0000950129-95-001198.txt : 19950918 0000950129-95-001198.hdr.sgml : 19950918 ACCESSION NUMBER: 0000950129-95-001198 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950831 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950915 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRISTAR CORP CENTRAL INDEX KEY: 0000737203 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 133129318 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-13099 FILM NUMBER: 95574105 BUSINESS ADDRESS: STREET 1: 12500 SAN PEDRO AVE STE 500 CITY: SAN ANTONIO STATE: TX ZIP: 78216 BUSINESS PHONE: 2104022200 MAIL ADDRESS: STREET 2: 12500 SAN PEDRO AVE, STE 500 CITY: SAN ANTONIO STATE: TX ZIP: 78216 FORMER COMPANY: FORMER CONFORMED NAME: ROSS COSMETICS DISTRIBUTION CENTERS INC DATE OF NAME CHANGE: 19930422 8-K 1 TRISTAR INC. FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8--K CURRENT REPORT Filed Pursuant to Section 13 or 15(d) of the Securities Act of 1934 Date of Report (Date of earliest event reported) August 31, 1995 TRISTAR CORPORATION -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-13099 13-3129318 -------------------------------------------------------------------------------- (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 12500 San Pedro Avenue, Suite 500, San Antonio, Texas 78216 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (210) 402-2200 ---------------------------- Not Applicable -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) 2 Item 2. Acquisition or Disposition of Assets. On August 31, 1995, Eurostar Perfumes, Inc., a Texas corporation ("Eurostar"), was merged (the "Merger") with and into TRISTAR CORPORATION, a Delaware corporation ("Tristar"), with Tristar as the surviving corporation. The Merger was consummated pursuant to an Agreement and Plan of Merger (the "Agreement") dated as of July 1, 1995, by and among Tristar, Eurostar and Transvit Manufacturing Corporation, a British Virgin Islands corporation ("Transvit") owned by the Core Sheth Families. As provided in the Agreement, all the issued and outstanding shares of Eurostar Common Stock, $.001 par value ("Eurostar Common Stock"), were converted into the right to receive an aggregate of 9,977,810 shares of Tristar Common Stock, $.01 par value ("Tristar Common Stock"). The number of shares of Tristar Common Stock received by the Core Sheth Families in exchange for the Eurostar Common Stock was based on a valuation of Eurostar and Tristar at approximately 60% and 40%, respectively, of the value of the combined entities. In addition, the exercise price of certain warrants held by an affiliate of the Core Sheth Families may be reduced in connection with the Merger. The Core Sheth Families is a group which, prior to the Merger, owned 60.5% of the outstanding shares of Tristar Common Stock (71% assuming the exercise of all outstanding warrants) and all of the outstanding shares of Eurostar Common Stock. The Core Sheth Families consist of Shashikant S. Sheth, a director of Tristar, Jamnadas Sheth, Kirit Sheth and Mahendra Sheth. Viren S. Sheth, a director of Tristar and its President and Chief Executive Officer, is Shashikant S. Sheth's brother. Although Viren S. Sheth is not a member of the Core Sheth Families, he is related by blood to certain members of the Core Sheth Families. Viren S. Sheth also served as President, Chief Executive Officer and a director of Eurostar. Following the Merger approximately 16.6 million shares of Tristar Common Stock are outstanding, of which approximately 14 million shares, representing approximately 84% of the total, are held by the Core Sheth Families. The Core Sheth Families also hold warrants to acquire an additional 2,400,000 shares of Tristar Common Stock, which, if exercised, would increase their beneficial ownership to approximately 86% of the outstanding shares of Tristar Common Stock. Tristar engages in numerous transactions with entities owned by the Core Sheth Families. Prior to the Merger, Tristar was purchasing virtually all of its fragrance products from Eurostar. From 1989 until September 1992, Tristar purchased virtually all of its fragrance products from another single supplier, S&J Perfume Company, Ltd. ("S&J Perfume"), which, since January 1991, has also been controlled by the Core Sheth Families. During fiscal 1994 and for the six months ended February 28, 1995, fragrance products supplied by Eurostar represented approximately 79% and 78%, respectively, of Tristar's net sales, and cosmetics supplied by Emicos International, Ltd. ("Emicos"), another affiliate of the Core Sheth Families, accounted for approximately 12% and 12%, respectively, of Tristar's net sales. For fiscal 1994 and for the six months ended February 28, 1995, purchases from Eurostar amounted to $27,282,000 and $13,200,000, respectively, and purchases from Emicos amounted to $4,254,000 and $1,238,000, respectively. At August 31, 1994 and at February 28, 1995, Tristar owed outstanding payables to Eurostar in the amounts of $1,162,000 and $1,167,000, respectively, and owed outstanding payables to Emicos in the amounts of $726,000 and 3 $792,000, respectively. During fiscal 1994 and for the six months ended March 31, 1995, approximately 85% and 66%, respectively, of Eurostar's sales were to Tristar. In October 1992, Tristar entered into a three-year distribution agreement with Eurostar and S&J Perfume, also an entity owned and controlled by the Core Sheth Families, for the purchase of fragrance products. Under the terms of the agreement, during fiscal 1994, Eurostar supplied virtually all of Tristar's requirements for fragrance products for exclusive distribution by Tristar in the United States, Mexico, Canada and Puerto Rico. This agreement was amended in August 1993 to assure Tristar of a supply of fragrance products from Eurostar through August 1999. No purchases have been made by Tristar from S&J Perfume or its successor company, Starion International Limited, a United Kingdom corporation, since fiscal 1993. This distribution agreement was terminated in connection with the Merger. During fiscal 1994, Tristar sold cosmetic pencils to Emicos in the amount of $343,000. At August 31, 1994, Tristar had a receivable outstanding from Emicos of $126,000. Eurostar purchases various products from Tristar for resale to Eurostar's customers in Central and South America. These purchases were $114,000 in fiscal 1994. At August 31, 1994, Tristar had a receivable outstanding from Eurostar of $248,000. In October 1993, Tristar became a party to a one-year design and consulting agreement with Eurostar pursuant to which Eurostar and other entities of the Core Sheth Families provide marketing concepts and design services to Tristar for the production of marketing and advertising material. The agreement, renewable each calendar year, provides for a fixed annual fee to be renegotiated at the end of each calendar year. The agreement was renewed for calendar 1995, but was terminated as a result of the Merger. The fee for calendar 1995 was $150,000. Tristar was a party to a Computer Services and Support Agreement with Eurostar pursuant to which Tristar paid Eurostar approximately $132,000 per year for access to hardware and software which was used to maintain Tristar's inventory and accounting systems. This agreement was terminated as a result of the Merger. In May 1995, Tristar sold its cosmetic pencil manufacturing business, including all related equipment and inventory, to Eurostar in consideration for the cost of inventories payable upon utilization of such inventories and a seven-year note for approximately $600,000. In connection with the sale, Eurostar agreed to supply all of Tristar's requirements for cosmetic pencils at contractual prices such that, under fiscal 1994 volume levels and selling prices, Tristar would achieve in future periods the same contribution from cosmetic pencil sales as was achieved in fiscal 1994. Tristar intends to sell or lease its manufacturing plant facilities in South Carolina. -2- 4 The Core Sheth Families have also loaned Tristar funds in connection with the settlement of certain stockholder litigation. On December 17, 1993, Tristar announced court approval of a settlement agreement, on behalf of Tristar and certain other parties, of the previously disclosed stockholder class action litigation for a cash payment of $9.5 million. To finance the settlement agreement, the Core Sheth Families loaned Tristar $9 million and purchased and extended common stock warrants for a price of $500,000. The last portion of the settlement amount was paid by Tristar on December 16, 1994. The loans from the Core Sheth Families mature in ten years, with interest payable annually and principal payable 20% at the end of year eight, 20% at the end of year nine and the remaining 60% at the end of year ten, with the exception of $1 million which was paid in December 1994 with a court approved distribution of the proceeds of an executive liability and indemnification policy owned by Tristar. These loans bear interest at the long-term federal rate and are subordinated to indebtedness of Tristar owed to its senior lenders. The common stock warrants were purchased by the Core Sheth Families on December 14, 1994, pursuant to an agreement entered into in connection with the settlement agreement. The warrants grant the Core Sheth Families the right to purchase up to 2,000,000 shares of Tristar's Common Stock within ten years of the date of issuance. The initial per-share price of the common stock under the warrants is $5.34 and it increases by 10% per year beginning December 15, 2001. As discussed below, the exercise price of such warrants may be reduced in connection with the Merger. In connection with the Merger, Tristar has agreed with the Core Sheth Families that the exercise price of the outstanding 10-year warrants held by the Core Sheth Families to purchase an aggregate of 2,000,000 shares of Tristar Common Stock will be repriced at an amount, if lower than the current exercise price, equal to the lowest average Closing Sales Price of the Tristar Common Stock for any twenty (20) consecutive trading days during the period beginning September 1, 1995 and ending on August 31, 1996. The current exercise price of such warrants is $5.34 per share and such price is scheduled to increase 10% per year beginning December 15, 2001. The operations acquired from Eurostar included a plant, equipment and other physical property used to manufacture designer alternative fragrances, cosmetics and bath and body products. Tristar intends to continue to use such plant, equipment and other physical property in the same manner as used prior to the Merger. -3- 5 Item 7. Financial Statements and Exhibits. (a) Financial Statements. -4- 6 Independent Auditors' Report The Board of Directors and Stockholder Eurostar Perfumes, Inc.: We have audited the accompanying consolidated balance sheets of Eurostar Perfumes, Inc. and subsidiaries as of September 30, 1994 and 1993, and the related consolidated statements of income and retained earnings and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in note 3 to the consolidated financial statements, approximately 85% and 99% of the Company's 1994 and 1993 sales, respectively, are to Tristar Corporation, a related party. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Eurostar Perfumes, Inc. and subsidiaries as of September 30, 1994 and 1993, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. As discussed in note 1(c) to the consolidated financial statements, the Company changed its method of accounting for inventories in 1994. KPMG Peat Marwick LLP San Antonio, Texas November 18, 1994 -5- 7 Independent Accountants' Review Report The Board of Directors and Stockholder Eurostar Perfumes, Inc.: We have reviewed the accompanying consolidated balance sheet of Eurostar Perfumes, Inc. and subsidiaries as of March 31, 1995, and the related consolidated statements of income and retained earnings and cash flows for the six-month periods ended March 31, 1995 and 1994, and for the period from March 5, 1992 (inception) through September 30, 1992. These consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquires of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP San Antonio, Texas July 14, 1995 -6- 8 EUROSTAR PERFUMES, INC. AND SUBSIDIARIES Consolidated Balance Sheets
March 31, September 30, September 30, 1995 1994 1993 ----------- ------------- ------------- (unaudited) Current assets: Cash $ 740,058 $ 1,430,924 $ 420,523 U.S. treasury note, resticted (note 2) - - 100,156 Trade accounts receivable: Affiliate (note 3) 1,893,490 1,881,614 5,856,190 Non-affiliate 1,675,858 868,560 31,450 Inventories (notes 3 and 4) 4,987,599 6,644,423 5,275,121 Deferred income taxes (note 7) 294,000 203,092 88,322 Other current assets 152,805 167,186 113,858 ----------- ----------- ----------- Total current assets 9,743,810 11,195,799 11,885,620 Deferred income taxes (note 7) - - 75,255 Net property, plant and equipment (note 5) 8,001,663 8,440,174 7,952,906 ----------- ----------- ----------- $17,745,473 $19,635,973 $19,913,781 =========== =========== =========== Current liabilities: Current installments of note payable to parent company (note 6) $ 1,500,000 $ 2,050,000 $ 2,500,000 Trade accounts payable: Non-affiliate accounts 1,044,227 2,288,209 2,970,136 Affiliate accounts (note 3) 147,408 1,137,156 1,771,144 Customer advances 192,765 83,169 122,589 Income taxes payable 602,737 2,027,666 2,247,244 Accrued expenses (note 6) 888,442 853,069 259,271 ----------- ----------- ----------- Total current liabilities 4,375,579 8,439,269 9,870,384 Note payable to parent company, excluding current installments (note 6) 5,015,701 4,165,701 6,468,684 Deferred income taxes (note 7) 409,000 159,092 - Other liabilities 223,057 269,118 134,545 ----------- ----------- ----------- Total liabilities 10,023,337 13,033,180 16,473,613 ----------- ----------- ----------- Stockholder's equity: Common stock, $.001 par value. Authorized, issued and outstanding 1,000,000 shares 1,000 1,000 1,000 Additional paid-in capital 99,000 99,000 99,000 Retained earnings 7,622,136 6,502,793 3,340,168 ----------- ----------- ----------- Total stockholder's equity 7,722,136 6,602,793 3,440,168 Commitments and contingencies (notes 3 and 8) ----------- ----------- ----------- $17,745,473 $19,635,973 $19,913,781 =========== =========== ===========
-7- See accompanying notes to consolidated financial statements. 9 EUROSTAR PERFUMES, INC. AND SUBSIDIARIES Consolidated Statements of Income and Retained Earnings
Six months ended March 31, Years ended September 30, Period from ---------------------------- ----------------------------- March 5, 1992 through 3/31/95 3/31/94 1994 1993 September 30, 1992 ----------- ----------- ----------- ----------- --------------------- (unaudited) (unaudited) (unaudited) Net sales (notes 3 and 9) $17,410,449 $16,371,092 $31,481,083 $28,144,851 $ 216,038 Cost of goods sold (note 3) 12,139,545 9,397,860 19,932,841 17,687,588 198,755 ----------- ----------- ----------- ----------- --------- Gross profit 5,270,904 6,973,232 11,548,242 10,457,263 17,283 Selling, general and administrative expenses (note 3) 3,369,615 2,749,953 5,944,374 3,935,640 743,069 ----------- ----------- ----------- ----------- --------- Operating income (loss) 1,901,289 4,223,279 5,603,868 6,521,623 (725,786) Other income (expense): Interest expense (144,933) (161,199) (337,712) (341,630) (38,173) Other income 33,257 1,846 41,046 7,801 - ----------- ----------- ----------- ----------- --------- Income (loss) before income taxes 1,789,613 4,063,926 5,307,202 6,187,794 (763,959) Income tax expense (benefit) (note 7) 670,270 1,631,227 2,144,577 2,349,011 (265,344) ----------- ----------- ----------- ----------- --------- Net income (loss) 1,119,343 2,432,699 3,162,625 3,838,783 (498,615) Retained earnings (deficit) at beginning of period 6,502,793 3,340,168 3,340,168 (498,615) - ----------- ----------- ----------- ----------- --------- Retained earnings (deficit) at end of period $ 7,622,136 $ 5,772,867 $ 6,502,793 $ 3,340,168 (498,615) =========== ============ =========== =========== ========= Net Income (loss) per common share $ 1.11 $ 2.43 $ 3.16 $ 3.83 (.49) =========== ============ =========== =========== ========= Number of common shares outstanding 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 =========== ============ =========== =========== =========
-8- See accompanying notes to consolidated financial statements. 10 EUROSTAR PERFUMES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows
Period from March 5, 1992 Six months ended March 31, Years ended September 30, through 1995 1994 1994 1993 September 30, 1992 (unaudited) (unaudited) (unaudited) ----------- ----------- ---------- ---------- ----------------- Cash flows from operating activities: Net income (loss) $ 1,119,343 $ 2,432,699 $ 3,162,625 $ 3,838,783 $ (498,615) Adjustments to reconcilie net income (loss) to net cash provided by (used in) operating activities: Allowance for obsolescence and other adjustments 242,388 56,254 239,774 110,000 - Deferred income tax expense 159,000 70,577 119,577 101,767 (265,344) Depreciation 531,635 447,899 968,607 685,258 - Changes in operating assets and liabilities: Trade accounts receivable (819,174) 3,277,607 3,137,466 (5,671,110) (216,530) Inventories 1,414,436 (241,698) (1,609,076) (3,870,813) (1,514,308) Other current assets 14,381 (10,642) (53,328) (47,402) (66,456) Trade accounts payable (2,233,730) (2,576,959) (1,315,915) 2,097,425 2,643,855 Customer advances 109,596 (122,589) (39,420) 122,589 - Income taxes payable (1,424,929) (194,036) (219,578) 2,247,244 - Accrued expenses 35,373 387,560 593,798 243,566 15,705 Other liabilities (46,061) 166,781 134,573 - - ----------- ----------- ----------- ----------- ------------ Net cash provided by (used in) operating activities (897,742) 3,693,453 5,119,103 (142,693) 98,307 ----------- ----------- ----------- ----------- ------------ Cash flows from investing activities: Acquisition of property, plant and equipment (93,124) (953,937) (1,455,875) (3,211,640) (5,291,979) Acquisition of U.S. Treasury note - - - (100,156) Proceeds from sale of U.S. Treasury note - - 100,156 - - ----------- ----------- ----------- ----------- ------------ Net cash used in investing activities (93,124) (953,937) (1,355,719) (3,211,640) (5,392,135) ----------- ----------- ----------- ----------- ------------ Cash flows from financing activities: Proceeds from note payable to bank - - - 2,000,000 4,500,000 Repayment of note payable to bank - - - (6,500,000) - Proceeds from issuance of common stock - - - - 100,000 Proceeds from note payable to parent company 2,000,000 171,984 - 7,658,691 1,309,993 Payments of note payable to parent company (1,700,000) (2,500,000) (2,752,983) - - ----------- ----------- ----------- ----------- ------------ Net cash provided by (used in) financing activities 300,000 (2,328,016) (2,752,983) 3,158,691 5,909,993 ----------- ----------- ----------- ----------- ------------ Net increase (decrease) in cash (690,866) 411,500 1,010,401 (195,642) 616,165 Cash at beginning of year 1,430,924 420,523 420,523 616,165 - ----------- ----------- ----------- ----------- ------------ Cash at end of year $ 740,058 $ 832,023 $ 1,430,924 $ 420,523 $ 616,165 =========== =========== =========== =========== ============ Supplemental disclosure of cash flow information: Income taxes paid $ 1,905,650 $ 1,465,000 $ 2,295,775 $ - $ - =========== =========== =========== =========== ============ Interest paid $ 15,580 $ 37,870 $ 304,915 $ 237,493 $ - =========== =========== =========== =========== ============
-9- See accompanying notes to consolidated financial statements. 11 EUROSTAR PERFUMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Data with respect to March 31, 1995 and for the six month periods ended March 31, 1995 and 1994, and for the period from March 5, 1992 (inception) to September 30, 1992 is unaudited) (1) Summary of Significant Accounting Policies (a) Description of Business Eurostar Perfumes, Inc. (the "Company"), is a wholly-owned subsidiary of Transvit Manufacturing Corporation ("Transvit"), a foreign company owned by the Core Sheth Families. The Company was incorporated on March 5, 1992. The primary business of the Company is to manufacture perfumes at its plant located in Pleasanton, Texas. The Company purchases significant amounts of inventory from various European companies, and the Company is not dependent on a single supplier or only a few suppliers. As discussed in note 3, the Company has significant transactions with related parties. (b) Principles of Consolidation The consolidated financial statements include the financial statements of Eurostar Perfumes, Inc. and its wholly-owned subsidiaries, American Star Corporation, which in 1993 marketed the Company's products to customers located primarily in South America, and Southern Star Sales, Inc. (Southern Star), a foreign sales corporation which markets the Company's products internationally. American Star Corporation became dormant in fiscal year 1994 as its sales activity was transferred to Southern Star. All significant intercompany balances and transactions have been eliminated in consolidation. (c) Interim Financial Statements (Unaudited) The consolidated financial statements as of March 31, 1995 and for the six month periods ended March 31, 1995 and 1994 and for the period from March 5, 1992 (inception) through September 30, 1992 are unaudited. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended March 31, 1995 are not necessarily indicative of the results that may be expected for the year ending September 30, 1995. The unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information pursuant to the Securities and Exchange Commission's Proxy Rules (Regulation 14A). (d) Inventories Inventories are valued at the lower of cost or market. In 1994, the Company adopted the last in, first-out (LIFO) method of costing inventory. Previously, the first-in, first-out (FIFO) method of costing inventory was used. Management believes that the LIFO method has the effect of minimizing the impact of price level changes on inventory valuations and generally matches current costs against current revenues in the consolidated statement of income. The effect of the change was to reduce net income by approximately $185,000, net of income taxes, from that which would otherwise have been reported. There is no cumulative effect on prior years since the ending inventory as previously reported is the beginning inventory for LIFO purposes. Accordingly, proforma results of operations for the prior year had LIFO been followed is not determinable. -10- 12 EUROSTAR PERFUMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Summary of Significant Accounting Policies (continued) (e) Other Current Assets Other current assets consist principally of deposits for Texas worker's compensation insurance. (f) Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is calculated on the straight-line method over the following estimated useful lives: Buildings and improvements 40 years Computer equipment and software 5 years Machinery and equipment 5 - 7 years Office equipment, fixtures and vehicle 3 - 7 years Maintenance and repairs are charged to operations (g) Foreign Currency Transactions The Company purchases significant amounts of inventory from foreign suppliers. Such inventory is recorded using currency exchange rates in effect on the date of purchase. Gains and losses on the settlement of accounts payable for such purchases are recorded based upon the currency exchange rates in effect on the date of settlement. Gains and losses on accounts payable to be settled subsequent to September 30, 1994 and 1993 have been provided based upon the currency exchange rates in effect on September 30, 1994 and 1993. The net gain (loss) on transactions in foreign currencies for the years ended September 30, 1994 and 1993 was $(59,058) and $5,205. (h) Revenue Recognition Revenue is recognized at the time of shipment for all products. (i) Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (j) Net (Loss) Income Per Share Net (loss) income per share is computed based on the number of common shares outstanding during each period. -11- (Continued) 13 EUROSTAR PERFUMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (2) U.S. Treasury Note U.S. treasury note represented a deposit held by the Bureau of Alcohol, Tobacco and Firearms for the permit maintained by the Company to store and dispense the alcohol used in production. The security consisted of a $100,000 face value U.S. treasury note bearing interest at 4.25% per annum. The deposit was returned and sold in 1994. (3) Related Party Transactions In May 1995, the Company purchased Tristar Corporation's ("Tristar") cosmetic pencil manufacturing business, including all related equipment and inventory, in consideration for a seven year $600,000 note payable and cash equal to the cost of inventories payable upon utilization of such inventories. Tristar, a major customer of the Company, is located in the United States and is principally engaged in the marketing and wholesale distribution of alternatives to designer fragrances in North America. Tristar is a publicly traded company in which the Core Sheth Families have a majority ownership interest. Additionally, Tristar and the Company have the same president and chief executive officer. Included in affiliate trade accounts receivable at September 30, 1994 and 1993 and March 31, 1995, is $1,437,466, $5,380,990 and $1,629,164, respectively, due from Tristar. For the years ended September 30, 1994 and 1993 and the six months ended March 31, 1995 and 1994, approximately 85%, 99%, 66%, and 94%, respectively, of the Company's sales were to Tristar. Approximately 2% of the Company's sales for the year ended September 30, 1994 and the six months ended March 31, 1995 were to foreign based affiliates located principally in South America. Such sales were not significant for the year ended September 30, 1993 and the six months ended March 31, 1994. For the years ended September 30, 1994 and 1993 and the six months ended March 31, 1995 and 1994, the Company purchased approximately $5,788,000, $6,605,000, $3,241,000, and $3,290,000, respectively, of inventory and other items from affiliates. In accordance with a design/consultant fee contract with Tristar whereby the Company provides certain graphics and design consulting services, the Company charged Tristar $150,000, $112,500, $75,000, and $75,000, for the years ended September 30, 1994 and 1993 and the six months ended March 31, 1995 and 1994, respectively. The Company entered into a computer services and support agreement with Tristar whereby the Company provides access to hardware and software. The company charged Tristar $55,000 and $55,000 for the year ended September 30, 1994 and the six months ended March 31, 1995, respectively. These amounts have been offset against selling, general and administrative expenses in the accompanying consolidated statements of income and retained earnings. Included in trade accounts receivable at September 30, 1993 is $475,200 of net advances due from Eurostar Corporation ("Corp."), a wholly-owned subsidiary of Transvit, which employed certain executives of the Company and provided management services to the Company. Management fees paid to Corp. for the year ended September 30, 1993 totaled $978,896 and are included in selling, general and administrative expenses in the accompanying consolidated statements of income and retained earnings. Management fees were equal to the costs incurred by Corp., which include primarily payroll and related items. Effective October 1, 1993, the employees of Corp. were transferred to the Company. -12- (Continued) 14 EUROSTAR PERFUMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (3) Related Party Transactions (continued) On October 23, 1992, the Company and a certain affiliate entered into a distribution agreement with Tristar under which the Company is obligated to supply Tristar with fragrance products. The distribution agreement extends two years beyond any notice of termination given by the Company. In August 1993, the Company agreed that it will not provide any notice of termination of its distribution agreement with Tristar for a period of four years. The effect of this agreement is to assure the continuation of the relationship between the Company and Tristar through at least 1999. As a major customer of the Company, Tristar's ability to meet its obligations will significantly impact the level of operations of the Company. (4) Inventories Inventories consist of the following:
March 31, September 30, ------------- ---------------------- 1995 1994 1993 ------------- --------- --------- (unaudited) Raw Materials $ 4,584,444 5,813,830 4,939,036 Finished Goods 1,493,102 1,144,802 99,444 Work-in-process 283,215 316,565 346,641 ------------- --------- --------- 6,360,761 7,275,197 5,385,121 Less: Allowance for obsolescence and other adjustments 592,162 349,774 110,000 Allowance for LIFO valuation 781,000 281,000 - ------------- --------- --------- $ 4,987,599 6,644,423 5,275,121 ============= ========= =========
(5) Property, Plant and Equipment Property, plant and equipment consists of the following:
March 31, September 30, ------------- ---------------------- 1995 1994 1993 ------------- --------- --------- (unaudited) Machinery and equipment $ 4,721,822 4,728,847 4,059,594 Building and improvements 3,783,373 3,783,373 3,755,198 Computer equipment and software 1,199,047 1,110,158 468,340 Office equipment, fixtures and vehicle 450,382 438,990 322,362 Land 32,670 32,670 32,670 ------------- --------- --------- 10,187,294 10,094,038 8,638,164 Less: Accumulated depreciation 2,185,632 1,653,864 685,258 ------------- --------- --------- $ 8,001,662 8,440,174 7,952,906 ============= ========= =========
(6) Notes Payable On August 1, 1993, the Company entered into a line of credit promissory note agreement (the "LOC") with its parent company, Transvit, whereby funds of up to $9,000,000 were made available to the Company. Proceeds from the LOC in 1993 were used to pay certain bank debt and the outstanding balance of a $2,000,000 line of credit demand promissory note with Transvit. Interest is payable annually and bears interest at 4.5% per annum. The total amount outstanding on the LOC at September 30, 1994 and 1993 is $6,215,701 and $8,968,684, respectively. -13- (Continued) 15 EUROSTAR PERFUMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (6) Notes Payable- (continued) The current installments of the LOC as of September 30, 1994 and 1993, $2,050,000 and $2,500,000, respectively, are based on management's best estimate of amounts to be paid during the next fiscal year. As discussed below, the Company recently entered into a secured credit facility which under its terms resticts the repayment of the Transvit line of credit to payments no more than the greater of (i) $3,500,000 in the first fiscal year or $1,500,000 per fiscal year thereafter, or (ii) fifty percent (50%) of the Company's cash flow for fiscal years after the first year. Accrued interest payable to Transvit of $48,471 and $58,312 as of September 30 1994 and 1993, respectively, is included in accrued expenses in the accompanying consolidated balance sheets. On June 27, 1995, the Company entered into a $5,200,000 credit facility which consists of term loans totaling $3,700,000 and a revolving credit commitment of $1,500,000 bearing interest at the prime rate plus 1.75% (9% at June 27, 1995) per annum and additional fees. In early July 1995, a $3,500,000 term loan was drawn down. The term loan calls for equal monthly installments and matures in 2002. Borrowings under the revolving line of credit are limited to forty (40%) of eligible inventory as define therein. The revolving line of credit expires in June 1997 with options to renew annually thereafter. The credit facility is secured by substantially all of the Company's assets. The agreement contains a material adverse change provision, as well as certain restrictions and conditions among which are limitations on cash dividends, capital expenditures and repayments to Transvit under the Company's other line of credit. (7) Income Taxes Income tax expense consists of the following:
Current Deferred Total ------- -------- ----- Year Ended September 30, 1994 U.S. Federal $1,776,000 110,955 1,886,955 State 249,000 8,622 257,622 ---------- ------- --------- $2,025,000 119,577 2,144,577 ========== ======= ========= Year Ended September 30, 1993 U.S. Federal $1,987,642 94,430 2,082,072 State 259,602 7,337 266,939 ---------- ------- --------- $2,247,244 101,767 2,349,011 ========== ======= =========
Income tax expense for the years ended September 30, 1994 and 1993 differed from the amounts computed by applying the U.S. federal income tax rate of 35 percent to income before income taxes as a result of the following:
1994 1993 ---- ---- Computed expected tax expense $1,857,521 2,165,728 Increase (decrease) in income taxes resulting from: State income taxes, net of federal income tax benefit 161,850 171,337 Penalty 60,000 68,374 Foreign sales corporation commissions not subject to income taxes (37,000) - Other, net 102,306 (563428) ---------- --------- Total income tax expense $2,144,577 2,349,011 ========== =========
-14- (Continued) 16 EUROSTAR PERFUMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (7) Income Taxes - (continued) The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at September 30, 1993 and 1994 are presented below:
1994 1993 ---- ---- Deferred tax assets: Inventories, principally due to allowance for obsolescence $143,759 40,304 Start-up and organizational costs 162,257 214,428 Compensated absences, principally due to accrual for financial reporting purposes 41,573 - Related party interest, principally due to accrual for financial reporting purposes 17,760 48,018 Other 683 - ------- ------- Total deferred tax assets 366,032 302,750 Deferred tax liabilities: Plant and equipment, principally due to differences in deprecation and capitalized interest 322,032 139,173 ------- ------- Net deferred tax asset $44,000 163,577 ======= =======
Based upon the level of historical taxable income and projections for future taxable income, including the reversal of existing taxable temporary differences, over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences. (8) Operating Leases The Company has several noncancelable operating leases, primarily for equipment, office space, and office furniture that expire over the next three years. Rental expense for operating leases for the year ended September 30, 1994 and 1993 was $97,838 and $69,653, respectively. Future minimum lease payments under noncancellable operating leases (with initial or remaining lease terms in excess of one year) as of September 30, 1994 are:
Year ending September 30: 1995 $ 75,020 1996 50,955 1997 8,973 ---------- $ 134,948 ==========
(9) Export Sales and Related Receivables Export sales, primarily to South America, for the year ended September 30, 1994 and for the six months ended March 31, 1995 and 1994 were approximately $4,756,000, $6,000,000, and $500,000, respectively. Included in trade accounts receivable at September 30, 1994 and for the six months ended March 31, 1995 and 1994 is approximately $1,125,000, $2,000,000, and $330,000, respectively, due from foreign customers. Export sales for the year ended September 30, 1993 were not significant. -15- 17 Item 7. Financial Statements and Exhibits. (Continued) (b) Pro Forma Financial Information. -16- 18 UNAUDITED PRO FORMA CONSOLIDATED COMBINED FINANCIAL STATEMENTS The following unaudited pro forma consolidated combined financial statements give effect to the merger of Tristar and Eurostar accounted for in a manner similar to that in a pooling of interests as the companies are considered entities under common control. The pro forma consolidated combined balance sheet as of May 31, 1995 is presented as though the Merger had occurred on May 31, 1995 using Tristar's consolidated balance sheet as of May 31, 1995 and Eurostar's consolidated balance sheet as of March 31, 1995. The pro forma consolidated combined statements of income for the fiscal years ended August 31, 1994, 1993 and 1992 and for the nine month periods ended May 31, 1995 and 1994 are presented as though the acquisition had occurred as of March 5, 1992 (Eurostar's date of inception) using Tristar's consolidated statements of income for the fiscal years ended August 31, 1994, 1993, and 1992 and the nine month periods ended May 31, 1995 and 1994, and Eurostar's consolidated statements of income for the fiscal years ended September 30, 1994 and 1993, the period from March 5, 1992 (date of inception) through September 30, 1992 and the nine month periods ended March 31, 1995 and 1994. The pro forma consolidated combined financial statements have been prepared for illustrative purposes only and do not purport to be indicative of the results that actually would have been obtained if the Merger had been effected on the dates indicated or of the results which may be obtained in the future. -17- 19 TRISTAR CORPORATION AND EUROSTAR PERFUMES, INC. UNAUDITED PRO FORMA CONSOLIDATED COMBINED BALANCE SHEET
Historical ------------------------- Eurostar Tristar Perfumes, Pro Forma Corporation Inc. Combined May 31, March 31, Pro Forma May 31, ASSETS 1995 1995 Adjustments 1995 ----------- ----------- ----------- ----------- Current assets: Cash and cash equivalents $ 249,000 $ 740,000 $ 989,000 Accounts receivable 4,952,000 1,676,000 6,628,000 Accounts receivable - related parties, net - 1,893,000 $(1,629,000) (A) 264,000 Current portion note receivable - related party 50,000 - (50,000) (G) Accounts receivable - insurance reimbursement 815,000 - 815,000 Inventories 8,549,000 4,987,000 (2,063,000) (C) 11,473,000 Prepaid expenses and other current assets 297,000 153,000 450,000 Refundable income taxes 52,000 - 52,000 Deferred income taxes - 294,000 701,000 (E) 995,000 ----------- ----------- ----------- ----------- Total current assets 14,964,000 9,743,000 (3,041,000) 21,666,000 ----------- ----------- ----------- ----------- Note receivable - related party 550,000 - (550,000) (G) Assets held for sale 648,000 - 648,000 Property, plant and equipment 714,000 8,002,000 600,000 (G) 9,316,000 ----------- ----------- ----------- ----------- Other assets: Warrant valuation 1,532,000 (698,000) (D) 834,000 Other assets 56,000 56,000 Deferred income taxes - 2,714,000 (E) 2,714,000 ----------- ----------- ----------- ----------- Total other assets 1,588,000 - 2,016,000 3,604,000 ----------- ----------- ----------- ----------- Total assets $18,464,000 $17,745,000 $ (975,000) $35,234,000 =========== =========== =========== ===========
See accompanying notes to Unaudited Pro Forma Consolidated Combined Financial Statements. -18- 20 TRISTAR CORPORATION AND EUROSTAR PERFUMES, INC. UNAUDITED PRO FORMA CONSOLIDATED COMBINED BALANCE SHEET, Continued
Historical -------------------------- Eurostar Tristar Perfumes, Pro Forma Corporation Inc. Combined May 31, March 31, Pro Forma May 31, LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1995 Adjustments 1995 ----------- ----------- ----------- ----------- Current liabilities: Short-term borrowings $ 3,964,000 $ - $ 3,964,000 Accounts payable--trade 474,000 1,044,000 1,518,000 Accounts payable--related parties, net 2,857,000 147,000 $(1,629,000) (A) 1,375,000 Accrued expenses 1,592,000 1,081,000 2,673,000 Income taxes payable - 603,000 603,000 Current portion of long-term obligations 35,000 1,500,000 1,535,000 ----------- ----------- ----------- ----------- Total current liabilities 8,922,000 4,375,000 (1,629,000) 11,668,000 ----------- ----------- ----------- ----------- Obligations under capital leases, less current portion 31,000 - 31,000 Subordinated long term debt, related parties 8,000,000 - 8,000,000 Net payable to parent company - 5,016,000 5,016,000 Deferred income taxes - 409,000 (409,000) (E) - Other liabilities - 223,000 223,000 ----------- ----------- ----------- ----------- Total liabilities 16,953,000 10,023,000 (2,038,000) 24,938,000 ----------- ----------- ----------- ----------- Commitments and contingencies Shareholders' equity: Preferred stock - - - Common stock 67,000 1,000 99,000 (F) 167,000 Additional paid-in-capital 10,281,000 99,000 (99,000) (F) 10,281,000 Retained earnings (accumulated deficit) (8,837,000) 7,622,000 (698,000) (D) (2,063,000) (C) 3,824,000 (E) (152,000) ----------- ----------- ----------- ----------- Total shareholders' equity 1,511,000 7,722,000 1,063,000 10,296,000 ----------- ----------- ----------- ----------- Total liabilities and shareholders' equity $18,464,000 $17,745,000 $ (975,000) $35,234,000 =========== =========== =========== ===========
See accompanying notes to Unaudited Pro Forma Consolidated Combined Financial Statements. -19- 21 TRISTAR CORPORATION AND EUROSTAR PERFUMES, INC. UNAUDITED PRO FORMA CONSOLIDATED COMBINED STATEMENT OF INCOME
Historical -------------------------------- Tristar Eurostar Pro Forma Corporation Perfumes, Inc. Combined Nine Months Nine Months Nine Months Ended Ended Ended May 31, March 31, Pro Forma May 31, 1995 1995 Adjustments 1995 ----------- ------------- ------------ ----------- Net sales $24,091,000 $25,708,000 $(17,636,000) (B) $32,163,000 (17,636,000) (B) Cost of sales 19,821,000 17,670,000 (131,000) (C) 19,724,000 ----------- ----------- ------------ ----------- Gross profit 4,270,000 8,038,000 131,000 12,439,000 Selling, general and administrative expenses 6,576,000 5,323,000 11,899,000 ----------- ----------- ------------ ----------- (Loss) income from operations (2,306,000) 2,715,000 131,000 540,000 Other income (expense): Interest expense (961,000) (249,000) (1,210,000) Interest and other (expense) income (419,000) 36,000 123,000 (D) (260,000) Insurance reimbursement 2,065,000 - 2,065,000 ----------- ----------- ------------ ----------- (Loss) income before (benefit) provision for income taxes (1,621,000) 2,502,000 254,000 1,135,000 (Benefit) provision for income taxes - 969,000 (442,000) (E) 527,000 ----------- ----------- ------------ ----------- Net (loss) income $(1,621,000) $ 1,533,000 $ 696,000 $ 608,000 =========== =========== ============ =========== Net (loss) income per common share: Primary $ (.24) $ 1.53 $ .04 =========== =========== =========== Fully diluted $ (.24) $ 1.53 $ .04 =========== =========== =========== Weighted average number of shares outstanding: (1,000,000) (F) 9,977,810 (F) Primary 6,646,067 1,000,000 235,418 (F) 16,859,295 =========== =========== ============ =========== (1,000,000) (F) 9,977,810 (F) Fully diluted 6,646,067 1,000,000 244,643 (F) 16,868,520 =========== =========== ============ ===========
See accompanying notes to Unaudited Pro Forma Consolidated Combined Financial Statements. -20- 22 TRISTAR CORPORATION AND EUROSTAR PERFUMES, INC. UNAUDITED PRO FORMA CONSOLIDATED COMBINED STATEMENT OF INCOME
Historical -------------------------------- Tristar Eurostar Pro Forma Corporation Perfumes, Inc. Combined Nine Months Nine Months Nine Months Ended Ended Ended May 31, March 31, Pro Forma May 31, 1994 1994 Adjustments 1994 ----------- ------------- ------------ ----------- Net sales $35,861,000 $24,605,000 $(22,867,000) (B) $37,599,000 (22,867,000) (B) Cost of sales 29,290,000 14,907,000 (155,000) (C) 21,175,000 ----------- ----------- ------------ ----------- Gross profit 6,571,000 9,698,000 155,000 16,424,000 Selling, general and administrative expenses 8,298,000 3,840,000 12,138,000 ----------- ----------- ------------ ----------- (Loss) income from operations (1,727,000) 5,858,000 155,000 4,286,000 Other income (expense): Interest expense (859,000) (248,000) (1,107,000) Interest and other income 12,000 4,000 16,000 ----------- ----------- ------------ ----------- (Loss) income before (benefit) provision for income taxes (2,574,000) 5,614,000 155,000 3,195,000 (Benefit) provision for income taxes - 2,268,000 (659,000) (E) 1,609,000 ----------- ----------- ------------ ----------- Net (loss) income (2,574,000) $ 3,346,000 $ 814,000 $ 1,586,000 =========== =========== ============ =========== Net (loss) income per common share: Primary $ (.39) $ 3.34 $ .09 =========== =========== =========== Fully diluted $ (.39) $ 3.34 $ .09 =========== =========== =========== Weighted average number of shares outstanding: (1,000,000) (F) 9,977,810 (F) Primary 6,629,837 1,000,000 259,780 (F) 16,867,427 =========== =========== ============ =========== (1,000,000) (F) 9,977,810 (F) Fully diluted 6,629,837 1,000,000 259,780 (F) 16,867,427 =========== =========== ============ ===========
See accompanying notes to Unaudited Pro Forma Consolidated Combined Financial Statements. -21- 23 TRISTAR CORPORATION AND EUROSTAR PERFUMES, INC. UNAUDITED PRO FORMA CONSOLIDATED COMBINED STATEMENT OF INCOME
Historical ------------------------------- Tristar Eurostar Pro Forma Corporation Perfumes, Inc. Combined Year Year Year Ended Ended Ended August 31, September 30, Pro Forma August 31, 1994 1994 Adjustments 1994 ----------- -------------- ---------------- ----------- Net sales $46,488,000 $31,481,000 $(27,282,000)(B) $50,687,000 (27,282,000)(B) Cost of sales 38,457,000 19,933,000 (1,155,000)(C) 29,953,000 ----------- ----------- ------------ ----------- Gross profit 8,031,000 11,548,000 1,155,000 20,734,000 Selling, general and administrative expenses 10,662,000 5,944,000 16,606,000 ----------- ----------- ------------ ----------- (Loss) income from operations (2,631,000) 5,604,000 1,155,000 4,128,000 Other income (expense): Interest expense (1,195,000) (338,000) (1,533,000) Interest and other (expense) income (352,000) 41,000 164,000 (D) (147,000) Litigation expenses (208,000) - (208,000) ----------- ----------- ------------ ----------- (Loss) income before (benefit) provision for income taxes (4,386,000) 5,307,000 1,319,000 2,240,000 (Benefit) provision for income taxes (95,000) 2,145,000 (820,000)(E) 1,230,000 ----------- ----------- ------------ ----------- Net (loss) income $(4,291,000) $ 3,162,000 $ 2,139,000 $ 1,010,000 =========== =========== ============ =========== Net (loss) income per common share: Primary $ (.65) $ 3.16 $ .06 =========== =========== =========== Fully diluted $ (.65) $ 3.16 $ .06 =========== =========== =========== Weighted average number of shares outstanding: (1,000,000)(F) 9,977,810 (F) Primary 6,631,948 1,000,000 241,886 (F) 16,851,664 =========== =========== ============ =========== (1,000,000)(F) 9,977,810 (F) Fully diluted 6,631,948 1,000,000 241,886 (F) 16,851,664 =========== =========== ============ ===========
See accompanying notes to Unaudited Pro Forma Consolidated Combined Financial Statements. -22- 24 TRISTAR CORPORATION AND EUROSTAR PERFUMES, INC. UNAUDITED PRO FORMA CONSOLIDATED COMBINED STATEMENT OF INCOME
Historical --------------------------------- Tristar Eurostar Pro Forma Corporation Perfumes, Inc. Combined Year Year Year Ended Ended Ended August 31, September 30, Pro Forma August 31, 1993 1993 Adjustments 1993 ------------- -------------- ------------- -------------- Net sales $ 51,409,000 $ 28,145,000 $ (25,104,000)(B) $ 54,450,000 (25,104,000)(B) Cost of sales 40,367,000 17,688,000 3,349,000 (C) 36,300,000 ------------- ------------ ------------- ------------- Gross profit 11,042,000 10,457,000 (3,349,000) 18,150,000 Selling, general and administrative expenses 8,753,000 3,935,000 12,688,000 ------------- ------------ ------------- ------------- (Loss) income from operations 2,289,000 6,522,000 (3,349,000) 5,462,000 Other income (expense): Interest expense (248,000) (342,000) (590,000) Interest and other (expense) income 25,000 8,000 33,000 Litigation expenses (2,758,000) - (2,758,000) Shareholders litigation settlement (9,500,000) - (9,500,000) ------------- ------------ ------------- ------------- (Loss) income before (benefit) provision for income taxes (10,192,000) 6,188,000 (3,349,000) (7,353,000) (Benefit) provision for income taxes (2,033,000) 2,349,000 (2,562,000)(E) (2,246,000) ------------- ------------ ------------- ------------- Net (loss) income $ (8,159,000) $ 3,839,000 $ (787,000) $ (5,107,000) ============= ============ ============= ============= Net (loss) income per common share: Primary $ (1.23) $ 3.83 $ (.31) ============= ============ ============= Fully diluted $ (1.23) $ 3.83 $ (.31) ============= ============ ============= Weighted average number of shares outstanding: (1,000,000)(F) Primary 6,623,238 1,000,000 9,977,810 (F) 16,601,048 ============= ============ ============= ============= (1,000,000)(F) Fully diluted 6,623,238 1,000,000 9,977,810 (F) 16,601,048 ============= ============ ============= =============
See accompanying notes to Unaudited Pro Forma Consolidated Combined Financial Statements. -23- 25 TRISTAR CORPORATION AND EUROSTAR PERFUMES, INC. UNAUDITED PRO FORMA CONSOLIDATED COMBINED STATEMENT OF INCOME
Historical ---------------------------------- Tristar Eurostar Pro Forma Corporation Perfumes, Inc. Combined Year Period Year Ended Ended Ended August 31, September 30, Pro Forma August 31, 1992 1992 Adjustments 1992 ------------ -------------- ----------- ------------ Net sales $ 47,519,000 $ 216,000 $47,735,000 Cost of sales 35,129,000 199,000 35,328,000 ------------ ---------- ----------- ----------- Gross profit 12,390,000 17,000 12,407,000 Selling, general and administrative expenses 5,492,000 743,000 6,235,000 ------------ ---------- ----------- ----------- Income (loss) from operations 6,898,000 (726,000) 6,172,000 Other income (expense): Interest expense (236,000) (38,000) (274,000) Interest and other income 36,000 36,000 Litigation expenses (1,650,000) - (1,650,000) ------------ ---------- ----------- ----------- Income (loss) before provision (benefit) for income taxes 5,048,000 (764,000) 4,284,000 Provision (benefit) for income taxes 1,761,000 (265,000) 1,496,000 ------------ ---------- ----------- ----------- Net income (loss) $ 3,287,000 $ (499,000) $ 2,788,000 ============ ========== =========== =========== Net income (loss) per common share: Primary $ .46 $ (.49) $ .22 ============ ========== =========== Fully diluted $ .46 $ (.49) $ .22 ============ ========== =========== Weighted average number of shares outstanding: (1,000,000)(F) Primary 7,072,844 1,000,000 5,820,389 (F) 12,893,233 ============ ========== =========== =========== (1,000,000)(F) Fully diluted 7,072,844 1,000,000 5,820,389 (F) 12,893,233 ============ ========== =========== =========== See accompanying notes to Unaudited Pro Forma Consolidated Combined Financial Statements.
-24- 26 TRISTAR CORPORATION Notes to Unaudited Pro Forma Consolidated Combined Financial Statements The following pro forma adjustments are reflected in the accompanying unaudited pro forma consolidated combined balance sheet and statements of income. (A) To eliminate intercompany balances between Tristar and Eurostar. (B) To eliminate intercompany sales between Tristar and Eurostar. (C) To eliminate the impact of intercompany profit in Tristar's ending inventory on items purchased from Eurostar. (D) To reflect the write-off of the unamortized portion of the value assigned to the distribution agreement between Tristar and Eurostar in connection with the valuation of warrants issued to the Core Sheth Families and the extension of the expiration date of warrants previously issued to the Core Sheth Families (see Note 6 of Notes to Consolidated Financial Statements) and to reflect the resultant reduction in amortization expense. At the Merger date, the unamortized portion of this value will be written off as a charge through the statement of operations. This charge, which should approximate $657,000 if the merger is consummated in August 1995 as currently planned, is not reflected in the accompanying pro forma statements of operations. (E) To eliminate Tristar's deferred tax asset valuation and to tax effect the pro forma adjustments at 34%. Based upon the combined Tristar and Eurostar's level of historical taxable income and projections for future taxable income, including the reversal of existing taxable temporary differences, over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences. (F) To reflect the issuance of 9,977,810 shares of Tristar Common Stock in exchange for Eurostar's outstanding shares and to reflect the impact of Tristar's common equivalent shares from dilutive stock options and warrants. The pro forma consolidated combined balance sheet does not reflect the possible future accounting impact of the potential reduction in the exercise price of the warrants held by the Core Sheth Families to purchase an aggregate of 2,000,000 shares of Tristar Common Stock as the effect of repricing is currently unknown. A valuation of the repricing provisions will be completed at the date of consummation of the merger utilizing the Black Scholes Method. The value related to the repricing provisions, if any, will be accounted for through a reduction in Retained Earnings in a manner similar to that for a dividend, with a corresponding increase in Additional Paid-In Capital to reflect the corresponding increase in warrant value. See "The Merger -- Description of the Merger -- Repricing of Certain Warrants." (G) To reclassify the note receivable from Eurostar related to the May 1995 pencil plant sale to property, plant and equipment. Substantial charges will be incurred by the combined company in connection with the Merger. The investment banking, legal, accounting, printing, mailing and similar expenses are expected to approximate $1,000,000. Such costs will be reflected in the combined company's fiscal 1995 statement of operations yet are not reflected in the pro forma consolidated combined financial statements except for the approximately $92,000 which has been accrued for as of May 31, 1995. -25- 27 Item 7. Financial Statements and Exhibits. (Continued) (c) Exhibit Index. Exhibit 3.1 Certificate of Incorporation, as amended Exhibit 10.1 Agreement and Plan of Merger dated as of July 1, 1995, among TRISTAR CORPORATION, Eurostar Perfumes, Inc. and Transvit Manufacturing Corporation Exhibit 10.2 Amendment to Common Stock Purchase Warrant dated August 31, 1995, between TRISTAR CORPORATION and Starion International, Ltd. Exhibit 10.3 Agreement dated August 31, 1995, among TRISTAR CORPORATION, Eurostar Perfumes, Inc. and Starion International Ltd. -26- 28 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRISTAR CORPORATION By /s/ Loren M. Eltiste ----------------------------------- Loren M. Eltiste Vice President, Chief Financial Officer, Assistant Secretary and Principal Accounting Officer DATE: August 31, 1995 -27- 29 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION ----------- ----------- Exhibit 3.1 Certificate of Incorporation, as amended Exhibit 10.1 Agreement and Plan of Merger dated as of July 1, 1995, among TRISTAR CORPORATION, Eurostar Perfumes, Inc. and Transvit Manufacturing Corporation Exhibit 10.2 Amendment to Common Stock Purchase Warrant dated August 31, 1995, between TRISTAR CORPORATION and Starion International, Ltd. Exhibit 10.3 Agreement dated August 31, 1995, among TRISTAR CORPORATION, Eurostar Perfumes, Inc. and Starion International Ltd. EX-3.1 2 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.1 CERTIFICATE OF MERGER OF EUROSTAR PERFUMES, INC. (a Texas corporation) INTO TRISTAR CORPORATION (a Delaware corporation) Pursuant to Section 252(c) of the State of Delaware General Corporation Law TRISTAR CORPORATION, a Delaware corporation, hereby certifies as follows: FIRST: The names of the constituent corporations to the merger are TRISTAR CORPORATION, whose State of incorporation is Delaware, and Eurostar Perfumes, Inc., whose State of incorporation is Texas. SECOND: An Agreement and Plan of Merger has been approved, adopted, certified, executed and acknowledged by each constituent corporation in accordance with Section 252 of the General Corporation Law of the State of Delaware. THIRD: TRISTAR CORPORATION shall be the surviving corporation. FOURTH: The Certificate of Incorporation of the surviving corporation shall be its Certificate of Incorporation, except that paragraph IV of the Certificate of Incorporation of TRISTAR CORPORATION, as the surviving corporation, which sets forth the authorized capital stock of TRISTAR CORPORATION, is hereby amended to read in its entirety as follows: "ARTICLE IV CAPITAL STOCK Section 1. Classes and Shares Authorized. The authorized capital stock of the Corporation shall consist of 30,000,000 shares of Common Stock, $.01 par value per share (hereinafter referred to as either the "Common Shares" or "Common Stock") and 1,000,000 shares of Preferred Stock, $.05 par value per share (hereinafter referred to as either the "Preferred Shares" or "Preferred Stock"). Section 2. Preferred Stock. The shares of Preferred Stock shall be issuable from time to time in one or more series, with respect to each of which series the Board of Directors shall be authorized, without further approval from the shareholders of the Corporation, to fix: (a) the designation of the series; 2 (b) the number of shares of each series, which number the Board of Directors may increase or decrease (but not below the number of shares thereof then outstanding); (c) the annual dividend rate of the series; (d) the dates at which dividends, if declared, shall be payable, and the dates from which the dividends shall be cumulative; (e) the redemption rights, if any, for shares of the series; (f) the terms and amount of any sinking fund provided for the purchase or redemption of shares of the series; (g) the amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation; (h) whether the shares of the series shall be convertible into Common Stock or other securities, and, if so, the conversion price or prices, any adjustments thereof, and all other terms and conditions upon which such conversion may be made; (i) restrictions on the issuance of the shares of the same series or of any other class or series; and (j) the voting rights, if any, exercisable by the holders of the shares of such series. Shareholders shall have no preemptive rights." FIFTH: The executed Agreement and Plan of Merger is on file at the principal place of business of the surviving corporation; the address of said principal place of business is as follows: TRISTAR CORPORATION 12500 San Pedro Avenue, Suite 500 San Antonio, Texas 78216 Attn: Secretary SIXTH: A copy of the Agreement and Plan of Merger will be furnished by the surviving corporation, TRISTAR CORPORATION, on request and without cost, to any stockholder of any constituent corporation. SEVENTH: The authorized capital stock of the non-surviving corporation, which is incorporated under the laws of the State of Texas, is 1,000,000 shares of Common Stock, $.001 par value. EIGHTH: This Certificate of Merger shall become effective at 11:59 P.M. Central Daylight Savings Time on August 31, 1995. -2- 3 IN WITNESS WHEREOF, this certificate is hereby executed 30th day of August, 1995. TRISTAR CORPORATION By: /s/ Viren S. Sheth --------------------------------- Viren S. Sheth, President and Chief Executive Officer ATTEST: /s/ Loren M. Eltiste ---------------------------------- Loren M. Eltiste, Assistant Secretary -3- 4 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION Ross Cosmetics Distribution Centers, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware. DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation, at a meeting duly held, adopted the following resolution proposing and declaring advisable an amendment to the certificate of Incorporation of said corporation: RESOLVED, that the Board recommends to the shareholders of the Company that, at the Annual Meeting of the Company, they approve the amendment to the Company's Certificate of Incorporation changing the Company's corporate name to TRISTAR CORPORATION; SECOND: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 of the General Corporation Law of Delaware. THIRD: Accordingly, Article I of the Company's Certificate of Incorporation is hereby amended to read as follows: "The name of the corporation is TRISTAR CORPORATION." IN WITNESS WHEREOF, said corporation has caused this certificate to be signed by Richard P. Rifenburgh, its Chairman of the Board of Directors, and attested by James M. Shoemaker, Jr., its Secretary, this 16th day of March, 1993. Ross Cosmetics Distribution Centers, Inc. By /s/ Richard P. Rifenburgh ---------------------------------- Richard P. Rifenburgh Chairman of the Board of Directors ATTEST: By /s/ James M. Shoemaker, Jr. -------------------------------- James M. Shoemaker, Jr. Secretary -4- 5 CERTIFICATE OF OWNERSHIP AND MERGER (ARTICLES OF MERGER) MERGING ROSS COSMETICS DISTRIBUTION CENTER S.W., INC., A TEXAS CORPORATION INTO ROSS COSMETICS DISTRIBUTION CENTERS, INC. A DELAWARE CORPORATION Pursuant to Section 253 of the General Corporation Law of the State of Delaware and Article 5.16 of the Texas Business Corporation Act. Ross Cosmetics Distribution Centers, Inc. (hereinafter referred to as the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Delaware GCL"), does hereby certify that: 1. The Corporation was incorporated on June 5, 1987, pursuant to the Delaware GCL and is existing under such Law. The address of the Corporation's registered office in Delaware is 32 Loockerman Square, Suite L-100, Dover, Delaware 19901. 2. Ross Cosmetics Distribution Center S.W., Inc. ("RCDCSW") was incorporated on May 10, 1985, pursuant to the Texas Business Corporation Act and is existing under such Law. 3. RCDCSW has only one class of shares outstanding (Common Stock $.001 par value per share) and the number of outstanding shares of RCDCSW Common Stock is 1,000, all of which is owned by the Corporation. 4. The Corporation, by the following resolutions of its Board of Directors, duly adopted on the 25th day of January 1993, determined to merge into itself RCDCSW on the conditions set forth in such resolutions. WHEREAS the Corporation lawfully owns all the outstanding stock of RCDCSW, a corporation organized and existing under the laws of Texas; and WHEREAS the Corporation desires to merge into itself RCDCSW, and to be processed of all the estate, property, rights, privileges and franchises of said corporation. NOW, THEREFORE, BE IT RESOLVED, that the Corporation merge into itself, and it does hereby merge into itself RCDCSW and assumes all of its liabilities and obligations, and FURTHER RESOLVED, that the president or a vice-president, and the secretary or treasurer of the Corporation be and they hereby are directed to make and execute, under the corporate seal of the Corporation, a certificate of ownership setting forth a copy of the resolution, to merge RCDCSW and assume its liabilities and obligations, and the date of adoption thereof, and to file the same in the offices of the Secretary of the State of Delaware and Texas, and a certified copy thereof in the office of the Recorder of Deeds in Kent County, Delaware, and in such other places as may be proper; and FURTHER RESOLVED, that the officers of the Corporation be and they hereby are authorized and directed to do all acts and things whatsoever, whether within or -5- 6 without the State of Delaware and Texas, which may be in any way necessary or proper to effect said merge. IN WITNESS WHEREOF, the authorized officers of the below named corporations have herewith set their hands and seals this 25th day of January 1993. ROSS COSMETICS DISTRIBUTION CENTERS, INC. ATTEST: /s/ James M. Shoemaker, Jr. By: /s/ Richard P. Rifenburgh ------------------------------------ -------------------------------- Secretary Title: Chairman -------------------------------- ROSS COSMETICS DISTRIBUTION CENTER S.W., INC. ATTEST: /s/ James M. Shoemaker, Jr. By: /s/ Eugene H. Karam ------------------------------------ -------------------------------- Secretary Title: President -------------------------------- -6- 7 Certificate of Restoration and Revival of Certificate of Incorporation of Ross Cosmetics Distribution Centers, Inc. It is hereby certified that: 1. The name of the corporation (hereinafter called the "corporation") is Ross Cosmetic Distribution Centers, Inc. 2. The corporation was organized under the provisions of the General Corporation Law of the State of Delaware. The date of filing of its original certificate of incorporation with the Secretary of State of the State of Delaware is June 5, 1987. 3. The address, including the street, city, and county, of the registered office of the corporation in the State of Delaware and the name of the registered agent at such address as follows: The Prentice-Hall Corporation System, Inc., 32 Loockerman Square, Suite L-100, Dover, Delaware 19901, County of Kent. 4. The corporation hereby procures a restoration and revival of its certificate of incorporation, which became inoperative by law on March 1, 1991 for failure to file annual reports and non-payment of taxes payable to the State of Delaware. 5. The certificate of incorporation of the corporation, which provides for and will continue to provide for, perpetual duration, shall, upon the filing of this Certificate of Restoration and Revival of the Certificate of Incorporation in the Department of State of the State of Delaware, be restored and revived and shall become fully operative on February 28, 1991. 6. This Certificate of Restoration and Revival of the Certificate of Incorporation is filed by authority of the duly elected directors and prescribed by Section 312 of the General Corporation Law of the State of Delaware. Signed and attested to on April 8, 1991. /s/ Eugene H. Karam --------------------------------------- Vice President Attest: /s/ Michael E. Emery ---------------------------------- Assistant Secretary -7- 8 REGISTERED OFFICE AND OF REGISTERED AGENT PURSUANT TO SECTION 134 OF TITLE 8 OF THE DELAWARE CODE TO: DEPARTMENT OF STATE Division of Corporations Townsend Building Federal Street Dover, Delaware 19903 Pursuant to the provisions of Section 134 of Title 8 of the Delaware Code, the undersigned Agent for service of process, in order to change the address of the registered office of the corporations for which it is registered agent, hereby certifies that: 1. The name of the agent is Corporate Filing Service, Inc. 2. The address of the old registered office was 229 South State Street, Kent County, Delaware 19901. 3. The address to which the registered office is to be changed is 32 Loockerman Square, Suite L-100, Dover, Kent County, Delaware 19901. The new address will be effective on October 27, 1989. 4. The names of the corporations represented by said agent are set forth on the list annexed to this certificate and made a part hereof by reference. IN WITNESS WHEREOF, said agent has caused this certificate to be signed on its behalf by its Vice President and Assistant Secretary this 10th day of October 1989. CORPORATE FILING SERVICE, INC. /s/ Alan E. Spiewak --------------------------------------- Alan Spiewak, Vice President ATTEST: /s/ Richard L. Kushay -------------------------------------- Richard L. Kushay, Assistant Secretary -8- 9 Certificate for Renewal and Revival of Charter Ross Cosmetics Distribution Centers, Inc., a corporation organized under the laws of Delaware, the charter of which was voided for non-payment of taxes, now desires to procure a restoration, renewal and revival of its charter, and hereby certifies as follow: 1. The name of this corporation is Ross Cosmetics Distribution Centers, Inc. 2. Its registered office in the State of Delaware is located at 229 South State Street, City of Dover, Zip Code 19901, County of Dover, the name and address of its registered agent is Corporate Filing Services, Inc. (#9007630). 3. The date of filing of the original Certificate of Incorporation in Delaware was June 5, 1987. 4. The date when restoration, renewal, and revival of the charter of this company is to commence is the 28th day of February, same being prior to the date of the expiration of the charter. This renewal and revival of the charter of this corporation is to be perpetual. 5. This corporation was duly organized and carried on the business authorized by its charter until the 1st day of March, 1989 A.D. 19___ at which time its charter became inoperative and void for non-payment of taxes and this certificate for renewal and revival is filed by authority of the duly elected directors of the corporation in accordance with the laws of the State of Delaware. IN TESTIMONY WHEREOF, and in compliance with the provisions of Section 312 of the General Corporation Law of the State of Delaware, as amended, providing for the renewal, extension and restoration of charters, Ross A. Freitas the last and acting President, and Carolyn S. Kenner, the last and acting Secretary of Ross Cosmetics Distribution Centers, Inc., have hereunto set their hands to this certificate this 28th day of May, 1989. /s/ Ross A. Freitas --------------------------------------- Last and Acting President ATTEST: /s/ Carolyn S. Kenner --------------------------------------- Last and Acting Secretary -9- 10 CERTIFICATE OF CHANGE OF ADDRESS OF REGISTERED OFFICE AND OF REGISTERED AGENT PURSUANT TO SECTION 134 OF TITLE 8 OF THE DELAWARE CODE TO: DEPARTMENT OF STATE Division of Corporations Townsend Building Federal Street Dover, Delaware 19903 Pursuant to the provisions of Section 134 of Title 8 of the Delaware Code, the undersigned Agent for service of process, in order to change the address of the registered office of the corporations for which it is registered agent, hereby certifies that: 1. The name of the agent is CORPORATE FILING SERVICE, INC. 2. The address of the old registered office was 410 South State Street, Dover, Delaware 19901. 3. The address to which the registered office is to be changed is 229 South State Street, Dover, Delaware 19901. The new address will be effective on September 1, 1987. 4. The names of the corporations represented by said agent are set forth on the list annexed to this certificate and made a part hereof by reference. IN WITNESS WHEREOF, said agent has caused this certificate to be signed on its behalf by its Vice President and Secretary this 27th day of September 1987. CORPORATE FILING SERVICE, INC. /s/ --------------------------------------- ATTEST: /s/ ---------------------------------------- Secretary -10- 11 CERTIFICATE OF MERGER OF ROSS COSMETICS DISTRIBUTION CENTERS, INC. (a New York Corporation) INTO ROSS COSMETICS DISTRIBUTION CENTERS, INC. (a Delaware Corporation) Under Section 252 of the Business Corporation Law of the State of Delaware -------------------------------------------------------------------------------- The undersigned, Ross Freitas, being the President of Ross Cosmetics Distribution Centers, Inc., a domestic corporation duly organized and existing under and by virtue of the laws of the State of Delaware and being, the President of Ross Cosmetics Distribution Centers, Inc., a foreign corporation duly organized and existing by virtue of the laws of the State of New York, do hereby certify that: 1. The name of each constituent corporation is as follows: (i) Ross Cosmetics Distribution Centers, Inc. (hereinafter "RCDC"), (a New York corporation); and (ii) Ross Cosmetics Distribution Centers, Inc. (the "Surviving Corporation"), (a Delaware corporation). 2. The Agreement of Merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with Section 252. 3. The name of the surviving corporation is Ross Cosmetics Distribution Centers, Inc., a Delaware corporation. 4. An Agreement of Merger has been adopted by the Board of Directors of the Surviving Corporation and thereafter was duly ratified by shareholders of the Surviving Corporation in accordance with Section 252 of the Delaware Corporation Law. 5. The authorized capital stock of RCDC is 10,000,000 shares of Common Stock. -11- 12 6. The designation and number of outstanding shares of RCDC entitled to vote on the merger is 2,144,231 shares of Common Stock, $.01 par value per share. 7. The merger of RCDC and the Surviving Corporation into the Surviving Corporation was authorized by RCDC at a meeting of shareholders by a vote of the holders of a minimum of sixty-seven (67%) per cent of all outstanding shares of RCDC entitled to vote thereon pursuant to New York Business Corporation Law and Delaware Corporation Law. 8. An executed copy of the Agreement of Merger is on file at the principal place of business of the Surviving Corporation at 135 Canal Street, Staten Island, New York 10304, and shall be furnished to any stockholder of a constituent corporation requesting such without cost. 9. The Certificate of Incorporation of the constituent Delaware corporation shall be the Certificate of Incorporation of the Surviving Corporation and shall not be amended or changed. -12- 13 IN WITNESS WHEREOF, I have executed and subscribed this Certificate of Merger and do affirm the foregoing statements made herein are true under the penalties of perjury this 17th day of September, 1987. ROSS COSMETICS DISTRIBUTION CENTERS, INC., (a New York Corporation) ATTEST: By: /s/ Carolyn Safer Kenner By: /s/ Ross Freitas ------------------------------- --------------------------------- CAROLYN SAFER KENNER, ROSS FREITAS, President Secretary ROSS COSMETICS DISTRIBUTION CENTERS, INC., (a Delaware Corporation) ATTEST: By: /s/ Carolyn Safer Kenner By: /s/ Ross Freitas ------------------------------- --------------------------------- CAROLYN SAFER KENNER, ROSS FREITAS, President Secretary -13- 14 CERTIFICATE OF INCORPORATION OF ROSS COSMETICS DISTRIBUTION CENTERS, INC. * * * * * * * * * * * * * * * ARTICLE I NAME The name of the corporation is Ross Cosmetics Distribution Centers, Inc. ARTICLE II REGISTERED OFFICE AND AGENT The registered office of the Corporation in the State of Delaware is located at 410 South State Street in the City of Dover, County of Kent. The name of its registered agent at that address is Corporate Filing Services, Inc. ARTICLE III PURPOSE To conduct, carry on and engage in the wholesale distribution of cosmetic products, perfumes, colognes, beauty aids and health care products; and in connection therewith to manufacture, buy, sell, job, import, export and otherwise deal in and with cosmetics, chemicals and pharmaceutical products, lipsticks, rouges, powders, soaps, colognes, perfumes, toilet waters, hair bleaches, henna, hair rinses and washes, hair dressings, lotions, fresheners, shadow and eyebrow pencils, massage creams, cold cream, vanishing cream, balms, ointments, drugs, medicines, pharmaceutical and chemical products, preparations and compounds, sanitary and hygienic goods and products, nail polishes, bleaches, cuticle removers, baby oils, deodorants, depilatories, witch hazel, rubbing alcohol, astringents, dentifrices, mouth washes, gargles, shaving creams, shaving stocks, shaving soaps, mineral oils, smelling salts, tooth brushes, combs, brushes, vanities, nail files, cuticle scissors, paper towels and tissues, jars, bottles, tubes, perfume bases, oils, extracts, flavors and other cosmetics, perfumes, toilet preparations, beauty preparations, chemicals and pharmaceuticals of every kind and description; and all products, by-products, materials, supplies, machinery, tools, packaging materials, applicators and devices used or useful in connection with or resulting from the manufacture, sale, marketing, distribution or use thereof. To purchase, lease, copyright, produce, construct and otherwise acquire, and to use, operate, repair, maintain, develop and improve and to sell, trade, exchange, rent, lease, create security interests in and otherwise dispose of any and all materials, facilities, appliances, articles, products, equipment or supplies proper for or adapted to be used in connection with or incidental to the business and affairs of the corporation as the same pertain to the conduct and operation of the corporation's principal or ancillary business activities and to do any and -14- 15 all things incidental thereto, or necessary to expedient or proper to be done in connection with the matters set out herein. To take, buy, sell, exchange, rent, lease, sublease or otherwise acquire, and to erect, construct, maintain, improve, rebuild, enlarge, alter, manage, control, develop, assign, transfer, convey, pledge, alienate or otherwise dispose and to mortgage or otherwise encumber, and to generally deal in real and personal property wherever situated, either directly or through ownership of shares in any corporation, and to acquire, buy, hold, sell, assign, transfer, mortgage, pledge, exchange or otherwise encumber or dispose of the securities of any corporation, domestic or foreign, including but not limited to shares, scrip, bonds, notes, evidences of indebtedness, debentures, commercial paper, whether such corporation be public or private, and to do any other lawful acts necessary, incidental or proper thereto, not prohibited by law, and while the holder of any securities, to exercise all rights and privileges of ownership, and to collect all dividends, and interest payable thereon, and to do all things not prohibited by law, to protest, conserve, or increase the value of all property and of all securities held by it. To have as part of the corporate purposes, all of the powers conferred upon corporations organized under the General Corporation Law subject to any limitations thereof contained in the Certificates of Incorporation or in the laws of the State of Delaware. ARTICLE IV CAPITAL STOCK Section 1. Classes and Shares Authorized. The authorized capital stock of the Corporation shall consist of 10,000,000 shares of Common Stock, $.01 par value per share (hereinafter referred to as either the "Common Shares" or "Common Stock") and 1,000,000 shares of Preferred Stock, $.05 par value per share (hereinafter referred to as either the "Preferred Shares" or "Preferred Stock"). Section 2. Preferred Stock. The shares of Preferred Stock shall be issuable from time to time in one or more series, with respect to each of which series the Board of Directors shall be authorized, without further approval from the shareholders of the Corporation, to fix: (a) the designation of the series; (b) the number of shares of each series, which number the Board of Directors may increase or decrease (but not below the number of shares thereof then outstanding); (c) the annual dividend rate of the series; (d) the dates at which dividends, if declared, shall be payable, and the dates from which the dividends shall be cumulative; (e) the redemption rights, if any, for shares of the series; (f) the terms and amount of any sinking fund provided for the purchase or redemption of shares of the series; -15- 16 (g) the amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation; (h) whether the shares of the series shall be convertible into Common Stock or other securities, and, if so, the conversion price or prices, any adjustments thereof, and all other terms and conditions upon which such conversion may be made; (i) restrictions on the issuance of the shares of the same series or of any other class or series; and (j) the voting rights, if any, exercisable by the holders of the shares of such series. Shareholders shall have no pre-emptive rights. ARTICLE V PRE-EMPTIVE RIGHTS Stockholders of the Corporation shall not have pre-emptive rights to acquire unissued or treasury shares of the Corporation or securities convertible into such shares of carrying a right to subscribe to or acquire such shares. ARTICLE VI PLACE OF BUSINESS Part or all of the business of the Corporation may be conducted in the City of Dover, County of Kent, or any place in the State of Delaware or outside of the State of Delaware, in other states or territories of the United States and in foreign countries. ARTICLE VII BOARD OF DIRECTORS Section 1. Board of Directors: Number. The governing board of the Corporation shall be known as the Board of Directors, shall consist of a minimum of three and a maximum of nine members, subject, however, to the number being from time to time increased or decreased in such manner as shall be provided in the By-laws of the Corporation, provided that the number of directors shall not be reduced to less than three except that there need be only as many directors as there are stockholders in the event that the outstanding shares are held of record by fewer than three stockholders. Section 2. Classification of Directors. The Board of Directors may, but need not be divided into three classes, Class 1, Class 2 and Class 3, each class to be as nearly equal in number as possible. In the event the Corporation elects to adopt a "staggered" Board, the term of office of Class 1 directors shall expire at the first annual meeting of stockholders after their election, that of Class 2 directors shall expire at the second annual meeting after their election, and that of Class 3 directors shall expire at the third annual meeting after their election. At each annual meeting after such classification, the number of directors equal to the number of the class whose term expires at the time of such meeting shall be elected to hold office until the third succeeding annual meeting. No classification of directors shall be effective prior to the first annual meeting of stockholders or at any time when the Board of Directors consists of less than six members. Notwithstanding the foregoing, and except as otherwise required by -16- 17 law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the terms of the director or directors elected by such holders shall expire at the next succeeding annual meeting of stockholders. Section 3. Nomination of Directors. (a) Nominations for the election of directors may be made by the Board of Directors, by a committee of the Board of Directors or by any stockholder entitled to vote for the election of directors. Nominatings by stockholders shall be made by notice, in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Corporation not less than 14 days nor more than 50 days prior to any meeting of the stockholders called for the election of directors; provided, however, that if less than 21 days notice of the meeting is given to stockholders, such written notice shall be delivered or mailed, as prescribed, to the Secretary of the Corporation not later than the close of the seventh day following the day on which notice of the meeting was mailed to stockholders. (b) Each notice under subsection (a) shall set forth: (i) the name, age, business address and, if known, residence address after each nominee proposed in such notice; (ii) the principal occupation or employment of each such nominee, and (iii) the number of shares of stock of the Corporation which are beneficially owned by each such nominee. (c) The chairman of the stockholders' meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Section 4. Certain Powers of the Board of Directors. In furtherance and not in limitation of the powers conferred by statute, and subject to the rights of the holders of the Corporation's Preferred Stock as specified in Section 5 of Article IV, the Board of Directors is expressly authorized: (a) to manage and govern the Corporation by majority vote of members present at any regular or special meeting at which a quorum shall be present, to make, alter, or amend the By-laws of the Corporation at any regular or special meeting, to fix the amount to be reserved as working capital over and above its capital stock paid in, to authorize and cause to be executed mortgages and liens upon the real and personal property of this Corporation, and to designate one or more of committees, each committee to consist of two or more of the directors of the Corporation, which, to the extent provided in the resolution or in the By-laws of the Corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation (such committee or committees shall have such name or names as may be stated in the By-laws of the Corporation or as may be determined from time to time by resolution adopted by the Board of Directors); (b) to sell, lease, exchange, or otherwise dispose of all of or substantially all of the property and assets of the Corporation in the ordinary course of its business upon such terms and conditions as the Board of Directors may determine without vote or consent of the stockholders; (c) to sell, pledge, lease, exchange, liquidate, or otherwise dispose of all or substantially all the property or assets of the Corporation, including its goodwill, if not in the ordinary course of its business, upon such terms and conditions as the Board of Directors may determine; provided, however, that such transaction is authorized or ratified by the affirmative vote of the holders of at least a majority to the shares entitled to vote thereon at a stockholders' meeting duly called for such purpose, or is authorized or ratified by the written -17- 18 consent of the holders of all of the shares entitled to vote thereon; and provided, further, that any such transaction with any substantial stockholder or affiliate of the corporation shall be authorized or ratified by the affirmative vote of the holders of at least two-thirds of shares entitled to vote thereon at a stockholders' meeting duly called for that purpose, unless such transaction is with any subsidiary of the Corporation or is approved by the affirmative vote of a majority of the continuing directors of the Corporation, or is authorized or ratified by the written consent of the holders of all the shares entitled to vote thereon; (d) to merge, consolidate, or exchange all of the issued and outstanding shares of one or more classes of the Corporation upon such terms and conditions as the Board of Directors may authorize; provided, however, that such merger, consolidation, or exchange is approved or ratified by the affirmative vote of the holders of at least a majority of the shares entitled to vote thereon at a stockholders' meeting duly called for that purpose, or is authorized or ratified by the written consent of the holders of all of the shares entitled to vote thereon; and provided, further, that any such merger, consolidation or exchange with any substantial stockholder or affiliate of the Corporation shall be authorized or ratified by the vote of the holders of at least two-thirds of the shares entitled to vote thereon at a stockholders' meeting duly called for that purpose, unless such merger, consolidation or exchange is with any subsidiary of the Corporation or is approved by the affirmative vote of a majority of the continuing directors of the Corporation, or is authorized or ratified by the written consent of the holders of all the shares entitled to vote thereon; and (e) to distribute to the stockholders of the Corporation, without the approval of the stockholders, in partial liquidation, out of stated capital or capital surplus of the Corporation, a portion of its assets, in cash or in property, so long as the partial liquidation is in compliance with the Delaware General Corporation Law. (f) as used in this Section 5, the following terms shall have the following meanings: (i) an "affiliate" shall mean any person or entity which is an affiliate within the meaning of Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended; (ii) a "continuing director" shall mean a director who was elected before the substantial stockholder or affiliate of the Corporation which is to be a party to a proposed transaction within the scope of subsections (c) and (d) of this Section 5 became such a substantial stockholder or affiliate of the Corporation, as the case may be, or is designated at or prior to his first election or appointment to the Board of Directors by the affirmative vote of a majority of the Board of Directors who are continuing directors; (iii) a "subsidiary" shall mean any corporation in which the Corporation owns the majority of each class of equity security; and (iv) a "subsidiary stockholder" shall mean any person or entity which is the beneficial owner, within the meaning of Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, of 10% or more of the outstanding capital stock of the Corporation. ARTICLE VIII CONFLICTS OF INTEREST Section 1. Related Party Transactions. No contract or other transaction of the Corporation with any other person, firm or corporation, or in which the corporation is -18- 19 interested, shall be affected or invalidated by (a) the fact that any one or more of the directors or officers of this Corporation is interested in or is a director or officer of such other firm or corporation; or (b) the fact that any director or officer of this Corporation, individually or jointly with others, may be a party to or may be interested in any such contract or transaction, so long as the contract or transaction is authorized, approved or ratified at a meeting of the Board of Directors by sufficient vote thereon by directors not interested therein, to which such fact of relationship or interest has been disclosed, or the contract or transaction has been approved or ratified by vote or written consent of the stockholders entitled to vote, to whom such fact of relationship or interest has been disclosed, or so long as the contract or transaction is fair and reasonable to the Corporation. Each person who may become a director or officer of the Corporation is hereby relieved from any liability that might otherwise arise by reason of his contracting with the Corporation for the benefit of himself or any firm or corporation in which he may be in any way interested. Section 2. Corporate Opportunities. The officers, directors and other members of management of the Corporation shall be subject to the doctrine of corporate opportunities only insofar as it applies to business opportunities in which the Corporation has expressed an interested as determined from time to time by resolution of the Board of Directors. When such areas of interest are delineated, all such business opportunities within such areas of interest which come to the attention of the officers, directors and other members of management of the Corporation shall be disclosed promptly to the Corporation and made available to it. The Board of Directors may reject any business opportunity presented to it, and thereafter any officer, director, or other member of management may avail himself of such opportunity. Until such time as the Corporation, through its Board of Directors, has designated an area of interest, the officers, directors, and other members of management of the Corporation shall be free to engage in such areas of interest on their own and the provisions hereof shall not limit the rights of any officer, director, or other member of management of the Corporation to continue a business existing prior to the time that such area of interest is designated by the Corporation. This provision shall not be construed to release any employee of the Corporation (other than an officer, director or member of management) from any duties which such employee may have to the Corporation. ARTICLE IX INDEMNIFICATION Section 1. Liability of Directors. No Director shall be personally liable to the Corporation or any stockholder for monetary damages for breach of fiduciary duty as a director, except for any matter is respect of which such director shall be liable under Section 174 of Title 8 of the Delaware Code (relating to the Delaware General Corporation Law) or any amendment thereto or successor provision thereto as shall be liable for reason that, in addition to any and all other requirements for such liability, he: (i) shall have breached his duty of loyalty to the Corporation or its stockholders; (ii) shall not have acted in good faith, or in failing to act, shall not have acted in good faith; (iii) shall have acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, shall have acted in a manner involving intentional misconduct or a knowing violation of law; or (iv) shall have derived an improper personal benefit. Neither the amendment nor repeal of this Article IX, nor the adoption of any provision of the Certificate of Incorporation inconsistent with this Article IX, shall eliminate or reduce the effect of this Article IX in respect to any matter occurring, or any cause of action, suit or claim that, but for this Article IX would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. Section 2. Insurance. The Board of Directors may exercise the Corporation's power to purchase and maintain insurance on behalf of any person who is or was a director, officer, -19- 20 employee, fiduciary or agent of the Corporation, or is or was serving at the request of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under this Article X. Section 3. Miscellaneous. The indemnification provided by this Article X shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under these Articles of Incorporation, the By-laws, agreements, vote of the stockholders or disinterested directors, or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, fiduciary or agent and shall inure to the benefit of the heirs and personal representatives of such person. ARTICLE X ARRANGEMENTS WITH CREDITORS Whenever a compromise or arrangement is proposed by the Corporation between it and its creditors or any class of them, and/or between the Corporation and its stockholders or any class of the, any court of equitable jurisdiction may, on summary application by the Corporation, or by a majority of its stockholders, or on the application of any receiver or receivers appointed for the Corporation, or on the application of trustees in dissolution, order a meeting of the creditors or class of creditors and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be notified in such manner as the court decides. If a majority in number representing at least three-fourths in amount of the creditors or class or creditors, and/or the holders of the majority of the stock or class of stock of the Corporation, as the case may be, agree to any compromise or arrangement and/or to any reorganization of the Corporation, as a consequence of such compromise or arrangement and/or said reorganization shall, if sanctioned by the court to which the application has been made, be binding upon all the creditors or class of creditors and/or on all the stockholders or class of stockholders of the Corporation, as the case may be, and also on the Corporation. ARTICLE XII SHAREHOLDERS' MEETINGS Stockholders' meetings may be held at such time and place as may be stated or fixed in accordance with the By-laws. At all stockholders' meetings one-third of all shares entitled to vote shall constitute a quorum. ARTICLE XII AMENDMENT These Articles of Incorporation may be amended by resolution of the Board of Directors if no shares have been issued, and if shares have been issued, by the affirmative vote of the holders of at least a majority of the shares entitled to vote thereon at a meeting duly called for that purpose, or, when authorized, when such action is ratified by the written consent of all the stockholders entitled to vote thereon. -20- 21 ARTICLE XIII SHAREHOLDER VOTE Whenever the laws of the State of Delaware require the vote or concurrence of the holders of two-thirds of the outstanding shares entitled to vote thereon, with respect to any action to be taken by the stockholders of the Corporation, such action may be taken by the vote or concurrence of the holders of at least a majority of the shares entitled to vote thereon. ARTICLE XIV DISSOLUTION Section 1. Procedure. The Corporation shall be dissolved upon the affirmative vote of the holders of at least a majority of the shares entitled to vote thereon at a meeting duly called for that purpose, or when authorized or ratified by the written consent of the holders of all of the shares entitled to vote thereon. Section 2. Revocation. The corporation shall revoke voluntary dissolution proceedings upon the affirmative vote of the holders of at least a majority of the shares entitled to vote at a meeting duly called for that purpose, or when authorized or ratified by the written consent of the holders of all of the shares entitled to vote thereon. ARTICLE XV The names and addresses of each Incorporator are: Ross A. Freitas 135 Canal Street Staten Island, New York 10305 Carolyn Safer Kenner 135 Canal Street Staten Island, New York 10305 IN WITNESS WHEREOF, the undersigned officers for and on behalf of the Corporation have signed this Certificate of Incorporation this 22nd day of May, 1987. ROSS COSMETICS DISTRIBUTION CENTERS, INC. By: /s/ Ross Freitas ---------------------------------- Ross Freitas, Incorporator By: /s/ Carolyn Safer Kenner ---------------------------------- Carolyn Safer Kenner, Incorporator -21- EX-10.1 3 AGREEMENT AND PLAN OF MERGER 1 EXHIBIT 10.1 AGREEMENT AND PLAN OF MERGER Among EUROSTAR PERFUMES, INC., TRANSVIT MANUFACTURING CORPORATION and TRISTAR CORPORATION July 1, 1995 2 TABLE OF CONTENTS I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 Consummation of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.5 Certificate of Incorporation; Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.6 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.7 Conversion of Securities; Exchange; Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . 2 1.8 Taking of Necessary Action; Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 II REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 3 2.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.2 Representations and Warranties of Eurostar and Parent . . . . . . . . . . . . . . . . . . . . . . . 3 (a) Organization and Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 (b) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 (c) Authorization and Validity of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 4 (d) No Approvals or Notices Required; No Conflict with Instruments to which Eurostar or Parent is a Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 (e) Eurostar Financial Statements; Material Agreements . . . . . . . . . . . . . . . . . . . . 5 (f) Conduct of Business in the Ordinary Course; Absence of Certain Changes and Events . . . . . 5 (g) Certain Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 (h) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 (i) Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 (j) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 (k) Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 (l) No Severance Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 (m) Voting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 (n) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 (o) Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.3 Representations and Warranties of Tristar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 (a) Organization and Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 (b) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 (c) Authorization and Validity of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 10 (d) No Approvals or Notices Required; No Conflict with Instruments to which Tristar or any of the Tristar Subsidiaries is a Party . . . . . . . . . . . . . . . . . . . . . . . . . . 11 (e) Commission Filings; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 11 (f) Conduct of Business in the Ordinary Course; Absence of Certain Changes and Events . . . . . 12 (g) Certain Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 (h) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 (i) Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 (j) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 (k) Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 (l) No Severance Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 (m) Voting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 (n) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 (o) Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
i 3 III COVENANTS OF EUROSTAR PRIOR TO THE EFFECTIVE TIME . . . . . . . . . . . . . . . 16 3.1 Conduct of Business by Eurostar Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 16 3.2 Access to Information; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 IV COVENANTS OF TRISTAR PRIOR TO THE EFFECTIVE TIME . . . . . . . . . . . . . . . . 18 4.1 Conduct of Business by Tristar Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 18 4.2 Access to Information; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 4.3 NASDAQ/NMS Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 V ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 19 5.1 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 5.2 Approval of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 5.3 Filings; Consents; Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 5.4 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 5.5 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 5.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 5.7 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 5.8 Termination of Distribution Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 VI CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 21 6.1 Conditions to Obligation of Each Party to Effect the Merger . . . . . . . . . . . . . . . . . . . . 21 6.2 Additional Conditions to Obligations of Tristar . . . . . . . . . . . . . . . . . . . . . . . . . . 22 6.3 Additional Conditions to Obligations of Eurostar . . . . . . . . . . . . . . . . . . . . . . . . . . 22 VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 23 7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 7.3 Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 7.4 Survival of Representations, Warranties, Covenants and Agreements . . . . . . . . . . . . . . . . . 24 7.5 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 7.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 7.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 7.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 7.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 7.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 7.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 7.12 Entire Agreement; Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ii 4 AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger (the "Agreement"), executed the 31st day of July, 1995 (the "Date Hereof"), to be effective July 1, 1995 (the "Effective Date"), is among Eurostar Perfumes, Inc., a Texas corporation ("Eurostar"), Transvit Manufacturing Corporation, a British Virgin Islands corporation and the sole stockholder of Eurostar ("Parent"), and TRISTAR CORPORATION, a Delaware corporation ("Tristar"). WHEREAS, subject to and in accordance with the terms and conditions of this Agreement, as of the Date Hereof, the respective Boards of Directors of Eurostar and Tristar, and Parent as sole stockholder of Eurostar, have approved the merger of Eurostar with and into Tristar (the "Merger"), whereby each issued and outstanding share of common stock, par value $.001 per share, of Eurostar ("Eurostar Common Stock") not owned directly or indirectly by Eurostar will be converted into the right to receive common stock, par value $.01 per share, of Tristar ("Tristar Common Stock"), as provided herein; WHEREAS, for federal income tax purposes, it is intended that the Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS, the Merger is intended to be accounted for in a manner similar to a "pooling of interests" for accounting purposes; and WHEREAS, the parties hereto desire to set forth certain representations, warranties and covenants made by each to the other as an inducement to the consummation of the Merger; NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties and covenants herein contained, the parties hereto hereby agree as follows: ARTICLE I THE MERGER 1.1 The Merger. Subject to and in accordance with the terms and conditions of this Agreement and in accordance with the Delaware General Corporation Law (the "DGCL"), and the Texas Business Corporation Act (the "TBCA"), at the Effective Time (as defined in Section 1.3) Eurostar shall be merged with and into Tristar. As a result of the Merger, the separate corporate existence of Eurostar shall cease and Tristar shall continue as the surviving corporation (sometimes referred to herein as the "Surviving Corporation") and shall succeed to and assume all of the rights and obligations of Eurostar in accordance with the DGCL and the TBCA. 1.2 Closing Date. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Fulbright & Jaworski L.L.P., 300 Convent Street, Suite 2200, San Antonio, Texas, as soon as practicable after the satisfaction or waiver of the conditions set forth in Article VI or at such other time and place and on such other date as Eurostar and Tristar shall agree; provided, that the closing conditions set forth in Article VI shall have been satisfied or waived at or prior to such time. The date on which the Closing occurs is herein referred to as the "Closing Date". 1.3 Consummation of the Merger. As soon as practicable on the Closing Date, the parties hereto will cause the Merger to be consummated by filing with the Secretary of State of the State of Delaware a certificate of merger in such form as required by, and executed in accordance with, the relevant provisions of the DGCL, and by filing with the Secretary of State of the State of Texas articles of merger in such form as required by, and executed in accordance with, the Texas Business Corporation Act (the "TBCA"). The "Effective Time" of the Merger as that term is used in this Agreement shall mean the later to occur of the filing of such certificate of merger or articles of merger. 1.4 Effects of the Merger. The Merger shall have the effects set forth in the applicable provisions of the DGCL and the TBCA and as set forth herein. 5 1.5 Certificate of Incorporation; Bylaws. The Certificate of Incorporation and bylaws of Tristar, as in effect immediately prior to the Effective Time and as amended as described in the Preliminary Proxy Statement (hereinafter defined), shall be the Certificate of Incorporation and bylaws of the Surviving Corporation and thereafter shall continue to be its Certificate of Incorporation and bylaws until amended as provided therein and under the DGCL. 1.6 Directors and Officers. The directors of Tristar immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and bylaws of the Surviving Corporation, and the officers of Tristar immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified. 1.7 Conversion of Securities; Exchange; Fractional Shares. Subject to the terms and conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Eurostar, Tristar or their respective stockholders: (a) Each share of Eurostar Common Stock issued and outstanding immediately prior to the Effective Time (the "Shares"), other than any Shares to be canceled pursuant to Section 1.7(b), shall be converted, subject to the provisions of this Section 1.7, into the right to receive 9.97781 shares of Tristar Common Stock; provided, however, that no fractional shares of Eurostar Common Stock shall be issued, and, in lieu thereof, the number of shares shall be rounded downward to the next whole number. (b) Each share of Eurostar Common Stock held in the treasury of Eurostar immediately prior to the Effective Time shall be canceled and extinguished at the Effective Time without any conversion thereof and no payment shall be made with respect thereto. (c) As soon as practicable after the Effective Time, each holder of an outstanding certificate that prior thereto represented Shares shall be entitled, upon surrender thereof to the transfer agent for the Tristar Common Stock, to receive in exchange therefor a certificate or certificates representing the number of whole shares of Tristar Common Stock into which the Shares so surrendered shall have been converted as aforesaid, of such denominations and registered in such names as such holder may request. Until so surrendered, each outstanding certificate that, prior to the Effective Time, represented Shares shall be deemed from and after the Effective Time, for all corporate purposes, other than the payment of earlier dividends and distributions, to evidence the ownership of the number of full shares of Tristar Common Stock into which such Shares shall have been converted pursuant to this Section 1.7. Unless and until any such outstanding certificates shall be surrendered, no dividends or other distributions payable to the holders of Tristar Common Stock, as of any time on or after the Effective Time, shall be paid to the holders of such outstanding certificates which prior to the Effective Time represented Shares; provided, however, that, upon surrender and exchange of such outstanding certificates, there shall be paid to the record holders of the certificates issued and exchanged therefor the amount, without interest thereon, of dividends and other distributions, if any, that theretofore were declared and became payable since the Effective Time with respect to the number of full shares of Tristar Common Stock issued to such holders. (d) All shares of Tristar Common Stock into which the Shares shall have been converted pursuant to this Section 1.7 shall be issued in full satisfaction of all rights pertaining to such converted Shares. 1.8 Taking of Necessary Action; Further Action. The parties hereto shall take all such reasonable and lawful action as may be necessary or appropriate in order to effectuate the Merger as promptly as possible. If, at any time after the Effective Time, any such further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of Eurostar or Tristar, such corporations shall direct their respective officers and directors to take all such lawful and necessary action. -2- 6 ARTICLE II REPRESENTATIONS AND WARRANTIES Unless stated otherwise, all representations and warranties are as of the Effective Date. 2.1 Certain Definitions. As used in this Agreement, the following terms shall have the meanings ascribed to them below: (a) "Environmental Laws" shall mean all federal, state, local or municipal laws, rules, regulations, statutes, ordinances or orders of any governmental entity relating to (i) the control of any potential pollutant or protection of the air, water or land, (ii) solid, gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation, and (iii) exposure to hazardous, toxic or other substances alleged to be harmful. The term "Environmental Laws" shall include, but not be limited to, the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq. and the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq. (b) "Environmental Permit" shall mean any permit, license, approval, registration, identification number or other authorization with respect to any business or other operations conducted by Eurostar or any Eurostar Subsidiary (as defined in Section 2.2(a)) or Tristar or any Tristar subsidiary (as defined in Section 2.3(a)). (c) "Hazardous Materials" shall mean any (i) petroleum or petroleum products, (ii) hazardous substances as defined by Section 101(14) of CERCLA or (iii) any other chemical, substance or waste that is regulated under any Environmental Law. (d) "Knowledge" of any party shall mean the collective knowledge of such party's officers, directors and key employees. (e) "Material Adverse Change" with respect to any party shall mean a material adverse change in the business, financial condition or results of operations of such party and its subsidiaries, taken as a whole; provided, however, that in no event shall the term "Material Adverse Change" be deemed to include (a) changes in national economic conditions or industry conditions generally, (b) changes, or possible changes, in federal, state or local statutes and regulations applicable to Eurostar, Tristar or the Surviving Corporation. (f) "Material Adverse Effect" on any party shall mean any material adverse effect on the business, financial condition or results of operations of such party and its subsidiaries, taken as a whole or on such party's ability to consummate the Merger; (g) "Permitted Liens" shall mean (A) liens for taxes not due and payable or which are being contested in good faith, (B) mechanics', warehousemen's and other statutory liens incurred in the ordinary course of business, and (C) defects and irregularities in title and encumbrances which are not substantial in character or amount and do not materially impair the use of the property or asset in question. 2.2 Representations and Warranties of Eurostar and Parent. Eurostar and Parent hereby, jointly and severally, represent and warrant to Tristar that, except as set forth in the Preliminary Proxy Statement or in the disclosure letter delivered by Eurostar to Tristar on the Date Hereof (the "Eurostar Disclosure Letter") that as of the Effective Date: (a) Organization and Compliance with Law. Eurostar and each of its corporate subsidiaries (the "Eurostar Subsidiaries") is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has all requisite corporate power and authority and all necessary governmental authorizations to own, lease and -3- 7 operate all of its properties and assets and to carry on its business as now being conducted, except where the failure to have such governmental authority would not, either individually or in the aggregate, have a Material Adverse Effect. Eurostar and each of the Eurostar Subsidiaries is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except in such jurisdictions where the failure to be duly qualified does not and would not, either individually or in the aggregate, have a Material Adverse Effect. Neither Eurostar nor any of the Eurostar Subsidiaries, nor any employee or, to the Knowledge of Eurostar, any agent of Eurostar or any of the Eurostar Subsidiaries, has made any payment or transfer of funds or assets to any person or conferred any benefit on any person or received any funds, assets or personal benefit in violation of any applicable law, rule or regulation. Eurostar and each of the Eurostar Subsidiaries is in compliance with all applicable laws, judgments, orders, rules and regulations, domestic and foreign, except where failure to be in such compliance would not, either individually or in the aggregate, have a Material Adverse Effect. Eurostar has heretofore delivered to Tristar true and complete copies of the articles of incorporation and bylaws of Eurostar. The Eurostar Disclosure Letter sets forth each of the Eurostar Subsidiaries and their respective jurisdictions of incorporation. (b) Capitalization. (i) The authorized capital stock of Eurostar consists of 1,000,000 shares of Eurostar Common Stock, par value $.001 per share, all of which are issued and outstanding. All issued shares of Eurostar Common Stock are validly issued, fully paid and nonassessable and were not issued in violation of the preemptive rights of any person. Eurostar is not a party to, and has no Knowledge of, any agreement or arrangement providing for registration rights with respect to any capital stock or other securities of Eurostar. All issued shares of Eurostar Common Stock are owned by Parent free and clear of all liens, charges, encumbrances, adverse claims and options of any nature. All outstanding shares of capital stock of Eurostar Subsidiaries are owned by Eurostar free and clear of all liens, charges, encumbrances, adverse claims and options of any nature. (ii) Other than as set forth in this Section 2.2(b), there are not as of the Effective Date, and at the Effective Time there will not be, any (A) shares of capital stock or other equity securities of Eurostar outstanding or (B) outstanding options, warrants, scrip, rights to subscribe for, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of any class of capital stock of Eurostar, or contracts, understandings or arrangements to which Eurostar is a party, or by which it is or may be bound, to issue additional shares of its capital stock or options, warrants, scrip or rights to subscribe for, or securities or rights convertible into or exchangeable for, any additional shares of its capital stock. (c) Authorization and Validity of Agreement. Eurostar and Parent have all requisite corporate power and authority to enter into this Agreement and to perform their respective obligations hereunder. As of the Date hereof, the execution and delivery by Eurostar and Parent of this Agreement and the consummation by each of them of the transactions contemplated hereby have been duly authorized by all necessary corporate action. As of the Date hereof, this Agreement has been duly executed and delivered by Eurostar and Parent and is the valid and binding obligation of Eurostar and Parent, enforceable against Eurostar and Parent in accordance with its terms, except as such enforceability may be limited or affected by (i) bankruptcy, insolvency, reorganization, moratorium, liquidation, arrangement, fraudulent transfer, fraudulent conveyance and other similar laws (including court decisions) now or hereafter in effect and affecting the rights and remedies of creditors generally or providing for the relief of debtors, (ii) the refusal of a particular court to grant equitable remedies, including, without limitation, specific performance and injunctive relief, and (iii) general principles of equity (regardless of whether such remedies are sought in a proceeding in equity or at law) and except as the -4- 8 enforceability of any indemnification provision contained in this Agreement may be limited by applicable federal or state securities laws. (d) No Approvals or Notices Required; No Conflict with Instruments to which Eurostar or Parent is a Party. Neither the execution and delivery of this Agreement nor the performance by Eurostar or Parent of its obligations hereunder, nor the consummation of the transactions contemplated hereby by Eurostar or Parent, will (i) conflict with the charter or bylaws of Eurostar or Parent; (ii) assuming satisfaction of the requirements set forth in clause (iii) below, violate any provision of law applicable to Eurostar or Parent; (iii) except for (A) requirements of Federal and state securities law, and (B) the filing of articles of merger by Eurostar in accordance with the TBCA, require any consent or approval of, or filing with or notice to, any public body or authority, domestic or foreign, under any provision of law applicable to Eurostar or Parent; or (iv) require any consent, approval or notice under, or violate, breach, be in conflict with or constitute a default (or an event that, with notice or lapse of time or both, would constitute a default) under, or permit the termination of any provision of, or result in the creation or imposition of any lien upon any properties, assets or business of Eurostar or Parent under, any note, bond, indenture, mortgage, deed of trust, lease, franchise, permit, authorization, license, contract, instrument or other agreement or commitment or any order, judgment or decree to which Eurostar or Parent is a party or by which Eurostar or Parent or any of their respective assets or properties are bound or encumbered, except those that have already been given, obtained or filed and except in any of the cases enumerated in clauses (ii) through (iv), those that, in the aggregate, would not have a Material Adverse Effect. (e) Eurostar Financial Statements; Material Agreements. Eurostar has delivered to Tristar copies of the consolidated balance sheet of Eurostar and the Eurostar Subsidiaries as of September 30, 1992, 1993 and 1994, and March 31, 1995, and consolidated statements of income and consolidated statements of shareholders' equity of Eurostar and the Eurostar Subsidiaries for the fiscal periods then ended. The financial statements delivered by Eurostar pursuant to this Section 2.2(e) are collectively referred to herein as the "Eurostar Consolidated Financial Statements." The Eurostar Consolidated Financial Statements do not include the pro forma financial statements of Tristar and Eurostar included in the Preliminary Proxy Statement or to be included in the Proxy Statement (hereinafter defined). Each of the Eurostar Consolidated Financial Statements (including any related notes or schedules) was, and each of the Eurostar Consolidated Financial Statements to be included in the Proxy Statement will be, prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as may be noted therein or in the notes or schedules thereto), and fairly presents or will fairly present, as the case may be, the consolidated financial position of Eurostar and the Eurostar Subsidiaries as of the dates thereof and the statements of income, cash flows (or changes in financial position prior to the approval of Statement of Financial Accounting Standards Number 95) and stockholders' equity for the periods then ended (subject, in the case of the unaudited interim financial statements, to normal year-end audit adjustments on a basis comparable with past periods in accordance with generally accepted accounting principles). As of the Effective Date, neither Eurostar nor any of the Eurostar Subsidiaries has any material liabilities, absolute or contingent, not reflected in the Eurostar Consolidated Financial Statements, except for (i) liabilities not required under generally accepted accounting principles to be reflected on such financial statements or the notes thereto and (ii) liabilities incurred in the ordinary course of business since March 31, 1995, consistent with past operations and not relating to the borrowing of money. The Eurostar Disclosure Letter contains a list of all material contracts of Eurostar and the Eurostar Subsidiaries, true and correct copies of which have been made available to Tristar. (f) Conduct of Business in the Ordinary Course; Absence of Certain Changes and Events. Since March 31, 1995, except as contemplated by this Agreement, Eurostar and the Eurostar Subsidiaries have conducted their business only in the ordinary and usual course, and there has not been (i) any Material Adverse Change in Eurostar or any condition, event or development that reasonably may be expected to result in any such Material Adverse Change; (ii) any change by Eurostar in its accounting methods, principles or practices; or (iii) any -5- 9 declaration, setting aside or payment of any dividends or distributions in respect of the Eurostar Common Stock or any redemption, purchase or other acquisition of any of its securities or any securities of any of the Eurostar Subsidiaries. (g) Certain Fees. With the exception of the engagement of Principal Financial Services, Inc. and Duncan-Smith Co., by Eurostar, neither Eurostar nor any of its officers, directors or employees, on behalf of Eurostar or any of the Eurostar Subsidiaries or its or their respective Boards of Directors (or any committee thereof), has employed any financial advisor, broker or finder or incurred any liability for any financial advisory, brokerage or finders' fees or commissions in connection with the transactions contemplated hereby. (h) Litigation. There are no claims, actions, suits, investigations or proceedings pending or, to the knowledge of Eurostar or any of the Eurostar Subsidiaries, threatened against or affecting Eurostar or any of the Eurostar Subsidiaries or any of their respective properties at law or in equity, or any of their respective employee benefit plans or fiduciaries of such plans, or before or by any federal, state, municipal or other governmental agency or authority, or before any arbitration board or panel, wherever located, that individually or in the aggregate if adversely determined would have a Material Adverse Effect, or that involve the risk of criminal liability. (i) Employee Benefit Plans. The Eurostar Disclosure Letter sets forth a complete and accurate list of: (i) each "employee welfare benefit plan" (as such term is defined in Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) (the "Eurostar Welfare Plans"); (ii) each "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA) (the "Eurostar Pension Plans"); and (iii) all other employee benefit agreements or arrangements, including, but not limited to, deferred compensation plans, incentive plans, bonus plans or arrangements, stock option plans, stock purchase plans, golden parachute agreements, severance pay plans, dependent care plans, cafeteria plans, employee assistance programs, scholarship programs, employment contracts and other similar plans, agreements and arrangements (collectively, with the Eurostar Welfare Plans and the Eurostar Pension Plans, the "Eurostar Benefit Plans"), that were in effect as of the Effective Date or were maintained within three years of the Closing Date, or were approved before the Effective Date but are not yet effective, for the benefit of directors, officers, employees or former employees (or their beneficiaries) of Eurostar, any of the Eurostar Subsidiaries incorporated in the United States (the "Eurostar U.S. Subsidiaries") or any member of a controlled group or affiliated service group (as defined in Section 414(b), (c) or (m) of the Code) that is incorporated or domiciled in the United States of which Eurostar or any of the Eurostar U.S. Subsidiaries is a member (collectively, the "Eurostar Group"). Eurostar and the Eurostar U.S. Subsidiaries have provided to Tristar, as to each Eurostar Benefit Plan, as applicable, access to a complete and accurate copy of (i) such plan, agreement or arrangement; (ii) the trust, group annuity contract or other document that provides the funding for such plan; (iii) the most recent annual Form 5500, 990 and 1041 reports; (iv) the most recent actuarial report or valuation statement; (v) the most current summary plan description, booklet or other descriptive written materials, and any summary of material modifications prepared after each such summary plan description; (vi) the most recent Internal Revenue Service ("IRS") determination letter and all rulings or determinations requested from the IRS subsequent to the date of such determination letter; and (vii) all other pending correspondence from the IRS or the Department of Labor that relates to such plan received by Eurostar. Each Eurostar Welfare Plan and each Eurostar Pension Plan (i) is in compliance with ERISA, including, but not limited to, all reporting and disclosure requirements of Part 1 of Subtitle B of Title I of ERISA, except where the failure to be in compliance would not, either -6- 10 individually or in the aggregate, have a Material Adverse Effect; (ii) is in compliance with the Code, except where the failure to be in compliance would not, either individually or in the aggregate, have a Material Adverse Effect; (iii) has had the appropriate Form 5500 timely filed for any Eurostar Pension Plan for each year of its existence and for any Eurostar Welfare Plan for each year of its existence after 1987; (iv) has not engaged in any transaction described in Section 406 or 407 of ERISA or Section 4975 of the Code unless it received an exemption under Section 408 of ERISA or Section 4975 of the Code, as applicable, or unless such transaction has been corrected and all applicable excise taxes paid or waived; (v) has at all times complied with the bonding requirements of Section 412 of ERISA; (vi) has no issue pending (other than the payment of benefits in the normal course or the qualification of the plan pursuant to an application pending before the IRS) nor any issue resolved adversely to the Eurostar Group that may subject the Eurostar Group to the payment of a penalty, interest, tax or other amount; and (vii) can be unilaterally terminated or amended on no more than 90 days' notice. No notice has been received by the Eurostar Group of an increase or proposed increase in any premium relative to any Eurostar Benefit Plan, and no amendment to any Eurostar Benefit Plan within the last twelve months has increased the rate of employer contributions thereunder. Each Eurostar Benefit Plan that is intended to be a voluntary employee benefit association has been submitted to and approved by the IRS as exempt from federal income tax under Section 501(c)(9) of the Code, or the applicable submission period relating to any such plan will not have ended prior to the Closing. No Eurostar Benefit Plan will cause the Eurostar Group to have liability for severance pay as a result of this Agreement. The Eurostar Group does not provide employee post-retirement medical or health coverage or contribute to or maintain any employee welfare benefit plan that provides for health benefit coverage following termination of employment except as required by Section 4980B(f) of the Code or other applicable statute, nor has the Eurostar Group made any representations, agreements, covenants or commitments to provide that coverage. All group health plans maintained by the Eurostar Group have been operated in compliance with Section 4980B(f) of the Code. Each Eurostar Pension Plan has been submitted to and approved as qualifying under Section 401(a) of the Code by the IRS or the applicable remedial amendment period relating to such plan will not have ended prior to the Closing. No facts have occurred which, if known by the IRS, could cause disqualification of any Eurostar Pension Plan. Each Eurostar Pension Plan to which Section 412 of the Code is applicable fully complies with the funding requirements of that Section and there is no accumulated funding deficiency as defined in Section 302(a)(2) of ERISA (whether or not waived) in any such plan. The Eurostar Group has paid all premiums (including interest, charges and penalties for late payment) due the Pension Benefit Guaranty Corporation (the "PBGC") with respect to each Eurostar Pension Plan for which premiums are required. No Eurostar Pension Plan has been terminated under circumstances that would result in liability to the PBGC or the Eurostar Group. There has been no "reportable event" (as defined in Section 4043(b) of ERISA and the regulations under that Section) with respect to any Eurostar Pension Plan subject to Title IV of ERISA. With respect to each Eurostar Pension Plan, the Eurostar Group has not (i) ceased operations at a facility so as to become subject to the provisions of Section 4062(e) of ERISA, (ii) withdrawn as a substantial employer so as to become subject to the provisions of Section 4063 of ERISA or (iii) ceased making contributions on or before the Closing Date to any such plan subject to Section 4064(a) of ERISA to which the Eurostar Group made contributions at any time during the six years prior to the Closing Date. Neither the Eurostar Group nor any member thereof has made a complete or partial withdrawal from a multiemployer plan (as defined in Section 3(37) of ERISA) so as to incur withdrawal liability as defined in Section 4201 of ERISA. Eurostar's subsidiaries incorporated outside of the United States and any benefit plans maintained by any of them for the benefit of their directors, officers, employees or former employees (or any of their beneficiaries) are in compliance with applicable laws pertaining to such plans in the jurisdictions of such subsidiaries, except where such failure to be in compliance would not, either individually or in the aggregate, have a Material Adverse Effect. -7- 11 (j) Taxes. All returns and reports, including, without limitation, information and withholding returns and reports ("Tax Returns") of or relating to any foreign, federal, state or local tax, assessment or other governmental charge ("Taxes" or a "Tax") that are required to be filed on or before the Closing Date by or with respect to Eurostar or any of the Eurostar Subsidiaries, or any other corporation that is or was a member of an affiliated group (within the meaning of Section 1504(a) of the Code) of corporations of which Eurostar was a member for any period ending on or prior to the Closing Date, have been or will be duly and timely filed (including any applicable extensions), and all Taxes, including interest and penalties, due and payable pursuant to such Tax Returns have been paid or adequately provided for in reserves established by Eurostar, except where the failure to file, pay or provide for would not, either individually or in the aggregate, have a Material Adverse Effect. No Tax Returns of or with respect to Eurostar or any of the Eurostar Subsidiaries have been audited by the applicable governmental authority. There is no material claim against Eurostar or any of the Eurostar Subsidiaries with respect to any Taxes, and no material assessment, deficiency or adjustment has been asserted or proposed with respect to any Tax Return of or with respect to Eurostar or any of the Eurostar Subsidiaries that has not been adequately provided for in reserves established by Eurostar. The total amounts set up as liabilities for current and deferred Taxes in the balance sheet dated March 31, 1995, included in the Eurostar Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles and are sufficient to cover the payment of all material Taxes, including any penalties or interest thereon and whether or not assessed or disputed, that are, or are hereafter found to be, or to have been, due with respect to the operations of Eurostar and the Eurostar Subsidiaries through the periods covered thereby. (k) Environmental. Except such matters which would not, either individually or in the aggregate, have a Material Adverse Effect: (i) Neither Eurostar nor any Eurostar Subsidiary has caused or, to the Knowledge of Eurostar, permitted the release or disposal of Hazardous Materials onto, at or near any property owned or operated by Eurostar or any Eurostar Subsidiary. (ii) To the Knowledge of Eurostar, neither Eurostar nor any Eurostar Subsidiary has caused or allowed the generation, use, treatment, storage or disposal of Hazardous Materials in connection with any business or other operations conducted by Eurostar or any Eurostar Subsidiary except in accordance with all applicable Environmental Laws. (iii) To the Knowledge of Eurostar, Eurostar and the Eurostar Subsidiaries have obtained and are in substantial compliance with all Environmental Permits required with respect to the business or other operations conducted by Eurostar or any Eurostar Subsidiary. (iv) To the Knowledge of Eurostar, Eurostar and the Eurostar Subsidiaries have filed all reports required by Environmental Laws. (v) Eurostar and the Eurostar Subsidiaries have provided Tristar access to all environmental audits or assessments prepared by or for, or received by, Eurostar or any Eurostar Subsidiary with respect to any business or other operations conducted by Eurostar or any Eurostar Subsidiary. (vi) Eurostar has no Knowledge of any facts, conditions or circumstances that could cause Eurostar or any Eurostar Subsidiary to incur any loss, liability, damage, costs or expenses, with respect to any individual event in excess of $50,000, or in the aggregate in excess of $250,000, over Eurostar's accrued liabilities related to environmental matters reflected on Eurostar's most recent consolidated balance sheet contained in the Eurostar Consolidated Financial Statements, for (A) violations of United States or foreign Environmental Laws, (B) failure to obtain a United States or foreign Environmental Permit, (C) response or remedial costs under any Environmental Law or (D) personal -8- 12 injury or property damage resulting from exposure to or releases of Hazardous Materials under United States or foreign Environmental Laws. (vii) Neither Eurostar nor any Eurostar Subsidiary has received any inquiry or notice, nor does Eurostar have any reason to suspect or believe any of them will receive any inquiry or notice, of any actual or potential proceeding, claim, lawsuit or loss that arises under or relates to any Environmental Law. (viii) Neither Eurostar nor any Eurostar Subsidiary is currently operating or required to be operating under any compliance order, schedule, decree or agreement, any consent decree, order or agreement, or any corrective action decree, order or agreement issued or entered into under any Environmental Law. (ix) No underground storage tanks are present on the properties owned or operated by either Eurostar or any Eurostar U.S. Subsidiary and, to the Knowledge of Eurostar, any underground storage tanks previously removed from any properties owned or operated by either Eurostar or any Eurostar U.S. Subsidiary were removed in accordance with applicable Environmental Laws. (x) To the Knowledge of Eurostar, all prior operations conducted by Eurostar or any Eurostar Subsidiary have been conducted in compliance with all applicable limitations, restrictions, conditions, standards, prohibitions, requirements and obligations established under applicable Environmental Laws. (l) No Severance Payments. None of Eurostar or the Eurostar Subsidiaries will owe a severance payment or similar obligation to any of their respective employees, officers or directors as a result of the Merger or the transactions contemplated by this Agreement, nor will any of such persons be entitled to an increase in severance payments or other benefits as a result of the Merger or the transactions contemplated by this Agreement in the event of the subsequent termination of their employment. (m) Voting Requirements. The consent of the holders of at least a majority of the outstanding shares of Eurostar Common Stock is the only action of the holders of any class or series of the capital stock of Eurostar necessary to approve this Agreement and the Merger. (n) Insurance. The Eurostar Disclosure Letter sets forth all policies of insurance in effect as of the Effective Date relating to the business or operations of Eurostar and the Eurostar Subsidiaries. (o) Title to Property. Eurostar and each of the Eurostar Subsidiaries have good and indefeasible title to all of their respective real properties purported to be owned in fee and good title to all their respective other material assets, free and clear of all mortgages, liens, charges and encumbrances other than Permitted Liens. 2.3 Representations and Warranties of Tristar. Tristar hereby represents and warrants to Eurostar that, except as set forth in the Preliminary Proxy Statement or in the disclosure letter delivered by Tristar to Eurostar on the Date Hereof (the "Tristar Disclosure Letter") that as of the Effective Date: (a) Organization and Compliance with Law. Tristar and each of its subsidiaries (the "Tristar Subsidiaries") is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has all requisite corporate power and authority and all necessary governmental authorizations to own, lease and operate all of its properties and assets and to carry on its business as now being conducted, except where the failure to have such governmental authority would not, either individually or in the aggregate, have a Material Adverse Effect. Tristar and each of the Tristar Subsidiaries is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except in such jurisdictions where the failure to be duly qualified does not -9- 13 and would not, either individually or in the aggregate, have a Material Adverse Effect. Tristar and each of the Tristar Subsidiaries is in compliance with all applicable laws, judgments, orders, rules and regulations, domestic and foreign, except where failure to be in such compliance would not, either individually or in the aggregate, have a Material Adverse Effect. Neither Tristar nor any of the Tristar Subsidiaries, nor any employee or, to the Knowledge of Tristar, any agent of Tristar or any of the Tristar Subsidiaries, has made any payment or transfer of funds or assets to any person or conferred any benefit on any person or received any funds, assets or personal benefit in violation of any applicable law, rule or regulation. Tristar has heretofore delivered to Eurostar true and complete copies of the certificate or articles of incorporation and bylaws of Tristar and each Tristar Subsidiary. The Tristar Disclosure Letter sets forth each of the Tristar Subsidiaries and their respective jurisdictions of incorporation. (b) Capitalization. (i) The authorized capital stock of Tristar consists of 10,000,000 shares of Tristar Common Stock, par value $.01 per share, and 1,000,000 shares of preferred stock, par value $.05 per share. As of June 15, 1995, there were issued and outstanding 6,648,996 shares of Tristar Common Stock and no shares of preferred stock, and no shares of Tristar Common Stock were held as treasury shares. As of June 15, 1995, there were reserved for issuance 2,666,634 shares of Tristar Common Stock pursuant to the stock option plan and warrants described in Section 2.3(b)(ii). All issued shares of Tristar Common Stock are validly issued, fully paid and nonassessable and no holder thereof is entitled to preemptive rights. Tristar is not a party to, and has no Knowledge of, any voting agreement, voting trust or similar agreement or arrangement relating to any class or series of its capital stock, or any agreement or arrangement providing for registration rights with respect to any capital stock or other securities of Tristar. All outstanding shares of capital stock of the Tristar Subsidiaries are owned by Tristar free and clear of all liens, charges, encumbrances, adverse claims and options of any nature. (ii) As of the Effective Date, there are outstanding options (the "Tristar Options") issued to employees and directors to purchase an aggregate of 200,428 shares of Tristar Common Stock under Tristar's 1991 Stock Option Plan; 66,206 shares of Tristar Common Stock under a Nonqualified Stock Option Agreement and outstanding warrants issued to affiliates of Eurostar to purchase an aggregate of 2,400,000 shares of Tristar Common Stock (the "Tristar Warrants"). Other than as set forth in this Section 2.3(b), there are not as of the Effective Date, and at the Effective Time there will not be, any (A) shares of capital stock or other equity securities of Tristar outstanding (other than Tristar Common Stock issued pursuant to the exercise of Tristar Options or Tristar Warrants as described herein) or (B) outstanding options, warrants, scrip, rights to subscribe for, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of any class of capital stock of Tristar, or contracts, understandings or arrangements to which Tristar is a party, or by which it is or may be bound, to issue additional shares of its capital stock or options, warrants, scrip or rights to subscribe for, or securities or rights convertible into or exchangeable for, any additional shares of its capital stock. (c) Authorization and Validity of Agreement. Tristar has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery by Tristar of this Agreement and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action (subject only, with respect to the Merger, to adoption of this Agreement by its stockholders as provided for in Section 5.2). On or prior to the Date Hereof, the Board of Directors of Tristar and the Acquisition Committee of the Board of Directors of Tristar have determined to recommend approval of the Merger to the stockholders of Tristar, and such determination is in effect as of the Date Hereof. This Agreement has been duly executed and delivered by Tristar and is the valid and binding obligation of Tristar, enforceable against Tristar in accordance with its terms, except as such enforceability may be limited or affected by (i) bankruptcy, insolvency, reorganization, moratorium, liquidation, arrangement, fraudulent transfer, fraudulent conveyance -10- 14 and other similar laws (including court decisions) now or hereafter in effect and affecting the rights and remedies of creditors generally or providing for the relief of debtors, (ii) the refusal of a particular court to grant equitable remedies, including, without limitation, specific performance and injunctive relief, and (iii) general principles of equity (regardless of whether such remedies are sought in a proceeding in equity or at law) and except as the enforceability of any indemnification provision contained in this Agreement may be limited by applicable federal or state securities laws. (d) No Approvals or Notices Required; No Conflict with Instruments to which Tristar or any of the Tristar Subsidiaries is a Party. Neither the execution and delivery of this Agreement nor the performance by Tristar of its obligations hereunder, nor the consummation of the transactions contemplated hereby by Tristar, will (i) conflict with the Certificate of Incorporation or bylaws of Tristar or the charter or bylaws of any of the Tristar Subsidiaries; (ii) assuming satisfaction of the requirements set forth in clause (iii) below, violate any provision of law applicable to Tristar or any of the Tristar Subsidiaries; (iii) except for (A) requirements of Federal and state securities law, and (B) the filing of a certificate of merger in accordance with the DGCL, require any consent or approval of, or filing with or notice to, any public body or authority, domestic or foreign, under any provision of law applicable to Tristar or any of the Tristar Subsidiaries; or (iv) require any consent, approval or notice under, or violate, breach, be in conflict with or constitute a default (or an event that, with notice or lapse of time or both, would constitute a default) under, or permit the termination of any provision of, or result in the creation or imposition of any lien upon any properties, assets or business of Tristar or any of the Tristar Subsidiaries under, any note, bond, indenture, mortgage, deed of trust, lease, franchise, permit, authorization, license, contract, instrument or other agreement or commitment or any order, judgment or decree to which Tristar or any of the Tristar Subsidiaries is a party or by which Tristar or any of the Tristar Subsidiaries or any of its or their respective assets or properties are bound or encumbered, except those that have already been given, obtained or filed and except in any of the cases enumerated in clauses (ii) through (iv), those that, in the aggregate, would not have a Material Adverse Effect. (e) Commission Filings; Financial Statements. Since August 31, 1991, Tristar and each of the Tristar Subsidiaries have filed all reports, registration statements and other filings, together with any amendments required to be made with respect thereto, that they have been required to file with the Commission under the Securities Act and the Exchange Act. All reports, registration statements and other filings (including all notes, exhibits and schedules thereto and documents incorporated by reference therein) filed by Tristar with the Commission since August 31, 1991 through the Date Hereof, together with any amendments thereto, are sometimes collectively referred to as the "Tristar Commission Filings". Tristar has heretofore delivered to Eurostar copies of the Tristar Commission Filings. As of the respective dates of their filing with the Commission, except as otherwise disclosed in later filings with the Commission, the Tristar Commission Filings complied, and the Proxy Statement (as defined in Section 5.1) (except with respect to information concerning Eurostar and the Eurostar Subsidiaries furnished by or on behalf of Eurostar to Tristar specifically for use therein) will comply, in all material respects with the Securities Act, the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and did not or will not, as the case may be, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. All material contracts of Tristar and the Tristar Subsidiaries have been included in the Tristar Commission Filings, except for those contracts not required to be filed pursuant to the rules and regulations of the Commission, and copies of all such contracts have been made available to Eurostar. Each of the consolidated financial statements (including any related notes or schedules) included in the Tristar Commission Filings was, and each of the consolidated financial statements to be included in the Proxy Statement (except for those financial statements of Eurostar and the Eurostar Subsidiaries furnished by or on behalf of Eurostar to Tristar specifically for use therein) -11- 15 will be, prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as may be noted therein or in the notes or schedules thereto), and fairly presents or will fairly present, as the case may be, the consolidated financial position of Tristar and the Tristar Subsidiaries as of the dates thereof and the statements of income, cash flows (or changes in financial position prior to the approval of Statement of Financial Accounting Standards Number 95) and stockholders' equity for the periods then ended (subject, in the case of the unaudited interim financial statements, to normal year-end audit adjustments on a basis comparable with past periods in accordance with generally accepted accounting principles). As of the Date Hereof, Tristar has no material liabilities, absolute or contingent, not reflected in the Tristar Commission Filings, except for (i) liabilities not required under generally accepted accounting principles to be reflected on such financial statements or the notes thereto and (ii) liabilities incurred in the ordinary course of business since May 31, 1995, consistent with past operations and not relating to the borrowing of money. (f) Conduct of Business in the Ordinary Course; Absence of Certain Changes and Events. Since February 28, 1995, except as contemplated by this Agreement or disclosed in the Tristar Commission Filings filed with the Commission since that date, Tristar and the Tristar Subsidiaries have conducted their business only in the ordinary and usual course, and there has not been (i) any Material Adverse Change in Tristar or any condition, event or development that reasonably may be expected to result in any such Material Adverse Change; (ii) any change by Tristar in its accounting methods, principles or practices; (iii) any revaluation by Tristar or any of the Tristar Subsidiaries of any of its or their assets, including, without limitation, writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business; (iv) any entry by Tristar or any of the Tristar Subsidiaries into any commitment or transaction material to Tristar and the Tristar Subsidiaries, taken as a whole; (v) any declaration, setting aside or payment of any dividends or distributions in respect of the Tristar Common Stock or any redemption, purchase or other acquisition of any of its securities or any securities of any of the Tristar Subsidiaries; (vi) any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of Tristar and the Tristar Subsidiaries, taken as a whole; (vii) any increase in excess of $100,000 in indebtedness for borrowed money; (viii) any granting of a security interest or lien on any material property or assets of Tristar and the Tristar Subsidiaries, taken as a whole, other than Permitted Liens; or (ix) any increase in or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of stock options, stock appreciation rights, performance awards or restricted stock awards), stock purchase or other employee benefit plan or any other increase in the compensation payable or to become payable to any officers or key employees of Tristar or any of the Tristar Subsidiaries. (g) Certain Fees. With the exception of the engagement of Howard Frazier Barker Elliott by Tristar, neither Tristar nor any of its officers, directors or employees, on behalf of Tristar or any of the Tristar Subsidiaries or its or their respective Boards of Directors (or any committee thereof), has employed any financial advisor, broker or finder or incurred any liability for any financial advisory, brokerage or finders' fees or commissions in connection with the transactions contemplated hereby. (h) Litigation. Except as disclosed in the Tristar Commission Filings, there are no claims, actions, suits, investigations or proceedings pending or, to the Knowledge of Tristar or any of the Tristar Subsidiaries, threatened against or affecting Tristar or any of the Tristar Subsidiaries or any of their respective properties at law or in equity, or any of their respective employee benefit plans or fiduciaries of such plans, or before or by any federal, state, municipal or other governmental agency or authority, or before any arbitration board or panel, wherever located, that individually or in the aggregate if adversely determined would have a Material Adverse Effect, or that involve the risk of criminal liability. (i) Employee Benefit Plans. The Tristar Disclosure Letter sets forth a complete and accurate list of: -12- 16 (i) each "employee welfare benefit plan" (as such term is defined in Section 3(1) of ERISA) (the "Tristar Welfare Plans"); (ii) each "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA) (the "Tristar Pension Plans"); and (iii) all other employee benefit agreements or arrangements, including, but not limited to, deferred compensation plans, incentive plans, bonus plans or arrangements, stock option plans, stock purchase plans, golden parachute agreements, severance pay plans, dependent care plans, cafeteria plans, employee assistance programs, scholarship programs, employment contracts and other similar plans, agreements and arrangements (collectively, with the Tristar Welfare Plans and the Tristar Pension Plans, the "Tristar Benefit Plans"), that were in effect as of the Effective Date or were maintained within three years of the Closing Date, or were approved before this date but are not yet effective, for the benefit of directors, officers, employees or former employees (or their beneficiaries) of Tristar, any of the Tristar Subsidiaries or any member of a controlled group or affiliated service group as defined in Sections 414(b),(c),(m) and (o) of the Code of which Tristar or any of the Tristar Subsidiaries is a member (collectively, the "Tristar Group"). Tristar has provided to Eurostar, as to each Tristar Benefit Plan, as applicable, access to a complete and accurate copy of (i) such plan, agreement or arrangement; (ii) the trust, group annuity contract or other document that provides the funding for such plan; (iii) the most recent annual Form 5500, 990 and 1041 reports; (iv) the most recent actuarial report or valuation statement; (v) the most current summary plan description, booklet or other descriptive written materials, and any summary of material modifications prepared after each such summary plan description; (vi) the most recent IRS determination letter and all rulings or determinations requested from the IRS subsequent to the date of such determination letter; and (vii) all other pending correspondence from the IRS or the Department of Labor received by any member of the Tristar Group that relates to such plan. Each Tristar Welfare Plan and each Tristar Pension Plan (i) is in compliance with ERISA, including, but not limited to, all reporting and disclosure requirements of Part 1 of Subtitle B of Title I of ERISA, except where the failure to be in compliance would not, either individually or in the aggregate, have a Material Adverse Effect; (ii) is in compliance with the Code, except where the failure to be in compliance would not, either individually or in the aggregate, have a Material Adverse Effect; (iii) has had the appropriate Form 5500 timely filed for any Tristar Pension Plan for each year of its existence and for any Tristar Welfare Plan for each year of its existence after 1987; (iv) has not engaged in any transaction described in Section 406 or 407 of ERISA or Section 4975 of the Code unless it received an exemption under Section 408 of ERISA or Section 4975 of the Code, as applicable, or unless such transaction has been corrected and all applicable excise taxes paid or waived; (v) has at all times complied with the bonding requirements of Section 412 of ERISA; (vi) has no issue pending (other than the payment of benefits in the normal course or the qualification of the plan pursuant to an application pending before the IRS) nor any issue resolved adversely to the Tristar Group that may subject the Tristar Group to the payment of a penalty, interest, tax or other amount; and (vii) can be unilaterally terminated or amended on no more than 90 days' notice. No notice has been received by the Tristar Group of an increase or proposed increase in any premium relative to any Tristar Benefit Plan, and no amendment to any Tristar Benefit Plan within the last twelve months has increased the rate of employer contributions thereunder. Each Tristar Benefit Plan that is intended to be a voluntary employee benefit association has been submitted to and approved by the IRS as exempt from federal income tax under Section 501(c)(9) of the Code, or the applicable submission period relating to any such plan will not have ended prior to the Closing. No Tristar Benefit Plan will cause the Tristar Group to have liability for severance pay as a result of this Agreement. The Tristar Group does not provide employee post-retirement medical or health coverage or contribute to or maintain any employee welfare benefit plan that provides for health benefit coverage following termination of employment except as required by Section 4980B(f) of the Code or other applicable statute, nor -13- 17 has the Tristar Group made any representations, agreements, covenants or commitments to provide that coverage. All group health plans maintained by the Tristar Group have been operated in compliance with Section 4980B(f) of the Code. Except for each Tristar Pension Plan that is an ERISA top-hat plan, each Tristar Pension Plan has been submitted to and approved as qualifying under Section 401(a) of the Code by the IRS or the applicable remedial amendment period relating to such plan will not have ended prior to the Closing. No facts have occurred which, if known by the IRS, could cause disqualification of any Tristar Pension Plan. Each Tristar Pension Plan to which Section 412 of the Code is applicable fully complies with the funding requirements of that Section and there is no accumulated funding deficiency as defined in Section 302(a)(2) of ERISA (whether or not waived) in any such plan. The Tristar Group has paid all premiums (including interest, charges and penalties for late payment) due the PBGC with respect to each Tristar Pension Plan for which premiums are required. No Tristar Pension Plan has been terminated under circumstances that would result in liability to the PBGC or the Tristar Group. There has been no "reportable event" (as defined in Section 4043(b) of ERISA and the regulations under that Section) with respect to any Tristar Pension Plan subject to Title IV of ERISA. With respect to each Tristar Pension Plan, the Tristar Group has not (i) ceased operations at a facility so as to become subject to the provisions of Section 4062(e) of ERISA, (ii) withdrawn as a substantial employer so as to become subject to the provisions of Section 4063 of ERISA or (iii) ceased making contributions on or before the Closing Date to any such plan subject to Section 4064(a) of ERISA to which the Tristar Group made contributions at any time during the six years prior to the Closing Date. Neither the Tristar Group nor any member thereof has made a complete or partial withdrawal from a multiemployer plan (as defined in Section 3(37) of ERISA) so as to incur withdrawal liability as defined in Section 4201 of ERISA. (j) Taxes. All Tax Returns of or relating to any Taxes that are required to be filed on or before the Closing Date by or with respect to Tristar or any of the Tristar Subsidiaries, or any other corporation that is or was a member of an affiliated group (within the meaning of Section 1504(a) of the Code) of corporations of which Tristar was a member for any period ending on or prior to the Closing Date, have been or will be duly and timely filed (including any applicable extensions), and all Taxes, including interest and penalties, due and payable pursuant to such Tax Returns have been paid or adequately provided for in reserves established by Tristar, except where the failure to file, pay or provide for would not, either individually or in the aggregate, have a Material Adverse Effect. All Tax Returns of or with respect to Tristar or any of the Tristar Subsidiaries have been audited by the applicable governmental authority, or the applicable statute of limitations has expired, for all periods up to and including the tax year ended August 31, 1986. There is no material claim against Tristar or any of the Tristar Subsidiaries with respect to any Taxes, and no material assessment, deficiency or adjustment has been asserted or proposed with respect to any Tax Return of or with respect to Tristar or any of the Tristar Subsidiaries that has not been adequately provided for in reserves established by Tristar. The total amounts set up as liabilities for current and deferred Taxes in the balance sheet dated February 28, 1995, included in the Tristar Commission Filings have been prepared in accordance with generally accepted accounting principles and are sufficient to cover the payment of all material Taxes, including any penalties or interest thereon and whether or not assessed or disputed, that are, or are hereafter found to be, or to have been, due with respect to the operations of Tristar and the Tristar Subsidiaries through the periods covered thereby. (k) Environmental. Except for such matters which would not, individually or in the aggregate, have a Material Adverse Effect: (i) Neither Tristar nor any Tristar Subsidiary has caused or, to the Knowledge of Tristar, permitted the release or disposal of Hazardous Materials onto, at or near any property owned or operated by Tristar or any Tristar Subsidiary. (ii) To the Knowledge of Tristar, neither Tristar nor any Tristar Subsidiary has caused or allowed the generation, use, treatment, storage or disposal of Hazardous -14- 18 Materials in connection with any business or other operations conducted by Tristar or any Tristar Subsidiary except in accordance with all applicable Environmental Laws. (iii) To the Knowledge of Tristar, Tristar and the Tristar Subsidiaries have obtained and are in substantial compliance with all Environmental Permits required with respect to the business or other operations conducted by Tristar or any Tristar Subsidiary. (iv) To the Knowledge of Tristar, Tristar and the Tristar Subsidiaries have filed all reports required by Environmental Laws. (v) Tristar and the Tristar Subsidiaries have provided Eurostar access to all environmental audits or assessments prepared by or for, or received by, Tristar or any Tristar Subsidiary with respect to any business or other operations conducted by Tristar or any Tristar Subsidiary. (vi) Tristar has no Knowledge of any facts, conditions or circumstances that could cause Tristar or any Tristar Subsidiary to incur any loss, liability, damage, costs or expenses, with respect to any individual event, in excess of $50,000, or in the aggregate in excess of $250,000, for (A) violations of Environmental Laws, (B) failure to obtain an Environmental Permit, (C) response or remedial costs under any Environmental Law or (D) personal injury or property damage resulting from exposure to or releases of Hazardous Materials. (vii) Neither Tristar nor any Tristar Subsidiary has received any inquiry or notice, nor does Tristar have any reason to suspect or believe any of them will receive any inquiry or notice, of any actual or potential proceeding, claim, lawsuit or loss that arises under or relates to any Environmental Law. (viii) Neither Tristar nor any Tristar Subsidiary is currently operating or required to be operating under any compliance order, schedule, decree or agreement, any consent decree, order or agreement, or any corrective action decree, order or agreement issued or entered into under any Environmental Law. (ix) No underground storage tanks are present on the properties owned or operated by either Tristar or any Tristar Subsidiary and, to the Knowledge of Tristar, any underground storage tanks previously removed from any properties owned or operated by either Tristar or any Tristar Subsidiary were removed in accordance with applicable Environmental Laws. (x) To the Knowledge of Tristar, all prior operations conducted by Tristar or any Tristar Subsidiary have been conducted in compliance with all applicable limitations, restrictions, conditions, standards, prohibitions, requirements and obligations established under applicable Environmental Laws. (l) No Severance Payments. None of Tristar or the Tristar Subsidiaries will owe a severance payment or similar obligation to any of their respective employees, officers or directors as a result of the Merger or the transactions contemplated by this Agreement, nor will any of such persons be entitled to an increase in severance payments or other benefits as a result of the Merger or the transactions contemplated by this Agreement in the event of the subsequent termination of their employment. (m) Voting Requirements. The consent of the holders of at least 66 2/3% of the outstanding shares of Tristar Common Stock is the only action of the holders of any class or series of the capital stock of Tristar necessary to approve this Agreement and the Merger. -15- 19 (n) Insurance. The Tristar Disclosure Letter sets forth all policies of insurance in effect as of the Effective Date relating to the business or operations of Tristar and the Tristar Subsidiaries. (o) Title to Property. As set forth in the Tristar Commission Filings, Tristar and each of the Tristar Subsidiaries have good and indefeasible title to all of their real properties purported to be owned in fee and good title to all their other material assets, free and clear of all mortgages, liens, charges and encumbrances other than Permitted Liens. ARTICLE III COVENANTS OF EUROSTAR PRIOR TO THE EFFECTIVE TIME 3.1 Conduct of Business by Eurostar Pending the Merger. Eurostar covenants and agrees that, from the Effective Date of this Agreement until the Effective Time, unless Tristar shall otherwise provide its prior consent in writing (which consent shall not be unreasonably withheld) or as disclosed in the Eurostar Disclosure Letter or the Preliminary Proxy Statement or as otherwise expressly contemplated by this Agreement: (a) The business of Eurostar and the Eurostar Subsidiaries shall be conducted only in, and Eurostar and the Eurostar Subsidiaries shall not take any action except in, the ordinary course of business and consistent with past practice; (b) Eurostar shall not, and shall not permit any of the Eurostar Subsidiaries to: (i) split, combine or reclassify any outstanding capital stock of Eurostar or any of the Eurostar Subsidiaries, or authorize, declare, set aside or pay any dividend payable in cash, stock, property or otherwise in respect of the capital stock of Eurostar or any of the Eurostar Subsidiaries; (ii) authorize or pay any extraordinary bonuses to employees; (iii) grant any stock options or rights to acquire Eurostar Common Stock or common stock of any of the Eurostar Subsidiaries to any person or entity; (iv) authorize or issue, sell, pledge, dispose of or encumber any shares of capital stock of Eurostar or any of the Eurostar Subsidiaries; (v) other than in the ordinary course of business and consistent with past practice and not relating to the borrowing of money, sell, pledge, dispose of or encumber any assets of Eurostar or any of the Eurostar Subsidiaries; (vi) redeem, purchase, acquire or offer to acquire any shares of Eurostar Common Stock or common stock of any of the Eurostar Subsidiaries; (vii) enter into or grant any material change in compensation, benefit, severance, consulting or stay-bonus arrangements applicable to employees generally or applicable to any employee with an annual salary in excess of $50,000; (viii) acquire any corporation, partnership, other business organization or division thereof; (ix) enter into any contract, agreement, commitment or arrangement other than in the ordinary course of business and consistent with past practice; (x) other than capital expenditures in the ordinary course of business and consistent with past practice, authorize any single capital expenditure (including any -16- 20 single capital lease) that is in excess of $25,000 or capital expenditures (including capital leases) that are, in the aggregate, in excess of $250,000; (xi) amend or propose to amend the charter or bylaws of Eurostar or any of the Eurostar Subsidiaries; or (xii) take, and Eurostar shall use its reasonable efforts to prevent any affiliate of Eurostar from taking, any action that would prevent, with the passage of time, the Merger's qualification for accounting treatment similar to "pooling of interests" accounting treatment or prevent the Merger from being treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. (c) Eurostar shall use its reasonable efforts (i) to preserve intact the business organization of Eurostar and each of the Eurostar Subsidiaries, (ii) to maintain in effect any franchises, authorizations or similar rights of Eurostar and each of the Eurostar Subsidiaries, (iii) to keep available the services of the current officers and key employees of Eurostar and each of the Eurostar Subsidiaries, (iv) to preserve its goodwill with those having business relationships with Eurostar and the Eurostar Subsidiaries, (v) to maintain and keep the properties of Eurostar and each of the Eurostar Subsidiaries in as good a repair and condition as exists on the Effective Date, except for deterioration due to ordinary wear and tear and damage due to casualty; and (vi) to maintain in full force and effect insurance comparable in amount and scope of coverage to that maintained on the Effective Date by Eurostar and each of the Eurostar Subsidiaries; (d) Eurostar shall, and shall cause the Eurostar Subsidiaries to, perform their respective obligations under any contracts and agreements to which any of them is a party or to which any of their assets is subject, except to the extent such failure to perform would not have a Material Adverse Effect on Eurostar, and except for such obligations as Eurostar or the Eurostar Subsidiaries in good faith may dispute; and (e) Eurostar shall not, and shall not permit any of the Eurostar Subsidiaries to, take any action that would, or that reasonably could be expected to, result in any of the representations and warranties set forth in this Agreement becoming untrue. Eurostar promptly shall advise Tristar orally and in writing of any change or event having, or which, insofar as reasonably can be foreseen, would have, a Material Adverse Effect on Eurostar. 3.2 Access to Information; Confidentiality. From the Effective Date to the Effective Time, Eurostar shall, and shall cause the Eurostar Subsidiaries and its and their officers, directors, employees and representatives to, afford the representatives of Tristar complete access during normal business hours to its officers, employees, representatives, properties, books and records, and shall furnish Tristar all financial, operating and other data and information as Tristar, through its representatives, reasonably may request. Eurostar agrees to hold in confidence, and not to disclose to others for any reason whatsoever, any non-public information received by it, any of the Eurostar Subsidiaries or its or their representatives in connection with the transactions contemplated hereby except (i) as required by law; (ii) for disclosure to officers, directors, employees, representatives, shareholders and affiliates of Eurostar and the Eurostar Subsidiaries as necessary in connection with the transactions and filings contemplated hereby or as necessary to the operation of Eurostar's business; and (iii) for information which becomes publicly available other than through Eurostar. If the Merger is not consummated, Eurostar will return all non-public documents and other material obtained from Tristar, the Tristar Subsidiaries or its or their representatives in connection with the transactions contemplated hereby, and all copies, summaries and extracts thereof, or certify to Tristar that such information has been destroyed. -17- 21 ARTICLE IV COVENANTS OF TRISTAR PRIOR TO THE EFFECTIVE TIME 4.1 Conduct of Business by Tristar Pending the Merger. Tristar covenants and agrees that, from the Effective Date of this Agreement until the Effective Time, unless Eurostar shall otherwise provide its prior consent in writing (which consent shall not be unreasonably withheld) or as disclosed in the Tristar Disclosure Letter or the Preliminary Proxy Statement or as otherwise expressly contemplated by this Agreement: (a) The business of Tristar and the Tristar Subsidiaries shall be conducted only in, and Tristar and the Tristar Subsidiaries shall not take any action except in, the ordinary course of business and consistent with past practice; (b) Tristar shall not, and shall not permit any of the Tristar Subsidiaries to: (i) split, combine or reclassify any outstanding capital stock of Tristar or Sub, or authorize, declare, set aside or pay any dividend payable in cash, stock, property or otherwise in respect of the capital stock of Tristar or any of the Tristar Subsidiaries; (ii) authorize or pay any extraordinary bonuses to employees; (iii) grant any stock options or rights to acquire Tristar Common Stock or common stock of any of the Tristar Subsidiaries to any person or entity, other than options to purchase Tristar Common Stock issued pursuant to employee stock option plans in amounts consistent with past practice; (iv) authorize or issue, sell, pledge, dispose of or encumber any shares of capital stock of Tristar or any of the Tristar Subsidiaries except pursuant to the Tristar Options and other than as contemplated by this Agreement; (v) other than in the ordinary course of business and consistent with past practice and not relating to the borrowing of money, sell, pledge, dispose of or encumber any assets of Tristar or any of the Tristar Subsidiaries; (vi) redeem, purchase, acquire or offer to acquire any shares of Tristar Common Stock or common stock of any of the Tristar Subsidiaries; (vii) enter into or grant any material change in compensation, benefit, severance, consulting or stay-bonus arrangements applicable to employees generally or applicable to any employee with an annual salary in excess of $50,000; (viii) acquire any corporation, partnership, other business organization or division thereof; (ix) enter into any contract, agreement, commitment or arrangement other than in the ordinary course of business and consistent with past practice; (x) other than capital expenditures in the ordinary course of business and consistent with past practice, authorize any single capital expenditure (including any single capital lease) that is in excess of $25,000 or capital expenditures (including capital leases) that are, in the aggregate, in excess of $250,000; (xi) amend or propose to amend the charter or bylaws of Tristar or Sub; or (xii) take, and Tristar shall use its reasonable efforts to prevent any affiliate of Tristar from taking, any action that would prevent, with the passage of time, the Merger's qualification for accounting treatment similar to "pooling of interests" -18- 22 accounting treatment or prevent the Merger from being treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. (c) Tristar shall use its reasonable efforts (i) to preserve intact the business organization of Tristar and each of the Tristar Subsidiaries, (ii) to maintain in effect any franchises, authorizations or similar rights of Tristar and each of the Tristar Subsidiaries, (iii) to keep available the services of the current officers and key employees of Tristar and each of the Tristar Subsidiaries, (iv) to preserve its goodwill with those having business relationships with Tristar and the Tristar Subsidiaries, (v) to maintain and keep the properties of Tristar and each of the Tristar Subsidiaries in as good a repair and condition as exists on the Effective Date, except for deterioration due to ordinary wear and tear and damage due to casualty; and (vi) to maintain in full force and effect insurance comparable in amount and scope of coverage to that maintained on the Effective Date by Tristar and each of the Tristar Subsidiaries; (d) Tristar shall, and shall cause the Tristar Subsidiaries to, perform their respective obligations under any contracts and agreements to which any of them is a party or to which any of their assets is subject, except to the extent such failure to perform would not have a Material Adverse Effect on Tristar, and except for such obligations as Tristar or the Tristar Subsidiaries in good faith may dispute; and (e) Tristar shall not, and shall not permit any of the Tristar Subsidiaries to, take any action that would, or that reasonably could be expected to, result in any of the representations and warranties set forth in this Agreement becoming untrue. Tristar promptly shall advise Eurostar orally and in writing of any change or event having, or which, insofar as reasonably can be foreseen, would have, a Material Adverse Effect on Tristar. 4.2 Access to Information; Confidentiality. From the Effective Date to the Effective Time, Tristar shall, and shall cause the Tristar Subsidiaries and its and their officers, directors, employees and representatives to, afford the representatives of Eurostar complete access during normal business hours to its officers, employees, representatives, properties, books and records, and shall furnish Eurostar all financial, operating and other data and information as Eurostar, through its representatives, reasonably may request. Tristar agrees to hold in confidence all, and not to disclose to others for any reason whatsoever, any non- public information received by it, any of the Tristar Subsidiaries or its or their representatives in connection with the transactions contemplated hereby except (i) as required by law; (ii) for disclosure to officers, directors, employees and representatives of Tristar and the Tristar Subsidiaries as necessary in connection with the transactions and filings contemplated hereby or as necessary to the operation of Tristar's business; and (iii) for information which becomes publicly available other than through Tristar. If the Merger is not consummated, Tristar will return all non- public documents and other material obtained from Eurostar, the Eurostar Subsidiaries or its or their representatives in connection with the transactions contemplated hereby, and all copies, summaries and extracts thereof, or certify to Eurostar that such information has been destroyed. 4.3 NASDAQ/NMS Listing. Tristar shall use its reasonable efforts to cause the shares of Tristar Common Stock to be issued upon consummation of the Merger to be approved for listing on the NASDAQ/National Market System, subject to official notice of issuance, prior to the Closing Date. ARTICLE V ADDITIONAL AGREEMENTS 5.1 Proxy Statement. Prior to execution of this Agreement, Tristar prepared and filed with the Commission the preliminary proxy statement (the "Preliminary Proxy Statement") of Tristar relating to the Merger, and as promptly as practicable after the execution of this Agreement, Tristar shall prepare and file with the Commission a definitive proxy statement (the "Proxy Statement") of Tristar relating to the Merger. Subject to the terms and conditions set forth in Article VI, the Proxy Statement shall contain -19- 23 a statement that the Board of Directors of Tristar and the Acquisition Committee of the Board of Directors of Tristar recommended that the stockholders of Tristar approve and adopt the Merger and this Agreement. 5.2 Approval of Stockholders. Tristar shall promptly take all action reasonably necessary in accordance with the DGCL and its Certificate of Incorporation and bylaws to obtain the approval and adoption of the Merger and this Agreement from Tristar stockholders holding at least 66 2/3% of the Tristar Common Stock. Subject to the terms and conditions set forth in Article VI, the Board of Directors of Tristar (i) shall recommend to the stockholders of Tristar to adopt and approve the Merger and this Agreement and (ii) shall take all action reasonably necessary to obtain the approval and adoption of the Merger and this Agreement from Tristar stockholders holding at least 66 2/3% of the Tristar Common Stock. 5.3 Filings; Consents; Reasonable Efforts. Subject to the terms and conditions of this Agreement, Tristar and Eurostar shall (i) make all necessary filings with respect to the Merger and this Agreement under the Securities Act, the Exchange Act and applicable blue sky or similar securities laws and shall use its reasonable efforts to obtain required approvals and clearances with respect thereto; (ii) use its reasonable efforts to obtain all consents, waivers, approvals, authorizations and orders required in connection with the authorization, execution and delivery of this Agreement and the consummation of the Merger; and (iii) take, or use its reasonable efforts to cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable to satisfy or cause to be satisfied all conditions precedent under this Agreement and to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement. 5.4 Notification of Certain Matters. Tristar shall give prompt notice to Eurostar, and Eurostar shall give prompt notice to Tristar, orally and in writing, of (i) the occurrence, or failure to occur, of any event which occurrence or failure would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate at any time from the Effective Date to the Effective Time, (ii) any material failure of Tristar or Eurostar, as the case may be, or any officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder, and (iii) any fact or event that would make it necessary to amend the Proxy Statement or to render the statements therein not misleading or to comply with applicable law. 5.5 Agreement to Defend. In the event any claim, action, suit, investigation or other proceeding by any governmental body or other person or other legal or administrative proceeding is commenced that questions the validity or legality of the transactions contemplated hereby or seeks damages in connection therewith, whether before or after the Effective Time, the parties hereto agree to cooperate and use their reasonable efforts to defend against and respond thereto. 5.6 Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses. 5.7 Indemnity. Parent shall indemnify and hold harmless Tristar from and against all damages, costs and expenses (including reasonable attorneys' fees and costs of investigation) arising out of any breach of any of the representations, warranties or covenants of Eurostar or Parent in this Agreement to the extent such damages, costs and expenses exceed in the aggregate $1,000,000. Tristar shall indemnify and hold harmless Parent from and against all damages, costs and expenses (including reasonable attorneys' fees and costs of investigation) arising out of any breach of any of the representations, warranties or covenants of Tristar in this Agreement to the extent such damages, costs and expenses exceed in the aggregate $1,000,000. In the event any claim is made, or any suit or action is commenced, against any person in respect of which indemnification may be sought by such person under this Section 5.7 (the "Indemnified Party"), the Indemnified Party shall promptly give the party against whom indemnification is sought (the "Indemnifying Party") notice thereof and the Indemnifying Party shall be entitled to conduct or participate in the defense thereof at the Indemnifying Party's expense; provided, however, that the failure to give such notice shall not relieve the Indemnifying Party of its obligations hereunder, except to the -20- 24 extent the Indemnifying Party is prejudiced thereby. The Indemnifying Party may, at its expense, participate in or assume the defense of any such action, suit or proceeding involving a third party. In such case the Indemnified Party shall have the right (but not the duty) to participate in the defense thereof, and to employ counsel, at its own expense, separate from counsel employed by the Indemnifying Party in any such action and to be liable for the fees and expenses of one firm as counsel (and appropriate local counsel) employed by the Indemnified Party if the Indemnifying Party has not assumed the defense thereof. Whether or not the Indemnifying Party chooses to defend or prosecute any claim involving a third party, all the parties hereto shall cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith. The Indemnifying Party shall not be liable for any settlement effected without its consent of any claim, litigation or proceedings in respect of which indemnity may be sought hereunder, unless the Indemnifying Party refuses to acknowledge liability for indemnification under this Section 5.7 and/or declines to defend the Indemnified Party in such claim, litigation or proceeding. 5.8 Termination of Distribution Agreement. On or prior to the Closing Date, each party shall execute and deliver an instrument sufficient to terminate the Distribution Agreement dated October 23, 1992 (the "Distribution Agreement"), among Eurostar, Tristar and Starion International Ltd. ARTICLE VI CONDITIONS 6.1 Conditions to Obligation of Each Party to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the fulfillment or waiver at or prior to the Closing Date of the following conditions: (a) This Agreement and the Merger shall have been approved and adopted by the requisite vote of the stockholders of Tristar as may be required by law and by any applicable provisions of its Certificate of Incorporation or bylaws; (b) No order shall have been entered and remain in effect in any action or proceeding before any foreign, federal or state court or governmental agency or other foreign, federal or state regulatory or administrative agency or commission that would prevent or make illegal the consummation of the Merger; (c) There shall have been obtained any and all material permits, approvals and consents of securities or blue sky commissions of any jurisdiction, and of any other governmental body or agency, that reasonably may be deemed necessary so that the consummation of the Merger and the transactions contemplated thereby will be in compliance with applicable laws, the failure to comply with which would have a Material Adverse Effect on Tristar or the Surviving Corporation after the consummation of the Merger; (d) All approvals of private persons, financial institutions or corporations, (i) the granting of which is necessary for the consummation of the Merger or the transactions contemplated in connection therewith or (ii) the non-receipt of which would have a Material Adverse Effect on Tristar or the Surviving Corporation after the consummation of the Merger, shall have been obtained; (e) Tristar shall have been advised in writing on the Closing Date by Coopers & Lybrand L.L.P. that, in accordance with generally accepted accounting principles and applicable rules and regulations of the Commission, the Merger should be treated substantially similarly to a "pooling of interests" for accounting purposes; (f) Tristar shall have received from Howard Frazier Barker Elliott a written opinion, dated as of the date of this Agreement, satisfactory in form and substance to the Board of Directors of Tristar, to the effect that the terms of the Merger are fair to the minority -21- 25 stockholders of Tristar from a financial point of view, which opinion shall have been confirmed in writing to such Board of Directors (i) as of the date the Proxy Statement is first mailed to the stockholders of Tristar and (ii) as of the Closing Date; and (g) The Distribution Agreement shall have been terminated. 6.2 Additional Conditions to Obligations of Tristar. The obligation of Tristar to effect the Merger is, at the option of Tristar, also subject to the fulfillment or waiver at or prior to the Closing Date of the following conditions: (a) The representations and warranties of Eurostar and Parent contained in Section 2.2 shall be accurate in all material respects as of the Closing Date as though such representations and warranties had been made at and as of that time (except where any such representation or warranty is made as of a date specifically set forth therein); all of the terms, covenants and conditions of this Agreement to be complied with and performed by Eurostar on or before the Closing Date shall have been duly complied with and performed in all material respects; and a certificate of Eurostar to the foregoing effect dated the Closing Date and signed by the chief financial officer of Eurostar shall have been delivered to Tristar; (b) Since the Effective Date of this Agreement, no Material Adverse Change of Eurostar shall have occurred, and Eurostar and the Eurostar Subsidiaries shall not have suffered any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of Eurostar and the Eurostar Subsidiaries, taken as a whole, and Tristar shall have received a certificate of Eurostar signed by the chief executive officer of Eurostar dated the Closing Date to such effect; (c) Tristar shall have received from Akin Gump, Strauss, Hauer & Feld, L.L.P., counsel to Eurostar, an opinion dated the Effective Time covering the matters set forth in Exhibit 6.2(d); (d) Tristar shall have received from Coopers & Lybrand L.L.P., a written opinion dated as of the date that the Proxy Statement is first mailed to stockholders of Tristar to the effect that (i) the Merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code, (ii) Tristar and Eurostar will each be a party to that reorganization within the meaning of Section 368(b) of the Code and (iii) Tristar and Eurostar shall not recognize any gain or loss as a result of the Merger, and such opinion shall not have been withdrawn or modified in any material respect. 6.3 Additional Conditions to Obligations of Eurostar. The obligation of Eurostar to effect the Merger is, at the option of Eurostar, also subject to the fulfillment or waiver at or prior to the Closing Date of the following conditions: (a) The representations and warranties of Tristar contained in Section 2.3 shall be accurate as of the Closing Date in all material respects as though such representations and warranties had been made at and as of that time (except where any such representation or warranty is made as of a date specifically set forth therein); all of the terms, covenants and conditions of this Agreement to be complied with and performed by Tristar on or before the Closing Date shall have been duly complied with and performed in all material respects; and a certificate of Tristar to the foregoing effect dated the Closing Date and signed by the chief financial officer of Tristar shall have been delivered to Eurostar; (b) Since the Effective Date of this Agreement, no Material Adverse Change of Tristar shall have occurred, and Tristar and the Tristar Subsidiaries shall not have suffered any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the properties or business of Tristar and the Tristar Subsidiaries, taken as a whole, and Eurostar shall have received a certificate of Tristar signed by the chief executive officer of Tristar dated the Closing Date to such effect; -22- 26 (c) The shares of Tristar Common Stock issuable upon consummation of the Merger shall have been approved for listing on the NASDAQ/National Market System, subject to official notice of issuance; (d) Eurostar shall have received from Fulbright & Jaworski L.L.P., counsel to Tristar, an opinion dated the Effective Time covering the matters set forth in Exhibit 6.3(d). ARTICLE VII MISCELLANEOUS 7.1 Termination. This Agreement may be terminated and the Merger and the other transactions contemplated herein may be abandoned at any time prior to the Effective Time, whether prior to or after approval by the stockholders of Tristar: (a) by mutual consent of Eurostar and Tristar; (b) by either Eurostar or Tristar if the Merger has not been effected on or before September 30, 1995; (c) by either Tristar or Eurostar if a final, unappealable order to restrain, enjoin or otherwise prevent, or awarding substantial damages in connection with, a consummation of this Agreement or the transactions contemplated in connection herewith shall have been entered; (d) by Tristar or Eurostar if the required approval of the stockholders of Tristar for the adoption and approval of the Merger and this Agreement is not received; (e) by Tristar if (i) since the Effective Date of this Agreement there has been a Material Adverse Change in Eurostar, taken as a whole, or (ii) there has been a material breach of any representation or warranty set forth in this Agreement by Eurostar which breach has not been cured within ten business days following receipt by Eurostar of notice of such breach; (f) by Eurostar if (i) since the Effective Date of this Agreement there has been a Material Adverse Change in Tristar, taken as a whole, or (ii) there has been a material breach of any representation or warranty set forth in this Agreement by Tristar which breach has not been cured within ten business days following receipt by Tristar of notice of such breach; (g) By Tristar or Eurostar, if the Acquisition Committee of the Board of Directors of Tristar or the Board of Directors of Eurostar, in its discretion, determines that such termination is necessary for the Acquisition Committee of the Board of Directors of Tristar or the Board of Directors of Eurostar, as the case may be, to comply with their respective fiduciary duties to minority stockholders (in the case of Tristar) or stockholder (in the case of Eurostar) under applicable law; or (h) By Tristar or Eurostar, if there is pending or threatened any litigation against Tristar or Eurostar, or any of their respective stockholders, affiliates, directors, officers or employees (other than litigation disclosed in the Tristar Commission Filings), which is, in the view of the Board of Directors of Eurostar or the Acquisition Committee of the Board of Directors of Tristar, reasonably likely to have a Material Adverse Effect on Tristar or Eurostar, either prior to or following the consummation of the Merger. 7.2 Effect of Termination. In the event of any termination of this Agreement pursuant to Section 7.1, Tristar and Eurostar shall have no obligation or liability to each other except that (i) the provisions of the second paragraphs of Sections 3.2 and 4.2 and the provisions of Sections 5.6, and this Article VII shall survive any such termination, and (ii) nothing herein and no termination pursuant hereto will relieve any party from liability for any breach of this Agreement. -23- 27 7.3 Waiver and Amendment. Any provision of this Agreement may be waived at any time by the party that is, or whose stockholders are, entitled to the benefits thereof. This Agreement may not be amended or supplemented at any time, except by an instrument in writing signed on behalf of each party hereto; provided that after this Agreement has been approved and adopted by the stockholders of Tristar, this Agreement may be amended only as may be permitted by applicable provisions of the DGCL and the TBCA. The waiver by any party hereto of any condition or of a breach of another provision of this Agreement shall not operate or be construed as a waiver of any other condition or subsequent breach. The waiver by any party hereto of any of the conditions precedent to its obligations under this Agreement shall not preclude it from seeking redress for breach of this Agreement other than with respect to the condition so waived. 7.4 Survival of Representations, Warranties, Covenants and Agreements. The representations, warranties, covenants or agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive for a period of one year following the Closing Date. 7.5 Public Statements. Tristar and Eurostar agree to consult with each other prior to issuing any press release or otherwise making any public statement with respect to the transactions contemplated hereby, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law or applicable stock exchange policy. 7.6 Assignment. This Agreement shall inure to the benefit of and will be binding upon the parties hereto and their respective legal representatives, successors and permitted assigns. Except as set forth in this Agreement, this Agreement shall not be assignable by the parties hereto. 7.7 Notices. All notices, requests, demands, claims and other communications that are required to be or may be given under this Agreement shall be in writing and shall be deemed to have been duly given if (i) delivered in person or by courier, (ii) sent by telecopy or facsimile transmission, answer back requested, or (iii) mailed, certified first class mail, postage prepaid, return receipt requested, to the parties hereto at the following addresses: if to Tristar: Tristar Corporation 12500 San Pedro Avenue, Suite 500 San Antonio, Texas 78216 Attention: President with a copy to: Fulbright & Jaworski L.L.P. 300 Convent Street, Suite 2200 San Antonio, Texas 78205 Attention: Phillip M. Renfro, Esq. if to Eurostar Eurostar Perfumes, Inc. or Parent: 12001 Network, Bldg. E, Suite 110 San Antonio, Texas 78249-3355 Attention: President with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 300 Convent Street, Suite 1500 San Antonio, Texas 78205 Attention: Cecil Schenker, P.C. or to such other address as any party shall have furnished to the other by notice given in accordance with this Section 7.7. Such notices shall be effective, (i) if delivered in person or by courier, upon actual receipt by the intended recipient, (ii) if sent by telecopy or facsimile transmission, when the transmission -24- 28 is confirmed, or (iii) if mailed, upon the earlier of five days after deposit in the mail and the date of delivery as shown by the return receipt therefor. 7.8 Governing Law. This Agreement shall be governed by and construed in accordance with the substantive law of the State of Delaware without giving effect to the principles of conflicts of law thereof. 7.9 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall continue in full force and effect and shall in no way be affected, impaired or invalidated. 7.10 Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which together shall constitute one and the same agreement. 7.11 Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. 7.12 Entire Agreement; Third Party Beneficiaries. This Agreement constitutes the entire agreement and supersedes all other prior agreements and understandings, both oral and written, among the parties or any of them, with respect to the subject matter hereof and neither this nor any documents delivered in connection with this Agreement confers upon any person not a party hereto any rights or remedies hereunder. SIGNATURES ON FOLLOWING PAGE -25- 29 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the Date Hereof to be effective on the Effective Date. EUROSTAR PERFUMES, INC. By: /s/ Viren S. Sheth ------------------------------------------ Name: Viren S. Sheth ------------------------------------------ Title: President and Chief Executive Officer ------------------------------------------ TRANSVIT MANUFACTURING CORPORATION By: /s/ Mahendra Sheth ------------------------------------------ Name: ------------------------------------------ Title: ------------------------------------------ TRISTAR CORPORATION By: /s/ Loren Eltiste ------------------------------------------ Name: Loren Eltiste ------------------------------------------ Title: Vice President and Chief Financial Officer ------------------------------------------ -26- EX-10.2 4 AMENDMENT TO COMMON STOCK PURCHASE WARRENT 1 EXHIBIT 10.2 AMENDMENT TO COMMON STOCK PURCHASE WARRANT This Amendment (this "Amendment") to the Common Stock Purchase Warrant is entered into effective as of August 31, 1995, between Starion International, Ltd., a British Virgin Island Limited Partnership (the "Holder"), and TRISTAR CORPORATION, a Delaware corporation (the "Company"). Capitalized terms used herein but not defined herein have the respective meanings given them in the Warrant (as defined below). RECITALS WHEREAS, the Company and the Holder are parties to a Common Stock Purchase Warrant (the "Warrant") dated as of December 14, 1994, pursuant to which the Holder was granted the right to purchase from the Company, at any time on or before 5 p.m. Eastern Standard Time on December 15, 2004, two million (2,000,000) shares of the common stock of the Company, $.01 par value ("Common Stock"); WHEREAS, the Company has agreed, subject to certain conditions, to amend the Warrant as additional consideration in connection with the merger (the "Merger") of Eurostar Perfumes, Inc., a Texas corporation ("Eurostar"), with and into the Company; WHEREAS, the Company and the Holder desire to amend the Warrant to reflect such agreement; AGREEMENTS NOW THEREFORE, in consideration of the foregoing premises and of the mutual promises contained herein and for other good and valuable consideration, the adequacy, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Exercise Price. Subject to the consummation of the Merger and as of the Effective Time of the Merger (as such term is defined in the Agreement and Plan of Merger dated as of July 1, 1995, among the Company, Eurostar and Transvit Manufacturing Corporation, a Panamanian corporation), Article 4.1 of the Warrant establishing the Exercise Price of the Warrant Stock shall be amended and replaced with the following: "4.1 Exercise Price. The Exercise Price for the Warrant Stock shall be the lessor of (i) $5.34 per share, or (ii) an amount per share equal to the lowest average Closing Sales Price (as defined below) of the Warrant Stock for any twenty (20) consecutive trading days during the period beginning the day after the Effective Time and ending on August 31, 1996. The Exercise Price shall increase 10% per share on December 15, 2001, on December 15, 2002 and on December 15, 2003, on a cumulative and compounded basis. The "Closing Sales Price" as of a certain date will mean the average of the closing bid and asked prices, in the over-the-counter market as reported by the National Association of Securities Dealers Automated Quotation System, or if not so reported, as reported by the National Quotation Bureau, Incorporated, or any successor thereof, or if not so reported, the average of the closing bid and asked prices as furnished by any member of the National Association of Securities Dealers, Inc., selected from time to time by the Company for that purpose, or, if the Warrant Stock is listed or admitted to trading on a national securities exchange, the average of the reported closing bid and asked prices, regular way, on the principal national securities exchange on which the Warrant Stock is listed or admitted to trading." 2 2. No Adjustment of Warrant Stock. The Holder hereby acknowledges and agrees that the Merger does not result in an increase in the number of shares of Warrant Stock subject to the Warrant. 3. Waiver of Notice. The Holder hereby waives its right to notice of the Merger as provided under Section 5.3 of the Warrant. 4. Further Amendments. Any and all of the terms and conditions of the Warrant are hereby amended and modified wherever necessary, even though not specifically addressed herein, so as to conform to the amendments and modifications contained in this Agreement. 5. Ratification of Warrant. Except as amended hereby, the Warrant is hereby ratified and confirmed and shall continue in full force and effect. IN WITNESS WHEREOF, the Company and the Holder have caused this Agreement to be executed and delivered as of the date first above written. STARION INTERNATIONAL, LTD. By: /s/ Jay Sheth -------------------------------- Name: Jay Sheth -------------------------------- Title: Managing Director -------------------------------- TRISTAR CORPORATION By: /s/ Viren S. Sheth -------------------------------- Name: Viren S. Sheth -------------------------------- Title: Chief Executive Officer -------------------------------- -2- EX-10.3 5 AGREEMENT 1 EXHIBIT 10.3 AGREEMENT This Agreement dated effective August 31, 1995, by and between TRISTAR CORPORATION, a Delaware corporation (formerly Ross Cosmetics Distribution Centers, Inc.) ("Tristar"), Eurostar Perfumes, Inc., a Texas corporation ("Eurostar"), and Starion International Ltd., a United Kingdom company ("Starion") (successor to S&J Perfume Co., Ltd., a corporation organized under the laws of the United Kingdom). W I T N E S S E T H: WHEREAS, Tristar, Eurostar and Starion (or their respective predecessor or successor corporations, as applicable) entered into a Distribution Agreement (the "Distribution Agreement") dated October 23, 1992; and WHEREAS, the parties hereto desire to terminate the Distribution Agreement; NOW, THEREFORE, Tristar, Eurostar and Starion mutually agree to terminate the Distribution Agreement in all respects. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date and year first above written. TRISTAR CORPORATION (formerly Ross Cosmetics Distribution Centers, Inc.) By: /s/ Viren S. Sheth -------------------------------- Name: Viren S. Sheth -------------------------------- Title: Chief Executive Officer -------------------------------- EUROSTAR PERFUMES, INC. By: /s/ Paul R. Kimmel -------------------------------- Name: Paul R.Kimmel -------------------------------- Title: Chief Financial Officer -------------------------------- STARION INTERNATIONAL LTD. By: /s/ Jay Sheth -------------------------------- Name: Jay Sheth -------------------------------- Title: Managing Director --------------------------------