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1 800 CONTACTS INC
·
10-Q
Aug 14, 4:54 PM ET
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1 800 CONTACTS INC 10-Q
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Contents
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(i) A one-time nonrefundable payment of Nine Million U.S. Dollars (U.S. $9,000,000.00), payable by wire transfer or delivery of other immediately available funds, to be delivered as follows:
(1) One Million U.S. Dollars (U.S. $1,000,000) which Mi Gwang has placed into an escrow arrangement, as more fully set forth in Section 9(c) of this Agreement; and
(2) No later than ten days prior to the Closing Date, Mi Gwang shall wire an additional Eight Million U.S. Dollars (U.S. $8,000,000) U.S. to the Contacts Parties;
(ii) A one-time nonrefundable transfer of Six Million Five Hundred Thousand U.S. Dollars (U.S. $6,500,000) in MI GWANG CONTACT LENS CO., LTD.capital stock (the “Mi Gwang Shares”) issued at a price equal to the average closing price per share as quoted on the Korea Stock Exchange during the twenty (20) trading day period immediately preceding (but not including) the Closing Date. All Mi Gwang Shares shall be issued and registered pursuant to section 5(c) herein. Evidence of the registration of such Mi Gwang Shares shall be delivered upon Closing or as soon thereafter as reasonably practicable, but in no event later than July 15, 2007.
(d) Post-Closing Adjustment.
(i) Subsequent to Closing, the Contacts Parties shall prepare a statement of Closing Net Working Capital consistent with the format found in Schedule 2 and with ClearLab’s historical accounting practices. A difference between the Closing Net Working
Capital and the Target Net Working Capital of more than five percent (5%) shall be referred to in this Section 2(d) as the “Post-Closing Adjustment”.
(1) If the Post-Closing Adjustment is in favor of Mi Gwang, Mi Gwang shall submit the Closing Statement along with its calculation of the Post-Closing Adjustment to the Contacts Parties and if the Contacts Parties do not object to the amount of the Post-Closing Adjustment within twenty (20) days of receipt thereof, the Contacts Parties shall collectively pay to Mi Gwang an amount equal to 100% of the Post-Closing Adjustment not later than thirty (30) days following receipt of the Closing Statement, together with interest thereon from the Closing Date to the date of payment at a rate of eight percent (8%) per annum. Such payment shall be payable in Mi Gwang Shares (as determined according to value as of the Closing Date).
(2) If a Post-Closing Adjustment is applicable in favor of the Contacts Parties, the Contacts Parties shall submit the Closing Statement along with their calculation of the Post-Closing Adjustment to Mi Gwang and if Mi Gwang does not object to the amount of the Post-Closing Adjustment within twenty (20) days of receipt thereof, Mi Gwang shall pay to the Contacts Parties an amount equal to 100% of the Post-Closing Adjustment, not later than thirty (30) days following receipt of the Closing Statement, together with interest thereon from the Closing Date to the date of payment at a rate of eight percent (8%) per annum, payable in cash.
(ii) If either party objects to the Post-Closing Adjustment, such party shall notify the other within thirty (30) days following receipt thereof, setting forth in specific detail the basis for their objection and their proposal for any adjustments to the Post-Closing Adjustment. Mi Gwang and the Contacts Parties shall use their good faith efforts to reach agreement as to any such proposed adjustment or whether such adjustment is necessary. If agreement is reached as to all proposed further adjustments or to the effect that no adjustments are necessary, the parties shall make such adjustments, if any, and the Post-Closing Adjustment, if any, shall be based thereon and the applicable party shall promptly pay the amount of the Post-Closing Adjustment to the other not later than ten (10) days after reaching such agreement. In the event that a portion of the Post-Closing Adjustment is agreed to by the parties, the amount so agreed upon shall be paid within such thirty (30) day period. If Mi Gwang and the Contacts Parties are unable to reach agreement within thirty (30) days, then the parties shall submit the matter to mediation and arbitration in accordance with Section 10(b) hereof and the arbitrator shall review the proposed adjustments and shall make a determination as to the proposed adjustments, if any, and he or she shall cause the Post-Closing Adjustment to be properly prepared in accordance with the provisions of this Agreement. All resolutions shall represent either agreement with the positions taken by Mi Gwang or the Contacts Parties or a compromise between such positions. The determination of the arbitrator shall be final, conclusive and binding upon Mi Gwang and the Contacts Parties. Thereafter, if the arbitrator determines that an amount is owed by one party to the other, the liable party shall pay to the other, no later than ten (10) days thereafter, an amount equal to the Post-Closing Adjustment as determined by the arbitrator, together with interest thereon from the Closing Date to the date of payment at a rate of eight percent (8%) per annum. Mi Gwang or the Contact Parties, as the case may be, shall pay the costs of the arbitration, depending on which party’s calculation of the Post-Closing Adjustment is further from the Post-Closing Adjustment determined by the arbitrator.
(i) Prior to or on the same day as the execution of this Agreement, Mi Gwang shall issue, deliver, or cause to be delivered, to the Contacts Parties either of the following:
(1) a copy of an executed agreement between Mi Gwang and Daewoo Securities Company Ltd. (“Daewoo”), securing the necessary bonds with warrants against Mi Gwang securities a (“Bond With Warrant”) to obtain capital for the purchase of the Acquired Assets, in an amount acceptable to the Contacts Parties, in the Contacts Parties sole discretion. Further, Mi Gwang shall provide to the Contacts Parties all documentation provided to potential investors from Daewoo, and all updates to such documentation, simultaneously with the delivery of such documentation to the potential investors; or
(2) a letter addressed to the Contacts Parties, in form and substance acceptable to the Contacts Parties, from a financial institution(s) providing commercially reasonable assurances that Mi Gwang has, on deposit in readily available funds, sufficient capital for the purchase of the Acquired Assets.
(ii) The board of directors of Mi Gwang shall have adopted resolutions authorizing the execution of this Agreement and the transactions contemplated hereby hereby prior to the execution of this Agreement, and shall make a public announcement as required by the Stock Market Commercial Regulation 19.
(iii) Prior to Closing of this Agreement, the Bond With Warrant shall be issued.
(iv) Prior to Closing, the registration rights of the Bond with Warrant shall be completed pursuant to Korean Commercial Law 514.
(i) On or before Closing, the Contacts Parties shall furnish the documents of title of the Leasehold Property to Mi Gwang.
(ii) On or before Closing, the Contacts Parties shall: (a) discharge the outgoings of the Leasehold Property down to and including the Closing Date; (b) discharge all property tax, including surcharge, down to and including the Closing Date, whether the tax is levied or increased before, on or after Closing; and (c) discharge all rentals and all other monies, fees and interest payable to the Housing and Development Board of Singapore and quit rent in respect of the Leasehold Property down to and including the Closing Date.
(iii) After the Closing, Mi Gwang will be entitled to all the rentals and profits.
(iv) Where necessary, the Tax, payments, rentals and profits are to be apportioned between the Contacts Parties and Mi Gwang.
(v) Subject to Clause 7(a)(vi), Mi Gwang is purchasing the Leasehold Property with full knowledge and notice of its actual state and condition as of the date all parties have executed this Agreement, and Mi Gwang shall not be entitled to raise any objection in respect thereof.
(i) With respect to the “Flat Pack Patents” (as defined in Exhibit I hereto) Mi Gwang:
(1) Will not, until the date of expiration of the last to expire of the Flat Pack Patents, directly or indirectly, practice, utilize, or infringe such patents or patent applications;
(2) Will not, until the date of expiration of the last to expire of the Flat Pack Patents, allow any of its Affiliates, officers, directors, employees, stockholders, agents, contractors, or representatives, including but not limited to former ClearLab employees who become employees or consultants of the Mi Gwang, to directly or indirectly infringe, invalidate, or otherwise work around, develop, design, manufacture or sell any product utilizing such Flat Pack Patents; and
(ii) For a period of two (2) years from the Closing Date, Mi Gwang will not directly or indirectly solicit former ClearLab Singapore employees who accept employment or consulting work with the purchaser of the Contacts Parties’ Flat Pack Technology to work for Mi Gwang. The Confidentiality and Non-Competition Agreement shall be substantially in form and substance as set forth on Exhibit I hereto.
(i) the representations and warranties set forth in Section 3 and Schedule 5 shall be true, correct, and not misleading in all material respects at and as of the Closing Date, except to the extent that such representations and warranties are qualified by the term “material,” or contain terms such as “Material Adverse Effect” or “Material Adverse Change,” in which case such representations and warranties (as so written, including the term “material” or “Material”) shall be true, correct, and not misleading in all respects, subject to the above qualifiers, at and as of the Closing Date;
(ii) the Contacts Parties shall have performed and complied with all of their covenants hereunder in all material respects through the Closing, except to the extent that such covenants are qualified by the term “material,” or contain terms such as “Material Adverse Effect” or “Material Adverse Change,” in which case the Contacts Parties shall have performed and complied with all of such covenants (as so written, including the term “material” or “Material”) in all respects, subject to the above qualifiers, through the Closing;
(iii) there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement;
(iv) the Contacts Parties and Mi Gwang shall have received, and there shall remain in full force and effect as of Closing, all material Consents that may be required for the proper and effective transfer of the Acquired Assets and the entry into and implementation of the terms of this Agreement, and all material permits, licenses, authorizations and approvals that may be required for the use and operation of the Acquired Assets as of and further to Closing as the same has been used and operated by the Contacts Parties, all on terms and conditions approved by Mi Gwang in its reasonable discretion; such Consents, permits, licenses, authorizations and approvals shall include the Consent of the Housing and Development Board of Singapore for the transfer of the Leasehold Interest to Mi Gwang; the issuance of the Certificate of Registration of Factory in favor of Mi Gwang for such part of the Leasehold Property to be used by Mi Gwang or any Person as factory or manufacturing facilities; and the issuance of the use and storage of hazardous materials permit in favor of Mi Gwang pursuant to the Environmental Pollution Control Act (Singapore Statutes);
(v) Mi Gwang shall have received or will receive at Closing, all material Permits that are necessary to enable Mi Gwang to operate the Acquired Assets as currently conducted by the Contacts Parties (except for any concessions, Permits, licenses, authorizations, approvals, certificates, registrations and Consents as to which the failure to have would not reasonably be expected to have a Material Adverse Effect) and such Permits are attached as set forth in Schedule 1 hereto. The Contacts Parties shall transfer, assign, and deliver to Mi Gwang at the Closing all of the Permits which may be transferred and assigned;
(vii) Mi Gwang shall have received a duly executed assignment/transfer by ClearLab to Mi Gwang of the Leasehold Interest, which assignment/transfer shall be in substantially the form attached hereto as Exhibit H, which form shall be prepared by Mi Gwang’s counsel in Singapore, subject to such further amendments or modifications as may be necessary to meet such additional requirements of, or to incorporate such terms and conditions as may be imposed by, the relevant Authority; and
(viii) all actions to be taken by Contacts in connection with consummation of the transactions contemplated hereby and all certificates, instruments, and other documents required to effect the transactions contemplated hereby (including those set forth in Section 2(f)) will be reasonably satisfactory in form and substance to Mi Gwang.
(i) The Board of Directors of Mi Gwang shall have approved this Agreement and the transactions contemplated hereby and evidence thereof shall have been provided to Contacts;
(ii) The representations and warranties set forth in Section 4 above shall be true and correct in all material respects at and as of the Closing Date, except to the extent that such representations and warranties are qualified by the term “material,” or contain terms such as “Material Adverse Effect” or “Material Adverse Change,” in which case such representations and warranties (as so written, including the term “material” or “Material”) shall be true and correct in all respects, subject to the above qualifiers, at and as of the Closing Date;
(iii) The Mi Gwang Shares shall be duly authorized, validly issued, validly registered, duly paid and non-assessable and free of all liens and encumbrances, except for applicable securities law restrictions, and shall be subject to restrictions on their sale or transfer as follows: For a period of one (1) year after
the Closing Date, all of the Mi Gwang Shares shall be subject to a sale or transfer restriction. For a period of eighteen (18) months after the Closing Date, $500,000 of the Mi Gwang Shares (as determined according to value as of the Closing Date) shall be subject to a sale or transfer restriction. From the day after the one-year anniversary of the Closing Date, the Contacts Parties shall have the right to sell, transfer, encumber, or otherwise dispose of up to Six Million U.S. Dollars ($6,000,000) of the Mi Gwang Shares (as determined according to value as of the Closing Date). Upon the Business Day following the eighteenth (18th) month after the Closing Date, the Contacts Parties shall have the right to sell, transfer, encumber, or otherwise dispose of the balance of the Mi Gwang Shares;
(iv) Mi Gwang shall have performed and complied with all of its covenants hereunder in all material respects through the Closing, except to the extent that such covenants are qualified by terms such as “material” and “Material Adverse Effect,” in which case Mi Gwang shall have performed and complied with all of such covenants in all respects, subject to the above qualifiers, through the Closing;
(v) There shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; and
(vi) All actions to be taken by Mi Gwang in connection with consummation of the transactions contemplated hereby and all certificates, instruments, and other documents required to effect the transactions contemplated hereby (including those set forth in Section 2(f)) will be reasonably satisfactory in form and substance to Contacts.
(i) If any third party (a “Third Party”) notifies any party (the “Indemnified Party”) with respect to any matter (a “Third-Party Claim”) that may give rise to a claim for indemnification against any of the other parties (the “Indemnifying Party”) under this Section 8, then the Indemnified Party shall promptly (and in any event within five (5) Business Days after receiving notice of the Third-Party Claim) notify the Indemnifying Party thereof in writing.
(ii) The Indemnifying Party will have the right at any time to assume and thereafter conduct the defense of the Third-Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party; provided, however, that the Indemnifying Party will not consent to the entry of any judgment on or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnified Party (not to be unreasonably withheld) unless the judgment or proposed settlement involves only the payment of money damages and does not impose an injunction or other equitable relief upon the Indemnified Party.
(iii) Unless and until the Indemnifying Party assumes the defense of the Third-Party Claim as provided in Section 8(d)(ii) above, however, the Indemnified Party may defend against the Third-Party Claim in any manner it may reasonably deem appropriate.
(iv) In no event will the Indemnified Party consent to the entry of any judgment on or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld).
(i) Mi Gwang and the Contacts Parties may terminate this Agreement by mutual written consent at any time prior to the Closing;
(ii) Mi Gwang may terminate this Agreement by giving written notice to the Contacts Parties at any time prior to the Closing in the event (A) Contacts has within the then previous ten (10) Business Days given Mi Gwang any notice pursuant to Section 5(e) above, and (B) the development that is the subject of the notice has had a Material Adverse Effect;
(iii) Mi Gwang may terminate this Agreement by giving written notice to Contacts at any time prior to the Closing (A) in the event the Contacts Parties have breached any material representation, warranty or covenant contained in this Agreement in any material respect, Mi Gwang has notified the Contacts Parties of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach, or (B) if the Closing shall not have occurred on or before June 30, 2007, by reason of the failure of any condition precedent under Section 7(a) hereof (unless the failure results primarily from Mi Gwang itself breaching any representation, warranty or covenant contained in this Agreement); and
(iv) the Contacts Parties may terminate this Agreement by giving written notice to Mi Gwang at any time prior to the Closing (A) in the event Mi Gwang has breached any material representation, warranty or covenant contained in this Agreement in any material respect, the Contacts Parties have notified Mi Gwang of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach, provided, however, that no such cure period shall be applicable if Mi Gwang has failed to accomplish its pre-closing conditions by the dates indicated in Section 5, or (B) if the Closing shall not have occurred on or before June 30, 2007, by reason of the failure of any condition precedent under Section 7(b) hereof (unless the failure results primarily from Contacts itself breaching any representation, warranty, or covenant contained in this Agreement). In the event the Contacts Parties have cause to terminate this Agreement prior to Closing, but elect not to do so, the Contacts Parties shall be free to initiate, solicit, encourage or participate in any Competing Offer.
(i) The parties hereto shall attempt in good faith to resolve promptly any dispute arising out of or relating to this Agreement by negotiation. If the matter cannot be resolved in the normal course of business, either the Contacts Parties or Mi Gwang shall give to the other party written notice of any such dispute not resolved, after which the dispute shall be referred to the principal executive officers of Contacts and Mi Gwang, respectively, or their designees, who shall attempt to resolve the dispute. If the dispute has not been resolved by negotiation within forty-five (45) days of the written notice, either the Contacts Parties or Mi Gwang may submit such dispute for arbitration in accordance with Section 10(a)(ii).
(ii) Any controversy or claim arising out of or relating to this Agreement or the validity, inducement, or breach thereof that cannot be settled in accordance with Section 10(a)(i), shall be exclusively settled by binding arbitration before a single arbitrator in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce (“ICC”) then pertaining, except where those rules conflict with this provision, in which case this provision controls. The parties hereby consent to the jurisdiction of the applicable court for the jurisdiction in which the prevailing party to the arbitration is domiciled for the enforcement of this provision and the entry of judgment on any award rendered hereunder. Should such court for any reason lack jurisdiction, any court with
jurisdiction shall enforce this clause and enter judgment on any award. The arbitration shall be held in Los Angeles, California, U.S.A., and in rendering the award the arbitrator must apply the substantive law of the State of Delaware, U.S.A. (except where that law conflicts with this clause). The arbitrator shall be neutral, independent, disinterested, impartial and shall abide by The Code of Ethics for Arbitrators in Commercial Disputes approved by the ICC. Within forty-five (45) days of initiation of arbitration, the parties shall reach agreement upon an arbitrator; and in the event of their failure to do so, the ICC Court will be called upon to select the arbitrator who shall implement the arbitration in accordance with ICC Rules except as the parties and the arbitrator otherwise agree in writing. Each party has the right before or, if the arbitrator cannot hear the matter within an acceptable period, during the arbitration to seek and obtain from the appropriate court provisional remedies such as attachment, preliminary injunction, replevin, etc., to avoid irreparable harm, maintain the status quo or preserve the subject matter of the arbitration. THE ARBITRATOR SHALL NOT AWARD ANY PARTY CONSEQUENTIAL, SPECIAL, INCIDENTAL, PUNITIVE OR EXEMPLARY DAMAGES, AND EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO SEEK SUCH DAMAGES.
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