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Exhibit 2.5
AMENDMENT NO. 2 TO THE
RECAPITALIZATION AGREEMENT
AMENDMENT NO. 2, dated as of April 24, 1998 (this "Amendment"), to
the Recapitalization Agreement, dated as of March 6, 1998, as amended as of
April 23, 1998 (as so amended, the "Agreement"), among ECCA Merger Corp., a
Delaware corporation ("Newco"), Eye Care Centers of America, Inc., a Texas
corporation (the "Company"), and the Sellers named therein (the "Sellers").
WHEREAS, the Company, Newco and the Sellers have agreed to make
certain amendments to the provisions in the Agreement for a post-closing
adjustment to the aggregate consideration payable upon the consummation of the
Merger (as defined in the Recapitalization Agreement); and
WHEREAS, the amendments contained herein have been approved by the
requisite vote of the stockholders of the Company in accordance with Section
2.16 of the Recapitalization Agreement;
NOW THEREFORE, in consideration of the agreements and mutual
premises contained herein and in the Agreement, the parties hereto agree as
follows:
ARTICLE I
Definitions
1.1 Defined Terms. For purposes of this Amendment, unless otherwise
indicated, capitalized terms have the meanings ascribed to them in the
Agreement.
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ARTICLE II
Amendments
2.1 Deletion of Particular Sections. Sections 2.8(b), 4.3(c) and 5.7
are hereby deleted in their entirety from the Agreement.
2.2 Amendment of Section 1.1. Section 1.1 is hereby amended to add
the following defined term:
"Shortfall Amount" has the meaning set forth in Section 2.13."
2.3 Amendment of Section 2.13. Section 2.13 is hereby amended to
read in its entirety as follows:
"2.13 Adjustments to Merger Consideration.
(a) Adjustment at Closing. Two Business Days prior to the Closing
Date, the Company shall deliver or cause to be delivered to Newco a
projected consolidated balance sheet (the "Estimated Closing Date Balance
Sheet") of the Company and its Subsidiaries as of the Closing Date. The
Estimated Closing Date Balance Sheet (i) shall set forth the Net Working
Capital (the "Indicative Net Working Capital") and the amount of cash and
cash equivalents (the "Indicative Cash"), in each case as of the Closing
Date, without giving effect to the Recapitalization and the transactions
contemplated hereby, and (ii) be prepared in accordance with GAAP applied
on a basis consistent with the principles, practices and methodologies
used in the preparation of the consolidated balance sheet of the Company
and its Subsidiaries for the year ended January 3, 1998. In the event that
the Indicative Net Working Capital is less than $7,000,000 ("Target Net
Working Capital"), the Aggregate Funding Amount shall be decreased by the
amount of such shortfall and the Aggregate Merger Consideration shall be
adjusted accordingly.
(b) Post-Closing Adjustments. (i) Within 60 days after the Closing
Date, the Sellers shall deliver or cause to be delivered to the Company a
consolidated balance sheet of the Company and its Subsidiaries as of the
Closing Date, together with an unqualified opinion thereon by Ernst &
Young (the "Final Balance Sheet"). All the parties to this Agreement
accept, for purposes of the calculation of the adjustment provided for in
this Section 2.13(b), the principles, practices and methodologies,
consistent with GAAP, used in the preparation of the consolidated balance
sheet of the Company and its Subsidiaries for the year ended January 3,
1998.
(ii) The Company after the Closing Date shall cause Ernst &
Young to have access to the records and personnel of the Company
reasonably requested by
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them for purposes of preparing or auditing the Final Balance Sheet.
The Company shall cause KPMG to take such reasonable steps as they
deem necessary to calculate the Net Working Capital, and confirm the
cash and cash equivalents ("Cash") of the Company and its
Subsidiaries as of the Closing Date and to review the procedures and
materials (including work papers) employed by Ernst & Young in
connection therewith. Not later than 30 days after receipt of the
Final Balance Sheet, the Company shall deliver to the Seller
Representative a written notice ("Objection"), setting forth any
items with which the Company disagrees and a description of the
basis for such disagreement. In the event that the Company delivers
an Objection to the calculation of the Net Working Capital or Cash
of the Company and the Subsidiaries set forth in the Final Balance
Sheet, the Seller Representative shall negotiate in good faith with
the Company, and the Company hereby agrees to negotiate in good
faith with the Seller Representative, for a period of 30 days after
receipt of such Objection, to seek to resolve their differences with
respect to the Final Balance Sheet. If the Company and the Seller
Representative are unable to resolve all of such disagreements
within such 30 day period, then no later than seven days following
such 30 day period they shall refer their remaining differences to
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or any other internationally recognized firm of
independent public accountants as to which the Seller Representative
and the Company mutually agree (the "Independent Firm") who shall,
acting as experts and not as arbitrators, determine, only with
respect to the remaining differences so submitted, whether and to
what extent, if any, the Net Working Capital or Cash, as derived
from the Final Balance Sheet, requires adjustment. The parties shall
instruct the Independent Firm to deliver its written determination
to the Company and the Seller Representative no later than the
twentieth day after the remaining differences underlying the
Objection are referred to the Independent Firm. The Independent
Firm's determinations of Net Working Capital and Cash shall be
conclusive and binding upon the Company and Sellers absent manifest
error. The fees and disbursements of the Independent Firm shall be
shared equally by the Company and Sellers. The Company and Sellers
shall make readily available to the Independent Firm all relevant
books and records and any work papers (including those of the
parties' respective accountants) relating to the Final Balance Sheet
and all other items reasonably requested by the Independent Firm.
The "Adjusted Net Working Capital" shall be the Net Working Capital
included in (i) the Final Balance Sheet as delivered by the Sellers
in the event that (x) the amount of Net Working Capital is unchanged
from the Estimated Closing Date Balance Sheet to the Final Balance
Sheet; (y) no Objection with respect to the Net Working Capital is
delivered to the Seller Representative during the 30 day period
specified above or (z) Seller Representative and the Company so
agree, (ii) the Final Balance Sheet, as adjusted in accordance with
the Objection, in the event that the Seller Representative does not
dispute the Objection within the 30 day period following
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receipt by the Seller Representative of the Objection, or (iii) the
Final Balance Sheet, as adjusted by either (x) the agreement of the
Seller Representative and the Company or (y) the Independent Firm.
The "Adjusted Cash" shall be the Cash included in (i) the Final
Balance Sheet as delivered by the Sellers in the event that (x) the
amount of Cash is unchanged from the Estimated Closing Date Balance
Sheet to the Final Balance Sheet; (y) no Objection affecting the
Cash is delivered to the Seller Representative during the 30 day
period specified above or (z) Seller Representative and the Company
so agree, (ii) the Final Balance Sheet, as adjusted in accordance
with the Objection, in the event that the Seller Representative does
not dispute the Objection within the 30 day period following receipt
by the Seller Representative of the Objection, or (iii) the Final
Balance Sheet, as adjusted by either (x) the agreement of the Seller
Representative and the Company or (y) the Independent Firm.
(iii) If Adjusted Net Working Capital is less than both Target
Net Working Capital and Indicative Net Working Capital, then the
Aggregate Merger Consideration shall be adjusted downward by the
amount by which Adjusted Net Working Capital is less than Indicative
Net Working Capital, (the "Capital Shortfall Amount") and the
Sellers shall pay the Capital Shortfall Amount to the Company;
provided, however, that no adjustment payment shall be required
unless the Capital Shortfall Amount is greater than $100,000, in
which event the Sellers shall pay the entire Shortfall Amount to the
Company; provided, further, however, that if Indicative Net Working
Capital is greater than Target Net Working Capital and Adjusted Net
Working Capital is less than Target Net Working Capital, then the
Capital Shortfall Amount shall not exceed the amount by which the
Adjusted Net Working Capital is less than Target Net Working
Capital. If Adjusted Net Working Capital is greater than Indicative
Net Working Capital and Indicative Net Working Capital is less than
Target Net Working Capital, the Aggregate Merger Consideration shall
be adjusted upward by the amount by which Adjusted Net Working
Capital exceeds Indicative Net Working Capital (the "Excess Capital
Amount") and the Company shall pay to the Common Holders the Excess
Capital Amount, provided, however, that the Excess Capital Amount
shall not exceed the amount by which Indicative Net Working Capital
is less than Target Net Capital.
(iv) If Adjusted Cash is less than Indicative Cash, the
Aggregate Merger Consideration shall be adjusted downward by the
amount by which Adjusted Cash is less than Indicative Cash (a "Cash
Shortfall Amount") and the Sellers shall pay the Cash Shortfall
Amount to the Company; provided, however, that no adjustment payment
shall be required unless the Cash Shortfall Amount is greater than
$100,000, in which event the Sellers shall pay the entire Cash
Shortfall Amount to the Company. If Adjusted Cash exceeds Indicative
Cash, the
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Aggregate Merger Consideration shall be adjusted upward by the
amount by which Adjusted Cash exceeds Indicative Cash (the "Excess
Cash Amount") and the Company shall pay to the Common Holders an
aggregate amount equal to the Excess Cash Amount; provided, however,
that no adjustment payment shall be required unless the Excess Cash
Amount is greater than $100,000, in which event the Company shall
pay the entire Excess Cash Amount to the Common Holders. If Adjusted
Cash is equal to Indicative Cash, there shall be no adjustment to
the Aggregate Merger Consideration in respect of Cash.
(v) Notwithstanding any of the foregoing provisions of this
Section 2.13(b), any amounts payable by the Sellers to the Company
under this Section 2.13(b), whether in respect of a Capital
Shortfall Amount or a Cash Shortfall Amount, may be set off against
any Excess Capital Amount or Excess Cash Amount payable by the
Company to the Common Holders under this Section 2.13 (b), and vice
versa, such that only the net amount of such adjustments, taken
together, shall be payable by the Company or the Sellers, as the
case may be. Any such net amount that shall be payable by the
Sellers (a "Shortfall Amount") shall be paid severally by the
Sellers to the Company in accordance with their proportionate
shares, calculated for each Seller by multiplying the Shortfall
Amount by a fraction, the numerator of which is the portion of the
Aggregate Merger Consideration paid to such Seller and the
denominator of which is the sum of the portions of the Aggregate
Merger Considerations paid to all Sellers. Amounts withheld by the
Seller Representative, and deposited in escrow, in accordance with
Section 2.6(h)(I) from the cash consideration to which the Common
Holders are otherwise entitled at the Effective Time shall be held
for the benefit of the Sellers in order to satisfy the several
obligations of the Sellers to pay any Shortfall Amount; provided
that, for such purpose, each Common Holder (including any Seller)
shall be liable for only such Common Holder's Pro Rata Share of any
Shortfall Amount.
(vi) Any such net amount payable by the Company in accordance
with clause (v) shall be allocated among all Common Holders
receiving any part of the Aggregate Merger Consideration in
accordance with such Common Holders' respective Pro Rata Shares.
(vii) If the net adjustment calculated in accordance with
clause (v) is equal to zero, no adjustment shall be made to
Aggregate Merger Consideration and no post-closing payment shall be
required to be made to any Person pursuant to this Section 2.13(b)
(viii) Any amount owing pursuant to this Section 2.13(b) shall
be paid, by certified or official bank check or checks payable in
New York Clearing House
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(next day) funds not later than two Business Days following final
determination of the Adjusted Net Working Capital in accordance with
this Section 2.13(b).
(ix) No adjustment or other action taken pursuant to this
Section 2.13(b) shall affect the rights and obligations of the
parties under this Agreement or with respect to the transactions
contemplated hereby other than to the extent directly related to the
determination of the Adjusted Net Working Capital."
2.4 Amendment of Section 4.2(a). The last sentence of Section 4.2(a)
is hereby amended to read in its entirety as follows:
"There shall be delivered to Newco certificates of the Company, the
Management Sellers and the Investor Sellers to the foregoing effect with
respect to their respective representations, warranties and covenants."
2.5 Addition of Section 4.2(s). Section 4.2 is hereby amended to add
at the end thereof a paragraph (s), which shall read in its entirety as follows:
"(s) The Company shall have provided evidence reasonably
satisfactory to Newco that none of the payments made or scheduled to be
made to any "disqualified individual" of the Company (within the meaning
of section 280G(C) of the Code and the regulations issued thereunder) upon
the consummation of the Merger shall constitute "excess parachute
payments" (within the meaning of section 280G(b) of the Code and the
regulations issued thereunder), but only with respect to those individuals
who shall have timely requested of the Company in writing that such
payments are not to constitute "excess parachute payments" and who shall
have agreed in writing with the Company that any such payments shall
be made only upon obtaining shareholder approval in accordance with
Section 280G(b)(5) of the Code and the regulations issued thereunder."
2.6 Amendment of Section 4.2(l). Section 4.2(l) is hereby amended to
read in its entirety as follows:
"(l) Defeasance of the Notes. The Company shall have taken all
actions required to be taken under Article VIII of the Senior Note
Indenture for the defeasance of the Senior Notes, including the
irrevocable deposit with the trustee under the Senior Note Indenture of
U.S. Government Obligations (as defined in the Senior Note Indenture)
sufficient to pay and discharge all installments of principal and interest
on the Senior Notes through the first date of redemption permitted under
the Senior Note Indenture."
2.7 Amendment of Section 4.2(m). Section 4.2(m) is hereby amended to
read in its entirety as follows:
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"(m) Noncompetition Agreement. The Sellers other than ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ shall have executed and delivered to Newco a non-competition
agreement in the form attached hereto as Exhibit D ."
ARTICLE III
Miscellaneous
3.1 Scope of Amendment. Except as otherwise expressly provided for
in this Amendment, the Agreement shall remain in full force and effect. All
references in the Agreement to the "Agreement" shall be deemed to be references
to the Agreement as amended by this Amendment.
3.2 Counterparts. For the convenience of the parties hereto, this
Amendment may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
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IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered by the parties hereto by their duly authorized officers or
representatives on the date first hereinabove written.
ECCA MERGER CORP.
______________________________________
By:
Title:
EYE CARE CENTERS OF
AMERICA, INC.
______________________________________
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and CEO
SELLERS:
EQUITY LINKED INVESTORS, L.P.
By:
______________________________________
By:
Attorney-in-fact
EQUITY LINKED INVESTORS II
By:
______________________________________
By:
Attorney-in-fact
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INDOSUEZ EYE CARE PARTNERS
By: __________________________________
Attorney-in-Fact
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______________________________________
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______________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
______________________________________
AGT HOLDINGS, LLC
By: __________________________________
Name:
Title:
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
______________________________________
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______________________________________
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