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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT,
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT - APRIL 7, 1997
(Date of Earliest Event Reported)
STERLING VISION, INC.
(Exact Name of Registrant as Specified in Charter)
NEW YORK 1-14128 11-3096941
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
1500 HEMPSTEAD TURNPIKE
EAST MEADOW, NEW YORK 11554
(Address of Principal Executive Offices)
(516) 390-2100
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
On April 1, 1997, the Company, pursuant to the terms of
that certain Agreement and Plan of Reorganization, dated as of February 19,
1997, as amended (the "Plan"), among the Company and Messrs. David, Alan
and Sidney Singer (collectively, the "Shareholders"), purchased all of the
issued and outstanding shares of the capital stock of Singer Specs, Inc.
("SSI") which, as of the date of closing (the "Closing") was: (i) the owner
and operator of four (4) retail optical stores located in the States of
Pennsylvania and New Jersey (collectively, the "Company Stores"); (ii) the
franchisor of an additional 27 retail optical stores located (and/or in the
process of being constructed) in the States of Pennsylvania, Delaware, New
Jersey, Virginia and the U.S. Virgin Islands; and (iii) the owner of a
three story retail/office building located in Philadelphia, Pennsylvania.
In connection with the Closing, the following occurred:
1. The Shareholders conveyed all of their capital stock
in SSI to the Company, free and clear of any and all claims, liens and/or
encumbrances, in exchange for 305,747 shares of the Company's Common Stock
(collectively, the "Shares"), subject to possible adjustment as set forth
in the Plan;
2. All of the assets of SSI (other than its franchised
accounts and notes receivable, certain of its leases, its POS system, its
franchise and related agreements, its books and records, and its good will
and other intangible assets) were conveyed to corporations owned by the
Shareholders which, simultaneously therewith, converted each of the Company
Stores to franchised Sterling Optical Centers;
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3. The Company made an intercompany loan to SSI, in the
amount of $300,000, which sum was used by SSI to pay a portion of its
liabilities existing as of the Closing, the balance of which liabilities
were assumed by corporations owned by the Shareholders, who also personally
guaranteed the repayment of same; and
4. The Shareholders pledged back to the Company
substantially all of the Shares to secure their continuing obligations
under the Plan.
In addition to the foregoing, the Plan: (i) requires the
Company to file, with the U.S. Securities and Exchange Commission, a
registration statement seeking registration of all of the Shares; (ii)
restricts the Shareholders, from time to time, from selling a portion of
such Shares, all as set forth in the Plan; and (iii) requires the Company
to pay to the Shareholders, under certain circumstances, the difference
between the market price of its Common Stock (upon which the purchase price
was calculated) and the selling price of any such Shares sold by such
Shareholders.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
EXHIBIT NO. DOCUMENT
10.70 Eleventh Amendment and Waiver, dated
April 1, 1997, to the Credit Agreement
between the Company and Chase Manhattan
Bank.
10.71 Agreement and Plan of Reorganization, dated February 19, 1997,
as amended, among the Company and Messrs. David, Alan and
Sidney Singer.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned hereunto duly authorized.
STERLING VISION, INC.
By: /s/Robert Greenberg
------------------------
Name: Robert Greenberg
Title: President and Chief
Executive Officer
Date: April 7, 1997
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EXHIBIT NO. 10.70: ELEVENTH AMENDMENT AND WAIVER, DATED APRIL 1, 1997, TO
THE CREDIT AGREEMENT BETWEEN THE COMPANY AND CHASE
MANHATTAN BANK.
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ELEVENTH AMENDMENT AND WAIVER
ELEVENTH AMENDMENT AND WAIVER dated as of April 1, 1997, (the
"Amendment and Waiver"), with respect to the Credit Agreement dated as of April
5, 1994, by and between STERLING VISION, INC., a New York corporation (the
"Company") and THE CHASE MANHATTAN BANK, a New York banking corporation (the
"Bank") (as amended, the "Credit Agreement").
RECITALS
The Company has requested and the Bank has agreed,
subject to the terms and conditions of this Amendment and Waiver, to waive
and amend certain provisions of the Credit Agreement as herein set forth.
Accordingly, in consideration of the premises and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
agree as follows:
I. Waiver. The Bank hereby waives compliance with the
agreement contained in Section 3(c) of the Ninth Amendment and Waiver to
Credit Agreement to permit the Company to purchase all of the issued and
outstanding capital stock of Singer Specs, Inc., a Delaware corporation
("Singer") pursuant to an Agreement and Plan of Reorganization dated as of
February 19, 1997, as amended by a letter agreement dated March 19, 1997
and a letter agreement dated April 1, 1997 among the Company, Sidney
Singer, Alan Singer and David Singer (the "Transaction"), a true, correct
and complete copy of which, the Company represents and warrants to the
Bank, is attached hereto as Exhibit D ("the Plan of Reorganization");
provided, the Company does not use the proceeds of any Loan to fund the
"Liability Fund", as that term is defined in the Plan of Reorganization.
II. Amendments.
(a) The definition of "Revolving Credit Commitment Termination
Date" in Section 1.01 is hereby amended and restated in its entirety to read as
follows:
"Revolving Credit Commitment Termination Date" shall mean
November 15th, 1998
(b) Clause (a) of Section 2.01 is hereby amended to add the
text "or Section 3.10(c)" after the reference to "Section 2.01(d) therein".
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(c) Clause (c) of Section 3.09 is hereby amended and restated
in its entirety to read as follows:
The Bank shall directly charge all scheduled principal and
interest payments, all mandatory prepayments pursuant to Section 3.10(c), and
commitment fees, in each case, due in respect of the Loans to the Company's
account(s) at the Payment Office or other office of the Bank.
(d) Section 3.10 is hereby amended to add a new Clause
(c) which shall read in its entirety as follows:
(c) The Revolving Credit Commitment shall be reduced by the
sum of $75,000 on the 15th day of each month commencing April 15, 1997 and the
15th day of each month thereafter until the Revolving Credit Commitment
Termination Date. In the event that the aggregate principal amount of the
Revolving Credit Loans outstanding on the date of any such reduction exceeds the
Revolving Credit Commitment after giving effect to such reduction, the Company
shall pay to the Bank on such date the amount of such excess together with all
accrued interest thereon together with all other amounts due and payable
hereunder.
(e) Clause (v)(b) of Section 7.06 of the Credit Agreement
is hereby amended and restated in its entirety to read as follows:
A loan by the Company to Mr. Robert Greenberg (which such loan
shall be exclusive of the aggregate allowance of $250,000 permitted in clause
(a) hereof) in the principal amount of $122,500, accruing interest at 6% per
annum, and which loan shall require monthly payments of interest only for the
initial six months following the date of the loan and thereafter in equal
monthly installments of principal and interest commencing six months from the
date of such loan with a final payment due on or prior to January 1, 2002.
(f) Clause (a)(i) of Section 8.01 is hereby amended and
restated in its entirety to read as follows:
(a)(i) Default in the payment of any principal of any
Loan when due and payable, including, without limitation, any mandatory
prepayment of principal required pursuant to Section 3.10,
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II. Conditions Precedent. The waivers and amendments set
forth in Paragraph I and II, respectively, shall not be effective unless
the Bank shall have received on or prior to April 1, 1997, payment of an
amendment fee of $1,500 and each of the documents, certificates and
opinions referred to in clause (a) through (h) below and provided there
shall have been no waiver, amendment or modification to the Plan of
Reorganization, including, without limitation, a waiver by the Company of
any condition to the closing of the transactions contemplated thereby.
(a) The Joinder Agreement attached hereto as Exhibit A
duly executed by Singer and its Subsidiaries;
(b) An Acknowledgement and Agreement duly executed by the
Company, and, within one (1) Business Day of the closing of the
Transaction, stock certificates evidencing 100% of the issued and
outstanding shares of capital stock of Singer and stock powers with respect
thereto duly endorsed in blank;
(c) A Corporate Guaranty substantially in the form of
Exhibit C to the Credit Agreement duly executed by Singer and its
Subsidiaries;
(d) A Security Agreement in the form attached as Exhibit
G-2 to the Credit Agreement duly executed by Singer and its Subsidiaries
together with UCC-1 financing statements as required thereunder;
(e) A Pledge Agreement duly executed by Singer and,
within one (1) Business Day of the closing of the Transaction, stock
certificate evidencing 100% of the issued and outstanding shares of capital
stock of each Subsidiary of Singer and stock powers with respect thereto
duly endorsed in blank;
(f) A Trademark Security Agreement duly executed by
Singer; and
(g) An opinion of counsel to the Company substantially in
the form attached hereto as Exhibit C;
(h) A Secretary's Certificate of each of Singer and its
Subsidiaries certifying their respective certificates of incorporation,
by-laws and resolutions with respect to the agreements referred to in
clauses (a) through (d) above, together with a good standing certificate
issued by the Secretary of State of the state of their respective
incorporation.
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In the event any document, certificate, or opinion
referenced in clause (a) through (h) above is not delivered to the Bank on
or prior to the date thereof, the waiver and amendments granted pursuant to
Paragraph I and Paragraph II, respectively, shall be null and void and of
no force
and effect.
III. Miscellaneous.
(a) THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) All terms used herein shall have the same meaning as
in the Credit Agreement, as amended hereby, unless specifically defined
herein.
(c) This Amendment and Waiver shall constitute a Loan
Document.
(d) Except as expressly amended hereby, the Credit
Agreement shall remain in full force and effect in accordance with the
terms thereof. The Credit Agreement is ratified and confirmed in all
respects. The amendment and waiver herein are limited specifically to the
matters set forth above and for the specific instance, and purposes for
which given and do not constitute directly or by implication an amendment
or waiver of any other provisions of the Credit Agreement or a waiver of
any Event of Default or event which upon notice, lapse and time or both
would constitute an Event of Default which may occur or may have occurred
under the Credit Agreement.
(e) The Company hereby represents and warrants that,
after giving effect to this Amendment and Waiver, no Event of Default or
event which upon notice, lapse of time or both would constitute an Event of
Default, exists under the Credit Agreement or any other Loan Document.
(f) This Amendment and Waiver may be executed in one or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one Amendment and Waiver.
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IN WITNESS WHEREOF, the Company and the Bank have caused
this Amendment and Waiver to be duly executed by their duly authorized
officers as of the day and year first above written.
STERLING VISION, INC.
By: /s/Joseph Silver
-----------------------------------------
Title: Executive Vice President/Secretary
THE CHASE MANHATTAN BANK
By: /s/Flavia Kruger
-----------------------------------------
Title: Vice President
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The undersigned, not parties to the Credit Agreement but
as Corporate Guarantors under Corporate Guaranties executed in favor of the
Bank, hereby accept and agree to the terms of the foregoing Amendment and
Waiver and further acknowledge that their respective Corporate Guaranties
are in full force and effect and are ratified and confirmed.
STERLING ADVERTISING, INC.
STERLING VISION OF MAIN PLACE, INC.
STERLING VISION OF HEMPSTEAD, INC.
STERLING VISION OF NORTHWAY MALL, INC.
STERLING VISION OF REGO PARK, INC.
STERLING VISION OF BATAVIA, INC.
STERLING VISION OF NORTH SHORE MART, INC.
STERLING VISION OF BAY STREET, INC.
STERLING VISION OF BRAMALEA, INC.
STERLING VISION OF HAMILTON, INC.
STERLING VISION OF LIME RIDGE, INC.
STERLING VISION OF KINGSTON, INC.
STERLING VISION OF BLUE HEN MALL, INC.
STERLING VISION OF LANDOVER, INC.
STERLING VISION OF MONDAWMIN, INC.
STERLING VISION OF PADDOCK MALL, INC.
STERLING VISION OF METRO NORTH, INC.
STERLING VISION OF FRANKLIN MALL, INC.
STERLING VISION OF TINLEY PARK, INC.
STERLING VISION OF EAU CLAIRE, INC.
STERLING VISION OF SENECA, INC.
STERLING ROSLYN CORP.
STERLING VISION OF WALDEN, INC.
STERLING VISION OF INDEPENDENCE, INC.
STERLING VISION OF ROTTERDAM, INC.
STERLING VISION OF NEWBURGH, INC.
STERLING VISION OF BAY RIDGE, INC.
STERLING VISION OF WESTPORT, INC.
STERLING VISION, U.S.A., INC.
STERLING VISION OF CALIFORNIA, INC.
SITE FOR SORE EYES SACRAMENTO, INC.
SITE FOR SORE EYES ADVERTISING, INC.
STERLING VISION OF POTOMAC MILLS, INC.
SITE FOR SORE EYES YUBA CITY, INC.
STERLING VISION OF WHEATON PLAZA, INC.
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STERLING VISION OF MID RIVERS, INC.
STERLING VISION OF EAST ROCKAWAY, INC.
STERLING VISION OF NEWPARK, INC.
STERLING VISION OF COLUMBUS MILLS, INC.
STERLING VISION OF ONTARIO MILLS, INC.
STERLING VISION OF NANUET, INC.
STERLING VISION OF DELAFIELD, INC.
STERLING VISION OF TOMS RIVER, INC.
STERLING VISION OF ISLANDIA, INC.
STERLING VISION OF HAWTHORNE CENTER, INC.
STERLING VISION OF LEVITTOWN, INC.
STERLING VISION OF CHARLESTOWN, INC.
STERLING VISION OF SYOSSET, INC.
STERLING VISION OF CAPITOLA, INC.
STERLING VISION OF FOX RUN, INC.
STERLING VISION OF METRO N.Y., INC.
STERLING VISION OF BRUNSWICK, INC.
STERLING VISION OF ROSLYN, INC.
INSIGHT LASER CENTERS, INC.
STERLING VISION OF EAST MADISON, INC.
STERLING VISION OF HAGERSTOWN, INC.
STERLING VISION BRYANT II CORP.
STERLING VISION OF WHITE FLINT, INC.
STERLING VISION OF CAMBRIDGE SQUARE, INC.
STERLING VISION OF CAPE GIRARDEAU, INC.
STERLING VISION OF EDISON, INC.
STERLING VISION OF NAPA, INC.
STERLING VISION OF LOS GATOS, INC.
STERLING VISION OF PRINCE GEORGES PLAZA, INC.
STERLING VISION, INC.
STERLING VISION BOS, INC.
VISIONCARE OF CALIFORNIA
STERLING VISION OF TRACY, INC.
INSIGHT LASER CENTERS N.Y. I, INC.
INSIGHT LASER CENTERS NEW YORK II, LTD.
INSIGHT LASER CENTERS N.C. II, INC.
STERLING VISION DKM, INC.
STERLING VISION OF GREEN ACRES, INC.
STERLING VISION OF M.V., INC.
STERLING VISION OF SOUTHPARK, INC.
STERLING VISION OF NORTHPARK, INC.
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STERLING VISION OF BREA, INC.
STERLING VISION OF BLASDELL, INC.
STERLING VISION OF SOUTHDALE, INC.
STERLING VISION OF WESTMINSTER, INC.
STERLING VISION OF FAIR OAKS, INC.
STERLING VISION OF NEWPORT BEACH,INC.
STERLING VISION OF FULTON ST., INC.
STERLING VISION DKM ADVERTISING, INC.
720 MARKET STREET REALTY CORPORATION
STERLING VISION OF SACRAMENTO, INC.
STERLING VISION OF FARGO, INC.
STERLING VISION OF 1900 BROADWAY, INC.
STERLING VISION OF ANAHEIM, INC.
STERLING VISION OF EASTLAND, INC.
STERLING VISION OF GASTONIA, INC.
STERLING VISION OF KIRKWOOD MALL, INC.
STERLING VISION OF BLUEFIELD, INC.
STERLING VISION OF GREEN BAY, INC.
STERLING VISION KENNEDY BLVD., INC.
STERLING VISION OF WEST BEND, INC.
STERLING VISION OF WEST MADISON, INC.
STERLING VISION DKM OF SHEBOYGAN, INC.
STERLING VISION OF KENOSHA, INC.
STERLING VISION OF HAMPTON, INC.
STERLING VISION OF FORESTVILLE, INC.
STERLING VISION OF FOND DU LAC, INC.
STERLING VISION OF FNR, INC.
STERLING VISION OF MINOT, INC.
STERLING VISION LABORATORIES, INC.
STERLING VISION OF BASHFORD MANOR, INC.
BY /S/JOSEPH SILVER
----------------------
NAME: JOSEPH SILVER
TITLE: EXECUTIVE VICE PRESIDENT/SECRETARY
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EXHIBIT NO. 10.71: AGREEMENT AND PLAN OF REORGANIZATION, DATED FEBRUARY 19,
1997, AS AMENDED, AMONG THE COMPANY AND MESSRS.
DAVID, ALAN AND SIDNEY SINGER.
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AGREEMENT AND PLAN OF REORGANIZATION
dated as of
February 19, 1997
among
STERLING VISION, INC.
and
SIDNEY SINGER
ALAN SINGER
and
DAVID SINGER
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TABLE OF CONTENTS
Section 1. Exchange of Stock................................................1
1.1 Number of Shares.....................................................1
1.2 Delivery of Certificates by Shareholders.............................2
1.3 Pledge of Shares.....................................................2
1.4 Further Assurances...................................................2
1.5 Changes in Sterling's Capitalization.................................3
1.6 Adjustment in Number of Shares.......................................3
(a)Pre-Closing Adjustment............................................3
(b)Post-Closing Adjustment...........................................4
(c)Fractional Shares.................................................5
1.7 Registration of Shares...............................................5
1.8 Restrictions on Resale...............................................8
1.9 Funding Singer......................................................11
1.10 Liability of Singer and the Subsidiaries...........................11
Section 2. Closing.........................................................12
Section 3. Representations and Warranties of Singer........................13
3.1 Organization, Good Standing and Qualification.......................13
3.2 Capitalization......................................................13
3.3 Authority; Execution and Delivery; Requisite Consents,
Nonviolation........................................................14
3.4 Subsidiaries........................................................16
3.5 Singer Financial Information........................................16
3.6 Certain Changes or Events...........................................17
3.7 Title to Assets.....................................................19
3.8 Leases..............................................................19
3.9 Contracts...........................................................19
3.10 Intellectual Property..............................................21
3.11 Insurance..........................................................23
3.12 Labor Union Activities; Employee Relations.........................23
3.13 ERISA..............................................................24
3.14 Litigation.........................................................24
3.15 Compliance with Laws; Permits......................................25
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3.16 Taxes..............................................................26
3.17 Books and Records..................................................26
3.18 Environmental Matters..............................................27
3.19 Transactions with Affiliates.......................................28
3.20 No Brokers or Finders..............................................28
3.21 Investment Company Act.............................................28
3.22 Real Property Holding Corporation..................................29
3.23 Ownership of Singer Shares.........................................29
3.24 Disclosure.........................................................29
3.25 Real Estate........................................................29
3.26 Shareholders.......................................................29
3.27 Retail Locations...................................................30
3.28 Singer Assets at Closing...........................................30
Section 4. Representations, Warranties, and Covenants of Sterling..........31
4.1 Organization; Authorization.........................................31
4.2 Conflicting Instruments; Consents...................................32
4.3 Litigation..........................................................33
4.4 Finders or Brokers..................................................33
4.5 Sterling Common; Cash Payments......................................33
4.6 Securities Filings and Disclosure Document..........................34
4.7 Investment Intent...................................................34
4.8 Repurchase of Shares................................................35
4.9 Voting Stock........................................................35
4.10 Prior Ownership....................................................35
4.11 Investment Companies...............................................35
4.12 Business Risk......................................................35
4.13 Registration of Shares.............................................36
Section 5. Conduct of Singer Pending the Closing. .........................36
5.1 Spin-Off Transaction................................................36
5.2 Conversion of Company Stores........................................37
5.3 Access to Properties and Records; Confidentiality...................39
5.4 ....................................................................40
5.5 Affiliates..........................................................40
5.6 Meeting of Shareholders.............................................40
5.7 Business in Ordinary Course.........................................40
5.8 Employee Compensation...............................................41
5.9 Accounting Practices................................................41
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5.10 Landlord Consents..................................................41
5.11 Negative Covenants.................................................41
5.12 Liens..............................................................43
5.13 Best Efforts.......................................................43
5.14 Disclosure Schedule; Supplemental Disclosure.......................44
Section 6. Post-Closing Obligations........................................45
6.1 Relocation of Philadelphia Franchisee...............................45
6.2 Relocation of Westmoreland Franchisee...............................45
6.3 Franchise Conversions...............................................46
Section 7. Conduct of Sterling Pending the Closing.........................47
7.1 Recapitalization and Dividends......................................47
7.2 Issue of Sterling Common Stock......................................47
7.3 Employment Agreement................................................47
7.4 Communication With Landlords........................................47
Section 8. Conditions Precedent--Sterling. ................................48
8.1 Representations and Warranties True at Closing......................48
8.2 Due Performance.....................................................48
8.3 Opinion of Counsel..................................................49
8.4 Books and Records...................................................49
8.5 Revocation of Prior Authorizations..................................49
8.6 Resignations........................................................50
8.7 Acceptance by the Shareholders......................................50
8.8 No Change in Condition..............................................50
8.9 Spin-Off Transaction................................................50
8.10 Bank Consent.......................................................50
8.11 Exempt Registration................................................50
8.12 Real Estate........................................................50
8.13 Liens..............................................................50
Section 9. Conditions Precedent - The Shareholders.........................50
9.1 Representations and Warranties True at Closing......................51
9.2 Due Performance.....................................................51
9.3 Officers' Certificate...............................................51
9.4 Opinion of Sterling's Counsel.......................................52
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Section 10. Indemnification................................................52
10.1 Survival of Representations and Warranties; Remaining
Claims.............................................................52
10.2 Indemnification by the Shareholders................................53
10.3 Payment of Claim...................................................54
10.4 Claims for Indemnification.........................................54
10.5 Defense of Third Party Claims......................................56
10.6 Indemnification by Sterling........................................57
10.7 Certain Limitations................................................59
Section 11. Termination....................................................59
11.1 Termination........................................................59
11.2 Effect of Termination..............................................59
Section 12. General Provisions.............................................59
12.1 Further Assurances.................................................59
12.2 ...................................................................60
12.3 Waiver.............................................................60
12.4 Public Announcements...............................................60
12.5 Brokers............................................................60
12.6 Notices............................................................60
12.7 Entire Agreement...................................................61
12.8 Headings...........................................................61
12.9 Governing Law......................................................62
12.10 Assignment........................................................62
12.11 Counterparts......................................................62
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"),
dated as of February 19, 1997, between Sterling Vision, Inc., a New York
corporation ("Sterling"), and Sidney Singer, Alan Singer, and David Singer
(collectively the "Shareholders" and individually a "Shareholder"), being
the owners (both beneficially and of record) of all of the issued and
outstanding capital stock of Singer Specs, Inc., a Delaware corporation
("Singer").
WHEREAS, Sterling wishes to acquire and the Shareholders
wish to sell, transfer and convey to Sterling all of the issued and
outstanding capital stock of Singer in a transaction intended to qualify as
a reorganization within the meaning of ss. 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, Sterling and the Shareholders adopt this plan
of reorganization and agree as follows:
Section 1. Exchange of Stock.
1.1 Number of Shares. Subject to the terms and provisions
of this Agreement, on the Closing Date, as hereinafter defined, the
Shareholders agree to sell, transfer and convey to Sterling, free and clear
of any and all claims, liens and/or encumbrances, the number of shares of
common stock of Singer and the number of shares of preferred stock
(collectively, the "Transferred Stock") of Singer, shown opposite their
respective names on Section 1.1 of the schedule of disclosures attached
hereto as Schedule 1 (the "Disclosure Schedule"), in exchange for an
aggregate number of unregistered shares of voting common stock of Sterling,
$.01 par value per
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share (as the same may, from time to time, be increased or decreased
pursuant to the terms hereof, being hereinafter collectively referred to as
the "Shares"), to be determined by dividing $2,600,000 (subject to possible
adjustment as hereinafter provided, said amount, as so adjusted, being
hereinafter referred to as the "Valuation Amount") by the average bid price
of said Shares during the thirty (30) day period immediately preceding the
Closing Date, and reported by the Nasdaq National Market System (the
"Closing Price"), to be issued on the Closing Date to the Shareholders in
accordance with the respective percentages shown opposite their names in
Section 1.1 of the Disclosure Schedule (the "Exchange of Stock"). Each of
the certificates representing the Shares shall contain the restrictive
legends set forth on Exhibit A hereto.
1.2 Delivery of Certificates by Shareholders. The
Exchange of Stock shall be effected by the delivery by the Shareholders to
Sterling at the Closing of certificates representing all of the Transferred
Stock endorsed in blank or accompanied by stock powers executed in blank,
with all signatures guaranteed by a national bank and with all necessary
transfer tax and other revenue stamps, acquired at the Shareholders'
expense, affixed.
1.3 Pledge of Shares. As a means of securing the Shareholders'
indemnification obligations under Section 10 hereof, on the Closing Date, each
of the Shareholders shall execute and deliver to Singer a pledge agreement in
form and content reasonably satisfactory to counsel to the parties hereto.
1.4 Further Assurances. At the Closing and from time to
time thereafter, the Shareholders, at their sole cost and expense, shall
promptly execute and deliver to
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Sterling and/or Singer and/or cause to be executed and delivered to
Sterling and/or Singer, as the case may be, such additional instruments and
take such other action as Sterling and/or Singer may request in order to
more effectively sell, transfer, convey and assign the Transferred Stock to
Sterling and to confirm Sterling's title thereto, as well as to consummate
any and all of the other transactions provided for herein.
1.5 Changes in Sterling's Capitalization.
If between the date of this Agreement and the Closing,
the outstanding shares of Sterling voting common stock are, without the
receipt of new consideration by Sterling, changed into, or exchanged for a
different kind of shares or securities of Sterling through reorganizations,
or reclassification, Sterling will issue and deliver to the Shareholders,
in lieu of the Shares, such different kind of shares or securities of
Sterling, in equitably adjusted amounts, such that the Shareholders will be
treated no less equitably than any other stockholder of Sterling receiving
such different kind of shares or securities. In the event of any such
change in Sterling's capitalization, all references to Shares herein shall
refer to the different kind of shares or securities of Sterling as thus
adjusted.
1.6 Adjustment in Number of Shares.
Notwithstanding the foregoing calculation of the number
of Shares of Sterling voting common stock to be issued to the Shareholders
as set forth in Section 1.1, the following "Pre-Closing Adjustment" and
"Post-Closing Adjustment" shall be made:
(a) Pre-Closing Adjustment.
In the event the appraised fair market value of that
certain real estate located at 1909 Chestnut Street, Philadelphia,
Pennsylvania (the "Real Estate") based upon the average of two
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appraisals performed, prior to Closing, by one appraiser retained by Singer
and one appraiser retained by Sterling, each reasonably acceptable to the
other, and each paid for by the party retaining said appraiser, is more or
less than $700,000.00, the Valuation Amount shall be increased or reduced,
as the case may be, by the difference between $700,000 and said appraised
fair market value of the Real Estate; provided, however, that in the event
the difference between the two appraisals is more than $100,000, the two
appraisers shall select a third M.A.I. appraiser, who, prior to Closing
shall, alone, determine the final fair market value of the Real Estate, the
cost of which third appraiser shall be divided equally between Singer and
Sterling.
(b) Post-Closing Adjustment.
In the event the Shareholders, within a maximum period of
one hundred fifty (150) days following the Closing, shall not be able to
cause all of Singer's Franchisees in existence as of the Closing Date
(collectively, the "Existing Franchisees") together with each of their
respective principal owners, to enter into new Sterling Optical Center
Franchise Agreements and related documents, all as more particularly
described in Sterling's Franchise Offering Circular, dated October 15, 1996
(the "UFOC") a copy of which has been delivered to the Shareholders prior
to the date hereof, (but without the requirement that any such Franchisee
pay to Sterling the "Initial Franchisee Fee" or any other fees associated
with any such conversion; e.g., remodeling or conversion fees provided for
therein, other than costs to be incurred in changing the name and exterior
signage of such Existing Franchisee's premises, the installation of a POS
system therein, and any fees payable to each such Existing Franchisee's
legal advisors and/or landlord), the Valuation Amount shall be reduced by
the product obtained by multiplying (i) the sum of $100,000.00 by (ii) a
fraction, the numerator of which
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shall be the total annualized gross revenues (for the 12 month period
immediately preceding the Closing) of those retail optical stores owned by
those Existing Franchisees not so willing to convert to Sterling Optical
Centers (as described above), and the denominator of which shall be the
total annualized gross revenues (for the 12 month period immediately
preceding the Closing) of all Existing Franchisees. In such event, the
total number of Shares issued by Sterling (at the Closing) shall be reduced
by that number of Shares determined by dividing such decrease in the
Valuation Amount by the Closing Price of the Shares (collectively, the
"Excess Shares"); and the Shareholders, upon receipt of Sterling's
calculation of the Excess Shares, shall thereupon authorize, direct and/or
cause such Excess Shares (in individual numbers to be determined by the
Shareholders themselves) to be returned to Sterling for cancellation.
Notwithstanding the foregoing provisions of this Subsection (b), such
Post-Closing Adjustment of the Valuation Amount shall not take into account
the gross revenues for the retail optical store operated by the
Westmoreland Franchisee, as described in Section 6.2 hereof
(c) Fractional Shares
No fractional shares of Sterling will be issued in the
Exchange of Stock. To the extent any Shareholder would be entitled to
receive a fractional share of Sterling stock in the Exchange of Stock
pursuant to the provisions of this Section 1, such fractional share shall
be rounded up or down, as appropriate, to the nearest whole number of
Shares.
1.7 Registration of Shares.
(a) Sterling and each of the Shareholders hereby
acknowledge and agree that the Shares of Sterling to be issued in exchange
for the Transferred Stock shall contain
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the restrictive legends referred to as Exhibit "A" hereto, shall be issued
in the form of and shall constitute "restricted securities," as such term
is defined in Rule 144(a)(3) under the Securities Act of 1933, as amended
(the "Securities Act"), and will be issued pursuant to the exemption from
registration afforded by Section 4(2) of, or other provisions under, the
Securities Act and Regulation D promulgated thereunder.
(b) Sterling hereby agrees to (i) use reasonable, good
faith efforts to prepare for filing and file with the "Securities and
Exchange Commission ("SEC") under the Securities Act, on or before April
15, 1997, (but in no event prior to the Closing Date) a registration
statement on Form S-1, or Form S-3, or on any other appropriate form (the
"Registration Statement") for the purpose of registering, on behalf of the
Shareholders, the Shares of Sterling to be issued in connection with this
Agreement, and (ii) use its reasonable good faith efforts to have the
Registration Statement declared effective as promptly thereafter as is
reasonably practicable. Immediately upon the effective date of the
Registration Statement, Sterling shall replace the Shares with new Shares
identical in form except that paragraph 1 of the restrictive legends set
forth on Exhibit "A" shall be deleted. Sterling further agrees to use its
reasonable good faith efforts to maintain the effectiveness of the
Registration Statement, and to promptly filed with the SEC any supplements
or post-effective amendments thereto which may be required in order to
maintain such effectiveness for a period of not less than two (2) years
from the Closing Date. The Shareholders shall not make any offers or sales
pursuant to the Registration Statement following written notice by Sterling
to the Shareholders that the Registration Statement is not current, until
such time as Sterling shall provide written notice that offers and sales
may commence. Sterling hereby agrees to bear all expenses associated with
the
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Registration Statement other than the fees and expenses of the Shareholders
(and their attorneys and accountants), and any broker-dealers, agents or
underwriters who participate in any sales of stock by such Shareholders
thereunder.
(c) Each Shareholder agrees, at his sole cost and
expense, to timely cooperate with Sterling in connection with the
preparation and filing of the Registration Statement and any disclosure
document prepared by Sterling for delivery to the Shareholders pursuant to
Rule 502 of Regulation D (the "Disclosure Statement"), and to promptly
furnish to Sterling any information concerning Singer, the Subsidiaries (as
hereinafter defined), themselves, and/or any of their respective affiliates
which counsel to the Shareholders determines to be required or otherwise
appropriate to be disclosed therein and/or Sterling determines to be
required or otherwise appropriate to be disclosed therein. The Shareholders
hereby represent, warrant and agree that no such information furnished in
writing to Sterling will contain any untrue statement of material fact or
omit to state a fact necessary to make the statements contained therein not
misleading. The Shareholders further agree that, prior to the filing of any
such Registration Statement and/or Disclosure Statement, they, together
with their counsel, will review such Registration Statement or Disclosure
Document from time to time and suggest appropriate additions, deletions or
revisions thereto to ensure that the information relating to each of them,
Singer and/or the Subsidiaries, and/or any of their respective affiliates
presented therein, remains true, accurate and complete in all material
respects as of the date of review. Sterling hereby agrees not to revise,
amend or otherwise change any such written information furnished by any
Shareholder for inclusion in such Registration Statement or Disclosure
Document in any material respect without prior consultation
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with the Shareholder furnishing the same. The Shareholders shall have no
responsibility to Sterling hereunder for (i) any written information that
is furnished by any of them pursuant to this Subsection 1.6(c) unless such
information is included in the Registration Statement or Disclosure
Document as submitted by such Shareholder(s) or as modified with the
written consent of such Shareholder(s); or (ii) any such information unless
all additions, deletions or revisions suggested by the Shareholders with
respect thereto are incorporated in the Registration Statement or
Disclosure Document, as the case may be, in their entirety. In addition,
from time to time after the filing of said Registration Statement and
Disclosure Statement, the Shareholders shall each promptly advise Sterling,
in writing, of any material changes in any such information (previously
furnished to Sterling hereunder) and/or any additional information
concerning Singer, the Subsidiaries and/or any of them, and/or any of their
respective affiliates that may be required to insure that the information
contained in such Registration Statements and/or Disclosure Statement is
true and correct in all material respects and does not omit to state a fact
necessary to make the statements contained therein not misleading.
1.8 Restrictions on Resale. Any disposition of the Shares
received by the Shareholders shall be effected in compliance with the
provisions of this Agreement, the Pledge Agreement, and all applicable
state and federal securities laws. In addition, any Shareholders who are
affiliates of Singer shall not sell, transfer, convey and/or assign any of
the Shares of Sterling received by them pursuant to this Agreement from the
Closing Date until the date when Sterling has first published the results
covering at least thirty (30) days of combined operations of Sterling and
Singer following the Closing Date. In connection with the preceding
sentence, Sterling hereby agrees to file with the SEC in a timely manner,
without extension of time, and in compliance with applicable
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law (i) its Quarterly Report on Form 10-Q for the applicable fiscal period
in which the Closing occurs; and (ii) all periodic reports until the date
of effectiveness of the Registration Statement and during the period of its
effectiveness thereafter. Subject to the foregoing limitations, the
Shareholders shall be allowed to sell their Shares as follows:
(a) Subject to the terms of the Pledge Agreement,
immediately upon the effective date of the Registration Statement, or if an
exemption from registration under the Securities Act is otherwise
available, immediately after Closing, which ever first occurs (the "First
Sale Date"), an aggregate of ninety-five thousand (95,000) Shares may be
sold, transferred, conveyed and/or assigned ("Initial Sale Shares"),
regardless of the number of additional shares registered pursuant to such
Registration Statement.
(b) During the twelve (12) month period immediately
following the Closing Date, no Shares (other than the Initial Sale Shares)
may be sold, transferred, pledged, conveyed, assigned and/or encumbered.
(c) Subject to the terms of the Pledge Agreement,
beginning on the first anniversary date of the Closing Date, up to an
aggregate of 30,000 additional Shares (the "Additional Shares") may be
sold, transferred, conveyed, pledged, assigned and/or encumbered by
the Shareholders.
(d) Subject to the terms of the Pledge Agreement,
beginning on the second anniversary date of the Closing Date, and
continuing for each successive twelve (12) month period thereafter, up to
an aggregate of to one-third (33.3%) percent of the difference between the
aggregate Shares issued by Sterling pursuant to this Agreement (as the same
may be increased
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or decreased pursuant to the terms hereof) and 125,000 Shares may be sold,
transferred, conveyed, pledged, assigned and/or encumbered by the
Shareholders
(e) The period of time between the Closing Date and the
first date that the Shareholders shall not be restricted (pursuant to the
provisions of this Section 1.8(c) from selling, transferring, conveying
and/or assigning the Shares shall be referred to herein as the "Restricted
Period". In each instance when Shares become available for release from the
restrictions of this Section 1.8, the identity of whose Shares are to be
released shall be determined by the Shareholders themselves.
(f) In the event Sterling shall undertake a registration
of its common stock (other than a registration: (i) of the shares of its
common stock underlying certain convertible debentures and/or warrants that
may be issued by Sterling; (ii) of the shares of its common stock to be
issued in repayment of a certain debt owed to B.E.C. Corporation and/or
(iii) pursuant to Form S-4 or S-8 [or Form S-3, if such registration covers
an offering of the type contemplated by Form S-8] or any successor Forms
thereto) which is declared effective by the SEC within the Restricted
Period, the restrictions on sale set forth in subsections (b) and (c)
herein shall be eliminated with respect to an aggregate of fifty (50%) of
the remaining Shares, that is exclusive of the Initial Sale Shares and the
Additional Shares. The balance of said Shares, however, shall continue to
be restricted, on a pro-rata basis, over the remaining term of the
Restricted Period.
(g) In the event any Shareholder shall actually sell any
of his or her Shares (then permitted to be sold pursuant to the terms
hereof) in the open market at a price [exclusive of fifty (50%) percent of
any and all commissions payable to broker-dealers, underwriters,
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etc.] less than the Closing Price of said Shares, Sterling shall, within
twenty (20) days after its receipt of demand therefor, pay to such
Shareholder an amount equal to the product of (i) the number of Shares
actually sold by such Shareholder, and (ii) the difference between the
Closing Price and the gross selling price [net of fifty (50%) percent of
any such commissions] of such Shares actually so sold by such Shareholder;
provided, however, that if , at any time after the expiration of thirty
(30) days following the respective dates that any of the Shares may be sold
pursuant to the provisions of Subsections 1.8(a), 1.8(c) and 1.8(d) above,
but prior to the date that any Shareholder shall actually sell any of the
Shares in the open market (as hereinabove permitted), the closing bid price
of Sterling's common stock shall be in excess of the Closing Price for five
(5) or more consecutive trading days, the obligation of Sterling (as set
forth herein) shall not apply to any such Shares that could have been sold.
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(h) On the First Sale Date, and on each date thereafter
that Shares shall be released from the restrictions set forth in this
Section 1.8, Sterling shall immediately replace the Shares with Shares
identical in form except that paragraph 2 of the restrictive legends set
forth on Exhibit "A" shall be deleted.
1.9 Funding Singer At Closing, Sterling agrees to pay or
cause to be paid (whether in the form of an intercompany loan and/or as a
capital contribution) to Singer the sum of $300,000 (the "Liability Fund"),
which proceeds shall be used by Singer to pay at Closing, within five (5)
business days after receipt of written direction and authorization from
Alan Singer given to Singer within a maximum period of one hundred fifty
(150) days following the Closing, all or a portion of those liabilities of
Singer outstanding as of the Closing Date (other than the mortgages
encumbering the Real Estate) which are set forth on Schedule 2 attached
hereto. In no event shall any part of the Liability Fund be paid to the
Shareholders or to pay any transaction expenses which would otherwise be
the responsibility of the Shareholders pursuant to this Agreement.
Notwithstanding the liabilities set forth on Schedule 2, Alan Singer shall
have the absolute right to direct Singer, from time to time during the one
hundred fifty (150) day period following the Closing, only, which of said
liabilities should have a priority in payment or have allocated to them a
greater or lesser portion of the Liability Fund.
1.10 Liability of Singer and the Subsidiaries. It is
expressly understood that nothing contained herein shall be deemed to
otherwise limit and/or absolve the Shareholders and the Spin-Off Companies
(as defined in Section 5.1) from their joint and several, unconditional and
absolute, obligation to indemnify Singer, Sterling and each
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of their respective affiliates, and hold each of them harmless from and
against, any and all liabilities, claims, demands, actions and/or causes of
action, suits, proceedings, and/or investigations (together with reasonable
attorneys' fees and disbursements), whether foreseen or unforseen, absolute
or contingent, ordinary or extraordinary, of Singer and/or the
Subsidiaries, which arose and/or accrued prior to the Closing including,
but not limited to: (i) any obligations pertaining to Singer's 401(k) plan;
(ii) employee salaries, and vacation and/or severance pay; (iii) the
litigation described in Section 3.14 of the Disclosure Schedule; and (iv)
the amount necessary to satisfy and discharge the existing mortgages
encumbering the Real Estate, including, but not limited to, prepayment
penalties and all interest accruing thereunder from and after the Closing
Date to the date of the Shareholders actual payment to Singer of the amount
necessary to satisfy and discharge the same, the terms and conditions of
said indemnification obligation being those set forth in Section 10 hereof.
Section 2. Closing.
The Closing contemplated by Section 1.1 shall be held at
the principal offices of Sterling, 1500 Hempstead Turnpike, East Meadow,
New York, on or about March 6, 1997, unless another place or time is agreed
upon in writing by the parties (the "Closing Date"). If on the Closing Date
any condition precedent to the obligations of Sterling or the Shareholders
to consummate the Exchange of Stock shall have not been satisfied, Sterling
or the Shareholders, as the case may be, shall have the right, in each of
their sole and absolute discretions, to agree, in writing, to defer
(adjourn) the Closing until such date as all conditions precedent to such
respective party's obligation to effect the Exchange of Stock have been
satisfied, subject, however, to the rights of the parties set forth in
Section 11 hereof.
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Section 3. Representations and Warranties of Singer.
Each of the Shareholders hereby represent and warrant to
Sterling that, except as set forth on the Disclosure Schedule attached
hereto as Schedule 1 and specifically identifying the relevant subsection
hereof, as of the date hereof and as of the Closing the following are and
will be
true and correct, in all material respects:
3.1 Organization, Good Standing and Qualification.
Singer, and each of its subsidiaries (all of which are described on Section
3.1 of the Disclosure Schedule (collectively, the "Subsidiaries" and,
together with Singer, the "Companies") is a corporation duly organized ,
validly existing and in good standing under the laws of the State of its
incorporation. Each of the Companies has all requisite power and authority
to carry on its business as now conducted. Each of the Companies is duly
qualified to transact business and is in good standing in each jurisdiction
in which the failure to so qualify could have a material adverse effect on
its business, properties, operations, earnings, assets, liabilities,
condition (financial or otherwise) or prospects (collectively,
"Condition").
3.2 Capitalization. The capital stock of Singer, as
authorized by its Certificate of Incorporation, a true and correct copy of
which is annexed hereto as Exhibit "B", consists of 10,000,000 shares of
common stock and 100,000 shares of preferred stock, of which only the
Transferred Stock are issued and outstanding. Except as set forth in
Section 3.2 of the Disclosure Schedule, as of the Closing, Singer will not
(i) have outstanding any capital stock or other securities
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convertible into or exchangeable for any shares of its capital stock other than
the Transferred Stock to be sold, transferred and conveyed to Sterling
hereunder, and no person will have any right to subscribe for or to purchase
(including conversion or preemptive rights), or any options for the purchase of,
or any agreements providing for the issuance (contingent or otherwise) of, any
calls, commitments or other claims of any character relating to, any capital
stock or any stock or securities convertible into or exchangeable for any
capital stock of Singer; (ii) have any capital stock, equity interests or other
securities reserved for issuance for any purpose; or (iii) be subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
options. All of the issued and outstanding shares of Singer's capital stock have
been duly and validly issued and are fully paid and nonassessable. Section 1.1
of the Disclosure Schedule sets forth a complete and correct list of the name of
each of Singer's stockholders and the number of shares of Singer's capital stock
owned by such stockholder.
3.3 Authority; Execution and Delivery; Requisite
Consents, Nonviolation.
Each of the Shareholders has, and as of the Closing will
have, and each of the Companies (including, but not limited to, the
Spin-Off Companies [as said term is hereafter defined]), as of the Closing,
will have all requisite power and authority to execute, deliver and perform
this Agreement and each other document or instrument executed by and/or to
be executed by any of them and/or by any of the Companies, in connection
herewith or pursuant hereto (this Agreement, together with all of the
foregoing documents and instruments, are sometimes collectively referred to
herein as the "Closing Documents"), and to consummate the transactions
contemplated hereby and thereby. This Agreement is, and each of the Closing
Documents will be, as of the Closing, duly executed and
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delivered by each of the Shareholders and/or each of any of the Companies
which is a party thereto, as the case may be, and the legal valid and
binding obligation of each of the Shareholders and/or each and any of the
Companies, as the case may be, enforceable against each of them in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforceability of creditors' rights in general or by general principles of
equity (the "Enforceability Exceptions"). Except as set forth in Section
3.3 of the Disclosure Schedule, the execution, delivery and performance of
this Agreement and the other Closing Documents, the consummation of the
transactions contemplated hereby and thereby (including, without
limitation, the transfer of the Transferred Stock to Sterling) will not (i)
require the consent, license, permit, waiver, approval, authorization or
other action of, by or with respect to, or registration, declaration or
filing with (collectively "Consents"), any court or governmental authority,
department, commission, board, bureau, agency or instrumentality, domestic
or foreign ("Governmental Authority") or any other individual, partnership,
corporation, unincorporated organization or association, limited liability
company, trust or other entity (collectively, a "Person") except for any
such Consents, the failure of which to obtain would not, individually, or
in the aggregate, have a material adverse effect on the Condition of the
Companies or of the ability of the Shareholders to consummate the Exchange
of Stock and the other transactions contemplated hereby; (ii) violate or
conflict with any provision of the Certificate of Incorporation and/or the
By-Law of any of the Companies as in effect immediately prior to the
execution and delivery of this Agreement; or (iii) constitute a default
(with or without notice or lapse of time or both) under, violate or
conflict with, or give rise to a right of termination, cancellation or
acceleration or to a loss of a material benefit
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under (collectively "Conflicts") any Law (as defined in Section 3.15
below), Contract (as defined in Section 3.9 below), rights relating to
Intellectual Property (as defined in Section 3.10 below), Permit (as
defined in Section 3.15 below) or Order (as defined in Section 3.14 below)
to which any of the Companies and/or the Shareholders is a party or by
which any of them, and/or their respective properties and/or assets, are
bound, except for such Conflicts which do not, individually or in the
aggregate, have a material adverse effect on the Condition of the Companies
or of the ability of the Shareholders to consummate the Exchange of Stock
and the other transactions contemplated hereby.
3.4 Subsidiaries. Section 3.4 of the Disclosure Schedule
correctly sets forth all of the Subsidiaries of Singer, the place of
incorporation of each such Subsidiary and its authorized capitalization,
its shares of capital stock outstanding, and the record and beneficial
owner of those shares. Immediately prior to the Closing, Singer will not
own or control, directly or indirectly, any other Subsidiaries and/or any
partnership interests, stock or other equity interests in any partnership,
corporation or other entity or any voting rights or right to control the
policies and direction of any partnership, corporation or other entity.
There are not outstanding (and neither Singer nor any Subsidiary has any
plan to issue, grant or enter into) any options, warrants, rights
(including conversion or preemptive rights), subscriptions or agreements
for the purchase or acquisition from or by Singer or any Subsidiary of any
shares of capital stock of any Subsidiary. There are no voting agreements,
voting trust agreements, shareholder agreements or other agreements
relating to the capital stock of any of the Subsidiaries.
3.5 Singer Financial Information.
Singer previously has provided to Sterling its
unconsolidated balance sheet as of
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March 31, 1996, and the related unconsolidated statements of operations,
stockholders' equity and cash flows for the twelve (12) months then ended,
as audited by Rafter & Associates, P.C., who issued their opinion thereon,
dated June 7, 1996 (the "Audited Financials"). Attached hereto as Schedule
3 is a true and correct copy of (i) the Audited Financials; and (ii) an
unaudited consolidated balance sheet of Singer Optical Group, Inc., Vision
Optical Co., Inc., Singer Discount Eyeglasses of Delaware, Inc., Singer
Specs, Inc. and Singer Specs Advertising as of March 31, 1996, and December
31, 1996, and the related unaudited consolidated statements of operations,
and stockholders' equity and cash flows for each of the twelve and nine
month period then ended for said consolidated group of companies (the
"Unaudited Financials" and, together with the Audited Financials, the
"Financial Statements"). The Financial Statements are complete and correct
in all material respects; are in accordance with the books of account,
ledgers and records of such companies; have been prepared in conformity
with generally accepted accounting principles applied, on a consistent
basis except as noted therein; and present fairly the consolidated
financial position, results of operations and cash flows of each such
companies as of the respective dates thereof. Except as set forth in
Section 3.5 of the Disclosure Schedule, as of the Closing, the Companies
will not have any obligation or liability, contingent or otherwise, other
than (i) current (not more than 30 days past due) liabilities, each of
which will have been incurred by each such Company in the ordinary course
of business and consistent with past practice; (ii) obligations under those
Contracts described in Section 3.9 of the Disclosure Schedule or contracts
of a type not required to be described in Section 3.9 of the Disclosure
Schedule; and (iii) the mortgage(s) encumbering the Real Estate (true and
correct copies
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of which are contained in Schedule 4 annexed hereto) which, as of the
Closing, will be current and have any approximate principal balance of
$250,000.
3.6 Certain Changes or Events.
Except as set forth in Section 3.6 of the Disclosure
Schedule, since December 31, 1996, the business of each of the Companies
has been operated only in the ordinary course, consistent with past
practice, and in addition to, and not in limitation of, the foregoing: (i)
there has been no change in the Condition of any of the Companies, except
for changes in the ordinary course of business consistent with past
practice which have not been, in the aggregate, materially adverse to any
such Company; (ii) to the best of each Shareholder's knowledge and belief,
there has been no change of Laws, no revocation or change in any Contract
or Permit or right to do business, and no other event or occurrence of any
character, whether or not insured against, which has resulted, or could
reasonably be expected to result, in a material adverse change in the
Condition of any of the Companies; (iii) Singer has not authorized or made
any distributions, or declared or paid any dividends, upon or with respect
to any of its capital stock, or other equity interests, nor has Singer
redeemed, purchased or otherwise acquired, or issued or sold, any of its
interests, nor has Singer redeemed, purchased or otherwise acquired, or
issued or sold, any of its capital stock or other equity interest; (iv)
none of the Companies has entered into any material transaction, other than
in the ordinary course of business and consistent with past practice; (v)
none of the Companies has incurred any indebtedness for borrowed money or
made any loans or advances to any Person (other than advances under the
Companies' existing lines of credit with its banks made in the ordinary
course of business the total amount of which, as of the date hereof, is set
forth on Schedule 2 annexed hereto);
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(vi) there has been no knowing waiver by any of the Companies of a valuable
right or of a material debt owed to it; (vii) none of the Companies has
failed to satisfy or discharge any Lien, except in the ordinary course of
business and which is not material to the Condition of any such Company;
(viii) there has been no material change in any compensation, arrangement
or agreement with any employee, director, stockholder or Affiliate (as
defined below) except in the ordinary course of business consistent with
past practice; and (ix) there has been no agreement or commitment by any of
the Companies to do or perform any of the acts described in this Section
3.6 except in the ordinary course of business consistent with past
practice. "Affiliate" of a specified Person shall mean a Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified.
3.7 Title to Assets. Each of the Companies has good and
marketable title to all of its assets and properties, free and clear of any
liens, pledges, security interests, or encumbrances of any kind
(collectively "Liens"), except (i) as disclosed in Section 3.7 of the
Disclosure Schedule, (ii) Liens for current taxes not yet due which have
arisen only in the ordinary course of business and consistent with past
practice, (iii) in the case of leased property, the rights of the lessors
under, and the terms and provisions of, the governing leases and any and
all Liens affecting the fee interest or other interest of such lessors in
the property covered thereby, and (iv) statutory and contractual lessor's
liens granted in the ordinary course of business(collectively "Permitted
Liens").
3.8 Leases. With respect to any assets or properties it
leases, a description of each of which is set forth on Section 3.8 of the
Disclosure Schedule, each Company holds a valid
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and subsisting leasehold interest therein, free and clear of any Liens,
except Permitted Liens and except as set forth in Section 3.8 of the
Disclosure Schedule, is in compliance, in all material respects, with the
terms of the applicable lease, and enjoys peaceful and undisturbed
possession under such lease. All of the assets and properties of each of
the Companies that are material to the conduct of its business in the
ordinary course consistent with past practice are in good operating
condition and repair, subject to ordinary wear and tear.
3.9 Contracts. Except for those (the "Scheduled
Contracts") listed in Section 3.9 of the Disclosure Schedule, none of the
Companies is a party to, nor are any of the Companies or any of their
respective assets or properties bound by, or subject to, any contracts,
agreements, notes, instruments, franchises, leases, licenses, commitments,
arrangements or understandings, written or oral (collectively, "Contracts")
of the following types:
(a) any Contracts pursuant to which any of the Companies,
or another party thereto, is obligated to pay in excess of ten thousand
dollars ($10,000.00);
(b) any Contracts pursuant to which any of the
Companies acquired the right to use any Intellectual Property or
information that is material to, or necessary in the business of, such
Company, or pursuant to which any of the Companies has granted to others
the right to use, or which otherwise related to, its Intellectual Property;
(c) any Contracts (other than advances of expenses to
employees in the ordinary course of business) involving loans, loan
agreements, debt securities, mortgages, deeds of trust, security
agreements, suretyship or guarantees;
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(d) any Contracts between any of the Companies, on the
one hand, and any of their respective officers, directors, employees or any
other Persons that beneficially own in excess of 5.0% of the outstanding
equity interest of Singer (each a "Principal Owner"), or any Affiliate or
relative, or Affiliate of a relative, of any of the foregoing, on the
other;
(e) any deferred compensation agreements, bonus, pension,
profit sharing, stock option and incentive plans or arrangements,
hospitalization, medical and insurance plans, agreements and polices,
retirement and severance plans and other employee compensation policies and
agreements affecting employees of any of the Companies;
(f) any Contracts with any labor union affecting
employees of any of the Companies;
(g) any Contracts which restrict any of the Companies
from freely engaging in business or competing anywhere;
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(h) any distributorship, customer sales or leasing
Contracts; and
(i) any Contracts which otherwise are material to the
Condition of any of the Companies.
Except as set forth in Section 3.9 of the Disclosure
Schedule, all of the Scheduled Contracts are in full force and effect and
constitute the legal, valid and binding obligations of each of the
Companies that is a party hereto, except as the enforcement thereof may be
limited by the Enforceability Exceptions; the Companies, and to the best of
each Shareholder's knowledge and belief, each other party thereto has
performed in all material respects all obligations required to be performed
by it under the Scheduled Contracts, and no material violation exists in
respect thereof on the part of any of the Companies or to the best of each
Shareholder's knowledge and belief, any other party thereto with the giving
of notice or lapse of time or both, would constitute such a material
violation; none of the Scheduled Contracts is currently being renegotiated;
and the validity, effectiveness and continuation of all Scheduled Contracts
will not be materially adversely affected by the transactions contemplated
by this Agreement.
3.10 Intellectual Property.
(a) (i) Set forth in Section 3.10(A) of the Disclosure
Schedule is a true, correct and complete list of all patents, trademarks,
service marks, trade names, brand names, computer software programs, and
registered copyrights, and any applications for any of the foregoing
(collectively, the "Intellectual Property") of any kind in which any of the
Companies has an interest or which is otherwise used in, or relates to the
business of, such Company. Section 3.10(B) of the Disclosure Schedule
contains a true, correct and complete list of all licenses or
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agreements that in any way affect the rights of the Companies to any of the
Intellectual Property or any trade secret material to the Companies (the
"Intellectual Property Licenses").
(ii) With respect to any Intellectual Property
necessary to conduct its business, except as set forth in Section 3.10(C)
of the Disclosure Schedule, each Company owns or has the right to use such
Intellectual Property in its business.
(iii) Each of the Intellectual Property Licenses is in
full force and effect and constitutes a legal, valid, binding and
enforceable obligation in accordance with its terms against each Company
which is a party thereto (and, to the best of each Shareholders knowledge
and belief, each other Person which is a party thereto), except as to the
enforcement thereof may be limited by the Enforceability Exceptions. Each
Company has performed all material obligations imposed upon it under each
of the Intellectual Property Licenses to which it is a party. None of the
Companies nor, to the best of each Shareholder's knowledge and belief, any
other party thereto, is in material default thereunder, nor, to the best of
each Shareholder's knowledge and belief, is there any event that, with
notice or lapse of time, or both, would constitute such a material default
thereunder. None of the Companies has received any notice that any other
party to any of the Intellectual Property Licenses intends to cancel,
terminate or refuse to renew the same or to exercise or decline to exercise
any option or other right thereunder. No licenses, sublicenses, covenants
or agreements have been granted or entered into by any Company in respect
of any of the Intellectual Property, except the Intellectual Property
Licenses. No director, officer, stockholder, employee or other Affiliate of
Singer owns, directly or indirectly, in whole or in part, any of the
Intellectual Property.
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(iv) The consummation of the transactions contemplated
hereby will not materially alter or impair the rights of any Company to any
of such Company's Intellectual Property, or under any of the Intellectual
Property Licenses.
(v) Except as set forth in Section 3.10(C) of the
Disclosure Schedule no claim with respect to the Intellectual Property, or
any Intellectual Property License which would adversely affect the ability
of any Company to conduct it business as presently conducted is currently
pending, or, threatened by any Person, nor does any of the Shareholders
know of any grounds for any claim against any Company.
3.11 Insurance. Each of the Companies has in full force
and effect (i) fire and casualty insurance polices, with extended coverage,
sufficient in amount (subject to reasonable deductibles) to allow it to
replace any of it properties that might be damaged or destroyed, (ii) all
workers' compensation or similar insurance required by the laws of any
jurisdiction in which the business of such Company is operated, (iii)
public liability insurance against claims for personal injury, death or
property damage suffered upon, in or about any premises occupied by such
Company or occurring as a result of the ownership, maintenance or operation
by such Company of any automobile, truck or other vehicle, (iv) products
liability insurance against claims for personal injury, death or property
damage suffered as a result of the distribution, resale or use of products
distributed, manufactured, produced or sold by such Company or services
rendered by it, providing coverage in such amounts as is customary for
companies of established reputation engaged in the same or similar business
and similarly situated, and (vii) such other insurance policies as are
sufficient
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for compliance with all requirements of Law and applicable agreements. Each
of the foregoing policies is described in Section 3.11 of the Disclosure
Schedule.
3.12 Labor Union Activities; Employee Relations. Except
as set forth in Section 3.12 of the Disclosure Schedule, no employee of any
of the Companies is represented by any labor union or covered by any
collective bargaining agreement; nor, to the best of each Shareholder's
knowledge and belief, has any labor union sought to represent any employee
of any of the Companies. There is no strike or other labor dispute
involving any of the Companies pending, or to the best of each
Shareholder's knowledge and belief, threatened. The employment of each
officer and key employee of each of the Companies is terminable at will.
3.13 ERISA. Except as set forth in Section 3.13 of the
Disclosure Schedule, neither Singer nor any of its Subsidiaries maintains
(nor has Singer or any of its Subsidiaries ever maintained) nor does any of
them have (nor has any of them ever had) any obligation under (including,
without limitation, any obligation to contribute to) an employee benefit
plan as described in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
3.14 Litigation. Except as set forth in Section 3.14 of
the Disclosure Schedule and for matters in which the amount in controversy
is less than $5000, there is no claim, demand, action, suit, proceeding,
investigation or governmental approval process (collectively "Actions")
pending or, to the best of each Shareholder's knowledge and belief,
threatened against any of the Companies, or affecting any of the properties
or assets of any of the Companies (including, without limitation any of its
Permits), nor is there any basis for any such
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Action. Except as set forth in Section 3.14 of the Disclosure Schedule, to
the best of each Shareholder's knowledge and belief after due inquiry,
there is no Action against any director, officer or employee of any of the
Companies in connection with the business of any of the Companies which, in
the event of an adverse judgment against any such Person, could have a
material adverse effect on the Condition of any of the Companies, nor is
there any basis for any such Action. The foregoing includes, without
limitation, any Action pending or, to the best of each Shareholder's
knowledge and belief, threatened (or any basis therefor known to each of
the Shareholders) involving the prior employment of any employees of any of
the Companies. Except as set forth in Section 3.14 of the Disclosure
Schedule, none of the Companies nor any of their respective assets or
properties, nor, in connection with its business, any stockholder,
director, officer or employee of any of the Companies, is subject to any
order, judgment, writ, injunction, decree, ruling or decision
(collectively, an "Order") of any Governmental Authority which is material
to the Condition of any such Company. Except as set forth in Section 3.14
of the Disclosure Schedule, there is no Action by any of the Companies
currently pending or which any of the Companies intends to initiate which
is material to the Condition of any such Company.
3.15 Compliance with Laws; Permits.
(a) Except as set forth in Section 3.15(A) of the
Disclosure Schedule, none of the Companies has violated or failed to comply
with, in any material respect, any statute, law, ordinance, rule,
regulation or policy of any Governmental Authority (collectively "Laws") to
which it or any of its properties or assets is subject. Each of the
Companies has all
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permits, licenses, orders, certificates, authorizations and approvals of
any Governmental Authority (collectively the "Permits") that are material
to the conduct of its business as presently conducted.
(b) Except as set forth in Section 3.15(B) of the
Disclosure Schedule, all such Permits are, and as of the Closing will be,
in full force and effect; no violations or notices of failure to comply
have been issued or recorded in respect of any such Permits; and none of
the Shareholders has any knowledge of any reason why such Permits may be
revoked or
suspended.
(c) Except as set forth in Section 3.15(C) of the
Disclosure Schedule, all applications, reports, notices and other documents
required to be filed by the Companies with all Governmental Authorities
have been timely filed and are complete and correct in all material
respects as filed or as amended prior to the date hereof. With respect to
any required Permits, applications for which are either pending or
contemplated to be made pursuant to the business strategy of the Companies,
none of the Companies knows of any reason why such Permits should not be
approved and granted by the appropriate Governmental Authority. None of the
Companies, nor any of their respective officers or agents, has made any
illegal or improper payments to, or provided any illegal or improper
inducement of, any governmental official or other Person in an attempt to
influence any such Person to take or to refrain from taking any action
relating to any of the Companies.
3.16 Taxes. Except as set forth in Section 3.16 of the
Disclosure Schedule:
(a) All federal, state, city, county, local and
foreign income, franchise, sales, use and value added tax returns and
reports, and all other material tax returns and
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reports required to be filed by any Company in any other jurisdiction
(collectively, "Returns") have been timely filed.
(b) To the best of each Shareholder's knowledge and
belief, all such Returns are true, correct and complete in all material
respects.
(c) All taxes, assessments, fees, interest, penalties and
other charges with respect thereto (collectively, "Taxes") due or claimed
to be due from any of the Companies have been paid except to the extent
reserved against on the Financial Statements.
(d) No income tax return of any of the Companies has been
audited by the applicable Governmental Authority, and there are in effect
no waivers of the applicable statute of limitations for Taxes in any
jurisdiction for any of the Companies for any period.
3.17 Books and Records. The books of account, ledgers and
records of each of the Companies accurately and completely reflect, in all
material respects, all information relating to its business, the nature,
acquisition, maintenance, location and collection of its assets, and the
nature of all transactions giving rise to its obligations or accounts
receivable. The minute book of each Company fully sets forth all actions
(to be taken by each such Company's Board of Directors and stockholders)
which required Board of Directors and/or stockholder approval.
3.18 Environmental Matters. Except as set forth in
Section 3.18 of the Disclosure Schedule, to the knowledge of the
Shareholders, the business assets and properties of each of the Companies
are and have been operated and maintained in substantial compliance with
all applicable federal, state, city and county and local environmental
protection laws and regulations (collectively, the "Environmental Laws").
No event has occurred which, with or without the passage
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of time or the giving of notice, or both, would constitute a material
non-compliance by any of the Companies with, or a material violation by any
of the Companies of, the Environmental Laws. None of the Companies nor, to
the knowledge of each Shareholder, any of their predecessors, has caused or
permitted to exist, as a result of an intentional or unintentional act or
omission by any such Company, or, to the knowledge of each of the
Shareholders, without any inquiry, by any contractor or supplier , a
disposal, discharge or release of solid wastes, pollutants or hazardous
substances, on or from any site which currently is, or, was previously
owned, leased, occupied or used by any of the Companies, or, to the
knowledge of each of the Shareholders without any inquiry, any contractor
or supplier of any of their raw materials, except where such disposal,
discharge or release was in compliance with the Environmental Laws. Section
3.18 of the Disclosure Schedule contains a complete and correct list of the
name and location of each site with respect to which any of the Companies
has received notice that such Company is considered to be a potentially
responsible person for cleanup or other liability in respect of
Environmental Laws.
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3.19 Transactions with Affiliates.
Except as set forth in Section 3.19 of the Disclosure
Schedule, and except as provided in the footnotes to the Financial
Statements:
(a) None of the Companies has had any direct or indirect
dealings with any past or present Principal Owner of Singer or with any of
his or its Affiliates, associates or relatives;
(b) Except for employment arrangements with its
employees, none of the Companies has any obligation to or claim against any
past or present Principal Owner of Singer, or any of his or its Affiliates,
associates or relatives, and no such Person has any obligations to or claim
against any of the Companies;
(c) All products, services or benefits provided to any
Company by any such Person, or provided by any Company to any such Person
are provided at a charge equal to the fair market value of such products,
services or benefits; and
(d) No past or present Principal Owner of any of the
Companies, nor any of his or its Affiliates, associates or relatives, has
any direct or indirect interest of any kind in any business or entity which
is competitive with the Companies.
3.20 No Brokers or Finders. None of the Companies nor any
of their respective Affiliates has entered or will enter into any agreement
pursuant to which any of the Companies and/or Sterling will be liable, as a
result of the transactions contemplated by this Agreement or any of the
Closing Documents, for any claim of any person for any commission, fee
or other compensation as finder or broker.
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3.21 Investment Company Act.
To the best of each Shareholder's knowledge and belief,
neither Singer nor any of its Subsidiaries is an "investment company", nor
is Singer or any of its Subsidiaries directly or indirectly controlled by
or acting on behalf of any Person which is an "Investment Company" within
the meaning of the Investment Company Act of 1940, as amended.
3.22 Real Property Holding Corporation.
To the best of each Shareholder's knowledge and belief,
none of the Companies is, and none of the Companies have been, a United
States real property holding corporation (as defined in Section 897(c)(2)
of the Internal Revenue Code of 1986, as amended (the "Code") during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
3.23 Ownership of Singer Shares.
Each of the Shareholders owns his respective shares of
Transferred Stock set forth opposite such Shareholder's name in Section 1.1
of the Disclosure Schedule free and clear of all any and all claims, liens
and/or encumbrances (other than encumbrances created by this Agreement or
solely by or in favor of Sterling).
3.24 Disclosure. In connection with Sterling's
acquisition of the Transferred Stock as contemplated hereby, each of the
Shareholders has disclosed to Sterling all material facts and information
concerning the Companies and their Condition and has not made any untrue
statement of a material fact or omitted to state any material fact
necessary in order to make the statements contained herein or in any other
Closing Document not misleading.
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3.25 Real Estate. Attached hereto as Schedule 5 is a true
and correct copy of a current title report on the Real Estate.
3.26 Shareholders. Each of the Shareholders is acquiring
the Shares for investment purposes only and not with any present intention
of distributing or selling the Shares except from and after the date the
same are registered under the Securities Act, as contemplated hereby. The
Shareholders have conducted an independent investigation of Sterling and
each hereby acknowledges that their acquisition of the Shares involves
business risks which make the future success of Sterling and Singer largely
dependent upon the business ability of Sterling. Except as otherwise set
forth herein, and in the Public Documents (as defined in Section 4.6) the
Shareholders have not received or relied upon any warranty or guaranty,
express or implied, as to the potential revenues, profits or success of
Sterling.
3.27 Retail Locations. Section 3.27 of the Disclosure
Schedule sets forth the locations of each retail optical store operated
and/or franchised by the Companies, together with the identity of each
Existing Franchisee of each franchised location.
3.28 Singer Assets at Closing. As of the Closing Date,
the only assets which will be owned by Singer and/or the three (3)
subsidiary corporations to be owned by Singer following the Closing shall
be: (i) the POS system being used by Singer in connection with its
franchised business; (ii) the Intellectual Properties set forth in Section
3.10(A) of the Disclosure Schedule; (iii) franchise agreements and related
documents for Singer's Existing Franchisees; (iv) real estate leases for
all locations for each of its Existing Franchisees and Company Stores (as
defined in Section 5.1); (v) the Real Estate; (vi) accounts receivable and
notes receivable from Existing Franchisees, other
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than those generated from the sale of assets to franchisees at Johnstown,
Pennsylvania; New Britain, Pennsylvania; the Virgin Islands; and any other
Company Store prior to Closing (such notes receivable being listed on
Section 3.28 of the Disclosure Schedule); (vii) all corporate books and
records including, but not limited to, books and financial records; and
(viii) all of the issued and outstanding stock of Singer Specs Associates,
Inc., Singer Specs Enterprises, Inc., and Specs, Ltd (collectively, the
"Remaining Assets").
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Section 4. Representations, Warranties, and Covenants of Sterling.
Sterling represents and warrants to, and covenants with,
the Shareholders as follows:
4.1 Organization; Authorization.
(a) Sterling is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York.
Sterling is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties owned or leased by it makes such qualification or licensing
necessary, except for those jurisdictions where the failure to be so
qualified, licensed or in good standing is not reasonably anticipated,
individually or in the aggregate, to have a material adverse effect on the
business of Sterling and its subsidiaries, taken as a whole, or the ability
of Sterling to consummate the Exchange of Stock or any of the other
transactions contemplated hereby (a "MAC Effect"). Sterling has all
requisite corporate power and authority to own or lease and operate its
properties and assets and to carry on its business as now conducted, except
where the failure to do so is not reasonably anticipated to result in a MAC
Effect.
(b) Sterling has the necessary corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the Exchange of Stock, and the other
transactions contemplated hereby. The execution, delivery and performance
of this Agreement and the consummation of the Exchange of Stock and the
other transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Sterling. This Agreement has been
duly executed and delivered by Sterling, constitutes the
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valid and binding agreement of Sterling and, except as the enforceability
thereof may be limited by the Enforceability Exceptions, is enforceable against
Sterling in accordance with its terms.
4.2 Conflicting Instruments; Consents.
(a) The execution and delivery by Sterling of this
Agreement do not, and the performance by Sterling of its obligations
hereunder and the consummation of the Exchange of Stock and the other
transactions contemplated hereby will not, (i) violate any provision of the
certificate of incorporation or the by-laws of Sterling, or (ii) except as
set forth in Schedule 6 attached hereto, result in the creation of any
lien, security interest, charge, claim or encumbrance upon any of the
properties or assets of Sterling or any of its subsidiaries under, conflict
with or result in a breach of, create an event of default (or event that,
with the giving of notice or lapse of time or both, would constitute an
event of default) or otherwise require a consent under, or give any third
party the right to terminate, cancel or accelerate any obligation under,
any contract, agreement, note, bond, guarantee, deed or trust, loan
agreement, mortgage, license, lease, indenture, instrument, order,
arbitration award, judgment or decree to which Sterling or any subsidiary
thereof is a party or by which Sterling or any subsidiary thereof, or any
assets or properties of Sterling or any subsidiary thereof, are bound or
affected, except for any such conflicts which individually or in the
aggregate is not reasonably anticipated to result in a MAC Effect.
(b) To the best of Sterling's knowledge, except for
applicable requirements of the Securities Act, the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder, and
applicable state securities and franchise laws, the execution and delivery
by Sterling of this Agreement do not, and the consummation of the
transactions
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contemplated hereby will not, result in a violation of, or require any
authorization, approval, consent or other action by, or registration,
declaration or filing with or notice to, any court or administrative or
other governmental body pursuant to, any statute, law, rule, regulation or
ordinance applicable to Sterling, except for any such Governmental
Consents, the failure of which to obtain is not reasonably anticipated to
result in a MAC Effect.
4.3 Litigation. There is no pending or, to the best
knowledge of Sterling, threatened action, suit, claim, proceeding, inquiry
or investigation before or by any arbitrator, court, governmental
department, commission, board, bureau, instrumentality, body or agency,
domestic or foreign, involving or attempting to restrain or prevent the
consummation of the Exchange of Stock and the other transactions
contemplated by this Agreement or that might reasonably be expected to
affect the right of the Shareholders to own the Shares of Sterling to be
received by them in the Exchange of Stock.
4.4 Finders or Brokers. Sterling has employed no broker,
finder, consultant or intermediary in connection with the Exchange of Stock
and the other transactions contemplated by this Agreement that would be
entitled to a broker's, finder's or similar fee or commission in connection
therewith or upon consummation of such transactions.
4.5 Sterling Common; Cash Payments.
The Shares of Sterling to be received by the Shareholders
in the Exchange of Stock have been duly authorized, will be validly issued,
fully paid and nonassessable and will not be issued in violation of any
preemptive rights or any applicable law; provided, however, that Sterling
makes no representations as to the availability, on the Closing Date, of
the exemption from registration
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pursuant to which the Shares will be issued (although an exemption from
registration shall nonetheless be a condition precedent to the
Shareholders' obligation to consummate the transactions set forth herein).
Such Shares will, upon delivery thereof, be free and clear of all liens,
charges, pledges, encumbrances, equities and claims whatsoever (other than
encumbrances created by this Agreement). To the best of Sterling's
knowledge and belief, as of the Closing, Sterling will have sufficient
resources available to it to enable it to make the payments required by
Section 1.8 hereof.
4.6 Securities Filings and Disclosure Document. Sterling
has furnished the Shareholders with copies of its most recent Annual eport
on Form 10-K, as filed with the SEC, all Forms 10-Q and 8-K filed
thereafter and all other filings made with the SEC after the filing of the
most recent Form 10-K (collectively, the "Public Documents"). The Public
Documents, at the time of their filing, did not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. Subject to the
provision of Section 1.7(c) hereof, the Registration Statement and
Disclosure Document, as it pertains to Sterling prior to giving effect to
the Exchange of Stock, when delivered to the Shareholders will not contain
an untrue statement of a material fact and will not omit to state a fact
necessary to make the statements contained therein not misleading.
4.7 Investment Intent. Sterling has no plan or intention
to liquidate Singer; to merge into another corporation; to cause Singer to
sell or otherwise dispose of any of its assets, except as contemplated
hereby and except for dispositions made in the ordinary course of business
and the possible sale of the Real Estate; or to sell or otherwise dispose
of any of the
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Transferred Stock acquired in the transaction, except for transfers
described in ss. 368(a)(2)(C) of the Code. Sterling is acquiring the
Transferred Stock for investment and not with a view toward, or for sale in
connection with, any distribution thereof, nor with any present intention
of distributing or selling the Transferred Stock. Sterling will not sell,
offer to sell or solicit offers to buy any of the shares of Transferred
Stock in violation of the Securities Act or the securities law of any
state. Sterling understands that the shares of Transferred Stock have not
been registered under federal or any state's securities laws.
4.8 Repurchase of Shares. Except as otherwise
contemplated by Section 1.5(b) of this Agreement and the Pledge Agreement,
Sterling has no plan or intention to reacquire any of its Shares issued in the
Exchange of Stock.
4.9 Voting Stock. Sterling will acquire the Transferred
Stock solely in exchange for the Shares. For purposes of this representation,
Transferred Stock redeemed for cash or other property furnished by Sterling will
be considered as acquired by Sterling. Further, no liabilities of the
Shareholders will be assumed by Sterling except if and to the extent the
repayment of any liability of any of the Companies and/or the performance of any
obligation of any of the Companies is personally guaranteed by any such
Shareholder and/or any such Shareholder could be held responsible or liable
therefor, nor will any of the Transferred Stock be subject to any liabilities.
4.10 Prior Ownership. Sterling does not own, directly or
indirectly, nor has it owned during the past five years, directly or indirectly,
any stock of Singer.
4.11 Investment Companies. To the best knowledge of
Sterling, Sterling is not an investment company as defined in ss.
ss.368(a)(2)(F)(iii) and 368(a)(2)(F)(iv) of the Code.
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4.12 Business Risk. Sterling has conducted an independent
investigation of Singer and hereby acknowledges that its acquisition of the
Transferred Stock involves business risks which make the future success of the
Companies largely dependent upon the business abilities of Sterling. Except as
otherwise set forth herein, Sterling has not received or relied upon any
warranty or guarantee, express or implied, as to the potential revenues, profits
or success of the Companies being acquired pursuant to this Agreement.
4.13 Registration of Shares. Sterling has no knowledge of
any facts or circumstances which it can reasonably anticipate will result in any
impediment to the registration of the Shares pursuant to the provisions of this
Agreement.
Section 5. Conduct of Singer Pending the Closing.
The Shareholders represent and warrant that they have the
authority and power to, and agree that they shall cause Singer to conduct itself
in the following manner pending the Closing:
5.1 Spin-Off Transaction. Singer shall, prior to the
Closing, (i) transfer, convey, and assign to one or more of its Subsidiaries
(the "Spin-Off Companies")all of the assets of the Companies other than the
Remaining Assets, including but not limited to all of the fixed assets and
inventory located in Singer's four (4) existing retail stores formerly owned by
Vision Optical Co., Inc. (if not otherwise converted to Franchises prior to
Closing) (collectively, the "Company Stores") and all of the intercompany and
shareholder receivables (but not accounts receivable or any notes receivable due
from Existing Franchisees (all of which are set forth in Section 3.28 of the
Disclosure Schedule); (ii) cause the Spin-Off Companies to assume all
liabilities and obligations, under all of the Contracts and leases, other than
those included in the Remaining Assets; (iii) cause the Spin-Off
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Companies to assume one or more of each and every one all of the obligations
and/or liabilities of the Companies arising and/or accruing at any time prior to
the Closing and all obligations and/or liabilities of each of the Companies,
except those obligations and liabilities arising and/or accruing from and after
the Closing pursuant to those Contracts to be included as part of the Remaining
Assets which are the only liabilities intended to remain with Singer after the
Exchange of Stock; and (iv) distribute the stock of the Spin-Off Companies to
the Shareholders in a transaction intended to qualify under Sections
368(a)(1)(D) and 355 of the Code as a tax-free "Spin-Off" (the "Spin-Off
Transaction"). The Spin-Off Transaction shall include agreements, each to be in
form and substance acceptable to counsel to the parties hereto, which provides
inter alia, (i) for the assumption, by the Spin-Off Companies, on a joint and
several basis, of all liabilities and obligations of the Companies which arose
and/or accrued at any time prior to the Closing; (ii) for the assumption, by the
Spin-Off Companies, of all leases, contracts and/or other agreements to which
any of the Companies is a party, other than the Franchise Agreements and related
documents with Existing Franchisees and the leases for all of the Companies'
real estate other than its corporate offices and other than the leases for the
two (2) Company Stores described in Subsection 5.2(f) hereof, each of which
leases shall be assigned to and assumed by the Spin-Off Company which is the
franchisee of each such location); (iii) for the indemnification of Sterling and
Singer, on a joint and several basis, of all of the obligations and liabilities
of the Shareholders hereunder and under each of the Closing Documents, as well
as all liabilities, claims, demand, actions causes of action, suits, proceedings
and/or investigations (together with reasonable attorneys' fees and
disbursements) which arose and/or accrued prior to the Closing; all as
contemplated by Section 1.10 and Section 10 hereof; and (iv) the obligation of
the
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Shareholders, upon receipt of the proceeds of sale from the Initial Sale Shares,
to cause one or more of the Spin-Off Companies to pay off the principal balance,
as of the Closing Date, of all mortgages on the Real Estate, together with
accrued and unpaid interest thereon (to the date of Closing) and all interest
accruing thereon from and after the Closing Date (to the date of such payment by
the Shareholders) and any prepayment penalties required to be paid by the
mortgagor upon the prepayment of said mortgages.
5.2 Conversion of Company Stores.
Simultaneously with the Closing, the Shareholders shall
cause each Spin-Off Company which owns a former Company Store to execute and
deliver to Sterling a Sterling Optical Center Franchise Agreement (for converted
stores) for each said Company Store, together with such ancillary documents as
are then customarily used by Sterling to grant franchises for Sterling Optical
Centers in the states in which each of the Company Stores is located (each of
which is described and contained in the UFOC) including, but not limited to, a
collateral assignment of each Company Store lease and the personal guaranties of
each of the Shareholders owning the stock of the Spin-Off Company in question,
subject, nevertheless, to the following modifications:
(a) The Initial Franchisee Fee shall be waived;
(b) The payment of any transfer fee (with respect to the
first transfer, only) shall be waived;
(c) The Spin Off Company, as Franchisee, shall have up to
ninety (90) days from the Closing Date to change the tradename and signage
at its Company Store(s) to "Sterling Optical";
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(d) In the event of a transfer of any such Franchise
Agreement to a new person, firm or entity, the transferee shall not obtain the
benefit of any "Base Sales" exclusion (as described in the Sterling Optical
Center Franchise Agreement);
(e) Subject to the provisions of Subsection 5.2(d), the
Sterling Optical Center Franchise Agreement for the Company Stores currently
located in Exton, Pennsylvania and Beaver Valley Mall, Pennsylvania shall
provide for a Base Sales exclusion in accordance with the provisions of
Sterling's "standard form" of Franchise Agreement (and without modification
thereto); and
(f) Subject to the provisions of Subsection 5.2(d), the
Sterling Optical Center Franchise Agreements for the Company Stores in each of
the two (2) locations other than Exton, Pennsylvania, and Beaver Valley Mall,
Pennsylvania (if not otherwise converted to Franchises prior to Closing) shall
provide for a Base Sales exclusion during the initial twelve (12) months of the
term thereof, only, and subject to such Spin-Off Company then being in
compliance in all material respects with all of its obligations under this
Agreement, the Closing Documents and the franchise agreement(s) and ancillary
documents pertaining thereto, offer the Franchisee a one time opportunity, to be
exercised by written notice given to Sterling within the thirty (30) day period
immediately following the second anniversary of the term thereof , to cancel its
Sterling Optical Center Franchise Agreements without any further liability or
obligation to Singer and/or Sterling whatsoever, except if and to the extent
Singer may be liable under the lease for the locations in question.
5.3 Access to Properties and Records; Confidentiality. Upon
reasonable notice, each of the Companies will afford to the officers and other
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authorized representatives of Sterling full access to the property, books, and
records of each of the Companies, within and without the regular operating hours
of each of the Companies, in order that Sterling may have full opportunity to
make such investigation as it shall desire to make of the affairs of each of the
Companies, and the officers and other authorized representatives of each of the
Companies shall furnish Sterling with such financial and operating data and
other information as to the business and properties of each of the Companies as
Sterling shall from time to time reasonably request. Sterling will not use any
information obtained pursuant to this Section 5.3 for any purpose unrelated to
the consummation of the transactions contemplated by this Agreement and, if the
Closing does not take place, will hold all non-public information and documents
obtained pursuant to this Section 5.3 in confidence. If this Agreement is
terminated, Sterling will deliver to Singer all non-public documents and
summaries thereof, so obtained or prepared by it.
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5.4 [Intentionally Omitted].
5.5 Affiliates. Each of the Shareholders will provide
Sterling with such information as may reasonably be requested by Sterling to
determine the identity of those persons who may be deemed to be affiliates of
Singer under Rule 145 promulgated by the SEC under the Securities Act, and a
list of those persons whom Sterling believes may be deemed to be affiliates
thereunder.
5.6 Meeting of Shareholders.
The Shareholders will cause Singer to call a meeting of its
shareholders (the "Singer Shareholders' Meeting") to be held at such time as the
Shareholders and Sterling shall agree upon, for the purpose of voting upon the
Plan of Reorganization and the transactions contemplated by this Agreement.
5.7 Business in Ordinary Course.
The Shareholders will cause Singer to conduct its business
in the ordinary course and will: (1) use their, and will cause Singer to use its
best efforts to preserve its business organization intact, to keep available to
Sterling the services of its present officers and employees, and to preserve the
goodwill of suppliers, customers, and others having business relations with it;
(2) maintain its properties in proper repair, working order, and condition,
reasonable wear and tear and damage by casualty excepted; (3) keep in force at
no less than their present limit all policies of insurance listed in Section
3.11 of the Disclosure Schedule; (4) promptly comply with the requirements of
all governmental authorities (including, but not limited to, those pertaining
the offer and sale of franchises); (5) make no material change in the customary
terms and conditions on which it extends
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credit to customers; and (6) enter into no sale, lease, contract, commitment,
or other transaction of the type described in Section 3.9 of the Disclosure
Schedule; provided, however, that nothing contained in this Section 5.7 shall
prohibit compliance by Singer with, or Singer's borrowing or repayment of funds
pursuant to, any agreements or other commitments disclosed by Singer to Sterling
in Sections 3.9 of the Disclosure Schedule.
5.8 Employee Compensation.
Singer will not institute, agree to, or amend any employment
contract in excess of $15,000 per year, or any bonus, stock-option,
profit-sharing, pension, retirement, incentive, or similar arrangement, except
to grant normal individual increases in compensation in accordance with
established agreements or procedures.
5.9 Accounting Practices. Except as required by generally
accepted accounting principles, Singer will not make any changes in its
accounting methods or practices.
5.10 Landlord Consents. Prior to, and as a condition to, the
Closing, the Shareholders shall cause Singer and its Subsidiaries to obtain any
consents required to be given by any of the landlords under the leases for each
location at which the Existing Franchisees or Company Stores conduct their
business as a result of the Exchange of Stock or the Spin-Off Transaction and
shall use their reasonable good faith efforts to obtain the agreement of each
such landlord to permit the change of the trade name of each such location to
"Sterling Optical".
5.11 Negative Covenants. The Shareholders hereby covenant
and agree that, during the period commencing on the date hereof and continuing
until the Closing, they shall
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not permit or cause Singer to do any of the following without the prior
written consent of Sterling, which consent shall not be unreasonably withheld:
(a) Singer will not declare any dividends on or make
other distributions in respect of its (or any of the Subsidiaries) capital
stock other than the Spin-Off Transaction described in Section 5.1. Without
the prior written consent of Sterling, Singer and the Singer Subsidiaries
will not amend their respective Articles of Incorporation or Bylaws;
(b) Singer will not, and will cause the Singer
Subsidiaries not to, issue, authorize, or propose the issuance of, or
purchase or redeem, or propose the purchase or redemption of, any shares of
its capital stock or any class of securities convertible into, or rights,
warrants, or options to acquire, any such shares or other convertible
securities;
(c) Singer will not change the outstanding shares of
Singer common stock or preferred stock into any different class by reason
of any reclassification, recapitalization, split, combination, exchange of
shares, or readjustment, or declare a stock dividend thereon;
(d) Singer will not, and will not authorize or permit any
officer, director, employee, investment banker, attorney, accountant, or
other representative, directly or indirectly to: (i) initiate contact with
any person or entity in an effort to solicit, or in any manner reasonably
likely to result in, any "Takeover Proposal" (as such term is defined
below); (ii) except to the extent required by applicable law, furnish or
cause to be furnished any non-public information concerning its business,
properties, or assets to any person or entity in connection with any
Takeover Proposal; or (iii) except to the extent required by applicable
law, negotiate with any person or entity
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with respect to any Takeover Proposal. As used in this Section 5.12(d),
"Takeover Proposal" shall mean any proposal, other than as contemplated by this
Agreement, for a merger or other business combination involving Singer and a
third party, or for the acquisition of a substantial equity interest in Singer
by, or the sale of substantially all of the assets of Singer to, a third party.
(e) Singer will not acquire or agree to acquire by
merging with, consolidating with, purchasing all or substantially all of
the assets of, or otherwise, any corporation, partnership, association, or
other business organization or division thereof, except in the routine and
ordinary course of business, and as a preliminary step to the Spin-Off
Transaction.
(f) Singer will not refinance any debt secured by the
Real Estate, nor sell, lease, pledge, encumber, or otherwise dispose of
any of its (or any of its Subsidiaries) assets that are material,
individually or in the aggregate, to the Condition of Singer (and/or such
Subsidiary), other than (i) those described in the Spin-Off Transaction, or
(ii) the sale of Company Stores to franchisees.
(g) Singer will not incur any indebtedness for money
borrowed or issue or sell any debt securities, other than borrowings in the
ordinary course of business.
(h) Singer will not modify or amend any Franchise
Agreement (and/or any documents executed in connection therewith) or waive
any of its rights thereunder, except that Singer may offer any incentives
and pursue any course of conduct, including compromising any amount due in
order to collect the receivables of its Existing Franchisees.
(i) Singer will not release any party from any guaranty
in favor of Singer.
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(j) Singer will not make any change in its banking and
safe-deposit arrangements and will not grant any powers of attorney.
5.12 Liens. The Shareholders shall use their best efforts
to cause all Remaining Assets except the Real Estate, to be free of all
Liens, including those Permitted Liens disclosed in Section 3.7 of the
Disclosure Schedule, as of the Closing Date. Sterling recognizes, however,
that some of the Remaining Assets may be subject to one or more of the
Permitted Liens, including those, if any, on Section 3.7 of the Disclosure
Schedule, at Closing, but which are intended to be discharged at the same
time the mortgages encumbering the Real Estate are to be discharged.
5.13 Best Efforts. The Shareholders will use their best good
faith and diligent efforts to bring about the transactions contemplated by this
Agreement as soon as practical, unless this Agreement is terminated as provided
herein.
5.14 Disclosure Schedule; Supplemental Disclosure.
(a) Each of the parties hereto acknowledges and agrees
that notwithstanding references contained throughout this Agreement to the
contrary, certain sections of the Disclosure Schedule or Exhibits or Schedules
have not been attached hereto as of the date hereof. Singer and the Shareholders
hereby agree to deliver the remainder of the sections of the Disclosure Schedule
or Exhibits or Schedules to Sterling as soon as practicable, but in no event
later than February 28, 1997. The representations and warranties corresponding
to such remaining sections of the Disclosure Schedule shall not be deemed to be
effective until such sections are delivered pursuant to this Section 5.14(a). In
the event, Sterling shall determine, in its reasonable discretion, that any
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section of the Disclosure Schedule or any Exhibit or Schedule furnished pursuant
to this Section 5.14(a) is unacceptable, Sterling may, at its option, within
five (5) business days of receipt of such remaining sections, terminate this
Agreement by giving written notice thereof to the Shareholders.
(b) After it is delivered to Sterling, Singer and the
Shareholders shall have the continuing obligation to promptly supplement or
amend the Disclosure Schedule with respect to any matter thereafter arising
or discovered which, if existing or known at the date of this Agreement,
would have been required to be set forth or described in the Disclosure
Schedule; provided, however, that for the purpose of the rights and
obligations of the parties hereunder, any such supplemental or amended
disclosure shall not be deemed to have been disclosed as of the date of
this Agreement unless so agreed to in writing by Sterling; and provided,
further that Sterling shall be deemed to have waived any breach created by
any such supplement or amendment in the event Sterling elects to consummate
the Exchange of Stock notwithstanding such breach.
Section 6. Post-Closing Obligations.
6.1 Relocation of Philadelphia Franchisee.
The Shareholders shall, at their sole cost and expense, as
soon as reasonably possible, but in no event later than five (5) months after
the Closing, cause the Singer Franchisee currently occupying a portion of the
Real Estate to relocate the assets of its existing store (and the transfer of
the franchise therefor) to another location reasonably acceptable to Sterling
and said Franchisee. Until such time as this Singer Franchisee is relocated to
another location, or the Real Estate is sold, whichever first occurs, the
Franchisee shall have the right to continue to occupy the Real Estate
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pursuant to the Lease Agreement and related documents currently in effect,
copies of which are attached hereto as Schedule 7.
6.2 Relocation of Westmoreland Franchisee.
On or before ninety (90) days after the Closing Date, the
Shareholders shall procure from its Franchisee located in the Westmoreland Mall
(as a result of a conflict with one of Sterling's existing franchised stores)
its written commitment to either: (i) relocate its assets to another location
reasonably acceptable to Sterling and said Franchisee; or (ii) its intention to
remain a Singer/Specs store in the Westmoreland Mall. In the event the
Franchisee elects to relocate and convert to a Sterling Optical Center [as
described in Section 1.6(b)], the Shareholders shall accomplish the relocation
within nine (9) months after the date of the Franchisee's written commitment,
and within five (5) days after its receipt of demand therefor, Sterling shall
reimburse the Shareholders for one-half (1/2) of the out-of-pocket fees, costs,
and expenses actually and reasonably incurred in connection with said
relocation, but in no event shall Sterling's one-half share exceed $50,000.00.
In the event this Franchisee and Sterling cannot agree on a new location within
said nine (9) month period of time, the Shareholders shall have no obligation to
relocate the Franchisee. In the event this Franchisee elects to remain a
Singer/Specs store in the Westmoreland Mall, the Shareholders shall obtain a
written waiver from said Franchisee of any rights it may have (under its
existing franchise agreement) as a result of the operation of a Sterling Optical
Center in Westmoreland Mall. For purposes of this Section 6.2, the only
relocation costs for which the Shareholders shall be liable (and Sterling liable
for reimbursement for one-half) shall be the cost to remove the fixtures and
equipment from the Westmoreland Mall store and transport the same to the new
location (to the extent permitted by the
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new lease for such new location and, if not so permissible, to install new
fixtures and equipment), the build out or remodeling of the new location so as
to ready the same for such franchisee's use and occupancy, and commissions to a
leasing broker.
6.3 Franchise Conversions. With respect to those of Singer's
Existing Franchisees which elect to enter into a new Sterling Optical Center
Franchise Agreement (as described in Section 1.6(b) hereof), as well as those
Spin-Off Companies as the Franchisee of the Company Stores (as described in
Section 5.2 hereof), Sterling agrees to use reasonable good faith efforts to
assist said Franchisees in obtaining third party financing for the expansion of
their respective existing operations, the renovation of their franchised
locations and/or for general corporate purposes; provided, however, that the
foregoing covenant shall not require Sterling and/or Singer: (i) to guaranty any
obligations of any such Franchisee; and/or (ii) to subordinate any of its or
their liens upon, or security interests in the assets of any such Franchisee;
and/or (iii) to otherwise waive and/or modify it rights under (or increase its
obligations under its Franchise Agreement (and ancillary documents) with any
such Franchisee; and/or (iv) to incur any out-of-pocket expense in connection
therewith.
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Section 7. Conduct of Sterling Pending the Closing.
Sterling agrees that between the date hereof and the Closing:
7.1 Recapitalization and Dividends. With respect to the
shares of Sterling common stock outstanding on the date hereof, Sterling will
not combine such shares into a smaller number of shares, divide such shares into
a larger number of shares, otherwise reclassify such shares, or effect any other
recapitalization with respect thereto or declare any stock or other dividend;
provided, however, that the foregoing shall not prohibit and/or restrict
Sterling from issuing (or reserving for issuance) any additional shares of its
capital stock and/or from granting options or warrants with respect to its
capital stock.
7.2 Issue of Sterling Common Stock.
Sterling will provide for the issuance or transfer as of the
Closing Date of all of the Shares into which the Transferred Stock are to be
exchanged and converted upon the Closing Date.
7.3 Employment Agreement. Sterling and Alan Singer shall
attempt to negotiate and enter into a Consulting Agreement pursuant to which
Alan Singer will be retained by Sterling for a term of not less than one (1)
year; provided, however, that the inability of such parties to enter into such
Consulting Agreement shall not relieve any party hereto from complying with
its/his obligations under this Agreement and/or otherwise modify or amend any of
the provisions hereof and/or cause an adjustment in the number of Shares to be
transferred to the Shareholders.
7.4 Communication With Landlords.
Sterling, without the prior approval of Alan Singer, which
approval shall not be
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unreasonably withheld and/or delayed, shall not initiate any discussions and/or
negotiations with any Landlord (of any location of a Singer Franchisee or
Company Store)concerning a modification or amendment of its lease; provided,
however, that the foregoing shall not prohibit Sterling from communicating with
any such landlord in connection with its due diligence activities concerning
Singer and/or in connection with obtaining any consents required of such
landlord in connection with the consummation of the transactions as set forth
herein.
Section 8. Conditions Precedent--Sterling.
All obligations of Sterling under this Agreement are
subject, at Sterling's option, to the fulfillment, before or at the Closing, of
each of the following conditions, each of which may be waived by Sterling, in
its sole and absolute discretion:
8.1 Representations and Warranties True at Closing. The
Shareholders shall have executed and delivered to Sterling a certificate, dated
as of the Closing, certifying that: (i) the Shareholders' representations and
warranties contained in this Agreement shall be deemed to have been made again
at and as of the Closing and shall then be true and correct in all material
respects and shall not omit to state any fact necessary to make any such
representation and/or warranty not misleading; and (ii) all information
contained in any Exhibit or Schedule annexed hereto and/or contained in any
document and/or instrument furnished and/or delivered to Sterling pursuant to
this Plan of Reorganization and/or in connection with the consummation of the
transactions set forth herein (in each case whether prior to or after the date
hereof) shall be true and correct in all material respects and shall not omit
to state a fact necessary to make any such information not misleading.
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8.2 Due Performance. The Shareholders shall have performed
and complied with, and shall have caused Singer and each of its Subsidiaries,
together with the Spin-Off Companies, to have performed and complied with, all
of their respective responsibilities, obligations, agreements and/or covenants
under, and of all the terms and conditions required by, this Agreement to be
performed and/or complied with by each of them before (and/or simultaneously
with) the Closing.
8.3 Opinion of Counsel. The Shareholders shall have
delivered to Sterling an opinion of Singer's, the Shareholders' and the Spin-Off
Companies' counsel, Caplan & Luber, LLP. dated as of the Closing, to the effect
that (1) the representations in Sections 3.1 , 3.2, 3.3 (first two-sentences)
and 3.4 are correct; (2) except as specified in the opinion, counsel has no
reason to believe without further inquiry of any inaccuracy in the other
representations contained herein; and (3) the stock certificates, stock powers,
and other instruments to be delivered to Sterling at the Closing will be in
proper in form and substance and will vest in Sterling good title to all of the
issued and outstanding shares of capital stock of Singer, free and clear of all
liens, charges, claims and encumbrances, and not subject to any adverse claims.
8.4 Books and Records. The Shareholders shall have caused
Singer to make available and shall have delivered to Sterling all books and
records of Singer, including, but not limited to, its minute books and stock
transfer records.
8.5 Revocation of Prior Authorizations.
The Shareholders shall have delivered to Sterling certified
copies of resolutions adopted by: (i) Singer's and each of its Subsidiary's
respective board of directors authorizing all
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actions taken and/or to be taken by Singer or any such Subsidiary in
connection with the consummation of the transactions set forth herein; (ii)
Singer's board of directors revoking as of the Closing all prior
authorizations, powers of attorney, designations, and appointments relating
to the signing of checks, borrowing of funds, access to corporate
safe-deposit boxes and other similar matters, to the extent requested by
Sterling; and (iii) each of the Spin-Off Companies authorizing the actions
taken and/or to be taken by the Spin-Off Companies in connection with the
consummation of the transactions set forth herein.
8.6 Resignations. There shall have been delivered to
Sterling the signed resignations of all of the directors and officers of
Singer, dated as of the Closing.
8.7 Acceptance by the Shareholders.
The terms of this Agreement shall have been accepted by
all of the Shareholders of Singer as evidenced by their signatures hereto.
8.8 No Change in Condition. The Shareholders shall have
executed and delivered to Sterling a certificate, dated as of the Closing,
certifying that, since March 31, 1996, there has been no material, adverse
change in the Condition of Singer.
8.9 Spin-Off Transaction. The Spin-Off Companies shall
have executed and delivered to Sterling the documents required of it pursuant to
the terms of Section 5.1.
8.10 Bank Consent. Sterling shall have obtained Chase
Manhattan Bank's consent to the terms and conditions hereof.
8.11 Exempt Registration. The exemption from registration
(pursuant to which the Shares will be issued) is then available to Sterling
and the Shareholders.
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8.12 Real Estate. There shall have been no damage or
destruction, due to a casualty taking place after the date hereof, to the
Real Estate, the cost of which to repair is estimated to be in excess of
$25,000.
8.13 Liens. The Shareholders shall have delivered to
Sterling documentary evidence establishing that all Liens against any of the
Remaining Assets (other than the mortgages on the Real Estate and other than
Permitted Liens) have been released and discharged.
Section 9. Conditions Precedent - The Shareholders.
All obligations of the Shareholders under this Agreement
are subject, at their option, to the fulfillment, before or at the Closing, of
each of the following conditions, each of which may be waived by the
Shareholders in their sole and absolute discretion:
9.1 Representations and Warranties True at Closing. The
Chief Executive Officer of Sterling shall have executed and delivered to the
Shareholders a certificate, dated as of the Closing, certifying that: (i)
Sterling's representations and warranties contained in this Agreement shall be
deemed to have been made again at and as of the Closing and shall then be true
and correct in all material respects and shall not omit to state any fact
necessary to make any such representation and/or warranty not misleading; and
(ii) all information contained in any Exhibit or Schedule annexed hereto and/or
contained in any document and/or instrument furnished and/or delivered to the
Shareholders pursuant to this Plan of Reorganization and/or in connection with
the consummation of the transactions set forth herein (in each case whether
prior to or after the date hereof) shall be true and correct in all material
respects and shall not omit to state a fact necessary to make any such
information not misleading.
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9.2 Due Performance. Sterling shall have performed and
complied with all of its responsibilities, obligations, agreements and/or
covenants under, and of all the terms and conditions required by, this Agreement
to be performed and/or complied with by it before (and/or simultaneously with)
the Closing.
9.3 Officers' Certificate. The Shareholders shall have been
furnished with a certificate signed by the counsel for Sterling, dated as of the
Closing, certifying that, except as disclosed in such counsel's separate letter
to counsel to the Shareholders, dated as of the date hereof, and except as
disclosed in any Form 8-K filed by Sterling with the SEC, and/or in any press
release published by Sterling (in each case, after said date but prior to the
Closing), copies of which will have been delivered to the Shareholders' counsel,
since September 30, 1996, there has been no material adverse change in the
Condition of Sterling and its subsidiaries taken as a whole.
9.4 Opinion of Sterling's Counsel.
The Shareholders shall have received an opinion of Joseph
Silver, Esq., General Counsel to Sterling, dated as of the Closing, to the
effect that (1) the representations contained in Sections 4.1, and 4.2 hereof
are true and correct in all material respect; (2) except as specified in the
opinion, such counsel has no reason to believe, without further inquiry, of any
inaccuracy in the representations contained in any of Sterling's representations
and/or warranties contained herein; and (3) the Shares to be issued to the
Shareholders pursuant to this Agreement will, when so issued, be validly issued,
fully paid, and nonassessable and exempt from registration under the Securities
Act.
Section 10. Indemnification.
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10.1 Survival of Representations and Warranties; Remaining
Claims.
(a) All representations and warranties of the Shareholders
contained in this Agreement (whether set forth in Section 3 hereof or elsewhere
herein) shall survive the Closing (and shall not be extinguished by any
investigation made by or on behalf of any party hereto) for a period expiring
eighteen (18) months after the Closing Date, at which time the Shareholders
shall no longer be liable with respect thereto except as to any claims made
pursuant to and in accordance with Section 10.4 in respect thereof by Sterling,
Singer or any other Indemnitee on or before the expiration of such period;
provided, however, that (i) the representations and warranties contained in
Section 3.1 and Section 3.4 shall survive the Closing indefinitely, and (ii) the
representations and warranties continued in Section 3.16 shall survive the
Closing for a period equal to the greater of three (3) years or ninety (90) days
following the expiration of any applicable period of limitations, plus any
extended period applicable thereto by reason of any waiver of such period of
limitations.
(b) All representations and warranties of Sterling contained
in this Agreement (whether made in Section 4 or otherwise) shall survive the
Closing (and shall not be extinguished by any investigation made by or on behalf
of any party hereto) for a period expiring eighteen (18) months after the
Closing Date, at which time such representations and warranties shall expire and
Sterling shall no longer be liable with respect thereto, except as to any claims
made pursuant to Section 10.6 in respect thereof by the Shareholders or any
other Indemnitee on or before
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the expiration of such period; provided, however, that the representations and
warranties contained in Section 4.1 and Section 4.5 shall survive the Closing
indefinitely.
(c) The covenants, obligations and agreements of the parties
hereto set forth in this Agreement, (including, but not limited to, those set
forth in this Section 10 hereof) as well as the covenants, obligations and
agreements of the Spin-Off Companies shall not be affected by the expiration of
any representations or warranties pursuant to this Section 10.1.
10.2 Indemnification by the Shareholders.
(a) The Shareholders and each of them, jointly and
severally, hereby agree to indemnify Singer, Sterling and each of their
respective subsidiaries and each of their respective officers, directors,
agents and representatives (collectively the "Indemnitee") against, and
hold them harmless from, any and all expenses (including expenses of
investigations), claims, demands, losses, costs, deficiencies, actions,
suits, proceedings, judgments, liabilities (including tax liabilities) and
damages (including related counsel fees and expenses) of any nature
whatsoever ("Losses") incurred or suffered by any of them in connection
with or as a result of any of the following:
(i) any breach or inaccuracy of any representation or
warranty of the Shareholders contained herein (whether set forth in Section
3 hereof or elsewhere) and/or in any document or instrument to be executed
by the Shareholders or any of them, in connection with the consummation of
the transactions provided for herein; and/or
(ii) any breach or default in the performance and/or
observance of any of the covenants, agreements and/or obligations to be
observed, performed
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and/or complied with: (A) by any of the Companies, pursuant to the terms and
provisions hereof, prior to the Closing; or (B) by any of the Shareholders
and/or the Spin-Off Companies, whether prior to or after the Closing, pursuant
to the terms and provisions of this Agreement (including, but not limited to the
matters set forth in Section 1.10 and 5.1 hereof) and/or any document,
instrument and/or agreement, executed by the Shareholders (or any of them)
and/or the Spin-Off Companies, in connection herewith; and/or
(iii) any Losses arising from or in connection with the
past, present or future operations or activities of the Subsidiaries, Vision
Optical Co., Inc., or the distribution of the stock of the Spin-Off Companies to
the Shareholders(except future operations of those Subsidiaries acquired by
Sterling as part of the Exchange of Stock).
10.3 Payment of Claim. Sterling shall provide the
Shareholders with prompt notice of the payment or incurrence of any Losses. Upon
the payment or incurrence of a Loss, the Shareholders shall promptly pay the
Indemnitee the amount of such Loss.
10.4 Claims for Indemnification.
Within thirty (30) days after receipt by Sterling of a
written notice of any claim or the commencement of any action which
Sterling believes may give rise to a claim for indemnification under this
Section 10, Sterling shall notify the Shareholders, in writing, of the
claim or the commencement of such action, but the failure to give such
notice shall not relieve the Shareholders of any liability hereunder except
if and to the extent such failure actually prejudices any such Shareholder
with respect to such claim or action. Thereafter, Sterling shall deliver to
the Shareholders within fifteen (15) days after its actual receipt thereof,
copies of all written notices and
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documents (including court papers) received by Sterling relating to such claim
or action, but the failure to deliver such notices or documents shall not
relieve the Shareholders of any liability hereunder except if and to the extent
such failure actually prejudices any such Shareholder with respect to such claim
or action. Any claims for indemnification under this Section 10 must be asserted
in writing (setting forth in reasonable detail a description of such claim,
together with the facts and circumstances then known to Sterling and pertaining
thereto , if any, available at the time of such notice which Sterling's good
faith judgment form the basis therefor) to the Shareholders before (i) with
respect to those matters referenced in Section 10.2(a)(i), the expiration of the
applicable survival period, if any, set forth in Section 10.1 hereof, and (ii)
with respect to those matters referenced in Section 10.2(a)(ii) and
10.2(a)(iii), the third anniversary of the Closing Date, provided, however, that
any claim for Losses related to a breach of the representations and warranties
contained in Section 3.1 or 3.4 may be asserted at any time; and provided,
however, that any claim for Losses related to tax liabilities may be asserted at
any time prior to the later of the third anniversary after the Closing and the
date which is ninety (90) days following the expiration of any applicable period
of limitations, plus any extended period applicable thereto by reason of any
waiver of such period of limitations. Notwithstanding the foregoing, however, if
notice of any claim for indemnification is timely given pursuant to this Section
10.4, litigation asserting any such claims for indemnification may be commenced
subsequent to the expiration of any such applicable survival period.
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10.5 Defense of Third Party Claims.
(a) With respect to the litigation more particularly
described in Section 3.14 of the Disclosure Schedule, the Shareholders, at
their sole cost and expense, shall continue in the defense of same.
(b) Except as otherwise set forth in Subsection 10.5(a)
above, if, with respect to any claim (other than those described in
Subsection (a) above, which may give rise to indemnity under this Section
10 resulting from or arising out of any claim or legal proceeding by a
person other than Sterling, Singer or any other Indemnitee (including any
claim or legal proceeding relating to whether any Loss, deduction or credit
claimed by Sterling or any other Indemnitee for tax purposes with respect
to a Loss is allowable) (a "Third-Party Claim"), the Shareholders, within
twenty (20) days after their receipt of any such notice from Sterling,
Singer and/or another Indemnitee providing such notice, acknowledge, in
writing, to Sterling, Singer and/or any such other Indemnitee, the
Shareholders' obligation to indemnify each of them pursuant hereto, the
Shareholders, may, in such written notice to Sterling Singer and/or such
other Indemnitee(s) acknowledging such obligation to indemnify, notify
Singer and/or such other Indemnitee(s) of their election to assume the
defense of such claim or related legal proceeding and, in such event, the
Shareholders at their sole cost and expense, shall take all steps necessary
in the defense or settlement thereof, provided, that the Shareholders shall
not expressly consent to a settlement or compromise of, or expressly
consent to the entry of any judgment arising from, any such claim or legal
proceeding without the prior written consent (not to be unreasonably
withheld) of Sterling (it being understood that in considering whether or
not to give such consent, Sterling shall be entitled to assess the
implications of such
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settlement, compromise or judgment on the current or future conduct of its
and/or Singer's business activities). In such event, Sterling and any other
Indemnitee shall be entitled to participate in (but not control) the defense of
any such action, with their own counsel and at their own expense.
(c) If, with respect to a Third-Party Claim, the
Shareholders, within the time period set forth above, neither acknowledge
nor disclaim in writing to Sterling or any other Indemnitee the
Shareholders' obligation to indemnify each of them pursuant hereto, or
disclaim in writing to Sterling and any other Indemnitee the Shareholders'
obligation to indemnify each or any of them pursuant hereto, Sterling or
any other Indemnitee may defend against such claim or related legal
proceeding with such counsel and in such manner as they deem appropriate,
and may consent to the settlement or compromise of, or consent to the entry
of a judgment arising from, such claim or legal proceeding without the
consent of the Shareholders; provided, however that the
Shareholders and their respective agents and representatives shall be entitled
to participate in (but not control) the defense of any such action, with their
own counsel and at their own expense.
(d) Whether or not the Shareholders choose to defend any
claim or litigation for which Sterling, Singer or any other Indemnitee may
be entitled to indemnification under this Section 10, each of the parties
hereto shall cooperate in the defense thereof. Such cooperation shall
include the retention and the provision to the Shareholders of records and
information that are reasonably relevant to such claim or litigation, and
making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
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10.6 Indemnification by Sterling.
Sterling shall indemnify each of the Shareholders and
their respective agents and representatives against, and hold them harmless
from, any and all Losses incurred by any of them in connection with or as a
result of the following:
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(a) any breach or inaccuracy of any representation or
warranty of Sterling contained herein (whether set forth in Section 4
hereof or elsewhere) and/or in any document or instrument to be executed or
filed with any Governmental Authority by Sterling in connection with the
consummation of the transactions provided for herein; and/or
(b) any breach or default in the performance and/or
observance of any of the covenants, agreements and/or obligations to be
observed, performed and/or complied with: (A) by Sterling pursuant to the
terms and provisions hereof, prior to the Closing; or (B) by Sterling
whether prior to or after the Closing, pursuant to the terms and provisions
of this Agreement and/or any document, instrument and/or agreement,
executed or filed with any Governmental Authority by Sterling in connection
herewith; and/or
(c) any breach or inaccuracy of any representation or
warranty made by Sterling in the Registration Statement or Disclosure
Schedule; or
(d) any Losses (other than those attributable to a state
of facts, events or other condition existing at Singer or any Singer
Subsidiary as of the Closing Date) arising from or in connection with the
operations of Singer and those Singer Subsidiaries acquired in the Exchange
of Stock as such operations are conducted by Sterling and/or its
franchisees subsequent to the Closing Date. The foregoing indemnification
shall be subject to and provided in the manner set forth in Sections 10.1(b),
10.3, 10.4, 10.5, and 10.7 hereof, modified, as applicable, to reflect Sterling
as the indemnitors and the Shareholders and their respective agents and
representatives as the indemnitee. For purposes of such modification, all
references in such sections to "Sterling" shall be deemed to be references to
"Shareholders" and vice versa.
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10.7 Certain Limitations. Notwithstanding any other
provision of this Section 10, (i) the Shareholders shall not be required to
indemnify Sterling or any of the Indemnitee for any Loss to the extent the
Shareholders are entitled to indemnification from Sterling hereunder with
respect to such Loss or (ii) Sterling shall not be required to indemnify
the Shareholders for any Loss to the extent Sterling is entitled to
indemnification from the Shareholders hereunder with respect to such Loss.
Section 11. Termination.
11.1 Termination. This Agreement may be terminated (i) by
mutual consent in writing; (ii) by either the Shareholders or Sterling if the
Closing shall not have taken place, unless adjourned to a later date by mutual
consent in writing, by March 31, 1997, except if and to the extent resulting
from a breach of either party's obligations hereunder or (iii) by either the
Shareholders or Sterling if there has been a material misrepresentation or
material breach of any warranty or covenant by the other party.
11.2 Effect of Termination. In the event of termination
of this Agreement by either Sterling or the Shareholders, as provided in Section
11.1(i) or (ii), this Agreement shall forthwith become null and void and there
shall be no liability on the part of either Sterling or the Shareholders, or
their respective officers, directors, or affiliated entities. Nothing in this
Section 11.2 shall relieve any party from liability for any breach of this
Agreement.
Section 12. General Provisions.
12.1 Further Assurances. At any time, and from time,
after the Closing Date, each party will execute (and/or cause to be
executed) such additional instruments and take
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(and/or cause to be taken) such action as may be reasonably requested by the
other party to confirm or perfect title to any property transferred hereunder or
otherwise to carry out the intent and purposes of this Agreement.
12.2 [Intentionally Omitted].
12.3 Waiver. Any failure on the part of either party
hereto to comply with any of its obligations, agreements, or conditions
hereunder may be waived in writing by the party to whom such compliance is owed.
12.4 Public Announcements. The parties hereto agree that
the form, content and timing of release of any public announcement concerning
this Agreement will be subject to the prior approval of the Chief Executive
Officer or President of Singer and Sterling, respectively, except that any party
may make any such public disclosure which it believes in good faith to be
required by law or by the terms of any applicable securities laws or applicable
requirements of a stock exchange or securities market place (in which case such
party will consult with the other parties prior to making such disclosure). The
parties hereto agree to issue a mutually acceptable press release on or before
ten (10) days after (a) the execution of this Agreement and (b) the Closing, or
the earlier termination of this Agreement.
12.5 Brokers. Each party represents to the other party
that no broker or finder has acted for it in connection with this Agreement and
agrees to indemnify and hold harmless the other party against any fee, loss, or
expense arising out of claims by brokers or finders employed or alleged to have
been employed by it.
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12.6 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given if delivered in
person or sent by prepaid first-class registered or certified mail, return
receipt requested, as follows:
If to Shareholders:
Alan Singer
1219 East Granite View Drive
Phoenix, Arizona 85044
and
David Singer
1301 Lancaster Avenue
Berwyn, PA 19312
With a copy to:
Caplan & Luber, LLP.
40 Darby Road
Paoli, PA 19301
If to Buyer:
Sterling Vision, Inc.
1500 Hempstead Turnpike
East Meadow, NY 11554
Attention: President
With a copy to:
Sterling Vision, Inc.
1500 Hempstead Turnpike
East Meadow, NY 11554
Attention: General Counsel
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12.7 Entire Agreement. This Agreement constitutes the
entire agreement between the parties and supersedes and cancels any other
agreement, representation, or communication, whether oral or written, between
the parties hereto relating to the transactions contemplated herein or the
subject matter hereof, including but not limited to that certain letter
agreement dated October 18, 1996, among the parties hereto.
12.8 Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.9 Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of Delaware
without giving effect to the conflict of law rules thereof.
12.10 Assignment. This Agreement shall inure to the
benefit of, and be binding upon, the parties hereto and their successors and
assigns; provided, however, that any assignment by either party of its rights
under this Agreement without the written consent of the other party shall be
void.
12.11 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, with intent to be legally bound, this
Agreement has been executed by the parties in the day and year first above
written.
STERLING VISION, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
(SIGNATURES CONTINUED ON NEXT PAGE)
------------------------------------
SIDNEY SINGER
------------------------------------
ALAN SINGER
------------------------------------
DAVID SINGER
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EXHIBIT A
RESTRICTIVE LEGENDS
1. The securities represented by this Certificate have
not been registered under the Securities Act of 1933, as amended (the
"Act"). Neither such securities nor any interest therein may be offered,
sold or otherwise transferred, pledged or hypothecated, except pursuant to:
(1) a Registration Statement covering such securities or such interest and
the disposition thereof that shall have become effective under the Act; or
(2) an exemption from registration under the Act relating to the
disposition of such securities or such interest, and in each case in
accordance with any applicable laws of any State of the United States.
2. The transfer of the securities represented by this
Certificate is restricted pursuant to the terms of that certain Agreement and
Plan of Reorganization (the "Agreement"), dated , 1997, among David
Singer, Alan Singer and Sidney Singer and Sterling Vision, Inc. Neither such
securities nor any interest therein may be offered, sold or otherwise
transferred, pledged, hypothecated or encumbered, except in strict compliance
with the terms and conditions of the Agreement.
<PAGE>
SCHEDULES
Schedule 1 Disclosure Schedule
Schedule 2 Schedule of Liabilities
Schedule 3 Financial Statements
Schedule 4 Mortgages on Real Estate
Schedule 5 Title Report for Real Estate
Schedule 6 Sterling Conflicts
Schedule 7 Lease for Franchisee of Real Estate
EXHIBITS
Exhibit A Form of Restrictive Legend
Exhibit B Singer Certificate of Incorporation
<PAGE>
March 19, 1997
VIA FAX TO: (610) 640-9865
Messrs. Alan, David and Sidney Singer
c/o Joel Luber, Esq.
Caplan & Luber
40 Darby Road
Paoli, PA 19301
RE: STERLING VISION, INC. WITH SINGER SPECS, INC.
Gentlemen:
Reference is made to that certain Agreement and Plan of Reorganization (the
"Agreement"), dated February 19, 1997, between Sterling Vision, Inc.
("Sterling") and each of you. All capitalized terms used (but not otherwise
defined) herein shall have the identical meanings ascribed to them in said
Agreement.
With respect to the foregoing, this letter will serve to confirm the
understanding and agreement of the parties that the appraised fair market
value of the Real Estate shall be $610,000.00.
If the foregoing correctly sets forth our understanding and agreement,
kindly indicate such acceptance by signing, in the space indicated below,
and returning to the undersigned a duplicate copy of this letter.
Very truly yours,
STERLING VISION, INC.
By:/s/Joseph Silver
------------------------
Joseph Silver,
Executive Vice President &
General Counsel
AGREED AND CONSENTED TO:
March ___, 1997
Mr. Alan Singer
Mr. David Singer
Mr. Sidney Singer
By: /s/Joel Luber
----------------------
Joel Luber, Counsel
<PAGE>
April 1, 1997
Via FAX: (610) 640-9865
Mr. Alan Singer
Mr. David Singer
Mr. Sidney Singer
c/o Joel Luber, Esq.
Caplan & Luber
40 Darby Road
Poali, Pennsylvania 19301
Re: STERLING VISION, INC. WITH SINGER SPECS, INC.
Gentlemen:
Reference is made to that certain Agreement and Plan of Reorganization,
dated February 19, 1997, as amended (the "Agreement") among Sterling
Vision, Inc. ("Sterling") and each of you. All capitalized terms used (but
not otherwise defined) herein shall have the identical, respective meanings
ascribed to them in said Agreement.
When fully executed, this letter will serve to modify and amend
said Agreement, as follows:
1. Section 1.1 of the Agreement is hereby amended to provide: (i) that the
Closing Price shall be equal to the average bid price of Sterling's Common
Stock during the period March 3, 1997 through and including March 31, 1997;
and (ii) based upon the foregoing: (x) the Closing Price is hereby agreed
to be $8.2094; and (y) the number of Shares to be initially issued to the
Shareholders is an aggregate of 305,747 Shares;
2. Sections 1.1 and 1.8 of the Agreement are each hereby amended so as to
permit each of David Singer and Alan Singer to pledge to Summit Bank an
aggregate of 7,500 of the Initial Sale Shares to be issued to each of them,
all pursuant to that certain Stock Pledge and Security Agreement to be
dated as of March 31, 1997, between Summit Bank and each of David Singer
and Alan Singer;
<PAGE>
3. Subsection 1.8(f) of the Agreement is hereby modified and amended to
delete the words "and/or" appearing on the fourth line thereof and to
insert, after the words "...or any successor Form thereto" appearing in the
sixth and seventh lines thereof, the following: "and/or (iv) of up to an
aggregate, maximum of 250,000 shares of its Common Stock that may be issued
in connection with its (or one of its subsidiary's) acquisition of
substantially all of the capital stock and/or assets of another person or
entity)...";
4. For purposes of Section 10.2(a)(ii)(B) of the Agreement, the term
"Losses" shall exclude any Losses arising from or in connection with any
breach or default in the performance and/or observance of any covenants,
agreements and/or obligations to be observed, performed and/or complied
with by any of the Shareholders and/or Spin-Off Companies in connection
with the Sterling Optical Center Franchise Agreements and/or ancillary
documents to be entered into for each Company Store as set forth in Section
5.2 of the Agreement;
5. Section 1.8 of the Agreement is hereby amended, as follows:
a. Subsection (a) thereof is hereby amended to change the
words "...an aggregate of ninety-five thousand (95,000) Shares..." appearing in
the third and fourth lines thereof to, "...an aggregate of one hundred thousand
(100,000) Shares..."
b. Subsection (c) thereof is hereby amended to change the
words "...up to an aggregate of thirty thousand (30,000) additional Shares..."
appearing in the second line thereof, to "...up to an aggregate of forty
thousand (40,000) additional Shares..."; and
6. Each of the Shareholders hereby consent to the form of disclosure
(regarding this transaction) contained in SVI's Form 10-K For The Year Ended
December 31,1996.
<PAGE>
If the foregoing correctly sets forth our understanding and agreement,
kindly indicate the same by signing, in the space below, and returning to
the undersigned a duplicate copy of this letter.
Very truly yours,
STERLING VISION, INC.
By: /s/ Joseph Silver
---------------------------
Joseph Silver,
Executive Vice President &
General Counsel
JS/pas
AGREED AND CONSENTED TO:
April 1, 1997
/s/ David Singer
- --------------------------
David Singer
/s/ David Singer
- --------------------------
Alan Singer
By: David Singer,
Attorney-in-Fact
/s/ David Singer
- --------------------------
Sidney Singer
By: David Singer,
Attorney-in-Fact
