<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 17, 1998.
REGISTRATION STATEMENT 333-31343
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
------------------------
AMENDMENT NO. 3 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------
AMBASSADOR EYEWEAR GROUP, INC.
(Name of Small Business Issuer in Its Charter)
------------------------------
<TABLE>
<S> <C> <C>
DELAWARE 5040 23-2807063
(State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code No.) Identification No.)
</TABLE>
------------------------
3600 MARSHALL LANE
BENSALEM, PENNSYLVANIA 19020
(800) 523-4675
(Address and Telephone Number of Principal Executive Offices)
3600 MARSHALL LANE
BENSALEM, PENNSYLVANIA 19020
(Address of Principal Place of Business or Intended Principal Place of Business)
MR. BARRY BUDILOV
PRESIDENT AND CHIEF EXECUTIVE OFFICER
3600 MARSHALL LANE
BENSALEM, PENNSYLVANIA 19020
(800) 523-4675
(Name, Address and Telephone Number of Agent for Service)
------------------------------
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
JEFFREY A. BAUMEL, ESQ. JAMES M. JENKINS, ESQ.
Gibbons, Del Deo, Dolan, Griffinger & Vecchione Harter, Secrest & Emery LLP
One Riverfront Plaza 700 Midtown Tower
Newark, New Jersey 07102 Rochester, NY 14604
(973) 596-4500 (716) 232-6500
</TABLE>
--------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.
--------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 17, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PRELIMINARY PROSPECTUS
AMBASSADOR EYEWEAR GROUP, INC.
1,200,000 SHARES OF COMMON STOCK
$6.00 PER SHARE
------------------
Ambassador Eyewear Group, Inc., a Delaware corporation ("Ambassador" or the
"Company"), hereby offers 1,200,000 shares (the "Shares") of its Common Stock,
par value $.01 per share (the "Common Stock"). See "Description of Securities."
Prior to this offering of stock (the "Offering"), there has been no public
market for the Shares and there can be no assurance that an active market will
develop. Application has been made for listing of the Shares for quotation on
the Pacific Stock Exchange and on the Chicago Stock Exchange, subject to notice
of issuance. There can be no assurance that any of these listing applications
will be approved. If such listing applications are not approved, the Company
will apply for the listing of the Shares offered hereby on the National
Association of Securities Dealers, Inc.'s ("NASD's") Over-the-Counter Electronic
Bulletin Board Service (the "OTC"). See "Risk Factors--Uncertain Public Market
for the Company's Common Stock."
It is anticipated that the public offering price for the Shares will be
$6.00 per share. The offering price of the Shares have been determined by
negotiation between the Company and H.J. Meyers & Co., Inc., and National
Securities Corporation, the representatives (the "Representatives") of the
several underwriters (the "Underwriters") and is not necessarily related to the
Company's asset value or any other established criterion of value. For the
method of determining the public offering price of the Common Stock, see "Risk
Factors" and "Underwriting."
------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A SUBSTANTIAL
DEGREE OF RISK. PERSONS WHO PURCHASE THESE SECURITIES WILL INCUR IMMEDIATE AND
SUBSTANTIAL DILUTION. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
FACTORS SET FORTH UNDER "RISK FACTORS," AT PAGE 4.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS
PRICE TO PUBLIC AND COMMISSIONS(1) PROCEEDS TO COMPANY (2)
<S> <C> <C> <C>
Per Share................... $6.00 $.60 $5.40
Total (3)................... $7,200,000 $720,000 $6,480,000
</TABLE>
(1) Does not reflect additional compensation to be received by the
Representatives in the form of (a) a non-accountable expense allowance of
$216,000 (or $248,400 if the Underwriters' over-allotment option described
in Footnote (3) is exercised in full) and other compensation payable to the
Representatives, and (b) warrants to purchase up to 120,000 shares of Common
Stock at a purchase price of $9.90 per share (that being 165% of the public
offering price) exercisable over a period of four years, commencing one year
from the date of this Prospectus (the "Representatives' Warrants"). In
addition, the Company has agreed to indemnify the Underwriters against
certain civil liabilities under the Securities Act of 1933, as amended (the
"Securities Act"). See "Underwriting."
(2) Before deducting additional expenses of the Offering payable by the Company,
estimated at $650,000, and the Representative's non-accountable expense
allowance.
(3) The Company has granted the Underwriters an option, exercisable within 45
days, to purchase up to an additional 180,000 shares of Common Stock on the
same terms and conditions as set forth above, solely to cover
over-allotments, if any. If the over-allotment option is exercised in full,
the total "Price to Public," "Underwriting Discount" and "Proceeds to
Company" will be $8,280,000, $828,000 and $7,452,000, respectively. See
"Underwriting."
The Shares are being offered on a "firm commitment" basis by the
Underwriters, when, as, and if delivered to and accepted by the Underwriters and
subject to prior sale, withdrawal or cancellation of the offer without notice.
It is expected that delivery of certificates representing the Shares will be
made at the offices of H.J. Meyers & Co., Inc. ("H.J. Meyers"), 1895 Mount Hope
Avenue, Rochester, New York 14620, on or about , 1998.
------------------------
H.J. MEYERS & CO., INC. NATIONAL SECURITIES CORPORATION
----------------
The date of this Prospectus is , 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SHARES, INCLUDING
PURCHASES OF THE SHARES TO STABILIZE ITS MARKET PRICE, PURCHASES OF THE SHARES
TO COVER SOME OR ALL OF A SHORT POSITION IN THE SHARES MAINTAINED BY THE
REPRESENTATIVES AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
This Prospectus refers to various registered trademarks that are owned by
parties other than the Company.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES
THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. EACH PROSPECTIVE INVESTOR SHOULD
READ THIS PROSPECTUS IN ITS ENTIRETY. EXCEPT AS OTHERWISE INDICATED, ALL
INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITER'S OVER-ALLOTMENT
OPTION IS NOT EXERCISED AND REFLECTS A 1,166.667-FOR-ONE STOCK SPLIT EFFECTED AS
OF JUNE 30, 1997. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
INFORMATION SET FORTH UNDER "RISK FACTORS."
THE COMPANY
The Company designs, sources, markets and distributes high quality
prescription eyeglass frames and non-prescription sunglasses to department and
specialty stores, optical chains and eyewear boutiques throughout the United
States. The Company also provides integrated marketing, merchandising materials
and consulting support to assist its customers in the sales of the Company's
eyewear products. The Company distributes its eyewear products to a broad and
substantial customer base, including Wal-Mart, K-Mart, National Vision
Associates and U.S. Vision, as well as to many regional chain stores and local
outlets. The Company has established relationships with various fashion
designers, fashion celebrities and marketing organizations including Kathy
Ireland, Halston, and the John Lennon Estate and highly recognizable consumer
products brands such as Playskool, Nintendo and international jewelry designer
Kenneth Jay Lane. The Company intends to continue to identify and license trade
names and trademarks from various high profile brand sources in an effort to
target and capture additional segments of the eyewear market.
The Company utilizes a diverse team of freelance experienced fashion eyewear
designers to work with fashion houses, celebrities, manufacturers and
experienced members of the optical industry to design eyewear styles that convey
fashion, elegance and sophistication. The Company's eyeglass frames and
sunglasses are manufactured at a variety of independent factories in the United
States and internationally. The Company distributes products through independent
sales representatives situated throughout the world and intends to increase the
size of its dedicated sales force, expand its sales and marketing capabilities
and develop additional alliances with fashion designers and licensors.
In 1996, approximately 60% of Americans used some form of corrective
eyewear. Retail sales of eyewear products totaled $14.6 billion in 1996, up from
$13.8 billion in 1995, representing a 5.8% increase. Furthermore, it is
generally accepted that vision deteriorates with age. As the American population
ages, demand for corrective eyewear is likely to continue to grow. In addition,
the growing medical and public concern with respect to exposure to harmful sun
rays has led to an increase in the sale of sunglasses, reaching $2.95 billion in
1996, representing an 8% increase from 1995.
The Company's business strategy is to become a leading source of eyewear in
the United States and globally. The Company intends to focus on: (i) growth
through the acquisition of businesses and companies that will complement its
business; (ii) the continued development of relationships with distributors
throughout the world; and (iii) expanding its products line by seeking and
negotiating licenses with high fashion and highly recognizable brand names and
licensors. In particular, the Company intends to increase its sales of
sunglasses by substantially expanding its sunglass product line and its sunglass
distribution network. The Company has accomplished a great deal of its growth
through the acquisition of other eyewear distributors that are similarly
situated. In June 1996, the Company acquired substantially all of the assets of
Windsor Optical, Inc. ("Windsor") and in February 1997, the Company acquired
substantially all of the assets of Renaissance Eyewear Group ("Renaissance")
from the secured creditor of Renaissance, thereby substantially increasing its
sales base and available resources. The Company also assumed certain liabilities
of Windsor. Renaissance had total sales of approximately $14 million during its
fiscal year ended October 31, 1996 of which approximately $2.5 million were
sunglass products. Through the acquisition of substantially all of the assets of
Renaissance and the establishment of licensing arrangements and employment
agreements as a result of such acquisition, the Company not only expanded its
sales base, but also its product lines to include additional designer product
lines and sunglasses. The Company intends to continue to seek strategic
acquisitions as a method of broadening its product lines and expanding its
potential market.
<PAGE>
The Company was incorporated in Delaware in May 1995 as Diplomat Ambassador
Inc. when it acquired the business of Chanuk, Inc. ("Chanuk"), a Pennsylvania
corporation. On July 10, 1997, the Company changed its name to Ambassador
Eyewear Group, Inc. The principal executive offices of the Company are located
at 3600 Marshall Lane, Bensalem, Pennsylvania 19020, and its telephone number is
(800) 523-4675.
THE OFFERING
<TABLE>
<S> <C>
Shares of Common Stock Offered............... 1,200,000 shares(1)
Shares of Common Stock to be Outstanding
after the Offering......................... 4,700,000 shares (1)(2)
Use of Proceeds.............................. The Company intends to use the estimated net
proceeds from the Offering of $5,614,000
($6,553,600 if the Underwriter's
over-allotment option is exercised in full)
for reduction of debt and general corporate
purposes, including working capital and to
finance potential acquisitions. See "Use of
Proceeds."
Risk Factors................................. Investment in the Common Stock offered hereby
involves a high degree of risk as well as
immediate and substantial dilution. See "Risk
Factors" and "Dilution".
Proposed Pacific Stock Exchange Symbol.......
Proposed Chicago Stock Exchange Symbol.......
</TABLE>
- ------------------------
(1) Assumes no exercise of the Underwriters' over-allotment option with respect
to shares of Common Stock that would be offered by the Company.
(2) Excludes (i) 529,333 shares of Common Stock issuable upon exercise of
outstanding options and warrants, (ii) 120,000 shares of Common Stock
issuable upon exercise of the Representatives' Warrants and (iii) 196,834
shares of Common Stock issuable to two officers, directors and principal
stockholders of the Company who are holders of $1,181,000 principal amount
8% Convertible Promissory Notes (assuming an initial public offering price
of $6.00 per share) that are convertible at the option of the holders at any
time at a per share price equal to the initial public offering price (the
"Convertible Notes"). See "Certain Relationships and Related Party
Transactions" "Description of Securities" and "Underwriting."
2
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table presents summary historical, pro forma (condensed) and
as adjusted financial data for the Company derived from the Company's financial
statements which have been included elsewhere in this Prospectus. This
information should be read in conjunction with "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements and notes thereto each included elsewhere herein.
<TABLE>
<CAPTION>
PERIOD FROM
MAY 10, 1995 PRO FORMA NINE MONTHS ENDED
(INCEPTION) (CONDENSED) DECEMBER 31,
THROUGH MARCH YEAR ENDED MARCH 31, 1997 ------------------------------
31, 1996 MARCH 31, 1997 (1) 1996 1997
-------------- -------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
STATEMENT OF OPERATIONS
DATA:
Net Sales................. $ 11,005 $ 16,455 $ 29,129 $ 11,722 $ 17,429
Gross profit.............. 4,179 7,903 14,038 5,619 9,597
Selling, general and
administrative
expenses................ 4,258 6,145 12,727 4,513 7,865(3)
Income (loss) from
operations.............. (79) 1,758 1,311 1,106 1,732
Net income (loss)......... (299) 680 136 368 489
Basic income (loss) per
share(2)................ (.09) .19 .04 .11 .14
Diluted income (loss) per
share(2)................ $ (.08) $ .18 $ .04 $ .10 $ .13
Weighted average number of
shares outstanding-basic
income (loss) per
share................... 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000
Weighted average number of
shares
outstanding-diluted
income (loss) per
share................... 3,590,000 3,836,000 3,836,000 3,826,000 3,864,000
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------
AS ADJUSTED
ACTUAL (4)
--------- --------------
<S> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital...................................................................... $ 1,580 $ 7,381
Total assets......................................................................... 23,570 24,320
Non-current notes payable--stockholders/officer(5)................................... 1,181 1,181
Long-term debt....................................................................... 370 370
Total liabilities.................................................................... 23,030 18,166
Stockholders' equity................................................................. 540 6,154
</TABLE>
- ------------------------
(1) The pro forma unaudited condensed statement of operations reflects the
acquisitions of substantially all of the assets of Windsor and Renaissance
and the assumption of certain debt of Windsor as if such transactions had
occurred on April 1, 1996. The information contained herein should be read
in conjunction with the pro forma condensed statement of operations and the
notes thereto, the financial statements of the Company and of Renaissance
and the related notes thereto and with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," each included elsewhere
in this Prospectus. The pro forma condensed statement of operations for the
year ended March 31, 1997 gives effect to the operations for each of the
Company, Renaissance and Windsor as if the acquisitions of substantially all
of the assets of Renaissance and Windsor had occurred on April 1, 1996, but
do not reflect the anticipated efficiencies of scale or other cost reduction
measures being implemented by the Company, the success of which cannot be
assured. However, no assurance can be given that any such efficiencies will
be achieved. The pro forma condensed statement of operations is presented
for informational purposes only, and is not necessarily indicative of what
the actual results of operations would have been had the transactions
occurred at April 1, 1996, nor do they purport to indicate the results of
future operations.
(2) See Note B(8) to the Company's Financial Statements.
3
<PAGE>
(3) Includes approximately $766,000 relating to redundant costs of operating
Renaissance in a separate facility through July 1997, consisting primarily
of duplicate overhead and personnel expenses incurred prior to the
consolidation of the Company's operations into one location as well as
actual costs related to the relocation.
(4) Adjusted to reflect the sale of the Shares offered by the Company hereby at
an assumed initial public offering price of $6.00 per Share and the
repayment of $4,720,000 of debt with the proceeds therefrom, including
$106,000 loaned to the Company after December 31, 1997. See "Use of
Proceeds" and "Capitalization."
(5) Represents the Convertible Notes.
4
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK
AND SHOULD NOT BE MADE BY PERSONS WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. PROSPECTIVE INVESTORS, PRIOR TO MAKING AN INVESTMENT DECISION,
SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER INFORMATION CONTAINED IN
THIS PROSPECTUS (INCLUDING THE FINANCIAL STATEMENTS AND NOTES THERETO), THE
FOLLOWING FACTORS. THIS PROSPECTUS CONTAINS, IN ADDITION TO HISTORICAL
INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.
THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY. FACTORS THAT COULD CAUSE
OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED BELOW, AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS.
SUBSTANTIAL INDEBTEDNESS The Company has, from time to time, experienced
cash flow shortfalls and has been required to borrow substantial amounts from
banks. The Company had total liabilities of approximately $23.0 million at
December 31, 1997, approximately $20.6 million of which are current which
amounts have increased to date. Of such debt, approximately $13.1 million is
payable to CoreStates Bank (the "Bank") pursuant to the Company's revolving line
of credit. During the year ended March 31, 1997, and the nine months ended
December 31, 1997, the Company incurred $738,000 and $972,000, respectively, in
net interest expenses. The revolving line of credit is secured by substantially
all of the assets of the Company. The credit facility is represented by demand
notes payable to the Bank under which the Bank may demand repayment at any time.
The Company intends to reduce outstanding borrowings from the Bank by
approximately $4.1 million from the proceeds of this Offering. The Company
anticipates that even after the proposed repayment of a portion of the Company's
indebtedness from the proceeds of this Offering, the Company's outstanding
indebtedness and ongoing interest expense will continue to be signficant. In
addition, if the Bank were to demand repayment of the entire outstanding
borrowings under the facility, the Company would be required to identify
alternative financing to satisfy its repayment obligation and to continue its
operations. There can be no assurance that any such alternative funding sources
will be available on a commercially reasonable basis if at all. If it is
unsuccessful in so identifying such financing the Company may be required to
cease operations. The loan agreement with the Bank also contains provisions
which restrict certain activities of the Company, including the declaration of
dividends and also provides for various other restrictive covenants, including
the continuing participation of Rudy A. Slucker, the Chairman of the Board of
Directors and Barry Budilov, the President and Chief Executive Officer, in their
current management positions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Financial Statements.
RISKS RELATED TO SUBSTANTIAL INVENTORY AND ACCOUNTS RECEIVABLE BALANCES. As
of December 31, 1997, the Company had an inventory of approximately $11.7
million consisting principally of eyeglass frames and sunglasses held at its
warehouse for distribution and accounts receivable valued at approximately $9.7
million. The market for eyewear and accessories is subject to the risk of
changing consumer trends. In order to be able to promptly fill orders from
distributors, the Company maintains substantial inventories. In the event that a
significant number of models or accessories do not achieve widespread consumer
acceptance, the Company may be required to take significant price markdowns,
which could have a material adverse effect on the Company's business, prospects,
results of operations or financial condition. The Company's balance sheet as of
December 31, 1997 reflects a reserve against accounts receivable of
approximately $1.9 million which includes approximately $365,000 to cover
returns of goods sold. If the reserve is insufficient to cover the Company's
accounts receivable or if returns exceed the amounts reserved for, the Company
would be required to recognize additional expenses in the future to the extent
of such amounts.
CONTINUING LOSSES FROM RENAISSANCE OPERATIONS; POTENTIAL CLAIMS RELATING TO
PURCHASE OF ASSETS. The Company acquired substantially all of the assets of
Renaissance in February 1997 and only recently coordinated the integration of
the assets relating to the business of Renaissance into the business of the
Company. Renaissance has experienced substantial and increased losses in recent
years. For the Renaissance fiscal years ended October 31, 1996 and 1995,
Renaissance had net losses of approximately $5.6 million and $200,000,
respectively. In addition, net sales for Renaissance declined to approximately
$14.1
5
<PAGE>
million in the Renaissance fiscal year 1996 from approximately $17.4 million in
the Renaissance fiscal year 1995. No assurance can be given that net sales of
products relating to product lines acquired from Renaissance will not continue
to decline. Furthermore, there can be no assurance that the Company will be able
to integrate successfully the assets of Renaissance into the Company's
operations or that Renaissance's operations will not continue to adversely
affect the results of operations of the Company. In connection with the
acquisition of substantially all of the assets of Renaissance from the secured
creditor of Renaissance upon a default by Renaissance of its loan to such
creditor, no liabilities of Renaissance were contractually assumed by the
Company. A number of creditors of Renaissance have instituted collection actions
in court against Renaissance for amounts due to them from Renaissance. The
Company is not a party to any of these actions. To the extent that any creditors
of Renaissance seek recourse against the Company as the purchaser of
substantially all of the assets of Renaissance, the Company may incur
substantial expenses in connection with defending any such actions. Furthermore,
to the extent that any such creditors are successful in asserting any claims
against the Company as a successor to the business of Renaissance or challenge
the acquisition from the secured creditor, the Company could be responsible for
substantial liabilities and its business, prospects, results of operations or
financial condition could be adversely affected. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and Financial
Statements.
RISKS ASSOCIATED WITH MANAGEMENT OF GROWTH, IMPLEMENTATION OF GROWTH
STRATEGY AND POTENTIAL INABILITY TO SUCCESSFULLY INTEGRATE ACQUISITIONS. The
successful implementation of the Company's expansion strategy will be dependent
on, among other things, the continued growth of the designer eyewear and premium
sunglass markets; the Company's ability to develop and introduce new products to
consumers and the marketplace; the Company's ability to identify and obtain
additional licenses for currently popular styles on a timely basis and on
favorable terms; the Company's ability to identify potential acquisition
prospects; the establishment of additional distribution arrangements; the hiring
and retaining of additional marketing, creative and other personnel; and the
successful management of such growth (including monitoring operations,
controlling costs and maintaining effective quality, inventory and service
controls). As the Company continues to grow, there will be additional demands on
the Company's financial, technical and administrative resources. The failure to
maintain and improve such resources or the occurrence of unexpected difficulties
relating to the Company's expansion strategy, could have a material adverse
effect on the Company's business, prospects, results of operations or financial
condition. There can be no assurance that the Company will be able to implement
successfully its business strategy or otherwise expand its operations. The
complete integration and consolidation into the Company of the product lines
acquired upon the acquisition of the assets of Renaissance as well as any future
corporate acquisitions and new product licensing arrangements will require
substantial management, financial and other resources, and could pose
significant pressure on the financial condition and operating results of the
Company. There can be no assurance that the Company's resources will be
sufficient to accomplish such integration, or that the Company will not
experience difficulties with customers, personnel or others. In addition,
although the Company believes that its acquisitions and licensing arrangements
will enhance its competitive position and business prospects, there can be no
assurance that such benefits will be realized or that the combination of the
Company with other companies will be successful. Although the Company regularly
evaluates possible acquisition opportunities, the Company is not a party to any
agreements, commitments, arrangements or understanding with respect to any such
acquisition and there can be no assurance that any such acquisitions will be
effected. See "Use of Proceeds" and "Business--Strategy."
DEPENDENCE ON MAJOR CUSTOMERS. The Company's sales to its five largest
customers represented approximately 62% of its sales in fiscal 1996,
approximately 51% in fiscal 1997 (30% on a pro forma basis during fiscal 1997
giving effect to the acquisitions of substantially all of the assets of Windsor
and Renaissance) and approximately 48% during the nine months ended December 31,
1997. Sales to the Company's top customer, Wal-Mart, accounted for approximately
51% of the Company's sales in fiscal 1996, approximately 35% of its sales in
fiscal 1997 (20% on a pro forma basis during fiscal 1997 giving effect to the
acquisitions of substantially all of the assets of Windsor and Renaissance) and
approximately
6
<PAGE>
37% for the nine months ended December 31, 1997. The Company anticipates that
sales to its top five customers will continue to account for a significant
percentage of its sales. The Company has no long term commitments or contracts
with any of its customers. The loss or decreased sales from one or more of these
customers and in particular, Wal-Mart, would have a material adverse effect on
the Company's business, prospects, results of operations or financial condition.
Furthermore, the inability of any of the Company's customers to satisfy any of
their obligations to the Company at any time or on a timely basis could have a
material adverse effect on the business, prospects, results of operations or
financial condition of the Company. See "Business--Marketing and Advertising."
DEPENDENCE ON LICENSES AND SIGNIFICANT CONTINUING ROYALTY OBLIGATIONS AND
ACQUISITION COSTS. Sales of eyewear under license agreements represented
approximately 35% and 30% of the pro forma sales of the Company and Renaissance
combined sales for fiscal 1996 and 1997, respectively, and 36% for the nine
months ended December 31, 1997. The Company's license agreements generally
require the Company to satisfy minimum purchase requirements or to make annual
royalty payments and advertising expenditures and maintain quality control and
retail distribution commensurate with the licensor's image. Accordingly, certain
licensors are entitled to receive payment from the Company whether or not
specified minimum levels of annual sales for licensed products are met. For the
years ending March 31, 1998 and 1999, the annual aggregate royalty obligations
of the Company under current license agreements will exceed $1 million and
$745,000, respectively, even if the Company were to generate no sales under the
agreements. The license agreements also generally provide that the licensor has
the right to approve products sold pursuant to the license and to terminate the
license if the Company does not satisfy its contractual obligations in any
material respect. Management believes that the value of its licenses depends to
a great extent upon the Company's ability to anticipate, gauge and respond to
changing consumer tastes and the popularity of certain fashion trends and
styles. The agreements licensing to the Company the rights to use certain
trademarks and trade names will terminate on various dates through the year
2000. The Company's successful efforts in developing licensed products and other
factors may result in increased royalty requirements to the Company for
renewals. Although the Company has no reason to believe it will not be able to
renew its licenses upon their respective expiration dates on favorable terms,
the loss of one or more of the licenses, or the decline in popularity of certain
trade names, could have a material adverse effect on the Company's business,
prospects, results of operations or financial condition. The Company's
obligations under employment agreements and consulting agreements with members
of management and its Board of Directors aggregate approximately $500,000 for
the year ending March 31, 1998. In addition, payments under notes,
non-competition and other agreements relating to the acquisition of
substantially all of the assets of Chanuk, Windsor and Renaissance, will
aggregate approximately an additional $375,000 for each of the years ending
March 31, 1998 and March 31, 1999. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements
attached hereto.
DEPENDENCE ON OFFERING PROCEEDS TO IMPLEMENT PROPOSED EXPANSION; NEED FOR
ADDITIONAL FINANCING. The Company intends to continue to expand by identifying
and acquiring the businesses or assets of companies with product lines and
distribution channels that are complementary to those of the Company. The
Company is dependent on the proceeds of this Offering or other financing to
implement its proposed expansion. Although the Company anticipates that the
proceeds of this Offering with the continuing availability of funds under its
line of credit will be sufficient to meet its cash needs for at least the next
12 months, in the event that the Company's plans change, its assumptions change
or prove to be inaccurate or the proceeds of this Offering and future cash flow
proves to be insufficient to fund the Company's expansion plans (due to
unanticipated expenses, delays, problems, difficulties or otherwise), the
Company would be required to seek additional financing sooner than anticipated
or curtail its expansion activities. The Company may determine, depending upon
the opportunities available to it, to seek additional debt or equity financing
to fund the cost of continuing expansion. To the extent the Company finances an
acquisition with a combination of cash and equity securities, any such issuance
of equity securities would result in dilution to the interests of the Company's
stockholders. Additionally, to the extent that the Company incurs indebtedness
or issues debt securities in connection with any acquisition, the Company
7
<PAGE>
will be subject to risks associated with incurring substantial indebtedness,
including the risks that interest rates may fluctuate and cash flow may be
insufficient to pay principal and interest on any such indebtedness. Other than
its Bank line of credit, the Company has no current arrangements with respect
to, or sources of, additional financing, and it is not anticipated that existing
stockholders will provide any portion of the Company's future financing
requirements. There can be no assurance that additional financing will be
available to the Company on reasonable terms, if at all. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Certain Relationships and Related Party Transactions."
CONSUMER PREFERENCES AND INDUSTRY TRENDS. The fashion eyewear industry is
characterized by the frequent introduction of new products and services, and is
subject to changing consumer preferences and industry trends, which may
adversely affect the Company's ability to plan for future design, development
and marketing of its products and services. The Company's success will depend on
the Company's ability to anticipate and respond to these and other factors
affecting the industry. Moreover, if a downturn occurs in the economy, the
fashion industry including fashion eyewear, may be particularly vulnerable.
There can be no assurance that the Company will be able to anticipate and
respond quickly and effectively to changing consumer preferences and industry
trends or that competitors will not develop and commercialize new products that
render the Company's products and services obsolete or less marketable. See
"Business-- Industry Background" and "--Competition."
DEPENDENCE ON LIMITED NUMBER OF SUPPLIERS. The Company is currently
dependent on a limited number of third-party manufacturers for its entire supply
of eyewear. The Company does not have an agreements with any of such
manufacturers and purchases eyewear pursuant to purchase orders placed from time
to time in the ordinary course of business. The Company is substantially
dependent on the ability of its manufacturers to provide adequate inventories of
quality eyewear on a timely basis and on favorable terms. The Company's
manufacturers also produce eyewear for certain of the Company's competitors, as
well as other large customers, and there can be no assurance that such
manufacturers will have sufficient production capacity to satisfy the Company's
inventory or scheduling requirements during any period of sustained demand, or
that the Company will not be subject to the risk of price fluctuations and
periodic delays. Although the Company believes that its relationship with its
manufacturers is satisfactory and that numerous alternative sources for its
eyewear are currently available, the loss of services of such manufacturers or
substantial price increases imposed by such manufacturers, in the absence of
readily available alternative sources of supply, would have a material adverse
effect on the Company's business, prospects, results of operations or financial
condition. See "Business--Sources of Supply."
RISKS RELATING TO THE USE OF FOREIGN SUPPLIERS. The Company imports
substantially all of its frames from foreign suppliers located in Taiwan, Korea,
Japan, Germany and Italy, and, therefore, its prices for and supply of those
frames may be adversely affected by changing economic conditions
internationally. The Company may also be subject to other risks associated with
its international relationships, including tariff regulations and requirements
for export licenses, unexpected changes in regulatory requirements, potentially
adverse tax consequences, economic and political instability, restrictions on
repatriation of earnings and the burdens of complying with a wide variety of
foreign laws. In addition, the laws of certain countries may not protect the
Company's products and intellectual property rights to the same extent as do the
laws of the United States. There can be no assurance that such factors will not
have a material adverse effect on the Company's future sales or licenses and,
consequently, on the Company's business, prospects, results of operations or
financial condition as a whole.
USE OF PROCEEDS TO REPAY DEBT; BROAD DISCRETION IN APPLICATION OF PROCEEDS;
BENEFITS TO INSIDERS. Approximately $4,144,000 (74%) will be used for the
repayment of bank indebtedness by reducing the Company's debt under its line of
credit and $894,000 (16%) of the estimated net proceeds of this offering have
been allocated to working capital and general corporate purposes. Accordingly,
the Company will have broad discretion as to the application of the proceeds of
the offering and capital available under its
8
<PAGE>
revolving line of credit. Additionally, approximately $576,000 (10%) of the
proceeds will be used to repay indebtedness to Rudy A. Slucker, the Company's
Chairman of the Board of Directors, incurred by the Company from February 1997
to November 10, 1997 to assist the Company in financing its costs relating to
the acquisition of substantially all of the assets of Renaissance and the
integration of the business of Renaissance into the business of the Company. The
Company is also indebted to Mr. Slucker and Barry Budilov, the President and
Chief Executive Officer of the Company, to the extent of approximately $1.2
million under the Convertible Notes, which bear interest at the rate of 8% per
annum. In addition, since Rudy Slucker and Mr. Budilov have each guaranteed up
to $1.1 million of such debt, the likelihood of a default and a call on their
guarantee is reduced to the extent of the reduction in the amount of the debt.
In addition, Messers. Slucker and Budilov have agreed to increase their personal
guarantees by $375,000 each if the Company fails to complete this public
offering by February 20, 1998. Accordingly, upon the completion of this
Offering, the personal obligations of Messrs. Slucker and Budilov will be
reduced further. Finally, the Company's obligations under employment agreements
and consulting agreements with members of management and its Board of Directors,
including Messrs. Slucker and Budilov, aggregate approximately $470,000 (8%)
over the next 12 months. See "Use of Proceeds."
HIGHLY COMPETITIVE MARKET. The prescription and non-prescription eyewear
markets are highly competitive. The major competitive factors in the eyewear
market include, but are not limited to, fashion trends, brand recognition,
method of distribution, the number and range of products offered, an increase in
contact lens users and the increase acceptance of laser surgery as a viable
method to correct or assist poor vision. The Company competes with a number of
established companies, including Luxotica, Safilo, Marchon, and Bausch & Lomb,
which collectively control a substantial portion of the premium market segment,
other large companies and with several companies having smaller but significant
market shares. Several of these companies have substantially greater resources
and better name recognition than the Company and sell their products through
broader and more diverse distribution channels. In addition, several of these
competitors have their own manufacturing facilities. The Company could also face
competition from new competitors, including established branded consumer
products companies, such as Nike, Inc., that also have greater financial and
other resources than the Company. In addition, as the Company expands
internationally, it will face substantial competition from companies that have
already established their products in international markets and consequently
have significantly more experience in those markets than the Company. In
addition, to retain and increase its market share, the Company must continue to
be competitive in the areas of quality and performance, technology, obtaining
attractive licenses, customer service and price, of which there can be no
assurance. See "Business--Competition."
DEPENDENCE ON NEW PRODUCT INTRODUCTIONS, TRADEMARKS AND TRADE NAMES.
Although a substantial portion of the Company's product lines are designed to be
"traditional" designs, that are not necessarily subject to changing fashion
trends, the eyewear industry is nevertheless subject to continuing broader as
well as often subtle shifts in consumer taste and preferences. The Company
offers in excess of 700 eyewear styles at any given time and may introduce up to
100 new styles in any given year. The sustainability of the Company's growth
will depend, in part, on its continued ability to develop, identify and
introduce innovative designs and products and on the acceptance of such designs
and products by consumers. Innovative designs are often not successful and
successful product designs can be displaced by other product designs introduced
by competitors that shift market preferences in their favor. Sunglasses are
particularly subject to shifting consumer tastes and may have relatively short
life cycles, thereby requiring the Company to introduce new products more
frequently. In addition, competitors may follow the Company's introduction of
successful products with similar product offerings, thereby decreasing the
Company's market share. If the Company misjudges the market for a particular
product, particularly its sunwear line of products, the Company's sales may be
adversely affected and it may be faced with excess inventories and there may be
an adverse effect on the Company's business, prospects, results of operations or
financial condition. As a result of these and other factors, there can be no
assurance that the Company will successfully maintain or increase its market
share. In addition, the Company owns and has obtained licenses to various
domestic and international trademarks related to its products and business.
These
9
<PAGE>
licenses expire at various times through the year 2000. The loss of one or more
of the trademarks could have a material adverse effect on the Company's
business, prospects, results of operations or financial condition. Further, if
the Company had to defend against any litigation proceedings, suits or claims
relating to its intellectual property rights or to its intellectual property or
institute any action to protect such rights, the Company's involvement in such
action could have a material adverse effect on the Company's business,
prospects, results of operations or financial condition.
DEPENDENCE UPON KEY PERSONNEL AND CONSULTANTS. The Company is dependent on
certain of its executive officers, including Barry Budilov, the Company's
President and Chief Executive Officer, and Rudy A. Slucker, the Company's
Chairman of the Board. The Company intends to obtain and become the beneficiary
of key person life insurance policies in the face amount of $1,000,000 on the
lives of each of Mr. Budilov and Mr. Slucker. The loss of the services of such
persons, or an inability to attract, retain and motivate additional highly
skilled management personnel, could materially adversely effect the Company's
business, prospects, results of operations or financial condition. There can be
no assurance that the Company will be able to retain its existing personnel or
attract and retain additional qualified employees. Mr. Slucker is employed on a
full time basis by another corporation and provides limited amounts of
consulting services to the Company's business, on an as needed basis. See
"Management."
SEASONALITY. The Company believes that its business is subject to seasonal
trends, resulting in lower sales of prescription eyewear during its third
quarter (the three months ended December 31) and higher sales of sunglass
products during the spring. Accordingly, sales and results of operations may
fluctuate from month to month throughout the year and quarterly results may not
always be indicative of the entire year.
CONTROL OF THE COMPANY BY OFFICERS AND DIRECTORS. Immediately following
this Offering, Rudy A. Slucker and Barry Budilov will beneficially own an
aggregate of approximately 77% of the outstanding shares of the Company's Common
Stock. As a result, such persons, acting together, have the ability to exercise
control over all matters requiring stockholder approval. In addition, the
Company's revolving line of credit includes a provision that requires the
continuing involvement and control of the Company by current management as a
condition to the continuing availability of the revolving line of credit. The
concentration of ownership could delay or prevent a change in control of the
Company. See "Management" and "Principal Stockholders."
DILUTION. Purchasers of the Shares offered hereby will suffer an immediate
and substantial dilution of $4.71 per Share (78.5%) from the initial public
offering price (assuming an initial public offering price of $6.00 per Share).
In addition, investors purchasing Shares in the Offering will incur additional
dilution to the extent that stock options are exercised. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of the Offering, the
Company will have 4,700,000 shares of Common Stock outstanding, as well as
options and warrants to purchase an additional 649,333 shares of Common Stock
(including the Representatives' Warrants). An additional 196,834 shares of
Common Stock are issuable upon the conversion of the Convertible Notes. The
1,200,000 Shares sold in the Offering will be freely tradable without
restriction or further registration under the Securities Act of 1933, as amended
(the "Securities Act"). The 3,500,000 shares of Common Stock owned by existing
stockholders are deemed to be "restricted securities," as that term is defined
in Rule 144 promulgated under the Securities Act, in that such shares were
issued in a private transaction not involving a public offering. All of the
3,500,000 shares of Common Stock held by existing stockholders will be eligible
for sale under Rule 144 ninety days after the Offering. The Company and each of
the Company's directors, officers and shareholders have agreed not to offer,
assign, issue, sell, hypothecate or otherwise dispose of any shares of Common
Stock or any securities exercisable for or convertible into shares of Common
Stock, other than with respect to up to 300,000 shares of Common Stock, for a
period of 18 months after the date of this Prospectus without the prior, written
consent of the Representatives. No prediction can be made as to the effect, if
any, that sales of securities or the availability of securities for sale will
have on the market price of the Shares prevailing from time to time. The holders
of the Representatives' Warrants will have
10
<PAGE>
certain demand and "piggyback" registration rights with respect to such warrants
and the shares of Common Stock underlying such warrants commencing one year
after the date hereof. If the Underwriter should exercise their registration
rights to effect a distribution of the Representatives' Warrants or the Warrant
Shares, the Representatives, prior to and during such distribution, will be
unable to make a market in the Company's securities, which may therefore be
limited. If the Representatives cease making a market in the Common Stock, the
Company could lose the ability to list the Common Stock on the Pacific Stock
Exchange, Chicago Stock Exchange or the OTC because of each such market's
requirement of at least two market makers, the market and market prices for the
Common Stock may be materially adversely affected, and holders thereof may be
unable to sell or otherwise dispose of shares of Common Stock. See "Shares
Eligible For Future Sale" and "Underwriting."
NO PRIOR MARKET; DETERMINATION OF OFFERING PRICE. Prior to the Offering,
there has been no public market for the Company's Common Stock. Although the
Company is seeking listing of the Common Stock on the Pacific Stock Exchange and
the Chicago Stock Exchange, there can be no assurance that such application will
be approved or that an active public market will develop. The initial public
offering price has been determined by negotiation between the Company and the
Representatives. There can be no assurance that the initial public offering
price will correspond to the price at which the Common Stock will trade in the
public after the Offering or that an active trading market for the Common Stock
will develop and continue after the Offering. See "Underwriting."
DIFFICULTY OF TRADING "PENNY STOCKS." If the Company is unable to obtain
listing of the Common Stock on the Pacific Stock Exchange and the bid price of
the Company's Common Stock falls below $5.00 per share, and under certain other
circumstances, the Company's Common Stock may be subject to rules that impose
additional sales practice and market making requirements on broker-dealers who
sell or make a market in lower-priced securities which constitute "penny
stocks". The additional requirements will generally apply if sales are made to
persons other than established customers (as defined in such rules) and
accredited investors (generally, institutions and, for individuals, an investor
with assets in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 together with such investors' spouse). For transactions covered by
these rules, the broker-dealer must make a special suitability determination for
the purchaser and must have received the purchaser's written consent to the
transaction prior to the purchase. Consequently, many broker-dealers may be
unwilling to sell or make a market in the Company's securities because of the
added disclosure requirements, thereby making it more difficult for purchasers
in this Offering to resell the Common Stock in the secondary market.
UNCERTAIN PUBLIC MARKET FOR THE COMPANY'S COMMON STOCK. The Company has
applied to list the Common Stock on the Pacific Stock Exchange and Chicago Stock
Exchange. There can be no assurance that either of such listing will be
approved, or that a market for the Common Stock will develop or be sustained.
The investment community could show little or no interest in the Company in the
future. As a result, purchasers of the Company's securities may have difficulty
in selling such securities should they desire to do so. If neither of the
Pacific Stock Exchange or Chicago Stock Exchange listing applications are
approved, the Company will apply to list its Common Stock on the NASD's OTC
Bulletin Board Service. It is substantially more difficult for investors to
dispose of securities or to obtain accurate quotations as to securities in the
OTC Bulletin Board Service. In the event the Company's Common Stock is not
approved for listing on the Pacific Stock Exchange or Chicago Stock Exchange or
the Company's Common Stock is subsequently delisted from the Pacific Stock
Exchange or Chicago Stock Exchange, the Company intends to use its best efforts
to list its Common Stock on the OTC Bulletin Board Service.
POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Common Stock
may be highly volatile. Factors such as fluctuations in the Company's operating
results, announcements of new products by the Company or its competitors,
developments with respect to trademarks or proprietary rights, changes in stock
market analyst recommendations regarding the Company, other companies selling
similar products and general market conditions may have a significant effect on
the market price of the Common Stock. In addition, the stock market has
periodically experienced significant price and volume fluctuations unrelated
11
<PAGE>
to operating performance of particular companies. These broad market
fluctuations may adversely affect the market price of the Common Stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Underwriting."
ABSENCE OF DIVIDENDS. The Company's current policy is to retain earnings
for use in its business and, accordingly, the Company does not intend to pay
cash dividends on its Shares in the foreseeable future. Furthermore, the
Company's credit facility with CoreStates Bank restricts the payment of cash
dividends while amounts are outstanding under the facility. See "Dividend
Policy."
ELIMINATION OF LIABILITY FOR DIRECTORS. The Company's Articles of
Incorporation limit the liability of a director of the Company to the Company
and its stockholders for monetary damages for breach of fiduciary duty to the
fullest extent permitted by the Delaware General Corporate Law ("DGCL"). The
DGCL permits elimination of a director's personal liability for monetary damages
for breach of fiduciary duty, except: (i) for breach of the director's duty of
loyalty to a company or its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the law;
(iii) for acts specified in Section 174, DGCL; and (iv) for transactions in
which the director directly or indirectly derived an improper personal benefit.
As a result of such provisions, the rights of Company stockholders to recover
monetary damages from directors of the Company for certain breaches of
directors' fiduciary duties may be significantly limited. See
"Management--Indemnification of Directors and Executive Officers and Limitation
of Liability."
BLANK CHECK PREFERRED STOCK; POSSIBLE ANTI-TAKEOVER EFFECTS; ISSUANCE OF
SERIES A PREFERRED STOCK. The Company's Articles of Incorporation authorizes
the Board of Directors to issue up to 1,000,000 shares of Preferred Stock, $.01
par value per share. The Preferred Stock may be issued in one or more series,
the terms of which may be determined at the time of issuance by the Board of
Directors, without further action by stockholders, and may include, among other
things, voting rights (including the right to vote as a series on particular
matters), preferences as to dividends and liquidation, conversion and redemption
rights, and sinking fund provisions. The issuance of any such preferred stock
could materially adversely affect the rights of holders of Common Stock and,
therefore, could reduce the value of the Common Stock. In addition, specific
rights granted to future holders of preferred stock could be used to restrict
the Company's ability to merge with, or sell its assets to a third party,
thereby preserving control of the Company's existing stockholders. The issuance
of the preferred stock may, in some circumstances, deter or discourage takeover
attempts and other changes in control of the Company, including takeovers and
changes in control which some holders of the Common Stock may deem to be in
their best interests and in the best interest of the Company, by making it more
difficult for a person who has gained a substantial equity interest in the
Company to obtain voting control or to exercise control effectively thereby
preserving control of the Company by the current controlling stockholders. See
"Description of Securities."
SETTLED NASD INVESTIGATION OF H.J. MEYERS. On July 16, 1996, the National
Association of Securities Dealers, Inc. issued a Notice of Acceptance, Waiver
and Consent (the "AWC") whereby H.J. Meyers was censured and ordered to pay
fines and restitution to retail customers in the amount of $250,000 and
approximately $1.025 million, respectively. The AWC was issued in connection
with claims by the NASD that H.J. Meyers charged excessive markups and markdowns
in connection with the trading of four securities originally underwritten by
H.J. Meyers. The activities in question occurred between December 1990 and
October 1993. H.J. Meyers has informed the Company that the fines and refunds
will not have a material adverse effect on H.J. Meyers' operations and H.J.
Meyers has effected remedial measures to help ensure that the subject conduct
does not recur.
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Shares offered by the
Company hereby are estimated to be $5,614,000 (or $6,553,600 if the Underwriters
over-allotment option is exercised in full), based on an assumed initial public
offering price of $6.00 per share and after deducting the estimated underwriting
discounts and offering expenses payable by the Company. The Company intends to
apply the proceeds of the Offering substantially as follows:
<TABLE>
<CAPTION>
USE OF PROCEEDS AMOUNT PERCENTAGE
- ---------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Repayment of indebtedness....................................... $ 4,720,000 84%
General corporate purposes...................................... 894,000 16%
Total......................................................... $ 5,614,000
</TABLE>
The Company intends to use the net proceeds from the Offering over the next
12 months for reduction of approximately $4,144,000 (74% of net proceeds) of the
Company's bank debt and repayment of approximately $576,000 (10% of net
proceeds) of indebtedness to Rudy A. Slucker, the Chairman of the Board of
Directors of the Company; and general corporate purposes, including for working
capital and to finance potential acquisitions ($894,000, 16% of net proceeds).
The Company intends to use the funds available upon the partial repayment of its
line of credit for the expansion of sales and marketing activities, for the
purchase of inventory and for general corporate purposes. A portion of the
Company's working capital will be used to satisfy the Company's obligations
under employment agreements and consulting agreements with members of management
and its Board of Directors which aggregate approximately $470,000 (8% of net
proceeds) over the next 12 months. In addition the Company will make interest
payments of an aggregate of approximately $94,400 over the next 12 months on the
Convertible Notes to Mr. Slucker and Barry Budilov, the Company's President. Any
proceeds from the exercise of the Underwriters' over-allotment option will be
added to working capital and may be used to finance potential acquisitions.
The debt that is being repaid from the proceeds of this Offering is
comprised of (i) $4,144,000 of principal, interest and fees to CoreStates Bank
which reflects a portion of the amounts outstanding to such bank and (ii)
$576,000 to Rudy A. Slucker. The CoreStates Bank debt is pursuant to a demand
note that bears interest at an annual rate equal to the prime rate (8.5% at
December 31, 1997). The debt to Mr. Slucker was incurred between February 4,
1997 and February 1, 1998 to assist the Company in financing its costs relating
to the acquisition of substantially all of the assets of Renaissance and the
integration of the business of Renaissance into the Company and for working
capital. The loan from Mr. Slucker is repayable upon demand and bears interest
at the rate of 8% per annum. The cash used by the Company from its loan
facilities has been used by the Company to fund working capital, including,
among other things, to pay salaries of management to pay for costs associated
with moving the Company's facilities, and to pay interest to the Company's
principal stockholders on outstanding debt. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Certain
Relationships and Related Party Transactions."
The foregoing represents the Company's best estimate of the allocation of
the net proceeds of this Offering based upon the Company's currently
contemplated operations, business plans, as well as current economic and
industry conditions, and is subject to reapportionment among the categories
listed above or to new categories in response to, among other things, changes in
the Company's plans, unanticipated future revenues and expenditures, and
unanticipated industry conditions. The Company's management will maintain broad
discretion as to the allocation of proceeds. The amount and timing of
expenditures will vary depending on a number of factors, including, without
limitation, the results of operations and changing industry conditions. To the
extent deemed appropriate by management, the Company may acquire fully developed
products or businesses that are complementary to the Company's operations and
which, in the opinion of management, facilitate the growth of the Company and
enhance the market
13
<PAGE>
penetration or reputation of its products. To the extent that the Company
identifies any such opportunities, an acquisition may involve the expenditure of
significant cash or the issuance of Common Stock. Any expenditure of cash will
reduce the amount of cash available for working capital or marketing and
advertising activities. Although the Company has been engaged in discussions
with a number of potential candidates, the Company currently has no commitments,
understandings or arrangements with respect to any such acquisition. The
Company's current corporate policy would not prohibit any such transactions
between the Company and any business or company in which management or any
affiliate or associate of any member of management have an ownership interest,
but would require that the terms of any such transaction be on terms no less
favorable to the Company as those that could be obtained from an independent
third party.
Pending application of the net proceeds, the Company intends to invest the
net proceeds in short-term investment grade, interest-bearing securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock and presently does not intend to do so in the foreseeable future.
Management intends to retain all available earnings to finance and expand its
business. Declaration of dividends in the future will be at the discretion of
the Board of Directors and will depend on the Company's future earnings, capital
requirements, financial position, contractual restrictions, and other factors
deemed relevant by the Company's Board of Directors. The Company's loan
agreement with CoreStates Bank contains restrictions on the payment of
dividends. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
14
<PAGE>
CAPITALIZATION
The following table sets forth the actual short-term debt and capitalization
of the Company at December 31, 1997 and as adjusted to give effect to the sale
of the Shares offered hereby at an assumed initial public offering price of
$6.00 per Share and the repayment of certain indebtedness with the proceeds
therefrom. See "Use of Proceeds" and "Capitalization." This table should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements and notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------
<S> <C> <C>
AS
ACTUAL ADJUSTED(1)
---------- -------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Short-term debt........................................................................ $ 13,771 $ 9,157
---------- -------------
---------- -------------
Long-term debt......................................................................... 370 370
Non-current notes payable--stockholders/officer(2)..................................... 1,181 1,181
Stockholders' equity:
Preferred Stock, $.01 per value; 1,000,000 shares authorized, none issued............ -- --
Common stock, $.01 par value; 20,000,000 shares authorized; 3,500,000 shares 35
outstanding 4,700,000 shares issued and outstanding
as adjusted (3).................................................................... 47
Additional paid-in capital........................................................... 187 5,789
Unearned portion of compensatory stock options....................................... (156) (156)
Retained earnings.................................................................... 474 474
---------- -------------
Total stockholders' equity......................................................... 540 6,154
---------- -------------
Total capitalization............................................................. $ 2,091 $ 7,705
---------- -------------
---------- -------------
</TABLE>
- ------------------------
(1) Includes the repayment of $4,144,000 owed by the Company to CoreStates Bank
pursuant to a revolving line of credit agreement and $576,000 of
indebtedness ($106,000 of which was borrowed after December 31, 1997), to
Rudy A. Slucker, the Chairman of the Board of Directors of the Company.
(2) Represents the Convertible Notes.
(3) Excludes (i) 529,333 shares of Common Stock issuable upon exercise of
outstanding options; (ii) 120,000 shares of Common Stock issuable upon
exercise of the Representatives' Warrants and (iii) 196,834 shares of Common
Stock issuable pursuant to the Convertible Notes. See "Certain Relationships
and Related Party Transactions" and "Underwriting."
15
<PAGE>
DILUTION
At December 31, 1997, the net tangible book value of the Company was
approximately $23,000, or $.01 per Share. "Net tangible book value per share"
represents the amount of total tangible assets of the Company less total
liabilities of the Company, divided by the number of shares of Common Stock then
outstanding. "Dilution per share" represents the difference between the price to
be paid by new investors and the net tangible book value per share of Common
Stock outstanding after the Offering. After giving effect to the receipt of the
net proceeds from the sale by the Company of the Shares offered hereby at an
assumed initial public offering price of $6.00 per share, the net tangible book
value of the Company at December 31, 1997 would have been approximately
$6,074,000, or $1.29 per Share. This represents an immediate increase in net
tangible book value of $1.28 per share to existing stockholders and an immediate
dilution of $4.71 per share of Common Stock to new stockholders purchasing
Shares offered hereby at an assumed initial offering price of $6.00 per Share,
as illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price......................... $ 6.00
Net tangible book value per share at December 31, 1997...... $ .01
Increase per share attributable to sale of Shares in the
Offering.................................................. $ 1.28
---------
Net tangible book value per share after the Offering.......... $ 1.29
---------
Dilution to new investors this Offering....................... $ 4.71
---------
---------
</TABLE>
The following table summarizes on a pro forma basis as of December 31, 1997
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by the
existing stockholders and by new investors purchasing Shares in the Offering at
an assumed initial offering price of $6.00 per Share (before deducting the
estimated underwriting discount and offering expenses payable by the Company).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- --------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Existing Stockholders.................................. 3,500,000 74.47% $ 1,000 .01% $ .0003
New Investors.......................................... 1,200,000 25.53% 7,200,000 99.99% $ 6.00
---------- --------- ------------- ---------
Total.................................................. 4,700,000 100.00% $ 7,201,000 100.00%
---------- --------- ------------- ---------
---------- --------- ------------- ---------
</TABLE>
The above discussion and tables assume no exercise of any outstanding stock
options. See "Capitalization" and "Underwriting."
If the over-allotment option is exercised in full, the net tangible book
value per share after the Offering would be approximately $1.44 per share,
resulting in dilution to new investors of $4.56 per share. See "Capitalization"
and "Underwriting".
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW. The Company designs, markets, sources and distributes high
quality prescription eyeglass frames and non-prescription sunglasses to
department and specialty stores, optical chains and eyewear boutiques throughout
the United States and the world. On May 3, 1995 (inception), the Company was
organized and on May 10, 1995, the Company acquired substantially all of the
assets and assumed certain of the liabilities of Chanuk. Chanuk was engaged in
substantially the same business as the Company and a majority stockholder of
Chanuk is the mother-in-law of the President of the Company. The Company has
expanded through the acquisition of other companies in related and complementary
businesses and through the increase of its sales base. On June 26, 1996 the
Company acquired substantially all of the assets and assumed certain of the
liabilities of Windsor and on February 26, 1997, the Company acquired from a
bank substantially all of the assets of Renaissance. The bank had foreclosed on
Renaissance upon default of its loan agreement. In connection with the
acquisition, the Company paid the bank $3,446,000. The Company also entered into
a consulting agreement with the former owner of Renaissance which provided for
annual aggregate payments of $200,000 per year for five years. In addition,
under a consulting agreement, the Company granted the former owner of
Renaissance options to purchase 180,833 shares of Common Stock of the Company
for $3.00 per share. Following the acquisition, the Company paid an aggregate of
approximately $400,000 to various creditors of Renaissance deemed to be
necessary to preserve the value of the acquired assets.
The results of operations for the Company for the period from inception to
March 31, 1996 ("Fiscal 1996") gives effect to the operations of the Company
independent of Windsor and Renaissance. The operations of the Company for the
year ended March 31, 1997 include the results of operations of the Company
during such period, including nine months of operations attributable to the
operations of Windsor as well as approximately one month of operations of
Renaissance. The pro forma condensed statement of operations for the year ended
March 31, 1997 gives effect to the operations for each of the Company,
Renaissance and Windsor as if the acquisitions of substantially all of the
assets of Renaissance and Windsor had occurred on April 1, 1996. The operations
of Renaissance give effect to its conduct as a stand-alone business and do not
reflect the anticipated efficiencies of scale or other cost reduction measures
being implemented by the Company. However, no assurance can be given that any
such efficiencies will be achieved. The discussion of the liquidity and capital
resources of the Company at March 31, 1997, includes information with respect to
the Company that gives effect to both the acquisition of Renaissance and Windsor
since the respective acquisitions occurred prior to such date.
The Company has, from time to time, experienced cash flow shortfalls and has
been required to borrow substantial amounts from banks. The Company had total
liabilities of approximately $23.0 million at December 31, 1997, approximately
$20.6 million of which are current which amounts have increased to date. Of such
debt, approximately $13.1 million is payable to CoreStates Bank (the "Bank")
pursuant to the Company's revolving line of credit. During the year ended March
31, 1997, and the nine months ended December 31, 1997, the Company incurred
$738,000 and $972,000, respectively, in net interest expenses. The revolving
line of credit is secured by substantially all of the assets of the Company. The
credit facility is represented by demand notes payable to the Bank under which
the Bank may demand repayment at any time. The Company intends to reduce
outstanding borrowings from the Bank by approximately $4.1 million from the
proceeds of this Offering. The Company anticipates that even after the proposed
repayment of a portion of the Company's indebtedness from the proceeds of this
Offering, the Company's outstanding indebtedness and ongoing interest expense
will continue to be significant. In addition, if the Bank were to demand
repayment of the entire outstanding borrowings under the facility, the Company
would be required to identify alternative financing to satisfy its repayment
obligation and to continue its operations. There can be no assurance that any
such alternative funding sources will be available on a commercially reasonable
basis if at all. If it is unsuccessful in so identifying such financing the
Company may be required to cease operations. The loan agreement with the Bank
also contains provisions which
17
<PAGE>
restrict certain activities of the Company, including the declaration of
dividends and also provides for various other restrictive covenants, including
the continuing participation of Rudy A. Slucker, the Chairman of the Board of
Directors and Barry Budilov, the President and Chief Executive Officer, in their
current management positions.
YEAR ENDED MARCH 31, 1997 ("FISCAL 1997") COMPARED TO FISCAL 1996. Net
sales for Fiscal 1997 were approximately $16.5 million as compared to
approximately $11.0 million for Fiscal 1996. The increase in sales was
attributable to the addition of the product lines and sales resulting from the
acquisition of Windsor in June 1996 as well as to increases in sales of existing
product lines of the Company. In addition, Fiscal 1996 reflects approximately
one less month of operations than Fiscal 1997.
Cost of sales for Fiscal 1997 were approximately $8.6 million (approximately
52% of net sales) as compared to approximately $6.8 million for Fiscal 1996
(approximately 62% of net sales) for Fiscal 1996. Cost of sales includes the
purchase price for eyeglass frames, in addition to the costs of the Company of
importing such frames. Cost of sales decreased from 1997 to 1996 as a percentage
of net sales because the Company was able to identify lower cost sources of
manufacturing as its sales volume increased and established efficiencies of
scale in connection with the distribution and maintenance of its inventories.
Selling, general and administrative expenses, consisting of advertising,
marketing, accounting and salaries of officers, increased from approximately
$4.3 million (approximately 39% of net sales) for Fiscal 1996 to approximately
$6.1 million (approximately 37% of net sales) for Fiscal 1997. Selling, general
and administrative expenses increased in aggregate dollar amounts reflecting
increased sales and marketing costs and increased administrative costs relating
to the acquisition of substantially all of the assets of Windsor and Renaissance
and the increase in accounting and overhead expense relating to the introduction
of new product lines.
Income from operations increased from a loss of approximately $79,000
(approximately .7% of net sales) for Fiscal 1996 to income of approximately $1.8
million (approximately 10.7% of net sales) during Fiscal 1997, reflecting the
increased sales by the Company from its pre-existing base of customers as well
as the addition of the Windsor operations and a decrease in cost of sales.
Interest expense increased from approximately $474,000 for Fiscal 1996 to
approximately $742,000 during Fiscal 1997, reflecting the increased borrowing by
the Company both to finance the acquisition of Windsor, to finance the growth of
the Company's operations and to finance the increase in the Company's inventory
necessary to allow the Company to provide improved delivery capabilities for its
increase in customer base.
NINE MONTHS ENDED DECEMBER 31, 1997 ("1997 NINE MONTHS") COMPARED TO NINE
MONTHS ENDED DECEMBER 31, 1996 ("1996 NINE MONTHS"). Net sales for the 1997
Nine Months were approximately $17.5 million as compared to approximately $11.7
million for the 1996 Nine Months. The increase in sales was attributable to the
addition of the product lines and sales resulting from the acquisition of
Windsor in June 1996 and Renaissance in February 1997, as well as to increases
in sales of existing product lines of the Company.
Cost of sales for the 1997 Nine Months were approximately $7.9 million
(approximately 45% of net sales) as compared to approximately $6.1 million for
the 1996 Nine Months (approximately 52% of net sales). Cost of sales includes
the purchase price for eyeglass frames, in addition to the costs to the Company
of importing such frames. Cost of sales decreased in 1997 compared to 1996 as a
percentage of net sales because the Company was able to identify lower cost
sources of manufacturing as its sales volume increased. The Company believes
that the gross profit percentage achieved during the 1997 Nine Months is
indicative of what it expects to achieve for the full fiscal year.
Selling, general and administrative expenses, consisting principally of
advertising, marketing, accounting and salaries of officers, increased from
approximately $4.5 million (approximately 39% of net sales) for the 1996 Nine
Months to approximately $7.9 million (approximately 45% of net sales) for the
1997 Nine
18
<PAGE>
Months. Selling, general and administrative expenses increased as a result of
increased sales and marketing costs and increased administrative costs relating
to the acquisition of substantially all of the assets of Windsor and Renaissance
and the increase in accounting and overhead expense relating to the introduction
of new product lines. Selling, general and administrative expenses during the
1997 Nine Months includes approximately $766,000 relating to redundant costs of
operating Renaissance in a separate facility through July 1997, consisting
primarily of duplicate overhead and personnel expenses incurred prior to the
consolidation of the Company's operations into one location as well as actual
costs related to the relocation. The Company expects that, in future quarters,
with the addition of Renaissance, its selling, general and administrative
expenses will decline as a percentage of net sales as it achieves increased
efficiencies of scale.
Income from operations increased from approximately $1.1 million
(approximately 9% of net sales) for the 1996 Nine Months to approximately $1.7
million (approximately 10% of net sales) during the 1997 Nine Months, reflecting
the increased sales by the Company from its pre-existing base of customers as
well as the addition of the Windsor and Renaissance operations and a decrease in
cost of sales partially offset by an increase in overhead costs.
Interest expense increased from approximately $442,000 for the 1996 Nine
Months to approximately $972,000 during the 1997 Nine Months, reflecting the
increased borrowing by the Company both to finance the acquisition of Windsor
and Renaissance, to finance the growth of the Company's operations and to
finance the increase in the Company's inventory necessary to allow the Company
to provide improved delivery capabilities for its increase in customer base.
LIQUIDITY AND CAPITAL RESOURCES. At December 31, 1997, the Company had
working capital of approximately $1.6 million. The Company's total current
assets at December 31, 1997 of approximately $22.2 million includes accounts
receivable of approximately $9.7 million and inventories of approximately $11.7
million. The Company's accounts receivable reflects an allowance for doubtful
accounts of approximately $1.9 million. The Company's inventories consist
principally of eyeglass frames and sunglasses held at its warehouse for
distribution. The market for eyewear and accessories is subject to the risk of
changing consumer trends. In order to be able to promptly fill orders from
distributors, the Company maintains a significant level of inventory. In the
event that a significant number of particular models or accessories does not
achieve widespread consumer acceptance, the Company may be required to take
significant price markdowns, which could have a material adverse effect on the
business results of operations and financial condition of the Company. However,
the Company believes that current reserves adequately reflect the Company's
exposure for reduction in the value of its inventory and does not anticipate any
material write-downs of inventory in the near future.
The Company's current liabilities as of December 31, 1997 include
approximately $13.1 million relating to its revolving line of credit with
CoreStates Bank. The Company has used its line of credit to fund its continuing
operations, to fund its increased inventory and to fund the acquisitions of
Windsor and Renaissance. The revolving line of credit expires annually on June
1st and is automatically renewed for one year periods and provides for a maximum
borrowing amount of $13 million. Indebtedness under the line accrues interest at
the prime rate (8.5% at December 31, 1997) and, is collateralized by
substantially all of the assets of the Company. Rudy A. Slucker, the Chairman of
the Board of Directors of the Company, and Barry Budilov, the President of the
Company, have each provided personal guarantees for the line of credit for up to
$1.1 million of such debt. In addition, Messrs. Slucker and Budilov have agreed
to increase their present guarantees by $375,000 each if the Company fails to
complete this public offering by February 20, 1998. Accordingly, upon the
completion of this Offering, the personal obligations of Messrs. Slucker and
Budilov will be reduced further. The Company intends to repay approximately $4.1
million of this debt from the proceeds of this Offering, including a transaction
fee of $100,000 which relates to the acquisition of Renaissance, which is
payable to CoreStates Bank upon the closing of this Offering. The revolving line
of credit restricts the payment of dividends to stockholders and provides for
various restrictive covenants, including the continuing participation of Rudy A.
Slucker and Barry Budilov in their current management
19
<PAGE>
positions. The Company has also borrowed an aggregate of $576,000 from Mr.
Slucker from February 4, 1997 through February 1, 1998 to assist the Company in
financing its costs relating to the acquisition of substantially all of the
assets of Renaissance and the integration of the business of Renaissance into
that of the Company and for working Capital. The loan is payable on demand with
interest at the rate of 8% per annum. The Company will repay the debt upon the
closing of the Offering.
At December 31, 1997, the Company's current liabilities also include
approximately $4.4 million of accounts payable and $1.6 million accrued
expenses, payable in the ordinary course of its business. The Company's
long-term debt includes approximately $242,000 (which does not include current
portion of $101,000) of indebtedness in connection with the acquisition of
Windsor, approximately $761,000 of net deferred credit, representing the excess
value of net assets of Renaissance acquired over cost. This amount is being
amortized over a period of five years from the date of acquisition.
The Company's indebtedness includes approximately $1.18 million in principal
and interest, payable to Mr. Slucker and Mr. Budilov under the 8% Convertible
Notes. The Convertible Notes are repayable with interest at 8% per annum subject
to restrictions contained in the Company's loan agreement with CoreStates Bank
on March 31, 2000. If the Company has earnings equal to or in excess of $.60 per
share for the year ending March 31, 1999, the Convertible Notes may be prepaid
at the option of the holder commencing on March 31, 1999. The Convertible Notes
may be converted at any time into shares of Common Stock at a rate equal to the
initial public offering price per share.
Sales of eyewear under license agreements represented approximately 35% and
30% of the pro forma sales of the Company and Renaissance for fiscal 1996 and
1997, respectively. The Company's license agreements generally require the
Company to satisfy minimum purchase requirements or to make annual royalty
payments and advertising expenditures and maintain quality control and retail
distribution commensurate with the licensor's image. Accordingly, certain
licensors are entitled to receive payment from the Company whether or not
specified minimum levels of annual sales for licensed products are met. For the
year ending March 31, 1998 and 1999, the annual aggregate commission obligations
of the Company under current license agreements will exceed $944,000 and
$528,000, respectively, even if the Company were to generate no sales under the
agreements.
As of December 31, 1997, the Company's obligations under employment
agreements and consulting agreements with members of management and its Board of
Directors aggregate approximately $470,000 over the next 12 months. In addition,
payments under notes, non-competition and other agreements relating to the
acquisition of substantially all of the assets of Chanuk, Windsor and
Renaissance, will aggregate approximately an additional $375,000 for the years
ending March 31, 1998 and March 31, 1999.
The Company currently leases office, warehouse and showroom facilities and
equipment under operating leases, which expire at various times through the year
2002. Future minimum lease payments under non-cancelable leases at December 31,
1997 aggregate approximately $2.0 million through the year 2002.
The Company leased its prior principal offices in Philadelphia, Pennsylvania
under a lease that expires in the year 2000. Monthly rental payments under such
lease are approximately $11,000. The Company has since moved to an alternative
location in Pennsylvania for its management, inventory and distribution
operations for which it pays a base annual rent of approximately $300,000 per
year. The Company does not intend to use its Philadelphia facility and is
negotiating to sublet the facility. If the Company sublets the facility for less
than the full rental amount, if at all, the Company will be required to
recognize a charge to the extent of any shortfall.
In connection with the acquisitions of substantially all of the assets of
Renaissance in 1997, the Company satisfied certain obligations of that business
to particular creditors, the cooperation of which was deemed to be necessary to
continue conducting business. In connection with the acquisition of
substantially all of the assets of Renaissance, no liabilities of Renaissance
were contractually assumed by the Company.
20
<PAGE>
The Company has been provided with estimates indicating that the net liabilities
of Renaissance exceeded $3.0 million at the time the Company acquired the
assets. A number of creditors of Renaissance have instituted collection actions
in court against Renaissance for amounts due to them from Rennaissance. The
Company is not a party to any of these actions, and has no knowledge of the
amounts involved in such proceedings. To the extent that any creditors of
Renaissance seek recourse against the Company as the purchaser of substantially
all of the assets of Renaissance, the Company may incur substantial expenses in
connection with defending any such actions. Furthermore, to the extent that
creditors are successful in asserting any claims against the Company as a
successor to Renaissance or challenge the acquisition from the secured creditor,
the Company could be responsible for substantial liabilities and its financial
position could be adversely affected.
PRO FORMA RESULTS OF OPERATIONS FOR THE COMPANY AND RENAISSANCE. The pro
forma unaudited condensed statement of operations for the Company reflects the
acquisitions of Windsor and Renaissance as if such transactions had occurred on
April 1, 1996. Pro forma net sales were approximately $29.1 million for Fiscal
1997, reflecting net sales for the Company of approximately $16.5 million, net
sales for Renaissance for the eleven months ended February 28, 1997 of
approximately $11.7 million and net sales for Windsor for the three months ended
June 30, 1996 (being the period during which Windsor's sales were not included
in those of the Company) of approximately $1.0 million. Cost of sales for
Renaissance for the eleven months ended February 28, 1997 were approximately
$6.1 million (approximately 52% of net sales), resulting in a gross profit of
approximately $5.6 million (approximately 48% of net sales). However, selling,
general and administrative expenses for Renaissance were approximately $6.5
million for the eleven months (approximately 56% of net sales), resulting in a
loss from operations for Renaissance of approximately $900,000. On a pro forma
basis, $332,000 of expenses for the Company are eliminated to reflect the
acquisition of Windsor and Renaissance as if they had taken place on April 1,
1996. Income from operations on a pro forma basis are approximately $1,311,000,
resulting in a pro forma income before taxes of approximately $205,000.
SEASONALITY. The Company believes that its business is subject to seasonal
trends, resulting in lower sales of prescription eyewear during its third
quarter (the three months ended December 31) and higher sales of sunglass
products during the spring. Accordingly, sales and results of operations may
fluctuate from month to month throughout the year and quarterly results may not
always be indicative of the entire year.
INFLATION. Management believes that there has been no significant impact on
the Company's operations as a result of inflation.
21
<PAGE>
BUSINESS
OVERVIEW
The Company designs, sources, markets and distributes high quality
prescription eyeglass frames and non-prescription sunglasses to department and
specialty stores, optical chains and eyewear boutiques throughout the United
States and the world. The Company also provides integrated marketing,
merchandising materials and consulting support to its distributors and sales
force in the sale of the Company's eyewear products. The Company distributes its
eyewear products to a broad and substantial customer base including Wal-Mart,
K-Mart, National Vision Associates and U.S. Vision as well as many regional
chain stores and local outlets. The Company has established relationships with
various fashion designers, fashion celebrities and marketing organizations
including Kathy Ireland, Halston and the John Lennon Estate, and highly
recognizable consumer products brands such as Playskool, Nintendo and
international jewelry designer Kenneth Jay Lane. The Company intends to continue
to identify and license trade names and trademarks from various high profile
brand sources in an effort to target and capture additional segments of the
eyewear markets. As used in this Prospectus, the term "sources" means that the
Company retains third parties to manufacture products to the Company's
specifications.
The Company utilizes a diverse team of freelance experienced fashion eyewear
designers to work with fashion houses, celebrities, manufacturers and
experienced members of the optical industry to design eyewear styles that convey
fashion, elegance and sophistication. The Company's eyeglass frames and
sunglasses are manufactured at a variety of independent factories throughout the
world. The Company distributes products through independent sales
representatives situated in the United States and internationally and intends to
increase the size of its dedicated sales force, expand its sales and marketing
capabilities and develop additional alliances with fashion designers and
licensors. The Company was incorporated in Delaware in May 1995 as Diplomat
Ambassador Inc. when it acquired the business of Chanuk, a Pennsylvania
corporation. On July 10, 1997, the Company changed its name to Ambassador
Eyewear Group, Inc.
INDUSTRY BACKGROUND
In 1996 approximately 60% of the nation's population, used some form of
corrective eyewear. Retail sales of eyewear products totaled $14.6 billion in
1996. According to a recent study, this represents a 6% increase over $13.8
billion that was spent in 1995, when actual sales increased by 7% over 1994. The
market for corrective eyewear has grown steadily over the past five years and
the demographic trends of an aging population are expected to generate increased
demand for corrective eyewear and optical services in
the immediate future.
Industry sources attribute growing retail sales of eyewear to the industry's
success in generating consumer interest in fashion eyewear. It has been reported
that American consumers are showing a distinct preference for high fashion and
high performance in eyewear frame styles. Frames accounted for $5.5 billion in
retail sales in 1996, up 7% over $5.1 billion in 1995. The average retail price
for frames also increased by about two dollars to nearly $59 in 1996. This
accounted for about 39% of an average sale of $150 for a complete set of
eyewear. It is reported that designers and brand names are leading the growth in
sales of eyewear. It has been estimated that 41% of all frame sales in 1996 were
designer/branded/licensed products, an increase of 1% from 1995. In addition,
premium materials are also being embraced by consumers, including light weight
stainless steel and titanium eyeglass frames. Metal frames are estimated to
account for 61% of all frames sold in 1996. It is estimated that in 1986,
plastic frames accounted for over two-thirds of all frames sold.
The Company believes that since the mid-1980s the sunglass market has
experienced significant growth, driven primarily by the expansion of the
premium-priced sunglass market segment. According to a 1996 sunwear survey in
the United States, retail sales of sun related eyewear grew to $2.95 billion in
1996, up 8% over 1995. The premium priced sunglass segment accounts for
approximately 53% of such sales.
22
<PAGE>
STRATEGY
The Company's business strategy for growth focuses on maintaining and
expanding its competitive position in the markets it currently serves and
establishing competitive market positions in other geographic areas, primarily
within the United States and, to a lesser extent, globally. The principal
elements of the Company's strategy include:
- TARGET MID-RANGE PRICE CONSUMERS. The Company has specifically targeted
and developed the market segment for high-quality designer eyewear sold at
retail price points below those of "designer" eyewear of comparable
quality. The Company identified in the early 1990's the potential that
mass market discount stores such as Wal-Mart and K-Mart had for marketing
eyewear and established its important supply relationships when such
retailers were only first entering the eyewear market. The Company
distributes eyewear and related products that are comparable in fashion
and quality to any product in the market and yet generally lower in cost.
- TARGET ADDITIONAL DISTRIBUTORS, COORDINATE AND MANAGE DISTRIBUTION. The
Company is pursuing additional relationships with distributors throughout
the world and globally. The Company believes that by continually
establishing such relationships, it will be able to increase its share of
the eyewear market in the United States as well as abroad. Currently, the
Company distributes its products through a coordinated network of Company
employed and independent sales representatives. The Company maintains
strict control over its sales network by employing a substantial
percentage of its sales representatives on a full-time basis, and by
monitoring pricing policy and participating in advertising and promotional
activities.
- PURSUE ACQUISITIONS TO INCREASE PENETRATION IN EXISTING AND NEW
MARKETS. The Company seeks to increase its penetration in new and existing
markets by acquiring businesses and product lines that are complementary
to that of the Company. The Company expects to pursue selective
acquisitions of customer bases or businesses, companies that complement
the Company's current operations or expand its services or network
capabilities. The Company believes that such acquisitions, investments and
strategic alliances are an important means of increasing sales volume.
Through the acquisition of substantially all of the assets of Windsor in
1996, the Company acquired eight new lines of eyewear including licenses
for Kenneth Jay Lane and John Lennon. Through the acquisition of
substantially all of the assets of Renaissance, the Company significantly
enhanced its sunglass product lines as well as its channels of
distributions for sunglass products. In addition, following the
acquisition, the Company negotiated licenses to use additional trade
names, including Oscar de la Renta and Nintendo. Renaissance had sales of
approximately $14 million for the year ended October 31, 1996 and
distributed five different lines of eyeglass frames and sunglasses. The
Company intends to continue to expand its sales of sunglasses by
increasing its sales and efforts and identifying and acquiring additional
sunwear product lines.
PRODUCTS
The Company offers hundreds of models of prescription eyeglass frames and
sunglasses in a wide range of styles under the Kathy Ireland, Halston,
Playskool, Menrad, Atrio, John Lennon, Kenneth Jay Lane, Harve Bernard, Sarah
Coventry, Nintendo, Georgio de Marco trademarks and trade names, among others,
and under the Company's proprietary Phoenix, Da Vinci, Tarelli, Details,
Landolfi trademarks and/ or trade names. The Company's prescription eyeglass
frames and sunglasses, which are characterized by high quality and design and
are often intricately detailed, are affordable, and are priced less than
"designer" eyewear of comparable quality sold by other manufacturers. The
Company's products generally are sold at retail price points between $80 and
$150, while the Company believes that eyewear of comparable quality sold by
other distributors is generally sold at retail price points between $130 and
$300. The following describes certain of the Company's licensing and
distribution arrangements:
23
<PAGE>
KATHY IRELAND. The Company, in association with Kathy Ireland, has designed
a line of eyeglass frames and sunglasses for men and women. Kathy Ireland,
actress, model, and executive in the combined industries of fitness and fashion,
continues to run her businesses with the same integrity and success that first
launched her Signature collections. She directs every aspect of her products
including design, self testing and production. The styles, sold exclusively by
the Company, are designed to be stylish, contemporary and casual. The eyeglasses
are designed using a variety of materials, including the latest metal alloys and
plastic colorations. All are available in either ophthalmic or sun styles.
Shapes include cat-eye, rectangles, ovals and "preppie-designs." The Company has
entered into a four year exclusive (sunglasses, eyeglasses, readers and
ophthalmic frames and accessories) and non-exclusive agreement with Kathy
Ireland, Inc. under which the Company has been granted a worldwide license to
use certain licensed products (the "Ireland Agreement"). In addition, Ms.
Ireland has agreed to endorse the Company's line of eyeglasses and provide
limited marketing assistance including attending various marketing events. The
Ireland Agreement expires on January 30, 2000. The Ireland Agreement provides
for guaranteed minimum royalties to Kathy Ireland for the term of the Ireland
Agreement. The Company is required to pay a royalty fee based on net sales.
HALSTON. Halston is a world renowned designer of sophisticated and elegant
fashion. Halston eyewear is designed for men and women and is intended to serve
the moderate to upper price market. Each frame is airbrushed with a lacquer to
provide a stylish long-lasting finish. The Company entered into a Supply
Agreement (the "Halston Agreement") with Styl-Rite Optical Mfg. Co.
("Styl-Rite") under which the Company has been granted a right to purchase from
Styl-Rite certain ophthalmic frames bearing the Halston trademark for resale to
retail outlets and specialty shops. The Halston Agreement expires on December
31, 1998. The Company has an option to renew the agreement for an additional
three year period provided that it meets certain minimum purchase requirements
and that Styl-Rite renews its license agreement with Halston Investments, Ltd.,
the successor-in-interest by assignment from Halston Trademarks, Inc., owner of
the "Halston" trademark.
PLAYSKOOL. The Company has developed a children's line of eyewear that is
marketed under the Playskool brand name. Playskool is one of the most recognized
names in children's products and produces the largest number of frames in the
industry exclusively for children. The Playskool styles are designed in
consultation with pediatric specialists to insure proper fit for a child's face
and comfort for a child's unique requirements. The frames are designed with
bright colors and light designs, include spring hinges and silicon nosepads to
maintain fit and which contain hypo-allergenic coatings. Frames carry an
unconditional guarantee. The Company has entered into a non-exclusive license
agreement with Playskool under which the Company has been granted a license to
use certain licensed products in the United States (the "Playskool Agreement").
The Playskool Agreement expires on December 31, 1998 pursuant to the second
renewal term. Additional renewal of the Playskool agreement is at the discretion
of the licensor. The Playskool Agreement provides for guaranteed minimum
royalties to the licensor for the term of the Playskool Agreement. The Company
is required to pay a royalty fee based on net sales.
NINTENDO. The Nintendo Eyewear collection is intended to be a functional
children to teen line of eyeglass frames and to be fashionable with quality
features such as dual action spring hinges and double lacquer coatings to add
strength and durability. Nintendo is one of the largest video game companies in
the world and its products are in millions of households in the United States.
The Nintendo Eyewear collection is targeted to the six to fourteen year old age
group, mirroring Nintendo's most heavily penetrated video game market. The
Company entered into a merchandise license agreement with Nintendo of America,
Inc. under which the Company has been granted a non-exclusive license to
manufacture and sell prescription eyewear, sunglasses and non-prescription
sunglasses in the United States, Canada, Mexico, Panama, and Guatemala (the
"Nintendo Agreement"). The Nintendo Agreement expires on December 31, 2000. The
Company has an option to renew the Nintendo Agreement for one additional three
year term. The Nintendo Agreement provides for guaranteed minimum royalties to
the licensor for the term of the agreement. The Company is also required to pay
a royalty fee based on net sales.
24
<PAGE>
THE MENRAD GRUPPE. The Company's high end lines of eyewear, including its
Menrad, Atrio and Jaguar line are manufactured by the Menrad Gruppe, a 100
year-old German manufacturer of high-quality precision metal eyeglass frames.
The Menrad line of eyeglasses are intended to exhibit superb anatomical fit,
comfort, optical precision and durability. Menrad frames are made with rare and
fine precious metals. The base metal in many of their frames are nickel-free and
every frame is coated with a plastic film that insures complete protection from
metal induced allergies, while providing the added benefit of scratch and
corrosion resistance. The Menrad eyewear, which includes sunglasses, is marketed
under the Atrio and Menrad names. The Company distributes these products on a
non-exclusive basis. The Company is subject to certain minimum purchase
requirements. The Company is not required to pay a royalty in connection with
its use of the trademarks.
JOHN LENNON. John Lennon's round, wire framed glasses became an
unmistakable part of his image and a symbol for his time. John Lennon frames
vary from high-end to moderate-priced and include designs for men and women. The
Company is negotiating to renew its distribution agreement with Eagle Eyewear,
Inc. in order to be the exclusive distributor of adult optical frames and adult
sunglasses for Eagle Eyewear, Inc. in the United States and Canada. If the
distribution agreement is renewed, the Company would order and purchase John
Lennon products solely from Eagle Eyewear, Inc. Further, Eagle Eyewear, Inc.
would retain final approval of the use of John Lennon's name or likeness by the
Company. The Company would be subject to certain minimum purchase requirements.
The Company is required to pay a royalty fee on a weekly basis. The Company
distributes John Lennon frames on a non-exclusive basis.
KENNETH JAY LANE. Kenneth Jay Lane is a world-famous designer of costume
jewelry. The Company's Kenneth Jay Lane collection was designed to emulate his
elegant, luxurious designs. The collection features unique metal trims, temples,
bridges and colors with colored stones and pearls integrated into the frame
designs to achieve a high-fashion appearance. The sunwear collection includes
frames adorned with colored stones and gold and silver points intended to
emulate Kenneth Jay Lane's jewelry designs. The license to Kenneth Jay Lane was
acquired at the time of the Windsor acquisition under a license agreement
between Windsor and Kenneth Jay Lane (the "Lane Agreement") The license provides
the Company with an exclusive right to use the Kenneth Jay Lane name in the
United States, Canada, Puerto Rico, the Caribbean Islands, Central America and
Mexico. The Lane Agreement was renewed in September 1997. The Lane Agreement
provided for guaranteed minimum royalties to the licensor and for the payment by
the Company of a royalty fee based on net sales. In addition, the Company was
required to spend a certain percentage of net sales for advertising and
promotional purposes.
HARVE BENARD LTD. Harve Benard is an upscale women's clothing designer that
has had a significant name brand recognition for many years. The Harve Benard
eyewear collection is designed to be sophisticated yet practical, designed in a
glamorous, wearable, daytime look. The frame styles feature exceptional fashion
in a finely crafted product. The license to Harve Benard was acquired at the
time of the Chanuk acquisition under a license agreement between Chanuk and
Harve Benard Ltd. The license gives the Company an exclusive right to use the
Harve Benard mark in connection with the manufacture, distribution and sale of
men's and women's sunglasses and ophthalmic spectacle frames in the United
States and Canada. The Agreement expires on December 31, 1998. The Company has
an option to renew this agreement after the expiration date. The Agreement
provides for guaranteed minimum royalties to the licensor for the term of the
Agreement. The Company is required to pay a royalty fee based on net sales.
SARAH COVENTRY. The Company believes that the Sarah Coventry label
represents classic feminine styling with mass appeal. Sarah Coventry products
appear in national advertising in consumer magazines such as Redbook and
Glamour. Targeted to the value conscious customer, the Sarah Coventry eyewear
collection is intended to offer a quality image at an excellent value. The
Company has entered into two separate exclusive license agreements with
Lifestyle Brands, Ltd., owner of the Sarah Coventry trade name, under which the
Company has been granted a license to manufacture and sell sunglasses, sunglass
cases, accessories, ophthalmic frames, and cases under the Sarah Coventry trade
name (the "Lifestyle
25
<PAGE>
Agreements"). The Lifestyle Agreements expire on June 30, 1998. With respect to
the license related to sunglasses, sunglass cases and related accessories, the
Lifestyle Agreements shall renew automatically for an additional three year term
if the Company achieves certain minimum net sales. The Lifestyle Agreements also
provide for guaranteed minimum royalties to the licensor for the term of the
Lifestyle Agreements. The Company is required to pay a royalty fee based on net
sales.
FLEX SPECS. Flex Specs are flexible eyeglass frames with a mechanism at the
temple hinge that maintains constraint and strong pressure on the eyeglass
frame. In addition, the Flex-Specs frame has no screws at the hinge. The Company
has licensed exclusively the right to distribute Flex-Specs eyeglass frames in
the United States.
OTHER BRANDS. The Company has also entered into license agreements with
other brand names that provide for the payment of guaranteed minimum royalties
to licensors and additional royalty fees. Additionally, the Company has arranged
for the manufacture of a variety of proprietary brands, including agreements
with Tarelli Eyewear and Landolfi, Phoenix and DaVinci, intended to provide
European styling at moderate prices to its consumers.
MARKETING AND ADVERTISING
The Company markets its eyewear products primarily to independent retailers,
mass merchandisers, chain stores, department stores and international
distributors. The Company's sales efforts include the direct channels of a
dedicated sales force and telephone sales. The Company advertises primarily
through print trade journals and the distribution of catalogs. The Company
intends to expand its print advertising to include consumer oriented media. In
addition, through promotions, the Company assists the retailers in enhanced
distribution of the Company's products to consumers. Promotional incentives to
sell-through the Company's eyewear plus cooperative advertising to the retailers
clientele will generate additional distribution for the Company.
CHAIN STORES, DEPARTMENT STORES AND MASS MERCHANDISERS. Chain stores and
superstores have begun to be a factor in the market share of eyewear. In 1995,
chain stores and superstores comprised 18% of the retail market or $2.5 billion.
Further, according to Jobson Optical Group Data Base, in 1995, the top 100 chain
stores held over 29% of the retail market. A substantial majority of the
Company's sales during fiscal 1996 included sales to customers in this category.
INDEPENDENT RETAILERS. Independent optical shops and eyecare professionals,
including franchises; comprised over 60% of the retail eyewear market during
1996. The Company employs direct sales efforts to identify and market to
independent retailers this market through a dual sales force, promoting distinct
product lines. Although this constitutes a large part of the eyeglass market,
this category accounts for a lesser part of the Company's sales during fiscal
1996 included sales to customers in this category.
INTERNATIONAL DISTRIBUTORS. The Company believes that substantial sales
opportunities may be exploited outside of the United States. Although the
Company has limited sales abroad it intends to expand its international business
to markets outside the United States. Sales during fiscal 1996 to customers in
this category were not material, although the Company has identified foreign
sales as a source of possible expansion.
The Company's sales to its five largest customers represented over 62% of
its sales in fiscal 1996 and 51% in fiscal 1997 (30% on a pro forma basis giving
effect to the acquisitions of the assets of Windsor and Renaissance) and
approximately 48% for the nine months ended December 31, 1997. Sales to the
Company's top customer, Wal-Mart accounted for approximately 51%, of the
Company's sales in fiscal 1996, and approximately 35%, of its sales in fiscal
1997 (20% on a pro forma basis giving effect to the acquisitions of the assets
of Windsor and Renaissance) and approximately 37% for the nine months ended
December 31, 1997. The Company anticipates that sales to its top five customers
will continue to account for a significant percentage of its sales. The Company
has no long term commitments or contracts with any of its customers. The loss or
decreased sales from one or more of these customers and in particular, Wal-Mart,
would have a material adverse effect on the Company's financial condition. The
inability of any of
26
<PAGE>
the Company's significant customers to satisfy any of their bills at any time or
on a timely basis for any reason could have a material adverse effect on the
financial condition of the Company.
The Company makes use of a dedicated and independent sales force of an
aggregate of approximately 30 sales representatives. This direct sales force
targets small, medium, and large-sized retailers from high-end boutiques to
discount frame outlets. The sales force is equipped to provide sales training,
support, and management consulting to the retailer. In addition, sales
representatives are equipped to assist with retail window displays, designer
boutique creating, and eyewear promotions.
The Company also employs telephone sales methods which consist of a
telemarketing program developed by the Company that enables small accounts and
remote location accounts to gain access to the Company's variety of products and
services. Monthly contacts by phone representatives assist these key accounts in
the selection and distribution of products. The Company plans to expand its
telemarketing organization by adding six additional employees on a part-time
basis.
National trade shows and international conventions have become the sounding
boards for the global eyewear industry. New products are launched and designers
showcase their creations and themselves during these events. The Company plans
to exhibit its products to an increasing number of distributors, retailers, and
consumers worldwide. The four most popular shows occur annually and include
Silmo in Paris, Mido in Milan, the Vision Expo in New York and the Vision Expo
in California.
The Company develops point of purchase materials that feature the Company's
products and brands which are provided to individual retail accounts. Original
display materials are periodically constructed to help design boutique
atmospheres within the retail accounts and properly display the Company's
products in the account's showroom and window display. Some of these products
include actual record albums to display the John Lennon Collection, Playskool
figurines and toys to complement the children's line, designer scarves, hats and
accessories to cross-merchandise designer eyewear. The Company believes that
advertising a designer's eyewear adjacent to other products also created by the
designer is a valuable method for creating name recognition and demand for the
Company's product.
SOURCES OF SUPPLY
The Company arranges for the production of its products primarily with
foreign suppliers on a purchase order basis on standard commercial terms,
secured in each case by the Company's general credit. At the present time, the
Company secures its supplies in three ways. First, the Company enters into
arrangements with certain suppliers whereby the Company provides such suppliers
with, among other things, specifications, materials and designs pursuant to
which certain products requested by the Company are made. Second, the Company
enters into arrangements with certain suppliers whereby such specifications and
designs are provided to the Company who then has the option of having products
made pursuant to such specifications and designs. Finally, the Company enters
into arrangements whereby certain finished products are presented to the Company
and the Company then chooses from the selections presented. These arrangements
have worked well for the Company and the Company intends to continue such
relationships in the future.
The Company imports substantially all of its frames from international
suppliers located in Taiwan, Korea, Italy, Germany and Japan, and, therefore,
its prices for and supply of those frames may be adversely affected by changing
economic conditions in foreign countries and fluctuations in currency exchange
rates. The Company may also be subject to other risks associated with
international operations, including tariff regulations and requirements for
export licenses, unexpected changes in regulatory requirements, receivable
requirements, difficulties in managing international operations, potentially
adverse tax consequences, economic and political instability, restrictions on
repatriation of earnings and the burdens of complying with a wide variety of
foreign laws. In addition, the laws of certain countries may not protect the
Company's products and intellectual property rights to the same extent as do the
laws of the United States. There can be no assurance that such factors will not
have a material adverse effect on the Company's future international sales or
licenses and, consequently, on the Company's business and operations as a whole.
27
<PAGE>
COMPETITION
The eyewear industry is highly competitive and fragmented. The Company
competes with different companies in different markets. The prescription and
non-prescription eyewear markets are highly competitive. The Company competes
with a number of established companies, including Luxotica, Safilo, Marchon and
Bausch & Lomb, which together control a substantial portion of the premium
market. In the sunglass market, the Company competes with a variety of
competitors with substantially greater financial and other resources than the
Company including Bausch & Lomb, the manufacturer of Ray-Ban, Oakley and
Gangoyles sunglasses. All of the aforementioned companies have substantially
greater resources and better name recognition than the Company and sell their
products through broader and more diverse distribution channels. In addition,
several of these competitors have their own manufacturing facilities. The
Company could also face competition from new market entrants, including
established branded consumer products companies, such as Nike, Inc., that also
have greater financial and other resources than the Company. In addition, as the
Company expands internationally, it will face substantial competition from
companies that have already established their products in international markets
and consequently have significantly more experience in those markets than the
Company. The Company also faces competition from the expanded use of contact
lenses and expanding laser surgery to correct vision. The major competitive
factors in the eyewear market include fashion trends, brand recognition, method
of distribution and the number and range of products offered. In addition, to
retain and increase its market share, the Company must continue to be
competitive in the areas of price, quality and performance, technology,
intellectual property protection and customer service.
LICENSES AND TRADEMARKS
The Company owns and has obtained licenses to various domestic and
international trademarks related to its products and business. These licenses
expire at various times through the year 2000. While these trademarks in the
aggregate are important to the Company's competitive position, no single
trademark or license thereof is material to the Company. The trade names
Halston, Kathy Ireland, Playskool and others and certain trademarks are owned by
various third parties and licensed to the Company for limited purposes on a
royalty basis.
EMPLOYEES
At February 1, 1997, the Company had 107 full-time employees and one
part-time employee. Approximately 26 of such employees are engaged in
administrative positions, 28 in sales management, seven in management and 35
provide warehouse and distribution support. The Company considers its relations
with its employees to be good. None of the Company's employees are represented
by labor unions. See "Legal Proceedings."
PROPERTY
In September 1995, the Company leased its former principal offices occupying
30,000 square feet in Philadelphia, Pennsylvania, which were used to house all
the Company's management, inventory and distribution operations. Pursuant to the
lease relating to such facility, the Company is obligated to make monthly rental
payments of approximately $11,000. Such lease expires in 2000. In July 1997, the
Company moved to a new location in Bensalem, Pennsylvania, for its management,
inventory and distribution operations. The new facility has 64,000 square feet.
The Company has entered into a new lease expiring August 2002, under which
monthly base rent is approximately $25,000 per month. The Company is negotiating
to sublease the Philadelphia facility, although no assurance can be given that
it will be successful in such negotiations.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
28
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --------- ------------------------------------------
<S> <C> <C>
Rudy A. Slucker........................... 47 Chairman of the Board of Directors
Barry Budilov............................. 42 President, Chief Executive Officer and
Director
Kenneth B. Kitnick........................ 35 Executive Vice President
Raymond Green............................. 35 Treasurer
Jay Rice(1)............................... 45 Director
Jeffrey Seiken(1)......................... 44 Director
</TABLE>
- ------------------------
(1) Member of the Compensation and Audit Committees.
In connection with the Offering, the Company intends to increase the size of
the Board of Directors to accommodate two additional directors who will not be
officers or employees of the Company.
The business experience of each of the executive officers and directors is
set forth below.
RUDY A. SLUCKER has served as Chairman of the Board of Directors of the
Company since May 1995. Mr. Slucker also serves on a full time basis as Chairman
of the Board of Directors, President and Chief Executive Officer of the TearDrop
Golf Company, a Nasdaq-listed company, which position he has held since
September 1996 and of the Tommy Armour Golf Company, a wholly-owned subsidiary
of TearDrop Golf Company, since November 1997. Mr. Slucker was the Chief
Executive Officer of the Atlas Group of Companies, Inc. ("Atlas"), which
imported and marketed hardware and consumer products, from 1978 until 1990, when
it was sold. Since 1990, Mr. Slucker has been a venture capital investor. He
currently serves on the board of directors and/or is a principal stockholder of
Major League Fitness, a chain of fitness centers associated with Major League
Baseball through a licensing agreement and Babylon Enterprises and Beacon
Concessions, which, together, currently own and operate the Beacon Theater in
Manhattan. Mr. Slucker graduated from the University of Cincinnati with a
Bachelors Degree in 1971.
BARRY BUDILOV has been President and Chief Executive Officer of the Company
and has served as a Director since the Company's inception in 1995. From 1989 to
1995, Mr. Budilov served as the President of Chanuk, the predecessor of the
Company. Prior thereto and since 1987, Mr. Budilov served as Chief Financial
Officer of Eco-Med, Inc, which was sold in 1989 to Avicare, Inc., a
publicly-traded company. Mr. Budilov is a certified public accountant. Mr.
Budilov graduated magna cum laude from George Washington University with a
Bachelor's Degree in accounting in 1977.
KENNETH B. KITNICK has served as Executive Vice President of the Company
since June 1996. Prior to joining the Company he spent sixteen years in the
optical industry as Vice President and Chief Operating Officer of Windsor, which
the Company acquired in January 1997. Mr. Kitnick graduated from Franklin &
Marshall College with a Bachelor's Degree in mathematics in 1983.
RAYMOND GREEN has served as Treasurer of the Company since the Company's
inception in 1995. From 1992 to 1994 he served as the controller for The Backe
Group, Inc., a holding company in the communications field. Prior thereto and
since 1990, he was the Controller for Water-Jel Technologies, Inc., a
manufacturing company with securities traded on Nasdaq. Prior thereto and since
1987, he was employed as a staff accountant for Abo, Uris & Altenburger, a
certified public accounting firm. Mr. Green graduated from Iona College in 1983
with a Bachelor's Degree in finance.
JAY RICE has been the managing partner of the law firm of Nagel Rice &
Dreifuss since 1983 and has served as a Director of the Company since June 1997.
He served as a member of the advisory board to Summit Bank from 1989 to 1991.
Since 1990, he has served as a trustee and is now the President of the Jewish
Community Housing Corp. and has been the President of the Board of Trustees of
the United
29
<PAGE>
Jewish Federation of Metrowest since 1995. Prior to joining Nagel Rice &
Dreifuss, Mr. Rice served as a law clerk to the Honorable Baruch S. Seidman of
the New Jersey Superior Court, Appellate Division from 1977 to 1978. Mr. Rice
has authored several legal articles and has served as a lecturer. Mr. Rice is a
member of the Essex County Bar Association, the New Jersey State Bar Association
(serving as Chairman of the Equity Jurisprudence Committee from 1989 to 1991)
and the American Bar Association. Mr. Rice received his Juris Doctorate from
Rutgers University in 1977.
JEFFREY SEIKEN practices law in Philadelphia, Pennsylvania in the law
offices of Jeffrey Seiken and has served as a Director of the Company since June
1997. From 1988 through 1996, Mr. Seiken was a partner with the law firm of Rush
& Seiken. He was one of the initial founders and investors in American Health
Care, a corporation formed in 1988. American Health Care provides nursing home
care to elderly individuals with facilities in New Jersey, Alabama, Indiana and
Oregon. In addition, Mr. Seiken has been involved in real estate development
since 1985. Mr. Seiken has also served as a member of the Whitemarsh Township,
Pennsylvania Sewer Authority and the Whitemarsh Township Planning Commission.
The Representatives have the right to appoint an observer to attend all
meetings of the Board of Directors. The observer will have no right to vote on
any matters before the Board. See "Underwriting-- Observer to the Board of
Directors."
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has appointed an Audit Committee and a
Compensation Committee. The members of both the Audit Committee and Compensation
Committee consist of Jeffrey Seiken and Jay Rice. The Audit Committee
periodically reviews the Company's auditing practices and procedures, makes
recommendations to management or to the Board of Directors as to any changes to
such practices and procedures deemed necessary from time to time to comply with
applicable auditing rules, regulations and practices, and recommends independent
auditors for the Company to be elected by the stockholders. The Compensation
Committee meets periodically to make recommendations to the Board of Directors
concerning the compensation and benefits payable to the Company's executive
officers and other senior executives. The Company reimburses directors for their
out-of-pocket expenses incurred in attending Board and Committee meetings.
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company intends to enter into an employment agreement with Barry
Budilov, effective on the effective date of this Offering, pursuant to which he
will serve on a full-time basis as President and Chief Executive Officer of the
Company for a period of three years. The agreement will provide for an annual
base salary of $200,000 subject to annual increases at the discretion of the
Board of Directors. The agreement will also contain a confidentiality provision
and a provision prohibiting Mr. Budilov from competing with the Company for a
period of one year subsequent to the termination of his employment.
The Company intends to enter into a consulting agreement with Rudy Slucker,
effective on the effective date of this Offering, pursuant to which he will
serve as Chairman of the Board of the Company for a period of three years. The
agreement will provide for an annual consulting fee of $100,000, subject to
annual increases at the discretion of the Board of Directors. Mr. Slucker will
not be required to devote any minimum amount of time to the affairs of the
Company and is subject to an employment agreement with another company. The
consulting agreement will also contain a confidentiality provision and a
provision prohibiting Mr. Slucker from competing with the Company for a period
of one year subsequent to the termination of his employment.
Upon consummation of the acquisition of substantially all of the assets of
Windsor, the Company entered into an employment agreement with Kenneth Kitnick,
who became the Executive Vice President of the Company and into a consulting
agreement with Jay Kitnick, Kenneth Kitnick's father. The employment agreement
with Kenneth Kitnick became effective on June 26, 1996, pursuant to which he is
serving on a full-time basis as a Vice President of the Company for a period of
four years. The agreement provides for an initial base salary of $105,000, plus
an automobile allowance and provides for annual minimum increases through the
year 2000 to a maximum of $120,000. The agreement has been amended,
30
<PAGE>
as of June 30, 1997, to provide for the grant as of the date of the agreement to
Kenneth Kitnick of options to purchase 151,667 shares of Common Stock at an
exercise price of $1.50 per share, vesting over a period of five years. The
agreement contains a non-compete provision which prohibits Kenneth Kitnick from
directly or indirectly competing with the Company for a period of one year upon
termination. For a description of the Consulting Agreement with Jay Kitnick, see
"Certain Relationships and Related Party Transactions."
The Company has entered into a five-year employment agreement with Edward
Kauz which became effective on February 27, 1997. The agreement provides for
aggregate annual payments to Mr. Kauz of $200,000, subject to certain conditions
set forth in a supplemental agreement, dated February 27. In addition, under an
amendment to the consulting agreement dated as of June 30, 1997, Mr. Kauz agreed
to waive his right to serve as Vice Chairman of the Board of Directors and was
granted on February 27, 1997 an option to purchase 180,833 shares of Common
Stock for five years at an exercise price of $3.00 per share.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
As permitted by Section 145 of the Delaware General Corporation Law (the
"DGCL"), the Certificate of Incorporation includes a provision that eliminates
personal liability for its directors for monetary damages for breach of
fiduciary duty as a director except for liability: (i) for any breach of the
director's duty of loyalty to the Company or its stockholders; (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law; (iii) under Section 174 of the DGCL; and (iv) for any
transaction from which the director derived an improper personal benefit.
As permitted by Section 145 of the DGCL, the Company's Amended Certificate
of Incorporation and By-Laws provide that: (i) the Company is required to
indemnify its directors and officers to the fullest extent permitted by the
DGCL; (ii) the Company may indemnify other persons as set forth in the DGCL;
(iii) rights conferred in the By-Laws are not exclusive; and (iv) the Company is
authorized to enter into indemnification agreements with its directors,
officers, employees and agents. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted for directors, officers and
controlling persons of the Company pursuant to the foregoing provisions or
otherwise, the Company has been advised that in the opinion of the Commission,
such indemnification is against public policy as expressed in the Securities Act
and is therefore, unenforceable.
The Company, intends to apply for, and expects to obtain, directors and
officers liability insurance with an annual aggregate coverage limit of $2
million.
DIRECTOR COMPENSATION
At present, no separate cash compensation or fees are payable to directors
of the Company, other than reimbursement of expenses incurred in connection with
attending meetings. The Company expects, however, that new non-employee
directors not otherwise affiliated with the Company or its stockholders will be
paid $500 per meeting and reimbursement for reasonable out-of-pocket costs for
attending meetings.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company for services rendered in all capacities for named executive officers of
the Company who received compensation in excess of $100,000 during the period
from inception to March 31, 1996 and the year ended March 31, 1997.
31
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION SECURITIES
FISCAL --------------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#)
- --------------------------------------------------------- ----------- ---------- --------------- -------------------
<S> <C> <C> <C> <C>
Rudy A. Slucker, Chairman of the Board of Directors...... 1997(1) $ 260,000 0 0
1996(2) $ 172,000 0 54,833
Barry Budilov, President and Chief Executive Officer..... 1997(1) $ 250,000 0 0
1996(2) $ 169,900 0 54,833
</TABLE>
- ------------------------
(1) Messrs. Slucker and Budilov will be compensated at annual rates of $100,000
and $200,000, respectively, under agreements that are effective as of the
effective date of this Offering.
(2) Fiscal 1996 consisted of approximately 11 months.
No options were deemed to be granted to the Chief Executive Officer or other
named executive officers of the Company during the period from April 1, 1996
through March 31, 1997.
No stock options were exercised by the Chief Executive Officer or other
named executive officers of the Company. The following table sets forth certain
information regarding unexercised options held by the Chief Executive Officer
and other named executive officers of the Company at March 31, 1997.
AGGREGATED OPTION EXERCISES THROUGH MARCH 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE- MONEY OPTIONS AT
OPTIONS AT MARCH 31, 1997 MARCH 31, 1997($)(1)
---------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------------------------------------- ---------------------------- -------------------------
<S> <C> <C>
Rudy A. Slucker, Chairman of the Board of Directors..... 54,833/0 $ 315,290/0(2)
Barry Budilov, President and Chief Executive Officer.... 54,833/0 $ 315,290/0
</TABLE>
- --------------------------
(1) Assuming a value of $6 per share.
(2) Does not include an option to purchase 500,000 shares of Common Stock for
$6.00 per share granted personally by Mr. Budilov to Mr. Slucker.
STOCK OPTION PLAN
On November 12, 1997, the Board of Directors and the stockholders of the
Company adopted the 1997 Employee Stock Option Plan ("Plan") and reserved
150,000 shares of Common Stock for issuance thereunder. The Plan provides for
the granting to employees (including employees who are also directors and
officers) of options intended to qualify as incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), and for the granting of nonstatutory stock options to employees,
consultants and independent contractors. The Plan is currently administered by
the entire Board of Directors of the Company. The Plan terminates on June 5,
2007 unless terminated earlier by the Company's Board of Directors.
The exercise price per share of incentive stock options granted under the
Plan must be at least equal to the fair market value of the Common Stock on the
date of grant. In addition, in accordance with the Underwriting Agreement
relating to this Offering, the Company has agreed not to grant any options under
the Plan with an exercise price per shares less than the initial public offering
price of the Common Stock. With respect to any participant who owns shares
representing more than 10% of the voting power of all classes of the Company's
outstanding capital stock, the exercise price of any incentive or nonstatutory
stock option must be equal to at least 110% of the fair market value on the
grant date, and the maximum term of the option must not exceed five years. The
terms of all other options granted under the Plan may not exceed ten years. Upon
a merger of the Company, the options outstanding under the Plan will terminate
unless assumed or substituted by the successor corporation. To date, no options
have been granted under the Plan.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On May 3, 1995, the Company was formed by Rudy A. Slucker, the Company's
current Chairman of the Board of Directors, and Barry Budilov, the current
President and Chief Executive Officer of the Company, at which time each of Mr.
Slucker and Budilov were issued 1,750,000 shares of Common Stock for $.0003 per
share and, as of such date, were each granted options to acquire 54,833 shares
of Common Stock at an exercise price of $.25 per share.
On May 10, 1995, the Company acquired from Chanuk, the predecessor to the
Company, substantially all of the assets of Chanuk valued at approximately $6
million and assumed an aggregate of approximately $5.7 million of liabilities of
the business of Chanuk. The Company acquired Chanuk for approximately $700,000,
which amount was determined by negotiation between the shareholders of Chanuk
and the Company based primarily on the perceived net asset value of Chanuk at
the time. The assumed liabilities included indebtedness of Chanuk to Mr. Slucker
of approximately $508,000. In addition, Daniel Messinger, an uncle of Mr.
Budilov's wife, was repaid $250,000 in debt from the proceeds of the sale.
Chanuk, a company engaged in the wholesale sale and distribution of eyewear, was
a company owned approximately 10% by a partnership controlled by Rudy A. Slucker
and 74% by the mother-in-law of Barry Budilov. Chanuk was incorporated in
Pennsylvania on December 3, 1965 and commenced its eyewear business in 1980. The
above $700,000 purchase price was represented by the issuance by Messrs. Budilov
and Slucker of promissory notes in the principal amount of $343,500 each to
Chanuk.
In consideration of the issuance of promissory notes to Chanuk, the Company
issued promissory notes for $343,500 to each of Rudy A. Slucker and Barry
Budilov. In addition, on May 8, 1995, the $508,000 in debt previously owed from
Chanuk to Mr. Slucker was assumed by the Company and took the form of a
promissory note. All three obligations are represented by demand promissory
notes that bear interest at 8% per annum.
The Company's indebtedness includes approximately $1.18 million in principal
and interest, payable to Mr. Slucker and Mr. Budilov under the 8% Convertible
Notes. The Convertible Notes are repayable with interest at 8% per annum,
subject to restrictions contained in the Company's loan agreement with
CoreStates Bank, on March 31, 2000. If the Company has earnings equal to or in
excess of $.60 per share for the year ending March 31, 1999, the Convertible
Notes may be prepaid at the option of the holder commencing on March 31, 1999.
The Convertible Notes may be converted at any time into shares of Common Stock
at the initial public offering price per share. The Company's revolving line of
credit with CoreStates Bank restricts the payment of dividends to stockholders
and provides for a variety of conditions of default, including the continuing
participation of Rudy A. Slucker and Barry Budilov in their current management
positions.
Upon consummation of the acquisition of Chanuk, in May 1995, the Company
entered into a Consulting Agreement with Chanuk. The agreement became effective
on May 10, 1995 and terminates on May 9, 2005. Pursuant to the agreement, two
prior officers of Chanuk who are relatives of Mr. Budilov provided advisory and
consulting services to the Company on behalf of Chanuk, for which Chanuk
received the sum of $26,000 per year, which was to be payable over a ten year
period in installments of $500 per week. The time and effort devoted to the
Company on a weekly basis did not exceed five hours per week. The Company also
entered into a consulting agreement with Central City Optical, Inc. ("Central
City"), a company owned by Daniel Messinger (one of the relatives referred to
above) pursuant to the same terms as set forth above, which agreement will
continue in effect until May 9, 2005. In addition, in November 1997, Chanuk
assigned its rights and obligations under its consulting agreement to Central
City. Mr. Messinger provides consulting services to the Company on behalf of
Central City.
In June 1996, the Company acquired substantially all of the assets of
Windsor (the "Windsor Acquisition"). In connection with the Windsor Acquisition,
the Company acquired trademark licenses with Kenneth Jay Lane and John Lennon,
among others. The aggregate consideration for the Windsor Acquisition was
$550,000, including $100,000 in cash and two promissory notes, payable to
Windsor, in the
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<PAGE>
aggregate principal amount of $450,000. Kenneth Kitnick, who subsequently became
an officer of the Company, was an officer and principal shareholder of Windsor.
Upon consummation of the Windsor Acquisition, the Company entered into an
employment agreement with Kenneth Kitnick and a consulting agreement with Jay
Kitnick. Jay Kitnick is the father of Kenneth Kitnick. The three-year consulting
agreement with Jay Kitnick provides for 36 monthly payments of $6,944 commencing
on June 20, 2004. The agreement contains a non-compete provision prohibiting Jay
Kitnick from directly or indirectly competing with the Company for a period of
three years from June 26, 1996. See "Management--Executive Compensation"
In February 1997, the Company acquired from Summit Bank (the "Bank"),
pursuant to a Collateral Sale Agreement (the "Renaissance Acquisition"),
substantially all of the assets of Renaissance. The Bank had acquired the assets
of Renaissance in a foreclosure proceeding instituted by the Bank. The aggregate
consideration paid to the Bank for Renaissance was $3,446,000. Edward Kauz, who
had a right to become a Vice Chairman of the Board of the Company was an
officer, principal stockholder and significant shareholder of a debtor to
Renaissance.
Mr. Kauz remains the sole stockholder of Renaissance. At the time that the
Company acquired the assets of Renaissance, a company 50% owned by Mr. Kauz owed
Renaissance $2.8 million which receivable had been written down to no value at
the time of the acquisition of Renaissance. The Company has entered into a
five-year consulting agreement with Edward Kauz which became effective on
February 27, 1997. The agreement provides for aggregate payments to Mr. Kauz of
$200,000 subject to certain conditions set forth in a supplemental agreement,
dated February 27, 1997. In addition, under an amendment to such agreement dated
as of June 30, 1997, Mr. Kauz waived his right to serve as Vice Chairman of the
Board of Directors and was granted as of February 27, 1997 a five-year option to
purchase 180,833 shares of Common Stock for five years for $3.00 per share.
In connection with the revolving loan facility from CoreStates Bank to the
Company, each of Rudy Slucker and Barry Budilov, and their respective spouses,
have provided personal guarantees of no more than $1.1 million each, securing
the Company's indebtedness which amounts may be increased by $375,000 each on
February 20, 1998, under certain circumstances.
From February 4, 1997 through February 1, 1998, in connection with, and to
assist the Company in financing its costs related to the acquisition of
substantially all of the assets of Renaissance and the integration of the
business of Renaissance into the business of the Company and for working
capital, Rudy A. Slucker loaned the Company $576,000, payable upon demand with
interest at 8% per annum. This loan will be repaid from the proceeds of this
Offering.
In January 1998, Mr. Budilov granted to Mr. Slucker an option to purchase
500,000 shares of Common Stock owned by Mr. Budilov for $6.00 per share.
Management believes that each of the above transactions was made pursuant to
terms no less favorable than the terms reasonably expected in third-party,
unaffiliated transactions.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of December 31, 1997, and
as adjusted to reflect the sale of the Shares offered hereby, by: (i) each of
the Company's directors and executive officers; (ii) each person who is known to
the Company to own beneficially more than 5% of the Company's shares of Common
Stock; and (iii) all directors and executive officers of the Company as a group.
Unless otherwise indicated, the persons named in this table have sole voting and
investment power with respect to the shares of Common Stock shown as
beneficially owned by them and have an address, care of the Company, of 3600
Marshall Lane, Bensalem, Pennsylvania 19020. Under the rules of the Securities
and Exchange Commission, a person is deemed to be a "beneficial" owner of
securities if he or she has or shares the power to vote or direct the voting of
such securities or the power to dispose or direct the disposition of such
securities. A person is also deemed to be a beneficial owner of any securities
of which that person has the right to acquire beneficial ownership within 60
days. More than one person may be deemed to be a beneficial owner of the same
securities.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
---------------------- ---------------------
NAME NUMBER PERCENT NUMBER PERCENT
- ------------------------------------------------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Rudy A. Slucker(1)(2)(3)............................... 2,444,500 66.17% 2,444,500 49.94%
Barry Budilov(3)....................................... 1,862,000 51.55% 1,862,000 38.69%
Kenneth Kitnick(4)..................................... 151,667 4.15% 151,667 3.13%
Raymond Green.......................................... 0 -- 0 --
Jay Rice............................................... 0 -- 0 --
Jeffrey Seiken......................................... 0 -- 0 --
All directors and executive officers as a group
(6 persons)(1)(3)(4)................................. 3,958,167 100.00% 3,958,167 76.74%
</TABLE>
- ------------------------
(1) Includes 94,680 shares of Common Stock held in the names of Mr. Slucker's
wife and two children over which Mr. Slucker disclaims beneficial ownership.
(2) Also includes an option to purchase 500,000 shares granted to Mr. Slucker
from Barry Budilov.
(3) Includes (i) options to acquire 54,833 shares of Common Stock held by each
of Mr. Slucker and Mr. Budilov and (ii) 57,167 shares of Common Stock for
Mr. Budilov and 139,667 shares of Common Stock for Mr. Slucker issuable upon
the conversion of the Convertible Notes. See "Description of Securities."
(4) Includes options to acquire 151,667 shares of Common Stock of the Company.
Commencing 90 days after the completion of this Offering each of Mr. Slucker
and Mr. Budilov intend to donate up to 47,000 shares of Common Stock each, every
90 days (not to exceed 150,000 shares of Common Stock each), to the Slucker
Family Foundation, a charitable foundation over which Mr. Slucker will be a
controlling person. The Common Stock donated to the foundation will not be
subject to a lock-up agreement with the Underwriters.
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<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company is 21,000,000 consisting of
20,000,000 shares of Common Stock, $.01 par value and 1,000,000 shares of
Preferred Stock, $.01 par value. As of the date of this Prospectus, 3,500,000
shares of Common Stock are outstanding and held of record by five stockholders.
Upon the completion of this Offering there will be 4,700,000 shares of Common
Stock outstanding (4,880,000 if the Underwriter's over-allotment option is
exercised in full).
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
1,000,000 shares of Preferred Stock without further stockholder approval. The
Preferred Stock may be divided into such classes or series as the Board of
Directors may determine by resolution. The Board of Directors is authorized to
determine and fix the rights, preferences, privileges and restrictions granted
to or imposed upon any wholly unissued series of Preferred Stock , including
dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices and liquidation preferences and to fix the number of shares of
any series of Preferred Stock and the designation of any such series of
Preferred Stock. Currently no shares of Preferred Stock are outstanding.
COMMON STOCK
The holders of the shares of Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of stockholders. Subject
to preferences that may be applicable to any outstanding shares of Preferred
Stock, the holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of the funds
legally available for the payment of dividends. See "Dividend Policy." In the
event of a liquidation, dissolution or winding up of the Company, subject to the
liquidation preferences of Preferred Stock, the holders of Common Stock are
entitled to receive any declared and unpaid dividends, in addition to being
entitled to share ratably in all assets remaining after payment of liabilities
and liquidation preferences of any then outstanding shares of Preferred Stock.
Holders of Common Stock have no preemptive rights to convert their Common Stock
into any other securities. There are no redemption or sinking fund provisions
applicable to the Common Stock.
All outstanding shares of Common Stock have been duly authorized and validly
issued and are fully paid and non-assessable, and the shares of Common Stock
issued upon completion of this Offering have been duly authorized and, when
issued, will be fully paid and non-assessable.
TRANSFER AGENT AND REGISTRAR
The transfer agent registrar for the Shares is the Continental Stock
Transfer & Trust Company, Two Broadway, New York, New York 10005.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common Stock
of the Company, and no predictions can be made as to the effect, if any, that
market sales of Shares or the availability of such Shares will have on the
market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock, or the perception that such sales could
occur, could adversely affect prevailing market price of the Common Stock and
the ability of the Company to raise capital through a sale of equity securities.
Upon the closing of the Offering, the Company will have 4,700,000 (4,880,000
if the Underwriters' over allotment option is exercised in full) shares of
Common Stock outstanding. Of those shares, the 1,200,000 Shares sold in the
Offering (1,380,000 Shares if the Underwriters' over-allotment option is
36
<PAGE>
exercised in full) will be freely tradable without restriction, except as to
affiliates of the Company, or further registration under the Securities Act. The
remaining Shares held by existing stockholders are "restricted securities"
within the meaning of Rule 144 promulgated under the Securities Act and may not
be sold in the absence of registration under the Securities Act unless an
exemption from registration is available, including the exemption contained in
Rule 144. Rule 701 under the Securities Act provides that Common Stock acquired
on the exercise of options granted under a written compensatory plan of the
Company or contract with the Company prior to the date of this Prospectus may be
resold by persons, other than Affiliates, beginning 90 days after the date of
this Prospectus, subject only to the manner of sale provisions of Rule 144, and
by affiliates, as such term is defined under Rule 144, without compliance with
the one-year minimum holding period contained in Rule 144, subject to certain
limitations. There are 529,333 shares of Common Stock issuable upon the exercise
of outstanding options (the "Option Shares"). Beginning 90 days after the date
of this Prospectus, all of the Option Shares would be eligible for sale in
reliance on Rule 701.
In general, under Rule 144(e), as currently in effect, a stockholder (or
stockholders whose shares are aggregated), including an affiliate, who has
beneficially owned for at least one year shares of Common Stock that are treated
as "restricted securities," would be entitled to sell publicly, within any
three-month period, up to the greater of 1% of the then outstanding shares of
Common Stock (47,000 shares immediately after the completion of this offering)
or the average weekly reported trading volume in the Common Stock during the
four calendar weeks preceding the date on which notice of sale is given,
provided certain requirements are satisfied. In addition, affiliates of the
Company must comply with additional requirements of Rule 144 in order to sell
shares of Common Stock (including shares acquired by affiliates in this
Offering). Under Rule 144, a stockholder deemed not to have been an affiliate of
the Company at any time during the 90 days preceding a sale by him, and who has
beneficially owned for at least two years shares of Common Stock that are
treated as "restricted securities," would be entitled to sell those shares
without regard to the foregoing requirements. Since all outstanding shares of
Common Stock have been held for at least one year and are not subject to the
above described restriction on sale, they will be eligible for immediate sale
without restriction in the public market.
The holders of the Representatives' Warrant will also have certain demand
and incidental registration rights with respect to the Representatives' Warrant
and the 120,000 shares of Common Stock underlying the Warrants commencing after
the date of this Prospectus.
The Company and each of its directors, officers and stockholders have agreed
with the Underwriter that they will not offer, assign, issue, sell, hypothecate
or otherwise dispose of any Shares or any securities exercisable for or
convertible into shares of Common Stock, other than with respect to up to
300,000 shares of Common Stock, for a period of 18 months after the date of this
Prospectus without the prior written consent of the Representatives. See
"Underwriting."
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<PAGE>
UNDERWRITING
The Underwriters named below have agreed, subject to the terms and
conditions of the Underwriting Agreement between the Company, H.J. Meyers & Co.,
Inc. and National Securities Corporation, as Representatives of the
Underwriters, to purchase from the Company the number of Shares set forth
opposite their names on a "firm commitment" basis. The 10% underwriting discount
set forth on the cover page of this Prospectus will be allowed to the
Underwriters at the time of delivery to the Underwriters of the Shares so
purchased
<TABLE>
<CAPTION>
NUMBER
OF SHARES
NAME OF UNDERWRITER PURCHASED
- --------------------------------------------------------------------------------- ----------
<S> <C>
H.J. Meyers & Co., Inc...........................................................
National Securities Corporation..................................................
----------
TOTAL.................................................................... 1,200,000
----------
----------
</TABLE>
The Underwriters have advised the Company that they propose to offer the
Shares to the public at the initial public offering price set forth on the front
cover page of this Prospectus, and at such price less a concession not in excess
of $ per share of Common Stock to certain dealers who are members of the
National Association of Securities Dealers, Inc., of which the Underwriters may
allow and such dealers may reallow concessions not in excess of $ per share
of Common Stock to certain other dealers. The public offering price and
concession and discount may be changed by the Underwriters after the initial
public offering.
The Company has granted to the Underwriters an over-allotment option
expiring at the close of business on the 45th day subsequent to the date of this
Prospectus, to purchase up to an additional 180,000 Shares at the public
offering price, less the underwriting discount set forth on the cover page of
this Prospectus. The Underwriters may exercise such option only to satisfy
over-allotments in the sale of the Shares.
The Company has agreed to pay to the Representatives a non-accountable
expense allowance equal to 3% of the total proceeds of this Offering, or
$216,000 (and 3% of the total proceeds from the sale of any shares of Common
Stock pursuant to the exercise of the over-allotment option, or $248,400 if the
Underwriters exercise the over-allotment option in full). In addition to the
Underwriters' commissions and the Representatives' expense allowance, the
Company is required to pay the costs of qualifying the shares of Common Stock
under federal and state securities laws, together with legal and accounting
fees, printing and other costs in connection with this Offering.
At the closing of this Offering, the Company will issue to the
Representatives, for nominal consideration, the Representatives' Warrant to
purchase up to 120,000 shares of Common Stock of the Company (also referred to
herein as the "Representatives' Warrants"). The shares of Common Stock subject
to the Representatives' Warrant are identical to the shares of Common Stock sold
to the public, except for the purchase price and certain registration rights.
The Representatives' Warrants will be exercisable for a four-year period
commencing one year from the date of this Prospectus, at an exercise price of
$9.90 per share of Common Stock (that being 165% of the initial public offering
price per share of Common Stock). The Representatives' Warrants will be
restricted from sale, assignment, pledge or hypothecation prior to their
38
<PAGE>
initial exercise date except to successors in interest to the Representatives
and/or one or more officers of the Representatives.
The Representatives' Warrants will contain anti-dilution provisions
providing for appropriate adjustment in the event of any recapitalization,
reclassification, stock dividend, stock split or similar transactions. The
Representatives' Warrants does not entitle the Representatives to any rights as
stockholders of the Company until such warrants are exercised and the shares of
Common Stock are purchased thereunder.
The Representatives' Warrants and the shares of Common Stock issuable
thereunder may not be offered for sale to the public except in compliance with
the applicable provisions of the Securities Act. The Company has agreed that if
it causes a post-effective amendment to the Registration Statement of which this
Prospectus is a part, or a new registration statement or offering statement
under Regulation A, to be filed with the Securities and Exchange Commission
("Commission"), the Representatives shall have the right during the life of the
Representatives' Warrant to include therein for registration the
Representatives' Warrants and/or the shares of Common Stock issuable upon their
exercise at no expense to the Representatives. Additionally, the Company has
agreed that, upon demand by the holder(s) of at least 50% of the (i) total
unexercised Representatives' Warrants and (ii) shares of Common Stock issued
upon the exercise of the Representatives' Warrants, made on no more than two
separate occasions during the exercise period of the Representatives' Warrants,
the Company shall use its best efforts to register the Representatives' Warrants
and/or any of the shares of Common Stock issuable upon the exercise thereof,
provided that the Company has available current financial statements, the
initial such registration to be at the Company's expense and the second at the
expense of the holder(s).
For the period during which the Representatives' Warrants are exercisable,
the holder(s) will have the opportunity to profit from a rise in the market
value of the Company's Common Stock, with a resulting dilution in the interests
of the other stockholders of the Company. The holder(s) of the Representatives'
Warrants can be expected to exercise the warrants at a time when the Company
would, in all likelihood, be able to obtain any needed capital from an offering
of its unissued Common Stock on terms more favorable to the Company than those
provided for in the Representatives' Warrants. Such facts may materially
adversely affect the terms on which the Company can obtain additional financing.
The Company has agreed to enter into a one year consulting agreement with
H.J. Meyers, pursuant to which H.J. Meyers will act as financial consultant to
the Company, commencing upon the closing date of this Offering. Under the terms
of this agreement, H.J. Meyers, to the extent reasonably required in the conduct
of the business of the Company and at the prior written request of the President
of the Company, has agreed to evaluate the Company's managerial and financial
requirements, assist in the preparation of budgets and business plans, advise
with regard to sales planning and sales activities, and assist in financial
arrangements. H.J. Meyers will make available qualified personnel for this
purpose. The non-refundable consulting fee of $60,000 will be payable, in full,
on the closing date of this Offering.
The Company has agreed that it will engage a public relations firm
acceptable to the Representatives and the Company. The Company also has agreed
to maintain a relationship with such public relations firm for minimum period of
two years and on such other terms as are acceptable to the Reprsentatives.
The Company has also agreed that, for a period of two years from the closing
of this Offering, if it participates in any merger, consolidation or other
transaction which H.J. Meyers has brought to the Company (including an
acquisition of assets or stock for which it pays, in whole or in part, with
shares of the Company's Common Stock or other securities), which transaction is
consummated within three years of the closing of this Offering, then it will pay
for H.J. Meyers' services an amount equal to 5% of the first $3 million of value
paid or value received in the transaction, 3% of any consideration above $3
million and less than $5 million and 2% of any consideration in excess of $5
million. The Company has also agreed that if, during this two-year period,
someone other than H.J. Meyers brings such a merger, consolidation, or other
transaction to the Company, and if the Company in writing retains H.J. Meyers
for consultation or other services in connection therewith, than upon
consummation of the transaction the Company will pay
39
<PAGE>
to H.J. Meyers as a fee the appropriate amount as set forth above or as
otherwise agreed to between the Company and H.J. Meyers.
The Company has agreed that for a period of one year from the date of this
Prospectus the Company will not sell or otherwise dispose of any securities
without the prior written consent of the Respresentatives, which consent shall
not be unreasonably withheld, with the exception of shares of Common Stock
issued pursuant to the exercise of options, warrants or other convertible
securities outstanding prior to the date of this Prospectus. The Company will
not sell or issue any securities pursuant to Regulation S under the Securities
Act without the Respresentatives' prior written consent.
The Company's officers, directors and 5% shareholders have agreed that for a
period of 18 months from the date of this Prospectus they will not offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock acquired
prior to this Offering, other than up to 300,000 shares of Common Stock, without
the prior written consent of the Representatives.
For a period of 36 months from the closing of this Offering, the
Representatives are entitled to designate one member as a nominee for election
to the Company's Board of Directors. Rudy A. Slucker and Barry Budilov have
agreed to vote their shares in favor of such nominee. If the Representatives
elect not to nominate a Board of Directors Member, then they shall have the
right to select a person to act as an observer to attend all meetings of the
Board of Directors. The Company has agreed to hold at least four meetings and to
indemnify the Representatives' observer against any claims arising out of his
participating at meetings.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriters against certain liabilities in connection with
the Registration Statement, including liabilities under the Act.
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.
The offering price of the securities being offered hereby was determined by
negotiation between the Company and the Representatives. Factors considered in
determining such price include the history of and the prospects for the industry
in which the Company competes, the past and present operations of the Company,
the future prospects of the Company, the ability of the Company's management,
the earnings, net worth and financial condition of the Company and the general
condition of the securities markets at the time of this Offering.
On July 16, 1996, the NASD issued a Notice of Acceptance, Waiver and Consent
(the "AWC") whereby H.J. Meyers was censured and ordered to pay fines and
restitution to retail customers in the amount of $250,000 and approximately
$1.025 million, respectively. The AWC was issued in connection with claims by
the NASD that H.J. Meyers charged excessive markups and markdowns in connection
with the trading of four securities originally underwritten by H.J. Meyers. The
activities in question occurred between December 1990 and October 1993. H.J.
Meyers has informed the Company that the fines and refunds will not have a
material adverse effect on H.J. Meyers' operations and that H.J. Meyers has
effected remedial measures to help ensure that the subject conduct does not
recur.
40
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock will be passed upon by Gibbons,
Del Deo, Dolan, Griffinger & Vecchione, a Professional Corporation, Newark, New
Jersey. Certain legal matters in connection with this Offering will be passed
upon for the Underwriter by Harter, Secrest & Emery, LLP, Rochester, New York.
EXPERTS
The financial statements of the Company as at March 31, 1997 and for the
period from May 3, 1995 (Inception) to March 31, 1996 and for the year ended
March 31, 1997, and the financial statements of Renaissance as at October 31,
1996 and for the year then ended, appearing in this Prospectus and Registration
Statement have been audited by Richard A. Eisner & Company, LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein and
in the Registration Statement, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The financial statements of Renaissance for the year ended October 31, 1995,
appearing in this Prospectus and Registration Statement have been audited by
J.H. Cohn LLP, independent public accountants, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission, a Registration Statement on Form
SB-2 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the
Shares offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company and
the Shares offered hereby, reference is made to the Registration Statement.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to herein are not necessarily complete and, where
such contract or other document is filed as an exhibit to the Registration
Statement, each such statement is qualified in all respects by the provisions in
such exhibit, to which reference is hereby made. Copies of the Registration
Statement may be inspected without charge at the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 or at the
Regional Offices of the Commission located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60604 and Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of all or any portion of the
Registration Statement can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of
certain fees prescribed by the Commission.
Prior to the date of this Prospectus, the Company was not subject to the
information requirements of the Exchange Act. Upon the effectiveness of the
Registration Statement, the Company will be subject to certain of the
informational requirements of the Exchange Act and, in accordance therewith,
will file periodic reports and other information with the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of the reports and
information so filed can be obtained from the Public Reference Section of the
Commission upon payment of certain fees prescribed by the Commission.
The Commission maintains a Web site that contains reports, proxy statements
and other information regarding registrants that file electronically with the
Commission that can be electronically examined. The address of the Commission's
Web site is http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and with such other periodic reports as
the Company may from time to time deem appropriate or as may be required by law.
41
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PRO FORMA:
Pro Forma Unaudited Condensed Statement of Operations for the Year Ended March 31,
1997............................................................................. F-2
HISTORICAL:
AMBASSADOR EYEWEAR GROUP, INC.
Report of Independent Auditors..................................................... F-3
Balance Sheet as at March 31, 1997 and December 31, 1997 (unaudited)............... F-4
Statements of Operations for the Period from May 3, 1995 (Inception) through March
31, 1996, for the Year Ended March 31, 1997 and for the nine-month periods
(unaudited) ended December 31, 1996 and 1997..................................... F-5
Statements of Changes in Stockholders' Equity for the Period from May 3, 1995
(Inception) through March 31, 1996, for the Year Ended March 31, 1997 and for the
nine months ended December 31, 1997 (unaudited).................................. F-6
Statements of Cash Flows for the Period from May 3, 1995 (Inception) through March
31, 1996, for the Year Ended March 31, 1997 and for the nine-month periods
(unaudited) ended December 31, 1996 and 1997..................................... F-7
Notes to Financial Statements...................................................... F-8
RENAISSANCE EYEWEAR, INC.
Report of Independent Auditors..................................................... F-20
Report of Independent Public Accountants........................................... F-21
Statement of Assets, Liabilities and Capital Deficiency Preceding the Bank Taking
Possession of the Assets as at October 31, 1996.................................. F-22
Statements of Operations Preceding the Bank Taking Possession of the Assets for the
Years Ended October 31, 1995 and October 31, 1996................................ F-23
Statements of Changes in Stockholders' Equity (Capital Deficiency) for the Years
Ended October 31, 1995 and October 31, 1996...................................... F-24
Statements of Cash Flows Preceding the Bank Taking Possession of the Assets for the
Years ended October 31, 1995 and October 31, 1996................................ F-25
Notes to Financial Statements...................................................... F-26
</TABLE>
F-1
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1997
(IN THOUSANDS EXCEPT PER SHARE DATA)
The following pro forma unaudited condensed statement of operations reflects
the acquisitions of Windsor Optical, Inc. ("Windsor") and Renaissance Eyewear
Inc. ("Renaissance") as if such transactions had occurred on April 1, 1996. The
acquisitions have been accounted for as purchases in accordance with Accounting
Principles Board Opinion No. 16. In the opinion of management of the Company,
all adjustments necessary to present fairly such pro forma statements of
operations have been made.
This pro forma condensed statement of operations should be read in
conjunction with the notes thereto, the financial statements of the Company and
of Renaissance and the related notes thereto and with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," each included
elsewhere in this Prospectus. The pro forma condensed statement of operations is
presented for informational purposes only and is not necessarily indicative of
what the actual results of operations would have been had the transactions
occurred at April 1, 1996, nor do they purport to indicate the results of future
operations.
The Ambassador column presents results of operations of Ambassador for the
full year ended March 31, 1997 which includes the operations of Windsor and
Renaissance from their respective dates of acquisition, June 26, 1996 and
February 26, 1997. The Windsor and Renaissance columns present respectively,
their separate unaudited results of operations for the portion of the year ended
March 31, 1997 prior to their dates of acquisition.
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------
<S> <C> <C> <C> <C> <C>
RENAISSANCE WINDSOR PRO FORMA
AMBASSADOR ELEVEN MONTHS THREE MONTHS RESULTS
YEAR ENDED ENDED ENDED YEAR ENDED
MARCH 31, FEBRUARY 28, JUNE 30, PRO FORMA MARCH 31,
1997 1997 1996 ADJUSTMENTS 1997
------------- -------------- ----------------- ----------- -----------
Net sales................................. $ 16,455 $ 11,705 $ 969 $ 29,129
Cost of sales............................. 8,552 6,060 479 15,091
------------- -------------- ----- -----------
Gross profit.............................. 7,903 5,645 490 14,038
Selling, general and administrative
expenses................................ 6,145 6,522 392 $ (332)(A) 12,727
------------- -------------- ----- ----------- -----------
Income (loss) from operations............. 1,758 (877) 98 332 1,311
Interest expense (net).................... 738 337 23 8(A) 1,106
Writedown in connection with bank taking
possession of assets.................... 7,054 (7,054)(B) -0-
------------- -------------- ----- ----------- -----------
Income (loss) before taxes................ 1,020 (8,268) 75 7,378 205
Income tax expense (benefit).............. 340 (475) 25 179(A) 69
------------- -------------- ----- ----------- -----------
NET INCOME (LOSS)......................... $ 680 $ (7,793) $ 50 $ 7,199 $ 136
------------- -------------- ----- ----------- -----------
------------- -------------- ----- ----------- -----------
Basic income per share.................... $ .19 $ .04
------------- -----------
------------- -----------
Diluted income per share (C).............. $ .18 $ .04
------------- -----------
------------- -----------
Weighted average shares outstanding--basic
income per share........................ 3,500 3,500
------------- -----------
------------- -----------
Weighted average shares
outstanding--diluted income per share
(D)..................................... 3,836 3,836
------------- -----------
------------- -----------
</TABLE>
- ------------------------
Notes:
(A) Expense adjustments (for depreciation and amortization of deferred credit)
for the period ended March 31, 1997 to reflect the acquisitions as if they
had taken place April 1, 1996 and the related tax effect.
(B) Elimination of loss resulting from bank taking possession of and selling all
of the assets of Renaissance. The bank took possession of assets with a book
value of $10,500 in connection with a default on bank debt of $3,446.
(C) Pursuant to the Commission's Staff Accounting Bulletin No. 98, potential
common shares issued at prices below the anticipated public offering price
during the twelve months preceding the initial filing date of the
registration statement have been included in the calculation of diluted
income per share in a manner similar to a stock split or stock dividend.
(D) See calculation of weighted average number of shares outstanding in the
Statement of Operations for the year ended March 31, 1997.
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Ambassador Eyewear Group, Inc.
Bensalem, Pennsylvania
We have audited the accompanying balance sheet of Ambassador Eyewear Group,
Inc. as at March 31, 1997 and the related statements of operations, changes in
stockholders' equity and cash flows for the period from May 3, 1995 (inception)
through March 31, 1996 and for the year ended March 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements enumerated above present fairly, in
all material respects, the financial position of Ambassador Eyewear Group, Inc.
at March 31, 1997 and the results of its operations and its cash flows for the
period from May 3, 1995 (inception) through March 31, 1996 and for the year
ended March 31, 1997 in conformity with generally accepted accounting
principles.
Richard A. Eisner & Company, LLP
New York, New York
June 12, 1997
With respect to
Notes G and I[1]
June 30, 1997
F-3
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1997
------------- -------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash............................................................................. $ 75,000 $ 90,000
Accounts receivable, less allowance for returns and doubtful accounts of
$2,394,000 and $1,866,000...................................................... 7,403,000 9,732,000
Inventories...................................................................... 11,508,000 11,749,000
Prepaid expenses................................................................. 175,000 103,000
Deferred taxes................................................................... 586,000 526,000
Other current assets............................................................. 4,000 19,000
------------- -------------
Total current assets........................................................... 19,751,000 22,219,000
Fixed assets, net of accumulated depreciation of $276,000 and $447,000............. 744,000 792,000
Deferred financing cost............................................................ 119,000 80,000
Deferred offering costs............................................................ 437,000
Other assets....................................................................... 42,000 42,000
------------- -------------
TOTAL........................................................................ $ 20,656,000 $ 23,570,000
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable--banks............................................................. $ 12,098,000 $ 13,095,000
Notes payable--stockholders/officers............................................. 280,000 470,000
Loans from stockholders/officers................................................. 63,000
Current portion of long-term debt................................................ 96,000 101,000
Accounts payable................................................................. 4,242,000 4,358,000
Accrued expenses................................................................. 808,000 1,579,000
Income taxes payable............................................................. 544,000 868,000
Current portion of capital leases payable........................................ 69,000 105,000
------------- -------------
Total current liabilities...................................................... 18,137,000 20,639,000
Consulting payable................................................................. 29,000 61,000
Long-term debt, less current portion............................................... 319,000 242,000
Notes payable--stockholders/officers............................................... 1,181,000 1,181,000
Capital leases payable, less current portion....................................... 90,000 128,000
Deferred taxes..................................................................... 41,000 18,000
Deferred credit, net............................................................... 836,000 761,000
------------- -------------
Total liabilities.............................................................. 20,633,000 23,030,000
------------- -------------
Commitments, contingencies and other matters
Stockholders' equity:
Preferred stock, par value $.01 per share; authorized 1,000,000 shares; none
issued
Common stock, par value $.01 per share; authorized 10,000,000 shares; issued and
outstanding 3,500,000 shares................................................... 35,000 35,000
Additional paid-in capital....................................................... 187,000 187,000
Unearned portion of compensatory stock options................................... (184,000) (156,000)
Retained earnings (accumulated deficit).......................................... (15,000) 474,000
------------- -------------
Total stockholders' equity..................................................... 23,000 540,000
------------- -------------
TOTAL........................................................................ $ 20,656,000 $ 23,570,000
------------- -------------
------------- -------------
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-4
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
MAY 3, 1995
(INCEPTION) NINE MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31,
MARCH 31, MARCH 31, ----------------------------
1996 1997 1996 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Net sales........................................... $ 11,005,000 $ 16,455,000 $ 11,722,000 $ 17,492,000
Cost of sales....................................... 6,826,000 8,552,000 6,103,000 7,895,000
------------- ------------- ------------- -------------
Gross profit........................................ 4,179,000 7,903,000 5,619,000 9,597,000
Selling, general and administrative expenses........ 4,258,000 6,145,000 4,513,000 7,865,000
------------- ------------- ------------- -------------
Income (loss) from operations....................... (79,000) 1,758,000 1,106,000 1,732,000
Interest income..................................... 4,000 4,000
Interest (expense).................................. (474,000) (742,000) (442,000) (972,000)
------------- ------------- ------------- -------------
Income (loss) before provision for income taxes..... (553,000) 1,020,000 668,000 760,000
Income tax provision (benefit)...................... (254,000) 340,000 300,000 271,000
------------- ------------- ------------- -------------
NET INCOME (LOSS)................................... $ (299,000) $ 680,000 $ 368,000 $ 489,000
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Basic income (loss) per share....................... $ (.09) $ .19 $ .11 $ .14
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Diluted income (loss) per share..................... $ (.08) $ .18 $ .10 $ .13
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted average number of common shares
outstanding--basic income (loss) per share........ 3,500,000 3,500,000 3,500,000 3,500,000
Effect of potential common shares................... 90,000 336,000 326,000 364,000
------------- ------------- ------------- -------------
Weighted average number of common shares
outstanding--diluted income (loss) per share...... 3,590,000 3,836,000 3,826,000 3,864,000
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-5
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNEARNED
COMMON STOCK PORTION OF RETAINED
-------------------------- ADDITIONAL COMPENSATORY EARNINGS TOTAL
NUMBER OF PAID-IN STOCK (ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL OPTIONS DEFICIT) EQUITY
------------ ------------ ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock............. 3,500,000 $ 35,000 $ (34,000) $ 1,000
Acquisition of Chanuk................ (362,000) (362,000)
Net loss for the period May 3, 1995
(inception) through March 31,
1996............................... (299,000) (299,000)
Balance--March 31, 1996.............. 3,500,000 35,000 (695,000) (660,000)
Fair value of options granted........ $ 187,000 $ (184,000) 3,000
Net income for the year.............. 680,000 680,000
------------ ------------ ---------- ------------- ------------ ------------
Balance--March 31, 1997.............. 3,500,000 $ 35,000 $ 187,000 $ (184,000) $ (15,000) $ 23,000
Amortization of unearned portion of
compensatory stock options......... 28,000 28,000
Net income for the nine months....... 489,000 489,000
------------ ------------ ---------- ------------- ------------ ------------
BALANCE--DECEMBER 31, 1997
(unaudited)........................ 3,500,000 $ 35,000 $ 187,000 $ (156,000) $ 474,000 $ 540,000
------------ ------------ ---------- ------------- ------------ ------------
------------ ------------ ---------- ------------- ------------ ------------
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-6
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
MAY 3, 1995
(INCEPTION) NINE MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31,
MARCH 31, MARCH 31, --------------------------
1996 1997 1996 1997
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Cash flows from operating activities:
Net income (loss)........................................... $ (299,000) $ 680,000 $ 368,000 $ 489,000
Adjustments to reconcile net income (loss) to net cash (used
in) operating activities:
Depreciation............................................ 110,000 175,000 120,000 160,000
Amortization of deferred financing costs................ 127,000 71,000 36,000 39,000
Amortization of deferred credit......................... (8,000) (75,000)
Deferred taxes.......................................... (372,000) 173,000 (133,000) 36,000
Compensatory stock option............................... 3,000 28,000
Loss on disposal of assets.............................. 94,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable............ 57,000 (3,992,000) (2,212,000) (2,329,000)
(Increase) in inventories............................. (1,550,000) (1,364,000) (1,239,000) (241,000)
Decrease in prepaid expenses.......................... 222,000 98,000 172,000 72,000
(Increase) decrease in other assets................... (153,000) 173,000 172,000 (15,000)
Increase (decrease) in accounts payable............... 28,000 252,000 (80,000) 116,000
Increase in consulting payable........................ 29,000 19,000 32,000
Increase in accrued expenses.......................... 302,000 106,000 343,000 521,000
Increase in income taxes payable...................... 119,000 425,000 359,000 324,000
----------- ----------- ----------- -------------
Net cash (used in) operating activities............. (1,365,000) (3,525,000) (2,075,000) (749,000)
----------- ----------- ----------- -------------
Cash flows from investing activities:
Fixed asset acquisitions.................................... (199,000) (136,000) (95,000) (167,000)
Cash obtained through acquisitions.......................... 2,000 59,000 59,000
Deferred financing costs acquired........................... (127,000)
Proceeds from insurance claim............................... 30,000
----------- ----------- ----------- -------------
Net cash (used in) investing activities............. (294,000) (77,000) (36,000) (167,000)
----------- ----------- ----------- -------------
Cash flows from financing activities:
Net borrowings from bank--line of credit.................... 1,667,000 3,575,000 2,229,000 997,000
Payments of financing costs................................. (90,000) (55,000)
Payments of registration costs.............................. (187,000)
Proceeds from stockholder/officer........................... 15,000 265,000 15,000 283,000
Payments of notes payable--stockholders/officer............. (13,000) (12,000) (30,000)
Payments of notes payable--Windsor.......................... (35,000) (72,000)
Payments on capital leases.................................. (48,000) (39,000) (60,000)
----------- ----------- ----------- -------------
Net cash provided by financing activities........... 1,669,000 3,667,000 2,138,000 931,000
----------- ----------- ----------- -------------
NET INCREASE IN CASH.......................................... 10,000 65,000 27,000 15,000
Cash--beginning of period..................................... -0 - 10,000 10,000 75,000
----------- ----------- ----------- -------------
CASH--END OF PERIOD........................................... $ 10,000 $ 75,000 $ 37,000 $ 90,000
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Supplementary cash flow information:
Income taxes paid (net of refunds received)................. $ 88,000 $ 48,000 $ (90,000)
Interest paid............................................... $ 300,000 629,000 418,000 934,000
Supplementary schedule of noncash investing and financing
activities:
Deferred financing fee.................................... 100,000
Acquisitions (see Note C)
Accrued offering costs.................................... 250,000
Equipment acquired under capital leases................... 189,000 51,000 7,000 134,000
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-7
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)
(NOTE A)--THE COMPANY AND BASIS OF PRESENTATION:
Ambassador Eyewear Group, Inc. (the "Company", formerly Diplomat Ambassador,
Inc.), designs, markets and distributes prescription eyeglass frames and
nonprescription sunglasses to department and specialty stores, optical chains
and eyewear boutiques worldwide. On May 3, 1995 the Company was organized and on
May 10, 1995, acquired substantially all of the assets and assumed certain of
the liabilities of Chanuk Inc. ("Chanuk") and became the business successor. On
June 26, 1996 the Company acquired substantially all of the assets and assumed
certain of the liabilities of Windsor Optical, Inc. ("Windsor"). On February 26,
1997 the Company acquired from a bank substantially all of the assets of
Renaissance Eyewear Inc. ("Renaissance") and incurred certain other obligations
(see Note C and L [7]).
The Company imports substantially all of its frames and nonprescription
sunglasses from a limited number of international suppliers, principally in the
Far East.
(NOTE B)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
[1] USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
[2] INVENTORIES:
Inventories, consisting principally of eyeglass frames and sunglasses, are
stated at the lower of cost or market. Cost is determined by the first-in,
first-out method.
[3] FIXED ASSETS:
Fixed assets, including assets held under capital leases, are stated at cost
and depreciation is computed by the straight line method over the estimated
useful lives of 5 to 7 years. Leasehold improvements are stated at cost and are
amortized over the shorter of the lease term or the estimated useful lives of
the related assets.
[4] AMORTIZATION OF INTANGIBLE ASSETS:
Deferred financing costs are being amortized on a straight line basis over
the remaining term of the revolving credit facility. (See Note F[1]).
Accumulated amortization was $71,000 and $110,000, respectively at March 31,
1997 and December 31, 1997.
[5] DEFERRED CREDIT:
The deferred credit represents the excess value of net assets of Renaissance
acquired over cost, which is being amortized over a period of five years.
Accumulated amortization was $8,000 and $83,000, respectively at March 31, 1997
and December 31, 1997.
[6] INCOME TAXES:
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes"
which requires the use of the liability method of accounting for income taxes.
The Company reports on a calendar year end for income tax purposes.
F-8
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)
(NOTE B)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
[7] REVENUE RECOGNITION:
Revenue is recognized when merchandise is shipped to customers. The Company
accrues a sales return allowance in accordance with its return policy for
estimated returns of inventory subsequent to the balance sheet date that relate
to sales prior to the balance sheet date. Estimated sales returns are provided
for and at March 31, 1997 and December 31, 1997 the allowance for returns was
$555,000 and $365,000, respectively.
[8] INCOME (LOSS) PER SHARE:
The Company adopted SFAS No. 128, "Earnings Per Share," in the period ended
December 31, 1997 and has retroactively applied the effects thereof for all
periods presented. Accordingly, the presentation of per share information
includes calculations of basic and diluted income (loss) per share. The impact
on the per share amounts previously reported was not significant for any of the
periods presented.
Potential common shares, consisting of 166,833 options, were not included in
the calculation of diluted loss per share for the period from May 3, 1995 thru
March 31, 1996 since their effect would be antidilutive.
Additionally, pursuant to the Commission's Staff Accounting Bulletin No. 98,
potential common shares issued at prices below the anticipated public offering
price during the twelve months preceding the initial filing date of the
registration statement have been included in the calculations of diluted income
(loss) per share in a manner similar to a stock split or stock dividend.
[9] CONCENTRATION OF CREDIT RISK:
Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist principally of accounts receivable. The
Company extends credit to a substantial number of its customers and performs
ongoing credit evaluations of the customers' financial condition while requiring
no collateral.
[10] FAIR VALUES OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires the Company to disclose estimated fair
values for its financial instruments. The carrying amounts reported in the
balance sheet for cash, accounts receivable, accounts payable and accrued
expenses approximate fair value because of the short maturity period of those
instruments. In addition the carrying amounts reported for notes payable
approximate fair value based on recent market rates of interest for similar
instruments.
[11] STOCK-BASED COMPENSATION:
During the year ended March 31, 1997 the Company adopted Statement of
Financial Accounting Standards Board No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). The provisions of SFAS No. 123 allow companies
to either expense the estimated fair value of stock options or other awards
granted to employees or to continue to follow the intrinsic value method set
forth in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25") but disclose the pro forma effects on net income
(loss) had the fair value of the options been expensed. The Company has elected
to continue to apply APB No.25 to its stock-based compensation awards to
employees and will
F-9
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)
(NOTE B)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
disclose pro forma net income (loss) and basic and diluted income (loss) per
share in accordance with SFAS No. 123. Accordingly, the Company accounts for the
difference between the exercise price of compensatory stock options and the fair
value of the stock as "Unearned Compensatory Stock Options," which the Company
charges to operations over the vesting period.
[12] FOREIGN CURRENCY TRANSACTIONS:
Foreign currency transaction gain and losses are recognized as incurred.
During the period from May 3, 1995 (inception) through March 31, 1996, the year
ended March 31, 1997 and the nine months ended December 31, 1997 gains/losses
were not material.
[13] ADVERTISING:
The costs of advertising are expensed when incurred or the first time the
advertising takes place. Advertising expense for the period from May 3, 1995
(inception) through March 31, 1996, for the year ended March 31, 1997 and the
nine months ended December 31, 1997 was approximately $155,000, $277,000 and
$160,000, respectively.
[14] RECENT ACCOUNTING PRONOUNCEMENTS:
In June 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 129, "Disclosure of Information about Capital
Structure", No. 130, "Reporting Comprehensive Income", and No. 131, "Disclosure
about Segments of an Enterprise and Related Information". The Company believes
that the above pronouncements will not have a significant effect on the
information presented in the financial statements.
[15] UNAUDITED INTERIM FINANCIAL STATEMENTS:
In the opinion of management, the unaudited financial statements include all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the Company's financial position at December 31, 1997 and
results of operations and cash flows for the nine-month periods ended December
31, 1997 and 1996. The financial statements as of December 31, 1997 and for the
nine months ended December 31, 1997 are not necessarily indicative of the
results that may be expected for the year ending March 31, 1998.
(NOTE C)--ASSET ACQUISITIONS:
[1] CHANUK:
In May 1995 the Company acquired substantially all of the assets and assumed
certain of the liabilities of Chanuk, an eyewear distributor and a predecessor
entity. The majority stockholder (74 percent) of Chanuk is the mother-in-law of
one of the Company's 50% stockholders. Such 50% stockholder is the President and
Chief Executive Officer of the Company and was the President of Chanuk. The
Company's other 50% stockholder owned a minority interest (approximately 10%) in
Chanuk. The Company became the business successor to Chanuk and the transaction
is considered a recapitalization rather than a business combination. The
acquisition was recorded at Chanuk's historical cost basis which approximates
fair value. The Company issued two notes payable aggregating $687,000, for the
value of the net assets acquired, to its
F-10
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)
(NOTE C)--ASSET ACQUISITIONS: (CONTINUED)
two stockholders as consideration for a note issued by the stockholders to
Chanuk for the same amount (see Note F). The excess ($362,000) of the notes
payable over the historical basis of the net assets acquired has been accounted
for as a reduction of stockholders' equity. The cost was recorded as follows:
<TABLE>
<S> <C>
Cash............................................................ $ 2,000
Accounts receivable, net........................................ 2,089,000
Inventory....................................................... 2,995,000
Prepaid expenses & other assets................................. 442,000
Fixed assets.................................................... 468,000
Note payable--bank.............................................. (2,288,000)
Accounts payable................................................ (2,875,000)
Loans payable--stockholders..................................... (508,000)
Deficit......................................................... 362,000
----------
Notes payable--stockholders..................................... $ 687,000
----------
----------
</TABLE>
[2] WINDSOR:
In June 1996 the Company acquired substantially all of the assets and
assumed certain of the liabilities of Windsor, an eyewear distributor. In
addition, the Company paid $100,000 cash and issued two notes payable to Windsor
aggregating $450,000. This acquisition was treated for accounting purposes as a
purchase. Accordingly, the various assets acquired and liabilities assumed were
recorded at their respective estimated fair values as of the date of
acquisition. The cost of the acquisition was allocated as follows:
<TABLE>
<S> <C>
Cash............................................................ $ 59,000
Accounts receivable, net........................................ 448,000
Inventory....................................................... 1,937,000
Fixed assets.................................................... 45,000
Other assets.................................................... 66,000
Loan payable--bank (including $100,000 borrowed in connection
with the purchase)............................................ (1,022,000)
Accounts payable................................................ (1,083,000)
----------
Notes payable--Windsor.......................................... $ 450,000
----------
----------
</TABLE>
The Company entered into a three year employment agreement with one of the
principal stockholders of Windsor, who is currently an officer of the Company
(see Note L[2]). The Company also granted options to purchase 151,667 shares of
common stock at $1.50 per share to this individual. In addition the Company
entered into a consulting agreement with another principal stockholder of
Windsor (see Note L[3]).
[3] RENAISSANCE:
In February 1997 the Company purchased substantially all of the assets of
Renaissance, an eyewear distributor, from Summit Bank after Summit Bank had
passively foreclosed on Renaissance upon default of its loan agreement. The
Company also satisfied certain obligations aggregating $400,000 and entered
F-11
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)
(NOTE C)--ASSET ACQUISITIONS: (CONTINUED)
into a noncompete agreement and a consulting agreement with the former owner of
Renaissance which provide for annual aggregate payments of $200,000 per year for
five years (see Note L[3]). In addition the Company granted the former owner
options to purchase 180,833 shares of common stock at $3 per share. The Company
valued the option at $187,000 representing the fair value at date of grant which
is being charged to operations over five years. The excess of the fair value of
the net assets acquired over the purchase price was first applied as a reduction
of noncurrent assets and the remaining balance is treated for accounting
purposes as a deferred credit. The cost of the acquisition was allocated as
follows:
<TABLE>
<S> <C>
Accounts receivable, net........................................ $ 975,000
Inventory....................................................... 3,662,000
Prepaid expenses................................................ 53,000
Note payable--bank.............................................. (3,446,000)
Deferred credit................................................. (844,000)
Accrued expenses................................................ (400,000)
</TABLE>
The Company's financial statements include the operations of the acquired
entities from the respective dates of such acquisitions.
[4] PRO FORMA RESULTS OF OPERATIONS:
The following unaudited pro forma summary of results of operations has been
prepared as if each of the acquisitions had occurred on May 3, 1995 (inception)
after giving effect to all purchase price adjustments and the elimination of
nonrecurring items:
<TABLE>
<CAPTION>
PERIOD FROM
MAY 3, 1995
(INCEPTION) YEAR ENDED
TO MARCH 31, MARCH 31,
PRO FORMA 1996 1997
- --------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Net revenue.................................................... $ 28,172,000 $ 29,129,000
Net income (loss).............................................. (475,000) 136,000
Basic income (loss) per share.................................. $ (.14) $ .04
Diluted income (loss) per share................................ $ (.13) $ .04
</TABLE>
The pro forma results do not purport to be indicative of the results that
would have actually been achieved if the respective acquisitions had taken place
as of May 3, 1995 (inception) or of results which may occur in the future.
(NOTE D)--ACCOUNTS RECEIVABLE:
The Company has recorded allowances of $2,394,000 and $1,866,000 as of March
31, 1997 and December 31, 1997, respectively, against accounts receivable.
Management believes, based on information available at the financial statement
dates, that such allowances are adequate valuation reserves against potential
uncollectable accounts and returns. Management does not believe that there
exists presently a substantial risk that receivable recovery will be materially
less than the net carrying amount of its accounts receivable. Additionally,
receivables over 180 days have been substantially reserved.
F-12
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)
(NOTE E)--FIXED ASSETS:
Fixed assets are summarized as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1997
------------ -------------
<S> <C> <C>
Furniture, fixtures and displays................................. $ 232,000 $ 262,000
Equipment........................................................ 636,000 829,000
Leasehold improvements........................................... 152,000 148,000
------------ -------------
Total........................................................ 1,022,000 1,239,000
Accumulated depreciation......................................... 276,000 447,000
------------ -------------
Balance...................................................... $ 744,000 $ 792,000
------------ -------------
------------ -------------
</TABLE>
(NOTE F)--BANK LOANS AND LONG-TERM DEBT:
[1] BANK LOANS:
The Company has entered into a revolving line of credit agreement with a
bank which expires annually on June 1, is automatically renewed for one year and
provides for borrowings of up to a maximum of $12,000,000 based on specified
percentages, described in the agreement, of eligible accounts receivable and
inventories. Borrowings under the agreement bear interest at the prime rate
(8.5% at March 31, 1997 and December 31, 1997). The credit facility is
collateralized by substantially all of the assets of the Company and contains
certain restrictive covenants including the payment of dividends. The credit
facility is represented by demand notes payable to the bank under which the bank
may demand repayment at any time. During the nine months ended December 31, 1997
the Company entered into an overadvance line of credit of $1,000,000 pursuant to
an agreement which is due on the earlier of February 20, 1998 or the closing of
the proposed public offering. $2.2 million under the revolving line of credit is
guaranteed by the stockholders/officers of the Company which amount is subject
to an increase of $750,000 if the proposed offering does not close by February
20, 1998. At March 31, 1997 and December 31, 1997 $11,998,000 and $12,995,000,
respectively was outstanding under the credit facility.
Upon the closing of the Company's anticipated initial public offering, a fee
of $100,000 will be due to the bank. This fee was recorded as a deferred
financing cost and is being amortized over the remaining term of the credit
facility.
[2] LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER
MARCH 31, 31,
1997 1997
--------- -----------
<S> <C> <C>
Notes payable--Windsor(a)............................ $ 415,000 $ 343,000
Less amounts due within one year..................... 96,000 101,000
--------- -----------
Amounts due after one year........................... $ 319,000 $ 242,000
--------- -----------
--------- -----------
</TABLE>
(a) In connection with the acquisition of Windsor in June 1996, the Company
issued two notes aggregating $450,000 to Windsor which bear interest at the rate
of 7% per annum. The notes are payable
F-13
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)
(NOTE F)--BANK LOANS AND LONG-TERM DEBT: (CONTINUED)
in aggregate monthly installments of principal and interest of approximately
$10,000 through January 2000 and approximately $5,000 thereafter through July
2003.
Long-term debt is payable as follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
- ----------------------------------------------------------------------------------
<S> <C>
1998.............................................................................. $ 96,000
1999.............................................................................. 103,000
2000.............................................................................. 58,000
2001.............................................................................. 45,000
2002.............................................................................. 48,000
Thereafter........................................................................ 65,000
----------
TOTAL......................................................................... $ 415,000
----------
----------
</TABLE>
(NOTE G)--NOTES PAYABLE--STOCKHOLDERS/OFFICER:
In connection with the acquisition of Chanuk in May 1995 the Company assumed
a note payable to a stockholder/officer of the Company in the amount of
$508,000. The note bears interest at the rate of 8% per annum and is payable on
demand. At March 31, 1997 and December 31, 1997 the balance due on the note was
$495,000.
Two stockholders/officers personally satisfied a portion of the purchase
price and the Company issued notes payable of $343,500 to each of the officers
for such amounts. The notes payable bear interest at a rate of 8% per annum and
are due on demand but no later than January 1, 2000 and are subordinate to the
bank debt. At March 31, 1997 and December 31, 1997 the balance on these notes
aggregated $686,000.
In February 1997, stockholders/officers loaned the Company $280,000 in
connection with the acquisition of substantially all of the assets of
Renaissance. The loan is payable on demand and bears interest at the rate of 8%
per annum. During the nine months ended December 31, 1997 the Company repaid
$30,000 of this loan and borrowed an additional $220,000 under the same terms.
Subsequent to December 31, 1997, the Company agreed to issue convertible
notes in exchange for $1,181,000 of the outstanding balance of these notes. Such
notes are convertible, at the holder's option, into Common Shares at the initial
public offering price.
(NOTE H)--CAPITAL LEASES PAYABLE:
The Company leases equipment under various agreements with terms of 32 to 60
months and accounts for these leases as capital leases. Equipment purchases
under these leases for the period from May 3, 1995 (inception) through March 31,
1996, for the year ended March 31, 1997 and for the nine months ended December
31, 1997 were $189,000, $51,000 and $134,000, respectively. The net book value
of equipment held under capital leases was approximately $183,000 and $257,000,
respectively at March 31, 1997 and December 31, 1997.
F-14
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)
(NOTE H)--CAPITAL LEASES PAYABLE: (CONTINUED)
Future lease payments as of March 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
- ----------------------------------------------------------------------------------
<S> <C>
1998.............................................................................. $ 91,000
1999.............................................................................. 69,000
2000.............................................................................. 29,000
2001.............................................................................. 5,000
----------
Total......................................................................... 194,000
Less amounts representing interest................................................ 35,000
----------
Present value of future lease payments............................................ 159,000
Less amount due within one year................................................... 69,000
----------
Amounts due after one year........................................................ $ 90,000
----------
----------
</TABLE>
(NOTE I)--STOCKHOLDERS' EQUITY:
[1] COMMON STOCK:
In May 1995 the Company issued 1,500 shares of its common stock to each of
its two stockholders, both of whom are officers of the Company.
In June 1997 the Company effected a 1,166.67 for 1 stock split. The
financial statements give retroactive effect to this transaction as if it
occurred on May 3, 1995 (inception).
In June 1997 the Company amended its certificate of incorporation to
increase the authorized capital stock to 11,000,000 shares, of which 10,000,000
are common stock and 1,000,000 preferred stock. The accompanying financial
statements reflect this increase retroactively.
[2] STOCK OPTIONS:
The Company applies APB 25 in accounting for stock-based compensation to
employees and, accordingly, recognizes compensation expense for the difference
between the fair value of the underlying common stock and the exercise price of
the option at the date of grant. The effect of applying SFAS No. 123 on fiscal
1996 and 1997 pro forma net income (loss) is not necessarily representative of
the effects on reported net income (loss) for future years due to, among other
things, (1) the vesting period of the stock options and (2) the fair value of
additional stock options that may be granted in future years. Had compensation
cost for the Company's stock options granted to employees been determined based
upon the fair value at the grant date consistent with the methodology prescribed
under SFAS No. 123, the Company's net income (loss), basic income (loss) per
share and diluted income (loss) per share would have been approximately (i)
$(302,000), $(.09) and $(.08), respectively, for the period May 3, 1995
(inception) through March 31, 1996 and (ii) $661,000, $.19 and $.17,
respectively, for the year ended March 31, 1997. The weighted average fair value
of the options granted during fiscal 1996 and 1997 are estimated at $.09 and
$.80, respectively, on the date of grant using the Black-Scholes option-pricing
model with the following assumptions: dividend yield of 0%, volatility of 30%,
risk-free interest rate of 6.74%, and expected life of four years.
F-15
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)
(NOTE I)--STOCKHOLDERS' EQUITY: (CONTINUED)
THE FOLLOWING TABLE SUMMARIZES INFORMATION ABOUT STOCK OPTIONS OUTSTANDING
AT MARCH 31, 1997 AND DECEMBER 31, 1997 (ALL EXERCISABLE):
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
REMAINING CONTRACTUAL AVERAGE
EXERCISE NUMBER LIFE (IN YEARS) EXERCISE
PRICE OUTSTANDING AT MARCH 31, 1997 PRICE
- -------------------------------------- ----------- ------------------------- -----------
<S> <C> <C> <C>
$ .25................................. 166,833 2 $ .25
1.50................................. 151,667 3 1.50
3.00................................. 180,833 5 3.00
-----------
Total................................. 499,333 1.63
-----------
-----------
</TABLE>
Subsequent to December 31, 1997 one of the Company's two
stockholders/executive officers agreed to grant the other stockholder/executive
officer an option to purchace up to 500,000 of his shares of the Company's
common stock at $6.00 per share. None of the proceeds upon exercise of the
options will be received by the Company. The option was granted as consideration
for services rendered to the Company. The Company will account for this
transaction as an employee stock option and accordingly no expense will be
recognized.
(NOTE J)--PROPOSED PUBLIC OFFERING:
The Company has signed a letter of intent with an underwriter with respect
to a proposed public offering of the Company's securities. There is no assurance
that such offering will be consummated. In connection therewith, the Company
anticipates incurring substantial costs, which, if the offering is not
consummated, will be charged to expense.
(NOTE K)--INCOME TAXES:
The provisions for federal and state income taxes for the period from May 3,
1995 (inception) through March 31, 1996, for the year ended March 31, 1997 and
for the nine-month periods ended December 31, 1996 and 1997 are comprised of the
following:
<TABLE>
<CAPTION>
PERIOD FROM
MAY 3, 1995
(INCEPTION) NINE MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31,
MARCH 31, MARCH 31, ----------------------
1996 1997 1996 1997
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Current:
Federal.................................. $ 75,000 $ 325,000 $ 274,000 $ 149,000
State.................................... 43,000 188,000 159,000 86,000
----------- ----------- ---------- ----------
118,000 513,000 433,000 235,000
----------- ----------- ---------- ----------
Deferred:
Federal.................................. (238,000) (111,000) (85,000) 23,000
State.................................... (134,000) (62,000) (48,000) 13,000
----------- ----------- ---------- ----------
(372,000) (173,000) (133,000) 36,000
----------- ----------- ---------- ----------
Total.............................. $(254,000) $ 340,000 $ 300,000 $ 271,000
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
</TABLE>
F-16
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)
(NOTE K)--INCOME TAXES: (CONTINUED)
The deferred tax asset of $586,000 and liability of $41,000 at March 31,
1997 and the deferred tax asset of $526,000 and liability of $18,000 at December
31, 1997 represent the anticipated future tax consequences attributable to
temporary differences between the basis of assets and liabilities for financial
and tax reporting purposes and consists of the following components:
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1997
----------------------- -----------------------
CURRENT NONCURRENT CURRENT NONCURRENT
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Accounts receivable........................ $ 283,000 $ 210,000
Inventory valuation........................ 252,000 252,000
Depreciation............................... $ (41,000) $ (18,000)
Accounts payable........................... 12,000 28,000
Other...................................... 36,000 36,000
---------- ----------- ---------- -----------
Total.............................. $ 586,000 $ (41,000) $ 526,000 $ (18,000)
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
Expected tax expense based on the statutory rate is reconciled with actual
tax expense as follows:
<TABLE>
<CAPTION>
PERIOD FROM
MAY 3, 1995 NINE MONTHS ENDED
(INCEPTION)
THROUGH YEAR ENDED DECEMBER 31,
MARCH 31, MARCH 31, --------------------
1996 1997 1996 1997
--------------- ------------- --------- ---------
<S> <C> <C> <C> <C>
Federal statutory rate............................. 34.0% 34.0% 34.0% 34.0%
State income tax, net of federal benefit........... 10.8% 8.1% 10.9% 8.5%
Recognition of liability for tax purposes.......... (8.6)% (6.3)%
Other.............................................. 1.1% (.2)% (.5)%
--- --- --- ---------
Effective tax rate................................. 45.9 % 33.3 % 44.9% 35.7%
--- --- --- ---------
--- --- --- ---------
</TABLE>
(NOTE L)--COMMITMENTS, CONTINGENCIES AND OTHER MATTERS:
[1] OPERATING LEASES:
The Company currently leases office, warehouse, showroom facilities and
equipment under operating leases, which expire at various times through 2002.
F-17
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)
(NOTE L)--COMMITMENTS, CONTINGENCIES AND OTHER MATTERS: (CONTINUED)
Future minimum lease payments under noncancelable leases at March 31, 1997
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31,
- ----------------------------------------------------------------------------------
<S> <C>
1998........................................................................ $ 231,000
1999........................................................................ 150,000
2000........................................................................ 150,000
2001........................................................................ 47,000
2002........................................................................ 13,000
Thereafter.................................................................. 3,000
----------
Total................................................................... $ 594,000
----------
----------
</TABLE>
During the nine months ended December 31, 1997 the company entered into a
lease and moved to a new facility. The lease agreement provides for aggregate
minimum rental payments of approximately $1.6 million through December 2002. In
connection therewith the Company wrote off certain assets which will no longer
be utilized, resulting in a charge to operations of $79,000 during the nine
months ended December 31, 1997.
Rent expense for the period from May 3, 1995 (inception) through March 31,
1996, for the year ended March 31, 1997 and for the nine months ended December
31, 1997 was approximately $76,000, $140,000 and $265,000, respectively.
[2] EMPLOYMENT AGREEMENTS:
The Company has entered into an employment agreement with the
President/Chief Executive Officer which provides for an annual salary of
$175,000. The Agreement was amended by oral agreement to increase the annual
salary to $250,000. The agreement shall continue so long as the President
remains a stockholder of the Company, unless the agreement is terminated as
defined in the agreement. The Company has an employment agreement with one of
the former principal stockholders of Windsor. The employment agreement provides
for annual salaries ranging from $105,000 to $120,000 through the year 2000 and
a minimum bonus of 5% of the bonuses granted to the principal stockholders of
the Company and annual base salary as follows:
[3] CONSULTING AND NONCOMPETE AGREEMENTS:
The Company has entered into an agreement with an affiliate of one of the
officers/stockholders to provide consulting, advisory and other supportive
services for an annual fee of $208,000. In March 1997 the agreement was orally
amended to increase payments to $5,000 per week. The agreement shall continue as
long as the officer remains a stockholder of the Company, unless the agreement
is terminated as defined in the agreement.
In May 1995 in connection with the Chanuk acquisition the Company entered
into two separate ten year consulting agreements to provide consulting, advisory
and support services to the Company for $500 per week each.
In connection with the acquisition of Renaissance the Company entered into a
noncompete agreement and consulting agreement with the stockholder of
Renaissance which provide for annual aggregate payments of $200,000 per year
through February 2002.
F-18
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED WITH RESPECT TO DATA AS OF DECEMBER 31, 1997 AND FOR THE
NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1997)
(NOTE L)--COMMITMENTS, CONTINGENCIES AND OTHER MATTERS: (CONTINUED)
In addition the Company entered into a three year consulting agreement,
which began in June 1996, with a principal stockholder of Windsor which provides
for 36 monthly payments of $6,944 commencing June 2004. The Company has present
valued the payments and has recorded an expense of approximately $29,000 and a
corresponding liability for the year ended March 31, 1997.
[4] MAJOR CUSTOMER:
One major customer accounted for approximately 51%, 35% and 37%of net sales
for the period May 3, 1995 (inception) through March 31, 1996, for the year
ended March 31, 1997 and for the nine months ended December 31, 1997,
respectively.
[5] ROYALTY AND LICENSING AGREEMENTS:
The Company has entered into various license agreements which provide for
the payment of royalties ranging from 6% to 8% of net selling price of products
sold, as defined.
The Company is obligated under these agreements to make future minimum
payments as follows:
<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31,
- --------------------------------------------------------------------------------
<S> <C>
1998...................................................................... $ 944,000
1999...................................................................... 528,000
2000...................................................................... 269,000
2001...................................................................... 97,000
------------
Total................................................................. $ 1,838,000
------------
------------
</TABLE>
[6] LETTERS OF CREDIT:
At March 31, 1997 and December 31, the Company had outstanding irrevocable
letters of credit in the amount of $52,000 and $0, respectively.
[7] SUCCESSOR LIABILITIES:
In connection with the acquisition of all of the assets of Renaissance in
February 1997 no liabilities of Renaissance were assumed by the Company. To the
extent that any creditors of Renaissance seek recourse against the Company as
the purchaser of substantially all of the asssets of Renaissance, the Company
may incur substantial expenses in connection with defending any such actions.
Additionally, to the extent that creditors are successful on asserting any
claims against the Company as successor to Renaissance, the Company would be
required to charge its operations.
F-19
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Renaissance Eyewear, Inc.
Cranford, NJ
We have audited the accompanying statement of assets, liabilities and
capital deficiency of Renaissance Eyewear, Inc. (the "Company") as at October
31, 1996 and the related statements of operations, changes in capital deficiency
and cash flows all preceding the bank taking possession of the assets (Note A)
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly, in
all material respects, the financial position of Renaissance Eyewear, Inc. at
October 31, 1996 and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
As discussed in Notes A and K to the financial statements, the Company
defaulted on its bank loan. In February 1997, the bank took possession of all of
the Company's assets.
Richard A. Eisner & Company, LLP
New York, New York
June 12, 1997
F-20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Renaissance Eyewear, Inc.
We have audited the accompanying combined statements of operations, changes
in stockholders' equity and cash flows of Renaissance Eyewear, Inc. and
Affiliate for the year ended October 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1995 combined financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Renaissance Eyewear, Inc. and Affiliate for the year ended October 31,
1995, in conformity with generally accepted accounting principles.
J. H. Cohn LLP
Roseland, New Jersey
December 22, 1995
F-21
<PAGE>
RENAISSANCE EYEWEAR, INC.
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL DEFICIENCY
PRECEDING THE BANK TAKING POSSESSION OF THE ASSETS
(NOTE A)
AS AT OCTOBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash.......................................................................... $ 8,000
Accounts receivable, net of allowance for returns and doubtful accounts of
$967,000.................................................................... 2,268,000
Other receivables............................................................. 87,000
Inventories................................................................... 3,705,000
Prepaid expenses.............................................................. 90,000
----------
Total current assets...................................................... 6,158,000
Other assets.................................................................... 273,000
----------
TOTAL..................................................................... $6,431,000
----------
----------
LIABILITIES AND CAPITAL DEFICIENCY
Current liabilities:
Loan payable--bank............................................................ $2,663,000
Long-term debt................................................................ 638,000
Accounts payable and accrued expenses......................................... 3,597,000
Bank acceptances payable...................................................... 219,000
Due to related party.......................................................... 180,000
----------
Total current liabilities................................................. 7,297,000
----------
Commitments and contingencies
Capital deficiency:
Preferred stock, $1,000 par value, nonvoting; 5,000 shares authorized;
1,970.915 shares issued..................................................... 1,971,000
Common stock, no par value; 15,000 shares authorized, issued and
outstanding................................................................. 81,000
Additional paid-in capital.................................................... 2,124,000
(Accumulated deficit)......................................................... (4,844,000)
Treasury stock, 198 shares of preferred stock at cost......................... (198,000)
----------
Total capital deficiency.................................................. (866,000)
----------
TOTAL..................................................................... $6,431,000
----------
----------
</TABLE>
Attention is directed to the foregoing accountants' report
and to the accompanying notes to financial statements.
F-22
<PAGE>
RENAISSANCE EYEWEAR, INC.
STATEMENTS OF OPERATIONS
PRECEDING THE BANK TAKING POSSESSION OF THE ASSETS
(NOTE A)
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
----------------------------
<S> <C> <C>
1996 1995
------------- -------------
Revenue:
Net sales........................................................................ $ 14,097,000 $ 17,382,000
Other income, including interest................................................. 469,000 446,000
------------- -------------
Total.......................................................................... 14,566,000 17,828,000
------------- -------------
Costs and expenses:
Cost of sales.................................................................... 7,497,000 8,162,000
Selling expenses................................................................. 5,541,000 6,773,000
General and administrative expenses.............................................. 3,018,000 2,946,000
Interest expense................................................................. 478,000 523,000
------------- -------------
Total.......................................................................... 16,534,000 18,404,000
------------- -------------
Loss from operations before write off of receivable from affiliate, impairment of
fixed assets and income tax benefit.............................................. (1,968,000) (576,000)
Income tax (benefit)............................................................... (19,000) (389,000)
Write off of uncollectible receivable from affiliate............................... 2,810,000
Loss on Impairment of fixed assets................................................. 876,000
------------- -------------
NET LOSS........................................................................... $ (5,635,000) $ (187,000)
------------- -------------
------------- -------------
</TABLE>
Attention is directed to the foregoing accountants' report
and to the accompanying notes to financial statements.
F-23
<PAGE>
RENAISSANCE EYEWEAR, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
PRECEDING THE BANK TAKING POSSESSION OF THE ASSETS
(NOTE A)
<TABLE>
<CAPTION>
PROFESSIONAL
RENAISSANCE EYEWEAR, INC. TECHNOLOGY
------------------------------------ CONSULTANTS ADDITIONAL RETAINED
PREFERRED COMMON TREASURY COMMON PAID-IN EARNINGS
STOCK STOCK STOCK STOCK CAPITAL (DEFICIT) TOTAL
------------ --------- ----------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance--November 1, 1994... $ 1,971,000 $ 81,000 $ (167,000) $ 1,000 $ 2,124,000 $ 977,000 $ 4,987,000
Purchase of treasury
stock..................... -- -- (15,000) -- -- -- (15,000)
Dissolution of affiliate.... -- -- -- (1,000) -- 1,000 -0 -
Net loss.................... -- -- -- -- -- (187,000) (187,000)
------------ --------- ----------- ----------- ------------ ------------- -------------
Balance--October 31, 1995... 1,971,000 81,000 (182,000) -0 - 2,124,000 791,000 4,785,000
Purchase of treasury
stock..................... -- -- (16,000) -- -- -- (16,000)
Net loss.................... -- -- -- -- -- (5,635,000) (5,635,000)
------------ --------- ----------- ----------- ------------ ------------- -------------
BALANCE-- OCTOBER 31, 1996.. $ 1,971,000 $ 81,000 $ (198,000) $ -0 - $ 2,124,000 $ (4,844,000) $ (866,000)
------------ --------- ----------- ----------- ------------ ------------- -------------
------------ --------- ----------- ----------- ------------ ------------- -------------
</TABLE>
Attention is directed to the foregoing accountants' report
and to the accompanying notes to financial statements.
F-24
<PAGE>
RENAISSANCE EYEWEAR, INC.
STATEMENTS OF CASH FLOWS
PRECEDING THE BANK TAKING POSSESSION OF THE ASSETS
(NOTE A)
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
----------------------------
<S> <C> <C>
1996 1995
------------- -------------
Cash flows from operating activities:
Net loss.......................................................................... $ (5,635,000) $ (187,000)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization................................................. 216,000 241,000
Provision for bad debts....................................................... 770,000 239,000
Write off of affiliate receivable............................................. 2,810,000
Loss on impairment of fixed assets............................................ 876,000
Gain on sale of fixed assets.................................................. (72,000)
Deferred income taxes......................................................... 134,000 (120,000)
Changes in operating assets and liabilities:
Accounts receivable......................................................... 1,068,000 (980,000)
Inventories................................................................. 809,000 (22,000)
Prepaid expenses and other current assets................................... 273,000 230,000
Due from related parties.................................................... (486,000) (381,000)
Other assets................................................................ 3,000 (2,000)
Bank acceptances payable.................................................... (99,000)
Accounts payable and accrued expenses....................................... 641,000 940,000
Income taxes payable........................................................ (150,000) (195,000)
------------- -------------
Net cash provided by (used in) operating activities....................... 1,257,000 (336,000)
------------- -------------
Cash flows from investing activities:
Proceeds from sale of fixed assets................................................ 72,000
Capital expenditures.............................................................. (5,000) (26,000)
------------- -------------
Net cash provided by (used in) investing activities....................... 67,000 (26,000)
------------- -------------
Cash flows from financing activities:
Net (payments) proceeds under line of credit agreement............................ (457,000) 943,000
Proceeds of long-term debt........................................................ 1,250,000
Payments of long-term debt........................................................ (853,000) (1,824,000)
Purchase of preferred stock for treasury.......................................... (16,000) (15,000)
------------- -------------
Net cash (used in) provided by financing activities....................... (1,326,000) 354,000
------------- -------------
NET DECREASE IN CASH................................................................ (2,000) (8,000)
Cash--beginning of year............................................................. 10,000 18,000
------------- -------------
CASH--END OF YEAR................................................................... $ 8,000 $ 10,000
------------- -------------
------------- -------------
Supplementary disclosures of cash flow information:
Interest paid................................................................... $ 442,000 $ 495,000
</TABLE>
Attention is directed to the foregoing accountants' report
and to the accompanying notes to financial statements.
F-25
<PAGE>
RENAISSANCE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS
(NOTE A)--THE COMPANY:
Renaissance Eyewear, Inc. (the "Company") markets and distributes
prescription eyeglass frames and nonprescription sunglasses to department and
specialty stores, optical chains and eyewear boutiques worldwide.
In February 1997, the Company defaulted on its credit facility and the bank
took possession of all of the Company's assets, which were acquired from the
bank by a third party, Ambassador Eyewear Group, Inc. ("Ambassador"). In
connection therewith, Ambassador paid off the remaining balance due under bank's
credit facility. As a result, the Company has no assets remaining with which to
pay its creditors (see Note K). The Company's current operations are limited to
leasing its employees to and being reimbursed for expenses by Ambassador.
(NOTE B)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
[1] Concentrations of credit risk:
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash and trade accounts receivable. The
Company maintains its cash in bank deposit accounts which, at times, may exceed
federally insured limits. Concentrations of credit risk with respect to trade
receivables, other than trade receivables from an affiliate, are limited due to
the large number of customers comprising the Company's customer base and their
dispersion across different geographic areas. In addition, the Company routinely
assesses the financial strength of its customers.
[2] Inventories:
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
[3] Depreciation and amortization:
Provision is made for depreciation and amortization of equipment and
improvements principally on the straight-line method over the estimated useful
lives of the related assets as follows:
<TABLE>
<CAPTION>
RANGE OF
ESTIMATED
CATEGORY USEFUL LIVES
- -------------------------------------------------------------------------------- ------------
<S> <C>
Machinery and equipment......................................................... 5-10 years
Furniture and fixtures.......................................................... 5-10 years
Vehicles........................................................................ 3 years
Leasehold improvements.......................................................... 3-15 years
</TABLE>
[4] Advertising:
The Company expenses the cost of advertising and promotions as incurred.
Advertising costs charged to operations amounted to $397,000 and $550,000 in
1996 and 1995, respectively.
[5] Reclassifications:
Certain accounts in the 1995 financial statements have been reclassified to
conform to the 1996 presentation.
F-26
<PAGE>
RENAISSANCE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(NOTE B)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
[6] Income taxes:
The Company applies Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes", which requires deferred income tax assets
and liabilities to be computed for differences between the financial statement
and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and rates applicable
to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the change during the period
in deferred tax assets and liabilities.
[7] Long lived assets:
The Company has adopted the provisions of SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" in
1996. SFAS 121 requires impairment losses to be recorded on long-lived assets
(i.e. property and equipment and patent and trademarks) used in operations when
impairment indicators are present and undiscounted cash flows estimated to be
generated by those assets are less than the asset's carrying amount. Based on
current circumstances, the adoption of SFAS 121 has a material effect on the
Company's financial statements for the year ended October 31, 1996.
[8] Use of estimates in the preparation of financial statements:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(NOTE C)--INVENTORIES:
Inventories consist of the following at October 31, 1996:
<TABLE>
<S> <C>
Raw material.................................................... $ 99,000
Work in process................................................. 37,000
Finished goods.................................................. 3,569,000
---------
Total..................................................... $3,705,000
---------
---------
</TABLE>
(NOTE D)--NOTE PAYABLE--BANK:
At October 31, 1996, the Company has a $5,295,000 credit facility with a
bank which, in addition to the term loans discussed in Note E, provides for a
revolving line of credit. Borrowings under the facility bear interest at rates
ranging from 1% to 1 3/4% over the prime rate, are collateralized by
substantially all of the Company's assets and are personally guaranteed by the
principal stockholder. Subsequent to October 31, 1996 the Company defaulted on
this credit facility (see Notes A and K).
F-27
<PAGE>
RENAISSANCE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(NOTE E)--LONG-TERM DEBT:
Long-term debt consists of the following at October 31, 1996:
<TABLE>
<S> <C>
Bank term loans (see Note D):
Payable in monthly installments of $35,000 plus
interest through January 31, 1997........................... $ 535,000
Payable in monthly installments of $4,416 plus
interest through January 31, 1997........................... 53,000
Payable in monthly installments of $4,167 plus
interest through January 31, 1997........................... 17,000
Mortgage--payable in monthly installments through July 2006 with
interest at 9%. Secured by a condominium held for sale (included
in other assets) with a book value of $65,323................... 33,000
---------
Current maturities................................................ $ 638,000
---------
---------
</TABLE>
The minimum payment on notes required to be made through October 31, 1997 is
approximately $605,000.
An investment in real estate, which acted as security on the mortgage was
sold in January 1997 and the remaining debt was paid off at that time.
Therefore, the amount due during the year ending October 31, 1997 only includes
payments on the mortgage through the date of the sale.
(NOTE F)--INCOME TAXES:
The income tax (benefit) consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
--------------------------
<S> <C> <C>
1996 1995
------------- -----------
Current:
Federal....................................................... $ (1,635,000) $ (270,000)
State......................................................... (192,000)
------------- -----------
(1,827,000) (270,000)
------------- -----------
Deferred:
Federal....................................................... 1,601,000 (92,000)
State......................................................... 207,000 (27,000)
------------- -----------
1,808,000 (119,000)
------------- -----------
Total....................................................... $ (19,000) $ (389,000)
------------- -----------
------------- -----------
</TABLE>
At October 31, 1996 the Company has available net operating loss
carryforwards to reduce future federal and state taxable income of approximately
$6,246,000 and $7,812,000, respectively, which expire in various amounts through
2011.
Deferred tax assets result primarily from allowances for bad debts that are
not deductible for tax purposes until losses are identified and written off,
certain costs which are capitalized to inventory for tax
F-28
<PAGE>
RENAISSANCE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(NOTE F)--INCOME TAXES: (CONTINUED)
purposes and become deductible when the inventory is sold and federal and state
net operating loss carryforwards ("NOL's"). Deferred tax liabilities result from
certain expense items (primarily rent) being treated differently for financial
and tax reporting purposes. A valuation allowance which increased by
approximately $2,253,000 during the year ended October 31, 1996, has been
established for the full amount of the deferred tax assets which would otherwise
have been recorded due to management's uncertainty regarding the Company's
ability to generate taxable income in future periods. The Company's deferred tax
assets (liabilities) at October 31, 1996 consist of the following:
<TABLE>
<CAPTION>
CURRENT NONCURRENT TOTAL
----------- ------------ -------------
<S> <C> <C> <C>
Allowance for bad debts............................. $ 372,000 $ 372,000
Inventory capitalized............................... 120,000 120,000
Depreciation........................................ $ 108,000 108,000
NOL's............................................... 2,468,000 2,468,000
Other............................................... (100,000) (100,000)
----------- ------------ -------------
$ 392,000 $ 2,576,000 2,968,000
----------- ------------
----------- ------------
Valuation allowance................................. (2,968,000)
-------------
$ -0 -
-------------
-------------
</TABLE>
The difference between the statutory federal income tax rate and the
effective income tax rate based on net loss before taxes stated in the statement
of operations for the year ended October 31, 1996 is due to (i) state income tax
benefit net of federal expense, (ii) an income tax refund and (iii) an increase
in the valuation allowance on deferred tax assets.
(NOTE G)--PREFERRED STOCK:
The Company's cumulative preferred stock has a minimum dividend rate of 9%
and a maximum rate of 16%. Dividends of approximately $2,069,000 were in arrears
on the preferred stock at October 31, 1996. These dividends are payable in cash
or by the issuance of additional shares of preferred stock having a par value
equal to the amount of the dividends declared. Such dividends are payable at the
sole discretion of the Board of Directors or upon the liquidation of the
Company.
(NOTE H)--BENEFIT PLANS:
[1] Profit sharing plan:
Prior to June 30, 1995, the Company maintained a qualified employee stock
ownership plan ("ESOP") covering all eligible salaried and hourly employees.
Annual contributions were determined by the Board of Directors and made in the
form of the Company's preferred stock. No contribution was made during 1996 and
1995.
Upon an employee's death or retirement at age 65, the Company is required to
redeem, at par value, all of the shares of preferred stock previously issued to
the employee. During 1996 and 1995, 15.79 and 15.08 shares of preferred stock,
respectively, were redeemed by the Company and are being held in the treasury.
F-29
<PAGE>
RENAISSANCE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(NOTE H)--BENEFIT PLANS: (CONTINUED)
Effective July 1, 1995, the Board of Directors approved the restatement of
the ESOP to a profit sharing plan. Annual contributions by the Company are made
at the discretion of the Board of Directors. No contributions were made during
fiscal 1996.
[2] 401(k) plan:
The Company has a 401(k) plan for the benefit of substantially all
employees. Annual contributions are made at the discretion of the Board of
Directors. The Company did not make a contribution to the 401(k) plan for the
years ended October 31, 1996 and October 31, 1995.
(NOTE I)--RELATED PARTY TRANSACTIONS:
Transactions with a Canadian entity, which is 50% owned by the principal
stockholder of the Company, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
----------------------
<S> <C> <C>
1996 1995
---------- ----------
Sales to.............................................................. $ 248,000 $ 449,000
Management fees charged to............................................ 75,000 75,000
</TABLE>
At October 31, 1996 and October 31, 1995, amounts due related party consist
of a note payable to the wife of the principal stockholder, which was originally
due on demand, but has been subordinated to the bank debt described in Notes D
and E. Interest on the note (9% per annum) amounted to $16,000 in 1996 and 1995.
In addition, the Company leases various facilities from its sole stockholder
(see Note J).
(NOTE J)--COMMITMENTS AND CONTINGENCIES:
[1] Leases:
The Company leases various office facilities from the sole stockholder under
noncancelable operating leases expiring through 2004. Rent expense amounted to
approximately $249,000 in both 1996 and 1995.
The Company also leased a showroom under a noncancelable operating lease
which expired in July 1996. The Company entered into a new showroom lease
effective July 1996. This lease expires in July 1999. Rent expense amounted to
approximately $24,000 and $25,000 in 1996 and 1995, respectively.
F-30
<PAGE>
RENAISSANCE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(NOTE J)--COMMITMENTS AND CONTINGENCIES: (CONTINUED)
Minimum future lease payments under noncancelable operating leases in years
subsequent to October 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING PRINCIPAL NEW YORK
OCTOBER 31, STOCKHOLDER SHOWROOM TOTAL
- ------------------------------------------------------ ------------ ----------- ------------
<S> <C> <C> <C>
1997.................................................. $ 177,000 $ 11,000 $ 188,000
1988.................................................. 231,000 21,000 252,000
1999.................................................. 223,000 16,000 239,000
2000.................................................. 215,000 215,000
2001.................................................. 207,000 207,000
Thereafter............................................ 537,000 537,000
------------ ----------- ------------
Total........................................... $ 1,590,000 $ 48,000 $ 1,638,000
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
The future minimum lease payments have been adjusted to reflect Ambassador's
assumption of various operating leases effective March 1, 1997.
[2] Royalties:
The Company has entered into various royalty agreements with licensers,
expiring through 1998, which require royalty payments based on sales volume.
Royalties charged to operations amounted to $530,000 and $644,000 in 1996 and
1995, respectively. The minimum royalty payment due under these agreements in
the year ending October 31, 1997 is $100,000.
The minimum royalty payment disclosed above has been adjusted to reflect
payments due through February 28, 1997. Subsequent to this date, Ambassador will
continue to make payments on any continuing license agreements.
[3] Letters of credit:
At October 31, 1996, the Company is contingently liable for letters of
credit aggregating $80,000 to be used for future inventory purchases.
(NOTE K)--SUBSEQUENT EVENTS:
As described in Note A, in February 1997 the Company defaulted on its bank
loan and the bank seized all of the Company's assets, which were acquired from
the bank by Ambassador, who paid off the remaining balance of the bank loan.
The following proforma unaudited summary financial information gives effect
to the bank taking possession of the Company's assets as if it had occurred on
October 31, 1996:
<TABLE>
<S> <C>
Total assets.................................................... $ -0 -
----------
----------
Total liabilities............................................... $4,634,000
Capital deficiency.............................................. (4,634,000)
----------
Total liabilities and capital deficiency........................ $ -0 -
----------
----------
</TABLE>
F-31
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY
SECURITIES BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON ASKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 1
Risk Factors.................................... 4
Use of Proceeds................................. 12
Dividend Policy................................. 13
Capitalization.................................. 14
Dilution........................................ 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 16
Business........................................ 21
Management...................................... 28
Certain Relationships and Related Party
Transactions.................................. 32
Principal Stockholders.......................... 34
Description of Securities....................... 35
Shares Eligible for Future Sale................. 35
Underwriting.................................... 37
Legal Matters................................... 40
Experts......................................... 40
Available Information........................... 40
Index to Financial Statements................... F-1
</TABLE>
------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE SHARES OFFERED HEREBY, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
1,200,000 SHARES
AMBASSADOR EYEWEAR
GROUP, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
H.J. MEYERS & CO., INC.
NATIONAL SECURITIES CORPORATION
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL grants corporations the power to indemnify
directors, officers, employees and agents in accordance with the provisions
thereof. Article 17 of the Registrant's By-Laws provides, in effect, that the
Registrant shall indemnify any and all of its directors and officers to the
fullest extent permitted by the DGCL, as the same may be amended. The
indemnification so provided is expressly not exclusive of any other rights to
which those seeking indemnification may be entitled and shall inure to the
benefit of the heirs, executors and administrators of such persons.
Section 102(b)(7) of the DGCL grants corporations the power to eliminate a
director's personal liability for monetary damages to the corporation or its
stockholders for breach of fiduciary duty as a director, except in circumstances
involving a breach of director's duty to loyalty to the corporation or its
stockholders, acts or omissions not in good faith or which involve intentional
misconduct or knowing violations of the law, self-dealing or the unlawful
payment of dividends or repurchase of stock. Section 10 of the Registrant's
Amended and Restated Certificate of Incorporation provides, in effect, that
personal liability of a director of the Registrant shall be eliminated to the
fullest extent permitted by the DGCL, as the same may be amended.
Reference is hereby made to Section 10 of the Amended and Restated
Certificate of Incorporation of the Company, Section 17 of the By-Laws and the
Underwriting Agreement regarding relevant indemnification provisions described
above and elsewhere herein.
The Underwriting Agreement, included as Exhibit 1.1 hereto, provides that,
in certain circumstances, each of the underwriters will indemnify the directors
and officers of the Registrant against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the fees and expenses to be incurred in
connection with the issuance and distribution of the shares of Common Stock, par
value $.01 per share, offered hereby.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............... $ 4,582
National Association of Securities Dealers, Inc. Filing Fee....... $ 2,012
Chicago Stock Exchange Listing Fee................................ 15,000
Underwriters Expense Allowance.................................... 216,000
Blue Sky Fees and Expenses........................................ $ 35,000
Legal Fees and Expenses........................................... $ 185,500
Accounting Fees and Expenses...................................... $ 275,000
Printing and Engraving Costs...................................... $ 100,000
Transfer Agent Fees and Expenses.................................. $ 7,500
Miscellaneous Expenses............................................ $ 25,406
---------
TOTAL....................................................... $ 866,000
</TABLE>
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following table sets forth all sales of unregistered securities by the
Registrant within the past three years.
<TABLE>
<CAPTION>
AGGREGATE
NATURE OF CLASS OF OFFERING
TRANSACTION AND DATE PURCHASERS SECURITIES SOLD PRICE PRICE PER SHARE
- -------------------------------- ------------------ ------------------ ------------- ---------------
<C> <S> <C> <C> <C>
Initial Capitalization May 1995 Rudy Slucker and 3,500,000 shares $ 1,000 $ .0003
Barry Budilov of Common Stock
</TABLE>
<TABLE>
<CAPTION>
SHARES NUMBER OF SHARES PRICE PER
OPTIONEE ISSUANCE DATE EXERCISABLE EXERCISABLE SHARE
- ---------------------------------------------- ---------------- ----------------- ----------------- -----------
<S> <C> <C> <C> <C>
Barry Budilov................................. May 1995 5 year option 54,833 $ .25
Kenneth Butchin............................... May 1995 5 year option 57,167 $ .25
Rudy Slucker.................................. May 1995 5 year option 54,833 $ .25
Edward Kauz................................... February 1997 5 year option 180,833 $ 3.00
Kenneth Kitnick............................... June 1997 5 year option 151,667 $ 1.50
</TABLE>
The Company relied on Section 4(2) of the Securities Act in connection with
the initial capitalization of the Company and the sale of shares of Common Stock
to two officers and Directors of the Company, as a transaction by the issuer not
involving a public offering. These investors were both accredited investors as
defined under the Securities Act. The Company relied upon Section 4(2) of the
Securities Act or under Rule 701 under the Securities Act in connection with the
grant of options to the extent that the number of shares subject to such options
does not exceed 15% of the outstanding number of shares of Common Stock. No
underwriters or sales agents were involved nor any commissions paid in
connection with any of the above transactions.
II-2
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
1.1 ** Form of Underwriting Agreement.
3.1 ** Amended and Restated Certificate of Incorporation.
3.1a** Amendment to Amended and Restated Certificate of Incorporation.
3.2 ** By-Laws.
4.3 Specimen Common Stock Certificate.
5.1 Opinion of Gibbons, Del Deo, Dolan, Griffinger & Vecchione.
10.1 ** Asset Sale Agreement dated June 26, 1996 by and among the Company, Windsor Optical, Inc. and Jay
Kitnick and Kenneth Kitnick.
10.2 ** Possession Agreement dated February 26, 1997 by and among Summit Bank, Edward Kauz and Barbara Kauz
and Renaissance Eyewear, Inc.
10.3 ** Collateral Sale Agreement dated February 26, 1997 by and between the Company and Summit Bank.
10.4 ** Form of Underwriter's Warrant to Purchase Common Stock of the Company.
10.5 * Employment Agreement between the Company and Barry Budilov.
10.6 * Consulting Agreement between the Company and Rudy A. Slucker.
10.7 ** Employment Agreement dated June 26, 1996 between the Company and Kenneth Kitnick.
10.8 ** Employment Agreement dated February 27, 1997 between the Company and Edward Kauz.
10.9 ** Supplemental Employment Agreement dated February 27, 1997 between the Company and Edward Kauz.
10.10** Consulting Agreement dated June 26, 1996 between the Company and Jay Kitnick.
10.11** Consulting Agreement dated May 9, 1995 between the Company and Chanuk, Inc.
10.12** Promissory Note payable to Windsor Optical, Inc. dated June 26, 1996 in the principal amount of
$150,000.
10.13** Promissory Note payable to Windsor Optical, Inc. dated June 26, 1996 in the principal amount of
$300,000.
10.14** Loan Agreement dated June 7, 1996 between the Company and CoreStates Bank, N.A.
10.15** First Amendment to Loan Agreement dated February 25, 1997.
10.16** Second Rider to Guaranty dated February 25, 1997 amending and restating Rider to Guaranty dated
June 7, 1996 executed by Barry Budilov and Carole Budilov in favor of CoreStates Bank, N.A.
10.17** Second Rider to Guaranty dated February 25, 1997 amending and restating Rider to guaranty dated
June 7, 1996 executed by Rudy A. Slucker and Linda Slucker in favor of CoreStates Bank, N.A.
10.18** Second Rider to Subordination Agreement dated February 25, 1997.
10.19** Demand Note payable to CoreStates Bank, N.A. dated February 25, 1997 in the principal amount of
$12,000,000.
10.20+ Product License Agreement dated June 14, 1995 between the Company and Lifestyle Brands, Ltd.
(sunglasses, sunglass cases and accessories).
10.21+ Product License Agreement dated June 14, 1995 between the Company and Lifestyle Brands, Ltd.
(opthalmic frames and cases).
10.22+ License Agreement dated January 1, 1992 between Diplomat Optical Company and Playskool.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
10.23+ License Agreement dated January 1, 1992 between Chanuk Inc. d/b/a Diplomat Optical Company and
Harve Bernard Ltd.
10.24+ License Agreement dated April 10, 1989 between Renaissance Eyewear Inc. and Nintendo of America
Inc.
10.25 [Intentionally Omitted].
10.26 [Intentionally Omitted].
10.27+ License Agreement dated April 1, 1994 between Windsor Optical, Inc. and Kenneth Jay Lane, Inc.
10.28+ License Agreement dated August 24, 1995 by and among Kathy Ireland, Inc., the Sterling/ Winters Co.
and Diplomat Ambassador Eyewear Group.
10.29+ License Agreement dated January 1, 1993 between Jones Investment Co., Inc. and Diplomat Ambassador
Eyewear Group.
10.30+ Supply Agreement dated November 18, 1996 between StylRite Optical Mfg. Co., Inc. and the Company.
10.31+ Merchandise License Agreement dated February 21, 1997 between Nintendo of America, Inc. and the
Company.
10.32+ Amendment dated November 1995 to License Agreement dated January 1, 1992 between Diplomat Optical
Company and Playskool.
10.33* Form of Lock-up Agreement.
10.34+** License Renewal Agreement, dated September 22, 1997, between the Company and Kenneth Jay Lane, Inc.
10.35** 1997 Stock Option Plan.
10.36** Lease, dated July 10, 1997, between the Company and 3600 Meadow Lane Partnership.
10.37 Form of Stock Option Agreement between the Company and Barry Budilov.
10.38 Form of Stock Option Agreement between the Company and Rudy Slucker.
10.39 Form of Stock Option Agreement between the Company and Kenneth Butchin.
10.40 Form of Stock Option Agreement between the Company and Edward Kauz.
10.41 Form of Stock Option Agreement between the Company and Kenneth Kitnick.
10.42 Financial Consulting Agreement.
10.43 Mergers and Acquisitions Agreement.
23.1 Consent of Gibbons, Del Deo, Dolan, Griffinger & Vecchione, P.C. (included in Exhibit 5.1).
23.2 Consent of Richard A. Eisner & Company, LLP.
23.3 Consent of J. H. Cohn LLP.
24.1 Power of Attorney (Page II-5).
27 ** Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
+ Portions of these Exhibits have been omitted and have been filed separately
with the Secretary of the Commission pursuant to Registrant's Application
Requesting Confidential Treatment under Rule 406 of the Securities Act.
ITEM 28. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
II-4
<PAGE>
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
Offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("Securities Act") may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Amendment No. 3
to the Registration Statement to be signed on its behalf by the undersigned, in
the City of Philadelphia, State of Pennsylvania, on February 17, 1998.
AMBASSADOR EYEWEAR GROUP, INC.
By: /s/ BARRY BUDILOV
------------------------------------------
Barry Budilov
President and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------------------ ----------------------------------- --------------------
<C> <S> <C>
*
------------------------------------------- Chairman of the Board February 17, 1998
Rudy A. Slucker
/s/ BARRY BUDILOV President, Chief Executive Officer
------------------------------------------- and Director (Principal Executive February 17, 1998
Barry Budilov Officer)
/s/ RAYMOND GREEN
------------------------------------------- Treasurer and Principal Financial February 17, 1998
Raymond Green and Accounting Officer
*
------------------------------------------- Director February 17, 1998
Jay Rice
*
------------------------------------------- Director February 17, 1998
Jeffrey Seiken
*/s/ BARRY BUDILOV
- -------------------------------------------
Barry Budilov, February 17, 1998
as attorney-in-fact
</TABLE>
II-6
<PAGE>
EXHIBIT 4.3
SHARES
NUMBER
A SEE REVERSE FOR
CERTAIN DEFINITIONS
AMBASSADOR EYEWEAR GROUP, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE CUSIP 02317L 10 7
THIS CERTIFIES that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.01 EACH OF THE
COMMON STOCK OF
AMBASSADOR EYEWEAR GROUP, INC. transferable on the books of the Corporation
by the holder hereof in person or by duly authorized attorney upon surrender
of this certificate properly endorsed.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the seal of the Corporation and the signatures of its duly
authorized officers.
Dated:
AMBASSADOR EYEWEAR GROUP, INC.
CORPORATE
SEAL
1995
DELAWARE
/s/ /s/
Secretary President
Countersigned and Registered
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
Transfer Agent
and Registrar
By
Authorized Officer
<PAGE>
The Company will furnish to any shareholder upon request and without
charge a full statement of the designation, relative rights, preferences and
limitations of the shares of each class authorized to be issued and the
designation, relative rights, preferences and limitations of each series of
preferred shares which the Company is authorized to issue so far as the same
have been fixed, and the authority of the Board of Directors of the Company
to designate and fix the relative rights, preferences and limitations of
other series.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- __________Custodian________
(Cust) (Minor)
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors
JT TEN -- as joint tenants with right of Act _______________________
survivorship and not as tenants (State)
in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
| |
- --------------------------------------
__________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
____________________________________________________________________SHARES
OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
__________________________________________________________________ATTORNEY
TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH
FULL POWER OF SUBSTITUTION IN THE PROMISES.
DATED ____________________________
NOTICE: _____________________________________________________________
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER
Signature(s) Guaranteed.
______________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION,
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15
<PAGE>
EXHIBIT 5.1
February 17, 1998
Ambassador Eyewear Group, Inc.
3600 Marshall Lane
Bensalem, Pennsylvania 19020
RE: Registration Statement on Form SB-2
(File NO. 333-31343) for 1,200,000 shares of Common Stock
---------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Ambassador Eyewear Group, Inc., a Delaware
corporation (the "Company"), in connection with the proposed public offering
of 1,200,000 shares of the Company's common stock, par value $0.01 per share
(the "Common Stock"), and up to an additional 300,000 shares of Common Stock
subject to an over-allotment option granted to the several underwriters of
such public offering. The Company has filed a Registration Statement on Form
SB-2 (File No. 333-31343) (the "Registration Statement") with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Act of
1933, as amended (the "Act"), with respect to the public offering of the
Common Stock. As such counsel, you have requested our opinion as to the
matters described herein relating to the issuance of the Common Stock.
In connection with this opinion, we have examined and relied upon copies
certified or otherwise identified to our satisfaction of: (i) the
Company's Amended and Restated Certificate of Incorporation and By-laws, each
as amended to date; (ii) the minute books and other records of corporate
proceedings of the Company through the date hereof as made available to us
by officers of the Company; (iii) an executed copy of the Registration
Statement, and each
<PAGE>
amendment thereto through the date hereof, together with the exhibits and
schedules thereto, in the form filed with the Commission; and we have
reviewed such matters of law and fact deemed necessary by us in order to
deliver the within opinion.
For purposes of this opinion we have assumed the authenticity of all
documents submitted to us as originals, the conformity to originals of
copies, and the authenticity of the originals of such copies. We have also
assumed the legal capacity of all natural persons, the genuineness of all
signatures on all documents examined by us, the authority of such persons
signing on behalf of the parties thereto other than the Company and the due
authorization, execution and delivery of all documents by the parties thereto
other than the Company. As to certain factual matters, we have relied upon
statements and representations of officers and other representatives of the
Company.
Based upon and subject to the foregoing assumptions and the further
limitations set forth below, it is our opinion that the Common Stock have
been duly authorized and, when issued and delivered in the manner and for the
consideration stated in the Registration Statement, will be validly issued,
fully paid and non-assessable.
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the laws of
the State of Delaware or the federal law of the United States be changed by
legislative action, judicial decision or otherwise.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the reference to our firm under the heading
"Legal Matters" in the Registration Statement. In giving such consent, we do
not admit that we are in the category of persons whose consent is required
under section 7 of the Act or the rules and regulations of the Commission
promulgated thereunder.
This opinion is furnished to you in connection with the filing of the
Registration Statement and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
Very truly yours,
GIBBONS, DEL DEO, DOLAN, GRIFFINGER
& VECCHIONE
/s/ Jeffrey A. Baumel
------------------------------------
<PAGE>
Exhibit 10.20
INDEX TO DIPLOMAT-AMBASSADOR INC.
PRODUCT LICENSE AGREEMENT
THE SCHEDULE
PARAGRAPH PAGE NO.
- --------- --------
1. GRANT OF LICENSE
a. Grant 1 - 2
b. Term 2
c. License Year and License Quarter 2 - 3
d. Territory 3
e. Minimum Net Sales 3
2. COVENANTS OF LICENSEE
a. Use 3 - 4
b. Best Efforts 5
c. Royalties
(i) Guaranteed Royalties 5
(ii) Earned Royalties 5 - 6
(iii) Interest 6
d. Statements and Payments 6 - 7
e. Records and Audit 7
f. Expenses of Conducting Examinations 7 - 8
g. Product Quality 8
h. Approval of Products and the Materials 8 - 10
i. Title and Protection and Preservation
of Trademarks and Copyrights 10 - 12
j. Right to Subcontract, Licensee
Financial Statements and Lists
of Sources and Customers 12
k. Inventory 13
l. Trademarks and Non-Competitive Brands 14
m. Indemnification and Product
Liability Insurance 14 - 15
n. Advertising Expenditures 15
3. ADDITIONAL COVENANTS OF THE PARTIES
a. Reservation of Rights 16
b. Certain Sales 16
4. TITLE AND PROTECTION
a. Indemnification by Licensor 17
b. Enforcement 17
5. RELATIONSHIP BETWEEN THE PARTIES
a. No Joint Venture 17
b. Assignment 18
<PAGE>
INDEX TO DIPLOMAT-AMBASSADOR INC.
PRODUCT LICENSE AGREEMENT
(Continued)
6. SUBLICENSING 18
7. DEFAULTS AND RIGHTS OF TERMINATION
a. Defaults and Right to Cure 18 - 19
b. Bankruptcy or Assignment for
Creditors, Business Discontinuance 19
c. Loss of Trademark Rights 19
d. Impossible Performance 19 - 20
8. EXPIRATION OR TERMINATION
a. Effect of Expiration or Termination 20
b. Reserved Rights 20
c. Inventory 20 - 21
d. Continued Sales After Expiration
or Termination 21
e. Equitable Relief and Legal Fees 21 - 22
f. Continuity of Sales 22
g. Termination Fee 22
9. NOTICES
a. Effectiveness 22 - 23
b. Address Change 23
10. SEVERABILITY 23
11. CONSENTS AND APPROVALS 23
12. APPLICABLE LAW 23 - 24
13. NO BROKER 24
14. CONSTRUCTION 24
15. SURVIVABILITY 24
16. RIGHTS CUMULATIVE 24
17. ENTIRE AGREEMENT 24
<PAGE>
THE SCHEDULE referred to in the Agreement made as of June 14, 1995.
S.1. LICENSOR: LIFESTYLE BRANDS, LTD.
680 North Lake Shore Drive
Chicago, IL 60611
S.2. LICENSEE: DIPLOMAT-AMBASSADOR INC.
1010 Arch Street, Third Floor
Philadelphia, PA 19107
Attn: Barry Budilov
Phone: 215-925-1551
Fax: 215-925-0204
S.3. THE TRADEMARKS: SARAH COVENTRY; BUTTERFLY DESIGN;
FASHION CHANGES, STYLE DOESN'T
S.4. THE TYPE OF LICENSE: Exclusive
S.5. THE USE OF THE TRADEMARKS: Design, manufacture, advertise,
promote, sell and distribute to retail
stores located in the Territory or to
wholesalers which will sell the
Products to and only to retail stores
located in the Territory.
S.6. THE PRODUCTS: Sunglasses, sunglass cases, fashion
eyewear neck cords and sunglass pin holders
S.7. THE TERRITORY: United States and Canada
S.8. THE COMMENCEMENT DATE: July 1, 1995
S.9. THE EXPIRATION DATE: June 30, 1998
S.10. THE MINIMUM NET SALES (in United States Dollars):
License Year Amount
------------ ------
LY1 (7/1/95 - 6/30/96) $
LY2 (7/1/96 - 6/30/97) $
LY3 (7/1/97 - 6/30/98) $
Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
THE SCHEDULE (Continued)
S.11. GUARANTEED ROYALTIES (in United States Dollars):
License Year Amount
------------ ------
LYl (7/1/95 -6/30/96) $
LY2 (7/1/96 -6/30/97) $
LY3 (7/1/97 -6/30/98) $
S.12. EARNED ROYALTIES:
percent ( ) of Net Sales (as defined in Paragraph 2.d.(ii)
and subject to the provisions of Paragraph 3.b.(ii) of the
Agreement) of the Products.
S.13. THE ADDRESS WHERE BOOKS KEPT: See Paragraph S.2 above.
LIFESTYLE BRANDS, LTD.
(LICENSOR)
By: /s/ David Batchelor
-----------------------------
David H.L. Batchelor
Senior Vice President
Product Marketing
Date: Oct. 3 1995
DIPLOMAT-AMBASSADOR INC.
(LICENSEE)
By: /s/ Barry Budilov
-----------------------------
Title: President
Date: 11/1/95
Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
LICENSE AGREEMENT
This Agreement is made as of the 14th day of June 1995, by and between the
corporation described in Paragraph S.1. of the Schedule attached hereto and made
a part hereof (hereinafter referred to as "Licensor") and the corporation
described in Paragraph S.2. of the Schedule (hereinafter referred to as
"Licensee").
RECITALS
WHEREAS, Licensor has certain rights in and to the trademark SARAH
COVENTRY and other trademarks identified in Paragraph S.3. of the Schedule
(hereinafter collectively referred to as the "Trademarks");
WHEREAS, Licensee recognizes that the Trademarks have acquired notoriety
and goodwill with the general public by virtue of their use in connection with
home party plan sales of jewelry and have since gained further goodwill and
notoriety through the manufacture, advertising, promotion, sale and distribution
of a broad range of consumer products, including, but not limited to, jewelry,
clothing, leather goods and personal health and home articles and accessories;
WHEREAS, the parties hereto desire that Licensor grant to Licensee a
license to use the Trademarks in the design, manufacture, advertising,
promotion, sale and distribution of the "Products" (as defined in Paragraph
1.a.(i) hereof);
NOW, THEREFORE, in consideration of the mutual promises herein contained,
it is mutually agreed as follows:
1. GRANT OF LICENSE.
a. Grant:
(i) Upon and subject to the terms and conditions hereinafter
set forth, Licensor hereby grants to Licensee, and Licensee hereby
accepts, the right, license and privilege specified in Paragraph
S.4. of the Schedule to use the Trademarks in connection with, and
only with, the use specified in Paragraph S.5. of the Schedule on
and in connection with specifically designated and approved articles
of merchandise specified in Paragraph S.6. of the Schedule
(hereinafter collectively referred to as the "Products") in the
territory specified in Paragraph S.7. of the Schedule (hereinafter
referred to as the "Territory"). Such right, license and privilege
is hereinafter referred to as the "License." It is understood and
agreed that while the manufacture of the Products may take place
outside the Territory, none of the Products may be advertised,
promoted, sold or distributed outside the Territory by Licensee.
-1-
<PAGE>
(ii) Nothing contained in this Agreement shall prevent
Licensor from doing any or all of the following: (a) using or
granting one or more others the right or license to use the
Trademarks on or in connection with the Products in any area of the
world other than the Territory or on or in connection with any
services or goods other than the Products in any or all area(s) of
the world including the Territory; (b) manufacturing or having
manufactured in the Territory the Products for sale outside the
Territory; (c) producing or having produced limited quantities of
the Products to be used in the Territory specifically for
promotional and advertising purposes and not for sale; and (d)
retaining and exercising the exclusive rights hereby reserved to
Licensor to design, manufacture, advertise, promote, sell and
distribute and license the design, manufacture, advertising,
promotion, sale and distribution of any and all of the Products in
the Territory and elsewhere or either thereof through direct
marketing sales (including, but not limited to, direct mail, catalog
houses, home shopping programs, infomercials and the like), premium
sales, incentive sales and home party plan sales.
b. Term:
(i) The term of the License and this Agreement (hereinafter
referred to as the "Term") shall commence on the date specified in
Paragraph S.8. of the Schedule (hereinafter referred to as the
"Commencement Date") and shall expire at midnight Chicago time on
the date specified in Paragraph S.9. of the Schedule (hereinafter
referred to as the "Expiration Date"), unless sooner terminated by
operation of law or as provided in this Agreement.
(ii) On the condition that Licensee shall be in compliance
with the terms of this Agreement, including the timely payment of
all amounts due under it, and if Licensee has achieved the Minimum
Net Sales as specified in Paragraph S.10 of the Schedule for the
third License Year, then this Agreement shall automatically renew
for a three (3) year term (July 1, 1998 - June 30, 2001) on the same
terms and conditions, except that the Minimum Net Sales for the
first License Year of the renewal term (7/1/98 - 6/30/99) shall be
United States Dollars
(U.S.$ ) and United States
Dollars (U.S.$ ) for License Year Two of the renewal term
(7/1/99 - 6/30/00) and there shall be no automatic renewal of the
extended term.
c. License Year and License Quarter:
(i) For all purposes under this Agreement, a "License Year"
shall be twelve (12) consecutive calendar
-2-
Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
months commencing on the Commencement Date and ending at midnight
Chicago time on the day preceding the anniversary of the
Commencement Date and each twelve (12) month period thereafter, and
if the expiration or termination of the License and this Agreement
is effective other than at the end of such twelve (12) month period,
then the final period of less than twelve (12) months ending on the
effective date of such expiration or termination shall be deemed to
be a License Year.
(ii) For all purposes under this Agreement, a "License
Quarter" shall be the first (1st) and each succeeding three (3)
month period of each License Year, and if the expiration or
termination of the License and this Agreement is effective other
than at the end of a License Year, then the final period of less
than three (3) months ending on the effective date of such
expiration or termination shall be deemed to be a License Quarter.
d. Territory: The License shall extend only to the Territory, and
the use by Licensee of the Trademarks shall be confined to the Territory.
e. Minimum Net Sales: Notwithstanding anything in this Agreement to
the contrary, if Licensee's Net Sales (as defined in Paragraph 2.d.(ii)
hereof) in any License Year are less than those specified in Paragraph
S.10. of the Schedule for such License Year (hereinafter referred to as
the "Minimum Net Sales"), then Licensor shall have the right to either:
(i) declare the License to be non-exclusive, thereby giving Licensor the
rights to design, manufacture, advertise, promote, sell and distribute the
Products in competition with Licensee or otherwise grant any or all of
such rights to one or more other parties or (ii) terminate the License and
this Agreement by deeming the failure to attain the Minimum Net Sales to
be an incurable default under this Agreement. Such declaration or
termination: (a) shall be effective upon the receipt by Licensee of
written notice from Licensor no later than thirty (30) days after
Licensor's receipt of the Statement (as defined in Paragraph 2.d.(i)
hereof) evidencing such shortfall and (b) shall have no effect upon the
amounts due and payable to Licensor for periods prior to or after such
declaration or termination.
2. COVENANTS OF LICENSEE.
a. Use:
(i) Subject to Licensor's prior approval as hereinafter
required, Licensee shall commence the design, manufacture,
advertising, promotion, sale and distribution of or for the Products
as soon as practicable after the Commencement Date, but in no event
later than January 1, 1997. If Licensee fails to do so
-3-
<PAGE>
by such date, Licensor may treat such failure as an incurable
default under this Agreement. In the event during any License Year,
Licensee has not on a regular and ongoing basis sold or distributed
one or more of the Products within one or more categories of the
Products under Paragraph S.6. of the Schedule, Licensor shall have
the right to delete any of such Products or such categories from the
Schedule upon not less than thirty (30) days' prior written notice
to Licensee.
(ii) Licensee shall not cause or authorize any use of the
Trademarks in any area of the world outside the Territory and shall
not knowingly manufacture, sell or otherwise deal with or distribute
any of the Products on behalf of or to any individual(s), entity or
entities that Licensee believes or has reason to believe intends or
intend or is or are likely to sell, deal with or distribute any of
the Products in any way outside the Territory. Licensee shall, upon
receipt of notice from Licensor, immediately and permanently cease
supplying any or all of the Products to the individual(s), entity or
entities named in such notice as one or more of those that directly
or indirectly sell, deal with or distribute any or all of the
Products outside the Territory.
(iii) Licensee warrants and represents that it has and will
continue to have throughout the Term and the Sell-Off Period (as
defined in Paragraph 8.d. hereof) the legal right and authority to
enter into this Agreement and to assume and perform its duties and
obligations hereunder and that there is or are no, and Licensee
shall not enter into during the Term and the Sell-Off Period any,
contract(s), agreement(s) or understanding(s) with any
individual(s), entity or entities which would in any way restrict or
prevent Licensee from the performance of its duties and obligations
under this Agreement.
(iv) Licensee shall be responsible for obtaining, at its own
expense, any and all licenses, permits, approvals (including
governmental and all other licenses, permits and approvals)
necessary for Licensee to: (a) design, manufacture, advertise,
promote, sell and distribute the Products; (b) pay Guaranteed
Royalties (as defined in Paragraph 2.c.(i) hereof), Earned Royalties
(as defined in Paragraph 2.c.(ii) hereof), Advertising Contributions
(as defined in Paragraph 2.n. hereof) and taxes; and (c) fulfill any
and all other duties and obligations and exercise the rights of
Licensee under this Agreement. In the event Licensee is unable, for
any reason, to obtain prior to the Commencement Date or maintain
throughout the Term all of such licenses, permits or approvals, such
inability shall be an incurable default under this Agreement.
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b. Best Efforts: Licensee shall, throughout the Term and the
Sell-Off Period, constantly use its best efforts in the advertising,
promoting, selling and distributing and in all other dealing with or
disposal of the Products to protect the good name and goodwill associated
with the Trademarks and Licensor and to obtain the greatest Net Sales
throughout the entire Territory and the entire Term and the Sell-Off
Period. Licensee acknowledges and agrees that the sale of the Products in
certain types of stores can negatively affect the reputation and the value
of the Trademarks, as some types of stores are perceived by the public as
having lower quality products than other types of stores regardless of
whether the products or their prices are the same. Licensee agrees that it
will use its best efforts to sell and distribute the Products only to
those stores that are generally perceived by the public as good quality
stores by virtue of their reputations for quality products and by their
providing certain service amenities associated with good quality stores,
which may include without limitation the availability of any or all of the
following: customer service desks; knowledgeable, regular, full-time
service representatives; and provision for the return of products.
Licensee and Licensor agree that warehouse outlets, deep discount chains
and other similar channels are generally perceived by the public as having
lower quality products and will therefore not be considered acceptable
channels of sale and distribution of the Products under this Agreement.
Licensor and Licensee agree to reasonably attempt to settle all
differences of opinion as to whether or not a specific store or chain of
stores is an acceptable channel for the sale and distribution of the
Products, but Licensor's decisions in this matter shall govern and
control. Except as provided in Paragraph 2.n. hereof, Licensee shall be
responsible for and shall assume and pay for all costs and expenses
related to Licensee's design, manufacture, advertising, promotion, sale
and distribution of the Products.
c. Royalties:
(i) Guaranteed Royalties: Licensee will pay to Licensor or its
designee(s) guaranteed minimum royalties (hereinafter referred to as
"Guaranteed Royalties") in the amount and for each License Year
specified in Paragraph S.11. of the Schedule. Guaranteed Royalties
for each such License Year shall be paid in four (4) equal
installments, and each such installment shall be due on the first
(1st) day of each License Quarter of each such License Year. Under
no circumstances whatsoever will Licensor return to Licensee all or
any part(s) of Guaranteed Royalties, except as provided in Paragraph
8.b. hereof.
(ii) Earned Royalties: Licensee shall pay to Licensor or its
designee(s) royalties (hereinafter referred to as "Earned
Royalties") in the amount equal to the amount calculated according
to Paragraph S.12. of the
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Schedule, but only to the extent that for each License Year such
calculated amount exceeds Guaranteed Royalties for such License
Year. Earned Royalties shall be payable in accordance with the terms
and conditions of Paragraph 2.d. hereof.
(iii) Interest: Each sum, including, but not limited to,
Guaranteed Royalties and Earned Royalties, that shall not be paid on
the due date by Licensee shall bear interest from such due date
until the date on which such sum is paid in full at an amount equal
to the lesser of percent ( %) per annum or the highest
percentage rate allowed by law.
d. Statements and Payments:
(i) Within forty-five (45) days after each License Quarter or
the conclusion of the Sell-Off Period, Licensee shall furnish to
Licensor or its designee a complete and accurate statement in a
format acceptable to Licensor and certified to be true by the Chief
Financial Officer of Licensee (hereinafter referred to as the
"Statement") showing for such License Quarter and the License Year
through such period or for the Sell-Off Period: (a) a listing of
Licensee's accounts in the Territory and the units and description
of all of the Products sold and distributed or otherwise disposed of
by Licensee; (b) the computations of Net Sales on all such sales;
(c) the computation of Earned Royalties and the amount of Earned
Royalties due and payable; and (d) the advertising and promotion
expenditures made by Licensee pursuant to Paragraph 2.n. hereof and
the details of all such expenditures, supported by copies of
vouchers and copies of all advertising for or relating to the period
covered by such Statement. When, during any License Year, the amount
of Guaranteed Royalties for such License Year has been exceeded by
the amount calculated according to Paragraph S.12. of the Schedule
for such License Year, Licensee shall commence payment of Earned
Royalties. Licensee shall pay all accrued and unpaid Earned
Royalties by remittance accompanying each of the Statements.
(ii) As used in this Agreement, the term "Net Sales" means the
invoice price charged by Licensee for the Products less (x) refunds,
credits and allowances actually made or allowed to customers for
returned Products, (y) customary trade discounts (including
anticipations) afforded to and actually taken by customers against
payment for the Products and (z) value added tax assessed on sales
(only where applicable).
(iii) In the event the percentage of returns of Products in
any License Year exceeds percent ( %) of Net Sales for such
License Year, then Licensor may
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elect to treat such an occurrence as an incurable default by
Licensee under this Agreement.
(iv) Except as otherwise specifically provided in this
Agreement, if Licensee sells any or all of the Products to any
individual(s), entity or entities in whole or in part controlled by
Licensee, the invoice price used to determine Net Sales hereunder
shall be the invoice price at which the Products are resold by such
individual or entity to an unrelated customer in an arm's-length
transaction.
e. Records and Audit: Licensee shall: (i) keep accurate books of
account and records (including but not limited to utilization of
consecutively numbered invoices which reconcile to the Statements and
Licensee's general ledger) covering all transactions relating to or
arising out of the License and this Agreement (which books and records
shall be maintained separately from Licensee's documentation relating to
other items manufactured or sold by Licensee) and (ii) permit Licensor or
its nominees, employees, agents or representatives to have full access to,
to inspect such books and records at all reasonable hours of the day, to
conduct an examination of and to copy (at Licensor's expense) all such
books and records. Licensee shall maintain in good order and condition all
such books and records for a period of two (2) years after the expiration
or termination of the License and this Agreement or, in the event of a
dispute between the parties hereto, until such dispute is resolved,
whichever date is later, and such books and records shall be kept at the
address stated in Paragraph S.13. of the Schedule, except as such address
may be changed from time to time in accordance with Paragraph 9.b. hereof.
Receipt or acceptance by Licensor of any Statement furnished pursuant
hereto or any sums paid by Licensee hereunder shall not preclude Licensor
from questioning the correctness thereof at any time, and if one or more
inconsistencies or mistakes are discovered by Licensor in such Statement,
it or they shall be rectified in an amended Statement received by Licensor
no later than ten (10) days after the date of receipt by Licensee of
notice of that which should be rectified.
f. Expenses of Conducting Examinations: If an inspection or
examination referred to in Paragraph 2.e. hereof discloses, or Licensor or
Licensee otherwise discovers, an underpayment of Earned Royalties and
Advertising Contributions or either thereof, the amount of such
underpayment shall be paid by Licensee to Licensor no later than thirty
(30) days after receipt of notice or knowledge thereof by Licensee. In the
event of such an underpayment by Licensee in excess of percent ( %)
in any License Year, then Licensor may elect to treat such occurrence as
an incurable default by Licensee under this Agreement within thirty (30)
days of discovery. If such inspection or examination: (i) discloses or
Licensor or Licensee otherwise discovers an overpayment of Earned
Royalties
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and Advertising Contributions or either thereof (or, pursuant to Paragraph
8.b. hereof, an overpayment of Guaranteed Royalties), the amount of such
overpayment shall be credited against future payment(s) of any or all of
the Guaranteed Royalties, Earned Royalties and Advertising Contributions
or, in the event of the expiration or termination of the License and this
Agreement and there is or are no such future payment(s), such amount shall
be paid by Licensor to Licensee no later than thirty (30) days after the
discovery thereof by Licensor, subject to Licensor's rights of setoff,
recoupment and counterclaim or (ii) reveals that for the period covered by
such inspection or examination there is an error of percent ( %) or
more in the Earned Royalties and Advertising Contributions or either
thereof previously reported on the Statement(s) as being due from
Licensee, all expenses involved in the conducting of such inspection or
examination shall be borne by Licensee. Licensee shall pay to Licensor the
amount of such expenses no later than ten (10) days after Licensee's
receipt of Licensor's invoice therefor. If such error is less than
percent ( %), such expenses shall be borne by Licensor.
g. Product Quality: Licensee hereby warrants and agrees that the
Products designed, manufactured, advertised, promoted, sold or distributed
under this Agreement shall bear the Trademarks faithfully produced and
shall meet the high standards of quality, workmanship, material, design,
size, color and style established by Licensor in accordance with the terms
and conditions of this Agreement, including without limitation the Quality
Standards attached hereto and made a part of this Agreement as Exhibit A.
Licensee will not knowingly or negligently cause or authorize any or all
of the Products not conforming to this Agreement to be sold or
distributed, as doing so may adversely affect Licensor's goodwill in the
Trademarks. All of the Products shall conform to and comply with, in all
respects, all federal, state and local laws, rules and regulations
governing the design, quality, labeling and safety of such Products.
Licensee shall not cause, condone or authorize: (i) the use of any
substandard or offensive materials in or in connection with any or all of
the Products; (ii) any violation of any federal, state or local law or
regulation, including, but not limited to, provisions thereof imposing
advertising standards or requiring trade or content description of the
Products; or (iii) the use of the Trademarks or any other word(s),
device(s) or symbol(s) associated in any way with any or all of Licensor
and its subsidiaries and affiliates in connection with any product or
activity that is not the subject of the License and this Agreement.
h. Approval of Products and the Materials:
(i) Licensee understands and agrees that each of the Products
and other items bearing the Trademarks or intended for use in
connection with the Products
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(hereinafter collectively referred to as the "Materials") must be
approved in advance by Licensor. The Materials include, but are not
limited to, cartons, containers, labels, wrappers, packages and
other inner and outer packaging materials, fixtures, displays,
artwork and printing, advertising, sales, marketing and promotional
materials. Licensee shall, at its own expense, submit to Licensor or
its designee(s) for written approval, samples of each of the
Products and the Materials at each stage of development thereof,
which shall include, but not be limited to: (a) an initial sketch or
photograph; (b) a sample prototype or equivalent acceptable to
Licensor; and (c) two (2) samples as actually manufactured or
produced in final form as intended to be sold and distributed or
either thereof by Licensee. Licensee must obtain Licensor's written
approval of each stage of development before proceeding to the next
stage, and in no event shall Licensee commence or permit the mass
manufacture, advertising, promotion, sale or distribution of any or
all of the Products or the Materials unless and until Licensee has
received Licensor's written approval of the samples provided
pursuant to (c) of this Paragraph. While Licensor shall have the
sole and absolute discretion to approve or withhold approval of any
and all of the Products, the Materials and sample(s) of either
throughout each stage of development, Licensor shall only withhold
approval on the samples submitted pursuant to (c) of this Paragraph
because such samples do not conform to that or those thing(s)
previously approved. In the event Licensor fails to provide its
approval or disapproval of any or all things submitted to Licensor
pursuant to this Paragraph 2.h.(i) within fourteen (14) days of
Licensor's receipt thereof, Licensor shall be deemed to have
disapproved of such thing(s).
(ii) To ensure that each of the Products and the Materials are
constantly maintained in conformance with the previously approved
samples pursuant to Paragraph 2.h.(i) hereof, Licensee shall, within
seven (7) days of receipt of a request from Licensor, send or cause
to be sent to Licensor at Licensee's expense: (a) such actual
samples requested by Licensor of the Products and the Materials
Licensee is using, manufacturing, selling, distributing or otherwise
disposing of and (b) a listing or revised listing of each location
where any of the Products and the Materials or either thereof are
designed, manufactured, stored or otherwise dealt with, except to
the extent such listing or revised listing duplicates currently
accurate information provided pursuant to Paragraph 2.j.(ii) hereof.
Licensor and its nominees, employees, agents and representatives
shall have the right to enter upon and inspect, at all reasonable
hours of the day and with reasonable notice, any and all such
location(s) and to take, without
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payment, such samples of any of the Products and the Materials as
Licensor reasonably requires for the purposes of such inspection.
(iii) If any of the Products or Materials sent or taken
pursuant to Paragraph 2.h.(ii) hereof or that otherwise come(s) to
the attention of Licensor does or do not conform in Licensor's sole
reasonable opinion to the previously approved samples, Licensor
shall so notify Licensee, in writing, specifying in what respect
such of the Products or Materials is or are unacceptable.
Immediately upon receipt of such notice, Licensee shall suspend all
manufacture, sale and distribution of and shall obtain back from
Licensee's customers all such Products and Materials and shall not
resume the manufacture, sale or distribution thereof unless and
until Licensee has made all necessary changes to the satisfaction of
Licensor and has received Licensor's written reapproval of each of
such Products and Materials.
(iv) Except as otherwise specifically provided in this
Agreement, all of the Products and the Materials that are not
approved by Licensor or that are determined by Licensor to be
non-conforming or unacceptable shall not be sold, distributed or
otherwise dealt with by Licensee. All such Products and Materials
shall be destroyed by Licensee with, if Licensor so requests, an
appropriate certificate of destruction furnished to Licensor.
(v) Except as provided in Paragraph 2.b.(iv) hereof, any and
all sale(s), distribution or use by Licensee of unapproved,
non-conforming or unacceptable Products or Materials shall not only
constitute an incurable default under the terms of this Agreement,
but such Products or Materials also shall be considered unlicensed
and an infringement of Licensor's proprietary rights, and Licensor
shall have the right to bring legal action against Licensee for any
and all remedies available to Licensor in addition to the remedies
available under this Agreement.
i. Title and Protection and Preservation of Trademarks and
Copyrights:
(i) Licensee hereby acknowledges each of the following: the
great value of the goodwill associated with the Trademarks; the
worldwide recognition thereof; that the proprietary rights therein
and goodwill associated therewith are solely owned by and belong to
Licensor; that the Trademarks and other related words, devices,
designs and symbols are inherently distinctive or have secondary
meaning firmly associated in the mind of the general public with
Licensor, its subsidiaries and
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affiliates and its or their activities; and that all additional
goodwill associated with the Trademarks created through the use of
such Trademarks by Licensee shall inure to the sole benefit of
Licensor. During and after the Term, Licensee shall not:
(a) attack or question the validity of, or assist any
individual(s), entity or entities in attacking or questioning,
the title or any rights of or claimed by any or all of
Licensor, its subsidiaries and affiliates and their respective
licensees and sublicensees in and to the Trademarks or any
other trademark(s), copyright(s) or such other intellectual or
intangible property or properties associated or connected with
any or all of Licensor, its subsidiaries and affiliates, their
publications, published material, activities, licensees and
sublicensees;
(b) directly or indirectly seek for itself, or assist
any third party or parties to use or acquire, any rights,
proprietary or otherwise, in any patent, trademark, copyright
or such other intellectual or intangible property so
associated or connected, without the prior written approval of
Licensor;
(c) in any way seek to avoid Licensee's duties or
obligations under this Agreement because of the assertion or
allegation by any individual(s), entity or entities that any
or all of the Trademarks are invalid or by reason of any
contest concerning the rights of or claimed by Licensor; or
(d) file or prosecute one or more trademark applications
regarding Licensee's use of the Trademarks, unless first
requested to do so in writing by Licensor. (Licensee will
cooperate with Licensor in connection with any and all such
filings.)
(ii) Licensee shall:
(a) use the Trademarks as permitted under this Agreement
in each jurisdiction strictly in accordance with the legal
requirements in such jurisdiction;
(b) affix or imprint irremovably and legibly on each of
the Products and on or within all of the Materials such
Trademarks, trademark notices, copyright notices and legends
as Licensor directs;
(c) manufacture, sell, distribute or otherwise deal with
the Materials solely in connection with the Products (except
for any or all of the Materials
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which do not bear one or more of the Trademarks or otherwise
are not associated with any or all of the Products by virtue
of, but not limited to, such things as design, color or
content); and
(d) not cause or grant permission to any third party or
parties to acquire any copyright(s) or other proprietary
right(s) in connection with any word(s), device(s), design(s)
or symbol(s) used by Licensee in connection with any of the
Products or the Materials.
j. Right to Subcontract, Licensee Financial Statements and Lists of
Sources and Customers:
(i) Licensee may subcontract the manufacture of any or all
component part(s) of any or all of the Products bearing the
Trademarks pursuant to this Agreement, provided Licensee first
obtains from each such subcontractor an executed written agreement
in the form substantially identical to that attached hereto and made
a part hereof as Exhibit B and furnishes a copy of each such
executed agreement to Licensor.
(ii) With the Statement submitted at the end of each License
Year pursuant to Paragraph 2.d. (i) hereof and at any other time so
requested by Licensor during the Term and the Sell-Off Period or
either thereof, Licensee shall provide Licensor with: (a) copies of
Licensee's most recent audited financial statements (including
without limitation footnotes) and annual reports, 10-K's, balance
sheets or other similar documents that indicate Licensee's financial
status and (b) an updated list of the names and addresses of all
manufacturing sources, subcontractors, suppliers, dealers,
wholesalers, retailers, customers and others which have been engaged
in the design, manufacture, advertising, promotion, sale,
distribution or other dealings with any or all of the Products and
the Materials during the Term and the Sell-Off Period or either
thereof. Such list shall, if so requested by Licensor, contain the
full specification of all designs, utility models, patents or
trademarks that may be involved, directly or indirectly, in the
manufacture, production or distribution of any or all of the
Products and the Materials. Licensee shall obtain the consent of any
and all relevant third parties for such disclosure. Licensor shall
keep any material disclosed to it under this Paragraph 2.j.(ii)
confidential and shall not disclose it without Licensee's prior
written notice. Nothing herein, however, shall prevent Licensor from
disclosing such material pursuant to a court order which requires
Licensor to so disclose such material, and in such event, Licensor
shall notify Licensee of such requirement.
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k. Inventory: Insofar as reasonable, Licensee shall at all times
during the Term be able to fulfill all orders for the Products promptly
and yet not have an excessive inventory on hand at the time of the
expiration or termination of the License. Within forty-five (45) days
after each License Year or within ten (10) days of receipt of a request
from Licensor, Licensee will furnish Licensor with a statement signed by
the Chief Financial Officer of Licensee, setting forth in detail the
quantities of work in process and finished goods inventories of the
Products.
l. Trademarks and Non-Competitive Brands:
(i) For purposes of this Paragraph 2.1., the term "Licensee"
shall include any affiliate, subsidiary or principal shareholder of
Licensee.
(ii) Licensee shall not use, cause or authorize to be used any
word(s), device(s), design(s), slogan(s) or symbol(s) confusingly
similar to any or all of the Trademarks. During the Term and the
Sell-Off Period, any or all of the following shall not be used on or
in connection with the Products without Licensor's prior written
consent: (a) permutations of any or all of the Trademarks; (b)
secondary marks; or (c) new words, devices, designs, slogans or
symbols. Upon such authorization by Licensor and use by Licensee,
each such permutation, secondary mark, word, device, design, slogan
and symbol shall be the property of Licensor and shall be included
as one of the Trademarks subject to this Agreement. Should Licensee
create or develop any advertising, promotion, packaging or trade
dress unique to the Products, all such advertising, promotion,
packaging or trade dress shall be the property of Licensor and shall
not be used by Licensee on or in connection with any other product
or merchandise during and after the Term. No later than ten (10)
days after expiration or termination of this Agreement or at any
other time Licensor so requests, Licensee will assign to Licensor,
without charge, all of Licensee's right, title and interest
(including without limitation all copyrights) in and to such
advertising, promotion, packaging or trade dress and shall cooperate
fully with Licensor in preparing and recording whatever
documentation may be necessary or desirable to effect such
assignment.
(iii) Without Licensor's prior written consent, Licensee shall
not design, manufacture, advertise, promote, distribute, sell or
deal with in any way in the Territory any product(s) or material(s)
that is or are in Licensor's sole and absolute judgment confusingly
similar to any or all of the Products and the Materials.
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(iv) Licensee shall not use color combinations, designs or
styles unique to any or all of the Products on or in connection with
any other product(s), and Licensee, without charge, will assign to
Licensor ownership of all rights that Licensee has acquired or may
acquire in such color combinations, designs or styles no later than
ten (10) days after expiration or termination of this Agreement or
at any other time Licensor so requests.
(v) Licensee shall not during the Term and the Sell-Off
Period design, manufacture, advertise, promote, distribute, sell or
otherwise deal with any men's sophisticate publication(s) or
product(s) identified with or by any such publication(s) that are,
in Licensor's opinion, competitive with Playboy magazine, which for
the purposes of this paragraph shall include, but not be limited to,
Hustler or Penthouse. In the event Licensee commences any dealing
with such publication(s) or product(s), whether directly or
indirectly, such dealing shall be a default under this Agreement.
m. Indemnification and Product Liability Insurance: Licensee shall:
(i) indemnify, defend and hold harmless Licensor, its
subsidiaries and affiliates, their respective shareholders,
licensees and franchisees and the agents, officers, directors and
employees of each (hereinafter collectively referred to as
"Indemnitees") from all costs, claims, suits, losses, damages and
expenses (including without limitation attorneys' fees and
litigation expenses) arising out of or in connection with: (a) the
design, manufacture, advertising, promotion, sale or distribution of
or any other dealing whatsoever with the Products; (b) any alleged
action(s) or failure(s) to act whatsoever by Licensee; (c) any
alleged defect(s) in any or all of the Products; (d) any alleged
non-conformity to or non-compliance with any law(s) pertaining to
the design, quality, safety, advertising, promotion or marketing of
any or all of the Products and the Materials; or (e) one or more
breaches by Licensee of any or all of its representations or
warranties hereunder;
(ii) obtain and maintain, at Licensee's own expense, product
liability insurance satisfactory to Licensor in the minimum amount
of Four Million U.S. Dollars ($4,000,000) of primary and umbrella
coverage from one or more insurance companies, each with a Best's
rating of "A" (or better), and qualified to transact business in the
Territory (each such insurance policy shall name each of the
Indemnitees as additional insureds by reason of the indemnity
contained in Paragraph 2.m.(i) hereof and shall evidence the
insurer's agreement that such insurance shall not be amended,
canceled, terminated or
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permitted to lapse without thirty (30) days' prior written notice
to Licensor), and provide Licensor with a certificate of such
insurance upon execution of this Agreement by Licensee and on each
anniversary date of the grant or issuance of each such policy during
the Term and the Sell-Off Period evidencing that each such policy
has not been altered with respect to the Indemnitees in any way
whatsoever nor permitted to lapse for any reason, and evidencing the
payment of premium of each such policy; and
(iii) cause each such policy to be in full force and effect
prior to the commencement of any design, manufacture, advertising,
promotion, sale, distribution or dealing with any or all of the
Products whatsoever. Failure by Licensee to obtain the required
insurance prior to such commencement or failure by Licensee to
adequately maintain such insurance during the Term and the Sell-Off
Period shall be an incurable default by Licensee under this
Agreement.
n. Advertising Expenditures: In addition to all other amounts or
payments due from Licensee under this Agreement, and not to be credited
against any Guaranteed Royalties or Earned Royalties, Licensee agrees to
expend within each License Year for advertising and promotion in trade and
consumer media or either thereof (including without limitation newspapers,
magazines, television, radio and point-of-sale materials, but specifically
excluding displays and fixtures) not less than percent ( %) of Net
Sales for such License Year. Some or all of such sum for advertising and
promotion shall be paid to Licensor (hereinafter referred to as
"Advertising Contributions") as follows:
(i) Concurrently with the furnishing of each Statement
required under Paragraph 2.d.(i) hereof, Licensee shall remit to
Licensor for use in Licensor's advertising and promotion pool an
amount equal to percent ( %) of Net Sales for the time period
covered by such Statement, which amount shall be shown on each such
Statement and credited against Licensee's annual advertising and
promotion expenditures required herein; and
(ii) If the Statement for the last License Quarter of a
License Year shows that such percent ( %) threshold has not
been reached, the difference between the amount actually spent and
the amount required to be spent must be remitted to Licensor for use
in Licensor's advertising and promotion pool with such Statement.
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3. ADDITIONAL COVENANTS OF THE PARTIES.
a. Reservation of Rights: All rights not expressly and specifically
granted herein to Licensee are reserved by Licensor.
b. Certain Sales:
(i) In the event Licensor during the Term chooses to exercise
some or all of Licensor's rights pursuant to Paragraph 1.a.(ii)(d)
hereof, Licensee, if requested to do so by Licensor, will sell to
Licensor and its licensee(s) or either thereof any or all of the
Products at the best prices and terms given to other customers of
the Products ordering substantially the same quantities of similar
merchandise from Licensee.
(ii) In the event of any such sale of the Products by Licensee
to Licensor, Licensee shall ship or deliver such Products either
directly to Licensor, at Licensor's expense, or, as Licensor may
direct, to any other individual(s), entity or entities. Any or all
such sales of the Products by Licensee to Licensor shall be at the
prices described in Paragraph 3.b.(i) hereof, less, at Licensee's
election, applicable Earned Royalties; provided that, if Licensor
makes such election, Licensee will not have to pay Earned Royalties
on such sale(s). Licensee will, however, include such sale(s) in the
computation of Net Sales for the limited purpose of calculating
Minimum Net Sales. Licensee shall bill Licensor and its licensee(s)
or either thereof in accordance with Licensee's normal billing
procedures for all such Products shipped or delivered.
4. TITLE AND PROTECTION.
a. Indemnification by Licensor: Licensor represents and warrants
that: (i) it is the owner of the Trademarks; (ii) the Trademarks are
valid; and (iii) the Trademarks are, to the best of Licensor's knowledge,
free from any claim by any third party that would unreasonably interfere
with the rights granted to Licensee under this Agreement. Licensor shall
indemnify, defend and hold harmless Licensee, its subsidiaries and
affiliates, their respective shareholders and the agents, officers,
directors and employees of each against and from all claims or suits
(provided prompt notice of each such claim or suit which comes to the
attention of Licensee is given to Licensor by Licensee) arising solely and
directly out of the authorized use of the Trademarks on or in connection
with the Products by Licensee in the Territory, but in no event shall such
indemnification include consequential damages, including, but not limited
to compensation or reimbursement for loss of prospective profits,
anticipated sales or other losses occasioned by termination of this
Agreement or any other reason(s). Licensor shall have the option to settle
or to
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undertake and conduct the defense of any such claim or suit. Licensee may,
through counsel of Licensee's own choice and at its own expense,
participate in any such claim or suit, but in such event Licensor shall
have sole and exclusive control over such defense, and Licensor's
decisions with respect thereto shall govern and control. Licensee
expressly covenants that no discussions by Licensee whatsoever with any
and all claimants and litigants, no compromise or settlement by Licensee
of any claim or suit and no negotiations by Licensee with respect to any
compromise or settlement shall be had, made or entered into without the
prior written approval of Licensor.
b. Enforcement: Licensee shall promptly notify Licensor in writing
of each actual, suspected or apparent infringement or imitation of the
Trademarks or the Materials or either thereof that comes to the attention
of Licensee. Licensor shall take such action in regard to such
infringement or imitation as Licensor, in its sole and absolute judgment,
deems to be appropriate. Licensor shall, in its sole and absolute
discretion, decide whether to assert any claim or undertake or conduct any
suit with respect to such infringement or imitation, but Licensee shall,
upon receipt of notice from Licensor and pursuant to Licensor's
instructions, on behalf of Licensor, assert any such claim or handle,
undertake and conduct any such suit at Licensor's expense in the name of
Licensor or Licensee or in both names as Licensor may direct. Licensee
expressly covenants that no discussions whatsoever with the infringing or
imitating party or parties, no compromise or settlement of any such claim
or suit and no negotiations with respect to any compromise or settlement
of any such claim or suit shall be had, made or entered into without the
prior written approval of Licensor. Licensee may share in as much as
percent ( %) of any damage recovery or settlement obtained by Licensor or
on Licensor's behalf by Licensee as a result of any such claim or suit
only if Licensee notified Licensor upon the initiation of such claim or
suit that Licensee desires to participate financially in such claim or
suit by contributing to the payment of the costs and expenses thereof and
only in an amount that shall bear the same ratio to the damage recovery or
settlement as the amount of Licensee's financial participation permitted
by Licensor bears to the total costs and expenses incurred in obtaining
such damage recovery or settlement. In no event shall Licensor be
responsible to Licensee for consequential damages that result from any
such infringement or imitation.
5. RELATIONSHIP BETWEEN THE PARTIES.
a. No Joint Venture: Nothing herein contained shall be construed to
place the parties hereto in the relationship of partners or joint
venturers, and Licensee shall have no power to obligate or bind any or all
of Licensor and its subsidiaries or affiliates in any manner whatsoever.
-17-
Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
b. Assignment.
(i) Licensor, in entering into this Agreement, is relying
entirely upon Licensee's skills, reputation and personnel, including
without limitation its officers, managers, directors and
shareholders. This Agreement and all rights, duties and obligations
hereunder are personal to Licensee and shall not, without the prior
consent of Licensor (which may be given or withheld in the sole
discretion of Licensor), be assigned, delegated, sold, transferred,
leased, mortgaged or otherwise encumbered by Licensee or by
operation of law. Any attempt to do so without such consent shall be
void and shall constitute an incurable default under this Agreement.
If Licensor in its reasonable discretion believes that any change(s)
in any or all of the officers, managers, directors and shareholders
of Licensee has materially interfere with or materially and
adversely affect Licensee's performance hereunder or the
relationship between the parties hereto, Licensor may deem such
change(s) to be a default under this Agreement and shall so notify
Licensee. The consent of Licensor to any such assignment(s),
delegation(s), sale(s), transfer(s), lease(s), mortgage(s), other
encumbrance(s) or change(s) shall not be deemed to be consent to any
subsequent assignment(s), delegation(s), sale(s), transfer(s),
lease(s), mortgage(s), other encumbrance(s) or change(s).
(ii) Licensor may assign this Agreement or assign or delegate
any or all of its rights, duties and obligations hereunder to any of
its subsidiaries or affiliates or to any individual(s), entity or
entities.
6. SUBLICENSING. Licensee may not, without the prior written approval of
Licensor, whose discretion shall be final and absolute, enter into any
sublicense agreement(s) or grant any sublicense(s) for any or all of the rights
or obligations of Licensee under the License or this Agreement. The consent of
Licensor to any sublicense agreement(s) or sublicense(s) shall not be deemed to
be a consent to any subsequent sublicense agreement(s) or sublicense(s).
7. DEFAULTS AND RIGHTS OF TERMINATION.
a. Defaults and Right to Cure:
(i) Except as otherwise provided in this Agreement, if
Licensee shall violate any of the terms or conditions hereof or
default on any of its duties, obligations or warranties hereunder,
Licensor shall have the right and option, but not the duty, to
terminate the License and this Agreement upon thirty (30) days'
prior written notice, but no neglect or failure to serve such notice
shall be deemed to be a waiver of any such violation or default.
Such termination shall become effective unless
-18-
<PAGE>
such violation or default described in such notice shall be
materially remedied to the satisfaction of Licensor within such
thirty (30) day period.
(ii) Notwithstanding the provisions of Paragraph 7.a.(i)
hereof, if such violation or default: (a) is of a kind that a remedy
or cure cannot effectively restore the prior circumstances; or (b)
is described in this Agreement as an incurable default, then the
License and this Agreement shall terminate upon receipt by Licensee
of written notice thereof without any period of remedy or cure
whatsoever. The termination of the License and this Agreement shall
be without prejudice to any rights that Licensor otherwise has
against Licensee under this Agreement or under law.
b. Bankruptcy or Assignment for Creditors, Business Discontinuance:
If: (i) Licensee files a petition in bankruptcy or is adjudicated a
bankrupt; (ii) a petition in bankruptcy is filed against Licensee; (iii)
Licensee shall become insolvent or shall make or agree to make an
assignment for the benefit of creditors or an arrangement pursuant to any
bankruptcy law; (iv) Licensee discontinues business; (v) Licensee receives
a qualified opinion from its independent auditor regarding Licensee's
financial statements or an opinion stating that Licensee's financial
situation raises substantial doubt about Licensee's ability to continue as
a going concern (or the equivalent of such an opinion); or (vi) a receiver
shall be appointed for Licensee, the License and this Agreement shall
automatically terminate without the necessity of any notice whatsoever. If
the License and this Agreement are so terminated, any and all of Licensee
and its receivers, representatives, trustees, agents, administrators,
successors and assigns shall have no right to sell or in any way deal with
any or all of the Products and the Materials, except with the special
prior written consent and under the instructions of Licensor that it or
they shall be obligated to follow.
c. Loss of Trademark Rights: If Licensee's right to use any or all
of the Trademarks is adjudged illegal, invalid or restricted and such
adjudication has become final and non-appealable or Licensor in its sole
discretion chooses not to appeal therefrom, or if a settlement agreement
is entered into by Licensor that prohibits or restricts Licensor's or
Licensee's right(s) to use the Trademarks, the License and this Agreement
shall automatically terminate without the necessity of any notice
whatsoever as of the date such adjudication becomes final and
non-appealable, the Licensor makes such choice or the execution and
delivery of such settlement agreement.
d. Impossible Performance: Licensee and Licensor shall be released
from their respective duties and obligations under this Agreement, and the
License and this Agreement shall terminate, if governmental regulations or
other causes arising
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<PAGE>
out of a state of national emergency or war, or any other similar cause(s)
beyond the control of the parties hereto, shall render performance
hereunder impossible. Either party hereto shall so notify the other in
writing of any such cause(s) and of its desire to be released, and upon
receipt by the other of such notice, the License and this Agreement shall
terminate and all amounts owed under this Agreement (including without
limitation all Earned Royalties and Advertising Contributions on sales of
the Products theretofore made) shall become immediately due and payable.
8. EXPIRATION OR TERMINATION.
a. Effect of Expiration or Termination: Upon and after the
expiration or termination of the License and this Agreement, all rights
granted to Licensee under this Agreement shall immediately revert to
Licensor. Licensee will refrain from any further use of the Trademarks or
any further reference to anything similar to the Trademarks (including,
but not limited to, words, devices, designs and symbols) or in any way
associated with any or all of the Products, Licensor and its subsidiaries
or affiliates, except with the prior written consent of Licensor or as
expressly provided in Paragraph 8.d. hereof.
b. Reserved Rights: The expiration or termination of the License and
this Agreement shall not: (i) relieve Licensor or Licensee, respectively,
of any obligations incurred prior or subsequent to such expiration or
termination or (ii) impair or prejudice any of the rights of Licensor or
Licensee, respectively, accruing prior or subsequent thereto as provided
in this Agreement. Upon termination of the License and this Agreement
pursuant to Paragraph 7.c. or 7.d. hereof, Guaranteed Royalties for the
then current License Year shall be prorated based on the ratio that the
number of days in such License Year prior to termination bears to the
number of days in the License Year had the License and this Agreement not
been terminated. Earned Royalties due for such License Year shall be the
excess of Earned Royalties over such prorated Guaranteed Royalties. Any
overpayment of Guaranteed Royalties or overpayment or underpayment of
Earned Royalties based on such proration shall be adjusted by the parties
hereto in accordance with Paragraph 2.f. hereof.
c. Inventory: Not more than ninety (90), but not less than thirty
(30) days prior to the expiration of the Term, or no later than Ten (10)
days after (i) receipt by Licensee of notice of termination or (ii) the
happening of any event that terminates the License and this Agreement
where no such notice is required, Licensee shall furnish to Licensor a
complete and accurate statement signed by the Chief Financial Officer
of Licensee showing the number and description of each of the Products in
work in process and in finished goods inventories and the location(s)
thereof. Licensor and its nominees, employees, agents and representatives
shall have the right to
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<PAGE>
conduct a physical inspection to ascertain or verify the presence of such
inventories and the accuracy of such statement. Any refusal by Licensee to
submit to such inspection shall forfeit Licensee's right to complete work
in process and to sell finished goods inventory pursuant to Paragraph 8.d.
hereof, and Licensor shall retain all other legal and equitable rights it
has in the circumstances, which rights are hereby specifically reserved.
d. Continued Sales After Expiration or Termination: Except as
provided in Paragraph 8.c. hereof and so long as Licensee is not in
arrears in the payment of all amounts due to Licensor, upon the expiration
of the License and this Agreement or if the License and this Agreement are
terminated pursuant to any paragraph of this Agreement except Paragraphs
7.a.(ii), 7.b. or 7.c. hereof, Licensee may for a period of ninety (90)
days after the Expiration Date or the effective date of termination
(hereinafter referred to as the "Sell-Off Period") sell through Licensee's
existing, recognized network of customers, all of the Products (in
finished form) that have been approved by Licensor and that were in work
in process inventory or in finished goods inventory on the Expiration Date
or at the time such notice of termination is received. In the event that
Licensee is unable to cancel a work in process order, Licensee shall be
given a ninety (90) day period, after receipt of the work in process
Products within which to sell those work in process Products. Licensee
shall pay Earned Royalties and furnish Statements with respect to the
Sell-Off Period (including any additional period pursuant to a
non-cancelable work in process order) and otherwise comply with the terms
and conditions of this Agreement as though the License and this Agreement
were still in effect. It is expressly understood and agreed by Licensee
that the Sell-Off Period shall be: (i) non-exclusive consistent with
Paragraph 8.f. hereof and (ii) considered a separate accounting period for
the purpose of computing Earned Royalties due to Licensor for sales during
such period, and such sales shall not be applied against any Guaranteed
Royalties due or payable prior to the Sell-Off Period. If the License and
this Agreement are terminated for failure of Licensee to make any
payment(s) due under this Agreement or pursuant to Paragraphs 7.a.(ii),
7.b. or 7.c. hereof, Licensee shall forfeit any and all rights to use the
Sell-Off Period and shall be obligated to turn over to Licensor all
Products in process or on hand at the time of termination.
e. Equitable Relief and Legal Fees:
(i) Subject to Paragraph 8.d. hereof, Licensee hereby
acknowledges that its failure to cease the design, manufacture,
advertising, promotion, sale or distribution of the Products and the
Materials upon the expiration or termination of this Agreement will
result in irreparable harm to the Trademarks, Licensor and the
rights of subsequent licensee(s) for which there is no adequate
remedy at law. Accordingly, in the event of such failure
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<PAGE>
or in the event of any violation or default by Licensee under this
Agreement (after giving effect to the provisions of Paragraph
7.a.(i) hereof), Licensor shall be entitled to equitable relief
without the necessity of posting bond by way of any or all of
temporary and permanent injunctions and such other relief as any
court of competent jurisdiction may deem just and proper. In this
regard, Licensee hereby consents to the judgment of temporary and
permanent injunctions in favor of Licensor in order to give effect
to this Paragraph 8.e.(i).
(ii) In the event either party hereto files any action against
the other to enforce any of the provisions of this Agreement or to
secure or protect such party's rights under this Agreement, such
party shall be entitled to recover, in any judgment in its favor
entered therein, the attorneys' fees and litigation expenses of such
party, together with such court costs and damages as are provided by
law.
f. Continuity of Sales: In order to enable Licensor to maintain
continuity of sales of the Products upon expiration or termination of this
Agreement, Licensor shall have the right, notwithstanding anything to the
contrary contained in Paragraph 1.a. hereof, to authorize one or more
individuals or entities to design, manufacture, advertise, promote, sell
and distribute the Products in the Territory for four (4) months preceding
the expiration of this Agreement or from the sooner of the time that
notice is received by Licensee of termination of this Agreement or when
this Agreement is terminated. Such individual(s), entity or entities
shall not, however, be authorized to ship to its or their customers any
or all of the Products until after this Agreement has expired or has been
terminated, but may ship the Products to such customers during the
Sell-Off Period, if any.
g. Termination Fee: Notwithstanding anything to the contrary in this
Agreement, if Licensor terminates this Agreement as a result of a default
by Licensee, Licensee shall pay to Licensor as a termination fee no later
than ten (10) days after the date of such termination all outstanding
Guaranteed Royalties required to be paid during the six (6) month period
following termination in addition to all Earned Royalties and Advertising
Contributions due through the effective date of termination.
9. NOTICES.
a. Effectiveness: Unless otherwise expressly indicated in this
Agreement, each notice, request, approval, consent, payment and Statement
(hereinafter referred to as a "Submission") specifically provided for in
this Agreement shall be in writing and shall be considered effective or
received the earliest of: (i) five (5) days after the date when such
Submission is mailed by certified or registered mail with postage prepaid
to the party hereto at the address(es) set
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<PAGE>
forth below; (ii) two (2) business days after the date (a) when such
Submission is sent by express courier service addressed to such party at
such address(es) or (b), except for payments, when such Submission is sent
by facsimile addressed to such party at such address(es) and the sender
thereof requests and receives written confirmation from such party that
such Submission has been received and is legible; or (iii) when such
Submission is actually received by such party at such address(es):
To Licensor: 730 Fifth Avenue
New York, NY 10019
Attention: Betsy Kain
Facsimile: 212-957-2950
Telephone: 212-261-5000
With a copy to: General Counsel
At the address specified in Paragraph
S.1. of the Schedule
To Licensee: The address specified in
Paragraph S.2. of the Schedule
Attention: Barry Budilov
Telephone: 215-925-1551
Facsimile: 215-925-0204
b. Address Change: Notwithstanding the provisions of Paragraph 9.a.
hereof, each party hereto may give written notice to the other party of
some other address(es) to which Submissions shall be sent, in which event
such Submissions to such party subsequently shall be sent to such
address(es).
10. SEVERABILITY. Each provision of this Agreement shall be severable. If,
for any reason, any provision(s) herein is or are finally determined to be
invalid and contrary to, or in conflict with, any existing or future law or
regulation of a court or agency having valid jurisdiction, such determination
shall not impair the operation or affect the remaining provisions of this
Agreement, and such remaining provisions will continue to be given full force
and effect and bind the parties hereto. Each invalid provision shall be
curtailed only to the extent necessary to bring it within the requirements of
such law or regulation.
11. CONSENTS AND APPROVALS. If Licensor fails or refuses to grant to
Licensee any request(s), consent(s) or approval(s), Licensor may, but shall not
be required to, give one or more of the reason(s) thereof or, but Licensor shall
not be liable for any events or circumstances that arise as a result of such
failure or refusal.
12. APPLICABLE LAW. This Agreement shall be governed by and interpreted
under the laws of the State of Illinois without regard to its conflicts of laws
provisions. Licensee hereby submits to personal jurisdiction in Cook County,
Illinois. The parties hereto
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<PAGE>
agree that any and all disputes arising out of or relating in any way to this
Agreement shall be litigated only in courts sitting in Cook County, Illinois.
13. NO BROKER. Licensee warrants and represents that Licensee used no
broker(s) in connection with the execution and delivery of this Agreement.
14. CONSTRUCTION. The headings used herein are for convenience only and
shall not be deemed to define, limit or construe the contents of any
provision(s) of this Agreement. The wording of this Agreement will be deemed to
be the wording chosen by the parties hereto to express their mutual intent, and
no rule of strict construction will be applied against any such party. The
Recitals and the Additional Terms and Conditions (contained in Exhibit C which
is attached hereto) shall be deemed to be part of this Agreement. This Agreement
may be executed in separate counterparts, each of which is deemed to be an
original, and all of which taken together constitute one and the same agreement.
15. SURVIVABILITY. Paragraphs 1.a.(ii), 2.a.(ii) through 2.a.(iv), 2.c.
through 2.g., 2.h.(iv) through 3.a., 3.b.(ii), 4.a., 5.a. and 7.a.(ii) through
17, the Schedule and Paragraphs 1. through 4. of Exhibit B of this Agreement
shall survive the expiration or termination of the License and this Agreement.
16. RIGHTS CUMULATIVE. The respective rights and remedies of the parties
hereto, whether herein specified or otherwise, shall be cumulative, and the
exercise of one or more of them shall not preclude the exercise of any or all
other rights and remedies each such party has hereunder or by law.
17. ENTIRE AGREEMENT. This Agreement (with the Schedule and Exhibits A
through C) represents the entire understanding of the parties hereto. None of
the terms of this Agreement can be waived or modified except by an express
agreement in writing signed by the parties hereto. There are no representations,
promises, warranties, covenants or undertakings other than those contained in
this Agreement. No custom or practice of the parties hereto at variance with the
terms hereof shall constitute a waiver of Licensor's right to demand exact
compliance with any of the terms herein at any time. The failure of either party
hereto to enforce, or the delay by either party hereto in enforcing, any or all
of its rights under this Agreement shall not be deemed as constituting a waiver
or a modification thereof, and either party hereto may, within the time provided
by applicable law, commence appropriate proceedings to enforce any or all of
such rights. Except as expressly provided in this Agreement, no individual(s),
entity or entities other than Licensee and Licensor shall be deemed to have
acquired any rights by reason of anything contained in this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending this Agreement to be
effective as of the Commencement Date, have caused this Agreement to be executed
by the duly authorized representative of each.
LIFESTYLE BRANDS, LTD.
(LICENSOR)
By: /s/ David Batchelor
-----------------------------
David H.L. Batchelor
Senior Vice President
Product Marketing
Date: Oct. 3, 1995
DIPLOMAT-AMBASSADOR INC.
(LICENSEE)
By: /s/ Barry Budilov
-----------------------------
Title: President
Date: 11/1/96
<PAGE>
Exhibit 10.21
INDEX TO DIPLOMAT-AMBASSADOR INC.
PRODUCT LICENSE AGREEMENT
THE SCHEDULE
PARAGRAPH PAGE NO.
- --------- --------
1. GRANT OF LICENSE
a. Grant 1-2
b. Term 2
c. License Year and License Quarter 2
d. Territory 2
e. Minimum Net Sales 2-3
2. COVENANTS OF LICENSEE
a. Use 3-4
b. Best Efforts 4-5
c. Royalties
(i) Guaranteed Royalties 5
(ii) Earned Royalties 5
(iii) Interest 5
d. Statements and Payments 5-6
e. Records and Audit 6-7
f. Expenses of Conducting Examinations 7
g. Product Quality 7-8
h. Approval of Products and the Materials 8-9
i. Title and Protection and Preservation
of Trademarks and Copyrights 10-11
j. Right to Subcontract, Licensee
Financial Statements and Lists
of Sources and Customers 11-12
k. Inventory 12
l. Trademarks and Non-Competitive Brands 12-13
m. Indemnification and Product
Liability Insurance 13-14
n. Advertising Expenditures 14
3. ADDITIONAL COVENANTS OF THE PARTIES
a. Reservation of Rights 14
b. Certain Sales 15
4. TITLE AND PROTECTION
a. Indemnification by Licensor 15-16
b. Enforcement 16
5. RELATIONSHIP BETWEEN THE PARTIES
a. No Joint Venture 16
b. Assignment 16-17
<PAGE>
INDEX TO DIPLOMAT-AMBASSADOR INC.
PRODUCT LICENSE AGREEMENT
(Continued)
6. SUBLICENSING 17
7. DEFAULTS AND RIGHTS OF TERMINATION
a. Defaults and Right to Cure 17
b. Bankruptcy or Assignment for
Creditors, Business Discontinuance 18
c. Loss of Trademark Rights 18
d. Impossible Performance 18
8. EXPIRATION OR TERMINATION
a. Effect of Expiration or Termination 18-19
b. Reserved Rights 19
c. Inventory 19
d. Continued Sales After Expiration
or Termination 19-20
e. Equitable Relief and Legal Fees 20
f. Continuity of Sales 20-21
g. Termination Fee 21
9. NOTICES
a. Effectiveness 21-22
b. Address Change 22
10. SEVERABILITY 22
11. CONSENTS AND APPROVALS 22
12. APPLICABLE LAW 22
13. NO BROKER 22
14. CONSTRUCTION 22
15. SURVIVABILITY 22
16. RIGHTS CUMULATIVE 23
17. ENTIRE AGREEMENT 23
<PAGE>
THE SCHEDULE referred to in the Agreement made as of June 14, 1995.
S.1 LICENSOR: LIFESTYLE BRANDS, LTD.
680 North Lake Shore Drive
Chicago, IL 60611
S.2. LICENSEE: DIPLOMAT-AMBASSADOR INC.
1010 Arch Street, Third Floor
Philadelphia, PA 19107
Attn: Barry Budilov
Phone: 215-925-1551
Fax: 215-925-0204
S.3. THE TRADEMARKS: SARAH COVENTRY; BUTTERFLY DESIGN;
SARAH COVENTRY AMERICA; FASHION
CHANGES, STYLE DOESN'T
S.4. THE TYPE OF LICENSE: Exclusive
S.5. THE USE OF THE TRADEMARKS: Design, manufacture, advertise,
promote, sell and distribute to retail
stores located in the Territory or to
wholesalers which will sell the
Products to and only to retail stores
located in the Territory.
S.6. THE PRODUCTS: Ophthalmic frames and cases
S.7. THE TERRITORY: United States and Canada
S.8. THE COMMENCEMENT DATE: July 1, 1995
S.9. THE EXPIRATION DATE: June 30, 1998
S.10. THE MINIMUM NET SALES (in United States Dollars):
License Year Amount
------------ ------
LY1 (7/1/95 - 6/30/96) $
LY2 (7/1/96 - 6/30/97) $
LY3 (7/1/97 - 6/30/98) $
Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
THE SCHEDULE (Continued)
S.11. GUARANTEED ROYALTIES (in United States Dollars):
License Year Amount
------------ ------
LY1 (7/1/95 - 6/30/96) $
LY2 (7/1/96 - 6/30/97) $
LY3 (7/1/97 - 6/30/98) $
S.12. EARNED ROYALTIES:
percent ( %) of Net Sales (as defined in Paragraph 2.d.(ii) and
subject to the provisions of Paragraph 3.b.(ii) of the Agreement) of the
Products.
S.13. THE ADDRESS WHERE BOOKS KEPT: See Paragraph S.2 above.
LIFESTYLE BRANDS, LTD.
(LICENSOR)
By: /s/ David Batchelor
---------------------
David H.L. Batchelor
Senior Vice President
Product Marketing
Date: October 3, 1995
DIPLOMAT-AMBASSADOR INC.
(LICENSEE)
By: /s/ Barry Budilov
---------------------
Title: President
Date: 11/1/96
Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
LICENSE AGREEMENT
This Agreement is made as of the 14th day of June 1995, by and between the
corporation described in Paragraph S.1. of the Schedule attached hereto and made
a part hereof (hereinafter referred to as "Licensor") and the corporation
described in Paragraph S.2. of the Schedule (hereinafter referred to as
"Licensee").
RECITALS
WHEREAS, Licensor has certain rights in and to the trademark SARAH
COVENTRY and other trademarks identified in Paragraph S.3. of the Schedule
(hereinafter collectively referred to as the "Trademarks") ;
WHEREAS, Licensee recognizes that the Trademarks have acquired notoriety
and goodwill with the general public by virtue of their use in connection with
home party plan sales of jewelry and have since gained further goodwill and
notoriety through the manufacture, advertising, promotion, sale and distribution
of a broad range of consumer products, including, but not limited to, jewelry,
clothing, leather goods and personal health and home articles and accessories;
WHEREAS, the parties hereto desire that Licensor grant to Licensee a
license to use the Trademarks in the design, manufacture, advertising,
promotion, sale and distribution of the "Products" (as defined in Paragraph
1.a.(i) hereof);
NOW, THEREFORE, in consideration of the mutual promises herein contained,
it is mutually agreed as follows:
1. GRANT OF LICENSE.
a. Grant:
(i) Upon and subject to the terms and conditions hereinafter
set forth, Licensor hereby grants to Licensee, and Licensee hereby
accepts, the right, license and privilege specified in Paragraph
S.4. of the Schedule to use the Trademarks in connection with, and
only with, the use specified in Paragraph S.5. of the Schedule on
and in connection with specifically designated and approved articles
of merchandise specified in Paragraph S.6. of the Schedule
(hereinafter collectively referred to as the "Products") in the
territory specified in Paragraph S.7. of the Schedule (hereinafter
referred to as the "Territory"). Such right, license and privilege
is hereinafter referred to as the "License." It is understood and
agreed that while the manufacture of the Products may take place
outside the Territory, none of the Products may be advertised,
promoted, sold or distributed outside the Territory by Licensee.
(ii) Nothing contained in this Agreement shall prevent
Licensor from doing any or all of the following: (a) using or
granting one or more others the right or license to use the
Trademarks on or in connection with
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<PAGE>
the Products in any area of the world other than the Territory or on
or in connection with any services or goods other than the Products
in any or all area(s) of the world including the Territory; (b)
manufacturing or having manufactured in the Territory the Products
for sale outside the Territory; (c) producing or having produced
limited quantities of the Products to be used in the Territory
specifically for promotional and advertising purposes and not for
sale; and (d) retaining and exercising the exclusive rights hereby
reserved to Licensor to design, manufacture, advertise, promote,
sell and distribute and license the design, manufacture,
advertising, promotion, sale and distribution of any and all of the
Products in the Territory and elsewhere or either thereof through
direct marketing sales (including, but not limited to, direct mail,
catalog houses, home shopping programs, infomercials and the like),
premium sales, incentive sales and home party plan sales.
b. Term: The term of the License and this Agreement (hereinafter
referred to as the "Term") shall commence on the date specified in
Paragraph S.8. of the Schedule (hereinafter referred to as the
"Commencement Date") and shall expire at midnight Chicago time on the date
specified in Paragraph S.9. of the Schedule (hereinafter referred to as
the "Expiration Date"), unless sooner terminated by operation of law or as
provided in this Agreement.
c. License Year and License Quarter:
(i) For all purposes under this Agreement, a "License Year"
shall be twelve (12) consecutive calendar months commencing on the
Commencement Date and ending at midnight Chicago time on the day
preceding the anniversary of the Commencement Date and each twelve
(12) month period thereafter, and if the expiration or termination
of the License and this Agreement is effective other than at the end
of such twelve (12) month period, then the final period of less than
twelve (12) months ending on the effective date of such expiration
or termination shall be deemed to be a License Year.
(ii) For all purposes under this Agreement, a "License
Quarter" shall be the first (1st) and each succeeding three (3)
month period of each License Year, and if the expiration or
termination of the License and this Agreement is effective other
than at the end of a License Year, then the final period of less
than three (3) months ending on the effective date of such
expiration or termination shall be deemed to be a License Quarter.
d. Territory: The License shall extend only to the Territory, and
the use by Licensee of the Trademarks shall be confined to the Territory.
e. Minimum Net Sales: Notwithstanding anything in this Agreement to
the contrary, if Licensee's Net Sales (as defined
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in Paragraph 2.d.(ii) hereof) in any License Year are less than those specified
in Paragraph S.10. of the Schedule for such License Year (hereinafter referred
to as the "Minimum Net Sales"), then Licensor shall have the right to either:
(i) declare the License to be non-exclusive, thereby giving Licensor the rights
to design, manufacture, advertise, promote, sell and distribute the Products in
competition with Licensee or otherwise grant any or all of such rights to one or
more other parties or (ii) terminate the License and this Agreement by deeming
the failure to attain the Minimum Net Sales to be an incurable default under
this Agreement. Such declaration or termination: (a) shall be effective upon the
receipt by Licensee of written notice from Licensor no later than thirty (30)
days after Licensor's receipt of the Statement (as defined in Paragraph 2.d.(i)
hereof) evidencing such shortfall and (b) shall have no effect upon the amounts
due and payable to Licensor for periods prior to or after such declaration or
termination.
2. COVENANTS OF LICENSEE.
a. Use:
(i) Subject to Licensor's prior approval as hereinafter required,
Licensee shall commence the design, manufacture, advertising, promotion,
sale and distribution of or for the Products as soon as practicable after
the Commencement Date, but in no event later than August 1, 1995. If
Licensee fails to do so by such date, Licensor may treat such failure as
an incurable default under this Agreement. In the event during any License
Year, Licensee has not on a regular and ongoing basis sold or distributed
one or more of the Products within one or more categories of the Products
under Paragraph S.6. of the Schedule, Licensor shall have the right to
delete any of such Products or such categories from the Schedule upon not
less than thirty (30) days' prior written notice to Licensee.
(ii) Licensee shall not cause or authorize any use of the Trademarks
in any area of the world outside the Territory and shall not knowingly
manufacture, sell or otherwise deal with or distribute any of the Products
on behalf of or to any individual(s), entity or entities that Licensee
believes or has reason to believe intends or intend or is or are likely to
sell, deal with or distribute any of the Products in any way outside the
Territory. Licensee shall, upon receipt of notice from Licensor,
immediately and permanently cease supplying any or all of the Products to
the individual(s), entity or entities named in such notice as one or more
of those that directly or indirectly sell, deal with or distribute any or
all of the Products outside the Territory.
(iii) Licensee warrants and represents that it has and will continue
to have throughout the Term and the Sell-Off Period (as defined in
Paragraph 8.d. hereof) the legal right and authority to enter into this
Agreement
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and to assume and perform its duties and obligations hereunder and that
there is or are no, and Licensee shall not enter into during the Term and
the Sell-Off Period any, contract(s), agreement(s) or understanding(s)
with any individual(s), entity or entities which would in any way restrict
or prevent Licensee from the performance of its duties and obligations
under this Agreement.
(iv) Licensee shall be responsible for obtaining, at its own
expense, any and all licenses, permits, approvals (including governmental
and all other licenses, permits and approvals) necessary for Licensee to:
(a) design, manufacture, advertise, promote, sell and distribute the
Products; (b) pay Guaranteed Royalties (as defined in Paragraph 2.c.(i)
hereof), Earned Royalties (as defined in Paragraph 2.c.(ii) hereof),
Advertising Contributions (as defined in Paragraph 2.n. hereof) and taxes;
and (c) fulfill any and all other duties and obligations and exercise the
rights of Licensee under this Agreement. In the event Licensee is unable,
for any reason, to obtain prior to the Commencement Date or maintain
throughout the Term all of such licenses, permits or approvals, such
inability shall be an incurable default under this Agreement.
b. Best Efforts: Licensee shall, throughout the Term and the Sell-Off
Period, constantly use its best effort, in the advertising, promoting, selling
and distributing and in all other dealing with or disposal of the Products to
protect the good name and goodwill associated with the Trademarks and Licensor
and to obtain the greatest Net Sales throughout the entire Territory and the
entire Term and the Sell-Off Period. Licensee acknowledges and agrees that the
sale of the Products in certain types of stores can negatively affect the
reputation and the value of the Trademarks, as some types of stores are
perceived by the public as having lower quality products than other types of
stores regardless of whether the products or their prices are the same. Licensee
agrees that it will use its best efforts to sell and distribute the Products
only to those stores that are generally perceived by the public as good quality
stores by virtue of their reputations for quality products and by their
providing certain service amenities associated with good quality stores, which
may include without limitation the availability of any or all of the following:
customer service desks; knowledgeable, regular, full-time service
representatives; and provision for the return of products. Licensee and Licensor
agree that certain deep discount chains and other similar channels are generally
perceived by the public as having lower quality products and will therefore not
be considered acceptable channels of sale and distribution of the Products under
this Agreement without Licensor's written approval. Licensor and Licensee agree
to reasonably attempt to settle all differences of opinion as to whether or not
a specific store or chain of stores is an acceptable channel for the sale and
distribution of the Products, but Licensor's decisions in this matter shall
govern and control. Except as provided in Paragraph 2.n. hereof, Licensee
shall be responsible for and shall assume and pay for
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all costs and expenses related to Licensee's design, manufacture, advertising,
promotion, sale and distribution of the Products.
c. Royalties:
(i) Guaranteed Royalties: Licensee will pay to Licensor or its
designee(s) guaranteed minimum royalties (hereinafter referred to as
"Guaranteed Royalties") in the amount and for each License Year specified
in Paragraph S.11 of the Schedule. Guaranteed Royalties for each such
License Year shall be paid in four (4) equal installments and each such
installment shall be due on the first (1st) day of each License Quarter of
each such License Year. Under no circumstances whatsoever will Licensor
return to Licensee all or any part(s) of Guaranteed Royalties, except as
provided in Paragraph 8.b. hereof.
(ii) Earned Royalties: Licensee shall pay to Licensor or its
designee(s) royalties (hereinafter referred to as "Earned Royalties") in
the amount equal to the amount calculated according to Paragraph S.12. of
the Schedule, but only to the extent that for each License Year such
calculated amount exceeds Guaranteed Royalties for such License Year.
Earned Royalties shall be payable in accordance with the terms and
conditions of Paragraph 2.d. hereof.
(iii) Interest: Each sum, including, but not limited to, Guaranteed
Royalties and Earned Royalties, that shall not be paid on the due date by
Licensee shall bear interest from such due date until the date on which
such sum is paid in full at an amount equal to the lesser of
percent ( %) per annum or the highest percentage rate allowed by law.
d. Statements and Payments:
(i) Within forty-five (45) days after each License Quarter or the
conclusion of the Sell-Off Period, Licensee shall furnish to Licensor or
its designee a complete and accurate statement in a format acceptable to
Licensor and certified to be true by the Chief Financial Officer of
Licensee (hereinafter referred to as the "Statement") showing for such
License Quarter and the License Year through such period or for the
Sell-Off Period: (a) a listing of Licensee's accounts in the Territory and
the units and description of all of the Products sold and distributed or
otherwise disposed of by Licensee; (b) the computations of Net Sales on
all such sales; (c) the computation of Earned Royalties and the amount of
Earned Royalties due and payable; and (d) the advertising and promotion
expenditures made by Licensee pursuant to Paragraph 2.n. hereof and the
details of all such expenditures, supported by copies of vouchers and
copies of all advertising for or relating to the period covered by such
Statement. When, during any License
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Year the amount of Guaranteed Royalties for such License Year has been
exceeded by the amount calculated according to Paragraph S.12. of the
Schedule for such License Year, Licensee shall commence payment of Earned
Royalties. Licensee shall pay all accrued and unpaid Earned Royalties by
remittance accompanying each of the Statements.
(ii) As used in this Agreement, the term "Net Sales" means the
invoice price charged by Licensee for the Products less (x) refunds,
credits and allowances actually made or allowed to customers for returned
Products, (y) customary trade discounts (including anticipations) afforded
to and actually taken by customers against payment for the Products and
(z) value added tax assessed on sales (only where applicable).
(iii) In the event the percentage of returns of Products in any
License Year exceeds percent ( %) of Net Sales for such License
Year, then Licensor may elect to treat such an occurrence as an incurable
default by Licensee under this Agreement.
(iv) Except as otherwise specifically provided in this Agreement, if
Licensee sells any or all of the Products to any individual(s), entity or
entities in whole or in part controlled by Licensee, the invoice price
used to determine Net Sales hereunder shall be the invoice price at which
the Products are resold by such individual or entity to an unrelated
customer in an arm's-length transaction.
e. Records and Audit: Licensee shall: (i) keep accurate books of account
and records (including but not limited to utilization of consecutively numbered
invoices which reconcile to the Statements and Licensee's general ledger)
covering all transactions relating to or arising out of the License and this
Agreement (which books and records shall be maintained separately from
Licensee's documentation relating to other items manufactured or sold by
Licensee) and (ii) permit Licensor or its nominees, employees, agents or
representatives to have full access to, to inspect such books and records at all
reasonable hours of the day, to conduct an examination of and to copy (at
Licensor's expense) all such books and records. Licensee shall maintain in good
order and condition all such books and records for a period of two (2) years
after the expiration or termination of the License and this Agreement or, in the
event of a dispute between the parties hereto, until such dispute is resolved,
whichever date is later, and such books and records shall be kept at the address
stated in Paragraph S.13. of the Schedule, except as such address may be
changed from time to time in accordance with Paragraph 9.b. hereof. Receipt or
acceptance by Licensor of any Statement furnished pursuant hereto or any sums
paid by Licensee hereunder shall not preclude Licensor from questioning the
correctness thereof at any time, and if one or more inconsistencies or mistakes
are discovered by Licensor in such Statement, it or they shall be rectified in
an amended
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Statement received by Licensor no later than ten (10) days after the date of
receipt by Licensee of notice of that which should be rectified.
f. Expenses of Conducting Examinations: If an inspection or examination
referred to in Paragraph 2.e. hereof discloses, or Licensor or Licensee
otherwise discovers, an underpayment of Earned Royalties and Advertising
Contributions or either thereof, the amount of such underpayment shall be paid
by Licensee to Licensor no later than thirty (30) days after receipt of notice
or knowledge thereof by Licensee. In the event of such an underpayment by
Licensee in excess of percent ( %) in any License Year, then Licensor may
elect to treat such occurrence as an incurable default by Licensee under this
Agreement within thirty (30) days of discovery. If such inspection or
examination: (i) discloses or Licensor or Licensee otherwise discovers an
overpayment of Earned Royalties and Advertising Contributions or either thereof
(or, pursuant to Paragraph 8.b. hereof, an overpayment of Guaranteed Royalties),
the amount of such overpayment shall be credited against future payment(s) of
any or all of the Guaranteed Royalties, Earned Royalties and Advertising
Contributions or, in the event of the expiration or termination of the License
and this Agreement and there is or are no such future payment(s), such amount
shall be paid by Licensor to Licensee no later than thirty (30) days after the
discovery thereof by Licensor, subject to Licensor's rights of setoff,
recoupment and counterclaim or (ii) reveals that for the period covered by such
inspection or examination there is an error of percent ( %) or more in the
Earned Royalties and Advertising Contributions or either thereof previously
reported on the Statement(s) as being due from Licensee, all expenses involved
in the conducting of such inspection or examination shall be borne by Licensee.
Licensee shall pay to Licensor the amount of such expenses no later than ten
(10) days after Licensee's receipt of Licensor's invoice therefor. If such error
is less than percent ( %), such expenses shall be borne by Licensor.
g. Product Quality: Licensee hereby warrants and agrees that the Products
designed, manufactured, advertised, promoted, sold or distributed under this
Agreement shall bear the Trademarks faithfully produced and shall meet the high
standards of quality, workmanship, material, design, size, color and style
established by Licensor in accordance with the terms and conditions of this
Agreement, including without limitation the Quality Standards attached hereto
and made a part of this Agreement as Exhibit A. Licensee will not knowingly or
negligently cause or authorize any or all of the Products not conforming to this
Agreement to be sold or distributed, as doing so may adversely affect Licensor's
goodwill in the Trademarks. All of the Products shall conform to and comply
with, in all respects, all federal, state and local laws, rules and regulations
governing the design, quality, labeling and safety of such Products. Licensee
shall not cause, condone or authorize: (i) the use of any substandard or
offensive materials in or in connection with any or all of the Products; (ii)
any violation of any federal, state or local
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law or regulation, including, but not limited to, provisions thereof imposing
advertising standards or requiring trade or content description of the Products;
or (iii) the use of the Trademarks or any other word(s), device(s) or symbol(s)
associated in any way with any or all of Licensor and its subsidiaries and
affiliates in connection with any product or activity that is not the subject of
the License and this Agreement.
h. Approval of Products and the Materials:
(i) Licensee understands and agrees that each of the Products and
other items bearing the Trademarks or intended for use in connection with
the Products (hereinafter collectively referred to as the "Materials")
must be approved in advance by Licensor. The Materials include, but are
not limited to, cartons, containers, labels, wrappers, packages and other
inner and outer packaging materials, fixtures, displays, artwork and
printing, advertising, sales, marketing and promotional materials.
Licensee shall, at its own expense, submit to Licensor or its designee(s)
for written approval, samples of each of the Products and the Materials at
each stage of development thereof, which shall include, but not be limited
to: (a) an initial sketch or photograph; (b) a sample prototype or
equivalent acceptable to Licensor; and (c) two (2) samples as actually
manufactured or produced in final form as intended to be sold and
distributed or either thereof by Licensee. Licensee must obtain Licensor's
written approval of each stage of development before proceeding to the
next stage, and in no event shall Licensee commence or permit the mass
manufacture, advertising, promotion, sale or distribution of any or all of
the Products or the Materials unless and until Licensee has received
Licensor's written approval of the samples provided pursuant to (c) of
this Paragraph. While Licensor shall have the sole and absolute discretion
to approve or withhold approval of any and all of the Products, the
Materials and sample(s) of either throughout each stage of development,
Licensor shall only withhold approval on the samples submitted pursuant to
(c) of this Paragraph because such samples do not conform to that or those
thing(s) previously approved. In the event Licensor fails to provide its
approval or disapproval of any or all things submitted to Licensor
pursuant to this Paragraph 2.h.(i) within fourteen (14) days of Licensor's
receipt thereof, Licensor shall be deemed to have disapproved of such
thing(s).
(ii) To ensure that each of the Products and the Materials are
constantly maintained in conformance with the previously approved samples
pursuant to Paragraph 2.h.(i) hereof, Licensee shall, within seven (7)
days of receipt of a request from Licensor, send or cause to be sent to
Licensor at Licensee's expense: (a) such actual samples requested by
Licensor of the Products and the Materials Licensee is using,
manufacturing, selling,
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distributing or otherwise disposing of and (b) a listing or revised
listing of each location where any of the Products and the Materials or
either thereof are designed, manufactured, stored or otherwise dealt with,
except to the extent such listing or revised listing duplicates currently
accurate information provided pursuant to Paragraph 2.j.(ii) hereof.
Licensor and its nominees, employees, agents and representatives shall
have the right to enter upon and inspect, at all reasonable hours of the
day and with reasonable notice, any and all such location(s) and to take,
without payment, such samples of any of the Products and the Materials as
Licensor reasonably requires for the purposes of such inspection.
(iii) If any of the Products or Materials sent or taken pursuant to
Paragraph 2.h.(ii) hereof or that otherwise come(s) to the attention of
Licensor does or do not conform in Licensor's sole reasonable opinion to
the previously approved samples, Licensor shall so notify Licensee in
writing, specifying in what respect such of the products or Materials is
or are unacceptable. Immediately upon receipt of such notice, Licensee
shall suspend all manufacture, sale and distribution of and shall obtain
back from Licensee's customers all such Products and Materials and shall
not resume the manufacture, sale or distribution thereof unless and until
Licensee has made all necessary changes to the satisfaction of Licensor
and has received Licensor's written reapproval of each of such Products
and Materials.
(iv) Except as otherwise specifically provided in this Agreement,
all of the Products and the Materials that are not approved by Licensor or
that are determined by Licensor to be non-conforming or unacceptable shall
not be sold, distributed or otherwise dealt with by Licensee. All such
Products and Materials shall be destroyed by Licensee with, if Licensor so
requests, an appropriate certificate of destruction furnished to Licensor.
(v) Except as provided in Paragraph 2.b.(iv) hereof, any and all
sale(s), distribution or use by Licensee of unapproved, non-conforming or
unacceptable Products or Materials shall not only constitute an incurable
default under the terms of this Agreement, but such Products or Materials
also shall be considered unlicensed and an infringement of Licensor's
proprietary rights, and Licensor shall have the right to bring legal
action against Licensee for any and all remedies available to Licensor in
addition to the remedies available under this Agreement.
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i. Title and Protection and Preservation of Trademarks and Copyrights:
(i) Licensee hereby acknowledges each of the following: the great
value of the goodwill associated with the Trademarks; the worldwide
recognition thereof; that the proprietary rights therein and goodwill
associated therewith are solely owned by and belong to Licensor; that the
Trademarks and other related words, devices, designs and symbols are
inherently distinctive or have secondary meaning firmly associated in the
mind of the general public with Licensor, its subsidiaries and affiliates
and its or their activities; and that all additional goodwill associated
with the Trademarks created through the use of such Trademarks by Licensee
shall inure to the sole benefit of Licensor. During and after the Term,
Licensee shall not:
(a) attack or question the validity of, or assist any
individual(s), entity or entities in attacking or questioning, the
title or any rights of or claimed by any or all of Licensor, its
subsidiaries and affiliates and their respective licensees and
sublicensees in and to the Trademarks or any other trademark(s),
copyright(s) or such other intellectual or intangible property or
properties associated or connected with any or all of Licensor, its
subsidiaries and affiliates, their publications, published material,
activities, licensees and sublicensees;
(b) directly or indirectly seek for itself, or assist any
third party or parties to use or acquire, any rights, proprietary or
otherwise, in any patent, trademark, copyright or such other
intellectual or intangible property so associated or connected,
without the prior written approval of Licensor;
(c) in any way seek to avoid Licensee's duties or obligations
under this Agreement because of the assertion or allegation by any
individual(s), entity or entities that any or all of the Trademarks
are invalid or by reason of any contest concerning the rights of or
claimed by Licensor; or
(d) file or prosecute one or more trademark applications
regarding Licensee's use of the Trademarks, unless first requested
to do so in writing by Licensor. (Licensee will cooperate with
Licensor in connection with any and all such filings.)
(ii) Licensee shall:
(a) use the Trademarks as permitted under this Agreement in
each jurisdiction strictly in accordance with the legal requirements
in such jurisdiction;
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(b) affix or imprint irremovably and legibly on each of the
Products and on or within all of the Materials such Trademarks,
trademark notices, copyright notices and legends as Licensor
directs;
(c) manufacture, sell, distribute or otherwise deal with the
Materials solely in connection with the Products (except for any or
all of the Materials which do not bear one or more of the Trademarks
or otherwise are not associated with any or all of the Products by
virtue of, but not limited to, such things as design, color or
content); and
(d) not cause or grant permission to any third party or
parties to acquire any copyright(s) or other proprietary right(s) in
connection with any word(s), device(s), design(s) or symbol(s) used
by Licensee in connection with any of the Products or the Materials.
j. Right to Subcontract, Licensee Financial Statements and Lists of
Sources and Customers:
(i) Licensee may subcontract the manufacture of any or all
component part(s) of any or all of the Products bearing the Trademarks
pursuant to this Agreement, provided Licensee first obtains from each such
subcontractor an executed written agreement in the form substantially
identical to that attached hereto and made a part hereof as Exhibit B and
furnishes a copy of each such executed agreement to Licensor.
(ii) With the Statement submitted at the end of each License Year
pursuant to Paragraph 2.d.(i) hereof and at any other time so requested by
Licensor during the Term and the Sell-Off Period or either thereof,
Licensee shall provide Licensor with: (a) copies of Licensee's most recent
audited financial statements (including without limitation footnotes) and
annual reports, 10-K's, balance sheets or other similar documents that
indicate Licensee's financial status and (b) an updated list of the names
and addresses of all manufacturing sources, subcontractors, suppliers,
dealers, wholesalers, retailers, customers and others which have been
engaged in the design, manufacture, advertising, promotion, sale,
distribution or other dealings with any or all of the Products and the
Materials during the Term and the Sell-Off Period or either thereof. Such
list shall, if so requested by Licensor, contain the full specification of
all designs, utility models, patents or trademarks that may be involved,
directly or indirectly, in the manufacture, production or distribution of
any or all of the Products and the Materials. Licensee shall obtain the
consent of any and all relevant third parties for such disclosure.
Licensor shall keep any material disclosed to it under this Paragraph
2.j.(ii) confidential and shall not disclose it without Licensee's prior
written notice. Nothing herein, however, shall
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prevent Licensor from disclosing such material pursuant to a court order
which requires Licensor to so disclose such material, and in such event,
Licensor shall notify Licensee of such requirement.
k. Inventory: Insofar as reasonable, Licensee shall at all times during
the Term be able to fulfill all orders for the Products promptly and yet not
have an excessive inventory on hand at the time of the expiration or termination
of the License. Within forty-five (45) days after each License Year or within
ten (10) days of receipt of a request from Licensor, Licensee will furnish
Licensor with a statement signed by the Chief Financial Officer of Licensee,
setting forth in detail the quantities of work in process and finished goods
inventories of the Products.
l. Trademarks and Non-Competitive Brands:
(i) For purposes of this Paragraph 2.1., the term "Licensee" shall
include any affiliate, subsidiary or principal shareholder of Licensee.
(ii) Licensee shall not use, cause or authorize to be used any
word(s), device(s), design(s), slogan(s) or symbol(s) confusingly similar
to any or all of the Trademarks. During the Term and the Sell-Off Period,
any or all of the following shall not be used on or in connection with the
Products without Licensor's prior written consent: (a) permutations of any
or all of the Trademarks; (b) secondary marks; or (c) new words, devices,
designs, slogans or symbols. Upon such authorization by Licensor and use
by Licensee, each such permutation, secondary mark, word, device, design,
slogan and symbol shall be the property of Licensor and shall be included
as one of the Trademarks subject to this Agreement. Should Licensee create
or develop any advertising, promotion, packaging or trade dress unique to
the Products, all such advertising, promotion, packaging or trade dress
shall be the property of Licensor and shall not be used by Licensee on or
in connection with any other product or merchandise during and after the
Term. No later than ten (10) days after expiration or termination of this
Agreement or at any other time Licensor so requests, Licensee will assign
to Licensor, without charge, all of Licensee's right, title and interest
(including without limitation all copyrights) in and to such advertising,
promotion, packaging or trade dress and shall cooperate fully with
Licensor in preparing and recording whatever documentation may be
necessary or desirable to effect such assignment.
(iii} Without Licensor's prior written consent, Licensee shall not
design, manufacture, advertise, promote, distribute, sell or deal with in
any way in the Territory any product(s) or material(s) that is or are in
Licensor's sole and absolute judgment confusingly similar to any or all of
the Products and the Materials.
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(iv) Licensee shall not use color combinations, designs or styles
unique to any or all of the Products on or in connection with any other
product(s), and Licensee, without charge, will assign to Licensor
ownership of all rights that Licensee has acquired or may acquire in such
color combinations, designs or styles no later than ten (10) days after
expiration or termination of this Agreement or at any other time Licensor
so requests.
(v) Licensee shall not during the Term and the Sell-Off Period
design, manufacture, advertise, promote, distribute, sell or otherwise
deal with any men's sophisticate publication(s) or product(s) identified
with or by any such publication(s) that are, in Licensor's opinion,
competitive with Playboy magazine, which for the purposes of this
paragraph shall include, but not be limited to, Hustler or Penthouse. In
the event Licensee commences any dealing with such publication(s) or
product(s), whether directly or indirectly, such dealing shall be a
default under this Agreement.
m. Indemnification and Product Liability Insurance:
Licensee shall:
(i) indemnify, defend and hold harmless Licensor, its subsidiaries
and affiliates, their respective shareholders, licensees and franchisees
and the agents, officers, directors and employees of each (hereinafter
collectively referred to as "Indemnities") from all costs, claims, suits,
losses, damages and expenses (including without limitation attorneys' fees
and litigation expenses) arising out of or in connection with: (a) the
design, manufacture, advertising, promotion, sale or distribution of or
any other dealing whatsoever with the Products; (b) any alleged action(s)
or failure(s) to act whatsoever by Licensee; (c) any alleged defect(s) in
any or all of the Products; (d) any alleged non-conformity to or
non-compliance with any law(s) pertaining to the design, quality, safety,
advertising, promotion or marketing of any or all of the Products and the
Materials; or (e) one or more breaches by Licensee of any or all of its
representations or warranties hereunder;
(ii) obtain and maintain, at Licensee's own expense, product
liability insurance satisfactory to Licensor in the minimum amount of
($4,000,000) of primary and umbrella coverage from one or
more insurance companies, each with a Best's rating of "A" (or
better), and qualified to transact business in the Territory (each such
insurance policy shall name each of the Indemnitees as additional insureds
by reason of the indemnity contained in Paragraph 2.m.(i) hereof and shall
evidence the insurer's agreement that such insurance shall not be amended,
canceled, terminated or permitted to lapse without thirty (30) days' prior
written notice to Licensor), and provide Licensor with a certificate of
such insurance upon execution of this
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Agreement by Licensee and on each anniversary date of the grant or
issuance of each such policy during the Term and the Sell-Off Period
evidencing that each such policy has not been altered with respect to the
Indemnitees in any way whatsoever nor permitted to lapse for any reason,
and evidencing the payment of premium of each such policy; and
(iii) cause each such policy to be in full force and effect prior to
the commencement of any design, manufacture, advertising, promotion, sale,
distribution or dealing with any or all of the Products whatsoever.
Failure by Licensee to obtain the required insurance prior to such
commencement or failure by Licensee to adequately maintain such insurance
during the Term and the Sell-Off Period shall be an incurable default by
Licensee under this Agreement.
n. Advertising Expenditures: In addition to all other amounts or payments
due from Licensee under this Agreement, and not to be credited against any
Guaranteed Royalties or Earned Royalties, Licensee agrees to expend within each
License Year for advertising and promotion in trade and consumer media or either
thereof (including without limitation newspapers, magazines, television, radio,
and point-of-sale materials, but specifically excluding displays and fixtures)
not less than percent ( %) of Net Sales for such License Year. Some or all
of such sum for advertising and promotion shall be paid to Licensor (hereinafter
referred to as "Advertising Contributions") as follows:
(i) Concurrently with the furnishing of each Statement required
under Paragraph 2.d.(i) hereof, Licensee shall remit to Licensor for use
in Licensor's advertising and promotion pool an amount equal to
percent ( %) of Net Sales for the time period covered by such Statement,
which amount shall be shown on each such Statement and credited against
Licensee's annual advertising and promotion expenditures required herein;
and
(ii) If the Statement for the last License Quarter of a License Year
shows that such percent ( %) threshold has not been reached, the
difference between the amount actually spent and the amount required to be
spent must be remitted to Licensor for use in Licensor's advertising and
promotion pool with such statement.
3. ADDITIONAL COVENANTS OF THE PARTIES.
a. Reservation of Rights: All rights not expressly and specifically
granted herein to Licensee are reserved by Licensor.
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b. Certain Sales:
(i) In the event Licensor during the Term chooses to exercise some
or all of Licensor's rights pursuant to Paragraph 1.a.(ii)(d) hereof,
Licensee, if requested to do so by Licensor, will sell to Licensor and its
licensee(s) or either thereof any or all of the Products at the best
prices and terms given to other customers of the Products ordering
substantially the same quantities of similar merchandise from Licensee.
(ii) In the event of any such sale of the Products by Licensee to
Licensor, Licensee shall ship or deliver such Products either directly to
Licensor at Licensor's expense or, as Licensor may direct, to any other
individual(s), entity or entities. Any or all such sales of the Products
by Licensee to Licensor shall be at the prices described in Paragraph
3.b.(i) hereof, less, at Licensee's election, applicable Earned Royalties;
provided that, if Licensor makes such election, Licensee will not have to
pay Earned Royalties on such sale(s). Licensee will, however, include such
sale(s) in the computation of Net Sales for the limited purpose of
calculating Minimum Net sales. Licensee shall bill Licensor and its
licensee(s) or either thereof in accordance with Licensee's normal billing
procedures for all such Products shipped or delivered.
4. TITLE AND PROTECTION.
a. Indemnification by Licensor: Licensor represents and warrants that: (i)
it is the owner of the Trademarks; (ii) the Trademarks are valid; and (iii) the
Trademarks are, to the best of Licensor's knowledge, free from any claim by any
third party that would unreasonably interfere with the rights granted to
Licensee under this Agreement. Licensor shall indemnify, defend and hold
harmless Licensee, its subsidiaries and affiliates, their respective
shareholders and the agents, officers, directors and employees of each against
and from all claims or suits (provided prompt notice of each such claim or suit
which comes to the attention of Licensee is given to Licensor by Licensee)
arising solely and directly out of the authorized use of the Trademarks on or in
connection with the Products by Licensee in the Territory, but in no event shall
such indemnification include consequential damages, including, but not limited
to compensation or reimbursement for loss of prospective profits, anticipated
sales or other losses occasioned by termination of this Agreement or any other
reason(s). Licensor shall have the option to settle or to undertake and conduct
the defense of any such claim or suit. Licensee may, through counsel of
Licensee's own choice and at its own expense, participate in any such claim or
suit, but in such event Licensor shall have sole and exclusive control over such
defense, and Licensor's decisions with respect thereto shall govern and control.
Licensee expressly covenants that no discussions by Licensee whatsoever with any
and all claimants and litigants, no compromise or settlement by Licensee of any
claim or suit and no negotiations by Licensee
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<PAGE>
with respect to any compromise or settlement shall be had, made or entered into
without the prior written approval of Licensor.
b. Enforcement: Licensee shall promptly notify Licensor in writing of each
actual, suspected or apparent infringement or imitation of the Trademarks or the
Materials or either thereof that comes to the attention of Licensee. Licensor
shall take such action in regard to such infringement or imitation as Licensor,
in its sole and absolute judgment, deems to be appropriate. Licensor shall, in
its sole and absolute discretion, decide whether to assert any claim or
undertake or conduct any suit with respect to such infringement or imitation,
but Licensee shall, upon receipt of notice from Licensor and pursuant to
Licensor's instructions, on behalf of Licensor, assert any such claim or handle,
undertake and conduct any such suit at Licensor's expense in the name of
Licensor or Licensee or in both names as Licensor may direct. Licensee expressly
covenants that no discussions whatsoever with the infringing or imitating party
or parties, no compromise or settlement of any such claim or suit and no
negotiations with respect to any compromise or settlement of any such claim or
suit shall be had, made or entered into without the prior written approval of
Licensor. Licensee may share in as much as percent ( %) of any damage
recovery or settlement obtained by Licensor or on Licensor's behalf by Licensee
as a result of any such claim or suit only if Licensee notified Licensor upon
the initiation of such claim or suit that Licensee desires to participate
financially in such claim or suit by contributing to the payment of the costs
and expenses thereof and only in an amount that shall bear the same ratio to the
damage recovery or settlement as the amount of Licensee's financial
participation permitted by Licensor bears to the total costs and expenses
incurred in obtaining such damage recovery or settlement. In no event shall
Licensor be responsible to Licensee for consequential damages that result from
any such infringement or imitation.
5. RELATIONSHIP BETWEEN THE PARTIES.
a. No Joint Venture: Nothing herein contained shall be construed to place
the parties hereto in the relationship of partners or joint venturers, and
Licensee shall have no power to obligate or bind any or all of Licensor and its
subsidiaries or affiliates in any manner whatsoever.
b. Assignment:
(i) Licensor, in entering into this Agreement, is relying entirely
upon Licensee's skills, reputation and personnel, including without
limitation its officers, managers, directors and shareholders. This
Agreement and all rights, duties and obligations hereunder are personal to
Licensee and shall not, without the prior consent of Licensor (which may
be given or withheld in the sole discretion of Licensor), be assigned,
delegated, sold, transferred, leased, mortgaged or otherwise encumbered by
Licensee or by operation of law. Any attempt to do so without such consent
shall be void and shall constitute
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an incurable default under this Agreement. If Licensor in its reasonable
discretion believes that any change(s) in any or all of the officers,
managers, directors and shareholders of Licensee has materially interfere
with or materially and adversely affect Licensee's performance hereunder
or the relationship between the parties hereto, Licensor may deem such
change(s) to be a default under this Agreement and shall so notify
Licensee. The consent of Licensor to any such assignment(s),
delegation(s), sale(s), transfer(s), lease(s), mortgage(s), other
encumbrance(s) or change(s) shall not be deemed to be consent to any
subsequent assignment(s), delegation(s), sale(s), transfer(s), lease(s),
mortgage(s), other encumbrance(s) or change(s).
(ii) Licensor may assign this Agreement or assign or delegate any or
all of its rights, duties and obligations hereunder to any of its
subsidiaries or affiliates or to any individual(s), entity or entities.
6. SUBLICENSING. Licensee may not, without the prior written approval of
Licensor, whose discretion shall be final and absolute, enter into any
sublicense agreement(s) or grant any sublicense(s) for any or all of the rights
or obligations of Licensee under the License or this Agreement. The consent of
Licensor to any sublicense agreement(s) or sublicense(s) shall not be deemed to
be a consent to any subsequent sublicense agreement(s) or sublicense(s).
7. DEFAULTS AND RIGHTS OF TERMINATION.
a. Defaults and Right to Cure:
(i) Except as otherwise provided in this Agreement, if
Licensee shall violate any of the terms or conditions hereof or
default on any of its duties, obligations or warranties hereunder,
Licensor shall have the right and option, but not the duty, to
terminate the License and this Agreement upon thirty (30) days'
prior written notice, but no neglect or failure to serve such notice
shall be deemed to be a waiver of any such violation or default.
Such termination shall become effective unless such violation or
default described in such notice shall be materially remedied to the
satisfaction of Licensor within such thirty (30) day period.
(ii) Notwithstanding the provisions of Paragraph 7.a.(i)
hereof, if such violation or default: (a) is of a kind that a remedy
or cure cannot effectively restore the prior circumstances; or (b)
is described in this Agreement as an incurable default, then the
License and this Agreement shall terminate upon receipt by Licensee
of written notice thereof without any period of remedy or cure
whatsoever. The termination of the License and this Agreement shall
be without prejudice to any rights that Licensor otherwise has
against Licensee under this Agreement or under law.
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<PAGE>
b. Bankruptcy or Assignment for Creditors, Business Discontinuance: If:
(i) Licensee files a petition in bankruptcy or is adjudicated a bankrupt; (ii) a
petition in bankruptcy is filed against Licensee; (iii) Licensee shall become
insolvent or shall make or agree to make an assignment for the benefit of
creditors or an arrangement pursuant to any bankruptcy law; (iv) Licensee
discontinues business; (v) Licensee receives a qualified opinion from its
independent auditor regarding Licensee's financial statements or an opinion
stating that Licensee's financial situation raises substantial doubt about
Licensee's ability to continue as a going concern (or the equivalent of such an
opinion); or (vi) a receiver shall be appointed for Licensee, the License and
this Agreement shall automatically terminate without the necessity of any notice
whatsoever. If the License and this Agreement are so terminated, any and all of
Licensee and its receivers, representatives, trustees, agents, administrators,
successors and assigns shall have no right to sell or in any way deal with any
or all of the Products and the Materials, except with the special prior written
consent and under the instructions of Licensor that it or they shall be
obligated to follow.
c. Loss of Trademark Rights: If Licensee's right to use any or all of the
Trademarks is adjudged illegal, invalid or restricted and such adjudication has
become final and non-appealable or Licensor in its sole discretion chooses not
to appeal therefrom, or if a settlement agreement is entered into by Licensor
that prohibits or restricts Licensor's or Licensee's right(s) to use the
Trademarks, the License and this Agreement shall automatically terminate without
the necessity of any notice whatsoever as of the date such adjudication becomes
final and non-appealable, the Licensor makes such choice or the execution and
delivery of such settlement agreement.
d. Impossible Performance: Licensee and Licensor shall be released from
their respective duties and obligations under this Agreement, and the License
and this Agreement shall terminate, if governmental regulations or other causes
arising out of a state of national emergency or war, or any other similar
cause(s) beyond the control of the parties hereto, shall render performance
hereunder impossible. Either party hereto shall so notify the other in writing
of any such cause(s) and of its desire to be released, and upon receipt by the
other of such notice, the License and this Agreement shall terminate and all
amounts owed under this Agreement (including without limitation all Earned
Royalties and Advertising Contributions on sales of the Products theretofore
made) shall become immediately due and payable.
8. EXPIRATION OR TERMINATION.
a. Effect of Expiration or Termination: Upon and after the expiration or
termination of the License and this Agreement, all rights granted to Licensee
under this Agreement shall immediately revert to Licensor. Licensee will refrain
from any further use of the Trademarks or any further reference to anything
similar to the Trademarks (including, but not
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<PAGE>
limited to, words, devices, designs and symbols) or in any way associated with
any or all of the Products, Licensor and its subsidiaries or affiliates, except
with the prior written consent of Licensor or as expressly provided in Paragraph
8.d. hereof.
b. Reserved Rights: The expiration or termination of the License and this
Agreement shall not: (i) relieve Licensor or Licensee, respectively of any
obligations incurred prior or subsequent to such expiration or termination or
(ii) impair or prejudice any of the rights of Licensor or Licensee,
respectively, accruing prior or subsequent thereto as provided in this
Agreement. Upon termination of the License and this Agreement pursuant to
Paragraph 7.c. or 7.d. hereof, Guaranteed Royalties for the then current
License Year shall be prorated based on the ratio that the number of days in
such License Year prior to termination bears to the number of days in the
License Year had the License and this Agreement not been terminated. Earned
Royalties due for such License Year shall be the excess of Earned Royalties over
such prorated Guaranteed Royalties. Any overpayment of Guaranteed Royalties or
overpayment or underpayment of Earned Royalties based on such proration shall be
adjusted by the parties hereto in accordance with Paragraph 2.f. hereof.
c. Inventory: Not more than ninety (90), but not less than thirty (30)
days prior to the expiration of the Term, or no later than Ten (10) days after
(i) receipt by Licensee of notice of termination or (ii) the happening of any
event that terminates the License and this Agreement where no such notice is
required, Licensee shall furnish to Licensor a complete and accurate statement
signed by the Chief Financial Officer of Licensee showing the number and
description of each of the Products in work in process and in finished goods
inventories and the location(s) thereof. Licensor and its nominees, employees,
agents and representatives shall have the right to conduct a physical inspection
to ascertain or verify the presence of such inventories and the accuracy of such
statement. Any refusal by Licensee to submit to such inspection shall forfeit
Licensee's right to complete work in process and to sell finished goods
inventory pursuant to Paragraph 8.d. hereof, and Licensor shall retain all other
legal and equitable rights it has in the circumstances, which rights are hereby
specifically reserved.
d. Continued Sales After Expiration or Termination: Except as provided in
Paragraph 8.c. hereof and so long as Licensee is not in arrears in the payment
of all amounts due to Licensor, upon the expiration of the License and this
Agreement or if the License and this Agreement are terminated pursuant to any
paragraph of this Agreement except Paragraphs 7.a.(ii), 7.b. or 7.c. hereof,
Licensee may for a period of one hundred twenty (120) days after the Expiration
Date or the effective date of termination (hereinafter referred to as the
"Sell-Off Period") sell through Licensee's existing, recognized network of
customers, all of the Products (in finished form) that have been approved by
Licensor and that were in work in process inventory or in finished goods
inventory on the
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<PAGE>
Expiration Date or at the time such notice of termination is received. In the
event that Licensee is unable to cancel a work in process order, Licensee shall
be given a ninety (90) day period after receipt of the work in process Products
within which to sell those work in process Products. Licensee shall pay Earned
Royalties and furnish Statements with respect to the Sell-Off Period (including
any additional period pursuant to a non-cancelable work in process order) and
otherwise comply with the terms and conditions of this Agreement as though the
License and this Agreement were still in effect. It is expressly understood and
agreed by Licensee that the Sell-Off Period shall be: (i) non-exclusive
consistent with Paragraph 8.f. hereof and (ii) considered a separate accounting
period for the purpose of computing Earned Royalties due to Licensor for sales
during such period, and such sales shall not be applied against any Guaranteed
Royalties due or payable prior to the Sell-Off Period. If the License and This
Agreement are terminated for failure of Licensee to make any payment(s) due
under this Agreement or pursuant to Paragraphs 7.a.(ii), 7.b. or 7.c. hereof,
Licensee shall forfeit any and all rights to use the Sell-Off Period and shall
be obligated to turn over to Licensor all Products in process or on hand at the
time of termination.
e. Equitable Relief and Legal Fees:
(i) Subject to Paragraph 8.d. hereof, Licensee hereby acknowledges
that its failure to cease the design, manufacture, advertising, promotion,
sale or distribution of the Products and the Materials upon the expiration
or termination of this Agreement will result in irreparable harm to the
Trademarks, Licensor and the rights of subsequent licensee(s) for which
there is no adequate remedy at law. Accordingly, in the event of such
failure or in the event of any violation or default by Licensee under this
Agreement (after giving effect to the provisions of Paragraph 7.a.(i)
hereof), Licensor shall be entitled to equitable relief without the
necessity of posting bond by way of any or all of temporary and permanent
injunctions and such other relief as any court of competent jurisdiction
may deem just and proper. In this regard, Licensee hereby consents to the
judgment of temporary and permanent injunctions in favor of Licensor in
order to give effect to this Paragraph 8.e.(i).
(ii) In the event either party hereto files any action against the
other to enforce any of the provisions of this Agreement or to secure or
protect such party's rights under this Agreement, such party shall be
entitled to recover, in any judgment in its favor entered therein, the
attorneys' fees and litigation expenses of such party, together with such
court costs and damages as are provided by law.
f. Continuity of Sales: In order to enable Licensor to maintain continuity
of sales of the Products upon expiration or termination of this Agreement,
Licensor shall have the right, notwithstanding anything to the contrary
contained in
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Paragraph 1.a. hereof to authorize one or more individuals or entities to
design, manufacture, advertise, promote, sell and distribute the Products in the
Territory for four (4) months preceding the expiration of this Agreement or from
the sooner of the time that notice is received by Licensee of termination of
this Agreement or when this Agreement is terminated. Such individual(s), entity
or entities shall not, however, be authorized to ship to its or their customers
any or all of the Products until after this Agreement has expired or has been
terminated, but may ship the Products to such customers during the Sell-Off
Period, if any.
g. Termination Fee: Notwithstanding anything to the contrary in this
Agreement, if Licensor terminates this Agreement as a result of a default by
Licensee, Licensee shall pay to Licensor as a termination fee no later than ten
(10) days after the date of such termination all outstanding Guaranteed
Royalties required to be paid during the six (6) month period following
termination in addition to all Earned Royalties and Advertising Contributions
due through the effective date of termination.
9. NOTICES.
a. Effectiveness: Unless otherwise expressly indicated in this Agreement,
each notice, request, approval, consent, payment and Statement (hereinafter
referred to as a "Submission") specifically provided for in this Agreement shall
be in writing and shall be considered effective or received the earliest of: (i)
five (5) days after the date when such Submission is mailed by certified or
registered mail with postage prepaid to the party hereto at the address(es) set
forth below; (ii) two (2) business days after the date (a) when such Submission
is sent by express courier service addressed to such party at such address(es)
or (b), except for payments, when such Submission is sent by facsimile addressed
to such party at such address(es) and the sender thereof requests and receives
written confirmation from such party that such Submission has been received and
is legible; or (iii) when such Submission is actually received by such party at
such address(es):
To Licensor: 730 Fifth Avenue
New York, NY 10019
Attention: Betsy Kain
Facsimile: 212-957-2950
Telephone: 212-261-5000
With a copy to: General Counsel
At The address specified in
Paragraph S.1. of the Schedule
To Licensee: The address specified in
Paragraph S.2. of the Schedule
Attention: Barry Budilov
Telephone: 215-925-1551
Facsimile: 215-925-0204
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With a copy to: Barry Ruteofsky
Telephone: 215-573-4376
Facsimile: 215-573-4313
b. Address Change: Notwithstanding the provisions of Paragraph 9.a.
hereof, each party hereto may give written notice to the other party of
some other address(es) to which Submissions shall be sent, in which event
such Submissions to such party subsequently shall be sent to such
address(es).
10. SEVERABILITY. Each provision of this Agreement shall be severable. If,
for any reason, any provision(s) herein is or are finally determined to be
invalid and contrary to, or in conflict with, any existing or future law or
regulation of a court or agency having valid jurisdiction, such determination
shall not impair the operation or affect the remaining provisions of this
Agreement, and such remaining provisions will continue to be given full force
and effect and bind the parties hereto. Each invalid provision shall be
curtailed only to the extent necessary to bring it within the requirements of
such law or regulation.
11. CONSENTS AND APPROVALS. If Licensor fails or refuses to grant to
Licensee any request(s), consent(s) or approval(s), Licensor may, but shall not
be required to, give one or more of the reason(s) therefor, but Licensor shall
not be liable for any events or circumstances that arise as a result of such
failure or refusal.
12. APPLICABLE LAW. This Agreement shall be governed by and interpreted
under the laws of the State of Illinois without regard to its conflicts of laws
provisions. Licensee hereby submits to personal jurisdiction in Cook County,
Illinois. The parties hereto agree that any and all disputes arising out of or
relating in any way to this Agreement shall be litigated only in courts sitting
in Cook County, Illinois.
13. NO BROKER. Licensee warrants and represents that Licensee used no
broker(s) in connection with the execution and delivery of this Agreement.
14. CONSTRUCTION. The headings used herein are for convenience only and
shall not be deemed to define, limit or construe the contents of any
provision(s) of this Agreement. The wording of this Agreement will be deemed to
be the wording chosen by the parties hereto to express their mutual intent, and
no rule of strict construction will be applied against any such party. The
Recitals and the Additional Terms and Conditions (contained in Exhibit C which
is attached hereto) shall be deemed to be part of this Agreement. This Agreement
may be executed in separate counterparts, each of which is deemed to be an
original, and all of which taken together constitute one and the same agreement.
15. SURVIVABILITY. Paragraphs 1.a.(ii), 2.a.(ii) through 2.a.(iv), 2.c.
through 2.g., 2.h. (iv) through 3.a., 3.b. (ii), 4.a., 5.a. and 7.a. (ii)
through 17, the Schedule and Paragraphs 1. through 4. of Exhibit B of this
Agreement shall survive the expiration or termination of the License and this
Agreement.
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16. RIGHTS CUMULATIVE. The respective rights and remedies of the parties
hereto, whether herein specified or otherwise, shall be cumulative, and the
exercise of one or more of them shall not preclude the exercise of any or all
other rights and remedies each such party has hereunder or by law.
17. ENTIRE AGREEMENT. This Agreement (with the Schedule and Exhibits A
through C) represents the entire understanding of the parties hereto. None of
the terms of this Agreement can be waived or modified except by an express
agreement in writing signed by the parties hereto. There are no representations,
promises, warranties, covenants or undertakings other than those contained in
this Agreement. No custom or practice of the parties hereto at variance with the
terms hereof shall constitute a waiver of Licensor's right to demand exact
compliance with any of the terms herein at any time. The failure of either party
hereto to enforce, or the delay by either party hereto in enforcing, any or all
of its rights under this Agreement shall not be deemed as constituting a waiver
or a modification thereof, and either party hereto may, within the time provided
by applicable law, commence appropriate proceedings to enforce any or all of
such rights. Except as expressly provided in this Agreement, no individual(s),
entity or entities other than Licensee and Licensor shall be deemed to have
acquired any rights by reason of anything contained in this Agreement.
IN WITNESS WHEREOF, the parties hereto, intending this Agreement to be
effective as of the Commencement Date, have caused this Agreement to be executed
by the duly authorized representative of each.
LIFESTYLE BRANDS, LTD.
(LICENSOR)
By: /s/ David Batchelor
-------------------
David H.L. Batchelor
Senior Vice President
Product Marketing
Date: Oct. 3, 1995
DIPLOMAT-AMBASSADOR Inc.
(LICENSEE)
By: /s/ Barry Budilov
-------------------
Title: President
Date: 11/1/96
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Exhibit 10.22
LICENSE AGREEMENT SUMMARY
-------------------------
LICENSED PROPERTY: PLAYSKOOL
This Summary is hereby incorporated into and made a part of the
attached License Agreement. The specifics detailed below, where numbered as
paragraphs or subparagraphs, relate to similarly numbered paragraphs or
subparagraphs in the attached License Agreement.
The License Agreement is between:
Licensor and Licensee
-------- --------
PLAYSKOOL, INC. DIPLOMAT OPTICAL COMPANY
1027 Newport Avenue 4211 Van Kirk Street
Pawtucket, Rhode Island 02862 Philadelphia, Pennsylvania 19135
1. GRANT OF LICENSE.
(a) Licensed Articles. Eyewear frames for prescription eyewear only
and coordinating eyewear accessories such as eyewear cases. License excludes
prescription ophthalmic lenses and non-prescription sunglasses.
(b) Territory. United States, its territories and possessions.
(c) Term.
Initial Term: January. 1, 1992 through December 31, 1994
Renewal Term: If, during the Initial Term, the Licensee has
earned and paid to the Licensor dollars ($ ) in
royalties, the agreement shall automatically be renewed for a period of one
year. Otherwise, any renewal shall be at the sole discretion of the Licensor.
2. TERMS OF PAYMENT
(a) Royalty Rate. % of Net Sales (except % of sales made F.O.B.
shipping point outside the Territory).
(b) Terms of Payment: Total
Royalty Advance Balance
Guarantee Payment Due Dates
--------- ------- ---------
Initial Term: $ $ $ due by
December 15, 1994
The advance royalty payment is due and payable upon Licensee's signing hereof
and the balance of royalty guarantee is due and payable as set forth above.
(c) Periodic Statements: Within thirty (30) days after the initial
shipment of the Licensed Articles, and promptly on the twenty-fifth (25th) day
of the month following each calendar quarter thereafter, Licensee shall furnish
to Licensor complete and accurate statements. The attached form must be used for
reporting royalties.
Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
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(d) Royalty Payments: Royalties in excess of the aforementioned
minimum royalty guarantee shall be due on the twenty-fifth (25th) day of the
month following the calendar quarter in which earned, and payment shall
accompany statements. Licensee shall not be permitted to reduce royalty payments
for any reason without prior written approval from Licensor. The Licensee shall
pay the Licensor interest on a late royalty payment at an interest rate of
% per month, or the highest rate permitted by law, from the date the
royalty should have been received by the Licensor.
8. (a) Labeling: As a condition to the grant of rights hereunder,
Licensee agrees that it will cause to appear on or within each Licensed Article
sold by it and on or within all advertising, promotional or display material
bearing the name, the notice: "(C) (year) Playskool, Inc. All rights reserved."
and any other notice desired by Licensor, and where such article or advertising,
promotional or display material bears a trademark or service mark, appropriate
statutory notice of registration thereof.
(b) Approvals: Each and every tag, label, imprint, storyboard, copy
and layout or other device containing any such notice and all advertising,
promotional or display material bearing the name, shall be submitted by Licensee
to Licensor for its written approval prior to use by Licensee. It is imperative
that Licensee use Licensor's approval form with each submission for Licensor's
approval. Otherwise, Licensor is not under any obligation to review Licensee's
submission.
10. (b) Distribution: Licensed Articles may only be sold through
professional optical distributors and mass marketers with optical services.
12. (a) Initial on Sale Date: The initial on sale date shall be
within a period of six (6) months after the commencement of the term of the
License Agreement.
14. Sell-off Period: One hundred-twenty (120) days.
The aforesaid terms and conditions and those set forth in the
attached License Agreement shall only be binding upon Licensor provided that
Licensee signs and returns the License Agreement Summary and License Agreement
within thirty (30) days of the aforementioned date, and Licensor countersigns
same.
AGREED TO AND ACCEPTED:
PLAYSKOOL, INC. DIPLOMAT OPTICAL COMPANY
By /s/ Dan D. Drew By /s/ Barry Budilov
-------------------- -----------------------
Date 1-24-92 Title President
Date 1-23-92
Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
LICENSE AGREEMENT
This AGREEMENT made this 1st day of January, 1992, by and between
PLAYSKOOL, INC., a Delaware corporation with its principal place of business at
1027 Newport Avenue, Pawtucket, Rhode Island 02862 (hereinafter called
"Licensor") and DIPLOMAT OPTICAL COMPANY with its principal place of business at
4211 Van Kirk Street, Philadelphia, Pennsylvania 19135 (hereinafter called
"Licensee").
WITNESSETH:
WHEREAS, Licensor has rights to the name, characters, symbols,
designs, likenesses and visual representations of PLAYSKOOL, and the copyrights
and trademarks thereon, as set forth on Schedule "A" hereunto annexed (which
names, characters, symbols, designs, likenesses and visual representations and
each of the individual components thereof shall hereinafter jointly be called
the "Name"); and
WHEREAS, Licensee desires to utilize the Name upon and in connection
with the manufacture, sale and distribution of articles hereinafter described.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration, the parties do hereby
agree as fellows:
1. GRANT OF LICENSE
(a) Licensed Articles. Upon the terms and conditions hereinafter set
forth, Licensor hereby grants to Licensee and Licensee hereby accepts the right,
license and privilege of utilizing the Name solely upon and in connection with
the manufacture, sale and distribution of the articles listed in the License
Agreement Summary, Paragraph 1(a), (hereinafter referred to as the "Licensed
Articles"), and no other articles of any kind. Licensor further grants to
Licensee, upon the terms and conditions hereinafter set forth, the right to use
the said trademarks only on or in connection with the Licensed Articles, but
only such trademarks and uses thereof as may be approved when the Licensed
Articles are approved and only on or in connection with the Licensed Articles.
(b) Territory. The license hereby granted extends only to the area
listed in the License Agreement Summary, Paragraph 1(b). Licensee agrees that it
will not make or authorize any use, direct or indirect, of the Name in any other
area, and that it will not knowingly sell Licensed Articles to persons who
intend or are likely to resell them in any other area.
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Notwithstanding this territorial limitation however, Licensee shall have the
right to manufacture the Licensed Articles (or have the Licensed Articles
manufactured for it as provided in Paragraph 20 hereof) outside the licensed
territory, provided, however, that the Licensed Articles are sold and
distributed only within such licensed territory.
(c) Term. The Initial Term of the license hereby granted shall be
effective as shown in the License Agreement Summary, Paragraph 1(c), unless
sooner terminated in accordance with the provisions hereof.
2. TERMS OF PAYMENT
(a) Rate. Licensee agrees to pay to Licensor as royalty, a sum equal
to that shown in the License Agreement Summary, Paragraph 2(a) , on all net
sales by Licensee or any of its affiliated, associated or subsidiary companies
of the Licensed Articles. The term "net sales" shall mean gross sales less
quantity discounts, sales taxes and returns, but no deductions shall be made for
cash or other discounts or uncollectible accounts. All costs and expenses
incurred in the manufacture, sale, distribution or exploitation of the Licensed
Articles, or otherwise incurred by Licensee, shall be paid by Licensee, and no
such costs or expenses shall be deducted from any royalty payable to Licensor.
With respect, however, to all sales made hereunder direct to customers within
the Territory where the terms of the sales are f.o.b. shipping point a place
outside United States, the said royalty shall instead be Percent ( %) of
the net selling price, unless a different rate is specifically indicated for
such f.o.b. sales on the License Agreement summary attached hereto.
(b) Terms of Payment: Initial Term. Licensee agrees to pay as a
minimum guarantee against royalties to be paid Licensor during the Initial Term
hereof, and as an advance payment applicable to said minimum guarantee, the sums
as shown in the License Agreement Summary, Paragraph 2(b). The advance and the
balance of the minimum guarantee against royalties shall be payable as shown in
the License Agreement Summary, Paragraph 2(b). No part of such minimum royalty
shall in any event be repayable to Licensee.
(c) Periodic Statements. Within thirty (30) days after the initial
shipment of the Licensed Articles, and promptly on the twenty-fifth (25th) day
of the month following each calendar quarter thereafter, Licensee shall furnish
to Licensor complete and accurate statements certified to be accurate by
Licensee, or if a corporation, by an officer of Licensee, showing the number,
country in which manufactured, country in which sold or to which
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shipped, description, gross sales price, itemized deductions from gross sales
price and net sales price of the Licensed Articles distributed and/or sold by
Licensee during the preceding calendar quarter, together with any returns made
during the preceding quarter. Such statements shall be furnished to Licensor
whether or not any of the Licensed Articles have been sold during the quarter to
which such statements refer. The form attached to this agreement must be used
for reporting royalties. Upon demand of Licensor, Licensee shall, at its own
expense, furnish to Licensor a detailed statement by an independent certified
public accountant or an officer of Licensee, showing the number, country in
which manufactured, country in which sold or to which shipped, description,
gross sales price, itemized deductions from gross sales price and net sales
price of the Licensed Articles distributed and/or sold by Licensee to the date
of Licensor's demand.
(d) Royalty Payments. Royalties in excess of the aforementioned
minimum royalty shall be due on the 25th day of the month following the calendar
quarter in which earned, and payment shall accompany the statements furnished as
required above. The receipt or acceptance by Licensor of any of the statements
furnished pursuant to this agreement, or of any royalties paid hereunder (or the
cashing of any royalty checks paid hereunder) shall not preclude Licensor from
questioning the correctness thereof at any time within two (2) years after the
expiration and/or termination of this License Agreement, and in the event that
any inconsistencies or mistakes are discovered in such statements or payments,
they shall immediately be rectified and the appropriate payment made by
Licensee. Licensee shall not be permitted to reduce royalty payments for any
reason without prior written approval from Licensor. The Licensee shall pay the
Licensor interest on a late royalty payment at an interest rate of % per
month, or the highest rate permitted by law, from the date the royalty payment
should have been received by the Licensor.
3. EXCLUSIVITY
(a) Nothing in this agreement shall be construed to prevent Licensor
from granting any other licenses for the use of the Name or from utilizing the
Name in any manner whatsoever, except that Licensor agrees that except as
provided herein, it will grant no other licenses for the territory to which this
license extends effective during the term of this agreement, for the use of the
Name in connection with the sale of the Licensed Articles.
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(b) Licensor reserves the right to use or license others to use
and/or manufacture Licensed Articles, including articles identical to those sold
by Licensee, as premiums. Licensor further reserves the right to use or license
others to use and/or manufacture Licensed Articles in direct response media.
(c) It is further understood that (i) in accordance with prior
terminated or expired license agreements relating to the use of the Licensed
Property in connection with the Articles in the Territory, Licensor reserves the
right to permit Licensee thereunder to sell-off such articles on hand or in
process within the Territory during the Term, and that (ii) third parties
granted rights for such exploitation of the Licensed Property after the Term
hereof may be granted permission to display, but not sell, proposed product at
trade shows during the Term, and/or consult with retailers and other third
parties, with regard to development and manufacturing of Licensed Articles.
4. GOOD WILL
Licensee recognizes the great value of the good will associated with
the Name, and acknowledges that the Name and all rights therein, including
copyright and trademark rights and good will pertaining thereto, belong
exclusively to Licensor, and that the Name has a secondary meaning in the mind
of the public. Licensee further recognizes and acknowledges that a breach by
Licensee of any of its covenants, agreements or undertakings hereunder will
cause Licensor irreparable damage, which cannot be readily remedied in damages
in an action at law, and may, in addition thereto, constitute an infringement of
Licensor's copyrights in or trademarks of the Name, thereby entitling Licensor
to equitable remedies, costs and reasonable attorney's fees.
5. LICENSOR'S TITLE AND PROTECTION OF LICENSOR'S RIGHTS
(a) Licensee agrees to assist Licensor to the extent necessary or
desirable in the procurement of any protection or to protect any of Licensor's
rights to the Name, and Licensor, if it so desires, may commence or prosecute
any claims or suits in its own name or in the name of Licensee, or join Licensee
as a party thereto. Licensee shall notify Licensor in writing of any
infringements or imitations by others of the Name on articles similar to those
covered by this agreement which may come to Licensee's attention, and Licensor
shall have the sole right to determine whether or not any action shall be taken
on account of any such infringements or imitations. Licensee shall not institute
any suit or take any action on account of any such infringements or
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imitations, or otherwise institute any suit or take any action relating to the
Name, without first obtaining the written consent of the Licensor to do so.
(b) Except with Licensor's written consent, neither Licensee, its
parent or any of its subsidiaries or affiliates, will register or attempt to
register copyrights in any country or to register as a trademark, service mark,
design patent or industrial design, any of the Licensed Articles, trademarks or
derivations or adaptations thereof, or any word, symbol or design which is so
similar thereto as to suggest association with or sponsorship by Licensor or any
of its subsidiaries. In the event of breach of the foregoing, Licensee agrees,
at its expense and at Licensor's request, immediately to terminate the
unauthorized registration activity and promptly to execute and deliver, or cause
to be delivered to Licensor, such assignments and other documents as Licensor
may require to transfer Licensor all rights to the registrations, patents or
applications involved.
6. INDEMNIFICATION BY LICENSEE AND PRODUCT LIABILITY INSURANCE
Licensee hereby indemnifies Licensor and undertakes to defend
Licensee and/or Licensor against and hold Licensor harmless from any claims,
suits, and damage arising out of any allegedly unauthorized use of the Licensed
Articles, the Name or any patent, process, idea, method or device by Licensee in
connection with the Licensed Articles or any other alleged action by Licensee,
and also from any claims, suits, loss and damage arising out of actual or
alleged defects in the Licensed Articles, whether defects in design,
manufacture, or otherwise. Licensee agrees that it will obtain, at its own
expense, product liability insurance from a recognized insurance company,
providing adequate product liability insurance protection (at least in the
amount of $2,000,000 combined single limit of Bodily Injury Liability and
Property Damage Liability for each occurrence and annual aggregate), naming the
Licensee as named insured and Licensor as additional named insured against any
claims, suits, loss or damage arising out of any such actual or alleged defects
in the Licensed Articles. As proof of such insurance, a certificate of insurance
naming Licensor as an additional named insured will be submitted to Licensor by
Licensee for Licensor's prior approval before any Licensed Article is
distributed or sold, and at the latest, within thirty (30) days after the date
first written above. Any proposed change in such certificate of insurance shall
be submitted to Licensor for its approval. Licensor shall be entitled to a copy
of the then prevailing certificate of insurance, which shall be
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furnished Licensor by Licensee. As used in the first two sentences of this
Paragraph 6, "Licensor" shall also include the officers, directors, agents and
employees of the Licensor, or any of its subsidiaries or affiliates. The
certificate of insurance shall include a provision to notify the Licensor in
writing, prior to the effective date, of any cancellation of such insurance
before the expiration date thereof.
7. QUALITY OF MERCHANDISE
Licensee agrees that the Licensed Articles shall be of satisfactory
quality sufficient to meet consumer expectations. The Licensed Articles will be
of such style and appearance as to be appropriate for and suited to their
exploitation to the best advantage and to the protection and enhancement of the
Name and the good will pertaining thereto. The Licensee warrants that the
Licensed Articles will be designed, produced, sold and distributed in accordance
with all applicable United States laws, rules and regulations, including,
without limiting the generality of the foregoing, the Federal Food, Drug and
Cosmetic Act, the Federal Hazardous Substance Act (FHSA), the Flammable Fabrics
Act, the Consumers Products Safety Act, with all other state and local laws and
with the ASTM Standard Consumer Safety Specifications on Toy Safety (Toy
Manufacturers of America Voluntary Toy Safety Standard) (collectively, the "Acts
and Standards").
In order to insure that the Licensed Articles meet the above
standards, Licensee shall, prior to the date of first distribution of the
Licensed Articles, submit to the Licensor certification by the Licensee that
no Acts and Standards apply to the Licensed Articles.
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To this end, Licensee shall, before selling and distributing any of
the Licensed Articles, furnish to Licensor free of cost for its written
approval, a reasonable number of samples of each Licensed Article, its cartons,
containers and packing and wrapping material. The quality and style of such
Licensed Articles as well as of any carton, container or packing or wrapping
material, shall be subject to the approval of Licensor. After samples have been
approved pursuant to this paragraph, Licensee shall not depart therefrom in any
material respect without Licensor's prior written consent, and Licensor shall
not withdraw its approval of the approved samples except on sixty (60) days'
prior written notice to Licensee, unless the same shall be defective or harmful,
in which event, no such prior notice shall be required. Licensee shall, without
charge, furnish Licensor with ten (10) samples of each article manufactured
hereunder upon completion of the first production run thereof, and Licensee
shall not distribute same until it receives Licensor's written approval. Any
item submitted to Licensor shall not be deemed approved unless and until the
same shall be approved by Licensor in writing. From time to time after Licensee
has commenced selling the Licensed Articles, and upon Licensor's written
request, Licensee shall furnish without cost to Licensor, not more than ten (10)
additional random samples of each Licensed Article being manufactured or sold
by Licensee hereunder, together with any cartons, containers and packing and
wrapping material used in connection therewith. Should Licensor require
additional samples for any reason, Licensor may purchase such at Licensee's
cost. Sale of any Licensed Article by Licensee, the quality of which has not
been specifically approved by Licensor as
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hereinabove provided, shall be deemed to constitute a material breach of this
agreement.
8. TRADEMARK AND COPYRIGHT PROTECTION
(a) Labeling. As a condition to the grant of the rights hereunder,
Licensee agrees that it will cause to appear on or within each Licensed Article
sold by it and on or within all advertising, promotional or display material
bearing the Name, the notice as set forth in the License Agreement Summary,
Paragraph 8(a). In the event that any Licensed Article is marketed in a carton,
container and/or packing or wrapping material bearing the Name, such notice
shall also appear upon the said carton, container and/or packing or wrapping
material.
(b) Approval. Each and every tag, label, storyboard, copy and layout
imprint or other device containing any such notice, and all advertising,
promotional or display material bearing the Name, shall be submitted by Licensee
to Licensor for its written approval prior to use by Licensee. Approval by
Licensor shall not constitute a waiver of Licensor's rights or Licensee's duties
under any provision of this agreement. It is imperative that Licensee use
Licensor's approval form with each submission for Licensor's approval.
Otherwise, Licensor is not under any obligation to review Licensee's submission.
(c) Ownership. All right, title and interest in and to all
copyrights and trademarks embodying the Name or derived from the creation,
manufacture or sale by Licensee of the Licensed Articles, and all copyright and
trademark registrations based thereon, shall be in Licensor's name and shall be
owned exclusively by Licensor, and Licensee covenants and agrees that it shall
have no interest in or claim to the Name or to any of the copyrights and
trademarks associated therewith, except to the limited extent of the license to
use same pursuant to this agreement, and subject to its terms and conditions.
Licensee further agrees to provide Licensor with the date of the first use of
the Licensed Articles in interstate and in intrastate commerce and to provide
Licensor with all necessary documents, assignments and signatures which Licensor
may request for the purpose of perfecting Licensor's title to all such copyright
and trademark registrations. All uses of the trademarks by Licensee hereunder
shall inure to Licensor's benefit. Licensee acknowledges that Licensor is the
exclusive owner of all of the trademarks and the trademark rights created by
such uses. Without limiting the foregoing, Licensee hereby assigns to Licensor
all the trademarks and trademark rights created by such
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uses, together with the good will attaching to that part of the business in
connection with which the trademarks are used. Licensee agrees to execute and
deliver to Licensor, such documents as Licensor requires to register Licensee as
a Registered User or Permitted User of the trademarks and to follow Licensor's
instructions for proper use thereof in order that protection and/or
registrations for the trademarks may be obtained or maintained.
9. PROMOTIONAL MATERIAL
(a) In all cases where Licensee desires artwork involving Licensed
Articles to be executed, the cost of such artwork and the time for the
production thereof shall be borne by Licensee. All artwork and designs involving
the Name, or any reproduction thereof, shall be subject to prior written
approval of Licensor, and notwithstanding their invention or use by Licensee, be
and remain the property of Licensor, and Licensor shall be entitled to use the
same and to license the use of the same by others.
(b) Licensor shall have the right, but shall not be under any
obligation, to use the Name and/or the name of Licensee so as to give the Name,
Licensee, Licensor and/or Licensor's programs full and favorable prominence and
publicity.
(c) Licensee agrees not to offer for sale or advertise or publicize
any of the Licensed Articles on radio, broadcast, print or television without
the prior written approval of Licensor. Licensee also agrees to submit to
Licensor for advance approval, for the purpose of licensed character design
evaluation, designed sketches of all advertising and other publicity material
which Licensee proposes to use in connection with the promotion and sale of the
Licensed Articles.
10. DISTRIBUTION
(a) Licensee agrees that during the term of this license it will
diligently and/or continuously manufacture, distribute and sell the Licensed
Articles and that it will make and maintain proper and adequate arrangements for
the distribution of the Licensed Articles.
(b) Licensee agrees that it will sell and distribute the Licensed
Articles outright at a competitive price and at not more than the price
generally and customarily charged the trade by Licensee, and not on an approval,
or sale or return basis. Licensee further agrees to sell and distribute only to
professional optical distributors and mass-market retailers with optical
services as more particularly set forth in the License Agreement Summary,
Paragraph 10(b). Licensee shall not, without the prior
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written consent of Licensor, sell or distribute Licensed Articles to
distributors or merchants whose sales or distribution are or will be made for
publicity or promotional tie-in purposes, combination sales, premiums,
giveaways, or similar methods of merchandising, or whose business methods are
questionable. Licensee is expressly prohibited from making door to door sales.
In the event any sale is made at a special price to any of Licensee's
subsidiaries or to any other person, firm or corporation related in any manner
to Licensee or its officers, directors or major stockholders, there shall be a
royalty paid on such sales based upon the price generally charged the trade by
Licensee.
(c) Licensee agrees to sell to Licensor such quantities of the
Licensed Articles at as low a rate and on as good terms as Licensee sells
similar quantities of the Licensed Articles to the general trade.
11. RECORDS
Licensee agrees to keep accurate books of account and records
covering all transactions relating to the license hereby granted, and Licensor
and its duly authorized representatives shall have the right at all reasonable
hours of the day to an examination of said books of account and records and of
all other documents and materials in the possession or under the control of
Licensee with respect to the subject matter and terms of this agreement, and
shall have free and full access thereto for said purposes and for the purpose of
making extracts therefrom. All books of account and records shall be kept
available for at least two (2) years after the termination of this license. In
the event that Licensor's duly authorized representatives shall discover a
discrepancy of % or more pursuant to any such examination, Licensee shall pay
to Licensor the cost of such examination. The fee for said examination shall be
($ ) Dollars per day, but in no event shall Licensee be
charged in excess of ($ ) Dollars for any individual
examination. Royalties found to be due as a result of Licensor's examination of
the Licensee's books of accounts should be paid immediately with interest at an
interest rate of % per month, or the highest rate permitted by law, from
the date the royalty amount should have been paid to the Licensor.
12. BANKRUPTCY, VIOLATION, ETC.
(a) If Licensee shall not have commenced in good faith to
manufacture and distribute in substantial quantities all the Licensed Articles
by the initial on sale date, as defined in Paragraph 12(a) of the License
Agreement Summary, or if at any time thereafter in any calendar quarter
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Licensee fails to sell any of the Licensed Articles (or any class or category of
the Licensed Articles), Licensor, in addition to all other remedies available to
it hereunder, may terminate this license with respect to any Licensed Articles
or class or category thereof which have not been manufactured and distributed
during such calendar quarter, by giving notice of termination to Licensee. Such
notice shall be effective when mailed by Licensor.
(b) If Licensee becomes insolvent, or if a petition in bankruptcy or
for reorganization is filed by or against it, or if any insolvency proceedings
are instituted by or against it under any state or federal law, or if it makes
an assignment for the benefit of its creditors, or if a receiver is appointed
for its property and business and remains undischarged for a period of fifteen
(15) days, or if it liquidates its business in any manner whatsoever, or if any
distress, execution or attachment is levied on any of its assets and remains
undischarged for a period of fifteen (15) days, or if Licensee abandons the
manufacture of the Licensed Articles, Licensor shall have the right, if it so
elects, to terminate this agreement and the license hereby granted, upon ten
(10) days' notice in writing to Licensee. Upon the expiration of such ten (10)
days, this agreement and the license hereby granted shall cease and terminate,
but Licensee shall nevertheless continue to be liable to Licensor by reason of
its said default.
(c) If Licensee shall violate any of its other obligations under the
terms of this agreement, and each of such obligations shall be deemed to be
material, Licensor shall have the right to terminate the license hereby granted
upon ten (10) days' notice in writing, and such notice of termination shall
become effective unless Licensee shall completely remedy the violation within
the ten-day period and satisfy Licensor that such violation has been remedied.
(d) Termination of the license under the provisions of Paragraph 12
shall be without prejudice to any rights which Licensor may otherwise have
against Licensee, including the right to recover for damages caused it by
Licensee's breach. Upon the termination of this license, notwithstanding
anything to the contrary herein, all royalties on sales theretofore made shall
become immediately due and payable and no minimum royalties shall be repayable.
13. FINAL STATEMENT UPON TERMINATION OR EXPIRATION
Sixty (60) days before the expiration of this license and again,
within ten (10) days after such expiration (or, in the event of termination of
this license, ten (10) days after receipt of notice of termination or the
happening of the event which terminates this agreement where no notice is
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required), a statement showing the number and description of articles covered by
this agreement on hand or in process shall be furnished by Licensee to Licensor.
Licensor shall have the right to take a physical inventory to ascertain or
verify such inventory and statement, and refusal by Licensee to submit to such
physical inventory by Licensor shall forfeit Licensee's right to dispose of such
inventory as provided in Paragraph 14 hereof, Licensor retaining all other legal
and equitable rights Licensor may have in the circumstances.
14. DISPOSAL OF STOCK UPON EXPIRATION
After expiration of this agreement, Licensee, except as otherwise
provided in this agreement, may dispose of Licensed Articles which are on hand
or in process at the time of expiration, for a period of one hundred-twenty
(120) days after expiration, provided advances and royalties with respect to
that period are paid and statements are furnished for that period in accordance
with Paragraph 2. Notwithstanding anything to the contrary herein, Licensee
shall not manufacture, sell or dispose of any Licensed Articles after
termination hereof, based on the failure of Licensee to affix notice of
copyright, trademark or service mark registration or any other notice to the
Licensed Articles, cartons, containers, or packing or wrapping material, or
advertising, promotional or display material, or because of the departure by
Licensee from the quality and style approved by Licensor pursuant to Paragraph
7, or by reason of termination for any other causes set forth in Paragraph 12
above. In the event of such termination by Licensor by reason of any cause
contained in Paragraph 12, Licensee, its receivers, representatives, trustees,
agents, administrators and successors shall have no further right to sell,
exploit or in any way deal in or with any of the Licensed Articles or any
advertising matter, packing material, boxes, cartons or other documentation
relating thereto, except after having obtained express written consent of and
instructions with reference thereto from Licensor.
15. EFFECT OF TERMINATION OR EXPIRATION
Upon and after the expiration or termination of this license, all
rights granted to Licensee hereunder shall forthwith revert to Licensor, who
shall be free to license others to use the Name in connection with the
manufacture, sale and distribution of the Licensed Articles in the licensed
territory, and Licensee will refrain from further use of the Name or any further
reference to it, direct or indirect, or anything deemed by Licensor to
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be similar to the Name in connection with the manufacture, sale or distribution
of Licensee's products, except as provided in Paragraph 14.
16. LICENSOR'S REMEDIES
(a) Licensee acknowledges that its failure (except as otherwise
provided herein) to commence in good faith to manufacture, distribute and sell
in substantial quantities any one or more of the Licensed Articles by the
initial on sale date, and to continue during the term hereof to diligently and
continuously manufacture, distribute and sell the Licensed Articles or any class
or category thereof, will result in immediate damages to Licensor.
(b) Licensee acknowledges that its failure (except as otherwise
provided herein) to cease the manufacture, sale or distribution of the Licensed
Articles or any class or category thereof at the termination or expiration of
this agreement will result in immediate and irremediable damage to Licensor and
to the rights of any subsequent licensee. Licensee acknowledges and admits that
there is no adequate remedy at law for such failure to cease manufacture, sale
or distribution, and Licensee agrees that in the event of such failure, Licensor
shall be entitled to equitable relief by way of temporary and permanent
injunctions and such other further relief as any court with jurisdiction may
deem just and proper.
(c) Resort to any remedies referred to herein shall not be construed
as a waiver of any other rights and remedies to which Licensor is under this
agreement or otherwise.
17. EXCUSE FOR NONPERFORMANCE
Licensee shall be released from its obligations hereunder and this
license shall terminate in the event that governmental regulations or other
causes arising out of a state of national emergency or war or causes beyond the
control of the parties render performance impossible and one party so informs
the other in writing of such causes and its desire to be so released. In such
events, all royalties on sales theretofore made shall become immediately due and
payable, and no minimum royalties shall be repayable.
18. NOTICES
All notices and statements to be given, and all payments to be made
hereunder shall be given or made at the respective addresses of the parties as
set forth above, unless notification of change of address is given in writing
and the date of mailing shall be deemed the date the notice or statement is
given.
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19. NO JOINT VENTURE
Licensee shall not use the name or credit of Licensor in any manner
whatsoever, nor incur any obligation in Licensor's name. Nothing herein
contained shall be construed to constitute the parties joint ventures, nor shall
any similar relationship be deemed to exist between them. Nothing herein
contained shall be construed as constituting Licensee as Licensor's agent or as
authorizing Licensee to incur financial or other obligations in Licensor's name
without Licensor's special authorization in writing; and it is specifically
understood and agreed that under no circumstances shall any power granted, or
which may be deemed to be granted to Licensee, be deemed to be coupled with an
interest. It is specifically understood that the rights and powers retained by
Licensor to supervise or otherwise intervene in Licensee's activities and to
determine all matters of policy, all as hereinabove provided, are retained
because of the necessity of protecting Licensor's copyrights, trademarks,
properties and property rights generally, and specifically to conserve the good
will and good name of Licensor's company and of the Name.
20. NO ASSIGNMENT OR SUBLICENSE BY LICENSEE
This agreement and all rights and duties hereunder are personal to
Licensee and shall not, without the written consent of Licensor, be assigned,
mortgaged, sublicensed or otherwise encumbered by Licensee or by operation of
law. For purposes of this agreement, the term "assignment" shall, in addition to
the transfer of this agreement or the rights or obligations thereunder, whether
voluntarily, involuntarily, by operation of law or otherwise, be deemed to
include (i) a sale or other transfer by Licensee of all or substantially all of
its assets; (ii) the liquidation or dissolution of Licensee; (iii) the merger,
amalgamation, consolidation or reorganization of Licensee into or with another
corporation or other entity as a result of which Licensee is not the surviving
corporation; or (iv) any transaction (including any of the foregoing
transactions, as well as any in which Licensee is the surviving corporation)
which, whether by way of sale, gift or other transfer, whether involving the
Licensee or the record or beneficial owners of equity interests in the Licensee,
results in more than a ( %) percent change in the voting control of
Licensee. Licensee shall not be entitled to sublicense any of its rights under
this agreement, except in the event Licensee is not a manufacturer of the
Licensed Articles. Licensee shall be, subject to the prior written approval of
Licensor, entitled to utilize a third-party manufacturer in connection with the
manufacture and production of the Licensed Articles,
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provided that such manufacturer shall execute a letter in the form of Exhibit 1
attached hereto and made a part hereof. In such event, Licensee shall remain
primarily obligated under all of the provisions of this agreement. In no event
shall any sublicense agreement include the right to grant any further
sublicenses.
21. NO WAIVER
No waiver or modification of any of the terms of this agreement
shall be valid unless in writing and signed by the party to be charged. No
waiver by either party of a breach hereof or a default hereunder shall be deemed
a waiver by such party of a subsequent breach or default of like or similar
nature. Any approval or consent given by Licensor shall not constitute a waiver
of any of Licensor's rights or Licensee's duties under any provision of this
agreement. There are no representations, promises, warranties, covenants or
undertakings other than those contained in this agreement, which represents the
entire understanding of the parties. The failure of either party to enforce, or
the delay by either party in enforcing any of its rights under this agreement
shall not be deemed a continuing waiver or a modification thereof, and either
party may, within the time provided by applicable law, commence appropriate
legal proceedings to enforce any or all of such rights. No person, firm, group
or corporation (whether included in the Name or otherwise), other than Licensee
and Licensor, shall be deemed to have acquired any rights by reason of anything
contained in this agreement, except as provided in Paragraphs 5 and 20.
22. GOVERNING LAW
This agreement shall be construed in accordance with the internal
laws of the State of Rhode Island. The parties agree that any dispute arising
hereunder shall be subject to the exclusive jurisdiction of the courts of such
State, including the United States District Court for the District of Rhode
Island, and consent to the jurisdiction thereof.
The aforesaid terms and conditions as set forth above shall only be
binding upon Licensor provided that Licensee signs and returns the License
Agreement Summary and License Agreement within thirty (30) days of the
aforementioned date, and Licensor countersigns same.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be duly executed as of the day and year first above written.
PLAYSKOOL, INC.
By /s/ Dan D. Drew
---------------------------------
DIPLOMAT OPTICAL COMPANY
By /s/ Barry Budilov
---------------------------------
President
<PAGE>
Exhibit 10.23
AGREEMENT made as of the first day of January, 1992, by and between HARVE
BENARD LTD., a New York corporation with offices at 205 West 39th Street, New
York, New York 10018 (hereinafter referred to as "Licensor"), and CHANUK INC.,
d/b/a/ DIPLOMAT OPTICAL a Pennsylvania corporation with offices at 4211 Van Kirk
Street, Philadelphia, PA 19135 (hereinafter referred to as "Licensee").
WITNESSETH:
In consideration of the mutual covenants hereinafter set forth, Licensor
and Licensee do hereby respectively grant, covenant and agree as follows:
1. Grant of License
1.1 (a) Licensor hereby grants to Licensee, during the term of this
Agreement, an exclusive license only throughout the United States of America
possessions and territories of the United States of America and Canada
(hereinafter referred to as the "Territory") to use the mark "HARVE BENARD"
(hereinafter referred to as the "Licensed Mark") in connection with the
manufacture, distribution and sale solely of [Men's and Women's sunglasses and
ophthalmic spectacle frames] (hereinafter referred to as "Products"). The items
within the definition of "Products" which are manufactured, distributed and sold
by Licensee under and pursuant to this Agreement shall be referred to
collectively herein as "Articles."
<PAGE>
1.2 All Articles shall bear the Licensed Mark except as hereinafter
provided and no Articles (i.e., Products bearing the Licensed Mark) shall be
sold or otherwise distributed by Licensee under any mark other than the Licensed
Mark. Licensor reserves all rights to the Licensed Mark except as specifically
granted herein to Licensee and Licensor may exercise such rights at any time.
1.3 Licensee acknowledges that the rights granted to it hereunder do
not include the right to operate a boutique under the Licensed Mark or any
variation or simulation thereof or otherwise to sell Articles at retail.
1.4 Licensee shall use its best efforts to exploit the rights herein
granted throughout the Territory and to sell the maximum quantity of Articles
therein consistent with the high standards and prestige represented by the
Licensed Mark.
1.5 Licensee shall not export Articles from the Territory or sell
Articles to any entity which it knows or has reason to believe intends to export
Articles from the Territory.
1.6 Licensor and Licensee agree that the articles sold to Licensor
for sale in Licensor's Harve' Benard outlet stores, shall be invoiced at the
most favorable price which has been invoiced by licensee to customers described
herein, or at a more favorable price.
1.7 Licensor agrees that Licensee may sell Articles to full line
department stores such as, but not limited to Macy's, Nordstroms, May Company,
Bullocks, Bloomingdales, Saks Fifth Avenue, J.C. Penney, Sears and Dayton
Hudson; off-price retailer
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such as, but not limited to, Filene's, Marshalls, T.J. Maxx, Mandee and Annie
Sez; catalogue sales companies such as, but not limited to, Sears, Spiegel,
Montogomery Ward, and Avon; and warehouse clubs such as BJ Wholesale Club, and
Price Club; first quality boutiques; and to Licensor's owned and operated Harve'
Benard outlet stores. Sales to outlets with budget quality merchandise such as
flea markets, supermarkets and discount department stores are not contemplated
by this agreement.
2. Term
2.1 The initial term of this agreement shall be approximately three
(3) years and ten (10) months commencing as of March 1st, 1992 and continuing
through December 31, 1995. Thereafter, Licensee shall have the right to renew
this Agreement for one (1) additional term of three (3) years commencing on
January 1, 1996 and continuing through December 31, 1998, provided that (a)
Licensee notifies Licensor of its desire to renew this Agreement no later than
April 1, 1995 (b) Licensee is in compliance with all of the terms and conditions
of this Agreement both at the time the option is exercised and on the last day
of the initial term, and (c) "Net Sales" (as hereinafter defined) for the last
"Annual Period" (as hereinafter defined) of the initial term are not less than
$ . The period commencing on the date hereof and continuing through
December 31, 1993 and each twelve (12) month period commencing on each January
1st thereafter during the term of this Agreement shall constitute and shall be
referred to herein as an "Annual Period."
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2.2 If Licensee otherwise effectively renews this Agreement but Net
Sales during the last Annual Period of the initial term are less than
$ . unless Licensor waives the shortfall the renewal shall be ineffective
and this Agreement forthwith shall terminate. If, however, at the time it is
determined that there was such a shortfall, Licensee has commenced the
development of the 1996 collection, termination shall be effective upon the
completion of the 1996 collection (unless otherwise sooner terminated in
accordance herewith), but in no event later than December 31, 1996.
2.3 Notwithstanding the provisions of paragraph 2.1 above, Licensor
may terminate this Agreement within thirty (30) days after its receipt of any of
the annual statements to be delivered to Licensor pursuant to paragraph 10.2
below in the event that "Net Sales" (as hereinafter defined) for the Annual
Period covered by any such annual statement are less than the amount necessary
to generate the "Guaranteed Minimum Royalty" (as hereinafter provided) for such
Annual Period. Any such termination shall be effective as of the end of the
collection then in process.
2.4 Licensee has at its option to make up any shortfall in the
guaranteed minimum royalty payable within 30 days after receipt of any of the
annual statements to be delivered to licensor pursuant to paragraph 10.2 below,
at which time the licensor forfeits its option for termination of this agreement
for said annual period.
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3. Design Services
3.1 Intentionally Omitted
3.2 From time to time during each Annual Period, Licensor may
prepare and deliver to Licensee sketches and ideas for Articles. During each
Annual Period, Licensee shall submit to Licensor materials, designs, sketches,
colors, tags, labels and packaging from which Licensor may select those, if any,
which Licensor approves for use in connection with Articles. In its sole
discretion, Licensor shall approve or disapprove the materials, designs,
sketches, colors, tags, labels and packaging submitted as aforesaid and shall
discuss with Licensee any modifications or alterations thereof. Any such
approval by Licensor shall be given in writing prior to use of such materials,
designs, sketches, colors, tags, labels or packaging by Licensee.
3.3 All sketches and other material provided or approved by Licensor
shall be used by Licensee solely in connection with the manufacture,
distribution and sale of Articles in the Territory and pursuant to this
Agreement. If Licensee chooses not to use such sketches and other material,
Licensee shall deliver them to Licensor, at Licensee's expense, and may not use
them or permit their use thereafter. Whether or not Licensee chooses to use any
such sketches and other material, Licensor; may use and permit others to use
them in any manner it desires, provided that such use does not conflict with any
rights granted to Licensee hereunder.
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3.4 Licensee shall be responsible for making all samples as well as
for the production of Articles; and Licensee shall bear all costs in connection
therewith.
4. Confidentiality
4.1 Licensee acknowledges that all information relating to the
business and operations of Licensor which it learns or has learned during or
prior to the term of this Agreement, all special design concepts which Licensor
provides to it and all sketches and designs received by it from Licensor are
valuable property of Licensor. Licensee acknowledges the need to preserve the
confidentiality and secrecy of such information, concepts, sketches and designs
and agrees that, both during the term of this Agreement and after the
termination hereof, it shall not use or disclose same, except as provided below,
and it shall take all necessary steps to ensure that use by it or by its
contractors and suppliers (which use shall be solely as necessary for, and in
connection with, the manufacture, distribution, sale, advertising or promotion
of Articles) shall preserve in all respects such confidentiality and secrecy.
Licensee hereby indemnifies Licensor against any damage of any kind which may be
suffered by Licensor as a result of any willful breach by Licensee or its said
contractors or suppliers of the provisions of this paragraph. The provisions of
this paragraph and Licensee's obligations hereunder shall survive the expiration
or termination of this Agreement.
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<PAGE>
5. Manufacture of Articles; Quality Control
5.1 The contents and workmanship of Articles shall be at all times
of the highest quality and Articles shall be distributed and sold with packaging
and sales promotion materials appropriate for highest quality Products.
5.2 The styles, designs, packaging, contents, workmanship and
quality of all Articles must be approved by Licensor in writing prior to the
distribution or sale thereof. Licensor has the right to take all actions which
it deems necessary to ensure that Articles manufactured or sold hereunder are
consistent with the reputation and prestige of the Licensed Mark as a
designation for highest quality products.
5.3 Before selling or distributing any Article, Licensee shall
deliver to Licensor for its approval, free of charge, one (1) sample of each
such Article together with the tags, labels and packaging to be used in
connection therewith. In addition, upon Licensor's request, Licensee shall
submit to Licensor then current production samples or each Article produced
hereunder so that Licensor may assure itself of the maintenance of the quality
standards set forth herein. All Articles to be sold hereunder shall be at least
equal in quality to the samples approved by Licensor. Licensor and its duly
authorized representatives shall have the right, upon reasonable advance notice
and during normal business hours, to examine Articles in the process of being
manufactured and to inspect all facilities utilized by Licensee in connection
therewith.
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<PAGE>
5.4 All Articles shall be manufactured, sold, labeled, packaged,
distributed and advertised in accordance with all a applicable laws and
regulations. Licensee shall use and display the Licensed mark only in such form
and manner as are specifically approved in writing by Licensor. Licensee shall
cause to appear on all Articles produced hereunder, and on their tags, packaging
and the like, and on all advertising, promotional and publicity material used in
connection therewith, including, without limitation, point-of-sale displays and
similar materials, and on any printed matter of any kind on which the Licensed
Mark appears, including but not limited to business cards, invoices, order forms
and stationary, such legends, markings and notices as Licensor may request.
Before using or releasing any such material, Licensee shall submit to Licensor,
for its approval, proposed advertising, promotional and publicity copy, finished
artwork for tags, labels packaging and the like and all printed matter of any
kind on which the Licensed Mark appears. Same shall not be used or released
prior to Licensee's receipt of such approval.
5.5 After any sample, copy, artwork or other material has been
approved, Licensee shall not depart therefrom in any respect without the prior
written approval of Licensor. If Licensor should disapprove any sample Article
or any sample tag, label, packaging or the like, or any advertising, promotional
or publicity material, Licensee shall neither use nor permit the same to be used
in any manner.
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<PAGE>
5.6 INTENTIONALLY OMITTED
6. Approvals
6.1 It is specifically understood and agreed that Licensor's
approval pursuant to Sections 3 and 5 of this Agreement will not be unreasonably
withheld.
6.2 Notwithstanding anything to the contrary herein, Licensor's
approval of any Articles for inclusion in, or of materials of any kind for use
in connection with the manufacture, distribution, sale, advertising and/or
promotion of, any particular collection of Articles only shall constitute
approval for inclusion or for such use in connection with such collection and
shall not be deemed to constitute approval of such Articles or of any such
materials with respect to any other collection of Articles.
7. Advertising; Showroom
7.1 Licensee shall exercise its best efforts to promote and
advertise Articles in the various appropriate media throughout the Territory as
may be approved by Licensor.
7.2 INTENTIONALLY OMITTED
8. Guaranteed Minimum Royalty
8.1 (a) In consideration of both the license granted and the design
services to be performed by Licensor hereunder, Licensee shall pay to Licensor a
Guaranteed Minimum Royalty for each Annual Period as follows:
Guaranteed Minimum
Annual Period Royalty
------------- -------
First $
Second $
Third $
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(b) If this Agreement is effectively renewed, the Guaranteed
Minimum Royalty for each Annual Period during the renewal term shall be equal to
percent ( %) of the Guaranteed Minimum Royalty payable for
the preceding Annual Period.
8.2 The Guaranteed Minimum Royalty payable for each Annual Period
shall be paid to Licensor in four (4) equal quarter-annual installments on the
first day of each January, April, July and October during each such Annual
Period, except that, for the first Annual Period, the Guaranteed Minimum Royalty
shall be paid as follows: $ simultaneously with the execution hereof;
and $ on each of June 1, 1992, December 1, 1992 and June 1, 1993.
8.3 The Guaranteed Minimum Royalty for each Annual Period shall be
credited against the Sales Royalty for only the same Annual Period as provided
in Section 9 below.
9. Sales Royalty
9.1 In consideration of both the license granted and the design
services to be performed by Licensor hereunder, Licensee shall pay to Licensor a
Sales Royalty equal to percent ( %) of "Net Sales."
9.2 For purposed hereof, "Net Sales" shall be deemed to mean the
invoiced and/or shipped amount of Articles (and Products to which the Licensed
Mark is not affixed and Articles from which the Licensed Mark has been removed
in accordance with the provisions of paragraph 12.2 below) sold
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<PAGE>
by Licensee or any of its affiliates, less customary trade discounts actually
earned and taken by customers (but not other discounts for prompt payment, such
as "anticipation" discounts) and returns for damaged or defective merchandise
for exchange only. No deduction shall be made for other discounts, uncollectible
accounts or costs incurred by Licensee. Sales of Articles made other than in
arm's length transactions shall be deemed to have been made at the regular
wholesale price thereof.
9.3 The Sales Royalty hereunder shall be accounted for and paid
quarterly within thirty (30) days after the close of each three (3) month period
during the term of this Agreement (or portion thereof in the event of prior
termination for any reason), except that the first such accounting and payment
shall be for the period commencing on the date hereof and ending on December 31,
1993. The Sales Royalty payable for each accounting and payment period during
each Annual Period shall be computed on the basis of Net Sales during such
Annual Period, with a credit for any Guaranteed Minimum Royalty and Sales
Royalty payments therefore made to Licensor for said Annual Period. Returns
shall be accounted for (i.e., deductions for returns shall be made) in the
accounting and payment period in which the return is received (as opposed to the
period in which the original sale was accounted for).
9.4 No payment of Sales Royalty for any Annual Period in excess of
payments of Guaranteed Minimum Royalty for the same Annual Period shall be
credited against the Guaranteed Minimum Royalty due to Licensor for any other
Annual Period.
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<PAGE>
9.5 Net Sales shall not include sales to the Harve' Benard retail
stores controlled and operated by Licensor.
10. Sales Statement
10.1 Licensee shall deliver to Licensor at the time each Sales
Royalty payment is due, a statement signed by a duly authorized officer of
Licensee and certified by him as accurate indicating, sales by product category,
shipped during the period covered by such sales Royalty payment, the amount of
discounts and credits from gross sales which may be deducted therefrom and a
computation of the amount of Sales Royalty payable hereunder for said period.
Such statement shall be furnished to Licensor whether or not any Articles have
been sold during the period for which such statement is due.
10.2 Licensee shall deliver to Licensor, not later than forty-five
(45) days after the close of each Annual Period (or portion thereof in the event
of prior termination for any reason), a statement signed and certified by a duly
authorized officer of licensee and certified by him a accurate relating to said
entire Annual Period, setting forth the same information required to be
submitted by Licensee in accordance with paragraph 10.1 above and also setting
forth, with respect to the advertising and promotion of Articles, the total
amount expended by Licensee therefor during such Annual Period, including and
stating separately those amounts paid for cooperative, trade and national
consumer media advertisements
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11. Books and Records; Audits
11.1 Licensee shall prepare and maintain, in such manner as will
allow its accountants to audit same in accordance with generally accepted
accounting principles, complete and accurate books of account and records
(specifically including without limitation the originals or copies of documents
supporting entries in the books of account) covering all transactions arising
out of or relating to this Agreement. Licensor and its duly authorized
representatives have the right, during regular business hours and after 48 hours
prior notice for the duration of this Agreement and for three (3) years
thereafter, to audit said books of account and records and examine all other
documents and material in the possession or under the control of Licensee with
respect to the subject matter and the terms of this Agreement, including,
without limitation, invoices credits and shipping documents. All such books of
account, records and documents shall be kept available by Licensee for at least
three (3) years after the end of the Annual Period to which they relate.
11.2 If, as a result of any audit of Licensee's books and records,
it is shown that Licensee's payments were less than amount which should have
been paid, all payments required to be made to eliminate any discrepancy
revealed by said audit shall be made promptly upon Licensor's demand therefor,
and, if the discrepancy is in an amount equal to percent ( %) or more of
amount actually paid with respect to sales occurring during the period in
question, Licensee promptly shall reimburse Licensor for the cost of such audit.
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12. The Licensed Mark
12.1 Licensee shall not use the Licensed Mark, in whole or in part,
as a corporate name or trade name. Licensee shall not join any name or names
with the Licensed Mark so as to form a new mark. Licensee shall not use any name
or names in connection with the Licensed Mark in any advertising, publicity,
labeling, packaging or printed matter of any kind utilized by Licensee in
connection with Articles, unless and until Licensor consents thereto in writing.
12.2 Licensee acknowledges that Licensor is the owner of all right,
title and interest in and to the Licensed Mark in the Territory in any form or
embodiment thereof and is also the owner of the goodwill attached or which shall
become attached to the Licensed Mark in connection with the business and goods
in relation to which the same has been, is or shall be used. Sales by Licensee
shall be deemed to have been made by Licensor for purposes of trademark
registration and all uses of the Licensed Mark by Licensee shall inure to the
benefit of Licensor. Licensee shall not, at any time, do or suffer to be done
any act or thing which may in any way adversely affect any rights of Licensor in
and to the Licensed Mark or any registrations thereof or which, directly or
indirectly, may reduce the value of the Licensed Mark or detract from its
reputation. Licensee shall not affix the Licensed Mark to any Product if it is
to be sold as a "second" or as an "irregular" and shall remove the Licensed Mark
from any Article to be sold as a "second" or as an "irregular."
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<PAGE>
12.3 At Licensor's request, Licensee shall execute any documents
reasonably required by Licensor to confirm Licensor's ownership of all rights in
and to the Licensed Mark in the Territory and the respective rights of Licensor
and Licensee pursuant to this Agreement. Licensee shall cooperate with Licensor
in connection with the filing and prosecution by Licensor of applications in
Licensor's name to register the Licensed Mark for Products in the Territory and
the maintenance and renewal of such registrations as may issue.
12.4 Licensee shall use the Licensed Mark in the Territory strictly
in compliance with the legal requirements obtaining therein and shall use such
markings in connection therewith as may be required by applicable legal
provisions. Licensee shall cause to appear on all Articles and on all materials
on or in connection with which the Licensed Mark is used, such legends,
markings and notices as may be reasonable necessary in order to give appropriate
notice of any trademark, trade name or other rights therein or pertaining
thereto.
12.5 Licensee never shall challenge Licensor's ownership of or the
validity of the Licensed Mark or any application for registration thereof, or
any trademark registration thereof, or any rights of Licensor therein.
12.6 In the event that Licensee learns of any infringement or
imitation of the Licensed Mark or of any use by any person of a trademark
similar to the Licensed Mark, it promptly shall notify Licensor thereof.
Licensor thereupon shall take such
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action as it deems advisable for the protection of its rights in and to the
Licensed Mark and, if requested to do so by Licensor, Licensee shall cooperate
with Licensor in all respects at Licensor's sole expense, including without
limitation by being a plaintiff or co-plaintiff and by causing its officers to
execute pleading and other necessary documents. In no event, however, shall
Licensor be required to take any action if it deems it inadvisable to do so and
Licensee shall have no right to take any action with respect to the Licensed
Mark without Licensor's prior written approval.
13. Copyright
l3.1 any copyright which may be created in any sketch, design,
packaging, label, tag or the like designed or approved by Licensor shall be the
property of Licensor. Licensee shall not, at any time, do or suffer to be done
any act or thing which may adversely affect any rights of Licensor in such
sketches, designs, packaging, labels, tags and the like, including, without
limitation, filing any application in its name to record any claims to
copyrights in Articles, and shall do all things reasonably required by Licensor
to preserve and protect said rights, including, without limitation, placing the
copyright notice specified by the Universal Copyright Convention on all Articles
and the packaging, labels and tags therefor.
14. Indemnity; Insurance
14.1 Licensee hereby saves and holds Licensor harmless of and from
and indemnifies it against any and all losses,
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liability, damages and expenses (including reasonable attorneys' fees and
expenses) which Licensor may incur or be obligated to pay, or for which it may
become liable or be compelled to pay in any action, claim or proceeding against
it, for or by reason of any acts, whether of omission or commission, that may be
committed or suffered by Licensee or any of its servants, agents or employees in
connection with Licensee's performance of this Agreement. The provisions of this
paragraph and Licensee's obligations hereunder shall survive the expiration or
termination of this Agreement.
14.2 Licensee shall procure and maintain at its own expense in full
force and effect at all times during which Articles are being sold, with a
responsible insurance carrier acceptable to Licensor, a public liability
insurance policy including products liability coverage with respect to Articles,
as well as contractual liability coverage with respect to this Agreement, with a
limit of liability of not less than 3,000,000. Such insurance policy shall be
written for the benefit of Licensee and Licensor and shall provide for at least
thirty (30) days prior written notice to said parties of the cancellation or
substantial modification thereof. Such insurance may be obtained by Licensee in
conjunction with a policy of products liability insurance which covers products
other than Articles. Licensee shall deliver a certificate of such insurance to
Licensor promptly upon issuance of said insurance policy and, from time to time
upon reasonable request by Licensor, promptly shall furnish to Licensor evidence
of the maintenance of
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<PAGE>
said insurance policy. Nothing contained in this paragraph 14.2 shall be deemed
to limit in any way the indemnification provisions of paragraph 14.1 above.
15. Defaults
15.1 If Licensee fails to make any payment due hereunder, (a)
Licensee shall pay interest on the unpaid balance thereof from and including the
date such payment becomes due until the date the entire amount is paid in full
at a rate equal to the prime rate being charged in New York, New York, by
Citibank, N.A. as of the close of business on the date the payment first becomes
due plus percent ( %), and (b) if such default shall continue uncured for
a period of fifteen (15) days thereafter, Licensor shall have the right to
terminate this Agreement forthwith by written notice thereof to Licensee. If
Licensee discontinues the manufacture and distribution of Articles for a period
of sixty (60) or more days, if it exports Articles from the Territory or if it
defaults on any obligation which is secured by a security interest in any
Articles, Licensor shall have the right to terminate this Agreement forthwith by
written notice thereof to Licensee. If Licensor fails or if Licensee otherwise
fails to perform any of the terms, conditions, agreements or covenants in this
Agreement on its part to be performed and (i) such default is not curable, or
(ii) such default is curable but continues uncured for a period of fifteen (15)
days after notice thereof has been given to the defaulting party in writing by
the other party or (iii) such
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default is curable, but not within fifteen (15) days, and the defaulting party
is not diligently taking all steps necessary to cure the default as promptly as
practicable, the other party, at its sole election, may terminate this Agreement
forthwith by written notice thereof to the defaulting party.
15.2 (a) In the event that Licensee files a petition in bankruptcy,
is adjudicated a bankrupt or files a petition or otherwise seeks relief under or
pursuant to any bankruptcy, insolvency or reorganization statute or proceeding,
or if a petition in bankruptcy if filed against it or it becomes insolvent or
makes an assignment for the benefit of its creditors or a custodian, receiver or
trustee is appointed for it or a substantial portion of its business or assets,
this Agreement shall terminate automatically and forthwith.
(b) No assignee for the benefit or creditors, custodian,
receiver, trustee in bankruptcy, sheriff or any other officer of the court or
official charged with taking over custody of Licensee's assets or business shall
have any right to continue this Agreement or to exploit or in any way use the
Licensed Mark if this Agreement terminates pursuant to paragraph 15.2 (a) above.
(c) Notwithstanding the provisions of paragraph 15.2 (b)
above, in the event that, pursuant to the Bankruptcy Code or any amendment or
successor thereto (the "Code"), a trustee in bankruptcy of Licensee or Licensee,
as debtor, is permitted to assume this Agreement and does so and, thereafter,
desires to
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assign this Agreement to a third party, which assignment satisfies the
requirements of the Code, the trustee or Licensee, as the case may be, shall
notify Licensor of same in writing. Said notice shall set forth the name and
address of the proposed assignee, the proposed consideration for the assignment
and all other relevant details thereof. The giving of such notice shall be
deemed to constitute the grant to Licensor of an option to have this Agreement
assigned to it or to its designee for such consideration, or its equivalent in
money, and upon such terms as are specified in the notice. The aforesaid option
may be exercised only by written notice given to the trustee or licensee, as the
case may be, by Licensor within fifteen (15) days after Licensor's receipt of
the notice from such party, or within such shorter period as may be deemed
appropriate by the court in the bankruptcy proceeding. If Licensor fails to give
its notice to such party within the said exercise period, such party may
complete the assignment referred to in its notice, but only if such assignment
is to the entity named in said notice and for the consideration and upon the
terms specified therein. Nothing contained herein shall be deemed to preclude or
impair any rights which Licensor may have as a creditor in any bankruptcy
proceeding.
16. Rights on Expiration or Termination
16.1 In the event of termination in accordance with Section 15
above, Licensee shall pay to Licensor, (a) in addition to any Sales Royalty then
owed to it pursuant to Section 9 above or
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otherwise and all Guaranteed Minimum Royalty due and payable and unpaid as of
the date of termination, and (b) in addition to the Total Guaranteed minimum
Royalty remaining unpaid for the balance of the term of this Agreement, and
amount equal to any other actual damages Licensor may have suffered on account
of such termination or the acts or omissions from which it resulted.
16.2 Notwithstanding any termination in accordance with Section 15
above, Licensor shall have and hereby reserves all rights and remedies which it
has, or which are granted to it by operation of law, to enjoin the unlawful of
unauthorized use of the Licensed Mark or any violation by Licensee of the
confidentiality obligations under Section 4 above (any of which injunctive
relief may be sought in the courts, notwithstanding the arbitration provisions
of this Agreement, and also may be sought prior to or in lieu of termination),
to collect royalties payable by Licensee pursuant to this Agreement and to be
compensated for damages for breach of this Agreement. In addition, nothing
herein shall be deemed to prevent Licensor from bringing an action for damages
prior to or in lieu of termination if a default in performance by Licensee
occurs and is not cured timely in accordance with the provisions of Section 15
above.
16.3 Upon the expiration or termination of this Agreement, Licensee
immediately shall deliver to Licensor a complete and accurate schedule of
Licensee's inventory of Articles and of related work in process then on hand
(hereinafter referred to as "Inventory"). Such schedule shall be prepared as of
the
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close of business on the date of such expiration or termination and shall
reflect Licensee's cost of each such item. Licensor thereupon shall have the
option, exercisable by notice in writing delivered to Licensee within thirty
(30) days after its receipt of the complete Inventory schedule, to purchase any
or all of the Inventory for an amount equal to Licensee's Cost of the of the
Inventory being purchased. In the event such notice is sent by Licensor,
Licensee shall deliver to Licensor or its designee all of the Inventory referred
to therein within five (5) days after Licensor's said notice. Licensor shall pay
Licensee for such Inventory as is in marketable condition within sixty (60) days
after its receipt thereof.
16.4 If this agreement expires or is terminated other than pursuant
to paragraph 15.2 (a) above and other than by Licensor pursuant to paragraph
15.1 above, Licensee shall be (a) Entitled, for an additional period of six (6)
months only, on a non-exclusive basis, to sell and dispose of its Inventory. b)
If at this time there are current goods in process licensee is allowed (6) six
months after receipt of these goods to sell and dispose of this inventory. Such
sales shall be made subject to all of the provisions of this Agreement and to an
accounting for and the payment of Sales Royalty thereon. Such accounting and
payment shall be due within thirty (30) days after the close of the said six (6)
month period. Notwithstanding anything to the contrary herein, in the event that
Licensor notifies Licensee of its desire
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<PAGE>
to purchase any of the Inventory pursuant to paragraph 16.3 above, such notice
shall apply only to that portion of the Inventory remaining on the date said
notice is received by Licensee.
16.5 Except as specifically provided in paragraph 16.4 above, on the
expiration or termination of this Agreement, all of the rights of Licensee under
this Agreement shall terminate forthwith and shall revert immediately to
Licensor, all Sales Royalties on sales theretofore made shall become immediately
due and payable and Licensee shall discontinue forthwith all use of the Licensed
Mark, no longer shall have the right to use the Licensed Mark or any variation
or simulation thereof and promptly shall transfer to Licensor, free of charge,
all registrations, filings and rights with regard to the Licensed Mark which it
may have possessed at any time. In addition, Licensee thereupon shall deliver to
Licensor, free of charge, all samples of Articles and all sketches and other
material in its possession which were designed or approved by Licensor and all
labels, tags and other material in its possession with the Licensed Mark
thereon. After the expiration or termination of this Agreement, Licensee shall
not use or permit others to use any of said sketches and other material, or any
variations or simulations thereof, in connection with products or any other
merchandise.
17. (Intentionally omitted)
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<PAGE>
18. Representations and Warranties
18.1 Licensor represents and warrants that it has full right, power
and authority to enter into this Agreement and to perform all of its obligations
hereunder. Licensor further represents and warrants that it has granted no other
existing license to use the Licensed Mark on Products in the Territory and that
it shall grant not such other license during the term of this agreement except
in accordance with the provisions hereof.
18.2 Licensee represents and warrants that it has full right, power
and authority to enter into this Agreement and to perform all of its obligations
hereunder.
19. Notice
19.1 All reports, approvals requests, demands and notices required
or permitted by this Agreement to be given to a party shall be in writing and
shall be deemed to be duly given if personally delivered, if mailed (by
certified or registered mail, return receipt requested) or if sent by overnight
mail or courier service such as Express Mail or Federal Express, which requires
the addressee to acknowledge receipt thereof, to the party concerned at its
address set forth on page 1 above (or at such other address as a party may
specify by notice to the other).
20. Travel Expenses
20.1 Licensee shall reimburse Licensor for the travel expenses
(i.e., first class airfare, lodgings, meals and local transportation) incurred
by Licensor's personnel in connection with trips undertaken at Licensee's
request or for purposes of meetings with Licensee.
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<PAGE>
21. Assignability; Binding Effect
21.1 The performance of Licensee hereunder is of a personal nature
and, therefore, neither this Agreement nor the license or other rights granted
hereunder may be assigned, sublicensed or transferred by Licensee and any such
attempted assignment or sublicense, whether voluntary or by operation of law,
directly or indirectly, shall be void and of no force or effect. The direct or
indirect transfer or issuance of any shares of Licensee or the voting rights of
such shares shall be deemed a violative assignment hereof if such transfer or
issuance in any way shall limit or reduce the rights or ability of the current
owners of Licensee to control the business and affairs of Licensee.
21.2 This Agreement shall inure to the benefit of and shall be
binding upon the parties, their respective successors, Licensor's transferees
and assigns and Licensee's permitted transferees and assigns.
22. Arbitration
22.1 Except as specifically set forth in this Agreement, any and all
disputes, controversies and claims arising out of or relating to this Agreement
or concerning the respective rights or obligations hereunder of the parties
hereto (except disputes, controversies and claims relating to or affecting in
any way Licensor's ownership of or the validity of the Licensed Mark or any
registration thereof, or any application for registration thereof (hereinafter
referred to as "Licensed Mark Disputes") shall be
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<PAGE>
settled and determined by arbitration in New York, New York before the
Commercial Panel or the American Arbitration Association in accordance with and
pursuant to the then existing Commercial Arbitration Rules. The arbitrators
shall have the power to award specific performance or injunctive relief and
reasonable attorneys' fees and expenses to any party in any such arbitration and
the courts shall have similar power with regard to that injunctive relief sought
by Licensor pursuant to paragraph 16.2 above and with regard to Licensed Mark
Disputes ("Court Actions"). However, in any arbitration proceeding arising under
this Agreement, the arbitrators shall not have the power to change, modify or
alter any express condition, term or provision hereof, and to that extent the
scope of their authority is limited. The arbitration award shall be final and
binding upon the parties and judgement thereon may be entered in any court
having jurisdiction thereof. The service of any notice, process, motion or other
document in connection with an arbitration under this Agreement or for the
enforcement of any arbitration award hereunder may be effectuated in the manner
in which notices are to be given to a party pursuant to Section 19 above.
22.2 (a) Any court Action shall be brought in New York, New York, in
any court having jurisdiction thereof. Each of Licensor and Licensee hereby
irrevocably submits to the jurisdiction of any of said courts in any Court
Action and hereby waives any claim or defense of inconvenient forum.
- 26 -
<PAGE>
(b) Each of Licensor and Licensee represents and warrants that
it is not entitled to immunity from judicial proceedings and agrees that, should
the other bring any Court Action, it will not claim any immunity from such
proceedings for itself or with respect to its property.
23. Miscellaneous
23.1 Licensee shall not give away Articles or sell Articles in
connection with any tie-in or promotional campaign relating to products other
than Articles without the prior written consent of Licensor.
23.2 Notwithstanding anything to the contrary contained in this
Agreement, Licensor shall have the right, exercisable at any time, to negotiate
and enter into agreements with third parties pursuant to which it may grant a
license to use the Licensed Mark in connection with the manufacture,
distribution and sale of Products in the Territory or provide consultation and
design services with respect to products in the Territory, but only if, pursuant
to such third party agreements, the collections of such products are not shipped
prior to the termination of this Agreement. Nothing herein contained shall be
construed to prevent any such third party licensee from showing such products
and accepting orders therefor prior to the termination hereof.
23.3 This Agreement shall be construed and interpreted in accordance
with the laws of the State of New York applicable to agreements made and to be
performed in said State, contains the entire understanding and agreement between
the parties hereto with
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<PAGE>
respect to the subject matter hereof, supersedes all prior oral or written
understandings and agreements relating thereto and may not be modified,
discharged or terminated, nor may any of the provisions hereof be waived,
orally.
23.4 Nothing herein contained shall be construed to constitute the
parties hereto as partners or as joint venturers, or either as agent of the
other, and Licensee shall have no power to obligate or bind Licensor in any
manner whatsoever.
23.5 No waiver by either party, whether express or implied, of any
provision of this Agreement, or of any breach or default thereof, shall
constitute a continuing waiver of such provision or of any other provision of
this Agreement. Acceptance of payments by Licensor shall not be deemed a waiver
by Licensor of a any violation of or default under any of the provisions of this
Agreement by Licensee.
23.6 If any provision or any portion of any provision of this
Agreement shall be held to be void or unenforceable, the remaining provisions of
this Agreement and the remaining portion of any provision held void or
unenforceable in part shall continue in full force and effect.
23.7 This Agreement shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Agreement to be drafted. If any words or phrases in this Agreement shall have
been stricken out or otherwise eliminated, whether or not any other words or
phrases have been
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<PAGE>
added, this Agreement shall be construed as if those words or phrases were never
included in this Agreement, and no implication or inference shall be drawn from
the fact that the words or phases were so stricken out or otherwise eliminated.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
HARVE BENARD LTD.
by: /s/ Martin Holtzman Vice President
----------------------------------
CHANUK, INC.,
d/b/a DIPLOMAT OPTICAL
by: /s/ Barry Budilov President
----------------------------------
12-31-91
<PAGE>
Exhibit 10.24
LICENSE AGREEMENT
AGREEMENT effective as of the 10th day of April ________ 1989 by and between
Nintendo of America Inc., 4820-150th Avenue N.E., Redmond, WA 98052
(hereinafter referred to as "Licensor") and
Renaissance Eyewear, Inc. (hereinafter referred to as "Licensee").
1059 King George Road
Fords, NJ 08863
WITNESSETH:
WHEREAS, Licensor owns or is authorized to grant, for the purposes of this
Agreement, the rights in and to the names; titles; characters; including their
likenesses and visual and auditory representations; symbols; designs;
copyrights; trademarks; artwork; and elements embodied in or derived from the
property as described in Schedule A, annexed hereto (all of the foregoing
hereinafter referred to as "the Property"); and
WHEREAS, Licensee desires to obtain from Licensor the right to use the
Property on and in connection with the manufacture, sale, distribution and
promotion of the articles described below;
NOW, THEREFORE, in consideration of the mutual promises and undertakings herein
contained, it is hereby agreed:
1. GRANTS OF LICENSE.
(a) Articles. Licensor hereby grant to Licensee for the term of this
Agreement and subject to its conditions, the right, license and privilege to use
the Property solely on and in connection with the manufacture, sale,
distribution, and promotion of the articles listed in Schedule B, annexed
hereto.
(b) Territory. The license hereby granted extends to the territory
described in Schedule C, annexed hereto (hereinafter referred to as "the
Territory").
(c) Term. Unless sooner terminated in accordance with the provisions
hereof, the initial term of the license hereby granted and the renewal terms, if
any to be provided hereunder, shall extend for the periods set forth in Schedule
D, annexed hereto.
2. TERMS OF PAYMENT
(a) Rate. Licensee agrees to pay to the Licensor as its royalty a sum
equal to the percentage set forth in Schedule E, annexed hereto, of all net
sales by Licensee or any of its affiliated, associated or subsidiary companies
of the articles covered by this Agreement. The term "net sales" shall mean gross
sales less trade quantity discounts and actual returns only, and no deduction
shall be made for cash or other discounts or uncollectible accounts. No costs
incurred in the manufacture, sale, distribution or promotion of the articles or
in the payment by Licensee of taxes of any nature shall be deducted from any
royalty payable by Licensee.
(b) Minimum Royalties. Licensee agrees to pay to Licensor a minimum
royalty consisting of an advance payment to be applied against a minimum
guarantee in the initial term hereof and in any renewal term hereunder, in the
amounts and in the manner specified in Schedule F, annexed hereto. No part of
any such minimum royalty shall in any event be repayable to Licensee. Royalty
payments which exceed the initial term's minimum royalty or any renewal term's
minimum royalty shall not be credited toward the next succeeding term's minimum
royalty.
(c) Periodic Statements. Within thirty (30) days after the close of the
calendar quarter in which the initial shipment of articles covered by this
Agreement is made, and thereafter within thirty (30) days after the close of
each calendar quarter, Licensee shall furnish to Licensor, in a form to be
supplied by Licensor, or in the absence thereof, in a form acceptable to
Licensor, complete and accurate statements certified to be accurate by Licensee
showing the number, description, gross sales price, itemized deductions from
gross sales price, and net sales price of each and every article covered by this
Agreement sold by Licensee or any of its affiliated, associated or subsidiary
companies, and any returns made during the period, together with a computation
of the royalties payable thereon. Such statements shall be furnished to Licensor
whether or not any of the articles have been sold during said period. All
information shall be shown separately for each country within the Territory.
Licensee agrees that royalty reports will indicate clearly (by name of character
or similar description) the articles sold and will be given in sufficient detail
to enable Licensor to separate royalties by article. It is understood that
timely rendering of all statements required hereunder is essential under the
terms of this Agreement, and failure to render such statements in a timely
fashion shall deemed to be a breach of the Agreement immediately after the
deadline has gone by, regardless of whether or not Licensor gives Licensee any
notice to this effect.
(d) Royalty Payments. Licensee shall remit the royalties due in excess in
any previously paid advance sum for each calendar quarter within 30 days after
the close of each calendar quarter, and payment shall be made with the statement
rendered for that quarter. Payment shall be use in U.S. funds. The receipt or
acceptance by Licensor of any of the statements hereunder, or any royalties paid
hereunder, or the cashing of any royalty check paid hereunder, shall not
preclude Licensor from questioning the correctness thereof at any time, and in
the event that any inconsistencies or mistakes are discovered in such statements
or payments, they shall immediately be rectified and the appropriate payment
made by Licensee.
(e) Records and Audits. Licensee shall keep and maintain complete and
accurate records of the transactions underlying the accounting statements to be
furnished hereunder, and shall allow representatives of Licensor during office
hours and at reasonable intervals to inspect and make extracts or copies of such
records for the purpose of ascertaining the correctness of such statements. If
any such examination and audit shall disclose any deficiency of five per cent
(5%) or more, Licensee shall pay, in addition to such deficiency, the cost of
such examination and audit. Upon demand of Licensor, Licensee shall at its own
expense furnish to Licensor a detailed statement by an independent certified
public accountant showing the number, description, gross sales price, itemized
deductions from gross sales price and net sales price of the articles covered by
this Agreement distributed and/or sold by Licesee to the date of Licensor's
demand. All books of account and records shall be kept available for at least
five (5) years after the termination of this license.
(f) See adendum below*
3. EXCLUSIVITY.
Nothing in this Agreement shall be construed to prevent Licensor from
granting any other licenses for the use of the property or from using the
Property in any manner whatsoever, but Licensor agrees that, except as provided
in Paragraph 14(x) hereof, it will grant no other licenses for the Territory to
which this license extends effective during the term of this license, for the
use of the Property in connection with the articles as described in Schedule B
covered by this Agreement.
4. LICENSOR'S RIGHTS
Licensee recognizes all of Licensor's rights and interest in and to the
property, and that all use of trademarks and trade dress licensed hereunder
inures to the benefit of Licensor or its grantor(s). No right, title, or
interest, except the license interest granted by Paragraph 1 hereof, is
transferred by this Agreement to Licensee. Licensee agrees that it shall not
claim any title to or right to use the Property except pursuant to this
Agreement, and it shall not at any time attack or challenge the right of
Licensor or its grantor(s) in and to the Property, regardless of the nature or
basis or forum of such attack or challenge, and regardless of whether it relates
to title or validity. Licensee hereby agrees that at the termination or
expiration of this Agreement Licensee will be deemed to have assigned,
transferred and conveyed to Licensor or its grantor(s) all trademarks, service
marks, trade dress, copyrights, equities, good will, titles or other rights in
and to the Property which may have been obtained by Licensee or which may have
vested in Licensee as a result of its activities under this Agreement, and that
Licensee will execute any instruments requested by Licensor to accomplish or
confirm the foregoing. No consideration other than the mutual covenants and
considerations of this Agreement shall be necessary for any such assignment,
transfer or conveyance.
*(1) Payments to Licensor's Agent. Notwithstanding any provisions of this
Agreement to the contrary, until otherwise instructed in writing by
Licensor, all payments of royalties hereunder including advance payments
and minimum guarantees, shall be made payable to Leisure Concepts, Inc.,
which is hereby designated as Licensor's Agent for the purpose of receipt
of such payments, and transmitted to the Agent at its address, namely,
1414 Avenue of the Americas, New York, NY 10019
<PAGE>
5. ADVERTISING.
(a) Licensee agrees not to offer for sale, advertise or publicize any of
the articles licensed hereunder on television or in any other medium without the
prior written approval of Licensor, which approval shall not be unreasonably
withheld. All advertising and promotional materials including, but not limited
to, artwork, displays, and copy, shall be submitted by Licensee to Licensor for
Licensor's written approval prior to the use of any such advertising or
promotional materials.
(b) Licensors shall have the right to use the Property and Licensee's name
so as to give the Property, Licensee, Licensor, Licensor's grantor(s) and any
television series or any production in any medium, which may be based upon the
Property, full and favorable prominence and publicity. Neither Licensor nor its
grantor(s), however, shall be under any obligation whatsoever to broadcast or
to continue broadcasting or exhibiting any television program or film or
production or use the Property or any person, character, symbol, design or
likeness or visual representation thereof in any medium.
6. QUALITY OF MERCHANDISE.
(a) Licensee agrees that the article covered by this Agreement at all
times shall be of high standard and of such style, appearance and quality as to
protect and enhance the Property and the good will pertaining thereto, shall
meet Licensor's reasonable quality standards and specifications, and shall be
manufactured, sold distributed and promoted in accordance with all applicable
Federal, State and local laws. Before selling or distributing any of the
articles, Licensee shall furnish to Licensor free of cost, for its written
approval, the following in the order listed: (i) sketches; (ii) finished artwork
and final proofs; (iii) pre-production samples or strikeoffs; (iv) finished
products, including packaged samples; (v) all other finished cartons, labels,
containers and packing and wrapping material. The quality and style of such
articles as well as of any carton, label, container or packing or wrapping
material shall be subject to the approval of Licensor. After samples have been
approved pursuant to this paragraph, Licensee shall not depart therefrom in any
material respect without Licensor's prior written consent, and Licensor shall
not withdraw its approval of the approved samples. Before Licensee has commenced
selling any such articles hereunder, Licensee shall furnish to Licensor without
cost to Licensor two (2) samples of each such article, together with any
cartons, labels, containers, and packing and wrapping material used in
connection therewith and subsequently thirty (30) post-productions samples of
each such article. Thereafter, Licensor may request, from time to time,
individual random samples of each article and its related material as
hereinbefore described, being manufactured and sold by licensee hereunder.
(b) It is understood the Licensor shall have the right to take samples at
random from production runs twice a year but that, if quality problems are
encountered as a result of the examination of samples, Licensor shall have the
right to take such samples more frequently in an effort to assure that proper
quality control has been established. Licensor shall also have the right to have
its representatives visit the plant or plants where the articles covered by this
license are made and where the containers, packing material and the like are
printed or produced in order to determine whether or not proper quality controls
are being exercised.
7. LABELING
Licensee shall cause to appear on or within each article sold by it under
this license and on or within all advertising, promotional or display material
and on all cartons, containers, packaging, wrappers, labels, tags, and other
printed material employing the Property the copyright notice and license as
specified in Schedule G, annexed hereto, or other notice or notices as may
reasonably be specified by Licensor. Licensee shall cause to appear on all
articles sold by it under this license and on all advertising, promotional and
display material, and on all cartons, containers, packing, wrappers, labels,
tags and other printed material used on or in connection with articles employing
the Property, appropriate trademarks or service mark notices, approved by
licensor, which, in case of goods sold in the United States under registered
trademarks and service marks, shall be "o" or "Registered in the United States
Patent and Trademark Office" or "Reg. U.S. Pat. & Tm. Off." Each and every tag,
label, carton, container, wrapping, and packaging containing any such notice and
all advertising, promotional or display material bearing the Property shall be
submitted by Licensee to Licensor for its written approval prior to use by
Licensee. Approval by Licensor shall not constitute waiver of Licensor's rights
or Licensee's duties under any provision of this Agreement.
8. APPROVALS BY LICENSOR.
With respect to all written approvals by Licensors required under
paragraphs 5 (a), 6 (a), and 7 of this Agreement, each item submitted by
Licensee shall be deemed approved if Licensee has not received the written
disapproval of Licensor of the item in question within ten (10) days after its
receipt by Licensor. See Adendum below.
9. LICENSOR'S WARRANTY AND INDEMNIFICATION BY LICENSOR.
(a) Except as expressly set forth herein, Licensor represents and warrants
that it holds all such rights and interest in the Property as are required to
permit Licensor to enter into this Agreement and expressly warrants that
Licensor is authorized to enter into this Agreement. Licensor hereby indemnifies
Licensee and undertakes to hold it harmless against any action brought against
Licensee with respect solely to any claim or suit that Licensor is not possessed
of such right, title and interest in the Property as to be entitled to grant
this license to Licensee, provided that prompt notice is given to Licensor of
any such claim or suit and provided, further, that Licensor shall have the
option to undertake and conduct the defense of any suit so brought and no
settlement of any such claim or suit shall be made without the prior written
consent of Licensor. Licensee agrees to cooperate fully with Licensor in any
such action. The representations, warranties and undertakings of this paragraph
shall not be applicable (i) in respect of any claim or action made or brought by
Licensee or any other licensee of the Property from Licensor, or (ii) with
respect to the NES product and packaging trade dress.
(b) Licensee agrees that it shall give Licensor thirty (30) days notice to
correct any alleged breach by Licensor and Licensee further agrees that it will
not commence any action against Licensor or any other licensees of the property
without giving Licensor thirty (30) days prior notice of such suit, nor will it
in any such action seek preliminary injunctive relief or a temporary restraining
order against use of the Property without giving Licensor five (5) days notice
of motion. It is expressly agreed that a breach of the terms of this
subparagraph shall be adequate grounds for termination of this license, which
termination shall be effective forthwith upon Licensor's mailing a notice
thereof to Licensee by registered or certified mail, return receipt requested.
10. PROTECTION OF LICENSOR'S RIGHTS.
Licensee agrees to assist Licensor to the extent necessary to protect
Licensor's rights to the Property. Licensor or its grantor(s) may commence or
prosecute any claims or suits in their own name or in the name of Licensee or
join Licensee as a party thereto. Licensee shall notify Licensor in writing of
any infringements or imitations of the Property on articles similar to those
covered by this Agreement which may come to Licensee's attention, and Licensor
shall have the sole right to determine whether or not any action shall be taken
on account of any such infringements or imitations. Licensee shall not institute
any suit or take any actions on account of any such infringements or imitations
without first obtaining the written consent of the Licensor to do so.
11. REGISTRATION.
Licensee agrees to cooperate fully and in good faith with Licensor in
securing and preserving Licensor's and its grantor(s)' rights in and to the
Property. If there has been no previous registration of the Property, Licensee
shall, at Licensor's request and expense, register all copyrights, trademarks or
service marks in the appropriate class in the name of Licensor or its grantor(s)
or, if Licensor so requests, in Licensee's own name.
(1) Addendum to Paragraph 8. Provided that (i) at the time of each such
submission Licensee gives oral advise of same to Licensor's Licensing
Manager whose name and phone number will be supplied to Licensee, and (ii)
all submissions hereunder shall be made by certified mail, return receipt
requested, or any other method providing verifiable proof of receipt by
Licensor of the item in question.
<PAGE>
18. DISPOSAL OF STOCK UPON TERMINATION OR EXPIRATION.
After termination or expiration of the license under the provisions
hereof, Licensee, except as otherwise provided in this Agreement, may dispose of
articles covered by this Agreement which are on hand or in process at the time
notice of termination is received or upon the expiration date, whatever the case
may be, for a period of one hundred (100) and eighty (80) days thereafter, on a
nonexclusive basis, provided advance and royalty payments are up-to-date for the
current period and statements are furnished for that period in accordance with
Paragraph 2. All applicable royalties shall be paid on articles sold during the
sell-off period within twenty(20) days following the expiration of the sell-off
period. Notwithstanding anything to the contrary herein, Licensee shall not
manufacture, sell or dispose of any articles covered by this license after its
expiration or its termination based on the failure of Licensee to affix notice
of copyright, trademark or service mark registration or any other notice to the
articles, cartons, containers, or packing or wrapping material or advertising,
promotional or display material, or because of the departure by Licensee from
the quality and style approved by Licensor hereunder.
19. EFFECT OF TERMINATION OR EXPIRATION.
Upon and after the expiration or termination of this license, all rights
granted to Licensee hereunder shall forthwith revert to Licensor, who shall be
free to license others to use the Property in connection with the manufacture,
sale, distribution and promotion of the articles covered hereby, and Licensee
will refrain from further use of the Property or any further reference to it,
direct or indirect, or anything deemed by Licensor to be similar to the Property
in connection with the manufacture, sale, distribution or promotion of
Licensee's products, except as provided in Paragraph 18. It shall not be a
violation of any right of Licensee if Licensor should at any time during the
term hereof enter into negotiations with another to license use of the Property
in respect of the articles listed in Schedule B hereof within the Territory,
provided that it is contemplated that such prospective license shall commence
after termination of this license.
20. LICENSOR'S REMEDIES.
(a) Licensee acknowledges that its failure to commence in good faith to
offer to sell and to manufacture and distribute in substantial quantities the
articles listed in Schedule B within the period specified in Paragraph 14, and
to continue during the term hereof diligently and continuously to offer to sell
and to manufacture and distribute the articles covered by this Agreement or any
class or category thereof will result in immediate and irreparable damage to
Licensor.
(b) Licensee acknowledges that its failure (except as otherwise provided
herein) to cease the manufacture, sale, distribution or promotion of the
articles covered by this Agreement or any class or category thereof at the
termination or expiration of this Agreement or any portion thereof will result
in immediate and irreparable damage to Licensor and to the rights of any
subsequent licensee. Licensee acknowledges and admits that there is no adequate
remedy at law for such failure, Licensor shall be entitled to equitable relief
by way of temporary and permanent injunctions and such other and further relief
as any court of competent jurisdiction may deem just and proper.
21. NOTICES
All notices and statements required under this Agreement shall be in
writing addressed to the parties at the addresses above, unless notification of
a change of address is given in writing. The date of mailing shall be deemed the
date the notice or statement is given. All notices shall be sent by certified
mail, return receipt requested.
22. RELATIONSHIP BETWEEN THE PARTIES
Licensee shall not represent itself as the agent or legal representative
of Licensor for any purpose whatsoever, and shall have no right to create or
assume any obligation of any kind, express or implied, for or on behalf of
Licensor in any way whatsoever. This Agreement shall not create or be deemed to
create any agency, partnership or joint venture between the parties.
23. NO ASSIGNMENT OR SUBLICENSE.
This Agreement shall not be assigned or sublicensed by Licensee except
with the prior written consent of Licensor, not to be unreasonably withheld and
shall not be assigned by operation of law. Any assignment or sublicense in
violation of the preceding sentence shall be null and void. This Agreement may
be assigned by Licensor without any consent. Subject to such restriction and to
the restrictions against assignment by operations of law provided above, this
Agreement shall be binding upon and inure to the benefit of the parties, their
successors and assigns.
24. ENTIRE AGREEMENT.
This Agreement is intended by the parties as a final and complete
expression of their agreement, and supersedes any and all prior and
contemporaneous agreements and understandings relating to it.
25. MODIFICATION AND WAIVER.
This Agreement may not be modified and none of its terms may be waived,
except in writing signed by both parties. The failure of either party to
enforce, or delay by either party in enforcing, any of its rights shall not be
deemed a continuing waiver or a modification of this Agreement.
26. SEPARABILITY.
If any part of this Agreement shall be declared invalid or unenforceable
by a court of competent jurisdiction, it shall not affect the validity of the
balance of this Agreement, provided, however, that if any provision of this
Agreement pertaining to the payment of monies to Licensor shall be declared
invalid or unenforceable, Licensor shall have the right, at its option, to
terminate this Agreement upon giving not less than ten (10) days' written notice
to Licensee.
27. PARAGRAPH HEADINGS.
The headings of the paragraphs are for convenience only and in no way
limit or affect the provisions hereof.
28. GOVERNING LAWS.
This Agreement shall be governed by and interpreted in accordance with the
law of the State of New York applicable to agreements entered into and to be
performed wholly in New York.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the day and year first above written.
Nintendo of America Inc.
("Licensor")
By:
------------------------------
Title:
Renaissance Eyewear, Inc.
("Licensee")
By: /s/ Edward Kauz
------------------------------
Title: President
<PAGE>
Schedules Annexed to the License Agreement dated as of April 10,
1989, between
Nintendo of America Inc. ("Licensor") and
Renaissance Eyewear, Inc. ("Licensee").
Schedule A: The Property. Nintendo, Nintendo Entertainment
System, NES, R.O.B., Zapper, Super
Mario Bros., Mario Bros., The Legend
of Zelda, Donkey Kong, Metroid,
Punch-Out!!, the NES product and
packaging trade dress and Nintendo
Power*
Schedule B: The Articles. Prescription eyewear and sunglasses;
non-prescription sunglasses;
prescription sports goggles;
protective eyewear; and video ray
protective glasses, all such Articles
for children and adults. Licensor
reserves the right to license to
others the rights to use the Property
in connection with ski goggles and
video game glasses.
Schedule C: The Territory. U.S., its territories and possessions
and Canada
Schedule D: Term.
Initial Term: April 10, 1989 through December 31,
1991
Renewal Term(s): Licensee shall have the option to renew this
Agreement upon the same terms and conditions for two consecutive two year terms,
each such option exerciseable by written notice to Licensor to such effect at
least thirty days (30) prior to the end of the then current term, provided that
(i) Licensee is not in breach of this Agreement and (ii) earned royalties paid
or due to be paid by Licensee in the initial term equal at least $ and
each renewal term equals at least $ . In the event of such exercise said
written notice shall be accompanied by the requisite advance payment for the
renewal term in question as provided in Schedule F below.
Schedule E: Royalty Rate(s) % of domestic net sales
Schedule F: Minimum Royalty.
Initial Term
Advance Payment (due upon signing): $
Minimum Guarantee (due by end of the term): $
Renewal Term
Advance Payment (due on first day): $
Minimum Guarantee (due by end of the term): $
Schedule G: Copyright notice. (C) 1989 Nintendo of America Inc.
Officially Licensed By Nintendo Of
America Inc.
The foregoing licensing notice is intended to be applicable not only to
the licensed trademarks, but also to the licensed trade dress and any
licensed copyrights, for instance, game characters, utilized by the
Licensee.
Schedule H: Marketing Date. (January 1st) 1990
* When using the Nintendo Power trademark, Licensees shall also place
on the Articles, or if impractical, on the package labels or hang
tags associated with the Articles the following : "To subscribe to
Nintendo Power(TM) Magazine call 1-800-521-0900."
Confidential Treatment Requested - Portions filed separately with the
Commission.
<PAGE>
[Letterhead of LCI]
March 27, 1992
Ms. Barbara Kauz
Renaissance Eyewear
1059 King George Rd.
Fords, NJ 08863
Dear Ms. Kauz:
This has reference to the Nintendo license agreement between Nintendo of
America Inc. ("Licensor") and Renaissance Eyewear ("Licensee") dated April
10,1989, covering the Nintendo Property (hereinafter "the License Agreement").
The License Agreement is amended as follows.
1. Schedule D: term, Initial Term, is revised to read as follows:
"April 10, 1989 through December 31, 1993"
2. Schedule E: Royalty Rate, is revised to read as follows:
" % ( % royalty paid quarterly and % royalty to be applied to
promotional/advertising reserve. All reserve expenditures are to be
supported by receipts. Any unused portion of the reserve is to be paid to
Licensor by December 31, 1993.)
3. Schedule F: Minimum Royalty, Initial term, is revised to read as follows:
"Advance Payment: $ to be paid as follows: $ paid
12/31/91; $ to be paid by 3/15/92; to
be paid by 4/15/92.
Minimum Guarantee (due by end of the term): $ "
Except as herein provided all terms and conditions of the License
Agreement remain in full force and effect. Please indicate your agreement with
the foregoing by signing where specified below and by returning all three copies
of this amendment to MichelleAnn Craig at the address above. A fully executed
copy will be returned to you in due course.
Accepted and Agreed to: Very truly yours,
Renaissance Eyewear Nintendo of America Inc.
("Licensee") ("Licensor")
By: /s/ Edward Kauz By: /s/ Howard Lincoln
--------------------------- ----------------------------------
Howard Lincoln, Sr. Vice President
Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
[Letterhead of LCI]
July 22, 1992
Ms. Barbara Kauz
Renaissance Eyewear
1059 King George Rd.
Fords, NJ 08863
Dear Ms. Kauz:
This has reference to the Nintendo license agreement between Nintendo of
America Inc. ("Licensor") and Renaissance Eyewear ("Licensee") dated April
10,1989, covering the Nintendo Property (hereinafter "the License Agreement").
The License Agreement is amended as follows.
1. It is understood and agreed that the following is added to Schedule C:
Territory:
"Mexico, Panama, Guatemala, Costa Rica, Honduras, El Salvador, Belize,
Venezuela, Colombia, Ecuador, Chile, Argentina, Paraguay, Uruguay, Peru,
Trinidad, Barbados, Jamaica, Bermuda, Grenada, Dominican Republic, St. Maarten,
Guadeloupe, Martinique, Curacao, Antigua, Bahamas, St. Lucia, British Virgin
Islands"
2. For the addition of the above mentioned territories, Schedule F: Minimum
Royalty, Initial Term, Minimum Guarantee (due by the end of the term) is
increased by $ thereby resulting in a Minimum Guarantee total of $ .
Except as herein provided all terms and conditions of the License
Agreement remain in full force and effect. Please indicate your agreement with
the foregoing by signing where specified below and by returning all three copies
of this amendment to MichelleAnn Craig at the address above. A fully executed
copy will return to you in due course.
Accepted and Agreed to: Very truly yours,
Renaissance Eyewear Nintendo of America Inc.
("Licensee") ("Licensor")
By: By:
--------------------------- ----------------------------------
Howard Lincoln, Sr. Vice President
Confidential Treatment Requested - Portions Filed seperately with the
Commission.
<PAGE>
Exhibit 10.27
AGREEMENT dated as of April 1, 1994 between KENNETH JAY LANE, INC.,
a New York corporation with offices at 20 West 37th Street, New York, New York
(hereinafter referred to as "Licensor"), and WINDSOR OPTICAL, INC., a Delaware
corporation with offices at 625 Hollywood Avenue, Cherry Hill, New Jersey 08002
(hereinafter referred to as "Licensee").
W I T N E S S E T H:
In consideration of the mutual covenants and the undertakings
hereinafter set forth, Licensor and Licensee do hereby respectively grant,
covenant, and agree as follows:
1. (a) Licensor hereby grants to Licensee, on the terms and conditions
hereinafter set forth, an exclusive license (the "License"), limited to the
territory of the United States and its territorial possessions, Canada, Puerto
Rico, the Caribbean Islands, Central America and Mexico (hereinafter referred to
as the "Territory"), to use the mark "KENNETH JAY LANE" (hereinafter referred to
as the "Licensed Mark") in connection with the manufacture, distribution, and
sale solely of prescription eyeglass frames and sunglasses, designed or approved
by Licensor pursuant to this Agreement (hereinafter referred to as the
"Articles").
(b) Notwithstanding the License granted in paragraph 1(a), (i)
Licensor retains the right to use and to grant to others the right to use the
Licensed Mark (A) in the Territory and elsewhere on and in connection with all
product types not included in the Articles and (B) in any area of the world
other
<PAGE>
than the Territory on or in connection with all product types whether or not
included in the Articles, and (ii) Licensee is aware of and hereby acknowledges
that (A) Licensor has entered and may enter into licenses and other agreements
with various persons for the use of the Licensed Mark and other trademarks of
Licensor in the Territory and elsewhere in connection with articles other than
the Articles, and (B) the License granted herein to Licensee will not conflict
with such licenses and agreements and Licensee will take no action that would
lead to a conflict with such licenses and agreements.
(c) Neither Articles nor any modifications or adaptations thereof
may be manufactured, distributed, or sold by Licensee under any mark other than
the Licensed Mark. Licensor reserves all rights to the Licensed Mark, except as
specifically granted herein to Licensee, and Licensor may exercise such rights
at any time. Licensee acknowledges that it has been granted no rights to any
other trademarks owned or used by Licensor or to the name or likeness of Mr.
Kenneth Jay Lane (except as otherwise Permitted by this Agreement) and that such
other trademarks may be used by Licensor and by such third parties to which
Licensor has granted or may grant the right to use such trademarks.
(d) Licensee shall use its best efforts to (i) exploit the License
throughout the Territory and (ii) manufacture and sell the maximum quantity of
Articles therein. Licensee agrees not to export Articles from the Territory and
not to sell to any
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<PAGE>
third party which it believes, or has a reasonable basis to believe, intends to
export Articles from the Territory.
(e) During each Annual Period, Licensee shall spend for promotional
materials and national trade advertising of the Articles and the Licensed Mark
no less than percent ( %) of Net Sales (as defined herein). Licensee shall
submit, by facsimile if necessary, proposed advertisements for Licensor's
approval, including specific details as to the contents, budget, timing, and
media placement of such advertisements, at least 45 days in advance of the
insertion order date, and must receive written approval from Licensor before
proceeding with such advertisements. If Licensor fails to respond to such
request within 15 days after receipt of such request, the proposed advertisement
shall be deemed approved. After any advertisement has been provided or approved
by Licensor, Licensee shall not depart in any respect from the contents, budget,
timing, and media placement specified and approved by Licensor, without the
prior written approval of Licensor by mail or facsimile. If Licensor fails to
give written approval of the contents, the budget, the timing, or the media
placement of any advertisement submitted by Licensee, such advertisement shall
not be used in any manner. All advertisements shall be subject to the
restrictions contained in paragraph 6(c) of this Agreement. Licensee
acknowledges that Licensor's approval or disapproval of any advertising
proposals may be based, without limitation, solely on Licensor's subjective
aesthetic standards.
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Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
Notwithstanding the foregoing provisions of this paragraph 1(e),
Licensee may supply advertising "slicks", the contents of which have been
approved by Licensor in the manner set forth above, to retail optical stores and
retail optical departments which sell the Articles for use in local advertising;
provided, however, that Licensee shall take all steps necessary to insure that
such retail optical stores and departments utilizing such slicks shall not place
any advertising based upon such slicks next to or in conjunction with any other
advertisement of such store or department. An advertising "slick" for purposes
of this paragraph 1(e) means camera-ready copy depicting the Articles and/or the
Licensor which has been approved by Licensor and prepared in such a way that
additional print may be overlaid in places provided therefor prior to actual
publication or placement in any advertising media.
(f) The "Annual Period" shall be from July 1 to the next succeeding
June 30, except that the first Annual Period shall be from the date of this
Agreement to June 30, 1995 and the last Annual Period shall be from the last
July 1 during the Agreement to the termination date of the Agreement.
(g) Licensee agrees that neither Licensee nor its affiliates will
advertise, promote, or otherwise use the Licensed Mark with any trademark, name,
personal endorsement or other identification of any other designer or celebrity
or in connection with the merchandise of any other designer or celebrity.
Notwithstanding the foregoing, nothing contained herein shall prohibit
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<PAGE>
Licensee from promoting Articles in a catalog containing merchandise of another
designer or celebrity.
(h) Licensee agrees that neither Licensee nor its affiliates will
use the name, trademark, personal endorsement or other identification of any
other designer or celebrity in the Territory in connection with any product type
included in the definition of Articles during the term of this Agreement.
2. (a) The term of this Agreement shall be for the period commencing on
the date of this Agreement and ending June 30, 1997.
(b) Licensor reserves the right at its option to enter into
agreements with third parties prior to the termination of this Agreement
pursuant to which such third parties may manufacture, and, subsequent to the
expiration of this Agreement, distribute and sell Articles in the Territory,
subject to Licensee's limited right to sell and dispose of inventory after
expiration or termination of this Agreement pursuant to Section 12(b).
3. (a) Licensee's first collections under this Agreement shall be a Fall
line which is expected to be shown to Licensee's customers for Fall, 1994.
(b) Prior to beginning the production of any item, Licensee shall
submit concepts, materials, sketches, colorations, and samples to Licensor from
which Licensor may select those of which Licensor approves for use in connection
with that collection of Articles. No such concept, material, sketch, coloration,
or
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<PAGE>
sample may be used by Licensee in connection with the Articles unless Licensor
shall have approved in writing such use. Licensor may, at Licensee's request
(but is not required to) submit concepts, materials, sketches, colorations, and
samples to Licensee for use in connection with collections of Articles. No
design submitted or approved by Licensor and used in a collection may be used
again in a subsequent collection or in any other line of Licensee without the
written approval of Licensor. Licensee agrees promptly to reimburse Licensor for
any such items submitted. Licensee will reimburse Licensor and Licensor's
employees for any out-of-pocket expenses incurred at Licensee's request, whether
for travel or otherwise. All travel by Mr. Kenneth Jay Lane pursuant to this
Agreement at Licensee's request shall be first-class. All concepts, materials,
sketches, colorations, and samples either provided or approved by Licensor shall
be kept confidential prior to use by Licensee and may be used by Licensee solely
in connection with the manufacture, distribution, and sale of the Articles in
the Territory pursuant to this Agreement. Licensee will be responsible for the
production of the Articles and samples thereof and will bear all costs in
connection therewith. Licensor may use and permit others to use such concepts,
materials, sketches, colorations, and samples in any manner she desires,
provided that such use does not conflict with any rights granted Licensee
hereunder.
(c) No later than one month prior to the initial delivery to
Licensee's distributors of each collection of Articles,
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<PAGE>
Licensee shall make available to Licensor in New York City for its inspection,
free of any charge, the entire collection of Articles consisting of one sample
of each separate Article together with its tags, labels, and packaging.
(d) In providing any information hereunder Licensor is acting in an
advisory capacity only and Licensor shall have no responsibility for the
operation or production of the manufacturing, distribution, advertising, or
sales facilities contemplated under this Agreement or for any decisions that may
be made in connection therewith, whether upon the recommendation of Licensor or
otherwise.
4. (a) Licensee agrees that the design, contents, workmanship, and all
other characteristics of the Articles shall at all times be of the highest
quality, consistent with the prestige and reputation which Licensor and the
Licensed Mark have developed heretofore, and the Articles shall be distributed
and sold with packaging and sales promotion materials appropriate to maintain
such quality image. All Articles will be manufactured, sold, labeled, packaged,
distributed, and advertised in accordance with all applicable laws and
regulations. Licensor shall have the right to approve the styles, designs,
packaging, contents, workmanship, and quality of all Articles to insure that
Articles manufactured, sold, or distributed hereunder are consistent with the
quality standards set forth herein. At Licensor's request, Licensee will deliver
to Licensor or make available to Licensor in New York City free of any cost to
Licensor then current production samples of
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<PAGE>
Articles produced hereunder so that Licensor may assure itself of the
maintenance of the quality standards Set forth herein. After production,
Licensee will also furnish Licensor with one item of each style of the Articles.
Licensee agrees that all Articles to be sold hereunder will be at least equal in
quality to the samples delivered or made available to Licensor and approved by
Licensor. Licensor and its duly authorized representatives shall have the right
to examine Articles in the process of being manufactured and to inspect all
facilities utilized by Licensee in connection with the manufacture of Articles.
(b) All Articles will bear the Licensed Mark. The form of each
label, inscription or marking must be approved by Licensor in writing. If
Licensor has not responded within 15 days of receipt of a request for approval,
the item shall be deemed approved.
(c) Licensee will use and display the Licensed Mark only in such
form and manner as is specifically approved in writing by Licensor. Licensee
will cause to appear on all Articles produced hereunder, on their tags, labels,
final sale packaging, and the like, on all advertising and promotional material
used in connection therewith, and on all materials on or in connection with
which the Licensed Mark appears, including without limitation business cards,
invoices, order forms, and stationery, such legends, markings, and notices as
may reasonably be necessary in order to give appropriate notice of any
copyright, trademark, trade name, or other rights therein or pertaining thereto,
or as Licensor
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<PAGE>
may reasonably request. At least 45 days before using or releasing any such
material, Licensee shall submit to Licensor, for its approval, proposed
advertising and promotional copy, all printed material, and finished art work
for tags, labels, final sale packaging, and the like.
(d) After any sample, copy, art work, or other material has been
approved, Licensee shall not depart therefrom in any respect without the prior
written approval of Licensor. If Licensor disapproves any sample Article or any
sample tag, label, package, or the like, such shall not be used in any manner in
connection with the Licensed Mark or as an Article hereunder.
(e) Licensee acknowledges that Licensor's approval or disapproval
pursuant to paragraphs 3 and 4 may be based, without limitation, solely on
Licensor's subjective aesthetic standards, which shall be exercised in good
faith. If Licensor does not respond to any request for approval within 15 days
of receipt of such request, the item shall be deemed approved.
5. (a) (i) In consideration of the License granted and the services
to be performed by Licensor hereunder, Licensee shall,
subject to the terms and provisions hereof, pay to
Licensor, for each Annual Period, a guaranteed minimum
fee (the "Guaranteed Minimum Fee") as follows:
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<PAGE>
Annual Period Guaranteed Minimum Fee
First $
Second $
Third $
(ii) The Guaranteed Minimum Fee for each respective Annual
Period shall be paid in four equal quarterly
installments on the first day of each July, October,
January and April during such Annual Period, except that
during the first Annual Period the Guaranteed Minimum
Fee shall be paid as follows: $ on the date of this
Agreement, and $ on each of October 1, 1994,
January 1, 1995, and April 1, 1995. Notwithstanding the
foregoing, no amount shall be payable by Licensee to
Licensor in payment of the Guaranteed Minimum Fee for
any Annual Period if the amount of Guaranteed Minimum
Fee and Percentage Fee (as hereinafter defined)
theretofore paid Licensor for such Annual Period equals
or exceeds the total Guaranteed Minimum Fee for such
Annual Period.
-10-
Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
(iii) The Guaranteed Minimum Fee payments for each Annual
Period shall be credited only against Percentage Fee
payments for the same Annual Period as provided for in
paragraph 5(b).
(iv) In the event of the termination of this Agreement
pursuant to paragraph 12, all amounts due in payment of
Guaranteed Minimum Fees or the balance of the then
current term shall immediately, without notice or
demand, become due and payable.
(b) (i) In consideration of the License granted and the services
to be performed by Licensor hereunder, Licensee shall
pay to Licensor a percentage fee (the "Percentage Fee")
based upon Net Sales of all Articles during each Annual
Period. For purposes of this Agreement, "Net Sales"
shall be deemed to mean the invoiced amount of Articles
sold by Licensee or any of its affiliates, less actual
trade discounts, returns, and charges for customs duty,
freight, and sales taxes, if any. No deduction shall be
made for other discounts,
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<PAGE>
advertising, or other costs incurred by Licensee.
(ii) The Percentage Fee that Licensee shall pay to Licensor
for each Annual Period shall be an amount equal to (a)
percent ( %) of Net Sales other than to QVC
Network ("QVC") and (b) percent ( %) of Net
Sales to QVC, during such Annual Period.
(iii) Licensee shall deliver to Licensor within 30 days
following the end of each three month period (other than
the last three month period) during each Annual Period,
a statement signed by an executive officer of Licensee
and certified as accurate, indicating by month and by
style number the amount of Net Sales during such three
month period. Each such statement shall also indicate in
detail, separately for each jurisdiction in the
Territory, the number, description, invoice price, and
the total amount of gross sales of all Articles shipped
during the period covered, the amount of actual trade
discounts, returns, and charges for
-12-
Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
customs duty, freight, and sales taxes which may be
deducted therefrom, a computation of the amount of the
Percentage Fee payable hereunder in respect of such Net
Sales for such period, and also the amount and details
of the advertising and promotional expenses relating to
the Articles and the Licensed Mark incurred during such
period. Such statements shall be furnished to Licensor
whether or not any Articles have been sold during the
period for which such statement is due. All monetary
amounts shall be expressed in United States Dollars. In
the event Licensee makes any sales denominated in a
foreign currency, the Percentage Fee shall be expressed
both in such foreign currency and in United States
Dollars, the latter on the basis of the average buying
rate and selling rate of the foreign currency to United
States Dollars in effect in the capital city of such
country on the last banking day of such quarter.
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<PAGE>
(iv) Licensee shall deliver to Licensor within 60 days
following the end of each Annual Period, a report
certified by an executive officer of Licensee covering
such Annual Period and containing the same information
required to be contained in the statements referred to
in paragraph 5(b) (iii).
(v) The Percentage Fee shall be paid quarterly for each
Annual Period. The Percentage Fee for each three month
period (other than the last three month period) during
each Annual Period shall be paid simultaneously with the
delivery of the statement referred to in paragraph 5(b)
(iii) relating to such three month period during such
Annual Period, and the Percentage Fee for the last three
month period of each Annual Period shall be paid
simultaneously with the delivery of the report referred
to in paragraph 5(b) (iv) relating to such Annual
Period. The Percentage Fee for each such three month
period shall be computed on the basis of Net Sales from
the beginning of such Annual Period
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<PAGE>
through the last day of the most recent three month
period, with a credit for the Guaranteed Minimum Fee and
for the Percentage Fee theretofore paid to Licensor for
such Annual Period.
(vi) In no event shall any payment of Percentage Fee for any
Annual Period in excess of payments of Guaranteed
Minimum Fee for the same Annual Period be credited
against the Guaranteed Minimum Fee due to Licensor for
any other Annual period.
(c) All payments made hereunder by Licensee to Licensor shall be
made in New York City, New York, in United States Dollars. Licensee shall not be
relieved of its obligation to make payments required hereunder as heretobefore
provided notwithstanding any circumstances which make it impossible for Licensor
or Licensee to take payments out of any jurisdiction in the Territory. In the
event that Licensee shall be prevented by any law, decree, or regulation of any
governmental authority within the Territory from transmitting any payment
hereunder at the time and in the manner provided herein Licensee shall, not
later than the date on which such transmittal is required to be made hereunder,
deposit the full amount thereof to the credit of Licensor in such bank or
depository as Licensor shall specify and furnish evidence of such deposit to
Licensor. Licensee shall apply at its sole expense for
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<PAGE>
all export or currency licenses, and shall take all other actions which may be
necessary or expedient to facilitate the prompt receipt by Licensor of all
payments hereunder in the manner and at the times provided herein.
(d) Licensee shall compute and pay on behalf of Licensor all taxes,
if any, which any foreign jurisdiction may impose on Licensor with respect to
the amounts paid to Licensor by Licensee other than personal income taxes, if
any. The amount of such taxes paid by Licensee shall be deducted from each
payment of the Percentage Fee. Licensee shall furnish Licensor with an official
receipt promptly after each such payment of taxes. In the event such taxes are
not paid when due, all resulting penalties and interest imposed on Licensor
shall be borne by Licensee.
6. Licensee shall prepare and maintain, in accordance with generally
accepted accounting principles consistently applied, complete and accurate books
of account and records (including without limitation the originals or copies of
documents supporting entries in the books of account) covering all transactions
relating to the License hereby granted, including transactions relating to
fulfillment by Licensee of its advertising obligations set forth in Section
1(e). Licensor and its duly authorized representatives shall have the right,
during regular business hours and upon reasonable notice, to examine such books
of account and records and all other documents and materials in the possession
or under the control of Licensee with respect to the subject matter and the
terms of this Agreement and Licensor shall have free and full
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<PAGE>
access thereto for such purposes and for the purpose of making extracts
therefrom. All such books of account, records, and documents shall be kept
available by Licensee for at least three years after the Annual Period to which
they relate.
7. (a) If, as a result of any examination of Licensee's books and records,
it is shown that Licensee's fee payments for any period were less than the
amount which should have been paid for such period by an amount equal to at
least five percent of the fee actually paid during such period, Licensee
promptly shall reimburse Licensor for the cost of such examination and Licensor
shall have the right to terminate this Agreement immediately upon written
notice.
(b) All payments required to be made to eliminate any discrepancy as
revealed by any examination of Licensee's books and records shall be made
promptly upon demand.
8. (a) Licensee agrees that no name or names shall be used in connection
with the Licensed Mark in any advertising, publicity, labeling, packaging, or
printed matter of any kind utilized by Licensee in connection with the Articles
except as Licensor may, from time to time, consent in writing. Licensee agrees
to use its best efforts to prevent the unauthorized use of the Licensed Mark and
of any derivatives thereof. Licensee agrees not to use the Licensed Mark or the
name or likeness of Mr. Kenneth Jay Lane or any derivative thereof in its
corporate name or business name or, unless approved by Licensor in writing, on
its business stationery, purchase orders, invoices, or letterhead.
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<PAGE>
(b) Licensee acknowledges that Licensor is the owner of all right,
title, and interest in and to the Licensed Mark throughout the world in any form
or embodiment thereof and is also the owner of the goodwill attached or which
shall become attached to the Licensed Mark. Sales by Licensee shall be deemed to
have been made by Licensor for purposes of trademark registration and all uses
of the Licensed Mark by Licensee shall inure to the benefit of Licensor.
Licensee shall not do or suffer to be done any act or thing which will in any
way adversely affect any rights of Licensor in and to the Licensed Mark or any
registrations thereof or which, directly or indirectly, will reduce the value of
the Licensed Mark or detract from its reputation.
(c) Licensee shall timely execute any documents, including
Registered User agreements and applications to record the Licensee as a
Registered User, to confirm Licensor's ownership of all rights in and to the
Licensed Mark in the Territory and the respective rights of Licensor and
Licensee pursuant to this Agreement. Licensee will cooperate with Licensor, in
connection with the filing and prosecution by Licensor of applications in
Licensor's name to register the Licensed Mark for Articles in the Territory and
the maintenance and renewal of such registrations as may issue. Licensee will
reimburse Licensor for any and all costs incurred in connection with
applications to register the Licensed Mark for Articles in any jurisdiction in
the Territory and the maintenance and renewal of such registrations as may
issue.
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<PAGE>
(d) Licensee will use the Licensed Mark in the Territory strictly in
compliance with applicable legal requirements and will use such markings in
connection therewith as may be required.
(e) Licensee will never challenge Licensor's ownership of or the
validity of the Licensed Mark or any application for registration thereof, or
any trademark registrations thereof, or any rights of Licensor therein.
(f) Any copyright which may be created in any sketch, design, print,
package, label, tag, or the like designed or approved by Licensor will be the
property of Licensor. Licensee will not, at any time, do or suffer to be done
any act or thing which may adversely affect any rights of Licensor in such
sketches, designs, prints, packages, labels, tags, and the like and will, at
Licensor's request, do all things reasonably required by Licensor to preserve
and protect said rights. Licensee shall have the full right to use during the
term of this Agreement any sketch, design, print, package, label, tag or the
like designed or approved by Licensor in connection with this Agreement.
(g) Licensee acknowledges that the Licensed Mark has acquired a
valuable secondary meaning and goodwill with the public, and that products
bearing the Licensed Mark have acquired a reputation of highest quality and
style. Accordingly, notwithstanding any provision in this Agreement to the
contrary, Licensee undertakes and agrees not to use the Licensed Mark in any
manner whatsoever which, directly or indirectly, would derogate or detract
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<PAGE>
from its or Licensor's repute, including but not limited to selling the Articles
to discount department and chain stores. Licensee recognizes that the
undertaking on its part set forth in this paragraph represents a major
inducement and consideration for Licensor to enter into this Agreement and will
consult with Licensor regarding its plans for marketing and distributing
Articles.
(h) Licensee acknowledges that Licensor has made no representation
or warranty that Licensor has enforceable legal rights in and to the Licensed
Mark in any jurisdiction other than the United States. In the event that
Licensor does not have such rights in any foreign jurisdiction or jurisdictions
such event shall not be deemed to be a breach or default under this Agreement.
9. In the event that Licensee learns of any infringement or imitation of
the Licensed Mark or of any use by any person of a trademark similar to the
Licensed Mark, it shall promptly notify Licensor thereof in writing and if, in
Licensee's reasonable opinion, such infringement, imitation, or use also
constitutes an infringement of the rights herein granted to Licensee, Licensee
shall specifically so state in its notice. In such latter case, if appropriate
action is not taken by Licensor within 20 days after the date of its receipt of
such notice from Licensee, Licensee shall have the right to prosecute such
trademark infringer but in such event Licensee will keep Licensor advised in
advance of its intentions in such action, will consult with Licensor with
respect thereto, and will not settle such action without Licensor's written
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approval (which approval may not be unreasonably withheld). If, however,
Licensor does take such action, Licensor shall permit Licensee to join such
action as an additional plaintiff. In either case, Licensor and Licensee agree
to cooperate fully with the party conducting the action. Any recovery obtained
against the third-party infringer shall be applied first against the legal fees
incurred in connection with such action and shall then be allocated between
Licensor and Licensee in the same proportion as the judgment or decision, as the
case may be, allocates damages or the award; if such judgment or decision fails
to make such allocation, such shall be determined by mutual agreement or by
arbitration in New York City in accordance with and pursuant to the then
existing rules of the American Arbitration Association.
10. (a) Licensee does hereby indemnify and agrees to save and hold
Licensor, its officers, directors, shareholders, employees and agents harmless
of and from any and all liability, claims, causes of action, suits, losses,
damages, and expenses (including, but not limited to, reasonable attorneys' fees
and expenses) for which they or any of them may become liable or may incur or be
compelled to pay in any action or claim (including, but not limited to, any
action or claim relating to products liability) against them or any of them, for
or by reason of any acts, whether of omission or commission, that may be
committed or suffered by Licensee or any of its officers, directors, affiliates,
agents, or employees in connection with Licensee's performance of this Agreement
or in connection with the manufacture, distribution,
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sale, or promotion of the Articles. The indemnitees shall give Licensee prompt
written notice of any such action or claim and Licensee may then, in its sole
discretion, take such action as it deems advisable to defend such action or
claim on behalf of the indemnitees. In the event appropriate action is not taken
by Licensee within 20 days of its receipt of notice from the indemnitees, the
indemnitees shall have the right to defend such action or claim, but no
settlement thereof may be made without the approval of Licensee (which approval
may not be unreasonably withheld). In any case, the indemnitees and Licensee
shall keep each other fully advised of all developments and shall cooperate
fully with each other in all respects in connection with any such defense as is
made.
(b) Licensee shall procure and maintain at its own expense in full
force and effect at all times during which Articles are being sold, with a
responsible insurance carrier acceptable to Licensor, a public liability
insurance policy including products liability coverage with respect to the
Articles and contractual coverage relating to this Agreement, with a limit of
liability of not less than $2,000,000 (United States). Such insurance policy
shall be written for the benefit of Licensee and Licensor, and shall provide for
at least 30 days' prior written notice to Licensor and Licensee of the
cancellation or modification thereof. Such insurance may be obtained by Licensee
in conjunction with a policy of insurance which covers products other than the
Articles. Licensee shall deliver to Licensor, promptly upon issuance of same,
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a full and complete copy of such insurance policy and of all renewals thereof.
Nothing contained in this paragraph 10(b) shall be deemed to limit, in any way,
the indemnification provisions of paragraph 10(a).
11. (a) If Licensee shall fail to pay any amount due hereunder, (i)
Licensee agrees to pay interest, at a rate equal to the lesser of (A)
percent per annum over the prime rate being charged in New York City by Chemical
Bank as of the close of business on the date the payment first becomes due and
(B) the highest rate then permitted by law, on such amount remaining unpaid from
time to time from and including the date such amount becomes due until the date
such amount is paid in full and (ii) if such default shall continue uncured for
a period of ten days after written notice thereof ("Notice of Default") has been
given by Licensor, Licensor shall have the right to terminate this Agreement,
which termination may be automatic, at the option of Licensor, upon notice
thereof in the Notice of Default or in any subsequent notice to Licensee. If
Licensee shall otherwise fail to perform any of the terms, conditions,
agreements, or covenants in this Agreement on its part to be performed and such
default shall, although capable of being cured, continue uncured for a period of
15 days after a Notice of Default has been given by Licensor, Licensor may, at
its sole election, terminate this Agreement, which termination may be automatic
upon notice thereof in the Notice of Default or in any subsequent notice to
Licensee. If any such default is incapable of being cured by Licensee, Licensor
shall
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have the right to terminate the Agreement with immediate effect upon delivery of
written notice to Licensee. Licensee agrees that in the event of any default
under this paragraph 11(a) or in the event of a breach by Licensee of any other
provision of this Agreement, Licensee shall be responsible for all costs,
including without limitation legal fees and expenses, incurred by Licensor as a
result thereof. Nothing in this paragraph 12(a) shall be deemed to waive
Licensor's right to obtain damages for any default by Licensee, whether cured or
uncured.
(b) In the event Licensee files a petition for an order of relief
under any bankruptcy law, or if a petition for an order of relief is filed
against it and is not discharged or dismissed within 60 days thereafter, or if
it becomes insolvent, or makes an assignment for the benefit of its creditors,
or files a petition or otherwise seeks relief under or pursuant to any
bankruptcy, insolvency, or reorganization statute or proceeding, or if it
discontinues its business, or if a custodian, receiver, or trustee is appointed
for it or a substantial portion of its business or assets, Licensor may, at its
sole election, terminate this Agreement by written notice effective 60 days
after such filing or such other aforementioned event.
(c) No assignee for the benefit of creditors, custodian, receiver,
trustee in bankruptcy, sheriff, or any other officer of the court or official
charged with taking over custody of Licensee's assets or business shall have any
right to continue this Agreement or to exploit or in any way use the Licensed
Mark if
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Licensor exercises its right of termination pursuant to paragraph 10(b).
(d) Notwithstanding the provisions of paragraph 11(c), in the event
that, pursuant to any bankruptcy law, a trustee of Licensee (hereinafter
referred to as the "Trustee") or Licensee as debtor in possession is permitted
to assume this Agreement and does so and, thereafter, desires to assign this
Agreement to a third party, which assignment (i) satisfies the requirements of
such bankruptcy law, (ii) is to a party that has established a reputation for
producing products of the same type as the Articles and of a quality that is at
least equal to the quality of Articles produced by Licensee and consistent with
the standards set forth in this Agreement for Articles, (iii) is to a party that
can demonstrate its financial ability to perform the obligations of Licensee
pursuant to this Agreement, and (iv) provides that any payments in excess of the
amounts set forth hereunder be paid only to Licensor, the Trustee, or Licensee,
as the case may be, shall notify Licensor of the terms of such proposed
assignment in writing. The giving of such notice shall be deemed to constitute
an offer to Licensor to have this Agreement assigned to it or to its designee
for the consideration, or its equivalent in money, and upon such terms, as are
specified in the notice. The aforesaid offer may be accepted only by written
notice given to the Trustee or Licensee, as the case may be, by Licensor within
15 days of Licensor's receipt of the notice from such party. If Licensor fails
to give its notice to such party within the said 15 days, such party may
complete the
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assignment referred to in its notice, but only if such assignment is to the
entity named in the notice and for the consideration and upon the terms
specified therein. Nothing contained herein shall be deemed to preclude or
impair any rights which Licensor may have as a creditor in any proceeding or
shall be deemed to be a consent to any assignment.
(e) Notwithstanding any termination in accordance with the
foregoing, Licensor shall have and hereby reserves all the rights and remedies
which it has, or which are granted to it by operation of law, with respect to
the collection of fees payable by Licensee pursuant to this Agreement, with
respect to damages for breach of this Agreement by Licensee, with respect to the
recovery from Licensee of all costs incurred by Licensor as a result of any
breach of this Agreement by Licensee, including without limitation all legal
fees and expenses, and to enjoin the unlawful and unauthorized use of the
Licensed Mark.
12. (a) On the expiration or termination of this Agreement for any reason
whatsoever, all the rights of Licensee hereunder shall forthwith terminate and
automatically revert to Licensor and Licensee shall forthwith discontinue all
use of the Licensed Mark and shall no longer have the right to use the Licensed
Mark or any variation or simulation thereof. Licensee shall thereupon deliver to
Licensor, free of charge, all labels, tags, and other material in its possession
with the Licensed Mark thereon and Licensee shall cause stencils, sketches, and
other design materials not in its possession to be destroyed or rendered
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unusable. Licensee agrees not to reproduce or adapt any of such stencils,
sketches, or other design materials for use on merchandise subsequent to the
termination of this Agreement.
(b) Notwithstanding the provisions of paragraph 12(a), in the event
of the expiration or termination of this Agreement other than by Licensor in
accordance with paragraph 11, Licensee shall be permitted, for an additional
period of six months, on a non-exclusive basis, to sell and dispose of its
inventory of Articles from the collections prepared during the final year of
this Agreement (but no other Articles) on hand on the date of such termination
or expiration, subject to an accounting for and the payment of the Percentage
Fee on sales during such additional period and subject to the other terms and
conditions of this Agreement. Such accounting and payment shall be due within 30
days after the last day of such six-month period.
13. Licensor and Licensee each represents and warrants to the other that
the negotiations relative to this Agreement and the transactions contemplated
hereby have been carried on directly between them in such a manner as not to
give rise to any valid claims against either of them for a brokerage commission,
finder's fee or other like payment, except for any payments which may be due to
Mort Gordon Enterprises, Inc. Licensee agrees to indemnify Licensor against any
and all liabilities (including, without limitation, reasonable attorneys' fees
and disbursements paid or incurred in connection with any such liabilities) for
any brokerage or finder's fees or other commissions or fees that may be asserted
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against Licensor by reason of any actions of Licensee or on Licensee's behalf in
connection with or as a result of this Agreement or the transactions
contemplated hereby, except for any payments that may be due to Mort Gordon
Enterprises, Inc.
14. (a) Licensee represents and warrants that it has full right, power,
and authority to enter into this Agreement.
(b) Licensee has delivered to Licensor the audited balance sheet of
Licensee as of 12/31/92 and related statement of income for the year then ended.
Licensee represents and warrants that such statements present fairly the
information purported to be shown therein, have been prepared in accordance with
generally accepted accounting principles, are correct and complete, and are in
accordance with the books and records of Licensee. Licensee further represents
that since the end of Licensee's last fiscal year there has at no time been a
material adverse change in the financial condition of Licensee and there is no
fact known to Licensee which materially adversely affects or in the future may
materially adversely affect the financial condition or business of Licensee.
15. All reports, approvals, notices and statements required or permitted
by this Agreement to be given to a party shall be in writing and shall be deemed
to be duly given if personally delivered or mailed by certified or registered
mail, return receipt requested, to Licensor at its address as set forth on page
1, and to Licensee at the address set forth on page 1 of this Agreement (or at
such other address as a party may specify by
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notice to the other).
16. Neither this Agreement nor the License or other rights granted
hereunder may be assigned, sublicensed, or transferred by Licensee, except as
specifically provided in paragraph 11(d), and any attempted violative
assignment, sublicense, or transfer, whether voluntary or by operation of law,
shall be void and of no force or effect. A change of control of Licensee or a
transfer of all or a controlling portion of the stock of Licensee shall be
deemed to be an assignment of this Agreement. Except as otherwise provided
herein, this Agreement shall inure to the benefit of and shall be binding upon
the parties and their respective successors and assigns.
17. This Agreement contains the entire understands ing and agreement
between the parties hereto with respect to the subject matter hereof, supersedes
all prior oral and written understandings and agreements relating thereto, and
may not be modified, discharged, or terminated orally.
18. Nothing herein contained shall be construed to constitute the parties
hereto as partners or as joint venturers, or either as agent of the other, and
neither party shall have any power or authority to assume or create any
obligation or responsibility whatsoever, express or implied, on behalf of or in
the name
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of the other, to bind the other in any manner, or to make any representation,
warranty, or commitment on behalf of the other.
19. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to principles of
conflict of laws. However, any and all disputes, controversies, and claims
arising out of or relating to this Agreement and pertaining to Licensor's
ownership of or the validity in any country of the Licensed Mark or any
registration thereof or any application for registration thereof shall be
governed by and construed in accordance with the trademark laws and related
laws, statutes, rules, and regulations of such country unless there are no laws,
statutes, rules, or regulations in such country dispositive of such disputes,
controversies, and claims, in which case any and all such disputes,
controversies, and claims shall be governed by and construed in accordance with
the federal trademark laws and related laws, statutes, rules, and regulations of
the United States unless there are no federal laws, statutes, rules, or
regulations of the United States dispositive of such disputes, controversies,
and claims, in which case any and all such disputes, controversies, and claims
shall be governed by and construed in accordance with the laws of the State of
New York, without giving effect to principles of conflict of laws.
20. Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to
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insist upon strict adherence to any term of this Agreement on one or more
occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Agreement. Any waiver must be in writing.
21. If any provision of this Agreement is invalid, illegal, or
unenforceable, the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
22. This Agreement may be executed in counterparts, each of which shall be
deemed an original, but both of which together shall constitute one and the same
instrument.
23. Since a breach of the provisions of this Agreement by Licensee could
not adequately be compensated by money damages, Licensor shall be entitled, in
addition to any other right or remedy available to it, to an injunction
restraining such breach or a threatened breach and to specific performance of
any such provision of this Agreement, and in either case no bond or other
security shall be required in connection therewith, and Licensee hereby consents
to the issuance of such injunction and to the ordering of specific performance.
24. At any time and from time to time, each party agrees, without further
consideration, to take such actions and to execute and deliver such documents as
may be reasonably necessary to effectuate the purposes of this Agreement.
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25. Licensee hereby irrevocably consents to the jurisdiction of the courts
of the State of New York and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this
Agreement (other than as contemplated by the last sentence of paragraph 10), any
document or instrument delivered pursuant to, in connection with, or
simultaneously with this Agreement, or a breach of this Agreement or any such
document or instrument. Within 30 days after such service, or such other time as
may be mutually agreed upon in writing by the attorneys for the parties to such
action or proceeding, Licensee shall appear or answer such summons, complaint,
or other process. Should Licensee so served fail to appear or answer within such
30-day period or such extended period, as the case may be, Licensee shall be
deemed in default and judgment may be entered by Licensor against Licensee for
the amount as demanded in any summons, complaint, or other process so served.
26. Licensee agrees to obtain, at its expense, any and all required
approvals of this Agreement or any of the transactions contemplated hereby by
any government in the Territory outside of the United States or any agencies or
subdivisions thereof.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement the day and year first above written.
WINDSOR OPTICAL, INC.
By: /s/ Jay J. Kitnick
--------------------------------
Name: Jay J. Kitnick
Title: President
KENNETH JAY LANE, INC.
By: /s/ Kenneth Lane
--------------------------------
Name: Kenneth Lane
Title:
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Exhibit 10.28
ENDORSEMENT AGREEMENT
This Endorsement Agreement ("Agreement") is made and entered into as
of August 24, 1995, by and among the following parties:
(a) Kathy Ireland, Inc. ("KI Inc."), furnishing the services
of Kathy Ireland ("KI"), c/o The Sterling/Winters Co., 1900 Avenue of the
Stars, Suite #1640, Los Angeles, California 90067;
(b) The Sterling/Winters Co. ("SW"), 1900 Avenue of the Stars,
Suite #1640, Los Angeles, California 90067; and
(c) Diplomat Ambassador Eyewear Group ("Diplomat"), 1010 Arch
Street, 3rd Floor, Philadelphia, Pennsylvania 19107.
1. Recitals.
(a) Whereas Diplomat has created a new product line to be
known as "Kathy Ireland Eyewear" ("KI Eyewear");
(b) Whereas Diplomat estimates on a non-binding basis that
wholesale sales of KI Eyewear will reach $ during the first License
Year, $ during the 2nd License Year, $ during the 3rd License
Year, and $ during the 4th License Year (as those License Years are
defined in subparagraph 3.(b) of this Agreement);
(c) Whereas Diplomat desires to obtain the right to use the
name, likeness and endorsement of KI in connection with the advertisement,
promotion and sale of KI Eyewear; and
(d) Whereas KI, Inc. has the authority to grant the right to
use KI's name, likeness and endorsement to Diplomat in connection with the
advertisement, promotion and sale of KI Eyewear and desires to do so;
(e) NOW THEREFORE, for and in consideration of the mutual
promises and conditions contained in this Agreement, the parties hereby agree as
follows.
2. Grant of License.
(a) Products. Upon the terms and conditions set forth in this
Agreement, KI, Inc. hereby grants to Diplomat and Diplomat hereby accepts the
right, license and privilege of utilizing KI's name and likeness solely upon and
in connection with the manufacture, sale and distribution of the following
products:
(1) sunglasses, eyeglasses, readers and ophthalmic
frames;
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(2) optical cases, optical eye chains, eye pins, and
lens cleaning kits sold only in optical retailers; and
(3) such other optical accessories as the parties shall
agree.
(b) Territory. The license hereby granted extends worldwide.
(c) Term. The term of the license hereby granted shall
commence August 1, 1995 and continue until January 30, 2000, unless sooner
terminated in the manner provided in the immediately succeeding sentence or as
otherwise provided in this Agreement. Notwithstanding the foregoing, if the
management of Kmart stores elects not to carry KI eyewear prior to the end of
the first license year (January 30, 1997), then either party shall have the
right to terminate this Agreement as of such date.
3. Terms of Payment.
(a) Rate. Diplomat agrees to pay KI, Inc. as royalty a sum
equal to % of the net wholesale volume of the products covered by this
Agreement by Diplomat and its affiliated, associated, or subsidiary companies.
The term "net wholesale volume" shall mean gross sales to all customers; less
returns, trade discounts and cash discounts; but no deduction shall be made for
other discounts or uncollectible accounts. No costs incurred in the manufacture,
sale, distribution, or exploitation of the products covered by this Agreement
shall be deducted from any royalty payable by Diplomat.
(b) Minimum Royalties. Diplomat agrees to pay KI, Inc. the
minimum royalties set forth below as a minimum guarantee against royalties to be
paid to KI, Inc. under subparagraph 3.(a), above:
(1) 1st License Year (8/1/95 - 1/30/97): $
(2) 2nd License Year (2/1/97 - 1/30/98): $
(3) 3rd License Year (2/1/98 - 1/30/99): $
(4) 4th License Year (2/1/99 - 1/30/2000): $
The minimum royalty for the 1st License Year shall be paid as follows: $
upon the signing of the Deal Memo dated August 24, 1995, the balance of $
to be paid in six (6) equal, consecutive, monthly installments of $
commencing with the month in which this Agreement is signed. No part of the
minimum royalty for the first License Year shall in any event be repayable to
Diplomat. The minimum royalty for the 2nd, 3rd and 4th License Years shall be
made in four equal installments payable on February 1st, May 1st, August 1st and
November 1st of each such License Year. Notwithstanding the foregoing, if
royalties paid by Diplomat to KI, Inc. on net
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wholesale volume for any particular License Year under subparagraph 3(a) of this
Agreement should exceed the minimum royalties remaining to be paid for that same
License Year under this subparagraph 3(b), then no further payments of minimum
royalties for such License Year shall be required under this subparagraph 3(b).
(c) Periodic Statements. Within thirty (30) days after the
initial shipment of the products covered by this Agreement, and promptly on the
15th of each calendar month thereafter, Diplomat shall furnish to KI, Inc.
complete and accurate statements certified to be accurate by Diplomat showing
the number, description and gross sales price, itemized deductions from gross
sales price, and net sales price of the products covered by this Agreement
distributed and/or sold by Diplomat during the preceding calendar month,
together with any returns made during the preceding calendar month. Such
statements shall be furnished to KI, Inc. whether or not any of the products
have been sold during the preceding calendar month.
(d) Royalty Payments. Royalties in excess of the minimum
royalty shall be due on the 25th day of the month following the calendar month
in which they are earned, and payment shall accompany the statements furnished
pursuant to subparagraph (c), above. The receipt or acceptance by KI, Inc. of
any of the statements furnished pursuant to this Agreement, or of any royalties
paid hereunder, or the cashing of any royalty checks paid hereunder, shall not
preclude KI, Inc. from questioning the correctness of such statements or
payments, provided all such questions are raised with Diplomat within two years
of the date of KI Inc's receipt of the statement or payment in question. In the
event any inconsistencies or mistakes are discovered in such statements or
payments, they shall immediately be rectified and the appropriate payments made
by Diplomat.
4. Exclusivity.
The license hereby granted shall be exclusive as to the products
described in subparagraphs 2.(a)(1) and (2) of this Agreement, but nonexclusive
as to all other products covered by this Agreement. Nothing in this Agreement
shall be construed to prevent KI, Inc. from granting any other licenses for the
use of KI's name or likeness, or from utilizing KI's name and likeness in any
manner whatsoever, except that KI, Inc. agrees that except as provided herein it
will grant no other licenses for the territory to which this license extends for
the use of KI's name and likeness in connection with the sale of the products
described in subparagraphs 2.(a)(1) and (2) of this Agreement effective during
the term of this Agreement.
5. Personal Endorsement and Appearances.
(a) Endorsement. KI, Inc. agrees that KI shall endorse KI
Eyewear and that KI will use her best efforts to wear KI Eyewear whenever
reasonably possible and appropriate, with KI to have sole, unfettered discretion
as to where and when to wear KI Eyewear.
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(b) USA Appearance. KI will make one (1) personal appearance
per License Year during the period of this Agreement on behalf of Diplomat at
the Vision Expo in New York, New York, subject to the terms of this paragraph.
Such appearance shall be for the purpose of signing autographs, shall last for a
period of up to three (3) hours, and shall be subject to KI's schedule and
availability. Diplomat, at its own expense, shall provide KI with a hair and
make-up assistant of KI's choosing for each personal or media appearance
required under this Agreement.
(c) Travel. Travel expenses of KI in connection with all
scheduled personal appearances under this Agreement, as well the travel expenses
of KI's child, the child's nanny, KI's hair and make-up assistant of KI's
choosing, and two (2) additional traveling companions of KI's choosing
(collectively referred to as KI's "entourage"), shall be provided by Diplomat.
KI and the members of her entourage shall travel via first class air and
portal-to-portal limousine ground transportation. In addition, KI and the
members of her entourage shall be lodged in first class hotel accommodations and
all of them shall be reimbursed for all meals and other incidental expenses in
connection with such appearances. All the above travel expenses of KI and the
members of her entourage shall be billed directly to Diplomat. For purposes of
this paragraph (c), the term "travel expenses" shall include
(d) Photo Sessions. KI will participate in up to two (2) photo
sessions per License Year during the period of this Agreement on behalf of
Diplomat at a mutually acceptable time and place. The photo sessions shall be
scheduled at KI's convenience upon not less than two (2) weeks prior notice, and
shall be subject to KI's preexisting personal and professional commitments. The
photo sessions shall be up to two (2) consecutive days in duration, each day to
consist of no more than eight (8) working hours. The photo shoots shall be
produced by SW, approved in writing by Diplomat (which approval shall not be
unreasonably withheld), and all images produced from the photo sessions shall be
the property of SW. The parties agree that all images from the photo sessions
shall be retouched at the expense of Diplomat. In recognition of SW's expenses
in connection with the above photo sessions, Diplomat shall pay SW the sum of
$ per day for each day (or partial day) of such photo sessions. It is
understood by the parties that such sum shall include all expenses required to
provide Diplomat with positive film (excluding travel expenses of KI, as set
forth in this Agreement), and that such sum contemplates a typical location for
such photo sessions. If a more elaborate set-up for such photo sessions is
required, and such set-up is mutually agreed to by the parties, then the above
sum shall be increased to such amount as the parties shall agree. The above sum
shall not include retouching images.
(e) Videotapes. KI will participate in the production of up to
one (1) product information/sales video per License Year during the period of
this Agreement on behalf of Diplomat at a mutually acceptable time and place.
The video production sessions shall be scheduled at KI's convenience upon not
less than two (2) weeks prior notice, and shall be subject to KI's preexisting
personal and professional commitments. The video production sessions shall be up
to two (2) consecutive days
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in duration, each day to consist of no more than eight (8) working hours. The
video production sessions shall be produced by SW, approved in writing by
Diplomat (which approval shall not be unreasonably withheld), and all images
produced from the video production sessions shall be the property of SW. In
recognition of SW's expenses in connection with such video production sessions,
Diplomat shall pay SW a sum per day for each day (or partial day) of such
sessions, such sum to be agreed upon by the parties. It is understood by the
parties that such sum shall include all expenses required to provide Diplomat
with an acceptable video (excluding travel expenses of KI, as set forth in this
Agreement).
(f) Scope of License. The license granted to Diplomat in
subparagraph 2(a) of this Agreement shall include the right to use the photos
and videotapes referred to in subparagraphs 5(d) and 5(e) of this Agreement in
connection with the marketing, distribution and sale of the products described
in subparagraph 2(a) of this Agreement, subject to the prior approval of KI,
Inc.
6. Good Will, Etc.
Diplomat recognizes the great value of the good will associated with
KI's name and acknowledges that (a) KI's name, and all rights and good will
pertaining to KI's name, belong exclusively to KI, Inc. and (b) that KI's name
has a secondary meaning in the mind of the public.
7. KI, Inc.'s Title and Protection of KI. Inc.'s Rights.
(a) Diplomat agrees that it will not at any time during the
term of this Agreement or thereafter attack (i) KI, Inc.'s title to, or rights
in and to, KI's name or (ii) the validity of this license. KI, Inc. hereby
indemnifies Diplomat and undertakes to hold it harmless against only those
claims or suits (i) arising solely out of the authorized use of KI's name by
Diplomat in accordance with this Agreement and (ii) brought by those persons or
entities to whom KI, Inc. has licensed the use of KI's name and likeness. Prompt
notice shall be given by Diplomat to KI, Inc. of any such claim or suit. In
addition, KI, Inc. shall have the option to undertake and conduct the defense of
any suit so brought and no settlement of any such claim or suit shall be made
without the prior written consent of KI, Inc.
(b) Diplomat shall notify KI, Inc. in writing of any
infringements or imitations by others of KI's name on products similar to those
covered by this Agreement that may come to Diplomat's attention, and KI, Inc.
shall have the sole right to determine whether or not any action shall be taken
in connection with such infringements or imitations. Diplomat shall not
institute any suit or take any action in connection with any such infringements
or imitations without first obtaining the written consent of KI, Inc.
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8. Indemnification by Licensee and Product Liability Insurance.
Diplomat hereby indemnifies KI, Inc. and KI, undertakes to defend
KI, Inc. and KI against, and hold KI, Inc. and KI harmless from, any claims,
suits, loss and damage (including attorneys' fees and costs) arising out of (a)
any allegedly unauthorized use of any patent, process, idea, method, or device
by Diplomat in connection with the products covered by this Agreement, (b) any
alleged defects in the products covered by this Agreement, and (c) any other
alleged action by Diplomat. Diplomat agrees that it will obtain, at its own
expense, product liability insurance from a recognized insurance company which
is qualified to do business in the State of California providing adequate
protection (at least in the amount of $1,000,000) for KI, Inc., KI and
Diplomat against any claims, suits, loss or damage arising out of any alleged
defects in the products. As proof of such insurance, a fully paid certificate
of insurance naming KI, Inc. and KI as an insured party will be submitted to
KI, Inc. by Diplomat for KI, Inc.'s prior approval before any product is
distributed or sold, and at the latest within thirty (30) days after the date
first written above. Any proposed change in certificates of insurance shall be
submitted to KI, Inc. for its prior approval. KI, Inc. shall be entitled to a
copy of the then prevailing certificate of insurance, which shall be furnished
KI, Inc. by Diplomat. As used in the first 2 sentences of this paragraph 6,
"KI, Inc." shall also include the officers, directors, agents, and employees
of the KI, Inc., or any of its subsidiaries or affiliates.
9. Quality of Merchandise.
Diplomat agrees that the products covered by this Agreement
shall be of such style, appearance and quality as to be adequate and suited to
their exploitation to the best advantage, protection and enhancement of KI's
name and the good will pertaining to such name. Diplomat further agrees that (a)
such products will be manufactured, sold and distributed in accordance with all
applicable Federal, State and local laws, (b) that the policy of sale,
distribution, and/or exploitation by Diplomat shall be to the best advantage of
KI, Inc. and KI, and (c) that the latter policy shall in no manner reflect
adversely upon the good name of KI and KI, Inc. To this end, Diplomat shall,
before selling or distributing any of the products, furnish to KI, Inc. for its
approval, free of cost, a reasonable number of samples of each product and the
cartons, containers, packing and wrapping material for such products. The
quality and style of such products, as well as of any carton, container or
packing or wrapping material, shall be subject to the approval of KI, Inc.,
which shall not be unreasonably withheld or delayed. Failure to reject any
product, carton, container, or packing or wrapping within 15 days of receipt of
such item or items by KI, Inc. shall be deemed an acceptance of the quality and
style of such item or items. After samples have been approved pursuant to this
paragraph, Diplomat shall not depart therefrom in any material respect without
KI, Inc.'s prior written consent. From time to time after Diplomat has commenced
selling the products, and upon KI, Inc.'s written request, Diplomat shall
furnish without cost to KI, Inc. not more than ten (10) additional random
samples of each product being manufactured and sold by Diplomat under this
Agreement, together with any containers and packing and wrapping material used
in connection with such products.
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10. Labeling.
(a) Diplomat agrees that it will cause to appear on or within
each product sold by it under this license and on or within all
advertising, promotional, or display material bearing KI's name (i) the
notice "Copyright (c) (year) ______" and any other notice desired by KI,
Inc and (ii) where such product, advertising, promotional, or display
material bears a trademark or service mark, appropriate statutory notice
of registration or application for registration thereof. In the event that
any product is marketed in a carton, container, packing or wrapping
material bearing KI's name, such notice shall also appear upon the said
carton, container, packing or wrapping material. Each and every tag,
label, imprint, or other device containing any such notice and all
advertising, promotional or display material bearing KI's name shall be
submitted by Diplomat to KI, Inc. for its written approval prior to use by
Diplomat. Approval by KI, Inc. shall not constitute waiver of KI, Inc.'s
rights or Diplomat's duties under any provision of this Agreement.
(b) Diplomat agrees to cooperate fully and in good faith with
KI, Inc., at the expense of KI, Inc., for the purpose of securing and
preserving KI, Inc.'s (or any grantor of KI, Inc.'s) rights in and to KI's
name. It is agreed that nothing contained in this Agreement shall be
construed as an assignment or grant to Diplomat of any right, title or
interest in or to KI's name, it being understood that all rights relating
thereto are reserved by KI, Inc., except for the license hereunder to
Diplomat of the right to use and utilize KI's name only as specifically
and expressly provided in this Agreement. Diplomat hereby agrees that at
the termination or expiration of this Agreement Diplomat will be deemed to
have assigned, transferred and conveyed to KI, Inc. any trade rights,
equities, good will, titles or other rights in and to KI's name which may
have been obtained by Diplomat or which may have vested in Diplomat in
pursuance of any endeavors covered by this Agreement, and that Diplomat
will execute any instruments requested by KI, Inc. to accomplish or
confirm the foregoing. Any such assignment, transfer, or conveyance shall
be without consideration other than the mutual covenants and
considerations of this Agreement.
(c) Diplomat hereby agrees that its every use of KI's name
shall inure to the benefit of KI, Inc. and that Diplomat shall not at any
time acquire any rights in KI's name by virtue of any use it may make of
such name.
11. Promotional Material.
(a) In all cases where Diplomat desires artwork to be created
involving products that are the subject of this license, the cost of such
artwork and the time for the production thereof shall be borne by
Diplomat. All artwork and designs involving KI's name, or any reproduction
thereof, shall, notwithstanding their invention or use by Diplomat, be and
remain the
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property of SW, and SW shall be entitled to use the same and to license
the use of the same by others.
(b) KI, Inc. shall have the right, but shall not be under any
obligation, to use KI's name and/or the name of Diplomat so as to give
KI's name, KI, Inc., or KI, Inc.'s programs full and favorable prominence
and publicity. KI, Inc. shall not be under any obligation whatsoever to
use KI's name, or any person, character, symbol, design, likeness, or
visual representation thereof in any radio or television program.
(c) Diplomat agrees not to offer for sale, advertise, or
publicize any of the products licensed hereunder on radio or television
without the prior written approval of KI, Inc., which approval KI, Inc.
may grant or withhold in its unfettered discretion.
12. Distribution.
(a) Diplomat agrees that during the term of this license it
will diligently and continuously manufacture, distribute and sell the
products covered by this Agreement and that it will make and maintain
adequate arrangements for the distribution of the products.
(b) Diplomat agrees that it will sell and distribute the
products covered by this Agreement (i) to jobbers, wholesalers and
distributors for sale and distribution to retail stores and merchants, and
(ii) to retail stores and merchants for sale and distribution direct to
the public. Diplomat shall not, without the prior written consent of KI,
Inc., sell or distribute such products to jobbers, wholesalers,
distributors, retail stores, or merchants whose sales or distribution are
or will be made for publicity or promotional tie-in purposes, combination
sales, premiums, give-aways, or similar methods of merchandising. In the
event any sale is made at a special price to any of Diplomat's
subsidiaries or to any other person, firm or corporation related in any
manner to Diplomat or its officers, directors or major stockholders, there
shall be a royalty paid on such sales based upon the price generally
charged the trade by Diplomat.
(c) Diplomat agrees to sell to KI, Inc. such quantities of the
products at as low a rate and on as good terms as Diplomat sells similar
quantities of the products to the general trade.
13. Records.
Diplomat agrees to keep accurate books of account and records
covering all transactions relating to the license hereby granted. KI, Inc. and
its duly-authorized representatives shall have the right, upon reasonable notice
and at reasonable hours of the day, to visit the offices of Diplomat one time
each calendar quarter for the purpose of examining said books of account and
records, and all other documents and materials in the possession or under the
control of Diplomat, with respect to the
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subject matter and terms of this Agreement, and shall have free and full access
thereto for said purposes and for the purpose of making extracts therefrom. Upon
demand of KI, Inc., Diplomat shall furnish to KI, Inc. a detailed statement by
an independent certified public accountant showing the number, description,
gross sales price, itemized deductions from gross sales price and net sales
price of the products covered by this Agreement distributed and/or sold by
Diplomat to the date of KI, Inc.'s demand. The cost of preparing such statement
shall be borne by KI, Inc. However, notwithstanding the foregoing, if the
prepared statement indicates that KI, Inc., received less than all royalties
payable to it under this Agreement, and the differential between the royalties
received and those payable amounts to more than % of the royalties received,
then the cost of such statement shall be borne by Diplomat. In the event books
of account and records shall be kept available for at least two (2) years after
the termination of this license.
14. Bankruptcy, Violation, Etc.
(a) If Diplomat shall not have commenced in good faith to
manufacture or distribute in commercial quantities sunglasses and
ophthalmic frames using KI's name within three months after the date of
this Agreement, or if at any time thereafter in any six calendar month
period Diplomat fails to sell or distribute sunglasses or ophthalmic
frames, or any other product described in subparagraph 2(a) of this
Agreement, KI Inc. may give notice of such failure with respect to any
such product which has not been so manufactured or distributed during the
six calendar month period. In the event that Diplomat does not commence
selling such product in commercial quantities within 90 days after such
notice, such notice shall be deemed to be a termination of this License
with respect to such product.
(b) If Diplomat files a petition in bankruptcy, or is
adjudicated a bankrupt, or if a petition in bankruptcy is filed against
Diplomat, or if it becomes insolvent, or it makes an assignment for the
benefit of its creditors or an arrangement pursuant to any bankruptcy law,
or if Diplomat discontinues its business, or if a receiver is appointed
for it or its business, the license hereby granted shall automatically
terminate forthwith without any notice whatsoever being necessary. In the
event this license is so terminated, Diplomat, its receivers,
representatives, trustees, agents, administrators, successors and/or
assigns shall have no right to sell, exploit or in any way deal with or in
any of the products covered by this Agreement, or any carton, container,
packing or wrapping material, advertising, promotional or display material
pertaining thereto, except with and under the special consent and
instructions of KI, Inc. in writing, which they shall be obligated to
follow.
(c) If Diplomat shall violate any of its other material
obligations under the terms of this Agreement, KI, Inc. shall have the
right to terminate the license hereby granted upon twenty (20) days'
notice in writing, and such notice of termination shall become effective
unless Diplomat shall
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completely remedy the violation within the twenty-day period and satisfy
KI, Inc. that such violation has been remedied.
(d) Termination of the license under the provisions of this
paragraph 14 shall be without prejudice to any rights which KI, Inc. may
otherwise have against Diplomat. Upon the termination of this license,
notwithstanding anything to the contrary herein, all royalties on sales
theretofore made shall become immediately due and payable and no minimum
royalties shall be repayable.
15. Final Statement Upon Termination or Expiration.
Sixty (60) days before the expiration of this license and, in the
event of its termination, ten (10) days after receipt of notice of termination
or the happening of the event which terminates this Agreement where no notice is
required, a statement showing the number and description of products covered by
this Agreement on hand or in process shall be furnished by Diplomat to KI, Inc.
KI, Inc. shall have the right to take a physical inventory to ascertain or
verify such inventory and statement and refusal by Diplomat to submit to such
physical inventory by KI, Inc. shall forfeit Diplomat's right to dispose of such
inventory, KI, Inc. retaining all other legal and equitable rights KI, Inc. may
have under the circumstances.
16. Disposal of Stock Upon Termination or Expiration.
Upon and after the termination of the license, and except as
otherwise provided in this Agreement, Diplomat may dispose of products covered
by this Agreement which are on hand, or in process at the time notice of
termination is received, for a period of one hundred and twenty (120) days after
notice of termination, provided advances and royalties with respect to that
period are paid and statements are furnished for that period in accordance with
paragraph 3. Notwithstanding anything to the contrary herein, Diplomat shall not
manufacture, sell or dispose of any products covered by this license after (a)
the expiration of the license, or (b) the termination of the license based on
(i) the failure of Diplomat to affix notice of copyright, trademark or service
mark registration or any other notice to the products, cartons, containers, or
packing or wrapping material or advertising, promotional or display material, or
(ii) because of the departure by Diplomat from the quality and style approved by
KI, Inc. pursuant to paragraph 9.
17. Effect of Termination or Expiration.
Upon and after the expiration or termination of this license, all
rights granted to Diplomat hereunder shall forthwith revert to KI, Inc., who
shall be free to license others to use KI's name in connection with the
manufacture, sale and distribution of the products covered hereby, and Diplomat
will refrain from further use of KI's name or any further reference to it,
direct or indirect, or anything deemed by KI, Inc. to be similar to the KI's
name, in connection with the manufacture, sale or distribution of Diplomat's
products, except as provided in paragraph 17.
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18. KI, Inc.'s Remedies.
(a) Diplomat acknowledges that (except as otherwise provided
herein) its failure to commence in good faith to manufacture and
distribute in commercial quantities any one or more of the products listed
in subparagraph 2(a) within three (3) months of the date of this Agreement
and to continue during the term hereof to diligently and continuously
manufacture, distribute and sell the products covered by this Agreement,
or any class or category thereof, will result in immediate damages to KI,
Inc.
(b) Diplomat also acknowledges that (except as otherwise
provided herein) its failure to cease the manufacture, sale or
distribution of the products covered by this Agreement, or any class or
category thereof, at the termination or expiration of this Agreement will
result in immediate and irremediable damage to KI, Inc. and to the rights
of any subsequent licensee. Diplomat acknowledges and admits that there is
no adequate remedy at law for such failure to cease manufacture, sale or
distribution, and Diplomat agrees that in the event of such failure KI,
Inc. shall be entitled to equitable relief by way of temporary and
permanent injunctions and such other further relief as any court with
jurisdiction may deem just and proper.
(c) Resort to any remedies herein shall not be construed as a
waiver of any other rights and remedies to which KI, Inc. is entitled
under this Agreement or otherwise.
19. Excuse for Nonperformance.
Diplomat shall be released from its obligations hereunder and this
license shall terminate in the event that governmental regulations or other
causes arising out of a state of national emergency, war, or causes beyond the
control of the parties render performance impossible and one party so informs
the other in writing of such causes and its desire to be so released. In such
events, all royalties on sales theretofore made shall become immediately due and
payable and no minimum royalties shall be repayable.
20. No Joint Venture.
Nothing herein contained shall be construed to place the parties in
the relationship of partners or joint venturers, and Diplomat shall have no
power to obligate or bind KI, Inc. in any manner whatsoever.
21. No Assignment or Sublicense by Diplomat.
This Agreement and all rights and duties hereunder are personal to
Diplomat and shall not, without the written consent of KI, Inc., be assigned,
mortgaged, sublicensed or otherwise encumbered by Diplomat or by operation of
law.
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KI, Inc. may assign its rights hereunder, but shall furnish written
notice of such assignment to Diplomat.
22. No Waiver, Etc.
None of the terms of this Agreement can be waived or modified except
by an express Agreement in writing signed by both parties. There are no
representations, promises, warranties, covenants or undertakings other than
those contained in this Agreement, which represents the entire understanding of
the parties. The failure of either party hereto to enforce, or the delay by
either party in enforcing, any of its rights under this Agreement shall not be
deemed a continuing waiver or a modification thereof and either party may,
within the time provided by applicable law, commence appropriate legal
proceedings to enforce any or all of such rights. No person, firm, group or
corporation (whether included in KI's name or otherwise) other than Diplomat and
KI, Inc. shall be deemed to have acquired any rights by reason of anything
contained in this Agreement, except as provided in paragraphs 8 and 22.
23. Additional Endorsers. If, during the term of this Agreement,
Diplomat should utilize the services of any other person to endorse its
products, and the public image of such person is so inconsistent with that of KI
as to risk damaging the good will of KI's name should KI, Inc. continue to do
business with Diplomat, then KI, Inc. shall have the right to terminate this
Agreement, subject to the remedial and other provisions of paragraph 14 of this
Agreement.
24. Miscellaneous Provisions.
(a) Authority. KI, Inc. has the full right, power, legal
capacity and authority to enter into this Agreement on behalf of KI, to
carry out its terms, and to grant Diplomat the rights, licenses and
privileges granted in this Agreement.
(b) Merger. This Agreement supersedes any and all prior
written or oral agreements between the parties.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California without
regard to conflict of law principles.
(d) Attorneys' Fees. The prevailing party in any proceeding
brought to enforce any provision of this Agreement shall be entitled to
recover the reasonable fees and costs of its counsel, plus all other costs
of such proceeding.
(e) Notices. All notices and statements to be given, payments
to be made and materials to be submitted under this Agreement shall be
given, made and submitted via certified or registered mail, postage
prepaid, return
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receipt requested, at the addresses of the parties, as set forth above,
unless notification of a change of address is given in writing, and the
date of mailing shall be deemed the date the notice or statement is given.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first set forth above.
/s/ Kathy Ireland
---------------------------------
KATHY IRELAND, Individually
KATHY IRELAND, INC.
By /s/ Kathy Ireland
---------------------------------
KATHY IRELAND, President
THE STERLING/WINTERS CO.
By /s/ Jason Winters
---------------------------------
JASON WINTERS
DIPLOMAT AMBASSADOR EYEWEAR GROUP
By /s/ Barry Budilov
---------------------------------
BARRY BUDILOV, President
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ADDENDUM TO ENDORSEMENT AGREEMENT
This addendum to the Endorsement Agreement between Kathy Ireland, Inc.,
Diplomat Ambassador Eyewear Group, and The Sterling/Winters Company entered into
as of August 24, 1995 now includes the following provision:
Diplomat Ambassador Eyewear Group agrees to comply with the laws and
regulations of any state or territory in which they manufacture or have
sub-contracted any Kathy Ireland product, especially pertaining to labor and
safety issues.
Diplomat Ambassador Eyewear Group agrees to comply with any reasonable
requests from Kathy Ireland, Inc. concerning labor and safety resolutions.
DIPLOMAT AMBASSADOR EYEWEAR GROUP
3/4/97 By /s/ Barry Budilov
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Dated BARRY BUDILOV, President
KATHY IRELAND, INC.
3/18/97 By /s/ Kathy M Ireland
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Dated KATHY IRELAND, President
THE STERLING/WINTERS CO.
3/21/97 By /s/ Jason Winters
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Dated JASON WINTERS
<PAGE>
Exhibit 10.29
LICENSE AGREEMENT
THIS AGREEMENT made this 1st day of January, 1993 by and between JONES
INVESTMENT CO., INC. ("Jones"), a Delaware corporation, and DIPLOMAT-AMBASSADOR
EYEWEAR GROUP ("Licensee") a Pennsylvania corporation.
W I T N E S S E T H:
Jones is the owner and registrant of the trademark and subsisting
registrations for the Mark "Jones New York", registered in the United States
Patent and Trademark Office.
Licensee is engaged in the manufacture, sale and distribution of optical
frames and sunglasses, and Licensee desires to obtain from Jones a license to
use the Mark in connection with such goods under and subject to all of the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing and
of the mutual covenants contained herein, and intending to be legally bound
hereby, agree as follows:
I. Definitions
As used in this Agreement, the following terms and phrases shall have the
following meanings:
1.1 Annual Period. The period from commencement of the Term through
December 31, 1993 and each consecutive twelve (12) month period thereafter
during the Term.
1.2 Approval. The approval, not to be unreasonably withheld, by Jones of
one or more designs, samples, items of Packaging, advertising or promotional
materials or other items for which approval is required under this Agreement, in
writing in a document which identifies the item or items approved and is signed
by an authorized representative of Jones. Jones shall be deemed to have approved
any item submitted to it by Licensee for Approval under the terms of this
Agreement, if Jones fails to approve, disapprove or otherwise respond to the
submission in writing within fourteen (14) days after receipt of the items
submitted.
<PAGE>
1.3 Guaranteed Minimums. The guaranteed minimum Royalties payable by
Licensee under Paragraph 3.2.
1.4 Jones Merchandise. Any and all items of Merchandise which in any
manner bear, incorporate or embody the Mark or any design, pattern, sketch or
idea supplied by Jones.
1.5 Mark. Jones' trademark, "Jones New York".
1.6 Merchandise. The items of merchandise covered by the license granted
under this Agreement include only opthalmic eyewear, sunglasses and eyewear
accessories.
1.7 Net Sales. The invoiced amount of Jones Merchandise billed or shipped
by Licensee, less actual trade discounts, returns and allowances and sales tax,
if any, with no deduction made for other discounts or uncollectible accounts or
for any cost incurred by Licensee in the manufacture, sale, distribution, or
exploitation of the Jones Merchandise. In the event of sales by Licensee of
Jones Merchandise to outlet stores or other purchasers under Licensee's direct
or indirect control, Net Sales shall be calculated on the basis of a sales price
and invoiced amount that Licensee would charge to an unrelated third party in an
arms-length transaction, regardless of the price actually charged or invoiced.
1.8 Packaging. All tags, labels, cartons or containers and packing or
wrapping material used or to be used by Licensee in connection with Jones
Merchandise.
1.9 Royalties. The royalties to be paid by Licensee to Jones for or in
connection with the license to use the Mark granted under this Agreement,
provided for in Article III and all other applicable portions of this Agreement.
1.10 Term. The Initial and Renewal Terms, if any, of this Agreement,
provided for and defined in Article VIII, taken collectively.
1.11 Termination Inventory. The inventory provided for in Paragraph 8.5 of
Jones Merchandise finished products, Jones Merchandise on order, work in process
and of Packaging and advertising and promotional material on hand at the time of
the termination of this Agreement.
1.12 Territory. The geographical area consisting of the United States, its
territories and possessions and Canada. However, the license with respect to
Canada may be terminated at any time and for any reason by Jones, and Jones
shall not be liable for any damages which Licensee may suffer due to such
termination. In the event that Jones exercises its right to
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terminate the license for Canada granted herein, all requirements of this
Agreement, including the guaranteed minimum Royalties as set forth in Paragraph
3.2, shall remain unchanged. In addition, the parties shall comply in all
respects with Paragraphs 8.5 and 8.6 regarding the Canadian inventory and
termination sales thereof.
II. License
2.1 Grant of License. Jones hereby grants to Licensee an exclusive license
throughout the Territory to use the Mark in connection with the manufacture,
advertising, merchandising, promotion, sale and distribution of Jones
Merchandise approved by Jones, in accordance with the terms of this Agreement.
The license granted herein extends only to the Merchandise, Territory and uses
expressly provided for in this Agreement, and Licensee shall not use or attempt
to use the Mark on any other products or goods in any other area or any other
manner whatsoever.
2.2 Distribution Channels. Licensee acknowledges that Jones has
established a reputation for unique high quality fashionable merchandise sold in
high quality and high fashion stores, and that Jones maintains a marketing
strategy of retaining and projecting to consumers that reputation and ambience
for its products. Accordingly, in order to protect Jones' marketing strategy,
goodwill and prestige and reputation, Jones Merchandise shall be sold only in
better department stores and in better specialty stores and the license granted
under this Agreement extends only to the use of the Mark in connection with the
manufacture, advertising, merchandising, promotion, sale and distribution of
Jones Merchandise for sale to customers in such better department stores and
better specialty stores.
2.3 Prohibition on Exports. Licensee shall not export Jones Merchandise
from the Territory to any area outside of the Territory and shall not sell or
distribute Jones Merchandise to any person or entity that Licensee knows or has
reason to know intends so to export Jones Merchandise.
2.4 Resolution of Conflicts. Licensee recognizes that Jones has granted,
and may in the future grant, licenses to other parties to use the Mark or one or
more of Jones' other trademarks in connection with the manufacture, promotion
and distribution of wearing apparel, accessories or related items. If Licensee
or the licensee under any other such license notifies Jones of an existing or
potential conflict in definition of the merchandise covered by, or the rights of
the licensee under, their respective licenses and license agreements, Jones
shall endeavor to deal with the issue by discussions with authorized
representatives of
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<PAGE>
the affected party, and Licensee shall fully cooperate in any such efforts.
Jones may at any time determine finally to resolve any such conflict by written
notice of its determination and resolution to the affected licensees, and all
such determinations shall be final and binding upon Licensee.
2.5 Reservation of Rights. Jones reserves all rights to the Mark
including, without limitation, all rights to use the Mark and to grant others
the right to use the Mark in any area and with regard to any product, except as
specifically granted and licensed to Licensee under this Agreement.
2.6 Covenant Not to Compete.
2.6.1 Jones shall not design, manufacture or sell Merchandise or
license the design, manufacture or sale thereof in the Territory in competition
with Licensee during the Term.
2.6.2 Licensee shall not, during or after the Term of this
Agreement, use designs or styles unique to Jones Merchandise on or in connection
with any other brand of product and will assign to Jones the beneficial
ownership of all rights that Licensee has acquired or may acquire in such
designs or styles upon expiration or termination of this Agreement.
III. Royalties
3.1 Percentage Royalty.
3.1.1 In consideration of the license granted and the services to be
performed by Jones under this Agreement and subject to Guaranteed Minimums,
Licensee shall pay to Jones Royalties equal to ( %) percent of the Net
Sales of all Jones Merchandise, in accordance with all the terms and conditions
of this Agreement.
3.1.2 Licensee shall be obligated to pay and account for Royalties
for all Jones Merchandise billed or shipped, even if the Merchandise improperly
bears the Mark or the applicable transaction is otherwise in breach or violation
of the terms of this Agreement; provided that this subparagraph 3.1.2 shall not
be considered to authorize such transactions and that the payment or obligation
to pay Royalties for such transactions shall not in any manner limit Jones'
right to terminate this Agreement or to exercise any other right or remedy that
Jones may have as a result of the breach of this Agreement by such transactions.
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3.2 Guaranteed Minimum Royalties.
3.2.1 Notwithstanding the amount of Royalties computed and payable
under Paragraph 3.1, the Guaranteed Minimum Royalties to be paid from Licensee
to Jones for each Annual Period during the Term shall be as follows: for the
First Annual Period, the amount of $ ; for the Second Annual Period, the
amount of $ ; and for the Third Annual Period, the amount of $ .
3.2.2 Guaranteed Minimums for each Annual Period shall be paid as
follows:
First Annual Period:
$ contemporaneously with the execution of
this Agreement;
$ on or before April 1, 1993;
$ on or before July 1, 1993; and
$ on or before October 1, 1993.
Second Annual Period:
$ on or before January 1, 1994;
$ on or before April 1, 1994;
$ on or before July 1, 1994; and
$ on or before October 1, 1994.
Third Annual Period:
$ on or before January 1, 1995;
$ on or before April 1, 1995;
$ on or before July 1, 1995; and
$ on or before October 1, 1995.
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Fourth Annual Period (First Renewal Term):
$ on or before January 1, 1996;
$ on or before April 1, 1996;
$ on or before July 1, 1996; and
$ on or before October 1, 1996.
Fifth Annual Period:
$ on or before January 1, 1997;
$ on or before April 1, 1997;
$ on or before July 1, 1997; and
$ on or before October 1, 1997.
For purposes of computation of Royalties, Guaranteed Minimum payments shall be
considered as advances against Royalties otherwise payable in the same Annual
Period, but Guaranteed Minimums shall not be carried forward to any subsequent
Annual Period and shall not, under any circumstances, be repayable or refundable
to Licensee.
3.3 Payment and Periodic Reports. Royalties shall be paid, without set-off
or deduction for any reason, and accounted for quarterly, within twenty-five
(25) days after the end of each quarter. At the time each Royalty payment is
due, Licensee shall deliver to Jones a statement signed and certified as
accurate by Licensee's chief financial officer or by another officer or official
of Licensee, approved by Jones in advance in writing, accounting for the Net
Sales and Royalties for the applicable quarter. Such statement shall show the
total amount of gross sales of all Merchandise billed or shipped during the
quarter; an itemized list of any amounts which may, under this Agreement, be
deducted from gross sales for computing Net Sales; a computation of the amount
of Royalties payable on account of the Net Sales for the quarter; advertising
expenditures under Paragraph 4.6 during the quarter; and such other information
including, without limitation, customer and financial information and reports,
as Jones may reasonably require. At Jones' request, Licensee shall provide the
foregoing information on a customer-by-customer basis. Jones may, at any time,
provide Licensee with a standarized form for accounting for Royalties and
Licensee shall use any such form for the statements under this paragraph. The
statements provided for in this paragraph shall be furnished to
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Jones whether or not Licensee has sold, shipped or billed any Jones Merchandise
during the quarter for which the statement is due.
3.4 Annual Reports. Not later than forty-five (45) days after the end of
each Annual Period, Licensee shall deliver to Jones a statement, signed and
certified by Licensee's then regularly engaged independent certified public
accountant (or, if Licensee has no such regular engagement, by a reputable
independent certified public accountant) stating for the Annual Period the
information required in the quarterly statement under Paragraph 3.3 and such
other information as Jones may reasonably request within a reasonable time prior
to the date on which the statement is due.
3.5 Books and Records and Audit.
3.5.1 Licensee shall prepare and maintain, in accordance with
generally accepted accounting principles consistently applied, complete and
accurate books of accounts and records covering all transactions arising out of
or relating to this Agreement, which books and records shall at least be in
sufficient detail to permit Jones to monitor compliance by Licensee with all of
its obligations under this Agreement. Jones and its duly authorized
representatives shall have the right, upon five (5) days prior written or oral
notice, during regular business hours, throughout the Term and for three (3)
years thereafter, to audit such books of account and records and to examine all
other documents and materials in Licensee's possession or control relating to
this Agreement and Licensee's performance hereunder. Licensee shall maintain
such books of account, records and documents and material available for Licensee
for at least three (3) years after the termination of this Agreement. Except as
provided in subparagraph 3.5.2, any audit under this Paragraph shall be at
Jones' expense.
3.5.2 If any audit of Licensee's books and records by Jones under
subparagraph 3.5.1 discloses that the payments made by Licensee to Jones during
the period covered by the audit were up to ( %) percent less than the
payments that should have been made under this Agreement, Licensee shall pay the
deficiency, plus interest at a rate equal to ( %) percent above the rate
announced by Citibank as its "Prime Rate", within fourteen (14) days after
demand therefor by Jones. If an audit shows that the amount paid by Licensee was
more than ( %) percent less than the amount which should have been paid, the
interest payable shall be at a rate of five (5) percentage points above such
Prime Rate and Licensee shall, in addition, reimburse Jones for all costs of the
audit within fourteen (14) days after demand by Jones.
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IV. Performance
4.1 Performance Standards.
4.1.1 Throughout the Term, Licensee shall use its best effort and
cause its officers, employees, agents and contractors to use their best efforts
to sell the maximum quantity of Jones Merchandise, promote business for Jones
Merchandise and enhance the value and reputation of the Mark, consistent with
good business practices and the high standards and prestige represented by the
Mark. Jones recognizes that Licensee does, and during the Term, will continue to
manufacture and sell other lines of eyewear, to wit, "Sarah Coventry", "Diane
Freis" and "Playskool", and Licensee agrees that the continuation of such lines
will not interfere with its performance under this agreement and particularly
the provisions of this subparagraph 4.1.1.
4.1.2 In the use of the Mark and all other aspects of the
performance of this Agreement, Licensee shall at all times comply with all
applicable laws and regulations including, without limitation, all laws and
regulations related to the manufacture, sale, labeling, packaging, distribution
and advertising of Jones Merchandise sold within the Territory.
4.2 Abandonment. If Licensee shall fail to use the Mark in the manufacture
and sale of opthalmic eyewear or sunglasses or eyewear accessories within any
period of six (6) months or if Licensee shall determine or state in writing its
intention to cease so to use the Mark, Licensee shall be deemed to have
abandoned the use of the Mark, and Jones may at any time thereafter terminate
this Agreement by written notice under subparagraph 8.3.1. The parties
acknowledge that the abandonment of the use of the Mark by Licensee will
irreparably damage Licensee's capacity to use the Mark under the terms of this
Agreement and, for purposes of termination under Article VIII, abandonment of
the use of the Mark under this paragraph shall be considered a breach or
violation of this Agreement which is not curable.
4.3 Restrictions on Promotionals. Licensee shall not, without the prior
written consent of Jones, give away any Jones Merchandise (other than point of
display items) or market, sell or distribute any Jones Merchandise as a premium
or in connection with any tie-in or promotional campaign for any product or
products (except Jones Merchandise).
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4.4. Quality.
4.4.1 The materials and workmanship of, and Packaging and sales and
promotional materials for, the Jones Merchandise shall at all times be of high
quality, and the Jones Merchandise shall at all times be designed, manufactured,
distributed and promoted in a manner appropriate for the high quality of such
Jones Merchandise.
4.4.2 Jones and its duly authorized representative shall have the
right, during normal business hours upon reasonable advance notice, to inspect
any facility used by Licensee in connection with the manufacture of Jones
Merchandise or the manufacture or production of Packaging or advertising or
promotional material in order for Jones to monitor the quality of the Jones
Merchandise and Packaging and promotional materials and Licensee's compliance
with all other terms of this Agreement which relate to such manufacture and
production.
4.5 Advertising.
4.5.1 Until such time as Jones institutes a national advertising
program, Licensee shall, during each Annual Period, expend not less than
( %) percent of the amount of the aggregate Net Sales for the Annual Period for
advertising, in promoting Jones Merchandise in communications media, national
consumer publications, trade press, store promotional mailings or advertising
campaigns and store point of display items. Licensee shall comply with any
reasonable guidelines established by Jones for advertising activities and
expenditures. If, notwithstanding Licensee's good faith effort, the amount
expended by Licensee for an Annual Period is less than ( %) percent of the
Net Sales for the Annual Period, the difference shall, at Jones' option, either
be added to Licensee's required advertising expenditures for the next Annual
Period or be paid to Jones within the earlier of thirty (30) days after the
delivery to Jones of the annual report for the Annual Period under Paragraph 3.4
or ninety (90) days after the end of the Annual Period.
4.5.2 If, at any time during the Term, Jones institutes a national
advertising program, Licensee shall participate to the extent reasonably
required by Jones in such national advertising program, the contribution to same
by Licensee not to exceed ( %) percent of the aggregate Net Sales for the
Annual Period.
4.6 Approvals. Licensee shall not in any aspect of its performance under
this Agreement use any materials, designs, styles, fits or workmanship for
Jones Merchandise or use any items of Packaging or advertising or promotional
materials which Jones has not approved under the terms of this Agreement, which
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approval is not to be unreasonably withheld by Jones. Jones' Approval or
disapproval of any item or matter for purposes of this Agreement may be based
solely on Jones' subjective standards and Approval may be given or withheld in
Jones' sole discretion, provided that Jones shall act in good faith.
V. Designs, Samples and Packaging
5.1 Designs. Jones and Licensee shall cooperate in such manner as Jones
may approve in the development and creation of designs, styles and design and
style ideas for each collection of Jones Merchandise. All designs, styles,
patterns, photographs or ideas for Jones Merchandise provided by Jones to
Licensee or approved by Jones for purposes of this Agreement shall be the
exclusive property of Jones, and Licensee shall not use any of the foregoing
except for the manufacture, distribution and sale and advertising and promotion
of Jones Merchandise in accordance with the terms of this Agreement.
5.2 Samples. Licensee shall submit to Jones, free of charge, samples of
each item of Jones Merchandise within a reasonable time prior to the
commencement of production of the item for sale and distribution, but not later
than thirty (30) days prior to the scheduled first showing of the collection of
Jones Merchandise which includes the item. Licensee may, after the production
and distribution of the first collection of Jones Merchandise under this
Agreement, suggest procedures for representative samples, subject to continuing
inspections under Paragraph 5.4, and Jones shall consider and respond to any
such request in good faith but shall not be required to approve any such
procedures. Licensee may not sell or distribute any item of Jones Merchandise
unless Jones has approved the sample for the item in advance. In furtherance of
the foregoing, Licensee shall provide to Jones, on an annual basis, a schedule
reflecting the dates of collection showings with an indication as to when the
Jones Merchandise scheduled to be shown will be available for inspection by
Jones prior thereto.
5.3 Packaging. To the extent reasonably feasible, the samples provided
under Paragraph 5.2 shall include all tags, labels and other items of Packaging
that relate to, or that Licensee intends to use with, the item submitted as a
sample. Licensee shall submit to Jones samples of all other items of Packaging
within a reasonable time prior to the commencement of the production of such
items for use with Jones Merchandise. Jones shall not unreasonably require
Licensee materially to change labels, tags or other significant items or
Packaging from collection to collection.
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5.4 Continuing Inspection. Upon Jones' request at any time and from time
to time, Licensee shall submit to Jones a reasonable number of production
samples of items of Jones Merchandise or Packaging material in order for Jones
to monitor production in accordance with Jones Approvals, quality standards and
other requirements of this Agreement. If Jones notifies Licensee in writing of
the disapproval of any production sample, Licensee shall immediately take such
action as may be necessary for the item to meet Jones Approval and cease
production and distribution and sale of the item pending Approval. Jones shall
not unreasonably disapprove any production sample under this paragraph.
VI. Trademark and Trademark Protection
6.1 Ownership.
6.1.1 Licensee acknowledges that, as between Jones and Licensee,
Jones is the owner of all right, title and interest in and to the Mark in any
form or embodiment and is also the owner of the good will attached or which
shall become attached to the Mark in connection with the business and goods in
relation to which the same has, is or shall be used. Sales by Licensee shall be
deemed to have been made for purposes of trademark registration, and all uses of
the Mark by Licensee shall inure to the benefit of Jones.
6.1.2 At Jones' request, Licensee shall execute any documents,
including registered users agreements, reasonably required by Jones to confirm
Jones' ownership of all rights in and to the Mark in the Territory and the
respective rights of Jones and Licensee under this Agreement. Licensee shall
cooperate with Jones in connection with the filing and prosecution by Jones of
applications in Jones' name relating to the use of the Mark for Merchandise in
the Territory.
6.1.3 Licensee shall never challenge or encourage anyone to
challenge Jones' ownership or the validity of the Mark or any application for
registration thereof or any trademark, copyright or other registration thereof
or any rights of Jones therein.
6.2 No Adverse Acts. Licensee shall not, at any time or in any manner,
knowingly engage in any activity or do or permit any act which may in any way
adversely affect any rights of Jones to the Mark or any registrations or
applications for registration thereof or which may directly or indirectly reduce
the value of the Mark or derogate or detract from its repute.
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6.3 No Secondary Marks. Licensee shall not use any other trade names,
trademarks or other designations (including, without limitation, Licensee's own
corporate name or trade name) in connection with the Mark in any advertising,
publicity, labeling, Packaging or printed matter utilized by Licensee in
connection with Jones Merchandise. Licensee shall not join the Mark with any
other names or marks to form a new mark and shall not itself use the Mark as a
corporate name or trade name or in any other manner other than in connection
with the manufacture, distribution, sale and promotion of Jones Merchandise
under this Agreement.
6.4 Trademark Notices. Licensee shall cause the designation "R" to appear
immediately after, on the upper right, of the Mark on all Packaging and
advertising and promotional material and shall, in addition, cause to appear on
all Packaging and advertising and promotional materials and on all forms,
invoices, stationary, business cards and other documents and materials of any
kind bearing the Mark such designations, legend, or markings or notices as may
be necessary, or as Jones may require, to give notice of the status of the Mark
and Jones' rights and interests therein.
6.5 Copyrights. Any copyright that may be created by statute, common law
or otherwise in any design, sketch, print, Packaging or similar matter shall be
the sole property of Jones. Licensee shall take such action as may be necessary
or as Jones may require to confirm, preserve or protect such copyright,
including placing of copyright notices on the appropriate items. Licensee shall
not claim for itself or for any party other than Jones copyrights in any such
items and shall not file or attempt to file any copyright registrations
therefor.
VII. Warranties, Indemnification and Infringement
7.1 Warranties.
7.1.1 Jones represents and warrants to Licensee that Jones has the
full right, power and authority to enter into this Agreement and to grant the
rights, licenses and privileges granted by Jones hereunder to Licensee and to
perform all of Jones' obligations hereunder.
7.1.2 Licensee represents to Jones that Licensee has the full right,
power and authority to enter into this Agreement and to perform all of its
obligations hereunder.
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7.2 Indemnification by Jones. Jones shall indemnify, defend and hold
harmless Licensee from and against any and all claims, causes of actions, suits,
damages and expenses (including reasonable attorneys' fees and expenses) arising
out of any claim that Licensee's use of the Mark in accordance with the terms of
this Agreement constitutes an infringement of a valid trademark in the
Territory, upon Licensee giving Jones prompt written notice and authority and an
opportunity to undertake and fully conduct the defense thereof.
7.3 Indemnification by Licensee and Insurance.
7.3.1 Licensee shall indemnify, defend and hold harmless Jones from
and against any and all claims, causes of action, suits, damages and expenses
(including reasonable attorneys' fees) which Jones may incur or for which it may
become liable or required to pay by reason of any defect or alleged defect in
any Jones Merchandise; the breach by Licensee of any provision of this Agreement
or of any of Licensee's duties hereunder; or the acts or omissions of Licensee
or of any of its servants, agents, employees or contractors in connection with
the performance of this Agreement (excluding matters covered by Paragraph 7.2).
7.3.2 Licensee shall, at its own expense, obtain and maintain
throughout the Term in full force and effect with an insurance carrier
acceptable to Jones, products liability insurance with a limit of liability of
not less than $2,000,000, insuring against, without limitation, all damages,
profits, interest, attorneys' fees, costs and expenses arising out of any suit
or legal proceeding, claim or demand resulting from a defect or alleged defect
in any item of Jones Merchandise or out of the use or condition of an item of
Jones Merchandise. Such insurance policy shall name Jones as a co-insured and
shall provide for at least thirty (30) days advance written notice to Jones
before cancellation or substantial modification. Licensee shall promptly deliver
a certificate of such insurance to Jones and, if Jones so requests, a copy of
the policy for such insurance. The obligation of this subparagraph with respect
to insurance shall not be deemed to limit in any manner the indemnification
obligations of Licensee under subparagraph 7.3.1.
7.4 Infringements. Licensee shall promptly notify Jones in writing of any
known or suspected infringements of the Mark or of any copyright or other rights
or property of Jones, promptly after the same comes to Licensee's attention.
Jones shall have the sole and exclusive right to take action or institute
proceedings with respect to such infringement, and shall proceed as it may, in
its sole discretion, deem appropriate or desirable.
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Licensee shall cooperate in any action or proceeding by Jones with respect to an
infringement or suspected infringement in such manner as Jones may request.
VIII. Term and Termination
8.1 Initial Term. The initial term of this Agreement ("the Initial Term")
shall commence upon execution of this Agreement and end on December 31, 1995,
subject to earlier termination as provided in this Agreement and to renewal as
provided in Paragraph 8.2.
8.2 Renewal Term. If Licensee is not in default of any of the terms of
this Agreement, has complied with its obligations under this Agreement in all
material respects (without regard to whether Jones has given any notices of
default of failure to comply) and if it reasonably appears that Net Sales for
the last Annual Period of the Initial Term will exceed $ , Licensee
shall have the option, exercisable by written notice given to Jones not later
than six (6) months prior to the expiration of the Initial Term, to renew this
Agreement for a first renewal term ("First Renewal Term") of two (2) years,
beginning on January 1, 1996 and ending on December 31, 1997, subject to earlier
termination as provided in this Agreement.
8.3 Termination.
8.3.1 Jones may terminate this Agreement, effective immediately upon
giving Licensee written notice of termination, if (i) Licensee fails to make any
payment due to Jones under this Agreement when such payment is due and continues
such failure uncured for ten (10) days after written notice thereof from Jones
to Licensee, (ii) Licensee fails two (2) or more times during any Annual Period
during the Term to make any payment due to Jones within ten (10) days after such
payment is due, without regard to any notice of such failure from Jones, (iii)
Licensee abandons the Mark, as provided in Paragraph 4.2, (iv) the record or
beneficial ownership of Licensee or any of its parents or affiliates changes in
a manner so as to change the record, beneficial or actual control of Licensee,
or (v) Licensee defaults on any obligations secured by a security interest in or
other lien or encumbrance on Jones Merchandise.
8.3.2 Either Jones or Licensee may terminate this Agreement,
effective immediately upon giving the other party written notice of termination,
if (i) the other party breaches or fails to perform any of the terms or
provisions of this Agreement in a manner not provided for in subparagraph 8.3.1,
in any material respect and such breach or failure is not curable or, if
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curable, is not cured within twenty (20) days after written notice thereof from
the non-breaching party, or (ii) the other party files a voluntary petition or
proceeding in bankruptcy or under any federal or state bankruptcy or insolvency
or other law for the relief of debtors; consent to the appointment of a
receiver, custodian or liquidator for a portion of its business or property; has
filed against it and not dismissed within forty-five (45) days an involuntary
proceeding under any federal or state bankruptcy or insolvency or other law for
the relief of debtors or for the appointment of a receiver, custodian or
liquidator; makes an assignment for the benefit of its creditors; or ceases, or
admits its intention to cease, the manufacture, sale or distribution of Jones
Merchandise or the conduct of its business in the ordinary course.
8.4 Termination of Rights.
8.4.1 Upon the expiration or termination of this Agreement for any
reason whatever, all rights of Licensee under this Agreement shall terminate and
automatically revert to Jones. Licensee shall immediately discontinue all use of
the Mark and shall no longer have any right to use the Mark or any variation or
simulation thereof in any manner or for any purpose whatsoever. Licensee shall
transfer to Jones by such documentation as Jones may require all registrations,
filings, trademarks, copyrights and other rights with regard to the Mark which
Licensee may have possessed at any time. Subject to the provisions of Paragraph
8.6 concerning the sale of Termination Inventory, Licensee shall deliver to
Jones, without charge, all sketches, samples, designs or other matters relating
to Jones Merchandise and all Merchandise, Packaging materials and advertising
and promotional materials bearing the Mark in any form.
8.4.2 Upon termination or expiration of this Agreement for any
reason, including termination under Paragraph 8.3.2(ii), no trustee in
bankruptcy, assignee for the benefit of creditors, custodian, receiver, sheriff
or court officer or other successors to Licensee or its assets or business shall
have any right to continue this Agreement or to use or exploit the Mark in any
manner whatever.
8.4.3 Notwithstanding the provisions of subparagraph 8.4.2, in the
event that under the United States Bankruptcy Code or any amendment or successor
thereto (collectively the "Bankruptcy Code"), the trustee in bankruptcy of
Licensee or Licensee, as bankruptcy debtor, is permitted to and does assume this
Agreement and thereafter proposes to assign this Agreement by an assignment
which fulfills the applicable requirements of the Bankruptcy Code, other trustee
or Licensee shall notify Jones of the proposed assignment in advance, in
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writing, setting forth the name and address of the proposed assignee, the
proposed consideration for the assignment and all other material terms and
details of the proposal. Such notice shall be considered an offer to Jones to
have this Agreement assigned to Jones or to its designee for the consideration
(or its reasonable equivalent in money) and under the other material terms in
the notice. Jones may exercise the option and accept the offer by giving the
trustee or Licensee, as appropriate, written notice of exercise and acceptance
within twenty (20) days after Jones receives the notice from the trustee or
Licensee. If Jones fails to give notice and exercise the option within such
twenty (20) day period, the trustee or Licensee may complete the proposed
assignment, but only to the party and for the consideration and under the terms
described in the notice.
8.5 Termination Inventory. Within thirty (30) days after the expiration or
termination of this Agreement, Licensee shall prepare and deliver to Jones a
written Termination Inventory, including a complete and accurate schedule as of
the date of expiration or termination of all completed Jones Merchandise on
hand; Jones Merchandise on order; work in process relating to Jones Merchandise
on hand, including uncut piece goods and products and materials in the process
of manufacture; and all Packaging materials, advertising and promotional
materials and other documents or items that bear the Marks or Jones' name in any
form in Licensee's possession or control or in the process of manufacture for
Licensee. Jones shall have the option, exercisable within ten (10) days after
receipt of the Termination Inventory, to purchase all or any portion of the
items in the Termination Inventory for a purchase price equal to
( %) percent of Licensee's cost. Licensee shall deliver to Jones the items in
the Termination Inventory to be purchased, within five (5) days after receipt of
Jones' notice exercising its option to purchase, and Jones shall pay the
purchase price within thirty (30) days after receipt of all items of the
Termination Inventory purchased.
8.6 Termination Inventory Sales. For a period of six (6) months after the
expiration of Jones' option to purchase Termination Inventory under Paragraph
8.5, Licensee may sell finished Jones Merchandise in the remaining Termination
Inventory or finished Jones Merchandise completed from work in process in the
remaining Termination Inventory, on a non-exclusive basis, in accordance with
all of the terms of this Agreement. Royalties for all such sales shall be paid
and accounted for by Licensee within thirty (30) days after the end of such six
(6) month period. Any items in the Termination Inventory not sold and remaining
after the selling period provided for in this paragraph shall be delivered to
Jones, disposed of or destroyed in accordance with Jones' instructions.
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8.7 Subsequent License. Immediately upon the expiration or termination of
this Agreement for any reason, Jones shall have the free and unrestricted right
to grant other parties one or more licenses to use the Mark in connection with
the manufacture, sale and distribution or advertising and promotion of
Merchandise in the Territory or to enter into such other transactions as it
desires for the use of the Mark with Merchandise or in any other manner, without
any obligation of any kind to Licensee. The right of Licensee to sell items of
Termination Inventory under Paragraph 8.6 is non-exclusive only and shall not in
any manner limit Jones' rights to enter into other licenses or transactions.
8.8 Reservation of Rights. Notwithstanding any termination of this
Agreement, Jones shall have and hereby reserves all rights and remedies which
are granted or available to it under this Agreement or applicable law, and
termination shall not be deemed to be an exclusive remedy or to limit Jones in
any manner from enforcing any other rights or remedies.
IX. General Terms
9.1 Confidentiality. Jones and Licensee acknowledge that all information
and data which the parties have learned or will learn in connection with this
License Agreement and activities and transactions hereunder concerning the
business and operation of the parties and all tangible manifestations of such
information and data including, without limitation, designs, patterns, sketches,
business and marketing plans, customer lists, and financial and operating
reports constitute valuable proprietary confidential information and trade
secrets of the parties, and the parties shall not disclose any such data or
information or use any such data or information for themselves or any other
person or entity, except for the proper and authorized performance of this
Agreement in accordance with all of the terms hereof.
9.2 Arbitration.
9.2.1 Subject to the provisions of subparagraph 9.2.2, all disputes
arising under this Agreement or the obligations of the parties hereunder shall
be submitted to arbitration in New York, New York before a panel of three
arbitrators, in accordance with the then prevailing Rules for Commercial
Arbitration of the American Arbitration Association. The arbitrators in any such
arbitration shall award costs to the prevailing party and may, but shall not be
required to, award reasonable attorneys' fees. The decision of the arbitrators
shall be final and binding on all parties, except that the arbitrators shall
have no power to vary the terms of this
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Agreement. Judgment on the arbitrators' award may be entered in any court in the
State of New York or in any other court of competent jurisdiction.
9.2.2 The parties acknowledge that a breach of this Agreement
involving the improper or unauthorized use of the Mark or other matters may give
rise to irreparable harm pending the outcome of arbitration under subparagraph
9.2.1. Accordingly and notwithstanding the provisions of subparagraph 9.2.1,
either party may, upon a breach or threatened breach of this Agreement, bring an
action in a court of competent jurisdiction and apply therein for temporary or
preliminary injunctive or other equitable relief, pending resort to, and a
decision in, arbitration under subparagraph 9.2.1. If otherwise appropriate
under applicable law, a court may entertain any such action and grant injunctive
or equitable relief, and the provisions of subparagraph 9.2.1 providing for
arbitration shall not be construed to prevent the action or relief.
9.3 Assignability.
9.3.1 Jones may assign this Agreement to a successor to all or
substantially all of its business or the portion of its business which utilizes
the Mark, if the successor assumes all of Jones' responsibilities, obligations
and liabilities hereunder. Jones may, in addition, assign the right to receive
payments, but not any obligations, under this Agreement to a financial or
similar institution for purposes of financing, so long as Jones remains
responsible for all of its obligations hereunder.
9.3.2 This Agreement is personal to Licensee, and Licensee may not
assign, sublicense or otherwise transfer all or any portion of this Agreement or
any rights or obligations hereunder, whether voluntarily, involuntarily, by
operation of law or otherwise, and any such attempted assignment or other
transfer shall be null and void and of no effect.
9.4 Applicable Law. New York law shall govern the validity, construction,
interpretation and effect of this Agreement.
9.5 No Agency. Nothing contained in this Agreement shall be deemed or
construed as constituting the parties hereto as partners or joint venturers or
either party as an agent of the other and, without limiting the foregoing,
Licensee shall have no authority to bind or obligate or to incur any
indebtedness for Jones, and no such authority shall be implied.
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9.6 Failure to Exercise Rights. The failure of either party to act or
exercise any right under this Agreement, upon the breach of any of the terms
hereof, or otherwise, shall not be construed as a waiver of such breach or as
preventing either party from thereafter enforcing strict compliance with any and
all of the terms hereof.
9.7 Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provision shall be considered severable, and the
remaining provisions of this Agreement shall continue in full force and effect
and shall be valid and enforceable to the fullest extent permitted by law.
9.8 Entire Agreement. This Agreement contains the entire understanding
between the parties, no other representations or covenants having induced either
party to execute this Agreement. This Agreement and obligations and duties under
this Agreement may not be amended or modified in any manner, in whole or in
part, except by a written agreement or amendment or modification duly executed
by the party to be charged.
9.9 Headings. The Article and paragraph headings of this Agreement are for
convenience of reference only and do not form a part of the covenants, terms or
conditions of this Agreement or give full notice thereof.
9.10 Notices. All notices, reports, statements, exercises of options or
other communications required or permitted under this Agreement shall be in
writing and shall be sufficiently given only if personally delivered; mailed by
registered or certified mail, return receipt requested; sent by overnight
express courier, with written receipt of delivery; or transmitted by telecopier
and confirmed by first class mail within twenty-four (24) hours. All notices
shall be sent or delivered to the following addresses or to such other addresses
as either party may, by notice direct:
If to Jones: Jones Investment Co., Inc.
300 Delaware Avenue - Suite 534
Wilmington, Delaware 19801-1622
Attn: Norman J. Shuman
with copies to: Jones Apparel Group, Inc.
1411 Broadway - 21st Floor
New York, New York 10021
Attn: Herbert J. Goodfriend
If to Licensee: Diplomat-Ambassador Eyewear Group
4211 Van Kirk Street
Philadelphia, Pennsylvania 19135
Attn: Barry Budilov
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with a copy to: Alan Escott, Esq.
Suite 405
1500 Walnut Street
Philadelphia, Pennsylvania 19102
Notices given by mail shall be deemed given on the second business day after the
date on which they are mailed. All other notices shall be deemed as given on
receipt.
IN WITNESS WHEREOF, the parties, each by their duly authorized
representative, have executed this License Agreement as of the date first above
written.
JONES INVESTMENT CO., INC.
By: /s/ Norman J. Shuman
---------------------------------
Norman J. Shuman
Vice President
DIPLOMAT-AMBASSADOR EYE GROUP
By: /s/ Barry Budilov
---------------------------------
Barry Budilov
President
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<PAGE>
Exhibit 10.30
SUPPLY AGREEMENT
This Supply Agreement (the "Agreement") is entered into this 18 day of
November, 1996, (the "Effective Date") by and between Styl-Rite Optical Mfg.
Co., Inc., a Florida corporation ("Styl-Rite") and Diplomat-Ambassador, Inc., a
Delaware corporation ("Ambassador").
The following recitals are true and constitute the basis for this
Agreement:
A. Styl-Rite is engaged in manufacturing and distributing eyeglass
frames to wholesalers and retail optical outlets;
B. Styl-Rite has an exclusive license to use the Halston trademark in
connection with manufacturing, advertising, merchandising,
promoting, publicizing, selling and distributing ophthalmic frames;
C. Ambassador is a wholesaler engaged in distributing eyewear to retail
optical outlets and specialty shops; and
D. Ambassador desires to purchase from Styl-Rite and Styl-Rite desires
to sell to Ambassador, ophthalmic frames bearing the Halston
trademark for resale by Ambassador to retail outlet, and specialty
shops.
NOW THEREFORE, in consideration of the foregoing recitals, the mutual
covenant contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I. TERM
1.1 Term of Agreement. The initial term of this Agreement and Styl-Rite's and
Ambassador's respective obligations hereunder will begin on the Effective
Date and terminate on December 31, l998 (the "Initial Term"). Ambassador
shall have the option to renew this Agreement for an additional three (3)
year term (the "Subsequent Term") by providing Styl-Rite with its written
notice of renewal not less than one hundred twenty (120) days prior to the
expiration of the Initial Term; provided that Styl-Rite has exercised its
option to renew the License Agreement dated July 1, 1995, (the "License
Agreement") by and between Styl-Rite and Halston Investments, Ltd., the
successor-in-interest by assignment from Halston Trademarks, Inc., the
owner of the "Halston" trademark ("Halston"); provided further that
Ambassador has purchased from Styl-Rite the minimum number of units set
forth in Article 5.2 and Ambassador is otherwise in compliance with all
the material terms and conditions of this Agreement. This Agreement may
also be terminated prior to the expiration of the Initial Term or the
Subsequent Term in accordance with the terms of this Agreement.
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ARTICLE II. PURCHASES GENERALLY
2.1 Purchase and Sale Obligations.
2.1.1 Current Halston Eyewear Products. On the terms and subject to the
conditions set forth in this Agreement, Ambassador agrees to purchase from
Styl-Rite and Styl-Rite agrees to sell to Ambassador, ophthalmic frames, metal
or plastic, bearing the Halston trademark ("Halston Frames") in the quantities
specified in Ambassador's purchase orders delivered or transmitted to Styl-Rite
from time to time. All purchase orders submitted by Ambassador shall be in the
form of Exhibit "A" attached hereto. The parties agree the terms of this
Agreement shall govern and control if there is any inconsistency between the
terms of this Agreement and any purchase orders for Halston Frames submitted by
Ambassador. Unless otherwise agreed to in writing, all purchases of Halston
Frames hereunder shall be FOB Styl-Rite's place of business and Ambassador shall
pay all freight charges, local state and federal excise taxes, and the risk of
loss shall be with Ambassador from Styl-Rite's place of business. Ambassador
agrees that all orders for plastic Halston Frames will be filled by Styl-Rite
and may not be sourced from any other manufacturer or supplier.
2.1.2. Alternatively Sourced Metal Frames.
A. Approval of Prototypes. Prior to submitting any purchase orders to Styl-Rite
for a metal ophthalmic frame not included on Styl-Rite's then current product
list of Halston Frames (each an "Alternatively Sourced Frame"), Ambassador shall
submit a model or sample of the ophthalmic frame requested by Ambassador (each a
"Prototype"), including any wrapping labels, packaging or containers intended to
be used by Ambassador in connection with the distribution and sale of
Alternatively Sourced Frames, to Styl-Rite for approval. Prior to ordering any
Alternatively Sourced Frame for the first time, Ambassador shall submit to
Styl-Rite for approval two (2) copies of a Prototype of each different
Alternatively Sourced Frame which Ambassador would like to order from Styl-Rite
along with the proposed packaging. All Prototypes shall be sent by overnight
delivery to Styl-Rite, Attention: President, at the address set forth on the
signature page of this Agreement. Styl-Rite shall, pursuant to the terms of the
License Agreement, submit to Halston all Prototypes for approval by Halston.
Styl-Rite shall notify Ambassador as soon as practicable of Halston's approval
or disapproval of the Prototype. If Halston objects to a Prototype, Styl-Rite
shall, in addition to specifically describing those objections, set forth in
such notice any modifications to the Prototype which Styl-Rite deems are
necessary for the Prototype to be accepted as a Halston Frame. This approval
process shall be repeated until such time as the Prototype has been approved by
Halston or the parties agree that the Prototype will not be manufactured and
sold as a Halston Frame. Styl-Rite will not accept any purchase order for
Alternatively Sourced Frames from Ambassador without having received the prior
approval of each Prototype by Halston. Further, all communications by Ambassador
regarding Prototype and purchases of either Halston Frames or Alternatively
Sourced Frames hereunder shall be directed to Styl-Rite.
B. Purchase Orders. Halston's approval of each Prototype, Ambassador may, in its
sole discretion, request that Styl-Rite either (i) import the Alternatively
Sourced Frame directly from an overseas supplier identified by Ambassador (the
"Third Party Supplier"), (ii) import the Alternatively Sourced Frame from
Styl-Rite's own overseas supplier or (iii) manufacture the Alternatively Sourced
Frames if Styl-Rite has the capability to manufacture that type of frame. All
purchase orders for Alternatively Sourced Frames shall be in the form of Exhibit
"A" attached hereto. The parties agree the terms of this Agreement shall govern
and control if there is any inconsistency between the terms of this Agreement
and any purchase order for Alternatively Sourced Frames submitted by Ambassador.
Unless otherwise agreed to in writing, all purchases of Alternatively Sourced
Frames hereunder shall be FOB Styl-Rite's place of business or the Third
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Party Supplier's place of business in the event Ambassador requests that
Styl-Rite arrange to have the Alternatively Sourced Frames dropped shipped to
Ambassador. In either case, it shall be Ambassador's responsibility to pay all
freight charges, local state and federal excise taxes, and the risk of loss
shall be with Ambassador from Styl-Rite's or the Third Party Supplier's place of
business, as the case may be. Styl-Rite shall not process any purchase order for
Alternatively Sourced Frames unless Ambassador has complied with the terms of
Article 4.3.2 hereof. Upon the request of Styl-Rite, Ambassador agrees to
provide Styl-Rite with a reasonable number of samples of each style of
Alternatively Sourced Frame which is dropped shipped by the Third Party Supplier
to insure the Alternatively Sourced Frames an being manufactured in accordance
with the Prototypes approved by Halston. If, in the sole reasonable discretion
of Styl-Rite, the Alternatively Sourced Frames are not being manufactured in
accordance with the Prototypes, Styl-Rite shall notify Ambassador in writing of
such discrepancies and Ambassador shall promptly arrange to have the necessary
repairs and/or modifications made to the Alternatively Sourced Frames so that
those frames conform to the Prototypes.
2.2 Additional Product Lines. The terms of this Agreement may, upon the mutual
consent of Styl-Rite and Ambassador, be amended to provide for the purchase and
sale of other designer frames manufactured or sourced by Styl-Rite.
ARTICLE III. SALE AND DISTRIBUTION OF FRAMES
3.1 Sale and Distribution of Frames by Ambassador. Subject to the terms and
provisions of this Agreement, Styl-Rite hereby grants Ambassador and Ambassador
hereby accepts the exclusive right to distribute the Halston Frames and
Alternatively Sourced Frames at retail to the department stores and other
specialty shops listed on Exhibit "B" attached hereto. Ambassador shall not sell
any Halston Frames or Alternatively Sourced Frames to any department store or
other specialty shop not listed on Exhibit "B" without the prior written consent
of Styl-Rite, which consent will not be unreasonably withheld or delayed.
Further, Ambassador shall not sell any Halston Frames or Alternatively Sourced
Frames to any wholesalers, diverters or any other entities without the prior
written consent of Styl-Rite. Ambassador shall not market any Halston Frames or
Alternatively Sourced Frames as seconds or irregulars, unless the Halston mark
is removed from the Halston Frames and the Alternatively Sourced Frames or
unless Styl-Rite specifically authorizes Ambassador to sell such seconds or
irregulars with the Halston mark affixed thereto.
From time to time, Styl-Rite and Ambassador shall negotiate in good faith to
reach a mutually satisfactory agreement concerning additional department stores
and specialty shops to be included on Exhibit "B." Until this Agreement expires
or is terminated, Styl-Rite shall not, without the prior written consent of
Ambassador, sell or distribute any Halston Frames or Alternatively Sourced
Frames to any department store or other specialty shop listed on Exhibit "B"
from time to time.
ARTICLE IV. PURCHASE PRICE
4.1 Purchase Price for Halston Frames. The price to be charged Ambassador for
Halston Frames shall be Styl-Rite's list price less %. With respect to Halston
Frames to be provided as samples to Ambassador's sales representatives, the
Purchase price shall be Styl-Rite's list price less %.
4.2 Purchase Price for Alternatively Sourced Frames. The price to be charged
Ambassador for Alternatively Sourced Frames shall be Styl-Rite's Cost, as
defined below, plus %. The term Styl-Rite's Cost as used herein shall mean
Styl-Rite's landed cost (i.e. the price at which Styl-Rite purchases
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Confidential Treatment Requested - Portions filed seperately with the
Commission.
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Alternatively Sourced Frames from a Third Party Supplier, less freight,
handling, taxes and other costs attributable to the shipment or receipt by
Styl-Rite of the Alternatively Sourced Frames).
4.3 Payment Terms.
4.3.1 Halston Frames. Any sum due Styl-Rite for the purchase of Halston Frames
shall be due and payable by Ambassador within {sixty (60)} days of its receipt
of an invoice from Styl-Rite. Any sum due Styl-Rite hereunder for Halston Frames
that is not paid when due shall thereafter bear interest until paid at
percent ( %) per annum.
4.3.2 Alternatively Sourced Frames. Any sum due Styl-Rite for the purchase of
Alternatively Sourced Frames, including any deposits that may be required by a
Third Party Supplier at the time Styl-Rite places an order for Alternatively
Sourced Frames, shall be due and payable by Ambassador in immediately available
funds at least one business day prior to the date on which such amounts are due
and payable by Styl-Rite to the Third Party Supplier.
4.4 Minimum Amount of Purchases. If the total aggregate number of units of
Halston Frames and Alternatively Sourced Frames purchased by Ambassador during
the Initial Term of this Agreement is not greater than or equal to the minimum
number of units set forth below during the periods set forth therein, Styl-Rite
may terminate this Agreement in accordance with Article 5.1 hereof; provided,
however, that Styl-Rite has timely supplied Ambassador with Halston Frames and
Alternatively Sourced Frames in accordance with Styl-Rite's ordinary course of
business and consistent with past business practices between the parties. In the
event this Agreement is renewed for the Subsequent Term, Styl-Rite and
Ambassador will, within 10 business days of receiving Ambassador's written
notice of renewal, negotiate in good faith to determine the minimum number of
units during each annual period of the Subsequent Term; provided, however, that
the minimum number of units during each annual period of the Subsequent Term
shall not be less than the minimum number of units for the last annual period of
the Initial Term.
----------------------------------------------------
Period Minimum Units
Purchased
----------------------------------------------------
January 1, 1997-December 31, 1998
----------------------------------------------------
January 1, 1999-December 31, 1999
----------------------------------------------------
ARTICLE V. TERMINATION
5.1 Termination for Cause. If either party materially defaults in the
performance of any of its obligations (except for a default by Ambassador in its
obligation to pay Styl-Rite) under this Agreement, which default shall not be
substantially cured within 60 days after written notice is given to the
defaulting party specifying the default, then the party not in default, by
giving written notice to the defaulting party, may terminate this Agreement as
of a date specified in the notice of termination. Ambassador will pay Styl-Rite
for all outstanding invoices as of the date of termination.
5.2 Termination for Nonpayment. If Ambassador default in the payment when due of
any amount due to Styl-Rite hereunder and does not cure such default within
thirty (30) days after written notice thereof is
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Commission.
<PAGE>
given to Ambassador, then Styl-Rite may terminate this Agreement as of a date
specified in such notice of termination.
5.3 Termination for Insolvency. Subject to the provisions of Title 11, United
States Code, if either parry becomes or is declared insolvent or bankrupt, is
the subject of any proceedings relating to its liquidation, insolvency or for
the appointment of a receiver or similar officer for it, makes an assignment for
the benefit of all or substantially all of its creditors, or enters into an
agreement for the composition, extension, or readjustment of all or
substantially all of its obligations, then this Agreement shall terminate.
5.4 Termination of License Agreement. If at any time during the Initial Term or
the Subsequent Term, Styl-Rite's License Agreement with Halston is terminated
for any reason, this Agreement shall terminate as of the same date. Ambassador
will pay Styl-Rite for all outstanding invoices as of the date of termination.
ARTICLE VI CONFIDENTIALITY
6.1 Confidentiality. Except as otherwise provided in this Agreement, Styl-Rite
and Ambassador each agree that all information communicated to it by the other
or the other's affiliates, whether before or after the Effective Date, including
without limitation the terms of this Agreement, will be received in strict
confidence, will be used only for purposes of this Agreement, and will not,
without the prior Written consent of the other party, which consent shall not be
unreasonably withheld, be disclosed by the recipient party, its agents,
subcontractors or employees in any manner whatsoever other than to inform the
parties respective lender(s) for purposes of complying with the terms of any
loan agreement. Each party agrees to use the same means it uses to protect its
own confidential information, but in any event not less than reasonable means,
to prevent the disclosure of such information to outside parties. However,
neither party shall be prevented from disclosing information which belongs to
such party or is (a) already known by the recipient party without an obligation
of confidentiality other than pursuant to this Agreement; (b) publicly known or
becomes publicly known through no unauthorized act of the recipient party; (c)
rightfully received from a third party; (d) independently developed without use
of the other party's confidential information; (e) disclosed without similar
restrictions to a third party by the party owning the confidential information;
(f) approved by the other party for disclosure; or (g) required to be disclosed
pursuant to a requirement of a governmental agency or law if the disclosing
party provides the other party with notice of this requirement prior to
disclosure. The provisions of this Article will survive the expiration or
termination of this Agreement for any reason.
ARTICLE VII. REPRESENTATIONS, WARRANTIES, INDEMNITIES AND LIABILITY
7.1 Representations of Styl-Rite. Styl-Rite represents and warrants to
Ambassador that Styl-Rite possesses all requisite authority and power to conduct
its business and execute, deliver, and comply with the terms of this Agreement,
which has been duly authorized and approved by all necessary corporate action
and for which no approval or consent of any person or entity is required which
has not been obtained. Further, Styl-Rite represents and warrants to Ambassador
that (i) the License Agreement is in full force and effect in accordance with,
and subject to, all of the terms, covenants, conditions and agreements contained
therein; and (ii) until this Agreement expires or is terminated, Styl-Rite will
not, without Ambassador's prior written consent, sell or distribute Halston
Frames or Alternatively Sourced Frames to the department stores and specialty
shops listed on Exhibit "B" from time to time.
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7.2 Representations of Ambassador. Ambassador represents and warrants to
Styl-Rite that Ambassador possesses all requisite authority and power to conduct
its business and execute, deliver, and comply with the terms of this Agreement,
which has been duly authorized and approved by all necessary corporate action
and for which no approval or consent of any person or entity is required which
has not been obtained. Further, Ambassador represents and warrants to Styl-Rite
that Ambassador will not sell any Halston Frames or Alternatively Sourced
Frames, without Styl-Rite's prior written consent, other than to department
stores or specialty shops approved by Styl-Rite. Ambassador acknowledges the
Halston Frames and the Alternatively Sourced Frames bearing the Halston mark has
acquired a reputation of quality, prestige and style. Ambassador acknowledges
Halston is the owner of all right, title and interest in and to the Halston mark
in any and all forms in which it is used on Halston Frames and Alternatively
Sourced Frames, and is also the owner of the goodwill associated with the
Halston mark, including the goodwill associated with the sale of Halston Frames
and Alternatively Sourced Frames under this Agreement. Ambassador represents and
warrants to Styl-Rite that Ambassador shall not (i) contact Halston directly for
any reason during the term of this Agreement, (iii) negotiate with Halston to
obtain a license to use the Halston trademark for a period of one (1) year from
the expiration or termination date of the License Agreement and (iii) at any
time knowingly, do or cause to be done, any act which will, either directly or
indirectly, impair the rights of Halston in and to the Halston mark.
7.3 Warranty and Disclaimer. Styl-Rite warrants that all Halston Frames are
manufactured in conformance with standards generally applicable in the optical
industry and are merchantable for their intended use. Except as set forth
herein, Styl-Rite makes no other representations or warranties, either express
or implied, regarding the Halston Frames and, notwithstanding the foregoing
makes no representations or warranties, either express or implied, regarding the
Alternatively Sourced Frames. Ambassador shall make no warranties or
representations with respect to the Halston frames or the Alternatively Sourced
Frames, except as expressly authorized in writing by Styl-Rite. Styl-Rite's
liability for damages for breach of the foregoing warranties shall be limited,
at Styl-Rite's option, to the replacement of any nonconforming Halston Frames or
the return for credit by Ambassador of any nonconforming Halston Frame,
including any reasonable shipping and handling costs incurred by Ambassador.
Styl-Rites liability for any nonconforming products is expressly limited to the
foregoing remedies and Styl-Rite shall in no event be liable for any incidental
or consequential damages. Ambassador shall promptly inspect each shipment of
Halston Frames delivered to Ambassador to determine whether they conform to the
specifications set forth in Ambassador's purchase order. The failure by
Ambassador to notify Styl-Rite of any nonconforming products within twenty (20)
days after the delivery of each shipment of Halston Frames shall be deemed a
waiver by Ambassador of any such claims.
7.4 Indemnification of Styl-Rite. Ambassador agrees to indemnify, defend and
hold Styl-Rite harmless, from any all damages, liabilities, costs, and expenses,
including without limitation, reasonable attorneys' fees and expenses, arising
out of, under or in connection with any claim, demand, charge, action, cause of
action or other proceeding relating to the conduct of Ambassador's business,
including without limitation, the acquisition and use by Ambassador of the
Halston Frames and the Alternatively Sourced Frames to be provided by Styl-Rite
under this Agreement and for or by reason of the infringement of another's
trademark as a result of Ambassador's unauthorized use of the Halston mark.
7.5 Indemnification of Ambassador. Styl-Rite agrees to indemnify, defend and
hold Ambassador harmless, from any and all damages, liabilities, costs, and
expenses, including without limitation, reasonable attorneys' fees and expenses,
arising out of, under or in connection with any claim, demand, charge, action,
cause of action or other proceeding relating to any product liability claim
based on a defect in manufacturing
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the Halston Frames or any claim brought by any third party that the manufacture,
design, use marketing or sale of the Halston Frames or the Alternatively Sourced
Frames infringe any patent or trademark, except to the extent such damages
result from the negligence, recklessness, willful misconduct or any unauthorized
acts of the party asserting the claim or seeking indemnification.
7.6 Limitation of Liability of Styl-Rite. In the event Styl-Rite shall be held
liable to Ambassador, for any matter arising out of, under, or in connection
with this Agreement, whether based on an action or claim in contract, equity,
negligence, intended conduct, tort or otherwise, the amount of damages
recoverable against Styl-Rite for all events, acts or omissions shall not exceed
an amount equal to the entire principal obligation of Ambassador for the payment
of the purchase price for the Halston Frames and the Alternatively Sourced
Frames during the Initial term and the Subsequent Term; provided, however, that
this limitation on damages shall not apply to any product liability claim
asserted by any third party. In no event will the measure of damages payable by
Styl-Rite include, nor will Styl-Rite be liable for, any amounts for loss of
income, profit or savings or indirect, incidental, consequential, or punitive
damages of any party, including third parties. The provisions of this Article
will survive the termination of this Agreement for any reason.
7.7 Limitation of Liability of Ambassador. In no event will the measure of
damages payable by Ambassador include, nor will Ambassador be liable for, any
amounts for loss of income, profit or savings or indirect, incidental,
consequential, or punitive damages of any party, including third parties. The
provisions of this Article will survive the termination of this Agreement for
any reason.
7.8 Contractual Statute of Limitations. No claim and demand for arbitration or
cause of action which arose out of an event or events which occurred more than
two (2) years prior to the filing of a demand for arbitration or suit alleging a
claim or cause of action may be asserted by either party against the other
party; provided, however, that the foregoing contractual statute of limitations
shall not apply to any unknown claims or causes of action which are not
discovered until the expiration of more than two (2) years from the date on
which such event or events occurred. Each of those claims shall be subject to
the then applicable statute of limitations.
7.9 Acknowledgment. Styl-Rite and Ambassador each acknowledge that the
limitations and exclusions contained in this Article have been the subject of
active and complete negotiation between the parties and represent the parties'
agreement based upon the level of risk to Styl-Rite and Ambassador associated
with their respective obligations under this Agreement and the payments to be
made to Styl-Rite under this Agreement.
ARTICLE VIII. DISPUTE RESOLUTION
8.1 Cooperative Resolution of Disputes. During the course of the relationship
provided for in this Agreement, disputes, controversies or claims may arise
between the parties. To minimize the expense to and impact on each party of
formally resolving such disputes, controversies and claims, the parties will
meet regularly to review the performance of each party of its obligations under
this Agreement. If the parties are unable to resolve a dispute, controversy or
claim through this performance review process, upon the written request of
either party, each party will appoint a representative whose task it will be to
meet for the purpose of resolving the dispute, controversy or claim and
negotiate a resolution in good faith, without the necessity of any formal
proceeding relating thereto. No formal proceedings for the resolution of such
dispute, controversy or claim may be commenced until either or both of the
appointed representatives conclude in good faith that amicable resolution
through continued negotiation of the matter is not likely. Except where
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clearly prevented by the area in dispute or as provided herein, both parties
agree to continue performing their respective obligations under this Agreement
while the dispute is being resolved unless and until such obligations are
terminated or expire in accordance with the provisions hereof.
8.2 Arbitration for use when Cooperative Resolution Fails. Any dispute,
controversy or claim arising out of or related to this Agreement, or the
creation, validity, interpretation, breach or termination of this Agreement,
that the parties are unable to resolve through informal discussions or
negotiations pursuant to Article 8.1, will be submitted to binding arbitration
before a panel of three arbitrators in Philadelphia, Pennsylvania, in the event
Styl-Rite requests that any dispute, controversy or claim be submitted to
arbitration during either the Initial Term or the Subsequent term and in
Glendora, New Jersey, in the event Ambassador requests that any dispute,
controversy or claim be submitted to arbitration during either the Initial Term
or the Subsequent Term. Either party may demand arbitration in writing, by
serving on the other party a statement of the dispute, controversy or claim, and
the facts relating or giving rise thereto, in reasonable detail, and the name of
the arbitrator selected by it.
Other than those matters involving injunctive relief as a remedy, or any action
necessary to enforce the award of the arbitrators, the provisions of this
Article are a complete defense to any suit, action or other proceeding
instituted in any court or before any administrative tribunal with respect to
any dispute, controversy or claim arising out of or related to this Agreement or
the creation, validity, interpretation, breach or termination of this Agreement.
The provisions of this Article will survive the expiration or termination of
this Agreement for any reason. Nothing in this Article prevents the parties from
exercising the termination rights set forth in this Agreement.
Unless Styl-Rite is bringing an action under this Article for nonpayment by
Ambassador, Styl-Rite will continue to supply the Styl-Rite Frames, and
Ambassador shall continue to make payments to Styl-Rite, in accordance with this
Agreement, during the arbitration proceedings.
8.3 Injunctive Relief. Notwithstanding the provisions of Article 8.1 and 8.2,
Styl-Rite and Ambassador agree that either party may obtain a temporary
restraining order or preliminary injunction pending the resolution of any
dispute between the parties pursuant to either Article 8.1 or 8.2 hereof, if
they are otherwise entitled thereto under applicable law.
ARTICLE IX. MISCELLANEOUS
9.1 Binding Nature and Assignment. This Agreement shall be binding on the
parties hereto and their respective successors and permitted assignees. Neither
this Agreement, any part hereof, nor any right or obligation hereunder may be
assigned by any party hereto without the prior written consent of the other
party hereto (and any attempts to do so will be void).
9.2 Notices. Any notice, request or demand from one party to another under this
Agreement must be in writing (which may be by facsimile transmission) to be
effective and shall be deemed to have been given on the day actually delivered
or, if mailed, on the third business day after it is enclosed in an envelope,
addressed to the party to be notified at the address stated below, properly
stamped, sealed, and deposited in the appropriate official postal service. Until
changed by notice pursuant hereto, the address and facsimile number for each
party for purposes hereof is as shown on the signature pages(s) of this
Agreement. Any writing which may be mailed pursuant to the foregoing may also be
delivered by hand or telecopier and shall
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be effective when received by the addressee. Either party may from time to time
specify as its address for purposes of this Agreement any other address upon
giving prior written notice thereof to the other party.
9.3 Counterparts. This Agreement may be executed in several counterparts, all of
which taken together shall constitute one single agreement between the parties
hereto.
9.4 Headings. The Article and Article headings are for reference and convenience
only and shall not enter into the interpretation hereof.
9.5 Approvals and Similar Actions. Where agreement, approval, acceptance,
consent or similar action by either party is required by any provision of this
Agreement, such action shall not be unreasonably delayed or withheld.
9.6 Force Majeure. Each party shall be excused from performance hereunder (other
than performance of obligations to make payment) for any period and to the
extent that it is prevented from performing pursuant hereto, in whole or in
part, as a result of delays caused by the other or third parties or an act of
God, war, civil disturbance, court order, labor dispute, or other case beyond
its reasonable control, including failures or fluctuations in electrical power,
heat, light, air conditioning or telecommunications equipment, and such
nonperformance shall not be a default hereunder or a ground for termination
hereof.
9.7 Waiver. No delay or omission by either party hereto to exercise any right or
power hereunder shall impair such right or power or be construed to be waiver
thereof. A waiver by either of the parties hereto of any of the covenants to be
performed by the other or any breach thereof shall not be construed to be a
waiver of any succeeding breach thereof or of any other covenant herein
contained. All remedies provided for in this Agreement shall be cumulative and
in addition to and not in lieu of any other remedies available to either party
at law, in equity or otherwise.
9.8 No Third Party Beneficiary. Nothing in this Agreement may be relied upon or
shall benefit any party other than the parties hereto.
9.9 Entire Agreement. This Agreement, including any schedules referred to herein
and attached hereto, each of which is incorporated in this Agreement for all
purposes, constitutes the entire agreement between the parties with respect to
the subject matter of this Agreement and there are no representations,
understandings or agreements relating to this Agreement which are not fully
expressed herein. No amendment, modification, waiver or discharge hereof shall
be valid unless in writing and signed by an authorized representative or the
party against which such amendment, modification, waiver or discharge is sought
to be enforced.
9.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to choice of
law provisions, statutes, regulations or principles of this or any other
jurisdiction.
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IN WITNESS WHEREOF, Styl-Rite and Ambassador have each caused this
Agreement to be signed and delivered by its duly authorized officer as of
the date set forth above.
STYL-RITE OPTICAL MFG. CO., INC. DIPLOMAT-AMBASSADOR, INC.
By: /s/ Anthony Bartolotta By: /s/ Barry Budilov
--------------------------- -----------------------
Anthony Bartolotta Barry Budilov
Address: 3850 Northwest 35th Avenue Address: 1010 Arch Street, 3rd Floor
Miami, Florida 33142 Philadelphia, Pennsylvania
19107-3015
Facsimile: (305) 634-0731 Facsimile: (215) 925-0204
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EXHIBIT B
A & M Optical (aka Vision Masters) J & J Wholesale
Berris Optical Lenscrafters
Bizer Enterprises Midwest Vision
Budget Optical National Vision Associates
Cambridge Eye Doctors New Wave Optiks
Central City Optical New West
Cigna Health Plan Optical Outlets
Cohen's Fashion Optical Philadelphia Vision Centers
Diversified Ophthalmic Price Costco
Dr. Hollis Vision World Price Costco Canada
East Portland Optical Schaeffer Eye Center
Eye Care Centers of America Shawnee Optical
Eye Gallery (aka P.D. Plastics) South Florida Vision Centers
Eyeland Optical Sterling Vision/Site for Sore Eyes
Express Scripts Texas State Optical
Frame-n-Lens Total Optics
Frame-n-Lens Club Division Upscale Marketing
K-Mart Vision Land
Kaiser Permanente Vision Plaza
W.A. Jones
Wal-Mart
2949 Optical
/s/ Barry Budilov /s/ Anthony Bartolotta, Pres.
- ------------------------------- ----------------------------------
AMBASSADOR EYEWEAR GROUP STYL-RITE OPTICS
Barry Budilov Anthony Bartolotta
<PAGE>
Exhibit 10.31
Date: February 21, 1997 INITIAL TERM: January 1, 1998 - December 31, 2000
(C)1993 Nintendo
Nintendo
Merchandise License Agreement
THIS MERCHANDISE LICENSE AGREEMENT by and between Nintendo of America
Inc., 4820 150th Avenue NE, Redmond, WA 98052 (hereafter referred to as
"Licensor") and Ambassador Eyewear Group, 1010 Arch Street, 3rd Floor,
Philadelphia, PA 19107 (hereinafter referred to as "Licensee") is made as of the
latest date signed by the parties.
THIS WILL CONFIRM OUR AGREEMENT AS FOLLOWS:
1. GRANT OF LICENSE: Subject to the terms and conditions of this Agreement,
Licensor grants to Licensee for the Term (defined herein), the license to use
the trademarks, copyrights, characters, designs, and likenesses described in
Schedule A (collectively called the "Property"), to be used solely in connection
with the manufacture, distribution, promotion, advertisement and sale of the
article(s) described in Schedule B (herein called the "Licensed Products"). This
license does not constitute and may not be used so as to imply the endorsement
of the Licensed Product by Licensor. This license granted herein is
non-exclusive; nothing herein shall be construed so as to prevent Licensor from
granting any other licenses for the Property or from using the Property in any
matter whatsoever. Notwithstanding the preceding sentence and subject to
Paragraph 7, during the Term and for the Territory of this Agreement, Licensor
shall not enter into a license agreement with a third party for a licensed
product using the Properties for the categories listed in Schedule B.
2. TERRITORY: Licensee shall be entitled to use the license granted hereunder
only in the territory described in Schedule C (called the "Territory"). If the
territory includes one or more countries in the European Community, the Licensee
agrees as follows (i) that it will not seek customers outside the Territory for
the Licensed Products; (ii) that it will not establish outside the Territory any
branch for the sale of the Licensed Products; and (iii) that it will not
maintain outside the Territory any distribution depot for the Licensed Products;
nothing in this sentence shall be deemed to prevent the Licensee from fulfilling
orders for the Licensed Products received from unsolicited customers located in
countries of the European Community outside the Territory.
3. LICENSE PERIOD: The license granted hereunder shall be effective and
terminate as of the dates specified in Schedule D (the "Term"), unless sooner
terminated on renewed in accordance with the terms and conditions hereof.
4. PAYMENT:
(a) Rate. Licensee shall pay to Licensor as its royalty a sum equal to the
percentages set forth in Schedule E of all Net Sales (defined below) of the
Licensed Products by Licensee or any of its affiliated, associated or subsidiary
companies. The term "Net Sales" shall mean the gross amount of sales of Licensed
Products at the invoiced selling price, net normal and reasonable cash and
quantity discounts and returns for credit. No deduction shall be made for
uncollectible accounts or for costs incurred in manufacturing, selling,
distributing, advertising (including cooperative allowances).
(b) Minimum Royalties. Licensee shall pay to Licensor a minimum royalty
consisting of an advance payment to be applied against a minimum guarantee for
the Term, and in any renewal term ("Renewal Term") hereunder, in the amounts and
at the time specified in Schedule F. No part of any such minimum royalty shall
in any event be payable to Licensee. Royalty payments which exceed the Term's
minimum royalty or any Renewal Term's minimum royalty shall not be credited
toward the next succeeding term's minimum royalty.
(c) Periodic Statements. Within thirty (30) days after the end of the
calendar quarter in which the initial shipment of Licensed Products is made, and
thereafter within thirty (30) days after the end of each calendar quarter,
Licensee shall furnish to Licensor (in a form to be supplied by Licensor, or in
the absence thereof, in a form acceptable to Licensor) complete and accurate
statements certified by Licensee showing the number,
Nintendo Merchandise License Agreement Page 1
<PAGE>
description, gross sales price, itemized deductions from gross sales price, and
net sales price of each Licensed Product sold by Licensee or any of its
affiliated, associated or subsidiary companies, and any returns made during the
period, together with a computation of the royalties due. Licensee shall provide
such statements to Licensor whether or not any of the Licensed Products have
been sold during said period. All information shall be shown separately for each
country within the Territory. Licensee agrees that royalty reports will indicate
clearly (by name or character or similar description) the Licensed Products sold
and will be given in sufficient detail to enable Licensor to separate royalties
by Licensed Products. It is understood that timely rendering of all statements
required hereunder is essential under the terms of this Agreement.
(d) Royalty Payments. Licensee shall remit the royalties due in excess of
any previously paid advance sum for each calendar quarter within thirty (30)
days after the end of each calendar quarter, and payment shall be made with the
statement rendered for that quarter. Payment shall be in the currency set forth
in Schedule I. The receipt or acceptance by Licensor of any of the statements
hereunder, or any royalties paid hereunder, or the cashing of any royalty check
paid hereunder, shall not preclude Licensor from questioning the correctness
thereof at any time. In the event that any inconsistencies or mistakes are
discovered in such statements or payments, they shall immediately be rectified
and the appropriate payment made by Licensee.
(e) Records and Audits. At its principal place of business, Licensee shall
keep and maintain accurate records of the transactions underlying the statements
to be furnished hereunder. Licensee shall allow representatives of Licensor
during office hours, upon reasonable notice and at reasonable intervals (not to
exceed two times per calendar year), to audit and make copies of such records
for the purpose of ascertaining the correctness of such statements. If any such
audit shall disclose any deficiency of percent ( %) or more, Licensee shall
pay, in addition to such deficiency, the actual and reasonable cost of such
audit. Upon demand of Licensor, not to exceed two times per calendar year,
Licensee shall at its own expense furnish to Licensor a detailed statement
signed and verified by Licensee's chief financial officer showing the number,
description, gross sales price, itemized deductions from gross sales price and
net sales price of the Licensed Products covered by this Agreement distributed
and/or sold by Licensee (and any of its affiliated, associated, or subsidiary
companies) up to the date of Licensor's demand. All books of account and records
shall be kept available for at least three (3) years after the termination or
expiration of this Agreement.
(f) Payments. Until otherwise instructed in writing by Licensor, all
payments of royalties hereunder including advance payments and minimum
guarantees, shall be made payable to "Agent", as defined in Schedule J.
5. LICENSED PRODUCTS, QUALITY AND APPROVALS:
(a) General Quality. Licensee agrees that the Licensed Products shall: (i)
be of high standard and of such style, appearance and quality so as to protect
and enhance the Property and the good will pertaining thereto; (ii) meet
Licensor's quality standards and specifications, and (iii) be manufactured,
sold, distributed, advertised, and promoted in accordance with all applicable
laws.
(b) Preapproval of Licensed Products & Related Materials. Before
distributing, selling, advertising, or promoting any of the Licensed Products,
Licensee shall furnish to Licensor, free of cost, for its written approval, the
following in the order listed: (i) sketches; (ii) finished artwork and final
proofs; (iii) pre-production samples or strike-offs; (iv) the number of
post-production samples of each Licensed Product as set forth in Schedule K; and
(v) all other finished cartons, labels, containers, packing and wrapping
material, and similar materials upon which the Property appears (collectively
the "Related Materials"). The Licensed Products and the Related Materials are
subject to the written approval of Licensor.
(c) Packaging/Components. Licensor shall have the right to approve how the
Property is packaged in assortments, and shall have the right to approve which
components of the Property shall be included in combination with other
components of the Property.
(d) Additional Samples. In addition to the samples provided to Licensor
pursuant to Paragraph 5(b), Licensor may request, from time to time, up to
twelve (12) samples per year, individual random samples of each Licensed Product
and the Related Materials.
Nintendo Merchandise License Agreement Page 2
Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
(e) Notices. Licensee shall cause to appear on or within each Licensed
Product and all Related Materials the notice set forth in Schedule G, or other
notice specified by Licensor.
(f) Advertising, Promotional and Display Materials. Before finalizing,
using or distributing any advertising, promotional, display or other similar
materials bearing the Property, Licensee shall furnish same to Licensor for its
written approval.
(g) Approvals. With respect to all approvals by Licensor required under
this Paragraph 5, each item submitted by Licensee shall be deemed disapproved if
Licensee has not received the written approval of Licensor of the item in
question within ten (10) days after its submission by Licensee to Licensor.
Nothing herein, however, shall be deemed to obligate Licensor to respond to any
such submission within the ten (10) day period.
6. ARTWORK AND OWNERSHIP OF PROPERTY:
(a) Artwork. Licensor shall provide to Licensee, free of charge, one set
of camera-ready black and white artwork (depicting some, but not necessarily
all, of the Property) that Licensor generally makes available to its merchandise
licensees. All artwork and related material involving the Property,
notwithstanding their invention, creation, or use by Licensee, shall be and
remain the property of Licensor, and Licensor shall be entitled to use the same
and to license the use of same by others without restriction.
(b) Ownership of Property. Licensee recognizes all of Licensor's rights
and interests in and to the Property, and that all use of the Property licensed
hereunder inures to the benefit of Licensor or its grantor(s). No right, title,
or interest, except the license interest granted by Paragraph 1 hereof, is
transferred by this Agreement. At the termination or expiration of this
Agreement, Licensee will be deemed to have assigned, transferred and conveyed to
Licensor or its grantor(s) all trademarks, service marks, trade dress,
copyrights, equities, good will, titles or other rights in and to the Property
which may have been obtained by Licensee or which may have vested in Licensee as
a result of its activities under this Agreement, and that Licensee will, at
Licensor's expense in connection with the preparation thereof, execute any
instruments reasonably requested by Licensor to confirm the foregoing. No
consideration other than the mutual covenants and consideration of this
Agreement shall be necessary for any such assignment, transfer or conveyance.
Licensor shall acquire no right, title or interest in or to any trademarks owned
by Licensee and used by Licensee in connection with the Property, which rights
shall be and remain those of Licensee.
7. DISTRIBUTION:
(a) Marketing Date. Licensee shall diligently and continuously
manufacture, sell, distribute, advertise, and promote the Licensed Products
during the Term, and shall make and maintain adequate arrangements for the
distribution of the Licensed Products. Licensee shall offer the Licensed
Products for sale in substantial quantities by the marketing date specified in
Schedule H, with delivery within a reasonable time thereafter, including at
least one of the Licensed Products in each of the categories listed in Schedule
B. If, at any time thereafter, Licensee for a period of three (3) consecutive
months has failed to sell any of the Licensed Products (or any class or category
of the Licensed Products) covered hereunder, Licensor, in addition to all other
remedies available to it hereunder, may terminate this license with respect to
such Licensed Products or class or category thereof which have not been so sold
during such period by giving written notice of termination to such effect to
Licensee, which shall become effective thirty (30) days thereafter.
(b) Sale/Distribution. With regard to the sale and distribution of the
Licensed Products covered by this Agreement, Licensee agrees as follows:
(i) Licensee shall sell and distribute the Licensed Products
outright and not on an approval, consignment, or guaranteed sale or
return basis;
(ii) Licensee shall sell and distribute the Licensed Products
to jobbers, wholesalers, distributors, retail stores, and merchants
for sale or distribution directly to the public and may also sell to
catalog companies and home shopping networks;
Nintendo Merchandise License Agreement Page 3
<PAGE>
(iii) Except with the prior written consent of Licensor,
Licensee shall not directly or indirectly sell or distribute the
Licensed Products for Promotional Purposes (defined below).
Licensor specifically reserves the right unto itself to use,
manufacture, sell, and/or directly or indirectly distribute, or
license third parties to use, manufacture, sell, and/or distribute,
products similar to or the same as the Licensed Products, which may
use all, some, or none of the Property, for Promotional Purposes.
Promotional Purposes shall be defined to include any of the
following, regardless of whether the product(s) is given away free
or a fee is charged to the end consumer: promotions including
on-pack promotions, in-pack promotions, instant win games, tours or
exhibitions; and any other premium or promotion; any giveaway; any
sweepstakes or contest; any mail order; any movie, video, or show,
or record-related promotion, premium, or publicity; or any other
similar type of publicity. Licensee specifically acknowledges that
Licensor may exercise its rights contained in this paragraph
concurrently with the rights exercised to Licensee under this
Agreement.
(iv) Except with the prior written consent of Licensor,
Licensee will not use, or knowingly permit the use of, the Licensed
Product as a Premium (defined herein). The term "Premium" includes,
but is not limited to, free or self-liquidating items offered to the
public in conjunction with the sale or promotion of a product or
service, including traffic building or continuity visits by the
consumer/customer, or any similar scheme or device, the prime intent
of which is to use the Licensed Product(s) in such a way as to
promote, publicize and/or sell the products, services, or business
image of the third party company or manufacturer. "Premium" also
includes distribution of the Licensed Products for retail sale
through distribution channels offering earned discounts or "bonus"
points based upon the extent of usage of the offeror's product or
service.
(v) In the event any sale is made at a special price to any of
Licensee's subsidiaries or to any other person, firm or corporation
related in any manner to Licensee, or its officers, directors, or
major stockholders, there shall be a royalty paid on such sales
based upon the price generally charged the trade by Licensee.
(c) Suggested Retail Price. Licensee agrees to keep Licensor, at
Licensor's request, advised of the wholesale and suggested retail prices at
which Licensee sells the Licensed Products covered hereunder.
(d) Sales to Licensor. Licensee agrees to sell to Licensor such reasonable
quantities of the Licensed Products as Licensor shall request at as low a rate
and on as good terms as Licensee sells similar quantities of the Licensed
Products to the general trade.
8. LICENSOR'S WARRANTY: Licensor represents and warrants that, to the best of
its knowledge, it holds all such rights and interest in the Property as are
required to permit Licensor to enter into this Agreement and expressly warrants
that Licensor is authorized to enter into this Agreement. With respect to any
claim or suit that Licensor is not possessed of such right, title, and interest
in the Property as to be entitled to grant this license to Licensee, Licensor
shall have the option to undertake and conduct the defense of any suit so
brought and no settlement of any such claim or suit shall be made without the
prior written consent of Licensor. Licensee agrees to cooperate fully with
Licensor in any such action.
9. PROTECTION OF LICENSOR'S RIGHTS: Licensee agrees to assist Licensor, at
Licensor's sole cost and expense, to the extent reasonably necessary to protect
Licensor's rights to the Property. Licensor or its grantor(s) may commence or
prosecute any claims or suits in their own name or, subject to Licensee's
consent, not to be unreasonably withheld, in the name of Licensee or join
Licensee as a party thereto. Licensee shall promptly notify Licensor in writing
of any infringements or imitations of the Property on Licensed Products similar
to those covered by this Agreement which may come to Licensee's attention, and
Licensor shall have the sole right to determine whether or not any action shall
be taken on account of any such infringements or imitations. Licensee shall not
institute any suit or take any actions on account of any such infringements or
imitations without first obtaining the written consent of the Licensor.
Nintendo Merchandise License Agreement Page 4
<PAGE>
10. INDEMNIFICATION BY LICENSEE: Licensee shall indemnify Licensor and shall
defend Licensor against, and hold Licensor harmless from, all claims,
liabilities, suits, losses, damages, and expenses (including reasonable
attorneys' fees) brought by a third party against Licensor arising out of or
relating to:
(a) any alleged or actual unauthorized use of any intellectual property
right (including, but without limitation, any copyright, patent, trademark, or
other intellectual property right) by Licensee in connection with the Licensed
Products (except for claims that the Property infringes any copyright, patent,
or trademark), or
(b) any alleged or actual defect in the Licensed Products (including, but
without limitation, any claim or product liability); or
(c) any alleged or actual act or omission by Licensee or Licensee's agents
or employees (whether wrongful, negligent, or otherwise) in connection with the
Licensed Products or this Agreement.
As used in this paragraph, "Licensor" shall also include the grantor(s),
officers, directors, agents, and employees of Licensor, its subsidiaries, and
affiliates. This indemnity shall survive the termination or expiration of this
Agreement.
11. INSURANCE:
(a) Type of Insurance/Amount. During the Term and any Renewal Term,
Licensee shall obtain and maintain, at its own expense comprehensive general
liability insurance (including products' liability insurance), from an insurance
company reasonably acceptable to Licensor, providing adequate protection for
Licensee against any claims, liabilities, suits, losses, damages and expenses
arising out of or relating to the circumstances set forth in Paragraph 10, in
the amount of U.S. Five Million and No/100 Dollars (U.S. $5,000,000) or the
maximum amount available in the Territory, whichever is lower, per incident or
occurrence, with a reasonable deductible. If General Civil Insurance is solely
available in the Territory, during the Term and any Renewal Term, Licensee shall
obtain and maintain, at its own expense, a General Civil Insurance Policy in
accordance with the conditions specified in this subparagraph; provided,
however, if such General Civil Insurance does not include products' liability
coverage and products' liability coverage thereafter becomes available in the
Territory, Licensee shall immediately obtain such products liability coverage
through the remainder of the Term and any Renewal Term. Such insurance shall
remain in full force during the Term, any Renewal Term, and for a period of
three (3) years thereafter.
(b) Certificate/Additional Insured. Simultaneously with the execution of
this Agreement, and thereafter as requested by Licensor, Licensee shall provide
Licensor and Agent with a certificate of insurance (the original or a
translation of which must be provided in English) evidencing such insurance.
Licensor and Agent shall be named as additional insureds on such insurance
coverage; provided, however, such requirement may be waived by Licensor if
Licensee submits a written opinion of Licensee's attorney or insurance agent
that such additional insured coverage is not available as a matter of law or
local practice.
12. DEFAULT AND TERMINATION: If a petition in bankruptcy is filed by or against
Licensee, or if Licensee becomes insolvent, or makes an assignment for the
benefit of its creditors or an arrangement pursuant to any bankruptcy law, or if
Licensee discontinues its business or if a receiver is appointed for it or its
business, to the fullest extent permitted by law at the time of the occurrence,
the license hereby granted shall automatically terminate forthwith without any
notice whatsoever being necessary. In the event this license is so terminated,
Licensee, its receivers, representatives, trustees, agents, administrators,
successors, and/or assigns shall have no right to sell, exploit, or in any way
deal with or in any Licensed Products or any Related Material.
13. BREACH: If Licensee breaches any covenant or fails to perform any of its
obligations under the terms of this Agreement, Licensor shall have the right to
terminate the license hereby granted upon thirty (30) days' notice in writing,
except as otherwise provided herein, and except that with regard to any failure
or breach relating to copyright, trademark or service mark notices, monetary
payments or royalty statements, the notification period shall be fifteen (15)
days, and such termination shall become effective automatically (without any
obligation to serve any notice of termination or to accomplish any formality or
undertake any court proceeding) unless Licensee shall take reasonable steps to
completely remedy the failure or breach within either the fifteen (15) or thirty
(30) day period as appropriate. Termination of the license under the provisions
of this paragraph shall be without prejudice to any
Nintendo Merchandise License Agreement Page 5
<PAGE>
rights which Licensor may otherwise have against Licensee. Upon termination of
this license, all royalties on sales theretofore made shall become immediately
due and payable; no advances against royalties shall be repayable; and the
balance of any minimum royalty shall be immediately due and payable.
Furthermore, in the event that litigation of any nature with respect to the
performance by Licensee or Licensor of its obligations hereunder is initiated,
then and in such event, the prevailing party's costs and expenses, including
reasonable attorneys' fees, shall be reimbursed promptly by the non-prevailing
party to the prevailing party.
14. FINAL STATEMENT UPON TERMINATION OR EXPIRATION: Sixty (60) days before the
expiration of this license and, in the event of its termination, ten (10) days
after receipt of notice of termination or the happening of the event which
terminates this Agreement where no such notice is required, a statement showing
the number and description of Licensed Products covered by this Agreement on
hand or in process shall be furnished by Licensee to Licensor. Licensor shall
have the right to take a physical inventory to ascertain or verify such
inventory and statement, and refusal by Licensee to submit to such physical
inventory by Licensor shall forfeit Licensee's right to dispose of such
inventory, Licensor retaining all other legal and equitable rights Licensor may
have in the circumstances.
15. DISPOSAL OF STOCK UPON TERMINATION OR EXPIRATION: After termination or
expiration of this Agreement, except as otherwise provided herein, Licensee may
dispose of Licensed Products covered by this Agreement which are on hand or in
process at the time notice of termination is received or upon the expiration
date, for the sell-off period set forth in Schedule L on a non-exclusive basis,
provided Licensee is not in breach or otherwise in default under this Agreement.
All applicable royalties shall be paid on Licensed Products sold during the
sell-off period within twenty (20) days following the expiration of the sell-off
period. Notwithstanding anything to the contrary herein, Licensee shall not
manufacture, sell, or dispose of any Licensed Products covered by this license
after its expiration or its termination based on the failure of Licensee to
comply with Paragraph 5.
16. EFFECT OF TERMINATION OR EXPIRATION: Upon and after the expiration or
termination of this license, all rights granted to Licensee hereunder shall
forthwith revert to Licensor, and Licensee will refrain from further use of the
Property or any further reference to it, direct or indirect, or anything deemed
by Licensor to be similar to the Property in connection with the manufacture,
sale, distribution, or promotion of Licensee's products, except as provided in
Paragraph 15.
17. LICENSOR'S REMEDIES: Licensee acknowledges that its failure (except as
otherwise provided herein) to cease the manufacture, sale, distribution,
advertising, or promotion of the Licensed Products covered by this Agreement or
any class or category thereof at the termination or expiration of this Agreement
or any portion thereof may result in immediate and irreparable damage to
Licensor and to the rights of any subsequent licensee. Licensee acknowledges and
admits that there is no adequate remedy at law for such failure to cease
manufacture, sale, distribution, advertising, or promotion, and Licensee agrees
that in the event of such failure, Licensor shall be entitled to equitable
relief by way of temporary and permanent injunctions and such other and further
relief as any court of competent jurisdiction may deem just and proper.
18. NOTICES: All notices and statements required under this Agreement shall be
in writing addressed to the parties at the addresses above, unless notification
of a change of address is given in writing. The date of mailing shall be deemed
the date the notice or statement is given.
19. RELATIONSHIP BETWEEN THE PARTIES: Neither party shall represent itself as
the agent or legal representative of the other party for any purpose whatsoever,
and neither party shall have the right to create or assume any obligation of any
kind, express or implied, for or on behalf of the other party in any way
whatsoever. This Agreement shall not create or be deemed to create any agency,
partnership, or joint venture between the parties.
20. NO ASSIGNMENT OR SUBLICENSE: This Agreement shall not be assigned or
sublicensed by Licensee, except with the prior written consent of Licensor,
which consent shall not be unreasonably withheld, and shall not be assigned by
operation of law. Any assignment or sublicense in violation of the preceding
sentence shall be null and void. This Agreement may be assigned by Licensor upon
written notice to Licensee but without any consent, provided, however, that any
such assignment shall not release the Licensor from its obligations to the
Licensee under this Agreement. Subject to such restriction and to the
restriction against assignment by operation of law
Nintendo Merchandise License Agreement Page 6
<PAGE>
provided above, this Agreement shall be binding upon and inure to the benefit
of the parties, their successors and assigns. Nothing herein shall be deemed to
prevent Licensee from causing the Licensed Products to be manufactured by other
parties, subject to the terms and conditions of this Agreement. If any
manufacturing of the Licensed Products shall be conducted outside the Territory,
Licensee shall advise Licensor in advance of the name, address and manufacturing
location and any third party subcontractors shall sign the "Manufacturer's
Agreement" set forth in Exhibit A annexed hereto.
21. FORCE MAJEURE: The inability of Licensee to commence or complete its
obligations hereunder by the dates herein required resulting from delays caused
by strikes, picketing, insurrection, acts of God, war, emergencies, shortages,
or unavailability of materials, limitations imposed by exchange control
regulations or foreign investments regulations, or other causes beyond
Licensee's reasonable control, shall excuse performance during the continuation
thereof and extend the period for the performance of the obligations for the
period equal to the period(s) of any such delay(s). Notwithstanding the
foregoing, in the event performance by Licensee is suspended for three (3)
consecutive months in accordance with this Paragraph 21, then Licensor may, by
written notice to Licensee, elect to terminate this Agreement.
22. ENTIRE AGREEMENT: This Agreement is intended by the parties as a final and
complete expression of their agreement, and supersedes any and all prior and
contemporaneous agreements and understandings relating to it.
23. MODIFICATION AND WAIVER: This Agreement may not be modified and none of its
terms may be waived, except in writing signed by both parties. The failure of
either party to enforce, or the delay by either party in enforcing, any of its
rights shall not be deemed a continuing waiver or a modification of this
Agreement.
24. SEPARABILITY: If any part of this Agreement shall be declared invalid or
unenforceable by a court of competent jurisdiction, it shall not affect the
validity of the balance of this Agreement, provided, however, that if any
provision of this Agreement pertaining to the payment of monies to Licensor
shall be declared invalid or unenforceable, Licensor shall have the right, at
its option, to terminate this Agreement upon giving not less than ten (10) days'
written notice to Licensee.
25. PARAGRAPH HEADINGS: The headings of the paragraphs are for convenience only
and in no way limit or affect the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the day and year first above written.
LICENSOR: LICENSEE:
NINTENDO OF AMERICA INC.
By: Leisure Concepts, Inc.
Merchandising Licensing Agent Ambassador Eyewear Group
By /s/ Joe Garrity By /s/ Barry Budilov
--------------------------- ----------------------------
Al Kahn, Chief Executive officer or Its President
Joe Garrity, Chief Financial Officer
Date_____________________ Date 2/28/97
Nintendo Merchandise License Agreement Page 7
<PAGE>
Nintendo
Merchandise License Agreement
SCHEDULE PAGE
Schedules Annexed to the License Agreement dated as of February 21, 1997,
between Nintendo of America Inc. ("Licensor") and Ambassador Eyewear Group
("Licensee").
Schedule A: The Property: The following trademarks and characters and artwork
associated with the listed video game/story or audiovisual work of the same
name: Nintendo, Nintendo 64, N64, Nintendo Sports, Game Boy, Game Boy Pocket,
Super Mario 64, Super Mario Kart, Donkey Kong Country
Schedule B: Licensed Products: License for prescription eyewear and sunglasses;
non-prescription sunglasses featuring
polycarbonate lenses.
Schedule C: Territory: "U.S., its territories and possessions, Canada,
Mexico, Panama, Guatemala, Costa Rica, Honduras,
El Salvador, Belize, Venezuela, Colombia,
Ecuador, Chile, Argentina, Paraguay, Uruguay,
Peru, Trinidad, Barbados, Jamaica, Bermuda,
Grenada, Dominican Republic, St. Maarten,
Guadaloupe, Martinique, Curacao, Antigua,
Bahamas, St. Lucia, British Virgin Islands and
France."
Schedule D: Term: January 1, 1998 through December 31, 2000
Renewal Term: Licensee shall have the option to renew this
Agreement upon the same terms and conditions for one three year term, such
option exercisable by written notice to Licensor to such effect at least thirty
(30) days prior to the end of the Term, provided that (i) Licensee is not in
breach of this agreement and (ii) during the Term, royalties paid or due to be
paid by Licensee equal at least $ . In the event of such exercise, said
written notice shall be accompanied by the requisite advance payment for the
Renewal Term as provided in Schedule F below.
Schedule E: Royalty Rate: % of the in territory net sales price
Schedule F: Minimum Royalty during the Term:
Advance Payment: $ ($ due on or before
December 31, 1998; $ due on or
before December 31, 1999; $ due
on or before December 31, 2000)
All yearly advances due are to be paid
in equal quarterly installments.
Minimum Guarantee (due by end of the term): $
Nintendo Merchandise License Agreement Page 8
Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
Nintendo
Merchandise License Agreement
SCHEDULE PAGE
Minimum Royalty during the Renewal Term:
Advance Payment (due on first day): $
Minimum Guarantee (due by end of the term): $
Schedule G: Notice: (TM) & (C) [year of first use] Nintendo. All Rights
Reserved.
Schedule H: Marketing Date: January 1, 1998
Schedule I: Currency: U.S. Dollars
Schedule J: Agent's Name and Address:
Leisure Concepts, Inc.
1414 Avenue of the Americas, 6th Floor
New York, New York 10019
Schedule K: Number of Samples of Each Licensed Product: 12
Schedule L: Sell-Off Period: 180 Days
Contract #2683
Nintendo Merchandise License Agreement Page 9
Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
Exhibit 10.32
MEMORANDUM OF AMENDMENT
This is an Amendment to that certain License Agreement dated January 1,
1992, as previously amended, between HASBRO TOY GROUP, a division of Hasbro,
Inc., with its principal place of business at 1027 Newport Avenue, Pawtucket,
Rhode Island 02862-1059 ("Licensor") and Diplomat Optical Company, to which
DIPLOMAT-AMBASSADOR, INC., is successor-in-interest, with its principal place of
business at 4211 Van Kirk Street, Philadelphia, Pennsylvania 19135 ("Licensee").
RECITALS:
A. Pursuant to the License Agreement, Licensor granted a license to
Licensee to manufacture, distribute, promote and sell certain products, sold in
association with the trademark "PLAYSKOOL." Capitalized terms used in this
Agreement and not otherwise defined shall have the meanings given to such terms
in the License Agreement
B. Licensor and Licensee desire to modify and amend the License Agreement.
AGREEMENT:
In consideration of the mutual covenants and agreements in the License
Agreement and this Amendment the parties agree as follows:
1. The Term of the License Agreement is hereby renewed for an
additional three-year period commencing January 1, 1996 and
continuing through December 31, 1998 ("Second Renewal Term").
2. The Royalty Rate for the Second Renewal Term is % of Net Sales.
3. Licensee guarantees that, for sales of the Licensed Articles during
the Second Renewal Term referenced above, Licensee shall pay
Licensor not less than United States Dollars ($ ) payable
as follows:
$ due by December 15, 1996
$ due by December 15, 1997
$ due by December 15, 1998.
4. If Licensee's sales exceed United States Dollars
($ ) during the Second Renewal Term, and all other terms
and conditions of the License Agreement are satisfied, Licensee may
renew the Term of the License Agreement for an additional two-year
period commencing January 1, 1999 and continuing through December
31, 2000 ("Third Renewal
Word Processing Document No. 672-A3. JHM/DDM. Drafted 11/8/95. (C) 1995 Hasbro,
Inc. All rights reserved. This document shall not be deemed an offer and shall
not be binding unless signed by all parties.
Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
Term"). The Royalty Rate for the Third Renewal Term will be % and the
Guarantee will be United States Dollars ($ ) payable as follows:
$ due by December 15, 1999
$ due by December 15, 2000.
5. Except as specifically modified or amended by this Agreement, all of
the terms and conditions of the License Agreement are unmodified and
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have hereunto set their hands this ____
day of November, 1995.
HASBRO TOY GROUP, DIPLOMAT-AMBASSADOR, INC.
a division of Hasbro, Inc.
By: /s/ S. Hartley By: /s/ Barry Budilov
--------------------------- ---------------------------------
Title: General Manager Title: President
2
Confidential Treatment Requested - Portions filed seperately with the
Commission.
<PAGE>
Exhibit 10.37
FORM OF
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of May 3, 1995 between AMBASSADOR
EYEWEAR GROUP, INC., a Delaware corporation (the "Company") and BARRY BUDILOV
(hereinafter referred to as the "Optionee").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue stock options (the
"Options") to Optionee to purchase 54,833 shares (the "Shares") of Common
Stock of the Company, $.0003 par value per share (the "Common Stock"); and
NOW, THEREFORE, in consideration of the agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Grant. The Optionee is hereby granted the right to
purchase, at any time from May 3, 1995 until May 2, 2000 at 5:00 p.m., New
York time (the "Option Exercise Term"), 54,833 Shares at an initial exercise
price (subject to adjustment as provided in Article 7 hereof) of $.25 per
Share.
2. Option Certificate. An option certificate (the "Option
Certificate") shall be delivered to Optionee pursuant to this Agreement in
the form set forth in Exhibit A attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions and other variations as
required or permitted by this Agreement
3. Exercise of Options. The Options are exercisable at a
price of $.25 per share of Common Stock payable in cash or by certified check
to the order of the Company, subject to adjustment as provided in Article 7
hereof. Upon surrender of the Option Certificate with the Form of Election,
attached hereto as Exhibit B, duly executed, together with payment of the
Exercise Price (as hereinafter defined) for the Shares at the Company's
principal executive offices, the registered holder of the Option Certificate
("Holder") shall be entitled to receive a certificate or certificates for the
Shares so purchased. The purchase rights represented by each Option
Certificate are exercisable at the option of the Holder hereof, in whole or
in part (but not as to fractional Shares). In the case of the purchase of
less than all the Shares, the Company shall cancel said Option Certificate
upon the surrender thereof and shall execute and deliver a new Option
Certificate of like tenor for the balance of the Shares.
4. Issuance of Certificates. Upon the exercise of the
Options, the issuance of certificates for the Shares purchased shall be made
forthwith (and in any event within three business days thereafter) without
charge to the Holder thereof including, and such certificates shall (subject
to the provisions of Article 5 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance
<PAGE>
and delivery of any such certificates and the Company shall not be required
to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
The Option Certificate and the certificates representing
the Shares shall be executed on behalf of the Company by the manual or
facsimile signature of the present or any future Chairman or Vice Chairman of
the Board of Directors or President or Vice President of the Company under
its corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the present or any future Secretary or Assistant Secretary of
the Company.
Upon exercise, in part or in whole, of the Options,
certificates representing the Shares purchased (collectively, the "Option
Securities"), shall bear a legend substantially similar to the following:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended (the "Act"), and may not be offered or sold
except (i) pursuant to an effective registration
statement under the Act, (ii) to the extent applicable,
pursuant to Rule 144 under the Act (or any similar rule
under such Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to
the Company of an opinion of counsel, reasonably
satisfactory to counsel to the Company, stating that an
exemption from registration under such Act is available."
5. Restriction on Transfer of Options. The Holder of the
Option Certificate, by its acceptance thereof, covenants and agrees that the
Options are being acquired as an investment and not with a view to the
distribution thereof.
6. Price.
6.1. Initial and Adjusted Exercise Price. The initial
exercise price of each Option shall be $.25 per Share. The adjusted exercise
price shall be the price which shall result from time to time from any and
all adjustments of the initial exercise price in accordance with the
provisions of Article 7 hereof.
6.2. Exercise Price. The term "Exercise Price" herein
shall mean the initial exercise price or the adjusted exercise price,
depending upon the context.
7. Adjustments of Exercise Price and Number of Securities.
The following adjustments apply to the Exercise Price of the Options with
respect to the Shares and the number of Shares purchasable upon exercise of
the Options. In the event the Exercise Price per Share and/or the number of
Shares so purchasable is adjusted, then the Exercise Price of the Options
shall be adjusted in the same proportion.
2
<PAGE>
7.1. Computation of Adjusted Price. In case the Company
shall at any time after the date hereof pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock, then upon such
dividend or distribution the Exercise Price in effect immediately prior to
such dividend or distribution shall forthwith be reduced to a price
determined by dividing:
(a) an amount equal to the total number of shares
of Common Stock outstanding immediately prior to such dividend or
distribution multiplied by the Exercise Price in effect immediately prior to
such dividend or distribution, by
(b) the total number of shares of Common Stock
outstanding immediately after such issuance or sale.
For the purposes of any computation to be made in
accordance with the provisions of this Section 7.1, the Common Stock issuable
by way of dividend or other distribution on any stock of the Company shall be
deemed to have been issued immediately after the opening of business on the
date following the date fixed for the determination of stockholders entitled
to receive such dividend or other distribution.
7.2. Subdivision and Combination. In case the Company
shall at any time subdivide or combine the outstanding shares of Common
Stock, the Exercise Price shall forthwith be proportionately decreased in the
case of subdivision or increased in the case of combination.
7.3. Adjustment in Number of Securities. Upon each
adjustment of the Exercise Price pursuant to the provisions of this Article
7, the number of Shares issuable upon the exercise of each Option shall be
adjusted to the nearest full number by multiplying a number equal to the
Exercise Price in effect immediately prior to such adjustment by the number
of Shares issuable upon exercise of the Options immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise
Price.
7.4. Reclassification, Consolidation, Merger, etc. In
case of any reclassification or change of the outstanding shares of Common
Stock (other than a change in par value to no par value, or from no par value
to par value, or as a result of a subdivision or combination), or in the case
of any consolidation of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger in which the
Company is the surviving corporation and which does not result in any
reclassification or change of the outstanding shares of Common Stock, except
a change as a result of a subdivision or combination of such shares or a
change in par value, as aforesaid), or in the case of a sale or conveyance to
another corporation of the property of the Company as an entirety, the Holder
shall thereafter have the right to purchase the kind and number of shares of
stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance as if the
Holder were the owners of the Shares immediately prior to any such events, at
a price equal to the product of (x) the number of shares of Common Stock
issuable upon exercise of the Holder's Options and (y) the Exercise Price in
effect immediately prior to
3
<PAGE>
the record date for such reclassification, change, consolidation, merger,
sale or conveyance as if such Holder had exercised the Options.
7.5. Determination of Outstanding Shares of Common Stock.
The number of shares of Common Stock at any one time outstanding shall
include the aggregate number of shares issued or issuable upon the exercise
of options, rights and upon the conversion or exchange of convertible or
exchangeable securities.
8. Replacement of Option Certificates. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of any Option Certificate, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it,
and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of the Option, if mutilated, the
Company will make and deliver a new Option Certificate of like tenor, in lieu
thereof.
9. Elimination of Fractional Interests.
The Company shall not be required to issue certificates
representing fractions of Shares upon the exercise of the Option, nor shall
it be required to issue scrip or pay cash in lieu of fractional interests, it
being the intent of the parties that all fractional interests shall be
eliminated by rounding any fraction up to the nearest whole number of Shares.
10. Reservation of Securities.
The Company shall at all times reserve and keep available
out of its authorized shares of Common Stock, solely for the purpose of
issuance upon the exercise of the Option, such number of shares of Common
Stock as shall be issuable upon the exercise thereof. The Company covenants
and agrees that, upon exercise of the Options and payment of the Exercise
Price therefor, all Shares issuable upon such exercise shall be duly and
validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any shareholder.
11. Rights of Option Holder.
Nothing contained in this Agreement shall be construed as
conferring upon the Holder the right to vote or to consent or to receive
notice as a shareholder in respect of any meetings of shareholders for the
election of directors or any other matter, or as having any rights whatsoever
as a shareholder of the Company.
12. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt
requested:
4
<PAGE>
(a) If to Optionee, to the address of the Optionee as
shown on the books of the Company; or
(b) If to the Company, to the address of the Company's
principal executive officers or such address as the Company may designate.
13. Supplements and Amendments.
The Company and the Optionee may from time to time
supplement or amend this Option Agreement without the approval of any Holder
of the Option Certificate in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or
inconsistent with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Optionee may deem necessary or desirable and which the Company and the
Optionee deem not to adversely affect the interests of the Holder of the
Option Certificate.
14. Successors.
All the covenants and provisions of this Agreement by or
for the benefit of the Company and the Optionee inure to the benefit of their
respective successors and assigns hereunder.
15. Governing Law.
This Agreement and each Option Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State
of Delaware and for all purposes shall be construed in accordance with the
laws of said State.
16. Counterparts.
This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one
and the same instrument.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
AMBASSADOR EYEWEAR GROUP, INC.
By:__________________________________
Name:
Title:
OPTIONEE
________________________________
Barry Budilov
6
<PAGE>
EXHIBIT A
____________ Shares
THE SECURITIES ISSUABLE UPON EXERCISE OF STOCK
OPTIONS ISSUED PURSUANT TO THE STOCK OPTION AGREEMENT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR
SOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF
SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER
TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO COUNSEL FOR THE COMPANY, STATING THAT
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
AMBASSADOR EYEWEAR GROUP, INC.
Stock Option Certificate
Ambassador Eyewear Group, Inc. (the "Company"), a
Delaware Corporation, hereby grants to the person named
below an option to purchase shares of Common Stock, par
value $.0003 per share, of the Company (the "Option")
under and subject to the Stock Option Agreement between
the Company and ______________ (the "Agreement")
exercisable on the following terms and conditions and
those set forth in connection with this certificate:
Name of Optionee:__________________________________________________________
Address:__________________________________________________________
__________________________________________________________
__________________________________________________________
Social Security No.:__________________________________________________________
Number of Shares.:__________________________________________________________
Option Price:__________________________________________________________
Date of Grant:__________________________________________________________
EXERCISABILITY SCHEDULE
<TABLE>
<CAPTION>
Exercise Period
---------------------------------
Commencement
Number of Shares Subject to Option Date Expiration Date
- ----------------------------------- -------------- ---------------
<S> <C> <C>
54,833 May 3, 1995 May 2, 2000
</TABLE>
The Option shall not be treated as an Incentive Stock Option under
section 422 of the Internal Revenue Code of 1986, as amended. By acceptance
of this Option, the Optionee agrees to the terms and conditions hereof.
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
Stock Option Terms And Conditions
1. Agreement Incorporated by Reference. This Option is issued
pursuant to the terms of the Stock Option Agreement (the "Agreement)
between Ambassador Eyewear Group, Inc., a Delaware corporation (the
"Company) and Barry Budilov. Capitalized terms used and not otherwise
defined in this certificate have the meanings given to them in the
Agreement. This certificate does not set forth all of the terms and
conditions of the Agreement, which are incorporated herein by reference.
2. Option Price. The price to be paid for each share of Common
Stock issued upon exercise of the whole or any part of this Option is
the Option Price set forth on the face of this certificate.
3. Exercisability Schedule. This Option may be exercised at
any time and from time to time for the number of shares and in
accordance with the Agreement. This Option may not be exercised as to
any shares after the Expiration Date.
4. Method of Exercise. To exercise this Option, the
Optionholder shall deliver written notice of exercise to the President
of the Company specifying the number of shares with respect to which
the Option is being exercised accompanied by payment of the Option Price
for such shares in cash or by certified check. Promptly following such
notice, the Company will deliver to the Optionee a certificate
representing the number of shares with respect to which the Option is
being exercised.
5. Rights as a Stockholder. The Optionee shall not have any
rights as a stockholder of the Company in respect of shares as to which
the Option shall not have been exercised and payment made as provided
above.
6. Recapitalization, Mergers, Etc. As provided in the
Agreement, in the event of certain corporate transactions affecting the
Company's outstanding Common Stock, the number and kind of shares subject
to this Option and the exercise price hereunder Committee shall be
adjusted.
7. Compliance with Securities Laws. It shall be a condition
to the Optionee's right to purchase shares of Common Stock hereunder
that the Company may, in its discretion, require (a) in the opinion of
counsel for the Company, the proposed purchase shall be exempt from
registration under that Act and the Optionee shall have made such
undertakings and agreements with the Company as the Company may
reasonably require, and (b) that such other steps, if any, as counsel
for the Company shall consider necessary to comply with any law
applicable to the issue of such shares by the Company shall have been
taken by the Company or the Optionee, or both. The certificates
representing the shares purchased under this Option may contain such
legends as counsel for the Company shall consider necessary to comply
with any applicable law.
8. Payment of Taxes. The Optionee shall pay to the Company, or
make provision satisfactory to the Company for payment of, any taxes
required by law with respect to the exercise of this Option.
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
By: _________________________
ACCEPTED:
__________________________
<PAGE>
EXHIBIT B
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right, represented
by this Option Certificate, to purchase _________ Shares of Common Stock and
herewith tenders in payment for such securities, cash or a certified or
official bank check payable to the order of Ambassador Eyewear Group, Inc. in
the amount of $_____________, all in accordance with the terms of that Stock
Option Agreement dated as of ____________. The undersigned requests that a
certificate for such securities be registered in the name of
_________________________, whose address is _________________________________.
Date: Signature:______________________________ *
________________________________
(Insert Social Security or Other
Identifying Number of Holder)
* Signature must conform
in all respects to name of holder
as specified on the face of the
Option Certificate.
<PAGE>
Exhibit 10.38
FORM OF
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of May 3, 1995 between AMBASSADOR EYEWEAR
GROUP, INC., a Delaware corporation (the "Company") and RUDY A. SLUCKER
(hereinafter referred to as the "Optionee").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue stock options (the
"Options") to Optionee to purchase 54,833 shares (the "Shares") of Common
Stock of the Company, $.0003 par value per share (the "Common Stock"); and
NOW, THEREFORE, in consideration of the agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Grant. The Optionee is hereby granted the right to
purchase, at any time from May 3, 1995 until May 2, 2000 at 5:00 p.m., New
York time (the "Option Exercise Term"), 54,833 Shares at an initial exercise
price (subject to adjustment as provided in Article 7 hereof) of $.25 per
Share.
2. Option Certificate. An option certificate (the "Option
Certificate") shall be delivered to Optionee pursuant to this Agreement in
the form set forth in Exhibit A attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions and other variations as
required or permitted by this Agreement
3. Exercise of Options. The Options are exercisable at a
price of $.25 per share of Common Stock payable in cash or by certified check
to the order of the Company, subject to adjustment as provided in Article 7
hereof. Upon surrender of the Option Certificate with the Form of Election,
attached hereto as Exhibit B, duly executed, together with payment of the
Exercise Price (as hereinafter defined) for the Shares at the Company's
principal executive offices, the registered holder of the Option Certificate
("Holder") shall be entitled to receive a certificate or certificates for the
Shares so purchased. The purchase rights represented by each Option
Certificate are exercisable at the option of the Holder hereof, in whole or
in part (but not as to fractional Shares). In the case of the purchase of
less than all the Shares, the Company shall cancel said Option Certificate
upon the surrender thereof and shall execute and deliver a new Option
Certificate of like tenor for the balance of the Shares.
4. Issuance of Certificates. Upon the exercise of the
Options, the issuance of certificates for the Shares purchased shall be made
forthwith (and in any event within three business days thereafter) without
charge to the Holder thereof including, and such certificates shall (subject
to the provisions of Article 5 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance
<PAGE>
and delivery of any such certificates and the Company shall not be required
to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
The Option Certificate and the certificates representing
the Shares shall be executed on behalf of the Company by the manual or
facsimile signature of the present or any future Chairman or Vice Chairman of
the Board of Directors or President or Vice President of the Company under
its corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the present or any future Secretary or Assistant Secretary of
the Company.
Upon exercise, in part or in whole, of the Options,
certificates representing the Shares purchased (collectively, the "Option
Securities"), shall bear a legend substantially similar to the following:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended (the "Act"), and may not be offered or sold
except (i) pursuant to an effective registration
statement under the Act, (ii) to the extent applicable,
pursuant to Rule 144 under the Act (or any similar rule
under such Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to
the Company of an opinion of counsel, reasonably
satisfactory to counsel to the Company, stating that an
exemption from registration under such Act is available."
5. Restriction on Transfer of Options. The Holder of the
Option Certificate, by its acceptance thereof, covenants and agrees that the
Options are being acquired as an investment and not with a view to the
distribution thereof.
6. Price.
6.1. Initial and Adjusted Exercise Price. The initial
exercise price of each Option shall be $.25 per Share. The adjusted exercise
price shall be the price which shall result from time to time from any and
all adjustments of the initial exercise price in accordance with the
provisions of Article 7 hereof.
6.2. Exercise Price. The term "Exercise Price" herein
shall mean the initial exercise price or the adjusted exercise price,
depending upon the context.
7. Adjustments of Exercise Price and Number of Securities.
The following adjustments apply to the Exercise Price of the Options with
respect to the Shares and the number of Shares purchasable upon exercise of
the Options. In the event the Exercise Price per Share and/or the number of
Shares so purchasable is adjusted, then the Exercise Price of the Options
shall be adjusted in the same proportion.
2
<PAGE>
7.1. Computation of Adjusted Price. In case the Company
shall at any time after the date hereof pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock, then upon such
dividend or distribution the Exercise Price in effect immediately prior to
such dividend or distribution shall forthwith be reduced to a price
determined by dividing:
(a) an amount equal to the total number of shares
of Common Stock outstanding immediately prior to such dividend or
distribution multiplied by the Exercise Price in effect immediately prior to
such dividend or distribution, by
(b) the total number of shares of Common Stock
outstanding immediately after such issuance or sale.
For the purposes of any computation to be made in
accordance with the provisions of this Section 7.1, the Common Stock issuable
by way of dividend or other distribution on any stock of the Company shall be
deemed to have been issued immediately after the opening of business on the
date following the date fixed for the determination of stockholders entitled
to receive such dividend or other distribution.
7.2. Subdivision and Combination. In case the Company
shall at any time subdivide or combine the outstanding shares of Common
Stock, the Exercise Price shall forthwith be proportionately decreased in the
case of subdivision or increased in the case of combination.
7.3. Adjustment in Number of Securities. Upon each
adjustment of the Exercise Price pursuant to the provisions of this Article
7, the number of Shares issuable upon the exercise of each Option shall be
adjusted to the nearest full number by multiplying a number equal to the
Exercise Price in effect immediately prior to such adjustment by the number
of Shares issuable upon exercise of the Options immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise
Price.
7.4. Reclassification, Consolidation, Merger, etc. In
case of any reclassification or change of the outstanding shares of Common
Stock (other than a change in par value to no par value, or from no par value
to par value, or as a result of a subdivision or combination), or in the case
of any consolidation of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger in which the
Company is the surviving corporation and which does not result in any
reclassification or change of the outstanding shares of Common Stock, except
a change as a result of a subdivision or combination of such shares or a
change in par value, as aforesaid), or in the case of a sale or conveyance to
another corporation of the property of the Company as an entirety, the Holder
shall thereafter have the right to purchase the kind and number of shares of
stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance as if the
Holder were the owners of the Shares immediately prior to any such events, at
a price equal to the product of (x) the number of shares of Common Stock
issuable upon exercise of the Holder's Options and (y) the Exercise Price in
effect immediately prior to
3
<PAGE>
the record date for such reclassification, change, consolidation, merger,
sale or conveyance as if such Holder had exercised the Options.
7.5. Determination of Outstanding Shares of Common Stock.
The number of shares of Common Stock at any one time outstanding shall
include the aggregate number of shares issued or issuable upon the exercise
of options, rights and upon the conversion or exchange of convertible or
exchangeable securities.
8. Replacement of Option Certificates. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of any Option Certificate, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it,
and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of the Option, if mutilated, the
Company will make and deliver a new Option Certificate of like tenor, in lieu
thereof.
9. Elimination of Fractional Interests.
The Company shall not be required to issue certificates
representing fractions of Shares upon the exercise of the Option, nor shall
it be required to issue scrip or pay cash in lieu of fractional interests, it
being the intent of the parties that all fractional interests shall be
eliminated by rounding any fraction up to the nearest whole number of Shares.
10. Reservation of Securities.
The Company shall at all times reserve and keep available
out of its authorized shares of Common Stock, solely for the purpose of
issuance upon the exercise of the Option, such number of shares of Common
Stock as shall be issuable upon the exercise thereof. The Company covenants
and agrees that, upon exercise of the Options and payment of the Exercise
Price therefor, all Shares issuable upon such exercise shall be duly and
validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any shareholder.
11. Rights of Option Holder.
Nothing contained in this Agreement shall be construed as
conferring upon the Holder the right to vote or to consent or to receive
notice as a shareholder in respect of any meetings of shareholders for the
election of directors or any other matter, or as having any rights whatsoever
as a shareholder of the Company.
12. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt
requested:
4
<PAGE>
(a) If to Optionee, to the address of the Optionee as
shown on the books of the Company; or
(b) If to the Company, to the address of the Company's
principal executive officers or such address as the Company may designate.
13. Supplements and Amendments.
The Company and the Optionee may from time to time
supplement or amend this Option Agreement without the approval of any Holder
of the Option Certificate in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or
inconsistent with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Optionee may deem necessary or desirable and which the Company and the
Optionee deem not to adversely affect the interests of the Holder of the
Option Certificate.
14. Successors.
All the covenants and provisions of this Agreement by or
for the benefit of the Company and the Optionee inure to the benefit of their
respective successors and assigns hereunder.
15. Governing Law.
This Agreement and each Option Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State
of Delaware and for all purposes shall be construed in accordance with the
laws of said State.
16. Counterparts.
This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one
and the same instrument.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
AMBASSADOR EYEWEAR GROUP, INC.
By:
-----------------------------------
Name:
Title:
OPTIONEE
----------------------------------
Rudy A. Slucker
6
<PAGE>
EXHIBIT A
______ Shares
THE SECURITIES ISSUABLE UPON EXERCISE OF STOCK OPTIONS ISSUED PURSUANT
TO THE STOCK OPTION AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT
(i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO
THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) UPON
THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, STATING THAT AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
AMBASSADOR EYEWEAR GROUP, INC.
Stock Option Certificate
Ambassador Eyewear Group, Inc. (the "Company"), a Delaware Corporation,
hereby grants to the person named below an option to purchase shares of
Common Stock, par value $.0003 per share, of the Company (the "Option") under
and subject to the Stock Option Agreement between the Company and
______________ (the "Agreement") exercisable on the following terms and
conditions and those set forth in connection with this certificate:
Name of Optionee:__________________________________________________________
Address:__________________________________________________________
__________________________________________________________
Social Security No.:__________________________________________________________
Number of Shares:__________________________________________________________
Option Price:__________________________________________________________
Date of Grant:__________________________________________________________
<TABLE>
<CAPTION>
Exercisability Schedule
Exercise Period
---------------------------------
Commencement
Number of Shares Subject to Option Date Expiration Date
- ----------------------------------- -------------- ---------------
<S> <C> <C>
54,833 May 3, 1995 May 2, 2000
</TABLE>
The Option shall not be treated as an Incentive Stock Option under
section 422 of the Internal Revenue Code of 1986, as amended. By acceptance
of this Option, the Optionee agrees to the terms and conditions hereof.
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
Stock Option Terms And Conditions
1. Agreement Incorporated by Reference. This Option is issued
pursuant to the terms of the Stock Option Agreement (the "Agreement)
between Ambassador Eyewear Group, Inc., a Delaware corporation (the "Company)
and Rudy A. Slucker. Capitalized terms used and not otherwise defined in this
certificate have the meanings given to them in the Agreement. This
certificate does not set forth all of the terms and conditions of the
Agreement, which are incorporated herein by reference.
2. Option Price. The price to be paid for each share of Common Stock
issued upon exercise of the whole or any part of this Option is the Option
Price set forth on the face of this certificate.
3. Exercisability Schedule. This Option may be exercised at any
time and from time to time for the number of shares and in accordance with
the Agreement. This Option may not be exercised as to any shares after the
Expiration Date.
4. Method of Exercise. To exercise this Option, the Optionholder
shall deliver written notice of exercise to the President of the Company
specifying the number of shares with respect to which the Option is being
exercised accompanied by payment of the Option Price for such shares in cash
or by certified check. Promptly following such notice, the Company will
deliver to the Optionee a certificate representing the number of shares with
respect to which the Option is being exercised.
5. Rights as a Stockholder. The Optionee shall not have any rights
as a stockholder of the Company in respect of shares as to which the Option
shall not have been exercised and payment made as provided above.
6. Recapitalization, Mergers, Etc. As provided in the Agreement, in
the event of certain corporate transactions affecting the Company's
outstanding Common Stock, the number and kind of shares subject to this
Option and the exercise price hereunder Committee shall be adjusted.
7. Compliance with Securities Laws. It shall be a condition to the
Optionee's right to purchase shares of Common Stock hereunder that the
Company may, in its discretion, require (a) in the opinion of counsel for the
Company, the proposed purchase shall be exempt from registration under that
Act and the Optionee shall have made such undertakings and agreements with
the Company as the Company may reasonably require, and (b) that such other
steps, if any, as counsel for the Company shall consider necessary to comply
with any law applicable to the issue of such shares by the Company shall have
been taken by the Company or the Optionee, or both. The certificates
representing the shares purchased under this Option may contain such legends
as counsel for the Company shall consider necessary to comply with any
applicable law.
8. Payment of Taxes. The Optionee shall pay to the Company, or make
provision satisfactory to the Company for payment of, any taxes required by
law with respect to the exercise of this Option.
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
By:______________________________
ACCEPTED:
____________________________________
<PAGE>
EXHIBIT B
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Option Certificate, to purchase _________ Shares of
Common Stock and herewith tenders in payment for such securities, cash or a
certified or official bank check payable to the order of Ambassador Eyewear
Group, Inc. in the amount of $_____________, all in accordance with the terms
of that Stock Option Agreement dated as of ____________. The undersigned
requests that a certificate for such securities be registered in the name of
_________________________, whose address is _________________________________.
Date: Signature:______________________________ *
______________________________
(Insert Social Security or Other
Identifying Number of Holder)
* Signature must conform in all respects to
name of holder as specified on the face of the
Option Certificate.
<PAGE>
Exhibit 10.39
FORM OF
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of May 10, 1995 between AMBASSADOR
EYEWEAR GROUP, INC., a Delaware corporation (the "Company") and KENNETH
BUTCHIN (hereinafter referred to as the "Optionee").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue stock options (the "Options") to
Optionee to purchase 57,167 shares (the "Shares") of Common Stock of the
Company, $.01 par value per share (the "Common Stock"); and
NOW, THEREFORE, in consideration of the agreements herein set forth and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Grant. The Optionee is hereby granted the right to purchase, at
any time from May 10, 1995 until May 9, 2000 at 5:00 p.m., New York time (the
"Option Exercise Term"), 57, 167 Shares at an initial exercise price
(subject to adjustment as provided in Article 7 hereof) of $.25 per Share.
2. Option Certificate. An option certificate (the "Option
Certificate") shall be delivered to Optionee pursuant to this Agreement in
the form set forth in Exhibit A attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions and other variations as
required or permitted by this Agreement
3. Exercise of Options. The Options are exercisable at a price of
$.25 per share of Common Stock payable in cash or by certified check to the
order of the Company, subject to adjustment as provided in Article 7 hereof.
Upon surrender of the Option Certificate with the Form of Election, attached
hereto as Exhibit B, duly executed, together with payment of the Exercise
Price (as hereinafter defined) for the Shares at the Company's principal
executive offices, the registered holder of the Option Certificate ("Holder")
shall be entitled to receive a certificate or certificates for the Shares so
purchased. The purchase rights represented by each Option Certificate are
exercisable at the option of the Holder hereof, in whole or in part (but not
as to fractional Shares). In the case of the purchase of less than all the
Shares, the Company shall cancel said Option Certificate upon the surrender
thereof and shall execute and deliver a new Option Certificate of like tenor
for the balance of the Shares.
4. Issuance of Certificates. Upon the exercise of the Options, the
issuance of certificates for the Shares purchased shall be made forthwith
(and in any event within three business days thereafter) without charge to
the Holder thereof including, and such certificates shall (subject to the
provisions of Article 5 hereof) be issued in the name of, or in such names as
may be directed by, the Holder thereof; provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance
<PAGE>
and delivery of any such certificates and the Company shall not be required
to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
The Option Certificate and the certificates representing the Shares
shall be executed on behalf of the Company by the manual or facsimile
signature of the present or any future Chairman or Vice Chairman of the Board
of Directors or President or Vice President of the Company under its
corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the present or any future Secretary or Assistant Secretary of
the Company.
Upon exercise, in part or in whole, of the Options, certificates
representing the Shares purchased (collectively, the "Option Securities"),
shall bear a legend substantially similar to the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be offered or sold except (i) pursuant to an
effective registration statement under the Act, (ii) to the
extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under such Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to the
Company of an opinion of counsel, reasonably satisfactory to
counsel to the Company, stating that an exemption from
registration under such Act is available."
5. Restriction on Transfer of Options. The Holder of the Option
Certificate, by its acceptance thereof, covenants and agrees that the Options
are being acquired as an investment and not with a view to the distribution
thereof.
6. Price.
6.1. Initial and Adjusted Exercise Price. The initial exercise
price of each Option shall be $.25 per Share. The adjusted exercise price
shall be the price which shall result from time to time from any and all
adjustments of the initial exercise price in accordance with the provisions
of Article 7 hereof.
6.2. Exercise Price. The term "Exercise Price" herein shall mean
the initial exercise price or the adjusted exercise price, depending upon the
context.
7. Adjustments of Exercise Price and Number of Securities. The
following adjustments apply to the Exercise Price of the Options with respect
to the Shares and the number of Shares purchasable upon exercise of the
Options. In the event the Exercise Price per Share and/or the number of
Shares so purchasable is adjusted, then the Exercise Price of the Options
shall be adjusted in the same proportion.
2
<PAGE>
7.1. Computation of Adjusted Price. In case the Company shall at
any time after the date hereof pay a dividend in shares of Common Stock or
make a distribution in shares of Common Stock, then upon such dividend or
distribution the Exercise Price in effect immediately prior to such dividend
or distribution shall forthwith be reduced to a price determined by dividing:
(a) an amount equal to the total number of shares of Common
Stock outstanding immediately prior to such dividend or distribution
multiplied by the Exercise Price in effect immediately prior to such dividend
or distribution, by
(b) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
For the purposes of any computation to be made in accordance
with the provisions of this Section 7.1, the Common Stock issuable by way of
dividend or other distribution on any stock of the Company shall be deemed to
have been issued immediately after the opening of business on the date
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution.
7.2. Subdivision and Combination. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
7.3. Adjustment in Number of Securities. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Article 7, the number
of Shares issuable upon the exercise of each Option shall be adjusted to the
nearest full number by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Shares issuable
upon exercise of the Options immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
7.4. Reclassification, Consolidation, Merger, etc. In case of any
reclassification or change of the outstanding shares of Common Stock (other
than a change in par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or in the case of any
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding shares of Common Stock, except a change as a result
of a subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another corporation of
the property of the Company as an entirety, the Holder shall thereafter have
the right to purchase the kind and number of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance as if the Holder were the owners of
the Shares immediately prior to any such events, at a price equal to the
product of (x) the number of shares of Common Stock issuable upon exercise of
the Holder's Options and (y) the Exercise Price in effect immediately prior
to
3
<PAGE>
the record date for such reclassification, change, consolidation, merger,
sale or conveyance as if such Holder had exercised the Options.
7.5. Determination of Outstanding Shares of Common Stock. The
number of shares of Common Stock at any one time outstanding shall include
the aggregate number of shares issued or issuable upon the exercise of
options, rights and upon the conversion or exchange of convertible or
exchangeable securities.
8. Replacement of Option Certificates. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any Option Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and
reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of the Option, if mutilated, the Company
will make and deliver a new Option Certificate of like tenor, in lieu thereof.
9. Elimination of Fractional Interests.
The Company shall not be required to issue certificates
representing fractions of Shares upon the exercise of the Option, nor shall
it be required to issue scrip or pay cash in lieu of fractional interests, it
being the intent of the parties that all fractional interests shall be
eliminated by rounding any fraction up to the nearest whole number of Shares.
10. Reservation of Securities.
The Company shall at all times reserve and keep available out of
its authorized shares of Common Stock, solely for the purpose of issuance
upon the exercise of the Option, such number of shares of Common Stock as
shall be issuable upon the exercise thereof. The Company covenants and
agrees that, upon exercise of the Options and payment of the Exercise Price
therefor, all Shares issuable upon such exercise shall be duly and validly
issued, fully paid, non-assessable and not subject to the preemptive rights
of any shareholder.
11. Rights of Option Holder.
Nothing contained in this Agreement shall be construed as
conferring upon the Holder the right to vote or to consent or to receive
notice as a shareholder in respect of any meetings of shareholders for the
election of directors or any other matter, or as having any rights whatsoever
as a shareholder of the Company.
12. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt
requested:
4
<PAGE>
(a) If to Optionee, to the address of the Optionee as shown on
the books of the Company; or
(b) If to the Company, to the address of the Company's
principal executive officers or such address as the Company may designate.
13. Supplements and Amendments.
The Company and the Optionee may from time to time supplement
or amend this Option Agreement without the approval of any Holder of the
Option Certificate in order to cure any ambiguity, to correct or supplement
any provision contained herein which may be defective or inconsistent with
any provisions herein, or to make any other provisions in regard to matters
or questions arising hereunder which the Company and the Optionee may deem
necessary or desirable and which the Company and the Optionee deem not to
adversely affect the interests of the Holder of the Option Certificate.
14. Successors.
All the covenants and provisions of this Agreement by or for
the benefit of the Company and the Optionee inure to the benefit of their
respective successors and assigns hereunder.
15. Governing Law.
This Agreement and each Option Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of Delaware
and for all purposes shall be construed in accordance with the laws of said
State.
16. Counterparts.
This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and such counterparts shall together constitute but one and the
same instrument.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
AMBASSADOR EYEWEAR GROUP, INC.
By:__________________________________
Name:
Title:
OPTIONEE
________________________________
Kenneth Butchin
6
<PAGE>
EXHIBIT A
_______ Shares
THE SECURITIES ISSUABLE UPON EXERCISE OF STOCK OPTIONS ISSUED PURSUANT
TO THE STOCK OPTION AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT
(i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO
THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) UPON
THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, STATING THAT AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
AMBASSADOR EYEWEAR GROUP, INC.
Stock Option Certificate
Ambassador Eyewear Group, Inc. (the "Company"), a Delaware Corporation,
hereby grants to the person named below an option to purchase shares of
Common Stock, par value $.01 per share, of the Company (the "Option") under
and subject to the Stock Option Agreement between the Company and
______________ (the "Agreement") exercisable on the following terms and
conditions and those set forth in connection with this certificate:
Name of Optionee:__________________________________________________________
Address:__________________________________________________________
__________________________________________________________
__________________________________________________________
Social Security No.:__________________________________________________________
Number of Shares.:__________________________________________________________
Option Price:__________________________________________________________
Date of Grant:__________________________________________________________
Exercisability Schedule
<TABLE>
<CAPTION>
Exercise Period
---------------------------------
Commencement
Number of Shares Subject to Option Date Expiration Date
- ----------------------------------- -------------- ---------------
<S> <C> <C>
57,167 May 10, 1995 May 9, 2000
</TABLE>
The Option shall not be treated as an Incentive Stock Option under
section 422 of the Internal Revenue Code of 1986, as amended. By acceptance
of this Option, the Optionee agrees to the terms and conditions hereof.
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
Stock Option Terms And Conditions
1. Agreement Incorporated by Reference. This Option is issued
pursuant to the terms of the Stock Option Agreement (the "Agreement)
between Ambassador Eyewear Group, Inc., a Delaware corporation (the "Company)
and Kenneth Butchin. Capitalized terms used and not otherwise defined in this
certificate have the meanings given to them in the Agreement. This
certificate does not set forth all of the terms and conditions of the
Agreement, which are incorporated herein by reference.
2. Option Price. The price to be paid for each share of Common Stock
issued upon exercise of the whole or any part of this Option is the Option
Price set forth on the face of this certificate.
3. Exercisability Schedule. This Option may be exercised at any time
and from time to time for the number of shares and in accordance with the
Agreement. This Option may not be exercised as to any shares after the
Expiration Date.
4. Method of Exercise. To exercise this Option, the Optionholder
shall deliver written notice of exercise to the President of the Company
specifying the number of shares with respect to which the Option is being
exercised accompanied by payment of the Option Price for such shares in cash
or by certified check. Promptly following such notice, the Company will
deliver to the Optionee a certificate representing the number of shares with
respect to which the Option is being exercised.
5. Rights as a Stockholder. The Optionee shall not have any rights as
a stockholder of the Company in respect of shares as to which the Option
shall not have been exercised and payment made as provided above.
6. Recapitalization, Mergers, Etc. As provided in the Agreement, in
the event of certain corporate transactions affecting the Company's
outstanding Common Stock, the number and kind of shares subject to this
Option and the exercise price hereunder Committee shall be adjusted.
7. Compliance with Securities Laws. It shall be a condition to the
Optionee's right to purchase shares of Common Stock hereunder that the
Company may, in its discretion, require (a) in the opinion of counsel for the
Company, the proposed purchase shall be exempt from registration under that
Act and the Optionee shall have made such undertakings and agreements with
the Company as the Company may reasonably require, and (b) that such other
steps, if any, as counsel for the Company shall consider necessary to comply
with any law applicable to the issue of such shares by the Company shall have
been taken by the Company or the Optionee, or both. The certificates
representing the shares purchased under this Option may contain such legends
as counsel for the Company shall consider necessary to comply with any
applicable law.
8. Payment of Taxes. The Optionee shall pay to the Company, or make
provision satisfactory to the Company for payment of, any taxes required by
law with respect to the exercise of this Option.
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
By:_____________________________
ACCEPTED:
____________________________________
<PAGE>
EXHIBIT B
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Option Certificate, to purchase _________ Shares of
Common Stock and herewith tenders in payment for such securities, cash or a
certified or official bank check payable to the order of Ambassador Eyewear
Group, Inc. in the amount of $_____________, all in accordance with the terms
of that Stock Option Agreement dated as of ____________. The undersigned
requests that a certificate for such securities be registered in the name of
_________________________, whose address is _________________________________.
Date: Signature:______________________________ *
________________________________
(Insert Social Security or Other
Identifying Number of Holder)
* Signature must conform in all respects to
name of holder as specified on the face of the
Option Certificate.
<PAGE>
Exhibit 10.40
FORM OF
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of February 27, 1997 between AMBASSADOR
EYEWEAR GROUP, INC., a Delaware corporation (the "Company") and EDWARD KAUZ
(hereinafter referred to as the "Optionee").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue stock options (the "Options") to
Optionee to purchase 180,833 shares (the "Shares") of Common Stock of the
Company, $.01 par value per share (the "Common Stock"); and
NOW, THEREFORE, in consideration of the agreements herein set forth and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Grant. The Optionee is hereby granted the right to purchase, at
any time from February 27, 1997 until February 26, 2002 at 5:00 p.m., New
York time (the "Option Exercise Term"), 180,833 Shares at an initial exercise
price (subject to adjustment as provided in Article 7 hereof) of $3.00 per
Share.
2. Option Certificate. An option certificate (the "Option
Certificate") shall be delivered to Optionee pursuant to this Agreement in
the form set forth in Exhibit A attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions and other variations as
required or permitted by this Agreement
3. Exercise of Options. The Options are exercisable at a price of
$3.00 per share of Common Stock payable in cash or by certified check to the
order of the Company, subject to adjustment as provided in Article 7 hereof.
Upon surrender of the Option Certificate with the Form of Election, attached
hereto as Exhibit B, duly executed, together with payment of the Exercise
Price (as hereinafter defined) for the Shares at the Company's principal
executive offices, the registered holder of the Option Certificate ("Holder")
shall be entitled to receive a certificate or certificates for the Shares so
purchased. The purchase rights represented by each Option Certificate are
exercisable at the option of the Holder hereof, in whole or in part (but not
as to fractional Shares). In the case of the purchase of less than all the
Shares, the Company shall cancel said Option Certificate upon the surrender
thereof and shall execute and deliver a new Option Certificate of like tenor
for the balance of the Shares.
4. Issuance of Certificates. Upon the exercise of the Options, the
issuance of certificates for the Shares purchased shall be made forthwith
(and in any event within three business days thereafter) without charge to
the Holder thereof including, and such certificates shall (subject to the
provisions of Article 5 hereof) be issued in the name of, or in such names as
may be directed by, the Holder thereof; provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance
<PAGE>
and delivery of any such certificates and the Company shall not be required
to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
The Option Certificate and the certificates representing the Shares
shall be executed on behalf of the Company by the manual or facsimile
signature of the present or any future Chairman or Vice Chairman of the Board
of Directors or President or Vice President of the Company under its
corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the present or any future Secretary or Assistant Secretary of
the Company.
Upon exercise, in part or in whole, of the Options, certificates
representing the Shares purchased (collectively, the "Option Securities"),
shall bear a legend substantially similar to the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be offered or sold except (i) pursuant to an
effective registration statement under the Act, (ii) to the
extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under such Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to the
Company of an opinion of counsel, reasonably satisfactory to
counsel to the Company, stating that an exemption from
registration under such Act is available."
5. Restriction on Transfer of Options. The Holder of the Option
Certificate, by its acceptance thereof, covenants and agrees that the Options
are being acquired as an investment and not with a view to the distribution
thereof.
6. Price.
6.1. Initial and Adjusted Exercise Price. The initial exercise
price of each Option shall be $3.00 per Share. The adjusted exercise price
shall be the price which shall result from time to time from any and all
adjustments of the initial exercise price in accordance with the provisions
of Article 7 hereof.
6.2. Exercise Price. The term "Exercise Price" herein shall mean
the initial exercise price or the adjusted exercise price, depending upon the
context.
7. Adjustments of Exercise Price and Number of Securities. The
following adjustments apply to the Exercise Price of the Options with respect
to the Shares and the number of Shares purchasable upon exercise of the
Options. In the event the Exercise Price per Share and/or the number of
Shares so purchasable is adjusted, then the Exercise Price of the Options
shall be adjusted in the same proportion.
2
<PAGE>
7.1. Computation of Adjusted Price. In case the Company shall at
any time after the date hereof pay a dividend in shares of Common Stock or
make a distribution in shares of Common Stock, then upon such dividend or
distribution the Exercise Price in effect immediately prior to such dividend
or distribution shall forthwith be reduced to a price determined by dividing:
(a) an amount equal to the total number of shares of Common
Stock outstanding immediately prior to such dividend or distribution
multiplied by the Exercise Price in effect immediately prior to such dividend
or distribution, by
(b) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
For the purposes of any computation to be made in accordance
with the provisions of this Section 7.1, the Common Stock issuable by way of
dividend or other distribution on any stock of the Company shall be deemed to
have been issued immediately after the opening of business on the date
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution.
7.2. Subdivision and Combination. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
7.3. Adjustment in Number of Securities. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Article 7, the number
of Shares issuable upon the exercise of each Option shall be adjusted to the
nearest full number by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Shares issuable
upon exercise of the Options immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
7.4. Reclassification, Consolidation, Merger, etc. In case of any
reclassification or change of the outstanding shares of Common Stock (other
than a change in par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or in the case of any
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding shares of Common Stock, except a change as a result
of a subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another corporation of
the property of the Company as an entirety, the Holder shall thereafter have
the right to purchase the kind and number of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance as if the Holder were the owners of
the Shares immediately prior to any such events, at a price equal to the
product of (x) the number of shares of Common Stock issuable upon exercise of
the Holder's Options and (y) the Exercise Price in effect immediately prior
to
3
<PAGE>
the record date for such reclassification, change, consolidation, merger,
sale or conveyance as if such Holder had exercised the Options.
7.5. Determination of Outstanding Shares of Common Stock. The
number of shares of Common Stock at any one time outstanding shall include
the aggregate number of shares issued or issuable upon the exercise of
options, rights and upon the conversion or exchange of convertible or
exchangeable securities.
8. Replacement of Option Certificates. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any Option Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and
reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of the Option, if mutilated, the Company
will make and deliver a new Option Certificate of like tenor, in lieu thereof.
9. Elimination of Fractional Interests.
The Company shall not be required to issue certificates
representing fractions of Shares upon the exercise of the Option, nor shall
it be required to issue scrip or pay cash in lieu of fractional interests, it
being the intent of the parties that all fractional interests shall be
eliminated by rounding any fraction up to the nearest whole number of Shares.
10. Reservation of Securities.
The Company shall at all times reserve and keep available out of
its authorized shares of Common Stock, solely for the purpose of issuance
upon the exercise of the Option, such number of shares of Common Stock as
shall be issuable upon the exercise thereof. The Company covenants and
agrees that, upon exercise of the Options and payment of the Exercise Price
therefor, all Shares issuable upon such exercise shall be duly and validly
issued, fully paid, non-assessable and not subject to the preemptive rights
of any shareholder.
11. Rights of Option Holder.
Nothing contained in this Agreement shall be construed as
conferring upon the Holder the right to vote or to consent or to receive
notice as a shareholder in respect of any meetings of shareholders for the
election of directors or any other matter, or as having any rights whatsoever
as a shareholder of the Company.
12. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt
requested:
4
<PAGE>
(a) If to Optionee, to the address of the Optionee as shown on the
books of the Company; or
(b) If to the Company, to the address of the Company's principal
executive officers or such address as the Company may designate.
13. Supplements and Amendments.
The Company and the Optionee may from time to time supplement or
amend this Option Agreement without the approval of any Holder of the Option
Certificate in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Optionee may deem
necessary or desirable and which the Company and the Optionee deem not to
adversely affect the interests of the Holder of the Option Certificate.
14. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company and the Optionee inure to the benefit of their
respective successors and assigns hereunder.
15. Governing Law.
This Agreement and each Option Certificate issued hereunder shall
be deemed to be a contract made under the laws of the State of Delaware and
for all purposes shall be construed in accordance with the laws of said State.
16. Counterparts.
This Agreement may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original,
and such counterparts shall together constitute but one and the same
instrument.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
AMBASSADOR EYEWEAR GROUP, INC.
By:
--------------------------------------------
Name:
Title:
OPTIONEE
-----------------------------------------------
Edward Kauz
6
<PAGE>
EXHIBIT A
____ Shares
THE SECURITIES ISSUABLE UPON EXERCISE OF STOCK OPTIONS ISSUED PURSUANT
TO THE STOCK OPTION AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT
(i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO
THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) UPON
THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, STATING THAT AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
AMBASSADOR EYEWEAR GROUP, INC.
Stock Option Certificate
Ambassador Eyewear Group, Inc. (the "Company"), a Delaware Corporation,
hereby grants to the person named below an option to purchase shares of
Common Stock, par value $.01 per share, of the Company (the "Option") under
and subject to the Stock Option Agreement between the Company and
______________ (the "Agreement") exercisable on the following terms and
conditions and those set forth in connection with this certificate:
Name of Optionee:__________________________________________________________
Address:__________________________________________________________
__________________________________________________________
__________________________________________________________
Social Security No.:__________________________________________________________
Number of Shares.:__________________________________________________________
Option Price:__________________________________________________________
Date of Grant:__________________________________________________________
<TABLE>
<CAPTION>
Exercisability Schedule
Exercise Period
---------------------------------
Commencement
Number of Shares Subject to Option Date Expiration Date
- ----------------------------------- -------------- ---------------
<S> <C> <C>
180,833 February 27,1997 February 26, 2002
</TABLE>
The Option shall not be treated as an Incentive Stock Option under
section 422 of the Internal Revenue Code of 1986, as amended. By acceptance
of this Option, the Optionee agrees to the terms and conditions hereof.
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
Stock Option Terms And Conditions
1. Agreement Incorporated by Reference. This Option is issued
pursuant to the terms of the Stock Option Agreement (the "Agreement) between
Ambassador Eyewear Group, Inc., a Delaware corporation (the "Company) and
Edward Kauz. Capitalized terms used and not otherwise defined in this
certificate have the meanings given to them in the Agreement. This
certificate does not set forth all of the terms and conditions of the
Agreement, which are incorporated herein by reference.
2. Option Price. The price to be paid for each share of Common Stock
issued upon exercise of the whole or any part of this Option is the Option
Price set forth on the face of this certificate.
3. Exercisability Schedule. This Option may be exercised at any time
and from time to time for the number of shares and in accordance with the
Agreement. This Option may not be exercised as to any shares after the
Expiration Date.
4. Method of Exercise. To exercise this Option, the Optionholder
shall deliver written notice of exercise to the President of the Company
specifying the number of shares with respect to which the Option is being
exercised accompanied by payment of the Option Price for such shares in cash
or by certified check. Promptly following such notice, the Company will
deliver to the Optionee a certificate representing the number of shares with
respect to which the Option is being exercised.
5. Rights as a Stockholder. The Optionee shall not have any rights as
a stockholder of the Company in respect of shares as to which the Option
shall not have been exercised and payment made as provided above.
6. Recapitalization, Mergers, Etc. As provided in the Agreement, in
the event of certain corporate transactions affecting the Company's
outstanding Common Stock, the number and kind of shares subject to this
Option and the exercise price hereunder Committee shall be adjusted.
7. Compliance with Securities Laws. It shall be a condition to the
Optionee's right to purchase shares of Common Stock hereunder that the
Company may, in its discretion, require (a) in the opinion of counsel for the
Company, the proposed purchase shall be exempt from registration under that
Act and the Optionee shall have made such undertakings and agreements with
the Company as the Company may reasonably require, and (b) that such other
steps, if any, as counsel for the Company shall consider necessary to comply
with any law applicable to the issue of such shares by the Company shall have
been taken by the Company or the Optionee, or both. The certificates
representing the shares purchased under this Option may contain such legends
as counsel for the Company shall consider necessary to comply with any
applicable law.
8. Payment of Taxes. The Optionee shall pay to the Company, or make
provision satisfactory to the Company for payment of, any taxes required by
law with respect to the exercise of this Option.
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
By:
-------------------------
ACCEPTED:
- ----------------------------------
<PAGE>
EXHIBIT B
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Option Certificate, to purchase _________ Shares of
Common Stock and herewith tenders in payment for such securities, cash or a
certified or official bank check payable to the order of Ambassador Eyewear
Group, Inc. in the amount of $_____________, all in accordance with the terms
of that Stock Option Agreement dated as of ____________. The undersigned
requests that a certificate for such securities be registered in the name of
_________________________, whose address is _________________________________.
Date: Signature: *
---------------------------
-------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
* Signature must conform in all respects to
name of holder as specified on the face of
the Option Certificate.
<PAGE>
EXHIBIT 10.41
FORM OF
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of June 30, 1997 between AMBASSADOR EYEWEAR
GROUP, INC., a Delaware corporation (the "Company") and KENNETH KITNICK
(hereinafter referred to as the "Optionee").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue stock options (the "Options") to
Optionee to purchase 151,667 shares (the "Shares") of Common Stock of the
Company, $.01 par value per share (the "Common Stock"); and
NOW, THEREFORE, in consideration of the agreements herein set forth and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Grant. The Optionee is hereby granted the right to purchase, at any
time from June 30, 1997 until June 29, 2002 at 5:00 p.m., New York time (the
"Option Exercise Term"), 151,667 Shares at an initial exercise price (subject to
adjustment as provided in Article 7 hereof) of $1.50 per Share.
2. Option Certificate. An option certificate (the "Option Certificate")
shall be delivered to Optionee pursuant to this Agreement in the form set forth
in Exhibit A attached hereto and made a part hereof, with such appropriate
insertions, omissions, substitutions and other variations as required or
permitted by this Agreement
3. Exercise of Options. The Options are exercisable at a price of $1.50
per share of Common Stock payable in cash or by certified check to the order of
the Company, subject to adjustment as provided in Article 7 hereof. Upon
surrender of the Option Certificate with the Form of Election, attached hereto
as Exhibit B, duly executed, together with payment of the Exercise Price (as
hereinafter defined) for the Shares at the Company's principal executive
offices, the registered holder of the Option Certificate ("Holder") shall be
entitled to receive a certificate or certificates for the Shares so purchased.
The purchase rights represented by each Option Certificate are exercisable at
the option of the Holder hereof, in whole or in part (but not as to fractional
Shares). In the case of the purchase of less than all the Shares, the Company
shall cancel said Option Certificate upon the surrender thereof and shall
execute and deliver a new Option Certificate of like tenor for the balance of
the Shares.
4. Issuance of Certificates. Upon the exercise of the Options, the
issuance of certificates for the Shares purchased shall be made forthwith (and
in any event within three business days thereafter) without charge to the Holder
thereof including, and such certificates shall (subject to the provisions of
Article 5 hereof) be issued in the name of, or in such names as may be directed
by, the Holder thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance
<PAGE>
and delivery of any such certificates and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
The Option Certificate and the certificates representing the Shares
shall be executed on behalf of the Company by the manual or facsimile signature
of the present or any future Chairman or Vice Chairman of the Board of Directors
or President or Vice President of the Company under its corporate seal
reproduced thereon, attested to by the manual or facsimile signature of the
present or any future Secretary or Assistant Secretary of the Company.
Upon exercise, in part or in whole, of the Options, certificates
representing the Shares purchased (collectively, the "Option Securities"), shall
bear a legend substantially similar to the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be offered or sold except (i) pursuant to an
effective registration statement under the Act, (ii) to the extent
applicable, pursuant to Rule 144 under the Act (or any similar rule
under such Act relating to the disposition of securities), or (iii)
upon the delivery by the holder to the Company of an opinion of
counsel, reasonably satisfactory to counsel to the Company, stating
that an exemption from registration under such Act is available."
5. Restriction on Transfer of Options. The Holder of the Option
Certificate, by its acceptance thereof, covenants and agrees that the Options
are being acquired as an investment and not with a view to the distribution
thereof.
6. Price.
6.1. Initial and Adjusted Exercise Price. The initial exercise price
of each Option shall be $1.50 per Share. The adjusted exercise price shall be
the price which shall result from time to time from any and all adjustments of
the initial exercise price in accordance with the provisions of Article 7
hereof.
6.2. Exercise Price. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
7. Adjustments of Exercise Price and Number of Securities. The following
adjustments apply to the Exercise Price of the Options with respect to the
Shares and the number of Shares purchasable upon exercise of the Options. In
the event the Exercise Price per Share and/or the number of Shares so
purchasable is adjusted, then the Exercise Price of the Options shall be
adjusted in the same proportion.
2
<PAGE>
7.1. Computation of Adjusted Price. In case the Company shall at any
time after the date hereof pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock, then upon such dividend or distribution
the Exercise Price in effect immediately prior to such dividend or distribution
shall forthwith be reduced to a price determined by dividing:
(a) an amount equal to the total number of shares of Common
Stock outstanding immediately prior to such dividend or distribution multiplied
by the Exercise Price in effect immediately prior to such dividend or
distribution, by
(b) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
For the purposes of any computation to be made in accordance with
the provisions of this Section 7.1, the Common Stock issuable by way of dividend
or other distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the date following the date
fixed for the determination of stockholders entitled to receive such dividend or
other distribution.
7.2. Subdivision and Combination. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the Exercise
Price shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
7.3. Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Article 7, the number of
Shares issuable upon the exercise of each Option shall be adjusted to the
nearest full number by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Shares issuable
upon exercise of the Options immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
7.4. Reclassification, Consolidation, Merger, etc. In case of any
reclassification or change of the outstanding shares of Common Stock (other than
a change in par value to no par value, or from no par value to par value, or as
a result of a subdivision or combination), or in the case of any consolidation
of the Company with, or merger of the Company into, another corporation (other
than a consolidation or merger in which the Company is the surviving corporation
and which does not result in any reclassification or change of the outstanding
shares of Common Stock, except a change as a result of a subdivision or
combination of such shares or a change in par value, as aforesaid), or in the
case of a sale or conveyance to another corporation of the property of the
Company as an entirety, the Holder shall thereafter have the right to purchase
the kind and number of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance as if the Holder were the owners of the Shares immediately prior to
any such events, at a price equal to the product of (x) the number of shares of
Common Stock issuable upon exercise of the Holder's Options and (y) the Exercise
Price in effect immediately prior to
3
<PAGE>
the record date for such reclassification, change, consolidation, merger, sale
or conveyance as if such Holder had exercised the Options.
7.5. Determination of Outstanding Shares of Common Stock. The number
of shares of Common Stock at any one time outstanding shall include the
aggregate number of shares issued or issuable upon the exercise of options,
rights and upon the conversion or exchange of convertible or exchangeable
securities.
8. Replacement of Option Certificates. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any Option Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of the Option, if mutilated, the Company will
make and deliver a new Option Certificate of like tenor, in lieu thereof.
9. Elimination of Fractional Interests.
The Company shall not be required to issue certificates representing
fractions of Shares upon the exercise of the Option, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of Shares.
10. Reservation of Securities.
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of the Option, such number of shares of Common Stock as shall be
issuable upon the exercise thereof. The Company covenants and agrees that, upon
exercise of the Options and payment of the Exercise Price therefor, all Shares
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any shareholder.
11. Rights of Option Holder.
Nothing contained in this Agreement shall be construed as conferring
upon the Holder the right to vote or to consent or to receive notice as a
shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company.
12. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when delivered,
or mailed by registered or certified mail, return receipt requested:
4
<PAGE>
(a) If to Optionee, to the address of the Optionee as shown on the
books of the Company; or
(b) If to the Company, to the address of the Company's principal
executive officers or such address as the Company may designate.
13. Supplements and Amendments.
The Company and the Optionee may from time to time supplement or amend
this Option Agreement without the approval of any Holder of the Option
Certificate in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Optionee may deem
necessary or desirable and which the Company and the Optionee deem not to
adversely affect the interests of the Holder of the Option Certificate.
14. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company and the Optionee inure to the benefit of their respective
successors and assigns hereunder.
15. Governing Law.
This Agreement and each Option Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of Delaware and for all
purposes shall be construed in accordance with the laws of said State.
16. Counterparts.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and
such counterparts shall together constitute but one and the same instrument.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
AMBASSADOR EYEWEAR GROUP, INC.
By:__________________________________
Name:
Title:
OPTIONEE
________________________________
Kenneth Kitnick
6
<PAGE>
EXHIBIT A
_____ Shares
THE SECURITIES ISSUABLE UPON EXERCISE OF STOCK OPTIONS ISSUED PURSUANT TO
THE STOCK OPTION AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT
APPLICABLE, PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH
ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY
THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO
COUNSEL FOR THE COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT IS AVAILABLE.
AMBASSADOR EYEWEAR GROUP, INC.
Stock Option Certificate
Ambassador Eyewear Group, Inc. (the "Company"), a Delaware Corporation,
hereby grants to the person named below an option to purchase shares of Common
Stock, par value $.01 per share, of the Company (the "Option") under and subject
to the Stock Option Agreement between the Company and ______________ (the
"Agreement") exercisable on the following terms and conditions and those set
forth in connection with this certificate:
Name of Optionee: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
Social Security No.: _________________________________________________________
Number of Shares: _________________________________________________________
Option Price: _________________________________________________________
Date of Grant: _________________________________________________________
<TABLE>
<CAPTION>
Exercisability Schedule
-----------------------
Exercise Period
---------------
Commencement Expiration
Number of Shares Subject to Option Date Date
- ---------------------------------- ------------ ----------
<S> <C> <C>
151,667 June 30, 1997 June 29, 2002
</TABLE>
The Option shall not be treated as an Incentive Stock Option under section
422 of the Internal Revenue Code of 1986, as amended. By acceptance of this
Option, the Optionee agrees to the terms and conditions hereof.
7
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
Stock Option Terms And Conditions
1. Agreement Incorporated by Reference. This Option is issued pursuant
to the terms of the Stock Option Agreement (the "Agreement) between Ambassador
Eyewear Group, Inc., a Delaware corporation (the "Company) and Kenneth Kitnick.
Capitalized terms used and not otherwise defined in this certificate have the
meanings given to them in the Agreement. This certificate does not set forth
all of the terms and conditions of the Agreement, which are incorporated herein
by reference.
2. Option Price. The price to be paid for each share of Common Stock
issued upon exercise of the whole or any part of this Option is the Option Price
set forth on the face of this certificate.
3. Exercisability Schedule. This Option may be exercised at any time and
from time to time for the number of shares and in accordance with the Agreement.
This Option may not be exercised as to any shares after the Expiration Date.
4. Method of Exercise. To exercise this Option, the Optionholder shall
deliver written notice of exercise to the President of the Company specifying
the number of shares with respect to which the Option is being exercised
accompanied by payment of the Option Price for such shares in cash or by
certified check. Promptly following such notice, the Company will deliver to
the Optionee a certificate representing the number of shares with respect to
which the Option is being exercised.
5. Rights as a Stockholder. The Optionee shall not have any rights as a
stockholder of the Company in respect of shares as to which the Option shall not
have been exercised and payment made as provided above.
6. Recapitalization, Mergers, Etc. As provided in the Agreement, in the
event of certain corporate transactions affecting the Company's outstanding
Common Stock, the number and kind of shares subject to this Option and the
exercise price hereunder Committee shall be adjusted.
7. Compliance with Securities Laws. It shall be a condition to the
Optionee's right to purchase shares of Common Stock hereunder that the Company
may, in its discretion, require (a) in the opinion of counsel for the Company,
the proposed purchase shall be exempt from registration under that Act and the
Optionee shall have made such undertakings and agreements with the Company as
the Company may reasonably require, and (b) that such other steps, if any, as
counsel for the Company shall consider necessary to comply with any law
applicable to the issue of such shares by the Company shall have been taken by
the Company or the Optionee, or both. The certificates representing the shares
purchased under this Option may contain such legends as counsel for the Company
shall consider necessary to comply with any applicable law.
8. Payment of Taxes. The Optionee shall pay to the Company, or make
provision satisfactory to the Company for payment of, any taxes required by law
with respect to the exercise of this Option.
<PAGE>
AMBASSADOR EYEWEAR GROUP, INC.
By: ___________________________
ACCEPTED:
____________________________
<PAGE>
EXHIBIT B
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Option Certificate, to purchase _________ Shares of Common
Stock and herewith tenders in payment for such securities, cash or a certified
or official bank check payable to the order of Ambassador Eyewear Group, Inc. in
the amount of $_____________, all in accordance with the terms of that Stock
Option Agreement dated as of ____________. The undersigned requests that a
certificate for such securities be registered in the name of
_________________________, whose address is _________________________________.
Date: Signature:______________________________ *
______________________________
(Insert Social Security or Other
Identifying Number of Holder)
* Signature must conform in all respects to
name of holder as specified on the face of
the Option Certificate.
<PAGE>
Exhibit 10.42
Financial Consulting Agreement
This Agreement is made on [Closing Date], by and between Ambassador
Eyewear Group, Inc., a Delaware corporation having its principal office at
360 Marshall Lane, Bensalem, Pennsylvania 19020 (the "Company"), and H.J.
Meyers & Co., Inc., a New York corporation having an office at 1895 Mt. Hope
Avenue, Rochester, New York 14620 ("the Consultant").
In consideration of the mutual premises contained herein and on the
terms and conditions hereinafter set forth, the Company and Consultant agree
as follows:
1. Provision of Services.
(a) Consultant shall, to the extent reasonably required in the
conduct of the business of the Company, place at the disposal of the Company
its judgment and experience and, to such extent and at the prior written
request of the President of the Company to the Consultant's Managing Director
of Corporate Finance, provide business development and corporate finance
services to the Company, including the following:
(i) evaluation of the Company's managerial and financial
requirements;
(ii) assistance in recruiting, screening, evaluating and
recommending key personnel, directors, accountants, commercial and
investment bankers, underwriters, attorneys and other professional
consultants;
(iii) assistance in the preparation of budgets and business
plans;
(iv) advice with regard to sales planning and sales activities;
(v) advice with regard to stockholder relations and public
relations matters; and
(vi) evaluation of financial requirements and assistance in
financial arrangements.
Notwithstanding the foregoing, Consultant shall not provide services to the
Company hereunder in connection with mergers, acquisitions, consolidations,
joint ventures and similar corporate finance transactions, which transactions
are instead the subject of a certain letter agreement dated this date between
Consultant and the Company.
(b) In addition to the foregoing, for a period of thirty-six (36)
months, the Consultant shall have the option to select an observer designated
by the Consultant and reasonably acceptable to the Company, to receive notice
of and to attend all meetings of the Board of Directors of the Company (the
"Observer"). Such Observer shall have no voting rights, and shall be
reimbursed for all out-of-pocket expenses incurred in attending meetings
<PAGE>
of the Board of Directors. The Company shall hold at least four (4) meetings
of the Board of Directors per year. The Observer will be indemnified by the
Company against any claims arising out of his participation at Board
meetings. Additionally, the Company shall provide the Observer with the same
expense reimbursement and cash allowance in connection with meetings of the
Board of Directors as it provides to non-employee Directors of the Company.
(c) Consultant shall use reasonable efforts in the furnishing of
advice and recommendations, and for this purpose Consultant shall at all
times maintain or keep and make available qualified personnel or a network of
qualified outside professionals for the performance of its obligations under
this Agreement. To the extent reasonably practicable, Consultant shall so
use its own personnel rather than outside professionals.
2. Compensation. In consideration of Consultant's services hereunder,
the Company shall pay Consultant a consulting fee of $6,000 per month,
payable one year in advance on the date hereof (that being the closing date
of the sale of the Company's securities pursuant to a Registration Statement
on Form SB-2 filed with the Securities and Exchange Commission). Consultant
hereby accepts such compensation.
3. Expenses. The Company shall reimburse Consultant for reasonable
expenses incurred by Consultant in connection with its services rendered
hereunder. All expenses in excess of $500 shall be approved in writing by
the Company in advance. Consultant shall invoice the Company for its
expenses incurred. Payment of invoices shall be due upon receipt.
4. Liability; Indemnification.
(a) It is expressly understood and agreed that, in furnishing the
Company with management advice and other services as herein provided, neither
Consultant nor any of its officers, directors, employees or agents (including
without limitation the Observer) shall be liable to the Company, its
stockholders, its creditors or any other person or entity for errors of
judgment or for any act or omission except willful malfeasance, bad faith or
gross negligence in the performance of its duties hereunder. It is further
understood and agreed that Consultant may rely upon information furnished to
it and reasonably believed by it to be accurate and reliable and that, except
as herein provided, Consultant shall not be liable for any loss suffered by
the Company, or by any officer, director, employee, stockholder or creditor
of the Company, by reason of the Company's action or non-action on the basis
of any advice, recommendation or approval of Consultant or any of its
officers, directors, employees or agents.
(b) The Company shall indemnify, save harmless and defend
Consultant and its officers, directors, employees and agents (including
without limitation the Observer) from, against and in respect of any loss,
damage, liability, judgment, cost or expense whatsoever, including counsel
fees, suffered or incurred by it or him by reason of, or on account of, its
status or activities as a consultant to the Company hereunder (and, in the
case of the Observer, his participation in meetings of the Board of Directors
of the Company).
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<PAGE>
(c) Consultant shall indemnify, save harmless and defend the
Company and its officers, directors, employees and agents from, against and
in respect of any loss, damage, liability, judgment, cost or expense
whatsoever, including counsel fees, suffered or incurred by it or him by
reason of, or on account of, willful malfeasance, bad faith or gross
negligence in the performance of Consultant's duties hereunder.
(d) In the event that the Consultant is held liable under this
Section 4, the Consultant's liability is limited to the total compensation
received by Consultant pursuant to Section 2 of this Agreement. In no event
shall Consultant be liable for any incidental or consequential damages to the
Company, its stockholders, creditors or any other person or entity even if
advised of the possibility thereof.
5. Status of Consultant. Consultant shall at all times be an
independent contractor of the Company and, except as expressly provided or
authorized by this Agreement, shall have no authority to act for or represent
the Company.
6. Other Activities of Consultant. The Company recognizes that
Consultant now renders and may continue to render management and other
services to other companies which may or may not have policies and conduct
activities similar to those of the Company. Consultant shall be free to
render such advice and other services and the Company hereby consents
thereto. Consultant shall not be required to devote its full time and
attention to the performance of its duties under this Agreement, but shall
devote only so much of its time and attention as Consultant deems reasonable
or necessary for such purposes.
7. Control. Nothing contained herein shall be deemed to require the
Company to take any action contrary to its Certificate of Incorporation or
By-laws, or any applicable statute or regulation, or to deprive its Board of
Directors of its responsibility for and control of the conduct of the affairs
of the Company.
8. Term. Except as provided by Section 1(b) hereof, Consultant's
performance of services hereunder shall be for a term of one year commencing
on the date hereof.
9. In General.
(a) This Agreement sets forth the entire agreement and
understanding between the parties with respect to its subject matter and
supersedes all prior discussions, agreements and understandings of every and
any nature between them with respect thereto. This Agreement may not be
modified except in a writing signed by the parties.
(b) This Agreement has been made in the State of New York and
shall be governed by and construed in accordance with the laws thereof
without regard to principles of conflict of laws. Any proceeding commenced
by either party to enforce or interpret any provision of this Agreement shall
be brought in Monroe County, New York. The Company hereby submits to the
jurisdiction of the federal and state courts located in such County for such
purposes.
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<PAGE>
(c) Neither this Agreement nor either party's rights hereunder
shall be assignable by any party hereto without the prior written consent of
the other party hereto.
(d) This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
In Witness Whereof, the parties have caused this Agreement to be signed
by their respective officers or representatives duly authorized on the day
and year first above written.
Ambassador Eyewear, Inc.
By:________________________________
Name: Barry Budilov
Title: President and Chief Executive Officer
H.J. Meyers & Co., Inc.
By:________________________________
Name: Karl A. Brenza
Title:
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<PAGE>
Exhibit 10.43
H.J. Meyers & Co., Inc.
1895 Mount Hope Avenue
Rochester, New York 14620
[Effective Date]
Ambassador Eyewear Group, Inc.
3600 Marshall Lane
Bensalem, Pennsylvania 19020
Ladies and Gentlemen:
You have agreed that H.J. Meyers & Co., Inc. ("H.J. Meyers") may act as a
finder or financial consultant for you in various Transactions (as
hereinafter defined), in which Ambassador Eyewear, Inc. or its subsidiaries
(collectively, the "Company") may be involved for a period of 36 months from
the date of this Agreement (the "Period").
1. DEFINITIONS.
For the purposes of this Agreement:
(a) A "Transaction" shall mean any transaction or series or
combination of transactions involving the Company, other than in the ordinary
course of trade or business, whereby, directly or indirectly, control of, or
a material interest in any businesses, assets or properties, is sold,
purchased, leased or otherwise transferred, including, without limitation, a
sale, purchase or exchange of capital stock or assets, a lease of assets with
or without a purchase option, a merger or consolidation, a tender or exchange
offer, a leveraged buy-out, a restructuring, a recapitalization, a repurchase
of capital stock, an extraordinary dividend or distribution (whether cash,
property, securities or a combination thereof), a liquidation, the formation
of a joint venture or partnership, a minority investment or any other similar
transaction.
(b) "Consideration" shall mean the total value of all cash,
securities, other property and any other consideration, including, without
limitation, any contingent, earned or other consideration paid or payable,
directly or indirectly, in connection with a Transaction and consideration
shall be determined at the closing. The value of any such securities
(whether debt or equity) or other property shall be determined as follows:
(1) the value of securities that are freely tradeable in an established
public market shall be the last closing market price of such securities prior
to the public announcement of the Transaction; and (2) the value of
securities which are not freely tradeable or which have no established public
market, or if the consideration consists of property other than securities,
the value of such securities or other property shall be the fair market value
thereof as mutually agreed by the Company and H.J. Meyers. Consideration
shall also be deemed to include any indebtedness, including, without
limitation, pension liabilities, guarantees and other obligations assumed,
<PAGE>
directly or indirectly, in connection with, or which survives the closing of,
a Transaction. If the consideration to be paid is computed or payable in any
foreign currency, the value of such foreign currency shall, for the purposes
hereof, be converted into U.S. Dollars at the prevailing exchange rate on the
dates on which such consideration is payable.
2. H.J. Meyers' Fee.
(a) If during the Period H.J. Meyers brings to the Company an
opportunity for a proposed Transaction, then upon the consummation of any
such Transaction (but only if such consummation occurs within 36 months from
the date of this Agreement) the Company will pay to H.J. Meyers as a fee the
amount provided for in Paragraph 2(c) hereof; provided, however, that H.J.
Meyers shall be deemed to have brought an opportunity to the Company for
purposes of this Paragraph 2(a) only if the opportunity is at least briefly
specifically described in a writing (which need not identify the other
parties) signed by H.J. Meyers and received (with receipt acknowledged in
writing by the Company) prior to any negotiations between representatives of
the Company and representatives of the other party or parties to such
Transaction, and such writing signed by H.J. Meyers refers to the Company's
obligations under this Section 2.
(b) If during the Period an opportunity for a proposed Transaction
is brought to the Company by someone other than H.J. Meyers, and if the
Company in writing retains H.J. Meyers for consultation or other services in
connection therewith, then upon the consummation of that transaction, the
Company will pay H.J. Meyers as a fee the amount provided for in Paragraph
2(c) hereof.
(c) The amount to be paid by the Company to H.J. Meyers in any
case described in Paragraphs 2(a) or 2(b) hereof shall be calculated based on
the Consideration paid to or received by the Company (or its stockholders),
as follows: five percent (5%) of the first three million dollars
($3,000,000); three and one-half percent (3.5%) of any consideration greater
than three million dollars ($3,000,000) and less than or equal to five
million dollars ($5,000,000); and two percent (2%) of any consideration in
excess of five million dollars ($5,000,000).
(d) In addition to those fees payable to H.J. Meyers under the
provisions of Paragraph 2 hereof, the Company shall reimburse H.J. Meyers for
its out-of-pocket and incidental expenses incurred in connection with the
performance by H.J. Meyers of its duties under this Agreement. Such
reimbursement shall occur promptly as requested and shall include the fees
and expenses of H.J. Meyers' legal counsel and those of any advisor retained
by H.J. Meyers, subject, in each case, to prior approval by the Company.
3. PAYMENT. The fee due to H.J. Meyers hereunder shall be paid by the
Company in cash at the closing of the Transaction, without regard to whether
the Transaction involves payment in cash, stock or a combination of stock and
cash, or is made on an installment sales basis. By way of example, if the
Transaction involves securities of the acquiring entity (whether securities
of the Company, if the Company is the acquiring party, or securities of
another entity, if the Company is the selling party) having a value of
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<PAGE>
$6,000,000, the cash consideration to be paid by the Company to H.J. Meyers
at closing shall be $240,000.
4. INDEMNIFICATION. The Company hereby agrees to indemnify and hold
harmless H.J. Meyers, its respective directors, officers, controlling persons
(within the meaning of Section 15 of the Securities Act of 1933 or Section
20(a) of the Securities Exchange Act of 1934), if any, (collectively,
"Indemnified Persons" and individually, and "Indemnified Person") from and
against any and all claims, liabilities, losses, damages and expenses
incurred by any Indemnified Person (including reasonable fees and
disbursements of H.J. Meyers and an Indemnified Person's counsel) which (A)
are related to or arise out of (i) actions taken or omitted to be taken
(including any untrue statements made or any statements omitted to be made)
by the Company or (ii) actions taken or omitted to be taken by an Indemnified
Person with the Company's consent or in conformity with the Company's
instructions or the Company's actions or omissions or (B) are otherwise
related to or arise out of the performance by H.J. Meyers of duties pursuant
to this Agreement, and will reimburse H.J. Meyers and any other Indemnified
Person for all reasonable costs and expenses, including fees of H.J. Meyers
or an Indemnified Person's counsel, as they are incurred, in connection with
investigating, preparing for, or defending any action, formal or informal
claim, investigation, inquiry or other proceeding, whether or not in
connection with pending or threatened litigation, caused by or arising out of
or in connection with H.J. Meyers acting pursuant to this Agreement, whether
or not H.J. Meyers or any Indemnified Person is named as a party thereto and
whether or not any liability results therefrom. The Company will not,
however, be responsible for any claims, liabilities, losses, damages, or
expenses pursuant to clause (B) of the preceding sentence which are finally
judicially determined to have resulted primarily from H.J. Meyers' bad faith
or gross negligence. The Company also agrees that neither H.J. Meyers nor
any other Indemnified Person shall have any liability to the Company for or
in connection with this Agreement except for any such liability for claims,
liabilities, losses, damages, or expenses incurred by the Company which are
finally judicially determined to have resulted primarily from H.J. Meyers'
bad faith or gross negligence. The Company further agrees that the Company
will not, without the prior written consent of H.J. Meyers, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not H.J. Meyers or any
Indemnified Person is an actual or potential party to such claim, action,
suit or proceeding) unless such settlement, compromise or consent includes an
unconditional release of H.J. Meyers and each other Indemnified Person
hereunder from all liability arising out of such claim, action, suit or
proceeding.
In order to provide for just and equitable contribution, if a claim for
indemnification is made pursuant to these provisions but it is found in a
final judgment by a court of competent jurisdiction (not subject to further
appeal) that such indemnification is not available for any reason (except,
with respect to indemnification sought solely pursuant to clause (B) of the
first paragraph hereof, for the reasons specified in the second sentence
thereof), even though the express provisions hereof provide for
indemnification in such case, then the Company, on one hand, and H.J. Meyers,
on the other hand, shall contribute to such claim, liability, loss, damage or
expense for which such indemnification or reimbursement is held unavailable
in
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<PAGE>
such proportion as is appropriate to reflect the relative benefits to the
Company, on one hand, and H.J. Meyers, on the other hand, in connection with
the Transactions contemplated by this Agreement, subject to the limitation
that in any event H.J. Meyers' aggregate contribution to all losses, claims,
damages, liabilities and expenses to which contribution is available
hereunder shall not exceed the amount of fees actually received by H.J.
Meyers pursuant to this Agreement.
The foregoing right to indemnity and contribution shall be in addition
to any rights that H.J. Meyers and/or any other Indemnified Person may have
at common law or otherwise and shall remain in full force and effect
following the completion or any termination of this Agreement.
It is understood that, in connection with this Agreement, H.J. Meyers
may also be engaged to act for the Company in one or more additional
capacities, embodied in one or more separate written agreements. This
indemnification shall apply to this Agreement, any such additional
engagement(s) (whether written or oral) and any modification of this
Agreement or such additional engagement(s) and shall remain in full force and
effect following the completion or termination of this Agreement or such
additional engagements.
5. CONFIDENTIALITY. Any advice, either oral or written, provided to
the Company by H.J. Meyers hereunder shall not be publicly disclosed or made
available to third parties without the prior written consent of H.J. Meyers.
In addition, H.J. Meyers may not be otherwise publicly referred to without
its prior consent.
6. INFORMATION. In the event H.J. Meyers acts as finder or financial
advisor in a transaction, the Company will furnish H.J. Meyers with all
information concerning the Transaction which H.J. Meyers reasonably deems
appropriate and will provide H.J. Meyers with access to the Company's
officers, directors, accountants, counsel and other advisors. The Company
represents and warrants to H.J. Meyers that all such information concerning
the Company and its affiliates is and will be true and accurate in all
material respects and does not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in light of the circumstance under which
such statements are made. The Company acknowledges and agrees that H.J.
Meyers will be using and relying upon such information supplied by the
Company and its officers, agents and others and any other publicly available
information concerning the Company and its affiliates and any prospective
acquiror of the Company, its businesses or assets without any independent
investigation or verification thereof or independent appraisal by H.J. Meyers
of the Company and businesses or assets.
7. FINDERS. The Company represents and warrants to H.J. Meyers that
there are no brokers, representatives or other persons which have an interest
in compensation due to H.J. Meyers from any Transaction in which H.J. Meyers
has acted as finder or financial advisor.
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<PAGE>
8. ADVERTISEMENTS. H.J. Meyers shall have the right to place
advertisements in financial and other newspapers and journals at its own
expense describing its services to the Company hereunder in the event a
transaction is consummated.
9. BINDING OBLIGATION. The Company represents and warrants to H.J.
Meyers that H.J. Meyers' engagement hereunder has been duly authorized and
approved by the Board of Directors of the Company and that this letter
agreement has been duly executed and delivered by the Company and constitutes
a legal, valid and binding obligation of the Company.
10. IN GENERAL. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements
made and to be performed entirely within such State, without reference to
such State's principles respecting the conflict of laws. The Company submits
to the jurisdiction of state and federal courts located in Monroe County, New
York. This Agreement sets forth the entire agreement and understanding
between the undersigned with respect to its subject matter and supersedes all
prior discussions, agreements and understandings of every kind and nature
between them with respect thereto. This Agreement shall inure to the benefit
of, and be enforceable against, each of the undersigned and their respective
successors and assigns.
Please sign this letter at the place indicated below, whereupon it will
constitute our mutually binding agreement with respect to the matters
contained herein.
Very truly yours,
H.J. Meyers & Co., Inc.
By:__________________________________
Name: Karl A. Brenza
Title:
ACCEPTED AND AGREED TO:
Ambassador Eyewear Group, Inc.
By:____________________________________________
Name: Barry Budilov
Title: President and Chief Executive Officer
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<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Amendment No. 3 to Registration
Statement on Form SB-2 of our report dated June 12, 1997 (June 30, 1997 with
respect to the last paragraphs of Notes G and I(1)) on the financial statements
of Ambassador Eyewear Group, Inc. as at March 31, 1997 and for the period May 3,
1995 (inception) through March 31, 1996 and for the year ended March 31, 1997.
We also consent to the inclusion in this Amendment No. 3 to Registration
Statement on Form SB-2 of our report dated June 12, 1997 on the financial
statements of Renaissance Eyewear, Inc. as at October 31, 1996 and for the year
then ended. We also consent to the reference to our firm under the caption
"Experts" in the Prospectus.
Richard A. Eisner & Company, LLP
New York, New York
February 16, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
on Form SB-2 being filed by Ambassador Eyewear Group, Inc. of our report dated
December 22, 1995 on the combined financial statements of Renaissance Eyewear,
Inc. for the year ended October 31, 1995. We also consent to the reference to
our firm under the caption "Experts" in the Prospectus of the Registration
Statement.
/s/ J. H. COHN LLP
--------------------------------------
J. H. COHN LLP
Roseland, New Jersey
February 16, 1998
