AGREEMENT OF MERGER
This Agreement of Merger (the "Agreement") is dated the 22nd day of
August, 1997 by and among EYEMAKERS, INC., a Nevada corporation with its
principal place of business located at ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ ("Eyemakers"), EYEMAQ, INC., a Texas corporation with its
principal place of business also located at ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and BUDGET OPTICALS OF AMERICA, INC., a Texas
corporation with its principal place of business located at ▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("Budget Opticals").
RECITALS
A. Eyemakers owns all of the issued and outstanding shares of
capital stock of the Company.
B. The Board of Directors and the shareholders of the Company and
Budget Opticals, and the Board of Directors of Eyemakers, deem it advisable
and in the best interests of Company and Budget Opticals that Company merge
with and into Budget Opticals pursuant to this Agreement and a plan of
merger (the "Plan of Merger") in the form of Exhibit A attached hereto.
C. At the Closing (as defined in Section 1.4 hereof) hereunder,
Company and Budget Opticals shall enter into the Articles of Merger which
provide, among other things, for the merger of the Company with and into
Budget Opticals (the "Merger") and the conversion of all of the issued and
outstanding shares of Company Common Stock, no par value per share
("Company Common Stock"), into all of the issued and outstanding shares of
the common stock of Budget Opticals, no par value per share (the "Budget
Opticals Common Stock"), all as more fully described in Section 1.2 hereof
and the Plan of Merger. After the consummation of the Merger, the Company
shall have ceased to exist, and Budget Opticals shall have become a wholly-
owned subsidiary of Eyemakers.
D. The parties hereto desire to set forth herein the terms and
provisions of their understandings and agreements.
NOW, THEREFORE, in consideration of the premises, the provisions and
the respective agreements hereinafter set forth, the parties hereto hereby
agree as follows:
1. The Business Combination.
1.1 The Merger. At the Effective Time (as defined in Section
1.2 hereof), Company shall be merged with and into Budget Opticals in
accordance with the provisions of this Agreement and the Texas
Business Corporation Act, and the
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separate existence of Company shall cease, and Budget Opticals, as the
surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation"), shall continue its corporate existence under
the laws of the State of Texas as a wholly-owned subsidiary of Eyemakers.
1.2 Effective Time of the Merger. As soon as practicable after
the Closing (as defined in Section 1.4 hereof), the Company and Budget
Opticals (collectively referred to as the "Constituent Corporations")
will cause appropriate Articles of Merger to be duly prepared,
executed and verified in accordance with the provisions of the Texas
Business Corporation Act, which Articles of Merger shall be duly filed
with the Secretary of State of the State of Texas. The Merger shall
become effective upon the issuance of the certificate of merger by the
Secretary of State of the State of Texas (the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, immunities and
franchises, of a public as well as a private nature of each
Constituent Corporation; and all property, real, personal and mixed,
and all debts due on whatever account and all other choses in action
and every other interest of or belonging to or due to each Constituent
Corporation shall be deemed to be transferred to and vested in the
Surviving Corporation without further act or deed; and the title to
any real estate, or any interest therein, vested in either of the
Constituent Corporations shall not revert or be in any way impaired by
reason of the Merger. At the Effective Time, the Surviving
Corporation shall be responsible and liable for all the liabilities
and obligations of each Constituent Corporation; and any existing
claim, action or proceeding pending by or against either of the
Constituent Corporations may be prosecuted to judgment as if the
Merger had not taken place, or the Surviving Corporation may be
substituted in their place. Neither the rights of creditors nor any
liens on the property of either Constituent Corporation shall be
impaired by the Merger.
1.4 Closing. The closing of the Merger provided herein (the
"Closing") will be at the office of Eyemakers at 10:00 a.m., local
time, on August 22, 1997, or at such other place or at such other date
and time as Eyemakers, the Company and Budget Opticals may mutually
agree. Such date and time of Closing is herein referred to as the
"Closing Date".
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2. Conversion and Exchange of Shares; Additional Shares.
2.1 Conversion of Shares. At the Effective Time and without any
action on the part of Budget Opticals, Company or the holder of any of
the following securities:
2.1.1 Each outstanding share of Company Common Stock which
is outstanding immediately prior to the effective time of the
Merger shall be cancelled and shall cease to exist as shares of
the Company, except that each outstanding share of Company Common
Stock which shall be cancelled and shall cease to exist shall be
converted into the right to receive from the shareholders of the
Surviving Corporation its pro rata portion of the then issued and
outstanding shares of Budget Opticals Common Stock; provided,
however, that no Dissenting Shares (as defined in Section 2.3)
shall be exchanged but rather shall be subject to Section 2.3.
In consideration for the conversion of each share of Company
Common Stock into its pro rata portion of the then issued and
outstanding shares of Budget Opticals Common Stock, the
shareholders of Budget Opticals (the "Budget Opticals
Shareholders") shall receive, based upon their ownership interest
in the Budget Opticals Common Stock as set forth in Exhibit B,
their pro rata portion of (i) Fifty Thousand Dollars ($50,000.00)
to be transferred to the Budget Opticals Shareholders by
individual cashier's checks payable to the Budget Opticals
Shareholders, and (ii) Six Hundred Thousand (600,000) shares of
Eyemakers' non-voting Class B Preferred Stock, par value $0.001
per share, bearing a dividend rate of Five Percent (5%) per annum
payable annually on the anniversary date of the certificate
therefor, being convertible by the holders thereof into shares of
Eyemakers' common stock, no par value per share (the "Eyemakers
Common Stock"), at a conversion rate of $4.25 per share, and
being subject to redemption by Eyemakers at any time during the
two-year period commencing on the date of their issuance at a
redemption price of $7.50 per share (the "Class B Preferred").
Eyemakers hereby grants to each Budget Opticals Shareholder the
option, exercisable at any time after the expiration of Two (2)
years from the date of issuance thereof, to cause Eyemakers to
acquire any or all shares of Class B Preferred held by them at a
price equal to the conversion rate, or $4.25 per share. It is
the intention of the parties that the merger would qualify as a
nontaxable transaction to the Budget Opticals Shareholders except
to the extent of
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the cash received pursuant to the provisions of this paragraph.
Neither the Class B Preferred nor the Common Stock to be
issued upon conversion of the Class B Preferred by the Budget
Opticals Shareholders will be registered with either the
Securities and Exchange Commission ("SEC") or any regulatory
authority of any state. The Class B Preferred Stock and the
Common Stock could thus be sold by the Budget Opticals
Shareholders only pursuant to a subsequent registration statement
filed by Eyemakers with the SEC or pursuant to applicable
exemption from registration. The Class B Preferred and the
Common Stock would therefore be "Restricted Securities," as such
term in defined in Rule 144 as promulgated by the SEC.
2.1.2 Each share of Company Common Stock and Budget
Opticals Common Stock which are held in the treasuries of Company
and Budget Opticals, respectively, shall be automatically
cancelled and extinguished, and no consideration shall be
transferred in respect thereof.
2.2 Stock Options. At the Effective Time and without any action
on the part of the holder thereof, each option to purchase shares of
Budget Opticals Common Stock (the "Options") issued by Budget
Opticals, whether or not then exercisable, shall be converted into
issued and outstanding shares of Budget Opticals Common Stock.
2.3 Dissenting Shares.
2.3.1 Each outstanding share of Budget Opticals Common
Stock, the holder of which has demanded and perfected his or her
demand for appraisal of his or her shares in accordance with
Texas Business Corporation Act and has not effectively withdrawn
or lost his or her right to such appraisal as provided therein
("Dissenting Shares"), shall not be converted into or represent a
right to its pro rata portion of the consideration described in
Section 2.1 hereof, but the holder thereof shall be entitled only
to such rights as are granted by that law. Each holder of
Dissenting Shares who becomes entitled to consideration for his
Budget Opticals Common Stock pursuant to that law shall receive
consideration from Eyemakers in accordance with the provisions of
that law.
2.3.2 If any holder of Budget Opticals Common Stock who
demands appraisal of his shares under the Texas Business
Corporation Act shall effectively
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withdraw or lose (through failure to perfect or otherwise) his right
to appraisal, then each share of Budget Opticals Common Stock of such
holder shall automatically be converted into the right to receive its
pro rata portion of the consideration described in Section 2.1 above
without interest thereon.
2.3.3 Budget Opticals shall give Eyemakers (i) prompt
notice of any written demands for appraisal, withdrawals of
demands for appraisal and any other instruments served pursuant
to the Texas Business Corporation Act and which are received by
Company, and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the Texas
Business Corporation Act. Eyemakers will not voluntarily make
any payment with respect to any demands for appraisal and will
not settle or offer to settle such demands.
2.4 Stock Transfer Books. At the Effective Time, the stock
transfer books of Budget Opticals shall be closed and there shall be
no further registration of transfers of shares of Budget Opticals
Common Stock thereafter on the records of Budget Opticals.
2.5 Surrender and Exchange of Stock Certificates Representing
Budget Opticals Common Stock and Options to Purchase Shares of Budget
Opticals Common Stock. At the Effective Time, the holders of shares
of Budget Opticals Common Stock shall cease to have any rights as
shareholders of Budget Opticals, except such rights as they may have
pursuant to this Agreement and applicable law. After the Effective
Time, each Budget Opticals Shareholder shall be entitled, upon
surrender of certificates representing shares of Budget Opticals
Common Stock, to receive his or her pro rata portion of the
consideration described in Section 2.1 above and as set forth on
Exhibit B.
2.6 Supplementary Action. If at any time after the Effective
Time, any further assignments or assurances in law or any other things
are necessary or desirable to vest or to perfect or confirm of record
in the Surviving Corporation the title to any property or rights of
either of the Constituent Corporations, or otherwise to carry out the
provisions of this Agreement, the officers and directors of the
Surviving Corporation are hereby authorized and empowered on behalf of
the respective Constituent Corporations, in the name of and on behalf
of the appropriate Constituent Corporation, to execute and deliver any
and all things necessary or proper to vest or to perfect or confirm
title to such property or rights in the Surviving Corporation, and
otherwise to carry out the purposes and
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provisions of this Agreement.
3. Articles of Incorporation; By-Laws; Directors and Officers.
3.1 Articles of Incorporation. Unless otherwise determined
prior to the Effective Time, in the discretion of Eyemakers, at the
Effective Time the Articles of Incorporation of Budget Opticals, as in
effect immediately prior to the Effective Time, shall be the Articles
of Incorporation of the Surviving Corporation until thereafter amended
as provided by law and such Articles of Incorporation.
3.2 By-Laws. The By-Laws of Budget Opticals, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation until thereafter amended as provided by law, the
Articles of Incorporation of the Surviving Corporation and such By-Laws.
3.3 Directors. The directors of Budget Opticals immediately
prior to the Effective Time shall be the directors of the Surviving
Corporation, to hold office until their successors have been elected
and shall qualify or as otherwise provided in the By-Laws of the
Surviving Corporation.
3.4 Officers. The officers of Budget Opticals immediately prior
to the Effective Time shall be the officers of the Surviving
Corporation, to hold office until their successors have been appointed
and shall qualify or as otherwise provided in the By-Laws of the
Surviving Corporation.
4. Representations and Warranties of Budget Opticals. Budget
Opticals represents and warrants to Eyemakers and the Company as follows:
4.1 Existence; Good Standing; Corporate Authority; Compliance
With Law. Budget Opticals is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation. Budget Opticals is duly licensed or qualified to
do business as a foreign corporation and is in good standing under the
laws of all other jurisdictions in which the character of the
properties owned or leased by it therein or in which the transaction
of its business makes such qualification necessary. Budget Opticals
has all requisite corporate power and authority to own its properties
and carry on its business as now conducted. Budget Opticals is not in
default with respect to any order of any court, governmental authority
or arbitration board or tribunal to which Budget
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Opticals is a party or is subject, and Budget Opticals is not in violation
of any laws, ordinances, governmental rules or regulations to which it is
subject. Budget Opticals has obtained all licenses, permits or other
authorizations and has taken all actions required by applicable law or
governmental regulation in connection with its business as now
conducted.
4.2 Affiliate Entities. Except as set forth in Schedule 4.2,
Budget Opticals does not own, directly or indirectly, a majority or
controlling interest in any corporation, business trust, joint stock
company, partnership or other business organization or association
relating to the business operations of Budget Opticals. As used in
this Article 4 (other than Sections 4.3, 4.7 and 4.11 hereof),
references to Budget Opticals shall include the affiliated entities
set forth in Schedule 4.2 hereof.
4.3 Capitalization. Budget Opticals has authorized capital
stock consisting solely of Five Hundred Thousand (500,000) shares of
common stock, no par value per share, of which Five Hundred Thousand
(500,000) shares and no more are presently issued and outstanding.
Except for rights granted pursuant to this Agreement and as set forth
in Schedule 4.3 hereto, there are no outstanding rights, warrants,
options, subscriptions, agreements or commitments giving anyone any
right to require Budget Opticals to sell or issue any capital stock or
other securities.
4.4 Jurisdictions. Schedule 4.4 contains a list of all
jurisdictions in which Budget Opticals is presently licensed or
qualified to do business. Budget Opticals has complied in all
material respects with all applicable laws of each such jurisdiction
and all applicable rules and regulations of each regulatory agency
therein. Budget Opticals has not been denied admission to conduct any
type of business in any jurisdiction in which it is not presently
admitted as set forth in such Schedule 4.4, has not had its license or
qualification to conduct business in any jurisdiction revoked or
suspended and has not been involved in any proceeding to revoke or su-
spend a license or qualification.
4.5 Records. The corporate minute books of Budget Opticals to
be delivered to Eyemakers at the Closing will contain true and
complete copies of the articles of incorporation and by-laws, as
amended to the Closing Date, the minutes of all meetings of directors
and shareholders and certificates reflecting all actions taken by the
directors or shareholders without a meeting from the date of
incorporation of Budget Opticals to the Closing Date.
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4.6 Officers and Directors; Bank Accounts; Powers of Attorney;
Insurance. The officers and directors of Budget Opticals are as set
forth in Schedule 4.6. Schedule 4.6 also sets forth (i) the name of
each bank, savings institution or other person with which Budget
Opticals has an account or safe deposit box and the names and
identification of all persons authorized to draw thereon or to have
access thereto, (ii) the names of all persons, if any, holding powers
of attorney from Budget Opticals and a summary statement of the terms
thereof, and (iii) a list of all insurance policies owned by Budget
Opticals (other than those required to be listed in Schedule 4.15.2
hereof), together with a brief statement of the coverage thereof.
4.7 Financial Statements. Budget Opticals has furnished to
Eyemakers (i) unaudited balance sheets and notes thereto of Budget
Opticals as of December 31, 1996 and December 31, 1995, respectively,
and for the three-month period ended March 31, 1997 (collectively the
"Unaudited Balance Sheets"), and (ii) unaudited statements of
operations of Budget Opticals for the calendar years ended December
31, 1996 and December 31, 1995, respectively, and for the three-month
period ended March 31, 1997, copies of which are attached hereto as
Exhibit C (collectively the "Financial Statements"). The Unaudited
Balance Sheets are sometimes hereinafter collectively referred to as
the "Balance Sheets." The Financial Statements fully and fairly set
forth the financial condition of Budget Opticals as of the dates
indicated, and the results of its operations for the periods
indicated, in accordance with generally accepted accounting principles
consistently applied.
4.8 Undisclosed Liabilities. Budget Opticals has no liabilities
or obligations whatsoever, either accrued, absolute, contingent or
otherwise, which were not accrued in the liability section of the
Unaudited Balance Sheet except (i) those arising after the date of the
Unaudited Balance Sheet which are in the ordinary course of business,
in each case in normal amounts and none of which is materially
adverse, and (ii) as and to the extent specifically described in the
Schedules hereto.
4.9 Absence of Certain Changes or Events Since the Date of the
Unaudited Balance Sheets. Since the date of the Unaudited Balance
Sheets, Budget Opticals has not:
4.9.1 incurred any obligation or liability (fixed or
contingent), except normal trade or business obligations incurred
in the ordinary course of business and consistent with past
practice, none of which is materially adverse, and except in
connection with this Agreement and the transactions contemplated
hereby;
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4.9.2 discharged or satisfied any lien, security
interest or encumbrance or paid any obligation or liability
(fixed or contingent), other than in the ordinary course of
business and consistent with past practice;
4.9.3 mortgaged, pledged or subjected to any lien,
security interest or other encumbrance any of its assets or
properties (other than mechanic's, materialman's and similar
statutory liens arising in the ordinary course of business and
purchase money security interests arising as a matter of law
between the date of delivery and payment);
4.9.4 transferred, leased or otherwise disposed of any
of its assets or properties except for a fair consideration in
the ordinary course of business and consistent with past practice
or, except in the ordinary course of business and consistent with
past practice, acquired any assets or properties;
4.9.5 cancelled or compromised any debt or claim, except
in the ordinary course of business and consistent with past
practice;
4.9.6 waived or released any rights of material value;
4.9.7 except pursuant to those contracts listed on
Schedules 4.14 and 4.15 hereto, transferred or granted any rights
under any concessions, leases, licenses, agreements, patents,
inventions, trademarks, trade names, service marks or copyrights
or with respect to any know-how;
4.9.8 made or granted any wage or salary increase
applicable to any group or classification of employees generally,
entered into any employment contract with, or made any loan to,
or entered into any material transaction of any other nature
with, any officer or employee of Budget Opticals;
4.9.9 entered into any transaction, contract or
commitment, except (i) contracts listed on Schedules 4.14 and
4.15 hereto and (ii) this Agreement and the transactions
contemplated hereby;
4.9.10 suffered any casualty loss or damage (whether or
not such loss or damage shall have been covered by insurance)
which affects in any material respect its ability to conduct
business; or
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4.9.11 declared any dividends or bonuses, or authorized
or affected any amendment or restatement of the articles of
incorporation or by-laws of Budget Opticals or taken any steps
looking toward the dissolution or liquidation of Budget Opticals.
Between the date of this Agreement and the Effective Time, Budget
Opticals will not, without the prior written consent of Eyemakers, do
any of the things listed in Sections 4.9.1 through 4.9.11 above.
4.10 Taxes. Budget Opticals (i) has duly and timely filed or
caused to be filed all federal, state, local and foreign tax returns
(including, without limitation, consolidated and/or combined tax
returns) required to be filed by it prior to the date of this
Agreement which relate to Budget Opticals or with respect to which
Budget Opticals or the assets or properties of Budget Opticals are
liable or otherwise in any way subject, (ii) has paid or fully accrued
for all taxes shown to be due and payable on such returns (which taxes
are all the taxes due and payable under the laws and regulations
pursuant to which such returns were filed), and (iii) has properly
accrued for all such taxes accrued in respect of Budget Opticals or
the assets and properties of Budget Opticals for periods subsequent to
the periods covered by such returns. No deficiency in payment of
taxes for any period has been asserted by any taxing body and remains
unsettled at the date of this Agreement. Copies of all federal and
state income (or franchise) tax returns of Budget Opticals have been
made available for inspection by Eyemakers.
4.11 Transferability of Budget Opticals Common Stock. The
issued and outstanding shares of Budget Opticals Common Stock are
subject to no restrictions with respect to transferability to
Eyemakers in accordance with the terms of this Agreement.
4.12 Title to Property and Assets. Budget Opticals has good and
marketable title to all of the properties and assets used by it in the
conduct of its business (including, without limitation, the properties
and assets reflected in the Balance Sheets except any thereof since
disposed of for value in the ordinary course of business), and none of
such properties or assets is, except as disclosed in said Balance She-
ets or the Schedules hereto, subject to a contract of sale not in the
ordinary course of business or to security interests, mortgages, en-
cumbrances, liens or charges of any kind or character.
4.13 Condition of Personal Property. All tangible personal
property, equipment, fixtures and inventories
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included within the assets of Budget Opticals or required to be used in the
ordinary course of business are in good, merchantable or in reasonably
repairable condition and are suitable for the purposes for which they
are used. No value in excess of applicable reserves has been given to
any inventory with respect to obsolete or discontinued products. All
of the inventories and equipment, including equipment leased to
others, are well maintained and in good operating condition.
4.14 Real Estate. Schedule 4.14 contains a list of all real
property owned by Budget Opticals or in which Budget Opticals has a
leasehold or other interest and of any lien, charge or encumbrance
thereupon. Such Schedule also contains a substantially accurate
description identifying all such real property and the significant
rental terms (including rents, termination dates and renewal condi-
tions). The improvements upon such properties and use thereof by
Budget Opticals conforms to all applicable lease restrictions, zoning
and other local ordinances.
4.15 List of Contracts and Other Data. Schedule 4.15 sets forth
the following:
4.15.1 (i) all computer software, patents and
registrations for trademarks, trade names, service marks and
copyrights which are unexpired as of the date hereof and are used
in connection with the operation of the business of Budget
Opticals, all applications pending on said date for patents or
for trademark, trade name, service ▇▇▇▇ or copyright
registrations, and all other proprietary rights, owned or held by
Budget Opticals and which are reasonably necessary to, or
primarily used in connection with, the business of Budget
Opticals, and (ii) all licenses granted by or to Budget Opticals
and all other agreements to which Budget Opticals is a party and
which relate, in whole or in part, to any items of the categories
mentioned in (i) above or to other proprietary rights of Budget
Opticals which are reasonably necessary to, or used in connection
with, the business of Budget Opticals;
4.15.2 all collective bargaining agreements, employment
and consulting agreements, executive compensation plans, bonus
plans, profit-sharing plans, deferred compensation agreements,
employee pension or retirement plans, employee stock purchase and
stock option plans, group life insurance, hospitalization
insurance or other plans or arrangements providing for benefits
to employees of Budget Opticals;
4.15.3 all contracts, understandings and
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commitments (including, without limitation, mortgages, indentures and
loan agreements) to which Budget Opticals is a party, or to which it
or any of its assets or properties are subject, and which are not
specifically referred to in Sections 4.15.1 or 4.15.2 above or in
Schedule 4.14 hereof; and
4.15.4 the names and current annual compensation rates of
all employees of Budget Opticals.
True and complete copies of all documents and complete
descriptions of all oral understandings, if any, referred to in
Schedule 4.14 and 4.15 have been provided or made available to
Eyemakers and its counsel.
4.16 Business Property Rights. The property referred to in
Section 4.15.1 above, together with (i) all designs, methods,
inventions and know-how related thereto, and (ii) all trademarks,
trade names, service marks and copyrights claimed or used by Budget
Opticals which have not been registered (collectively the "Business
Property Rights"), constitute all such proprietary rights owned or
held by Budget Opticals and which are reasonably necessary to, or used
in, the conduct of the business of Budget Opticals. The designs,
methods, inventions and know-how described in the preceding sentence
constitute trade secrets of Budget Opticals within the meaning of all
applicable laws, and Budget Opticals has taken all necessary steps
required by law to protect these trade secrets as such. Budget
Opticals owns or has valid rights to use all such Business Property
Rights without conflict with the rights of others. Except as set
forth in Schedule 4.19 hereto, no person or corporation has made or,
to the knowledge of Budget Opticals, threatened to make any claim that
the operation of the business of Budget Opticals or any Business
Property Right is in violation of or infringes any proprietary or
trade right of any third party. To the knowledge of Budget Opticals,
no third party is in violation of or is infringing upon any Business
Property Right.
4.17 No Breach or Default. Budget Opticals is not in default
under any contract to which it is a party or by which it is bound, nor
has any event occurred which, after the giving of notice or the
passage of time or both, would constitute a default under any such
contract. Budget Opticals has no reason to believe that the parties
to such contracts will not fulfill their obligations under such
contracts in all material respects or are threatened with insolvency.
4.18 Labor Controversies. Budget Opticals is not a party to any
collective bargaining agreement. There are not
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any controversies between Budget Opticals and any of its employees which
might reasonably be expected to materially adversely affect the conduct of
its business, or any unresolved labor union grievances or unfair labor
practice or labor arbitration proceedings pending or, to the knowledge
of Budget Opticals, threatened relating to its business, and there are
not any organizational efforts presently being made or threatened
involving any of the employees of Budget Opticals. Budget Opticals
has not received notice of any claim that Budget Opticals has not
complied with any laws relating to the employment of labor, including
any provisions thereof relating to wages, hours, collective
bargaining, the payment of social security and similar taxes, equal
employment opportunity, employment discrimination and employment
safety, or that Budget Opticals is liable for any arrears of wages or
any taxes or penalties for failure to comply with any of the
foregoing.
4.19 Litigation. Except as set forth in Schedule 4.19, there
are no actions, suits or proceedings with respect to Budget Opticals
involving claims by or against Budget Opticals pending or threatened
against Budget Opticals, at law or in equity, or before or by any
federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality. No basis for
any action, suit or proceeding exists, and there are no orders, j-
udgments, injunctions or decrees of any court or governmental agency
with respect to Budget Opticals has been named or is a party which
apply, in whole or in part, to the business of Budget Opticals, the
assets or properties of Budget Opticals or the Budget Opticals Common
Stock or which would result in any material adverse change in the
business or prospects of Budget Opticals.
4.20 No Brokers. Budget Opticals has not entered into any
contract, arrangement or understanding with any person or firm which
may result in the obligation of Budget Opticals to pay any finder's
fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby, and Budget
Opticals is unaware of any claim or basis for any claim for payment of
any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement
or the consummation of the transactions contemplated hereby.
4.21 Validity and Effect of Agreements. This Agreement
constitutes, and all agreements and documents contemplated hereby when
executed and delivered pursuant hereto for value received will
constitute, the valid and legally binding obligations of Budget
Opticals enforceable
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in accordance with their terms, subject as to enforcement to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles. The consummation of the transactions contemplated hereby
does not require the consent of any third party not obtained, will not
result in the material breach of any term or provision of, or constitute
a default under, any order, judgment, injunction, decree, indenture,
mortgage, lease, lien, other agreement or instrument to which Budget
Opticals is a party or by which it is bound, and will not violate or
conflict with any provision of the by-laws or articles of incorporation
of Budget Opticals.
4.22 No Misrepresentation or Omission. No representation or
warranty by Budget Opticals in this Article 4 or in any other Article
or Section of this Agreement, or in any certificate or other document
furnished or to be furnished by Budget Opticals pursuant hereto,
contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the
statements contained therein not misleading or will omit to state a
material fact necessary in order to provide Eyemakers with accurate
information as to Budget Opticals.
4.23 Authorization of Agreements. The execution and delivery of
this Agreement and all agreements and documents contemplated hereby by
Budget Opticals, and the consummation by it of the transactions
contemplated hereby, have been duly authorized by all requisite
corporate action.
5. Representations and Warranties of Eyemakers and the Company.
Eyemakers and the Company, jointly and severally, represent and warrant to
Budget Opticals as follows:
5.1 Existence; Good Standing; Corporate Authority; Compliance
With Law. Eyemakers and the Company are corporations duly incor-
porated, validly existing and in good standing under the laws of the
respective jurisdictions of their incorporation. Eyemakers and the
Company are duly licensed or qualified to do business as foreign
corporations and are in good standing under the laws of all other
jurisdictions in which the character of the properties owned or leased
by them therein or in which the transaction of their business makes
such qualification necessary. Eyemakers and the Company have all
requisite corporate power and authority to own their properties and
carry on their businesses as now conducted. Neither Eyemakers nor the
Company is in default with respect to any order of any court, govern-
mental authority or arbitration board or tribunal to which either is a
party or is subject, and
14
neither Eyemakers nor the Company is in violation of any laws, ordinances,
governmental rules or regulations to which it is subject. Eyemakers and
the Company have obtained all licenses, permits or other authorizations
and have taken all actions required by applicable law or governmental
regulation in connection with their respective businesses as now conducted.
5.2 Affiliate Entities. Except as set forth in Schedule 5.2,
neither Eyemakers nor the Company owns, directly or indirectly, a
majority or controlling interest in any corporation, business trust,
joint stock company, partnership or other business organization or
association relating to the business operations of Budget Opticals.
As used in this Article 5 (other than Sections 5.3 and 5.6 hereof),
references to Eyemakers and the Company shall include the affiliated
entities set forth in Schedule 5.2 hereof.
5.3 Capitalization. Eyemakers has authorized capital stock
consisting solely of Twenty Million (20,000,000) shares of common
stock, $0.001 par value per share, of which Five Million Three Hundred
Eleven Thousand Two Hundred Thirty-Four (5,311,234) shares and no more
are presently issued and outstanding. Except for rights granted
pursuant to this Agreement and as set forth in Schedule 5.3 hereto,
there are no outstanding rights, warrants, options, subscriptions,
agreements or commitments giving anyone any right to require the
Company to sell or issue any capital stock or other securities. The
Company has authorized capital stock consisting solely of Five Hundred
Thousand (500,000) shares of common stock, no par value per share, of
which Five Hundred Thousand (500,000) shares and no more are presently
issued and outstanding. Except for rights granted pursuant to this
Agreement and as set forth in Schedule 5.3 hereto, there are no
outstanding rights, warrants, options, subscriptions, agreements or
commitments giving anyone any right to require the Company to sell or
issue any capital stock or other securities.
5.4 Jurisdictions. Schedule 5.4 contains a list of all
jurisdictions in which Eyemakers and the Company are presently
licensed or qualified to do business. Eyemakers and the Company have
complied in all material respects with all applicable laws of each
such jurisdiction and all applicable rules and regulations of each
regulatory agency therein. Neither Eyemakers nor the Company has been
denied admission to conduct any type of business in any jurisdiction
in which it is not presently admitted as set forth in such Schedule
5.4, has not had its license or qualification to conduct business in
any jurisdiction revoked or suspended and has not been involved in any
proceeding to revoke or su-
15
spend a license or qualification.
5.5 Taxes. Eyemakers and the Company (i) have duly and timely
filed or caused to be filed all federal, state, local and foreign tax
returns (including, without limitation, consolidated and/or combined
tax returns) required to be filed by either of them prior to the date
of this Agreement which relate to Eyemakers or the Company or with
respect to which either of them or the assets or properties of
Eyemakers or the Company are liable or otherwise in any way subject,
(ii) have paid or fully accrued for all taxes shown to be due and
payable on such returns (which taxes are all the taxes due and payable
under the laws and regulations pursuant to which such returns were
filed), and (iii) have properly accrued for all such taxes accrued in
respect of Eyemakers and the Company or the assets and properties of
either of them for periods subsequent to the periods covered by such
returns. No deficiency in payment of taxes for any period has been
asserted by any taxing body and remains unsettled at the date of this
Agreement. Copies of all federal and state income (or franchise) tax
returns of Eyemakers and the Company have been made available for
inspection by Budget Opticals.
5.6 Transferability of Eyemakers Preferred and Common Stock.
The Class B Preferred, and the Eyemakers Common Stock into which such
Class B Preferred is convertible, are subject to no restrictions with
respect to transferability to the Budget Opticals Shareholders in
accordance with the terms of this Agreement.
5.7 No Breach or Default. Neither Eyemakers nor the Company is
in default under any contract to which either is a party or by which
either is bound, nor has any event occurred which, after the giving of
notice or the passage of time or both, would constitute a default
under any such contract. Neither Eyemakers nor the Company has any
reason to believe that the parties to such contracts will not fulfill
their obligations under such contracts in all material respects or are
threatened with insolvency.
5.8 Labor Controversies. Neither Eyemakers nor the Company is a
party to any collective bargaining agreement. There are not any
controversies between Eyemakers, the Company or any of their
respective employees which might reasonably be expected to materially
adversely affect the conduct of their respective businesses, or any
unresolved labor union grievances or unfair labor practice or labor
arbitration proceedings pending or, to the knowledge of Eyemakers or
the Company, threatened relating to their respective businesses, and
there are not any organizational efforts presently being made or
threatened involving any of
16
the employees of Eyemakers or the Company. Neither Eyemakers nor the
Company has received notice of any claim that either has not complied
with any laws relating to the employment of labor, including any
provisions thereof relating to wages, hours, collective bargaining, the
payment of social security and similar taxes, equal employment
opportunity, employment discrimination and employment safety, or that
either is liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing.
5.9 Litigation. Except as set forth in Schedule 5.9, there are
no actions, suits or proceedings with respect to Eyemakers or the
Company involving claims by or against Eyemakers or the Company
pending or threatened against either Eyemakers or the Company, at law
or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrum-
entality. No basis for any action, suit or proceeding exists, and
there are no orders, judgments, injunctions or decrees of any court or
governmental agency with respect to Eyemakers or the Company has been
named or is a party which apply, in whole or in part, to the business
of Eyemakers or the Company, the assets or properties of Eyemakers or
the Company, the Class B Preferred or the Eyemakers Common Stock or
which would result in any material adverse change in the business or
prospects of Eyemakers or the Company.
5.10 Validity and Effect of Agreements. This Agreement
constitutes, and all agreements and documents contemplated hereby when
executed and delivered pursuant hereto for value received will
constitute, the valid and legally binding obligations of Eyemakers and
the Company, enforceable in accordance with their terms, subject as to
enforcement to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights
and to general equity principles. The consummation of the
transactions contemplated hereby does not require the consent of any
third party not obtained, will not result in the material breach of
any term or provision of, or constitute a default under, any order,
judgment, injunction, decree, indenture, mortgage, lease, lien, other
agreement or instrument to which either is a party or by which either
is bound, and will not violate or conflict with any provision of the
by-laws or articles of incorporation of Eyemakers or the Company.
5.11 No Misrepresentation or Omission. No representation or
warranty by Eyemakers or the Company in this Article 5 or in any other
Article or Section of this Agreement, or in any certificate or other
document furnished
17
or to be furnished by Eyemakers or the Company pursuant hereto, contains
or will contain any untrue statement of a material fact or omits or will
omit to state a material fact necessary to make the statements contained
therein not misleading or will omit to state a material fact necessary in
order to provide Budget Opticals with accurate information as to Eyemakers
and the Company.
5.12 Authorization of Agreements. The execution and delivery of
this Agreement and all agreements and documents contemplated hereby by
Eyemakers and the Company, and the consummation by both of them of the
transactions contemplated hereby, have been duly authorized by all
requisite corporate action.
6. Conditions of Merger.
6.1 General Conditions. The obligations of each party hereto to
effect the Merger shall be subject to fulfillment at or prior to the
Effective Time of the following conditions:
6.1.1 The Board of Directors and shareholders of Budget
Opticals shall have duly approved the Merger in accordance with
the Texas Business Corporation Act.
6.1.2 The Boards of Directors of Eyemakers and the Company,
and Eyemakers, in its capacity as sole shareholder of the
Company, shall have duly approved the Merger in accordance with
the Texas Business Corporation Act.
6.1.3 No injunction, restraining order or other order
issued by a court of competent jurisdiction which prohibits the
consummation of the Merger shall be in effect (each party
agreeing to use its best efforts to have any such injunction
lifted), and no governmental action or proceeding shall have been
commenced or threatened in writing seeking any injunction,
restraining order or other order which seeks to prohibit,
restrain, invalidate or set aside consummation of the Merger.
6.1.4 There shall not have been taken any action, and no
statute, rule or regulation shall have been enacted, by any state
or federal government or governmental agency which would render
the consummation of the Merger illegal.
6.2 Conditions to Obligation of Budget Opticals to Effect the
Merger. The obligation of Budget Opticals to effect the Merger shall
be subject to the fulfillment at or
18
prior to the Effective Time of the following additional conditions:
6.2.1 Eyemakers and the Company shall have performed in all
material respects their agreements contained in this Agreement
required to be performed on or prior to the Effective Time, and
Eyemakers and the Company shall have delivered to Budget Opticals
certificates in the name of Eyemakers and the Company,
respectively, to that effect, dated as of the Closing Date and
signed by its respective Chairman or President and its respective
Secretary or any Assistant Secretary.
6.2.2 The representations and warranties of Eyemakers and
the Company contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date as if made
on and as of such date, except as contemplated or permitted by
this Agreement, and Eyemakers and the Company shall have
delivered to Budget Opticals certificates in the names of
Eyemakers and the Company, respectively, to that effect, dated as
of the Closing Date and signed by its respective Chairman or
President and its respective Secretary or any Assistant
Secretary.
6.2.3 All corporate proceedings, including appropriate
action by the Boards of Directors of Eyemakers and the Company
and Eyemakers in its capacity as the sole shareholder of the
Company, necessary to authorize the execution and delivery by
Eyemakers and the Company of this Agreement and their performance
of their respective obligations hereunder, have been duly and
validly taken.
6.2.4 Eyemakers shall have executed and delivered to
Budget Opticals employment agreements in the form attached hereto
as Exhibit D between Eyemakers and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇, respectively.
6.2.5 Eyemakers shall have executed and delivered to
Budget Opticals non-qualified stock option agreements in the form
attached hereto as Exhibit E which are in such amounts, and which
have been duly executed by those employees of Budget Opticals, as
are set forth in Exhibit F attached hereto.
6.3 Conditions to Obligation of Eyemakers and the Company to
Effect the Merger. The obligation of Eyemakers and the Company to
effect the Merger shall be subject to the fulfillment at or prior to
the Effective Time of the
19
following additional conditions:
6.3.1 Budget Opticals shall have performed in all material
respects its agreements contained in this Agreement required to
be performed on or prior to the Closing Date, and Budget Opticals
shall have delivered to Eyemakers a certificate to that effect,
dated as of the Closing Date and signed by the Chairman or
President of Budget Opticals and its Secretary or any Assistant
Secretary.
6.3.2 The representations and warranties of Budget Opticals
contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date as if made on and
as of such date, except as contemplated or permitted by this
Agreement, and Budget Opticals shall have delivered to Eyemakers
and the Company a certificate to that effect, dated as of the
Closing Date and signed by the Chairman or President of Budget
Opticals and its Secretary or any Assistant Secretary.
6.3.3 The Company shall have received, all in form and
substance satisfactory in the judgment of Budget Opticals
reasonably exercised, all consents, approvals and waivers
required pursuant to the contracts listed in Schedule 4.15, the
debt instruments of Budget Opticals and all filings and
registrations with, and notifications to, all federal, state and
local authorities, required for consummation of the transactions
contemplated by this Agreement (other than the filing and
recordation of appropriate merger documents required by the laws
of the State of Texas) shall have been made by Budget Opticals,
and all approvals and authorizations of all federal, state and
local and such foreign authorities required for consummation of
the transactions contemplated by this Agreement shall have been
received and shall be in full force and effect.
6.3.4 Budget Opticals shall have delivered to Eyemakers
employment agreements in the form attached hereto as Exhibit D
duly executed by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇▇, respectively.
6.3.5 Budget Opticals shall have delivered to Eyemakers
non-qualified stock option agreements in the form attached hereto
as Exhibit E which are in such amounts, and which have been duly
executed by those employees of Budget Opticals, as are set forth
in Exhibit F attached hereto.
20
6.3.6 All shareholders of Budget Opticals have executed and
delivered to Eyemakers the Indemnity and Guaranty Agreement in
the form attached as Exhibit G hereto.
6.3.7 Shareholders ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇▇ shall each have executed and delivered to
Eyemakers a Noncompetition and Nondisclosure Agreement in the
form attached hereto as Exhibit H.
6.3.8 Budget Opticals shall have delivered to Eyemakers
such additional certificates, opinions of counsel and other
documents as Eyemakers may request.
6.3.9 Budget Opticals shall have delivered to Eyemakers
the resignations of all of the members of its Board of Directors,
such resignations to be effective as of the close of business on
the date of the Effective Time.
7. Termination, Amendment and Waiver.
7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of Budget Opticals:
7.1.1 by mutual consent of the Boards of Directors of
Budget Opticals, Eyemakers and the Company;
7.1.2 by either Budget Opticals, Eyemakers or the Company
if the Merger shall not have been consummated on or before July
31, 1997.
7.1.3 by Budget Opticals if there is a material breach of
any of the representations and warranties of Eyemakers or the
Company or if Eyemakers or the Company fails to comply with any
of their respective covenants or agreements contained herein or
if any of the conditions specified in Sections 6.1 or 6.2 has not
been met, waived or has become impossible to satisfy;
7.1.4 by Eyemakers or the Company if there is a material
breach of any of the representations and warranties of Budget
Opticals or if Budget Opticals fails to comply with any of its
covenants or agreements contained herein or if any of the
conditions specified in Sections 6.1 or 6.2 has not been met,
waived or has become impossible to satisfy;
The date on which this Agreement is terminated
21
pursuant to any of the foregoing subsections of this Section 7.1 is
herein referred to as the "Termination Date."
7.2 Effect of Termination. Upon the termination of this
Agreement pursuant to Section 7.1 hereof, this Agreement shall
forthwith become null and void, except that nothing herein shall
relieve any party from liability for any breach of this Agreement
prior to such termination.
7.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken by the Boards of Directors of Budget Opticals,
Eyemakers and the Company at any time before or after approval hereof
by the shareholders of Budget Opticals, but after any such approval no
amendment shall be made which in any other way materially adversely
affects the rights of the shareholders of Budget Opticals (other than
a termination of this Agreement) without the further approval of such
shareholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of the parties hereto.
7.4 Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken by the Boards of Directors of Budget
Opticals, Eyemakers and the Company, may (i) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant
hereto, and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid if set forth in
an instrument in writing signed on behalf of such party.
8. General Provisions.
8.1 Notice. All notices, requests or other communications
required hereunder shall be in writing and shall be given by personal
delivery, national overnight courier, facsimile transmission, or
certified or registered mail, to any party at the respective addresses
set forth in the first paragraph of this Agreement, or to such other
address as shall be specified in writing by such party to the other
party in accordance with the terms and conditions of this Section.
All notices, requests or other communications shall be deemed
effective (i) immediately if delivered personally or by facsimile
transmission, (ii) the next business day if delivered by national
overnight courier, or (iii) Three (3) business days after deposit with
the United States Postal Service, postage prepaid, if delivered by
certified or registered mail.
22
8.2 Expenses. Each party hereto will pay its own costs and
expenses incident to its negotiation and preparation of this Agreement
and to its performance of the transactions contemplated hereby.
8.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
8.4 Survival. For purposes of the Indemnity and Guaranty
Agreement, all of the terms, conditions, warranties and
representations contained in this Agreement shall survive, in
accordance with their terms, the Effective Time.
8.5 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
8.6 Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only and shall be
given no substantive or interpretive effect whatsoever.
8.7 Merger of Documents. This Agreement and all agreements and
documents contemplated hereby constitute one agreement and are
interdependent upon each other in all respects.
8.8 Incorporation of Exhibits and Schedules. All Exhibits and
Schedules attached hereto are by this reference incorporated herein
and made a part hereof for all purposes as if fully set forth herein.
8.9. Severability. If for any reason whatsoever, any one or
more of the provisions of this Agreement shall be held or deemed to be
inoperative, unenforceable or invalid as applied to any particular
case or in all cases, such circumstances shall not have the effect of
rendering such provision invalid in any other case or of rendering any
of the provisions of this Agreement inoperative, unenforceable or inv-
alid.
8.10 Assignability. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party hereto
without the prior written consent of the other parties hereto.
8.11 Entire Agreement. This Agreement, together with the
Exhibits, Schedules, and other documents contemplated hereby,
constitutes the final written expression of all of the agreements
between the parties, and is a complete and
23
exclusive statement of those terms. It supersedes all understandings and
negotiations concerning the matters specified herein. Any representations,
promises, warranties or statements made by any party that differ in
any way from the terms of this written Agreement and the Exhibits,
Schedules and other documents contemplated hereby, shall be given no
force or effect. The parties specifically represent, each to the
other, that there are no additional or supplemental agreements between
them related in any way to the matters herein contained unless
specifically included or referred to herein. No addition to or
modification of any provision of this Agreement shall be binding upon
any party unless made in writing and signed by all parties.
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year
hereinabove first set forth.
EYEMAKERS: EYEMAKERS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ORM, III
▇▇▇▇▇▇ ▇. Orm III, O.D.
Chairman of the Board
COMPANY: EYEMAQ, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ORM, III
▇▇▇▇▇▇ ▇. Orm III, O.D.
President
BUDGET OPTICALS: BUDGET OPTICALS OF AMERICA, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
24
LIST OF EXHIBITS
AND SCHEDULES
Exhibits
A Plan and Agreement of Reorganization
B Ownership of Budget Opticals of America, Inc.
C Financial Statements
D Employment Agreement
E Non-Qualified Stock Option Agreement
F Option Distribution
G Indemnity and Guaranty Agreement
H Noncompetition and Nondisclosure Agreement
Schedules
4.2 Affiliate Entities
4.3 Capitalization
4.4 List of Jurisdictions
4.6 Officers and Directors; Bank Accounts; Powers of Attorney;
Insurance
4.9 Absence of Certain Changes
4.14 Real Estate
4.15 List of Contracts and Other Data
4.19 Litigation
5.2 Affiliate Entities
5.3 Capitalization
5.4 Jurisdictions