SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) NA
Specialty Retail Group, Inc.
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(Exact name of registrant as specified in its charter)
Florida 0-18797 59-2824411
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
1720 Post Road East, Westport, Connecticut 06880
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 256-4380
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The Index to Exhibits
appears on page 7
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Item 5. Other Events.
A. On January 31, 1997, Registrant's wholly owned subsidiary, Building
Blocks, Inc. ("BBI"), which currently operates five retail toy stores, filed a
petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court for the Southern District of New York (Case No. 97-B-40684
(BRL)). The petition seeks protection from creditors while BBI attempts to
dispose of its retail stores either through sales of the stores and assignment
of their leases or by the liquidation of inventory and fixtures. References to
Registrant are to Specialty Retail Group, Inc. only.
B. Effective January 28, 1997, Building Blocks Holdings, Inc. ("Holdings"),
a wholly owned subsidiary of the Registrant, sold all of the outstanding capital
stock of Holdings' wholly owned subsidiary, Building Blocks Franchise Corp.
("Franchise"), through which the Registrant's retail toy store franchising
operations has been conducted. The net proceeds from the sale received at
closing ($33,231) were paid over to BBI pursuant to an agreement with the
purchasers requiring Holdings to obtain a general release from BBI to Franchise.
Holdings will also receive additional net proceeds of the sale in an amount of
up to $20,000, which becomes payable, subject to possible offsets, 100 days
after the closing. Such net proceeds are also payable to BBI.
C. Registrant, which has no other business operations, has been attempting
to attract an operating business
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with which to effectuate a business combination. Registrant has only nominal
cash and has accounts payable of approximately $400,000. Registrant is also the
guarantor of a lease on which BBI is in default. The lessor has commenced a suit
against BBI to recover $180,000 as a result of such default. Registrant has been
receiving cash advances from two stockholders in order to meet its operating
expenses and has been obtaining forbearances from its principal creditors. To
date such advances, which have been in the form of demand loans, have aggregated
$52,500, which amount is included in the aforesaid $400,000. There are no
assurances as to the time or extent that the advances and/or forbearances will
continue. Further, Registrant has no understandings regarding a business
combination and there is no assurance that any business combination can ever be
effectuated. Any such combination may depend upon Registrant's ability to reach
settlements of its outstanding liabilities.
D. Registrant's Board of Directors now consists of Kevin R. Greene and
Seymour Zises.
E. Registrant and Steven E. Glass have entered into an agreement which,
among other things, modifies Registrant's obligations under its guarantee of Mr.
Glass' employment agreement with BBI (the "Employment Agreement"). As a result,
the Company will have the right, under certain circumstances, to employ Mr.
Glass on the same economic terms as are provided in the Employment Agreement. In
addition, the guarantee will terminate if Mr. Glass resigns without cause or if
his employment
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is terminated with cause by BBI or the Registrant (each a "Guarantee Termination
Event"). Registrant's obligation under the guarantee is subject to offset for
income earned by Mr. Glass from other employment if his employment is terminated
during the guarantee period other than as a result of a Guarantee Termination
Event.
F. The stock options held by Mr. Glass have been restructured and he
currently holds options to purchase 430,000 shares of common stock of Registrant
at $.05 per share. An aggregate of 280,000 of these options are vested and
exercisable for a period of six years from February 1, 1997; 75,000 shares vest
in June 1997 and become exercisable for six years thereafter if a Guarantee
Termination Event has not occurred, and 75,000 shares vest in June 1997 if Mr.
Glass' employment has terminated other than as a result of a Guarantee
Termination Event, or in March 1998 if his employment terminates during the
guarantee period other than as a result of Guarantee Termination Event but only
if the Company fails to perform its obligation under the guarantee.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
10.1 Stock Purchase Agreement among Building Blocks Holdings, Inc.,
James L. Angel and Cheryl D. Angel dated January 28, 1997.
10.2. Amendment dated January 7, 1997 to Employment Agreement
between Building Blocks, Inc. and Steven E. Glass.
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10.3 Letter Agreement dated January 24, 1997 between Registrant and
Steven E. Glass.
10.4 Letter Agreement dated January 24, 1997 between Registrant and
Steven E. Glass.
10.5 Option Agreement dated February 1, 1997 between Registrant and
Steven E. Glass.
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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 hereunto duly authorized.
Dated: February 7, 1997
SPECIALTY RETAIL GROUP, INC.
By: KEVIN R. GREENE
-----------------------------
Kevin R. Greene
Chairman of the Board
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INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
10.1 Stock Purchase Agreement among Building Blocks
Holdings, Inc., James L. Angel and Cheryl D.
Angel, dated January 28, 1997.
10.2. Amendment dated January 7, 1997 to Employment
Agreement between Building Blocks, Inc. and Steven
E. Glass.
10.3 Letter Agreement dated January 24, 1997 between
Registrant and Steven E. Glass.
10.4 Letter Agreement dated January 24, 1997 between
Registrant and Steven E. Glass.
10.5 Option Agreement dated February 1, 1997 between
Registrant and Steven E. Glass.
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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into this 28th day of
January, 1997, by and between Building Blocks Holdings, Inc., a Delaware
corporation having an address for notice purposes at 1720 Post Road East,
Westport, Connecticut 06880 (the "Seller"), and James L. Angel and Cheryl D.
Angel as joint tenants, having an address for notice purposes at 1209 Dee Side
Drive, Dublin, Ohio 43017 (collectively the "Buyers").
RECITALS
WHEREAS, the authorized capital stock of Building Blocks Franchise
Corp., a Delaware corporation (the "Corporation") consists of 1,000 shares of
common stock, par value $.01 per share, of which 100 shares (the "Shares") are
currently issued and outstanding and are owned beneficially by Seller; and
WHEREAS, the Buyers desire to purchase from the Seller, and the
Seller desires to sell to the Buyers, all of the Shares, on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the Recitals (which are hereby
incorporated into and shall be deemed a part of this Agreement), the covenants
and agreements contained in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
SECTION 1.
Definitions
In addition to terms defined elsewhere in this Agreement, the
following terms shall have the meanings set forth below for the purposes of this
Agreement.
1.1 "Agreement" shall mean this Stock Purchase Agreement, as amended
from time to time by the parties, together with all Schedules and Exhibits
hereto.
1.2 "Balance Sheet" shall mean an unaudited summary consolidated
balance sheet of the Corporation as of the date of the Closing prepared by the
Corporation from its books and records.
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1.3 "Contracts" shall mean all contracts, agreements,
understandings, indentures, notes, bonds, loans, instruments, leases, subleases,
mortgages, franchises, and licenses.
1.4 "Documents and Other Papers" shall mean and include any
material, whether in printed or electronic form, used in or relating in any way
to the business of the Corporation, including any document, agreement,
instrument, certificate, notice, consent, affidavit, letter, fax, statement,
file, manual, ledger, computer disk, microfiche or other document in electronic
format, schedule, exhibit or any other paper whatsoever.
1.5 "Law" shall mean any law, statute, code, regulation, ordinance,
rule, order, decree, judgment, consent decree, injunction, settlement agreement
or governmental requirement enacted, promulgated, entered into, agreed or
imposed by any governmental authority.
1.6 "Lien" shall mean any lien, pledge, security interest or
encumbrance.
1.7 "Taxes" shall mean all taxes, charges, fees, duties, levies or
other assessments, including income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational, interest equalization, windfall profits,
severance, employee's income withholding, unemployment and Social Security taxes
and other withholding taxes, which are imposed by any governmental authority,
and such term shall include any interest, penalties or additions to tax
attributable thereto.
1.8 "Tax Return" shall mean any report, return or other information
required to be supplied to a governmental authority in connection with any
Taxes.
SECTION 2.
Purchase And Sale Of Shares
2.1 Agreement to Purchase and Sell. On the Closing Date and upon the
terms and subject to the conditions set forth in this Agreement, the Seller
shall transfer all of its right, title and interest in the Shares to Buyers,
free and clear of all Liens, and Buyers shall purchase the Shares by paying
$53,231 (the "Purchase Price") to the Seller and shall accept the Shares.
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2.2 The Purchase Price shall be paid as follows: (a) $33,231 by
certified or bank check or wire transfer, subject to collection, at the Closing
(as defined in Paragraph 2.2 hereof), and (b) $20,000 no later than 100 days
after the Closing, subject to reduction as provided in Paragraph 8.3(d) hereof.
2.3 Closing. The closing of the purchase and sale contemplated
herein (the "Closing") shall take place simultaneously with the execution
hereof, at the offices of the Seller at 1720 Post Road East, Westport,
Connecticut 06880, or at such other time and place as the parties shall agree in
writing.
SECTION 3.
Closing
3.1 Delivery of Shares and Purchase Price. At the Closing the Seller
shall deliver to the Buyers certificate(s) representing the Shares together with
duly executed stock power(s) attached and all stock transfer taxes paid and the
Buyers shall deliver the Purchase Price for the Shares by wire transfer or bank
check payable to the Seller. In addition, the Corporation shall issue a duly
executed stock certificate for the Shares in the name of the Buyers against
delivery of the certificates for the Shares in the Seller's name for
cancellation.
3.2 Other Deliveries. At the Closing the Seller shall also deliver
(i) executed resignations of all of the officers and directors of the
Corporation (ii) a general release to the Corporation and Seller from Building
Blocks, Inc. excluding only its rights under the Trade Mark license from the
Corporation to Building Blocks, Inc. and (iii) the Balance Sheet.
3.3 Allocation of Liabilities. The Seller covenants that it shall
discharge, or cause to be discharged, all accounts payable indicated on the
Balance Sheet and the Accounts Payable Ageing Report attached hereto, except for
the sum of $6,513.82 due to Dow Jones & Company, Inc. relating to advertising in
the Wall Street Journal. The Buyers covenant that they shall discharge, or cause
the Corporation to discharge, this liability. Neither the Buyers nor the
Corporation shall be liable for the payment of any other accounts payable.
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SECTION 4.
Representations of the Corporation
4.1 Issuance of Shares. The Shares are duly authorized, validly
issued, fully paid and nonassessable and will be transferred to Purchaser free
of any Lien.
4.2 Authority to Execute and Perform Agreement; Binding Effect. The
Seller has the corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. Such execution, delivery and
performance have been duly authorized by all necessary corporate action on the
part of the Seller. This Agreement has been duly executed and delivered by the
Seller and constitutes the valid and legally binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, except as the same
may be limited by bankruptcy or other laws affecting the enforcement of
creditors' rights generally or by general equitable principles and except as
rights to indemnity may be limited by principles of public policy.
4.3 Organization and Capitalization.
(a) Each of the Seller and the Corporation is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Corporation has all requisite corporate power and
authority to own and operate its properties and to carry on its business as it
is now being conducted.
(b) The Seller has delivered to the Buyers true and complete
copies of the Corporation's (i) Certificate of Incorporation and all amendments
thereto and (ii) By-Laws now in effect.
(c) The Corporation has authorized capital of 1,000 shares of
Common Stock, par value $.01 per share. The issued and outstanding Common Stock
of the Corporation consists of 100 shares of Common Stock, all of which are duly
authorized, validly issued, fully paid and non-assessable shares and all of
which are owned beneficially and of record by the Seller, free and clear of any
Lien. There are no outstanding subscriptions, options, warrants or other rights
entitling any third party to acquire any shares of capital stock of the
Corporation.
4.4 Consents. No consent, license, approval, permit, authorization
or notification of, or registration, declaration or filing with, any
governmental authority is required to be obtained or made by the Seller, and no
consent or approval of any
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third party is required to be obtained by the Seller, in connection with the
execution, delivery or performance of this Agreement, except where the failure
to obtain or make such consent, license, approval, permit, authorization,
notification, registration, declaration or filing would not have a material
adverse effect on the Corporation, its business, or any of its assets.
4.5 Compliance with Certificate and Law. The execution, delivery and
performance of this Agreement by the Seller will not conflict with or constitute
a default under or result in any violation of any term of the Certificate of
Incorporation or By-Laws of the Seller or of any Law applicable to Seller.
4.6 Litigation, etc. There are no judgments unsatisfied against the
Seller or the Corporation or any consent decrees or injunctions to which the
Seller or the Corporation is subject. Neither the Seller nor the Corporation is
a party to any pending or, to Seller's knowledge, threatened action, suit,
proceeding or investigation, at law or in equity, or otherwise in, for or by any
court or governmental board, commission, agency, department or office. Neither
the Seller nor the Corporation is subject to any order, judgment, decree or
governmental restriction which adversely affects the Shares or which would
prevent the consummation of the transactions contemplated by this Agreement.
4.7 Contracts. Neither the execution or delivery of this Agreement
nor the consummation of the transactions herein contemplated will conflict with,
or constitute a breach, violation or grounds for termination of any Contract to
which the Seller or the Corporation is a party.
4.8 Lists. Attached hereto as Schedule 4.8 are lists of the
following as of the date hereof: (i) all persons employed by the Corporations on
the date hereof; (ii) all employee benefit plans in which any such employees
participate; (iii) all Contracts, involving obligations on the part of either
party in excess of $5,000, under which the Corporation will have any rights or
obligations from and after the Closing, and all Liens to which any of its assets
are subject; (iv) all insurance policies maintained by the Corporation; (v) all
of the personal and real property owned by the Corporation; and (vi) all
trademarks, trade names, service marks, patents and any other intellectual
property owned by the Corporation. The Seller has delivered to the Buyers true
and complete copies of all Contracts, all employee benefit plans, all insurance
policies and all evidences of ownership and/or registration with governmental
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authorities of any intellectual property set forth on Schedule 4.8. The
Contracts constitute all of the material contracts used in the conduct of the
Corporation's business as heretofore conducted. Neither the Seller nor the
Corporation is aware of any threatened repudiation, cancellation or outstanding
disputes under any of the Contracts.
4.9 No Defaults or Violations.
(a) The Corporation is not in material breach of any material
provisions of any Contract set out in Schedule 4.8.
(b) The Corporation has not received any written notice of
any violation of any Law.
4.10 Licenses, etc. The Corporation holds all material licenses,
certificates, permits, approvals, franchises, rights and other authorizations of
or from any governmental authority, which are currently necessary for the
operations of its business.
4.11 ERISA.
(a) Neither the Corporation nor the Seller now maintains or
has ever maintained any "employee pension benefit plan" or a "welfare benefit
plan" (as defined respectively in Sections 3(2) and 3(1) of the Employee
Retirement Income Security Act of 1974 ("ERISA"), on behalf of its employees, or
an employee pension benefit plan which is subject to Title IV of ERISA and has
never sponsored or contributed to any "multi-employer pension plan" (as defined
in Section 3(37) of ERISA).
(b) The Corporation has no legal obligation to make any
payment with respect to any former employee pursuant to any retiree medical,
insurance or any other welfare benefit plan.
4.12 Taxes The Corporation has duly and timely (including
extensions) filed on a timely basis all Tax Returns which it has been required
or required to file, and has paid or provided for all Taxes due or claimed to be
due by any taxing authority. All such Tax Returns are true, complete and correct
in all material respects. The Corporation is not delinquent in the payment of
any Taxes, and there are no outstanding assessments or deficiencies with respect
to any Taxes. The Corporation has not executed or filed with any taxing
authority any agreement. There are no tax examinations or audits in progress
involving the Corporation.
4.13 Labor Matters; Personnel. The Corporation is not a party to any
collective bargaining agreement with any labor organization. No consent, action
or approval of any labor
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organization is required to be obtained by the Corporation in connection with
the performance by Seller of the terms of this Agreement and the consummation of
the transactions contemplated hereby. As of the date hereof there is not pending
or, to the best of their knowledge, threatened any labor dispute between either
the Corporation or the Subsidiary and any labor organization or any employee.
4.14 Bank Accounts, Cash and Securities. Schedule 4.14 is a correct
and complete list of: (i) each bank account and safe deposit box maintained by
the Corporation, and the names of all persons authorized to deal with such
accounts and safe deposit boxes; and (ii) all of its cash, cash equivalents,
security deposits and marketable securities on hand as of the date hereof.
4.15 Powers of Attorney. No person has any power of attorney to act
on behalf of the Corporation or the Subsidiary in connection with any of their
properties or business affairs other than as signatories on their bank accounts
and such powers that normally pertain to their offices.
4.16 No Dividends. At the Closing, there will be no declared but
unpaid dividends or other distributions in respect of the Corporation.
4.17 Representations True at Closing. By proceeding with the
Closing, the Seller will be deemed to have represented that the representations
set forth in this Section 4 are true and correct in all material respects as of
such date.
SECTION 5.
Representations and Covenants of the Buyers
The Buyers jointly and severally represent and warrant to the Seller
as follows:
5.1 Contracts or Other Agreements. Neither the execution or delivery
of this Agreement nor the consummation of this transaction will conflict with,
or constitute a breach or violation of any Contract to which either Buyer is a
party or by which he or she is bound or of any other restriction of any kind or
character applicable to him or her.
5.2 Enforceable Agreement. This Agreement has been duly executed and
delivered by each of the Buyers and constitutes the valid and legally binding
obligation of each of the Buyers enforceable against him or her in accordance
with its terms,
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affecting the enforcement of creditors' rights generally or by except as the
same may be limited by bankruptcy or other lawsgeneral equitable principles and
except as rights to indemnity may be limited by principles of public policy.
5.3 Consents. No consent, license, approval, permit, authorization
or notification of, or registration, declaration or filing with, any
governmental authority is required to be obtained or made by either of the
Buyers, and no consent or approval of any third party is required to be obtained
by either of the Buyers, in connection with the execution, delivery or
performance of this Agreement.
SECTION 6.
Acknowledgments of the Buyers
6.1 Access to Books, Records and Other Information. The Buyers
acknowledge that the Seller has made available to the Buyers and their
professional advisors, subject to the confidentiality provisions of Section 7,
all of the corporate and financial books and records of the Corporation, and
financial statements and other information concerning the Seller, Building
Blocks, Inc. and their parent corporation (including, without limitation, the
most recent year-end and subsequent interim period reports filed by the parent
with the Securities and Exchange Commission), and the Buyers fully appreciate
and understand the financial history and financial condition of each of such
corporations. The Buyers further acknowledge that the Buyers' representatives
have had the opportunity to address questions with respect to all of the
foregoing to members of management of the Seller, the Corporation, Building
Blocks, Inc. and their parent corporation and have received data, information,
and/or verbal responses thereto to their satisfaction.
6.2 No Obligation Not to Compete. Buyers acknowledge that nothing in
this Agreement is intended nor will this Agreement be construed as limiting, in
any way, the right of Seller or any parent or affiliate of Seller to engage in
the operation or franchising of retail toy stores.
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SECTION 7.
Confidentiality
7.1 If the transactions contemplated by this Agreement are not
consummated for any reason whatsoever, the Buyers shall promptly return to the
Corporation all documents and other papers in their actual or constructive
possession, custody or control relating to the Seller, the Corporation, Building
Blocks, Inc. or their parent.
7.2 If the transactions contemplated by this Agreement are not
consummated for any reason whatsoever, the Buyers shall, and shall cause each of
their employees, agents and representatives to keep confidential and not
disclose any information or data disclosed to them, whether orally, by
observation or in written form, concerning the operations, finances, business or
affairs of the Seller, the Corporation, Building Blocks, Inc. or their parent,
except that this obligation shall not apply to (i) information which was already
known to the Buyers prior to the disclosure thereof to them, (ii) information
generally known to the public through no fault of the Buyers, or (iii)
information disclosed to the Buyers by a third party who has the right to make
such disclosure.
SECTION 8.
Survival of Representations, Remedies and Indemnities
8.1 Survival of Representations. The representations of the parties
shall survive for a period of 90 days from the Closing.
8.2 Remedies. If, prior to the Closing, one of the parties hereto
becomes aware that a representation of the other herein is materially false or
that such other party has failed, in any material respect, to perform any of its
covenants herein, then the party so becoming aware shall have the right, as its
sole remedy, to refuse to consummate the transactions contemplated herein and,
in such event, this Agreement shall terminate and be null and void. If, after
the Closing, a party becomes aware of a material false representation by the
other or a material failure by such other party to perform any of its covenants,
then, as its sole remedy therefor, the discovering party shall be entitled to
indemnity as provided in Section 8.3.
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8.3 Indemnity.
(a) Subject to the provisions of Subsections (c), (d) and (e)
of this Section 8.3, the Seller hereby covenants and agrees to indemnify and to
hold the Buyers harmless (net of any tax effect) from and against and in respect
of (i) any loss, liability, claim, damage, deficiency, reasonable cost or
expense, actually incurred by the Buyers from or arising out of any
misrepresentation or non-fulfillment of any covenant on the part of the Seller
under this Agreement of which Buyers first become aware after the Closing; and
(ii) all reasonable costs and expenses (including reasonable attorneys' fees)
incurred by the Buyers (A) in connection with any action, suit, proceeding,
demand, assessment or judgment by or on behalf of a third party arising from
matters as to which a misrepresentation was made by the Seller herein and of
which Buyers first become aware after the Closing, or (B) with respect to any
claim made directly by the Buyers against the Seller based upon any
misrepresentation or non-fulfillment of any covenant on the part of the Seller
under this Agreement, unless the Buyers shall not prevail with respect to such
claim.
(b) Subject to the provisions of Subsections (c), (d) and (e)
of this Section 8.3, the Buyers agree to indemnify and to hold the Seller
harmless (net of any tax effect) from and against and in respect of any loss,
liability, claim, damage, deficiency, reasonable cost or expense actually
incurred by the Seller from or arising out of any misrepresentation or
non-fulfillment of any covenant on the part of the Buyers' under this Agreement
or by reason of the Buyers' operation of the business of the Corporation after
the Closing, and (ii) all reasonable costs and expenses (including reasonable
attorneys' fees) incurred by the Seller in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the foregoing.
(c) The Seller and the Buyers (who together for purposes of
this Subparagraph 8.3(c) shall be considered a "party") each agree to give
prompt written notice to the other of any claim against the party giving notice
which might give rise to a claim by it against the other party hereto based upon
the indemnity agreement contained in Section 8.3(a) or 8.3(b) hereof, stating
the nature and basis of the claim and, to the extent then known, the actual or
estimated amount thereof, but the failure to give such notice shall not affect
the rights of the indemnified party hereunder, except (i) to the extent the
indemnifying party shall have suffered actual damage by reason of such failure,
or (ii) if such notice is not given within 30 days from the date such claim
first became known to the party giving notice, in
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which event any right of indemnification with respect to such claim shall be
deemed to have lapsed and expired. In the event any action, suit or proceeding
is brought against a party with respect to which the other party hereto may have
liability under the indemnity agreement contained in Section 8.3(a) or 8.3(b)
hereof, the indemnifying party shall have the right, at its sole cost and
expense, to defend such action, with counsel of its own choosing which shall be
reasonably satisfactory to the indemnified party, in the name and on behalf of
the indemnified party and in connection with any such action, suit or proceeding
the parties hereto agree to render to each other such assistance as may
reasonably be required in order to insure the proper and adequate defense of any
such action, suit or proceeding. The indemnified party shall be kept fully
informed with respect to any such action, suit or proceeding and shall have a
right to participate therein at its own expense, it being understood and agreed
that so long as the indemnifying party has assumed the defense of such action,
suit or proceeding and has paid or is paying the costs and expenses of such
defense, the indemnified party shall bear its own counsel fees and expenses with
respect thereto. Neither party shall make any settlement of any claim which
might give rise to liability to the other party under the indemnity contained in
Section 8.3(a) or 8.3(b) hereof or otherwise without the written consent of such
other party, which consent such other party covenants shall not be unreasonably
withheld.
(d) If any franchisee of the Corporation as of the date
hereof asserts a claim against the Corporation, whether for breach of contract
or otherwise, the Buyers shall have the right (i) to withhold, from the $20,000
balance of the Purchase Price set forth in Paragraph 2.1(b) hereof, an amount
equal to the amount of the claim asserted, subject to final resolution of such
claim, and (ii) upon such final resolution, to offset against said balance of
the Purchase Price an amount equal to the amount for which the Corporation was
determined to be liable.
(e) No claim of the Buyers for indemnification by the Seller
under this Agreement may be made more than 100 days from the Closing, except
with respect to Taxes as to which claims for indemnification may be made within
the applicable statute of limitations. No claim of the Seller for
indemnification by the Buyers under this Agreement may be made more than 100
days from the Closing. At the end of the aforesaid 100-day period, all
liabilities of any nature of the parties arising out of this Agreement shall
terminate and cease to exist except as to Taxes and any liability asserted
pursuant to Subsection 8.3(c) which was received within the appropriate period.
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SECTION 9.
Stock Matters
9.1 Investment Purpose; Shares Unregistered. The Buyers represent
that they are acquiring the Shares solely for their own accounts, for investment
purposes only and not with a view to distribution thereof. The Buyers understand
that (i) the Shares have not been, and will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any state
securities laws and may be transferred only pursuant to such registration or an
available exemption therefrom; (ii) no United States federal or state agency has
passed upon or made any recommendation or endorsement of the Shares; and (iii)
the certificate evidencing its ownership of the Shares shall bear a legend
substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION
FROM REGISTRATION THEREUNDER.
SECTION 10.
No Brokers
The Seller and the Buyers agree that they have negotiated directly
with each other and no brokers or finders have been retained or are entitled to
any fees or commissions in connection with the transactions contemplated by this
Agreement. Each of the parties hereto (the "Indemnifying Party") will indemnify
and hold the other parties hereto harmless from any claim, loss, liability,
expense in respect of brokerage or finder's fees in connection with any of the
transactions contemplated by this Agreement, asserted by any person claiming to
have been engaged as a broker or finder by the Indemnifying Party.
12
<PAGE>
SECTION 11.
General Provisions
11.1 Parties in Interest and Assignment.
(a) This Agreement is binding upon, and is for the benefit
of, the parties and their respective successors and assigns.
(b) Neither this Agreement nor any of the rights or duties of
any party may be transferred or assigned to any person except by a written
agreement executed by each of the parties.
11.2 Choice of Law. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the internal laws of the
State of Connecticut.
11.3 Entire Agreement. This Agreement embodies the entire agreement
between the parties with respect to the Shares and cancels and supersedes all
previous agreements and understandings relating to the subject matter of this
Agreement, written or oral, between the parties. There are no covenants,
representations or warranties between the parties as to the Shares or as to any
matter set forth herein other than those set forth herein. All Exhibits and
Schedules called for by this Agreement and delivered to the parties shall be
considered a part of this Agreement with the same force and effect as though the
same had been specifically set forth in this Agreement.
11.4 Amendment. This Agreement may not be amended or modified except
by a writing signed by an authorized representative of the party against whom
enforcement of the change is sought.
11.5 No Waiver Except in Writing. Each party may, by written notice
to the other party: (i) extend the time for the performance of any of the
obligations or other actions of such party under this Agreement; (ii) waive any
inaccuracies in the representations of such other party contained in this
Agreement; or (iii) waive or modify performance of any of the covenants or other
obligations of such other party under this Agreement. Except as provided in the
foregoing sentence, no conduct of a party shall constitute a waiver of any right
or obligation of such party.
11.6 Section Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13
<PAGE>
11.7 Notices.
(a) All notices, requests, demands and other communications
under this Agreement shall be deemed to have been received three business days
after having been mailed by certified mail, return receipt requested, or one
business day after having been sent by overnight courier or when personally
delivered or transmitted by facsimile and, in each case, addressed to the
respective party at the address or facsimile number first stated above or to
such other address or facsimile number as such party may have fixed by notice as
provided herein.
(b) The respective attorneys for each party shall have the
right, but not the obligation, to give any notice or demand on behalf of its
respective client and any such notice or demand so given by such attorney shall
be deemed to have been given by such attorney's client.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date and year first above written.
SELLER:
BUILDING BLOCKS HOLDINGS, INC.
By: /s/ STEVEN E. GLASS
------------------------------------
Manager of Operations
Buyers:
/s/ JAMES L. ANGEL
----------------------------------------
JAMES L. ANGEL
/s/ CHERYL D. ANGEL
----------------------------------------
CHERYL D. ANGEL
14
<PAGE>
LIST OF OMITTED SCHEDULES TO AGREEMENT
1. Schedule 4.8(1) - List of Employees of Building Blocks
Franchise Corp.
2. Schedule 4.8(2) - List of Employee Benefit Plans of Building
Blocks Franchise Corp.
3. Schedule 4.8(3A) - List of Franchise Agreements Executed by
Building Blocks Franchise Corp.
4. Schedule 4.8(3B) - List of License Agreements.
5. Schedule 4.8(4) - List of Insurance Policies.
6. Schedule 4.8(5) - List of Personal and Real Property.
7. Schedule 4.8(6) - List of Contracts and Trademarks.
8. Schedule 4.14(1) - List of Bank Accounts.
Registrant agrees to furnish supplementally, a copy of any omitted
schedule to the Securities and Exchange Commission upon request.
15
EXHIBIT 10.2
BUILDING BLOCKS, INC.
1720 Post Road East
Westport, Connecticut 06880
January 7, 1997
Mr. Steven E. Glass
1720 Post Road East
Westport, Connecticut 06880
Dear Steven:
This will confirm the following amendment to your Employment
Agreement dated as of April 1, 1996, upon which we have mutually agreed.
Section 1 is hereby amended to read as follows: "Position - Employee
of the Company with such title as the parties shall mutually agree
upon.
This will also confirm our mutual agreement that you shall have the
right, upon notice to us to resign as an officer of Building Blocks, Inc. but
shall continue in its employ as Manager of Operations, which position shall
entail responsibilities and duties commensurate with those you are presently
exercising.
Kindly indicate your agreement to the foregoing by countersigning
the enclosed copy of this letter.
Very truly yours,
BUILDING BLOCKS, INC.
By: /s/ KEVIN R. GREENE
--------------------------------------------
Kevin R. Greene, Authorized Signatory
ACCEPTED AND AGREED:
/s/ STEVEN E. GLASS
- -----------------------------
Steven E. Glass
EXHIBIT 10.3
SPECIALTY RETAIL GROUP, INC.
1720 Post Road East
Westport, Connecticut 06880
January 24, 1997
Mr. Steven E. Glass
1720 Post Road East
Westport, Connecticut 06880
Dear Steven:
This will confirm our understanding as follows:
Subject to 3 below, Specialty Retail Group, Inc. ("SRG") shall have
the right to assume the Employment Agreement ("Agreement") between you and
Building Blocks, Inc. (as same has been amended regarding your ceasing to be an
officer).
2. In the event your employment is terminated, (i) by Building
Blocks, Inc. or SRG (if applicable) other than for cause as defined in the
Agreement, (ii) by your withdrawal other than due to a failure of Building
Blocks, Inc. or SRG (if applicable) to pay your salary when due, or (iii) as the
result of your death or disability as defined in the Agreement, (each a "Rights
Continuation Termination"), then SRG shall be liable under the guarantee or, if
applicable, under the Agreement to continue to pay the salary due under the
Agreement (or in the case of death or disability the amounts provided in the
Agreement), except that the amounts payable will be reduced by any income (other
than investment or other passive income) or compensation
<PAGE>
you earn elsewhere during the period the guarantee (or payment obligation) is in
effect.
3. In the event SRG assumes the Agreement, then on the later of (i)
June 30, 1997 or (ii) such date as there is no bona fide need for your services
in connection with Building Blocks, Inc. you shall have the right to terminate
your employment with SRG on 15 days' notice, and such termination shall be
deemed a Rights Continuation Termination.
4. In the event that subsequent to the termination of your
employment with SRG and its subsidiary, SRG requires your assistance in
connection with future inquiries, claims, etc., arising out of events which
occurred during the period in which you were employed by SRG or any of its
affiliates, and as to which you have knowledge or information, you agree to make
yourself available to SRG's management (subject to your availability in light of
the requirements of your then current employment or business activities) on
reasonable notice for reasonable periods of time to consult with respect thereto
at a fee of $100 per hour. You shall not be required hereby to provide more than
five hours in any given week during the first two months after termination of
your employment, or more than 10 hours in any 90 day period for the 10
succeeding months. Thereafter you shall not have any obligation to provide any
minimum number of hours pursuant hereto.
Very truly yours,
ACCEPTED AND AGREED: SPECIALTY RETAIL GROUP, INC.
/s/ STEVEN E. GLASS By: /s/ KEVIN R. GREENE
- ---------------------------------- ----------------------------------
Steven E. Glass Kevin R. Greene, Chairman
2
EXHIBIT 10.4
SPECIALTY RETAIL GROUP, INC.
1720 Post Road East
Westport, Connecticut 06880
January 24, 1997
Mr. Steven E. Glass
1720 Post Road East
Westport, Connecticut 06880
Dear Steven:
This will confirm our agreement that effective immediately, all of
the options to purchase Common Stock of Specialty Retail Group, Inc. granted
pursuant to your employment agreement dated April 1, 1996 and your prior
consulting agreement held by you are terminated and with no further force and
effect.
Kindly indicate your agreement to the foregoing by countersigning
the enclosed copy of this letter.
Very truly yours,
SPECIALTY RETAIL GROUP, INC.
By: /s/ KEVIN R. GREENE
--------------------------------------------
Kevin R. Greene, Authorized Signatory
ACCEPTED AND AGREED:
/s/ STEVEN E. GLASS
- ------------------------------
Steven E. Glass
EXHIBIT 10.5
Specialty Retail Group, Inc.
STOCK OPTION AGREEMENT
Optionee: Steven E. Glass
Address: 1720 Post Road East
Westport, Connecticut 06880
Total Number of Shares Subject to Option: 430,000
Exercise Price Per Share: $.05
Date of Grant: February 1, 1997 ("Grant Date")
1. Grant of Option. Specialty Retail Group, Inc., a Florida
corporation ("SRG" or the "Company"), hereby grants, as of the Grant Date, to
Steven E. Glass (the "Optionee") an option ("Option") to purchase all or any
part of 430,000 shares of common stock, $.001 par value, of the Company (the
"Shares") at the exercise price of $.05 per Share, subject to all of the terms
and conditions of: (i) this Stock Option Agreement ("Agreement"); and (ii) the
Exercise Notice and Agreement attached hereto as Exhibit A (the "Notice"). All
capitalized terms not otherwise defined herein shall have the meanings set forth
in the Plan. This Option is not intended to qualify as an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended.
2. Vesting; Exercise Period of Option. The Shares subject to this
Option shall vest, and this Option may be exercised, (a) as to 280,000 of the
Shares on and after the date hereof; (b) as to 75,000 shares on the earlier of
(i) the date the Company's Building Blocks, Inc. subsidiary has completed, in
all material respects, the reorganization of its business; and (ii) June 30,
1997, provided that in either case, Optionee's employment by SRG or a subsidiary
has not terminated prior to such date other than as a result of a "Rights
Continuation Termination" as defined in a letter agreement between SRG and
Optionee dated January 24, 1997; and (c) as to 75,000 on June 30, 1997 provided
that Optionee's employment by SRG or a subsidiary has not terminated prior to
such date other than as a result of a Rights Continuation Termination and
provided further that if a Rights Continuation Termination occurs prior to such
vesting, such vesting shall be deferred until March 1, 1998, and if on that date
SRG and/or a subsidiary shall have made all payments due under the aforesaid
letter agreement and/or the Employment Agreement referred to therein, the Option
shall not vest as to those shares. Options granted hereunder shall be
exercisable for a period of six years from the date same vest as set forth
above.
<PAGE>
3. Partial Exercise. Subject to Section 2 hereof, exercise of this
Option may be made in part at any time and from time to time, except that this
option may not be exercised as to fewer than one hundred (100) Shares unless
such exercise is made with respect to all of the Shares as to which this Option
is then exercisable.
4. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the
Company of a Notice in the form attached hereto as Exhibit A which has been duly
executed and completed by the Optionee.
(b) The Notice shall be accompanied by payment of the
purchase price of the Shares being purchased as specified therein. Payment for
the Shares shall be made in cash. In addition, the Committee, in its sole and
absolute discretion, may, by written notice to the Optionee, permit payment for
Shares purchased hereunder in any other form of legal consideration consistent
with applicable law and any rules and regulations relating thereto, including,
but not limited to, the execution and delivery of a full recourse promissory
note by the Optionee to the Company.
(c) Subject to Section 7 hereof and provided that the Notice
and payment are in form and substance satisfactory to the Committee and adequate
provision has been made for the payment of any federal, state, local or foreign
withholding obligations of the Company or any Subsidiary associated with such
exercise, the Company shall issue the full number of Shares set forth in such
Notice in the name of the Optionee or, if the Option was exercised by the
Optionee's guardian or legal representative as a result of the legal
incompetence of the Optionee, Optionee's guardian or legal representative, as
the case may be.
5. Nontransferability of Option. During the lifetime of the
Optionee, this Option may be exercised only by the Optionee or, in the event of
the legal incompetence of the Optionee, by his guardian or legal representative.
This Option may not be transferred by the Optionee otherwise than by will or by
the laws of descent and distribution. This Option may not be assigned, pledged
or hypothecated by the Optionee whether by operation of law or otherwise, or be
made subject to execution, attachment or similar process. Any attempted
transfer, assignment, pledge or hypothecation contrary to the provisions hereof,
and the levy of any execution, attachment or similar process upon this option,
shall be null and void and without effect.
6. No Obligation to Exercise Option. The grant of this Option
imposes no obligation on the Optionee to exercise it.
2
<PAGE>
7. Securities Law Requirements. No Shares shall be issued hereunder
unless and until: (i) the Company and the Optionee have taken all action
required to register the Shares under the Securities Act of 1933, as amended, or
to perfect an exemption from the registration requirements thereof; (ii) any
applicable listing requirement of any stock exchange on which the Common Stock
is listed has been satisfied; and (iii) any other applicable provision of state
or federal law has been satisfied. The Company shall be under no obligation to
register the Shares with the Securities and Exchange Commission or to effect
compliance with the registration or qualification requirements of any state
securities laws or stock exchange.
8. Adjustments upon Changes in Capitalization. In the event of any
change in capitalization affecting the Shares subject to this Option, such as a
stock dividend, stock split or recapitalization the Committee has the right, but
not the obligation, to make proportionate adjustments with respect to: (i) the
number of Shares which are subject to this Agreement and exercise price(s)
associated therewith; and (ii) such other matters as shall be appropriate in
light of the circumstances. If the Committee elects to so change the terms and
provisions of this Agreement, the Committee shall notify the Optionee in writing
and the terms and provisions contained therein, to the extant inconsistent with
those contained herein, shall govern in all respects.
9. Adjustment. (a) Upon the effective date of the dissolution or
liquidation of the Company, or of a reorganization, merger or consolidation of
the Company with one or more corporations in which the Company will not survive
as an independent, publicly owned corporation, or of a transfer of substantially
all of the property or more than eighty percent (80%) of the then outstanding
shares of Stock of the Company to another corporation, this Option shall
terminate unless provision be made in writing in connection with such
transaction for the continuance of the Plan and for the assumption of this
Option, or the substitution for this Option of new options covering the shares
of a successor employer corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to number and kind of stock and prices in which event
the Plan and this Option, or the new options substituted therefor, shall
continue in the manner and under the terms so provided. In the event of such
dissolution, liquidation, reorganization, merger, consolidation, transfer of
assets or transfer of Stock, and if provision is not made in such transaction
for the continuance of the Plan and for the assumption of this Option or the
substitution for this Option of new options covering the capital stock of a
successor employer corporation or a parent or subsidiary thereof, then the
Optionee shall be entitled, prior to the effective date of any such transaction,
to purchase the full number of shares of Stock under this Option that the
3
<PAGE>
Optionee would otherwise have been entitled to purchase during the remaining
term of the Option. Upon the first purchase of shares of Stock pursuant to a
tender offer or exchange offer, other than by the Company, for all or any part
of the Stock, or upon the change in control of the Company other than pursuant
to a tender offer, the Optionee shall be entitled, prior to the termination date
of any such tender offer or at any time prior to and within two (2) weeks
following such change of control to purchase the full number of shares of Stock
under this Option that the Optionee otherwise would have been entitled to
purchase during the remaining term of the Option.
(b) Adjustments under this paragraph shall be made by the
Board of Directors, whose determination as to what adjustments shall be made,
and the extent thereof, shall be final, binding and conclusive. No fractional
shares of Stock shall be issued pursuant to the Option or any such adjustment.
No such adjustment under this Section shall be made so as to constitute a
modification, extension or renewal of this Option within the meaning of such
terms as set forth in Section 425(h) of the Internal Revenue Code of 1986, as
amended (the "Code"), or so as to prevent the Company or any other corporation
or subsidiary thereof, if the Optionee shall become employed by such corporation
by reason of the transaction in respect of which such adjustment is made, from
being a corporation issuing or assuming this Option in a transaction to which
Section 425(a) of the Code applies.
10. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by the Optionee or the Company forthwith to the
Committee, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Committee shall be final and binding on the
Company and Optionee.
11. Entire Agreement. The Plan and the Notice are incorporated
herein by reference. This Agreement, the Plan and the Notice constitute the
entire agreement of the parties and supersede all prior undertakings,
agreements, representations, warranties and understandings with respect to the
subject matter hereof.
12. Shareholders' Rights. Neither the nor any beneficiary or other
person claiming under or through the Optionee shall acquire any rights as a
shareholder of the Company by virtue of the Optionee having been granted the
Option hereunder. Neither the Optionee nor any beneficiary or other person
claiming under or through the Optionee will have any right, title or interest in
or to any Shares, allocated or reserved under the Plan or subject to this Option
except as to Shares, if any, that have been issued or transferred to the
Optionee. No adjustment shall be made to the Option for dividends or
distributions or other rights for which the record date is prior to the date of
the exercise of this Option;
4
<PAGE>
13. No Right to Continue Services or Employment. Nothing contained
in this Agreement, the Plan or the Notice shall be deemed to confer upon the
Optionee any right to continue to render services to the Company, a Subsidiary
or Affiliate, or affect the right of the Company, a Subsidiary, an Affiliate,
the Board, the board of directors of a Subsidiary or an Affiliate, the
shareholders of the Company or a Subsidiary, or the holders of interests in an
Affiliate, as applicable, to terminate any consulting or employment relationship
as the case may be, of the Optionee at any time with or without cause, reason or
justification.
14. Headings. The headings contained in this agreement are for
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
15. Governing Law. This Agreement and all actions taken hereunder
shall be enforced, governed and construed by and interpreted under the laws of
the State of Florida applicable to contracts made and to be performed wholly
within such State without giving effect to the principles of conflict of laws
thereof.
16. Acknowledgement. The Optionee hereby acknowledges receipt of a
copy of the Plan, represents that he has read and understands the terms and
provisions thereof, and accepts this Option subject to all the terms and
provisions of the Plan and this Agreement including the Notice. The Optionee
further acknowledges that there may be tax consequences upon exercise of this
Option or upon disposition of the Shares received on exercise of this Option and
will rely on his own tax adviser with respect thereto.
OPTIONEE:
/s/ STEVEN E. GLASS
--------------------------------------
Steven E. Glass
SPECIALTY RETAIL GROUP, INC.
By: /s/ KEVIN R. GREENE
--------------------------------
Kevin R.Greene,
Chairman of the Board
5
