U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from: ____________ to ____________
Commission file number: 0-26022
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Solar-Mates, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as specified in its charter)
New York 11-2396918
- --------------------------------- ---------------------
(State or other jurisdiction (IRS Employer Identi-
of incorporation or organization) fication Number)
8125 25th Court East
Sarasota, Florida 34243
-----------------------
(Address of principal executive offices)
(941) 359-3599
--------------
(Issuer's telephone number, including area code)
Check whether the Issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES: X NO:
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. YES: NO:
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 2,384,000 shares of Common Stock,
$.001 par value, as of November 10, 1996.
Transitional Small Business Disclosure Format. YES: NO: X
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<PAGE>
Solar-Mates, Inc.
Index
Part I
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Item 1. Financial Statements
Consolidated Balance Sheet as of September 30, 1996 3
Consolidated Statements of Operations and Retained Earnings
(Deficit) for the Nine Months and Three Months Ended
September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9 - 13
Part II
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Item 6. Exhibits and Reports on Form 8-K 14
Signatures 14
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
For The Nine Months and Three Months Ended September 30, 1996 and 1995
Solar-Mates, Inc.
Consolidated Balance Sheets
September 30, 1996
(Unaudited)
ASSETS
Current Assets:
Cash $ 114,309
Trading securities 926,086
Other marketable securities 284,640
Accounts receivable - less allowance for
doubtful accounts of $100,000 2,671,260
Inventories 3,358,353
Prepaid expenses 558,464
----------
Total current assets 7,913,112
Fixed assets - net of accumulated depreciation 473,157
Other assets 359,720
----------
$8,745,989
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable - bank $1,500,000
Note payable - stockholder 45,398
Advances from stockholders 83,927
Accounts payable 1,647,784
Other current liabilities 508,048
----------
Total current liabilities 3,785,157
Notes payable - stockholder 173,921
Long-term debt 58,293
Commitments and contingencies -
Stockholders' equity:
Preferred stock, 1,000,000 shares authorized -
Common stock, $001 par value,
10,000,000 shares authorized,
2,384,000 shares issued and outstanding 2,384
Additional paid in capital 4,264,276
Retained earnings 461,958
----------
Total stockholders' equity 4,728,618
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$8,745,989
==========
3
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Solar-Mates, Inc.
Consolidated Statements of Operations and Retained Earnings (Deficit)
For The Nine Months and Three Months Ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 7,406,439 $ 5,313,195 $ 1,865,166 $ 740,790
Cost of sales 4,776,085 3,559,841 1,212,358 504,690
----------- ----------- ----------- -----------
Gross profit 2,630,354 1,753,354 652,808 236,100
----------- ----------- ----------- -----------
Operating expenses:
Selling expenses 1,433,645 656,422 550,221 280,312
General and administrative expenses 1,035,395 830,288 385,805 286,606
----------- ----------- ----------- -----------
2,469,040 1,486,710 936,026 566,918
----------- ----------- ----------- -----------
Income from operations 161,314 266,644 (283,218) (330,818)
Other (expense):
Interest expense (197,789) (211,000) (57,361) (55,044)
----------- ----------- ----------- -----------
Income before income taxes (36,475) 55,644 (340,579) (385,862)
Provision for income taxes
Current 12,400 (82,000)
----------- ----------- ----------- -----------
Net income (48,875) 55,644 (258,579) (385,862)
Retained earnings (deficit) - beginning of period 603,198 (1,074,140) 720,537 (632,634)
S-corporation distribution (92,365)
----------- ----------- ----------- -----------
Retained earnings (deficit) - end of period $ 461,958 $(1,018,496) $ 461,958 $(1,018,496)
=========== =========== =========== ===========
Per share information:
Weighted average shares outstanding 2,384,000 1,483,100 2,384,000 1,784,000
=========== =========== =========== ===========
Net income per share $ (0.02) $ 0.04 $ (0.11) (0.22)
=========== =========== =========== ===========
</TABLE>
4
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Solar-Mates, Inc.
Consolidated Statements of Cash Flows
For The Nine Months Ended September 30, 1996 and 1995
(Unaudited)
1996 1995
---- ----
Cash flows from operating activities $ (3,585) $ 1,235,655
Cash flows from investing activities:
Sale of trading securities 136,299
Acquisition of patents and trademarks (6,159) (8,867)
(Acquisition) disposition of other assets (112,036) 700
Purchase of fixed assets (219,877) (35,482)
--------- -----------
Net cash used by investing activities (201,773) (43,649)
--------- -----------
Cash flows from financing activities:
Decrease in accounts receivable stockholders 45,215 8,190
Long term borrowing 22,318
Principal payments on notes payable (106,363) (606,237)
S corporation distribution (92,365) -
Repayments on advances from stockholders (13,394) -
Offering cost (15,000) (127,820)
(Increase) in deferred offering cost - (348,107)
--------- -----------
Net cash used by financing activities (159,589) (1,073,974)
--------- -----------
Net increase (decrease) in cash (364,947) 118,032
Beginning - cash balance 479,256 18,301
--------- -----------
Ending - cash balance $ 114,309 $ 136,333
========= ===========
5
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Solar-Mates, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note A. Basis of presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and Item 310(b) of Regulation SB. They do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring adjustments) considered necessary for a fair
presentation have been included. The results of operations for the periods
presented are not necessarily indicative of the results to be expected for the
full year. For further information, refer to the financial statements of the
Company as of December 31, 1995 and 1994 and for the two years then ended,
including notes thereto included in the Company's Form 10-KSB.
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, Solartechnics (HK) Ltd. Intercompany
transactions and balances have been eliminated in consolidation.
Note B. Inventory
Inventory consisted principally of finished goods.
Note C. Commitments and Contingencies
Concentration of credit risk/major customer
During the nine month periods ended September 30, 1996 and 1995 the Company made
sales to Wal-Mart Stores, Inc. of approximately $4,800,000 and $4,700,000,
respectively. During the three month periods ended September 30, 1996 and 1995
the Company made sales to Wal-Mart Stores, Inc. of approximately $1,100,000 and
$680,000, respectively
Approximately $1,256,000 (47%) of the accounts receivable at September 30, 1996
are due from Wal-Mart Stores, Inc. and are unsecured. This customer is a major
national retailer and the
6
<PAGE>
Solar-Mates, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(Continued)
Company has not experienced collection problems with this customer.
Note D. Subscription Receivable
On September 26, 1996 Solar-Mates, Inc.(the "Company") entered into a
subscription agreement with an Austrian based bank for the infusion of $22.5
million in equity financing of which $7.5 million was funded on October 4, 1996.
The purpose of the funding is to pursue a specific acquisition targeted by the
Company in the sunglass industry. See Note E.
The equity infusion is in the form of non-voting convertible preferred shares of
the Company. The conversion price for the preferred shares in the initial
infusion is the lower of 80% of the market price of the Company's publicly trade
Common Stock, $.001 par value ("Common Stock") or $5.50 per share, and the
shares bear dividends at an annual rate of 6.5%. The remaining subscriptions for
an additional aggregate amount of $15 million of non-voting convertible
preferred shares is to be consummated simultaneously with the closing of the
targeted acquisition. The conversion price for the preferred shares to be issued
in the subsequent $15 million infusion is the lower of 80% of market price for
the Common Stock or, with respect to $7.5 million of such amount, $6.75 per
share, and with respect to the other $7.5 million, $8.25 per share. Such shares
are to bear dividends at an annual rate of 6%. The Company may, at its sole
discretion, pay any and all dividends in preferred shares of the same series
rather than in cash.
The convertibility of any preferred shares into Common Stock is subject to
shareholder approval. The agreement provides that the purchaser of the shares
shall vote all of the underlying shares (if and when converted), in connection
with any vote of the shareholders of the Company relating to the election of
directors, for a majority of directors, in accordance with the directions of
Stephen Nevitt, the Company's President and Principal Executive Officer, or his
successor or designee.
The subscription is being effected pursuant to an off-shore exemption in
reliance upon Regulation S under the Securities Act of 1933.
7
<PAGE>
Solar-Mates, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(Continued)
At the closing of the initial $7.5 million infusion, the Company also issued to
the investor three year warrants to purchase 150,000 shares of Common Stock at a
price of $5.5625 per share exercisable commencing on January 1, 1999. In
connection with the closing of the second infusion of $15 million, the Company
is required to issue an additional 600,000 identical warrants, with an exercise
price of $7.50 per share for 300,000 of the warrants and $10 per share for the
remaining warrants. The Company also paid a commission to a third party equal to
7% of the investment and an immediately exercisable five year warrant to
purchase 200,000 shares of Common Stock at a price of $5.50 per share. The
Company is also obligated to pay such 7% commission in connection with the
second infusion of $15 million.
Note E. Subsequent Event
On October 29,1996, the Company entered into an agreement to purchase from
Corning Incorporated, certain assets used in the business of designing,
manufacturing and distributing Serengeti sunglasses. The assets include
inventories, dies and molds, office furniture, plant machinery and equipment,
fixtures, trademarks, including, among others, the brand name Serengeti, and
patents used in the manufacturing of Serengeti brand sunglasses. The purchase
price will be $27.5 million. The Company anticipates closing the transaction
after the approval of its shareholders of the issuance of shares underlying the
convertible preferred shares and warrants is obtained.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
Prior to the 1980's, the Company manufactured its own sunglasses for sale
to the wholesale trade. As manufacturers in the Far East began playing greater
roles in the sunglass industry in the late 1970's, the Company began importing
its products and in 1980 discontinued its manufacturing operations completely.
Since 1978, the Company has focused primarily on the sale of sunglasses and
sunglass products to mass merchandisers such as large retail chain stores. In
the late 1980's, the Company began developing programs for mass merchants
designed to enhance their sale of sunglasses. The Company continually adds new
products and develops new marketing programs for its product lines. In late
1992, the Company introduced its line of Solar*X(R) sunglasses, which feature
ground and polished lens, comparable to optical quality sunglasses, at popular
prices. This product is currently the predominant line of the Company and has
contributed significantly to the sales growth of the Company.
The Company continues to introduce new products. Recently the Company
introduced a higher priced line of sunglasses under the brand name H2Optix(R).
The Company is not marketing this line to mass merchants but rather to specialty
retailers. This is intended to reduce the Company's dependence on its current
customer base.
On October 29,1996, the Company entered into an agreement to purchase from
Corning Incorporated, certain assets used in the business of designing,
manufacturing and distributing Serengeti sunglasses. The assets include
inventories, dies and molds, office furniture, plant machinery and equipment,
fixtures, trademarks, including, among others, the brand name Serengeti, and
patents used in the manufacturing of Serengeti brand sunglasses. The purchase
price will be $27.5 million. The Company anticipates closing the transaction
after the necessary approval of its shareholders is obtained.
Until such time as the Serengeti acquisition is completed the Company
expects its Solar*X(R) line of sunglasses to remain its predominant line.
9
<PAGE>
Results of Operations
Net sales increased 39% from $5,313,195 for the nine months ended September
30, 1995 to $7,406,439 for the nine months ended September 30, 1996, and
increased 152% from $740,790 for the three months ended September 30, 1995 to
$1,865,166 for the three months ended September 30, 1996. These increases were
due primarily to the introduction of new products including the Company's
H2Optix(R) line of sunglasses. In 1996 the Company began aggressively marketing
this line. Sales from the H2Optix(R) line were approximately $903,000 for the
nine months ended September 30, 1996. Additionally, approximately $578,000 of
the increase for the nine months ended September 30, 1996 was due to sales of
the Company's Outa Limitz(TM) line of sunglasses which did not exist during the
same period in 1995; $1,698,000 which results from increased activity of
Solar*X(TM), offset by a decrease of approximately $1,187,000 in sales of
Bonjour(R), a brand no longer marketed by the Company. Approximately $453,000 of
the increase for the three months ended September 30, 1996 was due to sales from
H2Optix(R); $722,000 resulted from sales of Solar*X(TM); $57,000 from sales of
the Outa Limitz(TM); and a decrease of approximately $101,000 in sales of
Bonjour(R).
Selling expenses increased by $777,223 or 118%, from $656,422 for the nine
months ended September 30, 1995 to $1,433,645 for the nine months ended
September 30, 1996 and increased by $269,909 or 96% from $280,312 for the three
months ended September 30, 1995 to $550,221 for the three months ended September
30, 1996. The increase in both the nine month and three month periods resulted
primarily from increased advertising and marketing cost associated with the
launch of H2Optix(R). The Company anticipates continued increases in selling
expenses related to H2Optix(R) during the remainder of 1996.
General and administrative expenses increased by $205,107 or 25%, from
$830,288 for the nine months ended September 30, 1995 to $1,035,395 for the nine
months ended September 30, 1996 and increased by $99,199 or 35% from $286,606
for the three months ended September 30, 1995 to $385,805 for the three months
ended September 30, 1996. The increase in both the nine month and three month
periods resulted primarily from increased personnel and administrative cost
associated with the general growth of the Company.
The Company's interest expenses decreased $13,211 or 6% from $211,000 for
the nine months ended September 30, 1995 to $197,789 for the nine months ended
September 30, 1996. The decreases resulted primarily from interest earned on
investment of the proceeds of the Company's public offering and the reduction of
debt.
10
<PAGE>
Liquidity and Capital Resources
The Company is financing its operations primarily through the proceeds of
an initial public offering ("IPO") completed in August 1995, its cash flow and
revolving lines of credit. The Company has a revolving line of credit in the
amount of $1,500,000 from SunTrust Bank (the "Credit Facility"). Interest on
outstanding loans under the Credit Facility accrue at a rate equal to 1.5% above
the prime rate. The Credit Facility is secured by a lien on all of the Company's
assets. Pursuant to the Credit Facility, the Company may borrow up to 70% of
accounts receivable under 61 days old and up to 25% of the Company's inventory
to a maximum of $1,500,000. Advances under the facility have been used for
general working capital purposes. The Credit Facility is guaranteed, jointly and
severally, by certain shareholders of the Company. As of September 30, 1996, the
Company has borrowed the maximum amount available under the Credit Facility.
The Company's cash flow requirements are greatest during the fourth quarter
of each year primarily as a result of inventory acquisition and the introduction
of new product lines for the upcoming sunglass season which traditionally occurs
in the later part of the fourth quarter. The Company believes that cash flow
generated from operations, supplier credit and the revolving credit facility
will be sufficient to satisfy its requirements. To the extent that such sources
are not sufficient, the Company may be required to obtain short-term loans as it
has done in the past.
The Company's working capital decreased from $4,357,962 at December 31,
1995 to $4,170,607 at September 30, 1996. This resulted primarily from purchase
of assets utilized in the growth of the business, the reduction of debt and an
"S" corporation distribution with respect to earnings prior to the IPO.
The Company purchased capital assets of approximately $338,000 during the
nine month period ended September 30, 1996.
The Company will require approximately $30,000,000 to finance the
acquisition of Serengeti and related costs and expenses, which it anticipates
obtaining through the issuance of equity securities and debt.
On September 26, 1996 the Company entered into a subscription agreement
with an Austrian based bank for the infusion of $22.5 million in equity
financing of which $7.5 million was funded on October 4, 1996. The equity
infusion (the "Equity Financing") is in the form of non-voting convertible
preferred shares of the Company. The conversion price for the
11
<PAGE>
preferred shares issued in the initial infusion is the lower of 80% of the
market price of the Company's publicly trade Common Stock, $.001 par value
("Common Stock") or $5.50 per share, and the shares bear dividends at an annual
rate of 6.5%. The remaining subscriptions for an additional aggregate amount of
$15 million of non-voting convertible preferred shares is to be consummated
simultaneously with the closing of the Serengeti acquisition. The conversion
price for the preferred shares to be issued in the subsequent $15 million
infusion is the lower of 80% of market price for the Common Stock or, with
respect to $7.5 million of such amount, $6.75 per share, and with respect to the
other $7.5 million, $8.25 per share. Such shares are to bear dividends at an
annual rate of 6%. The Company may, at its sole discretion, pay any and all
dividends in preferred shares of the same series rather than in cash.
The convertibility of any preferred shares into Common Stock is subject to
shareholder approval. The agreement provides that the purchaser of the shares
shall vote all of the underlying shares (if and when converted), in connection
with any vote of the shareholders of the Company relating to the election of
directors, for a majority of directors, in accordance with the directions of
Stephen Nevitt, the Company's President and Principal Executive Officer, or his
successor or designee.
The subscription is being effected pursuant to an off-shore exemption in
reliance upon Regulation S under the Securities Act of 1933.
At the closing of the initial $7.5 million infusion, the Company also
issued to the investor three year warrants to purchase 150,000 shares of Common
Stock at a price of $5.5625 per share exercisable commencing on January 1, 1999.
In connection with the closing of the second infusion of $15 million, the
Company is required to issue an additional 600,000 identical warrants, with an
exercise price of $7.50 per share for 300,000 of the warrants and $10 per share
for the remaining warrants. The Company also paid a commission to a third party
equal to 7% of the investment and an immediately exercisable five year warrant
to purchase 200,000 shares of Common Stock at a price of $5.50 per share. The
Company is also obligated to pay such 7% commission in connection with the
second infusion of $15 million.
The Company is currently negotiating the debt required to complete the
Serengeti acquisition and anticipates that the debt will be structured as a
combination of a five year term loan and a revolving credit facility. The
Company intends to obtain a revolving credit facility sufficient to fund its
working capital needs after the acquisition.
12
<PAGE>
Foreign Currency Exchange
The Company presently transacts business internationally in United States
currency. To date, the Company has not been affected significantly by currency
exchange fluctuations. However, future currency fluctuations in countries in
which the Company does business could adversely affect the Company by resulting
in pricing that is not competitive with prices denominated in local currencies.
Seasonality
The seasonality of the Company's business generally follows the selling
activity of its largest customer, Wal-Mart Stores, Inc. The Company's strongest
quarter in terms of sales is the fourth quarter followed by the first, second
and third quarters.
13
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit
Number Exhibit Description
------ -------------------
2 Agreement of Purchase and Sale, dated as of October 29, 1996,
between the Company and Corning Incorporated
10 Subscription Agreement, dated September 26, 1996, between the
Company and RBB Bank Aktiengesellschaft
27 Financial Data Schedule
(b) Reports on Form 8-K.
On October 4, 1996, the Registrant filed a Form 8-K with the Securities and
Exchange Commission which reported that the Company entered into a subscription
agreement with an Austrian based bank with respect to the Equity Financing.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Solar-Mates, Inc.
(Registrant)
Dated: August 13, 1996 By: /s/ Stephen Nevitt
------------------- ---------------------------
Stephen Nevitt
President
(Principal Executive Officer)
Dated: August 13, 1996 By: /s/ Jeffrey Rubin
------------------- ---------------------------
Jeffrey Rubin
Controller
(Chief Financial Officer)
14
AGREEMENT OF PURCHASE AND SALE
BY AND BETWEEN
CORNING INCORPORATED AND SOLAR-MATES, INC.
Dated as of October 29, 1996
<PAGE>
AGREEMENT OF PURCHASE AND SALE
This AGREEMENT, dated as of October 29, 1996, between CORNING
INCORPORATED, a New York corporation with its principal place of business at One
Riverfront Plaza, Corning, New York ("Corning"), and SOLAR-MATES, INC., a
corporation organized under the laws of the State of New York, with its
principal place of business at 8125 25th Court East, Sarasota, Florida 34243
("Buyer").
RECITALS:
WHEREAS, Corning, through the use of certain assets owned by it or certain
of its direct or indirect subsidiaries, is presently engaged in the business of
the design, manufacture and distribution of sunglasses (sunglass products
consisting of glass and polycarbonate finished lenses inserted into frames which
are manufactured using various materials). The foregoing business is hereinafter
referred to as the "Serengeti Business."
WHEREAS, Buyer desires to purchase and Corning desires to sell the Assets
(hereinafter defined) of the Serengeti Business.
NOW, THEREFORE, in consideration of the premises and mutual promises
contained in this Agreement and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I - DEFINITIONS
The following terms when used in this Agreement (including the Recitals
and Schedules) shall have the meanings set forth below:
1.1 "Assets" shall have the meaning set forth in Article II.
<PAGE>
-2-
1.2 "Buyer" shall have the meaning set forth in the introductory paragraph
of this Agreement.
1.3 "Buyer Assumed Liabilities" shall have the meaning set forth in
Section 3.1.
1.4 "China Transition Period" shall have the meaning set forth in Section
9.3(c) hereof.
1.5 "Closing" shall have the meaning set forth in Section 5.1 hereof.
1.6 "Closing Adjustments" shall have the meaning set forth in Section 4.3.
1.7 "Closing Date" shall have the meaning set forth in Section 5.1 hereof.
1.8 "Corning" shall have the meaning set forth in the introductory
paragraph of this Agreement.
1.9 "Corning Know-How" shall mean any and all knowledge or experience used
in the practical application of all technology and state-of-the-art industrial
techniques in the commercial production of products heretofore sold by the
Serengeti Business.
1.10 "Corning Patents" shall mean the patents (including all applications
and disclosures docketed therefor and all reissues, renewals, continuations,
extensions and divisions thereof) set forth in Schedule 1.10.
<PAGE>
-3-
1.11 "Deposit" shall have the meaning set forth in Section 16.9.
1.12 "Deposit Amount" shall mean the Deposit plus the Deposit Interest, if
any, as of the date of calculation.
1.13 "Deposit Interest" shall mean all interest accrued and on other
amounts earned in respect of the Deposit pursuant to the Escrow Agreement.
1.14 "Escrow Agent" shall mean United States Trust Company of New York, as
escrow agent, pursuant to the Escrow Agreement.
1.15 "Escrow Agreement" shall mean that certain Escrow Agreement dated as
of even date herewith among Corning, Buyer and the Escrow Agent, as the same may
be amended from time to time.
1.16 "Financing Failure" shall have the meaning set forth in Section
16.9(c).
1.17 "Forecasts" shall have the meaning set forth in Section 7.14(b).
1.18 "Governmental Authority" shall mean any foreign, federal, state,
local or other governmental or administrative authority or agency, court or
other governmental tribunal.
1.19 "Hired Employees" shall have the meaning set forth in Section 9.2(a).
1.20 "Horseheads" shall mean the Serengeti leased facility located at 203
Colonial Drive, Horseheads, New York 14845.
<PAGE>
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1.21 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
1.22 "Intellectual Property Rights" shall mean all common law and
statutory rights in, and all goodwill associated with, the Serengeti Trademarks,
Serengeti Copyrights and Serengeti Patents throughout the world.
1.23 "Japan Transition Period" shall have the meaning set forth in Section
9.3.
1.24 "Lens Blank Supply Agreement" shall mean the agreement in
substantially the form annexed as Exhibit III.
1.25 "Outside Date" shall have the meaning set forth in Section 5.1.
1.26 "Party; Parties" shall mean either Corning, Buyer, or both.
1.27 "Permitted Encumbrance" shall mean (i) the Buyer Assumed Liabilities;
(ii) statutory liens for current taxes, assessments or other governmental
charges not yet delinquent or the amount or validity of which is being contested
in good faith by appropriate proceedings, provided an appropriate reserve is
established therefor; (iii) mechanics', carriers', workers', repairers' and
similar liens, charges, or encumbrances arising or incurred in the ordinary
course of business that are not material to the business, operations and
financial condition of the Serengeti Business or any of the Assets; (iv) zoning,
entitlement and other land use and environmental regulations of Governmental
Authorities; and (v) such other imperfections in title, charges, easements,
restrictions and encumbrances which do not materially interfere with the use of
any Assets subject thereto or affected thereby.
<PAGE>
-5-
1.28 "Post-Closing Adjustments" shall have the meaning set forth in
Section 4.3.
1.29 "Purchase Price" shall have the meaning set forth in Section 4.1.
1.30 "Retained Assets" shall have the meaning set forth in Section 2.2.
1.31 "Retained Liabilities" shall have the meaning set forth in Section
3.2.
1.32 "Schedule of Actual Operating Results" shall mean the schedule of
operating results of the Serengeti Business for the nine-month period ended
September 30, 1996, attached hereto as a portion of Exhibit I.
1.33 "Serengeti Business" shall have the meaning set forth in the first
recital hereof.
1.34 "Serengeti Copyrights" shall mean all rights under copyrights owned
by Corning throughout the world relating to works heretofore used exclusively by
the Serengeti Business, and all registrations, applications, renewals,
continuations and extensions thereof owned by Corning.
1.35 "Serengeti Patents" shall mean the patents set forth in Schedule
2.1(f) and all registrations, applications, renewals, continuations and
extensions thereof or foreign counterparts thereof owned by Corning.
1.36 "Serengeti Trademarks" shall mean any and all common law and
statutory trademark and trade name rights in and to the trademarks, which are
used solely in the Serengeti Business as set forth in Schedule 2.1(f) throughout
the world, and all registrations, applications, renewals, continuations and
extensions thereof owned by Corning; provided, however that the
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term "Serengeti Trademarks" shall specifically exclude any right in or to the
trademark "Corning" or any derivation thereof.
1.37 "Statement of Net Assets" shall mean the statement of net assets of
the Serengeti Business as of September 30, 1996, attached hereto as a portion of
Exhibit I.
1.38 "Temporary Corning Trademark License" shall mean the license in
substantially the form annexed as Exhibit II.
1.39 "Transition Period" or "Horseheads Transition Period" shall have the
meaning set forth in Section 9.2(a).
ARTICLE II - PURCHASE OF ASSETS
Upon the terms and subject to the conditions herein stated and on the
basis of the representations, warranties and agreements herein contained:
2.1 Assets to be Sold to Buyer. Corning agrees to sell, assign and
transfer or cause to be sold, assigned or transferred to Buyer and Buyer agrees
to purchase and receive at the Closing, the assets set forth in subsections (a)
through (k) below owned or leased by Corning or any of its direct or indirect
subsidiaries and used by the Serengeti Business (but expressly excluding the
Retained Assets described in Section 2.2, below) (the "Assets") free and clear
of all liens and encumbrances, except the Permitted Encumbrances.
(a) Leases. Certain leasehold interests as set forth in Schedule 2.1(a).
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(b) Office Furniture, Plant Machinery and Equipment. All office furniture,
plant machinery and equipment, fixtures and leasehold improvements located in
the facilities referenced in Section 2.1(a), used in the conduct of the
Serengeti Business, to the extent set forth in Schedule 2.1(b).
(c) Inventories. All inventories of finished products, work in progress,
supplies, raw materials, dies and molds used in connection with the Serengeti
Business, of the type described in Schedule 2.1(c), that exist on the Closing
Date.
(d) Contract Rights. Subject to Section 3.2, all the respective right,
title and interest of Corning or any of its direct or indirect subsidiaries in
and to all contracts (including without limitation the distributor contracts and
the material contracts set forth on Schedule 7.8) related primarily to the
conduct of the Serengeti Business; provided, however, that Corning shall not
convey to Buyer, and Buyer shall not be required to assume, any leases,
conditional sales agreements, installment sales agreements or similar agreements
for the lease or sale to or use by Corning of furniture, machinery, equipment,
fixtures or leasehold improvements relating to the operation of the Serengeti
Business in Japan.
(e) Unfilled Customer Orders. All of Corning's unfilled customer orders
for the products manufactured and sold in the Serengeti Business.
(f) Intellectual Property Rights. All common law and statutory rights in,
and all goodwill associated with, the Intellectual Property Rights.
(g) Permits, Licenses and Franchises. Subject to Section 3.2, all permits,
licenses, franchises and similar authorizations used in the Serengeti Business,
as set forth on Schedule
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2.1(g).
(h) Customer List. Serengeti Business' customer list (including customers
of the Serengeti Business otherwise identified in the Schedules hereto) .
(i) Manufacturer's and Vendor's Warranties. All of the Serengeti Business'
right, title and interest under manufacturer's and vendors' warranties in
connection with the Assets.
(j) Intangible Assets. All intangible assets (other than those described
in, and except as otherwise provided in, Section 2.1(d) or Section 2.1(f)) of
the Serengeti Business, including the goodwill of the Serengeti Business.
(k) Books and Records. All books and records relating exclusively to the
Serengeti Business, including its billing and accounting records.
2.2 Assets to be Retained. Notwithstanding anything to the contrary in
this Agreement, Corning shall retain all right, title and interest in and to,
and exclude from the sale hereunder: (a) all cash associated with the conduct
of, or otherwise held by, the Serengeti Business as of or prior to the Closing
Date; (b) all refunds for taxes of any nature (including without limitation
income taxes) relating to the operation or ownership of the Assets and/or the
Serengeti Business prior to the Closing Date; (c) all accounts receivable
existing as of or prior to the Closing Date arising out of sales or operations
of the Serengeti Business conducted by Corning; (d) except for those assets
conveyed pursuant to Section 9.3(b), all assets of or associated with the
Serengeti Business that are located in Japan; (e) all assets of or associated
with the Serengeti Business that are located in France (including, without
limitation, assets associated with the processing of glass lens blanks into
Strata monolithic polarizing lenses); (f) subject to the license agreement
described in Section 11.2, all Corning Patents, all Corning
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Know-How and trademarks of Corning other than the Serengeti Trademarks; and (g)
all deposits in respect of assets and rights of Corning or the Serengeti
Business (collectively, the "Retained Assets").
ARTICLE III - CERTAIN LIABILITIES
Upon the terms, subject to the conditions and on the basis of the
representations, warranties and agreements hereinafter set forth:
3.1 Buyer Assumed Liabilities. Corning agrees to assign to Buyer on the
Closing Date, and Buyer agrees to assume on the Closing Date, and shall
thereafter be responsible for paying and satisfying, and shall indemnify, defend
and hold Corning and its direct and indirect subsidiaries harmless with respect
to, the following liabilities and obligations of Corning or any of its direct or
indirect subsidiaries:
(a) All liabilities and obligations which: (i) are related to the
operations or the Assets of the Serengeti Business from and after the Closing
Date; (ii) are contained in the leases (including without limitation rent and
other obligations), contract rights or unfilled customer orders included in the
Assets and which relate to the period from and after the Closing Date, except to
the extent otherwise provided herein; (iii) arise out of or relate to suits,
claims, liabilities, obligations, proceedings and actions of any kind
(including, without limitation, those instituted by any person or Governmental
Authority), resulting from actual or alleged harm, injury or damage to persons,
property or business arising out of the ownership of the Assets or the operation
of the Serengeti Business from and after the Closing including, without
limitation, any direct, incidental or consequential damages arising from any
product manufactured, sold or distributed by Buyer from and after the Closing in
connection with the Serengeti Business, or the
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breach of any implied or express warranty made in connection with such products,
or any property owned or occupied by the Serengeti Business from and after the
Closing (including, without limitation, suits, claims, proceedings and actions
based upon claims of product liability, breach of express or implied warranty or
a contractual right to seek a return or allowance); (iv) arise out of or relate
to returns or allowances occurring after the Closing with respect to any
products of the Serengeti Business; (v) arise out of or relate to claims or
obligations by or to distributors of products manufactured, sold or distributed
in connection with the Serengeti Business resulting from any breach, termination
or obligation under any distributor agreement or arrangement related to the
Serengeti Business provided such breach, termination or obligation is alleged to
have taken place or been incurred after the Closing; or (vi) arise out of or
related to any obligations and liabilities outstanding on or after the Closing
arising out of or relating to the cooperative advertising program of the
Serengeti Business.
(b) All foreign and United States local, state and federal taxes and
assessments (including any liabilities with respect to penalties or interest
thereon) related to the ownership or use of the Assets or income earned from the
operation, ownership or use of the Assets or the Serengeti Business from and
after the Closing Date.
(c) All unpaid liabilities and obligations (i) assumed by Buyer pursuant
to the express terms and conditions of this Agreement, including the Schedules
hereto and/or (ii) notwithstanding Section 3.2, to the extent an adjustment in
respect of which is made in favor of Buyer pursuant to Section 4.3 of this
Agreement.
All such obligations being assumed by Buyer are herein called the "Buyer
Assumed Liabilities" or the "Assumed Liabilities."
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3.2 Obligations to be Retained.
(a) In connection with the Assets sold to Buyer hereunder, Corning shall
retain, and shall be responsible for paying and satisfying, and shall indemnify,
defend and hold Buyer harmless with respect to, the following liabilities and
obligations relating to the Assets and the Serengeti Business (referred to,
including Section 3.2(b), as the "Retained Liabilities"):
(i) All foreign and United States local, state and federal taxes and
assessments (including any liabilities with respect to penalties or interest
thereon) related to the ownership or use of the Assets or income earned from the
operation or ownership of the Assets and the Serengeti Business before the
Closing Date (except such taxes and assessments to the extent an adjustment is
made in favor of Buyer pursuant to Section 4.3).
(ii) All liabilities arising out of the Contract Rights to be
transferred to Buyer described under Section 7.8 which are not assigned to Buyer
because necessary consents to such assignment have not been obtained by the
Closing Date (or such later date as may be mutually agreed upon by the parties
hereto).
(iii) Judgments, litigation or claims relating to periods and
arising out of events occurring prior to the Closing Date, excluding however
Buyer Assumed Liabilities.
(iv) Any other liabilities or obligations relating to the Assets or
the Serengeti Business which accrued or relate to periods prior to the Closing
Date and are not included in the Buyer Assumed Liabilities or which are incurred
before or after the Closing Date and are not disclosed herein or the Schedules
and Exhibits hereto to the extent required by this Agreement (provided that to
the extent such liability or obligation is not assumed by Buyer pursuant to
clause (ii), (iii), (iv), (v) or (vi) of Section 3.1(a) and, notwithstanding any
provision of this
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Agreement to the contrary, Corning shall retain the corresponding benefit which
gave or gives rise to such liability or obligation).
(b) Except to the extent an adjustment is made in favor of Buyer pursuant
to Section 4.3 of this Agreement, Corning shall be responsible for paying and
satisfying all accounts payable existing as of the Closing Date arising out of
or incurred with respect to operations of the Serengeti Business conducted by
Corning prior to the Closing Date.
ARTICLE IV - CONSIDERATION
4.1 Purchase Price. The total purchase price ("Purchase Price") for the
Assets and the Buyer Assumed Liabilities to be sold or transferred pursuant to
this Agreement shall be Twenty Seven Million Five Hundred Thousand Dollars
($27,500,000), subject to adjustment as provided in Section 4.3.
4.2 Payment of the Purchase Price. At Closing, (i) Buyer shall pay the
Purchase Price, less the Deposit Amount as of the Closing Date, to Corning in
immediately available funds by wire transfer to one or more accounts designated
by Corning, (ii) Buyer and Corning shall direct the Escrow Agent to pay the
Deposit Interest as of the Closing Date to Corning in immediately available
funds by wire transfer to one or more accounts designated by Corning, which
Deposit Interest, upon receipt thereof by Corning, shall be credited to Buyer's
payment of a portion of the Purchase Price, and (iii) the Deposit, as retained
by the Escrow Agent pursuant to Section 16.9(b), shall be credited to Buyer's
payment of a portion of the Purchase Price and shall continue to be held by the
Escrow Agent pursuant to Section 16.9(b) hereof and the Escrow Agreement.
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4.3 Adjustments to Purchase Price; Procedures. In furtherance of the
retention of liabilities and assumption of liabilities contemplated by Sections
3.2 and 3.1, respectively, at and after the Closing there shall be an adjustment
of the Purchase Price as provided in this Section 4.3. The Purchase Price shall
be adjusted and the charges identified below relating to the operation of the
Serengeti Business shall be apportioned so that Corning and Buyer shall bear
responsibility and be entitled to benefit as set forth in this Section 4.3.
(a) At Closing. No later than five business days prior to the
Closing Date, Corning shall deliver to Buyer Corning's certificate, estimated as
of the Closing Date, setting forth the following adjustments proposed to be made
at the Closing as of the Closing Date (the "Closing Adjustments"). The Closing
Adjustments shall consist of the following:
(i) the aggregate amount of prepaid expenses arising from
payments made for goods or services prior to the Closing Date where all or part
of the goods or services will not have been supplied at the Closing Date
(including, without limitation, rents paid in advance for a rental period
extending beyond the Closing Date); minus
(ii) the sum of:
(A) advanced payments received from customers prior to the
Closing Date for services to be rendered or goods to be supplied in whole or in
part on or after the Closing Date; and
(B) accrued expenses incurred in the ordinary course of the
Serengeti Business for goods and services (including, without limitation, rents
in respect of periods prior to the Closing Date) which are payable by Buyer
after the Closing Date and would otherwise
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constitute Retained Liabilities, including, without limitation, personal and
real property taxes or special assessments (other than any taxes incurred as a
result of the transactions contemplated by this Agreement) and utility and fuel
charges, if any, in respect of any personal or real property included in the
Assets and conveyed to Buyer pursuant to this Agreement (provided, however, that
with respect to personal and real property taxes for such personal or real
property included in the Assets, if the tax bills in respect of the same for the
tax year in which the Closing Date occurs are available, apportionment shall be
based upon the amounts disclosed in such tax bills, but, if and to the extent
the tax bills in respect of such personal and real property for the year in
which the Closing Date occurs are not available as of the Closing Date, such
taxes shall be apportioned for purposes of the Closing Adjustments on the basis
of the tax bills therefor for the preceding year).
Prior to Closing, Corning shall provide Buyer or Buyers
representatives with copies of such books and records as Buyer may reasonably
request for purposes of verifying such adjustments. At the Closing, adjustments
will be made to the Purchase Price on the basis of Corning's certificate
delivered pursuant to this Section 4.3(a), provided Buyer has not given notice
to Corning that in Buyer's opinion the proposed adjustments are materially
incorrect. Pursuant to such adjustments, if the aggregate amount of undisputed
Closing Adjustments as reflected on Corning's certificate is a positive amount
(i.e., greater than zero dollars), the Purchase Price shall be increased by the
aggregate amount of such Closing Adjustments and, if the aggregate amount of
undisputed Closing Adjustments as reflected on Corning's certificate is a
negative amount (i.e., less than zero dollars), the Purchase Price shall be
decreased by the aggregate amount of such Closing Adjustments. If Buyer gives
notice that in its opinion any of the proposed adjustments are materially
incorrect, and if the parties have not been able to resolve the matter prior to
the Closing Date, any disputed amounts shall be resolved pursuant to the Post-
Closing Adjustments set forth in Section 4.3(b).
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(b) Post-Closing Adjustments. As soon as practicable following the
Closing Date, and in any event within 120 days thereafter, or at such other time
as the parties mutually agree, Corning shall deliver to Buyer Corning's
certificate setting forth as of the Closing Date, the following (the
"Post-Closing Adjustments"):
(i) the aggregate amount of prepaid expenses arising from
payments made for goods or services prior to the Closing Date where all or part
of the goods or services will not have been supplied at the Closing Date
(including, without limitation, rents paid in advance for a rental period
extending beyond the Closing Date); minus
(ii) the sum of:
(A) advanced payments received from customers prior to the
Closing Date for services to be rendered or goods to be supplied in whole or in
part on or after the Closing Date; and
(B) accrued expenses incurred in the ordinary course of the
Serengeti Business for goods and services (including, without limitation, rents
in respect of periods prior to the Closing Date) which are payable by Buyer
after the Closing Date and would otherwise constitute Retained Liabilities,
including, without limitation, personal and real property taxes or special
assessments (other than any taxes incurred as a result of the transactions
contemplated by this Agreement) and utility and fuel charges, if any, in respect
of any personal or real property included in the Assets and conveyed to Buyer
pursuant to this Agreement (provided, however, that with respect to personal and
real property taxes for such personal or real property included in the Assets,
if the tax bills in respect of the same for the tax year in which the Closing
Date occurs are available, apportionment shall be based upon the amounts
disclosed in such tax bills, but, if
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and to the extent the tax bills in respect of such personal and real property
for the year in which the Closing Date occurs are not available as of the date
of Corning's certificate delivered pursuant to this Section 4.3(b), such taxes
shall be apportioned on the Closing Date on the basis of the tax bills therefor
for the preceding year).
Each of Buyer and Corning shall provide the other or the other's
representatives access to all books and records each Party may reasonably
request for purposes of preparing such certificate or verifying such
adjustments. Corning's certificate shall be final and conclusive unless objected
to by Buyer in writing within 15 business days after delivery. Corning and Buyer
shall attempt jointly to reach agreement as to the amount of Post-Closing
Adjustments within sixty (60) days after receipt by Corning of such written
objection by Buyer, which agreement, if achieved, shall be binding upon all
parties to this Agreement and not subject to dispute or review. If Corning and
Buyer cannot reach agreement as to the amount of Post- Closing Adjustments
within such sixty (60) day period, Corning and Buyer shall promptly submit any
disputed adjustment to Ernst & Young, or, if they are unable or unwilling to so
act, such other mutually satisfactory independent certified public accounting
firm of national stature which has not been employed as a primary auditor by any
Party hereto or an affiliate thereof for a period of two (2) years prior to the
date of such referral. One-half of the fees and expenses of such accounting firm
shall be borne by each Party. The determination of such firm shall be final and
binding upon all parties to this Agreement and not subject to dispute or review.
After taking into account any adjustment which has previously been made pursuant
to Section 4.3(a), any amounts due Buyer or Corning for Post-Closing Adjustments
shall be paid within 10 business days after final agreement or determination
except that, in the case of a dispute, the undisputed amount shall be paid in
accordance with the above provisions and payment shall not be delayed pending
final agreement or determination of the dispute.
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4.4 Returns and Allowances. To the extent, if any, that a customer
of the Serengeti Business effects or receives a chargeback or credit against an
account receivable of Corning relating to the Serengeti Business in connection
with any return or allowance sought by such customer which constitutes a Buyer
Assumed Liability, from time to time after the Closing Date, Buyer shall pay
Corning within ten (10) business days after request therefor an amount equal to
any such chargeback or credit.
ARTICLE V - CLOSING
5.1 Closing; Closing Date. Subject to compliance with the notice and
waiting periods of approvals of Governmental Authorities, if applicable, and to
the other terms and conditions hereof, the closing ("Closing") of the
transactions contemplated by this Agreement shall take place at the offices of
Cooperman Levitt Winikoff Lester & Newman, P.C in New York, New York at 10:00
a.m. ten (10) business days after notice by either Party to the other after
compliance with all applicable approvals of Governmental Authorities required to
be obtained prior to the Closing and the satisfaction of the conditions set
forth in Article XIV hereof or on such other date and such other place as the
Parties may agree. The day of Closing is hereinafter called the "Closing Date".
In the event (i) the Closing Date does not occur by 5:00 p.m. on March 31, 1997
(the "Outside Date") or (ii) the financial statements referred to in Section
6.2(b) have not been delivered to Buyer on or prior to November 30, 1996, this
Agreement may be terminated as provided in, and subject to the provisions of,
Section 16.9(a).
5.2 Transfer Taxes, Other Costs, Bulk Sales Act. The obligation to
pay gains tax, title recording fees and other sales taxes and transfer costs,
including any stamp taxes, duties or taxes on the transfer of the Assets,
including, without limitation, all costs or transfer taxes related to the
Intellectual Property Rights which may be payable with respect to the
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consummation of the transactions contemplated by this Agreement, shall be
allocated between Buyer and Corning in accordance with local custom and
practice; provided, however, that Corning shall be responsible for any income
taxes payable by Corning as a result of any gain on the sale of the Assets. At
the Closing, Buyer shall deliver to Corning such resale and other certificates
as may be necessary to ensure that the sale of inventory of the Serengeti
Business pursuant to this Agreement is exempt from sales and similar taxes.
Buyer waives the provisions
of any Bulk Sales Act or similar or corresponding law of any jurisdiction
applicable to the Assets provided, however, Corning hereby agrees to indemnify
and hold Buyer and its affiliates harmless against any loss, liability, damage
or expense, including attorneys' fees, resulting from any failure by Corning to
comply with such applicable Bulk Sales act or similar or corresponding acts.
5.3 Allocation of Purchase Price for Tax Purposes. The Parties shall
use reasonable best efforts to agree in writing upon the appropriate allocation
of the Purchase Price to the Assets for federal income tax purposes prior to the
Closing.
ARTICLE VI - INTERIM CONDUCT
6.1 Conduct of the Serengeti Business. Except as set forth on
Schedule 6.1(i), (l) or (m) or as otherwise reasonably required to perform its
obligations under this Agreement, from the date hereof to the Closing Date,
Corning shall or, to the extent applicable, cause its direct or indirect
subsidiaries which own Assets to:
(a) Maintain the Assets in the ordinary course of business and in
substantially in the same manner as they were maintained on and since January 1,
1995 (including without limitation any trademark registrations), except for
normal wear and tear, scrapping and salvage; and make
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necessary material and proper repairs and renewals thereof consistent with
Corning's past practices.
(b) Use its reasonable best efforts to preserve for Buyer good
relationships with employees, customers and suppliers of the Serengeti Business.
(c) Operate the Serengeti Business in the ordinary course and in a manner
consistent with recent past practices.
(d) Not enter into any transactions out of the ordinary course of
business, including any transactions to acquire any assets or incur any
liabilities outside of the ordinary course of business, which would individually
or in the aggregate have a material adverse financial effect upon the Serengeti
Business or which would create liens or encumbrances other than Permitted
Encumbrances on the Assets, without the prior written consent of Buyer.
(e) Maintain all insurance policies in effect on the date hereof (or have
in effect substantially similar insurance policies) on the properties and
businesses of the Serengeti Business.
(f) Upon notice and subject to the provisions of Article X below, give
Buyer, its counsel, accountants and other representatives reasonable access
during normal business hours to the Assets, books, tax returns, contracts,
commitments and records, employees, customers and distributors of Corning
relating to the Serengeti Business, including documents and information with
respect to the affairs and financial condition of the Serengeti Business.
(g) Not enter into any discussion, negotiation or any contract or
agreement to sell all or substantially all of the Assets or the Serengeti
Business to any other corporation, person or
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entity.
(h) Maintain the books, accounts and records pertaining to the Serengeti
Business in the usual manner, on a basis consistent with past practices in prior
years and comply in all material respects with laws, rules, regulations,
ordinances, orders and decrees applicable to the conduct of the Serengeti
Business.
(i) Not grant any material increase in compensation payable or to become
payable to any of the employees of the Serengeti Business or any bonus payment
or similar arrangement to or with any of such employees or agents.
(j) Not sell, assign, lease or transfer any material part of the Assets,
except inventory sold in the ordinary and normal course of business.
(k) Not sell inventory of the Serengeti Business other than in the
ordinary and normal course of business.
(l) Not cancel or compromise any debts or claims of the Serengeti Business
which Buyer has agreed to purchase pursuant to the terms of this Agreement.
(m) Not make any amendment or termination before the normal termination
date of any material contract, agreement or license relating to the Serengeti
Business.
(n) Promptly make all filings required by the HSR Act required to be made
by Corning, in respect of the transactions contemplated by this Agreement and
make such additional filings and provide such additional information as may be
required by the United States Department of Justice or the United States Federal
Trade Commission to expedite prompt
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termination of any applicable waiting periods in respect of the transactions
contemplated by this Agreement under the HSR Act.
(o) Not acquire any material inventory for the Serengeti Business other
than purchases of inventory in the ordinary course of business consistent with
past practices of the Serengeti Business.
(p) Deliver to Buyer, promptly after they are available to Corning,
monthly financial statements of the Serengeti Business in form consistent with
the monthly financial statements provided to Buyer prior to the execution
hereof.
(q) Promptly notify Buyer of (1) any casualty losses or damages suffered
by the Serengeti Business with respect to property and assets having an
individual replacement cost of more than $100,000 or aggregate replacement cost
of more than $250,000, (2) any material adverse change known to Corning in the
business, properties or financial condition of the Serengeti Business taken as a
whole, and (3) any written notice of violation received by Corning or any of its
subsidiaries from a Governmental Authority with respect to the Assets relating
to the Serengeti Business which, if adversely determined, would materially
adversely affect the ability of Buyer or Corning to consummate the transactions
contemplated by this Agreement.
(r) Not agree prior to the Closing Date to any request by a customer or
distributor for a return after the Closing Date of products of the Serengeti
Business without the consent of Buyer (which consent will not be unreasonably
withheld, delayed or conditioned after consideration by Buyer of, among other
things, the potential impact of such return on Buyer or the Serengeti Business
after the Closing Date).
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6.2 Cooperation and Consents.
(a) From the date hereof until the Closing Date and thereafter, if
necessary, Corning shall obtain all government and other approvals and consents
required to be obtained by Corning (including, but not limited to, any consents
required for the assignment by Corning to Buyer of the Assets referred to in
Sections 2.1(a), (d), (f), (g) and (i)) for the transactions contemplated by
this Agreement and Buyer shall cooperate in good faith to the extent reasonably
requested by Corning. From the date hereof until the Closing Date and
thereafter, if necessary, Buyer shall obtain all governmental and other
approvals and consents required to be obtained by Buyer for the transactions
contemplated by this Agreement and Corning shall cooperate in good faith to the
extent reasonably requested by Buyer provided, however, that Corning shall not
have any liability for Buyer's compliance with applicable securities laws and
Nasdaq rules except to the extent, if any, such liability may arise from
Corning's breach of any representation, warranty or covenant hereunder. Buyer
shall obtain, as promptly as practicable, all necessary shareholder votes,
consents and approvals and related consents and approvals of the Securities and
Exchange Commission and appropriate stock exchanges or the Nasdaq Stock Market,
as the case may be, to the transactions contemplated by this Agreement and the
effectuation of any financing required by Buyer to consummate the transactions
contemplated by this Agreement. Promptly after receipt by the Buyer of the
information specified in Section 6.2(b), Buyer shall file all requisite proxy
materials and other documents with the Securities and Exchange Commission and
appropriate stock exchanges or the Nasdaq Stock Market, as the case may be,
necessary or appropriate to obtain all such votes, consents and approvals.
(b) Corning agrees that it shall, at Corning's cost and expense, (i) use
its commercially reasonable best efforts to make promptly available to Buyer,
upon Buyer's request, such financial statements and financial statement
schedules and other financial information relating to the Serengeti Business
which Buyer may require in order to prepare any proxy
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statement which it files with the Securities and Exchange Commission, or any
applicable state securities commission, in connection therewith in connection
with obtaining the shareholder approval referred to in Section 6.2(a), and shall
direct Price Waterhouse to cooperate with Buyer in connection therewith and (ii)
use its commercially reasonable best efforts to obtain promptly for Buyer, upon
Buyer's request, any consent, report, opinion or letter of Price Waterhouse
required to be filed by Buyer under applicable regulations of the Securities and
Exchange Commission or any applicable state securities commission in connection
therewith.
(c) Corning agrees that it shall, at Buyer's cost and expense, (i) use its
commercially reasonable best efforts to make promptly available to Buyer, upon
Buyer's request, such financial statements, financial statement schedules and
other financial information relating to the Serengeti Business which Buyer may
be required to include in any registration statement, report or other document
which Buyer may file with the Securities and Exchange Commission or any
applicable state securities commission, and shall direct Price Waterhouse to
cooperate in connection therewith and (ii) use its commercially reasonable best
efforts to obtain promptly for Buyer, upon Buyer's request, any consent, report,
opinion or letter of Price Waterhouse required to be filed by Buyer under
applicable regulations of the Securities and Exchange Commission or any
applicable state securities commission in connection therewith.
6.3 HSR Notification. Buyer agrees to make promptly all filings required
by the HSR Act required to be made by Buyer, in respect of the transactions
contemplated by this Agreement and make such additional filings and provide such
additional information as may be required by the United States Department of
Justice or the United States Federal Trade Commission to expedite prompt
termination of any applicable waiting periods in respect of the transactions
contemplated by this Agreement under the HSR Act.
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6.4 Lien and Judgment Searches. Corning agrees that, as promptly as is
reasonably practicable after the date hereof, it shall cause to be delivered to
Buyer lien and judgment search reports from the Secretary of State of New York,
Steuben County, New York and Chemung County, New York with respect to Corning
and its direct and indirect subsidiaries which are transferring Assets to Buyer
pursuant hereto in customary form.
ARTICLE VII - REPRESENTATIONS AND WARRANTIES OF CORNING
The representations and warranties of Corning set forth in Sections 7.2,
7.3, 7.4, 7.7, 7.8, 7.9, 7.11, 7.16, 7.18 and 7.21 shall, insofar as they are
made by Corning with respect to itself, also be deemed to have been made by
Corning, to the extent appropriate, with respect to any of Corning's direct or
indirect subsidiaries that will convey Assets pursuant to this Agreement.
7.1 Organization and Authorization. Corning represents and warrants to
Buyer that it: (i) is a corporation duly organized and validly existing in good
standing under the laws of the State of New York; (ii) has the full corporate
power and authority to carry on its businesses as now being conducted and to own
and lease its properties; (iii) is qualified and in good standing as a foreign
corporation in all jurisdictions where the failure to so qualify would have a
materially adverse effect on the Assets or the business as conducted by the
Serengeti Business prior to the Closing; and (iv) has full corporate power and
authority to execute and deliver this Agreement and other agreements and
instruments to be executed and delivered by it in connection herewith and to
consummate the transactions contemplated hereby and thereby, subject however to
the consents and approvals described in Sections 7.6 and 15.2.
7.2 No Violation of Other Instruments.
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(a) Corning represents and warrants to Buyer that the execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby shall not: (i) violate any provision of the Articles of
Incorporation and By-laws of Corning; (ii) violate any provision of, or result
in the termination of, or the acceleration of, any obligation under any
mortgage, note, lien, lease, franchise, license, permit, agreement, instrument,
order, arbitration award, judgment or decree to which Corning is a party and
which would have a materially adverse effect on the Assets or on the operation
of the Serengeti Business; (iii) except with respect to the approvals of
Governmental Authorities referred to in Section 7.6, violate or conflict with
any law to which Corning is subject, restricting or prohibiting its ability to
consummate the transactions contemplated hereby or which could have a materially
adverse effect on the Assets or the operations of the Serengeti Business; or
(iv) impose any lien, mortgage, pledge, encumbrance, restriction or charge on
any of the Assets, which would materially adversely affect the Serengeti
Business.
(b) Corning, with respect to the Assets, represents and warrants to Buyer
that, except as otherwise disclosed to Buyer in this Agreement, including the
Schedules and Exhibits thereto, (i) Corning has good and marketable title to the
Assets free and clear of any liens, claims, defects in title or other
encumbrances other than Permitted Encumbrances and (ii) Corning or its
subsidiaries has valid leasehold interests in all the property leased by them
and used in the Serengeti Business and all such leases are valid and in full
force and effect and enforceable against Corning and, to the best of Corning's
knowledge, the other parties thereto in accordance with their terms and are set
forth in Schedule 2.1(a) or Schedule 7.8 hereto; provided, however, that this
Section 7.2(b) shall not apply to any Assets (including, without limitation,
leasehold interests) that are Retained Assets.
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7.3 Intellectual Property Rights. Corning represents and warrants to
Buyer, except as described on Schedule 7.3, Corning is the actual and, if
applicable, record owner of the Intellectual Property Rights free and clear of
all encumbrances other than Permitted Encumbrances and has the right to the use
thereof and is able to transfer the same as contemplated by this Agreement
without restriction. Except as described on Schedule 7.3, there is no pending
administrative proceeding against Corning materially affecting the Intellectual
Property Rights in the course of its operation of the Serengeti Business or any
third party's patent, trademark, trade name, copyright, trade secret, right of
publicity or privacy or other proprietary right. Except as described on Schedule
7.3, Corning has no knowledge and has not received any notice of any
infringement or alleged infringement by it in the course of its operation of the
Serengeti Business from January 1, 1994 of any patent, trademark, trade name,
copyright, trade secret, right of publicity or privacy or other proprietary
right of another and, since January 1, 1994, has not made any claim of
infringement against any other person for infringement of any Intellectual
Property Right. The Serengeti Trademarks constitute all of the trademarks,
registrations, applications, renewals, continuations and extensions thereof
owned by Corning which are used primarily in the Serengeti Business.
7.4 Powers of Attorney. Except to the extent set forth in Schedule 7.4,
Corning represents and warrants to Buyer that it has no powers of attorney
related to the Serengeti Business outstanding other than those issued in the
ordinary course of business with respect to insurance, tax and intellectual
property matters.
7.5 Judgment Decrees or Orders in Restraint of Business; Litigation.
Corning represents and warrants to Buyer, except as set forth in Schedule 7.5,
there are no actions, suits or proceedings pending or, to the best of Corning's
knowledge, threatened or, to the best of Corning's knowledge, investigations
pending or threatened which might reasonably be expected
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either individually or in the aggregate to result in any liability which would
have a material adverse effect on the Serengeti Business or the Assets.
7.6 Approvals. Corning represents and warrants to Buyer to the best of its
knowledge that: except with respect to the HSR Act, as amended, any other
required Governmental Authority approvals as set forth on Schedule 7.6, any
restrictions on the transfer or licensing of technology to foreign parties
imposed by the United States Government generally and such consents as are
required to transfer the permits, licenses and franchises described in Section
2.1(g), and leases, contracts and manufacturers' warranties comprising a portion
of the Assets, no approval, consent, waiver or other order, action of or filing
or registration with any court or other Governmental Authority or any other
third party is required for the execution and delivery by Corning of this
Agreement and the other agreements and instruments executed or to be executed
and delivered by it in connection herewith, and the consummation of the
transactions contemplated hereby.
7.7 Inventory; Returns and Allowances. Corning, with respect to the
inventory included in the Assets, represents and warrants to Buyer that: (i)
other than inventory maintained by sales and service personnel in the ordinary
course of business, the inventory included in the Assets is located at
facilities and locations leased or owned by Corning and used in the Serengeti
Business or its subcontractors; (ii) except to the extent of adjustments or
reserves set forth on the Statement of Net Assets dated as of September 30,
1996, the inventory reflected thereon was saleable and useable as of such date;
(iii) as of the Closing Date, the saleable and useable inventory valued at
standard cost as determined by Corning and used in the ordinary course of the
Serengeti Business, will be at least $10 million; and (iv) the inventory is
currently maintained at a level consistent with prior practices in the Serengeti
Business. Schedule 7.7 sets forth the aggregate amount of returns and allowances
from distributors and customers accrued by the Serengeti Business during the
year ended December 31, 1995 and the eight-month period ended
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August 31, 1996.
7.8 Material Contracts. Corning, with respect to the Assets it is selling
hereunder, represents and warrants to Buyer: (i) Schedule 7.8 contains all
written contracts included in the Assets and which relate primarily to the
Serengeti Business which are: (a) contracts of employment of an officer,
employee or consultant with a term of more than one year for a total
compensation or fee in any one year in excess of $25,000; (b) contracts for
capital expenditures involving expenditures of more than $25,000; (c) contracts
for the purchase of supplies or the sale of goods continuing for a period of
more than one year from the Closing Date and involving payments in excess of
$25,000; (d) leases having an unexpired terms as of the Closing Date of more
than two (2) years and involving annual rent or other payments in excess of
$25,000; or (e) distribution, dealer, manufacturer's representative, sales
agency or franchise contracts not terminable without penalty by Corning on one
hundred twenty (120) days' or less notice; or (f) other contracts involving
annual payments in excess of $25,000; (ii) as of the date hereof Corning is not
in material default of any such contracts listed on Schedule 7.8; and (iii)
except as set forth in Schedule 7.8, Corning has not received notice of
termination of any of the contracts listed on Schedule 7.8.
7.9 Labor Agreements and Actions. Corning represents and warrants to Buyer
that: (a) there are no controversies between Corning and its employees which
might reasonably be expected to materially adversely affect the conduct of the
Serengeti Business, or any unresolved labor grievances or unfair labor practice
or labor arbitration proceedings pending or threatened relating to the Serengeti
Business; (b) there are no strikes by employees of the Serengeti Business
pending which affect the Serengeti Business; (c) Corning is not a party to or
bound by any collective bargaining agreements with respect to the employees
listed on Schedule 9.2(a) and to the best of Corning's knowledge there are no
union organizational efforts presently being made or threatened with respect to
such employees; and (d) Corning does not have outstanding,
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and has not received, with respect to the employees listed on Schedule 9.2(a)
within the twelve (12) months up to and including the date of this Agreement any
notice of any claim that Corning has not complied with any laws relating to the
employment of labor, including any provisions thereof relating to wages, hours,
collective bargaining, the payment of social security and similar taxes, equal
employment opportunity, employment discrimination and employment safety, or that
Corning is liable for any arrears of wages or any taxes or penalties for failure
to comply with any of the foregoing.
7.10 Employees. Corning represents and warrants to Buyer that Schedule
7.10 sets forth a description of the benefit plans existing as of the date
hereof for U.S. non-union employees of the Serengeti Business.
7.11 Permits and Licenses. Corning, with respect to the Assets, represents
and warrants to Buyer that Corning has and, to the extent they are transferable
(assuming, for this purpose only, that any Assets requiring Governmental
Authority or third party consents to assign are transferable), the Assets
include all the permits, licenses, franchises and other authorizations from any
Governmental Authorities necessary to operate the Assets in the manner and in
connection which the Serengeti Business as it is currently being conducted.
7.12 Taxes. Corning represents and warrants to Buyer that all required
federal, state, county, local and foreign tax returns, reports and declarations
required to be filed in connection with the Serengeti Business have been filed,
and all taxes shown as due on such returns, reports and declarations have been
paid or reserves therefor have been reflected on the books and records of the
Serengeti Business or Corning.
7.13 No Government Investigation. Except to the extent set forth on
Schedule 7.13, Corning represents and warrants to Buyer there is no request for
information or court action and
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to the best of its knowledge that there is no investigation of any Governmental
Authority, which, if adversely determined, would prohibit or prevent or claim
damages as a result of this transaction or the transactions contemplated hereby.
7.14 Financial Information. (a) Corning represents and warrants to Buyer
that the methodologies, except as otherwise set forth in the footnotes thereto,
used in the preparation of the Schedule of Operating Results and the Statement
of Net Assets of the Serengeti Business dated as of September 30, 1996, are
consistent with the practices used by Corning and have included the disclosures
required by the United States Generally Accepted Accounting Principles.
(b) Corning represents and warrants to Buyer that, as of the date of
this Agreement, Corning has disclosed in the Schedules to this Agreement to
Buyer all material information and matters known to Corning that, together with
the uncertainty of the economy and sunglass industry generally, could materially
adversely affect the forecasted sales, operating margins or operating results of
the Serengeti Business set forth on Schedule 7.14(b) for the period referred to
therein (the Forecasts").
7.15 Environmental Matters. Corning represents and warrants to Buyer to
the best of its knowledge that it is in all material respects in compliance with
applicable federal, state, local or foreign laws, orders, regulations and
requirements applicable to its Serengeti Business that relate to or create
liability in respect of environmental matters.
7.16 Fees and Expenses. Corning represents and warrants that Corning has
not employed a finder or broker in respect of this Agreement and the transaction
contemplated hereby other than CS First Boston Corporation, whose fees shall be
paid by Corning.
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7.17 Material Manufacturing Assets. Corning represents and warrants to
Buyer that the manufacturing assets included in the Assets and currently in use
in the Serengeti Business are maintained and are, in all material respects, in
good condition and repair, reasonable wear and tear excepted, and are adequate
for the uses to which they are being put; and none of such Assets is in need of
substantial maintenance or repair except for ordinary, routine maintenance and
repair; provided, however, the foregoing shall not apply to any machinery,
equipment, fixtures, manufacturing assets or the facility of the Serengeti
Business located in Fukui, Japan. The machinery to be conveyed to Buyer pursuant
to Section 9.3(b) shall, both from and after the Closing Date and until and upon
such delivery, be, in all material respects, in good condition and repair,
reasonable wear and tear excepted and adequate for the uses to which such
machinery (or comparable machinery) was put by the Serengeti Business in the
ordinary course prior to the date of this Agreement, and such machinery shall
not be, as of the Closing Date and thereafter until the date of such delivery,
in need of substantial maintenance and repair except for ordinary, routine
maintenance and repair.
7.18 Insurance. Corning represents and warrants to Buyer that Corning
maintains the policies of fire, comprehensive all-risk, liability (including
products liability) and other forms of insurance covering the Assets in such
amounts and against such risks as are generally maintained for comparable
businesses and properties, and such valid policies or substantially similar
policies of such insurance will be in full force and effect on the Closing Date.
7.19 Absence of Certain Changes, Events or Conditions. Corning represents
and warrants to Buyer that since September 30, 1996, except (i) as set forth on
Schedule 7.19 or any of the other Schedules hereto, (ii) changes resulting from
or relating to such changes as have affected and/or may affect the economy or
the sunglass industry generally and/or (iii) such changes as may result from (A)
the failure of the Serengeti Business to realize the Forecasts
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and/or (B) the financial performance of the Serengeti Business after September
30, 1996 (as to each of which and all related matters involving the Forecasts
and/or financial performance Corning makes no representation or warranty in this
Agreement, other than as expressly set forth on Section 7.14(b)), Corning has
not, with respect to the Serengeti Business:
(a) suffered or incurred any material adverse change in the Assets
or, through the date of this Agreement, in the financial condition of the
Serengeti Business;
(b) suffered or incurred any material damage, destruction or loss
adversely affecting the Assets, whether or not such damage, destruction or loss
has been insured against;
(c) made or granted any increase in compensation payable or to
become payable to any of Corning's employees or agents or any bonus payment or
similar arrangement to or with any of its employees or agents, other than
increases in coverage or benefits available under employee benefits plans and
arrangements to any such employees or agents in the ordinary course of business
and consistent with Corning's past practices;
(d) other than in the ordinary and normal course of business, sold,
assigned leased or transferred any of the Assets, except inventory sold in the
ordinary and normal course of business;
(e) canceled or compromised any debts or claims other than in the
ordinary course of business;
(f) without consent of Buyer entered into any material transaction
(other than as contemplated by this Agreement) other than in the ordinary and
normal course of business;
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(g) made any amendment or termination before normal termination date
of any material contract, agreement or license to which Corning is a party;
(h) made any material change in the methods or procedures (including
deferral of payment not consistent with past practice) relating to the discharge
of trade accounts or the payment of any other expenses, debts or obligations or
made any other change to its accounting procedures; or
(i) made any agreement to do any of the foregoing.
7.20 Services Provided by Parent Company. Corning represents and warrants
to Buyer that Schedule 7.20 hereto describes those material services or items of
any kind which have been provided to the Serengeti Business by Corning or by any
affiliate of Corning since January 1, 1995. Except (i) for the Retained Assets,
and (ii) those assets necessary to provide the services described on Schedule
7.20 hereto or the services provided for in the agreements set forth in Exhibits
III and IV, the Assets, together with the rights to be granted to Buyer pursuant
to the agreements to be entered into in connection with the transactions
contemplated by this Agreement, constitute all of the material tangible and
intangible property necessary to conduct the Serengeti Business as now conducted
or as contemplated herein.
7.21 Distributors and Customers. Corning represents and warrants to Buyer
that, except (i) as set forth on Schedule 7.21 or any of the other Schedules
hereto, (ii) changes resulting from or relating to such changes as have affected
and/or may affect the economy or the sunglass industry generally and/or (iii)
such changes as may result from (A) the failure of the Serengeti Business to
realize the Forecasts and/or (B) the financial performance of the Serengeti
Business after September 30, 1996 (as to each of which and all related matters
involving the
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Forecasts and/or financial performance Corning makes no representation or
warranty in this Agreement, except as expressly set forth in Section 7.14(b)),
since September 30, 1996, there has not occurred a material adverse change in
the business relationships of Corning with the twenty-five largest (determined
in terms of sales volume for the nine months ended September 30, 1996)
distributors or customers of the Serengeti Business which has had a material
adverse effect on the Serengeti Business taken as a whole; provided, however,
that the foregoing shall not apply to any change resulting from any direct
dealings or actions by or on behalf of Buyer with any such distributor or
customer or any reduction in sales with any such customers or distributors not
attributable to (i) a termination or threatened termination of one or more such
business relationships or (ii) a breach of this Agreement by Corning.
7.22 Disclosures. Except to the extent disclosed in this Agreement, the
Schedules and/or Exhibits hereto, the representations and warranties of Corning
contained in this Agreement or in any Schedule, Exhibit, certificate or other
document delivered by Corning at Closing pursuant to this Agreement do not or
shall not, as the case may be, contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
7.23 Limitation. No representations or warranties whatsoever, other than
the express representations and warranties set forth in this Article VII, is
made by Corning, and, except to the extent of the foregoing, Corning hereby
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESSED OR IMPLIED, AS TO THE
CONDITION, VALUE OR QUALITY OF THE TANGIBLE ASSETS AND PROPERTIES OF THE
SERENGETI BUSINESS AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTY OF
MERCHANTABILITY, USAGE OR FITNESS FOR ANY PARTICULAR PURPOSE.
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ARTICLE VIII - REPRESENTATIONS AND WARRANTIES OF BUYER
8.1 Organization and Authorization. Buyer represents and warrants to
Corning that it: (i) is a corporation duly organized and validly existing in
good standing under the laws of the State of New York; (ii) has the full
corporate power and authority to carry on its business as now being conducted;
(iii) is qualified in good standing as a foreign corporation in all
jurisdictions where the failure so to qualify would have a materially adverse
effect on the business normally conducted by Buyer prior to the Closing; and
(iv) has full corporate power and authority to execute and deliver this
Agreement and other agreements and instruments to be executed and delivered by
it in connection herewith and to consummate the transactions contemplated hereby
and thereby, subject however to the consents and approvals described in Section
8.4, below.
8.2 No Violation of Other Instruments. (a) Buyer represents and warrants
to Corning that the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby shall not: (i) violate any
provision of the articles of incorporation and by-laws of Buyer; (ii) violate
any provision of, or result in the termination of, or the acceleration of, any
obligation under mortgage, note, lien, lease, franchise, license, permit,
agreement, instrument, order, arbitration award, judgment or decree to which
Buyer is a party; and (iii) except with respect to the approvals referred to in
Section 8.3, violate or conflict with any law to which Buyer is subject,
restricting or prohibiting its ability to consummate the transactions
contemplated hereby.
8.3 Approvals. Buyer represents and warrants to Corning that: except with
respect to the HSR Act, as amended, any other required Governmental Authority
approvals as set forth on Schedule 7.6, the votes, consents and approvals
referred to in the third and fourth sentences of
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Section 6.2(a), any restrictions on the transfer or licensing of technology to
foreign parties imposed by the United States Government generally, such consents
as are required to transfer the permits, licenses and franchises described in
Section 2.1(g) and such consents as are required to transfer the leases,
contracts and manufacturer warranties comprising a portion of the Assets, to the
best of Buyer's knowledge, no approval, consent, waiver or other order, action
of or filing or registration with any court or other Governmental Authority is
required for the execution and delivery by Buyer of this Agreement and the other
agreements and instruments executed or to be executed and delivered by it in
connection herewith.
8.4 No Government Investigation. Except as disclosed by Corning on
Schedule 7.13, Buyer represents and warrants to Corning that there is no request
for information or court action and, to the best of Buyer's knowledge, there is
no investigation of any Governmental Authority which, if adversely determined,
would prohibit or prevent or claim damages as a result of this transaction or
the transactions contemplated hereby.
8.5 No Broker. Buyer represents and warrants to Corning that no agent or
broker or other persons acting pursuant to authority given by Buyer is entitled
to any commission or finder's fee in connection with the transaction
contemplated by this Agreement.
ARTICLE IX - EMPLOYEES, EMPLOYEE BENEFITS AND CERTAIN
TRANSITIONAL MATTERS
9.1 Effect on Employment. Except as provided in this Article IX, Corning
and Buyer agree that (a) the transactions contemplated by this Agreement are not
intended to affect the employment of the personnel of the Serengeti Business and
(b) any and all obligations to employees of the Serengeti Business in respect of
periods prior to the Closing, including but not
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limited to, benefits and severance, shall be and remain the obligation and
liability of Corning, and Corning shall indemnify, defend and hold Buyer
harmless with respect thereto.
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9.2 Employment of Horseheads Employees.
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(a) Prior to Closing, Buyer will designate which of the employees of the
Serengeti Business who are principally employed at Horseheads as listed on
Schedule 9.2(a) it intends to offer employment to on and after Closing and shall
offer employment to such employees effective as of the Closing Date upon such
terms and conditions as Buyer shall establish. Buyer agrees that any such
employment pursuant to this Section 9.2 shall include credit for the employees'
years of service with Corning for the purpose of determining eligibility of
benefits offered by Buyer. All employees who accept Buyer's offer of employment
pursuant to this Section 9.2(a) are hereinafter referred to as "Hired
Employees". For a period of ninety (90) days after the Closing to the extent it
is reasonably possible to do so (the "Transition Period" or the "Horseheads
Transition Period"), Corning or one or more of its direct or indirect
subsidiaries will continue to employ the current employees of the Serengeti
Business who, immediately prior to the Closing, were principally employed at
Horseheads (other than the Hired Employees) or, to the extent it is reasonably
possible to do so without adversely impacting or disrupting Corning's business,
appropriate substitute employees or temporary personnel and make these employees
or temporary personnel available to Buyer at Horseheads in their existing
capacities or in such substitute or temporary capacities. Buyer shall
immediately upon request of Corning (but not more than ten (10) days after such
request), made not more than once a month by Corning, reimburse Corning for the
salary, benefits and related fees and costs (other than severance benefits,
which shall remain Corning's obligation) of such employees or temporary
personnel as set forth in Corning's invoice for such charges presented with such
request; provided, that, under no circumstances is Corning obligated to guaranty
the availability of any such employees for the Transition Period or for
subsequent employment by Buyer at the end of the Transition Period. During the
Transition Period, Corning shall not, with respect to any of the current
employees of the Serengeti Business made available to Buyer pursuant to this
Section 9.2(a), increase the compensation payable by Corning to such employees,
taken as a whole, or agree to increase the coverage or benefits, when taken as a
whole, available under employee benefit plans and arrangements to any such
employees other than in the ordinary course of business consistent with
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Corning's past practices.
(b) Buyer shall indemnify, defend and hold Corning and its affiliates
harmless from and against any losses, claims, damages, liabilities, costs and/or
expenses incurred by Corning or any of its affiliates in connection with the
making available of employees or temporary personnel pursuant to Section 9.2(a);
provided, however, that the foregoing shall not apply to any negligence (other
than any claim for negligence asserted against Corning by reason of an employee
being employed by Corning for matters arising out of the provision of services
at Horseheads pursuant to this Section 9.2) or willful misconduct by Corning.
(c) Buyer covenants and agrees that Buyer shall be solely responsible and
liable for employment-related claims or benefits of any kind by the Hired
Employees which accrue from or after the time they become employed by the Buyer
(other than any matters relating to the termination of their employment with
Corning).
(d) During the Horseheads Transition Period and for a period of at least
three (3) years thereafter, Buyer shall maintain insurance covering such risks
in such amounts as is customarily maintained by businesses similarly situated.
At the Closing and thereafter upon Corning's request from time to time, Buyer
shall provide Corning with copies of policies evidencing such insurance or
certificates therefor which name Corning as a loss payee and additional named
insured.
9.3 Fukui Operations During Japan Transition Period; Delivery of Certain
Equipment. (a) During a period of up to ninety (90) days after the Closing Date
(the "Japan Transition Period"), Corning or its Japanese subsidiary shall
operate, at Buyer's cost, the Serengeti Business's facility in Fukui, Japan and
manufacture, to the extent consistent with the production capabilities of such
facility and the regular operating methods and costs thereof which were in
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effect prior to the Closing Date, such quantities of the current line of
products of the Serengeti Business manufactured as of the date of this Agreement
at the Fukui, Japan facility as Buyer may reasonably request.
(b) Upon the completion of the Japan Transition Period, Corning shall
transfer title to Buyer, pursuant to bills of sale or other documents of title
as shall be reasonably acceptable to Buyer, the equipment, tooling and other
assets listed on Schedule 9.3(b) and located at Fukui, Japan (or comparable
equipment, tooling and other assets), free and clear of all liens and
encumbrances other than Permitted Encumbrances. Such equipment, tooling and
other assets (other than inventory) shall be delivered to Buyer F.O.B. the
facility of Corning's subsidiary in Fukui, Japan and risk of loss shall pass to
Buyer upon such delivery. All inventory in Fukui, Japan as of the Closing Date
shall be delivered to Buyer F.O.B. the Fukui, Japan facility on the Closing Date
free and clear of all liens and encumbrances other than Permitted Encumbrances.
(c) Upon installation by Buyer of the equipment conveyed to it pursuant to
Section 9.3(b) in China (as to which installation Buyer shall bear the full cost
and sole responsibility), for up to a six (6) month period thereafter (the
"China Transition Period"), Corning shall provide Buyer, at Buyer's expense,
with such technical support as may be reasonably required to provide the
operators of such equipment with training for the ordinary, minimal operation
and maintenance thereof (assuming, for such purpose, that (i) such operators
have the general skills and experience to operate and maintain such equipment
and (ii) Buyer supplies glass lens blanks of quality appropriate for the proper
and efficient operation of such equipment); provided, however, that Corning
makes no representation or warranty with respect to such training. Corning shall
use its reasonable best efforts to make the Operation Manager of the Fukui,
Japan facility of the Serengeti Business available, at Buyer's full cost, during
the China Transition Period to provide technical consulting services from time
to time with respect to the ordinary operation and maintenance of such
equipment; provided, however, that Buyer shall be solely
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responsible for recruiting the Operation Manager to provide such service and for
providing such compensation, benefits and incentives as may be required to
engage the Operation Manager to provide such service. Buyer shall indemnify,
defend and hold Corning harmless with respect to all losses, claims, damages,
liabilities incurred by Corning or any of its affiliates arising out of or in
connection with Section 9.3(c); provided, however, that the foregoing shall not
apply to any negligence (other than any claim for negligence asserted against
Corning by reason of an employee being employed by Corning for matters arising
out of the provision of services pursuant to this Section 9.3(c)) or willful
misconduct by Corning.
(d) Buyer shall reimburse Corning immediately upon request (but not more
than ten (10) business days after such request) for all costs and/or expenses
incurred by Corning or any of its affiliates arising out of or in connection
with this Section 9.3 described on Schedule 9.3(d), it being understood,
however, that such costs and expenses shall not include costs and expenses
arising out of any negligence or misconduct by Corning in connection with its
operation of the Fukui, Japan facility during the Japan Transition Period.
(e) During the Japan Transition Period, Corning shall maintain such
insurance, if any, as it maintains as of the date of this Agreement with respect
to its Fukui, Japan facility and the operations thereof.
9.4 No Third Party Beneficiary. Nothing in this Article IX, express or
implied, is intended to confer upon any person or entity other than Corning,
Buyer and their respective successors and assigns, any rights or remedies under
or by reasons of this Article IX.
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ARTICLE X - INVESTIGATION
For the purposes of a smooth transition from the date hereof until the
Closing Date, (i) Buyer and its independent accountants, attorneys and
representatives shall, upon reasonable notice, have the opportunity during
normal business hours in a manner so as not to interfere unreasonably with the
Serengeti Business, to continue to review information and documents relating to
the properties, books, contracts, commitments and records of the Serengeti
Business and to meet with management, accountants and attorneys for the
Serengeti Business to discuss its business and affairs, and (ii) Buyer shall,
upon reasonable notice, be permitted, during normal business hours and in a
manner which does not interfere with the Serengeti Business, to meet with
employees, customers and distributors of the Serengeti Business accompanied by
representatives of Corning. All such requests shall be made only to Mr. William
H. Perks, Jr. at Corning Incorporated, One Riverfront Plaza, Corning, New York
(fax. no. 607-974-6447).
ARTICLE XI - DISCONTINUANCE OF USE OF CORNING NAME
11.1 Discontinuance of Use. Except as set forth in the temporary Corning
trademark license in substantially the form set forth in Exhibit II (the
"Temporary Corning Trademark License"), Buyer shall eliminate the use and
designation of "Corning" and such other designations, if any, indicating any
affiliation with Corning or any of its subsidiaries or affiliates and all other
trademarks and trade names used by Corning or any of Corning's subsidiaries or
affiliates as follows: (a) with respect to all stationery, checks or contracts,
including without limitation purchase order and customer agreements, Buyer shall
eliminate promptly after the Closing Date any use of the designation "Corning"
and any other Corning designation indicating affiliation with Corning or any of
Corning's subsidiaries or affiliates; and (b) within ten (10)
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business days after the Closing Date or as soon thereafter as is reasonably
practicable, Buyer and Corning shall cooperate in notifying in writing all
customers, suppliers and banks of the Serengeti Business that the Serengeti
Business has been acquired by Buyer from Corning.
11.2 Temporary Corning Trademark License. At the Closing, Corning shall
grant to Buyer the Temporary Corning Trademark License in substantially the form
set forth in Exhibit II, to phase out the use of the "Corning" trademark for a
limited period to commence upon Closing.
ARTICLE XII - INDEMNIFICATION
12.1 Indemnification by Corning. Corning shall indemnify and hold Buyer
harmless from and against any and all claims, liabilities, losses, damages,
costs and/or expenses solely arising out of or solely relating to: (a) any
failure or breach by Corning of any representation, warranty, covenant,
obligation or undertaking made by Corning to Buyer in this Agreement or any one
or more of the Schedules and Exhibits hereto (to be determined net of any tax
benefits received by Buyer on account of such claims, liabilities, losses,
damages, costs or expenses (without giving cumulative or reiterative effect to
tax adjustments)); or (b) any Retained Liabilities.
12.2 Indemnification by Buyer. Buyer shall indemnify and hold Corning and
its direct and indirect subsidiaries harmless from and against any and all
claims, liabilities, losses, damages, costs and/or expenses solely arising out
of or solely relating to: (a) any failure or breach by Buyer of any
representation, warranty, covenant, obligation or undertaking made or assumed by
Buyer in or pursuant to this Agreement or any one or more of the Schedules and
Exhibits hereto (to be determined net of any tax benefits received by Corning on
account of such
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claims, liabilities, losses, damages, costs or expenses (without giving
cumulative or reiterative effect to tax adjustments)); and (b) the Buyer Assumed
Liabilities (including, without limitation, any claims, losses, liabilities,
damages, costs and expenses resulting from or arising out of the conduct of the
Serengeti Business or use of the Assets from and after the Closing).
12.3 Limitation of Corning's and Buyer's Indemnification.
(a) Notwithstanding the indemnification by Corning provided in Section
12.1 or any other provision of this Agreement to the contrary: (i) with respect
to the indemnity referred to in Section 12.1(a), Corning shall be required to
indemnify Buyer therefor only if the amount of such indemnification exceeds
$275,000 in the aggregate; (ii) the amount recoverable by Buyer pursuant to
Section 12.1(a) shall be limited to Four Million Dollars ($4,000,000.00) in the
aggregate; (iii) the amount recoverable by Buyer pursuant to any other
indemnification provision provided for in this Agreement (exclusive of Retained
Liabilities for which there shall be no limit) shall be limited to the Purchase
Price in the aggregate; and (iv) Buyer shall not be entitled to any
indemnification under this Agreement to the extent Buyer receives at or after
the Closing an adjustment to the Purchase Price pursuant to Section 4.3 in
respect of the subject matter of such indemnification claim.
(b) Notwithstanding the indemnification by Buyer provided in Section 12.2
or any other provision of this Agreement to the contrary: (i) with respect to
the indemnity referred to in Section 12.2(a), except as provided in Section
16.9(b), Buyer shall be required to indemnify Corning and its direct and
indirect subsidiary therefor only if the amount of such indemnification exceeds
$275,000 in the aggregate; (ii) the amount recoverable by Corning pursuant to
Section 12.2(a) shall be limited to Four Million Dollars ($4,000,000.00) in the
aggregate; (iii) the amount recoverable by Corning pursuant to any other
indemnification provision provided for in this Agreement (exclusive of Buyer
Assumed Liabilities for which there shall be no limit) shall be
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limited to the Purchase Price in the aggregate; and (iv) Corning shall not be
entitled to any indemnification under this Agreement to the extent Corning
receives at or after the Closing an adjustment to the Purchase Price pursuant to
Section 4.3 in respect of the subject matter of such indemnification claim.
12.4 Procedure for Indemnification.
(a) All items covered by Sections 12.1 and 12.2 and other indemnification
provisions of this Agreement are referred to herein as "Indemnified Claims." An
indemnified party hereunder shall promptly notify the indemnifying party in
writing of the assertion of any claim asserted against the indemnified party
which might give rise to an Indemnified Claim against the indemnifying party
stating the nature and basis of such claim and, if possible, the amount thereof.
Except as set forth herein, and expressly subject to subsection (c) below, the
indemnified party shall not pay or provide for the payment or settlement or
discharge of any such claim, for a period of thirty days after the date such
written notice was given to the indemnifying party, but thereafter may do so
together with all costs and expenses incident thereto, unless within such
thirty-day period the indemnifying party shall have provided the indemnified
party with notice and evidence that the indemnifying party reasonably disputes
such claim and agrees that, if adversely determined, it will otherwise discharge
or satisfy such claim.
(b) In the event that any action, suit or proceeding is brought against an
indemnified party with respect to which an indemnifying party may have liability
under an indemnity contained in this Article XII or elsewhere in this Agreement,
the action, suit or proceeding shall be defended (including all proceedings on
appeal or for review, which counsel for defendant shall reasonably deem
appropriate) by the indemnifying party by counsel of its choice, provided the
indemnifying party agrees in writing to indemnify and hold the indemnified party
harmless for the full amount of any loss or judgment it may sustain as a result
of such action, suit or
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proceeding. If the indemnifying party declines to defend such action, suit or
proceeding, then the indemnified party shall so defend and appoint counsel of
its choice to do so, the cost of which shall be reimbursed by the indemnifying
party. The indemnified party, if the indemnifying party defends and the
indemnifying party, if the indemnified party defends, shall have the right to be
represented by an advisory counsel and accountants, at its own expense, and such
party shall be kept fully informed of such action, suit or proceeding at all
stages thereof whether or not such Party is so represented. Each Party shall
make available to the other Party, its attorneys and accountants all books and
records relating to such proceedings or litigation and the Parties hereto agree
to render to each other such assistance as they may reasonably require of each
other in order to ensure the proper and adequate defense of any such action,
suit or proceeding.
(c) An indemnified party shall not make any settlement of any claims which
might give rise to an Indemnified Claim under the indemnity agreement contained
in this Article XII without the written consent of the indemnifying party,
provided that such consent shall not be unreasonably withheld and further
provided, that, notwithstanding the foregoing, (i) the indemnified party may
immediately cause to be paid or discharged any claim which the indemnifying
party has not disputed within thirty (30) days of notice as provided above and
(ii) if such settlement is for money damages only and will include a full and
unconditional release and discharge of the indemnified party, and the
indemnified party withholds its consent to such compromise or settlement, (A)
the indemnifying party's liability shall be limited to the amount of the
proposed settlement and the indemnifying party shall thereupon be relieved of
any further liability with respect to such claim, and (B) from and after such
date, the indemnified party will undertake all legal costs and expenses in
connection with any such claim and shall indemnify, defend and hold the
indemnifying party harmless from any further liability or obligation to any
third party in connection with any such claim in excess of the amount of the
proposed settlement.
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(d) In connection with any right of indemnification provided under this
Agreement, an indemnified party shall be entitled to recover from the
indemnifying party all costs and expenses (including, without limitation, costs
of investigation, reasonable attorneys', accountants' and other professional
fees and court expenses, penalties, fines, damages, levies, losses and charges
related thereto) arising out of or relating to the enforcement of such right of
indemnification against the indemnifying party.
(e) In asserting a claim for indemnification under this Agreement, Buyer
shall seek to recover the Deposit Amount before recovering any monies from
Corning or any other indemnifying party.
(f) After the Closing, the rights of indemnification contained in this
Agreement shall be deemed to be the exclusive remedy of the parties hereto with
respect to a default or breach by any other party or other claim under or with
respect to this Agreement.
ARTICLE XIII - POST-CLOSING COOPERATION
13.1 Further Action. After the Closing Date, each Party hereto shall, at
its own expense, take such of the actions to execute, acknowledge and deliver
all such acts, deeds, assignments, transfers, conveyances, powers of attorney,
and assurances as may be reasonably required to perfect the transactions
contemplated herein and to fulfill and implement the terms of this Agreement or
realize the benefits intended to be afforded hereby and to perfect Buyer's
respective rights, title and interest in the Assets and Serengeti Business to be
acquired by Buyer hereunder.
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13.2 Cooperation. Each party shall cooperate with the other after the
Closing Date. For a period of seven (7) years after the Closing, Buyer shall
maintain the material records of the Serengeti Business that are conveyed to
Buyer as of the Closing Date in its possession and shall, upon reasonable
request of Corning, permit Corning to examine such records at reasonable hours
and make copies thereof at Corning's expense. For a period of seven (7) years
after the Closing, Corning shall maintain the material records relating to the
Serengeti Business which are not conveyed to Buyer pursuant to this Agreement in
its possession and shall, upon reasonable request of Buyer, permit Buyer to
examine such records at reasonable hours and make copies thereof at Buyer's
request.
13.3 Post-Closing Assistance. In addition to its obligations in Section
13.1, if requested to do so in writing by Buyer prior to Closing, Corning shall
discuss with Buyer in good faith an arrangement pursuant to which Corning would
furnish, for a fee and subject to terms and conditions to be agreed upon by
Buyer and Corning, certain transitional services after the Closing Date for a
period up to six (6) months with respect to the operations of the Serengeti
Business. Any such arrangement shall be set forth in a separate written
agreement between Corning and Buyer.
ARTICLE XIV - CONDITIONS TO OBLIGATION TO CLOSE
14.1 Buyer Obligations to Close. The obligations of Buyer to consummate
the transactions contemplated by this Agreement are subject to the satisfaction
at or prior to the Closing of the following conditions, any one or more of which
may be waived in writing by Buyer:
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(a) Performance. Each of the acts and undertaking of Corning to be
performed at or prior to the Closing pursuant to this Agreement shall have been
duly performed in all material respects.
(b) Representations and Warranties. The representations and warranties
of Corning to Buyer contained in Article VII made as of a date shall be true and
correct in all material respects as of such date and in all other cases shall be
true and correct in all material respects on and as of the Closing Date with the
same effect as though made on and as of the Closing Date, except (i) for changes
permitted or contemplated by this Agreement or (ii) to the extent of changes
that shall have occurred in the ordinary course of business and consistent with
this Agreement or with the consent of the Buyer.
(c) Governmental Authority. All applicable laws and regulations
concerning any required governmental authority approvals, including, but not
limited to the notice and waiting period of the HSR Act, as amended, shall have
been complied with.
(d) Consents and Approvals. All material consents and approvals required
in connection with the transfer of Assets to Buyer as provided herein shall have
been obtained, or Corning and Buyer have entered into an arrangement pursuant to
Section 15.2.
(e) No Action or Proceeding. There shall be no material action,
proceeding or suit instituted or threatened which seeks to restrain or prohibit
consummation of the transaction between Buyer and Corning contemplated by this
Agreement.
(f) Shareholder Approval. The Buyer shall have received shareholder
approval of its purchase and the transactions contemplated by this Agreement.
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(g) Documents. Buyer shall have received the following documents from
Corning:
(1) Resolutions of Corning's Board of Directors or a committee thereof,
certified by its Secretary or Assistant Secretary, authorizing the
execution and delivery of this Agreement and all related documents
and the consummation of the transactions contemplated hereby and
thereby;
(2) A certificate from the Secretary or Assistant Secretary, or other
appropriate officer of Corning as to the incumbency and signatures
of officers;
(3) A Certificate of Good Standing for Corning and a certified copy of
the Restated and Amended Articles of Incorporation of Corning from
the Department of State of the State of New York;
(4) A certificate signed by a duly authorized officer of Corning stating
that the conditions set forth in Section 14.1 have been satisfied;
(5) An executed General Conveyance, Assignment, Bill of Sale and
Assumption Agreement from Corning covering the respective Assets
described in Article II which Corning is selling under this
Agreement in form and substance reasonably acceptable to Buyer;
(6) An assignment executed by Corning of the Serengeti Trademarks and
Serengeti Patents described on Schedule 2.1(f) in substantially the
form of Exhibit V and, if required by Buyer, the Serengeti
Copyrights;
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(7) One or more executed assignments of the contracts referred to in
Section 7.8;
(8) The executed Lens Blank Supply Agreement and the executed service
agreement described in Section 15.7;
(9) The license agreement relating to the license to Corning of certain
of the Serengeti Patents described in Section 15.8 executed by
Corning;
(10) The executed Temporary Corning Trademark License Agreement described
in Section 11.2;
(11) Copies of all leases, distribution agreements and licenses and
contracts identified in Schedule 7.8;
(12) A list of the material customers of the Serengeti Business with
year-to-date purchases greater than $10,000;
(13) Such other instruments of transfer as the Buyer may reasonably
request to consummate the transaction contemplated by this
Agreement; and
(14) To the extent reasonably obtainable by Corning and at Buyer's
expense, Corning shall deliver updates of the lien and judgment
searches referred to in Section 6.4 from the respective dates of
such searches to a date reasonably close to the Closing Date.
(f) Legal Opinion. Buyer shall have received an opinion of Corning's
internal legal counsel in a form reasonably acceptable to Buyer and Buyer's
counsel, to the effect that: (i)
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Corning is a corporation validly existing under the law of the State of New
York; (ii) Corning has full corporate power and authority to execute and deliver
this Agreement; (iii) such execution and delivery and the consummation of the
transactions hereunder shall not violate Corning's articles of incorporation or
by-laws; (iv) this Agreement when duly executed and delivered, assuming due
authorization, execution and delivery by Buyer, constitutes a valid and binding
obligation of Corning enforceable against it in accordance with its terms,
subject however to bankruptcy, insolvency and similar laws affecting the rights
of creditors generally and to equitable principles; and (v) concerning such
other matters pertaining to Corning as are reasonably customary in transactions
such as those contemplated hereby.
14.2 Corning Obligation to Close. The obligations of Corning to consummate
the transactions contemplated by this Agreement with Buyer are subject to the
satisfaction at or prior to the Closing of the following conditions, any one or
more of which may be waived in writing by Corning.
(a) Performance. Each of the acts and undertaking of Buyer to be performed
at or prior to the Closing pursuant to this Agreement shall have been duly
performed in all material respects.
(b) Representations and Warranties. The representations and warranties of
Buyer contained in Article VIII made as of a date shall be true and correct in
all material respects as of such date and in all other cases shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though made on and as of the Closing Date.
(c) Governmental Authority. All applicable laws and regulations
(including, but not limited to any required governmental authority approvals
such as the notice and waiting period of the HSR Act, as amended) shall have
been complied with.
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(d) No Action or Proceeding. There shall be no action, proceeding, suit
or investigation, instituted or threatened which seeks to restrain or prohibit
consummation of the transactions between Buyer and Corning contemplated by this
Agreement.
(e) Shareholder Approval. The Buyer shall have received shareholder
approval of its purchase and the transactions contemplated by this Agreement.
(f) Documents and Purchase Price. Corning shall have received the
following from Buyer, which shall be delivered in a manner agreed to:
(1) Resolutions of Buyer's Board of Directors and, to the extent
applicable, shareholders, certified by its Secretary or Assistant
Secretary, or other appropriate officer, authorizing the execution
and delivery of this Agreement and all related documents and the
consummation of the transactions contemplated hereby and thereby;
(2) A certificate from the Secretary, Assistant Secretary or other
appropriate officer of Buyer as to the incumbency and signatures of
officers;
(3) A Certificate of Good Standing for Buyer and a certified copy of the
Buyer's Articles of Incorporation from the Secretary of State of the
State of New York;
(4) A certificate signed by a duly authorized officer of Buyer stating
that the conditions set forth in Section 14.2 have been satisfied;
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(5) Documents of assumption setting forth Buyer's assumption of
obligations for contracts assigned to it and other Assumed
Liabilities hereafter in a form and substance reasonably acceptable
to Corning;
(6) The executed Lens Blank Supply Agreement and the executed services
agreement described in Section 15.7;
(7) An assignment of the Serengeti Patents and of the Serengeti
Trademarks executed by Buyer in substantially the form of Exhibit V
and license agreement relating to the license to Corning of certain
of the Serengeti Patents described in Section 15.8 executed by
Buyer;
(8) The Purchase Price as set forth in Article IV;
(9) The resale and other certificates described in Section 5.2; and
(10) Such other instruments of transfer as Corning may reasonably request
to consummate the transactions contemplated by this Agreement.
(f) Legal Opinions. Corning shall have received the opinion of counsel to
Buyer in a form reasonably acceptable to Corning and Corning's counsel to the
effect that: (i) it is a corporation validly existing under the laws of the
State of New York; (ii) it has the power and authority to execute and deliver
this Agreement; (iii) such execution and delivery and the consummation of the
transactions contemplated hereunder, including without limitation the assumption
of liabilities, shall not violate its articles of incorporation or by-laws; (iv)
this Agreement when duly executed and delivered, assuming due authorization,
execution and delivery by Corning constitutes its valid and binding obligation
enforceable against it in
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accordance with its terms, subject however to bankruptcy, insolvency, and
similar laws affecting the rights of creditors generally and to equitable
principles; and (v) concerning such other matters as are reasonably customary in
transactions such as those contemplated hereby.
ARTICLE XV - OTHER COVENANTS AND MATTERS
15.1 Cooperation. The parties hereto shall cooperate in good faith to
satisfy the conditions set forth in Article XIV.
15.2 Consents. Corning shall use its best reasonable efforts to obtain
consents to the assignment of contract rights, leases and permits, licenses and
franchises, described in Sections 2.1(a), (d), (f), (g) and (i) before the
Closing Date and Buyer shall cooperate in good faith to the extent reasonably
requested by Corning. In the event that such consents are not obtained or
obtainable on or prior to the Closing Date, and without waiver (until such time
as an alternative arrangement referred to below is entered into by Buyer and
Corning and the Closing shall occur) of Buyer's obligation to consummate the
transactions contemplated by this Agreement being subject to the satisfaction of
the condition set forth in Section 14.1(d), Corning and Buyer shall use
commercially reasonable best efforts to negotiate in good faith and if agreement
is reached, to enter into a subcontract, sublease, agency agreement or other
mutually acceptable alternative arrangements which provide to Buyer
substantially the same benefits and burdens as contained in the contract rights
or leases with respect to which consents are not obtained or obtainable;
provided however that, in the event such alternative arrangement is entered into
by Buyer and Corning and the Closing shall occur, except as otherwise expressly
agreed by Buyer and Corning, this Agreement shall not constitute an agreement to
assign and the Assets shall not include any contract, lease, commitment, sales
order, or purchase order or other agreement, permit, license or franchise if an
assignment or attempted assignment of the same without the consent of the other
party thereto or Governmental Authority would constitute a breach thereof
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or in any way impair the rights of Corning thereunder.
15.3 Return of the Documents in the Event of Termination. In the event of
the termination of this Agreement for any reason, Buyer shall promptly deliver
to Corning all of the documents, work papers, other material obtained from
Corning relating to the transactions contemplated hereby whether obtained before
or after the execution hereof and shall take all practicable steps to have any
information so obtained kept confidential, shall destroy and certify that any
copies or analyses made from such documents, work papers or other material have
been so destroyed.
15.4 Fees and Expenses. Except as otherwise expressly provided herein,
each Party shall bear its own expenses including without limitation, fees for
attorneys, auditors, investment bankers and accountants that arise in connection
with the negotiation or consummation of this Agreement or the Closing hereunder.
15.5 Public Announcements. Neither Corning nor Buyer, without the consent
of the other, shall: (1) make any announcements to the employees of the
Serengeti Business; (2) make any public announcement; (3) issue any press
release; or (4) make disclosure to any third party, except to its respective
counsel, accountants and other experts concerning this Agreement or the
transaction contemplated hereby except as may be required by law or stock
exchange or Nasdaq rule or otherwise required to perform its obligations under
this Agreement.
15.6 Cooperation and Tax Returns. In connection with preparation of any
tax returns required to be filed by Corning, Buyer or the Serengeti Business,
any audit examinations by any governmental taxing authorities, administrative or
judicial proceedings resulting therefrom, Corning and Buyer shall fully
cooperate with each other including but not limited to furnishing or making
available books and records of accounts, powers of attorneys and other materials
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necessary or helpful for the preparation and returns or defense against
assertions of any taxing authority as to the imposition of any taxes. Neither
Corning nor Buyer shall compromise to settle any tax deficiency related to the
Serengeti Business which could be asserted against the other without the prior
written consent of the other, which consent shall not be unreasonably withheld
or delayed.
15.7 Supply Agreement and Services Agreement. Upon the occurrence of the
Closing hereunder, Corning and Buyer shall enter into: (i) a supply agreement in
substantially the form set forth in Exhibit III, with a minimum of a five (5)
year term for Buyer's requirements for lens blanks; and (ii) a Services
Agreement in substantially the form set forth in Exhibit IV with a two (2) year
term for the Strata manufacturing process.
15.8 License Agreement. Upon the occurrence of the Closing hereunder,
Corning and Buyer shall enter into a patent assignment and a license agreement
in substantially the form set forth in Exhibits V and VI, respectively.
15.9 Survival. No claim for any breach of the representations and
warranties contained in Articles VII and VIII of this Agreement may be asserted
later than one (1) year after the Closing Date, except for claims arising out of
a breach of Section 7.2(b)(i) relating to title to Assets, the first sentence of
Section 7.3 relating to Intellectual Property Rights, Section 7.12 relating to
taxes or Section 7.15 relating to environmental matters which, in any such case,
may be asserted at any time after Closing. All obligations of (i) Corning with
respect to the Retained Liabilities, (ii) Buyer with respect to the Buyer
Assumed Liabilities and (iii) Corning or Buyer, as the case may be, with respect
to covenants and agreements contained in this Agreement which by their terms are
to be performed after the Closing shall survive until fully performed. Any claim
asserted must be in writing and directed to the proper parties as set forth in
Section 16.11.
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15.10 Non-Competition. For a period of five (5) years after the Closing,
Corning covenants and agrees that it will not directly or indirectly engage in
the business of manufacturing, selling, marketing or distributing complete
sunglasses or sunglass frames; provided nothing herein shall prohibit Corning's
sales of lens blanks and optical materials or the sale of prescription
eyeglasses or lenses used to treat or mitigate medical conditions or symptoms
such as light sensitivity.
15.11 Buyer's Obligation. Prior to Closing and except as otherwise
expressly provided herein, Buyer shall not interfere with or directly or
inadvertently take any action that will interfere with or otherwise disrupt
Corning's relationship with the customers, distributors or employees of the
Serengeti Business.
15.12 Confidentiality. For a period of five (5) years after the Closing
Date, all proprietary information of the Serengeti Business conveyed by Corning
to Buyer pursuant to this Agreement shall be treated as confidential unless: (a)
such information is or becomes part of the public knowledge or literature
through no fault of Corning; (b) such information shall otherwise become
available to Corning from a source other than Buyer, said source not being known
by Corning to be violative of any obligation of secrecy with respect to such
information; or (c) Corning is legally required to disclose such information
provided that, to the extent practicable, it gives Buyer a reasonable
opportunity to seek a protective order. Corning shall use all reasonable efforts
to prevent the use of all or any part of such confidential information in any
other connection or the transmission thereof to third parties unless and until
it has first obtained the written consent of Buyer specifically authorizing such
use or transmission.
15.13 Serengeti Trademark. For a period of ten (10) years after the
Closing Date, neither Corning nor any of its subsidiaries or controlled
affiliates shall, directly or indirectly,
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market, advertise, sell or offer for sale any product or service under the
trademark "Serengeti" anywhere in the world.
ARTICLE XVI - MISCELLANEOUS
16.1 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York and the United States of
America, applicable to contracts relating to the same subject matter hereof
entered into and fully performed within said State, notwithstanding any choice
of law principles to the contrary. In furtherance of the foregoing, the rights
and obligations of the Parties shall not be governed by or construed in
accordance with the provisions of the United Nations Convention on Contracts for
the International Sale of Goods.
16.2 Venue. The parties shall use their best efforts to resolve by
negotiation any dispute, controversy or claim which may arise in connection with
this Agreement. In the event the parties cannot resolve directly any such
dispute, controversy or claim, then any dispute, controversy or claim arising
out of or relating to this Agreement (or the breach thereof) shall be brought
only in the Supreme Court of the State of New York, County of Steuben, New York,
or in the United States District Court, Western District of New York, and each
party shall not claim such venue is improper under forum non conveniens or for
any other reason.
16.3 Legality. The Parties each declare that, to the best of their
respective knowledge, as of the date first above written there are no laws or
regulations in effect that materially limit or restrict their ability to fully
perform their obligations under this Agreement.
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16.4 Amendment. This Agreement may not be modified or amended except by a
writing duly signed by the authorized representatives of both Parties.
16.5 Effect of Unenforceable Provisions. All provisions of this Agreement
shall be severable for purposes of enforcement. If any provision of this
Agreement is invalid, ruled illegal by any court of competent jurisdiction, or
unenforceable under present or future laws effective during the term hereof,
then and in that event, it is the intention of the parties hereto that the
remainder of this Agreement shall not be affected thereby, and it is also the
intention of the parties that in lieu of each of such provision which is
invalid, illegal or unenforceable, there be added as part of this Agreement a
provision which shall be as similar in terms of such invalid, illegal or
unenforceable provision, and that deals equitably with the intended benefits and
obligations of the parties.
16.6 Waiver. No failure or delay on the part of a Party in exercising any
right, power or remedy hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or remedy
hereunder. No waiver of any provision hereof shall be effective unless in a
writing signed by the Party making such a waiver. The remedies herein provided
are cumulative and not exclusive of any remedies provided by law or available at
equity.
16.7 Governmental Information. Nothing in this Agreement shall authorize
the disclosure of, or access to, classified or restricted information, material
or know-how of the Government of the United States of America to persons not
authorized or licensed to disclose or receive such classified or restricted
information. Buyer agrees to abide by all applicable legal or governmental
restrictions or conditions imposed on the export or re-export of technical
information.
<PAGE>
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16.8 Disclaimer. Nothing in this Agreement shall be construed as: (a) an
assumption by Corning of any obligation to increase the sales or profits of
Buyer; (b) an assumption by Corning of any financial obligation to Buyer except
as expressly provided in this Agreement; (c) the creation of any relationship of
employment between Buyer and employees of Corning or its subsidiaries,
affiliates, or associated companies; or (d) the delegation of any function of
authority of Buyer to Corning.
16.9 Termination.
(a) If either Party hereto shall fail to comply substantially with any
material term or condition of this Agreement, or shall commit a material breach
of any covenant contained within this Agreement, and shall fail to remedy such
breach within sixty (60) days after notice in writing of the breach to the party
in default or by the Outside Date, if earlier, the Party not in default shall
have the right to terminate this Agreement by giving written notice of the
termination within twenty (20) days following the end of said sixty (60) day
period or after the Outside Date, if earlier and this Agreement shall terminate
as of the date of such notice with no further action being required by the
terminating Party; provided, however, that the notice and cure provisions in
this Section 16.9(a) shall not apply to Buyer's obligation to obtain funds to
consummate the transactions contemplated by this Agreement on or prior to the
Outside Date. Either Party may terminate this Agreement upon at least twenty
(20) days prior written notice thereof to the other Party (i) after the Outside
Date or (ii) after November 30, 1996 if the financial statements referred to in
Section 6.2(b) have not been delivered to Buyer; provided, that, prior to either
party terminating this Agreement pursuant to this clause (ii), the parties
shall, in good faith, negotiate alternatives to termination and a possible
extension of such date. The termination rights provided for in this paragraph
shall not affect any other legal or equitable remedies which may be available to
a non-defaulting Party and shall not affect obligations under this Agreement
which
<PAGE>
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have risen prior to such termination.
(b) Simultaneously with its execution of this Agreement, Buyer has
deposited with the Escrow Agent One Million Five Hundred Thousand Dollars
($1,500,000) in immediately available funds as a deposit (the "Deposit")
pursuant to the Escrow Agreement. The Deposit shall be held and disbursed in
accordance with the terms of the Escrow Agreement. At the Closing, Seller and
Buyer shall direct the Escrow Agent to disburse the Deposit Interest then
accrued or earned on the Deposit to or at the direction of Corning as provided
in Section 4.2 hereof and the Escrow Agent shall retain the Deposit for the
satisfaction of indemnification claims by Buyer against Corning, if any, under
this Agreement in accordance with the terms of the Escrow Agreement.
(c) If this Agreement is terminated pursuant to Section 16.9(a) as a
result of Buyer's failure to have available on or prior to the Outside Date
sufficient funds to pay the Purchase Price as adjusted pursuant to Section
4.3(a) (a "Financing Failure"), Corning shall be entitled to receive the Deposit
Amount as liquidated damages, in which event Corning and Buyer shall be
discharged from all further liability under this Agreement upon receipt by
Corning of the Deposit Amount in immediately available funds. Corning and Buyer
agree in advance that actual damages would be difficult to ascertain and that
the Deposit Amount is a fair and equitable amount to reimburse Corning for
damages sustained due to Buyer's Financing Failure.
(d) In the event the transactions contemplated by this Agreement are not
consummated on or prior to the Outside Date for any reason other than a
Financing Failure or this Agreement is otherwise terminated in accordance with
its terms, Buyer shall be entitled to be remitted the Deposit Amount from the
Escrow Agent promptly upon receipt of Buyer's written request therefor. Time is
of the essence with respect to Buyer's obligation to obtain funds to consummate
the transactions contemplated by this Agreement on or prior to the Outside Date.
<PAGE>
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Section 16.9(c) shall not relieve Buyer of any liability pursuant to Section
16.9(a) hereof or limit Buyer's liability to Corning for a greater sum as a
result of failure to consummate the transactions contemplated by this Agreement
on or prior to the Outside Date, Buyer's breach of or default under this
Agreement or otherwise, other than a Financing Failure.
(e) If Corning defaults in the performance of its obligation to consummate
the sale of Assets on the Closing Date in accordance with the terms of this
Agreement, Buyer shall be entitled, in addition to any other remedies that may
be available, to obtain specific performance of the terms of this Agreement.
(f) If this Agreement is terminated pursuant to Section 16.9(a) for any
reason other than a Financing Failure, Buyer and Corning shall have all rights
and remedies available at law or in equity, provided that in no event shall
either Party be entitled to damages from the other in excess of Four Million
Dollars ($4,000,000).
16.10 Force Majeure. If the performance of this Agreement or any
obligation under it is prevented, restricted or interfered with by reason of
fire, explosion, strike, lockout, labor dispute, casualty, accident, lack or
failure in part or in whole of transportation facilities, sources of supply and
labor, materials, power or supplies; or war, revolution, civil commotion, acts
of public enemies; or any law, order, proclamation, regulation, ordinance,
demand or requirement of any government or subdivision, authority or
representative of any such government or delay or failure of a government
authority to issue, export or import licenses or approvals or any other
conditions or acts whatsoever whether similar or dissimilar to those enumerated
which are beyond the reasonable control of the parties, the party so affected by
giving prompt notice to the other party shall be excused from such performance
to the extent of such prevention, restriction or interference; provided that (i)
the party so affected uses its best efforts to remedy or remove such causes of
nonperformance and resumes performance hereunder whenever such causes are
<PAGE>
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removed and (ii) this Section 16.10 shall not apply to Buyer's obligation to
obtain funds to consummate the transactions contemplated by this Agreement on or
prior to the Outside Date.
16.11 Notices. All notices and other communications provided for hereunder
shall be given in writing and shall be sent to the principal office of Buyer or
Corning set forth below.
(a) All notices and other communications to Corning shall be sent by hand
delivery, telex or telecopier, and if by telex or telecopier, confirmed, or by
certified mail with postage prepaid (return receipt requested) to:
Corning Incorporated
One Riverfront Plaza
Corning, NY 14831
Attention: The Secretary
Fax: (607) 974-6135
cc: Corning Incorporated
One Riverfront Plaza
Corning, NY 14831
Attention: Mr. William H. Perks, Jr.
Fax: (607) 974-6447
and to:
Nixon, Hargrave, Devans & Doyle LLP
437 Madison Avenue
New York, NY 10022
Attention: Richard F. Langan, Jr.
Fax: (212) 940-3111
(b) All notices and other communications to Buyer shall be sent by hand
delivery, telex or telecopier, and if by telex or telecopier, confirmed, or by
certified or registered mail with
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postage prepaid (return receipt requested) to:
Solar Mates Inc.
8125 25th Court East
Sarasota, FL 34243
Attention: Stephen Nevitt, President
Fax: (941) 359-3598
cc: Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, NY 10022
Attention: Robert Winikoff
Fax: (212) 755-2839
or, as to either party, at such other address as shall be designated by such
party in a written notice to the other party. All such notices and
communications shall be effective either: (a) when delivered by hand; (b) five
(5) days after being deposited in the mail; (c) when telexed, answer- back
received; or (d) when telecopied or sent by facsimile, with report of delivery,
receipt acknowledged.
16.12 Captions. Article and section headings in this Agreement are
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
16.13 Counterparts. This Agreement may be executed in any number of
counterparts by the Parties hereto in separate counterparts, each of which when
so executed and delivered shall be deemed to be an original and all of which
counterparts of this Agreement taken together shall constitute but one and the
same instrument.
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16.14 Joint Effort. Preparation of this Agreement has been a joint effort
of both Corning and Buyer and this Agreement shall not be construed more
severely against either Corning or Buyer.
16.15 No Assignment. This Agreement may not be assigned by either Party
without the prior written consent of the other party hereto.
16.16 Entire Agreement. This Agreement, its Schedules and Exhibits
constitutes the entire agreement of the Parties with respect to the subject
matter hereof and may not be modified, amended or terminated, except by a
written agreement specifically referring to this Agreement signed by Buyer and
Corning. No waiver of any breach or default hereunder shall be considered valid
unless in writing and signed by the party giving such waiver, and no such waiver
shall be deemed a waiver of any subsequent breach or default of the same or
similar nature.
<PAGE>
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IN WITNESS WHEREOF, each party has caused this Agreement to be executed on
its behalf by an officer thereunto duly authorized, all as of the day and year
first written above.
SOLAR-MATES, INC.
By ________________________________
CORNING INCORPORATED
By ________________________________
VPH:br
\solar.agr
Regulation S Offshore Subscription Agreement
Solar-Mates, Inc.
8125 25th Court East
Sarasota, FL 34243
Attention: Stephen Nevitt, President
Dear Mr. Nevitt:
This Subscription Agreement (the "Agreement") is being executed and
delivered by the prospective purchaser identified on the signature page to this
Agreement (the "Purchaser") in connection with the $22,500,000 offering (the
"Offering") by Solar- Mates, Inc., a New York corporation (the "Company"), and
the related materials described in Schedule 1 hereto (collectively, the "Related
Materials") and any subsequent amendments or supplements thereto, of shares of
the Company's Series A 6.5% Convertible Preferred Stock (the "Series A Shares"),
shares of the Company's Series B 6% Convertible Preferred Stock (the "Series B
Shares") and shares of the Company's Series C 6% Convertible Preferred Stock
(the "Series C Shares"; together with the Series A Shares and the Series B
Shares, the "Shares") as set forth in the Certificate of Amendment of the
Certificate of Incorporation of the Company (the "Amendment") attached hereto
and made a part hereof as Exhibit A. The Offering is being conducted in reliance
on Regulation S ("Regulation S"), promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act").
1. Subscription and Payment for Shares; Delivery of Shares. Subject to the
terms and conditions of this Agreement, the Purchaser hereby subscribes for and
agrees to purchase from the Company the number of Shares (the "Purchased
Shares") set out on the signature page to this Agreement. The price for the
Purchased Shares will be the price per share set forth on such signature page.
(a) The closing of the purchase of the Series A Shares (the "First
Closing") shall take place on the second business day following the date on
which this Agreement is accepted by the Company.
(b) The closing of the purchase of the Series B Shares and the Series C
Shares (the "Second Closing"; together with the First Closing, the "Closings";
and the dates of such Closings being the "Closing Dates") shall take place
concurrently with the closing of the purchase by the Company of all or
substantially all of the assets of the Serengeti Eyewear division of Corning
Incorporated (the "Serengeti Acquisition"). The parties agree that the Second
Closing shall in no event take place prior to the fifth business
<PAGE>
day following the date of approval by the Company's shareholders of the issuance
of the Underlying Shares (as hereinafter defined), by means of a majority of the
total votes cast in person or by proxy at a meeting of the Company's
shareholders held for such purpose. The Company shall use its commercially
reasonable efforts to cause the closing of the Serengeti Acquisition to occur at
least 10 business days after such shareholder approval.
(c) The Purchaser shall make payment of the purchase price for the
Purchased Shares on the respective Closing Dates as follows:
(i) Purchaser shall cause U.S. funds in the amount of such purchase
price to be sent by wire transfer in accordance with the instructions of
the Company;
or
(ii) Purchaser shall cause a bank, brokerage firm or other financial
institution with offices in New York City, as Purchaser's agent, to make
payment of such purchase price in U.S. dollars to the Company by certified
or bank check in immediately available funds.
(d) The Company shall deliver the certificate or certificates evidencing
the Purchased Shares on the respective Closing Dates, pursuant to delivery
instructions provided by the Purchaser to the Company, against payment of the
purchase price pursuant to the provisions of sub-sections (c)(i) or (ii) of this
Section 1.
2. Representations, Warranties and Covenants of Purchaser. Purchaser
hereby acknowledges that the Company is offering the Shares in reliance upon the
representations, warranties, and other information set forth by the Purchaser
herein. Purchaser hereby undertakes to notify the Company immediately of any
changes in any of the representations, warranties and other information
contained herein. In order to induce the Company to accept the subscription made
hereby, the Purchaser hereby represents, warrants and acknowledges to the
Company as follows:
2.1 Compliance with United States Securities Laws. Purchaser
understands that the Shares are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of federal and state
securities laws pursuant to Regulation S and that the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of Purchaser set forth herein in order to
determine the applicability of such exemptions and the suitability of Purchaser
to acquire the Shares. The Purchaser
2
<PAGE>
understands and acknowledges that the Shares and the shares of Common Stock into
which the Shares are convertible (the "Underlying Shares") have not been
registered under the Securities Act, and such Shares and Underlying Shares may
not be offered or sold in the United States or to any "U.S. Person" (as defined
in Rule 902(o) of Regulation S, which definition is set forth in Schedule 2
hereto and is hereby incorporated by reference) for a period of 40 days
following (i) with respect to the Series A Shares and the related Underlying
Shares, the date of the First Closing (the "First Restricted Period"), and (ii)
with respect to the Series B Shares and Series C Shares and the related
Underlying Shares, the date of the Second Closing (the "Second Restricted
Period"), and thereafter unless such Shares or Underlying Shares are registered
under the Securities Act and any applicable state securities law in the United
States or such offer or sale is made pursuant to exemptions from those
registration requirements. The Shares are being offered and sold pursuant to the
terms of Regulation S, which permits the Shares to be sold by the Company solely
to non-U.S. Persons in transactions outside of the United States, subject to
certain terms and conditions. The Purchaser further acknowledges that neither
the Securities and Exchange Commission nor any other United States or foreign
federal or state agency or authority has passed on or endorsed the merits of
this Offering. The Purchaser understands that in the view of the Securities and
Exchange Commission the statutory basis for the exemption claimed for the
Offering would not be present if the subscription contemplated hereby, although
in technical compliance with Regulation S, is part of a plan or scheme to evade
the registration provisions of the Securities Act.
2.2 Purchaser Not a U.S. Person; Investment Intent. Purchaser is
purchasing the Shares, for its own account or for persons or accounts as to
which it exercises investment discretion. PURCHASER AND EACH SUCH PERSON OR
ACCOUNT ARE NOT U.S. PERSONS. THE SECURITIES WERE NOT OFFERED TO THE PURCHASER
IN THE UNITED STATES, AND THE PURCHASER HAS EXECUTED THIS AGREEMENT OUTSIDE THE
UNITED STATES. The Purchaser is acquiring the Shares for investment only and not
with a view to the resale or distribution of any part thereof, and there is no
present intention of selling, transferring or granting participations in, or
otherwise distributing, the same or of changing the Purchaser's residence or
domicile to any jurisdiction or country. The Purchaser is not purchasing the
Shares as nominee or agent and not on behalf of any U.S. Person, and the
Purchaser, upon completion of the Offering contemplated hereby will become the
sole beneficial owner of the Shares, and has not pre-arranged any sale with
purchasers in the United States. The Purchaser is not an underwriter of, or
dealer in, the Shares, and is not participating, pursuant to any contractual or
other arrangement, in the distribution of the Shares. The Purchaser understands
that if the Purchaser is deemed a "statutory underwriter" with respect to the
Shares, despite the technical compliance of the subscription hereby with the
provisions of Regulation S, the Shares would be deemed "restricted" and could
3
<PAGE>
not be offered or sold in the Unites States or elsewhere unless registered under
the Securities Act or an exemption from the registration requirements of the
Securities Act is available.
2.3 Investment Experience of Purchaser. Either alone or together
with a "purchaser representative" (as defined in Rule 501(h) under the
Securities Act), the Purchaser is knowledgeable, sophisticated and experienced
in making, and is qualified to make, decisions with respect to investments in
securities such as the Shares and has requested, received, reviewed and
considered the Related Materials (set forth in Schedule 1 attached hereto) and
all other information it deems relevant in making a decision to execute this
Agreement and to purchase the Purchased Shares. The Purchaser has had the
opportunity to request additional information from and to ask questions of the
officers and directors of the Company. The Purchaser understands the risks
associated with investment in the Company, and the Purchaser, or the person or
account for which it is acting, is able to bear indefinitely the economic risk
of acquiring the Shares, has other adequate means of providing for current needs
and contingencies, has no need for liquidity with respect to such investment and
could afford the complete loss thereof.
2.4 Restrictions on Resale. Purchaser shall not engage in any
activity for the purpose of, or which may reasonably be expected to have the
effect of, conditioning the market in the United States for the Shares or the
Company's Common Stock, $.001 par value ("Common Stock"), or, during the First
Restricted Period or the Second Restricted Period, as the case may be, offer or
sell any of the Shares or any Underlying Shares in the United States to or for
the benefit or account of a U.S. Person. Purchaser understands that the Shares
and Underlying Shares are only transferable on the books and records of the
Company and its transfer agent and that the Company and the transfer agent will
not register any transfer of Shares or Underlying Shares which the Company in
good faith believes violates applicable federal or state securities law in the
United States or the restrictions set forth herein. All subsequent offers and
sales of the Shares and Underlying Shares by Purchaser shall be made in
compliance with Regulation S under the Securities Act, pursuant to registration
under the Securities Act or an exemption from such registration. In any case,
the Series A Shares and related Underlying Shares shall not be resold to U.S.
persons or within the United States during the First Restricted Period, and the
Series B Shares and the Series C Shares and related Underlying Shares shall not
be resold to U.S. persons or within the United States during the Second
Restricted Period, and in each case as otherwise restricted herein with respect
to the limitations on converting the Shares to the Underlying Shares, as set
forth in Section 2.5 below. Any proposed offer, sale or transfer of any of the
Shares or Underlying Shares during the applicable Restricted Period shall be
subject to the condition that Purchaser deliver to the Company (i) a written
4
<PAGE>
certification of the proposed transferee, acceptable in form and substance to
the Company's counsel, that such transferee is not a U.S. Person and is
acquiring the Shares or Underlying Shares for such transferee's own account and
(ii) a written opinion of counsel to the Purchaser, acceptable in form and
substance to the Company's counsel, to the effect that the offer, sale and
transfer of such Shares or Underlying Shares is permissible under the provisions
of Regulation S. The Purchaser understands that this resale restriction will
continue to apply to the Shares and Underlying Shares if disposed of by the
Purchaser during the Restricted Period and consents to the issuance of the
appropriate stop transfer instructions to the Company's transfer agent with
respect to the Shares and Underlying Shares.
2.5 Restrictions on Conversion. Purchaser understands and
acknowledges that (i) none of the Shares may be converted, in whole or in part,
for shares of Common Stock prior to the date of approval by the Company's
shareholders of the issuance of the Underlying Shares, by means of a majority of
the total votes cast in person or by proxy at a meeting of the Company's
shareholders held for such purpose, (ii) the Series B Shares cannot be
converted, in whole or in part, for shares of Common Stock until January 1,
1997, and (iii) the Series C Shares cannot be converted, in whole or in part,
for shares of Common Stock until July 1, 1997
2.6 Legends. Purchaser agrees that the certificates representing the
Purchased Shares and the Underlying Shares shall bear legends substantially in
the form set forth below, and understands that the first legend may be removed
(i) with respect to the Series A Shares and related Underlying Shares, at the
end of the First Restricted Period, and (ii) with respect to the Series B Shares
and the Series C Shares and related Underlying Shares, at the end of the Second
Restricted Period:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), of the United States of America and have been issued
in reliance upon the exemption from such registration
contained in Regulation S under the Act. They may not be
offered, sold or transferred in the United States or to any
"U.S. Person" (as defined in Regulation S)."
"Transfers, voting and other matters in respect of the
securities represented by this certificate are subject to the
terms and conditions of a certain Regulation S Offshore
Subscription Agreement between Solar-Mates, Inc. and the
holder hereof, dated September 26, 1996."
5
<PAGE>
Following any holding period imposed by Regulation S or other
applicable securities laws, the Company, upon the receipt of any opinion of
counsel to the Purchaser, satisfactory in form and substance to the Company's
Counsel, shall request the transfer agent to remove the second legend and
reissue the Shares or Underlying Shares, as the case may be, represented by the
certificate.
2.7 Due Execution, Delivery and Performance of this Agreement and
Other Obligations. Purchaser has full right, power, authority and capacity to
enter into this Agreement and to consummate the transactions contemplated
hereby; and, if Purchaser is a company or corporation, the execution, delivery
and performance of this Agreement by Purchaser have been duly authorized by all
requisite corporate and shareholder action of Purchaser. Upon the execution and
delivery of this Agreement and its acceptance by the Company, this Agreement
shall constitute the legal, valid and binding obligations of Purchaser,
enforceable against Purchaser in accordance with its terms (except insofar as
the enforcement thereof may be limited by any applicable laws relating to or
affecting the enforcement of creditors' rights generally or by general equitable
principles). The Purchaser has complied and will comply with all applicable
local laws and customary practices and documentation with respect to the
subscription contemplated hereby, at the Purchaser's own expense.
2.8 Binding Effect of Subscription Agreement. This Agreement shall
not be binding on the Company until such Agreement is accepted by the Company.
The Purchaser hereby acknowledges and agrees, subject to any applicable
securities law, that the subscription hereunder is irrevocable, that the
Purchaser is not entitled to cancel, terminate or revoke this Agreement or any
agreements of the Purchaser hereunder and that this Agreement and such other
agreements shall survive the death or disability of the undersigned and shall be
binding upon and inure to the benefit of the parties and their heirs, executors,
administrators, successors, legal representatives and assigns. If the Purchaser
is more than one person, the obligations of the undersigned hereunder shall be
joint and several, and the agreements, representations, warranties and
acknowledgements herein contained shall be deemed to be made by and be binding
upon each such person and his heirs, executors, administrators, successors,
legal representatives and assigns.
2.9 Decision to Invest. The investor is aware that the Company is a
public company subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the Purchaser has obtained or
has had the opportunity to obtain copies of the Company's filings made pursuant
to the Exchange Act. In making the decision to purchase the Shares herein
subscribed for, the Purchaser has relied solely upon the information about the
Company contained in the Related Materials provided to him and in the other
filings made pursuant to the
6
<PAGE>
Exchange Act, and upon independent investigations made by him or his legal
counsel or investment advisor. He is not relying on any representations or
warranties from the Company or any of its officers, directors, affiliates,
employees or agents, other than the information provided by the Company to him
in this Offering.
2.10 Purchaser's residence. The Purchaser is a resident and
domiciliary (not a temporary or transient resident) of the state (or province),
county and country set forth below, has no present intention to become a
resident of any other jurisdiction, and all communications, written or oral,
concerning the Shares have been directed to the Purchaser in, and received by
the Purchaser in, such jurisdiction.
2.11 Purchaser as Representative. If the Purchaser is executing this
Agreement in a representative or fiduciary capacity, the Purchaser has full
power and authority to execute and deliver the Agreement on behalf of the
subscribing corporation, partnership, trust or other entity for whom the
Purchaser is executing this Agreement, and such corporation, partnership, trust
or other entity has full right and power to enter into and perform this
Agreement.
2.12 Purchaser as Agent. The Purchaser may purchase Shares as agent
for various principals to be designated, in which case it shall hereby make the
above representations and warranties on behalf of such principals.
2.13 No Protection of Purchaser's Interests. The Purchaser has been
advised that the Company has not retained any independent professionals to
review or comment on this Offering or otherwise protect the interests of the
Purchaser. Although the Company has retained its own counsel, neither such firm
nor any other firm has acted on behalf of the Purchaser, and any purchaser of
the Shares offered hereby should not rely on the firm so retained by the Company
with respect to any matters herein described.
2.14 No Short Position. Neither Purchaser nor any of its affiliates
will directly or indirectly maintain any short position in any securities of the
Company during the First Restricted Period and the Second Restricted Period.
2.15 Valuation of the Common Stock. The Purchaser has
independently evaluated the fairness of the offering price for the
Shares.
3. Voting and Transfer Matters. During the period beginning on the date of
First Closing and ending on the fourth anniversary thereof, Purchaser shall vote
all of the Underlying Shares, in connection with any vote of shareholders of the
Company relating to the election of directors, for the election of directors
7
<PAGE>
constituting a majority of the directors nominated for such election in
accordance with the directions of Stephen Nevitt or his successor or designee.
Any transfer of Shares or Underlying Shares during such four-year period which
is permitted pursuant to the terms hereof and the terms of the Amendment shall
require, as a condition precedent thereto, the execution and delivery to the
Company of an instrument confirming that such transferee agrees to be bound by
the terms of this Agreement, including without limitation the terms of this
Section 3; provided, however, that no such instrument shall be required with
respect to any such transfers effected pursuant to "brokers' transactions"
within the meaning of Section 4(4) of the Securities Act.
4. Issuance of Warrants. At the First Closing, the Company shall issue to
the Purchaser, for nominal consideration, a Warrant in the form attached hereto
as Schedule 3. At the Second Closing, the Company shall issue to the Purchaser,
for nominal consideration, a Warrant in the form attached hereto as Schedule 4
and a Warrant in the form attached hereto as Schedule 5.
5. Legal Expenses for Enforcement In the event that any party hereto must
resort to legal process in order to enforce the other party's obligations under
this Agreement, such other party agrees to reimburse such party for all
reasonable attorney's fees incurred in such enforcement, provided that such
enforcement action by such party is successful.
6. Notices. All notices, demands, consents or similar communications under
this Agreement shall be given or made in writing and shall be delivered
personally, or sent by registered or certified airmail, postage prepaid or by
overnight courier services, and shall be deemed given when so delivered or three
(3) business days after so mailed, as the case may be:
(a) if to the Company, at its address as set out at the head of this
Agreement, or at such address or address as may have been furnished to Purchaser
in writing by the Company;
(b) if to Purchaser, at its address as set out following Purchaser's
signature on the signature page to this Agreement, or at such other address or
addresses as may have been furnished to the Company in writing; or
(c) if to any permitted transferee or transferees of Purchaser, at
such address or addresses as shall have been furnished to the Company or its
transfer agent at the time of the transfer or transfers, or at such other
address or addresses as may have been furnished by such transferee or
transferees to the Company or its transfer agent in writing.
7. Amendments. No amendment, interpretation or waiver of any of the
provisions of this Agreement shall be effective unless
8
<PAGE>
in writing and signed by the Company and at least a majority of the Purchasers
hereunder.
8. Headings. The headings of the sections of this Agreement are used for
convenience only and shall not affect the meaning or interpretation of the
contents of this Agreement.
9. Waiver. The failure to enforce or to require the performance at any
time of any of the provisions of this Agreement shall in no way be construed to
be a waiver of such provisions, and shall not affect either the validity of this
Agreement or any part hereof or the right of any party thereafter to enforce
every provision in accordance with the terms of this Agreement.
10. Governing Law. This Agreement and the relationships of the parties in
connection with the subject matter of this Agreement shall be governed by and
determined in accordance with the internal laws of the State of New York, in the
United States of America, without regard to the principles of choice or conflict
of law thereof. Venue for any dispute relating to the provisions of this
Agreement shall be within New York County, New York.
11. Submission to Jurisdiction. Each of the parties submits to the
jurisdiction of any state or federal court sitting in the New York County, New
York, in any action or proceeding arising out of or relating to this Agreement
or the Offering and agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court. Each party also agrees
not to bring any action or proceeding arising out of or relating to this
Agreement or the Offering in any other court. Each of the parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety or other security that might be required of
any other party with respect thereto.
12. Indemnification. The Purchaser agrees to indemnify and hold harmless
the Company, its affiliates and their respective officers, directors and
employees from and against any and all loss, damage, liability, cost or expense,
including reasonable attorneys' and accountants' fees, which the Company or any
one of them may incur by reason of or in connection with any misrepresentation
made by the Purchaser, any breach of any representation or warranty of the
Purchaser, the failure to fulfill any covenants or agreements under this
Agreement, or the sale or distribution of the Shares by the Purchaser in
violation of the Securities Act (including Regulation S) or any other applicable
law or regulation.
13. Severability. If any severable provision of this Agreement, or the
application thereof to any person or circumstance, is held to be void, invalid
or unenforceable by any judgment of a tribunal of competent jurisdiction, the
remainder of
9
<PAGE>
this Agreement shall not be affected by such judgment, and the remainder of this
Agreement shall be enforced as nearly as possible according to its original
terms and intent.
14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes any prior understanding or agreements
concerning the subject matter hereof.
15. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns.
16. Unenforceability. If any provision of this Agreement is or becomes or
is deemed invalid, illegal or unenforceable in any jurisdiction, to the maximum
extent permissible, such provision shall be deemed amended to conform to
applicable laws so as to be materially altering the intention of the parties, it
shall be stricken and the remainder of this Agreement shall remain in full force
and effect.
17. Termination. If the First Closing shall have occurred but the Second
Closing shall not have occurred by March 31, 1996, the Purchaser shall not be
required to purchase and the Company shall not be required to sell the Series B
Shares and the Series C Shares, but the failure of the Second Closing to occur
shall have no affect upon the transactions consummated pursuant to the First
Closing and all of the provisions hereof other than those relating to the Series
B Shares and the Series C Shares shall survive.
18. Counterparts. This Agreement may be executed in counterparts, all of
which shall constitute one agreement, and each such counterpart shall be deemed
to have been made, executed and delivered on the date of execution of this
Agreement by the Purchaser, without regard to the dates or times when such
counterparts may actually have been made, executed or delivered.
10
<PAGE>
IN WITNESS WHEREOF, the Purchaser has caused this Agreement to be executed
as of the 26th day of September, 1996, at the location stated below.
Purchaser: (if an Individual) Purchaser: (other than an
Individual purchasing for his
own account)
RBB Bank Aktiengesellschaft
___________________________________ -----------------------------------
(Signature) (Printed Name of Purchaser)
___________________________________ By:________________________________
(Signature of Joint (Signature of Authorized
Holder, if Applicable) Officer or Other
Representative)
___________________________________
(Printed Name of Joint Holder,
if Applicable)
Purchaser's Permanent Address:
Burgring 16 Herbert StrauB, Headtrader
- ----------------------------------- -----------------------------------
(Printed Name and Title of
Signatory)
8010 Graz
- -----------------------------------
Austria AUSTRIA
- ----------------------------------- -----------------------------------
(Purchaser's Country or (Purchaser's Jurisdiction
Jurisdiction of Citizenship) of Organization)
If this Agreement is being executed If this Agreement is being executed
in a jurisdiction other than the in a jurisdiction other than the
jurisdiction set forth above, jurisdiction set forth above,
indicate such location:____________ indicate such location:____________
___________________________________ ___________________________________
Purchaser's Telephone Number: Purchaser's Telephone Number:
011-43-316/8072-354
___________________________________ -----------------------------------
11
<PAGE>
Number of Series A Shares:
7,500
- -----------------------------------
Price per Share: Aggregate Purchase Price:
$1,000 $7,500,000
- ----------------------------------- -----------------------------------
Stock certificates should be made out as follows:_______________________________
Stock certificates and Subscription Agreement should be returned as follows:____
________________________________________________________________________________
Number of Series B Shares:
7,500
- -----------------------------------
Price per Share: Aggregate Purchase Price:
$1,000 $7,500,000
- ----------------------------------- -----------------------------------
Stock certificates should be made out as follows:_______________________________
Stock certificates and Subscription Agreement should be returned as follows:____
________________________________________________________________________________
Number of Series C Shares:
7,500
- -----------------------------------
Price per Share: Aggregate Purchase Price:
$1,000 $7,500,000
- ----------------------------------- -----------------------------------
Stock certificates should be made out as follows:_______________________________
Stock certificates and Subscription Agreement should be returned as follows:____
________________________________________________________________________________
12
<PAGE>
The foregoing Subscription Agreement, executed by RBB Bank
Aktiengesellschaft as Purchaser, is hereby accepted and agreed to by
Solar-Mates, Inc., as of the 26th day of September, 1996, as to $7,500,000 and
7,500 Series A Shares, $7,500,000 and 7,500 Series B Shares, and $7,500,000 and
7,500 Series C Shares.
SOLAR-MATES, INC.
By:______________________________
Stephen Nevitt, President
13
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> <blank>
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 114,309
<SECURITIES> 1,210,726
<RECEIVABLES> 2,671,260
<ALLOWANCES> <blank>
<INVENTORY> 3,358,353
<CURRENT-ASSETS> 7,913,112
<PP&E> 691,171
<DEPRECIATION> 218,014
<TOTAL-ASSETS> 8,745,989
<CURRENT-LIABILITIES> 3,785,157
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<COMMON> 2,384
<OTHER-SE> 4,726,234
<TOTAL-LIABILITY-AND-EQUITY> 8,745,989
<SALES> 7,406,439
<TOTAL-REVENUES> 7,406,439
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<TOTAL-COSTS> 2,469,040
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<INTEREST-EXPENSE> 197,789
<INCOME-PRETAX> (36,475)
<INCOME-TAX> 12,400
<INCOME-CONTINUING> (48,875)
<DISCONTINUED> <blank>
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<NET-INCOME> (48,875)
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