SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 26, 1999
BAUSCH & LOMB INCORPORATED
(Exact name of registrant as specified in its charter)
New York 1-4105 16-0345235
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number Identification No.)
One Bausch & Lomb Place, Rochester NY 14604-2701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 338-6000
Inapplicable
(Former name or address, if changed since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Disposal of Sunglass Business
On June 26, 1999, Bausch & Lomb Incorporated ("the company")
completed the sale of its sunglass business to Luxottica Group
S.p.A. ("Luxottica") for approximately $640 million in cash
pursuant to a Purchase Agreement dated April 28, 1999 (the
"Agreement"). A copy of the Agreement is attached hereto in
Exhibit 2. The transaction includes all of the company's sunglass
lines including the Ray-Ban, Revo, Arnette and Killer Loop
brands.
Formal completion of the sale will be deferred in a few countries
due to country-specific legal requirements.
Under the terms of the Agreement, the company will provide
certain administrative support and warehousing/distribution
services to Luxottica for a transition period of at least one
year.
The sunglass business accounted for over 95% of the company's
eyewear segment, and its disposition constitutes a disposal of a
business segment as defined by Accounting Principles Board
Opinion No. 30. Accordingly, previously issued financial results
will be restated in future filings to exclude historical results
of the eyewear segment from continuing operations. Historically
the eyewear segment included results for the previously divested
thin film technology and sports optics businesses, and the vision
accessories business which will be reported prospectively as part
of the company's vision care segment.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information.
Unaudited Pro Forma Condensed Consolidated Balance Sheet as
of March 27, 1999
Unaudited Pro Forma Condensed Consolidated Statements of
Earnings for the following periods:
Quarter ended March 27, 1999
Quarter ended March 28, 1998
Year ended December 26, 1998
Year ended December 27, 1997
Year ended December 28, 1996
(c) See Exhibit Index for a listing of exhibits.
PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
The following unaudited pro forma condensed consolidated balance
sheet and pro forma condensed consolidated statements of earnings
have been prepared to illustrate the effect of the divestiture of
the sunglass business of Bausch & Lomb Incorporated to Luxottica
Group S.p.A. and the classification of historical eyewear segment
results (substantially all of which was comprised of the sunglass
business) as discontinued operations in accordance with
Accounting Principles Board Opinion No. 30.
The pro forma condensed consolidated balance sheet assumes that
the divestiture was consummated on March 27, 1999. The pro forma
condensed consolidated statements of earnings assume that the
divestiture was consummated as of December 31, 1995. The pro
forma adjustments, and the assumptions on which they are based,
are described in the accompanying Notes to the Pro Forma
Condensed Consolidated Financial Statements.
These pro forma financial statements are based upon and should be
read in conjunction with the historical consolidated financial
statements and the related notes of the company, which were
previously reported on the company's 1996, 1997 and 1998 annual
reports to shareholders on Forms 10-K and the company's quarterly
report on Form 10-Q for the quarter ended March 27, 1999, and
which are incorporated herein by reference.
The pro forma information is presented for illustrative purposes
only and is not necessarily indicative of operating results or
financial position that would have occurred if the divestiture
had been consummated on the dates indicated, nor is it
necessarily indicative of future operating results or financial
position.
<TABLE>
BAUSCH & LOMB INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 27, 1999
DOLLAR AMOUNTS IN MILLIONS
(UNAUDITED)
Pro Forma
As Filed Adjustments Pro Forma
ASSETS
Current Assets
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 185.8 $ 518.0 (a) $ 546.3
(157.5) (b)
Other investments, short term 275.0 275.0
Trade receivables, net 532.1 (107.4) (a) 424.7
Inventories, net 454.0 (164.2) (a) 289.8
Deferred taxes, net 66.1 66.1
Other current assets 156.2 (18.7) (a) 137.5
1,669.2 70.2 1,739.4
Property, plant and equipment 722.8 (73.5) (a) 649.3
Goodwill and other
intangibles, net 753.8 (99.5) (a) 654.3
Other investments 116.8 116.8
Other assets 175.1 (1.3) (a) 173.8
Total Assets $3,437.7 $(104.1) $3,333.6
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities
Notes payable $ 110.6 $ 110.6
Current portion of long-term
debt 28.1 28.1
Accounts payable 100.2 $ (10.5) (a) 89.7
Accrued compensation 95.2 (9.5) (a) 85.7
Accrued liabilities 364.2 (46.3) (a) 317.9
Income taxes payable 54.3 54.3
752.6 (66.3) 686.3
Long-term debt, less current
portion 1,281.1 (157.5) (b) 1,123.6
Other long-term liabilities 105.0 (1.3) (a) 103.7
Minority interest 448.2 448.2
Total Liabilities 2,586.9 (225.1) 2,361.8
Shareholders' Equity 850.8 121.0 (a) 971.8
Total Liabilities &
Shareholders' Equity $3,437.7 $(104.1) $3,333.6
See accompanying Notes to Condensed Consolidated Pro Forma
Financial Statements.
</TABLE>
<TABLE>
BAUSCH & LOMB INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE QUARTER ENDED MARCH 27, 1999
DOLLAR AMOUNTS IN MILLIONS
(UNAUDITED)
Pro Forma
As Filed Adjustments Pro Forma
<S> <C> <C> <C> <C>
Net customer sales $ 574.8 $(107.3) (c) $ 467.5
Costs and expenses:
Cost of products sold 267.3 (57.2) (c) 210.1
Selling, administrative and
general 228.8 (42.9) (c) 185.9
Research and development 24.0 (2.7) (c) 21.3
520.1 (102.8) 417.3
Operating earnings 54.7 (4.5) 50.2
Other expense (Income):
Interest and investment
income (10.1) (10.1)
Interest expense 24.4 (2.0) (d) 22.4
Foreign currency (2.9) (2.9)
Earnings before minority
interest
& tax 43.3 (2.5) 40.8
Income tax expense 15.6 (1.6) (c) 14.7
0.7 (d)
Minority interest 5.3 (0.5) (c) 4.8
Earnings from continuing
operations $ 22.4 $ (1.1) $ 21.3
Earnings per share from
continuing operations:
Basic $ 0.39 $ 0.38
Diluted $ 0.39 $ 0.37
Average shares outstanding:
Basic 56,724
Diluted 58,062
See accompanying Notes to Pro Forma Condensed Consolidated
Financial Statements.
</TABLE>
<TABLE>
BAUSCH & LOMB INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE QUARTER ENDED MARCH 28, 1998
DOLLAR AMOUNTS IN MILLIONS
(UNAUDITED)
Pro Forma
As Filed Adjustments Pro Forma
<S> <C> <C> <C> <C>
Net customer sales $ 553.1 $(109.5) (c) $ 443.6
Costs and expenses:
Cost of products sold 276.1 (62.7) (c) 213.4
Selling, administrative
and general 228.7 (46.9) (c) 181.8
Research and development 20.6 (3.2) (c) 17.4
Purchased in-process research
& development 41.0 41.0
Restructuring charges 3.7 (1.9) (c) 1.8
570.1 (114.7) 455.4
Operating earnings (17.0) 5.2 (11.8)
Other expense (Income):
Interest and investment
income (10.1) (10.1)
Interest expense 25.4 (2.0) (d) 23.4
Foreign currency (1.7) (1.7)
Earnings before minority
interest
& tax (30.6) 7.2 (23.4)
Income tax expense (12.6) 2.0 (c) (9.9)
0.7 (d)
Minority interest 5.2 (0.6) (c) 4.6
Earnings from continuing
operations $ (23.2) $ 5.1 $ (18.1)
Earnings per share from
continuing operations:
Basic $ (0.42) $ (0.33)
Diluted $ (0.42) $ (0.33)
Average shares outstanding:
Basic 55,333
Diluted 55,333
See accompanying Notes to Pro Forma Condensed Consolidated
Financial Statements.
</TABLE>
<TABLE>
BAUSCH & LOMB INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 26, 1998
DOLLAR AMOUNTS IN MILLIONS
(UNAUDITED)
Pro Forma
As Filed Adjustments Pro Forma
<S> <C> <C> <C> <C>
Net customer sales $2,362.8 $(445.6) (c) $1,917.2
Costs and expenses:
Cost of products sold 1,093.1 (244.7) (c) 848.4
Selling, administrative
and general 917.0 (185.1) (c) 731.9
Research and development 91.7 (11.4) (c) 80.3
Goodwill impairment charge 85.0 85.0
Purchased in-process research
& development 41.0 41.0
Restructuring charges 11.3 (5.9) (c) 5.4
2,239.1 (447.1) 1,792.0
Operating earnings 123.7 1.5 125.2
Other expense (Income):
Interest and investment
income (45.1) (45.1)
Interest expense 100.8 (7.9) (d) 92.9
Foreign currency (6.4) (6.4)
Gain on divestiture (56.0) (56.0)
Earnings before minority
interest & tax 130.4 9.4 139.8
Income tax expense 79.4 0.7 (c) 83.0
2.9 (d)
Minority interest 25.8 (2.5) (c) 23.3
Earnings from continuing
operations $ 25.2 $ 8.3 $ 33.5
Earnings per share from
continuing operations:
Basic $ 0.45 $ 0.60
Diluted $ 0.45 $ 0.59
Average shares outstanding:
Basic 55,824
Diluted 56,367
See accompanying Notes to Pro Forma Condensed Consolidated
Financial Statements.
</TABLE>
<TABLE>
BAUSCH & LOMB INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 27, 1997
DOLLAR AMOUNTS IN MILLIONS
(UNAUDITED)
Pro Forma
As Filed Adjustments Pro Forma
<S> <C> <C> <C> <C>
Net customer sales $ 1,915.7 $(482.9) (c) $1,432.8
Costs and expenses:
Cost of products sold 884.7 (300.3) (c) 584.4
Selling, administrative and
general 743.8 (196.9) (c) 546.9
Research and development 67.5 (13.7) (c) 53.8
Restructuring charges 71.7 (26.7) (c) 45.0
1,767.7 (537.6) 1,230.1
Operating earnings 148.0 54.7 202.7
Other expense (Income):
Interest and investment
income (40.4) (40.4)
Interest expense 56.0 (7.9) (d) 48.1
Foreign currency (6.6) (6.6)
Litigation provision 21.0 21.0
Earnings before minority
interest & tax 118.0 62.6 180.6
Income tax expense 45.6 19.7 (c) 68.3
3.0 (d)
Minority interest 23.0 (1.1) (c) 21.9
Earnings from continuing
operations $ 49.4 $ 41.0 $ 90.4
Earnings per share from
continuing operations:
Basic $ 0.89 $ 1.63
Diluted $ 0.89 $ 1.63
Average shares outstanding:
Basic 55,383
Diluted 55,654
See accompanying Notes to Pro Forma Condensed Consolidated
Financial Statements
</TABLE>
<TABLE>
BAUSCH & LOMB INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 28, 1996
DOLLAR AMOUNTS IN MILLIONS
(UNAUDITED)
Pro Forma
As Filed Adjustments Pro Forma
<S> <C> <C> <C> <C>
Net customer sales $1,926.8 $(516.6) (c) $1,410.2
Costs and expenses:
Cost of products sold 872.3 (299.7) (c) 572.6
Selling, administrative and
general 773.1 (201.7) (c) 571.4
Research and development 75.5 (17.5) (c) 58.0
Restructuring charges 15.1 (1.6) (c) 13.5
1,736.0 (520.5) 1,215.5
Operating earnings 190.8 3.9 194.7
Other expense (Income):
Interest and investment
income (42.8) (42.8)
Interest expense 51.7 (7.9) (d) 43.8
Foreign currency (1.6) (1.6)
Gain on divestiture (1.5) (1.5)
Litigation provision 16.1 16.1
Earnings before minority
interest & tax 168.9 11.8 180.7
Income tax expense 63.7 1.4 (c) 68.1
3.0 (d)
Minority interest 22.1 (0.1) (c) 22.0
Earnings from continuing
operations $ 83.1 $7.5 $ 90.6
Earnings per share from
continuing operations:
Basic $ 1.48 $ 1.61
Diluted $ 1.47 $ 1.60
Average shares outstanding:
Basic 56,299
Diluted 56,510
See accompanying Notes to Pro Forma Condensed Consolidated
Financial Statements
</TABLE>
BAUSCH & LOMB INCORPORATED
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE DATA
(UNAUDITED)
Pro Forma Condensed Consolidated Balance Sheet Adjustments:
The pro forma condensed consolidated balance sheet assumes that
the divestiture of the eyewear segment occurred as of March 27,
1999. Assumptions and adjustments to reflect the eyewear segment
disposal in the condensed consolidated balance sheet include:
(a) To reflect the estimated net cash proceeds and gain on the
sale of sunglass product lines to Luxottica Group S.p.A.:
Sales price $636.0
Estimated cash taxes, assuming an effective income tax rate of
40% (80.0)
Estimated costs resulting directly from the divestiture
including transaction fees, legal and accounting fees,
termination benefits, and pension curtailment charge (38.0)
Estimated net cash proceeds $518.0
Net operating assets of sunglass business as of March 27, 1999 (397.0)
Estimated after-tax gain $121.0
For purposes of these statements, certain employee termination
benefits have been included in the estimated costs resulting
directly from the sunglass product lines sale. These include
costs that may arise in connection with the vesting of certain
stock options and grants as well as severance provisions.
The letter agreement between the two parties dated June 25, 1999
provides for a payment of up to an additional $4.0 in purchase
price within ninety days of the deal closing, subject to certain
conditions. As this additional consideration is of a contingent
nature, it has not been reflected in the pro forma condensed
consolidated financial statements or adjustments.
(b) To reflect the use of the after-tax proceeds from the sale of
the sunglass product lines. Cash received was used first to
retire a portion of domestic commercial paper borrowings (which
were classified as long-term debt for financial reporting
purposes at March 27, 1999) and the remainder was invested in
cash equivalents. The pro forma adjustment assumes that $157.5 of
the $357.5 of outstanding domestic commercial paper at March 27,
1999 was retired. This is consistent with the actual application
of cash at the disposal date. In accordance with SEC rules for
preparing pro forma financial statements, no adjustment has been
made to assume additional interest income would be generated from
the portion of the proceeds not used to retire debt.
Pro Forma Condensed Consolidated Statement of Earnings
Adjustments:
The pro forma condensed consolidated statements of earnings
assume that the divestiture of the eyewear segment occurred as of
December 31, 1995, which was the first day of fiscal 1996. The
statements do not include any impact of the gain on disposal or
costs related to the divestiture. The elimination of eyewear
segment results of operations in adjustment (c) includes all
costs reported historically by the divested businesses.
Assumptions and adjustments to reflect the eyewear segment
disposal in the pro forma condensed consolidated statements of
income include:
(c) To eliminate results of operations of eyewear segment from
historical financial statement amounts. For 1999 and 1998 amounts
relate entirely to the sunglass product line. For periods prior
to 1998 amounts also include results of the previously divested
thin film technology business. In future public filings,
historical results will be restated from those previously filed
to reflect results of the eyewear segment as discontinued
operations in accordance with Accounting Principles Board Opinion
No. 30.
(d) To reflect estimated impact on interest expense from use of
after-tax proceeds on sale to reduce outstanding debt by $157.5
million. For purposes of these statements, interest savings have
been reflected using an average rate of 5% per annum. A one-
eighth of one percentage point change in the interest rate used
for pro forma purposes would have the following impact on pro
forma income from continuing operations:
Per
Amount Share
Quarter ended March 27,1999 $ - $ -
Quarter ended March 28,1998 - -
Year ended December 26,1998 0.1 -
Year ended December 27,1997 0.1 -
Year ended December 26,1996 0.1 -
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.
BAUSCH & LOMB INCORPORATED
/s/ Stephen C. McCluski
Stephen C. McCluski
Senior Vice President and Chief Financial Officer
July 12, 1999
EXHIBIT INDEX
Exhibit No. Description
2(a) Purchase Agreement between Bausch & Lomb Incorporated and
Luxottica Group S.p.A. dated April 28, 1999. Omitted
schedules and exhibits to the Purchase Agreement as
identified within the schedules and exhibit index of the
agreement will be furnished supplementally to the
Commission upon request.
2(b) Letter Agreement between Bausch & Lomb Incorporated and
Luxottica Group S.p.A. dated June 25, 1999
EXHIBIT 2(a)
PURCHASE AGREEMENT
between
BAUSCH & LOMB INCORPORATED
and
LUXOTTICA GROUP S.p.A.
April 28, 1999
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS 1
1.1 Certain Definitions 1
1.2 Other Definitions 4
1.3 Other Rules of Construction 6
ARTICLE 2 SALE, PURCHASE AND ASSUMPTION 6
2.1 Purchased Assets 6
2.2 Assumed Liabilities 8
2.3 Excluded Assets and Liabilities 9
2.4 Purchase Price 9
2.5 Post-Closing Adjustment 10
ARTICLE 3 CLOSING 11
3.1 The Closing 11
3.2 Allocations 12
3.3 Staged Transfers 13
3.4 Deliveries by Buyer 15
3.5 Deliveries by Seller 16
3.6 Further Assurances 16
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER 17
4.1 Organization, Good Standing and Power 17
4.2 Authorization and Validity of Agreements 17
4.3 Consent and Approvals; No Conflict 18
4.4 Entire Business 18
4.5 Title to Purchased Shares and Purchased Assets 19
4.6 Financial Information 20
4.7 Absence of Undisclosed Liabilities 20
4.8 Absence of Certain Changes 20
4.9 Inventory 20
4.10 Legal Proceedings 21
4.11 Labor Relations Matters 21
4.12 Intellectual Property 21
4.13 Government Authorizations 21
4.14 Compliance with Applicable Laws 22
4.15 Regulatory Compliance 22
4.16 Employee Benefit Plans 22
4.17 Environmental Matters 24
4.18 Employees 24
4.19 Tax Matters 24
4.20 Contracts 24
4.21 Accounts Receivable 25
4.22 Certain Fees 26
4.23 Year 2000 26
4.24 No Other Representations or Warranties 26
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER 26
5.1 Organization, Good Standing and Power 26
5.2 Authorization and Validity of Agreements 27
5.3 Consents and Approvals; No Conflict 27
5.4 Legal Proceedings 28
5.5 Certain Fees 28
5.6 Purchase for Investment 28
5.7 Due Diligence 28
5.8 Knowledge of Buyer 28
5.9 No Other Representations or Warranties 29
ARTICLE 6 COVENANTS 29
6.1 Access to Information; Confidentiality 29
6.2 Conduct of the Business Pending the Closing Date 29
6.3 Excluded Assets and Excluded Liabilities of
Transferred Subsidiaries 30
6.4 Treatment of B&L India 31
6.5 Guarantees 32
6.6 Further Actions 32
6.7 Notification 33
6.8 No Action 33
6.9 Office Lease for Use of Leased Property 33
6.10 Trademark License for Use of Licensed Trademarks 33
6.11 Transition Services 33
6.12 Customs Drawbacks 33
6.13 Updated Schedules 34
ARTICLE 7 CONDITIONS PRECEDENT 34
7.1 Conditions to Obligations of Buyer and Seller 34
7.2 Conditions Precedent to Obligations of Buyer 34
7.3 Conditions Precedent to Obligations of Seller 35
ARTICLE 8 EMPLOYEE RELATIONS AND BENEFITS 37
8.1 Offer of Employment 37
8.2 Employee Benefits - Buyer's Obligations 37
8.3 Employee Benefits - Seller's Obligations 40
8.4 Accrued Vacation 41
8.5 Non-U.S. Benefit Plans 41
8.6 No Rights Conferred on Employees 41
ARTICLE 9 TERMINATION 42
9.1 General 42
9.2 Procedure 42
9.3 No Liabilities in Event of Termination 42
ARTICLE 10 SURVIVAL; INDEMNIFICATION 43
10.1 Survival 43
10.2 Indemnification 43
10.3 Procedure 44
10.4 Limitations on Indemnification 45
10.5 Exclusive Remedy 46
10.6 Time Period 47
ARTICLE 11 TRANSACTIONS SUBSEQUENT TO CLOSING 47
11.1 Access to Books and Records 47
11.2 Further Agreements 48
11.3 Asset Returns 49
11.4 Certain Tax Matters 49
11.5 Covenant Not to Compete 49
11.6 Buyer's Insurance 50
11.7 Company Stores 51
ARTICLE 12 MISCELLANEOUS 51
12.1 Public Announcement 51
12.2 Expenses 51
12.3 Transfer Taxes and Recording Expenses 51
12.4 Real Estate Taxes 52
12.5 Knowledge 52
12.6 Notices 52
12.7 Entire Agreement 54
12.8 Binding Effect; Benefit 54
12.9 Bulk Sales Law 54
12.10 Assignability 54
12.11 Amendment; Waiver 54
12.12 Disclosure Schedules and Exhibits 54
12.13 Section Headings 55
12.14 Severability of Provisions 55
12.15 Counterparts 55
12.16 Applicable Law 55
12.17 Submission to Jurisdiction 55
Schedules
Schedule 1
Business
Schedule 1.1(a)
Seller Subsidiaries
Schedule 1.1(b)
Transferred Subsidiaries
Schedule 2.3(a)
Excluded Assets
Schedule 2.3(b)
Excluded Liabilities
Schedule 2.5(b)
Accounting Principles (OMITTED)
Schedule 3.2(a)
Allocation Schedule (OMITTED)
Schedule 3.3(c)
Treatment Of Deferred Net Assets And Deferred Subsidiaries During
Deferral Period (OMITTED)
Schedule 3.3(d)
Treatment Of Deferred Net Assets And Deferred Subsidiaries If A
Deferred Closing Does Not Occur Within Eighteen Months Following
The Closing Date (OMITTED)
Schedule 11.6
Buyer's Insurance (OMITTED)
Exhibits
EXHIBIT A
Form of Bill of Sale, Assignment and Assumption Agreement
(OMITTED)
EXHIBIT B
Form of Office Lease (OMITTED)
EXHIBIT C
Form of Trademark License
EXHIBIT D
Form of Transition Services Agreement
PURCHASE AGREEMENT
This PURCHASE AGREEMENT is entered into this 28th day of April,
1999, by and between Bausch & Lomb Incorporated, a New York
corporation ("Seller"), and Luxottica Group S.p.A., an Italian
corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller and its subsidiaries are engaged, in part, in the
business of producing, marketing, distributing and selling
sunglasses and certain related accessories in various locations
throughout the world, all as further described in Schedule 1
attached hereto (the "Business"); and
WHEREAS, Seller desires to sell to Buyer and/or its affiliates,
or cause its subsidiaries to sell to Buyer and/or its affiliates,
certain assets owned by Seller and its subsidiaries which are
used exclusively in connection with the Business, the capital
stock of certain subsidiaries engaged exclusively in the
Business, and the capital stock of Seller's subsidiary in B&L
India Ltd. ("B&L India"); and
WHEREAS, in connection with such sale, Seller desires to assign
and transfer to Buyer and/or its affiliates certain liabilities
associated with the Business; and
WHEREAS, Buyer desires to buy, or cause its affiliates to buy,
such assets and capital stock and to assume, or cause its
affiliates to assume, such liabilities;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants of the parties hereto, the parties hereto hereby
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions
For purposes of this Agreement, except as otherwise expressly
provided herein, the following terms have the meanings set forth
below:
"Accounting Principles" means U.S. generally accepted accounting
principles applied in a manner consistent with Seller's policies,
methods, past practices and estimation methodologies described on
Schedule 2.5(b) attached hereto.
"Affiliate" means, with respect to any Person, any direct or
indirect majority-owned subsidiary, officer or director of such
Person and any other Person which directly or indirectly
controls, is controlled by or is under common control with such
Person, whether through the ownership of securities, by contract
or otherwise.
"Agreement" means this Agreement, the Schedules and Exhibits
hereto, the Seller Disclosure Schedule and the Buyer Disclosure
Schedule, as the same may from time to time be amended as
provided herein.
"Baseline Date" means December 26, 1998.
"Baseline Net Operating Assets" means the Net Operating Assets of
the Business reflected on the Baseline Net Operating Assets
Statement.
"Baseline Net Operating Assets Statement" means the statement
provided in Section 4.6 of the Seller Disclosure Schedule setting
forth the net operating assets of the Business as of the Baseline
Date.
"Bill of Sale, Assignment and Assumption Agreement" means a Bill
of Sale, Assignment and Assumption Agreement in substantially the
form of Exhibit A hereto.
"Business Assets" means the Purchased Assets, the Purchased
Shares and the assets which are owned, leased or licensed by the
Transferred Subsidiaries.
"Business Employees" means all employees of Seller, the Seller
Subsidiaries or the Transferred Subsidiaries engaged exclusively
in the Business as of the date as of which reference is being
made to such term.
"Buyer Disclosure Schedule" means the disclosure schedule
delivered by Buyer to Seller at or prior to the execution of this
Agreement.
"Buyer Entities" means Buyer and the Buyer Subsidiaries.
"Buyer Subsidiaries" means all direct or indirect wholly-owned
subsidiaries of Buyer to whom Buyer directs any Seller Entity to
transfer any Purchased Assets or Purchased Shares or to assign
any Assumed Liabilities.
"Buyer Material Adverse Effect" means a material adverse effect
on the ability of Buyer to perform its obligations under this
Agreement or under any Transaction Document, including performing
and satisfying, or causing to be performed or satisfied, the
Assumed Liabilities.
"Closing Net Operating Assets Statement" means the statement as
of the Closing Date setting forth the net operating assets of the
Business prepared pursuant to Section 2.5(b).
"Closing Net Operating Assets" means the net operating assets of
the Business as shown on the Closing Net Operating Assets
Statement before any adjustment to the Closing Net Operating
Assets Statement pursuant to Section 2.5(c).
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended.
"Code" means the Internal Revenue Code of 1986 and all
regulations promulgated thereunder, as the same have from time to
time been amended.
"Dollars" and "$" means dollars of the United States of America.
To the extent that the Seller Disclosure Schedule or Financial
Information reflects balances normally expressed in foreign
currencies, these balances are reflected in U.S. Dollars
converted from such foreign currencies by consistently using
Seller's translation methodology.
"ERISA" means the Employee Retirement Income Security Act of 1974
and all regulations promulgated thereunder, as the same have from
time to time been amended.
"Governmental Entity" means the United States government, the
government of any of the states constituting the United States,
any municipality and any other national or provincial or regional
government, and all of their respective branches, departments,
agencies, instrumentalities, non-appropriated fund activities,
subsidiary corporations or other subdivisions, to the extent such
Governmental Entity has jurisdiction.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the related regulations and published
interpretations promulgated or issued thereunder.
"Intellectual Property" means collectively, all copyrights,
patents, trademarks, trade names, services marks, processes,
inventions and formulae applied for, issued or licensed to or
used solely in the Business other than any intellectual property
licensed pursuant to the Trademark License.
"Laws" means any law, statute, code, ordinance, rule, regulation,
order, judgment or decree promulgated by any Governmental Entity.
"Material Adverse Effect" means an effect which is materially
adverse to the results of operations, financial condition, assets
or business of the Business taken as a whole.
"Office Lease" means the Office Lease between Seller and Buyer in
substantially the form of Exhibit B hereto.
"Person" means and includes an individual, a corporation, a
partnership, a limited liability company, a limited liability
partnership, a joint venture, a trust, an unincorporated
association, a Governmental Entity or any other entity, wherever
located or organized.
"Purchase Price" means Six Hundred Forty Million U.S. Dollars
(U.S. $640,000,000).
"Purchased Shares" means all of the issued and outstanding shares
of the capital stock of the Transferred Subsidiaries held by the
Seller Entities.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Disclosure Schedule" means the disclosure schedule
delivered by Seller to Buyer at or prior to the execution of this
Agreement.
"Seller Entities" means Seller and the Seller Subsidiaries.
"Seller Subsidiaries" means the direct or indirect subsidiaries
of Seller listed on Schedule 1.1(a) attached hereto.
"Senior Management Team" means the President of Seller's Global
Eyewear Business and those individuals reporting directly to him
as of the Closing Date.
"Taxes" means all taxes of any kind, including, without
limitation, those on or measured by or referred to as income,
gross receipts, sales, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, social security,
transfer, net worth, excise, severance, stamp, occupation,
premium, value added, property or windfall profits taxes,
customs, duties or similar fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any
Governmental Entity.
"Tax Return" means any return, report or statement required to be
filed with any Governmental Entity with respect to Taxes.
"Trademark License" means the Trademark License between Seller
and Buyer in substantially the form of Exhibit C hereto.
"Transaction Documents" means the agreements, instruments and
documents to be executed and delivered pursuant to this
Agreement.
"Transactions" means the transactions contemplated by this
Agreement and the Transaction Documents.
"Transferred Subsidiaries" means the direct or indirect
subsidiaries of Seller (including B&L India) listed on Schedule
1.1(b) attached hereto.
"Transition Services Agreement" means the Transition Services
Agreement between Seller and Buyer in substantially the form of
Exhibit D hereto.
"U.S." means the United States of America.
"Welfare Plan" means any plan defined in Section 3(1) of ERISA.
1.2 Other Definitions
Each of the following terms is defined in the Section referred
to below.
Defined Term Section Reference
Adjusted Closing Net Operating Assets 2.5(c)
Allocation Principles 3.2(a)
Allocation Schedule 3.2(a)
Assigned Contracts 2.1(f)
Assumed Liabilities 2.2
B&L India Recitals
Benefits Maintenance Period 8.2
Business Recitals
Business Products 11.6
Buyer Preamble
Buyer Indemnified Parties 10.2(b)
Buyer's Objection 2.5(c)
CERCLA 4.17
Closing 3.1
Closing Date 3.1
Competitive Activity 11.5(a)
Competitive Products 11.5(a)
Confidentiality Agreement 6.1
Contracts 4.20(a)
CPA Firm 2.5(c)
Damages 10.2(a)
Deferral Period 3.3(c)
Deferred Closing 3.3(a)
Deferred Closing Date 3.3(b)
Deferred Country 3.3(a)
Deferred Net Assets 3.3(b)
Deferred Shares 3.3(b)
Deferred Subsidiary 3.3(c)
Dispute Period 2.5(c)
Environmental Laws 4.17
ERISA Affiliate 4.16(a)
Excluded Assets 2.3
Excluded Liabilities 2.3
Expiration Date 10.6
Financial Information 4.6
Financial Statements 4.6
First Step 3.2(b)
Foreign Approval 3.3(a)
Foreign Injunction 3.3(a)
Guarantees 6.4
Indemnity Claim 10.4(e)
IRS 4.16(b)
Killer Loop 3.2(b)
Killer Loop Purchaser 3.2(b)
Killer Loop Shares 3.2(b)
Knowledge 12.5
Multiple Employer Plan 4.16(a)
Multiplemployer Plans 4.16(a)
Non-U.S.Benefit Plans 4.16(g)
Noncompetitive Period 11.5(a)
Payroll Practices 4.16(a)
Purchased Assets 2.1
PWC 2.5(b)
Permitted Liens 4.5
Plans 4.16(a)
Qualified Plans 4.16(c)
Representatives 6.1
Required Consents 7.1(b)
Response Period 2.5(c)
Second Step 3.2(b)
Section 338(h)(10) Election 11.4(c)
Seller Preamble
Seller Indemnified Parties 10.2(a)
Stock Allocation 3.2(a)
Tangible Asset Allocation 3.2(a)
Tax Benefit 10.4(e)
Third Party Claim 10.3(a)
338(h)(10) Subsidiaries 3.2(a)
338(h)(10) Tangible Asset Allocation 3.2(a)
Transfer Date 8.1(b)
Transferred Employees 8.1(b)
Vacation Policy 8.4
1.3 Other Rules of Construction
(a) References in this Agreement to any gender shall include
references to all genders. Unless the context otherwise
requires, references in the singular shall include references in
the plural and vice versa. References to a party to this
Agreement or to other agreements described herein means those
Persons executing this Agreement or such other agreements, as
applicable. The words "include", "including" or "includes" shall
be deemed to be followed by the phrase "without limitation" or
the phrase "but not limited to" in all places where such words
appear in this Agreement.
(b) This Agreement is the joint drafting product of Seller and
Buyer, and each provision hereof has been subject to negotiation
and agreement and shall not be construed for or against either
party as drafter thereof.
(c) The phrase "has made available" or similar words mean that on
or before March 3, 1999, Seller has placed copies of documents
containing such information in the "data room" maintained by
Seller in Rochester, New York for Buyer's review or has otherwise
delivered such information to Buyer.
ARTICLE 2
SALE, PURCHASE AND ASSUMPTION
2.1 Purchased Assets
Upon the terms and subject to the conditions of this Agreement
and in consideration of the payment of the Purchase Price and the
assumption of the Assumed Liabilities by the Buyer Entities, on
the Closing Date Seller shall, and shall cause the Seller
Subsidiaries to, sell, convey, transfer and assign to the Buyer
Entities the Purchased Shares and all of the following assets
which are not Excluded Assets (collectively, the "Purchased
Assets"):
(a) all of the gross FIFO inventory described on Section
2.1(a)(i) of the Seller Disclosure Schedule which is owned by the
Seller Entities on the Closing Date and all other finished goods,
work-in-process, component parts and raw materials inventory
relating exclusively to the Business and owned by the Seller
Entities on the Closing Date;
(b) all of the accounts receivable described on Section 2.1(b)(i)
of the Seller Disclosure Schedule which have not been collected
prior to the Closing Date and all other accounts receivable
generated by the Business and not collected prior to the Closing
Date;
(c) the real property described on Section 2.1(c)(i) of the
Seller Disclosure Schedule;
(d) all of the fixed assets and tangible personal property listed
on Section 2.1(d)(i) of the Seller Disclosure Schedule and owned
by the Seller Entities on the Closing Date and all other
equipment and devices, furniture, fixtures, point of sale
displays, supplies, machinery, hand tools and other fixed assets
and tangible personal property used exclusively in the Business
and owned by the Seller Entities on the Closing Date;
(e) all of the Intellectual Property listed on Section 2.1(e)(i)
of the Seller Disclosure Schedule and owned by the Seller
Entities on the Closing Date and all other Intellectual Property
used exclusively in the Business and owned by the Seller Entities
on the Closing Date;
(f) all of the Seller Entities' right, title and interest (or in
the case of Assigned Contracts that do not relate exclusively to
the Business, the portion of the Seller Entities' right, title
and interest in the Assigned Contracts to the extent related to
the Business) in and to the following contracts (collectively,
the "Assigned Contracts") as of the Closing Date:
(i) all purchase orders and commitments issued or made by
customers to any Seller Entity to the extent that they relate to
the Business;
(ii) the contracts between the Seller Entities and suppliers
described on Section 2.1(f)(ii) of the Seller Disclosure Schedule
and all other contracts, purchase orders and commitments issued
or made by any Seller Entity to suppliers as of the Closing Date
to the extent that they relate to the Business;
(iii) the leases relating to real property described on Section
2.1(f)(iii)(A) of the Seller Disclosure Schedule and any other
leases, licenses or other contracts or arrangements to which any
Seller Entity is a party pursuant to which any real property used
exclusively in the Business as of the Closing Date is leased,
held or otherwise used;
(iv) all leases, franchises, licenses, contracts or other
arrangements to which any Seller Entity is a party pursuant to
which any item of tangible personal property used exclusively in
the Business as of the Closing Date is leased, held or otherwise
used;
(v) the license agreements described on Schedule 2.1(f)(v)(A) of
the Seller Disclosure Schedule and all other license or franchise
agreements, contracts or other arrangements pursuant to which (A)
any Seller Entity has any rights in or the right to use
Intellectual Property which is used exclusively in connection
with the Business and which is owned by any other Person, or (B)
any other Person has any rights in or the right to use any
Intellectual Property which is a Purchased Asset;
(vi) the Authorized Distributor Agreements, Sales Agent
Agreements, Manufacturer's Representative Agreements, Commercial
Agent Agreements and advertising, marketing and endorsement
agreements described on Section 2.1(f)(vi)(A) of the Seller
Disclosure Schedule and all other distributor, manufacturer
representative, agency, representative, advertising, marketing
and endorsement agreements to which any of the Seller Entities is
a party to the extent that they relate to the Business;
(vii) all service contracts and warranty rights related to any
Purchased Assets or relating exclusively to the Business and all
such contracts and rights which relate in part to the Business to
the extent that such portion of such contracts can be segregated;
(viii) any third party software licenses held by a Seller Entity
relating to software used solely in connection with the operation
of the Business, which licenses are by their terms assignable in
connection with the transfer of the Purchased Assets, but not
including any licenses relating to software which is subject to a
broad license (including a site license) held by Seller or any of
its Affiliates; and
(ix) any other agreements, contracts, licenses, franchises,
purchase orders or other arrangements to which any Seller Entity
is a party and which relate exclusively to the Business or which
relate in part to the Business to the extent that such portion of
such agreements, contracts, licenses, franchises, purchase orders
or other arrangements can be segregated including, without
limitation, those agreements, contracts, licenses, franchises,
purchase orders and arrangements described on Section
2.1(f)(ix)(A) of the Seller Disclosure Schedule;
(g) all of the Seller Entities' business information with respect
to the Business, including lists of former, existing or
prospective customers, sales materials, competitive analyses,
marketing materials (including analyses and strategies),
advertising and promotional materials and supplier lists and all
other business or other records relating solely to the Business,
except for those business records that must be retained by the
Seller Entities for tax or general corporate purposes;
(h) all goodwill associated with the Business and the
Intellectual Property which is a Purchased Asset or which is
covered by an Assigned Contract; and
(i) all other assets, real, personal, tangible or intangible,
which are used exclusively in or relate exclusively to the
Business.
2.2 Assumed Liabilities
Upon the terms and subject to the conditions of this
Agreement, on the Closing Date Buyer shall, and shall cause the
Buyer Subsidiaries to, purchase and accept the Purchased Assets
and the Purchased Shares from the Seller Entities and assume all
of the following liabilities and obligations to the extent they
are not Excluded Liabilities (collectively, the "Assumed
Liabilities"):
(a) the accounts and trade payable liabilities incurred in
connection with the Business;
(b) accrued payroll, employee benefits and associated taxes,
withholding and insurance premiums relating to Business Employees
as of the Closing Date;
(c) all warranty claims arising from the operation of the
Business;
(d) all claims, actions, suits, proceedings and other obligations
for property damage, personal injury, death and other similar
losses or injuries arising out of the sale or use of products
manufactured, sold or distributed by the Business on or after the
Closing Date, whether in respect of any express or implied
representation and warranty or otherwise;
(e) all liabilities and obligations of the Seller Entities in
connection with any claim, action, suit, proceeding or other
obligation to the extent relating to the Business, other than
those described in paragraph 2 of Schedule 2.3(b) attached
hereto, whether or not a legal proceeding has been commenced with
respect to such action, claim or other obligation prior to the
Closing Date;
(f) all liabilities and obligations of the Seller Entities as of
the Closing Date to the extent they relate to the Purchased
Assets, including all obligations and liabilities arising under
the Assigned Contracts or taken into account in computing the
Adjusted Closing Net Operating Assets; and
(g) all other liabilities and obligations of the Seller Entities
as of the Closing Date to the extent that they relate to or arose
from the Business or its operation.
2.3 Excluded Assets and Liabilities
Notwithstanding anything herein to the contrary, it is
expressly understood and agreed that the Purchased Assets shall
not include the Excluded Assets described on Schedule 2.3(a)
attached hereto (the "Excluded Assets") and the Assumed
Liabilities shall not include the Excluded Liabilities described
on Schedule 2.3(b) attached hereto (the "Excluded Liabilities").
2.4 Purchase Price
Subject only to Section 3.2(b), upon the terms and subject to
the conditions of this Agreement and in consideration of the sale
and transfer of the Purchased Assets and the Purchased Shares to
the Buyer Entities by the Seller Entities, Buyer shall, or shall
cause the Buyer Subsidiaries to, pay the Purchase Price to the
Seller Entities by wire transfer of immediately available funds
in accordance with written instructions given by Seller to Buyer
which shall be given on or prior to the Closing Date. Seller may
elect, by giving no less than three (3) days notice to Buyer, to
have all or any portion of the Purchase Price paid in one or more
foreign currencies, in which case the portion of the Purchase
Price paid in each such foreign currency shall be converted into
such foreign currency by using the spot rate with respect to such
foreign currency published in the Wall Street Journal on the
Closing Date. The Purchase Price shall be allocated among the
Seller Entities as set forth on the Allocation Schedule delivered
to Buyer pursuant to Section 3.2.
2.5 Post-Closing Adjustment
(a) During the ten (10) business days immediately preceding the
Closing Date, or during such other period as Seller and Buyer
shall mutually agree, Seller and Buyer or their designated
representatives shall jointly conduct a physical inventory of the
inventory of the Business. Such physical inventory shall be
conducted using each locality's accounting procedures for the
conduct of physical inventories and shall be approved by Seller
and Buyer, which approval shall not be unreasonably withheld,
conditioned or delayed. The summary of the physical inventory
shall be utilized in the preparation of the Closing Net Operating
Assets Statement and, once approved by Buyer and Seller, shall be
conclusively binding on the parties for purposes of this
Agreement. Buyer, at its option, may elect not to participate in
conducting the physical inventory; however, in such case, the
summary of the physical inventory conducted by Seller shall be
conclusively binding on the parties for purposes of this
Agreement.
(b) Within 90 days following the Closing Date, Seller shall
prepare, or cause to be prepared, and deliver to Buyer the
Closing Net Operating Assets Statement. The Closing Net
Operating Assets Statement shall be prepared in accordance with
the Accounting Principles described on Schedule 2.5(b) attached
hereto, except that the amount of inventory thereon shall be
computed on a gross FIFO basis rather than on a LIFO basis, and
shall be reported on by PricewaterhouseCoopers LLP ("PWC"). The
expenses associated with preparing the Closing Net Operating
Assets Statement and obtaining PWC's report shall be borne solely
by Seller.
(c) Buyer and Buyer's independent accountants shall, within 30
days after the delivery by Seller of the Closing Net Operating
Assets Statement (the "Dispute Period"), complete their review of
the Closing Net Operating Assets Statement and any underlying
working papers used in preparing the report. In the event that
Buyer concludes that the Closing Net Operating Assets Statement
is incorrect or has not been prepared in accordance with the
Accounting Principles, Buyer shall inform Seller in writing (the
"Buyer's Objection"), setting forth a specific description of the
basis of Buyer's Objection and the adjustments to the Closing Net
Operating Assets Statement which Buyer believes should be made.
Buyer shall give Seller the Buyer's Objection on or before the
last day of the Dispute Period. Seller shall then have 30 days
following the last day of the Dispute Period (the "Response
Period") to review and respond to the Buyer's Objection. If
Seller and Buyer are unable to resolve all of their disagreements
with respect to the items raised in the Buyer's Objection within
30 days following the end of the Response Period, they shall
refer all unresolved items raised in the Buyer's Objection to a
U.S. office of Arthur Andersen LLP, or another internationally
recognized firm of independent public accountants as to which
Seller and Buyer mutually agree (the "CPA Firm"), who shall,
acting as experts in accounting and not as arbitrators, determine
on the basis of the Accounting Principles whether and to what
extent, if any, the Closing Net Operating Assets Statement
requires adjustment. The CPA Firm's review shall be limited to
the items raised in the Buyer's Objection which have not been
resolved by Seller and Buyer, and no adjustment shall be made
unless the CPA Firm determines that the information used to
prepare the Closing Net Operating Assets Statement is incorrect
or that the Closing Net Operating Assets Statement has not been
prepared in accordance with the Accounting Principles. Seller
and Buyer shall direct the CPA Firm to use all reasonable efforts
to render its determination within 45 days. The CPA Firm's
determination shall be conclusive and binding upon Buyer and
Seller. The fees and disbursements of the CPA Firm shall be
shared equally by Buyer and Seller. Buyer and Seller shall make
readily available to the CPA Firm all relevant books and records,
all work papers (including those of the parties' respective
accountants) relating to the Baseline Net Operating Assets
Statement and the Closing Net Operating Assets Statement, and all
other items reasonably requested by the CPA Firm which are
relevant thereto. The "Adjusted Closing Net Operating Assets"
shall be (i) the Closing Net Operating Assets in the event that
no Buyer's Objection is delivered to Seller during the Dispute
Period, (ii) the Closing Net Operating Assets adjusted in
accordance with the Buyer's Objection in the event that Seller
does not respond to Buyer's Objection during the Response Period,
or (iii) the Closing Net Operating Assets adjusted by either (x)
the agreement of Seller and Buyer or (y) the CPA Firm.
(d) Buyer shall provide Seller and its accountants with full
access to the books, records and employees of the Buyer Entities
and the Transferred Subsidiaries and to any other information,
including work papers of its accountants, to the extent necessary
for Seller to prepare the Closing Net Operating Assets Statement
and any response to Buyer's Objection. Seller shall provide
Buyer and its accountants with full access to all information
used by Seller in preparing the Baseline Net Operating Assets
Statement and Closing Net Operating Assets Statement, including
the procedures, books, records and work papers of its accountants
which are relevant thereto.
(e) Within 10 business days following final determination of the
Adjusted Closing Net Operating Assets, the Buyer Entities or the
Seller Entities, as applicable, shall make an adjustment payment
in U.S. dollars in an amount equal to the difference between the
Baseline Net Operating Assets and the Adjusted Closing Net
Operating Assets. The adjustment payment will be made by a
Seller Entity to a Buyer Entity if the Adjusted Closing Net
Operating Assets is less than the Baseline Net Operating Assets,
and by a Buyer Entity to a Seller Entity if the Adjusted Closing
Net Operating Assets is greater than the Baseline Net Operating
Assets. If a Buyer Entity is entitled to receive the payment,
Buyer shall notify Seller of the Buyer Entity to whom payment
shall be made and Seller shall determine which Seller Entity will
make the payment and will either make the payment or cause it to
be made. If a Seller Entity is entitled to receive the payment,
Seller shall notify Buyer of the Seller Entity to whom payment
shall be made and Buyer shall determine which Buyer Entity will
make the payment and will either make the payment or cause it to
be made. The adjustment payment payable pursuant to this Section
2.5(e) shall be paid by wire transfer of immediately available
funds to an account designated by the Person entitled to receive
the payment.
ARTICLE 3
CLOSING
3.1 The Closing
Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned
pursuant to ARTICLE 9 hereof, the closing with respect to the
transactions provided for in this Agreement (the "Closing") shall
take place at the offices of Nixon, Hargrave, Devans & Doyle LLP,
437 Madison Avenue, New York, New York 10022, at 10:00 a.m., New
York City time, on June 25, 1999 (or as soon as practicable
thereafter as all of the conditions to the Closing set forth in
ARTICLE 7 hereof are satisfied or waived), or at such other time,
date and place as shall be agreed upon by Seller and Buyer. The
actual date of the Closing is herein called the "Closing Date".
The Closing shall be deemed effective as of 11:59 p.m. on the day
immediately prior to the Closing Date.
3.2 Allocations
(a) Seller and Buyer confirm and acknowledge that set forth on
Schedule 3.2(a) attached hereto is an allocation schedule (the
"Allocation Schedule"), pursuant to which the Purchase Price and
Assumed Liabilities will be allocated among the Purchased Shares
and the Purchased Assets as of the Closing Date by implementing
the following principles (the "Allocation Principles") that are
also set forth in the Allocation Schedule:
(i) An amount (the "Tangible Asset Allocation") not in excess of
the book value as at the Closing Date of the individual assets
(excluding goodwill and intangibles other than as recorded on the
books of the non-U.S. Seller Entities as disclosed in Section 4.6
of the Seller Disclosure Schedule) of the Seller Entities shall
be allocated to such assets, respectively;
(ii) An amount (the "Stock Allocation") not in excess of, or, in
the case of Killer Loop, an amount equal to $6,000,000 over, the
net book value as at the Closing Date of each of the Transferred
Subsidiaries whose stock is to be purchased (other than the
Transferred Subsidiaries incorporated in the United States as to
which a Section 338(h)(10) Election is made (the "338(h)(10)
Subsidiaries")) shall be allocated to the stock of such
subsidiaries, respectively;
(iii) An amount (the "338(h)(10) Tangible Asset Allocation")
shall be allocated to the individual assets (excluding goodwill
and intangibles) of the 338(h)(10) Subsidiaries not in excess of
the book value as at the Closing Date of such assets,
respectively; and
(iv) An amount equal to the excess of the Purchase Price and
Assumed Liabilities over the sum of the Tangible Asset
Allocation, the Stock Allocation and the 338(h)(10) Tangible
Asset Allocation shall be allocated to the assets of the Seller
Entities and of the 338(h)(10) Subsidiaries, as the case may be,
that constitute trademarks or, in the case of Arnette Optic
Illusions, Inc., as a 338(h)(10) Subsidiary, and Revo, as a
Seller Entity, other intangible assets as recorded on the books
of such entities as disclosed in Section 4.6 of the Seller
Disclosure Schedule which, in the allocation procedure, shall be
designated as trademarks.
The Allocation Schedule includes an agreed upon estimate of the
respective book values referred to in the Allocation Principles
and sets forth an agreed upon methodology for implementing the
allocations provided for therein based on actual book values as
at the Closing Date. Seller and Buyer also confirm and
acknowledge to each other that book value as at the Closing Date
of all assets (excluding goodwill and intangibles) to be covered
by the Allocation Schedule, prepared as aforesaid, will
approximate the fair value as at such date of such assets. The
parties recognize that the Purchase Price does not include
Buyer's acquisition expenses and that Buyer will allocate such
expenses appropriately. Seller and Buyer agree to act in
accordance with the computations and allocations contained in the
Allocation Schedule in any relevant tax returns or filings.
(b) Anything in this Agreement to the contrary notwithstanding,
it is understood and agreed that the Closing shall occur in two
separate steps, both to occur on the Closing Date, with the
second step (the "Second Step") to occur immediately after the
first step (the "First Step"). All references to the "Closing"
herein shall be deemed to refer to the transactions referred to
below that are to occur at the First Step and the Second Step,
respectively, and such transactions together constitute all of
the transactions referred to in Section 3.1.
(i) At the First Step, Buyer or a direct or indirect subsidiary
of Buyer (the "Killer Loop Purchaser") shall purchase the
Purchased Shares constituting all of the issued and outstanding
shares (the "Killer Loop Shares") of capital stock of Killer Loop
S.p.A., an Italian corporation and one of the Transferred
Subsidiaries ("Killer Loop"), from the appropriate Seller
Subsidiary, in consideration for the payment to such Seller
Subsidiary of a portion of the Purchase Price in the amount of
U.S. $44,527,000 (provided that the purchase price for the Killer
Loop Shares shall be deemed by the parties to be adjusted to be
equal to the amount thereafter allocated to the Killer Loop
Shares pursuant to the Allocation Principles). The amount of
U.S. $44,527,000 shall be paid in the manner and subject to the
terms of Section 2.4. All actions and deliveries that would, by
the terms of this Agreement other than this Section 3.2(b), be
applicable to that portion of the Closing constituting the
purchase and sale of the Killer Loop Shares shall in fact be
applicable to and be made as part of the First Step.
(ii) At the Second Step, immediately after the consummation of
the First Step, Killer Loop, which shall then by virtue of the
First Step be a Buyer Subsidiary, or its designee or designees
theretofore specified in accordance with Section 3.2(c), shall
purchase all of the Purchased Assets and all of the remaining
Purchased Shares and assume the Assumed Liabilities, and shall
pay the balance of the Purchase Price due after giving effect to
the First Step, all pursuant to and in accordance with all of the
terms, provisions and conditions of this Agreement applicable to
the Closing, with the sole exception of the actions theretofore
taken as the First Step.
(c) Buyer shall have the right to direct the Seller Entities to
transfer the Purchased Assets and Purchased Shares to specific
Buyer Subsidiaries and to cause specific Buyer Subsidiaries to
assume the Assumed Liabilities. At least twenty (20) days before
the scheduled Closing Date, Buyer shall deliver to Seller a
schedule designating which Buyer Entity is acquiring each of the
Purchased Assets and Purchased Shares and assuming each of the
Assumed Liabilities. Seller shall cause the Seller Entities to
sell, transfer and convey the Purchased Assets and Purchased
Shares to the applicable Buyer Entity designated in the schedule,
and Buyer shall cause the Buyer Entities to assume the Assumed
Liabilities which the schedule designates them as assuming.
3.3 Staged Transfers
(a) If the conditions of ARTICLE 7 are satisfied, the Closing
shall occur even if (i) there is an injunction, restraining order
or decree of any nature of any court or Governmental Entity that
is in effect that restrains or prohibits the consummation of the
Transactions in any country other than the U.S. (a "Foreign
Injunction"), or (ii) a consent, approval, authorization or order
of a Governmental Entity that is necessary to permit the
consummation of the Transactions in any country other than the
U.S. which (x) would be reasonably likely to subject any Buyer
Entity, Seller Entity or Transferred Subsidiary, or any officer,
director or agent of any such Person, to civil or criminal
liability, or (y) could render any Transactions in such country
void or voidable (a "Foreign Approval") has not been obtained.
However, if a Foreign Injunction restrains or prohibits, or a
Foreign Approval is necessary to permit, the transfer of any
Purchased Shares or a portion of the Business Assets which is
reasonably necessary to operate the Business in the country in
which the Foreign Injunction is in effect or the Foreign Approval
is required (a "Deferred Country"), then there shall be an
initial closing and one or more deferred closings (each, a
"Deferred Closing"). At the Closing, the certificates (and
related representations and warranties) to be delivered pursuant
to Sections 7.2(c) and 7.3(c) need not be made or true as they
relate to any Foreign Injunction or Foreign Approval, and the
parties agree to use all commercially reasonable efforts to
mitigate the damages resulting from a Foreign Injunction or the
failure to obtain a Foreign Approval whether or not the Foreign
Injunction or Foreign Approval causes a Deferred Closing.
(b) On the Closing Date, the Closing shall occur with respect to
all of the Purchased Assets and Assumed Liabilities other than
those relating to a Deferred Country ("Deferred Net Assets") and
other than the Purchased Shares of a Transferred Subsidiary based
in a Deferred Country ("Deferred Shares"). A Deferred Closing
shall occur with respect to each Deferred Country as soon as
practicable following the receipt of the required Foreign
Approval or the lifting of the Foreign Injunction with respect to
such Deferred Country, but no more than thirty (30) days
following such event (the "Deferred Closing Date"). On each
Deferred Closing Date, (i) the applicable Seller Entities shall
transfer, convey and assign to the Buyer Entities any Purchased
Assets included in the Deferred Net Assets relating to such
Deferred Country and any Deferred Shares relating to such
Deferred Country, in each case in substantially the same form as
if such transfer had occurred on the Closing Date, (ii) the
applicable Buyer Entities shall assume the Assumed Liabilities
included in the Deferred Net Assets relating to such Deferred
Country in substantially the same form as if such assumption had
occurred on the Closing Date, and (iii) the Seller Entities shall
be entitled to treat as delivered the allocable portion of the
Purchase Price relating to the Deferred Net Assets and Deferred
Shares relating to such Deferred Country, together with any
interest or other earnings thereon.
(c) Between the Closing Date and any applicable Deferred Closing
Date (a "Deferral Period"), the Deferred Net Assets, the
Transferred Subsidiaries represented by any Deferred Shares (the
"Deferred Subsidiaries"), the allocable portion of the Purchase
Price relating to the Deferred Net Assets and Deferred Shares and
certain other matters shall be administered as described in
Schedule 3.3(c) hereto.
(d) In the event that a Deferred Closing has not occurred with
respect to each Deferred Country within eighteen (18) months
following the Closing Date, the Deferred Net Assets, Deferred
Subsidiaries, the allocable portion of the Purchase Price
relating to the Deferred Net Assets and Deferred Shares and
certain other matters with respect to Deferred Countries where a
Deferred Closing has not occurred within such period shall be
administered as described in Schedule 3.3(d) hereto.
(e) In the event that any consents or approvals are needed to
permit, or there is any injunction, restraining order or decree
of any nature of any court or Governmental Entity which
restrains, the transfer of any of the Purchased Assets or
Purchased Shares from a Seller Entity to a Buyer Entity that have
not been obtained or lifted, as applicable, on or prior to the
Closing Date or the applicable Deferred Closing Date (other than
a Foreign Injunction which restrains or prohibits, or a Foreign
Approval which is necessary to permit, the transfer of any
Purchased Shares or a portion of the Business Assets which is
reasonably necessary to operate the Business in the applicable
Deferred Country), neither this Agreement nor any Transaction
Document shall constitute a transfer, assignment or attempted
transfer or assignment thereof if such transfer, assignment or
attempted transfer or assignment would result in any violation of
Law or constitute a breach of any Assigned Contract or any
contract, license, franchise or other agreement to which a
Transferred Subsidiary is a party. In such event (i) Seller
shall and shall cause the Seller Subsidiaries to, and Buyer shall
and shall cause the Buyer Subsidiaries to, use their reasonable
efforts in good faith to obtain any such consent or approval, or
have any such injunction, restraining order or decree lifted, as
promptly as practicable thereafter whereupon the transfer or
assignment shall automatically be deemed to have been made
without further action by any Person, and (ii) if in the
reasonable judgment of Buyer such consent or approval may not be
obtained, or any such injunction, restraining order or decree
lifted, in an acceptable period of time, the parties shall use
reasonable efforts in good faith to cooperate, and to cause each
of their respective Affiliates to cooperate, in any lawful
arrangement designed to provide the applicable Buyer Entity with
the benefits relating to any such Business Assets.
3.4 Deliveries by Buyer
At the Closing, Buyer shall deliver or cause the applicable
Buyer Subsidiaries to deliver to the applicable Seller Entities
the following:
(a) the Purchase Price as provided in Section 2.4 plus the amount
of any applicable state and local sales and use, value added or
similar tax which under applicable law is required to be
collected by the Seller Entities in connection with the
Transactions;
(b) a Bill of Sale, Assignment and Assumption Agreement duly
executed by each Buyer Entity describing the Purchased Assets
being acquired by such Buyer Entity from each Seller Entity and
the Assumed Liabilities of each Seller Entity being assumed by
such Buyer Entity;
(c) the Office Lease duly executed by Buyer;
(d) the Trademark License duly executed by Buyer;
(e) the Transition Services Agreement duly executed by Buyer;
(f) the other certificates, agreements, documents, instruments
and opinions referred to in Sections 7.3 and 12.3 hereof; and
(g) such other documents, instruments and certificates as Seller
or its counsel may reasonably request.
3.5 Deliveries by Seller
At the Closing, Seller shall deliver or cause the applicable
Seller Entities to deliver to the applicable Buyer Entities the
following:
(a) a Bill of Sale, Assignment and Assumption Agreement duly
executed by each Seller Entity describing the Purchased Assets
being sold by such Seller Entity to each Buyer Entity and the
Assumed Liabilities of such Seller Entity which are being assumed
by each Buyer Entity;
(b) the stock certificates representing the Purchased Shares,
accompanied by stock powers duly endorsed in blank by the record
owner thereof;
(c) assignments in recordable form of the Purchased Assets which
are Intellectual Property or Assigned Contracts which relate to
Intellectual Property duly executed by the applicable Seller
Entity;
(d) the Transition Services Agreement duly executed by Seller;
(e) the Office Lease duly executed by Seller;
(f) the Trademark License duly executed by Seller;
(g) the stock books, stock ledgers, minute books and corporate
seals of the Transferred Subsidiaries in the possession of any
Seller Entity;
(h) the certificates, agreements, documents, instruments and
opinions referred to in Section 7.2 hereof;
(i) letters of resignation executed by such directors and/or
officers of each of the Transferred Subsidiaries (other than B&L
India) as shall be requested by Buyer; and
(j) such other documents, instruments and certificates as Buyer
or its counsel may reasonably request.
3.6 Further Assurances
From time to time after the Closing Date, each of Seller and
Buyer will execute and deliver, or cause to be executed and
delivered by its Affiliates, such other instruments of
conveyance, assignment, transfer, delivery and assumption, as
applicable, and will cooperate and assist in providing
information for and completing regulatory filings and effecting
the transfer of any permits or other authorizations issued by any
Governmental Entity and will take such other actions as the other
party may reasonably request in order to more effectively
transfer, convey, assign and deliver to the Buyer Entities the
Business Assets, to effect the assumption by the Buyer Entities
of the Assumed Liabilities and to consummate the transactions
contemplated hereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
4.1 Organization, Good Standing and Power
(a) Each of Seller, the Seller Subsidiaries and the Transferred
Subsidiaries is a corporation duly organized, validly existing
and in good standing under the Laws of the jurisdiction of its
incorporation, and has the requisite corporate power and
authority to own, lease and operate the Business Assets owned by
it and to conduct the Business as now conducted by it. Seller
has all requisite corporate power and authority to enter into
this Agreement and the Transaction Documents to which it is a
party and to perform its obligations hereunder and thereunder.
Each of the Seller Subsidiaries has all requisite corporate power
and authority to enter into the Transaction Documents to which it
is a party and to perform its obligations thereunder. Each of
Seller, the Seller Subsidiaries and the Transferred Subsidiaries
are duly authorized, qualified or licensed to do business as a
foreign corporation and, where such concept is applicable, are in
good standing, in each of the jurisdictions in which its
ownership of the Business Assets owned by it, or the conduct of
the Business by it, requires such authorization, qualification or
licensing, except where the failure to so qualify or to be in
good standing would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(b) Section 4.1 of the Seller Disclosure Schedule sets forth with
respect to each Transferred Subsidiary the number of shares of
capital stock of such Transferred Subsidiary outstanding and the
number of such shares owned beneficially and of record by each
Seller Entity. There are no outstanding options, warrants, or
other rights to acquire, or any plans, contracts, or commitments
providing for the issuance of or the right to acquire: (i) any
capital stock of any Transferred Subsidiary, or (ii) any
securities or other obligations convertible into or exchangeable
for the capital stock of any Transferred Subsidiary. Except as
described on Section 4.1 of the Seller Disclosure Schedule, there
are no voting trusts, proxies, agreements, or other arrangements
relating to the Purchased Shares.
4.2 Authorization and Validity of Agreements
The execution, delivery and performance by Seller of this
Agreement and the Transaction Documents to which it is a party
and the consummation by Seller of the Transactions have been duly
authorized by the Board of Directors of Seller. No other
corporate or stockholder action on the part of Seller is
necessary for the authorization, execution, delivery and
performance by Seller of this Agreement and the Transaction
Documents to which it is a party and the consummation by Seller
of the Transactions. On the Closing Date, the execution,
delivery and performance by each of the Seller Subsidiaries of
the Transaction Documents to which it is a party will have been
duly authorized by all corporate action required on its part.
This Agreement has been duly executed and delivered by Seller and
constitutes a valid and legally binding obligation of Seller,
enforceable against Seller in accordance with its terms, subject
to (i) the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
relating to or affecting the enforcement of creditor's rights
generally, (ii) general equitable principles (whether considered
in a proceeding in equity or at law) and (iii) an implied
covenant of good faith and fair dealing. When executed and
delivered as provided in this Agreement, each Transaction
Document will be a valid and binding obligation of each of the
Seller Entities (to the extent that any thereof is a party
thereto), enforceable against the Seller Entities in accordance
with its terms, subject to (i) the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting the enforcement of
creditors' rights generally, (ii) general equitable principles
(whether considered in a proceeding in equity or at law) and
(iii) an implied covenant of good faith and fair dealing.
4.3 Consent and Approvals; No Conflict
Except as described in Section 4.3 of the Seller Disclosure
Schedule and except for the pre-merger notification requirements
of the HSR Act, the expiration or early termination of the
waiting periods thereunder and such filings, notifications and
approvals as are required under foreign antitrust or competition
Laws, the execution, delivery and performance of this Agreement
and the Transaction Documents by Seller, the execution, delivery
and performance of the Transaction Documents by the Seller
Subsidiaries, and the consummation by each of them of the
Transactions:
(a) will not (with or without the giving of notice or the lapse
of time or both) violate, or require any consent, approval,
filing or notice to be made by the Seller Entities under, any
provision of any Law applicable to the Seller Entities or the
Transferred Subsidiaries except where any such violations or the
failure to obtain or make any such consents, approvals, filings
or notices would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or
materially impair the ability of the Seller Entities to perform
their respective obligations under this Agreement or the
Transaction Documents; and
(b) will not (with or without the giving of notice or the lapse
of time or both) conflict with, result in the breach or
termination of any provision of, constitute a default under,
result in the acceleration of the performance of an obligation of
the Seller Entities or the Transferred Subsidiaries under, or
result in the creation of a lien, charge or encumbrance upon the
Business Assets pursuant to: (i) the charter or by-laws (or
analogous organizational documents) of a Seller Entity or a
Transferred Subsidiary, or (ii) any indenture, mortgage, deed of
trust, lease, licensing agreement, contract, instrument or other
agreement to which a Seller Entity or Transferred Subsidiary is a
party or by which a Seller Entity, Transferred Subsidiary or any
of the Business Assets is bound, except for such conflicts,
breaches, terminations, defaults, accelerations, liens, charges
or encumbrances which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect or materially impair the ability of a Seller Entity to
perform its obligations under this Agreement or any other
agreement contemplated hereby to which it is a party.
4.4 Entire Business
(a) Except for the Excluded Assets, and except as set forth in
Section 4.4 of the Seller Disclosure Schedule, the Business
Assets and the services, rights and agreements described in the
Transition Services Agreement and the Trademark License (subject
to the limitations therein and in the related Exhibits), all
taken as a whole, constitute all of the assets, properties and
rights used to conduct the Business in all material respects as
conducted on the date hereof.
(b) Section 2.1(a)(ii) of the Seller Disclosure Schedule
describes the finished goods, work-in-process, component parts
and raw materials inventory owned by the Transferred Subsidiaries
as of the Baseline Date. Section 2.1(b)(ii) of the Seller
Disclosure Schedule describes the accounts receivable of the
Transferred Subsidiaries reflected on the Baseline Net Operating
Assets Statement. Section 2.1(c)(ii) of the Seller Disclosure
Schedule describes the real property owned by the Transferred
Subsidiaries as of the Baseline Date. Section 2.1(d)(ii) of the
Seller Disclosure Schedule describes the fixed assets and
tangible personal property owned by the Transferred Subsidiaries
as of the Baseline Date. Section 2.1(e)(ii) of the Seller
Disclosure Schedule describes the Intellectual Property owned by
the Transferred Subsidiaries as of the Baseline Date. With
respect to B&L India, each of the Sections of the Seller
Disclosure Schedule referenced in this Section 4.4(b) includes
only those items owned by B&L India which primarily relate to the
Business.
4.5 Title to Purchased Shares and Purchased Assets
On the Closing Date, the applicable Seller Entity will have
good title to any Purchased Shares free and clear of all liens,
charges and other encumbrances. On the Closing Date, Seller or
the Seller Subsidiaries will have good title to, or a valid and
binding leasehold interest in, the Purchased Assets and the
Transferred Subsidiaries will have good title to the assets
described on Sections 2.1(a)(ii), 2.1(b)(ii), 2.1(c)(ii),
2.1(d)(ii), and 2.1(e)(ii) of the Seller Disclosure Schedule, to
the extent that such assets have not been sold or otherwise
disposed of prior to the Closing Date in accordance with this
Agreement, and the other assets owned by the Transferred
Subsidiaries as of the Closing Date, in each case free and clear
of all liens, charges and other encumbrances, except: (i) as set
forth in Section 4.5 of the Seller Disclosure Schedule or any
Exhibit hereto; (ii) as disclosed in the Financial Information;
(iii) liens for Taxes, assessments and other governmental charges
not yet due and payable or due but not delinquent or being
contested in good faith by appropriate proceedings; (iv)
mechanics', workmen's, repairmen's, warehousemen's, carriers' or
other like liens arising or incurred in the ordinary course of
business, (v) original purchase price conditional sales contracts
and equipment leases with third parties entered into in the
ordinary course of business; (vi) with respect to real property:
(A) easements, quasi-easements, licenses, covenants, rights-of-
way and other similar restrictions, including, without
limitation, any other agreements, conditions or restrictions
which would be shown by a current title report or other similar
report or listing, (B) any conditions that may be shown by a
current survey, title report or physical inspection and (C)
zoning, building and other similar restrictions; (vii) liens,
charges or other encumbrances which do not materially impair the
continued use and operation of such properties in the manner in
which they are being used by the Seller Entities and the
Transferred Subsidiaries on the date hereof or which,
individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect; and (viii) with
respect to all Intellectual Property requiring subsequent
recording or registration to perfect title (all items included in
(i) through (viii) are referred to collectively herein as the
"Permitted Liens").
4.6 Financial Information
Seller has made available to Buyer an unaudited balance sheet
for the Business as at December 26, 1998 and related unaudited
statements of income and retained earnings for the Business for
the fiscal year then ended (the "Financial Statements") and the
Baseline Net Operating Assets Statement relating to the Business
included in Section 4.6 of the Seller Disclosure Schedule
(together with the Financial Statements, the "Financial
Information"). Subject to the qualifications, assumptions and
other limitations specified in the Financial Information and the
notes thereto, the Financial Information has been prepared from
the accounting books and records of the Seller Entities and
Transferred Subsidiaries in accordance with the Accounting
Principles consistently applied during the period involved,
present fairly in all material respects the financial condition
and results of operations of the Business as of the date and for
the period presented.
4.7 Absence of Undisclosed Liabilities
Except as disclosed in Section 4.7 of the Seller Disclosure
Schedule, as of the date hereof, the Business does not have any
liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by the Accounting
Principles to be recognized or disclosed on a balance sheet of
the Business or in the notes thereto, except (i) liabilities
reflected in the Baseline Net Operating Assets Statement, and
(ii) liabilities incurred after the date of the Baseline Net
Operating Assets Statement in the ordinary course of business
consistent with past practice (none of which, individually or in
the aggregate, has had a Material Adverse Effect).
4.8 Absence of Certain Changes
Except as set forth in Section 4.8 of the Seller Disclosure
Schedule or otherwise disclosed in this Agreement or the Exhibits
hereto, including, without limitation, the Transactions, since
the Baseline Date, the Seller Entities and the Transferred
Subsidiaries have conducted the Business in the ordinary course
consistent with past practice, and other than in the ordinary
course, have not, with respect to the Business: (i) sold,
assigned, pledged, hypothecated or otherwise transferred any of
the Business Assets, other than such sales, assignments, pledges,
hypothecations or other transfers which would not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect and other than transfers contemplated by this
Agreement and transfers between or among the Seller Entities and
Transferred Subsidiaries, (ii) terminated or materially amended
any contract or other agreement that is material to the Business
taken as a whole, (iii) suffered any damage, destruction or other
casualty loss (not covered by insurance) which would,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect, (iv) except for salary, bonuses and
incentive compensation paid or adjusted in the ordinary course of
business, increased the compensation payable or to become payable
by any Seller Entity or Transferred Subsidiary to any Business
Employees or increased any employee benefit plan, payment or
arrangement for any such Business Employees; or (v) entered into
an agreement to do any of the foregoing.
4.9 Inventory
Except as set forth in Section 4.9 of the Seller Disclosure
Schedule, all inventory of the Business is valued in accordance
with the Accounting Principles and, except for items of obsolete,
overstocked or unusable inventory and materials of below-standard
quality which are reflected in the Financial Information net of
any reserves therefor, consists of items of a quantity and
quality currently usable and salable in the ordinary course of
business consistent with past practices.
4.10 Legal Proceedings
Except as described in Section 4.10 or 4.12 of the Seller
Disclosure Schedule, to the Knowledge of Seller there is no
litigation, proceeding, or governmental investigation to which
any Seller Entity or Transferred Subsidiary is a party pending or
threatened in writing against any Seller Entity or Transferred
Subsidiary (i) relating to the Business Assets or the Business or
the Transactions as to which there is a reasonable likelihood of
an outcome or outcomes that would, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect, or (ii) which seeks to question, delay or prevent the
consummation of, or would materially impair the ability of any
Seller Entity to consummate, the Transactions.
4.11 Labor Relations Matters
(a) U.S. Labor Relations Matters. Except as described in Section
4.11 of the Seller Disclosure Schedule, to the Knowledge of
Seller there are no labor controversies pending or threatened
with respect to the Business which, individually or in the
aggregate, are reasonably expected to have a Material Adverse
Effect. Neither Seller nor any U.S. Seller Subsidiary nor any
U.S. Transferred Subsidiary is a party to any collective
bargaining agreements with respect to the Business with any labor
union or other representative of employees.
(b) Non-U.S. Labor Relations Matters. Except as set forth in
Section 4.11 of the Seller Disclosure Schedule, no non-U.S.
Seller Subsidiary (with respect to the Business) nor any non-U.S.
Transferred Subsidiary is a party to any collective bargaining
agreements with any labor union or other representative of
employees or any works' council or similar entity under
applicable Laws, including local agreements, amendments,
supplements, letters and memoranda of understanding of any kind,
nor, to the knowledge of Seller, is there any pending or
threatened union organization activity by or among any employees
of any non-U.S. Seller Subsidiary (with respect to the Business)
or non-U.S. Transferred Subsidiary.
4.12 Intellectual Property
Except as described in Section 4.12 of the Seller Disclosure
Schedule, the Seller Entities or the Transferred Subsidiaries
own, or are licensed to use, all material Intellectual Property
used to conduct the Business as presently conducted. Except as
set forth in Section 4.10 or 4.12 of the Seller Disclosure
Schedule, to Seller's Knowledge (i) there are no actions or
proceedings pending or threatened in writing which challenge any
Seller Entity's or Transferred Subsidiary's right to use any of
the Intellectual Property necessary to conduct the Business, and
(ii) the Seller Entities' and Transferred Subsidiaries' operation
of the Business has not infringed and does not infringe or
otherwise violate the rights of others in any manner which would,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
4.13 Government Authorizations
Except as described in Section 4.13 of the Seller Disclosure
Schedule, the Seller Entities and Transferred Subsidiaries have
all licenses, permits, consents, approvals, authorizations,
qualifications and orders of any Governmental Entity required for
the conduct of the Business as presently conducted by the Seller
Entities and Transferred Subsidiaries, except where the failure
to have such licenses, permits, consents, approvals,
authorizations, qualifications and orders would not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
4.14 Compliance with Applicable Laws
Except as described in Section 4.14 of the Seller Disclosure
Schedule (and without admitting any liability with respect
thereto), the Business has been conducted by the Seller Entities
and Transferred Subsidiaries so as to comply with all applicable
Laws of any Governmental Entity, except where the failure to
comply with such Laws would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
4.15 Regulatory Compliance
Except as described in Section 4.15 of the Seller Disclosure
Schedule (and without admitting any liability with respect
thereto), the Business has been conducted by the Seller Entities
and Transferred Subsidiaries so as to comply with all applicable
binding administrative policies of any Governmental Entity
relating to the manufacture, sale and distribution of sunglasses
and sunglass products except where such failure to comply would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
4.16 Employee Benefit Plans
(a) Section 4.16 of the Seller Disclosure Schedule sets forth
with respect to all U.S. locations of the Business a complete and
correct list of all "employee benefit plans", as defined in
Section 3(3) of ERISA, and any other pension plans or employee
benefit arrangements or Payroll Practices (including, without
limitation, severance pay, vacation pay, occasional absence pay,
company awards, salary continuation for disability, sick leave,
deferred compensation, bonus or other incentive compensation,
stock option or stock purchase arrangements or policies)
maintained, or contributed to, by any Seller Entity or
Transferred Subsidiary for the benefit of any Business Employees
or of any trade or business (whether or not incorporated) which
is treated with any Seller Entity or Transferred Subsidiary as a
single employer under Section 414(b), (c), (m) or (o) of the Code
("ERISA Affiliate") or to which any Seller Entity or Transferred
Subsidiary contributes or is obligated to contribute thereunder
with respect to Business Employees ("Plans"). Section 4.16 of
the Seller Disclosure Schedule identifies, in separate
categories, Plans in which Business Employees participate that
are (i) subject to Sections 4063 and 4064 of ERISA ("Multiple
Employer Plans"), (ii) multiemployer plans (as defined in Section
4001(a)(3) of ERISA) ("Multiemployer Plans") or (iii) Welfare
Plans providing continuing benefits after the termination of
employment (other than health plan continuation coverage as
required by Section 4980B of the Code and at the former
employee's own expense).
(b) Each Plan is in writing and Seller has made available to
Buyer with a true and complete copy of the most recent version of
each Plan document, including all amendments thereto, and a true
and complete copy of each material document prepared in
connection with each such Plan, including, as applicable, (i) a
copy of each trust or other funding arrangement, (ii) each
summary plan description and summary of material modifications,
(iii) the most recently filed Internal Revenue Service ("IRS")
Form 5500, including all attachments thereto, (iv) the most
recently received IRS determination letter for each such Plan,
and (v) the most recently prepared actuarial report and financial
statement in connection with each such Plan.
(c) Each of the Plans intended to qualify under Section 401(a) of
the Code ("Qualified Plans") has received a favorable
determination letter from the IRS that such Plan is so qualified,
and nothing has occurred with respect to the operation of any
such Plan which, either individually or in the aggregate, would
reasonably be expected to cause the loss of such qualification or
the imposition of any liability, penalty or tax under ERISA or
the Code.
(d) There has been no prohibited transaction (within the meaning
of Section 406 of ERISA or Section 4975 of the Code) with respect
to any Plan in which employees of the Business participate.
Neither Seller nor any ERISA Affiliate is currently liable or has
previously incurred any liability for any tax or penalty arising
under Section 4971, 4972, 4979, 4980 or 4980B of the Code or
Section 502(c) of ERISA, and no fact or event exists which could
reasonably be expected to give rise to any such liability.
Neither Seller nor any ERISA Affiliate has been required to post
any security under Section 307 of ERISA or Section 401(a)(29) of
the Code with respect to any Plan in which employees of the
Business participate and no fact or event exists which could
reasonably be expected to give rise to any such lien or
requirement to post any such security.
(e) All contributions and premiums required by law or by the
terms of any Plan in which Business Employees participate or any
agreement relating thereto have been timely made (without regard
to any waivers granted with respect thereto) and all such Plans
subject to Section 412 of the Code in which Business Employees
participate meet all minimum funding requirements under
applicable U.S. and non-U.S. Laws.
(f) Each of the Plans in which Business Employees participate has
been maintained in accordance with its terms and all provisions
of applicable laws and regulations with the possible exception of
matters that would not reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Effect.
All amendments and actions required to bring each of such Plans
into conformity in all material respects with all of the
applicable provisions of ERISA and other applicable laws and
regulations have been made or taken except to the extent that
such amendments or actions are not required by law to be made or
taken until a date after the Closing Date.
(g) (i) The Seller Entities and Transferred Subsidiaries are in
compliance in all material respects with applicable Laws and
collective bargaining agreements with respect to all benefit
plans, contracts and arrangements covering non-U.S. Business
Employees ("Non-U.S. Benefit Plans"); (ii) the Seller Entities
and Transferred Subsidiaries have no unfunding liabilities in
violation of local Law with respect to any Non-U.S. Benefit Plan
except as set forth on Section 4.16 of the Seller Disclosure
Schedule; (iii) all benefits payable under each of the Non-U.S.
Benefit Plans are provided in accordance with the terms of the
governing provisions of the relevant Non-U.S. Benefit Plan; and
(iv) Seller is not aware of any failure to comply with any
applicable Law which would or might result in the loss of tax
approval or qualification of any Non-U.S. Benefit Plans.
4.17 Environmental Matters
Except as described in Section 4.17 of the Seller Disclosure
Schedule, as of the date hereof: (i) the Business complies in
all respects with applicable Laws relating to environmental
matters, pollution, or waste disposal as in effect on the date
hereof (collectively, "Environmental Laws"), except where the
failure to comply with such laws, rules and regulations would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect; (ii) the Seller Entities and
Transferred Subsidiaries have obtained and are in compliance with
all permits required under Environmental Laws for the conduct of
the Business, except where the failure to obtain and comply with
such permits would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; (iii)
none of the operations of the Business is subject to any judicial
or administrative proceeding alleging the violation of or
liability under any Environmental Laws which if adversely
determined would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; (iv) in connection
with the operations of the Business, no Seller Entity or
Transferred Subsidiary has released or disposed of any material
that is defined as hazardous or toxic under any Environmental Law
at any of the Business facilities, except as would not reasonably
be expected to result, individually or in the aggregate, in a
Material Adverse Effect; (v) none of the real property owned or
leased by a Seller Entity or Transferred Subsidiary included in
the Business Assets is currently listed on the National
Priorities List or the Comprehensive Environment Response Cleanup
Liability Information System list prepared pursuant to the
Federal Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA"); and (vi) in connection with the
operations of the Business, the Seller Entities and Transferred
Subsidiaries have not received any written notice pursuant to
which they have been identified as a potentially responsible
party under CERCLA or any equivalent State statute.
4.18 Employees
Section 4.18 of the Seller Disclosure Schedule contains a list
of all Business Employees whose projected 1999 annual base
compensation equals or exceeds $100,000 and a summary of the
number of Business Employees employed, as of March 1, 1999, at
each location at which the Business is conducted.
4.19 Tax Matters
Except as disclosed in Section 4.19 of the Seller Disclosure
Schedule: (i) each Transferred Subsidiary has filed all material
Tax Returns required to be filed by it, or requests for
extensions to file such Tax Returns have been timely filed,
granted and have not expired and all such Tax Returns are
complete and correct in all material respects; (ii) each
Transferred Subsidiary has paid all material Taxes which have
become due as shown on such Tax Returns; (iii) no material claim
for unpaid Taxes is being asserted in writing by a Tax authority
with respect to any Transferred Subsidiary; and (iv) no
Transferred Subsidiary is a party to any Tax sharing agreement.
4.20 Contracts
(a) Except as specified in Section 4.20 of the Seller Disclosure
Schedule, all contracts, maintenance and service agreements,
purchase commitments for materials and other services,
advertising and promotional agreements, leases, license
agreements and other agreements pertaining to the Business that
are included in the Business Assets which individually involve
payments or other financial commitments as of the date hereof in
excess of $500,000 (the "Contracts") are in full force and effect
and are valid and enforceable in accordance with their respective
terms, subject to (i) the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting the enforcement of
creditors' rights generally, (ii) general equitable principles
(whether considered in a proceeding in equity or at law) and
(iii) an implied covenant of good faith and fair dealing and
except where the failure to be in full force and effect and valid
and enforceable would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Except
as specified in Section 4.20 of the Seller Disclosure Schedule,
the Seller Entities and Transferred Subsidiaries are not in
breach or default in the performance of any obligation under any
Contracts and no event has occurred or has failed to occur
whereby any of the other parties thereto have been or will be
released therefrom or will be entitled to refuse to perform
thereunder, except for such breaches, defaults and events which
would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. To the Knowledge of
Seller, as of the date hereof, no other party or parties to any
Contract relating to the Business is in breach or default in the
performance of any obligation thereunder except for such breaches
and defaults which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
(b) Section 2.1(f)(iii)(B) of the Seller Disclosure Schedule
describes certain leases relating to real property to which a
Transferred Subsidiary is a party as of the date hereof. Section
2.1(f)(v)(B) of the Seller Disclosure Schedule describes certain
license or franchise agreements, contracts or other arrangements
to which a Transferred Subsidiary is a party and pursuant to
which, as of the date hereof, (A) such Transferred Subsidiary has
rights in or the right to use Intellectual Property which is
owned by any other Person, or (B) any other Person has any rights
in or the right to use any Intellectual Property which is owned
by such Transferred Subsidiary. Section 2.1(f)(vi)(B) of the
Seller Disclosure Schedule describes certain Authorized
Distributor Agreements, Sales Agent Agreements, Manufacturer's
Representative Agreements, Commercial Agent Agreements and
advertising, marketing and endorsement agreements to which a
Transferred Subsidiary is a party as of the date hereof. Section
2.1(f)(ix)(B) of the Seller Disclosure Schedule describes certain
other agreements, contracts, licenses, franchises, purchase
orders and arrangements to which a Transferred Subsidiary is a
party as of the date hereof. True, complete and correct copies
of the agreements and other documents described on Section
2.1(f)(iii)(B), 2.1(f)(v)(B), 2.1(f)(vi)(B) and 2.1(f)(ix)(B) of
the Seller Disclosure Schedule have been made available to Buyer.
With respect to B&L India, each of the Sections of the Seller
Disclosure Schedule referenced in this Section 4.20(b) includes
only those agreements and other documents which primarily relate
to the Business.
4.21 Accounts Receivable
Except as disclosed in Section 4.21 of the Seller Disclosure
Schedule, the accounts receivable reflected in the Baseline Net
Operating Assets Statement have arisen out of bona fide
transactions in the ordinary course of business and are owned by
a Seller Entity or Transferred Subsidiary free and clear of all
liens.
4.22 Certain Fees
With the exception of fees and expenses payable to Warburg
Dillon Read LLC, which shall be paid by Seller, no Seller Entity,
Transferred Subsidiary nor of their respective officers,
directors or employees, on behalf of such Seller Entity or
Transferred Subsidiary, has employed any broker or finder or
incurred any other liability for any brokerage fees, commissions
or finders' fees in connection with the Transactions.
4.23 Year 2000
Except as set forth in Section 4.23 of the Seller Disclosure
Schedule, to the Knowledge of Seller, all computer software,
hardware and related systems included in the Business Assets and
used in connection with the Business are either (i) Year 2000
compliant or (ii) designated to receive upgrades or modifications
to become Year 2000 compliant, except where a failure of such
software, hardware and related systems to be Year 2000 compliant
would not reasonably be expected to have a Material Adverse
Effect. For purposes of this Section 4.23, "Year 2000 Compliant"
shall mean that the computer software, hardware or related
systems in question are designed to be used prior to, during, and
after the calendar year 2000 A.D., without error relating to the
processing, calculation, comparing, sequencing or other use of
data including calendar dates after 1999.
4.24 No Other Representations or Warranties
Except for the representations and warranties contained in
this ARTICLE 4, neither Seller nor any other Person makes any
express or implied representation or warranty on behalf of any
Seller Entity or Transferred Subsidiary.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1 Organization, Good Standing and Power
Each of Buyer and the Buyer Subsidiaries is a corporation duly
organized, validly existing and in good standing under the Laws
of the jurisdiction of its incorporation, and has the requisite
corporate power and authority to own, lease and operate the
assets owned by it and to conduct the business as now conducted
by it. Buyer has all requisite corporate power and authority to
enter into this Agreement and the Transaction Documents to which
it is a party and to perform its obligations hereunder and
thereunder. Each of the Buyer Subsidiaries has all requisite
corporate power and authority to enter into the Transaction
Documents to which it is a party and to perform its obligations
thereunder. Each of Buyer and the Buyer Subsidiaries are duly
authorized, qualified or licensed to do business as a foreign
corporation and, where such concept is applicable, are in good
standing, in each of the jurisdictions in which its ownership of
assets owned by it, or the conduct of the business as now
conducted by it, requires such authorization, qualification or
licensing, except where the failure to so qualify or to be in
good standing would not, individually or in the aggregate,
reasonably be expected to have a Buyer Material Adverse Effect.
5.2 Authorization and Validity of Agreements
The execution, delivery, and performance by Buyer of this
Agreement and the Transaction Documents to which it is a party
and the consummation by Buyer of the Transactions have been duly
authorized by the Board of Directors of Buyer. No other
corporate or stockholder action on the part of Buyer is necessary
for the authorization, execution, delivery and performance by
Buyer of this Agreement and the Transaction Documents to which it
is a party and the consummation by Buyer of the Transactions. On
the Closing Date, the execution, delivery and performance by each
of the Buyer Subsidiaries of the Transaction Documents to which
it is a party will have been duly authorized by all corporate
action required on its part. This Agreement has been duly
executed and delivered by Buyer and constitutes a valid and
legally binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, subject to (i) the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting the
enforcement of creditor's rights generally, (ii) general
equitable principles (whether considered in a proceeding in
equity or at law) and (iii) an implied covenant of good faith and
fair dealing. When executed and delivered as provided in this
Agreement, each Transaction Document will be a valid and binding
obligation of each of the Buyer Entities (to the extent that any
thereof is a party thereto), enforceable against the Buyer
Entities in accordance with its terms, subject to (i) the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting the
enforcement of creditors' rights generally, (ii) general
equitable principles (whether considered in a proceeding in
equity or at law) and (iii) an implied covenant of good faith and
fair dealing.
5.3 Consents and Approvals; No Conflict
Except as described in Section 5.3 of the Buyer Disclosure
Schedule and except for the pre-merger notification requirements
of the HSR Act, the expiration or early termination of the
waiting periods thereunder and such filings, notifications and
approvals as are required under foreign antitrust or competition
Laws, the execution, delivery and performance of this Agreement
and the Transaction Documents by Buyer, the execution, delivery
and performance of the Transaction Documents by the Buyer
Subsidiaries, and the consummation by each of them of the
Transactions:
(a) will not (with or without the giving of notice or the lapse
of time or both) violate, or require any consent, approval,
filing or notice to be made by the Buyer Entities under, any
provision of any Law applicable to the Buyer Entities except
where any such violations or the failure to obtain or make any
such consents, approvals, filings or notices would not,
individually or in the aggregate, reasonably be expected to have
a Buyer Material Adverse Effect or materially impair the ability
of the Buyer Entities to perform their respective obligations
under this Agreement or the Transaction Documents; and
(b) will not (with or without the giving of notice or the lapse
of time or both) conflict with, result in the breach or
termination of any provision of, constitute a default under,
result in the acceleration of the performance of an obligation of
a Buyer Entity under, or result in the creation of a lien, charge
or encumbrance upon the assets of a Buyer Entity pursuant to: (i)
the charter or by-laws (or analogous organizational documents) of
a Buyer Entity, or (ii) any indenture, mortgage, deed of trust,
lease, licensing agreement, contract, instrument or other
agreement to which a Buyer Entity is a party or by which a Buyer
Entity or any of its assets is bound, except for such conflicts,
breaches, terminations, defaults, accelerations, liens, charges
or encumbrances which would not, individually or in the
aggregate, reasonably be expected to have a Buyer Material
Adverse Effect or materially impair the ability of a Buyer Entity
to perform its obligations under this Agreement or any other
agreement contemplated hereby to which it is a party.
5.4 Legal Proceedings
To the Knowledge of Buyer, there is no litigation, proceeding
or governmental investigation pending or threatened against any
Buyer Entity which seeks to question, delay or prevent the
consummation of, or would materially impair the ability of any
Buyer Entity to consummate, the Transactions.
5.5 Certain Fees
With the exception of fees and expenses payable to Rothschild
Inc., which shall be paid by Buyer, no Buyer Entity nor any of
their respective officers, directors or employees, on behalf of
such Buyer Entity, has employed any broker or finder or incurred
any other liability for any brokerage fees, commissions or
finders' fees in connection with the Transactions.
5.6 Purchase for Investment
Each of the Buyer Entities acquiring Purchased Shares pursuant
to this Agreement is acquiring the Purchased Shares solely for
the purpose of investment and not with a view to, or for sale in
connection with any distribution thereof in violation of the
Securities Act. Buyer, for itself and each Buyer Subsidiary
acquiring Purchased Shares, acknowledges that the Purchased
Shares are not registered under the Securities Act or under any
state, local or foreign securities Laws, and that the Purchased
Shares may not be transferred or sold except pursuant to the
registration provisions of the Securities Act or pursuant to an
applicable exemption therefrom and pursuant to applicable state,
local and foreign Laws.
5.7 Due Diligence
In connection with the negotiation and execution of this
Agreement, Buyer has performed a comprehensive due diligence
investigation of the Business and, with its advisors, has made
its own analysis and evaluation of the Business, the Purchased
Assets, Assumed Liabilities and Transferred Subsidiaries.
5.8 Knowledge of Buyer
Buyer is not aware of any breach of any representation or
warranty made by Seller and has no actual knowledge of any fact,
occurrence, event or condition that would reasonably be expected
to make any representation or warranty made by Seller untrue in
any respect or of any pending or threatened occurrence which
would reasonably be expected to make performance by Buyer or
Seller of any covenant or agreement contained herein
substantially impossible of performance.
5.9 No Other Representations or Warranties
Except for the representations and warranties contained in
this ARTICLE 5, neither Buyer nor any other Person makes any
express or implied representation or warranty on behalf of any
Buyer Entity.
ARTICLE 6
COVENANTS
6.1 Access to Information; Confidentiality
Seller agrees that, during the period commencing on the date
hereof and ending on the Closing Date, it will (a) give or cause
to be given to Buyer and its counsel, financial advisors,
auditors and other authorized representatives (collectively,
"Representatives") access to the properties, books and records of
the Seller Entities relating to the Business and to the
properties, books and records of the Transferred Subsidiaries, in
each case to the extent that Buyer may from time to time
reasonably request such access, (b) furnish or cause to be
furnished to Buyer such financial and operating data and other
information relating to the Business and the Business Assets as
Buyer may from time to time reasonably request, and (c) provide
Buyer and its Representatives such access as Buyer may reasonably
request to the representatives, officers and employees of the
Seller Entities and Transferred Subsidiaries to the extent they
are involved in the Business; provided, however, that (w) access
to the properties, books, records representatives, officers and
employees shall only be provided during normal business hours,
upon reasonable advance notice and in such manner as will not
interfere with the operation of the Business, (x) Seller shall
have the right to have a representative present at all times
access to properties, books, records representatives, officers
and employees is provided, (y) access to the properties, books,
records representatives, officers and employees of B&L India
shall only be required to the extent that Seller is reasonably
able to provide such access, and (z) Buyer shall reimburse Seller
for any extraordinary out-of-pocket expenses incurred in
providing such access, data and other information. Buyer agrees
that it will, and will cause its Affiliates and Representatives
to, continue to treat all information so obtained from any Seller
Entity and Transferred Subsidiary as "Confidential Information"
under the Confidentiality Agreement entered into between Seller
and Buyer dated June 1998 (the "Confidentiality Agreement"), and
will continue to honor its obligations thereunder and that if
requested by Seller, Buyer will cause any of its Representatives
so requested to enter into a written agreement acknowledging the
terms of the Confidentiality Agreement and agreeing to be bound
thereby.
6.2 Conduct of the Business Pending the Closing Date
Seller agrees that, except as permitted, required or
contemplated by this Agreement, any Transaction Documents, or the
Exhibits or Schedules attached hereto, including, without
limitation, those actions contemplated on Section 6.2 of the
Seller Disclosure Schedule, or as otherwise consented to or
approved in writing by Buyer, during the period commencing on the
date hereof and ending at the Closing Date:
(a) Seller will, and will cause the Seller Subsidiaries and
Transferred Subsidiaries to, operate the Business only in the
usual, regular and ordinary manner, on a basis consistent with
past practice; provided, that any Seller Entity or Transferred
Subsidiary shall have the option to take actions which are
consistent with its existing business plans;
(b) Seller will not, and will cause the Seller Subsidiaries and
Transferred Subsidiaries not to, amend or modify in any material
respect any Contract pertaining to the Business;
(c) Seller will not permit any Transferred Subsidiary to amend
its charter or by-laws (or analogous organizational documents),
except as may be required in connection with the consummation of
the Transactions;
(d) Seller will not permit any Transferred Subsidiary to issue or
agree to issue any additional shares of capital stock of any
class or series, or any securities convertible into or
exchangeable for shares of capital stock, or issue any options,
warrants or other rights to acquire any shares of capital stock
other than to a Seller Entity or other Transferred Subsidiary, as
applicable, and except for directors' qualifying shares; and
(e) other than pursuant to the existing business plans of the
Business, Seller will not, and will not permit any other Seller
Entity or Transferred Subsidiary to: (i) sell, transfer, dispose
of or encumber any Business Assets having a value, individually
or in the aggregate, in excess of $500,000, other than in the
ordinary course of business consistent with past practice; (ii)
enter into any employment or consulting agreement with any
Business Employees or grant any increase in the compensation of
Business Employees, except for increases in the ordinary course
of business consistent with past practice or as a result of
collective bargaining, any industrial award or as required by any
employment or other agreement, any policy or any bonus, pension,
profit-sharing or other plan or commitment; (iii) except as
otherwise contemplated by the capital expenditure budgets for the
Business, make any capital expenditure or commitment pertaining
to the Business in excess of $500,000 for any single project; or
(iv) issue, contract to issue, or cause to be issued or
contracted to issue, on behalf of the Business, additional
indebtedness for borrowed money or guarantees.
Notwithstanding the foregoing, any actions taken by B&L India
which are prohibited by this Section 6.2 or any actions required
to be taken by this Section 6.2 which are not taken by B&L India
shall not constitute a breach of this Section 6.2 unless a Seller
Entity is reasonably able to compel B&L India not to take such
prohibited action or to take such required action.
6.3 Excluded Assets and Excluded Liabilities of Transferred
Subsidiaries
Notwithstanding Section 6.2 or any other provision of this
Agreement, prior to the Closing Seller shall use commercially
reasonable efforts to cause the Transferred Subsidiaries to
dispose of the Excluded Assets owned by the Transferred
Subsidiaries and to satisfy the Excluded Liabilities owed by the
Transferred Subsidiaries. The Transferred Subsidiaries may
dispose of the Excluded Assets by any means selected by Seller,
including transferring them to Seller or any of its Affiliates.
The Excluded Liabilities owed by the Transferred Subsidiaries
will be deemed to have been satisfied if they are assumed by
Seller or any of its Affiliates. If any Transferred Subsidiary
is prohibited by any Law from transferring any Excluded Assets to
Seller or any of its Affiliates, or if such a transfer would
result in material adverse consequences to the Transferred
Subsidiary or the transferee of such Excluded Assets, then,
unless the Transferred Subsidiary otherwise disposes of such
Excluded Assets, such Excluded Assets shall be deemed to no
longer be Excluded Assets and shall for purposes of this
Agreement be treated in the same manner as all other assets owned
by the Transferred Subsidiaries as of the Closing Date. If
Seller and its Affiliates are prohibited by any Law from assuming
any Excluded Liabilities of any Transferred Subsidiary, or if
such an assumption would result in material adverse consequences
on the Transferred Subsidiary or the Person assuming such
Excluded Liabilities, then, unless the Transferred Subsidiary
otherwise satisfies such Excluded Liabilities, such Excluded
Liabilities shall be deemed to no longer be Excluded Liabilities
and shall for purposes of this Agreement be treated in the same
manner as all other liabilities of the Transferred Subsidiaries
as of the Closing Date. Without limiting the generality of the
foregoing, any Excluded Assets that are not disposed of, and any
Excluded Liabilities not satisfied, pursuant to this Section 6.3
will be included on the Closing Net Operating Assets Statement
notwithstanding the fact that the categories of such Excluded
Assets and Excluded Liabilities were not included on the Baseline
Net Operating Assets Statement.
6.4 Treatment of B&L India
(a) Seller shall use commercially reasonable efforts to purchase
from B&L India as soon as practicable all assets of B&L India
which do not relate primarily to the Business and to cause B&L
India to use the proceeds of such sale to satisfy any liabilities
which do not relate primarily to the Business. If such
transactions have not been consummated prior to the Closing Date,
B&L India shall be treated as a Deferred Subsidiary pursuant to
Section 3.3 until such transactions have occurred and until there
are no other circumstances that would otherwise cause B&L India
to remain a Deferred Subsidiary; provided, that (a) Seller may
waive the condition that the sale transactions be consummated
prior to a Deferred Closing, (b) the period after which a
transfer of the Purchased Shares of B&L India will be abandoned
as contemplated by Schedule 3.3(d) shall be twenty-four (24)
months, and (c) any payments pursuant to Schedules 3.3(c) and
3.3(d) shall be computed solely on the basis of the assets,
liabilities and operations of B&L India which are primarily
related to the Business, adjusted to take into account the
applicable Seller Entity's partial ownership interest in B&L
India.
(b) If, at the time the Deferred Closing for B&L India takes
place, B&L India has any assets or liabilities which do not
relate primarily to the Business (which assets and liabilities
would consist of assets and liabilities as of the Closing Date
that were not reflected on the Closing Net Operating Assets
Statement, plus any assets or liabilities acquired or incurred
after the Closing Date that were not taken into account in
computing the payments pursuant to Schedules 3.3(c), less any
assets and liabilities disposed of or satisfied after the Closing
Date not taken into account in computing the payments pursuant to
Schedules 3.3(c)), then (i) the applicable Seller Entity shall
pay the applicable Buyer Entity its percentage interest in B&L
India multiplied by the amount, if any, by which such liabilities
exceed such assets, and (ii) the applicable Buyer Entity shall
pay the applicable Seller Entity the applicable Seller Entity's
percentage interest in B&L India multiplied by the amount, if
any, by which such assets exceed such liabilities. Any such
payment shall be made within ninety (90) days following the
Deferred Closing Date for B&L India.
(c) For purposes of the Closing Net Operating Assets Statement,
only the assets and liabilities of B&L India as of the Closing
Date which relate primarily to the Business shall be considered,
and any Purchase Price adjustment resulting from an increase or
decrease in the net assets of B&L India between those reflected
on the Baseline Net Operating Assets Statement and those
reflected on the Closing Net Operating Assets Statement shall be
determined by multiplying such increase or decrease by the
applicable Seller Entity's percentage interest in B&L India. In
addition, the amount for which Seller has an indemnification
obligation pursuant to Sections 10.2(b)(i) or (iii) with respect
to B&L India shall be determined taking into account the
applicable Seller Entity's percentage interest in B&L India.
(d) In the event of any conflict between this Section 6.4 and any
other Section of this Agreement, this Section 6.4 shall govern,
and Section 6.3 shall not apply to B&L India.
6.5 Guarantees
Buyer shall use its commercially reasonable efforts (which
shall not include agreeing to any modifications of the terms of
the underlying obligations) to cause a Buyer Entity to be
substituted in all respects for the applicable Seller Entity,
effective as of the Closing, in respect of all obligations of any
Seller Entity under each of the guarantees, indemnities, surety
bonds, letters of credit and letters of comfort, including,
without limitation, any of the foregoing relating to any lease of
real property, set forth in Section 6.5 of the Seller Disclosure
Schedule given by any Seller Entity for the benefit of the
Business (the "Guarantees"). To the extent that a Buyer Entity is
unable to effect such substitution, Buyer shall indemnify the
applicable Seller Entity from, and promptly reimburse such Seller
Entity for, any liability incurred by such Seller Entity with
respect to any such Guarantee. Buyer shall, or shall cause
another Buyer Entity to, obtain letters of credit, on terms and
from financial institutions reasonably satisfactory to Seller,
with respect to the obligations covered by each of the Guarantees
for which a Buyer Entity has not effected such substitution and,
with respect to any uncancelled Guarantee for which no
substitution is effected or letter of credit is provided, Buyer
shall, pursuant to Section 10.2(a)(iii) and (iv), indemnify the
Seller Entities and their Affiliates against any liability under
any such Guarantee.
6.6 Further Actions
(a) Subject to the terms and conditions hereof, Seller and Buyer
agree to use their respective best efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective
the Transactions, including using best efforts: (i) to obtain
prior to the Closing Date all material licenses, certificates,
permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities and parties to material contracts
with the Seller Entities and Transferred Subsidiaries as are
necessary for the consummation of the transactions contemplated
hereby, including but not limited to such consents and approvals
as may be required under the HSR Act as set forth below and any
foreign antitrust or competition Laws; (ii) to effect all
necessary registrations and filings; and (iii) to furnish to each
other such information and assistance as reasonably may be
requested in connection with the foregoing. Seller and Buyer
shall cooperate fully with each other to the extent reasonably
required to obtain such consents.
(b) Buyer and Seller shall timely and promptly make all filings
which may be required by each of them in connection with the
consummation of the Transactions under the HSR Act and any
foreign antitrust or competition Laws. Each party shall furnish
to the other such necessary information and assistance as such
party may reasonably request in connection with the preparation
of any necessary filings or submissions by it to any Governmental
Entity, including, without limitation, any filings necessary
under the provisions of the HSR Act.
6.7 Notification
Each party shall notify the other party and keep it advised as
to (i) any litigation or administrative proceeding pending and
known to such party or, to its Knowledge, threatened against such
party which challenges the consummation of the Transactions, and
(ii) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in
connection with the Transactions.
6.8 No Action
Subject to the provisions of Sections 9.1 or 9.2, Seller and
Buyer shall not take any action inconsistent with their
obligations under this Agreement or which could materially hinder
or delay the consummation of the transactions contemplated by
this Agreement.
6.9 Office Lease for Use of Leased Property
On the Closing Date, Buyer and Seller shall execute and
deliver the Office Lease.
6.10 Trademark License for Use of Licensed Trademarks
On the Closing Date, Buyer and Seller shall execute and
deliver the Trademark License.
6.11 Transition Services
On the Closing Date, Buyer and Seller shall execute and
deliver the Transition Services Agreement pursuant to which
Seller agrees to provide certain transitional services the Buyer
Entities on and subject to the terms and conditions thereof.
6.12 Customs Drawbacks
Seller and Buyer agree that any customs drawbacks to which any
Seller Entity or Transferred Subsidiary is entitled which result
from the export by a Seller Entity, Buyer Entity or Transferred
Subsidiary, whether before or after the Closing Date, of finished
goods manufactured with imported raw materials or work in process
inventory on which customs duties were paid prior to the Closing
Date shall be the property of the Seller. Buyer agrees to, and
to cause the Buyer Subsidiaries and Transferred Subsidiaries to,
make any assignment and provide any manufacturing, import or
other documentation to Seller which is necessary to permit Seller
to collect such customs drawbacks.
6.13 Updated Schedules
Prior to the Closing, Seller shall deliver to Buyer a list of
additions to and changes from the Seller Disclosure Schedule, if
any, reflecting events, matters or changes occurring between the
date of this Agreement and the Closing Date. The delivery of
such list shall constitute an amendment of Seller's
representations and warranties set forth in ARTICLE 4 to the
extent that such representations and warranties are made as of
the Closing Date but not to the extent that such representations
and warranties are made as of the date of this Agreement.
ARTICLE 7
CONDITIONS PRECEDENT
7.1 Conditions to Obligations of Buyer and Seller
The respective obligations of Buyer and Seller to consummate
the Transactions shall be subject to the satisfaction at or prior
to the Closing of the following conditions:
(a) No Injunction, etc. At the Closing Date, there shall be no
injunction, restraining order or decree of any nature of any
court or Governmental Entity that is in effect that restrains or
prohibits the consummation of the Transactions directly relating
to the U.S., except for injunctions that do not restrain the
transfer of a material portion of the Business Assets.
(b) Regulatory Authorizations. All consents, approvals,
authorizations and orders of Governmental Entities that are
necessary to permit the consummation of the Transactions directly
relating to the U.S. and which, if not obtained, would be
reasonably likely to subject any Buyer Entity, Seller Entity or
Transferred Subsidiary, or any officer, director or agent of any
such Person, to civil or criminal liability or could render any
Transactions directly relating to the U.S. void or voidable (the
"Required Consents") shall have been obtained except where the
failure to obtain the Required Consents, individually or in the
aggregate, would not restrain the transfer of a material portion
of the Business Assets, and all applicable waiting periods
specified under the HSR Act shall have lapsed or been terminated.
(c) Material Portion of the Business Assets. For purposes of
Section 7.1(a) and (b), a material portion of the Business Assets
shall mean Business Assets located in the U.S. having a net
operating asset value of at least three percent (3%) of the
Purchase Price as reflected on the Allocation Schedule or, if the
Allocation Schedule has not been delivered, the most recently
completed net operating assets statement delivered by Seller to
Buyer.
7.2 Conditions Precedent to Obligations of Buyer
The obligations of Buyer to consummate the Transactions are
subject to the satisfaction (or waiver by Buyer) at or prior to
the Closing of each of the following conditions:
(a) Accuracy of Representations and Warranties. All
representations and warranties of Seller contained herein or in
any certificate or document delivered to Buyer pursuant hereto
shall be true and correct on and as of the Closing Date, with the
same force and effect as though such representations and
warranties had been made on and as of the Closing Date, except
(i) as contemplated or permitted by this Agreement, (ii) to the
extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty
shall have been true and correct as of such date, and (iii) to
the extent that any inaccuracies in such representations and
warranties, individually or in the aggregate, have not had, and
would not reasonably be expected to have, a Material Adverse
Effect.
(b) Performance of Agreements. Seller shall have performed all
obligations and agreements, and complied with all covenants and
conditions, contained in this Agreement to be performed or
complied with by it prior to or on the Closing Date except to the
extent that any breaches of such obligations, agreements,
covenants and conditions, individually or in the aggregate, have
not had, and would not reasonably be expected to have, a Material
Adverse Effect.
(c) Officer's Certificate. Buyer shall have received a
certificate of Seller, dated the Closing Date and executed by an
executive officer of Seller, to the effect that the conditions
specified in Sections 7.2(a) and (b) above have been fulfilled.
(d) Supporting Documents. Buyer shall have received (i) a
certificate of the New York Secretary of State as to the
existence of Seller, and (ii) a certificate of the Secretary or
an Assistant Secretary of Seller certifying as to the resolutions
adopted by Seller's Board of Directors and the incumbency and
specimen signatures of the officers of Seller executing this
Agreement and the Transaction Documents executed and delivered by
Seller.
(e) Office Lease. Seller shall have executed and delivered to
Buyer the Office Lease.
(f) Trademark License. Seller shall have executed and delivered
to Buyer the Trademark License.
(g) Transition Services Agreement. Seller shall have executed
and delivered to Buyer the Transition Services Agreement.
(h) Resignations. The directors and officers of the Transferred
Subsidiaries (other than B&L India) who have been requested to
resign by Buyer shall have tendered their resignations effective
as of the Closing Date.
(i) Other Documents. Buyer shall have received the documents and
instruments contemplated by Section 3.5 and such other documents
and instruments as Buyer may reasonably request.
(j) Allocation Schedule. The Allocation Schedule, as agreed to
by Seller and Buyer on or prior to the date of the execution and
delivery of this Agreement, shall be in full force and effect in
accordance with its terms.
7.3 Conditions Precedent to Obligations of Seller
The obligations of Seller to consummate the Transactions are
subject to the satisfaction (or waiver by Seller) at or prior to
the Closing of each of the following conditions:
(a) Accuracy of Representations and Warranties. All
representations and warranties of Buyer contained herein or in
any certificate or document delivered to Seller pursuant hereto
shall be true and correct on and as of the Closing Date, with the
same force and effect as though such representations and
warranties had been made on and as of the Closing Date, except
(i) as contemplated or permitted by this Agreement, (ii) to the
extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty
shall have been true and correct as of such date, and (iii) to
the extent that any inaccuracies in such representations and
warranties, individually or in the aggregate, have not had, and
would not reasonably be expected to have, a Buyer Material
Adverse Effect.
(b) Performance of Agreements. Buyer shall have performed all
obligations and agreements, and complied with all covenants and
conditions, contained in this Agreement to be performed or
complied with by it prior to or on the Closing Date except to the
extent that any breaches of such obligations, agreements,
covenants and conditions, individually or in the aggregate, have
not had, and would not reasonably be expected to have, a Buyer
Material Adverse Effect.
(c) Officer's Certificate. Seller shall have received a
certificate of Buyer, dated the Closing Date and executed by an
executive officer of Buyer, to the effect that the conditions
specified in Sections 7.3(a) and (b) above have been fulfilled.
(d) Supporting Documents. Seller shall have received from Buyer
(i) a certificate from the appropriate Italian administrative
entity as to the existence and good standing of Buyer, and (ii) a
certificate of the Secretary or an Assistant Secretary of Buyer
certifying as to the resolutions adopted by Buyer's Board of
Directors and certifying as to the incumbency and specimen
signature of officers of Buyer executing this Agreement and the
Transaction Documents executed and delivered by Buyer.
(e) Office Lease. Buyer shall have executed and delivered to
Seller the Office Lease.
(f) Trademark License. Buyer shall have executed and delivered
to Seller the Trademark License.
(g) Transition Services Agreement. Buyer shall have executed and
delivered to Seller the Transition Services Agreement.
(h) Other Documents. Seller shall have received the documents
and instruments contemplated by Section 3.4 and such other
documents and instruments as Seller may reasonably request.
(i) Readiness of Second Step as Condition to First Step. Seller
shall be satisfied, in its reasonable judgment, as a condition
precedent to its obligation to consummate the First Step, that
all conditions precedent in its favor in respect of the Second
Step shall have been satisfied and that all actions and
deliveries required to be consummated as part of the Second Step
will be taken and made immediately after the consummation of the
First Step on the Closing Date.
ARTICLE 8
EMPLOYEE RELATIONS AND BENEFITS
8.1 Offer of Employment
(a) The parties hereto intend that there shall be continuity of
employment with respect to all Business Employees. It is
intended that Business Employees as of the Closing Date will
transfer employment from the Seller Entities to the Buyer
Entities on the Closing Date or as soon thereafter as is
administratively practicable. A transfer will be delayed in the
case of Business Employees who cannot be transferred on the
Closing Date because: (i) such change in employment would
adversely affect their legal status in a particular country; (ii)
the Business Employee is employed in a Deferred Country, or (iii)
other similar situations. Seller and Buyer agree to resolve the
issues with respect to each particular Business Employee whose
transfer to a Buyer Entity is deferred in order to effect the
transfer as soon as administratively practicable.
(b) The date identified as the first date on or after the Closing
Date when a Business employee can transfer employment from a
Seller Entity to a Buyer Entity is, for purposes of this ARTICLE
8, referred to as the "Transfer Date." On the Transfer Date, the
applicable Buyer Entity shall offer employment commencing on the
Transfer Date to all Business Employees, including those on
vacation, leave of absence, disability (other than long-term
disability) or temporary layoff, who were employed by a Seller
Entity immediately prior to such Transfer Date, on equivalent
terms (including salary, fringe benefits, job responsibility and
location) as those provided to such employees by the applicable
Seller Entity immediately prior to the Transfer Date. Those
persons who accept a Buyer Entity's offer of employment and who
commence working with a Buyer Entity as of a Transfer Date are
referred to as "Transferred Employees." Business Employees with a
deferred Transfer Date shall remain employees of a Seller Entity
until such Business Employees' respective Transfer Dates. The
compensation and benefits of such Business Employees shall be
paid by the applicable Seller Entities, and the Buyer Entities
will reimburse the applicable Seller Entities for the cost of
such compensation and benefits in a manner which is mutually
acceptable to Seller and Buyer.
8.2 Employee Benefits - Buyer's Obligations
Buyer agrees to maintain or cause the Buyer Subsidiaries and
Transferred Subsidiaries to maintain from the Closing Date until
the second anniversary of the Closing Date (the "Benefits
Maintenance Period") a retirement and welfare benefit program
which is at least, in the aggregate, equivalent to the retirement
and welfare benefit program maintained by the Seller Entities and
Transferred Subsidiaries as described in Section 4.16 of the
Seller Disclosure Schedule except as modified below:
(a) Pension Plan. Buyer agrees that if it maintains one or more
defined benefit pension plans, it will provide coverage for the
Transferred Employees under the one or more of such plans as
cover similarly situated employees of the Buyer. Buyer also
agrees that such coverage shall be under substantially the same
terms and conditions as apply to the Buyer's similarly situated
employees, provided that for purposes of eligibility, vesting and
benefit entitlement all service that a Transferred Employee has
under a Seller Entity or a Transferred Subsidiary plan shall
count as service under the Buyer's plan or plans. Buyer shall
not be required to grant prior service credit for purposes of
determining the amount of a Transferred Employee's accrued
benefit under Buyer's plan or plans. If Buyer does not maintain
any defined benefit pension plan, Buyer agrees that in meeting
its obligation under Section 8.2 of providing benefits in the
aggregate of substantially equal cost, it will treat the annual
cost of Seller's pension benefits as the contribution that would
need to be made to provide the normal cost of the pension
benefits for the Transferred Employees under Seller's defined
benefit pension plan for a year.
(b) 401(k) Plan. The 401(k) plan or plans maintained by any
Buyer Entity covering any Transferred Employees shall have
substantially the same eligibility, vesting and contribution
provisions as the plan or plans maintained by the Seller Entities
and Transferred Subsidiaries for the Transferred Employees but
other provisions of such 401(k) plans may differ at the
discretion of the Buyer Entities. The 401(k) plan or plans
maintained by any Buyer Entities shall permit the transfer to
such plan or plans of assets from the accounts the Transferred
Employees have in the 401(k) plan or plans of the Seller
Entities. Any such transfers shall include promissory notes for
participant loans. In addition, the Buyer Entities and the plans
of the Buyer Entities shall administer the loans pursuant to the
loans' terms.
(c) Non-Qualified Plans. Buyer agrees to establish, or cause the
Buyer Subsidiaries to establish, substantially similar deferred
compensation, top-hat and/or excess benefit plans to those
maintained by the Seller Entities and Transferred Subsidiaries
for the benefit of Transferred Employees.
(d) Welfare and Other Benefit Plans and Payroll Practices. Buyer
agrees to adopt or to cause the Buyer Subsidiaries to adopt
Welfare Plans and other employee benefit plans and Payroll
Practices having benefits, terms and conditions of participation
for the Transferred Employees which, in the aggregate, are
substantially equivalent to the benefits and terms and conditions
of participation that are in effect in the Seller Entities'
Welfare Plans and other plans. Any medical and dental plan
adopted by Buyer or a Buyer Subsidiary shall provide that the
plan's annual or lifetime deductibles, limitations or similar
terms and conditions will not start over as of a Transfer Date
but will be coordinated with the same provisions in the
applicable Seller Entity's plan. No preexisting condition
provisions shall be imposed in Buyer's or a Buyer Subsidiary's
plans to deny participation of the Transferred Employees in such
plans. Buyer agrees to make and to cause the Buyer Subsidiaries
to make reasonable efforts to ensure that no Transferred Employee
or dependent currently receiving a course of medical treatment
under a Seller Entity's plan shall be denied substantially
similar treatment under the Buyer's or a Buyer Subsidiary's plan
for the duration of the illness. Seller or the applicable Seller
Subsidiary shall be responsible for paying medical claims related
to medical services provided prior to a Transferred Employee's
Transfer Date (subject to the chargeback with respect to
employees with a deferred transfer), while Buyer or the
applicable Buyer Subsidiary shall be responsible for claims
related to services provided after a Transferred Employee's
Transfer Date. Buyer or the applicable Buyer Subsidiary shall be
responsible, beginning as of the Closing Date, for the payment of
all disability, workers' compensation and similar payments
payable to a Transferred Employee who is receiving such benefits
as of such Transferred Employee's Transfer Date.
(e) Tacking of Service Credit. For purposes of eligibility,
vesting and entitlement to benefits under all Plans, and for all
other purposes, the Buyer Entities will give the Transferred
Employees credit for all service such Transferred Employees have
with the Seller Entities or Transferred Subsidiaries.
(f) Incentive Plans. Buyer agrees to establish substantially
similar plans as a substitute for Seller's EVA, LTI and stock
plans. Such replacement plans shall, at a minimum, provide
substitute cash bonuses, options and stock grants. Buyer further
agrees to compensate Transferred Employees for all unvested
options and grants an employee has in Seller's plans as of the
Closing Date which, in the case of options, shall be a payment by
Buyer to the Transferred Employee in an amount equal to (i) the
amount, if any, by which (A) the average of the high and low
stock prices of Seller's common stock reported on the New York
Stock Exchange on the Closing Date, multiplied by (B) the number
of unvested options of such Transferred Employee having an
exercise price below such average, exceeds (ii) the aggregate
exercise price of such unvested options having an exercise price
below such average. Nothing in this Section 8.2 is intended to
require any Buyer Entity to establish or maintain any other cash
bonus, stock option or similar type of compensation or incentive
arrangement. If the Buyer or a Buyer Subsidiary chooses not to
provide any of the foregoing other incentive plans provided by
the Seller Entities, it shall provide plans that, in the
aggregate with the replacement incentive plans, provide benefits
of equivalent value to the Transferred Employees.
(g) COBRA. Buyer agrees that Buyer or the applicable Buyer
Subsidiary will be responsible for providing continuation
coverage of medical benefits for qualifying events arising on and
after the Closing Date.
(h) Severance. It is not intended that the transfer of any
Business Employees on a Transfer Date will trigger any severance
payments by operation of Law or under any Seller Entity's plan,
but if such payments are triggered Buyer shall reimburse or cause
a Buyer Subsidiary to reimburse the applicable Seller Entity for
all expenditures in connection therewith.
(i) Additional Severance. If any Business Employee's employment
terminates after the Closing Date, Buyer or a Buyer Subsidiary
shall be responsible for the payment of any severance benefits
due such employee, including any severance benefits provided for
in any retention agreement entered into between such Business
Employee and any Seller Entity or Transferred Subsidiary. Buyer
shall indemnify and reimburse or cause a Buyer Subsidiary to
indemnify or reimburse any applicable Seller Entity for any
severance benefits for which such Seller Entity is responsible.
Section 8.2(i) of the Seller Disclosure Schedule contains a list
of all retention agreements between Business Employees and any
Seller Entity or Transferred Subsidiary.
(j) Executive Benefits. Buyer agrees to maintain, and cause the
applicable Buyer Subsidiaries and Transferred Subsidiaries to
maintain, throughout the Benefits Maintenance Period all officer
perquisites provided to a Transferred Employee (e.g., change of
control protection, financial planning services, club dues,
automobiles and the like) of the same type and equivalent value
of the perquisites such Transferred Employees received from a
Seller Entity or Transferred Subsidiary prior to the Closing
Date. Buyer also agrees to maintain directors and officers
liability insurance for all Transferred Employees covered by such
insurance as of the Closing Date.
(k) Officer Status. Buyer agrees to appoint all Transferred
Employees who are members of the Senior Management Team of the
Business as officers of Buyer, a Buyer Subsidiary or Transferred
Subsidiary, even if they were not officers of a Seller Entity or
Transferred Subsidiary at or prior to the Closing Date. Buyer
shall cause each member of the Senior Management Team to receive
the benefits described in Section 8.2(j).
8.3 Employee Benefits - Seller's Obligations
(a) Pension Plan. Seller agrees to fully vest, as of the Closing
Date, each Transferred Employee's accrued benefit under Seller's
defined benefit pension plan and to pay out such vested accrued
benefits in accordance with the terms of the Seller's plan, e.g.,
persons eligible for normal or early retirement benefits will be
entitled to retire and receive immediate retirement benefits
while vested participants will be eligible to receive benefits
available to vested terminated employees.
(b) 401(k) Plan. Upon the establishment of Buyer's 401(k) plan
pursuant to Section 8.2(b), Seller agrees to cooperate and cause
the Seller Subsidiaries to cooperate with the Buyer Entities in
facilitating the transfer of 401(k) account balances of the
Transferred Employees to a plan or plans established by the Buyer
Entities for this purpose.
(c) Non-Qualified Plans. Seller agrees to, and cause the Seller
Subsidiaries to, retain the liabilities and assets in their
deferred compensation, top-hat and/or excess benefit plans as of
the Closing Date or applicable Transfer Date for the Transferred
Employees and to pay out promised benefits in accordance with the
plans' terms as from time to time in effect. Buyer agrees to
notify or cause the Buyer Subsidiary to notify the applicable
Seller Entity when a Transferred Employee with an interest in
such Seller Entity's non-qualified plan retires, terminates
employment or otherwise becomes entitled to receive benefits.
(d) COBRA. Seller agrees to, and cause the Seller Subsidiaries
to, retain sole responsibility for providing continuation
coverage for Business Employees and their beneficiaries for any
qualifying events that occur prior to the Closing Date.
(e) Employee Rights at Seller Entities' Worksites. A Transferred
Employee who, during the Benefits Maintenance Period, works at a
worksite of a Seller Entity shall have access to all services and
facilities at such worksite that are available to the Seller
Entity's employees provided that such access is consistent with
the safety and security requirements of the Seller Entity and
further provided that the Seller Entity may impose reasonable
fees for the use of certain services and facilities, as more
fully described in the Transition Services Agreement.
(f) Plan Administration. If a Buyer Entity adopts for the
Transferred Employees any benefit plan maintained by a Seller
Entity, Seller agrees that at the request of the Buyer it will,
or will cause the applicable Seller Subsidiary to, administer the
plan on behalf of the Buyer Entity and its employees during the
Benefits Maintenance Period under such financial and other terms
and conditions as are mutually agreeable to such Seller Entity
and the applicable Buyer Entity. If a Buyer Entity adopts any
plan that is not sponsored by a Seller Entities, the Seller (or
any applicable Seller Subsidiary) will only administer such plan
if it, in its sole discretion, elects to do so and only under
such terms and conditions as are mutually agreeable to the
parties.
(g) Severance and Retention Bonuses. Seller agrees that it or a
Seller Subsidiary is responsible for paying any retention bonuses
that any Seller Entity or Transferred Subsidiary may have
promised to Business Employees prior to the Closing Date and for
paying severance benefits payable under Seller's plans in
connection with any termination of employment prior to the
Closing Date.
8.4 Accrued Vacation
With respect to any accrued but unused vacation time to which
any Transferred Employee is entitled pursuant to the vacation
policy applicable to such Transferred Employee immediately prior
to the Closing Date or applicable Transfer Date (the "Vacation
Policy"), Buyer shall or shall cause the applicable Buyer
Subsidiary to allow such Transferred Employee to use such accrued
vacation; provided, however, that if Buyer or any Buyer
Subsidiary deems it necessary to disallow such Transferred
Employee from taking such accrued vacation, Buyer shall be liable
for and pay, or cause the applicable Buyer Subsidiary to pay, in
cash to each such Transferred Employee an amount equal to such
vacation time in accordance with the terms of the Vacation
Policy; provided, further, that Buyer shall be liable for and
pay, or cause the applicable Buyer Subsidiary to pay, in cash in
an amount equal to such accrued vacation time to any Transferred
Employee whose employment terminates for any reason subsequent to
the Closing Date or applicable Transfer Date but before such
vacation has been used.
8.5 Non-U.S. Benefit Plans
Section 8.5 of the Seller Disclosure Schedule describes
additional obligations of Buyer and Seller with respect to Non-
U.S. Benefit Plans, including sponsorship, continuation of
benefits of equivalent value, timing of benefits vesting and
timing and valuations regarding transfers of Non-U.S. Benefit
Plan assets. To the extent that a Non-U.S. Benefit Plan is not
specifically addressed in Section 8.5 of the Seller Disclosure
Schedule, such Non-U.S. Benefit Plan shall be governed by the
general provisions of this ARTICLE 8 and by local Laws.
8.6 No Rights Conferred on Employees
Nothing herein, expressed or implied, shall confer upon any
employee or former employee of any Seller Entity, Transferred
Subsidiary or any of their Affiliates (including, without
limitation, the Transferred Employees or the Business Employees),
any rights or remedies (including, without limitation, any right
to employment or continued employment for any specified period)
of any nature or kind whatsoever, under or by reason of this
Agreement.
ARTICLE 9
TERMINATION
9.1 General
This Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the
Closing:
(a) by mutual written consent of Buyer and Seller;
(b) by Seller if any of the applicable conditions set forth in
Section 7.3 shall have become incapable of fulfillment and shall
not have been waived by Seller;
(c) by Buyer if any of the applicable conditions set forth in
Section 7.2 shall have become incapable of fulfillment and shall
not have been waived by Buyer, subject to Section 3.3;
(d) by Seller if the Closing shall not have occurred by September
30, 1999 through no failure of Seller to satisfy any of its
material obligations under this Agreement, subject to Section
3.3;
(e) by Buyer if the Closing shall not have occurred by September
30, 1999 through no failure of Buyer to satisfy any of its
material obligations under this Agreement, subject to Section
3.3;
(f) by Buyer if the additions and changes, if any, to the Seller
Disclosure Schedule delivered by Seller pursuant to Section 6.13
reflect a Material Adverse Effect or facts or circumstances which
would reasonably be expected to have a Material Adverse Effect;
or
(g) by either Buyer or Seller if there shall be in effect any Law
that permanently enjoins, restrains or prohibits the consummation
of the Closing or if consummation of the Closing would violate
any non-appealable final order, decree or judgment of any court
or Governmental Entity, in each case subject to Sections 3.3 and
7.1.
9.2 Procedure
In the event of the termination and abandonment of this
Agreement, written notice thereof shall promptly be given to the
other party hereto, this Agreement shall terminate and the
Transactions shall be abandoned without further action by the
parties hereto.
9.3 No Liabilities in Event of Termination
In the event of any termination of this Agreement as provided
in Section 9.1, this Agreement shall become wholly void and of no
further force and effect and there shall be no liability on the
part of Buyer or Seller, except that the obligations of the
parties under Sections 12.1 (Public Announcement), 12.2
(Expenses), 12.6 (Notices), 12.16 (Applicable Law) of this
Agreement and this Section 9.2 shall remain in full force and
effect, and except that such termination shall not relieve either
party from liability for any material breach of any covenant or
agreement contained in this Agreement prior to such termination.
ARTICLE 10
SURVIVAL; INDEMNIFICATION
10.1 Survival
The representations and warranties of the parties made in or
pursuant to this Agreement and the Transaction Documents shall
survive for a period of twelve (12) months following the Closing
Date regardless of any investigation made at any time by or on
behalf of either party. No claim for indemnification may be made
with respect to a representation or warranty after the expiration
of the survival period. The covenants and agreements made by any
party which are to be performed after the Closing shall survive
until fully performed, and the covenants and agreement made by
any party which are to be performed at or prior to the Closing
shall expire at the Closing.
10.2 Indemnification
(a) Buyer's Indemnification Obligations. On and after the
Closing Date and subject to the limitations set forth in this
ARTICLE 10, Buyer hereby agrees to indemnify, defend and hold
harmless the Seller Entities and their respective directors,
officers, employees, subsidiaries and other Affiliates and
representatives (collectively, "Seller Indemnified Parties") from
and against, and will pay to the Seller Indemnified Parties the
amount of, any and all claims, losses, damages, costs, expenses,
obligations, liabilities, charges, actions, suits, proceedings,
deficiencies, interest, penalties and fines (including, without
limitation, costs of collection, reasonable attorney's fees and
other costs of defense, removal costs, remediation costs, closure
costs and expenses of investigation and ongoing monitoring)
whether or not involving a third party claim (collectively,
"Damages") imposed on, incurred or suffered by or asserted
against them in respect of, but only in respect of:
(i) any breach of Buyer's representations and warranties in this
Agreement, including, without limitation, representations and
warranties of Buyer contained in any certificate delivered by
Buyer at the Closing pursuant to the terms of this Agreement;
(ii) Buyer's failure, or the failure of any Buyer Subsidiary, to
perform or otherwise fulfill in any material respect any of its
agreements, covenants, obligations or undertakings hereunder or
under any of the Transaction Documents;
(iii) the Assumed Liabilities; and
(iv) all of the liabilities and obligations of the Transferred
Subsidiaries or subsidiaries of the Transferred Subsidiaries with
respect to which Buyer is not entitled to indemnification from
Seller pursuant to Section 10.2(b)(i) or (iii).
(b) Seller's Indemnification Obligations. On and after the
Closing Date, Seller hereby agrees to indemnify, defend and hold
harmless the Buyer Entities and their respective directors,
officers, employees, subsidiaries and other affiliates and
representatives (collectively, the "Buyer Indemnified Parties")
from and against, and will pay to the Buyer Indemnified Parties
the amount of, any and all Damages imposed on, sustained,
incurred or suffered by or asserted against them or the
Transferred Subsidiaries in respect of, but only in respect of:
(i) any breach of Seller's representations and warranties in this
Agreement, including, without limitation, representations and
warranties of Seller contained in any certificate delivered by
Seller at the Closing pursuant to the terms of this Agreement;
(ii) Seller's failure, or the failure of any Seller Entity, to
perform or otherwise fulfill in any material respect any of its
agreements, covenants, obligations or undertakings hereunder or
under any of the Transaction Documents; and
(iii) the Excluded Liabilities.
10.3 Procedure
(a) If any of the persons to be indemnified under this ARTICLE 10
has suffered or incurred any Damages with respect to which
indemnification is to be sought hereunder, the indemnified party
shall so notify the party from whom indemnification is sought
promptly in writing describing such Damages, the amount or
estimated amount thereof, if known or reasonably capable of
estimation, and the method of computation of such Damages. If a
claim or demand by a third party is made against an indemnified
party or any action at law or suit in equity is instituted
against an indemnified party by a third party (each claim,
demand, action or suit by a third party, a "Third Party Claim"),
and if an indemnified party intends to seek indemnity with
respect thereto under this ARTICLE 10, such indemnified party
shall promptly notify the indemnifing party in writing of such
Third Party Claim setting forth such Third Party Claim in
reasonable detail and tender to the indemnifying party the
defense of such Third Party Claim. The failure of the
indemnified party to give the indemnifying party prompt notice,
to provide notice in the form required or tender the defense of a
Third Party Claim as provided herein shall not relieve the
indemnifying party of any of its obligations under this ARTICLE
10, except to the extent that the indemnifying party is
materially prejudiced by such failure.
(b) For 30 days after receipt of such notice the indemnifying
party shall have the right but not the obligation to undertake
the conduct and control, through counsel of its own choosing and
at its own expense, of the settlement or defense of any Third
Party Claim, and the indemnified party shall cooperate with the
indemnifying party in connection therewith; provided, that if the
indemnifying party elects to undertake the conduct and control of
such settlement or defense, then the indemnified party may
participate in such settlement or defense through counsel chosen
by such indemnified party provided that the fees and expenses of
such counsel shall be borne by such indemnified party; and
provided, further, that pending the indemnifying party's decision
whether to exercise its right to undertake the conduct and
control of the settlement or defense of any Third Party Claim,
the indemnified party shall undertake, conduct and control the
settlement or defense thereof, through counsel of its own
choosing. So long as the indemnifying party is reasonably
contesting any Third Party Claim in good faith, the indemnified
party shall not pay or settle such Third Party Claim.
Notwithstanding the foregoing, the indemnified party shall have
the right to pay or settle any such Third Party Claim, provided,
that in such event it shall waive any right to indemnity therefor
by the indemnifying party. The indemnifying party shall not,
except with the consent of the indemnified party, enter into any
settlement or consent to entry of any judgment unless such
settlement or judgment includes as an unconditional term thereof
the giving by the Person or Persons asserting such Third Party
Claim to all indemnified parties (i.e., Seller Indemnified Party
or Buyer Indemnified Party as the case may be) an unconditional
release from all liability with respect to such claim and (ii)
the relief provided in connection with such settlement or
judgment effected by the indemnifying party is satisfied entirely
by the indemnifying party.
(c) If the indemnifying party does not notify the indemnified
party within 30 days after the receipt of the indemnified party's
notice of a claim of indemnity hereunder in connection with a
Third Party Claim that it elects to undertake the settlement or
defense thereof, the indemnified party shall have the right to
conduct and control the defense thereof and to contest, settle or
compromise the Third Party Claim but shall not thereby waive any
right to indemnity therefor pursuant to this Agreement.
10.4 Limitations on Indemnification
(a) Indemnification Threshold. Seller shall be required to
indemnify, defend and hold harmless the Buyer Indemnified Parties
under Section 10.2(b)(i) and Buyer shall be required to indemnify
defend and hold harmless the Seller Indemnified Parties under
Section 10.2(a)(i) with respect to Damages incurred by such
indemnified party in accordance with Section 10.2(b)(i) or
Section 10.2(a)(i), as applicable, only (i) if the amount of
Damages resulting an individual claim under such Sections is
equal to or greater than $10,000, and (ii) to the extent that the
aggregate amount of all Damages of the Buyer Indemnified Parties
or Seller Indemnified Parties for all claims which satisfy the
preceding clause (i) exceeds three percent (3%) of the Purchase
Price, in which case only the excess over three percent (3%) of
the Purchase Price shall be subject to indemnification.
(b) Limitation on Liability. In no event shall the aggregate
liability of Seller under Section 10.2(b)(i) exceed twenty
percent (20%) of the Purchase Price.
(c) Certain Special, Indirect, Incidental, Consequential and
Related Damages not Indemnifiable. In no event shall Seller or
Buyer, as the case may be, be liable to the Buyer Indemnified
Parties or the Seller Indemnified Parties hereunder for any
special, indirect, incidental, consequential or punitive damages.
(d) Indemnity Payments Reduced by Insurance Proceeds. Any
indemnity payment payable pursuant to this Agreement shall be
decreased to the extent of any insurance proceeds received by the
Buyer Indemnified Party or Seller Indemnified Party, as the case
may be, in respect of the Damages giving rise to such indemnity
payment.
(e) Tax Benefit. If the amount with respect to which any claim
is made under this ARTICLE 10 (an "Indemnity Claim") gives rise
to a currently realizable Tax Benefit (as defined below) to the
party making the claim, the indemnity payment shall be reduced by
the amount of the Tax Benefit available to the party making the
claim. To the extent such Indemnity Claim does not give rise to
a currently realizable Tax Benefit, if the amount with respect to
which any Indemnity Claim is made gives rise to a subsequently
realized Tax Benefit to the party that made the claim, such party
shall refund to the indemnifying party the amount of such Tax
Benefit when, as and if realized. For the purposes of this
Agreement, any subsequently realized Tax Benefit shall be treated
as though it were a reduction in the amount of the initial
Indemnity Claim, and the liabilities of the parties shall be re-
determined as though both occurred at or prior to the time of the
indemnity payment. For purposes of this Section 10.4(e), a "Tax
Benefit" means an amount by which the tax liability of the
indemnified party (or group of corporations including the
indemnified party) is reduced (including, without limitation, by
deduction, reduction of income, by virtue of increased tax basis
or otherwise, entitlement to refund, credit or otherwise) plus
any related interest received from the relevant taxing authority.
Where a party has other losses, deductions, credits or items
available to it, the Tax Benefit from any losses, deductions,
credits or items relating to the Indemnity Claim shall be deemed
to be realized proportionately with any other losses, deductions,
credits or items. For purposes of this Section 10.4(e), a Tax
Benefit is "currently realizable" to the extent it can be
reasonably anticipated that such Tax Benefit will be realized in
the current taxable period or year or in any tax return with
respect thereto (including through a carryback to a prior taxable
period) or in any taxable period or year prior to the date of the
Indemnity Claim. In the event that there should be a
determination disallowing the Tax Benefit, the indemnifying party
shall be liable to refund to the indemnified party the amount of
any related reduction previously allowed or payments previously
made to the indemnifying party pursuant to this Section 10.4(e).
The amount of the refunded reduction or payment shall be deemed a
payment under this Section 10.4(e) and thus shall be paid subject
to any applicable reductions under this Section 10.4(e).
(f) Adjustment to Purchase Price. The parties agree that any
indemnification payments made by Buyer or Seller pursuant to this
Agreement shall be treated for tax purposes as an adjustment to
the Purchase Price, unless otherwise required by applicable Law.
(g) Mitigation of Damages. Each indemnified party shall be
obligated, in connection with any claim for indemnification under
Section10.2, to use all reasonable efforts to mitigate Damages
upon and after becoming aware of any event which could reasonably
be expected to give rise to such Damages.
10.5 Exclusive Remedy
Except as specifically provided in Section 11.5, each of
Seller and Buyer acknowledges and agrees that, from and after the
Closing, Seller's and Buyer's sole and exclusive remedy (at law
or equity) with respect to any and all claims against the other
party relating to the subject matter of this Agreement and the
Transaction Documents shall be pursuant to the indemnification
provisions set forth in this ARTICLE 10 or as otherwise provided
hereunder. In furtherance of the foregoing, each of Seller and
Buyer hereby waives from and after the Closing, to the fullest
extent permitted under applicable Law, any and all rights, claims
and causes of action (other than claims of, or causes of action
arising from, fraud) it may have against the other party relating
to the subject matter of this Agreement arising under or based
upon any Law or otherwise.
10.6 Time Period
If, at any time prior to the expiration of the survival period
of the representations and warranties pursuant to Section 10.1
(the "Expiration Date"), any Seller Indemnified Party (acting in
good faith) delivers to Buyer a written notice asserting a claim
for recovery under Section 10.2(a)(i) (and setting forth in
reasonable detail the basis for such Seller Indemnified Party's
claim), then the claim asserted in such notice shall survive the
Expiration Date until such time as such claim is fully and
finally resolved. If, at any time prior to the applicable
Expiration Date, any Buyer Indemnified Party (acting in good
faith) delivers to Seller a written notice asserting a claim for
recovery under Section 10.2(b)(i) (and setting forth in
reasonable detail the basis for such Buyer Indemnified Party's
claim), then the claim asserted in such notice shall survive the
Expiration Date until such claim is fully and finally resolved.
ARTICLE 11
TRANSACTIONS SUBSEQUENT TO CLOSING
11.1 Access to Books and Records
(a) For a period of seven (7) years following the Closing Date,
Buyer shall, and shall cause the Buyer Entities, Transferred
Subsidiaries and their Affiliates to, retain and afford to the
Seller Entities and their Affiliates, their counsel and their
accountants, during normal business hours and upon reasonable
advance notice, reasonable access to the books, records and other
data of the Business and of the Business Assets with respect to
the period prior to the Closing Date and, in the case of any
Transferred Subsidiary, with respect to the applicable current
taxable period, to the extent that such access may be reasonably
required by any Seller Entity to facilitate (i) the preparation
and timely filing by a Seller Entity of such Tax Returns as it
may be required to file with respect to the operations of the
Business or the preparation and timely filing of such Tax Returns
as such Seller Entity shall bear responsibility for preparing
pursuant to Section 11.4 of this Agreement, the making of any
election related to Taxes or in connection with any audit,
amended return, claim for refund or any suit or proceeding with
respect thereto, (ii) the investigation, litigation and final
disposition of any claims, suits or proceedings which may have
been or may be made against any Seller Entity in connection with
the Business, (iii) the payment of any amount in connection with
any liabilities or obligations with respect to the Business which
have been retained by the Seller Entities, and (iv) any
indemnification claims made under ARTICLE 10 hereof or the
defense thereof. Buyer will not, and will cause the Buyer
Entities, Transferred Subsidiaries and their Affiliates not to,
dispose of, alter or destroy any such material, books and records
without giving thirty (30) days' prior notice to Seller to permit
Seller, at its expense, to examine, duplicate or repossess such
books and records.
(b) On and after the Closing Date, Buyer shall and shall cause
the Buyer Subsidiaries, Transferred Subsidiaries and their
Affiliates to further cooperate with the Seller Entities in the
preparation for and prosecution of the defense of any audit,
claim, action or cause of action arising out of or relating to
any liabilities of the Business which have not been assumed by
the Buyer Entities including, without limitation, by making
available evidence within the control of the Buyer Entities,
Transferred Subsidiaries and their Affiliates, and Persons needed
as witnesses employed by the Buyer Entities, Transferred
Subsidiaries and their Affiliates, in each case as reasonably
needed for such defense. Seller shall reimburse the applicable
Buyer Entity, Transferred Subsidiary or Affiliate for its
reasonable, direct out-of-pocket costs relating to its
cooperation under this Section 11.1(b).
(c) For the period required under Seller's record retention
policy, following the Closing Date, Seller shall retain and
afford, and will cause the Seller Subsidiaries to retain and
afford, to the Buyer Entities, the Transferred Subsidiaries,
their Affiliates and their counsel and accountants, during normal
business hours and upon reasonable advance notice, reasonable
access to the books, records and other data of the Seller
Entities with respect to the period prior to the Closing Date,
such retention (including the books, records and data to be
retained) to be made in accordance with the Seller's Record
Retention Policies disclosed to Buyer to the extent that such
access may be reasonably required by a Buyer Entity, Transferred
Subsidiary or their Affiliates to facilitate (i) the preparation
by such Buyer Entity, Transferred Subsidiary or Affiliate of such
tax returns as it may be required to file with respect to the
operations of the Business, the making of any election relating
to taxes or in connection with any audit, amended return, claim
for refund or any suit or proceeding with respect thereto, (ii)
the investigation, litigation and final disposition of any
material claims, suits or proceedings which may have been or may
be made against such Buyer Entity, Transferred Subsidiary or
Affiliate in connection with the Business, (iii) the payment of
any amount in connection with any liabilities or obligations with
respect to the Business which have been assumed by the Buyer
Entities, and (iv) any indemnification claims made under ARTICLE
10 hereof or the defense thereof. Seller will not, and will
cause the Seller Subsidiaries and their Affiliates not to,
dispose of, alter or destroy any such material, books and records
without giving thirty (30) days' prior notice to Buyer, at its
expense, to examine, duplicate or repossess such books and
records.
(d) Seller further agrees to, and cause the Seller Subsidiaries
and their Affiliates to, cooperate with Buyer in the preparation
for and prosecution of the defense of any audit, claim, action or
cause of action arising out of or relating to any liability
relating to the Business which arose prior to the Closing and
which has been assumed by a Buyer Entity including, without
limitation, by making available evidence within the control of a
Seller Entity or its Affiliate and persons needed as witnesses
employed by a Seller Entity or its Affiliate, in each case as
reasonably needed for such defense, and Buyer shall reimburse
such Seller Entity or Affiliate for its reasonable direct out-of-
pocket costs relating to its cooperation under this Section
11.1(d).
11.2 Further Agreements
Buyer authorizes and empowers the Seller Entities on and after
the Closing Date to receive and open all mail received by the
Seller Entities relating to the Business and to deal with the
contents of such communications in any proper manner. Seller
shall, and shall cause the Seller Subsidiaries to, promptly
deliver to Buyer any mail or other communications received by
them after the Closing Date pertaining to the Business or the
Business Assets and any cash, checks or other instruments of
payment to which any Buyer Entity or Transferred Subsidiary is
entitled. Buyer shall and shall cause the Buyer Subsidiaries and
Transferred Subsidiaries to promptly deliver to Seller any mail
or other communication received by it after the Closing Date
pertaining to the Excluded Assets and Excluded Liabilities and
any cash, checks or other instruments of payment in respect
thereof.
11.3 Asset Returns
In the event any Buyer Entity receives any assets of a Seller
Entity that are not intended to be transferred pursuant to the
terms of this Agreement, Buyer agrees to, and to cause the
applicable Buyer Subsidiary to, promptly return such assets to
Seller at Seller's expense.
11.4 Certain Tax Matters
(a) Seller shall prepare, or cause to be prepared, in a manner
consistent with past practices, all Tax Returns in respect of the
Transferred Subsidiaries for all taxable periods ending on or
prior to the Closing Date. Buyer shall provide, and cause the
Buyer Subsidiaries and Transferred Entities to provide, Seller
with the necessary information for completing such returns in a
manner consistent with past practices. Seller shall or shall
cause its Affiliates to timely file, or cause to be timely filed,
all Tax Returns prepared pursuant to this Section 11.4(a) that
are filed after the Closing Date. Seller shall pay to the
relevant taxing authority all Taxes due in connection with any
such Tax Return which Seller is required to have filed.
(b) Buyer shall prepare, or cause to be prepared, all Tax Returns
in respect of the Transferred Subsidiaries for all taxable
periods ending after the Closing Date. Buyer shall or shall
cause its Affiliates to timely file, or cause to be timely filed,
all Tax Returns prepared pursuant to this Section 11.4(b) that
are filed after the Closing Date. Buyer shall pay to the
relevant taxing authority all Taxes due in connection with any
such Tax Return which Buyer is required to have filed.
(c) Seller agrees that, if Buyer notifies Seller in writing of
its intention to make an election under Section 338(h)(10) of the
Code (or any similar election that may be available under
applicable state or local law) in respect of the purchase of the
Purchased Shares of one or more of the Transferred Subsidiaries
incorporated in the United States (each, a "Section 338(h)(10)
Election") within thirty (30) days after the Closing Date, Seller
shall, or shall cause the appropriate Seller Entity, as the case
may be, to, join with Buyer or the appropriate Buyer Entity, as
the case may be, in timely making each such joint Section
338(h)(10) Election (and in taking all legally required steps to
effectuate the same). If a Section 338(h)(10) Election is made,
the "modified aggregate deemed sale price," as defined in U.S.
Treasury Regulation 1.338(h)(10)-1, shall be determined in
accordance with Section 338 of the Code and the applicable U.S.
Treasury regulations, and shall be allocated solely in accordance
with the Allocation Principles.
11.5 Covenant Not to Compete
(a) For a period of five (5) years after the Closing Date (the
"Noncompetitive Period"), Seller agrees that it will not, and
will cause the Seller Subsidiaries and Seller's other Affiliates
not to, without the written approval of Buyer: (i) engage,
directly or indirectly, in any activity involving the
manufacture, production, marketing, advertising, distribution or
sale of any Competitive Product anywhere in the world (after
giving effect to the exceptions contained in the second
succeeding sentence, the "Competitive Activity"), or (ii)
directly or indirectly (A) hold or invest in any equity (or debt
convertible into equity) of, or (B) manage, operate or control,
any Person that engages in any Competitive Activity.
"Competitive Products" include finished sunglasses, plano
sunglass lenses and related sunglass accessories but do not
include prescription sunglass lenses manufactured, produced,
marketed, advertised, distributed or sold under the B&L name or
any other trade name which is not a Business Asset.
Notwithstanding the foregoing, nothing contained herein shall
limit the right of Seller, any Seller Subsidiary or any Affiliate
of Seller to: (x) hold and make passive investments in securities
of any Person that is registered on a national securities
exchange or admitted to trading privileges thereon or actively
traded in a generally recognized over-the-counter market;
provided, that the aggregate beneficial equity interest of
Seller, the Seller Subsidiaries and Seller's other Affiliates
therein shall not exceed 10% of the outstanding shares or
interests in such Person, (y) engage in any transaction whereby,
directly or indirectly, it acquires (whether by merger, stock
purchase, purchase of assets or otherwise) any Person or
business, or any interest in any Person or business, engaged,
directly or indirectly, in any Competitive Activity at the time
of such acquisition but is not primarily engage in such
Competitive Activity; provided, that, if such Person or business
generates more than 20% of its revenues from Competitive
Activities, within one year after any such transaction, Seller or
the applicable Seller Subsidiary or Affiliate of Seller shall
dispose of the portion of the Person or business engaged in the
Competitive Activity or cause such portion of the Person or
business to cease the Competitive Activity, or (z) engage,
directly or indirectly, in any activity that the Seller
Subsidiaries are expressly authorized to perform pursuant to the
terms of this Agreement and the Transaction Documents or any
transactions permitted hereby or thereby.
(b) For a period of two (2) years after the Closing Date, Seller
agrees that it will not, and will cause the Seller Subsidiaries
and Seller's other Affiliates not to solicit any Business
Employee for employment without the written approval of Buyer.
(c) Buyer and Seller acknowledge and agree that the restrictions
contained in this Section 11.5 are fair and reasonable. If, at
the time of enforcement of any provisions of this Section 11.5, a
court or other tribunal shall hold that the restrictions herein
are unreasonable or unenforceable under circumstances then
existing, Buyer and Seller agree that the maximum period, scope
or geographical area reasonable under such circumstances shall be
substituted for the period, scope or geographical area stated
herein.
(d) Buyer and Seller agree that in the event of any breach of the
provisions of this Section 11.5, money damages would be
inadequate and Buyer would have no adequate remedy at law.
Accordingly, notwithstanding anything to the contrary contained
in this Agreement, Seller agrees that Buyer shall have the right
to seek an adequate remedy for such breach not only by an action
for damages but also by an action or actions for specific
performance, injunction and/or other equitable relief in order to
enforce or prevent any violations of this Section 11.5.
11.6 Buyer's Insurance
From and after the Closing and until all of Buyer's
obligations hereunder and under the Trademark License shall have
expired, Buyer shall maintain insurance coverage at least equal
to the insurance coverage described on Schedule 11.6 attached
hereto. The policies providing such insurance shall be endorsed
to provide Seller with no less than thirty (30) days prior
written notice of any cancellation, non-renewal or material
change. The insurance companies providing such insurance
coverage shall have a current A. M. Best rating of A- or better,
and shall be licensed to do business in the applicable
jurisdictions. Buyer shall provide to Seller a certificate of
insurance evidencing each such insurance coverage upon the
request of Seller.
11.7 Company Stores
For a period of five (5) years after the Closing Date, Buyer
shall, and shall cause the Buyer Subsidiaries, Transferred
Subsidiaries and Buyer's other Affiliates to, supply any products
offered and sold by Buyer, the Buyer Subsidiaries, the
Transferred Subsidiaries and Buyer's other Affiliates that were
products of the Business prior to the Closing or are new products
of the Business developed after the Closing (collectively,
"Business Products") to the stores owned by Seller which sell to
employees of Seller and its Affiliates at the lowest published
wholesale price of Buyer for such Business Products. Buyer shall
sell or cause to be sold all Business Products ordered by
Seller's stores in reasonable quantities which are consistent
with past practices; provided, if the Business Products which are
ordered are in limited supply, Buyer may allocate, or cause to be
allocated, the available Business Products among the Seller's
stores and other purchasers of Business Products in such a manner
that Seller's stores are treated as favorably as any other
purchaser of Business Products.
ARTICLE 12
MISCELLANEOUS
12.1 Public Announcement
Prior to the Closing Date, no news release or other public
announcement pertaining in any way to the transactions
contemplated by this Agreement will be made by either party
without the prior consent of the other party (which consent shall
not be unreasonably withheld, conditioned or delayed) unless such
release or announcement is required by applicable Laws.
12.2 Expenses
Subject to the provisions of Section 12.3, whether or not the
Transactions are completed, each of the parties hereto shall pay
the fees and expenses incurred by it in connection with the
negotiation, preparation, execution and performance of this
Agreement, including, without limitation, attorneys',
accountants', brokers' and other advisors' fees.
12.3 Transfer Taxes and Recording Expenses
Buyer shall timely pay and shall indemnify the Seller Entities
for and against any and all U.S., foreign, state or local
transfer, documentary, sales, use, excise, gross receipts, stamp
duties, motor vehicle, registration, value added or similar taxes
and filing or recording expenses or fees, if any, required to be
paid in connection with this Agreement, the Transaction Documents
and the Transactions (including any interest charge, penalty or
addition to tax with respect thereto and excluding any income tax
payable by Seller or a Seller Subsidiary) and including, without
limitation, any fees, expenses and taxes with respect to the
transfer of any Purchased Assets or Purchased Shares from any
Seller Entity to any Buyer Entity. Buyer shall make any filings
required to be made in connection with such taxes or fees. Buyer
shall provide, or cause the appropriate Buyer Subsidiary to
provide, to the appropriate Seller Entity any applicable
certificates or other documents that will relieve the applicable
Seller Entity from collecting and paying any such taxes or fees
which are not due in connection with this Agreement, the
Transaction Documents and the Transactions including, without
limitation, a valid exempt use certificate or similar document
for qualifying production equipment and a valid resale
certificate or similar document for inventory purchased for
resale.
12.4 Real Estate Taxes
To the extent not taken into account in the Closing Net
Operating Assets Statement, any real or personal property Taxes
shall be pro-rated between the applicable Buyer Entities and the
applicable Seller Entities based on where the Closing Date occurs
in relationship to the period or periods covered by such Taxes.
Seller shall prepare a schedule computing any amount owed by the
Buyer Entities or Seller Entities and deliver it to Buyer within
ninety (90) days following the Closing Date. Any payments due
from one party to the other shall be made by check within ten
(10) days following the delivery of such statement.
12.5 Knowledge
"Knowledge" of Seller means the actual knowledge of those
officers of Seller who are listed on Schedule 12.5 hereto.
"Knowledge" of Buyer means the actual knowledge of those officers
of Buyer who are listed on Schedule 12.5 hereto.
12.6 Notices
All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given if delivered
personally, if sent by telecopier or facsimile or sent by a
recognized overnight courier service or mailed, first class mail,
postage prepaid, return receipt requested, as follows:
(a) If to Seller:
Bausch & Lomb Incorporated
One Bausch & Lomb Place
Rochester, New York 14604-2701
Attention: Chief Executive Officer
Fax: (716) 338-6085
with a copy to:
Bausch & Lomb Incorporated
One Bausch & Lomb Place
Rochester, New York 14604-2701
Attention: Senior Vice President and General Counsel
Fax: (716) 338-8706
(b) If to Buyer:
Luxottica Group S.p.A.
Via Valcozzena
Agordo, (Belluno) 32021
Italy
Attention: Chief Executive Officer
Fax: (39) (0437) 63840
with copies to:
LensCrafters Inc.
8650 Governors Hill Drive
Cincinnati, Ohio 45249
Attention: Chief Executive Officer
Fax: (513) 583-6388
and
Grimaldi e. Associatie: Clifford Chance
Via Clerici, 7
Milano 20121
Italy
Attention: Roberto Cappelli
Fax: (39) (02) 806 34 201
and
Winston & Strawn
200 Park Avenue
42nd Floor
New York, NY 10166-4193
Attention: Jonathan Goldstein
Fax: (212) 294-4700
or to such other address as either party shall have specified by
notice in writing to the other party. All such notices,
requests, demands and communications shall be deemed to have been
given on the date of personal delivery or when received by the
person to whom addressed if sent by telecopier, overnight courier
service or mail.
12.7 Entire Agreement
This Agreement, including the Exhibits and Schedules hereto,
constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral and written (other than the
Confidentiality Agreement dated June, 1998 between Seller and
Buyer), between the parties hereto with respect to the subject
matter hereof.
12.8 Binding Effect; Benefit
This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and
permitted assigns. Except as provided in ARTICLE 10 with respect
to indemnification, nothing in this Agreement, expressed or
implied, is intended to confer on any Person other than the
parties hereto or their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
12.9 Bulk Sales Law
Buyer and Seller each agree to waive compliance by the other,
the other Seller Entities and the other Buyer Entities with the
provisions of the bulk sales or similar Laws of any jurisdiction.
12.10 Assignability
This Agreement shall not be assignable by Seller without the
prior written consent of Buyer or by Buyer without the prior
written consent of Seller; provided that Seller and Buyer may
assign its rights and obligations, in whole or in part, to any
wholly-owned direct or indirect subsidiary of Seller or Buyer so
long as Seller or Buyer, as applicable remains bound by all of
the terms of this Agreement notwithstanding any such assignment.
12.11 Amendment; Waiver
This Agreement may be amended, supplemented or otherwise
modified only by a written instrument executed by the parties
hereto. No waiver by either party of any of the provisions
hereof shall be effective unless explicitly set forth in writing
and executed by the party so waiving. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement,
including without limitation, any investigation by or on behalf
of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations,
warranties, covenants or agreements contained herein or in any
Transaction Document. The waiver by any party hereto of a breach
of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach. No failure on
the part of either party hereto to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver
thereof.
12.12 Disclosure Schedules and Exhibits
Any fact or item which is disclosed on the Buyer Disclosure
Schedule, the Seller Disclosure Schedule, any other Schedule or
Exhibit to this Agreement or in the Financial Information with
reference to any section of this Agreement shall also be deemed
disclosed with respect to any other section of this Agreement to
which the disclosure may be relevant. Any fact or item disclosed
on the Seller Disclosure Schedule, Buyer Disclosure Schedule,
Schedule or Exhibit hereto shall not by reason only of such
inclusion be deemed to be material and shall not be employed as a
point of reference in determining any standard of materiality
under this Agreement.
12.13 Section Headings
The section headings contained in this Agreement and the table
of contents to this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
12.14 Severability of Provisions
Any provision of this Agreement or the Transaction Documents
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent and only
for the duration of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the
validity or enforceability of such provisions in any other
jurisdiction. If any such provision shall be adjudged by any
court or authority of competent jurisdiction to be prohibited or
unenforceable but would be valid and enforceable if part of the
wording thereof were to be deleted and/or the period thereof were
to be reduced and/or the area thereby were to be reduced, such
provision shall apply within the jurisdiction of such court or
authority with such modifications as are necessary to make it
valid and enforceable.
12.15 Counterparts
This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
12.16 Applicable Law
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard
to the conflicts of laws principles thereof.
12.17 Submission to Jurisdiction
The parties hereby irrevocably and unconditionally consent to
submit to the exclusive jurisdiction of the federal courts of the
United States of America located in New York City, New York for
any actions, suits or proceedings arising out of or relating to
this Agreement, the Transaction Documents or the Transactions
(and the parties agree not to commence any action, suit or
proceeding relating thereto except in such courts), and further
agree that service of any process, summons, notice or document by
U.S. registered mail shall be effective service of process for
any action, suit or proceeding brought against the parties in any
such court. The parties hereby irrevocably and unconditionally
waive any objection to the laying of venue of any action, suit or
proceeding arising out of this Agreement, any Transaction
Document or the Transactions, in the federal courts of the United
States of America located in New York City, New York, and hereby
further irrevocably and unconditionally waive and agree not to
plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an
inconvenient forum.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
SELLER:
BAUSCH & LOMB INCORPORATED
By:
Name:
Title:
BUYER:
LUXOTTICA GROUP S.P.A.
By:
Name:
Title:
SCHEDULE 1
BUSINESS
1. Development, production, marketing, distribution, sales and
servicing of sunglasses, sunglass parts, sunglass cases and point-
of-sale displays and advertising materials.
SCHEDULE 1.1(a)
SELLER SUBSIDIARIES
1. B&L U.K., Ltd. stock/assets
2. Dr. Mann Pharma stock
3. B&L (China) Investment Ltd. stock
4. B&L South Asia Inc. stock
5. BL Industries Otica, Ltda. assets
6. B&L Lamex, Inc. assets
7. B&L Canada, Inc. assets
8. Bausch & Lomb Mexico, S.A. de C.V. assets
9. B&L Puerto Rico, Inc. assets
10. B&L (Hong Kong) Ltd. assets
11. Segrab Inc. assets
12. B.L.J. Company, Ltd. (Japan) assets
13. B&L Singapore Pvt., Ltd. assets
14. B&L (M) SDN BHD (Malaysia) assets
15. B&L (Australia) Pty., Ltd. assets
16. B&L Taiwan, Ltd. assets
17. B&L Korea Inc. assets
18. B&L Thailand assets
19. B&L Ireland assets
20. B&L Saglik ve Optik Urunleri Tic. A.S. (Turkey) assets
21. B&L South Africa Pty assets
22. B&L B.V. (Netherlands) assets
23. Bausch & Lomb Nordic AB assets
24. B&L South Asia Management Co., Sdn. Bhd. assets
25. Young Han Inc. assets
26. B&L Shanghai Trading Co. Ltd. assets
27. B&L New Zealand Ltd. assets
28. I.O.M. S.p.A. (Italy) assets
29. B&L France S.A. assets
30. B&L GmbH (Austria) assets
31. B&L GmbH (Germany) assets
32. B&L Espana S.A. assets
33. B&L AG (Switzerland) assets
34. B&L Dist Ops S.A. (Switzerland) assets
SCHEDULE 1.1(b)
TRANSFERRED SUBSIDIARIES
1. Arnette Optic Illusions, Inc., a California corporation
2. REVO, Inc., a Delaware corporation
3. Arnette Europe S.A.R.L., a French corporation
4. Killer Loop S.p.A., an Italian corporation
5. REVO Europe Limited, an English Corporation
6. Ray-Ban, Inc., a New York Corporation
7. Guangzhou B&L Manufacturing Co., Ltd., a Peoples Republic of
China corporation
8. B&L India Ltd., an Indian corporation (44% of which is owned
by a Seller Entity)
SCHEDULE 2.3(a)
EXCLUDED ASSETS
1. Any and all assets and properties of Seller or any Seller
Subsidiary not used exclusively in connection with the Business
except for (i) assets which are expressly identified as Purchased
Assets in the Seller Disclosure Schedule, and (ii) the Assigned
Contracts described in Sections 2.1(f)(i) and (ii).
2. Except for assets which are identified as Purchased Assets in
the Seller Disclosure Schedule, any tangible assets and
properties of Seller or any Seller Subsidiary, whether or not
used exclusively in connection with the Business, which are
located at a facility of Seller or any Seller Subsidiary that is
not used exclusively in connection with the Business.
3. Any assets and properties owned by a subsidiary or Affiliate
of Seller other than the Seller Subsidiaries.
4. Any assets and properties which are made available pursuant to
the Transition Services Agreement which are not expressly
identified as Purchased Assets in the Seller Disclosure Schedule.
5. Any Intellectual Property licensed pursuant to the Trademark
License.
6. The customs drawbacks described in Section 6.12 of the
Agreement.
7. Any cash, cash equivalents, investments and net intercompany
receivables balances owned by the Transferred Subsidiaries except
as provided in Section 6.3 or 6.4 of the Agreement.
SCHEDULE 2.3(b)
EXCLUDED LIABILITIES
1. All liabilities directly related to the Excluded Assets to the
extent that they are not Assumed Liabilities and are not
reflected on the Closing Net Operating Assets Statement.
2. All claims, actions, suits, proceedings and other obligations
for property damage, personal injury, death and other similar
losses or injuries arising out of the sale or use of products
sold by the Business (including products sold by the Transferred
Subsidiaries) prior to the Closing Date, whether in respect of
any express or implied representation and warranty or otherwise.
3. Any net intercompany payables balances or third party debt
owed by the Transferred Subsidiaries except as provided in
Section 6.3 of the Agreement.
4. Workers compensation claims, liabilities and obligations
arising prior to the Closing Date.
5. [The restructuring reserve established by Seller in 1997 to
the extent that it relates to the Business.]
SCHEDULE 2.5(b)
ACCOUNTING PRINCIPLES
(OMITTED)
SCHEDULE 3.2(a)
ALLOCATION SCHEDULE
(OMITTED)
SCHEDULE 3.3(c)
TREATMENT OF DEFERRED NET ASSETS AND DEFERRED
SUBSIDIARIES DURING DEFERRAL PERIOD
(OMITTED)
SCHEDULE 3.3(d)
TREATMENT OF DEFERRED NET ASSETS AND DEFERRED
SUBSIDIARIES IF A DEFERRED CLOSING DOES NOT
OCCUR WITHIN EIGHTEEN MONTHS
FOLLOWING THE CLOSING DATE
(OMITTED)
SCHEDULE 11.6
BUYER'S INSURANCE
(OMITTED)
Exhibit A
FORM OF BILL OF SALE, ASSIGNMENT AND
ASSUMPTION AGREEMENT
(OMITTED)
Exhibit B
OFFICE LEASE
(OMITTED)
Exhibit C
FORM OF TRADEMARK LICENSE
(OMITTED)
Exhibit D
FORM OF TRANSITION SERVICES AGREEMENT
(OMITTED)
EXHIBIT 2(b)
June 25, 1999
Luxottica Group S.p.A.
Via Valcozzena
Agordo, (Belluno) 32021
Italy
Attn: Roberto Chemello
Co-Chief Executive Officer
RE: Certain Closing Matters Relating to the Acquisition
of Bausch & Lomb Incorporated's Eyewear Business by
Luxottica Group S.p.A.
Gentlemen:
We are writing this letter to confirm our agreement with respect
to certain closing matters in connection with the closing of the
transactions contemplated by the Purchase Agreement dated April
28, 1999 (the "Agreement") between Bausch & Lomb Incorporated
("B&L" or "Seller") and Luxottica Group S.p.A. ("Luxottica" or
"Buyer"). Except as otherwise defined in this letter agreement,
all capitalized terms used herein will have the meanings ascribed
to them in the Agreement. The Agreement shall be deemed amended
to the extent set forth in this letter agreement and shall
otherwise remain in full force and effect in accordance with its
terms.
1. Closing Date; Closing Date Balance Sheet (Section 3.1)
As set forth in the Purchase Agreement, the Closing shall take
place on June 25, 1999 for the purposes of executing and
delivering the Transaction Documents and payment of the Purchase
Price; provided, however, the Closing, including, without
limitation, the effective date of the transfer of Purchased
Assets and the Transferred Subsidiaries pursuant to the
Transaction Documents, shall be deemed effective for all purposes
and the Closing Net Operating Assets Statement shall be prepared
as of 11:59 p.m. on June 26, 1999, local time in the
jurisdictions in which such Purchased Assets and Transferred
Subsidiaries are principally located or organized.
2. Purchase Price (Section 2.4)
Section 2.4 of the Purchase Agreement is amended to provide that
the portion of the Purchase Price paid in one or more foreign
currencies shall be converted into such foreign currencies by
using the morning spot rate on June 23, 1999.
Section 2.4 of the Purchase Agreement is further amended to
provide that in the event that all or a portion of the Purchase
Price which Seller has elected to have paid in one or more
foreign currencies cannot be transferred to Seller on June 25,
1999, Buyer shall hold the portion of the Purchase Price paid in
each such foreign currency in interest bearing accounts and shall
transfer the funds with interest as soon as is practicable after
June 25, 1999 without any independent negative impact on the
relevant Buyer Entity.
3. Purchase Price Reduction and withholding
In consideration of the agreement in paragraph 1 hereof as to
postponement of the effective date of the transfer contemplated
by the Purchase Agreement, and provided that the Closing occurs
as provided in paragraph 1 hereof, B&L agrees to a reduction of
$4,000,000 U.S. to the Purchase Price, such that the Purchase
Price shall be $636,000,000 U.S., subject to paragraph 4 hereof.
The Buyer shall be entitled to delay payment of any portion of
the Purchase Price in any jurisdiction where the Seller has not,
as at the Closing, obtained and delivered a capital gains tax
exemption certificate that is required in order for the relevant
Buyer Entity not to be obligated to withhold sums for tax
payments as requested by the relevant Seller Entity.
4. Post-Closing Purchase Price Reduction Refund
Within the 90-day period following the Closing Date which is
provided in the Purchase Agreement for the preparation of the
Closing Net Operating Assets Statement (Section 2.5(b)), the
parties, through the chairman of their respective Board of
Directors, shall meet to discuss in good faith the possible
return of all or a part of the Purchase Price reduction described
in paragraph 3 above in light of the efficiency of the
cooperation which Seller will have extended to Buyer during the
complex and delicate phase of integration and transfer of the
eyewear division into the Buyer's business.
5. Transition Services
In recognition of the increase in the total number of Business
Employees being transferred and to eliminate any bad debt
provision in the Base Transition Services, the parties agree that
the yearly fee for the Base Transition Services shall be reduced
on an annualized basis from $31,340,000 to $29,300,000, for the
periods commencing on Closing and ending on December 31, 1999 and
on an annualized basis from $32,907,000 to $30,475,000 for the
periods commencing on January 1, 2000 and ending on the
termination or expiration of the Transition Services Agreement,
which amount shall be paid as set forth in paragraph 3(b) of the
Transition Services Agreement.
6. Transferred Subsidiaries (Schedule 1.1(b))
Schedule 1.1(b) to the Agreement is amended to delete REVO Europe
Limited and Ray-Ban, Inc. B&L agrees to cause the names of such
entities to be changed as soon as practicable following the
Closing Date to names which do not resemble any name which
constitutes a Business Asset. Schedule 1.1.(b) to the Agreement
is further amended to add BL Comercial Ltda. as a Transferred
Subsidiary. Buyer agrees to cause the name of such entity to be
changed as soon as practicable following the Closing Date to a
name which does not resemble any name or trademark of Seller.
7. Seller Subsidiaries (Section 1.1(a))
Schedule 1.1(a) to the Agreement is amended to delete BL
Industries Otica Ltda., B&L Korea, Inc., B&L South Asia
Management Co., Sdn. Bhd. and I.O.M. S.p.A.
8. Physical Inventory (Section 2.5(a))
The physical inventory of the inventory of the Business
contemplated by Section 2.5(a) of the Agreement to be conducted
during the ten (10) business days preceding the Closing Date or
at such other time as mutually agreed to by the parties will be
conducted commencing on June 27, 1999, in the manner provided for
in the Purchase Agreement.
9. Allocations (Section 3.2)
(a) All references in Section 3.2(b) to a separate payment of
U.S. $44,527,000 in respect of the shares of Killer Loop shall be
deemed deleted and the full Purchase Price shall be paid as
otherwise provided in the Purchase Agreement. Nonetheless, the
portion of the Purchase Price allocable to the purchase of the
shares of Killer Loop shall continue to be deemed to be such
amount and the Closing shall, as set forth in Section 3.2(b),
occur in the two steps referred to therein.
(b) Section 3.2(b)(ii) shall be deleted in its entirety and
replaced with the following paragraph:
(ii) At the Second Step, immediately after consummation of the
First Step, Buyer and the Buyer Entities that it shall have
designated pursuant to Section 3.2(c), shall purchase all of the
Purchased Assets and all of the remaining Purchased Shares and
assume the Assumed Liabilities, and shall pay the balance of the
Purchase Price due after giving effect to the First Step, all
pursuant to and in accordance with all of the terms, provisions
and conditions of this Agreement applicable to the Closing, with
the sole exception of the actions theretofore taken as the First
Step.
10. Conveyance of Tangible Personal Property in New York State
(Section 3.5)
Prior to the Closing Date, the Seller will contribute the
tangible personal property (other than inventory and motor
vehicles) constituting Purchased Assets that are located in New
York State to a newly formed New York limited liability company
("New LLC") in exchange for the membership interest in the New
LLC. At the Closing, the Seller shall assign its membership
interest in the New LLC to Ray-Ban Sun Optics, Inc. or such other
Buyer Entity as shall be designated by Luxottica. Luxottica
prepared all organizational documents for the New LLC including,
without limitation, the Operating Agreement and Articles of
Organization. B&L agrees to cause such governing documents to be
executed, filed and published as appropriate. The parties
understand and agree that the basis of the assets in New LLC will
be the book value of such assets on the books of the Seller prior
to its contribution to New LLC. Luxottica agrees to indemnify
and hold harmless the Seller Indemnified Parties from and against
any and all losses, damages, claims, taxes, penalties and
interest resulting from the transfer of such tangible personal
property to the New LLC and/or the failure to pay any taxes on
such transfer. This obligation will survive until the expiration
of statute of limitations for bringing any claims against the
Seller Indemnified Parties in respect of any such losses,
damages, claims, taxes, penalties and interest the subject of
indemnification herein.
11. Conveyance of Intellectual Property (Section 3.5)
Notwithstanding Section 3.5(c) of the Agreement at the Closing,
the applicable Seller Entities shall deliver assignments in the
form provided by Luxottica's trademark counsel, Bugnion, covering
the Purchased Assets which are Intellectual Property or Assigned
Contracts which relate to Intellectual Property solely with
respect to the following countries: the U.S. (and the Assignment
Agreement that will be in recordable form for the U.S. will also
be effective as a general assignment of all such Intellectual
Property and Assigned Contracts in all jurisdictions, even if not
in recordable form for any of such other jurisdictions); each
member of the European Union; Hong Kong; Australia; and Japan.
As soon as practical following the Closing, the Seller Entities
will execute any assignments prepared by the applicable Buyer
Entities which are reasonably necessary to permit the conveyance
and assignment of such Purchased Assets to be recorded in any
applicable jurisdictions or to otherwise confirm such conveyance
and assignment.
12. Accounts Receivable (Section 4.21)
The updates to the Seller Disclosure Schedule delivered to
Luxottica pursuant to Section 6.13 of the Agreement will delete
Item 1 of Section 4.21 of the Seller Disclosure Schedule.
13. Workers Compensation Claims (Section 8.2(d))
The last sentence of Section 8.2(d) of the Agreement will be
deemed deleted and, as provided in Schedule 2.3(b), the Seller
Entities will remain responsible for any Workers Compensation
claims, liabilities and obligations arising prior to the Closing.
Any reserves established for such workers compensation claims
will not be a Purchased Asset or Assumed Liability and will not
be reflected on the Closing Net Operating Assets Statement.
14. Transition Services Agreement (Section 6.11)
(a) The employees in the Puerto Rican eyewear operations of
the Business and Maxim Volovich of REVO, Inc. will not be treated
as Transferred Employees pursuant to the Agreement. Such
employees will continue to be employed by the Seller Entities,
and the Transition Services Agreement will be deemed revised to
provide that such employees will provide services to the Buyer
Entities but only for so long as the Buyer Entities desire to
continue such arrangement. The Transition Services Agreement
will also be deemed to provide that as compensation for such
services the Buyer Entities will pay to the applicable Seller
Entities all of the compensation and benefits costs associated
with such employees, including any severance or other redundancy
payment, provided that they remain at the same compensation
levels as currently provided.
(b) James Horn will not be treated as a Transferred Employee
pursuant to the Purchase Agreement. He will continue to be
employed by Seller through July 31, 1999 and the Transition
Services Agreement is deemed revised to provide that he will
provide services to the Buyer Entities through July 31, 1999. If
Buyer elects to continue to use Mr. Horn's services after July
31, 1999 and through December 31 1999, then the Transition
Services Agreement shall be deemed to provide that as
compensation for such additional services, the Buyer Entities
will pay to Seller all of the compensation and benefits costs
associated with Mr. Horn, including any payment due to Mr. Horn
under his retention agreement.
(c) In addition to the foregoing, the form of the Transition
Services Agreement set forth as Exhibit D to the Agreement is
hereby amended to be a form mutually agreed upon by the parties
at the time of Closing.
15. Insurance (Section 11.6)
To the extent that the Buyer Entities obtain insurance that is
required pursuant to Section 11.6 from a foreign insurance
company, such insurance company will not be required to be A.M.
Best rated. Any such foreign insurance company shall be rated by
a comparable foreign insurance rating agency and shall have a
rating which, in B&L's reasonable opinion, is equivalent to an
A.M. Best rating of A- or better or is otherwise reasonably
satisfactory to B&L.
16. Confidential Information
B&L has been advised by Warburg Dillon Read, its financial
advisor in connection with the Transactions, that all
confidential information provided to bidders other than Luxottica
has been returned by such bidders to Warburg Dillon Read (please
note that this information shall not be deemed to be a
representation by B&L that all bidders have, in fact, returned
all confidential information without retaining any copies
thereof). In the event that B&L or Luxottica becomes aware of
any breach by any bidder of its obligations with respect to the
confidential information furnished to such bidder, then B&L will
enforce such obligation or will assign such enforceable rights to
Luxottica for it to enforce.
17. Employees
Section 4.18 of the Agreement is hereby deemed deleted and
replaced in its entirety as follows:
Section 4.18 of the Seller Disclosure Schedule contains a list of
all Business Employees employed, as of May 31, 1999, at each
location at which the Business is conducted, in the total number
of 2343.
In addition, Section 4.18 of Seller's Disclosure Schedule shall
be replaced with a new Section 4.18 containing the list of all
Business Employees employed as provided above.
18. Deferred Closings
(a) The parties hereby confirm to each other that Deferred
Closings shall occur in respect of India and Turkey. In
addition, in certain jurisdictions, appropriate bills of sale and
other instruments and agreements providing for the transfer of
title to the Purchased Assets in such jurisdictions will be
executed and delivered at the Closing, but their effectiveness
will be made subject to the condition that certain governmental
consents, approvals or filings be obtained or made, such that the
transfer will occur upon or promptly after the satisfaction of
such condition (the "Conditional Closings").
(b) Anything in the Purchase Agreement or any other document
executed or delivered in connection therewith to the contrary
notwithstanding, it is agreed by the parties that:
(i) The closing of the sale of Purchased Assets
covered by any Deferred Closing and any
Conditional Closing shall occur in accordance with
the relevant transfer agreements executed and
delivered at the Closing with respect to the
jurisdiction covered thereby or, in the absence of
such transfer agreements for a particular
jurisdiction, as soon as reasonably possible after
the basis for the Deferred Closing or Conditional
Closing has been eliminated and, in any case, no
later than five (5) business days after you give
us notice of the elimination of the basis for the
Deferred Closing or Conditional Closing; and
(ii) B&L shall and, as appropriate, shall cause its
Affiliates to, from and after the Closing Date and
through the respective Deferred Closing Dates for
the Deferred Closings and Conditional Deferred
Closings, advise Luxottica as fully and as
frequently as practical of all material
developments and issues in the operation of such
businesses that come to B&L's attention and shall
accept and promptly implement all of Luxottica's
lawful directions given in good faith in respect
of all aspects of the operation of such
businesses. By signing this letter agreement,
Luxottica agrees that it shall indemnify B&L and
the Seller Indemnified Parties against and hold
B&L and the Seller Indemnified Parties harmless
from all losses, damages, claims, liabilities,
costs and expenses (including reasonable legal
fees and expenses) incurred by them and arising
out of or in connection with Luxottica's direction
of operations of the businesses covered by the
Deferred Closings and the Conditional Closings.
(d) The parties shall cooperate with each other to the extent
reasonably necessary and appropriate to eliminate as soon as
reasonably possible after the Closing Date the basis for each
Deferred Closing and Conditional Closing as agreed to by local
counsel for the parties, and, to the extent only one of the
parties is in a position to do so, it shall take all steps
reasonably necessary and appropriate to eliminate such basis as
soon as reasonably possible after the Closing Date. All
references in the Agreement, as modified hereby, to Deferred
Closings and Deferred Transfers shall apply to the Purchased
Assets covered by the Conditional Closings.
19. Purchase of Certain Assets of I.O.M. S.p.A by Killer Loop
Prior to the Closing, Seller shall cause Killer Loop to purchase
all of the Purchased Assets and assume all of the Assumed
Liabilities of I.O.M. S.p.A.
20. Transfer Documents
B&L will not at any time take or cause or permit any other Seller
Entity to take any executed original bill of sale or other
executed original asset transfer instrument or agreement relating
to Purchased Assets in any jurisdiction physically into such
jurisdiction if doing so would subject the transaction to stamp
duty, transfer or other similar taxes.
21. Additional Local Currency Payments
If, after the Closing, it is determined by B&L and Luxottica that
a portion of the Purchase Price should have been paid in local
currency in a particular jurisdiction that was not in fact paid
at the Closing in such manner, and that Luxottica should then
make such payment in such local currency, B&L shall repay to
Luxottica an amount in U.S. dollars that at the then current
exchange rate is equivalent to the amount in such local currency
that is necessary to be paid upon receipt from Luxottica of the
amount in such local currency.
22. Credit For Payroll Expenses
In light of the fact that the effective time of the Closing will
be 11:59 p.m. on June 26, 1999, and the fact that Luxottica will
pay or be charged for the payment of certain payroll expenses
relating to the Business in certain jurisdictions for the day of
June 26, 1999, Luxottica will, in connection with the post-
Closing Purchase Price adjustment procedure set forth in Section
2.5 of the Agreement, receive a credit in the amount of such
payroll expenses incurred by it for such day, as part of such
adjustment procedure.
23. Partial Assignments of Contracts
B&L will use its reasonable efforts to obtain from each third
party to a contract or agreement that is, pursuant to the
Agreement, partially assigned to a Buyer Entity, such party's
acknowledgment that the Buyer Entity will be treated by it as the
party entitled to the benefits of, and to enforce, that portion
of such contract or agreement as shall have been assigned to it,
provided, however, that the failure to obtain such acknowledgment
notwithstanding the use of reasonable efforts shall not be a
basis for any liability on the part of B&L.
24. Conflicts between Agreement and Transfer Documents
In the event of any conflict between any of the terms and
provisions of the Agreement and the terms and provisions of any
bill of sale, assignment agreement or other instrument or
document providing for the transfer or conveyance of any of the
Purchased Assets or the shares in any of the Transferred
Subsidiaries in any particular jurisdiction (a "Transfer
Document"), and treating as such a conflict the fact that any
Transfer Document may contain a representation, warranty or
covenant that is not contained in the Agreement, or any
limitation to a representation, warranty or covenant that is
contained in the Agreement then, anything in any Transfer
Document to the contrary notwithstanding: (i) the terms and
provisions of the Agreement shall control and govern such that
neither party shall have a cause of action, a claim for indemnity
under the Agreement or any other similar right to enforce or
obtain a benefit under the terms or provisions of the Transfer
Document that create or constitute the conflict; (ii) the
provisions of the preceding clause (i) are limited only insofar
as the Transfer Document is required to be enforceable in
accordance with its terms, but only in the jurisdiction to which
it relates, in order to, and to the extent required to, effect
the transfer of title and necessary related actions provided for
therein; and (iii) all of the representations and warranties, and
related indemnities, of the parties set forth in the Agreement
shall remain in full force and effect, including, without
limitation, the representation of the Seller in Section 4.5 as to
title to Purchased Shares and Purchased Assets..
25. Continued Effectiveness of Allocation Principles and
Allocation Schedule
The Allocation Principles and the Allocation Schedule shall
remain fully effective between the parties to the Agreement
notwithstanding any contrary or different allocation of the
Purchase Price at or prior to the Closing for purposes of
inserting amounts of consideration in the bills of sale and other
transfer instruments covering the Purchased Assets.
26. Accounts Receivable Lists
B&L will deliver copies of its records relating to accounts
receivable of the Business as at the close of business on June
26, 1999, including to the fullest extent possible, lists by
Seller Entity and by account debtors, with amounts due from each,
to Luxottica, as soon as they are available, but in any event not
later than July 25, 1999.
Please indicate your agreement with the terms of this letter
agreement by signing a copy of this letter agreement where
indicated below and returning it to us on the date hereof,
whereupon this letter agreement shall constitute a binding
agreement between the parties.
Very truly yours,
Bausch & Lomb Incorporated
By:
Jurij Kushner
Vice President and Controller
AGREED TO AS OF
THE DATE SET FORTH ABOVE:
Luxottica Group S.p.A.
By:
Name:
Title:
