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) April 1, 1998
CORNING INCORPORATED
(Exact name of registrant as specified in its charter)
New York 1-3247 16-0393470
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
One Riverfront Plaza, Corning, New York 14831
(Address of principal executive offices) (Zip Code)
(607) 974-9000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On April 1, 1998, Corning completed the recapitalization and sale of a
controlling interest in its consumer housewares business to an affiliate of
Borden, Inc. (the Consumer transaction). Corning received proceeds of $583
million in cash and will continue to retain an 8 percent interest in the Corning
Consumer Products Company. In addition, Corning could receive an additional
payment of up to $15 million if certain financial targets are met by Corning
Consumer Products Company for the three year period 1998-2000.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) The following restated historical financial statements and pro forma
financial information are being filed herewith:
(1) Restated historical consolidated Statement of Income for the years
ended December 31, 1995 and December 31, 1996.
(2) Restated historical and pro forma consolidated Statement of Income
for the year ended December 31, 1997.
(3) Pro forma consolidated Balance Sheet as of December 31, 1997.
(b) Exhibits
10.1 Recapitalization Agreement, dated as of March 2, 1998, among
Corning Incorporated, Corning Consumer Products Company, CCPC
Acquisition Corp. and Borden, Inc.
99.1 Historical 1997 Consolidated Statements of Income by quarter
99.2 Restated 1997 Consolidated Statements of Income by quarter
99.3 Restated 1997, 1996, 1995, 1994 and 1993 Consolidated Statements
of Income
2
<PAGE>
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.
CORNING INCORPORATED
Registrant
Date: April 13, 1998 By /s/ KATHERINE A. ASBECK
Katherine A. Asbeck
Vice President and Controller
3
<PAGE>
CORNING INCORPORATED
RESTATED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
On April 1, 1998, Corning completed the recapitalization and sale of a
controlling interest in its consumer housewares business to an affiliate of
Borden, Inc. (the Consumer transaction). Corning received proceeds of $583
million in cash and will continue to retain an 8 percent interest in the Corning
Consumer Products Company. In addition, Corning could receive an additional
payment of up to $15 million if certain financial targets are met by Corning
Consumer Products Company for the three year period 1998-2000.
The restated historical Statements of Income for the three years ended December
31, 1997 have been derived from the audited financial statements of Corning and
have been restated to reflect the consumer housewares business as a discontinued
operation.
The unaudited Pro Forma Consolidated Statement of Income for the year ended
December 31, 1997 presents the consolidated results of operations of Corning
assuming that the Consumer transaction had been completed as of January 1, 1997.
The unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1997
presents the consolidated financial position of Corning assuming that the
Consumer transaction had occurred at that date. In the opinion of management,
the pro forma financial statements include all material adjustments necessary to
restate Corning's historical results. The adjustments required to reflect such
assumptions are described in the Notes to the Pro Forma Consolidated Financial
Information (Unaudited).
The unaudited Pro Forma Consolidated Financial Information of Corning should be
read in conjunction with the historical financial statements of Corning included
in its 1997 annual report to shareholders. The pro forma information is
presented for informational purposes only and may not necessarily reflect future
results of operations or financial position or what the results of operations or
financial position would have been for Corning had the Consumer transaction
occurred as assumed herein.
4
<PAGE>
Corning Incorporated and Subsidiary Companies
Restated Historical Consolidated Statement of Income
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31, 1995
----------------------------------------
Discontinued
Operations Restated
Historical Adjustments (a) Historical
---------- --------------- ----------
<S> <C> <C> <C>
Revenues
Net sales $ 3,257.1 $ (612.4) $ 2,644.7
Royalty, interest and dividend income 30.6 (3.9) 26.7
--------- ---------- ----------
3,287.7 (616.3) 2,671.4
Deductions
Cost of sales 2,032.6 (423.9) 1,608.7
Selling, general and administrative expenses 556.2 (152.1) 404.1
Research and development expenses 175.7 (3.5) 172.2
Provision for restructuring 26.5 26.5
Interest expense 69.3 (12.7) 56.6
Other expense, net 21.3 (7.4) 13.9
--------- ---------- ----------
Income from continuing operations before taxes 406.1 (16.7) 389.4
Taxes on income 118.2 (10.9) 107.3
--------- ---------- ----------
Income from continuing operations before
minority interest and equity earnings 287.9 (5.8) 282.1
Minority interest in earnings of subsidiaries (64.4) 0.1 (64.3)
Dividends on convertible preferred
securities of subsidiary (13.7) (13.7)
Equity in earnings (losses) of associated companies:
Other than Dow Corning 66.7 (0.1) 66.6
Dow Corning Corporation (348.0) (348.0)
--------- ---------- ----------
Income (loss) from continuing operations (71.5) (5.8) (77.3)
Income from discontinued operations, net of
income taxes:
Life science businesses 20.7 20.7
Consumer housewares business 5.8 5.8
--------- ---------- ----------
Net Loss $ (50.8) $ $ (50.8)
========= ========== ==========
Basic earnings per share:
Continuing operations $ (0.32) $ (0.03) $ (0.35)
Discontinued operations 0.09 0.03 0.12
--------- ---------- ----------
Net Loss $ (0.23) $ $ (0.23)
========= ========== ==========
Diluted earnings per share:
Continuing operations $ (0.32) $ (0.03) $ (0.35)
Discontinued operations 0.09 0.03 0.12
--------- ---------- ----------
Net Loss $ (0.23) $ $ (0.23)
========= ========== ==========
Shares used in computing earnings per share:
Basic earnings per share 226.6 226.6 226.6
========= ========== ==========
Diluted earnings per share 226.6 226.6 226.6
========= ========== ==========
</TABLE>
(a) Includes all adjustments necessary to reflect the operations of the
consumer housewares business as a discontinued operation and minor
reclassification adjustments.
5
<PAGE>
Corning Incorporated and Subsidiary Companies
Restated Historical Consolidated Statement of Income
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31, 1996
----------------------------------------
Discontinued
Operations Restated
Historical Adjustments (a) Historical
---------- --------------- ----------
<S> <C> <C> <C>
Revenues
Net sales $ 3,651.6 $ (627.6) $ 3,024.0
Royalty, interest and dividend income 32.9 (3.2) 29.7
--------- ---------- ----------
3,684.5 (630.8) 3,053.7
Deductions
Cost of sales 2,258.9 (428.8) 1,830.1
Selling, general and administrative expenses 639.8 (140.4) 499.4
Research and development expenses 191.3 (2.1) 189.2
Interest expense 69.1 (11.9) 57.2
Other expense, net 38.1 (16.1) 22.0
--------- ---------- ----------
Income from continuing operations before taxes 487.3 (31.5) 455.8
Taxes on income 163.2 (11.8) 151.4
--------- ---------- ----------
Income from continuing operations before
minority interest and equity earnings 324.1 (19.7) 304.4
Minority interest in earnings of subsidiaries (52.6) 0.1 (52.5)
Dividends on convertible preferred
securities of subsidiary (13.7) (13.7)
Equity in earnings of associated companies 85.1 85.1
--------- ---------- ----------
Income from continuing operations 342.9 (19.6) 323.3
Income (loss) from discontinued operations, net of
income taxes:
Life science businesses (167.3) (167.3)
Consumer housewares business 19.6 19.6
--------- ---------- ----------
Net Income $ 175.6 $ $ 175.6
========= ========== ==========
Basic earnings per share:
Continuing operations $ 1.50 $ (0.08) $ 1.42
Discontinued operations (0.74) 0.08 (0.66)
--------- ---------- ----------
Net Income $ 0.76 $ $ 0.76
========= ========== ==========
Diluted earnings per share:
Continuing operations $ 1.48 $ (0.08) $ 1.40
Discontinued operations (0.70) 0.08 (0.62)
--------- ---------- ----------
Net Income $ 0.78 $ $ 0.78
========= ========== ==========
Shares used in computing earnings per share:
Basic earnings per share 227.1 227.1 227.1
========= ========== ==========
Diluted earnings per share 239.5 239.5 239.5
========= ========== ==========
</TABLE>
(a) Includes all adjustments necessary to reflect the operations of the
consumer housewares business as a discontinued operation and minor
reclassification adjustments.
6
<PAGE>
Corning Incorporated and Subsidiary Companies
Restated Historical and Pro Forma Consolidated Statement of Income
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31, 1997
---------------------------------------------------------------------
Discontinued
Operations Restated Pro Forma Pro
Historical Adjustments (a) Historical Adjustments (b) Forma
---------- --------------- ---------- --------------- -----
<S> <C> <C> <C> <C> <C>
Revenues
Net sales $ 4,089.7 $ (572.9) $ 3,516.8 $ $ 3,516.8
Royalty, interest and dividend income 39.4 (1.9) 37.5 37.5
---------- --------- ---------- ---------- ---------
4,129.1 (574.8) 3,554.3 3,554.3
Deductions
Cost of sales 2,406.2 (363.9) 2,042.3 2,042.3
Selling, general and administrative
expenses 671.4 (129.8) 541.6 541.6
Research and development expenses 250.7 (0.4) 250.3 250.3
Interest expense 85.0 (13.0) 72.0 (2.0)(1) 70.0
Other expense, net 37.6 (18.7) 18.9 18.9
---------- --------- ---------- ---------- ---------
Income from continuing operations
before taxes 678.2 (49.0) 629.2 2.0 631.2
Taxes on income 227.2 (17.7) 209.5 0.8 (2) 210.3
---------- --------- ---------- ---------- ---------
Income from continuing operations before
minority interest and equity earnings 451.0 (31.3) 419.7 1.2 420.9
Minority interest in earnings of subsidiaries (76.7) 0.4 (76.3) (76.3)
Dividends on convertible preferred
securities of subsidiary (13.7) (13.7) (13.7)
Equity in earnings of associated companies 79.2 79.2 79.2
---------- ---------- ---------- ---------- ---------
Income from continuing operations 439.8 (30.9) 408.9 1.2 410.1
Income from discontinued operations,
net of income taxes:
Consumer housewares business 30.9 30.9 30.9
---------- --------- ---------- ---------- ---------
Net Income $ 439.8 $ $ 439.8 $ 1.2 $ 441.0
========== ========== ========== ========== =========
Basic earnings per share:
Continuing operations $ 1.92 $ (0.13) $ 1.79 $ 0.00 $ 1.79
Discontinued operations 0.13 0.13 0.13
---------- --------- ---------- ---------- ---------
Net Income $ 1.92 $ $ 1.92 $ 0.00 $ 1.92
========== ========== ========== ========== =========
Diluted earnings per share:
Continuing operations $ 1.85 $ (0.13) $ 1.72 $ 0.00 $ 1.72
Discontinued operations 0.13 0.13 0.13
---------- ---------- ---------- ---------- ---------
Net Income $ 1.85 $ $ 1.85 $ 0.00 $ 1.85
========== ========== ========== ========== =========
Shares used in computing earnings per share:
Basic earnings per share 228.1 228.1 228.1 228.1 228.1
========== ========= ========== ========== =========
Diluted earnings per share 245.4 245.4 245.4 245.4 245.4
========== ========= ========== ========== =========
</TABLE>
(a) Includes all adjustments necessary to reflect the operations of the
consumer housewares business as a discontinued operation and minor
reclassification adjustments.
(b) See Notes to Pro Forma Consolidated Financial Information beginning on page
9.
7
<PAGE>
Corning Incorporated and Subsidiary Companies
Restated Historical and Pro Forma Consolidated Balance Sheet
As of December 31, 1997
(In millions)
<TABLE>
<CAPTION>
Discontinued
Operations Restated Pro Forma Pro
Historical Adjustments (a) Historical Adjustments (b) Forma
---------- --------------- ---------- --------------- -----
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash $ 65.3 $ (4.3) $ 61.0 $ 583.0 (3) $ 476.8
(167.2)(4)
Short term investments 36.0 36.0 36.0
Accounts receivable, net 628.0 (68.3) 559.7 559.7
Inventories 564.7 (136.4) 428.3 428.3
Deferred taxes and other current assets 130.2 (16.1) 114.1 29.1 (3) 143.2
--------- -------- --------- --------- --------
Total Current Assets 1,424.2 (225.1) 1,199.1 444.9 1,644.0
Investments
Associated companies, at equity 292.9 292.9 292.9
Others, at cost 17.1 17.1 17.1
Plant & Equipment, net 2,427.6 (159.7) 2,267.9 2,267.9
Goodwill and Other Intangible Assets, Net 363.3 (69.1) 294.2 294.2
Other Assets 286.3 (23.2) 263.1 263.1
Net assets of discontinued operations 357.6 357.6 (357.6)(3)
--------- --s------ --------- --------- --------
Total Assets $ 4,811.4 $ (119.5) $ 4,691.9 $ 87.3 $4,779.2
========= ======== ========= ========= ========
Liabilities and Stockholders' Equity
Current Liabilities
Loans payable $ 215.0 $ (2.0) $ 213.0 $ (167.2)(4) $ 45.8
Accounts payable 316.7 (16.7) 300.0 300.0
Other accrued liabilities 485.6 (40.9) 444.7 229.5 (3) 674.2
--------- -------- --------- --------- --------
Total Current Liabilities 1,017.3 (59.6) 957.7 62.3 1,020.0
--------- -------- --------- --------- --------
Other Liabilities 678.1 (50.6) 627.5 627.5
Loans Payable Beyond One Year 1,134.1 (8.3) 1,125.8 1,125.8
Minority Interest in Subsidiary Companies 350.3 (1.0) 349.3 349.3
Convertible Pref. Securities of Subsidiary 365.3 365.3 365.3
Convertible Preferred Stock 19.8 19.8 19.8
Common Stockholders' Equity
Common Stock 707.2 707.2 707.2
Retained Earnings 1,296.0 1,296.0 25.0 (3) 1,321.0
Treasury Stock (724.5) (724.5) (724.5)
Cumulative translation adjustment (32.2) (32.2) (32.2)
--------- -------- --------- -------- --------
Total Common Stockholders' Equity $ 1,246.5 $ $ 1,246.5 $ 25.0 $1,271.5
========= -------- ========= ========= ========
Total Liabilities and Stockholders' Equity $ 4,811.4 $ (119.5) $ 4,691.9 $ 87.3 $4,779.2
========= ======== ========= ========= ========
</TABLE>
(a) Includes all adjustments necessary to reflect the operations of the cosumer
housewares business as a discontinued operation.
(b) See Notes to Pro Forma Consolidated Financial Information beginning on page
9.
8
<PAGE>
CORNING INCORPORATED
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
Note 1.
The pro forma adjustment represents the net decrease in interest expense of
continuing operations related to the Consumer transaction. Historical income
from operations of the discontinued business includes an allocation of Corning's
interest expense based on the ratio of net assets of discontinued operations to
consolidated net assets. This allocation related to the consumer housewares
business totaled $13.0 million for the year ended December 31, 1997.
Had the Consumer transaction occurred on January 1, 1997, Corning would not have
issued commercial paper during the year. Interest associated with this debt
totaled $2.0 million in 1997. In accordance with rules established by the
Securities Exchange Commission, the pro forma adjustment does not include
interest income related to proceeds that would have been invested had the
Consumer transaction occurred on January 1, 1997.
Note 2.
The pro forma adjustment to taxes on income represents the estimated income tax
benefit of the pro forma increase in interest expense at the incremental
statutory tax rate of 39%.
Note 3.
The pro forma adjustment to cash, deferred taxes, net assets of discontinued
operations, accrued liabilities and retained earnings represents the receipt of
cash proceeds totaling $583 million from the Consumer transaction, recognition
of the tax liability on the gain from the Consumer transaction and establishment
of reserves related to estimates of transaction costs and contractual
indemnifications. Corning expects to record an after tax gain in the range of
$25-$50 million from this transaction. For these pro formas, a $25 million gain
has been assumed. Any difference would likely result in an increase to the
adjustment to retained earnings, a decrease to the adjustment to accrued
liabilities and deferred tax assets.
Note 4.
The pro forma adjustment to cash and loans payable represents the repayment by
Corning of commercial paper outstanding at December 31, 1997, with a portion of
the proceeds from the Consumer transaction.
9
<PAGE>
CORNING INCORPORATED
EXHIBIT INDEX
10.1 Recapitalization Agreement, dated as of March 2, 1998, among Corning
Incorporated, Corning Consumer Products Company, CCPC Acquisition Corp.
and Borden, Inc.
99.1 Historical 1997 Consolidated Statements of Income by quarter
99.2 Restated 1997 Consolidated Statements of Income by quarter
99.3 Restated 1997, 1996, 1995, 1994 and 1993 Consolidated Statements of
Income
10
RECAPITALIZATION AGREEMENT, dated March 2, 1998, among CORNING
INCORPORATED, a New York corporation (the "Seller"), CORNING CONSUMER PRODUCTS
COMPANY, a Delaware corporation (the "Company"), CCPC ACQUISITION CORP., a
Delaware corporation (the "Purchaser") and, solely for purposes of Sections
10.02 and 11.14(a) hereof, Borden, Inc., a New Jersey corporation and an
Affiliate of the Purchaser ("Borden").
WHEREAS, the Seller owns all the issued and outstanding shares
(the "Shares") of common stock, no par value per share, of the Company; and
WHEREAS, the Seller wishes to sell to the Purchaser, and the
Purchaser wishes to purchase from the Seller, certain Shares, and the Purchaser
and the Seller desire to effect a recapitalization of the Company, each on the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Purchaser, the Company and
the Seller hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings:
"Acquired Shares" means 920 Shares.
"Affiliate" means, with respect to any specified Person, any
other Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Recapitalization
Agreement, dated March 2, 1998, among the Seller, the Company, the Purchaser
and, for purposes of Sections 10.02 and 11.14(a) only, Borden (including the
Exhibits hereto and the Disclosure Schedule) and all amendments hereto made in
accordance with the provisions of Section 11.09.
"Books and Records" means all the books of account and other
financial records pertaining to the Company and the Subsidiaries.
<PAGE>
2
"Business" means the business of manufacturing, distributing,
exporting and/or selling the Corning Consumer Products as conducted and as
currently intended to be conducted by the Company and the Subsidiaries.
"Business Day" means any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by law to be closed in The
City of New York.
"Cash Dividend Amount" means $472,600,000 as adjusted pursuant to
Section 2.04.
"Charleroi Facility" means all real property, all improvements
thereon and all machinery and equipment used in connection therewith owned by or
leased or otherwise made available to the Company, including all easements,
licenses, rights and appurtenances thereto, comprising its manufacturing
facility located in the Borough of Charleroi, Washington County, Commonwealth of
Pennsylvania, such real property being bounded generally on the east by
Monongahela River, on the south by real property owned (on the date of this
Agreement) by West Penn Power, on the west by real property owned (on the date
of this Agreement) by Consolidated Rail Corporation and on the north by real
property owned (on the date of this Agreement) by the Borough of Charleroi.
"Closing Balance Sheet" means the audited consolidated balance
sheet (including the related notes and schedules thereto) of the Company and the
Subsidiaries, to be prepared pursuant to Section 2.04 and to be dated as of the
Closing Date, except that if the Closing Date is the first day of any month, the
Closing Balance Sheet will be dated as of the day immediately preceding the
Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended
through the date hereof.
"Confidentiality Agreement" means the letter agreement dated as
of February 9, 1998, Seller and Borden.
"Consumer Copyrights" means any and all statutory or other rights
in any copyrights owned by the Seller, the Company or any Subsidiary and
protecting a work which has been used or is currently intended to be used in the
Business.
"Consumer Grantee License Agreements" means each written
unexpired agreement dated prior to the Closing Date pursuant to which the Seller
(and its Affiliates), the Company or any Subsidiary, individually or in
combination with each other, has the right to use any Consumer Intellectual
Property, or any other intellectual property owned by a third party, in
connection with the Business.
<PAGE>
3
"Consumer Grantor License Agreements" means each written,
unexpired agreement dated prior to the Closing Date pursuant to which the Seller
(and its Affiliates), the Company or any Subsidiary has licensed to a third
party any Consumer Intellectual Property.
"Consumer Intellectual Property" means all intellectual property
rights owned or used by the Company and the Subsidiaries, including, without
limitation, the Consumer Trademarks, the Consumer Know-How, the Consumer
Patents, the Seller's Retained Patents, the Consumer Copyrights, and any one of
the foregoing.
"Consumer License Agreements" means the Consumer Grantor License
Agreements and the Consumer Grantee License Agreements.
"Consumer Know-How" means any and all knowledge and experience
used or currently intended to be used by the Seller, the Company or any
Subsidiary prior to the Closing Date, or that pertain or relate to the
technology and industrial techniques used, in the commercial production of
Corning Consumer Products and any evolutionary improvements therein, and not a
replacement therefor, created before the fifth anniversary of the Closing Date.
"Consumer Patents" means all patents, and all applications,
reissues, renewals, continuations and extensions relating to any patents owned
or used by, or subject to a right of assignment to, the Seller, the Company or
any Subsidiary prior to the Closing which in the case of the Seller only pertain
or relate to, or are only used in or currently intended for use in, the
Business, including, without limitation, those identified in Section 3.18 of the
Disclosure Schedule, but excluding Seller's Retained Patents.
"Consumer Trademarks" means all trademarks and all registrations,
applications, and renewals, relating to trademarks, and all logos, company names
and trade names currently owned, used and/or intended to be used by the Seller
(or its Affiliates), the Company or any Subsidiary in connection with the
Business, including, but not limited to, the trademarks listed in Section 3.18
of the Disclosure Schedule, and all goodwill associated with and all rights in
the foregoing.
"Corning Consumer Products" means Stanadyne Products, pressed
glass ceramic molds to be used for metal consumer products for retail sale,
final water filtration system products for home use (but excluding OEM Component
Products parts of such water filtration systems products) and products
manufactured, distributed and/or sold by the Company and the Subsidiaries for
use primarily in the preparation, cooking, storage, service and enjoyment of
foods and/or beverages, including, but not limited to, glass, glass-ceramic,
ceramic, plastic and metal ovenware, bakeware, cookware, dinnerware, tableware,
tableware accessories, kitchen gadgets; provided, however, that Corning Consumer
Products shall not include Steuben Products, ceramic briquettes, OEM Component
Products for consumer
<PAGE>
4
household appliances, household cooking ovens or ranges, products for lighting,
computers, laboratory science, electronics, medical applications, automobile and
building windows, mirrors, flatglass, television or display applications, liquid
filtration products (other than Stanadyne Products and final water filtration
system products for home use), OEM Component Product parts of water filtration
system products for home use, glass ceramic burner caps, glass ceramic cook
tops, flat glass ceramic stove windows and new products manufactured from flat
glass ceramic by Eurokera, S.N.C. or Keraglass, S.N.C. or their respective
licensees for sale in Europe.
"Cumulative Gross Margin" means the sum of the Gross Margins in
each of the three years ended December 31, 1998, 1999 and 2000.
"Disclosure Schedule" means the Disclosure Schedule attached
hereto, dated as of the date hereof, and forming a part of this Agreement.
"Durable Consumer Products" means Housewares and those products
identified on the attached Exhibit 1.01(a); provided that Durable Consumer
Products will not include such items as are specifically excluded from the
definition of Corning Consumer Products.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended and any regulations promulgated or proposed thereunder.
"Facility Financing Interests" means all of the rights and
obligations of the Seller and the Company with respect to the Charleroi Facility
and the Greencastle Facility, as evidenced by the documents and instruments set
forth on Section 5.18 of the Disclosure Schedule.
"Foreign Sales Corporation" means Corning Incorporated Foreign
Sales Corporation.
"Foreign Subsidiaries" means Corning Canada Inc. (a Canadian
corporation), Corning Australia Pty. Limited (an Australian corporation), CCPC
(Asia) Pte. Ltd. (a Singapore corporation), Mundial Brasil Produtos de Consumo
Ltda. (a Brazilian corporation), CCPC Korea Co. Ltd. (a Korean corporation) and
Iwaki Corning (Malaysia) SDN BHD (a Malaysian corporation).
"Governmental Authority" means any United States federal, state
or local or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
<PAGE>
5
"Greencastle Facility" means all real property, all improvements
thereon and all machinery and equipment used in connection therewith, including
all easements, licenses, rights and appurtenances thereto, owned by or leased or
otherwise made available to the Company comprising its manufacturing facility
located at 1200 South Antrim Way, Greencastle, Franklin County, Commonwealth of
Pennsylvania.
"Gross Margin" means the difference (as calculated by the Company
and certified by the Company's accountants in accordance with Section 5.23)
between (a) consolidated net sales of the Company and the Subsidiaries, and (b)
cost of sales, in each case as reflected on the 1998, 1999 and 2000 Financial
Statements adjusted as follows. Net sales and cost of sales shall be adjusted to
exclude, to the extent not reflected in Management's Business Plans for 1998,
1999 and 2000 provided to the Purchaser prior to the date hereof and projecting
Cumulative Gross Margin of $710,900,000 (i) any gain or loss associated with the
sale or write-down of assets not in the ordinary course of business, (ii) any
charges or income associated with a restructuring of the Business or a decision
to close, relocate any facility or terminate or relocate any employees
(including severance or other benefits, expense accruals and moving costs
associated with the foregoing), (iii) any one-time costs (or release of reserves
for estimated costs) or income, in each case solely related to the consummation
of the transactions contemplated hereby, including any incentive payments to
employees or any payments pursuant to the Pressware Union Agreement, (iv) any
expenses or income associated with any assets acquired or divested not in the
ordinary course of business, (v) any one-time costs incurred with respect to the
implementation of independent financial systems and (vi) the impact of any
changes in accounting policies or classifications.
"Housewares" means Corning Consumer Products and (i) products
used primarily in the preparation, cooking, storage, service and enjoyment of
food or beverages such as: (A) glass, ceramic, metal, plastic or other bakeware,
cookware, dinnerware, tableware, and ovenware; (B) crystal and china dinnerware,
tableware, and decorative objects or accessories; (C) kitchen and table
utensils, cutlery and gadgets; (D) food storage containers; (E) portable
appliances; (F) table linen and oven mitts; (ii) furnishings for the home; and
(iii) the products listed on the attached Exhibit 1.01(b); provided, however,
that Housewares shall not include such items as are specifically excluded from
the definition of Corning Consumer Products.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"Income Tax or Income Taxes" means any federal, state, local or
foreign tax, fee, assessment, levy, duty, tariff or other charges of any kind
imposed by a governmental taxing authority and (a) based upon, measured by, or
calculated with respect to, net income or net receipts, proceeds or profits, or
(b) based upon, measured by, or calculated with respect to multiple bases
(including, but not limited to corporate franchise or occupation taxes) if such
tax
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6
may be based upon, measured by, or calculated with respect to one or more bases
described in clause (a) above, in each case together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto.
"Indebtedness" means (a) indebtedness for borrowed money, (b)
obligations evidenced by bonds, notes, debentures or other similar instruments
or by letters of credit, including purchase money obligations or other
obligations relating to the deferred purchase price of property (other than
trade payables incurred in the ordinary course of business), (c) obligations as
lessee under leases which have been or should have been, in accordance with U.S.
GAAP, recorded as capital leases, (d) obligations under direct or indirect
guaranties in respect of Liabilities of others, (e) obligations in respect of
outstanding or unpaid checks or drafts or overdraft obligations and (f) accrued
interest, if any, on and all other amounts owed in respect of any of the
foregoing.
"IRS" means the Internal Revenue Service of the United States.
"knowledge" means, with respect to the Seller, the actual
knowledge of Peter F. Campanella, Clark S. Kinlin, Twilver Gordon, Gary P. Vogt,
Kim Frock, Thomas C. O'Brien, Katherine A. Asbeck, James B. Flaws, John L.
Cherill, Kirk P. Gregg, Michael Donnelly, Kevyn Hennessey and Paul R. A. Burke;
provided, however, that the actual knowledge of Kirk P. Gregg, Michael Donnelly
and Kevyn Hennessey shall be attributed to the knowledge of the Seller only with
respect to employee benefits matters, the actual knowledge of John L. Cherill
shall be attributed to the knowledge of the Seller only with respect to
environmental matters and the actual knowledge of Paul R. A. Burke shall be
attributed to the knowledge of the Seller only with respect to intellectual
property matters.
"Leased Real Property" means the real property leased by the
Company or any Subsidiary, as tenant, together with, to the extent leased by the
Company or any Subsidiary, all buildings and other structures, facilities or
improvements currently or hereafter located thereon, all fixtures, systems,
equipment and items of personal property of the Company or any Subsidiary
attached or appurtenant thereto, and all easements, licenses, rights and
appurtenances relating to the foregoing.
"Liabilities" means any and all debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or determinable.
"Material Adverse Effect" means any change in, or effect on, the
Company, the Subsidiaries or the Business that is or could reasonably be
expected to be materially adverse to the business, properties, results of
operations or financial condition of the Company and the Subsidiaries, taken as
a whole.
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7
"Net Worth" means Total Assets, other than, to the extent
included in Total Assets (a) cash and cash equivalents, (b) deferred Tax assets
and (c) any assets retained or transferred by the Seller pursuant to Section
5.14, minus Total Liabilities other than, to the extent included in Total
Liabilities (i) any Indebtedness, (ii) deferred Tax liabilities and (iii) any
liabilities retained by the Seller pursuant to Section 5.14.
"Other Consumer Products" means consumer products for retail
sale.
"1997 Balance Sheet" means the audited consolidated balance sheet
of the Company and the Subsidiaries as of December 31, 1997, a copy of which is
attached hereto as Exhibit 1.01(c).
"1997 Balance Sheet Date" means December 31, 1997.
"1998, 1999 and 2000 Financial Statements" means each of the
audited consolidated statements of income of the Company and the Subsidiaries
for the years ended December 31, 1998, December 31, 1999 and December 31, 2000
(including any notes thereto), each prepared in accordance with U.S. GAAP.
"OEM Component Products" means original equipment manufacturer's
component products.
"Owned Real Property" means the real property owned by the
Company or any Subsidiary, together with all buildings and other structures,
facilities or improvements currently or hereafter located thereon, all fixtures,
systems, equipment and items of personal property of the Company or any
Subsidiary attached or appurtenant thereto and all easements, licenses, rights
and appurtenances relating to the foregoing.
"Permitted Encumbrances" means: (a) liens for Taxes and
assessments not yet payable; (b) liens for Taxes, assessments and charges and
other claims, the validity of which are being contested in good faith; (c) with
respect to Section 3.09 (b) only, imperfections of title, liens, security
interests and other encumbrances the existence of which, individually or in the
aggregate, would not have a Material Adverse Effect; (d) inchoate mechanics' and
materialmen's liens for construction in progress; and (e) workmen's,
repairmen's, warehousemen's and carriers' liens arising in the ordinary course
of Business.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended.
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8
"Purchaser's Accountants" means Deloitte & Touche LLP,
independent accountants of the Purchaser.
"Purchaser Group" means the Purchaser and any Affiliate of the
Purchaser with which the Purchaser files a consolidated, combined or unitary Tax
Return.
"Real Property" means the Leased Real Property and the Owned Real
Property.
"Revolving Credit Agreement" means the Amended and Restated
Revolving Credit Agreement between the Company and the Seller, dated as of March
28, 1997.
"Seller Group" means the Seller and any Affiliate of the Seller
with which the Seller files a consolidated, combined or unitary Tax Return.
"Seller's Accountants" means Price Waterhouse LLP, independent
accountants of the Seller.
"Seller's Future Patents" means each patent or patent application
claiming a priority date after the Closing but prior to the fifth anniversary of
the Closing and that claims an invention that is an evolutionary improvement in,
and not a replacement for, the subject matter of Seller's Retained Patents.
"Seller's Retained Patents" means all patents, and all
applications, reissues, renewals, continuations and extensions relating to any
patents, owned by the Seller prior to the Closing and that pertain or relate to
the Business but have potential applicability outside of the Business, as
identified in Section 3.18 of the Disclosure Schedule.
"Stanadyne Products" means glass housings used in fuel systems
generally of the type heretofore sold by the Company to the Stanadyne Automotive
Corporation.
"Steuben Products" means high-end crystal glassware sold under
the Steuben trademark.
"Subsidiaries" means Revere Ware Corporation, a Delaware
corporation, and the Foreign Subsidiaries.
"subsidiary" or "subsidiaries" means any Person with respect to
which a specified Person (or a subsidiary thereof) owns a majority of the common
stock (or similar voting securities) or has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors or
individuals exercising similar functions.
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9
"Tax" or "Taxes" means any and all taxes, fees, assessments,
levies, duties, tariffs, imposts, and other charges of any kind (together with
any and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any governmental taxing authority including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, assets, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, severance, occupation, or net worth; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer,
estimated, value added, or gains taxes; license, registration and documentation
fees; and customs' duties, tariffs, and similar charges.
"Tax Return" means any return, declaration, report, claim for
refund or information return or statement relating to Taxes filed with a taxing
authority, including any schedule or attachment thereto, and including any
amendment thereof.
"Total Assets" means the total assets reflected on the 1997
Balance Sheet or the Closing Balance Sheet, as the case may be.
"Total Liabilities" means the total liabilities reflected on the
1997 Balance Sheet or the Closing Balance Sheet, as the case may be.
"U.S. GAAP" means United States generally accepted accounting
principles.
SECTION 1.02. Other Defined Terms. The following terms shall have
the meanings defined for such terms in the sections set forth below:
Term: Section:
Acquired Employees 6.01(a)
Administrative Services
Agreement 5.06
Allocation 7.07(b)
Benefit Maintenance Period 6.01(c)
Benefit Plan 3.14(a)
Canadian Plan 3.14(e)
Borden Preamble
Cash Dividend 2.01
Closing 2.03
Closing Date 2.03
Code section 338(h)(10) Election 7.07(a)
Company Preamble
Company Benefit Plan 3.14(a)
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10
Company's Accountants 5.23(a)
Compensation 6.01(b)
Continuation Period 6.01(b)
Corning 401(k) Plans 6.02(b)(i)
Corning Pension Plan 6.02(a)(i)
CORNING WARE and
PYROCERAM
License Agreement 5.09(b)(i)
Department 3.14(a)
Diversified Company 5.17
Elections 7.07(a)
Employee 3.14(a)
Employee Agreement 3.14(a)
Encumbrances 3.03
Environmental Claims 3.17
Environmental Law 3.17
Environmental Permits 3.17(a)
Environmental Report 3.17
ERISA Affiliate 3.14(a)
Existing Benefit Plans 6.02(c)(i)
Financial Statements 3.07
Financing 2.01
Goldman, Sachs 3.20
Greenville Supply
Agreement 5.11
Hazardous Materials 3.17
HMO 3.14(j)
Hourly Employees 6.02(a)(i)
Indemnified Party 9.04(a)
Indemnifying Party 9.04(a)
Independent Accounting Firm 2.04(b)(ii)
Key Employee Retention Program 6.02(e)
Leased Employees 6.02(d)(iii)
Losses 9.02(a)
Material Contracts 3.19(a)
Multi-Employer Plan 3.14(a)
1988 Guaranty 5.18
1992 Guaranty 5.18
New Company Plan 3.14(a)
New Defined Benefit Plan 6.02(a)(ii)
New 401(k) Plans 6.02(b)(ii)
Non-Competition Period 5.17
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Option Exercise Period 6.04
Patent and Know-How
License Agreement 5.09(d)
PBGC 3.14(a)
PCBs 3.17
Pension Plan 3.14(a)
Post-Closing Tax Detriment 7.02(a)(ii)
Pre-Closing Tax Detriment 7.02(a)(ii)
Pre-Closing Workers and
Products Claims 5.14(c)
Pressware Union Agreement 6.02(d)(ii)
Purchaser Preamble
Purchaser Indemnified Party 9.03(a)
Purchaser Returns 7.04(a)
PYREX License Agreement 5.09(b)(ii)
Retained Names and Marks 5.09(e)
Revere Hourly Employees 6.02(a)(ii)
Revere Plan 6.02(a)(iii)
Revere Post-Retirement Plan 6.02(c)(i)
Seller Preamble
Seller Benefit Plan 3.14(a)
Seller Indemnified Party 9.02(a)
Seller Insurance Policies 5.22
Separate Return Tax Liability 7.03(b)
Seller Returns 7.04(a)
Share Purchase Price 2.02
Shared Facility Agreement 5.10(c)
Shares Recitals
Stockholders Agreement 2.03(d)
Systems Plan 5.24
Tangible Property 3.13(d)
Technology Support
Agreement 5.12
Temporary CORNING
License Agreement 5.09(e)
Termination Benefits 6.01(c)
Transition Services Agreement 5.13
Welfare Plan 3.14(a)
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ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Consummation of Financing; Dividend. Upon the terms
and subject to the conditions of this Agreement, (a) prior to the Closing, the
Company may declare as a dividend payable to its stockholder of record as of the
day prior to the Closing Date, and pay to such stockholder on the Closing Date
an amount in cash equal to the Cash Dividend Amount (the "Cash Dividend"), and
(b) at the Closing, the Seller shall cause the Company to borrow, and the
Purchaser shall lend (or cause one of more of its Affiliates to lend), funds to
the Company on the terms previously described to the Seller (the "Financing") in
the amounts set forth on Exhibit 2.01 hereto, the proceeds of which (net of any
fees, expenses and other costs required to be paid by the Company in connection
with the Financing and the transactions contemplated hereby), together with the
proceeds of the preferred stock referred to in Section 2.03(b), shall be
sufficient to pay the Cash Dividend Amount.
SECTION 2.02. Purchase and Sale of Acquired Shares. Upon the
terms and subject to the conditions of this Agreement, at the Closing, the
Seller shall sell to the Purchaser, and the Purchaser shall purchase from the
Seller, the Acquired Shares for $110,400,000 in the aggregate (the "Share
Purchase Price"). The Share Purchase Price shall be payable as provided in
Section 2.03(c).
SECTION 2.03. Closing. Upon the terms and subject to the
conditions of this Agreement, the consummation of the transactions contemplated
by this Agreement shall take place at a closing (the "Closing") to be held at
the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York at
10:00 A.M. New York time, on the later to occur of (i) the fifth Business Day
following the satisfaction of the conditions contained in Sections 8.01(b) and
8.02(b), or (ii) April 1, 1998, or at such other place or at such other time or
on such other date as the Seller and the Purchaser mutually agree upon in
writing (the day on which the Closing takes place being the "Closing Date"). At
the Closing, the following will take place:
(a) The Company shall consummate the Financing.
(b) The Company shall issue to the Purchaser or one of its
Affiliates shares of preferred stock having an aggregate liquidation
preference of $30,000,000 and other terms substantially as set forth in
Exhibit 2.03(b) hereto in exchange for $30,000,000.
(c) Immediately following the consummation of the Financing and
the receipt by the Company of the proceeds therefrom, the Company will
pay the Cash Dividend declared pursuant to Section 2.01(a), by wire
transfer in immediately
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13
available funds to an account or accounts designated by the Seller at
least two Business Days before the Closing Date in a written notice to
the Company.
(d) Immediately following the payment of the Cash Dividend by the
Company to the Seller in accordance with Section 2.03(c), the Purchaser
will pay to the Seller the Share Purchase Price, by wire transfer in
immediately available funds to an account or accounts designated by the
Seller at least two Business Days before the Closing Date in a written
notice to the Purchaser. The Seller will deliver to the Purchaser stock
certificates evidencing the Acquired Shares duly endorsed in blank or
accompanied by stock powers duly executed in blank.
(e) The Company and its Subsidiaries shall have repaid or shall
repay all third-party Indebtedness of the Company or any Subsidiaries,
other than the Facility Financing Interests, and all Indebtedness of the
Company or any Subsidiaries owing to the Seller or any of its other
Affiliates shall be repaid or otherwise discharged as described in
Section 5.14(a) or otherwise in a manner that does not cause any adverse
tax consequences to the Company or any of the Subsidiaries.
(f) The Seller, the Company and the Purchaser shall enter into a
Stockholders Agreement (the "Stockholders Agreement"), substantially in
the form attached hereto as Exhibit 2.03(f).
SECTION 2.04. Adjustment of Cash Dividend Amount. The Cash
Dividend Amount shall be subject to adjustment as specified in Section 2.04(c):
(a) Closing Balance Sheet. As promptly as practicable, but in any
event within sixty calendar days following the Closing Date, the Seller
shall prepare and deliver to the Purchaser the Closing Balance Sheet,
together with a report thereon of the Seller's Accountants stating that
the Closing Balance Sheet fairly presents the consolidated financial
position of the Company at the Closing Date in conformity with U.S. GAAP
as in effect on the date hereof applied on a basis consistent with the
preparation of the 1997 Balance Sheet. For the purposes of the
preparation of the Closing Balance Sheet, the Financing, the payment of
the Cash Dividend Amount and the payments to be made to or on behalf of
the Purchaser or any of its Affiliates (in aggregate amounts previously
described to the Seller) in connection with the Closing shall be
excluded in calculating Net Worth.
(b) Disputes. (i) Subject to clause (ii) of this Section 2.04(b),
the Closing Balance Sheet delivered by the Seller to the Purchaser shall
be deemed to be and shall be final, binding and conclusive on the
parties hereto.
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14
(ii) The Purchaser may dispute any amounts relevant to
Section 2.04(c) reflected on the Closing Balance Sheet, but only
on the basis that the amounts reflected on the Closing Balance
Sheet were not arrived at in conformity with U.S. GAAP applied on
a basis consistent with the preparation of the 1997 Balance
Sheet; provided, however, that the Purchaser shall have notified
the Seller and the Seller's Accountants in writing of each
disputed item, specifying the amount thereof in dispute and
setting forth, in reasonable detail, the basis for such dispute,
within 30 Business Days of the Seller's delivery of the Closing
Balance Sheet to the Purchaser. In the event of such a dispute,
the Seller's Accountants, together with the Seller, and the
Purchaser's Accountants, together with the Purchaser, shall
attempt to reconcile their differences, and any resolution by
them as to any disputed amounts shall be final, binding and
conclusive on the parties hereto. If the Seller's Accountants,
together with the Seller, and the Purchaser's Accountants,
together with the Purchaser, are unable to resolve any such
dispute within 50 Business Days of the Seller's delivery of the
Closing Balance Sheet to the Purchaser and the items remaining in
dispute (excluding any item relating to Indebtedness or cash) are
such that the Cash Dividend Amount would be adjusted by at least
$250,000, the Seller's Accountants and the Purchaser's
Accountants shall submit the items remaining in dispute for
resolution to Arthur Andersen & Co. (or, if such firm shall
decline to act or is not, at the time of such submission,
independent of the Seller, the Company and the Purchaser, to
another independent accounting firm of international reputation
mutually acceptable to the Seller and the Purchaser) (either
Arthur Andersen & Co. or such other accounting firm being
referred to herein as the "Independent Accounting Firm"), which
shall, within 40 Business Days after such submission, determine
and report to the Seller and the Purchaser upon such remaining
disputed items, and such report shall be final, binding and
conclusive on the Seller and the Purchaser. The fees and
disbursements of the Independent Accounting Firm shall be
allocated between the Seller and the Purchaser in the same
proportion that the aggregate amount of such remaining disputed
items so submitted to the Independent Accounting Firm that is
unsuccessfully disputed by each such party (as finally determined
by the Independent Accounting Firm) bears to the total amount of
such remaining disputed items so submitted. Any amounts payable
pursuant to this Section 2.04 which are not in dispute shall be
paid in accordance with paragraph (c) of this Section 2.04,
notwithstanding that other amounts may remain in dispute.
(iii) In acting under this Agreement, the Independent
Accounting Firm shall be entitled to the privileges and
immunities of arbitrators.
(c) Cash Dividend Amount Adjustment. The Closing Balance Sheet
shall be deemed final for the purposes of this Section 2.04(c) upon the
earliest of (A) the failure
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15
of the Purchaser to notify the Seller of a dispute within 30 Business
Days of the Seller's delivery of the Closing Balance Sheet to the
Purchaser, (B) the resolution of all disputes, pursuant to Section
2.04(b)(ii), by the Purchaser's Accountants and the Seller's Accountants
and (C) the resolution of all disputes, pursuant to Section 2.04(b)(ii),
by the Independent Accounting Firm. Within three Business Days of the
Closing Balance Sheet being deemed final, a Cash Dividend Amount
adjustment or adjustments shall be made as follows:
(i) in the event that the amount of Net Worth calculated
with respect to the Closing Balance Sheet exceeds the amount of
Net Worth calculated with respect to the 1997 Balance Sheet, then
the Cash Dividend Amount shall be adjusted upward in an amount
equal to such excess;
(ii) in the event that the amount of Net Worth calculated
with respect to the Closing Balance Sheet is less than the amount
of Net Worth calculated with respect to the 1997 Balance Sheet,
then the Cash Dividend Amount shall be adjusted downward in an
amount equal to such deficiency;
(iii) in the event that the amount of cash and cash
equivalents reflected on the Closing Balance Sheet is greater
than zero, then the Cash Dividend Amount (as adjusted pursuant to
clause (i) or (ii) of this Section 2.04(c)) shall be adjusted
upward in an amount equal to such excess;
(iv) in the event that the amount of Indebtedness
reflected on the Closing Balance Sheet is greater than
$10,300,000, then the Cash Dividend Amount (as adjusted pursuant
to clause (i), (ii) or (iii) of this Section 2.04(c)) shall be
adjusted downward in an amount equal to such excess; and
(v) in the event that the amount of Indebtedness reflected
in the Closing Balance Sheet is less than $10,300,000, then the
Cash Dividend Amount (as adjusted pursuant to clause (i), (ii) or
(iii) of this Section (c)) shall be adjusted upward in an amount
equal to such difference.
The payments to be made by the Seller or the Company pursuant to
this Section 2.04(c) shall be made after giving effect to all the
adjustments set forth in clauses (i) or (ii) and (iii) or (iv) or (v)
above, and, in the case of payments to be made by the Seller, shall be
made, within three Business Days of the determination of any such
adjustment or adjustments, to the Company by wire transfer in
immediately available funds to an account or accounts designated by the
Company, and, in the case of payments to be made by the Company, shall
be made, within three Business Days of the determination of any such
adjustment or adjustments, to the Seller by wire transfer in immediately
available funds to an account or accounts designated by the Seller.
<PAGE>
16
(d) Interest. Any payment required to be made by the Seller or
the Company pursuant to Section 2.04(c) shall bear interest from the
Closing Date through the date of payment on the basis of the average
daily rate of interest publicly announced by Citibank, N.A. in New York,
New York from time to time as its base rate from the Closing Date to the
date of such payment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser as follows:
SECTION 3.01. Incorporation of the Seller and Authority of the
Seller and the Company. The Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of New York and has
all necessary corporate power and authority to enter into this Agreement, to
carry out its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by each of the
Seller and the Company, the performance by each of the Seller and the Company of
its obligations hereunder and the consummation by each of the Seller and the
Company of the transactions contemplated hereby have been duly authorized by all
requisite corporate action on the part of the Seller and the Company,
respectively. This Agreement has been duly executed and delivered by the Seller
and the Company, and (assuming due authorization, execution and delivery by the
Purchaser) constitutes a legal, valid and binding obligation of each of the
Seller and the Company enforceable against each of them in accordance with its
terms.
SECTION 3.02. Organization, Authority and Qualification of the
Company. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and authority to own, operate or lease the properties and assets now
owned, operated or leased by it. The Company is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction in
which the character of the properties owned or leased by it or the operation of
its business makes such qualification necessary except for such failures which,
individually or in the aggregate, would not have a Material Adverse Effect.
SECTION 3.03. Capital Stock of the Company. There are no options,
warrants, convertible securities or other rights, agreements, arrangements or
commitments relating to the capital stock of, or other equity interest in, the
Company obligating the Seller or the Company to issue, sell, transfer or
otherwise dispose of or sell any shares of capital stock of, or other equity
interest in, the Company. The Company has issued and outstanding 1,000 Shares,
which constitute all the authorized, issued and outstanding shares of capital
stock of the Company and are owned of record and beneficially solely by the
Seller. The Shares have been
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17
duly authorized and validly issued and are fully paid and nonassessable and were
not issued in violation of any preemptive rights. The Seller owns the Shares
free and clear of all pledges, security interests and all other liens,
encumbrances and adverse claims. (collectively, AEncumbrances"). Upon
consummation of the transactions contemplated by Section 2.03(c), the Purchaser
will acquire valid title to the Acquired Shares free and clear of all
Encumbrances, other than any Encumbrances imposed in connection with the
Financing. There are no voting trusts, stockholder or registration rights
agreements, proxies or other agreements or understandings in effect with respect
to the voting or transfer of any of the Shares.
SECTION 3.04. Subsidiaries. Section 3.04 of the Disclosure
Schedule sets forth, with respect to each Subsidiary, its type of entity, the
jurisdiction of its incorporation or organization, its authorized capital stock,
partnership capital or equivalent, the number and type of its issued and
outstanding shares of capital stock, partnership interests or similar ownership
interests and the Company's current ownership of such shares, partnership
interests or similar ownership interests. Except as set forth in Section 3.04 of
the Disclosure Schedule, each of the outstanding shares of capital stock of each
of the Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and all such shares are owned by the Company or another wholly
owned Subsidiary and are owned free and clear of all Encumbrances of any nature
whatsoever. Except as set forth in Section 3.04 of the Disclosure Schedule, the
Company and the Subsidiaries do not own any equity interest in any Person. As of
the date of this Agreement, the Company owns shares of capital stock of Foreign
Sales Corporation which, prior to the Closing Date, the Company shall transfer
to the Seller, as provided in Section 5.15. Each Subsidiary is duly organized
and validly existing under the laws of its respective jurisdiction of
incorporation and has the requisite power and authority to own, operate or lease
the properties and assets owned, operated or leased by such Subsidiary and to
carry on its business in all material respects as currently conducted by such
Subsidiary, except for such failures which, individually or in the aggregate,
would not have a Material Adverse Effect.
SECTION 3.05. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 3.06 have been obtained
and all filings and notifications listed in Section 3.06 of the Disclosure
Schedule have been made, and except as may result from any facts or
circumstances relating solely to the Purchaser or as described in Section 3.05
of the Disclosure Schedule, the execution, delivery and performance of this
Agreement by the Seller and the Company do not and will not (a) violate or
conflict in any material respect with the Certificate of Incorporation or
By-laws of the Seller or the Company, (b) conflict with or violate any law,
rule, regulation order, writ, judgment, injunction, decree, determination or
award applicable to the Seller, the Company, the Business or any Subsidiary, or
(c) result in any breach of, constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or, except for liens or other
<PAGE>
18
encumbrances imposed in connection with the Financing or the Stockholders
Agreement and applicable securities laws, result in the loss of any benefit to
the Company or any Subsidiary or the creation of any lien or other encumbrance
on the Shares or on any of the assets or properties of the Company or any
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument to which the
Seller, the Company or any Subsidiary is a party or by which any of such assets
or properties is bound or affected, except, in the case of clause (b) or (c), as
would not, individually or in the aggregate, have a Material Adverse Effect or
prevent or materially delay the consummation by the Seller or the Company of the
transactions contemplated hereby.
SECTION 3.06. Consents and Approvals. The execution, delivery and
performance of this Agreement by the Seller and the Company does not and will
not require any consent, approval, authorization or other order of, action by,
filing with or notification to, any Governmental Authority, except (a) as
described in Section 3.06 of the Disclosure Schedule, (b) the notification and
waiting period requirements of the HSR Act, (c) where failure to obtain such
consent, approval, authorization or action, or to make such filing or
notification, individually or in the aggregate, would not prevent or materially
delay the consummation by the Seller or the Company of the transactions
contemplated by this Agreement and would not have a Material Adverse Effect and
(d) as may be necessary as a result of any facts or circumstances relating
solely to the Purchaser.
SECTION 3.07. Financial Information; Inventory; Receivables. (a)
Financial Information. The Seller has delivered to the Purchaser true and
correct copies of the audited consolidated balance sheets of the Company and the
Subsidiaries as of December 31, 1997, 1996 and 1995 and the related audited
consolidated statements of income and cash flows (all such financial statements
being the "Financial Statements"). The Financial Statements present fairly in
all material respects the consolidated financial condition and results of
operations of the Company and the Subsidiaries as of such dates or for the
periods covered thereby and have been prepared in accordance with U.S. GAAP
applied on a basis consistent with the past practices of the Seller and the
Company.
(b) Inventory. All of the inventories of the Company and the
Subsidiaries are suitable, usable or salable in the ordinary course of business
for the purposes for which intended, except to the extent of normal
obsolescence, and except to the extent written down to realizable market value
prior to or as of the Closing Date or for which adequate reserves have been
provided in accordance with U.S. GAAP on the 1997 Balance Sheet consistent with
past practice.
(c) Receivables. All accounts and notes receivable of the Company
and the Subsidiaries reflected in the 1997 Balance Sheet or arising since the
1997 Balance Sheet Date have arisen in the ordinary course of business of the
Company and the Subsidiaries from bona fide transactions and represent valid
obligations due to the operations of the Company or the
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19
Subsidiaries in accordance with their terms, subject to the reserve for bad debt
set forth in the 1997 Balance Sheet.
SECTION 3.08. Absence of Undisclosed Liabilities. Except with
respect to the matters addressed in Section 3.16 or Article VII (which shall be
governed solely by the terms of such Section 3.16 or Article VII), there are no
Liabilities of the Company or any Subsidiary, other than Liabilities (i)
reflected or reserved against on the 1997 Balance Sheet, (ii) disclosed in
Section 3.08(a) of the Disclosure Schedule or (iii) incurred since the 1997
Balance Sheet Date in the ordinary course of business consistent with past
practice, and which do not, individually or in the aggregate, have a Material
Adverse Effect.
SECTION 3.09. Absence of Certain Changes or Events. Since the
1997 Balance Sheet Date, except as disclosed in Section 3.09 of the Disclosure
Schedule, the Business has been conducted in the ordinary course consistent with
past practice. As amplification and not limitation of the foregoing, since the
1997 Balance Sheet Date, and except as set forth in Section 3.09 of the
Disclosure Schedule or as contemplated by this Agreement, there has not been:
(a) any damage, destruction or loss to any of the assets or
properties of the Company or any Subsidiary which, individually or in
the aggregate, has had a Material Adverse Effect;
(b) any security interests, pledges, liens or other encumbrances
created on any properties or assets (whether tangible or intangible) of
the Company or any Subsidiary, other than (i) Permitted Encumbrances,
(ii) security interests, pledges, liens and other encumbrances that will
be released at or prior to the Closing and (iii) security interests,
pledges, liens or other encumbrances on assets having a value not
exceeding $500,000 in the aggregate;
(c) except for sales of inventory and obsolete fixed assets and
the transfer of cash in payment of trade payables, in each case, in the
ordinary course of business, any sale, assignment, transfer, lease or
other disposition or agreement to sell, assign, transfer, lease or
otherwise dispose of any of the fixed assets of the Company or any
Subsidiary having an aggregate value exceeding $500,000;
(d) any acquisition (by merger, consolidation or acquisition of
stock or assets) by the Company or any Subsidiary of any corporation,
partnership or other business organization or division thereof;
(e) except in the ordinary course of business, (i) any incurrence
by the Company or any Subsidiary of any indebtedness for borrowed money,
(ii) any issuance by the Company or any Subsidiary of any debt
securities or (iii) any assumption,
<PAGE>
20
granting, guarantee or endorsement or other accommodation or arrangement
making the Company or any Subsidiary responsible for the Liabilities of
any Person (other than the Company or another Subsidiary, as the case
may be), in the case of (i), (ii) and (iii) above, having an aggregate
value exceeding $500,000;
(f) any material change in any method of accounting or accounting
practice used by the Company or any Subsidiary, other than such changes
required by U.S. GAAP;
(g) any event that, individually or together with all other
events, has had a Material Adverse Effect;
(h) any action which, if it had been taken after the date hereof,
would have required the consent of the Purchaser under Section 5.01(b)
hereof; or
(i) any agreement to take any actions specified in this Section
3.09.
SECTION 3.10. Absence of Litigation. Except as set forth in
Section 3.10 of the Disclosure Schedule (a) there are no material claims,
actions, proceedings or investigations pending or, to the knowledge of the
Seller, threatened against or involving the Seller, the Company or any
Subsidiary or any of the assets or properties of the Company or any Subsidiary,
before any Governmental Authority and (b) the Company, the Subsidiaries and
their respective assets and properties are not subject to any Governmental
Order. The matters set forth in Section 3.10 of the Disclosure Schedule,
individually or in the aggregate, have not had a Material Adverse Effect.
SECTION 3.11. Compliance with Laws. Neither the Company nor the
Subsidiaries are in violation of any law, rule, regulation, order, judgment or
decree applicable to the Company or any Subsidiary or by which any of the
properties of the Company or any Subsidiary is bound, except (a) as set forth in
Section 3.11 of the Disclosure Schedule and (b) where such violations,
individually or in the aggregate, would not have a Material Adverse Effect.
Except as set forth in Section 3.11 of the Disclosure Schedule, the Company and
any Subsidiaries have not, in the last three years, received any written
communication from any Governmental Authority that alleges that the Company or
such Subsidiary is not in compliance in any material respect with any material
law, rule, regulation, ordinance, order, judgment or decree that has not been
resolved.
SECTION 3.12. Licenses and Permits. Except as set forth in
Section 3.12 of the Disclosure Schedule, the Company and the Subsidiaries have
all governmental licenses, permits and authorizations necessary to conduct the
Business, except for such governmental licenses, permits and authorizations the
absence of which, individually or in the aggregate, would not have a Material
Adverse Effect. None of the Seller, the Company or any Subsidiary
<PAGE>
21
has, within the last two years, received written notice or otherwise has
knowledge that any Governmental Authority intends to cancel or terminate any
material license, permit, certificate or other authorization required to carry
on the Business as currently conducted.
SECTION 3.13. Real Property; Tangible Property. (a) Section
3.13(a) of the Disclosure Schedule sets forth a list of all the Owned Real
Property. The Company and the Subsidiaries have good, valid, marketable and
insurable title in fee simple to the Owned Real Property, free and clear of all
liens, security interests and other encumbrances, except (i) as disclosed in
Section 3.13(a) of the Disclosure Schedule and (ii) Permitted Encumbrances.
(b) Section 3.13(b) of the Disclosure Schedule sets forth a list
of all Leased Real Property. Except as described in Section 3.13(b) of the
Disclosure Schedule, the Seller has made available to the Purchaser true and
complete copies of all leases and subleases relating to the Leased Real
Property. The Company and the Subsidiaries have good marketable and insurable
leasehold estates in the Leased Real Property, free and clear of all liens,
security interests and other encumbrances, except Permitted Encumbrances. Except
as disclosed in Section 3.13(b) of the Disclosure Schedule or as would not,
individually or in the aggregate, have a Material Adverse Effect, each such
lease or sublease is legal, valid, binding and enforceable and in full force and
effect, and will not cease to be legal, valid, binding and enforceable and in
full force and effect as a result of the consummation of the transactions
contemplated by this Agreement. To the knowledge of the Seller, no party to any
such lease or sublease is in material breach or default thereunder.
(c) Except as set forth on Section 3.13(c) of the Disclosure
Schedule, (i) none of the Seller, the Company or any Subsidiary has, within the
last two years, received written notice of any pending or threatened
condemnation or eminent domain proceedings or their local equivalent that would
materially affect the Owned Real Property or the Leased Real Property, (ii) the
Owned Real Property and Leased Real Property, the use and occupancy thereof by
the Company and the Subsidiaries, and the conduct of the Business thereon and
therein does not violate in any material respect any deed restrictions,
applicable law consisting of building codes, zoning, subdivision or other land
use or similar laws the violation of which would materially adversely affect the
use, value or occupancy of any such property or the conduct of the Business
thereon, (iii) none of the Seller, the Company or any Subsidiary has, within the
last two years, received written notice of a material violation of the
restrictions or laws described in the foregoing clause (ii), and (iv) none of
the structures or improvements on any of the Leased Real Property or Owned Real
Property encroaches upon real property of another person, and no structure or
improvement of another person encroaches upon any of the Leased Real Property or
Owned Real Property, except for any such encroachment that would not materially
adversely affect the use, value or occupancy of any such property.
(d) Except as set forth in Section 3.13(d) of the Disclosure
Schedule, the buildings, facilities, machinery, equipment, furniture, leasehold
and their improvement,
<PAGE>
22
fixtures, vehicles, structures, and related capitalized items and other tangible
property relating to the Business (the "Tangible Property") are in good
operating condition and repair, free (in the case of buildings or structures
located on the Owned Real Property or Leased Real Property) of any material
structural or engineering defects, and, subject to normal wear and tear and
continued repair and replacement in accordance with past practice, are suitable
for their intended use. During the past five years there has not been any
significant interruption of the operations of the Business due to inadequate
maintenance of the Tangible Property.
SECTION 3.14. Employee Benefit and Labor Matters.
(a) Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
"Benefit Plan" means each plan, program, policy payroll practice,
contract, agreement or other arrangement providing for compensation,
retirement benefits, severance, termination pay, performance awards,
stock or stock-related awards, fringe benefits or other employee
benefits of any kind, whether formal or informal, funded or unfunded,
written or oral and whether or not legally binding, including, without
limitation, each "employee benefit plan", within the meaning of Section
3(3) of ERISA and each "multi-employer plan" within the meaning of
Section 3(37) of 4001(a)(3) of ERISA.
"Company Benefit Plan" means (i) the Revere Plan and the Revere
Post-Retirement Plan (as such terms are defined in Article VI), (ii) any
Benefit Plan sponsored, maintained or contributed to exclusively for the
benefit of any current or former employee of any Foreign Subsidiary,
(iii) each other Benefit Plan (other than an Employee Agreement) which
is sponsored, maintained, contributed to, or required to be sponsored,
maintained or contributed to, by the Company or any Subsidiary
exclusively for the benefit of any Employee and which, either
individually or in the aggregate, is material to the business of the
Company or any Subsidiary.
"Department" means the U.S. Department of Labor.
"Employee" means each current, former or retired employee,
officer, consultant, independent contractor, agent or director of the
Company or any Subsidiary.
"Employee Agreement" means each management, employment,
severance, consulting, non-compete, confidentiality, or similar
agreement or contract between the Seller, the Company or any Subsidiary
or ERISA Affiliate and any Employee pursuant
<PAGE>
23
to which the Company or any Subsidiary has or may have any material
liability, contingent or otherwise.
"ERISA Affiliate" means each business or entity which is or was a
member of a "controlled group of corporations", under "common control"
or an "affiliated service group" with the Seller within the meaning of
Section 414(b), (c) or (m) of the Code, or required to be aggregated
with the Company under Section 414(o) of the Code or is under "common
control" with the Company, within the meaning of Section 4001(a)(14) of
ERISA.
"Multi-Employer Plan" means each Company Benefit Plan which is
"multi-employer plan" within the meaning of Section 3(37) or 4001(a)(3)
of ERISA.
"New Company Plan" means the New Defined Benefit Plan, the New
401(k) Plan and any other Benefit Plan that the Purchaser is required to
establish and maintain or cause to be established and maintained
pursuant to Article VI of this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means each Seller Benefit Plan or Company Benefit
Plan (other than a Multi-Employer Plan) which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA.
"Seller Benefit Plan" means each Benefit Plan in which Employees
participate that is sponsored, maintained or contributed to, or required
to be sponsored, maintained or contributed to, by the Seller or any
ERISA Affiliate, other than a Company Benefit Plan.
"Welfare Plan" means each Company Benefit Plan which is an
"employee welfare benefit plan" within the meaning of Section 3(1) of
ERISA.
(b) Disclosure Schedule. Section 3.14(b) of the Disclosure
Schedule contains a true and complete list of each Seller Benefit Plan, Company
Benefit Plan and Employee Agreement. Except as set forth on Section 3.14(b) of
the Disclosure Schedule, neither the Company, the Seller, any Subsidiary nor any
ERISA Affiliate has any plan or commitment, whether legally binding or not, to
establish any new Seller Benefit Plan or Company Benefit Plan, to enter into any
Employee Agreement or to modify or to terminate any Seller Benefit Plan, Company
Benefit Plan or Employee Agreement (except to the extent required by law or to
conform any such Seller Benefit Plan, Company Benefit Plan or Employee Agreement
to the requirements of any applicable law, in each case as previously
<PAGE>
24
disclosed to Buyer, or as required by this Agreement), nor has any intention to
do any of the foregoing been communicated to Employees.
(c) Documents. The Seller has made available to the Purchaser,
and shall deliver to the Purchaser as soon as practicable following the date of
this Agreement: (i) current, accurate and complete copies of all documents
embodying (and all material documents relating to) each Seller Benefit Plan,
Company Benefit Plan and Employee Agreement, including all amendments thereto,
and all written interpretations thereof and trust or funding agreements with
respect thereto; (ii) the two most recent annual actuarial valuations, if any,
prepared for each Seller Benefit Plan or Company Benefit Plan; (iii) the two
more recent annual reports (Series 5500 and all schedules thereto), if any,
required under ERISA in connection with each Seller Benefit Plan or Company
Benefit Plan or related trust; (iv) a statement of alternative form of
compliance pursuant to Department of Labor Regulation '2520.104-23, if any,
filed for each Company Benefit Plan which is a "Pension Benefit Plan" for a
select group of management of highly compensated employees; (v) the most recent
determination letter received from the IRS, if any, for each Company Benefit
Plan and related trust which is intended to satisfy the requirements of Section
401(a) of the Code; (vi) if the Seller Benefit Plan or Company Benefit Plan is
funded, the most recent annual and periodic accounting of Seller Benefit Plan or
Company Benefit Plan assets upon the Purchaser's request; (vii) the most recent
summary plan description together with the most recent summary of material
modifications, if any, required under ERISA with respect to each Company Benefit
Plan; and (viii) all material written communications to any Employee or
Employees relating to any Seller Benefit Plan or Company Benefit Plan.
(d) Compliance. Except as set forth in Section 3.14(d) of the
Disclosure Schedule: (i) the Company, the Seller, each Subsidiary and each ERISA
Affiliate have performed all material obligations required to be performed by
them under each Company Benefit Plan and Employee Agreement and all laws and
regulations applicable thereto; (ii) each Company Benefit Plan intended to
qualify under Section 401 of the Code (and each Corning 401(k) Plan, as defined
in Section 6.02(b)) is so qualified and a determination letter has been issued
by the IRS to the effect that each such Company Benefit Plan (and each Corning
401(k) Plan) is so qualified and no circumstances exist which could reasonably
be expected to adversely affect this qualification; (iii) no "prohibited
transaction", within the meaning of Section 4975 of the Code or Section 406 of
ERISA, has occurred with respect to any Company Benefit Plan which could result
in any material liability to the Company or any Subsidiary; (iv) there are no
actions, proceedings, arbitrations, suits or claims pending, or to the knowledge
of the Company, the Seller, any Subsidiary or any ERISA Affiliate, threatened or
anticipated (other than routine claims for benefits) against the Company, the
Seller, any Subsidiary or any ERISA Affiliate or any administrator, trustee or
other fiduciary of any Company Benefit Plan with respect to any Company Benefit
Plan or Employee Agreement, or against any Company Benefit Plan or against the
assets of any Company Benefit Plan which
<PAGE>
25
could result in any material liability to the Company or any Subsidiary; (v) no
event or transaction has occurred with respect to any Company Benefit Plan that
would result in the imposition of any material tax under Chapter 43 of Subtitle
D of the Code; (vi) each Company Benefit Plan can be amended, terminated or
otherwise discontinued without material liability to the Company, the Seller,
any Subsidiary or any ERISA Affiliate (other than liability for benefits accrued
as of the date of such amendment, termination or discontinuance), provided,
however, that such amendment, termination or discontinuance has been effected in
accordance with the procedures required under such plan; and (vii) no Company
Benefit Plan is under audit or investigation by the IRS, the Department or the
PBGC, and to the knowledge of the Company, the Seller, any Subsidiary or any
ERISA Affiliate no such audit or investigation is pending or threatened.
(e) Pension Plans. Except as set forth in Section 3.14(e) of the
Disclosure Schedule: (i) no steps have been taken to terminate any Pension Plan
now maintained or contributed to, no termination of any Pension Plan has
occurred pursuant to which all liabilities have not been satisfied in full, no
liability under Title IV of ERISA has been incurred by the Company, the Seller,
any Subsidiary or any ERISA Affiliate (whether or not related to a Pension Plan)
which has not been satisfied in full, and no event has occurred and no condition
exists that could reasonably be expected to result in the Company, the Seller,
Subsidiary or any ERISA Affiliate incurring a material liability under Title IV
of ERISA or could constitute grounds for terminating any Pension Plan; (ii) no
proceeding has been initiated by the PBGC to terminate any Pension Plan or to
appoint a trustee to administer any Pension Plan; (iii) each Pension Plan which
is subject to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the
Code, has been maintained in compliance with the minimum funding standards of
ERISA and the Code and no such Pension Plan has incurred any "accumulated
funding deficiency", as defined in Section 412 of the Code and Section 302 of
ERISA, whether or not waived; (iv) neither the Company, the Seller, any
Subsidiary nor any ERISA Affiliate has sought nor received a waiver of its
funding requirements with respect to any Pension Plan and all contributions
payable with respect to each Pension Plan have been timely made; and (v) no
reportable event, within the meaning of Section 4043 of ERISA, and no event
described in Section 4062 or 4063 or ERISA, has occurred with respect to any
Pension Plan. With respect to each of the Revere Plan and the Corning Canada
Inc. Pension Plan for Hourly Employees (the "Canadian Plan"), the projected
benefit obligations (as determined in accordance with Statement of Financial
Accounting Standards No. 87 using the assumptions employed by the Seller in its
most recent audited financial statements) under such plan do not exceed the
market value of such plan's assets, and with respect to the Canadian Plan, such
plan=s liabilities, determined on a "solvency" basis, do not exceed the fair
market value of such plan=s assets by more than Can. $100,000.
(f) Multi-Employer Plans. None of the Seller, the Company, any
Subsidiary or any ERISA Affiliate have any liability under any Multi-Employer
Plan.
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26
(g) No Post-Employment Obligations. Except as set forth in
Section 3.14(g) of the Disclosure Schedule, none of the Seller, the Company or
any Subsidiary (i) maintains or contributes to any Seller Benefit Plan or
Company Benefit Plan which provides, or has any liability to provide, life
insurance, medical, severance or other employee welfare benefits to any Employee
upon his or her retirement or termination of employment, except as may be
required by Section 4980B of the Code or (ii) to the best of the Seller's
knowledge, and except as would not result in a material liability to the
Company, has ever represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to Employees as a group)
that such Employee(s) would be provided with life insurance, medical, severance
or other employee welfare benefits upon their retirement or termination of
employment, except to the extent required by Section 4980B of the Code.
(h) Effect of Transaction. Except as set forth in Section 3.14(h)
of the Disclosure Schedule or as otherwise may be provided in Sections 6.03 and
6.04 of this Agreement, the execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) (i) constitute an event under any Company
Benefit Plan, Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee or (ii) result in the triggering or
imposition of any restrictions or limitations on the right of the Company or the
Purchaser to amend or terminate any Company Benefit Plan. No payment or benefit
which will or may be made by the Company, the Seller, any Subsidiary, the
Purchaser or any of their respective affiliates with respect to any Employee
will be characterized as an "excess parachute payment", within the meaning of
Section 280G(b)(1) of the Code.
(i) 501(c)(9) Trust. Except as set forth in Section 3.14(i) of
the Disclosure Schedule, no Company Benefit Plan nor Employee Agreement is
funded by a trust described in Section 501(c)(9) of the Code.
(j) Welfare Plan Funding. With respect to each Welfare Plan, all
claims incurred (including claims incurred but not reported) by Employees
thereunder for which the Company is, or will become, liable are (i) insured
pursuant to a contract of insurance whereby the insurance company bears any risk
of loss with respect to such claims; (ii) covered under a contract with a health
maintenance organization (an "HMO") pursuant to which the HMO bears the
liability for such claims or (iii) reflected as a liability or accrued for on
the Closing Balance Sheet.
(k) Controlled Group Liability. The Company and the Subsidiaries
have no liability, contingent or otherwise, to, or with respect to any Benefit
Plan (other than the Company Benefit Plans and Employee Agreements which are
listed on Schedule 3.14(b))
<PAGE>
27
which is now, or within the preceding five calendar years has been, sponsored,
maintained, contributed to, or required to be sponsored, maintained or
contributed to, by the Seller, the Company, any Subsidiary or any ERISA
Affiliate.
SECTION 3.15. Labor Matters. Section 3.15 of the Disclosure
Schedule lists all labor, collective bargaining and other agreements to which
the Company, the Seller or any Subsidiary is a party with any labor
organization, group or association with respect to Employees, and copies of such
agreements have been made available to the Purchaser. Except as set forth in
Section 3.15 of the Disclosure Schedule, the Company, the Seller and each
Subsidiary is in compliance in all material respects with all applicable
material laws, rules or regulations respecting employment practices, terms and
conditions of employment and wages and hours with respect to any Employee.
Except as set forth in Section 3.15 of the Disclosure Schedule there is no, and
in the past three years there has not been any, (a) unfair labor practice charge
within the meaning of the National Labor Relations Act and the Railway Labor Act
or complaint against the Company, the Seller or any Subsidiary pending before
the National Labor Relations Board or any comparable state agency relating to
labor matters involving any Employees and (b) labor strike, labor dispute or
material disturbance, material grievance, arbitration, material administrative
proceeding, material litigation or work stoppage pending or, to the knowledge of
the Seller, threatened against the Company, the Seller or any Subsidiary
relating to labor matters.
SECTION 3.16. Taxes. Except as set forth in Section 3.16 of the
Disclosure Schedule, (a) the Company and the Subsidiaries and each affiliated,
consolidated, combined or unitary group which included or includes the Company
or any Subsidiary have timely filed, in accordance with all applicable laws and
taking into account any extensions, all Income Tax returns required to be filed
by or on behalf of the Company and the Subsidiaries with respect to material
Income Taxes and have paid all Income Taxes due and payable by them (whether or
not shown as due on such returns) and all such Tax Returns are true and correct
in all material respects, (b) the Company and the Subsidiaries have timely
filed, in accordance with all applicable laws and taking into account any
extensions, all other material Tax returns required to be filed by them for any
period ending on or before the Closing Date, taking into account any extension
of time to file, and all such Tax returns of the Company and the Subsidiaries
were true, correct and complete in all material respects and all material Taxes
shown to be payable on such Tax returns of the Company and any Subsidiary (other
than Taxes being contested in good faith and for which the Company has
adequately reserved for in accordance with U.S. GAAP, other than deferred Taxes
that reflect the difference between book and tax basis in assets and
liabilities) have been paid, (c) no material adjustments relating to Taxes of
the Company or the Subsidiaries have been raised in writing by any governmental
authority during any presently pending audit or examination, (d) the Company and
its Subsidiaries are not presently being audited by any taxing authority with
respect to a material amount of Taxes, (e) no adjustment relating to the timing
of income, deductions, losses or credits of the
<PAGE>
28
Company or any Subsidiary has been made in writing by any taxing authority in
any completed audit or examination which, by application of the result of such
adjustment, could reasonably be expected to result in a material Tax deficiency
for any subsequent period, (f) no waivers of statutes of limitation with respect
to the material Tax Returns of the Company or the Subsidiaries have been given
by or requested in writing from the Company or the Subsidiaries, (g) there are
no material liens for Taxes (other than for Taxes not yet due and payable) on
any assets of the Company or any of the Subsidiaries, (h) neither the Company
nor any of the Subsidiaries has filed a consent pursuant to the collapsible
corporation provisions of Section 341(f) of the Code (or any corresponding
provision of state or local law) or agreed to have Section 341(f)(2) of the Code
(or any corresponding provisions of state or local law) apply to any disposition
of any asset owned by the Company or any of the Subsidiaries, as the case may
be, (i) neither the Company nor any of the Subsidiaries has agreed to make any
material adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise, and (j) no property owned by the Company or any
of the Subsidiaries (A) is property required to be treated as being owned by
another person pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986; (B) constitutes "tax exempt use
property" within the meaning of Section 168(h)(1) of the Code; or (C) is tax
exempt bond financed property within the meaning of Section 168(g) of the Code.
SECTION 3.17. Environmental, Health and Safety. Except as set
forth in Section 3.17 of the Disclosure Schedule or except as would not,
individually or in the aggregate, have a Material Adverse Effect: (a) the
Company and the Subsidiaries currently hold all the permits, licenses and
approvals of Governmental Authorities and agencies necessary for the current
use, occupancy or operation of the Business and required by any Environmental
Law ("Environmental Permits") and are in compliance with all such Environmental
Permits; (b) the Company and the Subsidiaries are, and for the past five years
have been, in compliance with all applicable Environmental Laws; (c) except as
permitted by and as would not result in any liability under applicable
Environmental Laws, there are no underground or aboveground storage tanks or any
surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous
Materials are being treated, stored or disposed on any of the Owned Real
Property or Leased Real Property or, with respect to the period of the Company's
or any Subsidiary's ownership, tenancy or operation of such property, on any
real property formerly owned, leased or operated by the Company or any
Subsidiary; (d) there is no asbestos or asbestos-containing material on any of
the Owned Real Property or Leased Real Property, except to the extent not
prohibited by, and as would not result in any liability under, applicable
Environmental Laws; (e) neither the Seller, the Company nor any Subsidiary, nor
any Person for whom any of them is liable by operation of law, has released,
discharged or disposed of Hazardous Materials on any of the Owned Real Property
or Leased Real Property or on any real property formerly owned, leased or
operated by the Company or any Subsidiary; (f) neither the Seller, the Company
nor any Subsidiary is undertaking any
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29
investigation or assessment or remedial or response action relating to any
release, discharge or disposal of or contamination with Hazardous Materials at
any site, location or operation, either voluntarily or pursuant to the order of
any Governmental Authority or the requirements of any Environmental Law; (g)
there are no past, pending or threatened in writing Environmental Claims against
the Company, any Subsidiary or any Real Property and, to the Seller's knowledge,
there are no facts that are reasonably expected to form the basis of any such
Environmental Claim; and (h) the Company has made available to the Purchaser
true and complete copies of all Environmental Reports in its possession.
As used in this Agreement, the following terms have the following
meanings:
"Environmental Claims" means any and all actions, suits, written
demands, written claims, complaints, liens, notices of noncompliance or
violation, notices of liability or potential liability, investigations, written
requests from Governmental Authorities, proceedings, consent orders or consent
agreements relating in any way to any Environmental Law, any Environmental
Permit or any Hazardous Material or arising from any actual or alleged injury or
threat of injury to health, safety or the environment.
"Environmental Law" means any foreign, federal, state or local
law, statute, ordinance, rule, regulation or common law, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, in each case in effect and as amended as of
the Closing Date, relating to, regulating or imposing liability or standards of
conduct concerning pollution or protection of the environment, health or safety
or the generation, use, handling, transportation, treatment, storage, disposal,
release or discharge of any Hazardous Materials.
"Environmental Report" means any written report, study,
assessment, audit or other similar document, in each case prepared during the
last five years, that addresses any issue of actual or potential noncompliance
with, or actual or potential liability under, any Environmental Law that may
affect the Company.
"Hazardous Materials" means any pollutants, contaminants, toxic
or hazardous substances, materials, wastes, constituents, compounds, chemicals,
including, without limitation, petroleum or any by-products thereof, any form of
natural gas, asbestos or asbestos-containing materials, polychlorinated
biphenyls ("PCBs") or PCB-containing equipment, radon or other radioactive
elements, carcinogenic or mutagenic agents, pesticides, explosives, flammables,
corrosives and urea formaldehyde foam insulation, in each case that form the
basis of liability, or are subject to regulation, under any Environmental Laws
as of the Closing Date.
SECTION 3.18. Intellectual Property. Each representation and
warranty set forth in this Section 3.18 is qualified in its entirety by
reference to Section 3.18 of the Disclosure Schedule.
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(a) Section 3.18 of the Disclosure Schedule contains true and
complete lists of (i) the Consumer Trademarks, (ii) the Consumer Patents, (iii)
the Seller's Retained Patents,(iv) registered Consumer Copyrights and (v) the
Consumer License Agreements.
(b) The Seller (or its Affiliates), the Company or a Subsidiary
owns or possesses adequate licenses or other valid rights to use, in each case,
free and clear of all liens, security interests, claims, or restrictions, all
material items of the Consumer Intellectual Property. There is no pending or, to
the knowledge of the Seller, threatened action, proceeding or Governmental
Order, or, to the knowledge of the Seller, assertion or claim, challenging,
limiting or canceling the validity or ownership of any Consumer Intellectual
Property. There are no pending or, to the knowledge of the Seller, threatened,
interferences, reexaminations, oppositions or other proceedings that could
threaten or diminish the scope, value, validity or enforceability of any
material Consumer Intellectual Property.
(c) There is no breach or violation of any Consumer License
Agreement by the Seller, the Company or any Subsidiary, or, to the knowledge of
the Seller, by any other party to such Consumer License Agreement. Each Consumer
License Agreement is a legal, valid, binding agreement of the Seller, the
Company or a Subsidiary, as the case may be. The consummation of the
transactions contemplated by this Agreement will not result in the termination
of, or any modification to, any Consumer License Agreement, except where the
foregoing would not, individually or in the aggregate, have a Material Adverse
Effect. The Company, the Seller or a Subsidiary, as the case may be, has taken
reasonable measures to maintain the confidentiality of the Consumer Know-How,
the value of which to the Company is dependent upon the maintenance of the
confidentiality thereof and has taken reasonable measures to police the Consumer
Intellectual Property for infringement by any third party. The Seller, the
Company and the Subsidiaries have not received notice of any, and to the
knowledge of the Seller, there are no, infringements or threatened infringements
of the Consumer Intellectual Property. None of the Seller, the Company or any
Subsidiary has licensed or otherwise permitted the use by any third party of any
Consumer Know-How on terms or in a manner that would have a Material Adverse
Effect. To the knowledge of the Seller, the conduct of the Business does not and
will not infringe upon or conflict with, in any way, any license, trademark,
trademark right, trade name, trade name right, patent, patent right, industrial
model, invention, service mark, copyright or other proprietary right of any
third party, except as would not, individually or in the aggregate, have a
Material Adverse Effect, and the Seller, the Company and the Subsidiaries have
not received any claim or notice from any third party to the contrary.
(d) The Consumer Intellectual Property is all of the intellectual
property used in and necessary for the operation of the Business as currently
conducted.
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31
SECTION 3.19. Material Contracts. (a) Section 3.19 of the
Disclosure Schedule lists the following contracts (the "Material Contracts") in
effect as of the date of this Agreement to which the Company or any Subsidiary
is a party:
(i) any commitment, contract, agreement or purchase order that
the Seller reasonably anticipates will, in accordance with its terms,
involve aggregate payments or receipts by the Company or any Subsidiary
of more than $200,000 within any 12-month period following the date of
this Agreement and that is not cancelable by the Company or such
Subsidiary without liability within 60 days;
(ii) any lease of personal property involving any annual expense
in excess of $250,000 that is not cancelable without liability within 60
days;
(iii) any contracts or agreements containing covenants limiting
the freedom of the Company or any Subsidiary to engage in any line of
business or compete with any Person;
(iv) any license agreement, assignment or contract (whether as
licensor or licensee, assignor or assignee) relating to any Consumer
Intellectual Property other than immaterial licenses granted in the
ordinary course of business consistent with past practice;
(v) any contract that creates a joint venture or partnership;
(vi) any contract or agreement relating to clean-up, abatement or
other actions in connection with the remediation of any liabilities
relating to Hazardous Substances;
(vii) any contract with an Affiliate; and
(viii) any credit agreement, loan agreement, guarantee, note or
other evidence of Indebtedness or agreement providing for Indebtedness.
Except as set forth in Section 3.19 of the Disclosure Schedule,
correct and complete copies of all written contracts listed or required to be
listed in Section 3.19 of the Disclosure Schedule have been made available to
Purchaser before the date hereof.
(b) Neither the Company nor any Subsidiary is (and, to the
knowledge of the Seller, no other party is) in breach or violation of, or
default under, any of the Material Contracts, where such breach or violation or
default would have a Material Adverse Effect. Each Material Contract is a valid
agreement, arrangement or commitment of the Company or
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32
Subsidiary that is a party thereto, enforceable against the Company or such
Subsidiary, as the case may be, in accordance with its terms and, to the
knowledge of the Seller, is a valid agreement, arrangement or commitment of each
other party thereto, enforceable against such party in accordance with its
terms, except in each case as would not, individually or in the aggregate, have
a Material Adverse Effect.
SECTION 3.20. Brokers. Except for Goldman, Sachs & Co. ("Goldman,
Sachs"), no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Seller. The Seller is solely responsible for the fees and expenses of
Goldman, Sachs.
SECTION 3.21. Entire Business. The assets of the Company and the
Subsidiaries (together with the rights to be licensed or made available to the
Company pursuant to agreements to be entered into pursuant to Article V) include
all of the assets, rights or properties of any kind that are material to or
necessary for the Business as it is now being and is currently proposed to be
conducted.
SECTION 3.22. Insurance. Section 3.22 of the Disclosure Schedule
lists all insurance policies of Seller, the Company and the Subsidiaries
covering the assets, products, employees and operations of the Company and the
Subsidiaries as of the date hereof. All such policies are in full force and
effect, all premiums due thereon have been paid by the Seller, the Company or
the Subsidiaries, and the Seller, the Company or the Subsidiaries have complied
in all materials respects with the provisions of such policies and have not
received notice from any of its insurance brokers or carriers that such broker
or carrier will not be willing or able to renew their existing coverage.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows:
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33
SECTION 4.01. Incorporation and Authority of the Purchaser. The
Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of Delaware and has all necessary corporate power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Purchaser, the performance by the Purchaser of
its obligations hereunder and the consummation by the Purchaser of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of the Purchaser. This Agreement has been duly
executed and delivered by the Purchaser, and (assuming due authorization,
execution and delivery by the Seller and the Company) constitutes a legal, valid
and binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms.
SECTION 4.02. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 4.03 have been obtained
and all filings and notifications described in Section 4.03 have been made, and
except as may result from any facts or circumstances relating solely to the
Seller, the execution, delivery and performance of this Agreement by the
Purchaser do not and will not: (a) violate or conflict with the Certificate of
Incorporation or By-laws of the Purchaser; (b) conflict with or violate any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to the Purchaser; or (c) result in any breach of, or constitute
a default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or, except for liens or other
encumbrances imposed in connection with the Financing or by the Stockholders
Agreement and applicable securities laws, result in the creation of any lien or
other encumbrance on any of the assets or properties of the Purchaser pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument to which the Purchaser or any of its
subsidiaries is a party or by which any of such assets or properties is bound or
affected, except in the case of this clause (b) or clause (c) or as would not,
individually or in the aggregate, have a material adverse effect on the business
or financial condition of the Purchaser or prevent or materially delay the
consummation by the Purchaser of the transactions contemplated hereby.
SECTION 4.03. Consents and Approvals. The execution, delivery and
performance of this Agreement by the Purchaser does not and will not require any
material consent, approval, authorization or other order of, action by, or
filing with or notification to, any Governmental Authority, except (a) the
notification and waiting period requirements of the HSR Act, (b) where failure
to obtain such consent, approval, authorization or action, or to make such
filing or notification, would not prevent or materially delay the consummation
by the Purchaser of the transactions contemplated by this Agreement and (c) as
may be necessary as a result of any facts or circumstances relating solely to
the Seller or the Company.
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34
SECTION 4.04. Absence of Litigation. There are no claims,
actions, proceedings or investigations pending or, to the knowledge of the
Purchaser, threatened against the Purchaser before any Governmental Authority
that are reasonably likely to prevent or materially delay the consummation by
the Purchaser of the transactions contemplated hereby.
SECTION 4.05. Investment Purpose. The Purchaser is acquiring the
Acquired Shares solely for the purpose of investment and not with a view to, or
for offer or sale in connection with, any distribution thereof and agrees that
the Acquired Shares will not be transferred except in a transaction registered
or exempt from registration under the Securities Act of 1933, as amended.
SECTION 4.06. Financing. The Purchaser has available or access to
funds sufficient to fund the payment of the Cash Dividend, to purchase the
Acquired Shares and to pay the fees, expenses and other costs required to be
paid by the Company in connection with the Financing and the transactions
contemplated hereby.
SECTION 4.07. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser (other than transaction fees and
management fees payable by the Company to an Affiliate of the Purchaser as
previously disclosed to the Seller).
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35
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. (a)
Unless the Purchaser otherwise agrees in writing and except as otherwise set
forth in this Agreement (including, but not limited to, Sections 5.14, 5.15 and
5.16) or in Section 5.01 of the Disclosure Schedule, between the date of this
Agreement and the Closing Date, the Seller will cause the Company and each
Subsidiary to (i) conduct the Business only in the ordinary course consistent
with past practice and in compliance with applicable laws, (ii) use reasonable
best efforts to preserve the current relationships of the Company and the
Subsidiaries with their respective customers, suppliers, distributors, agents,
officers and employees and other persons with which the Company and the
Subsidiaries have significant business relationships, (iii) use reasonable best
efforts to maintain all of the assets owned or used by the Business in the
ordinary course of business consistent with past practice and (iv) continue
capital expenditures substantially in accordance with the forecasts for capital
expenditures for 1998 attached hereto as Exhibit 5.01; provided that in
connection with such capital expenditures, the Seller agrees that it will
approve any appropriation request made by the Company in respect of budgeted
capital expenditures during the period between the date of this Agreement and
the Closing Date.
(b) Except as expressly provided in this Agreement (including,
but not limited to, Sections 5.14, 5.15 and 5.16) or Section 5.01 of the
Disclosure Schedule, between the date of this Agreement and the Closing Date,
the Seller will cause the Company and the Subsidiaries not to do any of the
following without the prior written consent of the Purchaser (and the Purchaser
shall act in good faith in considering any such request):
(i) create any security interest, pledge, lien or other
encumbrance on any properties or assets (whether tangible or intangible)
of the Company or any Subsidiary, other than (A) Permitted Encumbrances,
(B) security interests, pledges, liens and encumbrances that will be
released at or prior to the Closing and (C) security interests, pledges,
liens and encumbrances on assets having a value not exceeding $500,000
in the aggregate;
(ii) (A) except for sales of inventory and obsolete fixed assets
and the transfer of cash in payment of trade payables, in each case, in
the ordinary course of business, sell, assign, transfer, lease or
otherwise dispose of or agree to sell, assign, transfer, lease or
otherwise dispose of any assets of the Company or any Subsidiary or (B)
cancel any Liabilities owed to the Company or any Subsidiary, in the
case of both (A) and (B) above, having an aggregate value exceeding
$500,000;
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36
(iii) acquire (by merger, consolidation, or acquisition of stock
or assets) any corporation, partnership or other business organization
or division thereof;
(iv) (A) issue, repay, repurchase, redeem any debt securities
(other than issuances in the ordinary course of business of debt
securities to the Seller or any of its Affiliates on terms consistent
with past practice that will be repaid prior to the Closing Date), (B)
other than with respect to borrowings and repayments of borrowings under
the Revolving Credit Agreement in the ordinary course of business,
incur, repay, repurchase, redeem any indebtedness for borrowed money,
(C) assume, grant, guarantee or endorse, or make any other accommodation
or arrangement making the Company or any Subsidiary responsible for, the
Liabilities of any Person (other than the Company or another Subsidiary,
as the case may be) or (D) make any loans, advances or capital
contributions to, or investments in any Person (other than the Company
or a Subsidiary), in the case of (A), (B), (C) and (D), having an
aggregate value exceeding $500,000;
(v) change any method of accounting or accounting practice used
by the Company or any Subsidiary, other than such changes required by
U.S. GAAP; provided that the Seller will give the Purchaser prompt
notice of any such change;
(vi) (A) enter into or adopt, or amend any existing agreement or
arrangement relating to severance, except that the Company may pay any
severance required to be paid by any such agreement or arrangement
described in Section 3.14(b) of the Disclosure Schedule as in effect on
the date hereof, (B) enter into or adopt, or amend any existing
severance plan, (C) enter into or amend any employee benefit plan,
employment or consulting agreement or collective bargaining agreement
(including, without limitation, the plans, programs, agreements and
arrangements referred to in Section 3.14) except as set forth in Section
5.01(b)(vi) of the Disclosure Schedule and in accordance with any
collective bargaining agreement listed in Section 3.15 of the Disclosure
Schedule or (D) except in accordance with written guidelines for merit
compensation increases for employees other than officers or directors,
which have been provided to the Purchaser, grant any increases in
compensation, except compensation increases associated with promotions
and annual reviews of employees other than officers or directors in the
ordinary course of business or provided pursuant to collective
bargaining agreements;
(vii) accelerate or delay the manufacture, shipment or sale of
inventory, the collection of accounts or notes receivable or the payment
of accounts or notes payable or otherwise operate the business of the
Company or any Subsidiary, in each case in a manner that would
artificially affect the computation of the adjustments to the Cash
Dividend Amount pursuant to Section 2.04;
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37
(viii) engage in any transaction other than on an arms-length
basis with the Seller (or its other subsidiaries) or any officer or
director of the Seller, the Company or any Subsidiary, except, in the
case of the Seller (or such other subsidiary), in the ordinary course of
business consistent with past practice;
(ix) enter into, modify, terminate, amend or grant any waiver in
respect of any Material Contract (except in the ordinary course of
business in the case of those Material Contracts described in Section
3.19(a)(i));
(x) allow the lapse of any of the Company's or Subsidiaries'
rights of ownership or use of any material Consumer Intellectual
Property;
(xi) issue or sell any shares of the capital stock of, or other
equity interests in, the Company or any Subsidiary, or securities
convertible into or exchangeable for such shares or equity interests, or
issue or grant any options, warrants, calls, subscription rights or
other rights of any kind to acquire additional shares of such capital
stock, such other equity interests or such securities;
(xii) amend the Company's or any Subsidiary's Certificate of
Incorporation or By-laws or equivalent organization documents;
(xii) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of the capital stock
of the Company or any Subsidiary;
(xiii) make any material state, local or foreign tax election or
settle or compromise any material state, local or foreign tax liability;
(xiv) declare, set aside, make or pay any dividend or other
distribution, payable in stock or property, with respect to any capital
stock or other equity or ownership interest in the Company or any
Subsidiary, provided, that cash dividends with a payment date prior to
the date of the Closing Balance Sheet may be declared and paid at any
time prior to such date;
(xv) distribute, pay or otherwise transfer any cash to the Seller
or any of its other Affiliates between the date of the Closing Balance
Sheet and the Closing;
(xvi) settle or compromise any pending or threatened suit, action
or claim for in excess of $250,000 per suit, action or claim or which
relates to the transactions contemplated hereby;
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38
(xvii) authorize any single expenditure or series of related
capital expenditures for any capital which are not specifically provided
for in the Company's capital budget for the year ending December 31,
1998;
(xviii)adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any Subsidiaries; or
(xix) agree to take any of the actions specified in this Section
5.01(b).
SECTION 5.02. Access to Information. (a) From the date of this
Agreement until the Closing, upon reasonable notice, the Seller shall, and shall
cause the officers, employees, auditors, attorneys, advisors and agents of the
Seller, the Company and the Subsidiaries to, (i) afford the officers, employees,
auditors, attorneys, financing sources and authorized agents and representatives
of the Purchaser reasonable access, during normal business hours, to the
offices, properties, attorneys, auditors, consultants, advisors, books and
records and management employees, auditors, attorneys and financing sources of
the Company and the Subsidiaries and (ii) furnish to the officers, employees and
authorized agents and representatives of the Purchaser access to, and copies of,
such additional financial and operating data and other documents and information
regarding the assets, properties, goodwill and business of the Company and the
Subsidiaries as the Purchaser may from time to time reasonably request;
provided, however, that such investigation shall not unreasonably interfere with
any of the businesses or operations of the Seller, the Company, the Subsidiaries
or any Affiliate of the Seller; provided further, that the Seller shall only be
obligated to use its reasonable efforts to cause the auditors of the Seller to
make any work papers available to any Person. No investigation pursuant to this
Section 5.02(a) shall affect any representations or warranties of the parties
herein or the conditions to the obligations of the parties hereto.
(b) The Purchaser agrees that it shall preserve and keep all
Books and Records in the Purchaser's possession for a period of at least eight
years from the Closing Date. After such eight-year period, before the Purchaser
shall dispose of any of such Books and Records, at least 90 calendar days' prior
written notice to such effect shall be given by the Purchaser to the Seller, and
the Seller shall be given an opportunity, at its cost and expense, to remove and
retain all or any part of such Books and Records as the Seller may select. The
Seller acknowledges that the Purchaser shall not be liable to the Seller in the
event of any accidental destruction of such Books and Records.
(c) Each party agrees that it will cooperate with and make
available to the other party, during normal business hours, all Books and
Records, information and employees (without substantial disruption of
employment) retained and remaining in existence after the
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39
Closing Date which are necessary or useful in connection with any Tax inquiry,
audit, investigation or dispute, environmental report, filing or liability, any
litigation or investigation or any other matter requiring any such Books and
Records, information or employees for any reasonable business purpose similar to
the foregoing. The party requesting any such Books and Records, information or
employees shall bear all of the out-of-pocket costs and expenses (including,
without limitation, attorneys' fees, but excluding reimbursement for salaries
and employee benefits) reasonably incurred in connection with providing such
Books and Records, information or employees. The Seller may require certain
financial information relating to the Business for periods prior to the Closing
Date for the purpose of filing federal, state, local and foreign Tax returns and
other governmental reports, and the Purchaser agrees to furnish such information
to the Seller at the Seller's reasonable request and expense.
SECTION 5.03. Confidentiality. (a) The terms of the
Confidentiality Agreement are hereby incorporated herein by reference and shall
continue in full force and effect until the Closing, at which time such
Confidentiality Agreement and the obligations of the Purchaser under this
Section 5.03 shall terminate; provided, however, that the Confidentiality
Agreement shall terminate in accordance with its terms in respect of that
portion of the Information (as defined in the Confidentiality Agreement) that
does not relate to the Business and the transactions contemplated by this
Agreement. If this Agreement is, for any reason, terminated prior to the
Closing, the Confidentiality Agreement shall continue in full force and effect
in accordance with its terms.
(b) The Seller agrees to keep confidential all nonpublic
information in its possession regarding the Business, the Company and the
Subsidiaries (including, without limitation, any information made available to
the Seller pursuant to Section 5.02(c)); provided, however, that the Seller will
not be required to maintain as confidential any information that (i) becomes
generally available to the public other than as a result of a disclosure by the
Seller or (ii) is required to be disclosed pursuant to the terms of a valid
subpoena or order by Governmental Authority or other legal requirement.
(c) At the Closing, the Seller shall assign to the Purchaser, to
the extent assignable, its rights under any confidentiality agreements between
the Seller and Persons other than the Purchaser that were entered into in
connection with or relating to a possible sale of the Business, including,
without limitation, to the extent assignable, the right to enforce all terms of
such confidentiality agreements; provided, however, that to the extent such
confidentiality agreements are not assignable, the Seller agrees to take such
action as may be reasonably necessary to enforce its rights thereunder for the
benefit of the Company, at the Company's cost and expense. At the Closing, the
Seller shall deliver to the Purchaser executed copies of all such
confidentiality agreements to the extent available and permitted under such
agreements.
<PAGE>
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SECTION 5.04. Regulatory and Other Authorizations; Consents. (a)
Each party hereto shall use its reasonable best efforts to obtain all
authorizations, consents, orders and approvals of all Governmental Authorities
or third parties that may be or become necessary for the performance of its
obligations pursuant to this Agreement and will cooperate fully with the other
party in promptly seeking to obtain all such authorizations, consents, orders
and approvals. Each party hereto agrees to make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act, and to the extent
applicable, the appropriate form under the Canada Competition Act, with respect
to the transactions contemplated hereby within five Business Days of the date
hereof, to request early termination of the waiting period under the HSR Act,
and to supply promptly any additional information and documentary material that
may be requested pursuant to the HSR Act or, if applicable, the Canada
Competition Act. The parties shall cooperate with each other in connection with
the making of all such filings or responses, including providing copies of all
such documents to the non-filing or non-responding party and its advisors prior
to filing or responding. The parties hereto shall not take any action that will
have the effect of delaying, impairing or impeding the receipt of any required
approvals.
(b) The Purchaser agrees to take any and all reasonable steps
necessary to avoid or eliminate each and every impediment under any antitrust
law that may be asserted by any governmental antitrust authority so as to enable
the parties to close the transactions contemplated hereby.
(c) Each party hereto agrees to cooperate in obtaining any other
consents and approvals which may be required in connection with the transactions
contemplated by this Agreement.
SECTION 5.05. Investigation. (a) The Purchaser acknowledges and
agrees that (i) it has made its own inquiry and investigation into, and, based
thereon, has formed an independent judgment concerning, the Company, the
Subsidiaries and the Business, (ii) it has been furnished with or given adequate
access to such information about the Company, the Subsidiaries and the Business
as it has requested and (iii) no representations and warranties are being made,
and there shall be no liability (other than for intentional breach or fraud),
with respect to information (other than, with respect to the Company, the
Subsidiaries and the Business, the representations and warranties contained in
this Agreement) furnished by the Seller or any of its directors, officers,
employees, agents, stockholders, Affiliates, consultants, counsel, accountants,
investment bankers or other representatives concerning the Seller, its
Affiliates, the Company the Subsidiaries and the Business.
(b) In connection with the Purchaser's investigation of the
Company, the Subsidiaries and the Business, the Purchaser has received from the
Seller certain estimates, projections and other forecasts for the Company, the
Subsidiaries and the Business, and certain
<PAGE>
41
plan and budget information. The Purchaser acknowledges that there are
uncertainties inherent in attempting to make such projections, forecasts, plans
and budgets, that the Purchaser is familiar with such uncertainties and that the
Seller makes no representation or warranty with respect to any such estimates,
projections, forecasts, plans or budgets.
SECTION 5.06. Administrative Services Agreement. On the Closing
Date, upon the request of the Purchaser, the Seller shall enter into an
administrative services agreement with the Company (the "Administrative Services
Agreement"), substantially in the form attached hereto as Exhibit 5.06, pursuant
to which the Seller will provide or will cause one or more of its Affiliates to
provide to the Company, among other things, certain administrative support
services in Japan, Hong Kong, India, Korea, Mexico, China, Taiwan and Brazil and
certain sales support services in Mexico. In furtherance of the foregoing, the
Seller and the Company have established or will establish in compliance with
applicable laws and regulations such appropriate (in the reasonable judgment of
the Company) local entities or organizations in foreign jurisdictions to perform
or receive the services to be provided pursuant to the Administrative Services
Agreement.
SECTION 5.07. Company Headquarters. The Purchaser shall maintain
the principal business headquarters of the Company in the State of New York
within 25 miles of Corning, New York for a period of at least five years from
the Closing Date. The parties agree that the Company will move its principal
business headquarters currently located on the Seller's Houghton Park, Corning,
New York campus to a new location in the State of New York within 25 miles of
Corning, New York no later than 18 months following the Closing Date, and the
Purchaser agrees to use all reasonable efforts, and the Seller shall cooperate,
to expedite such relocation as promptly as practicable following the Closing
Date. At the Closing, the Company shall enter into a lease with the Seller with
respect to the Company's current principal business headquarters covering the
period from the Closing to the date on which the Company vacates such
headquarters premises, substantially in the form attached hereto as Exhibit
5.07.
SECTION 5.08. Non-Solicitation of Employees. For a period of two
years following the Closing Date and except as otherwise agreed to in writing by
the Seller and the Purchaser, (a) the Seller and its Affiliates shall not,
directly or indirectly, actively solicit or induce any salaried employee of the
Company or any of its Affiliates to leave such employment and become an employee
of the Seller or any of its Affiliates and (b) the Purchaser, the Company and
its Affiliates shall not, directly or indirectly, actively solicit or induce any
salaried employee of the Seller or any of its Affiliates to leave such
employment and become an employee of the Company or any of its Affiliates. The
parties agree that a remedy at law for any breach of any obligation under this
Section 5.08 will be inadequate and that in addition to any other rights and
remedies to which the Purchaser or the Seller may be entitled hereunder, at law
or in equity, the Purchaser or the Seller shall be entitled to injunctive relief
<PAGE>
42
and reimbursement for all reasonable attorney's fees and other expenses incurred
in connection with the enforcement hereof. In the event this Section 5.08 is
held to be in any respect an unreasonable restriction upon the Purchaser, the
Seller or the Company or their respective Affiliates by any court having
competent jurisdiction, the court so holding may reduce the geographic scope to
which this Section 5.08 pertains and/or the period of time for which it
operates, or effect any other change to the extent necessary to render this
Section 5.08 enforceable by such court. As so modified, this Section 5.08 will
continue in full force and effect. Such decision by a court of competent
jurisdiction shall not invalidate this Agreement, but this Agreement shall be
interpreted, construed and enforced as not containing such invalidated
provision.
SECTION 5.09. Intellectual Property Matters. (a) Consumer
Intellectual Property. At or prior to the Closing, subject to any pre-existing
licenses previously disclosed to the Purchaser, the Seller shall assign to the
Company all the Consumer Intellectual Property not owned by the Company or a
Subsidiary, other than (i) rights to the trademarks or any use of the terms
CORNING, CORNING WARE, CROWN CORNING, PYREX and PYROCERAM (the use of which
shall be governed by the license agreements referred to in Sections 5.09(b),
(c), (e) and (f)) and (ii) the Consumer Know-How owned by the Seller and the
Seller's Retained Patents (each of which shall be licensed to the Company
pursuant to Section 5.09(d)). The costs associated with such a transfer,
including any associated taxes, shall be borne by the Seller.
(b) Certain Trademarks of the Seller. (i) At the Closing, subject
to any pre-existing licenses previously disclosed to the Purchaser, the Seller
shall grant to the Company a worldwide, exclusive and fully paid, royalty-free
license to use the CORNING WARE and PYROCERAM trademarks only in the field of
Housewares, for a term of ten years, continuously renewable on the same terms
and conditions for consecutive ten-year terms at the option of the Company,
pursuant to a license agreement (the "CORNING WARE and PYROCERAM License
Agreement"), substantially in the form attached hereto as Exhibit 5.09(b)(i).
(ii) At the Closing, pursuant to the CORNINGWARE and PYROCERAM
License Agreement, the Seller shall grant to the Company a worldwide, exclusive,
fully paid, and royalty-free license to use the term CORNINGWARE as part of the
corporate name of the Company and any of its subsidiaries for a term of ten
years, continually renewable on the same terms and conditions for consecutive
ten year terms at the option of the Company, subject to the following
conditions: (A) the term CORNINGWARE must be preceded by a word that (1) does
not begin with the letters COR or COS, (2) is not merely an article (e.g. "a",
"the" or "an"), (3) does not include the word "consumer" and (4) is otherwise
subject to the Seller's approval, which approval shall not be unreasonably
withheld; (B) the corporate name including the term CORNINGWARE word shall use
such word in a manner so that the
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43
"CORNING" portion of the word is unified with the "WARE" portion of the word,
the Seller acknowledging that use in the form "CorningWare" is acceptable; (C)
the corporate name including the term CORNINGWARE shall not be used solely as a
trademark or servicemark; and (D) the certificate of incorporation (or
equivalent document) of the Company and any of its subsidiaries using the term
CORNINGWARE as part of its corporate name shall state that such use is pursuant
to the CORNINGWARE and PYROCERAM License Agreement.
(iii) At the Closing, pursuant to the CORNINGWARE and PYROCERAM
License Agreement, the Seller shall grant to the Company a worldwide, exclusive,
fully paid and royalty-free license to use the term CORNINGWARE as a servicemark
in connection with the operation of the outlet stores primarily selling
Housewares products of the Company for a term of ten years continually renewable
on the same terms and conditions for consecutive ten year terms at the option of
the Company.
(iv) At the Closing, subject to any pre-existing licenses
previously disclosed to the Purchaser, the Seller shall grant to the Company a
worldwide, exclusive and fully paid royalty-free license to use the "PYREX"
trademark in the field of Durable Consumer Products for a term of ten years,
continuously renewable on the same terms and conditions for consecutive ten-year
terms at the option of the Company, pursuant to a license agreement (the "PYREX
License Agreement"), substantially in the form attached hereto as Exhibit
5.09(b)(ii).
(c) License Agreements. At the Closing, the Seller shall assign
to the Company the Seller's interests in the Consumer License Agreements to
which the Seller is a party as they relate to the Business; provided, however,
that with respect to any Consumer License Agreement that involves the licensing
of the CORNING WARE, PYREX or PYROCERAM trademarks or any confusingly similar
modifications or derivations and which by its terms prohibits assignment and is
disclosed to the Purchaser, (i) the Seller shall not assign such Consumer
License Agreement, but instead shall designate the Company as the recipient of
any royalties with respect to the marks CORNING WARE and PYROCERAM in the field
of Housewares and with respect to the mark PYREX in the field of Durable
Consumer Products to be received (net of any taxes imposed on the Seller with
respect to such royalties) pursuant to such license agreement for the remaining
term thereof and (ii) the Company shall have the right to compel the Seller to
enforce the terms of such Consumer License Agreements.
(d) Patents and Know-How Licenses. At the Closing, subject to any
pre-existing licenses previously disclosed to the Purchaser, the Seller shall
grant to the Company (i) a worldwide, exclusive, fully paid royalty-free license
to use the Seller's Retained Patents and Seller's Future Patents and the
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44
Consumer Know-How owned by the Seller in and limited to the field of Corning
Consumer Products, and (ii) a non-exclusive, worldwide fully paid royalty-free
license to use the Seller's Retained Patents and Seller's Future Patents and the
Consumer Know-How owned by the Seller in and limited to the field of Durable
Consumer Products and Other Consumer Products, in each case pursuant to a
license agreement (the "Patent and Know-How License Agreement"), substantially
in the form attached hereto as Exhibit 5.09(d).
(e) Corning Name. No interest in or right to use the name
"CORNING" or "PYREX" or "PYROCERAM" or any confusingly similar derivation or
modification thereof or any trademark, servicemark, trade dress, logo, domain
name, URL (universal resource locator), trade name or corporate name of the
Seller, including, without limitation, "Crown Corning" or "Corning Designs"
(collectively, the "Retained Names and Marks") is being transferred to the
Purchaser pursuant to the transactions contemplated hereby and, except as
expressly provided in the license agreements to be executed pursuant to this
Agreement, such rights of the Company and the Subsidiaries in the Retained Names
and Marks shall terminate as of the Closing. At the Closing, the Seller shall
grant to the Company a temporary trademark license: (i) to use the word
"Corning" followed by the word "Consumer" as part of the name of the Company or
any of the Subsidiaries for up to three years from the Closing Date; and (ii) to
continue using the "CORNING" trademark and tradename and the CROWN CORNING
trademark and tradename, both pursuant to a license agreement (the "Temporary
CORNING License Agreement"), substantially in the form attached hereto as
Exhibit 5.09(e). Except as expressly authorized in the Temporary CORNING License
Agreement, as soon as practicable, but not more than (i) three years following
the Closing in the case of signs, purchase orders, invoices, sales orders,
labels, letterhead, shipping documents, packaging materials, promotional
brochures and related items, and (ii) not more than five years following the
Closing in the case of molds, the Purchaser shall cause the Company and each
Subsidiary to remove or obliterate all the Retained Names and Marks from all of
the foregoing, and not to put into use after the Closing Date any additional
documents or materials bearing the Retained Names and Marks.
(f) Further to the agreements of the Seller contained in this
Section 5.09, the Seller agrees that it will not renew any licenses that it has
discretion not to renew with respect to any of the Consumer Intellectual
Property after the Closing Date.
(g) The Seller shall cooperate with the Company after the Closing
to facilitate the transfer to the Company of any and all applicable Consumer
Intellectual Property not licensed pursuant to this Section 5.09, to apply for
such renewals, divisions, continuations, or other similar protections as the
Company may reasonably request and to assign those rights to the Company and to
execute such other and further documents as may be reasonably necessary to
effectuate the transfers and licenses contemplated by this Section 5.09.
SECTION 5.10. Corning Glass Center; Corning Plant Stores; Shared
Facility Agreement. (a) The Purchaser agrees to maintain the Company's
commercial arrangements with the Corning Glass Center, Corning, New York, for a
period of ten years following the
<PAGE>
45
Closing Date, on a pricing basis for Corning Consumer Products of the Company's
standard costs plus 15%; provided, however, that the Company shall not be
required to sell more than $4.0 million per year of Corning Consumer Products on
this basis.
(b) The Company will continue to sell products to the Seller's
manufacturing facilities for a period of five years after the Closing Date, at
the same locations, in substantially the same quantities and on substantially
the same terms as during the twelve-month period prior to the date hereof.
(c) At the Closing, the Seller and the Company shall enter into a
shared facility agreement (the "Shared Facility Agreement"), substantially in
the form attached hereto as Exhibit 5.10.
SECTION 5.11. Greenville Supply Agreement; Transfer of Molds. At
the Closing, the Seller and the Purchaser or the Company shall enter into a
supply agreement (the "Greenville Supply Agreement"), substantially in the form
attached hereto as Exhibit 5.11. The Seller shall, on or before the Closing
Date, transfer to the Company the molds located in its Greenville facility and
used in the Business.
SECTION 5.12. Technology Support Agreement. At the Closing, upon
the request of the Purchaser, the Seller shall enter into a technology support
agreement with the Purchaser or the Company (the "Technology Support
Agreement"), substantially in the form attached hereto as Exhibit 5.12.
SECTION 5.13. Transition Services Agreement. At the Closing, upon
the request of the Purchaser, the Seller shall enter into a transition services
agreement with the Purchaser or the Company (the "Transition Services
Agreement"), substantially in the form attached hereto as Exhibit 5.13.
SECTION 5.14. Actions Affecting the Closing Balance Sheet. On or
prior to the Closing Date, the Seller shall take or cause to be taken the
following actions:
(a) The Seller shall contribute to the capital of the Company (or
otherwise capitalize the Company) in satisfaction of all amounts
outstanding under the Revolving Credit Agreement immediately prior to
the Closing Date.
(b) Pursuant to Sections 6.02(a) and (c), the Seller shall assume
(and indemnify the Company in respect of), pursuant to an assumption
agreement in form and substance reasonably acceptable to the Purchaser,
certain post-retirement medical and life insurance liability obligations
and pension liability obligations for certain Acquired Employees.
<PAGE>
46
(c) The Seller shall assume (and indemnify the Company in respect
of) pursuant to an assumption agreement in form and substance reasonably
acceptable to the Purchaser all liabilities of the Company and the
Subsidiaries relating to workers' compensation and product liabilities
to the extent based on or arising out of injuries, accidents or
incidents the respective dates of occurrence of which were prior to the
Closing Date (the "Pre-Closing Workers and Products Claims"). Prior to
the Closing, the Company shall transfer any reserves for the Pre-Closing
Workers and Products Claims by book-entry to the Seller.
(d) The Seller will assign to the Company pursuant to an
assignment agreement in form and substance reasonably acceptable to the
Purchaser all emissions credits relating to the Business.
(e) For purposes of calculating the amount of Indebtedness and
cash on the Closing Balance Sheet, the transactions described in this
Section 5.14 shall be deemed to have occurred at the close of business
on the day next preceding the Closing.
SECTION 5.15. Foreign Sales Corporation. On or prior to the
Closing Date, the Seller shall cause the shares of capital stock of Foreign
Sales Corporation that are owned by the Company to be paid as a dividend to the
Seller or otherwise transferred from the Company to a Person other than the
Company or any Subsidiary.
SECTION 5.16. Payment of Intercompany Accounts Payable. The
Purchaser shall cause the Company and/or the Subsidiaries to pay to the Seller
all accounts payable that are accrued prior to the Closing Date by the Company
or any such Subsidiary in respect of services or goods provided by the Seller to
the Company on an arms-length basis or invoices accrued by the Seller to third
parties on behalf of the Company on an arms-length basis as they become payable
in accordance with their terms and consistent with past practice and at the
prices on which such services or goods were provided or purchased.
SECTION 5.17. Non-Competition. For a period of five years after
the Closing Date (the "Non-Competition Period"), neither the Seller nor any of
its Affiliates will manufacture, sell or distribute, or have any ownership
interest in or control any Person engaged in the manufacture, sale or
distribution of, products similar to Corning Consumer Products; provided,
however, that the foregoing shall not prohibit the Seller or any of its
Affiliates from: (a) owning, individually or collectively, directly or
indirectly, securities of any Person traded in a public market which engages in
the manufacture, sale or distribution of products similar to Corning Consumer
Products, provided that the Seller and its Affiliates do not, in the aggregate,
own more than 5% of any class of securities of such Person (other than the
Company); (b) engaging in or conducting any business contemplated by the
Administrative
<PAGE>
47
Services Agreement, the Greenville Supply Agreement, the Technology Support
Agreement or the Transition Services Agreement; (c) acquiring a diversified
company (the "Diversified Company") having not more than 20% of its sales or
$100,000,000 of revenues (based on its latest published annual audited financial
statements) attributable to the manufacture, sale and distribution of products
similar to Corning Consumer Products, so long as (i) the Seller shall promptly
notify the Purchaser of any such acquisition and (ii) the Seller or such
Affiliate shall cause the Diversified Company to dispose of the portion thereof
which has sales attributable to the manufacture, sale and distribution of
products similar to Corning Consumer Products within 24 months after such
acquisition; (d) owning less than 20% of the Shares of the Company; and (e)
manufacturing, selling and distributing Steuben Products, ceramic briquettes,
OEM Component Products for consumer household appliances, household cooking
ovens or ranges, products for lighting, computers, laboratory science,
electronics, medical applications, automobile and building windows, mirrors,
flatglass, television or display applications, liquid filtration products (other
than Stanadyne Products and final water filtration system products for home
use), OEM Component Product parts of water filtration system products for home
use, glass ceramic burner caps, glass ceramic cook tops, flat glass ceramic
stove windows and new products manufactured from flat glass ceramic by Eurokera,
S.N.C. or Keraglass, S.N.C. or their respective licensees for sale in Europe.
The parties agree that a remedy at law for any breach of any obligation under
this Section 5.17 will be inadequate and that in addition to any other rights
and remedies to which the Purchaser may be entitled hereunder, at law or in
equity, the Purchaser shall be entitled to injunctive relief and reimbursement
for all reasonable attorney's fees and other expenses incurred in connection
with the enforcement hereof. In the event this Section 5.17 is held to be in any
respect an unreasonable restriction upon the Seller or any of its Affiliates by
any court having competent jurisdiction, the court so holding may reduce the
geographic scope to which this Section 5.17 pertains and/or the period of time
for which it operates, or effect any other change to the extent necessary to
render this Section 5.17 enforceable by such court. As so modified, this Section
5.17 will continue in full force and effect. Such decision by a court of
competent jurisdiction shall not invalidate this Agreement, but this Agreement
shall be interpreted, construed and enforced as not containing such invalidated
provision.
(b) The Seller agrees that for so long as the CORNING WARE and
PYROCERAM License Agreement has not expired or been terminated in accordance
with its terms, the Seller shall not (and will require any direct or indirect
transferee not to), without the prior consent of the Company, use and will not
license (and shall require any direct or indirect transferee not to license) the
"CORNING" trademark or any confusingly similar derivations or modifications
thereof in the Housewares field except that, for purposes of such restriction
"Housewares" shall not include Steuben Products, ceramic briquettes, OEM
Component Products for consumer household appliances, household cooking ovens or
ranges, products for lighting, computers, laboratory science, electronics,
medical applications, automobile and building windows, mirrors, flatglass,
television or display applications, liquid filtration
<PAGE>
48
products (other than Stanadyne Products and final water filtration system
products for home use), OEM Component Product parts of water filtration system
products for home use, glass ceramic burner caps, glass ceramic cook tops, flat
glass ceramic stove windows, and new products manufactured from flat glass
ceramic by Eurokera, S.N.C. or Keraglass, S.N.C. or their respective licensees
for sale in Europe. In addition, the Seller agrees that for so long as the
CORNING WARE and PYROCERAM License Agreement has not expired or been terminated
in accordance with its terms, it will not use (and will require any direct or
indirect transferee not to use) the trademarks CORNING WARE and CROWN CORNING or
any confusingly similar derivations or modifications thereof on any products
manufactured by it or any of its subsidiaries after the Closing Date, and will
not license (and will require any direct or indirect transferee not to license)
any such trademark, derivations or modifications, except that nothing in this
Section 5.17(b) (other than the first sentence hereof) shall preclude Seller or
any of its present or future Affiliates from using the CORNING trademark. The
Seller also agrees that for so long as the PYREX License Agreement has not
expired or been terminated in accordance with its terms, the Seller shall not
(and will require any direct or indirect transferee not to), without the prior
consent of the Company, use the PYREX trademark or any confusingly similar
derivations or modifications thereof in the field of Durable Consumer Products
and on or with respect to any other consumer products and will not license (and
will require any direct or indirect transferee not to license) any such
trademark, derivations or modifications.
SECTION 5.18. Facility Financing Interests. On or prior to the
Closing Date, the Seller shall assign to the Company, and the Company shall
assume the Facility Financing Interests (except the Guaranty of Seller dated
August 18, 1988 to the Pennsylvania Department of Commerce (the "1988 Guaranty")
and the Guaranty Agreement dated as of December 1, 1992 between the Seller and
Pittsburgh National Bank relating to the Greencastle Facility (the "1992
Guaranty"), each of which relate solely to the Facility Financing Interests).
Notwithstanding anything to the contrary in this Agreement, the Facility
Financing Interests (except the 1988 Guaranty and the 1992 Guaranty) shall be
reflected as Indebtedness on the Closing Balance Sheet.
SECTION 5.19. Stockholders Agreement. At the Closing, the
Company, Purchaser and the Seller shall enter into the Stockholders Agreement.
SECTION 5.20. No Negotiation. Prior to the earlier of the
termination of this Agreement or the Closing, the Seller will not, and will
cause the Company, the Subsidiaries and their respective officers, directors,
employees and agents not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal with respect to, or
engage in any negotiations concerning, provide any confidential information or
data to, have any discussions with or enter into any agreements with, any Person
relating to any acquisition, business combination, reorganization or purchase of
all or any portion of the capital stock or
<PAGE>
49
assets of the Company or the Subsidiaries other than in the ordinary course of
business and in compliance with the other provisions of this Agreement with
regard to assets of the Company and the Subsidiaries. The Seller will, and will
cause the Company and the Subsidiaries to, immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any such potential transactions involving
the Company and the Subsidiaries. The Seller agrees not to release any third
party from, or waive any provisions of, any confidentiality or standstill
agreement to which Seller or the Company is a party. The Seller will, and will
cause the Company and the Subsidiaries to, immediately notify the Purchaser if
any inquiries are received in respect of the Company and the Subsidiaries and
shall provide details with respect thereto.
SECTION 5.21. Financial Statements and Reports. (a) As promptly
as practicable and in any event no later than 30 days after the end of each
fiscal month ending after the date hereof and before the Closing Date (other
than the last fiscal month) or sixty days after the end of each fiscal year
ending after the date hereof and before the Closing Date, as the case may be,
the Seller will deliver to the Purchaser true and complete copies of (in the
case of any such fiscal year) the audited and (in the case of any such fiscal
month) the unaudited consolidated balance sheets and the related audited or
unaudited consolidated statements of income and cash flows of the Company and
the Subsidiaries as of the last day of and for the fiscal year then ended or as
of the last day of and for each such fiscal month and the portion of the fiscal
year then ended, as the case may be, together with the notes, if any, relating
thereto, which financial statement shall be prepared on a basis consistent with
the Financial Statements referred to in Section 3.07.
(b) As promptly as practicable, the Seller will deliver to the
Purchaser true and complete copies of such other regularly-prepared financial
statements, reports and analyses as may be prepared by the Seller, the Company
or any Subsidiary relating to the Business or operations of the Company or any
Subsidiary.
SECTION 5.22. Insurance. From and after the Closing Date, the
Seller shall use its reasonable best efforts, subject to the terms of the Seller
Insurance Policies (as hereinafter defined), to retain the right, to the extent
the same exists and without the payment of any additional premiums or other fees
(or if additional premiums or other fees are payable, to advise the Company if
any right of recovery would exist upon the payment of such premiums or fees and,
if reimbursed by the Company therefor, to pay such premiums or fees), to make
claims and receive recoveries for the benefit of the Company, as well as for the
benefit of the Seller, under any insurance policies maintained at any time prior
to the Closing Date by the Seller and its predecessors (collectively, the
"Seller Insurance Policies"), covering any loss, liability, claim, damage or
expense relating to the assets, business, operations, conduct, products and
employees (including former employees) of the Company and its predecessors that
relates to or arises out of occurrences prior to the Closing and for which the
Company remains liable, has assumed liability or retains ownership of its
affected assets (as
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50
the case may be) after the Closing Date. With respect to the foregoing, the
Seller agrees to use its reasonable best efforts so that the Company shall have
the right, power and authority, subject to any required consent of the carriers
under the Seller Insurance Policies, to make directly or in the name of the
Seller any claims under the Seller Insurance Policies and to receive directly
recoveries thereunder.
SECTION 5.23. Cumulative Gross Margin Payment. (a) As promptly as
practicable, but in any event not later than the earlier to occur of the public
availability of the 2000 Financial Statements or March 31, 2001, the Company
shall prepare and deliver to the Seller (i) the 2000 Financial Statements,
together with a report thereon of the Company's independent accountants (the
"Company's Accountants") to the effect that such financial statements fairly
present the results of operations of the Company and the Subsidiaries for the
period ended December 31, 2000, in conformity with U.S. GAAP; (ii) the
calculation of Cumulative Gross Margin and (iii) a certificate of the Company's
Accountants with respect to the calculation of Cumulative Gross Margin in
accordance with the definition of Gross Margin.
(b) The Seller may dispute the amount of Cumulative Gross Margin
as calculated by the Company and the Company's Accountants, but only on the
basis, in the case of net sales and cost of sales, that the amounts reflected on
the 2000 Financial Statements were not prepared in conformity with U.S. GAAP;
provided, however, that the Seller shall have notified the Company and the
Company's Accountants in writing of each disputed item, specifying the amount
thereof in dispute and setting forth, in reasonable detail, the basis for such
dispute, within 30 Business Days of the Purchaser's delivery of the 2000
Financial Statements and the calculation of Cumulative Gross Margin to the
Seller. The Company shall make available to the Seller and its representatives
all information, records, data and auditors' working papers and access to its
personnel as shall be reasonably requested by the Seller in connection with its
evaluation of the calculation of the Cumulative Gross Margin. In the event of
such a dispute, the Company's Accountants, together with the Company, and the
Seller's Accountants, together with the Seller, shall attempt to reconcile their
differences, and any resolution by them as to any disputed items shall be final,
binding and conclusive on the parties hereto. If the Company's Accountants,
together with the Company, and the Seller's Accountants, together with the
Seller, are unable to resolve any such dispute within 50 Business Days of the
Company's delivery of the calculation of Cumulative Gross Margin to the Seller,
and the items remaining in dispute are such that the Seller would receive at
least $250,000 pursuant to such items, if such items were resolved in favor of
the Seller, the Company's Accountants and the Seller's Accountants shall
promptly submit the items remaining in dispute for resolution to the Independent
Accounting Firm, which shall, within 40 Business Days after such submission,
determine and report to the Seller and the Company upon such remaining disputed
items, and such report shall be final, binding and conclusive on the Seller and
the Company. The fees and disbursements of the Independent Accounting Firm shall
be allocated between the Seller and the Company in the same proportion that the
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51
aggregate amount of such remaining disputed items so submitted to the
Independent Accounting Firm that is unsuccessfully disputed by each such party
(as finally determined by the Independent Accounting Firm) bears to the total
amount of such remaining disputed items to submitted.
(c) The calculation of Cumulative Gross Margin shall be deemed
final for the purposes of this Section 5.23 upon the earliest of (A) the failure
of the Seller to notify the Company of a dispute within 30 Business Days of the
Company's delivery of the 2000 Financial Statements and the calculation of the
Cumulative Gross Margin to the Seller, (B) the resolution of all disputes,
pursuant to subsection (b) of this Section 5.23, by the Seller's Accountants and
the Company's Accountants and (C) the resolution of all disputes, pursuant to
subsection (b) of this Section 5.23, by the Independent Accounting Firm. Within
three Business Days of the calculation of Cumulative Gross Margin being deemed
final, the Company shall take the actions described in subsection (d) of this
Section 5.23. Any payment that the Company may be obligated to make to the
Seller pursuant to subsection (d) of this Section 5.23, shall be made by wire
transfer in immediately available funds to an account or accounts designated by
the Seller.
(d) In the event that the Cumulative Gross Margin is greater than
$710,900,000, then the Company shall pay to the Seller one dollar for each
dollar by which the Cumulative Gross Margin exceeds $710,900,000, up to a
maximum of $15,000,000. In the event that the Cumulative Gross Margin is less
than $710,900,000, the Company shall make no payment to the Seller pursuant to
this Section 5.23.
SECTION 5.24. Information Systems. (a) Prior to the Closing, the
Seller will use reasonable best efforts to cause the Company to continue to
implement, and make capital expenditures in respect of, the CCPC Year 2000 plan
(which has been provided to the Purchaser prior to the date of this Agreement)
(the "Systems Plan") in accordance with its terms.
(b) The Seller will extend information systems transitional
services under the Transition Services Agreement until the implementation of the
Systems Plan is substantially complete or the date of the first anniversary of
the expiration of the Transition Services Agreement (whichever is sooner);
provided, however, that the Seller intends to discontinue its mainframe
information system facilities on or about June 30, 1999. In connection with such
discontinuance, the Seller will provide reasonable assistance to the Company (at
the Company's expense) with respect to obtaining mainframe information services
from third party suppliers. After June 30, 1999, in the event the Company
requests that the Seller renew its lease for such mainframe facilities so as to
provide mainframe information system services to the Company until December 31,
1999, the cost of such renewal, together with the lease payments payable under
such renewal leases shall be shared equally by the Seller and the Company
(without duplication of any payments to be made by the Company to the Seller
under the Transition Services Agreement). Notwithstanding the foregoing, there
can be no assurance that such lease
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52
can be renewed by the Seller or that the mainframe facilities provided
thereunder will not fail prior to December 31, 1999.
SECTION 5.25. Reasonable Best Efforts. Purchaser and Seller agree
to use their respective reasonable best efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable, to consummate and make effective the transactions contemplated by
this Agreement as promptly as practicable after the date hereof.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Employees. (a) The Purchaser agrees to cause the
Company or the Subsidiaries to continue immediately after the Closing the
employment of those persons employed by the Company or any Subsidiary
immediately prior to the Closing, including those employees on vacation, leave
of absence, short-term disability (work-related or otherwise), sick leave or
layoff, (provided that any such employee on vacation, leave of absence,
short-term disability or sick leave returns to active employment promptly
following the expiration of such period of absence and in any event within one
year following the Closing), but excluding employees receiving long-term
disability benefits at the time of the Closing and employees subject to the
Pressware Union Agreement (as defined below) (the "Acquired Employees");
provided, however, that the foregoing does not obligate the Purchaser, the
Company or any Subsidiary at any subsequent time to employ any particular person
on any particular terms, except as specifically provided in this Article VI, and
nothing herein shall restrict the Company or any Subsidiary from terminating the
employment of any employee for any reason.
(b) The Purchaser agrees to cause the Company and the
Subsidiaries to continue to provide each Acquired Employee with salary and
benefits levels (other than equity-based compensation and the Performance
Improvement Plan) ("Compensation") that are substantially similar in aggregate
economic value, to those provided to the Acquired Employee immediately prior to
the Closing, for five years after the Closing Date for any Acquired Employee who
is not a member of a collective bargaining unit or until the expiration of the
relevant collective bargaining agreement in effect on the Closing Date with
respect to any Acquired Employee who is a member of a collective bargaining
unit, (as applicable, the "Continuation Period"); provided, however, (i) that if
the Seller reduces or modifies its Compensation level or any portion thereof for
any group or groups of its employees, the Purchaser may permit the Company or
the Subsidiaries to make commensurate modifications to the Compensation or any
portion thereof affecting a substantially similar group or groups of the
Acquired Employees (by size or function, as the case may be); and (ii) that,
subject to compliance with the other provisions of this Article VI and
applicable law, after the Closing
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53
Date, the foregoing shall not obligate the Purchaser to maintain a particular
level of employment, which shall be subject to the discretion of management of
the Purchaser. The Seller agrees to give the Company written notice of any
proposed modification or reduction of Compensation promptly (and in no event
later than the effectiveness of such modification or reduction). The Purchaser
agrees to give the Seller prompt written notice of the benefits it intends to
provide Acquired Employees pursuant to this Section 6.01(b) during the
Continuation Period promptly following the implementation (and any subsequent
amendment) of such benefits.
(c) From and after the Closing, the Company and the Subsidiaries
shall be solely responsible for all termination, severance benefits, costs,
charges and liabilities of any nature incurred as a result of the termination of
an Acquired Employee after the Closing, including, without limitation, any
claims arising out of or relating to any plant closing, mass layoff or similar
event under applicable law occurring after the Closing (collectively,
"Termination "Benefits"). For a period of one year following the Closing Date
(the "Benefit Maintenance Period"), Termination Benefits for employees of the
Company and the Subsidiaries shall be paid by the Company in the amounts and
kind which the Company and the Subsidiaries would have paid consistent with past
practice under similar circumstances of termination (including the amounts
required by law, plus any amounts required by any collective bargaining
agreement, plus any additional amounts customarily paid by the Company and the
Subsidiaries). The Termination Benefits of the Company and the Subsidiaries as
of the date of this Agreement are described in Section 6.01(c) of the Disclosure
Schedule.
SECTION 6.02. Employee Benefits Arrangements. (a) Pension Plans.
(i) Prior to the Closing Date, the Seller shall amend the Pension Plan of
Corning Incorporated (the "Corning Pension Plan") so that following the Closing
Date, (A) subject to clauses (C), (D) and (E) below, Acquired Employees
currently participating in the Corning Pension Plan shall cease to accrue
benefits in such plan, although the accrued benefits of such Acquired Employees
as of the Closing Date (as well as the accrued benefits of former employees of
the Company and the Subsidiaries and their beneficiaries) shall be retained by
the Corning Pension Plan as an exclusive obligation of the Seller, (B) Acquired
Employees' service with the Company or any Subsidiary after the Closing Date
will be taken into account for purposes of determining vesting under the Corning
Pension Plan, (C) no additional years of credited service shall be provided to
and no changes in average compensation or social security benefits shall be
recognized for the Acquired Employees for plan benefit formula purposes, (D)
service with the Company or any Subsidiary after the Closing Date will be taken
into account for purposes of determining eligibility for early retirement
subsidies, optional benefit forms and ancillary benefits with respect to the
benefits accrued under the Corning Pension Plan and (E) with respect to the
benefits for employees paid on an hourly basis ("Hourly Employees"), no
increases in the monthly benefit rate beyond that in effect at the Closing Date
shall be provided, other than future rate increases that, as of the Closing
Date, are scheduled to be
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54
effective on or subsequent to the Closing Date. Notwithstanding the foregoing
clauses (A) and (C), the Seller shall amend the Corning Pension Plan, at such
time, if any, during the Continuation Period that it implements a periodic
update of average compensation for participants in such plan then employed by
Seller and its subsidiaries, to increase the accrued benefits of Acquired
Employees who have benefits based on compensation (i.e., those on the "salaried
roll") in a manner consistent with periodic increases provided to such employees
in the past based on average compensation and credited service as of the Closing
Date.
(ii) Effective as of the Closing Date, the Purchaser will cause
the Company to establish a pension plan (the "New Defined Benefit Plan")
providing pension benefits for each Acquired Employee, other than Hourly
Employees of Revere Ware Corporation ("Revere Hourly Employees") and the Foreign
Subsidiaries, which are substantially similar in aggregate economic value,
consistent with the applicable collective bargaining agreements, to those
provided by the Corning Pension Plan as of the Closing Date, and which for the
Hourly Employees covered thereunder reflect all increases in monthly benefit
rates scheduled to be effective subsequent to the Closing Date; provided,
however, that nothing in this Section 6.02(a)(ii) shall limit or relieve
Seller's obligations under Section 6.02(a)(i). The Purchaser agrees to cause the
Company and the Subsidiaries to maintain the New Defined Benefit Plan without
any amendments inconsistent with the foregoing sentence for the Benefit
Maintenance Period; provided, however, that if the Seller reduces or modifies
its benefit levels under the Corning Pension Plan for any group or groups of its
employees, the Purchaser may make commensurate modifications to the New Defined
Benefit Plan affecting a substantially similar group or groups of the Acquired
Employees (by size or function, as the case may be). The Seller agrees to give
the Company written notice of any proposed modification or reduction of benefits
under the Corning Pension Plan promptly (and in no event later than the
effectiveness of such modification or reduction). With respect to Acquired
Employees generally, the Purchaser shall cause the Company and its Subsidiaries
to provide under the New Defined Benefit Plan pension benefits which recognize
service, compensation and social security benefits with the Company and the
Subsidiaries, both before and after the Closing Date, for purposes of vesting,
participation and eligibility for early retirement subsidies, optional benefit
forms and ancillary benefits (to the extent relevant), but not for benefit
accruals, to the extent that these would have been taken into account under the
Corning Pension Plan. The New Defined Benefit Plan shall not be required to
recognize any final or career average updates of compensation and,
notwithstanding Seller's practice of periodically providing such updates, it
shall not be considered a reduction of benefits under this Article VI if the New
Defined Benefit Plan does not provide for such updates.
(iii) The Purchaser shall cause the Company or its Subsidiaries
to continue to maintain the Revere Hourly Pension Plans (the "Revere Plan") for
current and former Revere Hourly Employees consistent with the applicable
collective bargaining agreements.
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55
(iv) The Purchaser shall cause the Company and the Foreign
Subsidiaries to continue to maintain during the Benefit Maintenance Period any
pension plan of a Foreign Subsidiary in effect on the Closing Date for current
and former employees of such Foreign Subsidiary without any amendments thereto
during the Benefit Maintenance Period that would cause the benefits for an
employee under such plan not to be substantially similar in aggregate economic
value to the benefits provided as of the Closing Date, except as may be required
by applicable local law.
(b) Investment/401(k) Plans. (i) Effective as of the Closing
Date, Acquired Employees shall no longer accrue benefits under the Corning
Incorporated Investment Plan and the Corning Incorporated Investment Plan for
Unionized Employees (the "Corning 401(k) Plans") in the capacity of employees of
Seller or one of its subsidiaries. The Seller shall cause employer matching and
retirement enhancement contributions for Employees with respect to the period up
to and including the Closing Date to be made to the Corning 401(k) Plans. The
Seller will amend the Corning 401(k) Plans to provide full vesting as of the
Closing Date to all Acquired Employees covered by the Corning 401(k) Plans as of
the Closing Date.
(ii) For so long as the Seller continues to provide payroll
services to the Purchaser with respect to the Acquired Employees, the Acquired
Employees (other than Acquired Employees of the Foreign Subsidiaries) shall
continue to participate in the Corning 401(k) Plans, which shall be maintained
as multiple employer plans for this purpose. Thereafter, the Purchaser shall
cause the Company or its Subsidiaries to establish one or more "401(k)" plans
for the Acquired Employees (the "New 401(k) Plans"), other than Acquired
Employees of the Foreign Subsidiaries. For the purpose of determining vesting
and employer matching and retirement enhancement contributions, the New 401(k)
Plans shall recognize service that the Acquired Employees had with the Company
or its Subsidiaries before the Closing Date. As soon as practicable following
the establishment of the New 401(k) Plans and the Seller's and the Purchaser's
receipt of the assurances described in Section 6.02(b)(iii) below, the Seller
shall cause an amount in cash, equal to the aggregate account balances of the
Acquired Employees participating in Corning 401(k) Plans as of the close of the
business day immediately preceding the date of transfer, to be transferred to
the trust or trusts maintained with respect to the New 401(k) Plans, and the
Purchaser shall assume all liabilities with respect to such account balances.
The Purchaser and the Seller shall cooperate to establish procedures to enable
Acquired Employees to continue payroll deductions consistent with past practices
for loans outstanding on and after the date of the transfer of account balances
under the Corning 401(k) Plans.
(iii) On or as soon as practicable following the adoption of the
New 401(k) Plans, each of the Purchaser and the Seller shall provide the other
party with reasonably satisfactory assurances (which may include, without
limitation, a favorable determination letter
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56
issued by the IRS) as to the qualification, respectively, of the New 401(k)
Plans and the Corning 401(k) Plans under Section 401(a) of the Code.
(c) Welfare and Fringe Benefit Plans. (i) Subject to the other
terms hereof, during the Benefit Maintenance Period, the Purchaser will cause
the Company and its Subsidiaries to provide each Acquired Employee with welfare
benefits substantially similar in aggregate economic value consistent with
applicable collective bargaining agreements to those provided to such Acquired
Employee immediately prior to the Closing Date in the areas generally of
medical, vision care, hearing aid, dental assistance, flexible spending
accounts, life insurance, post-retirement medical, post-retirement life
insurance, vacation, severance, salary continuation, accidental death and
dismemberment, dependent life insurance, business travel accident insurance,
adoption assistance, short-term disability, long-term disability, workers'
compensation, tuition refunds and educational leave, compensation/bonus plans
(including "Goalsharing benefits", but not including matching gifts, service
awards or the Worldwide Employee Stock Purchase Plan, the Performance
Improvement Plan or any other equity-based plan), and non-qualified supplemental
pension and deferred compensation arrangements as such employees had with the
Company or its Subsidiaries immediately prior to the Closing Date (it being
acknowledged and agreed that the Company shall not be required to maintain all
of the following so long as the aggregate economic benefit provided to an
Acquired Employee are substantially equivalent to the aggregate benefits
provided to such employee prior to the Closing Date) (the "Existing Benefit
Plans"); provided, however, that the Purchaser will cause the Company or its
Subsidiaries to continue to maintain the Revere Post-Retirement Benefit Plan
(the "Revere Post-Retirement Plan") consistent with applicable collective
bargaining agreements for the Benefit Maintenance Period; provided further that
if the Seller reduces or modifies the benefit levels under its post-retirement
medical and/or life insurance plans for any group or groups of its employees,
the Purchaser may make commensurate modifications to the Revere Post-Retirement
Plan for a substantially similar group or groups of Revere Ware Corporation
employees (by size or function, as the case may be). Notwithstanding the above,
however, other than with regard to employees of Revere Ware Corporation and the
Foreign Subsidiaries, neither the Purchaser nor the Company nor the Subsidiaries
shall be required to provide post-retirement medical and/or life insurance
benefits for former employees of the Company or any of its Subsidiaries or
Acquired Employees who are eligible to retire as of the Closing Date, it being
hereby agreed that such post-retirement benefits shall be provided by the Seller
under the same terms and conditions as the Seller may, from time to time, apply
to similarly situated employees (or, if there are no similarly situated
employees, as provided to other employees of the Seller), or at such higher
level as the retirees may be entitled to under applicable law. For such
post-retirement medical benefits, service with the Company or its Subsidiaries
after the Closing Date will be taken into account only in determining the
retiree's contributions with respect to their benefits. With regard to such
post-retirement life insurance, the Seller is not obligated to provide any
amounts other than those earned as of the Closing Date. The Purchaser agrees to
cause the Company
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57
and its Subsidiaries to maintain the Existing Benefit Plans without any
amendments inconsistent with the first sentence of this paragraph (i) which
would reduce benefit levels for the Benefit Maintenance Period; provided,
however, that if the Seller reduces or modifies its benefit levels for any group
or groups of its employees under any of its benefits plans which is
substantially similar to one of the Existing Benefit Plans, the Purchaser may
make commensurate modifications to the applicable, corresponding Existing
Benefit Plan for a substantially similar group or groups of Acquired Employees
(by size or function, as the case may be). The Seller agrees to give the Company
written notice of any proposed modification or reduction of benefits under any
of its benefit plans which is substantially similar to one of the Existing
Benefit Plans promptly (and in no event later than the effectiveness of such
modification or reduction).
(ii) The Purchaser shall cause the Company and the Subsidiaries
to give credit to Acquired Employees for all service with the Company, its
Subsidiaries or the Seller for the purpose of determining eligibility for any of
the Existing Benefit Plans to be provided in accordance with this Section and
for determining the amount and duration of any benefits under the Existing
Benefit Plans; provided, however, that such credit does not result in
duplication of benefits.
(d) Collective Bargaining Agreements. (i) Following the Closing
Date, the Purchaser shall cause the Company and the Subsidiaries to continue to
perform their respective obligations under the collective bargaining agreements
set forth on Section 6.02(d)(i) of the Disclosure Schedule. For the collective
bargaining agreements set forth on Section 6.02(d)(ii) of the Disclosure
Schedule, the Purchaser and the Seller shall cooperate so as to enable the
Company to recognize and assume such agreements where possible or to perform the
Seller's duties and obligations under and to otherwise abide by such agreements.
(ii) The Purchaser has received a copy of the Memorandum of
Understanding between the Seller and the Company and The American Flint Glass
Workers Union AFL-CIO, Including Local 1000, dated as of June 12, 1997 (the
"Pressware Union Agreement"). Accordingly, the Purchaser and the Seller agree as
follows with respect to the Pressware Union Agreement:
(A) the Purchaser agrees to take all actions which the Seller
undertook in the Pressware Union Agreement to require of the Purchaser;
(B) the Purchaser agrees to cause the Company to take all actions
which the Pressware Union Agreement requires or contemplates that the
Company shall take;
(C) the Seller agrees to take all action which the Pressware
Union Agreement requires or contemplates that the Seller shall take;
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58
(D) the Seller and the Purchaser agree to cooperate to ensure
that the Pressware Union Agreement will be implemented so as to
accomplish the intended purposes thereof;
(E) the Seller agrees to reimburse the Company and/or the
Purchaser (or, where appropriate, to pay) for the following payments
(net of any tax savings by the Company or the Purchaser realized in
connection with such payments but only at such time and to such extent
as such tax savings are actually realized) to Pressware employees under
the terms of the Pressware Union Agreement, within 10 days of the
Seller's receipt of the Company's (or the Purchaser's) invoices
therefor: (1) special financial inducements pursuant to Section 2(A) of
the Pressware Union Agreement in amounts consistent with those
previously disclosed by the Seller to the Purchaser and consistent with
the Employee Incentive Retention Plan and the Pressware Retention
Incentive Plan and (2) special cash awards under Section 2(C) of the
Pressware Union Agreement; and
(F) the Seller shall take all actions necessary to ensure that
there will be no "bumping" of employees from the Seller or any of its
Affiliates to the Company or any Subsidiary after the Closing.
(iii) After the Closing Date, the Seller shall, at the
Purchaser's request, lease to the Company, on terms reasonably satisfactory to
the Seller, the Company and the Purchaser, those employees (the "Leased
Employees") who are employed at the Company's Pressware facility on the Closing
Date and who choose, in accordance with the Pressware Union Agreement, to remain
employees of the Seller. The Company shall reimburse the Seller for all costs
and expenses incurred by the Seller in connection with the lease of the Leased
Employees. Such costs and expenses shall be calculated in a manner consistent
with the Seller's customary practices prior to the Closing Date of calculating
costs and expenses related to the Company's employees for accounting purposes.
(e) Retention Program. In addition to the Pressware Union
Agreement, the Seller has caused the Company to adopt a retention program for
key employees (the "Key Employee Retention Program"). Following the Closing, the
Purchaser shall cause the Company and the Subsidiaries to implement the Key
Employee Retention Program, and the Seller shall reimburse the Company or the
Purchaser, as the case may be, for all payments made after the Closing Date to
employees under such programs (net of any tax savings by the Company or the
Purchaser realized in connection with such payments but only at such time and to
such extent as such tax savings is actually realized), within 30 days after the
Seller's receipt of the invoice(s) of the Company or the Purchaser therefor.
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59
(f) Employee Discounts. Until the fifth anniversary of the
Closing Date, the Purchaser will cause the Company and its Subsidiaries to
continue the 30% discount policy in Company stores for employees and retirees of
the Seller, the Company and the Subsidiaries.
(g) Pension Benefit Guaranty Corporation Requirements. Subject to
Section 6.09, the Purchaser agrees to cooperate reasonably, at the Seller's
expense, with the Seller to attempt to resolve any requirements imposed by the
PBGC with respect to the Corning Pension Plan and the Revere Plan during the
Continuation Period, but only to the extent that such cooperation does not
result in any liability to the Purchaser, the Company or any Subsidiary or to
any of their respective officers, directors or stockholders.
SECTION 6.03. Goal Sharing Plan and Performance Improvement Plan.
The Seller shall reimburse the Company and the Subsidiaries for a pro rata
portion of any payments required to be made by any of them under the Goal
Sharing Plan for 1998 based on the number of days before the Closing Date during
the fiscal year ending in 1998 to the extent that the obligation for any such
payments is not accrued and reflected on the Final Closing Working Capital
Statement. The Seller also shall reimburse the Company and the Subsidiaries for
all amounts payable under the Performance Improvement Plan, which amounts shall
be based on performance for fiscal year ending 1998 prorated for the period
prior to the Closing Date.
SECTION 6.04. Stock Options. All options to acquire the Seller's
common stock held by the Acquired Employees that are intended to qualify as
Incentive Stock Options (within the meaning of Code Section 422(b)) shall remain
Incentive Stock Options for a period of 90 days following the Closing Date and
shall thereafter be converted into nonqualified stock options which, together
with any stock options not intended to qualify as Incentive Stock Options, shall
remain exercisable for a period of the shorter of three years following the
Closing Date or the remaining term of such option (the "Option Exercise
Period"); provided, however, that such three-year extension period shall not
apply to stock options granted prior to December 4, 1991, which options'
exercisability following the Closing Date shall remain subject to the terms
currently applicable thereto. All stock options referred to above shall continue
to vest during the Option Exercise Period as if the holders thereof remained
employed by the Seller or one of its Subsidiaries.
SECTION 6.05. Supplemental Plans. The Seller shall cause the
Acquired Employees who participate in the Supplemental Investment Plan to become
fully vested thereunder as of the Closing, and the account balances of such
Acquired Employees shall be paid to them in cash promptly thereafter in
accordance with the terms of such plan. Acquired Employees who participate in
the Seller's Supplemental Pension Plan shall receive vesting credit for service
with the Company for any Subsidiary following the Closing and, notwithstanding
the terms of such Plan, shall vest in accordance with the vesting schedule
contained in the Corning Pension Plan.
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SECTION 6.06. Medical Costs. The Seller shall be liable for, and
indemnify and hold harmless the Purchaser, the Company and the Subsidiaries
against, any and all Losses arising out of medical, dental and similar health
related claims incurred by the Acquired Employees on or prior to the Closing
Date other than claims incurred under any Company Benefit Plan. For this
purpose, a claim is "incurred" on the date the relevant treatment is rendered.
SECTION 6.07. Cooperation. The Seller shall cooperate with the
Purchaser with respect to compliance with the covenants set forth in this
Article VI, including entering into a transition services agreement with the
Purchaser to provide for continued benefit coverage to Acquired Employees
immediately after the Closing. The Seller also shall provide the Purchaser with
any documents relating to the Seller Benefit Plans in which Employees
participate that the Purchaser may reasonably request to enable the Purchaser to
satisfy its obligations under this Article VI.
SECTION 6.08. Remedies. The Purchaser acknowledges that a breach
of its obligations under this Article VI may cause irreparable injury to the
Seller in its goodwill, its reputation, and its employee relations, in addition
to monetary damages, which may be difficult to calculate, predict or limit, and
agrees that equitable relief, including, but not limited to, specific
enforcement of its obligations hereunder, may be appropriate (in addition to
indemnification pursuant to Article IX hereof) to prevent such breach.
Accordingly, without limiting the generality of Section 11.12, the Purchaser
agrees that it will not oppose a petition by the Seller for equitable relief
with respect to a threatened or actual breach of the Purchaser's obligations
under this Article VI on the grounds that such relief is inappropriate.
SECTION 6.09. Indemnification. The Seller shall indemnify and
hold harmless the Company, any of its Subsidiaries, their respective officers,
directors, successors and permitted transferees and assigns and each New Company
Benefit Plan against any and all Losses arising out of or relating to (i) any
Seller Benefit Plan or other Benefit Plan sponsored, maintained or contributed
to by the Seller or any ERISA Affiliate (and any Benefit Plan no longer in
effect that was previously sponsored, maintained or contributed to by the Seller
or any ERISA Affiliate), whether arising out of or relating to any event or
state of facts occurring or existing before, on or after the Closing Date, and
including, without limitation, any liabilities arising under Title IV of ERISA,
Section 302 of ERISA and section 412 or 4971 of the Code, (ii) the separation,
division, allocation, unwinding or similar event involving the liabilities of
the joint venture between Vitro S.A. and the Company with respect to Benefit
Plans, (iii) the pension plan asset transfer executed pursuant to the Agreement
of Purchase and Sale of Assets, dated April 28, 1988, and the Pension
Contribution and Asset Transfer Letter Agreement, dated June 22, 1988, (iv) any
post-retirement medical and/or life insurance benefit for Acquired Employees who
are eligible to retire as of the Closing Date and former
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Employees of the Company or any of its Subsidiaries (other than Employees of
Revere Ware and the Foreign Subsidiaries), (v) any individual who is on "loan"
status to the Pressware plant pursuant to the Pressware Union Agreement, and
(vi) any obligation to make special financial payments pursuant to the Pressware
Union Agreement, including Section 2(A), 2(B) or 2(C) thereof, in excess of any
amounts reimbursed pursuant to Section 6.02(d)(ii)(E) hereof.
SECTION 6.10. Survival. The covenants and agreements of the
parties hereto contained in this Article VI shall survive the Closing and shall
remain in full force and effect until the expiration of all statutes of
limitations with respect to the respective matters set forth herein.
ARTICLE VII
TAX MATTERS
SECTION 7.01. Tax Indemnities. (a) Except to the extent reserved
for on the Closing Balance Sheet (but only to the extent such reserve is taken
into account in determining the Cash Dividend Amount adjustment under Section
2.04(c) hereof) from and after the Closing Date, without duplication, the Seller
shall indemnify the Purchaser and the Company and their Affiliates against all
Taxes (including reasonable attorneys' and accountants' fees and other
reasonable out-of-pocket expenses incurred in connection therewith) (i) imposed
on or payable by the Company or any Subsidiary with respect to any taxable
period or portion thereof that ends on or before the Closing Date (including any
taxes allocated to such period under Section 7.01(d) hereof), (ii) imposed on or
payable by the Company or any Subsidiary under Treasury Regulation 1.1502-6 (or
any similar provision of state, local or foreign law) by reason of the Company
or any Subsidiary being included in any consolidated, affiliated, combined or
unitary group at any time on or before the Closing Date, (iii) imposed on or
payable by the Company or any Subsidiary as a result of (A) the Code section
338(h)(10) Election with respect to the Company and Revere Ware Corporation
referred to in Section 7.07 and (B) an actual election under a state or local
provision which is analogous or comparable to Code Section 338(h)(10); (iv)
relating to Foreign Sales Corporation or imposed as a result of the transactions
contemplated by Section 5.15 hereof, (v) relating to any payments required to be
made after the Closing Date under any Tax indemnity, Tax sharing, or Tax
allocation agreement between the Seller and the Company under which the Company
was obligated, or was a party, on or prior to the Closing Date, and (vi) arising
from the breach of any representation, warranty or covenant of Seller with
respect to Taxes under this Agreement. No indemnity shall be provided under this
Agreement for any Taxes resulting from any transaction of the Company or any
Subsidiary occurring on the Closing Date after the Closing that is not in the
ordinary course of business.
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(b) From and after the Closing Date, without duplication, the
Purchaser and the Company shall indemnify the Seller and its Affiliates against
all Taxes (including reasonable attorneys' and accountants' fees and other
reasonable out-of-pocket expenses incurred in connection therewith) (i) arising
from the breach of any representation, warranty or covenant of Purchaser with
respect to Taxes under this Agreement or (ii) imposed on the Company and the
Subsidiaries, which Taxes are not subject to indemnification pursuant to
paragraph (a) of this Section 7.01, including, but not limited to, Taxes (A)
resulting from any transaction of the Company and the Subsidiaries occurring
after the Closing Date or on the Closing Date after the Closing that is not in
the ordinary course of business or (B) with respect to any taxable period or
portion thereof that begins after the Closing Date and that are imposed on the
Company or any of the Subsidiaries.
(c) Payment by the indemnitor of any amount due under this
Section 7.01 shall be made within ten days following written notice by the
indemnitee that payment of such amounts to the appropriate tax authority is due,
provided that the indemnitor shall not be required to make any payment earlier
than two days before it is due to the appropriate tax authority. If the Seller
receives an assessment or other notice of Taxes due with respect to the Company
or any of the Subsidiaries for any period for which the Seller is not
responsible, in whole or in part, pursuant to paragraph (a) of this Section
7.01, then the Purchaser shall pay such Tax, or if the Seller pays such Tax,
then the Purchaser or the Company shall pay to the Seller, in accordance with
the first sentence of this Section 7.01(c), the amount of such Tax for which the
Seller is not responsible. In the case of a Tax that is contested in accordance
with the provisions of Section 7.03, payment of the Tax to the appropriate tax
authority will not be considered to be due earlier than the date a final
determination to such effect is made by the appropriate taxing authority or
court. Final determination shall have the meaning as set forth in 1313(a) of the
Code.
(d) Seller and Purchaser shall, to the extent permitted by
applicable law and except as otherwise provided herein, elect with the relevant
taxing authority to close the taxable period of the Company and the Subsidiaries
at the end of the day on the Closing Date. For purposes of this Agreement, in
the case of any Tax that is imposed on a periodic basis and is payable for a
taxable period that begins before the Closing Date and ends after the Closing
Date (including without limitation any Taxes resulting from a Tax audit or
administrative court proceeding), the portion of such Taxes which is payable for
the portion of such taxable period ending on the Closing Date shall be (i) in
the case of any Tax other than a Tax based upon or measured by income or
receipts, the amount of such Tax for the entire taxable period (or, in the case
of such Taxes determined on an arrears basis, the amount of such Tax for the
immediately preceding period) multiplied by a fraction, the numerator of which
is the number of days in the portion of such taxable period ending on the
Closing Date and the denominator of which is the number of days in the entire
taxable period and (ii) in the case of a Tax based upon or measured by income or
receipts, the amount which would be payable if the relevant
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taxable period ended on the Closing Date. Any credit or refund resulting from an
overpayment of Taxes shall be prorated based upon the method employed in clause
(ii) of the immediately preceding sentence. In the case of any Tax based upon or
measured by capital (including net worth or long-term debt) or intangibles, any
amount thereof required to be allocated under this Section 7.01(d) shall be
computed by reference to the level of such items on the Closing Date. The
taxable period of any partnership or other pass-through entity in which the
Company or any Subsidiary is a partner or other beneficial interest holder shall
be deemed to terminate on the Closing Date. All determinations necessary to
effect the foregoing allocations shall be made in a manner consistent with prior
practice of the Company and the Subsidiaries.
SECTION 7.02. Refunds and Tax Benefits. (a) Subject to paragraph
(b) of this Section 7.02, the Purchaser shall promptly pay to the Seller the
amount of any refund or credit or offset (including any interest paid or
credited or any offset allowed with respect thereto but reduced by any Taxes
that the Purchaser, the Company or any Subsidiary shall be required to pay with
respect thereto) received or used, in the case of a credit or offset, by the
Purchaser, the Company or any Subsidiary of Taxes (i) relating to taxable
periods or portions thereof ending on or before the Closing Date (including any
Taxes allocated to such period under Section 7.01(d) hereof) provided Seller
would be liable for such Taxes under Section 7.01(a) hereof, and only to the
extent that any such refunds or credits or offsets are in excess of the amount
of refunds for Taxes reflected on the Closing Balance Sheet (but only to the
extent such refund is taken into account in determining the Cash Dividend Amount
adjustment under Section 2.04(c) hereof) or (ii) attributable to an amount paid
by the Seller under Section 7.01 hereof. The amount of any refunds or credits or
offsets (including any interest paid or credited with respect thereto) received
by the Purchaser, the Company or any Subsidiary shall be for the account of the
Purchaser if (i) the refund, credit or offset is of Taxes (A) relating to
taxable periods or portions thereof that begin on or after the Closing Date
(including any Taxes allocated to such period under Section 7.01(d) hereof) or
(B) relating to taxable periods or portions thereof ending on or before the
Closing Date provided such refund, credit or offset relates to Taxes for which
Seller would not be liable under Section 7.01(a) hereof, or (ii) the refund,
credit or offset relates to an adjustment to a taxable period that begins before
the Closing Date that arises from an adjustment to a taxable period beginning on
or after the Closing Date, but only, in the case of items referred to in clause
(ii), if the adjustment would not impose a material Tax cost or otherwise
materially adversely affect the Seller or any of its Affiliates. The Purchaser
shall, if the Seller so requests and at the Seller's expense, cause the relevant
entity to file for and use its reasonable best efforts to obtain and expedite
the receipt of any refund to which the Seller is entitled under this Section
7.02, provided, however, that the Purchaser must consent to any such refund
claim, which consent may not be unreasonably withheld (for this purpose,
withholding of consent shall be reasonable if such refund claim could reasonably
be expected to have a material tax cost or otherwise materially adversely affect
Purchaser, the Company, the Subsidiaries or any of their Affiliates). If an
adjustment is
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made with respect to a taxable period ending on or before the Closing Date in
respect of Taxes of the Company or the Subsidiaries that increases the Tax
liability of the Purchaser Group for any taxable period including or ending
after the Closing Date (a "Post-Closing Tax Detriment") and decreases the Tax
liability of the Seller Group, Seller shall pay to Purchaser the amount of any
such Tax decrease at the time such Post-Closing Tax Detriment is realized by the
Purchaser. A Post-Closing Tax Detriment will be considered to be realized for
purposes of this Section 7.02 at the time that it increases the aggregate Tax
liability of the Purchaser Group, provided, however, a Post-Closing Tax
Detriment will be considered realized only to the extent it increases the
aggregate Tax liability of the Purchaser Group. If an adjustment is made with
respect to a taxable period ending after the Closing Date in respect of Taxes of
the Company or the Subsidiaries that increases the Tax liability of the Seller
Group for any taxable period ending on or before the Closing Date and decreases
the tax liability of the Purchaser Group, Purchaser shall pay to Seller the
amount of any such Tax decrease (a "Pre-Closing Tax Detriment") at the time such
Pre-Closing Tax Detriment is realized by the Seller. A Pre-Closing Tax Detriment
will be considered to be realized for purposes of this Section 7.02 at the time
that it increases the aggregate Tax liability of the Seller Group, provided,
however, a Pre-Closing Tax Detriment will be considered realized only to the
extent it increases the aggregate Tax liability of the Seller Group.
(b) The Seller has applied to the IRS for a refund of certain
FICA taxes paid with respect to employees of the Company for the years January
1, 1993 through December 31, 1996. The Seller has provided copies of such
application to the Purchaser. The Seller and the Purchaser agree that the Seller
shall pay the full amount of any refund received in respect of employees'
withholdings and payments to the employees of the Company entitled to receive
the same, and that the Seller shall (i) retain all refunds received in respect
of the respective employers' withholdings and payments (but only to the extent
not taken into account in determining the Cash Dividend Amount adjustment under
Section 2.04(c) hereof) and (ii) be liable for any reductions in, or net
deficiencies associated with, such refunds. The refund claim will not be
reflected as an asset on the Closing Balance Sheet.
(c) The Purchaser and the Company shall make any and all
elections under any state, local and foreign tax provisions comparable to
section 172(b)(3) of the Code in any state, locality, or foreign jurisdiction
within which the Company or any of the Subsidiaries file a combined, unitary or
similar return with the Seller or any of its Affiliates (other than the Company
or any of the Subsidiaries) to relinquish the entire carryback period with
respect to any net operating loss attributable to the Company or any of the
Subsidiaries in any taxable period beginning after the Closing Date that could
be carried back to a taxable year of the Company or any such Subsidiary ending
on or before the Closing Date. Neither the Seller nor any Affiliate thereof
shall be required to pay to the Purchaser, the Company or any Subsidiary any
refund or credit of Taxes that results from the carryback to any taxable period
ending on or before the Closing Date of any net operating loss, capital loss or
tax credit attributable to
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65
the Company or any of its Subsidiaries in any taxable period beginning after the
Closing Date, except that the Company or any of its Subsidiaries that have not
filed combined, unitary or similar returns with the Seller or any of its
Affiliates (other than the Company or any of its Subsidiaries) shall be entitled
to carryback losses or tax credits from any taxable period beginning on or after
the Closing Date to any taxable period of such Company ending on or prior to the
Closing Date, but only if such carryback would not impose a material Tax cost or
otherwise materially adversely affect the Seller or any of its Affiliates.
SECTION 7.03. Contests. (a) After the Closing Date, each of the
Seller and the Purchaser shall promptly notify the other party in writing upon
receipt of written notice of the commencement of any Tax audit or administrative
or judicial proceeding or of any demand or claim on the Seller, the Purchaser or
the Company or any Subsidiary which, if determined adversely to the taxpayer or
after the lapse of time, would be grounds for indemnification by the other party
under Section 7.01. Such notice shall contain factual information (to the extent
known to the notifying party) describing the asserted Tax liability in
reasonable detail and shall include copies of any notice or other document
received from any taxing authority in respect of any such asserted Tax
liability. If the indemnitee under Section 7.01 fails to give the indemnitor
under Section 7.01 prompt notice of an asserted Tax liability as required by
this Section 7.03, then the indemnitor shall not have any obligation to
indemnify for any loss arising out of such asserted Tax liability but only to
the extent that failure to give such notice results in a detriment to the
indemnitor.
(b) In the case of an audit or administrative or judicial
proceeding that relates to periods ending on or before the Closing Date, the
Seller shall have the sole right, at its expense, to control the conduct of such
audit or proceeding, but only to the extent that such audit or proceeding
relates to a Tax for which the Seller has a potential indemnification obligation
under Section 7.01; provided, however, that if the results of such contest could
reasonably be expected to have a material Tax cost to Purchaser, the Company, or
the Subsidiaries for any taxable period including or ending after the Closing
Date, then Seller and Purchaser shall jointly control the defense and settlement
of any such contest and each party shall cooperate with the other party at its
own expense and there shall be no settlement or closing or other agreement with
respect thereto without the consent of the other party, which consent shall not
be unreasonably withheld and, if the Seller does not assume the defense of any
such audit or proceeding, the Purchaser may defend the same in such manner as it
may deem appropriate, including, but not limited to, settling such audit or
proceeding; provided, however, that the Purchaser shall not settle any such
audit or proceeding without the consent of the Seller, which consent shall not
be unreasonably withheld. If the Seller chooses to control the contest, the
Purchaser shall promptly empower and shall cause the Company or Subsidiary or
other party promptly to empower (by power of attorney and such other
documentation as may be appropriate) such representatives of the Seller as it
may designate to represent the Purchaser, Company or Subsidiary or other party
or its successor in the contest insofar as the
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contest involves an asserted tax liability for which the Seller would be liable
under Section 7.01. Purchaser shall have sole control over the defense and
settlement of any contest relating to taxable periods or portions thereof that
begin on or after the Closing Date (including, subject to Section 7.03(c)
hereof, any Taxes allocated to such period under Section 7.01(d) hereof) or
relating to taxable periods or portions thereof ending on or before the Closing
Date provided the Taxes to which such contest relates are Taxes for which Seller
is not liable under Section 7.01(a) hereof, provided, however, that if the
results of any such contest otherwise controlled by Purchaser could reasonably
be expected to have a material Tax cost or otherwise materially adversely affect
the Seller or the Seller Group, then the Seller and Purchaser shall jointly
control the defense and settlement of any such contest and each party shall
cooperate with the other party at its own expense and there shall be no
settlement or closing or other agreement with respect thereto without the
consent of the other party, which consent shall not be unreasonably withheld.
(c) With respect to periods beginning before the Closing Date and
ending after the Closing Date, (i) each party may participate in an audit or
proceeding which relates to any such period and (ii) such audit or proceeding
shall be controlled by that party which would bear the burden of the greater
portion of the sum of the adjustment and any corresponding adjustments that may
reasonably be anticipated for future Tax periods; provided that neither party
shall settle any such audit or proceeding without the consent of the other,
which consent shall not be unreasonably withheld. The principle set forth in the
preceding sentence shall govern also for purposes of deciding any issue that
must be decided jointly (in particular, choice of judicial forum) in situations
in which separate issues are otherwise controlled hereunder by the Purchaser and
the Seller.
(d) The Purchaser and the Seller agree to cooperate, and the
Purchaser agrees to cause the Company and Subsidiaries to cooperate, in the
defense against or compromise of any claim in any audit or proceeding.
(e) Seller shall promptly notify Purchaser of the commencement of
any claim, audit, examination or other written change or adjustment received by
Seller, in each case relating to the Company or the Subsidiaries, by any taxing
authority which could reasonably be expected to affect the liability of
Purchaser, the Company or the Subsidiaries for a material amount of Taxes, and
Seller shall keep Purchaser informed of the progress thereof. The failure to
provide such notice shall not affect the indemnification obligations under this
Section unless the indemnified party is materially prejudiced as a result of
such failure.
(f) Purchaser shall promptly notify Seller of the commencement of
any claim, audit, examination or other written change or adjustment received by
Purchaser, in each case relating to the Company or the Subsidiaries for periods
up to and including the Closing
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Date, by any taxing authority which could reasonably be expected to affect the
liability of Seller, the Company or the Subsidiaries (with respect to periods up
to and including the Closing Date) for a material amount of Taxes, and Purchaser
shall keep Seller informed of the progress thereof. The failure to provide such
notice shall not affect the indemnification obligations under this Section
unless the indemnified party is materially prejudiced as a result of such
failure.
SECTION 7.04. Preparation of Tax Returns. (a) The Seller shall
prepare and file any Tax Returns relating to the Company and the Subsidiaries
for any taxable periods that end on or prior to the Closing Date (the "Seller
Returns"). The Seller Returns shall be prepared in a manner consistent with the
prior practice of the Company and the Subsidiaries (except to the extent counsel
for the Seller shall determine that there is no reasonable basis therefor) and,
in case of Seller Returns relating to Income Taxes, the Seller shall deliver the
Seller Returns to the Purchaser at least 15 days before such Seller Return is
due to be filed (taking into account any extensions of time to file such return
that have been properly obtained) for Purchaser's review and comment in
accordance with Section 7.04(b) hereof. In the case of any Tax Return for a
period that includes the Closing Date that does not cover a taxable period that
ends on the Closing Date (the "Purchaser Returns"), Purchaser shall prepare or
cause the Company to prepare such Purchaser Return in a manner consistent with
the prior practice of the Company and the Subsidiaries (except to the extent
counsel for the Purchaser shall determine that there is no reasonable basis
therefor) and the Purchaser shall deliver such Purchaser Return to the Seller at
least 7 days before such return is due to be filed (taking into account any
extensions of time to file such return that have been properly obtained) for
Seller's review and comment in accordance with Section 7.04(b) hereof. Seller
shall reimburse the Purchaser for any Taxes on the Purchaser Return owed by
Seller pursuant to Sections 7.01(a) and 7.01(d) hereof to the extent such amount
exceeds the accrual for such Taxes (other than deferred Taxes that reflect the
differences between book and tax basis in assets and liabilities), if any,
established therefor in the Closing Balance Sheet and only to the extent it is
taken into account in determining the Cash Dividend Amount adjustment under
Section 2.04(c) hereof. The Purchaser shall prepare and file or cause the
Company to prepare and file any Tax return relating to the Company or any of the
Subsidiaries for any taxable periods that begin on or after the Closing Date.
(b) The Purchaser shall have the right to object to any items set
forth on the Seller Returns and the Seller shall have the right to object to any
items set forth on the Purchaser Returns within 7 days of the delivery of a
particular return but only if there is no reasonable basis for the position
taken with respect to an item or items set forth on such return or such return
is otherwise substantially inaccurate. In the event of such an objection, the
parties along with the Seller's counsel or the Seller's Accountants and the
Purchaser's counsel or the Purchaser's Accountants shall attempt in good faith
to resolve the dispute and any resolution shall be final and binding on them. If
the parties cannot resolve any such dispute
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within 7 days of such delivery by Purchaser to Seller or Seller to Purchaser as
the case may be, the items remaining in dispute shall be submitted to an
independent accounting firm of international reputation selected by, and
mutually acceptable to, the Seller and the Purchaser or, if they cannot agree,
the Seller's Accountants and Purchaser's Accountants shall select such an
independent firm. The independent accounting firm so selected shall determine
the proper amounts for the items remaining in dispute and the Purchaser and the
Seller shall be bound by the determination by the independent accounting firm
absent manifest error. The independent accounting firm shall make any such
determination within 7 days after submission of the remaining disputed items. If
a Tax Return is due before the date a disputed item is resolved hereunder, it
shall be filed as prepared and resolved items shall be reflected on an amended
return.
SECTION 7.05. Cooperation and Exchange of Information. The Seller
and the Purchaser will provide each other with such cooperation and information
as either of them reasonably may request of the other in filing any Tax Return,
amended return or claim for refund, determining a liability for Taxes or a right
to a refund of Taxes or participating in or conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall include
providing copies of relevant Tax returns or portions thereof, together with
accompanying schedules and related work papers and documents relating to rulings
or other determinations by taxing authorities. Each party shall make its
employees reasonably available on a mutually convenient basis to provide
explanations of any documents or information provided hereunder. Each party will
retain all returns, schedules and work papers and all material records or other
documents relating to Tax matters of the Company and the Subsidiaries for the
taxable period that includes the Closing Date and for all prior taxable periods
until the later of (i) the expiration of the statute of limitations of the
taxable periods to which such returns and other documents relate, without regard
to extensions except to the extent notified by the other party in writing of
such extensions for the respective Tax periods or (ii) eight years following the
date (without extension) for such returns; provided, however, that a party shall
not dispose of any such materials if at least 90 Business Days before the later
of the end of either of the periods described in clause (i) or (ii) the other
party has notified the disposing party of its desire to review such material in
which case such other party shall be given an opportunity, at its cost and
expense, to remove and retain all or any part of such materials. Any information
obtained under this Section 7.05 shall be kept confidential, except as may be
otherwise necessary in connection with the filing of returns or claims for
refund or in conducting an audit or other proceeding.
SECTION 7.06. Conveyance Taxes. The Purchaser and the Seller each
shall be liable for and shall pay one-half of all sales, transfer, stamp, stock
transfer, value added, use, real property transfer or gains and similar taxes,
fees, assessments, levies, duties, tariffs, imposts and other charges incurred
as a result of the sale of the Acquired Shares and other transactions
contemplated hereby. The Purchaser and the Seller agree to cooperate in the
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execution and delivery of all instruments and certificates necessary to enable
the Seller and/or the Purchaser to comply with any pre-Closing filing
requirements.
SECTION 7.07. Section 338(h)(10) Election. (a) The Seller and the
Purchaser shall jointly make a deemed asset sale election described under Code
section 338(h)(10) (the "Code section 338(h)(10) Election") and shall make all
corresponding or similar elections under applicable state or local law with
respect to the Company and Revere Ware Corporation in connection with the
qualified stock purchase of the Acquired Shares by the Purchaser hereunder and
deemed purchase of the stock of Revere Ware Corporation (collectively,
"Elections"). The Seller and the Purchaser shall file all such Elections on a
timely basis and comply with all rules and regulations applicable to such
Elections. The Seller and the Purchaser shall cooperate with each other to take
all actions necessary and appropriate (including filing such forms, returns,
elections, schedules and documents on a joint or separate basis as may be
required) to effect and preserve timely Elections in accordance with applicable
Treasury Regulations under Code section 338 and comparable state or local laws.
(b) For the purpose of making the Code section 338(h)(10)
Election, the Purchaser shall compute and allocate the "modified aggregate
deemed sales price" among the assets of the Company (including items assigned to
the Company at or prior to the Closing under Article V) and of Revere Ware
Corporation in accordance with the provisions of Code section 338 and the
Treasury Regulations thereunder (the "Allocation"), and shall deliver to the
Seller the Allocation within 45 days of the Closing for the Seller's review and
comment. The Seller may dispute amounts set forth on the Allocation within 20
Business Days of delivery of the Allocation by the Purchaser to the Seller if
the Seller reasonably believes that any such amount or amounts are incorrect. In
the event of such a dispute, the parties along with the counsel to the Seller or
the Seller's Accountants and counsel to the Purchaser or the Purchaser's
Accountants shall attempt in good faith to resolve such dispute and any
resolution shall be final and binding on them. If the parties cannot resolve any
such dispute within 20 Business Days of such delivery by the Purchaser to the
Seller, the items remaining in dispute shall be submitted to an independent
accounting firm of international reputation selected by, and mutually acceptable
to, the Seller and the Purchaser or, if they cannot agree, the Seller's
Accountants and Purchaser's Accountants shall select such an independent firm.
If the independent accounting firm so selected determines that the items
remaining in dispute are not materially incorrect, then the Purchaser and the
Seller shall be bound by the Allocation as prepared by the Purchaser. If the
independent accounting firm so selected determines that one or more of the items
remaining in dispute are materially incorrect, then the Seller and the Purchaser
shall be bound by the allocation of such items as determined by the independent
accounting firm. The independent accounting firm shall make any such
determination within 30 Business Days after submission of the remaining disputed
items. Any subsequent adjustments to the modified aggregate deemed sales price
shall be reflected in the Allocation in a manner consistent with Code section
338 and the Treasury Regulations promulgated
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thereunder. The Seller shall calculate gain or loss, if any, resulting from the
Elections and the Purchaser shall calculate tax basis in the Company's and the
Subsidiaries' assets in a manner consistent with the Allocation (as determined
pursuant to the preceding four sentences) and neither party nor the Company nor
any Subsidiary shall take any position inconsistent with the Allocation in any
tax return, schedule, estimate or otherwise; provided, however, that the Seller
shall be entitled to subtract its selling costs from the "modified aggregate
deemed sales price" for purposes of calculating gain or loss and the Purchaser
shall be entitled to add its acquisition costs to the "adjusted grossed-up
basis" of the assets of the Company and the Subsidiaries for purposes of
determining the basis of the Company's and the Subsidiaries' assets. The
Purchaser will not make an election under section 338(g) of the Code with
respect to the sale of the stock of the Company and Revere Ware Corporation
hereunder except in connection with the Code section 338(h)(10) Election that
will be made by the Purchaser jointly with the Seller.
SECTION 7.08. Miscellaneous. (a) For Tax purposes, the parties
agree to treat all payments made under this Article VII, under any other
indemnity provisions contained in this Agreement, and for any misrepresentations
or breaches of warranties or covenants, as adjustments to the purchase price.
(b) This Article VII (and not Article IX) shall be the sole
provision for indemnification against breach of representations, warranties,
covenants and agreements regarding Tax matters.
(c) For purposes of this Article VII, all references to the
Purchaser, the Seller, the Company and the Subsidiaries include successors.
(d) The covenants and agreements of the parties hereto contained
in this Article VII shall survive the Closing and shall remain in full force and
effect until 60 days after the expiration of the applicable statutes of
limitations (taking into account any extensions or waivers thereof) with respect
to any Taxes that would be indemnifiable by the Seller under Section 7.01(a) of
this Agreement or by the Purchaser under Section 7.01(b) of this Agreement.
(e) The Company and the Subsidiaries shall be entitled to make
and receive any and all payments required to be made pursuant to any Tax sharing
agreement with the Seller or its Affiliates prior to the Closing, but only to
the extent such payments are taken into account in determining the Cash Dividend
Amount adjustment under Section 2.04(c) hereof. Except to the extent provided
herein, all Tax sharing agreements or similar agreements with respect to or
involving the Company and the Subsidiaries and the Seller shall be terminated as
of the Closing Date and, after the Closing Date, the Seller, its Affiliates, the
Company, and the Subsidiaries shall not be bound thereby or have any liability
thereunder.
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ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Seller and the
Company. The obligations of the Seller and the Company to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment
or waiver, at or prior to the Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. (i) The
representations and warranties of the Purchaser contained in this
Agreement shall be true and correct as of the Closing, with the same
force and effect as if made as of the Closing (or, in the case of
representations and warranties of the Purchaser which address matters
only as of a particular date, as of such date), except where the
failures to be so true and correct (without giving effect to any
limitation or qualification as to "materiality" (including the word
"material") or "material adverse effect" set forth therein) would not,
individually or in the aggregate, have a material adverse effect on the
ability of the Purchaser to consummate the transactions contemplated by
this Agreement; (ii) the covenants and agreements contained in this
Agreement to be complied with by the Purchaser at or prior to the
Closing shall have been complied with in all material respects; and
(iii) the Seller shall have received a certificate of the Purchaser as
to the matters set forth in clauses (i) and (ii) above signed by a duly
authorized officer of the Purchaser;
(b) HSR Act; Canada Competition Act. Any waiting period (and any
extension thereof) under the HSR Act and the Canada Competition Act
applicable to the purchase of the Shares contemplated hereby shall have
expired or shall have been terminated;
(c) No Order. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other Governmental Order which is in effect and has the
effect of making the transactions contemplated by this Agreement illegal
or otherwise restraining or prohibiting consummation of such
transactions, and no Governmental Authority shall have initiated any
action that seeks to impose criminal sanctions on the Seller or any of
its Affiliates or that has a reasonable likelihood of success on the
merits and would impose a material liability on the Seller, in each
case, that is intended to have the foregoing effect; and
(d) Stockholders Agreement. The Purchaser shall have executed and
delivered to the Seller the Stockholders Agreement.
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SECTION 8.02. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. (i) The
representations and warranties of the Seller contained in this Agreement
shall be true and correct as of the Closing, with the same force and
effect as if made as of the Closing (or, in the case of representations
and warranties of the Seller which address matters only as of a
particular date, as of such date), except where the failures to be so
true and correct (without giving effect to any limitation or
qualification as to "materiality" (including the word "material") or
"Material Adverse Effect" set forth therein) would not, individually or
in the aggregate, have a Material Adverse Effect; (ii) the covenants and
agreements contained in this Agreement to be complied with by the Seller
at or prior to the Closing shall have been complied with in all material
respects; and (iii) the Purchaser shall have received a certificate of
the Seller as to the matters set forth in clauses (i) and (ii) above
signed by a duly authorized officer of the Seller;
(b) HSR Act; Canada Competition Act. Any waiting period (and any
extension thereof) under the HSR Act and the Canada Competition Act
applicable to the purchase of the Shares contemplated hereby shall have
expired or shall have been terminated;
(c) No Order. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other Governmental Order which is in effect and has the
effect of making the transactions contemplated by this Agreement illegal
or otherwise restraining or prohibiting consummation of such
transactions, and no Governmental Authority shall have initiated any
action that seeks to impose any criminal sanctions on the Purchaser or
any of its Affiliates or the Company or any Subsidiary or that has a
reasonable likelihood of success on the merits and would impose material
liability on any such Person, in each case, that is intended to have the
foregoing effect;
(d) Certain Company Indebtedness. Prior to the Closing, the
Company shall have retired and paid in full (or otherwise canceled
without any adverse tax consequences to the Company) all its
Indebtedness (including the liabilities described in Section
3.09(e)(iii)), other than the Indebtedness under the Facility Financing
Interests.
(e) Ancillary Agreements. The Seller shall have duly executed and
delivered to the Purchaser, to the extent requested by the Purchaser,
the Administrative Services Agreement, the CORNING WARE and PYROCERAM
License Agreement,
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the PYREX License Agreement, the Patent and Know-How License Agreement,
the Temporary CORNING License Agreement, the Greenville Supply
Agreement, the Technology Support Agreement, the Shared Facility
Agreement and the Transition Services Agreement;
(f) Stockholders Agreement. The Seller shall have executed and
delivered to the Purchaser the Stockholders Agreement;
(g) Resignation of Directors. All directors of the Company and
any Subsidiary whose resignations shall have been requested by the
Purchaser not fewer than five Business Days prior to the Closing Date
shall have submitted their resignations or been removed from office
effective as of the Closing Date; and
(h) Termination of Certain Transactions. The Purchaser shall have
received legally binding documentation evidencing the termination
without liability (except as described in Section 5.16) to the
Purchaser, the Company or any Subsidiary of any transactions with the
Seller or any of its Affiliates (other than agreements entered into
pursuant to the provisions hereof).
(i) Certain Arrangements Regarding Management. Peter Campanella,
the President and Chief Executive Officer of the Company, shall have
entered into an agreement with the Company on substantially the terms
set forth in the attachment to the letter dated February 28, 1998,
signed by Mr. Campanella, relating to the management equity plan for
members of senior management of the Company; provided that the
provisions of this Section 8.02(i) shall not be available to the
Purchaser if it has changed, or stated its intention to change, in a
manner adverse to Mr. Campanella or any other members of management of
the Company who are asked by the Purchaser to enter into such agreement,
the terms of such plan from those attached to such letter.
(j) Section 1445 Withholding. The Seller shall have delivered to
the Purchaser a certificate complying with Treasury Regulations section
1.1445-2(b)(2), in form and substance reasonably satisfactory to the
Purchaser, duly executed and acknowledged, certifying that the Seller is
not a foreign person within the meaning of such section.
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ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival of Representations and Warranties. Subject
to the limitations and other provisions of this Agreement, the representations
and warranties of the parties hereto contained in this Agreement shall survive
the Closing and shall remain in full force and effect for a period of eighteen
months after the Closing Date; provided, however, that the representations and
warranties contained in Section 3.03 and 3.16 shall survive until 60 days after
the expiration of the statute of limitations related thereto.
SECTION 9.02. Indemnification for the Benefit of the Seller. (a)
The Purchaser agrees to indemnify or to cause the Company, from and after the
Closing Date, to indemnify the Seller and its Affiliates, officers, directors,
employees, agents, successors and assigns (as used in this Article IX, each a
"Seller Indemnified Party") against and hold them harmless from all Liabilities,
losses, damages, claims, costs, and expenses (including reasonable attorney's
fees) (collectively, "Losses") actually incurred by them arising out of (i) the
breach of any representation or warranty of the Purchaser contained herein, it
being understood that for all purposes of this Section 9.02, such
representations and warranties shall be interpreted without giving effect to any
limitations or qualifications as to "materiality" (including the word
"material") set forth therein, (ii) the breach of any covenant or agreement of
the Purchaser contained herein (other than in Article VII, it being understood
that the sole remedy for breach thereof shall be pursuant to Article VII), (iii)
the Facility Financing Interests, the 1988 Guaranty and the 1992 Guaranty and
(iv) the conduct of the Business by the Company or the Subsidiaries following
the Closing. Anything in Section 9.01 to the contrary notwithstanding, no claim
may be asserted nor may any action be commenced against the Purchaser for breach
of any representation or warranty contained herein, unless written notice of
such claim or action is received by the Purchaser describing in reasonable
detail the facts and circumstances with respect to the subject matter of such
claim or action on or prior to the date on which the representation or warranty
on which such claim or action is based ceases to survive as set forth in Section
9.01, irrespective of whether the subject matter of such claim or action shall
have occurred before or after such date.
(b) No claim may be made against the Purchaser or the Company for
indemnification pursuant to Section 9.02(a)(i) unless the aggregate of all
Losses of the Seller Indemnified Parties with respect to this Section 9.02 shall
exceed an amount equal to $4,000,000, and the Purchaser shall then only be
liable for Losses in excess of such $4,000,000 amount. No Seller Indemnified
Party shall be indemnified pursuant to Section 9.01(a)(i) with respect to any
individual item of Loss if the aggregate of all payments made for Losses of the
Seller Indemnified Parties for which the Seller Indemnified Parties have
received indemnification pursuant to this Section 9.02(a)(i) shall have exceeded
an amount equal to 40%
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of the sum of the Share Purchase Price and the Cash Dividend Amount. For the
purposes of this Section 9.02(b), in computing such individual or aggregate
amounts of claims, the Person seeking indemnification shall deduct from such
amounts (i) any insurance recoveries actually received by such Person offsetting
the amount of such Loss (net of cost of recovery), (ii) any recoveries actually
received by such Person from third parties pursuant to indemnification or
otherwise with respect thereto (net of cost of recovery), (iii) any Tax benefit
to such Person attributable to amounts indemnified against and (iv) any
adjustments to the Cash Dividend Amount pursuant to Section 2.04 with respect to
the subject matter in dispute. A Tax benefit will be considered to be recognized
by a Seller Indemnified Party that is a member of the Seller Group for purposes
of this Section 9.02 at the time it reduces the aggregate Tax liability of the
Seller Group. Any indemnification payment under this Section 9.02 shall be
increased by the amount of any liability for Taxes arising thereunder if such
payment is finally determined by a taxing authority or a court to be taxable
income to the party receiving such payment.
(c) Without duplication of the amounts referred to in the last
sentence of the preceding paragraph, payments by the Purchaser or the Company
pursuant to Section 9.02(a) shall be limited to the amount of any Loss that
remains after deducting therefrom (i) any insurance recoveries actually received
by the Person seeking indemnification offsetting the amount of such Loss (net of
cost of recovery), (ii) any recoveries actually received by such Person from
third parties pursuant to indemnification or otherwise with respect thereto (net
of cost of recovery), (iii) any Tax benefit to such Person attributable to
amounts indemnified against and (iv) any adjustments to the Cash Dividend Amount
pursuant to Section 2.04 with respect to the subject matter in dispute.
(d) Subject to Section 11.12, the Seller hereby acknowledges and
agrees that its sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement (other than for fraud or
intentional breach) shall be pursuant to the indemnification provisions set
forth in this Article IX and Article VII (with respect to the subject matter
thereof). In furtherance of the foregoing, the Seller hereby waives, to the
fullest extent permitted under applicable law, any and all rights, claims and
causes of action (other than for fraud or intentional breach) it may have
against the Purchaser arising under or based upon any federal, state, local or
foreign statute, law, ordinance, rule or regulation (including, without
limitation, any such rights, claims or causes of action arising under or based
upon common law or otherwise).
(e) Except as expressly set forth in this Agreement, the
Purchaser is not making any representation, warranty, covenant or agreement with
respect to the matters contained herein. Anything herein to the contrary
notwithstanding, no breach of any representation, warranty, covenant or
agreement contained herein (other than for fraud or intentional breach) shall
give rise to any right on the part of the Seller, after the consummation
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of the transactions contemplated by Article II, to rescind this Agreement or any
of the transactions contemplated hereby.
SECTION 9.03. Indemnification by the Seller. (a) The Seller
agrees to indemnify the Purchaser and its Affiliates, and their officers,
directors, employees, members, agents, successors and assigns (as used in this
Article IX, each a "Purchaser Indemnified Party") against and hold them harmless
from all Losses actually incurred by them arising out of (i) the breach of any
representation or warranty of the Seller contained herein (other than Section
3.16, it being understood that the sole remedy for breach thereof shall be
pursuant to Article VII or Section 3.17, it being understood that the sole
remedy for breach thereof shall be pursuant to Section 9.05), it being
understood that for all purposes of this Section 9.03, such representations and
warranties shall be interpreted without giving effect to any limitations or
qualifications as to "materiality" (including the word "material") or "Material
Adverse Effect" set forth therein, (ii) the breach of any covenant or agreement
of the Seller contained herein (other than Article VII, it being understood that
the sole remedy for breach thereof shall be pursuant to Article VII), (iii) any
Liabilities assumed by the Seller under Section 5.14, and (iv) all Liabilities
relating to former businesses of the Company and the Subsidiaries that were
transferred from the Company or the Subsidiaries prior to the Closing,
including, without limitation, the businesses sold to Newell Co. and the
transferred businesses of Corning Brasil. Anything in Section 9.01 to the
contrary notwithstanding, no claim may be asserted nor may any action be
commenced against the Seller for breach of any representation or warranty
contained herein, unless written notice of such claim or action is received by
the Seller describing in reasonable detail the facts and circumstances with
respect to the subject matter of such claim or action on or prior to the date on
which the representation or warranty on which such claim or action is based
ceases to survive as set forth in Section 9.01, irrespective of whether the
subject matter of such claim or action shall have occurred before or after such
date.
(b) No claim may be made against the Seller for indemnification
pursuant to Section 9.03(a)(i) unless the aggregate of all Losses of the
Purchaser Indemnified Parties with respect to this Section 9.03 shall exceed an
amount equal to $4,000,000, and the Seller shall then only be liable for Losses
in excess of such $4,000,000 amount. No Purchaser Indemnified Party shall be
indemnified pursuant to Section 9.03(a)(i) with respect to any individual item
of Loss if the aggregate of all payments made for Losses of the Purchaser
Indemnified Parties for which the Purchaser Indemnified Parties have received
indemnification pursuant to this Section 9.03(a)(i) shall have exceeded an
amount equal to 40% of the sum of the Share Purchase Price and the Cash Dividend
Amount. For the purposes of this Section 9.03(b), in computing such aggregate
amounts of claims, the Person seeking indemnification shall deduct from such
amounts (i) any insurance recoveries actually received by such Person offsetting
the amount of such Loss (net of cost of recovery), (ii) any recoveries actually
received by such Person from third parties pursuant to indemnification or
otherwise
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77
with respect thereto (net of cost of recovery), (iii) any Tax benefit to such
Person attributable to amounts indemnified against and (iv) any adjustments to
the Cash Dividend Amount pursuant to Section 2.04 with respect to the subject
matter in dispute. A Tax benefit will be considered to be recognized by a
Purchaser Indemnified Party that is a member of the Purchaser Group for purposes
of this Section 9.03 at the time it reduces the aggregate Tax liability of the
Purchaser Group. Any indemnification payment under this Section shall be
increased by the amount of any liability for Taxes arising thereunder if such
payment is finally determined by a taxing authority or a court to be taxable
income to the party receiving such payment.
(c) Without duplication of the amounts referred to in the last
sentence of the preceding paragraph, payments by the Seller pursuant to Section
9.03(a) shall be limited to the amount of any Loss that remains after deducting
therefrom (i) any insurance recoveries actually received by the Person seeking
indemnification offsetting the amount of such Loss (net of cost of recovery),
(ii) any recoveries actually received by such Person or any of its Affiliates
from third parties pursuant to indemnification or otherwise with respect thereto
(net of cost of recovery), (iii) any Tax benefit to such Person attributable to
amounts indemnified against and (iv) any adjustments to the Cash Dividend Amount
pursuant to Section 2.04 with respect to the subject matter in dispute.
(d) Subject to Section 11.12, the Purchaser hereby acknowledges
and agrees that its sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement (other than for fraud or
intentional breach) shall be pursuant to the indemnification provisions set
forth in this Article IX, Article VI (with respect to the subject matter
thereof) and Article VII (with respect to the subject matter thereof). In
furtherance of the foregoing, the Purchaser hereby waives, to the fullest extent
permitted under applicable law, any and all rights, claims and causes of action
(other than for fraud or intentional breach) it may have against the Seller
arising under or based upon any federal, state, local or foreign statute, law,
ordinance, rule or regulation (including, without limitation, any such rights,
claims or causes of action arising under or based upon common law or otherwise).
(e) Except as expressly set forth in this Agreement, the Seller
is not making any representation, warranty, covenant or agreement with respect
to the matters contained herein. Anything herein to the contrary
notwithstanding, no breach of any representation, warranty, covenant or
agreement contained herein (other than for fraud or intentional breach) shall
give rise to any right on the part of the Purchaser, after the consummation of
the transactions contemplated by Article II, to rescind this Agreement or any of
the transactions contemplated hereby.
SECTION 9.04. Indemnification Procedures. (a) A Purchaser
Indemnified Party or a Seller Indemnified Party, as the case may be (for
purposes of this Section 9.04, an
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"Indemnified Party"), shall give the indemnifying party under Section 9.02 or
9.03, as applicable (for purposes of this Section 9.04, an "Indemnifying
Party"), prompt written notice of any claim, assertion, event or proceeding by
or in respect of a third party of which such Indemnified Party has knowledge
concerning any Loss as to which such Indemnified Party may request
indemnification hereunder or any Loss as to which the $4,000,000 amount referred
to in Section 9.02(b) or 9.03(b) may be applied. The Indemnifying Party shall
have the right to direct, through counsel of its own choosing, which counsel
shall be reasonably satisfactory to the Indemnified Party, the defense or
settlement of any claim or proceeding the subject of indemnification hereunder
at its own expense. If the Indemnifying Party elects to assume the defense of
any such claim or proceeding, the Indemnified Party may participate in such
defense, but in such case the expenses of the Indemnified Party shall be paid by
the Indemnified Party. The Indemnified Party shall provide the Indemnifying
Party with access to its records and personnel relating to any such claim,
assertion, event or proceeding during normal business hours and shall otherwise
cooperate with the Indemnifying Party in the defense or settlement thereof, and
the Indemnifying Party shall reimburse the Indemnified Party for all its
reasonable out-of-pocket expenses in connection therewith. If the Indemnifying
Party elects to direct the defense of any such claim or proceeding, the
Indemnified Party shall not pay, or permit to be paid, any part of any claim or
demand arising from such asserted liability unless the Indemnifying Party
consents in writing to such payment or unless the Indemnifying Party withdraws
from the defense of such asserted liability or unless a final judgment from
which no appeal may be taken by or on behalf of the Indemnifying Party is
entered against the Indemnified Party for such liability. No settlement in
respect of any third party claim may be effected by the Indemnifying Party
without the Indemnified Party's prior written consent unless the settlement
involves a full and unconditional release of the Indemnified Party. If the
Indemnifying Party shall fail to undertake any such defense, the Indemnified
Party shall have the right to undertake the defense or settlement thereof, at
the Indemnifying Party's expense. If the Indemnified Party assumes the defense
of any such claim or proceeding pursuant to this Section 9.04 and proposes to
settle such claim or proceeding prior to a final judgment thereon or to forgo
any appeal with respect thereto, then the Indemnified Party shall give the
Indemnifying Party prompt written notice thereof and the Indemnifying Party
shall have the right to participate in the settlement or assume or reassume the
defense of such claim or proceeding in the event the Indemnifying Party agrees
to assume liability for any Losses arising from such claim or proceeding.
SECTION 9.05. Environmental Indemnification. (a) Subject to all
other terms and conditions of this Section 9.05, the Seller shall indemnify
Purchaser Indemnified Parties against and hold them harmless from all Losses
actually incurred by them arising from (i) the release of any Hazardous Material
into the environment from or at the Real Property or any other property
currently or formerly owned or operated by the Company or any Subsidiary in
connection with the Business, (ii) the transportation or disposal of any
Hazardous Material from the Real Property, or any other property currently or
formerly owned or operated by the
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Company or any Subsidiary in connection with the Business, to any offsite
location, (iii) any violation of or liability under any Environmental Law
related to the Business or any Hazardous Material, in each case occurring prior
to the Closing Date, and (iv) the breach of any representation or warranty of
the Seller contained in Section 3.17 (it being understood that for purposes of
Section 9.05(a)(iv), in establishing whether such representations and warranties
have been breached, the accuracy of such representations and warranties shall be
determined by giving effect to the limitations or qualifications as to
"materiality" (including the word "material") or "Material Adverse Effect"
contained therein) (hereafter collectively referred to as "Indemnifiable
Environmental Matters") in accordance with the following formula:
(A) The Seller shall pay for eighty percent (80%) and the
Company shall pay for twenty percent (20%) of all such Losses up
to an aggregate of twenty million dollars ($20,000,000); and
(B) The Seller shall pay for one hundred percent (100%) of
all such Losses in excess of twenty million dollars
($20,000,000).
(b) The Purchaser agrees as follows in connection with the
agreement by the Seller set forth in Section 9.05(a); provided, however, that
the Seller's obligations pursuant to Section 9.05(a) shall not be affected by
the failure of the Purchaser to comply with any of the following except to the
extent the Seller is prejudiced thereby:
(i) In the case of any Indemnifiable Environmental Matter
that requires remedial work of any kind to be performed at the
Real Property, the Purchaser Indemnified Party requesting
indemnification pursuant to this Section 9.05 shall give the
Seller (A) prompt, written notice of such Indemnifiable
Environmental Matter; and (B) all reasonable opportunity and
access to the Company's or any Subsidiary's records, personnel
and the Real Property necessary for the Seller to plan and
implement such remedial work. The Seller shall have the right to
plan and implement such remedial work, and the failure to afford
the Seller such right shall be presumed to prejudice the Seller
for purposes of this Section 9.05(b); provided, however, that if
the Seller does not undertake such remedial work within a
reasonable period after such Purchaser Indemnified Party provides
the Seller with notice as set forth in clause (A) above and
reasonable opportunity and access as set forth in clause (B)
above, such Purchaser Indemnified Party may undertake such
remedial work at the Sellers' expense in accordance with the
formula set forth in Section 9.05(a). If the Seller undertakes
such remedial work, the Seller shall (x) provide such Purchaser
Indemnified Party with an opportunity to review and comment on
any work plan or similar document related to such remedial work
no later than ten (10) days prior to the date the Seller intends
to submit such work plan or
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document to any Governmental Authority or other third party; (y)
provide such Purchaser Indemnified Party with a copy of all
significant correspondence received from any Governmental
Authority or other third party related to such remedial work; and
(z) undertake such remedial work in a manner so as not
unreasonably to disrupt operations and in compliance with all
applicable Environmental Laws and valid directives by
Governmental Authorities with jurisdiction.
(ii) In the case of any Indemnifiable Environmental Matter
that is the subject of a third party claim (whether or not such
Indemnifiable Environmental Matter requires remedial work to be
performed at the Real Property), the Purchaser Indemnified Party
requesting indemnification pursuant to this Section 9.05 shall
comply with the procedures set forth in Section 9.04.
(iii) Notwithstanding anything to the contrary, the Seller
shall not in any way be responsible for any Losses to the extent
they arise from any exacerbation of an Indemnifiable
Environmental Matter caused by the actions of a Purchaser
Indemnified Party after the Closing Date.
(iv) Notwithstanding anything to the contrary, the Seller
shall not in any way be responsible for any Losses arising from
an Indemnifiable Environmental Matter of which the Seller has not
received written notice pursuant to Paragraph (b)(i) or (b)(ii)
of this Section within seven (7) years after the Closing Date.
(c) Except as provided in Section 9.03(a)(iv), but otherwise
notwithstanding anything to the contrary in this Agreement, from and
after the Closing Date, the indemnification rights provided in this
Section 9.05 shall be the sole and exclusive remedy against the Seller
for any Loss incurred by any Purchaser Indemnified Party for any
Indemnifiable Environmental Matter. In furtherance of the foregoing,
from and after the Closing Date, the Purchaser hereby waives, to the
fullest extent permitted under applicable law, any claim or remedy
against the Seller now or hereafter available for any Indemnifiable
Environmental Matter under any Environmental Law, including without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act and any similar federal or state law whether or not in
existence on the date hereof. This waiver does not apply to any claim
based on fraud or the intentional breach of any representation, warranty
or covenant.
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ARTICLE X
TERMINATION AND WAIVER
SECTION 10.01. Termination. This Agreement may be terminated at
any time prior to the Closing:
(a) by the mutual written consent of the Seller and the
Purchaser; or
(b) by either the Seller or the Purchaser, if any Governmental
Authority with jurisdiction over such matters shall have issued a
Governmental Order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereunder and such order,
decree, ruling or other action shall have become final and unappealable;
provided, however, that the provisions of this Section 10.01(b) shall
not be available to a party unless such party shall have complied with
its obligations under Section 5.04 or otherwise used its reasonable best
efforts to oppose any such Governmental Order or to have such
Governmental Order vacated or made inapplicable to the transactions
contemplated by this Agreement; or
(c) by either the Seller or the Purchaser, if the Closing shall
not have occurred by June 1, 1998; provided, however, that the right to
terminate this Agreement under this Section 10.01(c) shall not be
available to any party whose failure to fulfill any obligation under
this Agreement shall have been the cause of, or shall have resulted in,
the failure of the Closing to occur prior to such date.
Time shall be of the essence in this Agreement.
SECTION 10.02. Effect of Termination. In the event of termination
of this Agreement as provided in Section 10.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
except (a) that the provisions of Section 5.03(a), this Section 10.02 and
Article XI shall survive termination of this Agreement and (b) that nothing
herein shall relieve any party from liability for any breach hereof.
SECTION 10.03. Waiver. At any time prior to the Closing, either
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the party to be bound thereby.
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ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Expenses. All costs and expenses, including,
without limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred; provided, however,
that, if the Closing occurs, all such expenses (other than those incurred by or
on behalf of the Seller) may be borne by the Company. The Seller agrees that it
is solely responsible for all the fees and expenses incurred in connection with
the transactions contemplated hereby (other than those incurred by the Purchaser
and other than those incurred by the Company after the Closing Date), including,
without limitation, the fees and expenses of Goldman, Sachs and Shearman &
Sterling. The Seller also acknowledges that the Company will pay to an Affiliate
of the Purchaser a transaction fee payable at the Closing and an on-going
management fee, in each case, as described to the Seller prior to the date
hereof.
SECTION 11.02. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by cable, by telecopy, by telegram, by
telex or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 11.02):
(a) if to the Seller:
Corning Incorporated
One Riverfront Plaza
Corning, NY 14831
Telecopy: (607) 974-8656
Attention: General Counsel
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopy: (212) 848-7179
Attention: Clare O'Brien, Esq.
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(b) if to the Company prior to the Closing:
Corning Consumer Products Company
E-Building
Houghton Park
Corning, NY 14831
Telecopy: (607) 974-2215
Attention: President
with copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopy: (212) 848-7179
Attention: Clare O'Brien, Esq.
(c) if to the Purchaser:
c/o Borden Capital Management Partners
180 East Broad Street
Columbus, OH 43215
Telecopy: (614) 627-8374
Attention: General Counsel
with a copy to:
Simpson, Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopy: (212) 455-2507
Attention: David Sorkin, Esq.
SECTION 11.03. Public Announcements. Unless otherwise required by
applicable law or any stock exchange requirements, no party to this Agreement
shall make, or cause to be made, any press release or public announcement in
respect of this Agreement or the transactions contemplated hereby or otherwise
communicate with any news media without the prior written consent of the other
party, and the parties shall cooperate as to the timing and contents of any such
press release or public announcement; provided, however, that the Seller may
make, or cause to be made, announcements in respect of this Agreement or the
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84
transactions contemplated hereby to its employees and the Company's employees
without the consent of the Purchaser.
SECTION 11.04. Headings. The descriptive headings contained in
this Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 11.05. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 11.06. Entire Agreement. This Agreement and the
agreements referred to herein constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and undertakings, both written and oral, between the Seller and the
Purchaser with respect to the subject matter hereof and thereof.
SECTION 11.07. Assignment. This Agreement shall not be assigned
without the express written consent of the Seller, the Company and the Purchaser
(which consent may be granted or withheld in the sole discretion of the Seller,
the Company or the Purchaser), except that no consent shall be required for
Purchaser to assign its rights and delegate its duties hereunder, in whole or in
part, to one or more of its Affiliates.
SECTION 11.08. No Third Party Beneficiaries. Except as provided
in Article IX, this Agreement shall be binding upon and inure solely to the
benefit of the parties hereto, their successors and their permitted assigns and
nothing herein, express or implied, is intended to or shall confer upon any
other Person any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
SECTION 11.09. Amendment. This Agreement may not be amended or
modified except by an instrument in writing signed by the Seller, the Company
and the Purchaser.
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85
SECTION 11.10. Governing Law. This Agreement shall be governed by
the laws of the State of New York. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in any New York state
or federal court sitting in The City of New York, and the parties hereto hereby
consent to the jurisdiction of such courts in any such action or proceeding.
SECTION 11.11. Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 11.12. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof.
SECTION 11.13. Waiver of Jury Trial. Each of the Seller, the
Company and the Purchaser hereby irrevocably waives all right to trial by jury
in any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the actions of the
Seller or the Purchaser in the negotiation, administration, performance and
enforcement thereof.
SECTION 11.14. Guarantee. (a) Until such time as the Closing
occurs or this Agreement is terminated in accordance with its terms, Borden
hereby guarantees the performance by the Purchaser (or any of its assignees
pursuant to Section 11.07) of all the Purchaser's obligations hereunder. In
connection with such guarantee, Borden hereby represents and warrants to the
Seller (i) that it is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of New Jersey and has all necessary
corporate power and authority to enter into this Agreement, and to carry out its
obligations hereunder, (ii) that the execution and delivery of this Agreement by
Borden and the performance of its obligations hereunder have been duly
authorized by all requisite corporate action on the part of Borden and (iii)
that this Agreement has been duly executed and delivered by Borden, and
(assuming due authorization, execution and delivery by the Seller, the Company
and the Purchaser) constitutes a legal, valid and binding obligation of Borden,
enforceable against Borden in accordance with its terms.
(b) From and after the Closing, the Company hereby guarantees the
performance by the Purchaser of all its obligations hereunder, including,
without limitation, all indemnity obligations hereunder.
<PAGE>
86
SECTION 11.15. Effect of Disclosure Schedules. Certain
information set forth in the Disclosure Schedules is included solely for
informational purposes and may not be required to be disclosed pursuant to this
Agreement. The disclosure of any information in the Disclosure Schedule shall
not be deemed to constitute an acknowledgment that such information is required
to be disclosed in connection with the representations and warranties made by
the Seller in this Agreement or that it is material, nor shall such information
be deemed to establish a standard of materiality.
<PAGE>
87
IN WITNESS WHEREOF, the Seller, the Company, the Purchaser and
Borden have caused this Agreement to be executed as of the date first written
above by their respective officers thereunto duly authorized.
CORNING INCORPORATED
By:
-----------------
Name:
Title:
CORNING CONSUMER PRODUCTS
COMPANY
By:
-----------------
Name:
Title:
CCPC ACQUISITION CORP.
By:
-----------------
Name:
Title:
BORDEN, INC.
(for purposes of Sections
10.02 and 11.14(a) only)
By:
-----------------
Name:
Title:
<PAGE>
Exhibits to the Recapitalization Agreement were intentionally omitted.
Corning Incorporated and Subsidiary Companies
Historical Consolidated Statements of Income
(In millions, except per share amounts)
Exhibit 99.1
<TABLE>
<CAPTION>
1997 as Reported
------------------------------------------------------------
Q1 Q2 Q3 Q4 TOTAL
-------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Revenues
Net sales $ 945.4 $ 1,031.1 $ 1,037.8 $ 1,075.4 $ 4,089.7
Royalty, interest and dividend income 10.5 9.5 9.8 9.6 39.4
-------- ---------- ---------- ---------- ---------
955.9 1,040.6 1,047.6 1,085.0 4,129.1
Deductions
Cost of sales 554.9 593.1 617.0 641.2 2,406.2
Selling, general and administrative expenses 159.4 171.7 168.4 171.9 671.4
Research and development expenses 51.1 53.5 70.8 75.3 250.7
Interest expense 25.0 23.3 18.9 17.8 85.0
Other, net 11.0 4.8 12.7 9.1 37.6
-------- ---------- ---------- ---------- ---------
Income before taxes 154.5 194.2 159.8 169.7 678.2
Taxes on income 53.3 67.0 52.1 54.8 227.2
-------- ---------- ---------- ---------- ---------
Income before minority interest and equity earnings 101.2 127.2 107.7 114.9 451.0
Minority interest in earnings of subsidiaries (12.6) (20.9) (23.0) (20.2) (76.7)
Dividends on convertible preferred
securities of subsidiary (3.4) (3.5) (3.4) (3.4) (13.7)
Equity in earnings other than Dow Corning 6.8 24.2 31.0 17.2 79.2
-------- ---------- ---------- ---------- ---------
Net Income $ 92.0 $ 127.0 $ 112.3 $ 108.5 $ 439.8
======== ========== ========== ========== =========
Basic earnings per share $ 0.40 $ 0.56 $ 0.49 $ 0.47 $ 1.92
======== ========== ========== ========== =========
Diluted earnings per share $ 0.39 $ 0.53 $ 0.47 $ 0.46 $ 1.85
======== ========== ========== ========== =========
Shares used in computing earnings per share:
Basic earnings per share 226.5 227.8 228.7 229.1 228.1
======== ========== ========== ========== =========
Diluted earnings per share 243.3 245.6 246.5 245.5 245.4
======== ========== ========== ========== =========
</TABLE>
Corning Incorporated and Subsidiary Companies
Consolidated Statements of Income
(In millions, except per share amounts)
Exhibit 99.2
<TABLE>
<CAPTION>
1997 Restated
------------------------------------------------------------
Q1 Q2 Q3 Q4 TOTAL
-------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Revenues
Net sales $ 817.1 $ 905.5 $ 891.9 $ 902.3 $ 3,516.8
Royalty, interest and dividend income 9.9 9.1 9.4 9.1 37.5
-------- -------- -------- ------- ---------
827.0 914.6 901.3 911.4 3,554.3
Deductions
Cost of sales 475.7 515.3 524.9 526.4 2,042.3
Selling, general and administrative expenses 128.8 138.9 134.0 139.9 541.6
Research and development expenses 51.0 53.4 70.7 75.2 250.3
Interest expense 21.2 19.5 16.2 15.1 72.0
Other, net 6.8 (1.8) 5.4 8.5 18.9
-------- -------- -------- ------- ---------
Income from continuing operations before taxes 143.5 189.3 150.1 146.3 629.2
Taxes on income 49.0 64.2 48.0 48.3 209.5
-------- -------- -------- ------- ---------
Income from continuing operations before
minority interest and equity earnings 94.5 125.1 102.1 98.0 419.7
Minority interest in earnings of subsidiaries (12.5) (20.8) (22.9) (20.1) (76.3)
Dividends on convertible preferred
securities of subsidiary (3.4) (3.5) (3.4) (3.4) (13.7)
Equity in earnings other than Dow Corning 6.8 24.2 31.0 17.2 79.2
-------- -------- -------- ------- ---------
Income from continuing operations 85.4 125.0 106.8 91.7 408.9
Income from discontinued operations 6.6 2.0 5.5 16.8 30.9
-------- -------- -------- ------- ---------
Net Income $ 92.0 $ 127.0 $ 112.3 $ 108.5 $ 439.8
======== ======== ======== ======= =========
Basic earnings per share:
Continuing operations $ 0.37 $ 0.55 $ 0.47 $ 0.40 $ 1.79
Discontinued operations 0.03 0.01 0.02 0.07 0.13
-------- -------- -------- ------- ---------
$ 0.40 $ 0.56 $ 0.49 $ 0.47 $ 1.92
======== ======== ======== ======= =========
Diluted earnings per share:
Continuing operations $ 0.36 $ 0.52 $ 0.45 $ 0.39 $ 1.72
Discontinued operations 0.03 0.01 0.02 0.07 0.13
-------- -------- -------- ------- ---------
$ 0.39 $ 0.53 $ 0.47 $ 0.46 $ 1.85
======== ======== ======== ======= =========
Shares used in computing earnings per share:
Basic earnings per share 226.5 227.8 228.7 229.1 228.1
========= ======== ======== ======= =========
Diluted earnings per share 243.3 245.8 246.8 245.5 245.4
========= ======== ======== ======= =========
</TABLE>
Corning Incorporated and Subsidiary Companies
Restated Consolidated Statements of Income
(In millions, except per share amounts)
Exhibit 99.3
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $ 3,516.8 $ 3,024.0 $ 2,644.7 $ 2,367.5 $ 2,018.4
Royalty, interest, and dividend income 37.5 29.7 26.7 23.7 25.7
----------- ----------- ----------- ---------- -----------
3,554.3 3,053.7 2,671.4 2,391.2 2,044.1
Deductions:
Cost of sales 2,042.3 1,830.1 1,608.7 1,464.2 1,307.0
Selling, general and administrative expenses 541.6 499.4 404.1 384.6 327.1
Research and development expenses 250.3 189.2 172.2 169.7 165.3
Provision for restructuring and other
special charges 26.5 (b) 65.5 (f)
Interest expense 72.0 57.2 56.6 54.0 46.3
Other, net 18.9 22.0 13.9 32.4 39.2
----------- ----------- ----------- ---------- -----------
Income from continuing operations before
taxes on income 629.2 455.8 389.4 286.3 93.7
Taxes on income from continuing operations 209.5 151.4 107.3 86.6 4.4
----------- ----------- ----------- ---------- -----------
Income from continuing operations before
minority interest and equity earnings 419.7 304.4 282.1 199.7 89.3
Minority interest in earnings of subsidiaries (76.3) (52.5) (64.3) (48.7) (15.1)
Dividends on convertible preferred securities
of subsidiary (13.7) (13.7) (13.7) (6.1)
Equity in earnings (losses) of associated companies:
Other than Dow Corning Corporation 79.2 85.1 66.6 48.5 44.0
Dow Corning Corporation (348.0)(b) (2.8) (144.5)
----------- ----------- ----------- ---------- -----------
Income (loss) from Continuing Operations 408.9 323.3 (77.3)(b) 190.6 (d) (26.3)(f)
Income (loss) from discontinued operations,
net of income taxes:
Life science businesses (167.3)(a) 20.7 (c) 59.0 (e) 39.9 (g)
Consumer housewares business 30.9 19.6 5.8 31.7 (28.8)
----------- ----------- ----------- ---------- -----------
Net Income (Loss) $ 439.8 $ 175.6 $ (50.8) $ 281.3 $ (15.2)
=========== =========== =========== ========== ===========
Basic Earnings per Share:
Continuing operations $ 1.79 $ 1.42 $ (0.35)(b) $ 0.89 (d) $ (0.15)(f)
Discontinued operations 0.13 (0.66)(a) 0.12 (c) 0.43 (e) 0.06 (g)
----------- ----------- --------- --------- ---------
$ 1.92 $ 0.76 $ (0.23) $ 1.32 $ (0.09)
=========== =========== =========== ========== ===========
Diluted Earnings per Share:
Continuing operations $ 1.72 $ 1.40 $ (0.35)(b) $ 0.88 (d) $ (0.15)(f)
Discontinued operations 0.13 (0.62)(a) 0.12 (c) 0.42 (e) 0.06 (g)
----------- ----------- ---------- ------- ---------
$ 1.85 $ 0.78 $ (0.23) $ 1.30 $ (0.09)
=========== =========== =========== ========== ===========
Shares used in computing earnings per share:
Basic earnings per share 228.1 227.1 226.6 211.8 192.0
=========== =========== =========== ========== ===========
Diluted earnings per share 245.4 239.5 226.6 214.2 192.0
=========== =========== =========== ========== ===========
</TABLE>
1
<PAGE>
Corning Incorporated and Subsidiary Companies
Notes to Restated Consolidated Statements of Income
(a) On December 31, 1996, Corning distributed all of the shares of Quest
Diagnostics Incorporated and Covance Inc., which collectively comprised
Corning's Health Care Services segment, to its shareholders on a pro rata
basis (the Distributions). Corning recorded a provision for loss on the
Distributions of $176.5 million, or $0.78 per share.
(b) In 1995, Corning recognized a restructuring charge from continuing
operations totaling $26.5 million ($16.1 million after tax), as a result
of severance for workforce reductions in corporate staff groups and the
write-off of production equipment caused by the decision to exit the
manufacturing facility for glass-ceramic memory-disks.
Corning also recorded an after-tax charge of $365.5 million to fully
reserve its investment in Dow Corning Corporation (a 50%-owned equity
company) as a result of Dow Corning Corporation filing for protection
under Chapter 11 of the United States Bankruptcy Code in May 1995.
Corning recognized equity earnings totaling $17.5 million from Dow
Corning Corporation in the first quarter of 1995. Corning discontinued
recognition of equity earnings from Dow Corning Corporation beginning in
the second quarter of 1995.
(c) In 1995, discontinued operations included a restructuring charge totaling
$40.5 million ($24.4 million after tax, or $0.11 per share).
(d) In 1994, Corning recognized a loss in equity earnings from Dow Corning
Corporation totaling $2.8 million, which includes a $75.9 million
reduction in equity earnings recorded by Corning as a result of a charge
taken by Dow Corning Corporation related to breast-implant litigation.
(e) In 1994, discontinued operations included a restructuring charge totaling
$82.3 million ($55.4 million after tax, or $0.26 per share).
(f) In 1993, Corning recognized a charge from continuing operations totaling
$65.5 million ($41.8 million after tax) which included integration costs
of the Costar acquisition and a planned company-wide restructuring
program. Corning also recognized a non-operating gain totaling $4.2
million ($2.6 million after tax).
Corning also recognized a loss in equity earnings from Dow Corning
Corporation totaling $144.5 million, which includes a $203.1 million
reduction in equity earnings recorded by Corning as a result of a charge
taken by Dow Corning related to breast-implant litigation.
(g) In 1993, discontinued operations included restructuring and other special
charges totaling $141.5 million ($78.7 million after tax, or $0.41 per
share).
2
<PAGE>
Corning Incorporated and Subsidiary Companies
Notes to Restated Consolidated Statements of Income
(Continued)
The following analysis summarizes the impact of these items on Corning's
net income and diluted earnings per share:
<TABLE>
<CAPTION>
Fiscal Year
------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Income
Before Unusual Items and
Dow Corning Corporation $ 408.9 $ 323.3 $ 286.8 $ 193.4 $ 157.4
Unusual items and Dow
Corning Corporation:
Dow Corning Corporation (348.0) (2.8) (144.5)
Restructuring and other special
charges, net of non-operating gains (16.1) (39.2)
-------- -------- -------- -------- -------
Continuing operations 408.9 323.3 (77.3) 190.6 (26.3)
Discontinued operations 30.9 (147.7) 26.5 90.7 11.1
-------- -------- -------- -------- -------
Net Income (Loss) $ 439.8 $ 175.6 $ (50.8) $ 281.3 $ (15.2)
======== ======== ======== ======== =======
Diluted Earnings Per Share
Before Unusual Items and
Dow Corning Corporation $ 1.72 $ 1.40 $ 1.26 $ 0.89 $ 0.81
Unusual items and Dow
Corning Corporation:
Dow Corning Corporation (1.54) (0.01) (0.76)
Restructuring and other special
charges, net of non-operating gains (0.07) (0.20)
-------- -------- -------- -------- -------
Continuing operations 1.72 1.40 (0.35) 0.88 (0.15)
Discontinued operations .13 (0.62) 0.12 0.42 0.06
-------- -------- -------- -------- -------
Net Income (Loss) $ 1.85 $ 0.78 $ (0.23) $ 1.30 $ (0.09)
======== ======== ======== ======== =======
</TABLE>
3
