. No consent of
any party to any material contract, agreement, instrument
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lease, license arrangement, or understanding to which the Purchaser or
AAi is a party, or to which any of their properties or assets are
subject, is required for the execution, delivery, and performance of
this Agreement by the Purchaser or AAi will not violate, result in a
breach of, conflict with, or (with or without the giving of notice or
the passage of time or both) entitle any party to terminate or call a
default under any material contract, agreement, instrument, lease,
license, arrangement, or understanding of the Purchaser or AAi; or
violate or result in a breach of any term of the certificate of
incorporation (or other charter document) or by-laws of the Purchaser
or AAi; or violate, result in a breach of, or conflict with any law,
rule, regulation, order, judgment, or decree binding on the Purchaser
or AAi or to which any of their operations, business, properties or
assets are subject.
5.7 Brokers' Fee. No finder, broker, or similar agent has acted
on behalf of, or has been retained by the Purchaser or AAi and no
finder, broker or similar agent is entitled to any fee as a result of
any of the transactions contemplated by this Agreement, which fee the
Purchaser and AAi represent will be paid by the Purchaser or AAi, as
the case may be.
5.8 Independent Investigation. Purchaser and AAi, or their
independent accountants, attorneys and agents acting on its behalf,
(i) have reviewed the Financial Statements, and has had the
opportunity to review information related to the Financial Statements,
(ii) have reviewed the corporate records of the members of the Xxxxxx
Xxxxx Group, material agreements and other information relating to the
Xxxxxx Xxxxx Group and such documents that have been made available to
Purchaser or AAi by Seller and the Partnership in response to
Purchaser's or AAi's due diligence requests, and (iii) have had the
opportunity to ask questions of and receive such information from
Seller and the Partnership, as well as the members of the Xxxxxx Xxxxx
Group, and their representatives, with respect to the Xxxxxx Xxxxx
Group and its business and operations, which Purchaser and AAi believe
is material to their assessment of the Xxxxxx Xxxxx Group and
Purchaser's purchase of the Shares pursuant to this Agreement.
Purchaser and AAi have (i) had access to the books and records,
financial and otherwise, of the members of the Xxxxxx Xxxxx Group and
the Partnership, and have inspected such books and records as they
have deemed appropriate in connection with their investigation of the
Xxxxxx Xxxxx Group, (ii) been afforded an opportunity to investigate
and make inquiries regarding the condition of the members of the
Xxxxxx Xxxxx Group, the Partnership and the assets, financial and
otherwise, of the Xxxxxx Xxxxx Group, and in the course thereof has
not received actual knowledge of any matters or things that are
inconsistent with any representation or warranty of Seller contained
in this Agreement or that may give rise to any liability on the part
of Seller under the Agreement, and Purchaser and AAi are not relying
on any representations (other than those contained in this Agreement),
oral or otherwise, by Seller or any of its officers, employees,
directors, shareholders, agents or representatives, in regard to the
purchase of the Shares.
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6. Conditions to the Obligations of the Purchaser and the Seller.
6.1 Conditions to the Obligations of the Purchaser. The
obligations of Purchaser and AAi under this Agreement are subject, at
the option of the Purchaser and AAi, to the following conditions:
(a) The representations and warranties of the Seller and
the Partnership contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date
as though made on and as of such date, except for changes
contemplated by this Agreement.
(b) The Seller shall have performed and complied in all
material respects with all covenants and agreements required
to be performed or complied with by it on or prior to the
Closing Date.
(c) The parties to this Agreement shall have obtained at
or prior to the Closing all consents required for the
consummation of the transactions contemplated by this
Agreement from any party to any contract, agreement,
instrument, lease, license, arrangement, or understanding to
which any of them is a party, or to which any of their
respective businesses, properties, or assets are subject,
except where the failure to obtain the same would not have a
Material Adverse Effect.
(d) There shall not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing consummation of
any of the transactions contemplated by this Agreement.
(e) The Seller shall have delivered to Purchaser and AAi
a certificate to the effect that each of the conditions
specified above in Section 6.1(a)-(n) is satisfied in all
material respects; provided, however, that with respect to the
condition set forth in Section 6.1(c), the Seller shall only
provide such certification with respect to those consents that
the Seller or any member of the Xxxxxx Xxxxx Group is required
to obtain.
(f) The Partnership shall have delivered to the Purchaser
and AAi a certificate to the effect that the condition
specified above in Section 6.1(a) is satisfied in all respects
with respect to the Partnership.
(g) The Seller shall have delivered to the Purchaser and
AAi at the Closing: certified copies of each member of the
Xxxxxx Xxxxx Group's Certificate or Articles of Incorporation
and By-laws; the partnership agreement; a good standing
certificate from the Secretary of State of each state of
incorporation of each member of the Xxxxxx Xxxxx Group is
incorporated, as of a date not more than thirty (30) business
days prior to the Closing Date; original stock certificates or
other evidences of equity ownership of each member of the
Xxxxxx Xxxxx Group. The Seller shall deliver at the Closing
or thereafter: all stock books, minute books and corporate
records of the Xxxxxx Xxxxx Group; and all other material
original agreements computer disks, documents, books and
records relating to the Xxxxxx Xxxxx Group and necessary to
conduct the Xxxxxx Xxxxx Group as currently or
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heretofore conducted. For the purposes of this paragraph,
items described herein and located on the premises of the
Partnership or any member of the Xxxxxx Xxxxx Group shall be
deemed delivered upon Closing by virtue of Purchaser taking
control of such premises.
(h) All directors of each member of the Xxxxxx Xxxxx
Group shall have resigned at or prior to the Closing as
directors and members of all committees of the Board of
Directors in writing effective immediately after the Closing.
All non-employee officers of each member of the Xxxxxx Xxxxx
Group shall have resigned at or prior to the Closing in
writing effective immediately after the Closing.
(i) All applicable waiting periods in respect of the
transactions contemplated under this Agreement under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 shall
have expired at or prior to the Closing or there shall have
been an early termination of such periods in accordance with
the parties' (or their affiliates', as appropriate) request
therefor.
(j) AAi on the one hand and Xxxxxx Capital, L.P. and its
affiliates (jointly, "Xxxxxx"), on the other shall, at or
prior to the Closing, have executed and delivered a
Shareholder Agreement, containing terms and conditions
mutually agreed by and among such parties, pursuant to which
AAi and Xxxxxx shall have each invested in Purchaser
$5,000,000; and all such commitments shall have been fully
funded on or before the Closing.
(k) The parties to this Agreement shall have obtained at
or prior to the Closing an agreement by and between Purchaser
and Eyecare Products PLC ( the "Eyecare") granting Purchaser
the right to purchase from Eyecare, for Fair Market Value, the
trademarks assigned to Eyecare as provided under the terms and
conditions set forth in the Trademark Assignment and
Conditional Agreements between Kitty Little, plc and Xxxxxxx
(the "Agreements"), if at any time after the Closing (i)
Seller has fewer than two (2) appointed individuals on the
Eyecare board of directors or (ii) Seller's ownership interest
in the issued and outstanding common stock of Eyecare
decreases to less than ten percent (10%). No provision of
this or any other agreement will in any way diminish any right
held by Purchaser under the Agreements, and in particular no
provision of this or any other agreement shall in anyway
diminish the buy back rights provided to Xxxxxxx in the
Agreements.
(l) At or prior to the Closing, a sales representative
agreement by and between the Partnership and Xxxxxx Marketing,
Inc., ("Xxxxxx") shall have been executed and a copy thereof
delivered to Purchaser whereby the Partnership agrees to
appoint and Xxxxxx agrees to act as the Partnership's
exclusive sales representative to Target Stores division of
Xxxxxx Xxxxxx Corporation under terms and conditions
reasonably satisfactory to Purchaser.
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(m) The Seller shall have executed and delivered to
Purchaser and AAi at or prior to the Closing a copy of a
settlement and release by and between Oakley, Inc., Seller and
Xxxxxxx whereby the parties thereto forever discharge each
other from any and all claims, complaints, causes of action,
demands or liabilities with regard to the acts set forth in
Civil Action No. 96-3420 B CGA, United District Court for the
Southern District of California.
(n) The Seller shall have delivered to Purchaser and AAi
a letter from Seller's accountants to the effect that Seller's
independent accountants agree to provide Purchaser and AAi
with (i) stand alone audited consolidated financial statements
for the Xxxxxx Xxxxx Group for the years 1995 and 1996 and an
estimate of the costs of such audits; and (ii) at the
appropriate time in connection therewith, a written consent of
such accountants to permit the Purchaser and AAi to use the
stand alone audited financial statements described herein in
any registration statements prepared in connection with an
initial public offering by AAi, subject to being provided
normal satisfaction from the "Big Six" accounting firm then
auditing AAi.
(o) Xxxxxxx X. Xxxxxx, at or prior to the Closing, shall
have executed and delivered to Purchaser an agreement
modifying certain provisions of his Offer of Employment dated
January 15, 1996, and any amendments thereto, and in
particular such modifications shall include the re-defining of
"severance" whereby Xx. Xxxxxx shall not receive severance as
a result of the consummation of the transaction contemplated
hereby.
(p) At or prior to the Closing, the Seller shall have
delivered to the Purchaser and AAi a copy of the Finance and
Security Agreement by and between the Partnership and
NATIONSBANK, N.A. (the "Operating Loan"), and such agreement
shall be in a form and of a substance reasonably satisfactory
to the Purchaser and AAi, including (without limitation) the
right to draw down not less than 19 million dollars at the
Closing to be used towards the Purchase Price as set forth in
this Agreement.
(q) At or prior to the Closing, the Seller shall have
delivered to the Purchaser a release of any and all
obligations of the Partnership as set forth in the Deed of
Trust and First Amendment to Loan Agreements dated May 3, 1996
by and between First Interstate Bank of Texas, N.A. (the
"Bank"), BEC Group, Inc. and the Partnership. Such release
shall be in form and substance reasonably satisfactory to the
Purchaser and AAi.
(r) At or prior to the Closing the Seller shall have
delivered to the Purchaser a release from any and all
liability and obligations of the Partnership under the Essilor
Indemnity Agreement dated as of February 11, 1996 by and
between Essilor International S.A. and BEC Group, Inc. to
which the Partnership is a party. Such release shall be in
form and substance reasonably satisfactory to the Purchaser
and AAi.
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(s) The Purchaser and AAi shall have received from Xxxx
Xxxxxxx, P.C. counsel for the Seller, a favorable opinion,
dated as of the Closing Date and reasonably satisfactory in
form and substance to AAi and AAi's counsel, to the effect as
stated in 4.1, 4.2, and 4.6, as well as to the effect that the
consummation by the Seller of the transactions contemplated by
this Agreement and the documents described herein have been
duly authorized by all necessary corporate action of the
Seller.
(t) At or prior to the Closing, the Partnership shall
have conveyed the Dallas Property to the Seller (or its
designee), and the Seller (or its designee) shall have assumed
the existing mortgage on such Dallas Property; and Seller (or
such designee) and the Partnership shall have executed and
delivered a lease agreement, in accordance with Section 7.5
below, pursuant to which the Xxxxxx Xxxxx Group shall lease
its current premises located at the Dallas Property.
(u) Subject to Section 2.2 (iii), above, at or prior to
Closing, all intercompany loans and advances existing among
the Seller and the members of the Xxxxxx Xxxxx Group shall
have been forgiven and released in full.
(v) At or prior to the Closing, AAi will have concluded
discussions with HMG World Wide In Store Marketing, Inc. to
the effect that the terms and provisions of the Display
Purchase Agreement dated September 30, 1995 are in form and
substance reasonably satisfactory to the Purchaser and AAi.
6.2 Conditions to the Obligations of the Seller. The obligations
of the Seller under this Agreement are subject, at the option of the
Seller, to the following conditions:
(a) The representations and warranties of the Purchaser
and AAi contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date as
though made on and as of such date, except for changes
contemplated by this Agreement.
(b) The Purchaser and AAi shall have performed and
complied in all material respects with all covenants and
agreements required to be performed or complied with by it on
or prior to the Closing Date.
(c) There shall not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing consummation of
any of the transactions contemplated by this Agreement.
(d) The Purchaser and AAi shall have delivered to the
Seller a certificate to the effect that each of the conditions
specified above in Section 6.2(a)-(l) is satisfied in all
material respects; provided, however, that with respect to the
condition set forth in Section 6.2(c), the Purchaser shall
only provide such certification with respect to consents the
Purchaser is required to obtain.
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(e) The Purchaser and the Partnership shall have
delivered the Purchase Price to the Seller.
(f) The Purchaser shall have delivered to the Seller at
the Closing: a certified copy of the Purchaser's Certificate
or Articles of Incorporation and By-laws, and a good standing
certificate from the Secretary of State of the Purchaser's
state of incorporation, as of a date not more than thirty (30)
business days prior to the Closing Date.
(g) All applicable waiting periods in respect of the
transactions contemplated under this Agreement under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 shall
have expired at or prior to the Closing or there shall have
been an early termination of such periods in accordance with
the parties' (or their affiliates', as appropriate) request
therefor.
(h) The Seller shall have received from Xxxxxxxx, Xxxxx &
Xxxxxx, counsel for the Purchaser and AAi, a favorable
opinion, dated as of the Closing Date and reasonably
satisfactory in form and substance to Seller and Seller's
counsel, to the effect as stated in 5.1, 5.2, and 5.3, as well
as to the effect that the consummation by the Purchaser and
AAi of the transactions contemplated by this Agreement and the
documents described herein have been duly authorized by all
necessary corporate action of the Purchaser and AAi.
7. Covenants and Agreements of the Purchaser and the Seller.
The Purchaser and the Seller covenant and agree with each other as
follows:
7.1 Confidentiality.
(a) In order to consummate the transactions contemplated
by this Agreement Confidential Information may be disclosed
among the parties. Therefore, the Seller, on its own behalf
and on behalf of each member of the Xxxxxx Xxxxx Group, the
Partnership, on its own behalf, and the Purchaser agree that
in consideration of the other party's disclosure of
Confidential Information the receiving party hereunder shall:
(i) treat and safeguard such Confidential
Information with at least the same degree of care as
it normally exercises to protect its own confidential
information but in no event with less than a
reasonable degree of care;
(ii) restrict disclosure of Confidential
Information solely to its employees, advisors or
representatives ("Representatives") with a need to
know and not disclose such Confidential Information
to any other parties; and
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(iii) use the Confidential Information provided
hereunder only in connection with the performance of
its duties hereunder and for no other purposes.
(b) The parties agree that the foregoing restrictions
shall not apply to information that:
(i) is known by the recipient at the time of
disclosure;
(ii) is or becomes, through no fault of the
recipient, available to the public;
(iii) is obtained by the recipient from a third
party without breach of any agreement with,
or obligation or confidentiality to the
disclosing party;
(iv) is independently developed by the recipient
without use of Confidential Information
received from the disclosing party;
(v) is required by law or court order to be
disclosed.
If this Agreement is terminated for any reason whatsoever, each
party shall (i) return to the other all tangible embodiments (and
all copies) of such Confidential Information that are in its
possession; (ii) not use any such Confidential Information in its
own operations or (iii) not disclose any such Confidential
Information to any Person for any purpose or reason whatsoever
unless required to do so by law. Without limiting the generality
of the foregoing, the existing Confidentiality Agreement between
AAi and Seller, dated October 2, 1996, shall remain in full force
and effect according to its terms.
7.2 Best Efforts. Subject to the terms and conditions provided
in this Agreement, each of the parties shall use their respective
best efforts in good faith to take or cause to be taken as promptly
as practicable all reasonable actions that are within its power to
cause to be fulfilled each of the conditions precedent to its
obligations or the obligations of the other parties to consummate
the transactions contemplated by this Agreement that are dependent
upon its actions, including obtaining all necessary consents,
authorizations, orders, approvals and waivers.
7.3 Operation of Business. The Seller and the Partnership, with
respect to itself only, covenant with the Purchaser as follows:
without the prior written consent of the Purchaser, between the
date hereof and the Closing Date they shall not, in connection with
the Xxxxxx Xxxxx Group, cause or permit any member of the Xxxxxx
Xxxxx Group to, and no member of the Xxxxxx Xxxxx Group shall in
any material respect:
(a) adopt, amend or modify any material employment or
personnel contract or plan, or increase the level of
compensation payable to any officer, director or
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employee of the Xxxxxx Xxxxx Group, other than increases not
greater than 4% annually over the current level of
compensation and in accordance with past practice;
(b) make any change in its authorized capital stock
including, without limitation, any stock split or
reclassification in respect of its outstanding capital stock,
or declaration, payment or setting aside for payment of any
dividend, fees, or other distribution, including the grant of
any stock options, in respect of any of the Xxxxxx Xxxxx
Group's capital stock or any redemption, purchase or other
acquisition of any shares of the capital stock or other
securities of the Xxxxxx Xxxxx Group;
(c) sell, transfer or otherwise dispose of any assets of
the Xxxxxx Xxxxx Group, except for sales of inventory in the
Ordinary Course of Business consistent with past practices;
(d) incur any obligation or liability (fixed or
contingent) relating to the Xxxxxx Xxxxx Group, except trade
or business obligations incurred in the Ordinary Course of
Business consistent with past practice;
(e) cancel or compromise any material debt or claim, or
waive or release any rights of value other than in the
Ordinary Course of Business;
(f) transfer, abandon, fail to maintain in good standing
or grant any rights under or with respect to any material
leases, licenses, agreements or Intellectual Property, or
enter into any agreement limiting the Xxxxxx Xxxxx Group's
ability in any material respect to conduct its operations or
distribute its products anywhere in the world;
(g) issue, sell, or otherwise dispose of any shares of
capital stock or any evidences of indebtedness or other
securities (except extensions or renewals or replacements of
evidences of indebtedness which extensions, renewals or
replacements are issued in the Ordinary Course of Business
consistent with past practice with respect to evidences of
indebtedness reflected in the Financial Statements);
(h) except as expressly contemplated hereby, amend
articles of incorporation or bylaws or the partnership
agreement;
(i) enter into any material contract or arrangement other
than in the Ordinary Course of Business;
(j) fail to maintain the material properties and assets
of the Xxxxxx Xxxxx Group, whether owned or leased, in their
current operating condition and repair, reasonable wear and
tear excepted;
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(k) fail to maintain in full force and effect insurance
for the Xxxxxx Xxxxx Group providing coverage and amounts of
coverage in accordance with its current and industry
practice;
(l) merge or consolidate with any other corporation or
acquire any stock, business, or substantially all of the
property or assets of any other Person;
(m) do any act which, with or without the giving of
notice or the passage of time, or both, would result in a
material breach of or material default under any Contract
required to be listed in Schedule 4.8;
(n) enter into any material agreement or understanding to
do any of the foregoing; or
(o) do or omit to do anything else that has a Material
Adverse Effect.
7.4 Full Access. The Seller shall permit and shall cause each
member of the Xxxxxx Xxxxx Group to permit representatives of the
Purchaser and AAi to have reasonable access at all reasonable times,
and in a manner so as not to unreasonably interfere with the normal
business operations of the Xxxxxx Xxxxx Group, to all premises,
properties, personnel, personnel records (including tax records),
contracts, and documents ("Records") of or pertaining to the Xxxxxx
Xxxxx Group. The Purchaser shall treat and hold such Records in
accordance with the provisions of Section 7.1 hereof.
7.5 Occupation of the Dallas Property. The Purchaser and the
Seller shall execute and deliver a Lease and Services Agreement, in
form mutually agreed pursuant to which the Partnership shall occupy
the space currently occupied by the Partner at the Dallas Property and
pursuant to which the Seller shall provide the Partnership certain
services to be agreed therein.
7.6 Payment of Certain Employee Bonuses. The Purchaser shall pay
(or shall cause Xxxxxx Xxxxx Group to pay), no later than April 30,
1997, up to $500,000 in the aggregate in bonuses to certain key
employees, in accordance with Attachment II to Schedule 4.15.
7.7 Further Assurances. At any time and from time to time, each
party agrees, at its or his expense, to take such actions and to
execute and deliver such documents as may be reasonably necessary to
effectuate the purposes of this Agreement.
7.8 Name Change. On or before the Closing Date, Seller shall have
effected a change of the corporate name of BEC Distribution, Inc. The
Purchaser shall have designated a name of its choosing. In the event
such name change has not been effected prior to Closing, the parities
shall cooperate after the Closing to effect the name change. After
the Closing Date or the Closing Date, whichever is earlier, the
Purchaser, the members of the Xxxxxx Xxxxx Group and the Partnership
shall not have any right, title or other interest in or to the names
"BEC", "Xxxxxx" or "Bolle" or any variations thereof or any names
containing or incorporating such names.
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7.9 Bolle(R) Brand. The Purchaser agrees for itself and on behalf
of the members of the Xxxxxx Xxxxx Group and the Partnership, from and
after the Closing, not to copy, or to sell, market or otherwise
distribute products copying Bolle(R) brand products in violation of
any applicable statute, law, ordinance or regulation; provided, that
the parties acknowledge and agree hereby that the Xxxxxx Xxxxx Group
and the Partnership may, notwithstanding anything contained in this
Section 7.9 to the contrary, such, market and distribute any such
product presently included in their product lines for the 1997 season.
7.10 Non-Competition. The Seller hereby agrees that for a period
of three (3) years from the Closing Date, neither the Seller nor any
other individual, partnership, firm, corporation, association, trust,
unincorporated organization or other entity that directly or
indirectly controls or is controlled by the Seller shall directly or
indirectly engage in, own, manage, operate, join, assist, advise or
control, any person, corporation or entity engaged in a business
directly competitive with the Xxxxxx Xxxxx Group as it exists as of
the Closing Date. Notwithstanding anything contained herein to the
contrary,
(i) The restrictions set forth herein shall not apply to
or to be deemed in any way to restrict the existing
business, as of the Closing Date, of Seller Bolle(R)
America, Inc.; Optical Radiation Corporation; or
Eyecare Products, PLC; and
(ii) The following shall not be deemed to be in violation
of the above restrictions:
(1) ownership of publicly traded securities
having no more than 5% of the outstanding voting
power of any competitive entity, or
(2) any association by the Seller or any of its
affiliates subsequent to the Closing Date which
results from the acquisition by the Seller or any of
its affiliates of an entity who is engaged in a
business directly competitive with the Xxxxxx Xxxxx
Group, if such entity's gross revenues resulting from
such competitive activities are less than $10,000,000
per year.
7.11 Income Taxes and Income Tax Preparation.
(a) The companies making up the Xxxxxx Xxxxx Group shall
be included in the consolidated federal Income Tax Return
filed by the Seller for the period from January 1, 1996
through the end of the day on the Closing Date, and Seller
shall be responsible for making all required Income Tax
payments for such period pursuant to such consolidated Income
Tax Return. The parties agree that for the purpose of
preparing such consolidated federal Income Tax Return, as well
as any Income Tax Returns for which the taxable year does not
close at the end of the day on the Closing Date, there will be
an interim closing of the books of the members of the Xxxxxx
Xxxxx Group and of the Partnership as of the end of the day on
the Closing Date and all payments (if any) representing
cancellation of options
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to purchase shares of the Seller held by Xxxxxx Xxxxx Group
employees shall be treated as extraordinary items within the
meaning of Reg. Section 1.1502-76(b)(2)(ii)(C) which shall be
allocated to the period ending at the end of the day on the
Closing Date for all tax purposes.
(b) Seller shall be responsible for the preparation and
filing of all Income Tax Returns in respect of federal and
state income taxes for the Xxxxxx Xxxxx Group, the Partnership
or any member of the Xxxxxx Xxxxx Group for taxable years or
periods ending on or before the end of the day of the Closing
Date and shall be responsible for the payment of any Income
Taxes. The Seller shall also be responsible for preparing and
filing the Partnership's 1996 calendar year federal, state and
local Income Tax Returns. The Purchaser shall be responsible
for the preparation and filing of any other federal, state and
local Income Tax Returns for the Xxxxxx Xxxxx Group, the
Partnership, or the members of the Xxxxxx Xxxxx Group for
periods beginning after the Closing Date.
(c) With respect to any period beginning before and
ending after the Closing Date, the determination of income,
losses and taxes for the portion of the year or period ending
on, and the portion of the year or period beginning after, the
Closing Date shall be made by an interim closing of the books
at the end of the day of the Closing Date, except that
extraordinary items shall be allocated in accordance with the
principles of Reg. Section 1.1502-76(b)(2)(ii)(C) and that any
exemptions, allowances or deductions that are calculated on a
calendar year basis and annual property taxes shall be
prorated on the basis of the number of days in the calendar
year elapsed through the Closing Date as compared to the
number of days in the calendar year elapsing after the Closing
Date. All such Income Tax Returns shall be prepared in
accordance with prior practice. Any taxes due with respect to
any such periods shall be pro rated in accordance with the
interim closing of the books as herein provided. In addition,
notwithstanding anything to the contrary contained herein, the
Seller shall prepare the 1996 calendar year Income Tax Return
of the Partnership on the basis of an interim closing of the
books at the end of the day of the Closing Date and based on a
package of Income Tax information provided by Purchaser
covering the period from the day after the Closing date
through the end of the calendar year 1996 and delivered to
Seller no later than forty-five (45) days after the end of the
calendar year 1996. Except as indicated above, such package
shall be completed in accordance with the past practice of the
Seller as to the method of computation of taxable income and
other relevant measures of income.
(d) At least thirty (30) days prior to the due date
(including extensions) for the filing of Seller's 1996
consolidated federal Income Tax Return, Seller shall provide
Purchaser, for its approval and the signature (with respect to
the Partnership income tax return) of the appropriate officers
or partners, copies of the Seller's 1996 consolidated federal
income tax return and the Partnership's 1996 calendar year
Income Tax Return or Returns. No later than thirty (30) days
before the due date thereof, Purchaser shall provide Seller,
for its approval, copies of all
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other Income Tax Returns for which Seller may have an
obligation for a portion or all of the Incomes Taxes shown
thereon. Approval by either party shall not be unreasonably
withheld, and signed Returns shall be returned no less than
fifteen (15) days prior to the due date; notwithstanding the
foregoing, the Purchaser's right to approve the Seller's 1996
consolidated Income Tax Return shall be limited to those items
included therein which relate directly to the Xxxxxx Xxxxx
Group or any member thereof. No later than 5 business days
before the due date for payments of Income Taxes with respect
to any such Income Tax Return prepared by Purchaser but for
which Seller has an obligation for a portion or all of the
Income Taxes shown thereon, Seller shall pay to Purchaser an
amount equal to the Income Taxes agreed to be allocable to
Seller pursuant to this Agreement, if any.
(e) In addition to the foregoing, the parties agree to
cooperate with each other in the preparation of any Income Tax
Return and in the conduct of any audit or other proceedings
involving the Xxxxxx Xxxxx Group or any member thereof, and to
provide each other such assistance and documents as may be
reasonably requested in connection with the preparation of any
return or the conduct of any audit or other proceeding. The
provisions of Section 8.4 shall apply to any audit or contest
of any Income Tax Return.
(f) The Purchaser will not, nor will it permit members of
the Xxxxxx Xxxxx Group, to make any changes in Income Tax
accounting methods or conventions, make or rescind any
election, or report or treat any specified item on any Income
Tax Return for any taxable period ending after the Closing
Date in a manner inconsistent with the manner in which such
specific item was reported or treated on any such Income Tax
Return for a taxable period ending on or prior to the Closing
Date, if such action would have an effect of either increasing
the Income Tax liability or reducing the Income Tax benefits
of the Xxxxxx Xxxxx Group on or prior to the Closing Date or
of the Seller for any taxable period. The Purchaser agrees
that any sales of assets by the Xxxxxx Xxxxx Group after the
Closing Date but before the end of the calendar year shall be
treated as an extraordinary item for Income Tax purposes.
(g) If Purchaser or any member of the Xxxxxx Xxxxx Group
receives any refund of Income Taxes or utilizes the benefit of
any overpayment of Income Taxes which relates to an income Tax
paid by Seller or the Xxxxxx Xxxxx Group with respect to a
period ending on or prior to the Closing Date, the Purchaser
shall make a payment to Seller at the time of and equal to the
amount of the refund or overpayment utilized. Purchaser
agrees, that without the express permission of Seller, it will
not carry back to periods ending on or before the Closing Date
any loss or credit recognized by the Xxxxxx Xxxxx Group
subsequent to the Closing Date.
(h) In addition to (and not in limitation of) the
indemnities provided in Section 8, Seller shall indemnify and
save Purchaser and AAi harmless from any and all Taxes imposed
on Purchaser or AAi either (i) arising as a result of the
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transactions contemplated by this Agreement; (ii) with respect
to or relating to any period ending on or before the Closing
Date, or, in the case of any taxable period that includes, but
does not end on, the Closing Date, the portion of said period
ending on the Closing Date; (iii) resulting from any member of
the Xxxxxx Xxxxx Group ceasing to be affiliated with Seller;
and (iv) attributable to Seller for any taxable period.
(i) Notwithstanding anything contained in this Agreement
to the contrary, the Seller shall have the benefit (without
reimbursement to the Partnership) of any tax losses through
the Closing Date, other than tax loss carry-forwards not
utilized as of such Closing Date.
7.12 Characterization of Certain Payments. All payments paid by
the Seller or the Purchaser under Sections 2.2 and 7.11 and Section 8
shall be treated for all tax purposes as adjustments to the Purchase
Price.
7.13 Inventory Price Adjustment. If the Purchaser or the Xxxxxx
Xxxxx Group (as the case may be) has not realized, and is not
reasonably in a position to realize, within two (2) years from the
Closing Date at least $15,355,000 from the inventory appearing on the
September 30, 1996 Balance Sheet, the Seller will promptly pay the
Purchaser the difference in cash; any amount due hereunder may be
offset against the redemption of the Preferred Stock.
7.14 Certain Employee Benefits.
(a) Notwithstanding anything contained in this Agreement
to the contrary, the Seller hereby acknowledges that the
Purchaser is not acquiring and shall not assume sponsorship of
any Employee Benefit Plan maintained by the Seller and in
which employees of the Xxxxxx Xxxxx Group, the Partnership or
any members of the Xxxxxx Xxxxx Group participate, including
(without limitation) the BEC Group, Inc. 401(K) Retirement
Plan and any group health and welfare insurance plans
sponsored by the Seller.
(b) Effective on the Closing Date, all employees of the
Xxxxxx Xxxxx Group, the Partnership and the members of the
Xxxxxx Xxxxx Group shall cease to be active participants in
the BEC Group, Inc. 401(k) Retirement Plan (the "401(k)
Plan"), and they shall be fully vested in their account
balances under the Plan without regard to their years of
service under the Plan. The parties acknowledge and agree
that Seller shall, to the extent permitted by applicable law
and the effective terms and conditions of any such Employee
Benefit Plan other than the 401(k) Plan, permit employees of
the Xxxxxx Xxxxx Group, the Partnership and the members of the
Xxxxxx Xxxxx Group to participate in existing health and
welfare Employee Benefit Plans after the Closing Date for a
reasonable transition period, provided, that the Purchaser
hereby agrees to reimburse Seller any and all extraordinary,
out-of-pocket or other costs or expenses incurred by Seller as
a result of or in connection with the participation of any
such employees in any
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such Employee Benefit Plans, and the Purchaser (for itself
and, after the Closing Date, on behalf of the Xxxxxx Xxxxx
Group, the Partnership and the members of the Xxxxxx Xxxxx
Group) agrees that it (or such entities, as appropriate) shall
be solely responsible for all employer contributions, costs,
or other expenses relating to or resulting from the
participation of any such employees.
(c) From and after the Closing Date, the Purchaser and
the Xxxxxx Xxxxx Group shall be solely responsible for (i)
health insurance coverage with respect to any former employee
of the Xxxxxx Xxxxx Group, the Partnership or any member of
the Xxxxxx Xxxxx Group who (1) has in place, as of the Closing
Date, a valid health care contribution election pursuant to
Section 601 et seq. of ERISA (known as "COBRA") or (2) has
retired from the employ of any such entities and is entitled
to coverage under any retiree or other medical plan, policy or
arrangement.
(d) Nothing herein contained shall serve as a guarantee
to any of the individuals referred to in Section 7.14 (c)
above with regard to any health insurance coverage other than
health insurance coverage available to persons actively
employed by the Purchaser or AAi.
7.15 Xxxx- Xxxxx Xxxxxx. The Purchaser and the Seller shall
execute all filings required under the Xxxx- Xxxxx Xxxxxx Anti Trust
Improvements Act of 1976 prior to the Closing. The Parties agree that
any and all fees associated with such filings, excluding attorneys
fees, shall be borne equally by the Purchaser and the Seller and each
party agrees to submit its respective portion of the fee upon filing
its submission.
7.16 Release of Guaranties. From and after the Closing Date, the
Purchaser shall cooperate, and shall cause the Xxxxxx Xxxxx Group, to
provide the Seller reasonable assistance in obtaining the release of
any guaranties by Seller or its predecessor, Xxxxxx Eyecare
Corporation, of obligations of the Xxxxxx Xxxxx Group or any of its
members. The Purchaser or the Xxxxxx Xxxxx Group agrees to provide
equivalent guaranties, to the extent reasonably requested. The Seller
shall reimburse any direct out-of-pocket expenses and costs incurred
as a result of cooperation provided under this Section 7.16.
8. Indemnification.
8.1 By the Seller. The Seller and its respective successors and
permitted assigns agree to indemnify the Purchaser and AAi (including
each of their employees, directors and officers and agents), and any
permitted successor or assignee of the Purchaser and AAi, to hold each
of them harmless from and against any and all actual costs, losses,
claims, obligations, liabilities, fines, penalties, damages,
deficiencies, actions, suits, proceedings, demands, assessments,
orders, judgments, costs and expenses, including fees, disbursements
and expenses of attorneys, accountants and consultants of any kind or
nature whatsoever (whether or not arising out of third-party claims
and including all amounts paid in investigation, defense or settlement
of the foregoing) sustained, suffered
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or incurred by any of them (hereafter, an "Indemnified Loss") in
connection with, or incident to:
(a) Conditions, circumstances or occurrences which
constitute or result in any breach of any representation,
warranty or covenant of the Seller on its own behalf or on
behalf of any member of the Xxxxxx Xxxxx Group contained in
this Agreement or in any agreement, Schedule or Exhibit
referred to herein or attached hereto, or in the Financial
Statements or in any other certificate or related document
delivered at or prior to the Closing, or by reason of any
claim, action or proceeding asserted or instituted arising out
of any matter or thing covered by any such representations,
warranty or covenants made by the Seller;
(b) Any liabilities arising out of the Excluded
Liabilities.
Provided, however, that no indemnification shall be payable
with respect to claims asserted by the Purchaser to the extent
the Indemnified Parties have insurance that would cover such
Indemnified Losses.
8.2. By the Purchaser and AAi. The Purchaser and AAi agree to
indemnify the Seller (including its employees, directors and
officers), and any other permitted successor or assignee of the
Seller, to hold harmless from and against any and all Indemnified
Losses incurred by any of them in connection with, or incident to:
(a) conditions, circumstances or occurrences which
constitute or result in any breach in any representation,
warranty, covenant or agreement of the Purchaser contained in
this Agreement or in any Schedule or Exhibit referred to
herein attached hereto, or in any agreement referred to herein
or in any schedule, certificate or other related document
delivered at or prior to the Closing, or by reason of any
claim, action or proceeding asserted or instituted arising out
of any matter or thing covered by any such representations,
warranty or covenants made by the Purchaser or AAi (other than
as a result of a breach or violation actually known to the
Indemnified Party, hereafter defined, prior to the Closing).
(b) any failure by the Purchaser, or, after the Closing
Date, by any member of the Xxxxxx Xxxxx Group or the
Partnership, to pay amounts due third parties or other
indebtedness, or otherwise arising from or relating to (i)
obligations or liabilities of the members of the Xxxxxx Xxxxx
Group or the Partnership (other than the Excluded Liabilities)
or (ii) the liabilities described in Section 2.6, above.
Provided, however, that no indemnification shall be payable with
respect to claims asserted by the Seller to the extent the Indemnified
Parties have insurance that would cover such Indemnified Losses.
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8.3 Limitations.
(a) No indemnification shall be payable by either party
through claims asserted by an Indemnified Party more than two
(2) years after the Closing Date, other than indemnification
claims based upon Income Tax liabilities of the Xxxxxx Xxxxx
Group, with respect to which the Seller's obligation to
indemnify shall extend until the applicable statutes of
limitations on enforcement thereof has expired, but in no
event more than seven (7) years after the Closing Date, or
until the conclusion of any proceeding commenced within such
period. Seller and Purchaser, respectively, shall not be
liable for indemnification under Section 8.1(a) or Section
8.2(a) unless and until the aggregate amount of Indemnified
Loss for the Indemnified Party under the appropriate Section
referred to above shall equal or exceed $250,000 (the
"Threshold"), and in no case shall either party assert any
claim for indemnification under this Article 8 for any
Indemnified Loss included within such party's Threshold;
provided, that, notwithstanding anything contained in the
foregoing to the contrary, the Threshold shall not apply in
the case of an Indemnified Loss described in Section 8.1(b) or
Section 8.2(b). Notwithstanding anything contained in this
Agreement to the contrary, in no event shall Seller be liable
for any Indemnified Losses in excess of the Purchase Price, as
adjusted pursuant to this Agreement.
(b) Notwithstanding anything contained in this Article 8
to the contrary, the parties have agreed to share in the
Litigation Costs as set forth more fully in Section 2.4(b),
above. Such agreed cost sharing shall apply with respect to
such Litigation Costs and the Litigation Liabilities, and
neither party shall assert a claim for indemnification under
this Article 8 unless and until the other party shall have
failed to perform its obligations under such Section 2.4, in
which case the Threshold provided in Section 8.3(a), above,
shall not apply; or, in the event aggregate Litigation Costs
exceed $500,000, in which case Purchaser may assert a claim
for indemnification hereunder and the Threshold provided in
Section 8.3(a) shall not apply.
8.4 Indemnity Procedures.
(a) Any party entitled to indemnification hereunder
("Indemnified Party") shall give prompt, written notice to the
other party ("Indemnifying Party") of any claim hereunder
specifying the amount and nature of the claim. The failure to
so notify an Indemnifying Party will not relieve the
Indemnifying Party of any liability that it may otherwise have
under this Agreement, unless such failure materially and
adversely prejudices the Indemnifying Party;
(b) The Indemnifying Party shall have the right to take
such action as in its judgment is necessary or desirable to
contest any matter involving a third party that gives rise to
an Indemnified Loss and shall conduct at its expense the
defense, by counsel mutually and reasonably satisfactory to
the parties, of any claim or legal proceeding commenced by a
third party insofar as it relates to an Indemnified Loss;
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(c) The Indemnified party will not pay or satisfy any
obligation constituting and Indemnified Loss if it is advised
in writing that such amount is being contested in good faith
by the Indemnifying Party, and if and so long as the
Indemnifying Party in fact actively contests the same, or, in
the case of a proceeding described in clause (b) above,
actively defends the same as set forth in (b) above. No
settlement of any such proceeding shall be made without the
consent of the Indemnifying Party, which consent will not be
unreasonably withheld, delayed or conditioned. The
Indemnified Party shall have the right to participate in (but
not to control, unless the Indemnified Party, after receiving
notice of a claim, has failed to take any action with respect
to such claim) the defense of any such legal proceeding at its
expense by counsel of its choice and shall cooperate in the
defense of any such claim (including providing such access to
its books, records and properties as the Indemnifying Party
shall reasonably request with respect to any matter for which
indemnification is sought hereunder), but shall be entitled to
be reimbursed as provided herein for all costs and expenses
(including reasonable attorney's fees) incurred in connection
with cooperation furnished at the request of the Indemnifying
Party. The parties shall use all reasonable efforts to
resolve equitably and expeditiously any dispute between them
as to an Indemnified Loss, pursuant to Section 8.1 hereof.
(d) With regard to claims of third parties for which
indemnification is payable hereunder, such indemnification
shall be paid the Indemnifying Party upon the earlier to occur
of: (1) the entry of a judgment against the Indemnified Party
and the expiration of any applicable appeal period, or if
earlier, five (5) days prior to the date that the judgment
creditor has the right to execute the judgment; (2) the entry
of an unappealable judgment or final appellate decision
against the Indemnified Party; or (3) a settlement of the
claim. With regard to other Indemnified Losses payable
hereunder, such indemnification shall be paid promptly by the
Indemnifying Party upon demand by the Indemnified Party.
9. Miscellaneous.
9.1 Public Statements. Except as may be required by law, or as
otherwise provided under Section 7.1 of this Agreement, before any
party hereto shall release any information concerning this Agreement
that is intended for or may result in public dissemination thereof,
they shall cooperate with the other party hereto, shall furnish drafts
of all documents or proposed oral statements to each other for
comments, and shall not release any such information without the
consent of the other party hereto, which consent shall not be
unreasonably withheld. Nothing contained herein shall prevent any
party from furnishing any information required by law, rule or
regulation, including the rules of a national securities exchange; or
to any governmental authority if required to do so by law or court
order.
9.2 Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants herein or in any attached
schedule, certificate, statement or other supporting document shall be
deemed to have been relied upon by the party in
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whose favor such provisions operate and, subject to applicable time
and recovery limitations thereon in Section 8 hereof, shall survive
the execution and delivery of this Agreement and the Closing Date and
continue in full force and effect regardless of any investigation made
by or on behalf of such party at any time, except to the extent that a
party had actual, specific knowledge of a breach or violation thereof
prior to the Closing Date, which the party alleging such knowledge
must prove by a preponderance of the evidence.
9.3 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the parties hereto
and the Indemnified Parties and their respective successors and
permitted assigns and other than the Xxxxxx Xxxxx Group employees
identified pursuant to the Schedules hereto as intended recipients of
certain bonuses pursuant to Section 7.6 hereto.
9.4 Entire Agreement. This Agreement, including the Schedules,
Exhibits and other documents attached hereto and referred to herein,
constitutes the entire agreement among the parties and supersedes and
prior understandings, agreements, or representations by or among the
parties, written or oral, to the extent they have related in any way
to the subject matter hereof.
9.5 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of and be binding upon the parties named
herein and their respective successors (including, without limitation,
successors by operation of law) and permitted assigns. No party may
assign either this Agreement or any of its rights, interests, or
obligations hereunder, except to a wholly-owned subsidiary, without
the consent of the other party, which shall not be unreasonably
withheld.
9.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
9.7 Headings and Recitals. The section Headings and Recitals
contained in this Agreement are inserted for convenience only and
shall not affect in any way the meaning or interpretation of this
Agreement.
9.8 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to the Seller:
BEC Group, Inc.
000 Xxxxxxxx Xxxxx Xxxxxx
Xxxxx X-000
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Xxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
Attn: Xxxxxx Xxxxxxxx, CEO
with a copy to:
Xxxx Xxxxxxx, P.C.
1350 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxx Xxxxxxxx
If to the Purchaser:
Xxxxxx Xxxxx Holdings, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxxx, Xxxxx 00000
Attn: Xxxxx XxXxxxx
with a copy to:
Xxxxxxx X. Xxxxxxxx, Esq.
Xxxxxxxx, Xxxxx & Xxxxxx
0000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
If to AAi:
Accessories Associates, Inc
000 Xxxxxx Xxxxxxxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
Attn: Xxxxxx X. Xxxxx
with a copy to:
Xxxxxxx X. Xxxxxxxx, Esq.
Xxxxxxxx, Xxxxx & Xxxxxx
0000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
Any party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set
forth above using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail,
or electronic mail), but no such notice, request, demand, claim, or
other communication shall be deemed to have been duly given unless and
until it actually is received by the intended recipient. Any party
may change the address to which notices,
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requests, demands, claims, and other communications hereunder are to
be delivered by giving the other parties notice in the manner herein
set forth.
9.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the
State of New York, without regard to its principles of conflicts of
law.
9.10 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and
signed by authorized representatives of the Purchaser, AAi and the
Seller. No waiver by any party or any default,
[THIS SPACE INTENTIONALLY LEFT BLANK]
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misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights incorporated herein
by reference and made a part hereof.
9.11 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
9.12 Agreements, Documents and Instruments. Unless otherwise
expressly provided or unless the context requires otherwise,
references to any agreement, document or instrument shall be deemed to
mean and include such agreement, document or instrument as amended,
modified or supplemented from time to time in accordance with the
terms hereof.
9.13 Expenses. Except as expressly provided in Section 7.15,
above, each party agrees to pay, without right of reimbursement from
the other party, the costs incurred by it incident to the performance
of its obligations under this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, costs
incident to the preparation of this Agreement, and the fees and
disbursements of counsel, accountants and consultants employed by such
party in connection herewith.
9.14 AAi Guaranty. AAi hereby guarantees the full and complete
performance by the Purchaser of all of the Purchaser's obligations
under this Agreement, subject to the terms and conditions contained
herein.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
XXXXXX XXXXX HOLDINGS, INC.
By:
---------------------------------
Title:
------------------------------
BEC GROUP, INC.
By:
---------------------------------
Title:
------------------------------
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XXXXXX XXXXX GROUP, L.P.
By:
---------------------------------
Title:
------------------------------
ACCESSORIES ASSOCIATES, INC.
By:
---------------------------------
Title:
------------------------------
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Schedule 5.3
Capital Structure
Class A Preferred Non-Voting Stock:
Voting Rights: None
Dividend Rights: None
Convertible: No
Redemption Date: February 28, 2000
Redemption Pay-Out: Will be redeemed by the Purchaser by
payment of an amount determined with
reference to the combined net sales of
sunglasses, reading glasses and
accessories by the Xxxxxx Xxxxx Group and
AAi for the year ending December 31,
1999, determined in accordance with
generally accepted accounting principles
consistently applied and excluding an
amount equal to the net sales determined
in accordance with generally accepted
accounting principles consistently
applied, by AAi of such products for the
year ending December 31, 1996, as
follows:
Xxxxxx Xxxxx Group Net Sales: Redemption Amount:
---------------------------- -----------------
$90,000,000 or less: $1,000,000
greater than $100,000,000: $2,000,000
greater than $110,000,000: $4,000,000
greater than $120,000,000: $6,000,000
The amount payable by Purchaser shall be prorated for net sales between
the targets specified above.
Optional Payment: AAi will agree that Seller may, at its
option, exchange the Preferred Stock for
shares of AAi common stock in the event
AAi completes an initial public offering
("IPO") at any time within three (3)
years of the Closing Date. The Seller
shall have sixty (60) days from the date
of the closing of the IPO in which to
exchange the Preferred Stock. In the
event that the Seller shall fail to
exchange the Preferred Stock in
accordance with the terms of this
Optional Payment, then the Seller shall
forever forfeit the right and privilege
to effect such exchange. The number of
shares to be issued by AAi upon such
exchange shall be equal to the maximum
potential Redemption Pay-Out divided by
the per share initial offering price,
multiplied by .85. Any AAi shares so
issued will be restricted securities.
AAi will afford the holder "piggyback"
registration rights.
Common Stock: Ten thousand (10,000) shares of common
stock, par value of $.01 per share.
