SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Filed Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) NOVEMBER 15, 1999
TRISTAR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-13099 13-3129318
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
12500 SAN PEDRO AVENUE, SUITE 500, SAN ANTONIO, TEXAS 78216
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (210) 402-2200
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 15, 1999, Tristar Corporation, a Delaware corporation (the
"Company"), and its newly formed wholly owned subsidiary, Tristar USA, Inc., a
Delaware corporation ("Tristar USA"), entered into a Plan of Merger and
Acquisition Agreement dated effective November 1, 1999 (the "Acquisition
Agreement") with Fragrance Impressions Limited, a Connecticut corporation
("FIL"). FIL, headquartered in Bridgeport, Connecticut, is a privately held,
marketer and distributor of designer alternative fragrances, cosmetics and bath
and body products. Under the terms of the Acquisition Agreement, FIL was merged
into Tristar USA for consideration of approximately $3.7 million, which included
$350,000 in cash; interest bearing promissory notes in the aggregate principal
amount of approximately $3.0 million (the "Notes") and options to purchase up to
100,000 shares of common stock of the Company at a per share price of $5.82.
These payments to the stockholders of FIL were funded with proceeds from the
private placement of the Series C Senior Convertible Preferred Stock completed
in October 1999. The consideration paid by Tristar USA was arrived at through
negotiations between the Company, Tristar USA and FIL and was based on a variety
of factors, including without limitation, earnings and revenue, the value of
goodwill and the nature of the alternative designer fragrance, cosmetic and bath
and body products industry.
Also in connection with this acquisition, (i) Tristar USA entered into
employment agreements with four former employees of FIL; (ii) Tristar USA
assumed debt of FIL of approximately $3.2 million; (iii) Tristar USA paid debt
owed by FIL of approximately $3.0 million with funds borrowed under a credit
facility with its lender; (iv) the Company issued options to purchase up to
20,000 shares of common stock of the Company at a per share price of $5.82; (v)
Tristar USA and the Company, as co-makers, issued a promissory note in the
principal amount of $45,000 to a former stockholder of FIL; and (vi) Tristar USA
paid $240,000 in cash and the Company and Tristar USA, as co-makers, issued
promissory notes in the aggregate principal amount of $410,000 to certain former
employees of FIL. Additionally, the Acquisition Agreement provides that Tristar
USA will pay the former shareholders of FIL up to an aggregate of $645,000 in
cash if the gross sales of Tristar USA for the next two years exceed certain
targets set forth in the Acquisition Agreement, and provides if such gross sales
fail to meet certain targets during such two year period, the payments due under
certain of the Notes will be reduced up to an aggregate of $645,000. The
Acquisition Agreement also provides for possible cash payments to the former FIL
shareholders and/or reductions in the payments due under certain of the Notes
depending on the net sales of Tristar USA for the three month period ending
December 31, 1999, the net inventory of Tristar USA as of April 1, 2000, and the
realization of accounts receivable of Tristar USA as of April 1, 2000, as set
forth in the Acquisition Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
It is impractical to provide the required financial statements of FIL at
the time of filing this Report. It is anticipated that such financial statements
will be filed by amendment as soon as practicable but in no event later than 60
days following the date on which this Report must be filed.
<PAGE>
(b) Pro Forma Financial Information.
It is impractical to provide the required pro forma financial information
with respect to FIL at the time of filing this Report. It is anticipated that
such financial information will be filed by amendment as soon as practicable but
in no event later than 60 days following the date on which this Report must be
filed.
(c) Exhibit Index.
Exhibit 2.1 Plan of Merger and Acquisition Agreement dated effective
November 1, 1999, by and among Tristar Corporation,
Tristar USA, Inc. and Fragrance Impressions Limited
(filed herewith)
Exhibit 10.1 Form of Option Agreement between Tristar
Corporation and each of the former stockholders of
Fragrance Impressions Limited (filed herewith)
Exhibit 10.2 Employment Agreement dated November 10, 1999 between
Tristar USA, Inc. and Thomas E. McCann (filed herewith)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRISTAR CORPORATION
By /s/ ROBERT M. VIOLA
Robert M. Viola
Senior Executive Vice President and
Chief Financial Officer
DATE: November 30, 1999
-3-
EXHIBIT 2.1
PLAN OF MERGER AND ACQUISITION AGREEMENT
DATED EFFECTIVE NOVEMBER 1, 1999
BY AND AMONG
TRISTAR CORPORATION,
TRISTAR USA, INC., AND
FRAGRANCE IMPRESSIONS LIMITED
<PAGE>
TABLE OF CONTENTS
1. GENERAL DEFINITIONS..................................................-1-
1.1 "ACCOUNTS RECEIVABLE"..........................................-1-
1.2 "AFFILIATE"....................................................-1-
1.3 "ARTICLE" .....................................................-2-
1.4 "ASSETS".......................................................-2-
1.5 "ASSOCIATE"....................................................-2-
1.6 "ATTORNEYS' FEES"..............................................-2-
1.7 "AUTHORIZATION"................................................-2-
1.8 "BALANCE SHEET DATE"...........................................-2-
1.9 "BEST KNOWLEDGE"...............................................-2-
1.10 "BRIDGEPORT LEASE AMENDMENT"...................................-2-
1.11 "BUSINESS".....................................................-2-
1.12 "BUSINESS DAY".................................................-2-
1.13 "CALCULATION DATE".............................................-2-
1.14 "CASH CONSIDERATION"...........................................-2-
1.15 "CATAPANO".....................................................-2-
1.16 "CATAPANO OBLIGATIONS".........................................-2-
1.17 "CERCLA".......................................................-3-
1.18 "CLOSING"......................................................-3-
1.19 "CLOSING DATE".................................................-3-
1.20 "CODE".........................................................-3-
1.21 "COMPENSATION AGREEMENTS"......................................-3-
1.22 "CONTRACTS"....................................................-3-
1.23 "CONTROL"......................................................-3-
1.24 "DAMAGES"......................................................-3-
1.25 "DAVIS"........................................................-3-
1.26 "DAVIS NOTE"...................................................-3-
1.27 "DAVIS RELEASE"................................................-3-
1.28 "DISCLOSURE SCHEDULE"..........................................-3-
1.29 "EARN-OUT".....................................................-3-
1.30 "EARN-OUT PERIOD"..............................................-3-
1.31 "ECKERD".......................................................-3-
1.32 "ECKERD GROSS SALES"...........................................-3-
1.33 "EFFECTIVE TIME"...............................................-4-
1.34 "ENCUMBRANCE"..................................................-4-
1.35 "ENVIRONMENTAL LAWS"...........................................-4-
1.36 "ERISA"........................................................-4-
1.37 "EXCHANGE ACT".................................................-4-
1.38 "FALKOWSKI"....................................................-4-
1.39 "FALKOWSKI OBLIGATIONS"........................................-4-
1.40 "FINANCIAL STATEMENTS".........................................-4-
1.41 "FIRST PERIOD GROSS SALES".....................................-5-
1.42 "FRIEDMAN".....................................................-5-
1.43 "FRIEDMAN NOTE"................................................-5-
1.44 "FRIEDMAN OBLIGATIONS".........................................-5-
1.45 "FRIEDMAN RELEASE".............................................-5-
1.46 "GEORGE LUBY"..................................................-5-
1.47 "GOVERNMENTAL AUTHORITY".......................................-5-
-i-
<PAGE>
1.48 "GOVERNMENTAL REQUIREMENT".....................................-5-
1.49 "GROSS SALES"..................................................-5-
1.50 "INDUCEMENT AGREEMENTS"........................................-5-
1.51 "INTELLECTUAL PROPERTY"........................................-5-
1.52 "IRS"..........................................................-6-
1.53 "KEY EMPLOYEES"................................................-6-
1.54 "LUBY".........................................................-6-
1.55 "LUBY OBLIGATIONS".............................................-6-
1.56 "MATERIAL ADVERSE EFFECT"......................................-6-
1.57 "MCCANN".......................................................-6-
1.58 "MERGER CONSIDERATION".........................................-6-
1.59 "MERGER DOCUMENTS".............................................-6-
1.60 "NON-OFFSET PROMISSORY NOTE" and "NON-OFFSET PROMISSORY NOTES".-7-
1.61 "OFFSET PROMISSORY NOTE" and "OFFSET PROMISSORY NOTES".........-7-
1.62 "PBGC".........................................................-7-
1.63 "PEOPLE'S BANK"................................................-7-
1.64 "PEOPLE'S BANK LOAN AGREEMENT".................................-7-
1.65 "PEOPLE'S BANK NOTES"..........................................-7-
1.66 "PEOPLE'S BANK RELEASE"........................................-7-
1.67 "PERMITTED ENCUMBRANCES".......................................-7-
1.68 "PERSON".......................................................-7-
1.69 "PROMISSORY NOTE" and "PROMISSORY NOTES".......................-7-
1.70 "PURCHASER STOCK"..............................................-7-
1.71 "RCRA".........................................................-8-
1.72 "REDUCTION"....................................................-8-
1.73 "REFERENCE BALANCE SHEET"......................................-8-
1.74 "SCHEDULE".....................................................-8-
1.75 "SEC"..........................................................-8-
1.76 "SEC DOCUMENTS"................................................-8-
1.77 "SECOND PERIOD GROSS SALES" ...................................-8-
1.78 "SECTION"......................................................-8-
1.79 "SECURITIES"...................................................-8-
1.80 "SECURITIES ACT"...............................................-8-
1.81 "SECURITIES LAWS"..............................................-8-
1.82 "SELLER STOCK".................................................-8-
1.83 "SELLER STOCK CERTIFICATE".....................................-8-
1.84 "SKU"..........................................................-8-
1.85 "SKU SALES"....................................................-8-
1.86 "STOCK OPTION" and "STOCK OPTIONS".............................-8-
1.87 "SUBSIDIARY"...................................................-8-
1.88 "SURVIVING CORPORATION"........................................-9-
1.89 "TAXES"........................................................-9-
1.90 "TAX RETURNS"..................................................-9-
1.91 "TRISTAR MEMBER"...............................................-9-
1.92 "TRISTAR STOCK"................................................-9-
1.93 "WALSWORTH"....................................................-9-
1.94 "WALSWORTH OBLIGATIONS"........................................-9-
1.95 "WALSWORTH RELEASE"............................................-9-
1.96 "WASTE MATERIALS"..............................................-9-
-ii-
<PAGE>
2. MERGER...............................................................-9-
2.1 THE MERGER.....................................................-9-
2.2 SURVIVING CORPORATION.........................................-10-
2.3 LIABILITIES...................................................-10-
2.4 CERTIFICATE OF INCORPORATION AND BYLAWS.......................-10-
2.5 DIRECTORS AND OFFICERS........................................-10-
2.6 CONVERSION OR CANCELLATION OF STOCK UPON MERGER...............-10-
2.7 EARN-OUT......................................................-11-
2.8 EXCHANGE PROCEDURES...........................................-14-
2.9 AGREEMENTS REGARDING CERTAIN EXISTING LIABILITIES OF SELLER...-14-
2.10 STAY INCENTIVE BONUS..........................................-15-
2.11 PURCHASE PRICE ADJUSTMENT.....................................-16-
2.12 PROMISSORY NOTE TO GEORGE LUBY................................-17-
3. CLOSING; CLOSING DATE...............................................-17-
4. REPRESENTATIONS AND WARRANTIES OF SELLER............................-17-
4.1 INCORPORATION.................................................-18-
4.2 SHARE CAPITAL.................................................-18-
4.3 FINANCIAL STATEMENTS..........................................-19-
4.4 EVENTS SINCE THE BALANCE SHEET DATE...........................-20-
4.5 COMPETING INTERESTS...........................................-20-
4.6 TAXES.........................................................-21-
4.7 EMPLOYEE MATTERS..............................................-22-
4.8 CONTRACTS AND AGREEMENTS......................................-22-
4.9 EFFECT OF AGREEMENT...........................................-25-
4.10 PROPERTIES, ASSETS AND LEASEHOLD ESTATES......................-26-
4.11 INTELLECTUAL PROPERTY.........................................-27-
4.12 SUITS, ACTIONS AND CLAIMS.....................................-28-
4.13 LICENSES AND PERMITS; COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS.-28-
4.14 AUTHORIZATION.................................................-28-
4.15 RECORDS.......................................................-29-
4.16 ENVIRONMENTAL PROTECTION LAWS.................................-29-
4.17 ACCOUNTS RECEIVABLE...........................................-30-
4.18 BROKERS AND FINDERS...........................................-30-
4.19 DEPOSITS......................................................-31-
4.20 WORK ORDERS...................................................-31-
4.21 CUSTOMER LIST.................................................-31-
4.22 SUPPLIER LIST.................................................-31-
4.23 NO ROYALTIES..................................................-31-
4.24 BANK ACCOUNTS.................................................-31-
4.25 INSURANCE.....................................................-31-
4.26 EMPLOYEE BENEFIT MATTERS......................................-32-
4.27 WARRANTIES AND PRODUCT LIABILITY..............................-34-
4.28 SECURITIES LAWS MATTERS.......................................-34-
4.29 MONETARY OBLIGATIONS TO CERTAIN INDIVIDUALS...................-36-
4.30 NAMES USED IN BUSINESS........................................-36-
4.31 NO UNTRUE STATEMENTS..........................................-36-
5. REPRESENTATIONS AND WARRANTIES OF THE TRISTAR PARTIES...............-37-
-iii-
<PAGE>
5.1 PURCHASER INCORPORATION.......................................-37-
5.2 AUTHORIZATION.................................................-37-
5.3 BROKERS AND FINDERS...........................................-37-
5.4 SEC DOCUMENTS.................................................-37-
5.5 RULE 144 REPORTING............................................-38-
6. NATURE OF STATEMENTS AND SURVIVAL OF GUARANTEES, REPRESENTATIONS AND
WARRANTIES OF SELLER AND THE TRISTAR PARTIES........................-38-
7. TAX TREATMENT.......................................................-39-
8. COVENANTS OF SELLER PRIOR TO CLOSING................................-39-
8.1 GENERAL AFFIRMATIVE COVENANTS.................................-39-
8.2 GENERAL NEGATIVE COVENANTS....................................-40-
8.3 ACCESS TO INFORMATION AND INSPECTION OF PROPERTIES............-41-
8.4 PUBLICITY.....................................................-41-
8.5 GOVERNMENT FILINGS............................................-41-
8.6 CONSENT OF OTHERS.............................................-42-
8.7 NO TRANSFER OF ASSETS.........................................-42-
8.8 NOTICE OF DEVELOPMENTS........................................-42-
9. COVENANTS OF THE TRISTAR PARTIES PRIOR TO CLOSING...................-42-
9.1 GENERAL AFFIRMATIVE COVENANTS.................................-42-
9.2 PUBLICITY.....................................................-43-
9.3 GOVERNMENT FILINGS............................................-43-
9.4 CONSENT OF OTHERS.............................................-43-
9.5 NOTICE OF DEVELOPMENTS........................................-43-
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRISTAR PARTIES..........-43-
10.1 OPINION OF COUNSEL FOR SELLER.................................-43-
10.2 RESOLUTIONS...................................................-44-
10.3 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND FULFILLMENT
OF COVENANTS..................................................-44-
10.4 MERGER DOCUMENTS..............................................-44-
10.5 EMPLOYMENT ARRANGEMENTS.......................................-44-
10.6 NO GOVERNMENTAL ACTIONS.......................................-44-
10.7 NO ADVERSE CHANGE.............................................-44-
10.8 NOTICES AND CONSENTS..........................................-44-
10.9 INDUCEMENT AGREEMENTS.........................................-45-
10.10 TERMINATION OF CONTRACTS......................................-45-
10.11 RELEASES......................................................-45-
10.12 BRIDGEPORT FACILITY...........................................-45-
10.13 INVESTOR QUESTIONNAIRE........................................-45-
10.14 OTHER DOCUMENTS...............................................-45-
10.15 WALSWORTH AGREEMENT...........................................-46-
10.16 OUTSTANDING PROMISSORY NOTE...................................-46-
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.......................-46-
11.1 OPINION OF COUNSEL............................................-46-
11.2 RESOLUTIONS...................................................-46-
11.3 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND FULFILLMENT
OF COVENANTS..................................................-46-
-iv-
<PAGE>
11.4 MERGER DOCUMENTS..............................................-46-
11.5 CASH CONSIDERATION, PROMISSORY NOTES AND MONETARY OBLIGATIONS.-46-
11.6 COMPENSATION AGREEMENTS.......................................-47-
11.7 BRIDGEPORT LEASE AMENDMENT....................................-47-
11.8 PEOPLE'S BANK DEBT............................................-47-
11.9 WALSWORTH OPTION..............................................-47-
11.10 OTHER DOCUMENTS...............................................-47-
12. SPECIAL CLOSING AND POST-CLOSING COVENANTS..........................-47-
12.1 TERMINATION OF AGREEMENTS.....................................-47-
12.2 FURTHER ASSURANCES............................................-47-
13. OFFSET PROVISIONS...................................................-47-
14. TERMINATION.........................................................-48-
14.1 MUTUAL CONSENT................................................-48-
14.2 FAILURE OF CONDITIONS.........................................-48-
14.3 FAILURE TO CLOSE..............................................-49-
15. NOTICES.............................................................-49-
16. GENERAL PROVISIONS..................................................-50-
16.1 GOVERNING LAW; INTERPRETATION; SECTION HEADINGS...............-50-
16.2 SEVERABILITY..................................................-50-
16.3 ENTIRE AGREEMENT..............................................-50-
16.4 BINDING EFFECT................................................-50-
16.5 THIRD-PARTY BENEFICIARIES.....................................-51-
16.6 ASSIGNMENT....................................................-51-
16.7 AMENDMENT; WAIVER.............................................-51-
16.8 GENDER; NUMBERS...............................................-51-
16.9 COUNTERPARTS..................................................-51-
16.10 TELECOPY EXECUTION AND DELIVERY...............................-51-
16.11 EXPENSES......................................................-52-
16.12 ARBITRATION...................................................-52-
16.13 REVIEW OF COUNSEL.............................................-53-
-v-
<PAGE>
PLAN OF MERGER AND ACQUISITION AGREEMENT
THIS PLAN OF MERGER AND ACQUISITION AGREEMENT (this "AGREEMENT") is made
and entered into this 10 day of November, 1999, to be effective November 1,
1999, by and among (i) Fragrance Impressions Limited, a Connecticut corporation
("Seller"), (ii) Tristar Corporation, a Delaware corporation ("TRISTAR"), and
(iii) Tristar USA, Inc., a Delaware corporation and a subsidiary of Tristar
("PURCHASER", and together with Tristar, the "TRISTAR PARTIES").
W I T N E S S E T H :
WHEREAS, Tristar is primarily in the business of marketing and
distributing designer alternative fragrances, cosmetics and bath and body
products;
WHEREAS, in connection with the transactions contemplated by this
Agreement, Tristar previously caused Purchaser to be organized and to issue to
Tristar all of the issued and outstanding shares of capital stock of Purchaser;
WHEREAS, Seller is in the business of marketing and distributing designer
alternative fragrances, cosmetics and bath and body products (the "BUSINESS");
WHEREAS, the respective boards of directors of Purchaser and Seller and
the shareholders of Seller and Purchaser have voted to approve the merger of
Seller with and into Purchaser (the "MERGER") pursuant to the terms and subject
to the conditions of this Agreement; and
WHEREAS, this Agreement is intended to qualify under Section 368 of the
Internal Revenue Code of 1986, as amended (the "CODE");
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto agree that Seller shall be merged with and into
Purchaser and that the terms and conditions of the Merger, the method of
carrying the Merger into effect and certain other provisions relating thereto
shall be as hereinafter set forth:
1. GENERAL DEFINITIONS. For purposes of this Agreement, the following
terms shall have the respective meanings set forth below:
1.1 "ACCOUNTS RECEIVABLE" has the meaning assigned thereto in SECTION
4.17.
1.2 "AFFILIATE" of any Person means any Person Controlling, Controlled by
or under common Control with such Person.
-1-
<PAGE>
1.3 "ARTICLE" and all references to an Article means an Article of this
Agreement unless otherwise stated.
1.4 "ASSETS" means the assets, properties and rights of a Person of every
nature, kind and description, wherever located, tangible and intangible, real,
personal and mixed, whether or not reflected in the books and records of such
Person as owned by such Person.
1.5 "ASSOCIATE" has the meaning assigned thereto in SECTION 4.5.
1.6 "ATTORNEYS' FEES" means an amount of the Cash Consideration not to
exceed $73,000.00.
1.7 "AUTHORIZATION" means any consent, approval or authorization of,
expiration or termination of any waiting period requirement (including pursuant
to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) by, or
filing, registration, qualification, declaration or designation with, any
Governmental Authority.
1.8 "BALANCE SHEET DATE" has the meaning assigned thereto in SECTION 4.3.
1.9 "BEST KNOWLEDGE" means both what a Person knew as well as what the
Person should have known had the person exercised reasonable diligence
appropriate under existing circumstances. When used with respect to a Person
other than a natural person, the term "Best Knowledge" shall include matters
that are known to the directors and officers of the Person.
1.10 "BRIDGEPORT LEASE AMENDMENT" has the meaning assigned thereto in
SECTION 10.12.
1.11 "BUSINESS" has the meaning assigned thereto in the recitals hereto.
1.12 "BUSINESS DAY" means any day other than Saturday, Sunday or other day
on which federally chartered commercial banks in San Antonio, Texas are
authorized or required by law to close.
1.13 "CALCULATION DATE" has the meaning assigned thereto in SECTION 2.7.
1.14 "CASH CONSIDERATION" has the meaning assigned thereto in SECTION 2.6.
1.15 "CATAPANO" means Robert Catapano, an individual, currently Vice
President and Chief Financial Officer of Seller.
1.16 "CATAPANO OBLIGATIONS" means the monetary obligations described in
SECTION 2.9(A) that are due to Catapano.
-2-
<PAGE>
1.17 "CERCLA" means the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980, as amended.
1.18 "CLOSING" has the meaning assigned thereto in ARTICLE 3.
1.19 "CLOSING DATE" has the meaning assigned thereto in ARTICLE 3.
1.20 "CODE" means the Internal Revenue Code of 1986, as amended.
1.21 "COMPENSATION AGREEMENTS" has the meaning assigned thereto in SECTION
10.5.
1.22 "CONTRACTS" has the meaning assigned thereto in SECTION 4.8(C).
1.23 "CONTROL" and all derivations thereof means the ability to either (a)
vote (or direct the vote of) 50% or more of the voting interests in any Person
or (b) direct the affairs of another, whether through voting power, contract or
otherwise.
1.24 "DAMAGES" means any and all liabilities, losses, damages, demands,
assessments, punitive damages, loss of profits, refund obligations (including,
without limitation, interest and penalties thereon) claims of any and every kind
whatsoever, costs and expenses (including interest, awards, judgments,
penalties, settlements, fines, costs of remediation, diminutions in value, costs
and expenses incurred in connection with investigating, prosecuting and
defending any claims or causes of action (including, without limitation,
reasonable attorneys' fees and reasonable expenses and all reasonable fees and
reasonable expenses of consultants and other professionals)).
1.25 "DAVIS" means Mel Davis, an individual, currently a consultant to the
Seller.
1.26 "DAVIS NOTE" means that certain promissory note dated June 30, 1997,
in the stated principal amount of $87,500, issued by Seller to Mel Davis.
1.27 "DAVIS RELEASE" has the meaning assigned thereto in SECTION 10.11.
1.28 "DISCLOSURE SCHEDULE" has the meaning assigned thereto in ARTICLE 4.
1.29 "EARN-OUT" has the meaning assigned thereto in SECTION 2.7.
1.30 "EARN-OUT PERIOD" has the meaning assigned thereto in SECTION 2.7.
1.31 "ECKERD"means Eckerd Corporation, a Delaware corporation.
1.32 "ECKERD GROSS SALES"means the total gross revenues earned by the
Seller and the Surviving Corporation by selling product to Eckerd from January
1, 1999 through December 31,
-3-
<PAGE>
1999, as determined in accordance with generally accepted accounting principles
and historical accounting practices of Seller, consistently applied.
1.33 "EFFECTIVE TIME" means the time at which a properly executed
certificate of merger in substantially the form attached hereto as EXHIBIT
1.33(A) (together with other documents required by law to effect the Merger) has
been filed with the Secretary of State of Delaware, properly executed Articles
of Merger in substantially the form attached hereto as EXHIBIT 1.33(B) (together
with other documents required by law to effect the Merger) has been filed with
the Secretary of State of Connecticut and such other documents and instruments
have been filed in any other jurisdiction where such an article or certificate
of merger is required.
1.34 "ENCUMBRANCE" means any security interest, mortgage, pledge, trust,
claim, lien, charge, option, defect, restriction, encumbrance or other right or
interest of any third Person of any nature whatsoever.
1.35 "ENVIRONMENTAL LAWS" means any and all applicable laws, statutes,
ordinances, rules, regulations, orders, or determinations of any Governmental
Authority pertaining to the environment heretofore or currently in effect in any
and all jurisdictions in which Seller is conducting or at any time has conducted
business, or where any of the Assets are located, or where any hazardous
substances generated by or disposed of by Seller are located. "Environmental
Laws" shall include, but not be limited to, the Clean Air Act, as amended,
CERCLA, the Federal Water Pollution Control Act, as amended, RCRA, the Safe
Drinking Water Act, as amended, the Toxic Substances Control Act, as amended,
and all other applicable laws, statutes, ordinances, rules, regulations, orders
and determinations of any Governmental Authority relating to (a) the control of
any potential pollutant or protection of the air, water or land, (b) solid,
gaseous or liquid waste generation, handling, treatment, storage, disposal or
transportation and (c) exposure to hazardous, toxic or other substances alleged
to be harmful. The terms "hazardous substance", "release" and "threatened
release" has the meanings specified in CERCLA, and the terms "solid waste" and
"disposal" (or "disposed") has the meanings specified in RCRA.
1.36 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.37 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
1.38 "FALKOWSKI" means Robert Falkowski, an individual, currently the
Regional Sales Manager of Seller.
1.39 "FALKOWSKI OBLIGATIONS" means the monetary obligations described in
SECTION 2.9(A) that are due to Falkowski.
1.40 "FINANCIAL STATEMENTS" has the meaning assigned thereto in SECTION
4.3.
-4-
<PAGE>
1.41 "FIRST PERIOD GROSS SALES" has the meaning assigned thereto in
SECTION 2.7.
1.42 "FRIEDMAN" means Jack Friedman, an individual, currently a creditor
of Seller.
1.43 "FRIEDMAN NOTE" means that certain promissory note dated September
27, 1995, in the stated principal amount of $1,000,000, issued by Seller to
Friedman.
1.44 "FRIEDMAN OBLIGATIONS" means the monetary obligations described in
SECTION 2.9(C) that are due to Friedman.
1.45 "FRIEDMAN RELEASE" has the meaning assigned thereto in SECTION 10.11.
1.46 "GEORGE LUBY" means George Luby, an individual, currently Chairman of
the Board of Directors of Seller.
1.47 "GOVERNMENTAL AUTHORITY" means any and all foreign, federal, state or
local governments, governmental institutions, public authorities and
governmental entities of any nature whatsoever, and any subdivisions or
instrumentalities thereof, including, but not limited to, departments, boards,
bureaus, commissions, agencies, courts, administrations and panels, and any
divisions or instrumentalities thereof, whether permanent or ad hoc and whether
now or hereafter constituted or existing.
1.48 "GOVERNMENTAL REQUIREMENT" means any and all applicable laws
(including, but not limited to, applicable common law principles), statutes,
ordinances, codes, rules, regulations, interpretations, guidelines, directions,
orders, judgments, writs, injunctions, decrees, decisions or similar items or
pronouncements, promulgated, issued, passed or set forth by any Governmental
Authority in effect as of the Effective Time.
1.49 "GROSS SALES" means the total gross revenues earned by the Surviving
Corporation by selling product during the applicable Earn-Out Period, as
determined in accordance with generally accepted accounting principles and
historical accounting practices of Seller, consistently applied with periods
prior to the Effective Time, which shall include SKU Sales.
1.50 "INDUCEMENT AGREEMENTS" has the meaning assigned thereto in SECTION
10.9.
1.51 "INTELLECTUAL PROPERTY" means:
(a) all of Seller's patents and applications therefor, including,
but not limited to, all divisions, reissues, substitutions, reexaminations,
continuations, continuations-in-part and extensions thereof;
-5-
<PAGE>
(b) all of Seller's inventions, whether or not patentable,
including, but not limited to, all new developments and inventions, as well as
all improvements on prior inventions regardless of prior inventorship; and
(c) all of Seller's know-how and work product, regardless of form
and whether tangible or intangible, including, but not limited to, (i) invention
and laboratory notebooks, (ii) source codes and object codes, (iii) system
designs, system specifications, flow charts, test data, records and journals,
(iv) blueprints, drawings and photographs, (v) research and engineering reports,
including any models or other hardware, (vi) licensing, marketing or development
analysis, and (vii) customer or prospective customer lists;
(d) all of Seller's copyright interests regardless of actual or
potential registrability, and including moral rights, rights of publication and
rights of attribution and integrity;
(e) all of Seller's trademark or service mark interests, together
with all of the goodwill of the business associated therewith and represented
thereby;
(f) all of Seller's trade secrets; and
(g) all of Seller's other intellectual property and other
proprietary interests, whether or not identifiable as of the date of execution
hereof, relating to, or used in connection with, the Business.
1.52 "IRS" means the Internal Revenue Service.
1.53 "KEY EMPLOYEES" has the meaning assigned thereto in SECTION 2.9.
1.54 "LUBY" means Robert Luby, an individual, currently a Vice President
of Seller.
1.55 "LUBY OBLIGATIONS" means the monetary obligations described in
SECTION 2.9(A) that are due to Luby.
1.56 "MATERIAL ADVERSE EFFECT" means a material adverse effect on the
Business, Assets, properties, operations, condition (financial or otherwise) or
results of operations of Seller, the Surviving Corporation, the Tristar Parties
or Tristar's Subsidiaries, as applicable.
1.57 "MCCANN" means Thomas E. McCann, an individual, currently the
President of Seller.
1.58 "MERGER CONSIDERATION" has the meaning assigned thereto in SECTION
2.6.
1.59 "MERGER DOCUMENTS" has the meaning assigned thereto in SECTION 2.1.
-6-
<PAGE>
1.60 "NON-OFFSET PROMISSORY NOTE" and "NON-OFFSET PROMISSORY NOTES" each
has the meaning assigned thereto in SECTION 2.6.
1.61 "OFFSET PROMISSORY NOTE" and "OFFSET PROMISSORY NOTES" each has the
meaning assigned thereto in SECTION 2.6.
1.62 "PBGC" has the meaning assigned thereto in SECTION 4.26(D).
1.63 "PEOPLE'S BANK" means People's Bank whose address is 850 Main Street,
Bridgeport Center, Bridgeport, Connecticut 06604.
1.64 "PEOPLE'S BANK LOAN AGREEMENT" means that certain First Amended and
Restated Loan and Security Agreement dated February 4, 1999, amending and
restating that certain Revolving Loan and Security Agreement dated July 29,
1995, each by and between People's Bank and Seller.
1.65 "PEOPLE'S BANK NOTES" means that certain First Amended and Restated
Revolving Promissory Note dated February 4, 1999, in the stated principal amount
of $5,693,000, issued by Seller to People's Bank and that certain Promissory
Note dated May 28, 1996, in the stated principal amount of $45,000, issued by
Seller to People's Bank.
1.66 "PEOPLE'S BANK RELEASE" has the meaning assigned thereto in SECTION
10.11.
1.67 "PERMITTED ENCUMBRANCES" means (a) Encumbrances for current taxes and
assessments not yet past due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves are
reflected in the Financial Statements, all of which Encumbrances are set forth
on SCHEDULE 1.67, (b) mechanics and materialmen Encumbrances for construction in
progress whether or not perfected by filing, recording, giving of notice or
other appropriate action in the relevant jurisdiction, (c) workmen, repairmen,
warehousemen, carriers, lessors and operators Encumbrances arising in the
ordinary course of business whether or not perfected by filing, recording,
giving of notice or other appropriate action in the relevant jurisdiction, and
(d) easements, including agreements and deeds of easement, and other minor
imperfections of title which could not have a Material Adverse Effect.
1.68 "PERSON" means any natural person, any Governmental Authority and any
entity, the separate existence of which is recognized by any Governmental
Authority or Governmental Requirement, including, but not limited to,
corporations, partnerships, joint ventures, joint stock companies, trusts,
estates, companies and associations, whether organized for profit or otherwise.
1.69 "PROMISSORY NOTE" and "PROMISSORY NOTES" each has the meaning
assigned thereto in SECTION 2.6.
1.70 "PURCHASER STOCK" means the common stock, $.01 par value, of
Purchaser.
-7-
<PAGE>
1.71 "RCRA" means the Resource Conservation and Recovery Act of 1976, as
amended.
1.72 "REDUCTION" has the meaning assigned thereto in SECTION 2.7.
1.73 "REFERENCE BALANCE SHEET" has the meaning assigned thereto in SECTION
4.3.
1.74 "SCHEDULE" and all references to Schedules means the Schedules to
this Agreement unless otherwise stated and includes the Disclosure Schedule. The
Schedules to this Agreement may be attached to this Agreement or may be set
forth in a separate document denoted as the Schedules to this Agreement, or
both.
1.75 "SEC" means the United States Securities and Exchange Commission.
1.76 "SEC DOCUMENTS" has the meaning assigned thereto in SECTION 5.4.
1.77 "SECOND PERIOD GROSS SALES" has the meaning assigned thereto in
SECTION 2.7.
1.78 "SECTION" and all references to a Section means the Section of this
Agreement unless otherwise stated.
1.79 "SECURITIES" has the meaning assigned thereto in SECTION 4.28(A).
1.80 "SECURITIES ACT" means the Securities Act of 1933, as amended.
1.81 "SECURITIES LAWS" has the meaning assigned thereto in SECTION
4.28(A).
1.82 "SELLER STOCK" means the common stock, par value $1.00, of Seller.
1.83 "SELLER STOCK CERTIFICATE" means each stock certificate representing
shares of Seller Stock.
1.84 "SKU" stands for "stock keeping unit" and means each separate size
and formulation of single products and multi-product packages offered for sale
to customers.
1.85 "SKU SALES" means all sales by Tristar or an Affiliate of Tristar to
existing customers of existing SKUs of Seller and any new customers in the chain
drug, mass merchants, supermarket chains and speciality chain markets with
respect to existing or new SKUs of Seller.
1.86 "STOCK OPTION" and "STOCK OPTIONS" each has the meaning assigned
thereto in SECTION 2.6.
1.87 "SUBSIDIARY" means, with respect to any Person (the "PARENT"), (a)
any corporation, association, joint venture, partnership or other business
entity of which securities or other ownership
-8-
<PAGE>
interests representing more than 50% of the ordinary voting power or beneficial
interest are, at the time as of which any determination is being made, owned or
controlled by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent and (b) any joint venture or
partnership of which the parent or any Subsidiary of the parent is a general
partner or has responsibility for its management.
1.88 "SURVIVING CORPORATION" means the corporation existing at and after
the Effective Time as a result of the Merger.
1.89 "TAXES" means any foreign, federal, state or local tax, assessment,
levy, impost, duty, withholding, estimated payment or other similar governmental
charge, together with any penalties, additions to tax, fines, interest and
similar charges thereon or related thereto.
1.90 "TAX RETURNS" means all Tax returns and reports (including, without
limitation, income, franchise, sales and use, unemployment compensation, excise,
severance, property, gross receipts, profits, payroll and withholding Tax
returns and information returns).
1.91 "TRISTAR MEMBER" means the Tristar Parties and the Surviving
Corporation.
1.92 "TRISTAR STOCK" means the common stock, $.01 par value, of Tristar.
1.93 "WALSWORTH" means Ron Walsworth, an individual, currently a
consultant to the Seller.
1.94 "WALSWORTH OBLIGATIONS" means the monetary obligations described in
SECTION 2.9(B) that are due to Walsworth.
1.95 "WALSWORTH RELEASE" has the meaning assigned thereto in SECTION
10.11.
1.96 "WASTE MATERIALS" means any toxic or hazardous materials or
substances, or solid wastes, including asbestos, buried contaminants, chemicals,
flammable or explosive materials, radioactive materials, petroleum and petroleum
products, and any other chemical, pollutant, contaminant, substance or waste
that is regulated by any Governmental Authority under any Environmental Law.
2. MERGER.
2.1 THE MERGER. Subject to the terms and conditions of this Agreement,
Seller shall be merged with and into Purchaser in accordance with all applicable
laws, with Purchaser being the Surviving Corporation. Purchaser and Seller shall
cause a certificate of merger to be filed with the Secretary of State of
Delaware, articles of merger to be filed with the Secretary of State of
Connecticut and such other documents and instruments to be filed in any other
jurisdiction where
-9-
<PAGE>
such a certificate or articles of merger is required, within two Business Days
after the Closing Date, unless legally prohibited from doing so (the certificate
of merger, the articles of merger and all other such documents and instruments
referenced in this Section, the "MERGER DOCUMENTS"). The Merger shall be
effective at the Effective Time.
2.2 SURVIVING CORPORATION. From and after the Effective Time, the
Surviving Corporation shall have the name Tristar USA, Inc. and shall possess
all Assets and every interest in the Assets, and the rights, privileges,
immunities, powers, franchises and authority, of a public as well as of a
private nature, of each of Seller and Purchaser, and all debts and all other
things in action or belonging or due to each of Seller and Purchaser, all of
which shall be vested in the Surviving Corporation without further act or deed,
and title to any real estate or any interest in the real estate vested in either
Seller or Purchaser shall not revert or in any way be impaired.
2.3 LIABILITIES. The Surviving Corporation shall be liable for all the
debts, liabilities and duties of each of Seller and Purchaser. Any action or
proceeding pending, by or against either Seller or Purchaser, may be prosecuted
to judgment, with right of appeal, as if the Merger had not taken place, or the
Surviving Corporation may be substituted in its place, and all the rights of
creditors of each of Seller and Purchaser shall be preserved unimpaired, and all
liens upon the property of each of Seller and Purchaser shall be preserved
unimpaired, on only the property affected by the liens immediately prior to the
Effective Time.
2.4 CERTIFICATE OF INCORPORATION AND BYLAWS. The certificate of
incorporation and bylaws of Purchaser in effect immediately prior to the
Effective Time shall be the certificate of incorporation and bylaws of the
Surviving Corporation following the Merger until otherwise amended or repealed.
2.5 DIRECTORS AND OFFICERS. The directors and officers of Purchaser
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation until their successors are duly elected or appointed
and qualified in the manner provided in the bylaws of the Surviving Corporation,
or as otherwise provided by law.
2.6 CONVERSION OR CANCELLATION OF STOCK UPON MERGER. In consideration for
the Merger and the non-competition, non-solicitation and non-disclosure
agreements in the Inducement Agreements and the other covenants and agreements
of the shareholders of Seller in the Inducement Agreements, as of the Effective
Time, by virtue of the Merger and without any action on the part of the holders
of any shares of Seller Stock, or the holder of the shares of Purchaser Stock,
(a) the aggregate Seller Stock outstanding immediately before the Effective Time
shall be converted into the right to receive (i) cash in the aggregate amount of
$350,000 (the "CASH CONSIDERATION"), (ii) promissory notes (each a "PROMISSORY
NOTE" and collectively, the "PROMISSORY NOTES") in the aggregate principal
amount of $3,050,000 issued by Purchaser and Tristar, as joint and several co-
makers, and (iii) options (each a "STOCK OPTION" and collectively, the "STOCK
OPTIONS") to purchase in the aggregate 100,000 shares of Tristar Stock at an
exercise price equal to $5.82, each in substantially the form attached hereto as
EXHIBIT 2.6(A) (the Cash Consideration, the Promissory
-10-
<PAGE>
Notes, the Stock Options and the Earn-Out are collectively referred to herein as
the "MERGER CONSIDERATION"), and (b) each share of Purchaser Stock outstanding
immediately before the Effective Time shall be converted into one share of
common stock of the Surviving Corporation. At the Closing, the Cash
Consideration less the Attorneys' Fees shall be paid to the shareholders of
Seller as set forth in SCHEDULE 2.6 by wire transfer of immediately available
funds to the account designated on SCHEDULE 2.6 for the shareholder entitled
thereto, Purchaser shall issue a Promissory Note (such Promissory Note
hereinafter referred to as an "OFFSET PROMISSORY NOTE") to each shareholder of
Seller identified on SCHEDULE 2.6 as receiving an Offset Promissory Note, each
such Offset Promissory Note to be in substantially the form attached hereto as
EXHIBIT 2.6(B) and in the stated principal amount as set forth in SCHEDULE 2.6,
Purchaser shall issue a Promissory Note (such Promissory Note hereinafter
referred to as a "NON-OFFSET PROMISSORY NOTE") to each shareholder of Seller
identified on SCHEDULE 2.6 as receiving a Non-Offset Promissory Note, each such
Non-Offset Promissory Note to be in substantially the form attached hereto as
EXHIBIT 2.6(C) and in the stated principal amount as set forth in SCHEDULE 2.6,
Tristar shall issue a Stock Option to each shareholder of Seller exercisable for
the amount of Tristar Stock as set forth in SCHEDULE 2.6, and the Attorneys'
Fees shall be paid as set forth on SCHEDULE 2.6.
2.7 EARN-OUT.
(a) GENERALLY. As of January 1, 2001 and again as of January 1, 2002
(each such date, a "CALCULATION DATE"), the Surviving Corporation shall
determine its Gross Sales for the immediately preceding 12-month period (each
such period, an "EARN-OUT PERIOD"). If as of the Calculation Date, the Gross
Sales of the Surviving Corporation for such Earn-Out Period exceed the amounts
set forth below, then, as additional consideration for the Merger, Seller Stock
outstanding immediately before the Effective Time shall be deemed to have been
converted into the right to receive cash (the "EARN-OUT") in the amount set
forth below opposite the level of Gross Sales achieved for such Earn-Out Period.
The aggregate maximum Earn-Out for the two Earn-Out Periods shall be $645,000.
GROSS SALES EARN-OUT
Less than $13,200,000 $0
Greater than $13,200,000 but 12.5% of any excess amount over
less than $14,200,000 $13,200,000
Greater than $14,200,000 but $125,000 PLUS 14.5% of any excess
less than $15,200,000 amount over $14,200,000
Greater than $15,200,000 but $270,000 PLUS 17.5% of any excess
less than $16,200,000 amount over $15,200,000
-11-
<PAGE>
Greater than $16,200,000 $445,000 PLUS 20% of any excess
amount over $16,200,000, up
to a maximum of $645,000
If as of the Calculation Date, the Gross Sales of the Surviving
Corporation for such Earn-Out Period are less than the amounts set forth below,
then the Tristar Parties shall be entitled to reduce the principal and interest
payments due on the Offset Promissory Notes by the amount set forth below
opposite the level of Gross Sales achieved for such Earn-Out Period (the
"REDUCTION"). The aggregate maximum Reduction for the two Earn-Out Periods shall
be $645,000.
GROSS SALES REDUCTION
$13,200,000 or more $0
Less than $13,200,000 but 12.5% of any amount below
$12,200,000 or more $13,200,000
Less than $12,200,000 but $125,000 PLUS 14.5% of any amount
$11,200,000 or more below $12,200,000
Less than $11,200,000 but $270,000 PLUS 17.5% of any amount
$10,200,000 or more below $11,200,000
Less than $10,200,000 $445,000 PLUS 20% of any amount
below $10,200,000, up to a maximum
of $645,000
Within 90 days after each Calculation Date, the Surviving Corporation
shall provide McCann (as the representative of Seller and the shareholders of
Seller) a written report detailing the Gross Sales for the immediately preceding
12-month period prior to such Calculation Date, together with all supporting
documentation reasonably requested by McCann. Within 30 days of receipt of such
written report, McCann shall inform the Surviving Corporation in writing that
either the determination of Gross Sales is acceptable or object to such
determination in writing setting forth a specific description of his objections
(it being agreed that McCann's failure to deliver such written notice to the
Surviving Corporation within such 30-day period shall be deemed acceptance by
McCann). If McCann objects as provided above and if the Surviving Corporation
does not agree with such objections, if any (it being agreed that the Surviving
Corporation's failure to deliver written notice to McCann of the Surviving
Corporation's disagreement with such objections within 30 days of the Surviving
Corporation's receipt of such objections shall be deemed acceptance by the
Surviving Corporation), or such objections are not resolved on a mutually
agreeable basis within 30 days after the Surviving Corporation's receipt of such
objections, any such disagreement shall be promptly submitted to a mutually
acceptable "big-five" accounting firm that has no affiliation with
-12-
<PAGE>
any shareholder of Seller, Seller, the Surviving Corporation or Tristar (the
"UNAFFILIATED FIRM"). The Unaffiliated Firm shall resolve within 30 days after
said Unaffiliated Firm's engagement by the parties the differences regarding
Gross Sales in accordance with generally accepted accounting principles
consistently applied and this Agreement. The decision of such Unaffiliated Firm
shall be final and binding upon the Surviving Corporation and the shareholders
of Seller, and the fees, costs and expenses of the Unaffiliated Firm shall be
shared equally between the shareholders of Seller and the Surviving Corporation.
The shareholders of Seller and the Surviving Corporation shall each bear the
fees, costs and expenses of his or its own accountants. All actions and
determinations by McCann under this SECTION 2.7 shall be final and binding on
the shareholders of Seller.
(b) CALCULATION OF EARN-OUT WHEN GROSS SALES FOR FIRST EARN-OUT PERIOD
RESULT IN AN EARN-OUT. If Gross Sales for the first Earn-Out Period (the "FIRST
PERIOD GROSS SALES") result in a Earn-Out for such Earn-Out Period, the
shareholders of Seller shall be entitled to an Earn-Out for such Earn-Out
Period, and the Earn-Out or Reduction for the second Earn-Out Period shall be
calculated as follows: (i) if Gross Sales for the second Earn-Out Period (the
"SECOND PERIOD GROSS SALES") are greater than or equal to $13,200,000 but less
than or equal to the First Period Gross Sales, there shall not be any Earn-Out
or Reduction for the second Earn-Out Period; (ii) if Second Period Gross Sales
are greater than the First Period Gross Sales, the Earn-Out for the second
Earn-Out Period shall be equal to the Earn-Out for such Earn-Out Period
calculated pursuant to the charts set forth in SECTION 2.7(A) less the Earn-Out
for the first Earn-Out Period; and (iii) if Second Period Gross Sales are less
than $13,200,000, the Reduction for such Earn-Out Period shall be calculated
pursuant to the charts set forth in SECTION 2.7(A).
(c) CALCULATION OF EARN-OUT WHEN GROSS SALES FOR FIRST EARN-OUT PERIOD
RESULT IN A REDUCTION. If First Period Gross Sales result in a Reduction for
such Earn-Out Period, the Tristar Parties shall be entitled to a Reduction for
such Earn-Out Period, and the Earn-Out or Reduction for the second Earn-Out
Period shall be calculated as follows: (i) if Second Period Gross Sales are less
than or equal to $13,200,000 but greater than or equal to the First Period Gross
Sales, there shall not be any Earn-Out or Reduction for the second Earn-Out
Period; (ii) if Second Period Gross Sales are less than the First Period Gross
Sales, the Tristar Parties shall be entitled to a Reduction for such Earn-Out
Period calculated pursuant to the charts set forth in SECTION 2.7(A) less the
Reduction for the first Earn-Out Period, and (iii) if Second Period Gross Sales
are greater than $13,200,000, the Earn-Out for such Earn-Out Period shall be
calculated pursuant to the charts set forth in SECTION 2.7(A).
(d) PAYMENT OF EARN-OUT. The Earn-Out, if any, for each Earn-Out Period
shall be paid on or before the later of 90 days after the end of such Earn-Out
Period and the date the determination of Gross Sales is deemed final pursuant to
the provisions of SECTION 2.7(A) pro rata to the shareholders of Seller as set
forth in SCHEDULE 2.6 by wire transfer of immediately funds to accounts
designated on SCHEDULE 2.6 for each such shareholder.
-13-
<PAGE>
(e) PAYMENT OF REDUCTION. If the Tristar Parties are entitled to a
Reduction as a result of the Gross Sales for either of the Earn-Out Periods, the
Reduction shall be paid as follows: (i) if the the First Period Gross Sales
result in a Reduction, the principal and interest payments due in 2001 on the
Offset Promissory Notes shall be reduced pro-rata according to the stated
principal amount of each Offset Promissory Note, by the amount of the Reduction;
and (ii) if the Second Period Gross Sales result in a Reduction, the principal
and interest due in 2002 on the Offset Promissory Notes shall be reduced
pro-rata according to the stated principal amount of each Offset Promissory
Note, by the amount of the Reduction.
(f) LOSS OF ECKERD ACCOUNT. If during either Earn-Out Period, the amount
of Gross Sales to Eckerd is less than the amount of the Eckerd Gross Sales, then
for purposes of determining the Earn-Out or Reduction for such Earn-Out Period
(and the subsequent Earn-Out Period, if applicable), the Gross Sales
attributable to the sale of product to Eckerd by the Surviving Corporation for
such Earn-Out Period shall be deducted from the Gross Sales for such Earn-Out
Period and the Gross Sales for such Earn-Out Period shall be increased by the
amount of the Eckerd Gross Sales.
2.8 EXCHANGE PROCEDURES.
(a) After the Effective Time, each outstanding Seller Stock
Certificate shall, until duly surrendered to Purchaser as contemplated by this
SECTION 2.8, be deemed to represent only the right to receive a portion of the
Merger Consideration as contemplated by SECTION 2.6.
(b) After the Effective Time, there shall be no further transfer on
the records of Seller of Seller Stock Certificates, and each share of Seller
Stock presented or surrendered to Purchaser shall be canceled in exchange for a
portion of the Merger Consideration as contemplated by SECTION 2.6. Purchaser
shall not be obligated to deliver any Merger Consideration to any holder of a
Seller Stock Certificate until such holder surrenders such Seller Stock
Certificate as provided herein or delivers an affidavit of lost stock
certificate and provides indemnification acceptable to Purchaser.
2.9 AGREEMENTS REGARDING CERTAIN EXISTING LIABILITIES OF SELLER.
(a) KEY EMPLOYEES. Pursuant to change of control provisions in the
employment agreements between Seller and each of Falkowski, Luby and Catapano
(Falkowski, Luby and Catapano collectively, the "KEY EMPLOYEES"), upon the
closing of the transactions contemplated by this Agreement, Seller will have
certain monetary obligations to each of the Key Employees. In full satisfaction
of such monetary obligations, the Tristar Parties shall, at Closing, pay $30,000
to each of Falkowski and Luby and $180,000 to Catapano in cash by wire transfer
of immediately available funds to an account designated by such Key Employee
PLUS issue to each Key Employee (i) a promissory note in the stated principal
amount of the balance due such Key Employee on such monetary obligations
substantially in the form of the promissory note attached hereto as EXHIBIT
2.9(A) and (ii) an option in form acceptable to the parties thereto to purchase
10,000 shares of Tristar
-14-
<PAGE>
Stock at an exercise price of $5.82. The maximum liability of the Tristar as to
each Key Employee pursuant to this SECTION 2.9(A) shall be the amount
represented by Seller in SECTION 4.29 as the amount due such Key Employee. The
payments to and issuance of the notes to each Key Employee are being issued in
satisfaction of obligations to the Key Employee arising under an employment
agreement between the Key Employee and Seller. Therefore the cash payments to
the Key Employees under this SECTION 2.9(A) and the principal and interest
payments on the promissory notes to be issued pursuant to this SECTION 2.9(A)
will be reduced by all standard legal deductions such as, without limitation,
F.I.C.A. and income tax withholding.
(b) RON WALSWORTH. Seller has certain monetary obligations to
Walsworth arising from commissions earned but not paid. At Closing, in full
satisfaction of such monetary obligations, (i) Purchaser shall pay to Walsworth
$74,000 by wire transfer of immediately available funds to an account designated
by Walsworth, (ii) the Tristar Parties shall issue to Walsworth a promissory
note substantially in the form of the promissory note attached hereto as EXHIBIT
2.9(B)(1) in the stated principal amount of the balance due Walsworth on such
monetary obligations less $60,000, and (iii) the Tristar Parties shall issue
Walsworth a promissory note substantially in the form of the promissory note
attached hereto as EXHIBIT 2.9(B)(2). The maximum liability of the Tristar
Parties pursuant this SECTION 2.9(B) shall be the amount represented by Seller
in SECTION 4.29 as the maximum due Walsworth. Seller shall use its best efforts
to cause Walsworth at Closing to execute and deliver to the Tristar Parties the
Walsworth Release.
(c) JACK FRIEDMAN. Seller has certain monetary obligations to
Friedman arising in connection with the Friedman Note. In full satisfaction of
such monetary obligations, the Tristar Parties agree at Closing to issue to
Friedman a promissory note in the stated principal amount of the amount due
Friedman on such monetary obligations and substantially in the form of the
promissory note attached hereto as EXHIBIT 2.9(C). The maximum liability of the
Surviving Corporation pursuant this SECTION 2.9(C) shall be the amount
represented by Seller in SECTION 4.29 as the maximum due Friedman. Seller shall
use its best efforts to cause Friedman at Closing to execute and deliver to the
Tristar Parties the Friedman Release.
(d) MEL DAVIS. Seller has certain monetary obligations to Davis
arising in connection with the Davis Note. In full satisfaction of such monetary
obligations, the Tristar Parties agree at Closing to issue to Davis a promissory
note in the stated principal amount of $33,654.00 and substantially in the form
of the promissory note attached hereto as EXHIBIT 2.9(D). Seller shall use its
best efforts to cause Davis at Closing to execute and deliver to Purchaser the
Davis Release.
2.10 STAY INCENTIVE BONUS. In the event that the individual is an employee
of the Surviving Corporation on March 1, 2000 or is terminated by the Surviving
Corporation without cause prior to March 1, 2000, the Surviving Corporation
shall pay to such individual, in cash, on or before the earlier of March 3, 2000
and the date of termination without cause, the amount set forth opposite the
individual's name in the chart below, less standard legal deductions such as,
without limitation, F.I.C.A. and income tax withholding:
-15-
<PAGE>
Fred Ryan $15,000
Tracy Rondini $12,000
Sandra Violette $15,000
Richard Edwards $10,000
Doris Albanese $ 3,000
Fred Reinke $ 3,000
Stanley Seabrook $ 2,000
2.11 PURCHASE PRICE ADJUSTMENT.
(a) BAD INVENTORY. On or before April 30, 2000, the Surviving
Corporation shall determine the amount of Bad Inventory (hereinafter defined)
and provide to McCann (as the representative of Seller and the shareholders of
Seller) its determination of such amount and thereafter provide to McCann with
all supporting documentation reasonably requested by McCann in connection
therewith. In the event that the amount of Bad Inventory is more than
$645,000.00, the shareholders of Seller shall pay to the Surviving Corporation
the difference between the amount of Bad Inventory and $600,000 pursuant to the
provisions of SECTION 2.11(E) below. In the event that the amount of Bad
Inventory is less than $555,000.00, the Surviving Corporation shall pay to the
shareholders of Seller the difference between $600,000 and the amount of Bad
Inventory pursuant to the provisions of SECTION 2.11(E) below. "BAD INVENTORY"
means inventory included on the Reference Balance Sheet (including inventory
which has been written off or reserved against) which, as of April 1, 2000, has
not been used during the preceding 12 months or represents more than a 12- month
supply based on the sale or use thereof during the preceding 12 months.
(b) NET SALES. As of January 1, 2000, the Surviving Corporation
shall determine the Net Sales of the Surviving Corporation for the immediately
proceeding 3 month period. On or before March 31, 2000, the Surviving
Corporation shall provide to McCann (as the representative of Seller and the
shareholders of Seller) its determination of such Net Sales, together with all
supporting documentation reasonably requested by McCann to support such
determination. To the extent such Net Sales exceed $2,814,000, such excess shall
be multiplied by 32% and the resulting dollar amount paid to the shareholders of
Seller pursuant to the provisions of Section 2.11(E) below. To the extent such
Net Sales are less than $2,814,000, such amount shall be multiplied by 32% and
the resulting dollar amount paid to the Surviving Corporation pursuant to the
provisions of SECTION 2.11(E) below. "Net Sales" means Gross Sales less
allowance and returns.
(c) CUSTOMER ACCOUNTS RECEIVABLE. As of April 30, 2000, the
Surviving Corporation shall determine the customer charge-backs for the accounts
listed on SCHEDULE 2.11(C) for shipments prior to the Balance Sheet Date, and
provide to McCann (as the representative of Seller and the shareholders of
Seller) its determination of such customer charge-backs on or before May 31,
2000, together with all supporting documentation reasonably requested by McCann
to support such determination. To the extent the aggregate of such customer
charge-backs exceeds by more than 7.5% of the sum of $992,000 and the combined
reserve for returns and cooperative
-16-
<PAGE>
advertising allowances as of the Balance Sheet Date, such amount shall be paid
to the Surviving Corporation pursuant to the provisions of SECTION 2.11(E)
below, and to the extent such the aggregate of such customer charge-backs is
less by more than 7.5% of the sum of $992,000 and the combined reserve for
returns and cooperative advertising allowances as of the Balance Sheet Date, the
Surviving Corporation shall pay such amount to the shareholders of Seller
pursuant to the provisions of SECTION 2.11(E) below.
(d) DISPUTES. All objections to and all disputes relating to the
determination of Bad Inventory, Net Sales and customer charge-backs arising
under this SECTION 2.11 shall be resolved pursuant to, and all fees, costs and
expenses of each accountant used in connection with the resolution of each such
dispute shall be paid pursuant to, the procedures contained in SECTION 2.7(A)
hereof.
(e) PAYMENT OF AMOUNTS DUE. Any sums due to the shareholders of
Seller pursuant to this SECTION 2.11 shall be paid by the Surviving Corporation
pro rata to the shareholders in accordance with the percentages set forth on
SCHEDULE 2.6 in cash by wire transfer of immediately available funds to the
account designated on SCHEDULE 2.6 for the shareholder. Any sums due the
Surviving Corporation under this SECTION 2.11 shall be realized by the Tristar
Parties by offsetting payments due on the Offset Promissory Notes pro rata
against each Offset Promissory Note in accordance with the original stated
principal amount of the Offset Promissory Notes and any offset shall be spread
out in equal payments over the remaining payments due under such Offset
Promissory Notes.
(f) ACTIONS AND DETERMINATIONS BY MCCANN. All actions and
determinations by McCann under this SECTION 2.11 shall be final and binding on
the shareholders of Seller.
2.12 PROMISSORY NOTE TO GEORGE LUBY. As consideration for George Luby
executing the Inducement Agreement referenced in SECTION 10.9 hereof, the
Tristar Parties agree at Closing to issue to George Luby a promissory note in
the stated principal amount of $45,000.00 and substantially in the form of the
promissory note attached hereto as EXHIBIT 2.12.
3. CLOSING; CLOSING DATE. Subject to the terms and conditions herein
contained, the consummation of the transactions referenced above shall take
place (the "CLOSING") on November 10, 1999, at 10:00 a.m., local time, at the
offices of Tristar Parties Counsel, or at such other time, date and place as
Purchaser and Seller shall in writing designate. The date of the Closing is
referred to herein as the "CLOSING DATE".
4. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to the Tristar Parties that the statements
contained in this ARTICLE 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date with the same
effect as if made on and as of such date, except as set forth in
-17-
<PAGE>
the disclosure schedule delivered by Seller to the Tristar Parties on the date
hereof and initialed by Seller (the "DISCLOSURE SCHEDULE"). The Disclosure
Schedule will be arranged in paragraphs corresponding to the numbered paragraphs
contained in this ARTICLE 4, and any disclosure on any part of the Disclosure
Schedule shall be deemed a disclosure on all other parts of the Disclosure
Schedule provided the required disclosure is fully and accurately disclosed.
4.1 INCORPORATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Connecticut, and is
duly authorized, qualified and licensed under all applicable Governmental
Requirements to carry on its business in the places and in the manner as now
conducted and to own, operate and lease the Assets it now owns, operates or
leases. Seller is currently, and has been since Seller's original date of
incorporation, an S Corporation as that term is defined under Subchapter S of
the Code and the Regulations thereunder. Seller has no Subchapter C current or
accumulated earnings or profits. Seller has continuously met all the Subchapter
S requirements imposed by the Code and Regulations throughout its existence and
its S corporation status has not been revoked, suspended or otherwise
compromised. Seller is not qualified as a foreign corporation in any
jurisdiction, Seller is not required to qualify or otherwise be authorized to do
business as a foreign corporation in any jurisdiction in order to carry on any
of its businesses as now conducted or to own, lease or operate the Assets of
Seller, and there has not been any claim by any other jurisdiction to the effect
that Seller is required to qualify or otherwise be authorized to do business as
a foreign corporation therein in order to carry on any of its businesses as now
conducted or to own, lease or operate the Assets. Complete and correct copies of
the Articles of Incorporation of Seller and all amendments thereto, certified in
each case by the Secretary of State of the State of Connecticut, and of the
Bylaws of Seller and all amendments thereto, certified by the Secretary of
Seller, heretofore have been delivered to the Tristar Parties. The minute books
of Seller previously made available to the Tristar Parties are complete and
accurately reflect all action taken prior to the date of this Agreement by its
board of directors and shareholders, in their capacities as such. To the Best
Knowledge of Seller, neither Seller nor any shareholder of Seller has not taken
any action, or failed to take any action which action or failure will preclude
or prevent Seller's business from being conducted in substantially the same
manner in which Seller has heretofore conducted the same. Seller has no
Subsidiaries.
4.2 SHARE CAPITAL. Seller's authorized capital stock consists of 20,000
shares of Seller Stock, of which 16,795 shares are issued and outstanding. PART
4.2 of the Disclosure Schedule contains a list of all Persons owning of record
capital stock of Seller with an indication thereon of the class of capital stock
and the number of shares of each class owned by each such Person. All of the
outstanding shares of Seller Stock have been duly authorized and validly issued
and are fully paid and non-assessable. There are no outstanding options,
warrants, convertible securities, calls, rights, commitments, preemptive rights,
agreements, arrangements or understandings of any character obligating Seller
(a) to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of Seller or any securities or obligations
convertible into or exchangeable for such shares or (b) to grant, extend or
enter into any such option, warrant,
-18-
<PAGE>
convertible security, call, right, commitment, preemptive right, agreement,
arrangement or understanding described in clause (a) above.
4.3 FINANCIAL STATEMENTS. Seller has delivered to the Tristar Parties
copies of the following financial statements for Seller, all of which financial
statements are included in SCHEDULE 4.3 (collectively, the "FINANCIAL
STATEMENTS"):
(a) Unaudited Balance Sheet of Seller (the "REFERENCE BALANCE
SHEET") as of October 31, 1999 (the "BALANCE SHEET DATE") and Unaudited Income
Statement of Seller for the ten-month period ended on the Balance Sheet Date;
and
(b) Audited Balance Sheets, Income Statements and Statements of
Changes in Financial Position for each of Seller's three (3) most recent fiscal
years.
Notwithstanding the following, the aggregate net income of Seller for all of the
periods together represented by the Financial Statements is true and accurate in
all material respects. Except that certain accruals were made in Seller's 1997
fiscal year that should have made in Seller's 1996 fiscal year, certain accruals
were made in Seller's 1998 fiscal year that should have made in Seller's 1997
fiscal year and certain accruals were made in the first 9 months of Seller's
1999 fiscal year that should have made in Seller's 1998 fiscal year, all
financial statements supplied to the Tristar Parties by Seller which are
included in SCHEDULE 4.3, except as specifically set forth therein and herein,
are and will be true and accurate in all material respects, have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated, and present fairly the
financial condition of Seller as of the dates and for the periods indicated
thereon. Any other financial statements or financial data relating to Seller
supplied to or otherwise obtained by the Tristar Parties may not be relied upon
by the Tristar Parties and Seller makes no representations or warranties
concerning the accuracy of any such statements or data. The Reference Balance
Sheet reflects, as of the Balance Sheet Date, all liabilities, debts and
obligations of any nature, kind or manner of Seller, whether direct, accrued,
absolute, contingent or otherwise, and whether due, or to become due, whether or
not such items are required to be reflected on such balance sheet under
generally accepted accounting principles consistently applied. Except as set
forth on the Reference Balance Sheet (including the notes thereto), Seller does
not have, and none of the Assets of Seller is subject to, any liabilities or
obligations (accrued, absolute, contingent or otherwise), except for liabilities
(i) incurred in the ordinary course of the Business or disclosed in the
Disclosure Schedule, or (ii) fully covered by Seller's insurance policies
(subject to deductibles and co-insurance requirements of said policies), none of
which have had a Material Adverse Effect.
-19-
<PAGE>
4.4 EVENTS SINCE THE BALANCE SHEET DATE. Since the Balance Sheet Date,
there has not been: (a) any change in the condition (financial or otherwise) or
in the properties, assets, liabilities, business or prospects of the Business,
except normal and usual changes in the ordinary course of business, none of
which has been materially adverse and all of which in the aggregate have not
been materially adverse; (b) any labor trouble, strike or any other occurrence,
event or condition affecting the employees of Seller that adversely affects the
condition (financial or otherwise) of the Assets of Seller or the Business; (c)
any material breach or default by Seller or, to the Best Knowledge of Seller, by
any other party, under any agreement or obligation included in the Assets of
Seller or by which any of the Assets of Seller are bound, except for (i)
violations of certain covenants in the People's Bank Loan Agreement, (ii)
violations of certain provisions of the Friedman Note, and (iii) failure to pay
when due certain commission obligations to Walsworth, all of which are fully and
accurately disclosed in PART 4.4 of the Disclosure Schedule; (d) any material
damage, destruction or loss (whether or not covered by insurance) adversely
affecting the Assets of Seller or the Business; (e) to the Best Knowledge of
Seller, any legislative or regulatory change adversely affecting the Assets of
Seller or the Business; (f) any material change in the types, nature,
composition or quality of the services or products of the Business, any material
adverse change in the contributions of any of the product lines of the Business
to the revenues or net income of such Business, or any material adverse change
in the sales, revenue or net income of the Business; (g) any material
transaction by Seller related to or affecting the Assets of Seller or the
Business other than transactions in the ordinary course of business of Seller;
(h) any other occurrence, event or condition that has materially adversely
affected (or can reasonably be expected to materially adversely affect) the
Assets of Seller or the Business; (i) any declaration, setting aside or payment
of any dividend (whether in cash, stock or property) with respect to any of
Seller's capital stock; (j) any granting by Seller to any executive officer of
Seller of any increase in compensation, any granting by Seller to any executive
officer of any increase in severance or termination pay, or any entry by Seller
into any employment, severance or termination agreement with any executive
officer; (k) any change in accounting methods, principles or practices by Seller
materially affecting its Assets, liabilities or business, except insofar as may
have been required or recommended by Seller's accountants, all of such changes
are fully and accurately disclosed in PART 4.4 of the Disclosure Schedule; (l)
any condition, event or occurrence through the date hereof which, individually
or in the aggregate, could reasonably be expected to prevent, hinder or delay in
any material respect the ability of Seller to consummate the transactions
contemplated by this Agreement; or (m) any agreement, in writing or otherwise,
by Seller or any corporate action by Seller with respect to the foregoing.
4.5 COMPETING INTERESTS. Seller does not, and to the Best Knowledge of
Seller, no director or officer of Seller, and no Associate (as hereinafter
defined) of Seller:
(a) owns, directly or indirectly, any equity interests in, or is a
director, officer or employee of, or consultant to, any entity which is a
competitor, supplier or customer of the Business, or, to the Best Knowledge of
Seller, a competitor, supplier or customer of Purchaser or Seller or an
Associate of Purchaser or Seller (except for ownership, if any, of less than one
percent of the
-20-
<PAGE>
outstanding capital stock of any corporation the capital stock of which is
traded on a nationally recognized securities exchange), or
(b) owns, directly or indirectly, in whole or in part, any property,
asset or right which is associated with the Assets of Seller or the Business or
which Seller is presently operating or using in connection with or the use of
which is necessary for or material to the operation of the Business.
For purposes of this Agreement, the term "ASSOCIATE" means:
(y) with respect to an individual:
(i) the spouse of the individual,
(ii) any trust in which the individual or any person described
in (i) above has a pecuniary interest or any trustee of such a trust, and
(iii) any business entity which is directly or indirectly
Controlled by any of the foregoing; and
(z) with respect to a Person other than a natural person, any Person
Controlling, Controlled by or under common Control with such Person, and any
director, officer, partner, trustee, administrator, beneficiary or executor of
such Person.
4.6 TAXES.
(a) All Tax Returns of or relating to any Taxes that are required to
be filed on or before the Effective Time, subject to any allowable extension
periods, for, by, on behalf of or with respect to Seller, including, but not
limited to, those relating to the income, business, operations or property of
Seller (whether on a separate, consolidated, affiliated, combined, unitary or
any other basis), have been timely filed with the appropriate foreign, federal,
state and local authorities, and all Taxes shown to be due and payable on such
Tax Returns or related to such Tax Returns have been paid in full on or before
the Effective Time, except Taxes which have not yet accrued or otherwise become
due, all of which are reflected on the Reference Balance Sheet.
(b) All such Tax Returns and the information and data contained
therein have been properly and accurately compiled and completed in all material
respects, fairly present the information purported to be shown therein, and
reflect all liabilities for Taxes for the periods covered by such Tax Returns,
net of any applicable reserves.
(c) None of such Tax Returns are under audit or examination by any
foreign, federal, state or local authority and there are no agreements, waivers
or other arrangements providing
-21-
<PAGE>
for an extension of time with respect to the assessment or collection of any Tax
or deficiency of any nature against Seller or with respect to any such Tax
Return, or any suits or other actions, proceedings, investigations or claims now
pending or, to the Best Knowledge of Seller, threatened against Seller with
respect to any Tax, or any matters under discussion with any foreign, federal,
state or local authority relating to any Tax, or any claims for any additional
Tax asserted by any such authority.
(d) All Taxes assessed and due and owing from or against Seller on
or before the Effective Time (including, but not limited to, ad valorem taxes
relating to any property of Seller) have been timely paid in full on or before
the Effective Time.
(e) All withholding Tax, Tax deposit and estimated Tax payment
requirements imposed on Seller for any and all periods ending on or before the
Effective Time, or through and including the Effective Time for periods that
have not ended on or before the Effective Time, have been timely satisfied in
full on or before the Effective Time or reserves adequate for the payment of
such withholding, deposit and estimated Taxes have been or will be established
in the financial statements of Seller on or before the Effective Time a copy of
which has been or will be provided to the Tristar Parties prior to Closing.
(f) The Financial Statements reflect and include adequate charges,
accruals, reserves and provisions for the payment in full of any and all Taxes
payable with respect to any and all periods ending on or before the respective
dates thereof.
4.7 EMPLOYEE MATTERS. SCHEDULE 4.7 sets forth a true and complete list of
the names of, and current annual compensation paid by Seller to each employee of
Seller utilized in connection with the operation of the Business. Seller is not
a party to or bound by any collective bargaining or other union agreements.
Seller has not, within the last five years, had or been threatened with any
union activities, work stoppages or other labor trouble with respect to its
employees. There are no disputes with employees in general to which Seller is a
party. There are no strikes, slowdowns or picketing against Seller (or, to the
Best Knowledge of Seller, against any material supplier of goods or services to
Seller) pending or, to the Best Knowledge of Seller, threatened. Seller has not
received notice from any union or employees setting forth demands for
representation, elections or for present or future changes in wages, terms of
employment or working conditions. Other than wage increases in the ordinary
course of business, since the Balance Sheet Date, Seller has not made any
commitment or agreement to increase the wages or modify the conditions or terms
of employment of any of the employees of Seller used in connection with the
Business.
4.8 CONTRACTS AND AGREEMENTS. (a) PART 4.8(A) of the Disclosure Schedule
sets forth a true and complete list of and briefly describes (including
termination date) all of the following contracts, agreements, leases, license
agreements, plans, arrangements or commitments, written or oral, that relate to
the Assets of Seller or the Business (including all amendments, supplements and
modifications thereto, whether written or oral); except those that are
terminable upon 30-days notice
-22-
<PAGE>
or less without penalty or any continuing obligations on the part of any party
thereto and that involve a sum of less than $5,000:
(i) any contract, agreement or commitment in respect of the sale of
products or services or the purchase of raw materials, supplies or other
products or utilities;
(ii) any offer, tender or the like outstanding and capable of being
converted into an obligation of Seller by the passage of time or by an
acceptance or other act of some other person or entity or both;
(iii) any sale, agency, distributorship agreement, franchise
agreement or legally enforceable commitment or obligation with respect thereto;
(iv) any collective bargaining agreement, union agreement,
employment agreement, consulting agreement, management service agreement,
agreement providing for the services of an independent contractor or any other
similar type of contract or agreement;
(v) any profit-sharing, pension, stock option, severance pay,
retirement, bonus, deferred compensation, group life and health insurance or
other employee benefit plan, agreement, arrangement or commitment of any nature
whatsoever, whether or not legally binding, or any agreement with any present or
former officer, director or shareholder of Seller;
(vi) any loan or credit agreement, indenture, guarantee (other than
endorsements made for collection), mortgage, pledge, conditional sale or other
title retention agreement, or any equipment financing obligation, lease and
lease-purchase agreement;
(vii) any lease related to the Assets of Seller or the Business, and
any other contract, agreement or legally enforceable commitment relating to or
affecting the Assets of Seller or the Business;
(viii)any performance bond, bid bond, surety bond or the like, any
contract or bid covered by such bond, or any letter of credit and guaranty;
(ix) any consent decree and other judgment, decree or order,
settlement agreement or agreement relating to competitive activities, requiring
or prohibiting any future action;
(x) any contract or agreement of any nature with any shareholder of
Seller, or any Associate of a shareholder of Seller or Affiliate of a
shareholder of Seller;
(xi) any contract, commitment or agreement entered into outside the
ordinary course of the operation of the Business;
-23-
<PAGE>
(xii) any agreement, indenture or other instrument which contains
restrictions with respect to the payment of dividends or any other distribution
in respect of its capital stock or the purchase, redemption or other acquisition
of capital stock;
(xiii)other than expenditures regularly made in the ordinary course
of business of Seller for items that are not property, plant or equipment, any
agreement, contract or commitment relating to any expenditure or a series of
related expenditures in excess of $10,000;
(xiv) any outstanding loan or advance by Seller to, or investment by
Seller in, any Person, or any agreement, contract, commitment or understanding
relating to the making of any such loan, advance or investment (excluding trade
receivables);
(xv) any contract, agreement, indenture, note or other instrument
relating to (A) the borrowing of money by Seller or the granting of any
Encumbrance or (B) any guarantee or other contingent liability (identifying the
primary contract or agreement to which such guarantee or contingent liability
relates or the agreement pursuant to which such guarantee was delivered) in
respect of any indebtedness, commitment, liability or obligation of any Person
(other than the endorsement of negotiable instruments for deposit or collection
in the ordinary course of business);
(xvi) any agreement, contract or commitment limiting the freedom of
Seller or any Affiliate of Seller to engage in any line of business, to own,
operate, sell, transfer, pledge or otherwise dispose of or encumber any Asset or
to compete with any Person or to engage in any business or activity in any
geographic area;
(xvii)any agreement, lease, contract or commitment or series of
related agreements, leases, contracts or commitments not entered into in the
ordinary course of business that is not cancelable under the terms of such
agreement, lease, contract or commitment without penalty to Seller within 30
days;
(xviiiany agreement, contract or commitment requiring (A) the
payment for goods or services whether or not such goods or services are actually
provided or (B) the furnishing of goods or services at a price less than
Seller's cost of producing such goods or providing such services;
(xix) any agreement or contract obligating Seller or that would
obligate or require any subsequent owner of the business currently conducted by
Seller or any of the Assets to provide for indemnification or contribution with
respect to any matter (other than customary indemnification provisions in leases
of property leased by Seller);
(xx) any license, royalty or similar agreement; or
(xxi) any agreement, contract or commitment that Seller expects to
have a Material Adverse Effect on Seller and/or Purchaser subsequent to Closing.
-24-
<PAGE>
PART 4.8(A) of the Disclosure Schedule sets forth with respect to each mortgage,
security agreement, letter of credit or guaranty, a cross-reference to the
principal agreement, instrument or document referred to in PART 4.8(A) of the
Disclosure Schedule pursuant to which such mortgage, security agreement, letter
of credit or guaranty was executed or to which such mortgage, security
agreement, letter of credit or guaranty relates.
(b) PART 4.8(B) of the Disclosure Schedule sets forth (i) the
aggregate outstanding principal amount as of October 31, 1999, with respect to
each loan, credit or other agreement, instrument or document listed in PART
4.8(A) of the Disclosure Schedule relating to the borrowing of money by Seller
and (ii) the amount of available borrowings as of October 31, 1999, with respect
to each such loan, credit or other agreement, instrument or document.
(c) All of such contracts, agreements, leases, licenses, plans,
arrangements, commitments and documents listed in PART 4.8(A) of the Disclosure
Schedule (collectively, the "CONTRACTS") are valid, binding and in full force
and effect in accordance with their terms and conditions, except as limited by
applicable bankruptcy, moratorium, insolvency or other similar laws affecting
generally the rights of creditors or by principles of equity, and there is no
existing default thereunder or material breach thereof by Seller, or, to the
Best Knowledge of Seller, by any other party to a Contract, or any conditions
which, with the passage of time or the giving of notice or both, might
constitute such a default by Seller, or, to the Best Knowledge of Seller, by any
other party to a Contract, and none of the Contracts will be breached in any
material respect by or give any other party a right of termination or any other
right solely as a result of the transactions contemplated by this Agreement.
There are no pending or, to the Best Knowledge of Seller, threatened disputes
with respect to the Contracts. Seller is not obligated to pay any liquidated
damages under any of the Contracts and to the Best Knowledge of Seller there are
no facts or circumstances that could reasonably be expected to result in an
obligation of Seller to pay any such liquidated damages. To the Best Knowledge
of Seller, based on the knowledge available to Seller on the date hereof, there
is no reason why any of the material Contracts (i) will result in a loss to the
Surviving Corporation on completion by performance or (ii) cannot readily be
fulfilled or performed by the Surviving Corporation on time without undue or
unusual expenditure of money or effort. Copies of all of the documents (or in
the case of oral commitments, descriptions of the material terms thereof)
relevant to the Contracts have been delivered by Seller to the Tristar Parties,
and such copies and/or descriptions are true, complete and accurate and include
all amendments, supplements or modifications thereto. All of the Contracts will
be fully vested in the Surviving Corporation as of the Effective Time of the
Merger, without the approval or consent of any Person, or, if such approval or
consent is required, it will be obtained by Seller and delivered to the Tristar
Parties at or prior to the Closing.
4.9 EFFECT OF AGREEMENT. Except with respect to the People's Bank Loan
Agreement (such exceptions being fully and accurately disclosed on the
Disclosure Schedule), the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not (a) violate any
provision of the Articles of Incorporation or other charter documents or bylaws
of
-25-
<PAGE>
Seller; (b) result in any violation of any Governmental Requirement applicable
to Seller, the Assets of Seller or the Business; (c) conflict with, or result in
any breach of, or default or loss of any right under (or an event or
circumstance that, with notice or the lapse of time, or both, would result in a
default), or the creation of an Encumbrance pursuant to, or cause or permit the
acceleration prior to maturity or "put" right with respect to, any material
obligation under, any contract, indenture, mortgage, deed of trust, lease, loan
agreement or other agreement or instrument to which Seller is a party or to
which any of the Assets of Seller are subject; (d) relieve any Person of any
obligation (whether contractual or otherwise) or enable any Person to accelerate
or terminate any such obligation or any right or benefit enjoyed by Seller or to
exercise any right under any agreement in respect of the Assets of Seller or the
Business; or (e) require notice to or the consent, authorization, approval,
clearance, waiver or order of any Person (except as may be contemplated by the
last sentence of SECTION 4.8(C)). To the Best Knowledge of Seller, the business
relationships between Seller and the clients, customers and suppliers of the
Business will not be adversely affected by the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except to
the extent such relationships may be affected by the prior relationships of such
clients, customers and suppliers with Tristar or its officers and directors. The
execution, delivery and performance of this Agreement by Seller will not result
in the loss of any material governmental license, franchise or permit possessed
by Seller.
4.10 PROPERTIES, ASSETS AND LEASEHOLD ESTATES.
(a) PART 4.10(A) of the Disclosure Schedule sets forth a complete
and accurate detailed description of each item of personal property, excluding
inventory, owned by Seller that had a book value as of the Balance Sheet Date
greater than $2,500. For purposes of this Section, "personal property" excludes
Intellectual Property. Seller has good title to all of its personal property
that is material to the Business, results of operations, financial condition or
the Assets of Seller (including, without limitation, those items of personal
property set forth on PART 4.10 of the Disclosure Schedule), free and clear of
all Encumbrances, except for Permitted Encumbrances.
(b) PART 4.10(B) of the Disclosure Schedule sets forth a complete
and accurate detailed description of each item of personal property leased by
Seller for which the annual rent payable under the applicable lease or contract
exceeds $5,000, and all such leases are free and clear of all Encumbrances.
Seller has not breached any material provision of and is not in default (and no
event or circumstance exists that with notice, or the lapse of time or both,
would constitute a default by Seller) under the terms of any lease or other
agreement pursuant to which such personal property is leased. To the Best
Knowledge of Seller, all of such leases or other agreements are in full force
and effect. There are no pending or, to the Best Knowledge of Seller, threatened
disputes with respect to any lease or other agreement pursuant to which such
personal property is leased and, to the Best Knowledge of Seller, the lessor
thereunder has not breached any material provision of and is not in default (and
no event or circumstance exists that with notice, or the lapse or time or both,
would constitute a default by the lessor) under the terms of any such lease or
other agreement.
-26-
<PAGE>
(c) Seller does not own any real property.
(d) PART 4.8(A) of the Disclosure Schedule sets forth is a complete
and accurate list of all leases of Seller with respect to real property leased
by Seller for which the annual rent payable under the applicable lease or
contract exceeds $5,000 with an indication thereon that the lease is a lease of
real property, and all such leases are free and clear of all Encumbrances,
except for Permitted Encumbrances.
(e) To the Best Knowledge of Seller, there is no (i) change
contemplated in any applicable law, statute, ordinance, rule, regulation, order
or determination of any Governmental Authority, (ii) applicable law, statute,
ordinance, rule, regulation, order or determination of any Governmental
Authority or any restrictive covenant or deed restriction affecting the real
property described in SECTION 4.10(C) and (D) hereof, including without
limitation any zoning ordinances, building codes, flood disaster laws, wetlands
regulations, health laws or Environmental Laws, (iii) judicial or administrative
action, (iv) action by adjacent landowners, (v) administrative action, (vi)
natural or artificial conditions on or about the real property identified in
SECTION 4.10(C) and (D) hereof or (vii) significant adverse fact or condition
relating to such real property or its use that would, in each case, prevent,
limit, impede or render materially more costly the ownership, operation or
maintenance of such real property compared to the cost as the date hereof.
4.11 INTELLECTUAL PROPERTY.
(a) PART 4.11(A) of the Disclosure Schedule sets forth a complete
list of all Intellectual Property, including but not limited to (i) all
trademarks, service marks and trade names owned or claimed by Seller, together
with all U.S., state and foreign registrations thereof and/or applications
therefor, (ii) all U.S and foreign copyright registrations owned or claimed by
Seller and/or applications therefor, and (iii) all material U.S. and foreign
patents and applications therefor on inventions, discoveries, improvements,
ideas or know-how owned or claimed by Seller.
(b) Seller has developed all Intellectual Property through its own
efforts for its own account and has good and clear title thereto, and there is
no contract obligation, license, Encumbrance, alleged infringement, dispute,
potential dispute, claim or other cloud of title concerning such Intellectual
Property whatsoever. The Intellectual Property neither infringes nor, to the
Best Knowledge of Seller, is being infringed by any third party proprietary
interest, including (without limitation) any third party patent, copyright,
trademark, or trade secret interest. The Intellectual Property is fully eligible
for protection under applicable law and has not been forfeited, abandoned,
lapsed or donated in any way into the public domain. To Seller's Best Knowledge,
all of Seller's trade secrets, including source codes, and system specifications
have been maintained in confidence and are not known to any third party, except
pursuant to contract or agreement disclosed as such in PART 4.8(A) of the
Disclosure Schedule. All personnel, including employees, agents, consultants,
and contractors, who have contributed to or participated in the conception and
development of the Intellectual Property either (1) have been a party to a
work-for-hire relationship
-27-
<PAGE>
with Seller that has accorded Seller full, effective, and exclusive original
ownership of all tangible and intangible property arising with respect to the
Intellectual Property or (2) have executed appropriate instruments of assignment
in favor of Seller as assignee that have conveyed to Seller full, effective, and
exclusive ownership of all tangible and intangible property thereby arising with
respect to the Intellectual Property. No agreements or arrangements are in
effect with respect to the development, nondisclosure, marketing, distribution,
licensing, or promotion of the Intellectual Property by any independent
contractor, salesperson, distributor, sublicensor, or other remarketer or sales
organization.
4.12 SUITS, ACTIONS AND CLAIMS. There are no suits, actions, claims,
inquiries or investigations by any Person, or any legal, administrative or
arbitration proceedings in which Seller is engaged or which are pending or, to
the Best Knowledge of Seller, threatened against or affecting Seller or any of
its properties, assets or business, or to which Seller is or might become a
party, or which question the validity or legality of the transactions
contemplated hereby. To Seller's Best Knowledge, no reasonable basis or
reasonable grounds for any such suit, action, claim, inquiry, investigation or
proceeding exists, and there is no outstanding order, writ, injunction or decree
of any Governmental Authority against or affecting Seller or any of its
properties, assets or business. Without limiting the foregoing, to the Best
Knowledge of Seller, there is no state of facts or the occurrence of any event
which reasonably could be the basis of any present or potential claim against
Seller.
4.13 LICENSES AND PERMITS; COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS.
Seller has all federal, state, local and foreign governmental licenses and
permits necessary to the conduct or operations of the Business as currently
conducted, such licenses and permits are in full force and effect, no material
violations currently exist in respect of any thereof and no proceeding is
pending or, to the Best Knowledge of Seller, threatened to revoke or limit any
thereof. PART 4.13 of the Disclosure Schedule sets forth a true, complete and
accurate list of (a) all such governmental licenses and permits, (b) all
consents, orders, decrees and other compliance agreements under which Seller is
operating or bound, copies of all of which have been furnished to the Tristar
Parties, and (c) all material governmental licenses and permits applied for but
not yet received by Seller. Seller has not received and is not aware of any
reports of inspections under the United States Occupational Safety and Health
Act, or under any other applicable federal, state or local health and safety
laws and regulations relating to Seller, the Assets of Seller or the operation
of the Business. There are no safety, health, anti-competitive or discrimination
claims that have been made or are pending or, to the Best Knowledge of Seller,
that are threatened relating to the Business or employment practices of Seller.
Seller has at all times complied in all material respects with all Governmental
Requirements applicable to its business and all Governmental Requirements with
respect to the distribution and sale of products and services by it.
4.14 AUTHORIZATION. Seller has full legal right, power and authority to
enter into and deliver this Agreement, to consummate the transactions set forth
herein and to perform all the terms and conditions hereof to be performed by it.
The execution and delivery of this Agreement by Seller and
-28-
<PAGE>
the performance by Seller of the transactions contemplated herein have been duly
and validly authorized by all requisite corporate actions of Seller, and this
Agreement has been duly and validly executed and delivered by Seller and is the
legal, valid and binding obligation of Seller, enforceable against it in
accordance with its terms, except as limited by applicable bankruptcy,
moratorium, insolvency or other similar laws affecting generally the rights of
creditors or by principles of equity.
4.15 RECORDS. Except for the Financial Statements, the books, records and
minutes kept by Seller with respect to the Assets of Seller and the Business,
including, but not limited to, all customer files, service agreements,
correspondence, and historic revenue data of Seller, may be incomplete and
therefore inaccurate and may not be relied upon by the Tristar Parties except to
the extent otherwise set forth in this Agreement.
4.16 ENVIRONMENTAL PROTECTION LAWS.
(a) To the Best Knowledge of Seller, it has at all times operated in
compliance with all applicable limitations, restrictions, conditions, standards,
prohibitions, requirements and obligations of Environmental Laws and related
orders of any court or other Governmental Authority.
(b) There are no existing, pending or, to the Best Knowledge of
Seller, threatened actions, suits, claims, investigations, inquiries or
proceedings by or before any court or any other Governmental Authority directed
against Seller or its Assets or the Business, which pertain or relate to (i) any
remedial obligations under any applicable Environmental Law, (ii) violations of
any Environmental Law, (iii) personal injury or property damage claims relating
to the release of chemicals or Waste Materials or (iv) response, removal or
remedial costs under CERCLA or any similar state law.
(c) To Seller's Best Knowledge, all notices, permits, licenses or
similar authorizations required to be obtained or filed by Seller under all
applicable Environmental Laws in connection with its current and previous
operation or use of the Assets, any other assets or properties currently or
previously leased or owned by Seller or the current and previous conduct of its
business have been duly obtained or filed and are in full force and effect.
(d) Seller has not received notice that any permit, license or
similar authorization required under any Environmental Law is to be revoked or
suspended by any Governmental Authority.
(e) Seller does not own or operate any underground storage tanks.
(f) No portion of the Assets of Seller or any other assets or
properties currently or previously leased or owned by Seller is part of a
Superfund site under CERCLA or any similar ranking or listing under any similar
state law.
-29-
<PAGE>
(g) All Waste Materials generated by Seller have been transported,
stored, treated and disposed of by carriers, storage, treatment and disposal
facilities authorized and maintaining valid permits under all applicable
Environmental Laws.
(h) To the Best Knowledge of Seller, no Person has disposed or
released any Waste Materials on or under the Assets of Seller or any other asset
or property currently or previously leased or owned by Seller and Seller has not
disposed or released Waste Materials on or under the Assets of Seller or any
other asset or property currently or previously leased or owned by Seller,
except in compliance with all Environmental Laws.
(i) To the Best Knowledge of Seller, no facts or circumstances exist
which could reasonably be expected to result in any liability to any Person with
respect to the current or past business and operations of Seller, the Assets of
Seller or any other assets or properties currently or previously leased or owned
by Seller in connection with (a) any release, transportation or disposal of any
Waste Materials, hazardous substance or solid waste or (b) action taken or
omitted that was not in full compliance with or was in violation of, any
applicable Environmental Law.
4.17 ACCOUNTS RECEIVABLE. All notes and accounts receivable of Seller that
are reflected on the Reference Balance Sheet or that have arisen since the
Balance Sheet Date ("ACCOUNTS RECEIVABLE") have arisen in the ordinary course of
business. All Accounts Receivable either (a) have been collected or (b) to the
Best Knowledge of Seller, are collectible on the respective due dates thereof,
or, if no due date is stated with respect thereto, within 90 days of their
creation in the ordinary course of business, in each case in the aggregate
recorded amounts thereof, less the applicable reserves with respect thereto
reflected on the Reference Balance Sheet. Seller has not factored or discounted
or agreed to factor or discount any Account Receivable. The values at which the
Accounts Receivable are carried on the Reference Balance Sheet reflect the
accounts receivable valuation policy of Seller which is consistent with Seller's
past practice and in accordance with generally accepted accounting principles
consistently applied. PART 4.17 of the Disclosure Schedule sets forth a true,
correct and complete list of all Accounts Receivable written off by Seller, in
whole or in part, as uncollectible since October 1, 1997. PART 4.17 of the
Disclosure Schedule also sets forth a true, correct and complete aging of the
Accounts Receivable of Seller as of the most recent practicable date.
4.18 BROKERS AND FINDERS. No broker or finder has acted for Seller or any
shareholder of Seller in connection with this Agreement or the transactions
contemplated by this Agreement and no broker or finder is entitled to any
brokerage or finder's fee or to any commission in respect thereof based in any
way on agreements, arrangements or understandings made by or on behalf of
Seller. All fees and commissions related to any arrangement between Seller
and/or any shareholder and any broker or finder, shall be paid by the
shareholder of Seller incurring same or, in the case of a broker or finder
acting on behalf of Seller, by the shareholders of Seller in proportion to the
percentage of the Cash Consideration each is entitled to receive pursuant to
SCHEDULE 2.6.
-30-
<PAGE>
4.19 DEPOSITS. Seller does not now hold any deposits or prepayments by
third parties with respect to any of the Assets of Seller or the Business.
4.20 WORK ORDERS. There are no outstanding work orders or contracts
relating to any portion of the Assets of Seller from or required by any policy
of insurance, fire department, sanitation department, health authority or other
Governmental Authority nor is there any matter under discussion with any such
parties or authorities relating to work orders or contracts.
4.21 CUSTOMER LIST. PART 4.21 of the Disclosure Schedule sets forth a
true, correct and complete list of all customers of the Business to which Seller
has sold or provided products or services during the two years immediately
preceding the date hereof. The list provides an accurate statement of the gross
revenues received from each such customer by the Business during the
twelve-month period ended December 31, 1998 and the nine-month period ended
September 30, 1999. The list also indicates by special designation all customers
on the list with respect to which the Business has not sold or provided products
or services during the three-month period immediately preceding September 30,
1999.
4.22 SUPPLIER LIST. PART 4.22 of the Disclosure Schedule sets forth a
true, correct and complete list of all suppliers of the Business from which
Seller has purchased or otherwise received an aggregate of $10,000 or more worth
of products or services during either of the two years immediately preceding the
date hereof. The list provides an accurate statement of the gross payments to
each such supplier by the Business during the twelve-month period ended December
31, 1998 and the nine-month period ended September 30, 1999. The list also
indicates by special designation all suppliers on the list with respect to which
the Business has not purchased or otherwise received products or services during
the three-month period immediately preceding September 30, 1999.
4.23 NO ROYALTIES. No royalty or similar item or amount is being paid or
is owing by Seller, nor is any such item accruing, with respect to the
operation, ownership or use of the Business or the Assets of Seller.
4.24 BANK ACCOUNTS. PART 4.24 of the Disclosure Schedule sets forth a true
and complete list of all bank or financial accounts and safe deposit boxes of
Seller and of the credit and debit balances of such bank and financial accounts
as of the most recent practicable date. Since the date of the balances set forth
on such list, there have been no payments out of or drafts against any of the
accounts included therein other than routine payments and drafts in the ordinary
course of business. PART 4.24 of the Disclosure Schedule also lists all persons
having signatory authority over or access to such bank and financial accounts
and safe deposit boxes.
4.25 INSURANCE. PART 4.25 of the Disclosure Schedule sets forth all
existing insurance policies held by Seller relating to the Business, the Assets
of Seller or the employees or the agents of Seller. Each such policy is in full
force and effect and is with insurance carriers believed by Seller
-31-
<PAGE>
to be responsible. There is no dispute with respect to such policies, and all
claims arising from events or circumstances occurring prior to the date hereof
have been paid in full or adequate reserves therefor are recorded in the
Reference Balance Sheet. All retroactive premium adjustments for any period
ended on or before October 30, 1999, under any worker's compensation policy or
any other insurance policies of Seller have been recorded in accordance with
generally accepted accounting principles and are reflected in the Reference
Balance Sheet. None of the policies set forth on PART 4.25 of the Disclosure
Schedule will terminate as a result of the transactions contemplated by this
Agreement.
4.26 EMPLOYEE BENEFIT MATTERS. As used in this Section, the "Seller" shall
include Seller and any member of a controlled group or affiliated service group
as defined in Sections 414(b), (c), (m) and (o) of the Code of which Seller is a
member.
(a) LIST OF ALL BENEFIT PLANS AND COMPENSATION AGREEMENTS. PART 4.26
of the Disclosure Schedule sets forth a complete and accurate list of all
employee welfare benefit and employee pension benefit plans as defined in
Sections 3(1), 3(2) and 3(3) of ERISA and all other employee benefit agreements
or arrangements, including but not limited to deferred compensation plans,
incentive plans, bonus plans or arrangements, stock option plans, stock purchase
plans, golden parachute agreements, severance pay plans, dependent care plans,
cafeteria plans, employee assistance programs, scholarship programs, employment
contracts and other similar plans, agreements and arrangements that are
currently in effect or were maintained within three years of the date hereof, or
have been approved before this date but are not yet effective, for the benefit
of directors, officers, employees, or former employees (or their beneficiaries)
of Seller. Seller is not aware of any commitment, whether legally binding or
not, to create any new plan, agreement or arrangement of Seller or modify any
now existing. Seller has delivered to the Tristar Parties, as to each plan,
agreement or arrangement listed in PART 4.26 of the Disclosure Schedule, as
applicable, a complete and accurate copy of (i) each plan, agreement or
arrangement listed, (ii) the trust, group annuity contract or other document
which provides the funding for the plan, agreement or arrangement, (iii) the
three most recent annual Form 5500, 990 and 1041 reports, (iv) the most recent
actuarial report or valuation statement, (v) the most current summary plan
description, booklet, or other descriptive written materials, and each summary
of material modifications prepared after the last summary plan description, (vi)
the most recent IRS determination letter and all rulings or determinations
requested from the IRS subsequent to the date of that exemption letter and (vii)
all other correspondence from the IRS or the Department of Labor received which
relates to one or more of the plans, agreements or arrangements. There are no
pending, or to the Best Knowledge of Seller, threatened or anticipated claims
(other than routine claims for benefits) by, on behalf of or against any of the
plans disclosed on PART 4.26 of the Disclosure Schedule or their related trusts.
(b) REPRESENTATIONS PERTAINING TO ALL EMPLOYEE BENEFIT PLANS. Each
employee welfare benefit plan and every employee pension benefit plan as defined
in Sections 3(1), 3(2) and 3(3) of ERISA which has been or is sponsored by,
participated in by or contributed to by Seller: (i) is in compliance with the
Code and ERISA, including but not limited to, all reporting and
-32-
<PAGE>
disclosure requirements of Part 1 of Subtitle B of Title I of ERISA; (ii) has
had the appropriate Form 5500 filed, timely, for each year of its existence;
(iii) has not engaged in any transaction described in Sections 406 or 407 of
ERISA or Section 4975 of the Code unless exempt under Section 408 of ERISA or
Section 4975 of the Code, as applicable; (iv) has at all times complied with the
bonding requirements of Section 412 of ERISA; (v) has no issue pending (other
than the payment of benefits in the normal course) nor any issue resolved
adversely to Seller which may subject Seller to the payment of a penalty,
interest, tax or other amount and (vi) can be unilaterally terminated or amended
on no more than 90 days notice, and (vii) all contributions or other amounts
payable by Seller as of the Closing Date with respect to each employee welfare
benefit plan and each employee pension benefit plan, other than an employee
pension benefit plan which is subject to Section 412 of the Code, have either
been paid or accrued in the Reference Balance Sheet, a copy of which has been
furnished to the Tristar Parties. No notice has been received by Seller of an
increase or proposed increase in the cost of any employee welfare benefit or
employee pension benefit plan or other employee benefit agreement or arrangement
listed in PART 4.26 of the Disclosure Schedule.
(c) ADDITIONAL REPRESENTATIONS PERTAINING TO CERTAIN EMPLOYEE
WELFARE BENEFIT PLANS. All voluntary employee benefit associations have been
submitted to and approved as exempt from federal income tax under Section
501(c)(9) of the Code by the IRS or the applicable submission period will not
have ended prior to the Closing. No plan, arrangement or agreement with any one
or more employees will cause Seller to have liability for severance pay as a
result of the Merger. Seller does not provide employee benefits, including
without limitation, death, post-retirement medical or health coverage (whether
or not insured) or contribute to or maintain any employee benefit plan which
provides for benefit coverage following termination of employment, nor has it
made any representations, agreements, covenants or commitments to provide that
coverage, except (i) as is required by Section 4980B(f) of the Code or other
applicable statute, (ii) death benefits or retirement benefits under any
employee pension benefit plan as defined in Section 3(2) of ERISA, (iii)
benefits the full cost of which is borne by the current or former employee (or
his beneficiary), or (iv) deferred compensation benefits which have been accrued
as liabilities on the books of Seller and disclosed on the Financial Statements.
All group health plans maintained by Seller have been operated in compliance
with Section 4980B(f) of the Code.
(d) ADDITIONAL REPRESENTATIONS PERTAINING TO CERTAIN EMPLOYEE
PENSION BENEFIT PLANS. All employee pension benefit plans as defined in Section
3(2) of ERISA which are intended to qualify under Section 401(a) of the Code
have been submitted to and approved as qualifying under Section 401(a) of the
Code by the IRS or the applicable remedial amendment period will not have ended
prior to the Closing. No facts have occurred which if known by the IRS could
cause disqualification of those plans. All employee pension benefit plans to
which Section 412 of the Code is applicable have fully complied with the funding
requirements of that Section and there is no accumulated funding deficiency as
defined in Section 302(a)(2) of ERISA (whether or not waived) in any one or more
of those plans. Seller has paid all premiums (any interest, charges and
penalties for late payment, if any applicable) due the Pension Benefit Guaranty
Corporation (the "PBGC") with respect to each employee pension benefit plan for
which premiums are required. No
-33-
<PAGE>
facts are known by Seller which will materially increase those premiums within
three years of the Closing Date. No employee pension benefit plan maintained by
Seller has been terminated under circumstances which would result in liability
to the PBGC. There has been no "reportable event" (as defined in Section 4043(b)
of ERISA and the regulations under that Section) with respect to any employee
pension benefit plan subject to Title IV of ERISA. Seller has not ceased
operations at a facility so as to become subject to the provisions of Section
4062(e) of ERISA, withdrawn as a substantial employer so as to become subject to
the provisions of Section 4063 of ERISA or ceased making contributions on or
before the date of the Closing to any employee pension benefit plan subject to
Section 4064(a) of ERISA to which Seller made contributions at any time during
the six years prior to the date of Closing. Seller has not made a complete or
partial withdrawal from a multiemployer plan (as defined in Section 3(37) of
ERISA) so as to incur withdrawal liability as defined in Section 4201 of ERISA.
The aggregate withdrawal liability of Seller, computed as if a complete
withdrawal by Seller had occurred under each multiemployer pension plan as of
the date hereof, would not exceed $10,000.
(e) The transactions contemplated by this Agreement will not
accelerate the time of payment or vesting, or increase the amount, of
compensation due any director, officer or employee or former director, officer
or employee (including any beneficiary) from Seller.
4.27 WARRANTIES AND PRODUCT LIABILITY.
(a) Except for warranties implied by law, Seller has not given or
made any warranties in connection with the sale, use or rental of goods or
services, including, without limitation, warranties covering the customer's
consequential damages. To the Best Knowledge of Seller, there is no state of
facts or occurrence of any event forming the basis of any present claim against
Seller with respect to warranties relating to products produced, manufactured,
marketed, sold, transported or distributed by Seller or services performed or
allegedly offered by or on behalf of Seller that could reasonably be expected to
materially exceed the reserves therefor.
(b) To the Best Knowledge of Seller, there is no state of facts or
any event forming the basis of any present claim against Seller not fully
covered by insurance, for personal injury or property damage alleged to be
caused by products produced, manufactured, sold, transported or distributed by
Seller or services performed or allegedly offered by or on behalf of Seller,
except for deductibles and self-insurance retentions.
4.28 SECURITIES LAWS MATTERS.
(a) Seller recognizes and understands that the Promissory Notes, the
Stock Options and the Tristar Stock to be issued upon the exercise of the Stock
Options (the "SECURITIES") will not be registered under the Securities Act or
under the securities laws of any state (the Securities Act and such securities
laws collectively, "SECURITIES LAWS"). The securities are not being so
-34-
<PAGE>
registered in reliance upon exemptions from the Securities Act and the
securities laws which are predicated, in part, on the representations,
warranties and agreements of Seller contained herein.
(b) Seller represents and warrants that (i) Seller has business
knowledge and experience, such experience being based on actual participation
therein, (ii) Seller is capable of evaluating the merits and risks of an
investment in the Securities and the suitability thereof as an investment
therefor, (iii) the Securities to be acquired by Seller will be acquired solely
for investment and not with a view toward resale or redistribution in violation
of the Securities Laws, (iv) in connection with the transactions contemplated
hereby, no assurances have been made concerning the future results of the
Tristar or the Surviving Corporation or any Affiliate thereof or as to the value
of the Securities and (vi) Seller is an "accredited investor" within the meaning
of Regulation D promulgated by the SEC pursuant to the Securities Act and
regulations promulgated thereunder. Except as set forth in SECTION 5.5, Seller
understands that none of the Tristar Parties is under any obligation to file a
registration statement or to take any other action under the Securities Laws
with respect to any such securities.
(c) Seller has consulted with Seller's own counsel in regard to the
Securities Laws and is fully aware (i) of the circumstances under which Seller
is required to hold the Securities, (ii) of the limitations on the transfer or
disposition of the Securities, (iii) that the Securities must be held
indefinitely unless the transfer thereof is registered under the Securities Laws
or an exemption from registration is available and (iv) that no exemption from
registration is likely to become available for at least one year from the date
of acquisition of the Securities. Seller has been advised by Seller's counsel as
to the provisions of Rules 144 and 145 as promulgated by the SEC under the
Securities Act and has been advised of the applicable limitations thereof.
Seller acknowledges that the Tristar Parties are relying upon the truth and
accuracy of the representations and warranties in this SECTION 4.28 by Seller in
consummating the transactions contemplated by this Agreement without registering
the Securities under the Securities Laws.
(d) Seller has been furnished with (i) the definitive proxy
statement filed with the SEC in connection with the annual meeting of
stockholders of Tristar held on February 10, 1999 and (ii) copies of Tristar's
Registration Statement on Form S-8, Annual Report on Form 10-K for the year
ended August 29, 1998, Quarterly Reports on Form 10-Q for the quarters ended
November 28, 1998, February 27, 1999 and May 29, 1999, Form 10-Q/A for the
quarter ended May 29, 1999 and Form 8-K dated March 15, 1999, filed with the SEC
under the Exchange Act. Seller has been furnished with the complete financial
statements of Tristar for the fiscal years ended August 1996, 1997 and 1998, and
the three, six and nine months periods ended November 1998, February 1999 and
May 1999, respectively. Seller has been furnished with a summary description of
the terms of the Tristar Stock and the Tristar Parties have made available to
Seller the opportunity to ask questions and receive answers concerning the terms
and conditions of the transactions contemplated by this Agreement and to obtain
any additional information which they possess or could reasonably acquire for
the purpose of verifying the accuracy of information furnished to Seller as set
forth herein or for the purpose of considering the transactions contemplated
hereby. Tristar has offered to make
-35-
<PAGE>
available to Seller upon request at any time all exhibits filed by Tristar with
the SEC as part of any of the reports filed therewith.
(e) Seller agrees that the certificates representing the Tristar
Stock to be issued upon the exercise of the Stock Options will be imprinted with
the following legend, the terms of which are specifically agreed to:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS AND ARE "RESTRICTED SECURITIES" AS THAT
TERM IS DEFINED IN RULE 144 UNDER THE ACT. NEITHER THE SHARES NOR ANY
INTEREST THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND SUCH STATE SECURITIES LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS WHICH, IN THE OPINION OF
COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
Seller understands and agrees that appropriate stop transfer notations will be
placed in the records of Tristar and with its transfer agent in respect of the
Securities.
4.29 MONETARY OBLIGATIONS TO CERTAIN INDIVIDUALS. The aggregate amount of
(a) the Falkowski Obligations does not exceed $150,000, (b) the Luby Obligations
does not exceed $200,000, (c) the Catapano Obligations does not exceed $300,000,
(d) the Walsworth Obligations does not exceed $484,274, and (v) the Friedman
Obligations does not exceed $598,969.84.
4.30 NAMES USED IN BUSINESS. The operation of the Business as now
conducted by Seller does not require the use of or consist of any rights under
any trademarks, trade names, brand names, service marks or copyrights other than
"Fragrance Impressions Limited".
4.31 NO UNTRUE STATEMENTS. The statements, representations and warranties
of Seller set forth in this Agreement and the Disclosure Schedule and in all
other documents and information furnished to the Tristar Parties, or either of
them, and their representatives in connection herewith do not include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements, representations and warranties made not misleading. To the
Best Knowledge of Seller, there is no fact or matter that is not disclosed to
the Tristar Parties in this Agreement or the Disclosure Schedule that materially
and adversely affects or, so far as Seller can now reasonably foresee, could
materially and adversely affect the condition (financial or otherwise) of the
Business
-36-
<PAGE>
or any of the Assets taken as a whole of Seller, the Assets or business of the
Surviving Corporation, or the ability of Seller to perform their respective
obligations under this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE TRISTAR PARTIES. The
Tristar Parties jointly and severally represent and warrant to Seller and for
the benefit of the shareholders of Seller as of the date hereof as follows:
5.1 PURCHASER INCORPORATION. Purchaser and Tristar are each a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
5.2 AUTHORIZATION. The Tristar Parties have full legal right, power and
authority, corporate and otherwise, to enter into this Agreement and to
consummate the transactions set forth herein and to perform all the terms and
conditions hereof to be performed by them. The execution and delivery of this
Agreement and the performance by the Tristar Parties of the transactions
contemplated herein have been duly authorized by all requisite corporate action
of the Tristar Parties and is the legal, valid and binding obligation of each of
them, enforceable against each of them in accordance with its terms, except as
limited by applicable bankruptcy, moratorium, insolvency or similar laws
affecting generally the rights of creditors or by principles of equity.
5.3 BROKERS AND FINDERS. No broker or finder has acted for the Tristar
Parties in connection with this Agreement or the transactions contemplated by
this Agreement and no broker or finder is entitled to any brokerage or finder's
fee or to any commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of the Tristar Parties.
5.4 SEC DOCUMENTS. Tristar has provided to Seller its Registration
Statement on Form S-8, Annual Report on Form 10-K for the year ended August 29,
1998, Quarterly Reports on Form 10-Q for the quarters ended November 28, 1998,
February 27, 1999 and May 29, 1999, and its proxy statement with respect to the
Annual Meeting of Stockholders held on February 10, 1999, Form 10-Q/A for the
quarter ended May 29, 1999 and Form 8-K dated March 15, 1999 (such documents
collectively referred to herein as the "SEC DOCUMENTS"). As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Exchange Act and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. No event has occurred since the filing of the SEC Documents not
disclosed in the SEC Documents that, to the Best Knowledge of the Tristar
Parties, could reasonably have a Material Adverse Effect on Tristar. The
consolidated financial statements of Tristar included in the SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes
-37-
<PAGE>
thereto) and fairly present the consolidated financial position of Tristar and
its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (except in
the case of interim period financial information, for normal year-end
adjustments).
5.5 RULE 144 REPORTING. From the date hereof until the seventh anniversary
of the Closing Date, Tristar (a) will make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act, at all times while Tristar is subject to the reporting
requirements of the Securities Act or the Exchange Act; (b) will file with the
SEC in a timely manner all reports and other documents required of Tristar under
the Securities Act and the Exchange Act (at any time while it is subject to such
reporting requirements); and (c) will furnish to any shareholder of Seller
holding Tristar Stock resulting from the exercise of a Stock Option upon request
a written statement by Tristar as to its compliance with the reporting
requirements of Rule 144, and of the Securities Act and the Exchange Act (at any
time while it is subject to such reporting requirements), a copy of the most
recent annual or quarterly report of Tristar, and such other reports and
documents of Tristar and other information in the possession of or reasonably
obtainable by Tristar as such shareholder may reasonably request in availing
itself of any rule or regulation of the SEC allowing such shareholder to sell
any such securities without registration.
6. NATURE OF STATEMENTS AND SURVIVAL OF GUARANTEES,
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE TRISTAR PARTIES. All
statements of fact contained in this Agreement or in any written statement
(including financial statements), certificate, schedule (including the
Disclosure Schedule) or other document delivered by or on behalf of Seller or
the Tristar Parties pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed representations and warranties
of Seller or the Tristar Parties hereunder, as applicable. All representations
and warranties made by the Tristar Parties hereunder or pursuant hereto or in
connection with the transactions contemplated hereby shall survive the Effective
Time regardless of any investigation at any time made by or on behalf of Seller;
provided that any claim for breach of any of the representations or warranties
made by the Tristar Parties must be brought within one year of the date hereof
or such claim shall be deemed to be waived. All representations and warranties
made by Seller hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Effective Time regardless of
any investigation at any time by or on behalf of the Tristar Parties; provided
that any claim for breach of any of the representations or warranties made by
Seller (other than the representations and warranties contained in SECTIONS 4.6,
4.27 and 4.28) must be brought within one year of the Effective Time or such
claim shall be deemed to be waived. Any claim for breach of the representations
and warranties made by Seller in SECTION 4.6 must be brought within one year
after the date of the filing of the Surviving Corporation's Federal Tax Return
for the first fiscal year following the Closing Date, and the representations
and warranties of Seller in SECTIONS 4.27 and 4.28 shall survive the Closing
indefinitely. The covenants and agreements made by Seller and the Tristar
Parties hereunder or pursuant hereto or in connection with the transactions
contemplated hereby shall continue until
-38-
<PAGE>
all obligations with respect thereto shall have been performed or satisfied or
shall have been terminated in accordance with their terms.
7. TAX TREATMENT. The parties hereto shall treat and report for federal
income tax purposes the Merger as a taxable acquisition of assets of the Seller
by Purchaser, followed immediately by the liquidation and dissolution of the
Seller. Any taxable gain resulting from the foregoing sale of assets by the
Purchaser shall be reported by Seller on its final Form 1120S Tax Return and
shall not be a liability assumed by the Surviving Corporation.
8. COVENANTS OF SELLER PRIOR TO CLOSING. Seller hereby covenants and
agrees:
8.1 GENERAL AFFIRMATIVE COVENANTS. From the date hereof to the Closing,
Seller agrees, unless Purchaser otherwise consents in writing, which consent
shall not be unreasonably withheld, Seller shall do and comply with each of the
following:
(a) use its best efforts to cause all of its representations and
warranties set forth in this Agreement to be true on and as of the Closing;
(b) use its best efforts to cause all of its obligations that are to be
fulfilled on or prior to the Closing to be so fulfilled;
(c) use its best efforts to cause all conditions to the Closing to be
satisfied by Seller set forth in this Agreement to be satisfied on or prior to
the Closing;
(d) deliver to the Tristar Parties at the Closing the documents required
of Seller under this Agreement;
(e) conduct the Business only in the usual and ordinary course;
(f) maintain the Assets of Seller in good working order and condition,
ordinary wear and tear excepted;
(g) perform all of its obligations under agreements relating to or
affecting the Assets of Seller or the Business;
(h) keep in full force and effect adequate insurance coverage on the
Assets of Seller and the Business;
(i) use its best efforts to maintain and preserve the Business and retain
its present employees, customers, suppliers and others having business relations
with it, subject to actions taken by Seller in the best interest of the
Business;
-39-
<PAGE>
(j) duly and timely file all reports or returns required to be filed with
any Governmental Authority, and timely pay all Taxes levied or assessed upon the
Assets of Seller or the Business or upon any part thereof;
(k) duly observe and conform to all material Governmental Requirements
relating to the Assets of Seller or to the operation and conduct of the Business
and all covenants, terms and conditions upon or under which any of the Assets of
Seller are held;
(l) remove and have released, by payment or otherwise, all Encumbrances of
any nature whatsoever on the Assets of Seller, other than Permitted
Encumbrances;
(m) duly and timely take all actions necessary to carry out the
transactions contemplated hereby;
(n) preserve and maintain the goodwill of the Business;
(o) deliver to the Tristar Parties on or before the 15th day of each month
true and correct unaudited monthly balance sheets and statements of income for
the Business for the immediately preceding month, commencing with the month
following the financial statement previously delivered by Seller to the Tristar
Parties, with such financial statements for the month of October 1999, to be
delivered at the time of execution of this Agreement; and
(p) deliver to the Tristar Parties on or before the Closing Date any
additional financial information reasonably requested by the Tristar Parties to
allow the Tristar Parties to timely comply with their reporting requirements
under the Exchange Act, all in form and substance sufficient to allow the
Tristar Parties to timely comply with such reporting requirements.
8.2 GENERAL NEGATIVE COVENANTS. From the date hereof to the Closing,
Seller agrees, unless Purchaser otherwise consents in writing, which consent
shall not be unreasonably withheld, Seller shall not do any or permit any of the
following:
(a) enter into, amend or assume any mortgage, pledge, conditional sale or
other title retention agreement, lien, encumbrance or charge of any kind upon
any of the Assets of Seller, or sell, lease, assign, exchange, abandon or
otherwise dispose of any of the Assets of Seller, including, but not limited to,
real property, machinery, equipment or other operating properties, except
inventory in the ordinary course of business;
(b) engage in any activity or transaction that could reasonably be
expected to have a Material Adverse Affect on the Assets of Seller or the
Business;
(c) permit any Encumbrance to attach upon the Assets of Seller, except
Permitted Encumbrances;
-40-
<PAGE>
(d) make any material organizational or personnel change, including
entering into any employment agreement, modifying any existing employment
agreement or increasing the compensation of any officer, director, employee,
agent or consultant of the Business;
(e) grant any increase in rates of pay or benefits to any employee,
officer, director, consultant or agent of the Business;
(f) take any actions which would cause any of Seller's representations and
warranties set forth in this Agreement to be false as of the Closing; or
(g) enter into or assume (whether or not in the ordinary course of
business) any contract, agreement, obligation, lease, license or commitment
related to the Business or the Assets of Seller (or of a type included in the
Assets of Seller) that can be expected to (i) have a term of more than three
months or (ii) generate gross expenses or gross revenues in excess of $25,000
per year.
8.3 ACCESS TO INFORMATION AND INSPECTION OF PROPERTIES. Seller shall
afford to the officers and authorized representatives of the Tristar Parties
access to the premises, facilities and tangible Assets of Seller for the purpose
of inspecting such Assets in such a manner as the Tristar Parties shall
reasonably deem appropriate. Seller shall also afford to the officers and
authorized representatives of the Tristar Parties access to the plants,
properties, documents, books and records of Seller related to the Assets of
Seller and the Business and shall furnish the Tristar Parties with such
financial and operating data and other information regarding the Assets of
Seller and the Business as the Tristar Parties may from time to time reasonably
request. At the request of Seller, the officers and representatives of the
Tristar Parties shall be accompanied at all times during such access by a
representative of Seller reasonably acceptable to the Tristar Parties and all
information acquired pursuant to such inspection shall be subject to the
Confidentiality Agreement dated September 15, 1999, between Tristar and Seller.
8.4 PUBLICITY. From the date hereof to the Closing, without the prior
written consent of Purchaser, Seller shall not make or permit any disclosure
with respect to the transactions contemplated hereby, including, without
limitation, issuing any press release, making any other public announcement or
making any announcement to the employees, customers or suppliers of the
Business, unless required by law or judicial compulsion. If any disclosure of
the transactions contemplated hereby is required by law or judicial compulsion,
Seller and the Tristar Parties shall jointly formulate the contents of such
disclosure. Each party agrees to act reasonably and cooperate with the other
party in formulating such disclosure so that each party may timely comply with
such disclosure requirements.
8.5 GOVERNMENT FILINGS. Seller shall cooperate with the Tristar Parties
and their representatives in the preparation of any documents or other material
that may be required by any Governmental Authority in connection with the
transactions contemplated hereby.
-41-
<PAGE>
8.6 CONSENT OF OTHERS. As soon as reasonably practicable after the date
hereof, and in any event prior to the Closing, Seller shall use its reasonable
commercial efforts to obtain the consents required to be obtained by it
hereunder of all necessary Persons (including Governmental Authorities having
jurisdiction over this transaction) to the consummation of the transactions
contemplated hereunder.
8.7 NO TRANSFER OF ASSETS. From and after the date hereof until the
Closing or termination of this Agreement, Seller shall not, without the prior
written consent of Purchaser: (a) offer for sale or other disposition (whether
by lease, merger or otherwise) all or a portion of the Assets of Seller (other
than inventory in the ordinary course of business), (b) solicit offers or
consider unsolicited offers to acquire (whether by lease, merger or otherwise)
the Assets of Seller (or any portion thereof, other than inventory in the
ordinary course of business), (c) hold discussions with, or furnish any
information to, any Person (other than the Tristar Parties) looking toward such
an offer, or (d) enter into any agreement (including, but not limited to, any
confidentiality or similar agreement, letter of intent, memorandum or letter of
understanding or definitive agreement) with any Person (other than the Tristar
Parties) with respect to the sale or other disposition (whether by lease, merger
or otherwise) of the Assets of Seller (or any portion thereof).
8.8 NOTICE OF DEVELOPMENTS. From the date hereof until the Closing, (a)
Seller shall immediately notify the Tristar Parties in writing of any material
problems or developments with respect to the prospects, business or operations
of the Business or the condition of the Assets of Seller, and (b) Seller shall,
promptly upon becoming aware thereof, give detailed written notice to the
Tristar Parties of the occurrence of, or the threatened occurrence of, any event
which would cause or constitute a material breach, or would have caused or
constituted a material breach, had such event occurred or been known to Seller
prior to the date hereof, of any of its covenants, agreements, representations
or warranties contained or referred to in this Agreement; provided, however,
that no such notice shall be deemed to cure or waive any breach unless Purchaser
specifically agrees thereto in writing.
9. COVENANTS OF THE TRISTAR PARTIES PRIOR TO CLOSING. The Tristar Parties
hereby covenant and agree:
9.1 GENERAL AFFIRMATIVE COVENANTS. From the date hereof to the Closing,
the Tristar Parties agree, unless Seller otherwise consents in writing, the
Tristar Parties shall do or comply with each of the following:
(a) use their best efforts to cause all of their representations and
warranties set forth in this Agreement to be true on and as of the Closing;
(b) use their best efforts to cause all of their obligations that are to
be fulfilled on or prior to the Closing to be so fulfilled;
-42-
<PAGE>
(c) use their best efforts to cause all conditions to the Closing set
forth in this Agreement to be satisfied on or prior to the Closing; and
(d) deliver to Seller at the Closing the documents required of the Tristar
Parties under this Agreement.
9.2 PUBLICITY. From the date hereof to the Closing, without the prior
written consent of Seller, the Tristar Parties shall not make or permit any
disclosure with respect to the transactions contemplated hereby, including,
without limitation, issuing any press release, making any other public
announcement or making any announcement to the employees, customers or suppliers
of the Business, unless required by law or judicial compulsion. If any
disclosure of the transactions contemplated hereby is required by law or
judicial compulsion, the Tristar Parties and Seller shall jointly formulate the
contents of such disclosure. Each party agrees to act reasonably and cooperate
with the other party in formulating such disclosure so that each party may
timely comply with such disclosure requirements.
9.3 GOVERNMENT FILINGS. The Tristar Parties shall cooperate with Seller
and its representatives in the preparation of any documents or other material
that may be required by any Governmental Authority in connection with the
transactions contemplated hereby.
9.4 CONSENT OF OTHERS. As soon as reasonably practicable after the date
hereof, and in any event prior to the Closing, the Tristar Parties shall use
their reasonable commercial efforts to obtain the consents required to be
obtained by the Tristar Parties hereunder of all necessary Persons (including
Governmental Authorities having jurisdiction over this transaction) to the
consummation of the transactions contemplated hereunder.
9.5 NOTICE OF DEVELOPMENTS. From the date hereof until the Closing, the
Tristar Parties shall, promptly upon becoming aware thereof, give detailed
written notice to Seller of the occurrence of, or the threatened occurrence of,
any event which would cause or constitute a material breach, or would have
caused or constituted a material breach, had such event occurred or been known
to the Tristar Parties prior to the date hereof, of any of its covenants,
agreements, representations or warranties contained or referred to in this
Agreement; provided, however, that no such notice shall be deemed to cure or
waive any breach unless Seller specifically agrees thereto in writing.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRISTAR PARTIES.
The obligations of the Tristar Parties under this Agreement are, except as may
be waived in writing by Tristar, subject to the fulfillment by Seller of each of
the following additional conditions on or prior to the Closing:
10.1 OPINION OF COUNSEL FOR SELLER. The Tristar Parties shall have
received an opinion from Sweeney Lev & Blinkoff LLP, counsel to Seller, dated
the Closing Date, in form and substance reasonably satisfactory to the Tristar
Parties, covering the matters set forth in SCHEDULE 10.1.
-43-
<PAGE>
10.2 RESOLUTIONS. The Tristar Parties shall have received a certified copy
of resolutions duly adopted by the Board of Directors and a unanimous written
consent of the shareholders of Seller authorizing and approving the execution
and delivery of this Agreement and performance by Seller of its obligations
hereunder.
10.3 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND FULFILLMENT OF
COVENANTS. Each of the representations and warranties of Seller set forth in
this Agreement and in the Schedules attached hereto shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
with the same force and effect as though such representations and warranties had
been made as of the Closing. Each and all of the agreements and covenants of
Seller to be performed on or before the Closing Date pursuant to the terms
hereof shall have been performed in all material respects. Seller shall have
delivered to the Tristar Parties a certificate dated the Closing Date and
executed by Seller to all such effects or disclosing any such representation or
warranty not so true and correct or any such agreement or covenant not so
performed.
10.4 MERGER DOCUMENTS. Seller shall executed and delivered the Merger
Documents to the Tristar Parties.
10.5 EMPLOYMENT ARRANGEMENTS. McCann shall have entered into an employment
agreement with Purchaser in substantially the form of the employment agreement
attached hereto as EXHIBIT 10.5(A), Falkowski shall have entered into an
employment agreement with Purchaser in substantially the form of the employment
agreement attached hereto as EXHIBIT 10.5(B), Catapano shall have entered into
an employment agreement with Purchaser in substantially the form of the
employment agreement attached hereto as EXHIBIT 10.5(C), and Luby shall entered
into an employment agreement with Purchaser in substantially the form of the
employment agreement attached hereto as EXHIBIT 10.5(D), (such employment
agreements collectively, the "COMPENSATION AGREEMENTS").
10.6 NO GOVERNMENTAL ACTIONS. No action or proceeding before any
Governmental Authority shall have been instituted or threatened to restrain or
prohibit the transactions contemplated by this Agreement. No Governmental
Authority shall have taken any other action as a result of which the management
of Purchaser reasonably deems it inadvisable to proceed with the transactions
contemplated by this Agreement.
10.7 NO ADVERSE CHANGE. No material adverse change in the Business shall
have occurred, and no loss or damage to any of the Assets of Seller which could
reasonably have a Material Adverse Effect, whether or not covered by insurance,
shall have occurred since the Balance Sheet Date, and Seller shall have
delivered to Purchaser a certificate dated the Closing Date and executed on
behalf of Seller by McCann to all such effects.
10.8 NOTICES AND CONSENTS. No notice to or consent, authorization,
approval or order of any Person shall be required for the consummation of the
transactions contemplated by this
-44-
<PAGE>
Agreement (except for notices that have been duly and timely given and consents,
authorizations and approvals that have been obtained). True and correct copies
of all required notices, consents, authorizations and approvals shall have been
delivered to Purchaser and shall be satisfactory in form and substance to
Purchaser and its counsel.
10.9 INDUCEMENT AGREEMENTS. Luby and McCann shall have executed an
agreement substantially in the form of the Inducement Agreement attached hereto
as EXHIBIT 10.9(A), and Walsworth shall have executed an agreement substantially
in the form of the Inducement Agreement attached hereto as EXHIBIT 10.9(B)
(collectively, the "INDUCEMENT AGREEMENTS").
10.10 TERMINATION OF CONTRACTS. The contracts, agreements and other
instruments listed on SCHEDULE 10.10 shall have been duly and validly terminated
without any liability on the part of Seller, and Seller shall have delivered to
the Tristar Parties at Closing a certificate dated the Closing Date to such
effect.
10.11 RELEASES. Each of Falkowski, Luby and Catapano shall have executed
and delivered to Purchaser a Release in substantially the form of the Release
attached hereto as EXHIBIT 10.11(A), Walsworth shall have executed and delivered
to Purchaser a Release in substantially the form of the Release attached hereto
as EXHIBIT 10.11(B) (the "WALSWORTH RELEASE"), Friedman shall have executed and
delivered to Purchaser a Release in substantially the form of the Release
attached hereto as EXHIBIT 10.11(C) (the "FRIEDMAN RELEASE"), Davis shall have
executed and delivered to Purchaser a Release in substantially the form of the
Release attached hereto as EXHIBIT 10.11(D) (the "DAVIS RELEASE"), People's Bank
shall have executed and delivered to Purchaser a Release in substantially the
form of the Release attached hereto as EXHIBIT 10.11(E) (the "PEOPLE'S BANK
RELEASE").
10.12 BRIDGEPORT FACILITY. Seller shall have executed and delivered to
Purchaser an amendment to the existing lease agreement relating to Seller's
Bridgeport, Connecticut facility in substantially the form of the First
Amendment to Lease attached hereto as EXHIBIT 10.12 (the "BRIDGEPORT LEASE
AMENDMENT").
10.13 INVESTOR QUESTIONNAIRE. Each shareholder of Seller shall have
executed and delivered to the Tristar Parties an Investor Questionnaire or shall
have caused such shareholder's purchaser representative to have executed and
delivered to the Tristar Parties a Purchaser Representative Questionnaire, each
in form and substance acceptable to the Tristar Parties and the information
contained therein shall be satisfactory to the Tristar Parties that the issuance
of the Stock Options and the Promissory Notes will not violate any Securities
Laws.
10.14 OTHER DOCUMENTS. Seller shall have delivered or caused to be
delivered all other documents, agreements, resolutions, certificates or
declarations as the Tristar Parties or their attorneys may reasonably request.
-45-
<PAGE>
10.15 WALSWORTH AGREEMENT. Walsworth shall have entered into an agreement
with the Surviving Corporation, on terms and conditions acceptable to the
Surviving Corporation, relating to his contractual commitments to Seller.
10.16 OUTSTANDING PROMISSORY NOTE. The Tristar Parties shall have received
the original of the Friedman Note, the Davis Note and the People's Bank Notes
each marked "Cancelled".
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligations
of Seller under this Agreement are, except as may be waived in writing by
Seller, subject to the fulfillment by the Tristar Parties of each of the
following additional conditions on or prior to the Closing:
11.1 OPINION OF COUNSEL. Seller will have received an opinion from
Fulbright & Jaworski L.L.P., counsel to the Tristar Parties, dated the Closing
Date, in form and substance reasonably satisfactory to Seller, covering the
matters set forth in SCHEDULE 11.1 and such other matters as Seller shall
reasonably request.
11.2 RESOLUTIONS. Seller shall have received a certified copy of
resolutions duly adopted by the Board of Directors of each of the Tristar
Parties and the shareholders of Purchaser authorizing and approving the
execution and delivery of this Agreement and performance by the Tristar Parties
of their obligations hereunder.
11.3 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND FULFILLMENT OF
COVENANTS. Each of the representations and warranties of the Tristar Parties set
forth in this Agreement and in the Schedules attached hereto shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing with the same force and effect as though such representations and
warranties had been made as of the Closing. Each and all of the agreements and
covenants of the Tristar Parties to be performed on or before the Closing Date
pursuant to the terms hereof shall have been performed in all material respects.
The Tristar Parties shall have delivered to McCann and George Luby a certificate
dated the Closing Date and executed by the Tristar Parties to all such effects
or disclosing any such representation or warranty not so true and correct or any
such agreement or covenant not so performed.
11.4 MERGER DOCUMENTS. Purchaser shall executed and delivered the Merger
Documents to Seller.
11.5 CASH CONSIDERATION, PROMISSORY NOTES AND MONETARY OBLIGATIONS.
Tristar or Purchaser, as applicable, shall have paid the Cash Consideration and
issued the Promissory Notes and Stock Options as contemplated by SECTION 2.6 and
paid the monetary obligations, issued the promissory notes and issued the stock
option agreements as contemplated by SECTIONS 2.9 and 2.12.
-46-
<PAGE>
11.6 COMPENSATION AGREEMENTS. Purchaser shall have entered into the
Compensation Agreements.
11.7 BRIDGEPORT LEASE AMENDMENT. Purchaser shall have executed and
delivered to Seller the Bridgeport Lease Amendment.
11.8 PEOPLE'S BANK DEBT. Purchaser shall have paid all indebtedness of
Seller to People's Bank, and People's Bank shall have executed and delivered the
People's Bank Release.
11.9 WALSWORTH OPTION. Tristar shall have issued to Walsworth an option
pursuant to which Walsworth may purchase 20,000 shares of Tristar Stock at an
exercise price equal to $5.82.
11.10 OTHER DOCUMENTS. The Tristar Parties shall have delivered or caused
to be delivered all other documents, agreements, resolutions, certificates or
declarations as Seller or its attorneys may reasonably request.
12. SPECIAL CLOSING AND POST-CLOSING COVENANTS.
12.1 TERMINATION OF AGREEMENTS. Seller shall take all necessary efforts to
ensure that the Agreements listed on SCHEDULE 10.10 are terminated prior to
Closing.
12.2 FURTHER ASSURANCES. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any further assignments
or assurances in law or otherwise are necessary or desirable to vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation, all rights, title
and interests in all the Assets and all privileges, powers and franchises of
Seller and Purchaser, the Surviving Corporation and its proper officers and
directors, in the name and on behalf of Seller and Purchaser, shall execute and
deliver all such proper deeds, assignments and assurances in law and do all
things necessary and proper to vest, perfect or confirm title to such property
or rights in the Surviving Corporation and otherwise to carry out the purpose of
this Agreement, and the proper officers and directors of the Surviving
Corporation are fully authorized in the name of Seller or otherwise to take any
and all such action. Seller hereby designates the Surviving Corporation and its
officers as Seller's true and lawful attorney-in-fact, with full power of
substitution, to execute and deliver for the benefit of the Surviving
Corporation any and all such proper deeds, assignments and assurances in law and
to do all things necessary and proper to vest, perfect or confirm title to such
property or rights in the Surviving Corporation and otherwise to carry out the
purpose of this Agreement. Seller hereby acknowledges and agrees that the power
of attorney set forth in the preceding sentence is coupled with an interest, and
further agrees to execute and deliver to the Surviving Corporation from time to
time any documents or instruments reasonably requested by the Surviving
Corporation to evidence such power of attorney.
13. OFFSET PROVISIONS. The following provision is in addition to the
offset provisions set forth in SECTIONS 2.7 and 2.11. Notwithstanding any other
provision of this
-47-
<PAGE>
Agreement, in the event any Tristar Party shall pay, incur or suffer any Damage
arising out of or resulting from or relating to any misrepresentation, breach of
warranty or breach of any covenant, commitment or agreement made herein or
undertaken herein by Seller (including, without limitation, any certificate
delivered hereunder by Seller), the Tristar Parties and the Surviving
Corporation shall have the right to and shall be obligated to reduce or offset
payments due on the Offset Promissory Notes in such amount or amounts of such
Damages, and any such reduction or offset shall be deemed to be a payment under
the Offset Promissory Notes to the extent of such reduction or offset as of the
date of issuance of such Offset Promissory Note. Any reduction or offset under
this Article shall be pro rata against each Offset Promissory Note in accordance
with the original stated principal amount of the Offset Promissory Notes. The
Surviving Corporation shall deliver to each authorized holder of a Offset
Promissory Note, at the address provided to the Surviving Corporation by such
holder, prior written notice of a reduction or offset and a reasonably detailed
description of the matter giving rise to such reduction or offset prior to such
offset or reduction under this ARTICLE 13.
Notwithstanding any provision of this Agreement, the Tristar Parties and
the Surviving Corporation shall not have the offset rights set forth in this
Article until the aggregate amount of such Damages exceeds $100,000 and after
such threshold amount has been attained, all Damages, other than those
aggregated to reach the threshold, shall be subject to offset hereunder. The
foregoing provision shall not apply to a Reduction under SECTION 2.7 or the
offset provisions of SECTION 2.11.
The Tristar Parties hereby acknowledge and agree that their sole recourse
for any amounts due from the shareholders of Seller pursuant to this Plan of
Merger and the Inducement Agreements (other than the non-compete and
non-disclosure of confidential information provisions thereof), shall be by
offset against the Offset Promissory Notes pursuant to this SECTION 13, and they
shall have no other rights or remedies against the shareholders of Seller for
such amounts. The foregoing shall not prevent the Tristar Parties from
exercising their right to seek an injunction as authorized by the Inducement
Agreements.
14. TERMINATION. This Agreement may be terminated without further
obligation of the parties, as follows:
14.1 MUTUAL CONSENT. This Agreement may be terminated at any time prior to
Closing by mutual written consent of the parties hereto.
14.2 FAILURE OF CONDITIONS. This Agreement may be terminated by either
party hereto, if the conditions, as set forth in this Agreement, to such party's
obligations under this Agreement are not fulfilled on or prior to the Closing
Date; provided that any such termination shall not otherwise limit the remedies
otherwise available to such party as a result of misrepresentations of or
breaches by the other party.
-48-
<PAGE>
14.3 FAILURE TO CLOSE. This Agreement will automatically terminate on
January 15, 2000, if the Closing shall not have occurred on or before such date,
unless the parties shall have otherwise agreed in writing prior to such date. No
party will be liable in damages to any other party as a result of termination
pursuant to this ARTICLE 14 unless the failure of the Closing was due to the
failure of such party to comply with the terms of this Agreement.
15. NOTICES. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, given by prepaid telex
or telegram or by facsimile or other similar instantaneous electronic
transmission device or mailed first class, postage prepaid, certified United
States mail, return receipt requested, as follows:
(a) If to the Surviving Corporation, Purchaser or Tristar, at:
Tristar Corporation
12500 San Pedro Avenue, Suite 500
San Antonio, Texas 78216
Attention: Chief Financial Officer
Facsimile No.: (210) 402-2239
With a copy to:
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
Attention: Phillip M. Renfro
Facsimile No.: (210) 270-7205
(b) If to Seller, at:
Fragrance Impressions Limited
116 Knowlton Street
Bridgeport, CT 06608
Attention: Thomas E. McCann
Facsimile No.: (212) 221-7128
With a copy to:
Sweeney Lev & Blinkoff LLP
708 Third Avenue
New York, NY 10017
-49-
<PAGE>
Attention: Leonard J. Lev
Facsimile No.: (212) 370-7336
provided that any party may change its address for notice by giving to the other
party written notice of such change. Any notice given under this Article shall
be effective (x) when delivered, if delivered personally, (y) 24 hours after
sending, if sent by telex or telegram or by facsimile or other similar
instantaneous electronic transmission device, and (z) 48 hours after mailing, if
mailed.
16. GENERAL PROVISIONS.
16.1 GOVERNING LAW; INTERPRETATION; SECTION HEADINGS. This Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of Texas, without regard to conflict-of-laws rules as applied in Texas.
The section headings contained herein are for purposes of convenience only, and
shall not be deemed to constitute a part of this Agreement or to affect the
meaning or interpretation of this Agreement in any way.
16.2 SEVERABILITY. Should any provision of this Agreement be held
unenforceable or invalid under the laws of the United States of America or the
State of Texas, or under any other applicable laws of any other jurisdiction,
then the parties hereto agree that such provision shall be deemed modified for
purposes of performance of this Agreement in such jurisdiction to the extent
necessary to render it lawful and enforceable, or if such a modification is not
possible without materially altering the intention of the parties hereto, then
such provision shall be severed herefrom for purposes of performance of this
Agreement in such jurisdiction. The validity of the remaining provisions of this
Agreement shall not be affected by any such modification or severance, except
that if any severance materially alters the intentions of the parties hereto as
expressed herein (a modification being permitted only if there is no material
alteration), then the parties hereto shall use commercially reasonable efforts
to agree to appropriate equitable amendments to this Agreement in light of such
severance, and if no such agreement can be reached within a reasonable time, any
party hereto may initiate arbitration pursuant to the provisions of SECTION
16.12 to determine and effect such appropriate equitable amendments.
16.3 ENTIRE AGREEMENT. This Agreement, the Schedules and the documents and
agreements referenced herein set forth the entire agreement and understanding of
the parties hereto with respect to the transactions contemplated hereby, and
supersede all prior agreements, arrangements and understandings related to the
subject matter hereof. No representation, promise, inducement or statement of
intention has been made by any party hereto which is not embodied or referenced
in this Agreement, the Schedules or the documents or agreements referenced
herein, and no party hereto shall be bound by or liable for any alleged
representation, promise, inducement or statement of intention not so set forth.
16.4 BINDING EFFECT. All the terms, provisions, covenants and conditions
of this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto
-50-
<PAGE>
and their respective heirs, executors, administrators, representatives,
successors and assigns; provided that this provision shall not permit and
assignment otherwise prohibited hereby.
16.5 THIRD-PARTY BENEFICIARIES. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as set forth in ARTICLE
5 hereof.
16.6 ASSIGNMENT. This Agreement and the rights and obligations of the
parties hereto shall not be assigned or delegated by any party hereto without
the prior written consent of the other parties hereto.
16.7 AMENDMENT; WAIVER. This Agreement may be amended, modified,
superseded or canceled, and any of the terms, provisions, representations,
warranties, covenants or conditions hereof may be waived, only by a written
instrument executed by all parties hereto, or, in the case of a waiver, by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
to enforce the same. No waiver by any party of any condition contained in this
Agreement, or of the breach of any term, provision, representation, warranty or
covenant contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or breach, or as a waiver of any other condition or of the breach of
any other term, provision, representation, warranty or covenant.
16.8 GENDER; NUMBERS. All references in this Agreement to the masculine,
feminine or neuter genders shall, where appropriate, be deemed to include all
other genders. All plurals used in this Agreement shall, where appropriate, be
deemed to be singular, and VICE VERSA.
16.9 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement shall be
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of the parties reflected hereon as signatories.
16.10 TELECOPY EXECUTION AND DELIVERY. A facsimile, telecopy or other
reproduction of this Agreement may be executed by one or more parties hereto,
and an executed copy of this Agreement may be delivered by one or more parties
hereto by facsimile or similar instantaneous electronic transmission device
pursuant to which the signature of or on behalf of such party can be seen, and
such execution and delivery shall be considered valid, binding and effective for
all purposes. At the request of any party hereto, all parties hereto agree to
execute an original of this Agreement as well as any facsimile, telecopy or
other reproduction hereof.
-51-
<PAGE>
16.11 EXPENSES. Whether or not the transactions contemplated hereby are
consummated, each of the parties will pay its own costs and expenses in
connection with the preparation, execution and delivery of this Agreement and
all agreements executed in connection herewith.
16.12 ARBITRATION. Any controversy of any nature whatsoever, including but
not limited to tort claims or contract disputes, between the parties to this
Agreement or their respective heirs, executors, administrators, legal
representatives, successors and assigns, as applicable, arising out of or
related to this Agreement, including the implementation, applicability and
interpretation thereof, shall, upon the written request of one party served upon
the other, be submitted to and settled by arbitration in New York, New York in
accordance with the provisions of the Federal Arbitration Act, 9 U.S.C.
ss.ss.1-15, as amended. The terms of the commercial arbitration rules of the
American Arbitration Association shall apply except to the extent they conflict
with the provisions of this paragraph. If the amount in controversy in the
arbitration exceeds Two Hundred and Fifty Thousand Dollars ($250,000), exclusive
of interest, attorneys' fees and costs, the arbitration shall be conducted by a
panel of three independent arbitrators. Otherwise, the arbitration shall be
conducted by a single independent arbitrator. The parties shall endeavor to
select independent arbitrators by mutual agreement. If such agreement cannot be
reached within 30 calendar days after a dispute has arisen which is to be
decided by arbitration, the selection of the arbitrator(s) shall be made in
accordance with Rule 13 of the Rules as presently in effect. If three
arbitrators are selected, the arbitrators shall elect a chairperson to preside
at all meetings and hearings. If a dispute is to be resolved by a sole
arbitrator in accordance with the terms hereof, or if the dispute is to be
resolved by a panel of three arbitrators as provided hereinabove, then each such
arbitrator shall be a member of a state bar engaged in the practice of law in
the United States or a retired member of a state or the federal judiciary in the
United States. The award of the arbitrator(s) shall require a majority of the
arbitrators in the case of a panel of arbitrators, shall be based on the
evidence admitted and the substantive law of the State of Texas and shall
contain an award for each issue and counterclaim. The award shall be made 30
days following the close of the final hearing and the filing of any post hearing
briefs authorized by the arbitrator(s). The award of the arbitrator(s) shall be
final and binding on the parties hereto. Each party shall be entitled to inspect
and obtain a copy of non- privileged relevant documents in the possession or
control of the other party. All such discovery shall be in accordance with
procedures approved by the arbitrator(s). Unless otherwise provided in the
award, each party shall bear its own costs of discovery. Each party shall be
entitled to take one deposition. Each party shall be entitled to submit one set
of interrogatories which require no more than 30 answers. All discovery shall be
expedited, consistent with the nature and complexity of the claim or dispute and
consistent with fairness and justice. The arbitrator(s) shall have the power to
compel any party to comply with discovery requests of the other parties and to
issue binding orders relating to any discovery dispute which shall be
enforceable in the same manner as awards. The arbitrator(s) also shall have the
power to impose sanctions for abuse or frustration of the arbitration process,
including without limitation, the refusal to comply with orders of the
arbitrator(s) relating to discovery and compliance with subpoenas. Without
limiting the scope of the parties' obligation to arbitrate disputes pursuant to
this SECTION 16.12, the arbitrator(s) are not empowered to award damages
including, without limitation, punitive damages and multiple damages under
applicable
-52-
<PAGE>
Texas statutes, in excess of compensatory damages; provided that in no event
shall consequential damages be awarded. Each of Tristar, Purchaser and Seller
hereby irrevocably waives and releases any right to recover such damages in
excess of those damages authorized by this SECTION 16.12. The arbitrator(s) may
require the non-prevailing party to pay the prevailing party's attorneys' fees
and costs incurred in connection with the arbitration. It is further agreed that
any of the parties hereto may petition the United States District Court for the
Western District of Texas, San Antonio Division, or any court having
jurisdiction for a judgment to be entered upon any award entered through such
arbitration proceedings.
16.13 REVIEW OF COUNSEL. Each party hereto acknowledges that it and its
counsel have received, reviewed and been involved in the drafting of this
Agreement and the agreements referenced herein to be executed at Closing and
that normal rules of construction, to the effect that ambiguities are to be
resolved against the drafting party, shall not apply.
[SIGNATURES ON FOLLOWING PAGE]
-53-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Plan of Merger and
Acquisition Agreement as of the date first above written.
PURCHASER:
TRISTAR USA, INC.
By: ____________________________________
Robert M. Viola
Executive Vice President
TRISTAR:
TRISTAR CORPORATION
By: ____________________________________
Robert M. Viola
Executive Vice President
SELLER:
FRAGRANCE IMPRESSIONS LIMITED
By: ____________________________________
Name: __________________________________
Title: _________________________________
-54-
<PAGE>
SCHEDULE 1.67
PERMITTED ENCUMBRANCES
SCHEDULE 2.6
ALLOCATION OF STOCK CONSIDERATION AND CASH CONSIDERATION
SCHEDULE 2.11(C)
CHARGE-BACK ACCOUNTS
SCHEDULE 4.3
SELLER'S FINANCIAL STATEMENTS
SCHEDULE 4.7
EMPLOYEE NAMES AND COMPENSATION
SCHEDULE 10.1
OPINION OF COUNSEL FOR SELLER
SCHEDULE 10.10
TERMINATED CONTRACTS
SCHEDULE 11.1
OPINION OF FULBRIGHT & JAWORSKI L.L.P.
-55-
<PAGE>
EXHIBIT 1.33(A)
DELAWARE FORM OF CERTIFICATE OF MERGER
EXHIBIT 1.33(B)
CONNECTICUT FORM OF ARTICLES OF MERGER
EXHIBIT 2.6(A)
OPTION AGREEMENT
EXHIBIT 2.6(B)
OFFSET PROMISSORY NOTE
EXHIBIT 2.6(C)
NON-OFFSET PROMISSORY NOTE
EXHIBIT 2.9(A)
KEY EMPLOYEE PROMISSORY NOTE
EXHIBIT 2.9(B)(1)
WALSWORTH PROMISSORY NOTE
EXHIBIT 2.9(B)(2)
WALSWORTH $60,000 PROMISSORY NOTE
EXHIBIT 2.9(C)
FRIEDMAN PROMISSORY NOTE
EXHIBIT 2.9(D)
DAVIS PROMISSORY NOTE
-56-
<PAGE>
EXHIBIT 2.12(E)
GEORGE LUBY PROMISSORY NOTE
EXHIBIT 10.5(A)
McCANN EMPLOYMENT AGREEMENT
EXHIBIT 10.5(B)
FALKOWSKI EMPLOYMENT AGREEMENT
EXHIBIT 10.5(C)
CATAPANO EMPLOYMENT AGREEMENT
EXHIBIT 10.5(D)
ROBERT LUBY EMPLOYMENT AGREEMENT
EXHIBIT 10.9(A)
LUBY/McCANN INDUCEMENT AGREEMENT
EXHIBIT 10.9(B)
WALSWORTH INDUCEMENT AGREEMENT
EXHIBIT 10.11(A)
KEY EMPLOYEE RELEASE
EXHIBIT 10.11(B)
WALSWORTH RELEASE
EXHIBIT 10.11(C)
FRIEDMAN RELEASE
-57-
<PAGE>
EXHIBIT 10.11(D)
DAVIS RELEASE
EXHIBIT 10.11(E)
PEOPLE'S BANK RELEASE
EXHIBIT 10.12
BRIDGEPORT LEASE AMENDMENT
-58-
<PAGE>
Schedule 10.1
SELLER'S OPINION
1. Seller is a corporation duly incorporated, in existence and in good
standing under the Connecticut Stock Corporation Act. Seller has the corporate
power to own or lease its properties and to carry on its business as now
conducted, and to own its assets.
2. Seller has the corporate power and authority to execute, deliver and
perform its obligations under this Agreement. Seller's execution of, delivery of
and performance of its obligations under this Agreement has been duly authorized
by all requisite corporate action, and this Agreement has been duly executed and
delivered by Seller.
3. This Agreement and each of the Inducement Agreements constitutes valid
and binding obligations of Seller or a shareholder of Seller, as applicable,
enforceable against Seller or the shareholders of Seller, as applicable, in
accordance with its terms.
4. The execution and delivery of this Agreement by Seller and the
performance by Seller of its obligations hereunder and the consummation of the
transactions contemplated hereby do not (with or without the giving of notice or
the lapse of time or both) (i) conflict with or result in a violation of the
Articles of Incorporation or Bylaws of Seller or (ii) to our knowledge (a)
breach or violate any judicial or regulatory judgment, order, writ or decree to
which Seller is a party or is subject or (b) violate any provision of law or
statute, or any rule or regulation of any governmental agency or authority
applicable to Seller.
5. Upon the filing of the Certificate of Merger with the Secretary of
State of the State of Connecticut as contemplated by SECTION 2.1, the
appropriate filings will have been made with the Secretary of State of the State
of Connecticut by Seller with respect to the Merger to cause the Merger to
become effective under the Connecticut Stock Corporation Act.
-59-
<PAGE>
Schedule 11.1
TRISTAR PARTIES' OPINION
1. The Tristar Parties are corporations duly incorporated, in existence
and in good standing under the Delaware General Corporation Law. The Tristar
Parties have the corporate power to own or lease their properties and to carry
on their business as described in Tristar's Form 10-K for the year ended August
29,1998, and to own their assets.
2. The Tristar Parties have the corporate power and authority to execute,
deliver and perform their obligations under this Agreement. The Tristar Parties'
execution of, delivery of and performance of their obligations under this
Agreement have been duly authorized by all requisite corporate action, and this
Agreement has been duly executed and delivered by the Tristar Parties.
3. This Agreement constitutes valid and binding obligations of the Tristar
Parties enforceable against the Tristar Parties in accordance with its terms.
4. The execution and delivery of this Agreement by the Tristar Parties and
the performance by the Tristar Parties of their obligations hereunder and the
consummation of the transactions contemplated hereby do not (with or without the
giving of notice or the lapse of time or both) (i) conflict with or result in a
violation of the Certificate of Incorporation or Bylaws of the Tristar Parties
or (ii) to our knowledge (a) breach or violate any judicial or regulatory
judgment, order, writ or decree to which the Tristar Parties are a party or are
subject or (b) violate any provision of law or statute, or any rule or
regulation of any governmental agency or authority applicable to the Tristar
Parties.
5. Upon the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware as contemplated by SECTION 2.1, the appropriate
filings will have been made with the Secretary of State of the State of Delaware
by the Tristar Parties with respect to the Merger to cause the Merger to become
effective under the Delaware General Corporation Law.
-60-
EXHIBIT 10.1
THIS OPTION AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS, AND NO INTEREST HEREIN OR THEREIN MAY BE SOLD, DISTRIBUTED,
ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
COVERING ANY SUCH TRANSACTION OR SUCH TRANSACTION IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND LAWS.
No. OPTION TO PURCHASE
ISSUED: November __, 1999 COMMON STOCK
Void After: As Provided Herein
TRISTAR CORPORATION
OPTION
THIS IS TO CERTIFY that, for value received and subject to the terms and
conditions hereof, __________, or such person to whom this Option is transferred
in compliance with SECTION 7 hereof ("HOLDER"), is entitled to exercise this
Option to purchase up to an aggregate of _________ (the "MAXIMUM OPTION"), fully
paid and nonassessable shares of TRISTAR CORPORATION, a Delaware corporation
("COMPANY"), Common Stock, par value $.01 per share (the "OPTION STOCK"), at a
price per share of $___ (the "EXERCISE PRICE") (such number of shares and the
Exercise Price being subject to adjustment as provided herein). No Option Stock
shall vest hereunder on the date hereof. Subject to the Maximum Options, ____
shares of Option Stock shall vest on each November __, beginning November __,
2000 until November __, 2005, when the unvested Option Stock shall vest. Holder
shall have no rights (including, without limitation, rights to purchase or sell
Option Stock or rights of a shareholder of Company) with respect to any shares
of Option Stock, unless and until such shares vest in accordance with the terms
of this Option.
This Option is subject to the following additional terms and conditions:
1. EXERCISE RIGHTS
This Option may be exercised by Holder, at any time on or before the
Expiration Date, in whole or in part, by delivering to Company at 12500 San
Pedro Avenue, Suite 500, San Antonio, Texas 78216 (or such other office or
agency of Company as it may designate by notice in writing to Holder at the
address of Holder appearing on the books of Company) (i) this Option
certificate, (ii) a money order, certified or bank check drawn in United States
currency or wire transfer and payable to Company in the amount of the Exercise
Price multiplied by the number of shares for which this Option is being
exercised, and (iii) the form of Election to Purchase attached hereto duly
completed and executed by Holder. The payment and subscription materials shall
be accompanied by such other instruments or agreements duly signed by Holder as
may be reasonably necessary or advisable in order that the issuance of such
Option Stock comply with applicable rules and
<PAGE>
regulations under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
any applicable state securities laws or any requirement of any national
securities exchange on which Option Stock may be traded. For purposes of this
Option, the "EXPIRATION DATE" shall mean November __, 2009.
2. DELIVERY OF STOCK CERTIFICATES
As soon as practicable after exercise of this Option, in whole or in part,
Company shall issue and deliver or cause to be delivered to Holder, or, upon the
order of Holder, to such person or persons as may be directed by Holder subject
to the provisions of SECTION 7 hereof, a certificate or certificates for the
number of shares of Option Stock to which Holder is entitled, and if the Option
Stock represented by the surrendered Option shall not have been exercised in
full, a new Option for the remaining number of shares of Option Stock which
shall not have been exercised (however, to the extent such a new Option is
issued for such remaining number of shares of Option Stock on the same terms and
conditions as set forth herein, such replacement Option may be unilaterally
executed and delivered by Company, without need for Holder's signature).
3. COVENANTS AS TO OPTION STOCK
All the shares of Option Stock issued pursuant to the exercise of this
Option will, upon their issuance, be validly issued and outstanding, fully paid
and nonassessable. Company shall pay all documentary stamp taxes attributable to
the initial issuance of Option Stock. Company shall not be required, however, to
pay any tax imposed in connection with any transfer involved in the issuance of
Option Stock in a name other than that of Holder. In such case, Company shall
not be required to issue any certificate for Option Stock until the person or
persons requesting the same shall have paid to Company the amount of any such
tax or shall have established to Company's satisfaction that the tax has been
paid or that no tax is due. Company shall at all times reserve and keep
available such number of shares of its authorized but unissued Option Stock as
shall from time to time be sufficient to permit the exercise of this Option.
4. NOTICE TO HOLDER
4.1 NOTICE TO HOLDER. If, at any time after the date hereof:
(a) Company shall authorize the distribution to all holders of Option
Stock or evidence of Company's indebtedness, assets (other than Option Stock for
which adjustment is provided in SECTION 5 hereof) or cash dividends or cash
distributions payable out of current earnings, retained earnings or earned
surplus or dividends payable in capital stock of Company;
(b) there shall be proposed any consolidation or merger to which Company
is to be a party and for which approval of holders of Option Stock is required,
or the conveyance or transfer of the assets of Company substantially as an
entirety;
(c) there shall be proposed any capital reorganization or reclassification
(other than a subdivision or combination of shares, stock dividend,
consolidation, merger or conveyance or transfer of assets provided for elsewhere
herein); or
-2-
<PAGE>
(d) there shall be proposed the voluntary or involuntary dissolution,
liquidation or winding up of Company;
Company shall cause to be given to Holder at the address registered with
Company, by first-class mail, postage prepaid, a written notice stating (i) the
date as of which holders of record of shares of Option Stock to be entitled to
receive any such distributions are to be determined or (ii) the date on which
any consolidation, merger, conveyance, transfer, reorganization,
reclassification, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of record of
shares of Option Stock shall be entitled to exchange the shares for securities
or other property, if any, deliverable upon the consolidation, merger,
conveyance, transfer, reorganization, reclassification, dissolution, liquidation
or winding up. Such notice shall be filed and mailed in the case of a notice
pursuant to clause (i) above at least 10 calendar days before the record date
specified and, in the case of a notice pursuant to clause (ii) above, at least
20 calendar days before the earlier of the dates specified.
4.2 EFFECT OF MERGER, ETC. In case, at any time prior to the Expiration
Date, of any consolidation or merger of Company with or into another entity
(other than a consolidation or merger in which Company is a continuing operation
and which does not result in any change in the Option Stock), a capital
reorganization or reclassification of the capital stock of Company (other than a
subdivision or combination of shares, stock dividend, consolidation, merger or
conveyance or transfer of assets provided for elsewhere herein) or the sale of
all or substantially all the properties and assets of Company as an entirety to
any other entity (a "VESTING EVENT"), all Option Stock granted under this Option
shall immediately vest upon the receipt of the notice required by SECTION 4.1
hereof and Holder shall be entitled to exercise this Option for a period of 30
days thereafter. If Holder fails, for whatever reason, to exercise this Option
during such 30-day period, this Option shall expire, even if prior to the
Expiration Date, the Option shall become void and all rights of Holder under
this Option shall cease.
5. ADJUSTMENTS FOR STOCK SPLITS, ETC.
If Company shall issue any shares of the same class as the Option Stock as
a stock dividend or subdivide the number of outstanding shares of such class
into a greater number of shares, then, in either such case, the Exercise Price
in effect before such dividend or subdivision shall be proportionately reduced
and the number of shares of Option Stock at that time issuable pursuant to the
exercise of this Option shall be proportionately increased; and, conversely, if
Company shall contract the number of outstanding shares of the same class as the
Option Stock by combining such shares into a smaller number of shares, then the
Exercise Price in effect before such combination shall be proportionately
increased and the number of shares of Option Stock at that time issuable
pursuant to the exercise of this Option shall be proportionately decreased. Each
adjustment in the number of shares of Option Stock issuable hereunder shall be
to the nearest whole share.
6. FRACTIONAL SHARES
No fractional shares shall be issued upon the exercise of this Option. In
lieu of fractional shares, Company shall pay Holder a sum in cash equal to the
fair market value of the fractional
-3-
<PAGE>
shares on the date of exercise; such fair market value being the average
weighted closing price of the Option Stock on The Nasdaq National Market during
the ten (10) consecutive trading day period ending at the close of the trading
day on the day of exercise pursuant to SECTION 1 hereof.
7. RESTRICTIONS ON TRANSFER
Neither this Option nor the Option Stock issued upon exercise hereof shall
be transferable by Holder or Holder's permitted assigns except (a) to persons
who demonstrate to the reasonable satisfaction of Company that they are
"accredited investors" within the meaning of Regulation D promulgated under the
Securities Act, (b) in the case of an individual, pursuant to such individual's
last will and testament or the laws of descent and distribution, or (c) to any
underwriter in connection with an underwritten public offering in which this
Option will be exercised by such underwriters prior to or concurrently with the
sale of the Option Stock to the public and, in any of the foregoing cases, only
in compliance with the Securities Act. Any attempted transfer in contravention
of this SECTION 7 shall be null and void. Company may require any transferee to
agree in writing to the restrictions contained in this SECTION 7. Company may
also require any transferee to execute an investment letter containing
representation and warranties as to such transferee's investment intent,
financial sophistication and ability to bear the risk of any investment in the
Option and the Option Stock, and containing such other representations and
warranties as Company may reasonably request or otherwise reasonably appropriate
and acceptable to Company to demonstrate compliance with the Securities Act,
before any such transfer shall be given effect.
8. LEGEND
Each stock certificate representing Option Stock shall carry such
appropriate legend, and such written instructions shall be given to Company's
transfer agent, as may be reasonably necessary or advisable to satisfy the
requirements of the Securities Act or any state securities laws.
9. HOLDER AS OWNER
Company may deem and treat the holder of record of this Option as the
absolute owner hereof for all purposes regardless of any notice to the contrary.
10. NO SHAREHOLDER RIGHTS
This Option shall not entitle Holder nor any other person or entity to any
voting rights or any other rights or privileges as a shareholder of Company or
to any other rights or privileges whatsoever except the rights stated herein;
and no dividend or interest shall be payable or shall accrue in respect of this
Option, until and then only to the extent that this Option shall be exercised
and certificates representing the Option Stock have been issued and delivered to
Holder.
11. LOST OPTION CERTIFICATE
Upon receipt by Company of satisfactory evidence of the loss, theft,
destruction or mutilation of this Option and either (in the case of loss, theft
or destruction) reasonable indemnification or (in
-4-
<PAGE>
the case of mutilation) the surrender of this Option for cancellation, Company
will execute and deliver to Holder, without charge, a new Option of like
denomination.
12. NOTICES
All notices, requests, demands and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if delivered personally, given by prepaid telex or telegram or
by facsimile or other similar instantaneous electronic transmission device or
mailed first class, postage prepaid, certified United States mail, return
receipt requested, as follows:
(a) If to Company, at:
12500 San Pedro Avenue, Suite 500
San Antonio, Texas 78216
Attention:
Facsimile No.: (210) 402-2239
(b) If to Holder, at:
___________________________
___________________________
___________________________
Attention: _____________________
Facsimile No.: _________________
Any party may change its address for notice by giving to the other party
written notice of such change. Any notice given under this SECTION 12 shall be
effective when received at the address for notice for the party to which the
notice is given.
13. SUCCESSOR
All the covenants and provisions of this Option by or for the benefit of
Company or Holder shall bind and inure to the benefit of their respective
successors and assigns hereunder; provided that this SECTION 13 shall not
authorize Holder to assign this Option or the Option Stock received upon
exercise of this Option except as expressly set forth herein.
14. BENEFITS OF THIS OPTION
Nothing in this Option shall be construed to give to any person or company
other than Company and Holder any legal or equitable right, remedy or claim
under this Option. This Option shall be for the sole and exclusive benefit of
Company and such Holder.
15. CONSTRUCTION
-5-
<PAGE>
The validity and interpretation of the terms and provisions of this Option
shall be governed by the laws of the State of Delaware, without regard to
conflict of law principles. The descriptive headings of the several sections of
this Option are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
16. REVIEW OF COUNSEL
Each party acknowledges that it and its counsel have received, reviewed
and been involved in the drafting of this Option and that normal rules of
construction, to the effect that ambiguities are to be resolved against the
drafting party, shall not apply.
IN WITNESS WHEREOF, Company has executed this Option as of the date first
written above.
TRISTAR CORPORATION
By: ___________________________________
Name: _________________________________
Title: ________________________________
HOLDER
_______________________________________
_______________________________________
-6-
<PAGE>
ELECTION TO PURCHASE
To: Tristar Corporation
The undersigned hereby irrevocably elects to purchase _________ shares of
Common Stock of Tristar Corporation ("COMPANY") issuable upon the exercise of
the attached Option, and requests that certificates for such shares be issued in
the name of and delivered to the address of the undersigned, and, if said number
of shares shall not be all the shares that may be purchased pursuant to the
attached Option, that a new Option evidencing the right to purchase the balance
of such shares be registered in the name of, and delivered to, the undersigned
at the address stated below. The undersigned hereby represents and warrants to
Company (i) that the undersigned is an "accredited investor" as defined in Rule
501 promulgated under the Securities Exchange Act of 1934, as amended, or the
undersigned has provided documentation reasonably acceptable to Company in the
opinion of Company, that the issuance of the Common Stock will not violate any
applicable securities law, and (ii) that said shares of Common Stock of Company
are being acquired for the account of the undersigned for investment and not
with a view to, or for sale in connection with, any distribution or public
offering thereof within the meaning of the Securities Act of 1933, as amended.
Payment enclosed in the amount of $______________________
Dated: ______________________________
Name of holder of Options: _____________________________________________
(please print)
Address: _______________________________________________________________
Signature: _____________________________________________________________
<PAGE>
ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers to
the transferee named below the attached Option, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint the
transfer agent of Tristar Corporation ("COMPANY") as the undersigned's attorney,
to transfer said Option on the books of Company, with full power of substitution
in the premises.
Dated: __________________________________
Name of holder of Options: ___________________________________________
(please print)
Address: _____________________________________________________________
Signature: ___________________________________________________________
Name of transferee: __________________________________________________
(please print)
Address of transferee: _______________________________________________
EXHIBIT 10.2
DISPUTES RELATING TO THIS AGREEMENT ARE REQUIRED TO BE SETTLED PURSUANT TO
CERTAIN DISPUTE RESOLUTION PROCEDURES AS PROVIDED IN ARTICLE 7 AND APPENDIX A OF
THIS AGREEMENT.
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into between
Thomas E. McCann ("Employee"), and Tristar USA, Inc., a Delaware corporation
("Company"), whose principal executive offices are located in New York, New
York, on the 10 day of November, 1999.
WHEREAS, Company desires to employ Employee, and Employee desires to be
employed by Company, on terms hereinafter set forth;
NOW, THEREFORE, in consideration for the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DUTIES
1.1 EMPLOYMENT. During the term of this Agreement, Company agrees to
employ Employee as Executive Vice President Sales, Fragrance Impressions Limited
Division, and Employee accepts such employment, on the terms and conditions set
forth in this Agreement.
1.2 EXTENT OF SERVICE. During the term of this Agreement, Employee shall
devote substantially all of his business time, energy and skill to the affairs
of Company and its affiliated companies, and Employee shall not be engaged in
any other business or consulting activities pursued for gain, profit or other
pecuniary advantage. The foregoing shall not prevent Employee from engaging in
business or consulting activities or from making monetary investments in
businesses, provided that such business and consulting activities and such
investments do not substantially interfere with Employee's duties hereunder.
1.3 DUTIES. Employee shall be responsible for managing the sales and
marketing for Company and his duties shall include such duties relating to sales
and marketing as may be prescribed from time to time by Employee's supervisors
or the Board of Directors of Company (the "Board"). Employee shall also perform,
without additional compensation, similar duties for Company's affiliated
companies. Employee shall also serve, without additional compensation, as a
member of the Executive Committee of the management of Tristar Corporation, a
Delaware corporation and the parent of Company ("Tristar"), during the term of
this Agreement. Such committee is not a committee of the Board of Directors of
Tristar. Employee's supervisors shall be the President and Chief Executive
Officer of Tristar and the Vice President of Marketing for Tristar,
<PAGE>
and Employee shall coordinate all marketing for Company with the Vice President
of Marketing for Tristar.
1.4 ACCESS TO AND USE OF PROPRIETARY INFORMATION. Employee recognizes
that, to assist Employee in the performance of his duties hereunder, Employee
will be provided access to and limited use of proprietary and confidential
information of Company, Tristar and their affiliates. Employee further
recognizes that, as a part of his employment with Company, Employee will benefit
from, and Employee's qualifications will be enhanced by, additional training,
education and experience which will be provided to Employee by Company directly
and/or as a result of work projects assigned by Company in which proprietary and
confidential information of Company and Tristar is utilized by Employee.
1.5 PRINCIPAL OFFICE. During the term of this Agreement, Employee's
principal office with Company shall be within a 25 mile radius of Bridgeport,
Connecticut or New York, New York.
ARTICLE 2
TERM OF EMPLOYMENT
The term of this Agreement (the "Term") shall commence on the date hereof
and continue until the earlier of (i) six-months after either party gives
written notice of termination, provided such termination may not be effective
until November 30, 2001, and (ii) termination pursuant to Article 4 hereof.
ARTICLE 3
COMPENSATION
3.1 MONTHLY BASE SALARY. As compensation for services rendered under this
Agreement, Employee shall be entitled to receive from Company a monthly base
salary (before standard deductions) equal to $18,750, subject to periodic review
and upward adjustment by the Board in its sole discretion (downward adjustment
shall not be permitted) (the "Salary"). Employee's monthly base salary shall be
payable at regular intervals (at least semi-monthly) in accordance with the
prevailing practice and policy of Company.
3.2 MANAGEMENT BONUS OBJECTIVES. Employee is eligible to receive a
Management Bonus as following: for the period from the date hereof to the end of
Company's fiscal year in 2000 and thereafter for each fiscal year of Company
during the Term (each a "Bonus Period"), Employee and the Board shall mutually
agree upon objectives ("Management Objectives") relating to Company management
and operations that Employee should achieve during such Bonus Period; provided
that if the Board and Employee are unable to agree on the Management Objectives,
the Management Objectives shall be determined by the Board in good faith. Each
Management Objective will be assigned a percentage, with the aggregate
percentage of the Management Objectives for each Bonus Period equal to 100%. To
the extent Employee achieves a particular Management Objective in a Bonus
Period, as determined by the Board, Employee will be credited with that portion
of the
-2-
<PAGE>
percentage assigned to such management Objective. The percentages credited to
Employee for the particular Bonus Period will be aggregated and the aggregate
percentage will be multiplied by the maximum Management Bonus available for such
Bonus Period. The maximum Management Bonus available for the Bonus Period from
the date hereof to the end of the Company's fiscal year in 2000, will be
$53,625.00 and the maximum Management Bonus for each Bonus Period thereafter
will be 30% of the Salary earned during such Bonus Period prior to the
termination of this Agreement.
3.3 SALES INCENTIVE BONUS. As of January 1, 2001, the Net Sales of Company
shall be determined for the preceding 12-month period. To the extent Net Sales
for such 12-month period (the "2000 Net Sales") exceed $12,000,000, employee
shall be paid a cash bonus of 2% of the Net Sales that exceed $12,000,000. Again
on January 1, 2002, the Net Sales of Company shall be determined for the
preceding 12-month period. To the extent Net Sales for such 12-month period
exceed the greater of $12,000,000 and the 2000 Net Sales, Employee shall be paid
a cash bonus of 2% of the Net Sales that exceed such greater amount. The bonus,
if any, to which Employee is entitled pursuant to this subsection, shall be in
addition to the Management Bonus referenced above in SECTION 3.2, and shall be
paid on or before 90-days after the end of the applicable 12-month period. For
purposes of this SECTION 3.3, "NET SALES" shall mean Gross Sales less returns
and allowances, and "GROSS SALES" means the total gross revenues earned by the
Company by selling product during the applicable 12-month period, as determined
in accordance with generally accepted accounting principles and historical
accounting practices of Fragrance Impressions Limited, a Connecticut corporation
("FIL"), consistently applied with periods prior to the date hereof, which shall
include all sales by Tristar Corporation, a Delaware corporation and the parent
of Company ("Tristar") or an affiliate of Tristar to existing customers of
existing SKUs of FIL and any new customers in the chain drug, mass merchants,
supermarket chains and speciality chain markets with respect to existing or new
SKUs of FIL.
3.4 BENEFITS. Employee shall, in addition to the compensation provided for
herein, be entitled to the following additional benefits:
(a) MEDICAL, HEALTH AND DISABILITY BENEFITS. Employee shall be
entitled to receive all medical, health and disability benefits that may,
from time to time, be provided to senior management personnel of Tristar,
as a group.
(b) OTHER BENEFITS. Employee shall also be entitled to receive any
other benefits that may, from time to time, be provided by Company to all
employees of Company as a group.
(c) VACATION. Employee shall be entitled to an annual vacation as
determined in accordance with the prevailing practice and policy of
Company.
(d) HOLIDAYS. Employee shall be entitled to holidays in accordance
with the prevailing practice and policy of Company.
-3-
<PAGE>
(e) REIMBURSEMENT OF EXPENSES. Company shall reimburse Employee for
all expenses reasonably incurred by Employee in conjunction with the
rendering of services at Company's request, provided that such expenses
are incurred in accordance with the prevailing practice and policy of
Company and are properly deductible by Company for federal income tax
purposes. As a condition to such reimbursement, Employee shall submit an
itemized accounting of such expenses in reasonable detail, including
receipts where required under federal income tax laws.
(f) CAR ALLOWANCE. Employee shall be entitled to receive a car
allowance of $500 per month, PRO RATED for any partial month.
ARTICLE 4
TERMINATION
4.1 TERMINATION WITH NOTICE. This Agreement may be terminated by Company
at any time, without Cause (hereinafter defined), immediately upon written
notice thereof given by Company to Employee. In the event of termination
effected by Company pursuant to this SECTION 4.1, Company shall pay Employee his
then current monthly base salary (subject to standard deductions) from the
effective date of such termination through the end of the Term either, at the
Company's election, (i) in a lump sum payment on or before 30 days after such
termination is effective or (ii) at regular intervals (at least semi-monthly) in
accordance with the prevailing practice and policy of Company (the "Severance").
Additionally, upon such termination Company shall continue to provide the
medical and health benefits set forth in SECTION 3.4(A) until the expiration of
the Term. Upon termination pursuant to this SECTION 4.1, other than payment of
the Severance and the provision of medical and health benefits set forth above,
Company shall have no further obligations to Employee hereunder.
4.2 TERMINATION FOR CAUSE. This Agreement may be terminated by Company for
Cause upon written notice thereof given by Company to Employee. In the event of
termination pursuant to this SECTION 4.2, Company shall pay Employee his monthly
base salary (subject to standard deductions) earned PRO RATA to the date of such
termination and Company shall have no further obligations to Employee hereunder.
The term "Cause" shall include, without limitation, the following, as determined
by the Board in its sole judgment: (i) Employee wilfully breaches any of the
material terms of this Agreement; (ii) Employee is convicted of a felony; (iii)
Employee fails, after at least one warning, to perform reasonable duties
assigned under this Agreement (other than a failure due to death or physical or
mental disability); (iv) Employee intentionally engages in conduct which is
demonstrably and materially injurious to Company; (v) Employee commits fraud or
theft of personal or Company property from Company premises; (vi) Employee
falsifies Company documents or records; (vii) Employee engages in acts of gross
carelessness or willful negligence that endanger life or property on Company
premises; (viii) Employee uses, distributes or is under the influence of illegal
drugs, alcohol or any other intoxicant on Company premises; (ix) Employee
possesses or stores hand guns on Company premises; (x) Employee commits any act
of sexual
-4-
<PAGE>
harassment with respect to any other employee of Company; or (xi) Employee
intentionally violates state, federal or local laws and regulations.
4.3 TERMINATION UPON DEATH OR DISABILITY. In the event that Employee dies,
this Agreement shall terminate upon Employee's death. Likewise, if Employee
becomes unable to perform the essential functions of his duties hereunder, with
or without reasonable accommodation, on account of illness, disability or other
reason whatsoever for a period of more than 180 consecutive or nonconsecutive
days in any 12-month period, Company may, upon notice to Employee, terminate
this Agreement. In the event of termination pursuant to this SECTION 4.3,
Employee (or his legal representatives) shall be entitled only to his monthly
base salary earned PRO RATA for services actually rendered prior to the date of
such termination; PROVIDED, HOWEVER, Employee shall not be entitled to his
monthly base salary for any period with respect to which Employee has received
short-term or long-term disability benefits under employee benefit plans
maintained from time to time by Company.
ARTICLE 5
PROPRIETARY PROPERTY; CONFIDENTIAL INFORMATION
5.1 CONFIDENTIAL INFORMATION. During the course of performing his services
pursuant to this Agreement, Employee acknowledges that he will have access to
trade secrets, proprietary information and other information concerning Tristar
Corporation and its products and business which Tristar Corporation maintains
confidential and is not generally available to the public ("Confidential
Information"). Without the prior written consent of Tristar Corporation,
Employee will not, at any time during or following the term of this Agreement,
disclose to any third person, or use for the benefit of Employee or any third
person, any Confidential Information acquired by Employee from Tristar
Corporation during the term of this Agreement. The foregoing restrictions will
not apply to any information which (a) becomes available to the public generally
(otherwise than by reason of Employee's breach of the provisions of this
Section), (b) can be shown by written records to have been known by Employee
prior to the date of this Agreement, or (c) is lawfully acquired by Employee
from another person. In the event Confidential Information is required to be
disclosed by Employee under court or governmental order, rule or regulation,
Employee shall immediately provide Tristar Corporation with notice thereof at
the address provided for Company below and shall give full and complete
cooperation to Tristar Corporation in its efforts to object to, and to obtain
protection of any Confidential Information that is the subject of, such required
disclosure. Upon termination of this Agreement, regardless of how such
termination may be brought about, Employee agrees to deliver to Tristar
Corporation or to destroy, at the option of Tristar Corporation, all
Confidential Information in the possession or control of Employee.
5.2 PUBLICITY. During the term of this Agreement and for a period of ten
years thereafter, Employee shall not, directly or indirectly, originate or
participate in the origination of any publicity, news release or other public
announcements, written or oral, whether to the public press or otherwise,
relating to this Agreement, to any amendment hereto, to Employee's employment
hereunder or to Tristar Corporation, without the prior written approval of
Company.
-5-
<PAGE>
5.3 EQUITABLE RELIEF. In the event of a breach or a threatened breach by
Employee of any of the provisions contained in this ARTICLE 5, Employee
acknowledges that Tristar Corporation will suffer irreparable injury not fully
compensable by money damages and, therefore, will not have an adequate remedy
available at law. Accordingly, Tristar Corporation shall be entitled, without
the necessity of posting a bond, to obtain such injunctive relief or other
equitable remedy from any court of competent jurisdiction as may be necessary or
appropriate to prevent or curtail any such breach, threatened or actual. The
foregoing shall be in addition to and without prejudice to any other rights that
Tristar Corporation may have under this Agreement, at law or in equity,
including, without limitation, the right to sue for damages.
5.4 TRISTAR CORPORATION DEFINED. When used in this ARTICLE 5 and in
ARTICLE 6, "Tristar Corporation" includes Company, Tristar, and all affiliates
and subsidiaries of Tristar.
ARTICLE 6
RESTRICTIVE COVENANTS
6.1 NON-COMPETITION. In consideration of the benefits of this Agreement,
including Employee's access to and limited use of proprietary and confidential
information of Tristar Corporation, as well as training, education and
experience provided to Employee by Tristar Corporation directly and/or as a
result of work projects assigned by Tristar Corporation with respect thereto,
Employee hereby covenants and agrees that during the term of this Agreement and
for a period of 3 years following termination of this Agreement, regardless of
how such termination may be brought about, Employee shall not, directly or
indirectly, as proprietor, partner, stockholder, director, officer, employee,
consultant, joint venturer, investor or in any other capacity, engage in, or
own, manage, operate or control, or participate in the ownership, management,
operation or control, of any entity which engages in any of Tristar
Corporation's geographical or commercial markets in the business of developing,
manufacturing, marketing and distributing designer alternative fragrances, body
sprays or cosmetic pencils; PROVIDED, HOWEVER, the foregoing shall not, in any
event, prohibit Employee from purchasing and holding as an investment not more
than 1% of any class of publicly traded securities of any entity which conducts
a business in competition with the business of Tristar Corporation, so long as
Employee does not participate in any way in the management, operation or control
of such entity. It is further recognized and agreed that, even though an
activity may not be restricted under the foregoing provision, Employee shall not
during the term of this Agreement and for a period of 12 months following
termination of this Agreement, regardless of how such termination may be brought
about, provide any services to any person or entity which may be used against,
or in conflict with the interests of, Tristar Corporation or its customers or
clients.
6.2 JUDICIAL REFORMATION. Employee acknowledges that, given the nature of
Tristar Corporation's business, the covenants contained in SECTION 6.1 establish
reasonable limitations as to time, geographic area and scope of activity to be
restrained and do not impose a greater restraint than is reasonably necessary to
protect and preserve the goodwill of Tristar Corporation's business and to
protect its legitimate business interests. If, however, SECTION 6.1 is
determined by any court
-6-
<PAGE>
of competent jurisdiction to be unenforceable by reason of its extending for too
long a period of time or over too large a geographic area or by reason of it
being too extensive in any other respect or for any other reason, it will be
interpreted to extend only over the longest period of time for which it may be
enforceable and/or over the largest geographic area as to which it may be
enforceable and/or to the maximum extent in all other aspects as to which it may
be enforceable, all as determined by such court.
6.3 CUSTOMER LISTS; NON-SOLICITATION. In consideration of the benefits of
this Agreement, including Employee's access to and limited use of proprietary
and confidential information of Tristar Corporation, as well as training,
education and experience provided to Employee by Tristar Corporation directly
and/or as a result of work projects assigned by Tristar Corporation with respect
thereto, Employee hereby further covenants and agrees that for a period of 5
years following the termination of this Agreement, regardless of how such
termination may be brought about, Employee shall not, directly or indirectly,
(a) use or make known to any person or entity the names or addresses of any
clients or customers of Tristar Corporation or any other information pertaining
to them, (b) call on, solicit, take away or attempt to call on, solicit or take
away any clients or customers of Tristar Corporation on whom Employee called or
with whom he became acquainted during his employment with Company, nor (c)
recruit, hire or attempt to recruit or hire any employees of Tristar
Corporation.
6.4 EQUITABLE RELIEF. In the event of a breach or a threatened breach by
Employee of any of the provisions contained in this ARTICLE 6, Employee
acknowledges that Tristar Corporation will suffer irreparable injury not fully
compensable by money damages and, therefore, will not have an adequate remedy
available at law. Accordingly, Tristar Corporation shall be entitled, without
the necessity of posting a bond, to obtain such injunctive relief or other
equitable remedy from any court of competent jurisdiction as may be necessary or
appropriate to prevent or curtail any such breach, threatened or actual. The
foregoing shall be in addition to and without prejudice to any other rights that
Tristar Corporation may have under this Agreement, at law or in equity,
including, without limitation, the right to sue for damages.
ARTICLE 7
ARBITRATION
Except for the provisions of ARTICLES 5 and 6 of this Agreement dealing
with proprietary property, confidential information and restrictive covenants,
with respect to which Company expressly reserves the right to petition a court
directly for injunctive and other relief, any claim, dispute or controversy of
any nature whatsoever, including but not limited to tort claims or contract
disputes between the parties to this Agreement or their respective heirs,
executors, administrators, legal representatives, successors and assigns, as
applicable, arising out of or related to Employee's employment or the terms and
conditions of this Agreement, including the implementation, applicability or
interpretation thereof, shall be resolved in accordance with the dispute
resolution procedures set forth in APPENDIX A attached hereto and made a part
hereof.
-7-
<PAGE>
ARTICLE 8
MISCELLANEOUS
8.1 SURVIVAL OF PROVISIONS. The covenants and provisions of ARTICLES 5, 6
and 7 hereof shall survive any termination of this Agreement and continue for
the periods indicated, regardless of how such termination may be brought about.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
mailed by certified mail (return receipt requested) or sent by an overnight
delivery service with tracking procedures or by facsimile to the parties at the
following addresses or at such other addresses as shall be specified by the
parties by like notice: If to Employee, at the address set forth below his name
on the signature page hereof; and if to Company, at 12500 San Pedro Avenue,
Suite 500, San Antonio, Texas 78216, Attention:
Chief Financial Officer.
8.3 NO RIGHTS IN CONTRACTS. Employee acknowledges and agrees that he or
she shall not have any rights in or to any contracts entered into with clients
or customers of Company in connection with services provided by Employee
hereunder (including those in which Employee may be specifically named with
Company), unless otherwise agreed to in writing by Company.
8.4 ASSIGNMENT. The rights and obligations of Company under this Agreement
shall inure to the benefit of and shall be binding upon the successors and
assigns of Company; provided that Company may only assign this Agreement to an
affiliate or subsidiary of Tristar. Employee's rights under this Agreement are
not assignable and any attempted assignment thereof shall be null and void.
8.5 GOVERNING LAW; JURISDICTION; VENUE. This Agreement shall be subject to
and governed by the laws of the State of Connecticut without regard to conflict
of law principles. Subject to the provisions of ARTICLE 7 hereof, the parties
agree to submit to the jurisdiction of the federal and state courts of the State
of Connecticut and the State of New York with respect to the breach or
interpretation of this Agreement or the enforcement of any and all rights,
duties, liabilities, obligations, powers and other relations among the parties
arising under this Agreement. Subject to the provisions of ARTICLE 7 hereof,
non-exclusive venue for any action permitted hereunder shall be proper in
Bridgeport, Fairfield County, Connecticut and New York, New York County, New
York, and the parties hereby consent to the jurisdiction of Connecticut and New
York courts and to such venues.
8.6 GUARANTEE. Tristar hereby guarantees the payment obligations of
Company hereunder.
8.7 ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the entire
agreement between the parties and supersedes all other agreements between the
parties which may relate to the
-8-
<PAGE>
subject matter contained in this Agreement. This Agreement may not be amended or
modified except by an agreement in writing which refers to this Agreement and is
signed by both parties.
8.8 HEADINGS. The headings of sections and subsections of this Agreement
are for convenience only and shall not in any way affect the interpretation of
any provision of this Agreement or of the Agreement itself.
8.9 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
8.10 WAIVER. The waiver by any party of a breach of any provision hereof
shall not be deemed to constitute the waiver of any prior or subsequent breach
of the same provision or any other provisions hereof. Further, the failure of
any party to 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 unless such party expressly waives such provision pursuant to
a written instrument which refers to this Agreement and is signed by such party.
8.11 REVIEW OF COUNSEL. Each party acknowledges that it and its counsel
have received, reviewed and been involved in the drafting of this Agreement and
that normal rules of construction, to the effect that ambiguities are to be
resolved against the drafting party, shall not apply.
[SIGNATURES ON FOLLOWING PAGE]
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Employment Agreement as
of the day and year first above written.
TRISTAR USA, INC.
By: _____________________________________
Robert M. Viola
Executive Vice President
EMPLOYEE:
_________________________________________
Thomas E. McCann
Address: 43 Bradley Road
Weston, Connecticut 06883
The undersigned joins for the sole purpose of agreeing to the provisions of
SECTION 8.6 hereof.
TRISTAR CORPORATION
By: ____________________________________
Robert M. Viola
Executive Vice President
-10-
<PAGE>
APPENDIX A
DISPUTE RESOLUTION PROCEDURES
Re: Employment Agreement dated November 10, 1999 (including any amendments,
the "Agreement"), between Tristar USA, Inc., a Delaware corporation ("Company"),
and Thomas E. McCann ("Employee"). Unless otherwise defined in this APPENDIX A,
terms defined in the Agreement and used herein shall have the meanings set forth
therein.
A. NEGOTIATIONS. If any claim, dispute or controversy described in ARTICLE
7 of the Agreement (collectively, the "Dispute") arises, either party may, by
written notice to the party, have the Dispute referred to the persons designated
below for attempted resolution by good faith negotiations within 45 days after
such written notice is received. Such designated persons are as follows:
1. COMPANY. The Chairman of the Board and Chief Executive Officer or
his designee; and
2. EMPLOYEE. Employee or his designee.
Any settlement reached by the parties under this PARAGRAPH A shall not be
binding until reduced to writing and signed by both parties. When reduced to
writing, such settlement agreement shall supersede all other agreements, written
or oral, to the extent such agreements specifically pertain to the matters so
settled. If the above-designated persons are unable to resolve such dispute
within such 45-day period, either party may invoke the provisions of PARAGRAPH B
below.
B. ARBITRATION. All Disputes shall be settled by negotiation among the
parties as described in PARAGRAPH A above or, if such negotiation is
unsuccessful, by binding arbitration in accordance with procedures set forth in
PARAGRAPHS C and D below.
C. NOTICE. Notice of demand for binding arbitration by one party shall be
given in writing to the other party pursuant to the Agreement. In no event may a
notice of demand of any kind be filed more than one (1) year after the date the
Dispute is first asserted in writing to the other party pursuant to PARAGRAPH A
above, and if such demand is not timely filed, the Dispute referenced in the
notice given pursuant to PARAGRAPH A above shall be deemed released, waived,
barred and unenforceable for all time, and barred as if by statute of
limitations.
D. BINDING ARBITRATION. Upon filing of a notice of demand for binding
arbitration by either party, arbitration shall be commenced and conducted as
follows:
1. ARBITRATORS. All Disputes and related matters in question shall be
referred to and decided and settled by a panel of three arbitrators, one
selected by Company, one selected by Employee and the third selected by the two
arbitrators so selected. Selection of the arbitrators to be
A-1
<PAGE>
selected Company and Employee shall be made within ten (10) business days after
the date of giving of a notice of demand for arbitration, and the two
arbitrators so appointed shall appoint the third within 10 business days
following their appointment. No person who has a bias, or financial or personal
interest in the result of the arbitration or any past or present relationship
with the parties or their representatives shall serve as arbitrator
2. COST OF ARBITRATION. The cost of arbitration proceedings, including
without limitation the arbitrators' compensation and expenses, hearing room
charges, court reporter transcript charges etc., shall be borne by the parties
equally or otherwise as the arbitrators may determine. The arbitrators may award
the prevailing party its reasonable attorneys' fees and costs incurred in
connection with the arbitration. The arbitrators are specifically instructed to
award attorneys' fees for instances of abuse in the discovery process.
3. LOCATION OF PROCEEDINGS. The arbitration proceedings shall be held
in the city and state where Employee's principal office with Company is located
at such time or, if Employee is not employed by Company at the time of such
arbitration proceedings, in the city and state where Company's principal office
with Company was located immediately prior to the termination of Employee's
employment with Company, unless the parties agree otherwise.
4. PRE-HEARING DISCOVERY. The parties shall have the right to conduct
and enforce pre- hearing discovery in accordance with the then current Federal
Rules of Civil Procedure, subject to these limitations:
(a) Each party may serve no more than one set of interrogatories
limited to 30 questions, including sub-parts;
(b) Each party may depose the other party's expert witnesses who
will be called to testify at the hearing, plus two fact witnesses without
regard to whether they will be called to testify (each party will be
entitled to a total of no more than 24 hours of deposition time of the
other party's witnesses), provided however, that the arbitrators may
provide for additional depositions upon showing of good cause; and
(c) Document discovery and other discovery shall be under the
control of and enforceable by the arbitrators.
5. DISCOVERY DISPUTES. All discovery disputes shall be decided by the
arbitrators. The arbitrators are empowered;
(a) to issue subpoenas to compel pre-hearing document or
deposition discovery;
(b) to enforce the discovery rights and obligations of the
parties; and
(c) to otherwise to control the scheduling and conduct of the
proceedings.
A-2
<PAGE>
Notwithstanding any contrary foregoing provisions, the arbitrators shall have
the power and authority to, and to the fullest extent practicable shall,
abbreviate arbitration discovery in a manner which is fair to all parties in
order to expedite the conclusion of each alternative dispute resolution
proceeding.
6. PRE-HEARING CONFERENCE. Within fifteen (15) days after selection of
the third arbitrator, or as soon thereafter as is mutually convenient to the
arbitrators, the arbitrators shall hold a pre- hearing conference to establish
schedules for completion of discovery, for exchange of exhibit and witness
lists, for arbitration briefs and for the hearing, and to decide procedural
matters and address all other questions that may be presented.
7. HEARING PROCEDURES. The hearing shall be conducted to preserve its
privacy and to allow reasonable procedural due process. Rules of evidence need
not be strictly followed, and the hearing shall be streamlined as follows:
(a) Documents shall be self-authenticating, subject to valid
objection by the opposing party;
(b) Expert reports, witness biographies, depositions and
affidavits may be utilized, subject to the opponent's right of a live
cross-examination of the witness in person;
(c) Charts, graphs and summaries shall be utilized to present
voluminous data, provided (i) that the underlying data is made available to
the opposing party thirty (30) days prior to the hearing, and (ii) that the
preparer of each chart, graph or summary is available for explanation and
live cross-examination in person;
(d) The hearing should be held on consecutive business days
without interruption to the maximum extent practicable; and
(e) The arbitrators shall establish all other procedural rules for
the conduct of the arbitration in accordance with the rules of arbitration
of the Center for Public Resources.
8. GOVERNING LAW. This arbitration provision shall be governed by, and
all rights and obligations specifically enforceable under and pursuant to, the
Federal Arbitration Act (9 U.S.C. ss. 1, ET SEQ.)
9. CONSOLIDATION. No arbitration shall include, by consolidation,
joinder or in any other manner, any additional person not a party to the
Agreement, except by written consent of both parties containing a specific
reference to these provisions.
10. AWARD. The arbitrators are empowered to render an award of general
compensatory damages and equitable relief (including, without limitations,
injunctive relief), but are not empowered to award exemplary, special or
punitive damages. The award rendered by the arbitrators
A-3
<PAGE>
(a) shall be final, (b) shall not constitute a basis for collateral estoppel as
to any issue and (c) shall not be subject to vacation or modification.
11. CONFIDENTIALITY. The parties hereto will maintain the substance of
any proceedings hereunder in confidence and the arbitrators, prior to any
proceedings hereunder, will sign an agreement whereby the arbitrators agree to
keep the substance of any proceedings hereunder in confidence.
A-4
<PAGE>
EXHIBIT A
LONG-TERM INCENTIVE PLAN
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (this "Agreement") dated as of the Grant Date (the
"Grant Date") set forth on Schedule I hereto, between TRISTAR CORPORATION, a
Delaware corporation (the "Company"), and the employee of the Company or of a
subsidiary of the Company identified on Schedule I hereto (the "Employee").
On the Grant Date the Company granted to the Employee the option or options
hereinafter described pursuant to, and subject to and upon the terms and
conditions set forth in, the Tristar Corporation Long-Term Incentive Plan, as
amended from time to time (the "Plan"), and promptly thereafter notified the
Employee of the grant of such option or options.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto hereby
agree as follows:
1. GRANT OF OPTION.
(a) On the Grant Date, the Company irrevocably granted to the Employee,
as a matter of separate agreement and not in lieu of salary or any other
compensation for services, the right and option to purchase all or any part
of the aggregate number of shares of its Common Stock, par value $.01 per
share (the "Common Stock"), set forth on Schedule I hereto, on the terms
and conditions herein set forth.
(b) To the extent set forth in Schedule I hereto, the right and option
to purchase shares of Common Stock are intended to be an incentive stock
option (an "ISO") within the meaning of Section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code"). To the extent such right and
option to purchase shares of Common Stock as set forth on Schedule I hereto
is not identified as being intended to be an ISO, such right and option
will be considered a non-statutory option. In addition, to the extent that
a right and option to purchase shares of Common Stock intended to be an ISO
does not qualify as an ISO, such right and option, to the extent that it
does not so qualify, shall be converted to a non-statutory option.
(c) The ISOs and non-statutory stock options granted to the Employee
hereunder are each referred to as an "Option" and collectively referred to
as the "Options".
Exhibit A-1
<PAGE>
2. TERMS.
(a) EXERCISE PRICE. The exercise price per share for the shares of
Common Stock subject to an Option granted hereunder shall be the per share
amount set forth in Schedule I hereto for such Option (the "Exercise
Price"). With respect to any Option that is intended to be an ISO, the
Exercise Price shall not be less than the fair market value per share
(determined as of the date the Option is granted) of the Common Stock on
such date.
(b) VESTING. Subject to the provisions of Section 4 of this Agreement
and the provisions of the Plan, the Option or Options granted hereunder
shall become exercisable as to the portions of the aggregate number of
shares covered by such Option as set forth on Schedule I hereto on and
after each of the related dates during the term of such Option set forth on
Schedule I hereto.
(c) TERM AND CONDITIONS OF EXERCISE. An Option granted hereunder shall
be exercisable in whole at any time or in part from time to time during the
term of such Option as to all or any of the shares then purchasable under
such Option, but not as to less than the minimum number of shares stated on
Schedule I hereto with respect to such Option (or the shares then
purchasable under the Option if less than such minimum) at any one time;
provided that if there is a Tandem SAR (as defined in the Plan) outstanding
which relates to any of the shares purchasable under such Option, then the
number of shares so purchasable shall be reduced by the number of shares in
respect of which the Tandem SAR has been exercised.
The term of the Option or Options subject hereto shall be for the
number of years from the Grant Date set forth on Schedule I hereto with
respect to such Option or such shorter period of time as is described in
Section 4. In no event shall the term of the Option exceed ten years from
the Grant Date.
Except as provided in Section 4, an Option granted hereunder shall not
be exercisable unless the Employee shall, at the time of exercise, be an
employee of the Company or of a subsidiary of the Company. The holder of
such Option shall have none of the rights of a shareholder with respect to
the shares subject to such Option until such shares are transferred to the
holder upon the exercise of such Option.
3. RESTRICTIONS ON TRANSFER. An Option granted hereunder shall not be
assignable or transferrable by the Employee except by will or by the laws of
descent and distribution, and subject to Section 4(a), such Option is
exercisable, during the Employee's lifetime, only by the Employee. The
designation of a beneficiary by the Employee shall not constitute a transfer.
More particularly (but without limiting the generality of the foregoing), such
Option may not be assigned, transferred (except as aforesaid), pledged or
encumbered in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process. In the event of any
attempted assignment, transfer, pledge, encumbrance or other disposition of such
Option contrary to the
Exhibit A-2
<PAGE>
provisions hereof, or the levy of any attachment or similar process upon such
Option, such Option shall be null and void and of no further effect.
4. STATUS OF OPTION UPON CERTAIN EVENTS. If the Employee's employment shall
terminate prior to the complete exercise of an Option granted hereunder, then
such Option shall thereafter be exercisable solely to the extent provided in
paragraphs (a) through (c) of this Section 4; provided, however, that (i) such
Option may not be exercised after the scheduled expiration date and (ii) if the
Employee's employment terminates for any reason other than as contemplated by
paragraphs (a) through (c) of this Section 4, the Option shall remain
exercisable for a period of 30 days following such termination (but in no event
shall such period extend beyond the scheduled expiration of such Option) at
which time such Option shall immediately terminate and be forfeited, but only
for the number of shares for which such Option shall have vested as provided on
Schedule I hereto as of the date of such termination.
(a) DEATH OR DISABILITY OR RETIREMENT. If the Employee shall die, be
subject to Disability (as defined in Section 22(e)(3) of the Code) while
employed by the Company or a subsidiary or retire (as such term is used in
any of the Company's pension plans), an Option granted hereunder (unless
previously terminated pursuant to paragraphs (b) or (c) below) may be
exercised as follows: (i) in the case of death, in full for the aggregate
number of shares covered thereby by the legatee or legatees of such Option
under the Employee's last will, or by the personal representatives or
distributees of the Employee, at any time within a period of one year after
the Employee's death, but in no event after the expiration of such Option
set forth in Section 2(c); (ii) in the case of Disability while employed by
the Company or a subsidiary, in full for the aggregate number of shares
covered thereby by the Employee or by the personal representatives of the
Employee if the Employee is unable to act for himself or herself, at any
time within a period of one year after the Employee ceases to be an
employee of the Company or one of its subsidiaries, but in no event after
the expiration of such Option set forth in Section 2(c) herein; and (iii)
in the case of retirement, for (a) the number of shares for which such
Option shall have vested as provided on Schedule I hereto as of the date of
such retirement, and (b) so long as the Employee does not become employed
by a "competitor" of the Company subsequent to such retirement, such
additional number of shares which shall thereafter become vested subsequent
to the date of such retirement pursuant to the Vesting Schedule set forth
on Schedule I hereto; by the Employee or by the personal representatives of
the Employee if the Employee is unable to act for himself or herself, at
any time within a period of five years after the date of such retirement,
but in no event after the expiration of the Option set forth in Section
2(c) herein. A determination as to whether the Employee has become employed
by a "competitor," and the definition of "competitor," shall be made by the
Compensation Committee of the Company (the "Committee"), in its sole
discretion. If an ISO is exercised more than three months after the
Employee's retirement and the Employee has not died or incurred a
Disability, such Option will be converted to a non-statutory option.
(b) TERMINATION WITH CAUSE. If the Employee's employment with the
Company or a subsidiary shall be terminated by the Company or such
subsidiary for "cause" (as
Exhibit A-3
<PAGE>
defined below) prior to the exercise of any part of the Option or Options
granted hereunder, then such Option or Options held by the Employee shall
immediately terminate and be forfeited unless the Committee, in its sole
discretion, shall otherwise determine. For purposes hereof, the term
"cause" shall have the meaning assigned thereto in that certain Employment
Agreement, dated of even date herewith, between the Employee and Tristar
USA, Inc., a Delaware corporation and a subsidiary of the Company.
(c) CHANGE IN EMPLOYMENT. The Option or Options granted hereunder shall
not be affected by any change of employment (or by any temporary leave of
absence approved by the Committee or by the Board itself), so long as the
Employee continues to be in the employ of the Company or of a subsidiary of
the Company.
5. ADJUSTMENTS. If all or any portion of an Option granted hereunder is
exercised subsequent to any stock dividend, stock split, recapitalization,
combination, exchange of shares, merger, consolidation, liquidation, split-up,
split-off, spin-off or other similar change in capitalization, any distribution
to stockholders, including a rights offering, other than regular cash dividends,
changes in the outstanding stock of the Company by reason of any increase or
decrease in the number of issued shares of Common Stock resulting from a
split-up or consolidation of shares or any similar capital adjustment or the
payment of any stock dividend, any share repurchase at a price in excess of the
closing market price (as determined by the Committee) of the Common Stock at the
time such repurchase is announced or other increase or decrease in the number of
such shares, the Committee may make such appropriate adjustments in the purchase
price paid upon exercise of such Option and the aggregate number and class of
shares or other securities or property issuable upon any such exercise as the
Committee shall, in its sole discretion, determine. In any such event, no
fractional share shall be issued upon any such exercise, and the aggregate price
paid shall be appropriately reduced on account of any fractional share not
issued; further, the minimum number of full shares which may be purchased upon
any such exercise shall be the minimum number specified on Schedule I hereto
adjusted proportionately.
6. PAYMENT; METHOD OF EXERCISE. Payment of the purchase price of the shares
of Common Stock subject to an Option granted hereunder may be made (i) in any
combination of cash or whole shares of Common Stock already owned by the
Employee or (ii) in shares of Common Stock withheld by the Company from the
shares of Common Stock otherwise issuable to the Employee as a result of the
exercise of such Option ("cashless exercise"). Subject to the terms and
conditions of this Agreement, such Option may be exercised by written notice to
the Company at its principal office, attention of the Secretary. Such notice
shall (a) state the election to exercise such Option, the number of shares in
respect of which it is being exercised and the manner of payment for such shares
and (b) be signed by the person or persons so exercising such Option and, in the
event such Option is being exercised pursuant to Section 4 by any person or
persons other than the Employee, accompanied by appropriate proof of the right
of such person or persons to exercise such Option. If the Option being exercised
is an ISO and non-statutory options have also been granted to the Employee
hereunder, such notice shall also identify whether the Option being exercised is
an ISO and, if so, the number of shares of Common Stock to be purchased pursuant
to such exercise. Such notice shall either (i) elect cashless exercise or be
accompanied by payment of the full purchase price
Exhibit A-4
<PAGE>
of such shares, in which event the Company shall issue and deliver a certificate
or certificates representing such shares as soon as practicable after the notice
is received, or (ii) fix a date (not more than 10 business days from the date of
such notice) for the payment of the full purchase price of such shares at the
Company's principal office, against delivery of a certificate or certificates
representing such shares. Cash payments of such purchase price shall, in case of
clause (i) or (ii) above, be made by cash or check payable to the order of the
Company. Common Stock payments (valued at the closing market price on the date
of exercise, as determined by the Committee), shall be made by delivery of stock
certificates in negotiable form. All cash and Common Stock payments shall, in
either case, be delivered to the Company at its principal office, attention of
the Secretary. Shares of Common Stock withheld pursuant to a cashless exercise
election shall be valued at the closing market price on the date of exercise, as
determined by the Committee. If certificates representing Common Stock are used
to pay all or part of the purchase price of an Option granted hereunder, a
replacement certificate shall be delivered by the Company representing the
number of shares delivered but not so used, and an additional certificate shall
be delivered representing the additional shares to which the holder of such
Option is entitled as a result of the exercise of such Option. The certificate
or certificates for the shares as to which such Option shall have been so
exercised shall be registered in the name of the person or persons so exercising
the Option and shall be delivered as aforesaid to or upon the written order of
the person or persons exercising such Option. All shares issued as provided
herein will be fully paid and nonassessable.
7. ADMINISTRATION. The Committee shall have the power to interpret the Plan
and this Agreement, and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret or revoke any such rules. All actions taken and all interpretations
and determinations made by the Committee shall be final and binding upon the
Employee, the Company and all other interested persons.
8. TAXES. The Company shall have the right to deduct or withhold, or
require the person exercising an Option to remit to the Company, an amount
sufficient to satisfy federal, state and local taxes (including such person's
FICA obligation) required by law to be withheld with respect to any taxable
event arising or as a result of this Option.
9. RESERVES, ETC. Shares of Common Stock delivered upon the exercise of an
Option granted hereunder shall, in the discretion of the Board of Directors of
the Company or the Committee, be either shares of Common Stock heretofore or
hereafter authorized and then unissued, or previously issued shares of Common
Stock heretofore or hereafter acquired through purchase in the open market or
otherwise, or some of each. The Company shall be under no obligation to reserve
or to retain in its treasury any particular number of shares of Common Stock at
any time, and no particular shares, whether unissued or held as treasury shares,
shall be identified as those covered by an Option granted hereunder.
10. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in this Agreement or in the
Plan shall confer upon the Employee any right to continue in the employ of the
Company or any subsidiary of the Company or shall interfere with or restrict in
any way the rights of the Company or any subsidiary of the Company, which are
hereby expressly reserved, to discharge the Employee at any time for any reason
whatsoever, with or without cause.
Exhibit A-5
<PAGE>
11. GENERAL RESTRICTIONS.
(a) An Option granted hereunder shall be subject to the requirement
that, if at any time the Committee shall determine that (i) the listing,
registration or qualification of the shares of Common Stock subject or
related thereto upon any securities exchange or under any state or Federal
law, or (ii) the consent or approval of any governmental regulatory body,
or (iii) an agreement by the recipient of such Option granted pursuant to
this Agreement with respect to the disposition of shares of Common Stock is
necessary or desirable (in connection with any requirement or
interpretation of any Federal or state securities law, rule or regulation)
as a condition of, or in connection with, the granting of such Option or
the issuance, purchase or delivery of shares of Common Stock thereunder,
such Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the
Committee.
(b) The Employee hereby (i) represents and warrants that any shares of
Common Stock issued, transferred or delivered to, or acquired by, the
Employee pursuant to this Agreement shall be acquired solely for the
Employee's own account for investment, and not with a view to any
distribution thereof that would violate the Securities Act of 1933 (the
"Securities Act") or the applicable securities laws of any state, (ii)
agrees that he or she will not distribute any such shares of Common Stock
in violation of the Securities Act or the applicable securities laws of any
state, and (iii) acknowledges that, unless notified to the contrary by the
Company, such shares of Common Stock will not have been registered under
the Securities Act or the securities laws of any state and must be held
indefinitely unless subsequently registered under the Securities Act and
any applicable state securities laws or unless an exemption from such
registration becomes or is available.
12. ENTIRE AGREEMENT; AMENDMENT. This Agreement together with the Plan
constitutes the entire agreement between the parties with respect to the subject
matter hereof. Any term or provision of this Agreement may be waived at any time
by the party which is entitled to the benefits thereof, except that any waiver
of any term or condition of this Agreement must be in writing.
The Committee shall have the authority to amend this Agreement to include
any provision which, at the time of such amendment, is authorized under the
terms of the Plan; however, an Option granted hereunder may not be revoked or
altered in a manner unfavorable to the holder without the written consent of the
holder.
13. GOVERNING LAW. The laws of the State of Delaware shall govern the
interpretation, validity and performance of the terms of this Agreement
regardless of the law that might be applied under principles of conflict of
laws.
14. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the successors, assigns and heirs of the respective parties.
Exhibit A-6
<PAGE>
15. NOTICES. All notices or other communications made or given in
connection with this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by registered or certified mail, return
receipt requested, to those listed below at their following respective addresses
or at such other address as each may specify by notice to the others:
TO THE EMPLOYEE:
As set forth in Schedule I
TO THE COMPANY:
MAILING ADDRESS:
Tristar Corporation
12500 San Pedro, Suite 500
San Antonio, Texas 78216
Attention: Compensation Committee
16. WAIVER. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver thereof
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
17. CONSTRUCTION. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation on construction of the Agreement. The
singular form shall include the plural, when the context so indicates. In the
event of an inconsistence between the terms of this Agreement and the terms of
Schedule I hereto, the terms of Schedule I shall prevail. In the event of an
inconsistency between the terms of this Agreement (including Schedule I) and the
terms of the Plan, the terms of the Plan shall prevail.
[SIGNATURES ON FOLLOWING PAGE]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunto duly authorized, and the Employee has hereunto
set his or her signature, all as of the Grant Date.
TRISTAR CORPORATION
By:
Name:
Title:
EMPLOYEE
Thomas E. McCann
<PAGE>
SCHEDULE I
Employee Name Thomas E. McCann
Employee Address 43 Bradley Road
Weston, Connecticut 06883
Grant Date November __, 1999
Shares of Common Stock underlying Option 150,000
Option Term 10 years
Options Considered to be ISO's within
the meaning of Section 422(b) of the
Code Yes XX No
Exercise Price Per Share $_________
(Closing price on Grant Date
as reported by the Nasdaq SmallCap
Market)
Vesting Schedule:
The Option shall be exercisable according to the following schedule:
November __, 1999 35,000
November __, 2000 23,000
November __, 2001 23,000
November __, 2002 23,000
November __, 2003 23,000
November __, 2004 23,000
Schedule I-1
