1
EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
BY AND AMONG
BEC GROUP, INC.,
FOSTER GRANT GROUP, L.P.,
FOSTER GRANT HOLDINGS, INC. AND
ACCESSORIES ASSOCIATES, INC.
DATED AS OF NOVEMBER 13, 1996
2
TABLE OF CONTENTS
Page
No.
-----
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
i
3
Page
No.
-----
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 Hart-Scott Rodino............................................... 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
ii
4
Page
No.
-----
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
iii
5
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of November 13, 1996, by and among
BEC GROUP, INC., a Delaware corporation with offices at 555 Theodore Fremd
Avenue, Rye, New York 10580 (the "Seller"), FOSTER GRANT GROUP, L.P., a Delaware
limited partnership with offices at 1601 Valley View Lane, Dallas, Texas 75234
(the "Partnership"), FOSTER GRANT HOLDINGS, INC., a Delaware corporation with
offices at 1601 Valley View Lane, Dallas, Texas 75234 (the "Purchaser") and
Accessories Associates, Inc., a Rhode Island corporation with offices at 500
George Washington Highway, Smithfield, Rhode Island 02917 (the "AAi").
WHEREAS, the Seller owns all of the issued and outstanding shares of
capital stock of The Bonneau Company, a corporation organized under Texas law
("Bonneau"), 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, Bonneau owns all of the issued and outstanding shares of
capital stock of BEC Distribution, Inc., a Delaware corporation ("BEC
Distribution"), Bonneau General, Inc., a Delaware corporation ("Bonneau
General"), Bonneau Holdings, a Delaware corporation ("Bonneau Holdings") and
Maximum Merchandising, Inc., a New York corporation ("MMI");
WHEREAS, Bonneau General is the sole general partner, and Bonneau
Holdings and O-Ray Holdings are all of the limited partners, of the Partnership;
WHEREAS, Bonneau, Opti-Ray and ABS, together with their respective
subsidiaries, and the Partnership (collectively, the "Foster Grant Group", and
individually, a "member" of the Foster Grant Group);
WHEREAS, AAi owns all of the issued and outstanding shares of capital
stock of the Purchaser;
WHEREAS, the Purchaser desires to acquire the Foster Grant Group from
the Seller, and the Seller desires to sell the Foster Grant 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 Bonneau (the "Bonneau Shares"), Opti-Ray
(the "Opti-Ray Shares") and ABS (the "ABS
6
Shares") (the Bonneau 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.
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.
"Bonneau 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 Foster Grant 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 Foster Grant
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.
2
7
"Copyrights" has the meaning set forth in Section 4.10(a).
"Dallas Property" means the real property described more fully in
Attachment I hereto, including the buildings located thereon, and
located at 1601 Valley View Lane, Farmer's Branch, Texas 75234.
"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.
"Foster Grant 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.
3
8
"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.
"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 Foster
Grant Group or of (ii) any member of the Foster Grant 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 Foster Grant 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 Foster Grant 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
Foster Grant 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).
4
9
"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).
"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 Bonneau Shares, which consist of 1,000
shares of common stock, par value $1.00 per share; Opti-Ray Shares,
5
10
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 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 Foster Grant Group or
any member of the Foster Grant 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 Foster Grant 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 Benson Eyecare Corporation and Edwin Bonneau;
(b) any liabilities arising under or in connection with
patent litigation previously initiated by Al-Site Corporation
against Bonneau 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.
6
11
(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 Foster Grant Group
and/or its members to, cooperate reasonably with the 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 Foster Grant 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 Foster Grant Group or the Partnership or pending,
threatened or commenced against the Seller and relating to the
Foster Grant 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 Foster Grant 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
7
12
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.
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 Hinckley, Allen & Snyder, 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 Foster Grant Group, as follows:
4.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Seller
owns directly all the outstanding shares of common stock of Bonneau,
Opti-Ray and ABS. Bonneau owns directly all the outstanding shares of
common stock of BEC Distribution, Bonneau General, Bonneau Holdings and
MMI. Opti-Ray owns directly all the outstanding shares of common stock
of O-Ray Holdings. Bonneau General is the sole general partner, and
Bonneau Holdings and O-Ray Holdings are all of the limited partners, of
the Partnership. Bonneau, Opti-Ray and ABS, together with their
respective subsidiaries, including the Partnership, comprise all of the
members of the Foster Grant Group. SCHEDULE 4.1 sets forth as to each
member of the Foster Grant 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 Foster Grant Group is a corporation or a
8
13
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 Foster
Grant 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 Material Adverse
Effect. Each member of the Foster Grant 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 Foster Grant Group
makes such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect. No member of the
Foster Grant 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 Foster Grant 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 Foster
Grant 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
Foster Grant 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 Foster Grant Group and the unaudited consolidated
statements of income and cash flows of the Foster Grant 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 Foster Grant Group as of and for the nine month
period ended September 30, 1996 (which have been prepared by management
of the Foster Grant 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,
9
14
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 Foster Grant Group; (b) fairly
present, in all material respects, the Foster Grant 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.
4.4 ABSENCE OF UNDISCLOSED LIABILITIES. No member of the Foster
Grant 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 Foster Grant Group of any
such material liability, commitment or obligation.
4.5 TAXES.
(a) Each corporate member of the Foster Grant 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 Foster Grant 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 Foster Grant Group or for
which an application by any member of the Foster Grant Group is
pending.
10
15
(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 Foster
Grant 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 Foster Grant Group that
arose in connection with any failure (or alleged failure) to pay any
tax. Neither the Seller nor any member of the Foster Grant 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 Foster Grant 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 Foster Grant Group is in progress, and
neither the Seller nor any member of the Foster Grant 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 Foster Grant Group is in force, and no
waiver or agreement by the Seller or any member of the Foster Grant
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 Foster Grant
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
Foster Grant Group have agreed to, and neither the Seller nor any
member of the Foster Grant 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 Foster Grant 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 Foster Grant 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 Foster
Grant 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 Foster Grant Group is involved in any
pending or, to Seller's knowledge, threatened
11
16
litigation, action, suit, proceeding, claim or investigation which,
singly or in the aggregate, could have a Material Adverse Effect upon
the members of the Foster Grant 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 Foster Grant 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 Foster
Grant Group.
4.7 STATUS OF PROPERTY OWNED OR LEASED.
(a) REAL PROPERTY. The real property identified as being
owned by the members of the Foster Grant 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 Foster Grant
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 Foster Grant Group and the Leased Real Property constitutes all the
real property leased by the members of the Foster Grant Group.
(i) TITLE. Each member of the Foster Grant 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
Foster Grant 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 Foster Grant Group.
12
17
(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.
(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 Foster Grant Group has received any notice
of and the Seller and each member of the Foster Grant 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.
13
18
(vii) COMPLIANCE. Neither the Seller nor any
member of the Foster Grant 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 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 Foster Grant 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 Foster Grant Group to be in default thereunder, except where such
default would not have a Material Adverse Effect.
14
19
(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 Foster Grant
Group as currently conducted. Except as specifically disclosed in
SCHEDULE 4.8, each member of the Foster Grant 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
Foster Grant 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 Foster Grant
Group are in generally good repair, normal wear and 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
Foster Grant 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
Foster Grant 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 Foster Grant
Group's requirements of any material product or other item sold or used
by the Foster Grant Group in the Ordinary Course of Business;
(c) Contract or commitment in connection with the Foster
Grant Group which by its terms does not terminate or is not terminable
without penalty by any member of the Foster Grant Group or any
successor or assign within thirty (30) days after notice from such
party thereto;
(d) Contract or agreement related to the Foster Grant
Group not made in the Ordinary Course of Business;
(e) Contract or agreement with any officer, director or
stockholder of the Foster Grant Group or with any Affiliate and which
relates to the Foster Grant Group;
(f) Employment, agency, consulting, or similar contract
in connection with the members of the Foster Grant 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;
15
20
(h) Loan or guaranty agreement, credit agreement, note or
other agreement or instrument evidencing indebtedness of any member of
the Foster Grant Group to any third party or of any third party to any
member of the Foster Grant 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
(j) Other contracts or agreements creating any material
obligation on any member of the Foster Grant Group with respect to the
Foster Grant 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 Foster Grant 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 Foster Grant 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 Foster Grant 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 Foster Grant
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 Foster Grant Group has contributed to any
Multiemployer Plan prior to the acquisition by Seller. No member of the
Foster Grant 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
16
21
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
Foster Grant 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 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 Foster Grant 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. ss. 1395y(b)), the Foster Grant 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 Foster Grant Group to
17
22
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 Foster Grant Group.
(j) The Foster Grant 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 Foster Grant 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.
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 mark
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 Foster Grant 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 Foster Grant 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 Foster
Grant Group and any other agreements to which the Foster Grant 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
Foster Grant Group or used in or necessary to the conduct of the
business of the Foster Grant 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, petty 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
18
23
Foster Grant Group or are part of or used in or necessary to the
conduct of the business of the Foster Grant 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 Foster Grant 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
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 Foster Grant Group;
(viii) all rights to develop, manufacture, use or
sell under all licenses in effect as of the Closing Date granted to the
Foster Grant Group that are part of, used in or necessary to the
conduct of the business of the Foster Grant 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 Foster Grant Group;
(x) all of the Foster Grant 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.
19
24
(xi) all goodwill associated with any of the
foregoing and all rights to sue 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 "Benson", "BEC", "Bolle",
"Optical Radiation Corporation" or "ORC" or any name or mark 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 Foster Grant 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 Foster Grant Group. Each item of Intellectual Property owned or
used by the Foster Grant 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 SCHEDULE 4.10, the Foster Grant 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 Foster
Grant 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 Foster Grant 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 Foster Grant 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 Foster Grant 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 Foster Grant Group has received any unresolved
charge, complaint, claim demand or notice alleging any such
interference, infringement, misappropriation or violation (including
any claim that the Foster Grant 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 Foster Grant 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 Foster Grant Group has granted to any third party with respect
to any of its Intellectual Property
20
25
(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 Foster Grant Group, is threatened which challenges the
legality, validity, enforceability, use or ownership of the item;
(iii) the Foster Grant 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 Foster Grant Group's marketing,
sale, or use of any Intellectual Property owed by the Foster Grant
Group for the period up to and including the Closing Date have been
paid or accrued consistent with Section 4.3.
(e) The Foster Grant Group has the right to use the name
"Foster Grant" 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 "Foster Grant" 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 Hart-Scott Rodino
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
Foster Grant 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
21
26
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 Foster Grant 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 Foster Grant 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 Foster Grant
Group in or about any real estate owned, leased or operated by any
member of the Foster Grant Group except as permitted under and in
accordance with applicable law;
(b) There are no locations not presently owned, leased or
operated by any member of the Foster Grant Group where Contaminants
from the operation of the business of any member of the Foster Grant
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
Foster Grant 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 Foster Grant Group or from other
locations where wastes from the operation of the Foster Grant Group's
properties or business have been or are located;
(e) No member of the Foster Grant 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 Foster Grant
Group has received any notice from any Person advising the Seller or
any member of the Foster Grant Group that any member of the Foster
Grant Group is potentially responsible for response costs with respect
to a release or threatened release of Contaminants.
22
27
4.13 LABOR PRACTICES. To Seller's Knowledge, there are no material
claims for unfair labor practices or threatened between any member of
the Foster Grant Group and any of their employees. No strikes, work
slowdowns or stoppages or other labor disputes involving any member of
the Foster Grant 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 Foster Grant 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 Foster Grant 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 Foster Grant 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 Foster Grant Group to bring the Foster
Grant 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 Foster Grant 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 Foster Grant 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 Foster Grant 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 Foster Grant Group or any member
thereof of all current directors and officers of the members of the
Foster Grant Group, and each other current employee of the Foster Grant
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 Foster Grant Group's policies and procedures, and
there has not been any accrual for or commitment or agreement by any
member of the Foster Grant 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 Foster Grant Group
23
28
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 Foster Grant 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 Foster Grant
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 Foster Grant Group that remains undischarged on the
Closing Date;
(c) Any obligation, liability or commitment incurred by
any member of the Foster Grant 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 Foster Grant 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
Foster Grant 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 Foster Grant Group with all material
requirements of law and all material agreements to which the Foster
Grant 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 Foster Grant 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
24
29
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 Foster Grant 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 Foster Grant Group's customers, competitors or
suppliers, or any organization that has a contract or arrangement with
any member of the Foster Grant Group relating to the Foster Grant
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 Foster Grant 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 Foster Grant Group has
received notice of nor does any member of the Foster Grant Group have
reason to believe that any sales representative listed on SCHEDULE 4.20
intends to terminate its relationship with such member (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 Foster Grant
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 Foster Grant Group. To the Seller's Knowledge,
the Foster Grant 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 Foster Grant Group knows of any fact
relating to the Foster Grant 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
25
30
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 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
26
31
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 Foster Grant 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 Hart-Scott Rodino
Antitrust Improvements Act of 1976. No consent of any party to any
material contract, agreement, instrument 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 Foster Grant
Group, material
27
32
agreements and other information relating to the Foster Grant 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 Foster Grant Group, and their
representatives, with respect to the Foster Grant Group and its
business and operations, which Purchaser and AAi believe is material to
their assessment of the Foster Grant 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 Foster Grant Group and the Partnership, and have
inspected such books and records as they have deemed appropriate in
connection with their investigation of the Foster Grant Group, (ii)
been afforded an opportunity to investigate and make inquiries
regarding the condition of the members of the Foster Grant Group, the
Partnership and the assets, financial and otherwise, of the Foster
Grant 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.
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.
28
33
(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 Foster Grant 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
Foster Grant 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 Foster Grant 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
Foster Grant Group. The Seller shall deliver at the Closing or
thereafter: all stock books, minute books and corporate
records of the Foster Grant Group; and all other material
original agreements computer disks, documents, books and
records relating to the Foster Grant Group and necessary to
conduct the Foster Grant Group as currently or heretofore
conducted. For the purposes of this paragraph, items described
herein and located on the premises of the Partnership or any
member of the Foster Grant Group shall be deemed delivered
upon Closing by virtue of Purchaser taking control of such
premises.
(h) All directors of each member of the Foster Grant
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 Foster Grant
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
Hart-Scott-Rodino 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 Marlin Capital, L.P. and its
affiliates (jointly, "Marlin"), on the other shall, at or
prior to the Closing, have executed and
29
34
delivered a Shareholder Agreement, containing terms and
conditions mutually agreed by and among such parties, pursuant
to which AAi and Marlin 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 Bonneau
(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 Bonneau in the
Agreements.
(l) At or prior to the Closing, a sales representative
agreement by and between the Partnership and Jacobs Marketing,
Inc., ("Jacobs") shall have been executed and a copy thereof
delivered to Purchaser whereby the Partnership agrees to
appoint and Jacobs agrees to act as the Partnership's
exclusive sales representative to Target Stores division of
Dayton Hudson Corporation under terms and conditions
reasonably satisfactory to Purchaser.
(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
Bonneau 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 Foster Grant 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.
30
35
(o) Michael A. Aviles, 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 Mr. Aviles 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.
(s) The Purchaser and AAi shall have received from Kane
Kessler, 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 Foster Grant Group shall lease
its current premises located at the Dallas Property.
31
36
(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 Foster Grant 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.
(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
Hart-Scott-Rodino 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.
32
37
(h) The Seller shall have received from Hinckley, Allen &
Snyder, 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 Foster Grant 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
(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;
33
38
(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 Foster Grant
Group, cause or permit any member of the Foster Grant Group to, and no
member of the Foster Grant 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 employee of
the Foster Grant 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 Foster Grant
Group's capital stock or any redemption, purchase or other
acquisition of any shares of the capital stock or other
securities of the Foster Grant Group;
34
39
(c) sell, transfer or otherwise dispose of any assets of
the Foster Grant 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 Foster Grant 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 Foster Grant 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 Foster Grant Group, whether owned or leased, in their
current operating condition and repair, reasonable wear and
tear excepted;
(k) fail to maintain in full force and effect insurance
for the Foster Grant 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;
35
40
(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 Foster Grant 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 Foster Grant Group, to all premises,
properties, personnel, personnel records (including tax records),
contracts, and documents ("Records") of or pertaining to the Foster
Grant 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 Foster Grant 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 Foster Grant Group and the Partnership shall not
have any right, title or other interest in or to the names "BEC",
"Benson" or "Bolle" or any variations thereof or any names containing
or incorporating such names.
7.9 BOLLE(R) BRAND. The Purchaser agrees for itself and on behalf
of the members of the Foster Grant 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 Foster Grant 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.
36
41
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 Foster Grant 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 Foster Grant
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 Foster Grant 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 Foster
Grant 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 to purchase shares of the Seller held
by Foster Grant 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 Foster Grant Group, the Partnership
or any member of the Foster Grant Group for taxable years or
37
42
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 Foster Grant Group, the
Partnership, or the members of the Foster Grant 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 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 Foster Grant Group or any member thereof. No
later than 5 business days before the due date for
38
43
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 Foster Grant 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 Foster Grant 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 Foster Grant 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 Foster Grant 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 Foster Grant 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 Foster Grant 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 Foster Grant 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
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 Foster Grant Group ceasing to be affiliated with Seller;
and (iv) attributable to Seller for any taxable period.
39
44
(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 Foster
Grant 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 Foster Grant Group, the Partnership or
any members of the Foster Grant 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
Foster Grant Group, the Partnership and the members of the
Foster Grant 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 Foster Grant Group, the Partnership and the members of the
Foster Grant 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 such Employee Benefit Plans, and the
Purchaser (for itself and, after the Closing Date, on behalf
of the Foster Grant Group, the Partnership and the members of
the Foster Grant 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.
40
45
(c) From and after the Closing Date, the Purchaser and
the Foster Grant Group shall be solely responsible for (i)
health insurance coverage with respect to any former employee
of the Foster Grant Group, the Partnership or any member of
the Foster Grant 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 HART- SCOTT RODINO The Purchaser and the Seller shall execute
all filings required under the Hart- Scott Rodino 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 Foster Grant Group, to
provide the Seller reasonable assistance in obtaining the release of
any guaranties by Seller or its predecessor, Benson Eyecare
Corporation, of obligations of the Foster Grant Group or any of its
members. The Purchaser or the Foster Grant 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 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 Foster Grant Group contained in
this
41
46
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 Foster Grant 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 Foster Grant
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.
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 Foster Grant
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
42
47
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;
(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
43
48
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 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,
44
49
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 Foster Grant 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.
555 Theodore Fremd Avenue
Suite B-302
Rye, New York 10580
Telecopier: (914) 967-9405
Attn: Martin Franklin, CEO
45
50
with a copy to:
Kane Kessler, P.C.
1350 Avenue of the Americas
New York, New York 10019-4896
Attn: Robert Lawrence
If to the Purchaser:
Foster Grant Holdings, Inc.
1601 Valley View Lane
Dallas, Texas 75234
Attn: Duane DeSisto
with a copy to:
Stephen J. Carlotti, Esq.
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, Rhode Island 02903
If to AAi:
Accessories Associates, Inc
500 George Washington Highway
Smithfield, Rhode Island 02917
Attn: Gerald F. Cerce
with a copy to:
Stephen J. Carlotti, Esq.
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, Rhode Island 02903
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, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other
parties notice in the manner herein set forth.
46
51
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]
47
52
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.
FOSTER GRANT HOLDINGS, INC.
By: /s/ Duane DeSisto
-------------------------------------
Title: Treasurer
-----------------------------------
BEC GROUP, INC.
By: /s/ Martin Franklin
-------------------------------------
Title: Chairman
-----------------------------------
48
53
FOSTER GRANT GROUP, L.P.
By: /s/ Martin Franklin
-------------------------------------
Title:
----------------------------------
ACCESSORIES ASSOCIATES, INC.
By: /s/ Duane DeSisto
-------------------------------------
Title: Chief Financial Officer
----------------------------------
49
54
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 Foster Grant 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:
FOSTER GRANT GROUP NET SALES: REDEMPTION AMOUNT:
----------------------------- ------------------
$90,000,000 or less: $1,000,000
> $100,000,000: $2,000,000
> $110,000,000: $4,000,000
> $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.
55
Exhibit 10.3
BEC Group, Inc.
555 Theodore Fremd Avenue
Suite B-302
Rye, New York 10580
December 11, 1996
Accessories Associates, Inc.
500 George Washington Highway
Smithfield, RI 02917
Gentlemen:
Reference is made to that certain Stock Purchase Agreement dated
November 13, 1996 (the "Purchase Agreement") amongst BEC Group, Inc., Foster
Grant Holdings, Inc., a Delaware corporation ("Holdings") and Accessories
Associates, Inc., a Rhode Island corporation ("AAI"), and certain other persons,
whereby Holdings acquired all the issued and outstanding capital stock as well
as partnership interests in certain subsidiaries and affiliates of BEC. The
Purchase Agreement contemplated, and had as a condition to closing, a
satisfactory bank loan and security agreement amongst Holdings and its
subsidiaries and NationsBank, as agent for certain lenders (the "Financing
Agreement"). Capitalized terms contained herein referring to the Financing
Agreement shall have the same meaning as set forth in the Financing Agreement.
Section 2.l.1(c) of the Financing Agreement provides that the Borrowers
therein will have the right to an over-advance of $2,000,000 for a limited
period of time provided that the Borrowers shall have caused to be provided to
the Agent a $2,000,000 irrevocable letter of credit in the form of Exhibit F to
the Financing Agreement. In order to induce you to close the transactions
contemplated by the Purchase Agreement, we agree that at your request if you
require the use of the over-line, we will provide to NationsBank one or more
letters of credit at no cost and expense to you in the amount of the over-line
drawing in the aggregate not to exceed $2,000,000 in the form of Exhibit F to
the Financing Agreement within five (5) days of receipt of written notice from
you. As part of the Purchase Agreement, you have delivered to us 100 shares of
the Series A Preferred Stock of Holdings. We agree that in the event that we
shall fail to provide the letters of credit as aforesaid, we will forthwith
return all shares of Series A Preferred Stock to you endorsed to the bank for
transfer or with blank stock powers attached, and we will
56
thereby forfeit our interest in said Preferred Stock. You shall have the right
to specific performance to enforce the provisions requiring return of such
Preferred Stock if we fail to do so after being requested to do so under this
Agreement. If the foregoing is satisfactory to you, please acknowledge your
acceptance of this Agreement on the copy of this letter which is enclosed.
Very truly yours,
BEC Group, Inc.
By: /s/ Ian Ashken
-----------------------------------
Accepted:
Foster Grant Holdings, Inc.
By: /s/ Duane DeSisto
---------------------------
Accessories Associates, Inc.
By: /s/ Duane DeSisto
---------------------------
Enclosure