EXHIBIT 10.7
------------
STOCK PURCHASE AGREEMENT
DATED APRIL 21, 2003
BETWEEN
BLUEBIRD FINANCE LIMITED
AND
SIGNATURE EYEWEAR, INC.
RELATING TO THE PURCHASE AND SALE
OF
SERIES A 2% CONVERTIBLE PREFERRED STOCK
OF
SIGNATURE EYEWEAR, INC.
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CONTENTS
CLAUSE
PAGE
1.
Definitions..........................................................1
2.
Purchase and
Sale....................................................4
3.
Representations and Warranties of the
Corporation....................5
4.
Representations and Warranties of
Buyer..............................9
5.
Covenants of the
Corporation........................................10
6.
Covenants of Buyer and the
Corporation..............................13
7.
Survival;
Indemnification...........................................14
8.
Miscellaneous.......................................................15
Signatories..................................................................18
EXHIBITS
A.
Certificate of
Determination........................................19
B.
Registration
Rights.................................................33
C.
Legal Opinion of special counsel to the
Corporation.................41
SCHEDULES
3.4
Non-Contravention...................................................47
3.5
Capitalization......................................................48
3.9 Material
Adverse Change.............................................49
3.10
Litigation..........................................................50
3.12
Subsidiaries........................................................51
3.14
Compliance with
Laws................................................52
3.14
Taxes...............................................................53
3.15
Trademarks..........................................................54
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") dated as of April
21, 2003
BETWEEN
(1) SIGNATURE EYEWEAR, INC., a California corporation (the
"CORPORATION"), and
(2) BLUEBIRD FINANCE LIMITED, a British Virgin Island corporation
("BUYER").
WHEREAS, the Corporation desires to sell the Preferred Shares (as
defined
herein) to Buyer, and Buyer desires to purchase the Preferred
Shares from the
Corporation, upon the terms hereinafter set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations,
warranties, covenants and undertakings contained herein, and for
other good and
valuable consideration, the receipt and sufficiency of which are
hereby
acknowledged, the parties hereto hereby agree as follows:
1.
DEFINITIONS
1.1 DEFINITIONS
(a)
The following terms, as used herein, have the following
meanings:
10-DAY MARKET PRICE means the average of the daily Market Prices of
the
Common Stock for the 10 consecutive trading days ending the day
prior to
the
date for which such value is to be computed.
AFFILIATE means, with respect to any specified Person, any other
Person
that, directly or indirectly, controls, is controlled by or is
under direct
or
indirect common control with, such specified Person. For the
purposes of
this
definition, "control" when used with respect to any Person means
the
power to direct the management and policies of such Person,
directly or
indirectly, whether through the ownership of voting securities, by
contract
or
otherwise, and the terms "affiliated," "controlling," and
"controlled"
have
meanings correlative to the foregoing.
BENEFICIAL OWNER has the meaning set forth in Rule 13d-3 under the
Exchange
Act,
and derivative terms such as "beneficially own" shall be given
corresponding meanings.
BOARD OF DIRECTORS means the Board of Directors of the
Corporation.
BUSINESS DAY means any day except Saturday, Sunday and any day that
is a
legal holiday or a day on which banking institutions in Los
Angeles,
California generally are authorized or required by law or other
governmental actions to close.
CERTIFICATE OF DETERMINATION means the certificate of
determination
executed on or before the date of this Agreement substantially in
the form
attached as Exhibit A.
CHANGE OF CONTROL means the occurrence of any of the following
events: (i)
any
Person or COC Group (with the exception of the Buyer or any of
its
affiliates) is or becomes the beneficial owner (as defined herein,
except
that
a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such
right is
exercisable immediately or only after the passage of time),
directly or
indirectly, of more than 50% of the total Voting Securities of
the
Corporation; or (ii) the Corporation consolidates with, or merges
with or
into, another Person or sells, assigns, conveys, transfers, leases
or
otherwise disposes of all
or
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substantially all of its assets to any Person, or any Person
consolidates
with, or merges with or into the Corporation, in any such event
pursuant to
a
transaction in which the outstanding Voting Securities of the
Corporation
are
converted into or exchanged for cash, securities or other
property,
other than any such transaction where (A) the outstanding Voting
Securities
of
the Corporation are converted into or exchanged for Voting
Securities of
the
surviving or transferee corporation or its parent corporation
and/or
cash, securities or other property in an amount which could be paid
by the
Corporation under the terms of the Corporation's credit and
financing
agreements and (B) immediately after such transaction no Person or
COC
Group is the beneficial owner (as defined herein, except that a
Person
shall be deemed to have "beneficial ownership" of all securities
that such
Person has the right to acquire, whether such right is
exercisable
immediately or only after the passage of time), directly or
indirectly, of
more
than 50% of the total Voting Securities of the surviving or
transferee
corporation, as applicable; or (iii) during any consecutive
two-year
period, individuals who at the beginning of such period constituted
the
Board of Directors (together with any new directors whose election
by the
Board of Directors or whose nomination for election by the
stockholders of
the
Corporation was approved by a vote of a majority of the directors
then
still in office who were either directors at the beginning of such
period
or
whose election or nomination for election was previously so
approved)
cease for any reason to constitute a majority of the Board of
Directors
then
in office.
CLOSING DATE means the date of the Closing.
COC
GROUP means a group within the meaning of Section 13(d)(3)
of the Exchange Act.
COMMISSION means the
Securities and Exchange Commission.
COMMON EQUITY means shares of Common Stock, and Convertible
Securities
(including the Series A Preferred Stock).
COMMON STOCK means the Corporation's common stock, par value $0.001
per
share.
CONVERSION SHARES means the shares of Common Stock issued upon
conversion
of
the Series A Preferred Stock.
CONVERTIBLE SECURITIES means any securities convertible into or
exchangeable or exercisable for Common Stock.
CONVERTIBLE VOTING SECURITIES means securities convertible into
or
exchangeable or exercisable for Voting Securities.
CREDIT FACILITY AGREEMENT means the agreement to be executed by the
Buyer
and
the Corporation on the same date as this Agreement.
DECEMBER FINANCIAL STATEMENTS means the draft unaudited
consolidated
financial statements of the Corporation for the period ended
December 31,
2002.
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended,
and the
rules and regulations promulgated thereunder.
FINANCE DOCUMENTATION means the Credit Facility Agreement, the
Security
Agreement, the Subordination Agreement.
GAAP
means the U.S. generally accepted accounting principles.
GROUP means the Corporation and its Subsidiaries.
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LIEN
means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind.
MARKET PRICE means, with respect to the Common Stock, on any given
day, (i)
the
price of the last trade, as reported on the Nasdaq National Market,
not
identified as having been reported late to such system, or (ii) if
the
Common Stock is so quoted, but not so traded, the average of the
last bid
and
ask prices, as those prices are reported on the Nasdaq National
Market,
or
(iii) if the Common Stock is not listed or authorized for trading
on the
Nasdaq National Market or any comparable system, the average of the
closing
bid
and asked prices as furnished by two members of the National
Association of Securities Dealers, Inc. selected from time to time
by the
Corporation for that purpose; provided that, in connection with (i)
or
(ii), the Corporation may from time to time specify in advance the
time at
which the trade price or bid and ask prices, respectively, shall
be
determined for purposes of a particular calculation under this
Agreement.
If
the Common Stock is not listed and traded in a manner that the
quotations referred to above are available for the period
required
hereunder, the Market Price per share of Common Stock shall be
deemed to be
the
fair value per share of such security as determined in good faith
by
the
Board of Directors.
MATERIAL ADVERSE EFFECT means a material adverse effect on:
(a)
the business or financial condition of any member of the Group or
the
Group as a whole;
(b)
the ability of the Corporation to perform its obligations under
this
Agreement or any of the Finance Documentation;
(c)
the validity or enforceability of this Agreement or any of the
Finance
Documentation; or
(d)
any right or remedy of the Buyer under this Agreement or any of
the
Finance Documentation.
OCTOBER FINANCIAL STATEMENTS means the draft consolidated
financial
statements of the Corporation for the year ended October 31,
2002.
PERSON means an individual, corporation, partnership, limited
liability
company, association, trust and any other entity or organization,
including
a
government or political subdivision or an agency or
instrumentality
thereof.
PREFERRED SHARES means 1,200,000 shares of Series A Preferred Stock
issued
on
the Closing Date.
PREFERRED STOCK has the meaning set out in Section 3.5(a).
RESTRICTED SECURITIES means (i) Common Equity and (ii) any other
Voting
Securities or Convertible Voting Securities.
SEC
REPORTS means all forms, reports and documents that the Corporation
is
required to file with the Commission.
SECURITIES ACT means the Securities Act of 1933, as amended, and
the rules
and
regulations promulgated thereunder.
SECURITY AGREEMENT means the security agreement to be executed by
the
Corporation and Buyer on the same date as this Agreement.
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SERIES A PREFERRED STOCK means the Series A 2% Convertible
Preferred Stock
of
the Corporation having the rights, preferences and restrictions as
set
forth in the Certificate of Determination.
SUBORDINATION AGREEMENT means the subordination agreement to be
executed
between the Buyer, the Corporation and Home Loan and Investment
Company on
the
same date as this Agreement.
SUBSIDIARY means, with respect to any Person, any corporation or
other
entity (and any predecessor thereof) of which the securities or
other
ownership interests having ordinary voting power to elect a
majority of the
Board of Directors or other persons performing similar functions
are
directly or indirectly owned by such Person.
VOTING SECURITIES means securities of the Corporation ordinarily
having the
power to vote for the election of directors of the Corporation
other than
the
Series A Preferred Stock, provided that when the term "Voting
Securities" is used with respect to any other Person it means the
capital
stock or other equity interests of any class or kind ordinarily
having the
power to vote for the election of directors or other members of
the
governing body of such Person.
(b)
The following
definitional provisions shall apply to this Agreement:
(i) The words
"hereof", "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to
this
Agreement as a whole and not to any particular provision of
this
Agreement.
(ii) The terms defined in the singular shall have a comparable
meaning
when used in the plural, and vice versa.
(iii) The terms "Dollars" and "$" shall mean United States
Dollars.
(iv) References herein to a specific Section, Subsection or
paragraph
shall refer, respectively, to Sections, Subsections or
paragraph
of this Agreement, unless the express context otherwise
requires.
(v) Wherever the word
"include," "includes," or "including" is used
this Agreement, it shall be deemed to be followed by the words
"without limitation".
2. PURCHASE AND SALE
2.1 PURCHASE AND SALE
Upon the terms of this Agreement, the Corporation agrees to sell to
Buyer, and
Buyer agrees to purchase from the Corporation, 1,200,000 Preferred
Shares at the
Closing. The purchase price (the PURCHASE PRICE) for the Preferred
Shares is
$800,000 in cash. The Purchase Price shall be paid as provided in
Section 2.2.
2.2 CLOSING.
The closing (the CLOSING) of the purchase and sale of the 1,200,000
Preferred
Shares hereunder shall take place at the offices of Jeffer,
Mangels, Butler &
Marmaro LLP, 1900 Avenue of the Stars, 7th Floor, Los Angeles, CA
90067,
immediately upon execution of this Agreement and the Finance
Documentation. At
the Closing:
(a)
The Corporation shall
deliver to Buyer:
(i) certificates for
the Preferred Shares;
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(ii) confirmation that the Certificate of Determination has been
filed
in accordance with the
laws of California;
(iii) certified copies of the Articles of Incorporation and bylaws
of
the Corporation;
(iv) a copy of the resolutions adopted by the Board of
Directors,
certified by the Secretary of the Corporation, authorizing this
Agreement and issuance of the Preferred Shares and the
Conversion
Shares; and
(v) an opinion
reasonably acceptable to Buyer from Jeffer, Mangels,
Butter & Marmaro, LLP, special counsel to the Corporation, in
the
form of the attached Exhibit C.
(b)
Buyer shall deliver to
the Corporation the Purchase Price in
immediately available funds by wire transfer to the account of
the
Corporation notified to Buyer.
2.3 CERTIFICATES.
(a)
Each certificate for
Preferred Shares or Restricted Securities issued
to Buyer shall bear the following legend:
"The securities represented hereby have not been registered
under
Securities Act of 1933, as amended, and may not be offered,
sold,
transferred or otherwise disposed of except in compliance such Act
and
other applicable laws."
(b)
The Corporation agrees
that, at the request of Buyer, it will remove
from the certificates representing any Preferred Shares or
Restricted
Securities the legend contemplated by subsection (a) regarding
the
restriction under the Securities Act in the event that outside
counsel
for Buyer delivers to the Corporation a written opinion that
the
transfer of such Restricted Securities is no longer restricted by
the
Securities Act.
3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation represents and warrants to Buyer as of the date
hereof (and if
different, as at the Closing Date) that: 3.1 CORPORATE EXISTENCE
AND POWER.
The Corporation is a corporation duly incorporated, validly
existing under the
laws of the State of California, and the Corporation and each of
its
Subsidiaries has the powers required to own its assets and to carry
on its
business as now conducted.
3.2 CORPORATE AUTHORIZATION.
(a)
The execution,
delivery and performance of this Agreement by the
Corporation, including the issuance of the Preferred Shares and
the
Conversion Shares, is within the Corporation's powers and has
been
duly authorized by all necessary corporate action on the part of
the
Corporation.
(b)
This Agreement
constitutes a legal and binding agreement of the
Corporation, enforceable against the Corporation in accordance
with
its terms, except (i) as such enforcement is limited by
bankruptcy,
insolvency and other similar laws affecting the enforcement of
creditors' rights generally and (ii) for limitations imposed by
general principles of equity.
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3.3 AUTHORIZATION.
The execution, delivery and performance of this Agreement by the
Corporation
requires no action by or in respect of, or filing with, any
governmental or
non-governmental body, agency, official or authority other than (i)
compliance
with any applicable requirements of the Exchange Act, (ii) with
respect to the
Corporation's obligations under Section 6.4, compliance with any
applicable
requirements of the Securities Act, (iii) the filing of the
Certificate of
Determination and Notice of Transaction under Section 25102(f) of
the California
Corporations Code in accordance with the laws of California, and
(iv) other
filings, notifications and consents that are immaterial to the
consummation of
the transactions contemplated hereby.
3.4 NON-CONTRAVENTION.
Assuming compliance with the matters referred to in Section 3.3,
the execution,
delivery and performance of this Agreement by the Corporation do
not and will
not conflict with (i) the articles of incorporation or bylaws of
the Corporation
or any of its Subsidiaries, (ii) any applicable law or regulation
or (iii) and
except as to matters which would be immaterial to the Corporation
or as set
forth in Schedule 3.4, (y) constitute a default under, or give rise
to any right
of termination, cancellation or acceleration of any right or
obligation of the
Corporation or to a loss of any benefit to which the Corporation is
entitled
under any provision of any agreement or other instrument binding
upon the
Corporation or (z) result in the creation or imposition of any Lien
on any asset
of the Corporation.
3.5 CAPITALIZATION.
(a)
As of the date hereof,
the authorized capital stock of the Corporation
consists of 30,000,000 shares of common stock (COMMON STOCK),
par
value $.001 per share; and 5,000,000 shares of preferred stock,
par
value $.001 per share (PREFERRED STOCK), of which 1,360,000 shares
are
designated as "Series A 2% Convertible Preferred Stock". As of
October
31, 2002, there were issued and outstanding the following shares
of
such
stock: 5,556,889 shares of Common Stock, no shares Preferred
Stock. The Certificate of Determination has been duly filed with
the
California Secretary of State and remains unchanged and in
effect.
(b)
All outstanding shares
of Common Stock are duly authorized, validly
issued and fully paid and nonassessable. There are no preemptive
or
other similar rights available to the existing holders of the
capital
stock of the Corporation. Except as contemplated by this Agreement
or
set forth in Schedule 3.5 hereto, there are no outstanding
options,
warrants, rights, puts, calls, commitments, or other contracts,
arrangements, or understandings issued by or binding upon the
Corporation requiring, and there are no outstanding debt or
equity
securities of the Corporation which upon the conversion, exchange
or
exercise thereof would require, the issuance, sale or transfer by
the
Corporation of any new or additional equity interests in the
Corporation (or any other securities of the Corporation or any of
its
Subsidiaries which, whether after notice, lapse of time or payment
of
monies, are or would be convertible into or exercisable or
exchangeable for equity interests in the Corporation). There are
no
voting trusts or other agreements or understandings to which
the
Corporation or any of its Subsidiaries is a party with respect to
the
voting of capital stock of the Corporation. There are no
outstanding
obligations pursuant to which the Corporation is or may become
obligated to purchase or redeem any shares of capital stock.
3.6 AUTHORIZATION OF PREFERRED SHARES AND CONVERSION SHARES.
The issuance, sale and delivery of the Preferred Shares has been
duly authorized
by all requisite corporate and stockholder action of the
Corporation, and the
Preferred Shares issued to Buyer, when issued and delivered in
accordance with
the terms of this Agreement, will be validly issued and
outstanding, fully paid
and nonassessable, free and clear of any Liens and not subject to
preemptive or
other similar rights of the stockholders of the Corporation. The
Conversion
Shares have
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been duly and validly reserved for issuance, and when issued upon
conversion of
the Preferred Shares, will be validly issued, fully paid, and
nonassessable,
free and clear of any Liens and not subject to preemptive or other
similar
rights of the shareholders of the Corporation. The issuance of the
Preferred
Shares and the Conversion Shares to Buyer is and will be in full
compliance with
all applicable federal, foreign, and state securities laws.,
provided that by
making the representations contained in this section 3.6, the
Corporation is not
making any representation concerning the ability of the Buyer to
subscribe for
the Preferred Shares and the Conversion Shares pursuant to this
Agreement.
3.7 FINDERS' FEES.
There is no investment banker, broker, finder or other intermediary
that has
been retained by or is authorized to act on behalf of the
Corporation who might
be entitled to any fee or commission in connection with the sale of
the
Preferred Shares pursuant to this Agreement.
3.8 FINANCIAL STATEMENTS.
(a)
The October Financial
Statements have been prepared in good faith with
due care and diligence and fairly represent its financial
condition
and results of operations as at the date to which they were drawn
up,
subject to:
(i) normal year end
adjustments and completion of the footnotes; and
(ii) adjustments required by the Corporation's auditors to be made
as
follows:
(A) increase in
inventory reserves as a result of obsolescence
or slow movement of inventory;
(B) increase in the
reserves for returns of goods, inventory and
merchandise;
(C) and increase in
the bad debt reserve,
all such adjustments to be notified to the Buyer promptly upon
agreement thereof by the Corporation and its auditors.
(b)
The December Financial
Statements have been prepared in good faith
with due care and diligence and fairly represent its financial
condition and results of operations as at the date to which they
were
drawn up, subject to:
(i) normal year end
adjustments; and
(ii) adjustments directly resulting from any adjustments made to
the
October Financial Statements in accordance with paragraph
(a)(ii)
above.
The December Financial Statements contain no footnotes.
(c)
Its audited
consolidated financial statements most recently delivered
to the Buyer:
(i) have been prepared
in accordance with accounting principles and
practices generally accepted in its jurisdiction of
incorporation, consistently applied; and
(ii) fairly represent its consolidated financial condition and
results
of operations as at the date to which they were drawn up,
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except, in each case, as disclosed to the contrary in those
financial
statements.
3.9 NO MATERIAL ADVERSE CHANGE.
There has been no material adverse change in the consolidated
financial
condition and results of operations of the Corporation since
December 31,
2002
other than:
(a)
as set out in Schedule
3.9 (Material Adverse Change); or
(b)
as otherwise known to
the Buyer.
3.10 LITIGATION.
No
litigation, arbitration or administrative proceedings are current
or, to
its
knowledge, pending or threatened, which, if adversely determined,
are
reasonably likely to have a Material Adverse Effect other than:
(a)
as set out in Schedule
3.10 (Litigation); or
(b)
threatened claims for
an amount not exceeding US$100,000 in aggregate.
3.11 OFFERING OF PREFERRED SHARES.
Neither the Corporation nor any Person acting on its behalf has
taken or will
take any action (including, without limitation, any offering of any
securities
of the Corporation under circumstances that would require, under
the Securities
Act, the integration of such offering with the offering and sale of
the
Preferred Shares) that might subject the offering, issuance or sale
of the
Preferred Shares to the registration requirements of Section 5 of
the Securities
Act.
3.12 SUBSIDIARIES AND OTHER INTERESTS.
Except as set forth in Schedule 3.12, the Corporation does not have
any
Subsidiaries and does not, directly or indirectly, own any capital
stock or have
any equity interests of or in any other entity. 3.13 COMPLIANCE
WITH LAW.
Except as disclosed in Schedule 3.13, the business of the
Corporation has been
and is presently being conducted in compliance with applicable US
and foreign
federal, state, and local governmental laws, rules, regulations and
ordinances,
except for any such noncompliance that would not have a Material
Adverse Effect
on the Corporation.
3.14 TAXES.
Except as disclosed in Schedule 3.14, the Corporation has timely
filed or caused
to be filed all Tax Returns that are required to be filed by or
with respect to
it, its operations and assets, and as of the time of filing, all
such Tax
Returns were complete and correct. Except as disclosed in Schedule
3.14, the
Corporation has paid or caused to be paid all Taxes as shown on
said returns and
on all assessments received by them to the extent that such Taxes
have become
due. The federal income Tax Returns of the Corporation have been
examined and
reported on by the Internal Revenue Service (or closed by
applicable statutes)
and all tax liabilities including additional assessments have been
satisfied for
all fiscal years prior to and including the fiscal year ended 31
October, 2001.
The Corporation has paid or caused to be paid, or have established
reserves
which, in the reasonable judgment of the Corporation, are adequate
in all
material respects, for all Tax liabilities applicable to the
Corporation for all
fiscal years which have not been examined and reported on by the
taxing
authorities (or closed by applicable statutes). The term TAXES
shall mean all
taxes, charges, fees, levies or other assessments, including,
without
limitation, all net income, gross income, gross receipts, premium,
sales, use,
ad valorem,
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transfer, franchise, profits, license, withholding, payroll,
employment, excise,
estimated severance, stamp, occupation, property or other taxes,
fees, custom
duties, assessments or charges of any kind whatsoever, together
with any
interest and any penalties (including penalties for failure to file
in
accordance with applicable information reporting requirements), and
additions to
tax by any authority (domestic or foreign). The term TAX RETURN
shall mean any
report, return, form, declaration or other document or information
required to
be supplied to any authority in connection with Taxes.
3.15 TRADEMARKS, ETC.
Schedule 3.15 sets forth a true and complete list of all patents,
trademarks,
trade names, service marks and copyrights and applications
therefor
(collectively, INTELLECTUAL PROPERTY) owned by or licensed to the
Corporation
which constitutes all the Intellectual Property necessary for use
in the United
States and in such other jurisdictions as is necessary for the
conduct of the
business of the Corporation as presently conducted. Except as
disclosed on
Schedule 3.15, the Corporation owns or has the perpetual right to
use, without
payment to or interference from any other party, all Intellectual
Property
listed on Schedule 3.15 and has not authorized any person in any
jurisdiction to
use any such Intellectual Property. All Intellectual Property
listed on Schedule
3.15 which may be so registered or filed has been duly registered
and filed in
or issued by the appropriate governmental agency in the
jurisdictions indicated,
all necessary affidavits of continuing use have been filed, and all
necessary
maintenance fees have been paid to continue all such rights in
effect. Except as
set forth in Schedule 3.15, the Corporation has no notice or
knowledge of any
objection or claim being asserted by any person with respect to the
ownership,
validity, enforceability or use of any Intellectual Property listed
on Schedule
3.15 or challenging or questioning the validity or effectiveness of
any such
license.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Corporation as of the date
hereof (and, if
different, as of the Closing Date) that:
4.1 CORPORATE EXISTENCE AND POWER.
Buyer is a corporation duly incorporated, validly existing and in
good standing
under the laws of its jurisdiction of incorporation.
4.2 CORPORATE AUTHORIZATION.
The execution, delivery and performance of this Agreement by Buyer
are within
Buyer's corporate powers and have been duly authorized by all
necessary
corporate action on the part of Buyer. This Agreement constitutes a
legal, valid
and binding agreement of Buyer, enforceable against Buyer in
accordance with its
terms, except (a) as such enforcement is limited by bankruptcy,
insolvency and
other similar laws affecting the enforcement of creditors' rights
generally and
(b) for limitations imposed by general principles of equity. 4.3
AUTHORIZATION.
The execution, delivery and performance of this Agreement by Buyer
requires no
action by or in respect of, or filing with, any governmental or
non-governmental
body, agency or official or any other Person other than (i)
compliance with any
applicable requirements of the Exchange Act, and (ii) other filings
or
notifications that are immaterial to the consummation of the
transactions
contemplated hereby.
4.4 NON-CONTRAVENTION.
Assuming compliance with the matters referred to in Section 4.3,
the execution,
delivery and performance of this Agreement by Buyer does not and
will not (i)
violate the certificate of incorporation or bylaws of Buyer, (ii)
violate any
applicable law, rule, regulation, judgment, injunction, order or
decree, except
for any such violations which would not have a material adverse
effect on the
ability of Buyer to consummate the transactions contemplated hereby
or (iii)
constitute a default under any agreement or other instrument
binding upon Buyer
except as to matters which would not be material to Buyer.
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<PAGE>
4.5 PURCHASE FOR INVESTMENT.
(a)
Buyer is an
"accredited investor" as defined in Rule 501 of Regulation
D promulgated under the Securities Act. Buyer is purchasing the
Preferred Shares for investment for its own account and not with
a
view to, or for sale in connection with, any distribution thereof
or
of any Conversion Shares in violation of the Securities Act.
(b)
Buyer understands that
(i) the offering and sale of the Preferred
Shares and the Conversion Shares by the Corporation is intended to
be
exempt from registration under the Securities Act pursuant to
Section
4(2) thereof and (ii) there is no existing public or other market
for
the Preferred Shares.
(c)
The Buyer confirms
that it (i) has been furnished with or has had
access to all of the
information that it considers necessary to make
an informed investment decision with respect to the Preferred
Shares
and Conversion Shares, (ii) has had the opportunity to discuss
with
management of the Corporation the intended business and
financial
affairs of the Corporation (iii) (either alone or together with
its
advisors) has sufficient knowledge and experience in financial
and
business matters so as to be capable of evaluating the merits
and
risks of its investment in the Preferred Shares and the
Conversion
Shares, (iv) is capable of bearing the economic risks of such
investment; and (v) it has not relied upon any oral representations
of
the
Corporation in connection with its decision to invest in the
Preferred Shares and the Conversion Shares.
(d)
Buyer has not received
any advertising or general solicitation in
connection with the issuance of the Preferred Shares.
(e)
Buyer understands that
the Preferred Shares and the Conversion Shares
will be issued in a transaction exempt from the registration or
qualification requirements of the Securities Act and applicable
state
securities laws, and that such securities must be held
indefinitely
unless a subsequent disposition thereof is registered or
qualified
under the Securities Act and such state securities laws or is
exempt
from such registration or qualification.
4.6 FINDER'S FEES
There is no investment banker, broker, finder or other intermediary
that has
been retained by or is authorized to act on behalf of the Buyer who
might be
entitled to any fee or commission in connection with the
transactions
contemplated by this Agreement.
5. COVENANTS OF THE CORPORATION
The Corporation agrees that:
5.1 CERTIFICATE OF DETERMINATION.
The Corporation has caused the Certificate of Determination set
forth as Exhibit
A hereto to be filed as required pursuant to the law of
California.
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<PAGE>
5.2 RESERVATION OF SHARES.
For so long as any of the Preferred Shares is outstanding, the
Corporation shall
keep reserved for issuance a sufficient number of shares of Common
Stock to
satisfy its conversion obligations under the Certificate of
Determination.
5.3 OTHER TRANSFERS OF RESTRICTED SECURITIES.
The Corporation shall take all actions reasonably necessary to
enable holders of
the Common Stock to sell such stock without registration under the
Securities
Act pursuant to Rule 144 under the Securities Act or any successor
rule or
regulation, subject in each case to the provisions of this
Agreement and,
specifically, the filing on a timely basis of all reports required
to be filed
under the Exchange Act.
5.4 PRO-RATA PARTICIPATION.
(a)
If the Corporation
shall issue (such issuance, including any Common
Equity issued to Buyer pursuant to this Section 5.4, an ISSUANCE)
any
Common Equity (other than an issuance of Common Equity (i) pursuant
to
the Corporation's existing or future stock option plans or pursuant
to
any other existing or future director or employee compensation
plan
approved by the Board of Directors, (ii) as consideration for
the
acquisition of a business or of assets, (iii) to the
Corporation's
joint venture partners in exchange for interests in the relevant
joint
venture, (iv) upon conversion, exercise or exchange of
Convertible
Securities, (v) that would cause an adjustment under paragraph
8(g)(iii) of the Certificate of Determination, (vi) pursuant to
any
shareholders' rights plan or (vii) as dividends on any class of
preferred stock of the Corporation), Buyer shall have the right
to
purchase for cash up to an amount of such Common Equity
(PRO-RATA
SECURITIES) on the same terms and at the same price as the issue
price
of such Common Equity (such price to be agreed by the Corporation
and
Buyer if such Common Equity is to be issued for consideration
other
than cash, and if the parties cannot agree on such price, the
price
shall be determined as provided in paragraph (c) of this Section
5.4)
so that, after the Issuance, Buyer would own the same
proportional
interest of Common Stock in the aggregate (assuming conversion,
exercise or exchange of all Convertible Securities) as is owned by
it
prior to the Issuance (assuming conversion, exercise or exchange
of
all Convertible Securities). The Corporation shall deliver
written
notice (a PRO-RATA NOTICE) to Buyer with respect to any
Issuance
subject to the provisions of this Section 5.4 not less than 10
days
before the anticipated date of such Issuance. Buyer's right to
purchase Pro-Rata Securities with respect to any Issuance of
Common
Equity shall terminate 10 business days after delivery of the
Pro-Rata
Notice. If Buyer timely elects to exercise its right to
purchase
Pro-Rata Securities, such election will constitute a binding offer
to
purchase and may not be revoked by Buyer; provided, however,
that
Buyer's obligation to acquire the Pro-Rata Securities will be
subject
to terms and conditions at least as favorable as those applicable
to
the Issuance giving rise to Buyer's rights under this Section 5.4
and
to receipt of any necessary governmental approvals (and the
parties
agree to expeditiously seek and cooperate with respect to
obtaining
such approvals). Notwithstanding anything in this Section 5.4 to
the
contrary, (x) if Buyer exercises its right to purchase any
Pro-Rata
Securities pursuant to an Pro-Rata Notice, but the Corporation
does
not consummate the issuance of Common Equity referred to in
such
notice (or reduces the size of such issuance), Buyer will not have
the
right to purchase such Pro-Rata Securities (or, in the event of
a
reduction in the size of the Issuance, have its right to
purchase
reduced pro rata), (y) if Buyer exercises its right to purchase
any
Pro-Rata Securities, the Corporation and Buyer agree that the
Issuance
giving Buyer such right shall not cause an adjustment under
paragraph
8(g)(ii) of the Certificate of Determination, and (z) if the
Corporation issues securities (RIGHTS) the issuance of which,
except
for this paragraph, would cause an adjustment under paragraph
8(g)(iii) of the Certificate of Determination, then (A) Buyer
shall,
in addition to any Rights it receives in respect of any Common
Stock
it owns, be entitled to receive Rights in respect of all
Preferred
Stock (as if such Preferred Stock had been converted into Common
Stock
immediately prior to the record date for the Issuance of such
Rights)
11
<PAGE>
owned by Buyer, and (B) the Corporation and Buyer agree that
the
issuance of Rights shall not cause an adjustment under Section
8(g)(iii) or 8(g)(iv) of the Certificate of Determination.
Buyer
agrees that it will not, directly or indirectly, sell, pledge,
encumber or otherwise transfer or agree to sell, pledge, encumber
or
otherwise transfer, any Rights it receives pursuant to this
Section
5.4 in respect of Preferred Shares. The agreements between the
Corporation and Buyer in this paragraph 5.4(a) not to make
adjustments
under paragraph 8(g) of the Certificate of Determination under
the
circumstances set forth in this paragraph 5.4(a) shall
constitute
agreements as referred to in, and for the purposes of,
paragraph
8(g)(vii) of the Certificate of Determination.
(b)
The rights and
agreements in paragraph (a) of this Section 5.4 shall
terminate in their entirety if all shares of Series A Preferred
Stock
have been either redeemed by the Corporation or converted into
Common
Stock.
(c)
If Buyer and the
Corporation fail to agree on the price at which Buyer
may purchase
securities under paragraph (a) of this Section 5.4 within
30 days following receipt by the Buyer of a Pro-Rata Notice, then
the
items in dispute shall be referred to a nationally recognized
investment banking firm or other third party arbitrator
selected
jointly by Buyer and the Corporation. The determination of such
investment banking firm or other third party arbitrator shall
be
rendered within 30 days of such referral. The Corporation and
Buyer
shall share equally in payment of all fees and expenses of such
investment banking firm or other third party arbitrator. All
determinations made pursuant to this paragraph (c) shall be final
and
binding on the Buyer and the Corporation.
5.5 CHANGE OF
CONTROL.
(a)
Subject to paragraphs
5.5(c) and (d) below, upon the occurrence of a
Change of Control (the date of such occurrence being the CHANGE
OF
CONTROL DATE), the Corporation shall, to the extent funds are
legally
available therefor, make an offer (the CHANGE OF CONTROL OFFER)
to
Buyer to repurchase 100% of Buyer's shares of Series A Preferred
Stock
at a price per share in cash equal to (A) if the Change of
Control
Payment Date is prior to the First Call Date (as defined in the
Certificate of Determination), 110% of the product of (i) one plus
the
number (or fraction) of shares of Series A Preferred Stock accrued
and
unpaid as dividends on such share to the Change of Control
Payment
Date, times (ii) the Conversion Ratio (as defined in the
Certificate
of Determination) in effect immediately prior to the Change of
Control, times (iii) if the Change of Control is the result of
a
tender or exchange offer, merger or other form of business
combination, the price paid per share of Common Stock in such
tender
or exchange offer, merger or other form of business combination
(with
the fair market value of any non-cash consideration being
determined
in good faith by the Board of Directors of the Corporation), or if
the
Change of Control is not the result of a tender or exchange
offer,
merger or other form of business combination, the 10-Day Market
Price
of the Common Stock on the Change of Control Date and (B) if
the
Change of Control Payment Date is on or after the First Call Date,
the
Redemption Price (as defined in the Certificate of
Determination);
provided, that Buyer shall not be entitled to tender any Series
A
Preferred Stock under this provision until such time as the
Corporation has repurchased such debt securities as are required to
be
repurchased by the Corporation upon such event pursuant to the
Corporation's credit and financing agreements. The Corporation
shall
promptly take all actions required to make such repurchases of
debt
securities.
(b)
The Corporation shall
make the Change of Control Offer not later than
30 days following the Change of Control Date by giving notice to
Buyer
specifying a date, not less than 20 days nor more than 30 days
after
the date of such notice, on which the Corporation will purchase
any
shares of Series A Preferred Stock subject to such offer (the
CHANGE
OF CONTROL PAYMENT DATE). Not less than 2 Business Days prior to
the
Change of Control Payment Date, Buyer shall notify the Corporation
(an
ELECTION NOTICE) as to the number of shares of Series A
Preferred
Stock in respect of which Buyer is accepting the Change of
Control
12
<PAGE>
Offer. If Buyer does not deliver the Election Notice by such date,
its
rights under this Section 5.5 will terminate. If Buyer does deliver
an
Election Notice by such date, then (i) such Election Notice will be
a
binding commitment of Buyer to sell to the Corporation on the
Change
of Control Payment Date the number of shares of Preferred Stock
specified in such Election Notice, subject to Section 5.5(a) and
(ii)
on the Change of Control Payment Date, (A) the Corporation will
deliver to Buyer an amount of cash equal to the purchase price for
the
Series A Preferred Stock to be purchased and (B) Buyer will deliver
to
the Corporation free and clear of any Liens one or more
certificates
representing the Series A Preferred Stock to be sold duly endorsed
or
accompanied by stock powers duly endorsed in blank, with any
required
transfer stamps affixed thereto.
(c)
Notwithstanding the
foregoing, the Corporation shall not be required
to make a Change of Control Offer following a Change of Control if
a
third party makes the Change of Control Offer in the manner, at
the
price and at the times and otherwise in compliance with the
requirements applicable to a Change of Control Offer made by
the
Corporation and purchases all shares of Series A Preferred
Stock
validly tendered under such Change of Control Offer.
(d)
The Corporation's
obligations under this Section 5.5 are subject to
compliance with the California Corporations Code. If the
Corporation
is limited by the California Corporations Code from fully
complying
with its obligations hereunder, the Corporation agrees that: (i)
it
will comply with its obligations hereunder to the extent it is able
to
do so and (ii) it will use its best efforts to remove any such
legal
impediment. If, at any time, the Corporation is obligated to make
a
Change of Control Offer hereunder but is not able to fully perform
its
obligations hereunder because of a legal impediment, Buyer may
elect
to have the Corporation defer such Change of Control Offer until
the
Corporation is legally able to fully perform its obligations
hereunder. The Series A Preferred Stock will continue to accrue
dividends until repurchased, redeemed or converted.
6. COVENANTS OF BUYER AND THE CORPORATION
6.1 REQUIRED REGULATORY APPROVALS; REASONABLE BEST EFFORTS; FURTHER
ASSURANCES.
Subject to the terms of this Agreement, Buyer and the Corporation
will, and will
cause their Affiliates to, use their reasonable best efforts to
take, or cause
to be taken, all actions and to do, or cause to be done, all things
necessary or
desirable under applicable laws and regulations to consummate the
transactions
contemplated by this Agreement. The Corporation and Buyer agree to
execute and
deliver such other documents, certificates, agreements and other
writings and to
take such other actions as may be necessary or desirable in order
to consummate
or implement expeditiously the transactions contemplated by this
Agreement.
6.2 CERTAIN FILINGS.
(a)
The Corporation and
Buyer will, and will cause their Affiliates to,
cooperate with one another (i) in determining whether any action by
or
in respect of, or filing with, any governmental body, agency,
official
or authority is required, or any actions, consents, approvals
or
waivers are required to be obtained from parties to any
material
contracts, in connection with the consummation of the
transactions
contemplated by this Agreement or the conversion by Buyer of Series
A
Preferred Stock and (ii) in taking such actions or making any
such
filings, furnishing information required in connection therewith
and
seeking timely to obtain any such actions, consents, approvals
or
waivers. Each of the Corporation and Buyer shall (A) give the
other
party prompt notice of the commencement of any action, suit,
litigation, arbitration, preceding or investigation by or before
any
governmental body with respect to the transactions contemplated
by
this Agreement, and (B) keep the other party informed as to the
status
of any such action, suit, litigation, arbitration, preceding or
investigation.
13
<PAGE>
(b)
The Corporation and
Buyer will, and will cause their Affiliates to,
take such actions, make such payments or commitments, and agree
to
such amendments to any of their respective franchises,
licenses,
contracts or other agreements or authorizations, as shall be
required
in order to obtain a consent, approval or waiver from any other
Person
in connection with the transactions contemplated hereby and by
the
Certificate of Determination (including conversion of the Series
A
Preferred Stock).
6.3 PUBLIC ANNOUNCEMENTS.
Except as may be required by applicable law or any listing
agreement with any
national securities exchange or quotation system, the parties agree
to consult
with each other before issuing any press release or making any
public statement
or completing any public filing with respect to this Agreement or
the
transactions contemplated hereby and will not issue any such press
release or
make any such public statement prior to such consultation.
6.4 REGISTRATION RIGHTS AGREEMENT.
The terms set forth in Exhibit B hereto are hereby incorporated by
reference.
The registration rights set forth in Exhibit B may be assigned by a
Holder (as
defined therein) to a transferee or assignee of the Preferred
Shares or the
Registrable Securities, provided that such transferee or assignee
agrees to be
bound to the terms of Exhibit B. The Corporation shall not, without
the prior
written consent of the Holder owning a majority-in-interest of the
Preferred
Shares or Registrable Securities, enter into an agreement which
grants a Person
registration rights superior to those granted in Exhibit B.
6.5 SEC REPORTS
The Corporation hereby agrees that (a) the Corporation shall,
within 90 days
after the Closing Date, have filed all required SEC Reports through
such date
and delivered or made available to Buyer copies thereof, and as of
the filing
date of such SEC Reports (b) the SEC Reports shall comply in all
material
respects with all applicable requirements of the Exchange Act or
the Securities
Act, as the case may be and (c) none of the SEC Reports shall
contain any untrue
statement of a material fact or omit to state a material fact
required to be
stated or incorporated by reference therein or necessary in order
to make the
statements therein, in light of the circumstances under which they
will be made,
not misleading.
7. SURVIVAL; INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATION AND WARRANTIES.
All representations and warranties contained in this Agreement and
all claims
with respect thereto shall terminate upon the expiration of 24
months after the
date of this Agreement, except that the representations and
warranties contained
in Sections 3.1, 3.2, 3.3, 3.6, 4.1, 4.2, and 4.3 shall survive
indefinitely.
Notwithstanding the preceding sentence, any representation or
warranty in
respect of which indemnity may be sought under this Agreement shall
survive the
time at which it would otherwise terminate pursuant to the
preceding sentence,
if notice of the inaccuracy or breach thereof giving rise to such
right of
indemnity shall have been given in reasonable detail to the party
against whom
such indemnity may be sought prior to such time.
7.2 INDEMNIFICATION.
(a)
The Corporation hereby
indemnifies Buyer against and agrees to hold
Buyer harmless from any and all damage, loss, liability and
expense
(including, without limitation, reasonable expenses of
investigation
and reasonable attorneys' fees and expenses in connection with
any
action, suit or proceeding) (DAMAGES) incurred or suffered by
Buyer
arising out of any misrepresentation or breach of warranty,
covenant
or agreement made or to be performed by the Corporation pursuant
to
this Agreement; provided that the Corporation's maximum
liability
under this Section 7.2(a) shall not exceed US$800,000.
(b)
Buyer hereby
indemnifies the Corporation against and agrees to hold
the Corporation harmless from any and all Damages incurred or
suffered
by the Corporation arising out of any misrepresentation or breach
of
warranty, covenant or agreement made or to be performed by
Buyer
pursuant to this Agreement.
7.3 PROCEDURES.
The party seeking indemnification under Section 7.2 (the
INDEMNIFIED PARTY)
agrees to give prompt notice to the party against whom indemnity is
sought (the
INDEMNIFYING PARTY) of the assertion of any claim, or the
commencement of any
suit, action or proceeding in respect of which indemnity may be
sought under
such Section. The Indemnifying Party may at its election
participate in and
control the defense of any such suit, action or proceeding at its
own expense.
The Indemnifying Party shall not be liable under Section 7.2 for
any settlement
effected without its consent of any claim, litigation or proceeding
in respect
of which indemnity may be sought hereunder.
8. MISCELLANEOUS
8.1 NOTICES.
All notices, requests and other communications to any party
hereunder shall be
in writing and shall be deemed duly given, effective (i) two
Business Days
later, if sent by international overnight courier, return receipt
requested (ii)
when sent if sent by fax, provided that the receipt of the fax is
promptly
confirmed by telephone confirmation thereof, and (iii) when served,
if delivered
personally to the intended recipient, and in each case,
addressed,
if to Buyer, to:
BlueBird Finance Limited
P.O. Box 957
Road Town
Tortola
British Virgin Islands
Attention: The Directors
if to the Corporation, to:
Signature Eyewear, Inc.
498 North Oak Street
Inglewood, CA
90302
Attention: Michael Prince
Chief Financial Officer
Fax: (310) 330-2770
with a copy (not constituting notice) to:
Jeffer, Mangels, Butler & Marmaro LLP
1900 Avenue of the Stars
7th Floor
Los Angeles, CA
90067
Attention: Joseph A. Eisenberg, PC
Fax: (310) 785-5357
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<PAGE>
Any party may change the address to which notices or other
communications
hereunder are to be delivered by giving the other party notice in
the manner
herein set forth.
8.2 AMENDMENTS AND WAIVERS.
Any provision of this Agreement may be amended or waived if, but
only if, such
amendment or waiver is in writing and is signed, in the case of an
amendment, by
each party to this Agreement, or in the case of a waiver, by the
party against
whom the waiver is to be effective. No failure or delay by any
party in
exercising any right, power or privilege hereunder shall operate as
a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or
further exercise thereof or the exercise of any other right, power
or privilege.
The rights and remedies herein provided shall be cumulative.
8.3 EXPENSES.
All costs and expenses incurred in connection with this Agreement
shall be paid
by the party incurring such cost or expense.
8.4 ASSIGNMENT.
The rights and obligations of the parties hereunder cannot be
assigned or
delegated without the prior written consent of the other party,
except that (i)
Buyer may assign all of its rights and obligations under this
Agreement to an
Affiliate (provided that (A) any such Affiliate continues to be a
Affiliate of
Buyer and (B) Buyer shall be responsible for any breach by such
Affiliate) and
(ii) Buyer may assign its rights and obligations under Section 6.4
and Exhibit B
of this Agreement to the assignee of Series A Preferred Stock,
provided such
assignee agrees to be bound to the terms of such provisions and
Exhibit.
8.5 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance
with the law of
the State of California (excluding conflicts of law
principles).
8.6 JURISDICTION.
Except as otherwise expressly provided in this Agreement, the
parties hereto
agree that any suit, action or proceeding seeking to enforce any
provision of,
or based on any matter arising out of or in connection with, this
Agreement or
the transactions contemplated hereby may only be brought in a state
or federal
court of competent jurisdiction sitting in Los Angeles County,
California and
each of the parties hereby consents to the non-exclusive
jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any
such suit,
action or proceeding. Process in any such suit, action or
proceeding may be
served on any party anywhere in the world, whether within or
without the
jurisdiction of any such court. Without limiting the foregoing,
each party
agrees that service of process on such party as provided in Section
8.1 shall be
deemed effective service of process on such party.
8.7 COUNTERPARTS; THIRD PARTY BENEFICIARIES.
This Agreement may be signed in any number of counterparts, each of
which shall
be an original, with the same effect as if the signatures thereto
and hereto
were upon the same instrument. This Agreement shall become
effective when each
party hereto shall have received a counterpart hereof signed by the
other party
hereto. No provision if this Agreement is intended to confer upon
any Person
other than the parties hereto any rights or remedies.
16
<PAGE>
8.8 ENTIRE AGREEMENT.
This Agreement (including the Exhibits hereto) and the Certificate
of
Determination constitute the entire agreement between the parties
with respect
to the subject matter of this Agreement and supersede all prior
agreements and
understandings, both oral and written, between the parties with
respect to the
subject matter of this Agreement.
8.9 HEADINGS.
The headings herein are included for convenience of reference only
and shall be
ignored in the construction or interpretation hereof.
8.10 SEVERABILITY.
The provisions of this Agreement shall be deemed severable and the
invalidity or
unenforceability of any provision shall not affect the validity
or
enforceability of the other provisions hereof. If any provision of
this
Agreement, or the application thereof to any person or entity or
any
circumstance, is held by a court of competent jurisdiction to be
invalid or
unenforceable, (a) a suitable and equitable provision shall be
substituted
therefor in order to carry out, so far as may be valid and
enforceable, the
intent and purpose of such invalid or unenforceable provision and
(b) the
remainder of this Agreement and the application of such provision
to other
persons, entities or circumstances shall not be affected by such
invalidity or
unenforceability, nor shall such invalidity or unenforceability
affect the
validity or enforceability of such provision, or the application
thereof, in any
other jurisdiction.
8.11 SPECIFIC PERFORMANCE.
The parties hereto agree that the remedy at law for any breach of
this Agreement
will be inadequate and that any party by whom this Agreement is
enforceable
shall be entitled to specific performance in addition to any other
appropriate
relief or remedy. Such party may, in its sole discretion, apply to
any court of
competent jurisdiction for specific performance or injunctive or
such other
relief as such court may deem just and proper in order to enforce
this Agreement
or prevent any violation hereof and, to the extent permitted by
applicable law,
each party waives any objection to the imposition of such
relief.
8.12 NO RECOURSE.
Notwithstanding any of the terms or provisions of this Agreement,
(a) the
Corporation agrees that neither it nor any Person acting on its
behalf may
assert any claims or cause of action against any officer, director,
partner,
member or stockholder of the Buyer or any of its Affiliates in
connection with
or arising out of this Agreement or the transactions contemplated
hereby and (b)
the Buyer agrees that neither it nor any Person acting on its
behalf may assert
any claims or cause of action against any officer, director,
partner, member or
stockholder of the Corporation or any of its Affiliates in
connection with or
arising out of this Agreement or the transactions contemplated
hereby.
8.13 CALIFORNIA COMMISSIONER OF CORPORATIONS
THE SALE OF THE SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT
HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND
THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY
PART OF THE
CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL,
UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY
SECTION 25100,
25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF
ALL PARTIES TO
THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION
BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly
executed by their respective authorized officers as of the day and
year first
above written.
SIGNATURE EYEWEAR, INC.
BY: ______________________________
NAME: MICHAEL PRINCE
TITLE: CHIEF FINANCIAL OFFICER
BLUEBIRD FINANCE LIMITED
BY: ______________________________
NAME:
TITLE:
18
<PAGE>
EXHIBIT A
CERTIFICATE OF DETERMINATION
OF
SERIES A 2% CONVERTIBLE PREFERRED STOCK
OF
SIGNATURE EYEWEAR, INC.
The undersigned hereby certify that:
1. They are the
President and Secretary, respectively, of Signature Eyewear,
Inc., a California corporation (CORPORATION).
2. The
authorized number of shares of this Corporation's Preferred Stock
is
5,000,000, and the number of shares of the Series A Preferred Stock
(which
is
the series created by this Certificate of Determination) is
1,360,000.
None
of the shares of the Series A Preferred Stock has been issued.
3. Pursuant to
authority granted by Article IV of this Corporation's Restated
Articles of Incorporation, the following resolutions have been duly
adopted
and
approved by this Corporation's Board of Directors:
"WHEREAS, the Restated Articles of Incorporation of this
Corporation
provide for a class of shares known as Preferred Stock, issuable
from time
to
time in one or more series; and
WHEREAS, the Board of Directors of this Corporation is authorized
to
determine or alter the rights, preferences, privileges, and
restrictions
granted to or imposed on any wholly unissued series of Preferred
Stock, to
fix
a number of shares constituting any such series, and to determine
the
designation of that series, or any of them; and
WHEREAS, the Board of Directors of this Corporation has determined
it to be
in
the best interests of this Corporation and its shareholders to
issue a
Series A Preferred Stock and to fix the rights, preferences,
privileges,
and
restrictions relating to that Series A Preferred Stock and the
number
of
shares constituting that series;
NOW,
THEREFORE, BE IT HEREBY RESOLVED, THAT pursuant to Article IV of
the
Articles of Incorporation which authorizes 5,000,000 shares of
preferred
stock, $0.001 par value (PREFERRED STOCK), the Board of Directors
hereby
fixes the powers, designations, preferences and relative,
participating,
optional and other special rights, and the qualifications,
limitations and
restrictions, of a series of Preferred Stock.
RESOLVED FURTHER, that each share of such series of Preferred Stock
shall
rank
equally in all respects and shall be subject to the following
provisions:
1. NUMBER AND DESIGNATION. 1,360,000 shares of the Preferred Stock
of the
Corporation shall be designated as Series A 2% Convertible
Preferred Stock (the
SERIES A PREFERRED STOCK) (including 160,000 shares of Series A
Preferred Stock
reserved exclusively for the payment of dividends pursuant to
paragraph 4 and
referred to therein as "Additional Shares"). After the initial
issuance of
1,200,000 shares of Series A Preferred Stock, the Corporation may
not issue
additional shares of Series A Preferred Stock except as Additional
Shares issued
in lieu of payment of dividends on outstanding shares of Series A
Preferred
Stock or upon the transfer, exchange or replacement of existing
shares of
Preferred Stock.
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<PAGE>
2. DEFINITIONS. Unless the context otherwise requires, when used
herein the
following terms shall have the meaning indicated.
10 DAY MARKET PRICE means the average of the daily Market Prices of
the Common
Stock for the 10 consecutive trading days ending the day prior to
the date for
which such value is to be computed
30 DAY MARKET PRICE means the average of the daily Market Prices of
the Common
Stock for the 30 consecutive trading days ending the day prior to
the date for
which such value is to be computed.
AFFILIATE means, with respect to any specified Person, any other
Person that,
directly or indirectly, controls, is controlled by or is under
direct or
indirect common control with, such specified Person. For the
purposes of this
definition, "control" when used with respect to any Person means
the power to
direct the management and policies of such Person, directly or
indirectly,
whether through the ownership of voting securities, by contract or
otherwise,
and the terms "affiliated," "controlling," and "controlled" have
meanings
correlative to the foregoing.
BOARD OF DIRECTORS means the Board of Directors of the
Corporation.
BUSINESS DAY means any day except Saturday, Sunday and any day that
is a legal
holiday or a day on which banking institutions in Los Angeles,
California
generally are authorized or required by law or other governmental
actions to
close.
CAPITAL STOCK means, with respect to any Person, any and all
shares, interests,
participations, rights in, or other equivalents (however designated
and whether
voting and/or non-voting) of such Person's capital stock, whether
outstanding on
the Issue Date or issued after the Issue Date, and any and all
rights (other
than any evidence of indebtedness), warrants or options
exchangeable for or
convertible into such capital stock.
CHANGE OF CONTROL means the occurrence of any of the following
events: (a) any
Person or Group is or becomes the beneficial owner (as defined in
Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that a Person shall be
deemed to have
"beneficial ownership" of all securities that such Person has the
right to
acquire, whether such right is exercisable immediately or only
after the passage
of time), directly or indirectly, of more than 50% of the total
Voting Stock of
the Corporation; or (b) the Corporation consolidates with, or
merges with or
into, another Person or sells, assigns, conveys, transfers, leases
or otherwise
disposes of all or substantially all of its assets to any Person,
or any Person
consolidates with, or merges with or into the Corporation, in any
such event
pursuant to a transaction in which the outstanding Voting Stock of
the
Corporation is converted into or exchanged for cash, securities or
other
property, other than any such transaction where (i) the outstanding
Voting Stock
of the Corporation is converted into or exchanged for Voting Stock
of the
surviving or transferee corporation or its parent corporation
and/or cash,
securities or other property in an amount which could be paid by
the Corporation
under the terms of the Corporation's credit and financing
agreements and (ii)
immediately after such transaction no Person or Group is the
beneficial owner
(as defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act,
except that a
Person shall be deemed to have "beneficial ownership" of all
securities that
such Person has the right to acquire, whether such right is
exercisable
immediately or only after the passage of time), directly or
indirectly, of more
than 50% of the total Voting Stock of the surviving or transferee
corporation,
as applicable; or (c) during any consecutive two-year period,
individuals who at
the beginning of such period constituted the Board of Directors
(together with
any new directors whose election by the Board of Directors or whose
nomination
for election by the stockholders of the Corporation was approved by
a vote of a
majority of the directors then still in office who were either
directors at the
beginning of such period or whose election or nomination for
election was
previously so approved) cease for any reason to constitute a
majority of the
Board of Directors then in office.
COMMON STOCK means the Corporation's common stock, par value $0.001
per share.
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<PAGE>
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended,
or any
successor statute, and the rules and regulations promulgated
thereunder.
FIRST CALL DATE means April 21, 2005.
GROUP means a group within the meaning of Section 13(d)(3) of the
Exchange Act.
ISSUE DATE means the first date of issuance of shares of Series A
Preferred
Stock.
HOLDER means a person who owns Series A Preferred Stock.
LIQUIDATION PREFERENCE is an amount equal to US$0.67 per share plus
accrued but
unpaid dividends per share of Series A Preferred Stock.
MARKET PRICE means, with respect to the Common Stock, on any given
day, (i) the
price of the last trade, as reported on the Nasdaq National Market,
not
identified as having been reported late to such system, or (ii) if
the Common
Stock is so quoted, but not so traded, the average of the last bid
and ask
prices, as those prices are reported on the Nasdaq National Market,
or (iii) if
the Common Stock is not listed or authorized for trading on the
Nasdaq National
Market or any comparable system, the average of the closing bid and
asked prices
as furnished by two members of the National Association of
Securities Dealers,
Inc. selected from time to time by the Corporation for that
purpose; provided
that, in connection with (i) or (ii), the Corporation may from time
to time
specify in advance the time at which the trade price or bid and ask
prices,
respectively, shall be determined for purposes of a particular
calculation . If
the Common Stock is not listed and traded in a manner that the
quotations
referred to above are available for the period required hereunder,
the Market
Price per share of Common Stock shall be deemed to be the fair
value per share
of such security as determined in good faith by the Board of
Directors.
OUTSTANDING, when used with reference to shares of stock, means
issued shares,
excluding shares held by the Corporation or a subsidiary.
PERSON means an individual, corporation, partnership, limited
liability company,
association, trust and any other entity or organization, including
a government
or political subdivision or an agency or instrumentality
thereof.
REDEMPTION PREMIUM means US$450,000.
VOTING STOCK means, with respect to any Person, the Capital Stock
of any class
or kind (other than the Series A Preferred Stock) ordinarily having
the power to
vote for the election of directors or other members of the
governing body of
such Person.
3. RANK.
(a) Any class or series of stock of the Corporation shall be deemed
to rank:
(i)
prior to the Series A Preferred Stock, either as to the payment
of
dividends or as to distribution of assets upon liquidation,
dissolution or
winding up, or both, if the holders of such class or series shall
be
entitled by the terms thereof to the receipt of dividends and of
amounts
distributable upon liquidation, dissolution or winding up, in
preference or
priority to the holders of Series A Preferred Stock (SENIOR
SECURITIES);
(ii)
on a parity with the Series A Preferred Stock, either as to the
payment of dividends or as to distribution of assets upon
liquidation,
dissolution or winding up, or both, whether or not the dividend
rates,
dividend payment dates or redemption or liquidation prices per
share
thereof be different from those of the Series A Preferred Stock if
the
holders of the Series
21
<PAGE>
A
Preferred Stock and of such class of stock or series shall be
entitled by
the
terms thereof to the receipt of dividends or of amounts
distributable
upon
liquidation, dissolution or winding up, or both, in pro
